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THIRD DIVISION
[G.R. No. 116593. September 24, 1997]
PULP AND PAPER, INC., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION AND EPIFANIA
ANTONIO, respondents.
D E C I S I O N
PANGANIBAN, J.:

2.
In the absence of wage rates specially prescribed for piece-rate workers, how should
the separation pay and salary differential of such workers be computed?
Statement of the Case
This is the main question raised in the instant petition for certiorari, filed under Rule
65 of the Rules of Court, to set aside and annul National Labor Relations
Commission’s[1]
Decision[2]
promulgated on September 24, 1993 and Resolution[3]
dated
December 16, 1993 in NLRC NCR CA No. 004041-92.[4]
Public respondent’s assailed
Decision affirmed in toto Labor Arbiter Eduardo J. Carpio’sdecision[5]
dated October 6,
1992, which disposed thus:[6]
“IN VIEW OF ALL THE FOREGOING, judgement [sic] is hereby rendered:
1. dismissing the complaint for illegal dismissal for lack of merit;
2. ordering respondent Pulp and Papers Distributors Inc. to pay complainant Efipania
(sic) Antonio the sum of P49.088.00 representing her separation pay; and
3. ordering respondent to pay the complainant the sum of P31,149.56 representing the
underpayment of wages.
4. dismissing all other issues for lack of merit.”
The assailed Resolution denied petitioner’s motion for reconsideration for lack of
merit.
The Facts
The facts as found by the labor arbiter are as follows:[7]
“A case of illegal dismissal and underpayment of wages [was] filed by MS.
EPIFANIA ANTONIO [private respondent herein] against PULP AND PAPER
DISTRIBUTORS INC., [petitioner herein] x xx.
In filing the present complaint, complainant in her position paper alleges that she was
a regular employee of the x xx corporation having served thereat as Wrapper
sometime in September 1975. On November 29, 1991, for unknown reasons, she was
advised verbally of her termination and was given a prepared form of Quitclaim and
Release which she refused to sign. Instead she brought the present complaint for
illegal dismissal.
In charging the [herein petitioner] of underpayment of wages, complainant in the
same position paper alleges that, rarely during her employment with the respondent

3.
she received her salary, a salary which was in accordance with the minimum wage
law. She was not paid overtime pay, holiday pay and five-day service incentive leave
pay, hence she is claiming for payments thereof by instituting the present case.
Respondent on the otherhand [sic] denied having terminated the services of the
complainant and alleges inter alia that starting 1989 the orders from customers
became fewer and dwindled to the point that it is no longer practical to maintain the
present number of packer/wrappers. Maintaining the same number of
packers/wrappers would mean less pay because the work allocation is no longer the
same as it was. Such being the case, the respondent has to reduce temporarily the
number of packers/wrappers. Complainant was among those who were temporarily
laid-off from work. Complainant last worked with the company on June 29, 1991.
As regards complainant’s allegation that on November 29, 1991, she was forced to
sign a quitclaim and release by the respondent, the latter clarified that considering that
five months from the time the complainant last worked with the company, the
management decided to release the complainant and give her a chance to look for
another job in the meantime that no job is available for her with the company. In other
words, complainant was given the option and considering that she did not sign the
documents referred to as the Quitclaim and Release, the respondent did not insist, and
did not terminate the services of the complainant. It was just surprise [sic] to receive
the present complaint. In fact, respondent added that the reason why the complainant
was called on November 29, 1991 was not to work but to receive her 13th month pay
of P636.70 as shown by the voucher she signed (Annex-A, Respondent).
As regards the claim of the complainant for underpayment, respondent did not
actually denied (sic) the same but give [sic] the reservation that should the same be
determined by this Office it is willing to settle the same considering the fact that
complainant herein being paid by results, it is not in a proper position to determine
whether the complainant was underpaid or not.”
The Issues
Petitioner couched the main issue in this wise:[8]
“Did the Public Respondent NLRC act correctly in affirming in toto the decision
rendered by the labor arbitration branch a quo in NLRC NCR Case no. 00-01-00494-
92?”
While it expressly admits that private respondent is entitled to separation pay,
petitioner raises nonetheless the following queries: “(a) Are the factors in determining

4.
the amount of separation pay for a ‘piece-rate worker’ the same as that of a ‘time-
worker’? (b) Is a worker, who was terminated for lack of work, entitled to separation pay
at the rate of one-month’s pay for every year of service?”[9]
The petition is based on the
following “grounds”:
“I
Public Respondent NLRC committed grave abuse of discretion and serious
reversible error when it affirmed in toto the award of separation pay in favor of
private respondent, without bases in fact and in law.
II
Public Respondent NLRC committed grave abuse of discretion and serious
reversible error when it affirmed in toto the award of underpayment in favor of
private respondent, without bases in fact and in law.”
The Public Respondent’s Ruling
In dismissing the appeal of petitioner, public respondent reasoned:[10]
“It is true that all the above circumstances cited by the [herein petitioner] are not
present in the case at bar, hence, separation pay based on those circumstances is not
owing to the [herein private respondent]. However, it is quite obvious that [petitioner]
missed the legal and factual basis why separation pay was awarded by the Labor
Arbiter. In the first place, the [petitioner] admits that the complainant-appellee was
temporarily laid off on June 29, 1991. This means that there was a temporary
suspension of employer-employee relationship between the appellant and the
appellee. Lay-off is a temporary termination initiated by the employer, but without
prejudice to the reinstatement or recall of the workers who have been temporarily
separated. The reasons for laying off employees are varied: lack of work, shutdown
for repairs, business reverses, and the like. Always, however, there is the expectation
that the employees who have been laid off will be recalled or rehired. This situation is
governed by Rule I, Section 12, of Book VI of the Implementing Rules and
Regulations of the Labor Code, which provides:
‘Sec. 12. Suspension of Relationship. -- The employer-employee relationship shall
be deemed suspended in case of suspension of operation of the business or
undertaking of the employer for a period not exceeding six (6) months x xx.’
From June 29, 1991 up to the time the complainant-appellee filed her complaint on
January 21, 1992, there was more than six (6) months that already elapse (sic) and yet,

5.
the appellant failed to recall the appellee to let her resume working. If the appellant
was not yet in a possession to recall or reinstate the appellee after six (6) months, up
to when shall appellant let her keep in waiting. Of course, she cannot be allowed to
wait interminably. That is the reason why the law imposes a period of six (6) months
within which the resumption of employer-employee relationship must be resumed in
temporary lay-offs. Otherwise, any employer can, in the guise of a temporary lay-off,
close its doors to an employee for more than six months and their claim that the lay-
off has ripened into termination and try to get away from any liability. The award of
separation pay is hereby declared in order.
On the second issue raised by the (petitioner) on appeal, We are also for the Labor
Arbiter’s ruling upholding the appellee’s right to salary differential in the amount
computed.
The argument interposed by the [petitioner] based on Art. 101 of the Labor Code, in
relation to Rule VII, Section (8), Book III of the Omnibus Implementing Rule and
Regulations, will not lie in the case at bar. In the first place, pursuant to the provision
of law cited by the [petitioner], all time and motion studies, or any other schemes or
devices to determine whether the employees paid by results are being compensated in
accordance with the minimum wage requirements, shall only be approved on petition
of the interested employer. Thus, it is the fault of the [petitioner] on whose initiative,
a time and motion study or any other similar scheme is not yet available in its
establishment.”
The Court’s Ruling
The appeal is not meritorious.
First Issue: Computation of Minimum Wage
Petitioner argues that private respondent was a piece-rate worker and not a time-
worker. Since private respondent’s employment as “(p)acker/(w)rapper” in 1975 until
her separation on June 29, 1991, “(h)er salary depended upon the number of ‘reams of
bond paper’ she packed per day.” Petitioner contends that private respondent’s work
“depended upon the number and availability of purchase orders from
customers.” Petitioner adds that, oftentimes, “packers/wrappers only work three to four
hours a day.” Thus, her separation pay “must be based on her latest actual
compensation per piece or on the minimum wage per piece as determined by Article
101 of the Labor Code, whichever is higher, and not on the daily minimum wage
applicable to time-workers.”[11]

6.
Compensation of Pieceworkers
In the absence of wage rates based on time and motion studies determined by the
labor secretary or submitted by the employer to the labor secretary for his approval,
wage rates of piece-rate workers must be based on the applicable daily minimum wage
determined by the Regional Tripartite Wages and Productivity Commission. To ensure
the payment of fair and reasonable wage rates, Article 101[12]
of the Labor Code provides
that “the Secretary of Labor shall regulate the payment of wages by results,
including pakyao, piecework and other nontime work.” The same statutory provision
also states that the wage rates should be based, preferably, on time and motion studies,
or those arrived at in consultation with representatives of workers’ and employers’
organizations. In the absence of such prescribed wage rates for piece-rate workers, the
ordinary minimum wage rates prescribed by the Regional Tripartite Wages and
Productivity Boards should apply. This is in compliance with Section 8 of the Rules
Implementing Wage Order Nos. NCR-02 and NCR-02-A -- the prevailing wage order at
the time of dismissal of private respondent, viz.:[13]
“SEC. 8. Workers Paid by Results. -- a) All workers paid by results including those
who are paid on piece work, takay, pakyaw, or task basis, shall receive not less than
the applicable minimum wage rates prescribed under the Order for the normal
working hours which shall not exceed eight (8) hours work a day, or a proportion
thereof for work of less than the normal working hours.
The adjusted minimum wage rates for workers paid by results shall be computed in
accordance with the following steps:
1) Amount of increase in AMW x 100 = % increase
Previous AMW
2) Existing rate/piece x % increase = increase in rate/piece;
3) Existing rate/piece + increase in rate/piece = adjusted rate/piece.
b) The wage rates of workers who are paid by results shall continue to be established
in accordance with Art. 101 of the Labor Code, as amended and its implementing
regulations.” (Underscoring supplied.)
On November 29, 1991, private respondent was orally informed of the termination
of her employment. Wage Order No. NCR-02, in effect at the time, set the minimum
daily wage for non-agricultural workers like private respondent at P118.00.[14]
This was
the rate used by the labor arbiter in computing the separation pay of private
respondent. We cannot find any abuse of discretion, let alone grave abuse, in the order
of the labor arbiter which was later affirmed by the NLRC.

7.
Moreover, since petitioner employed piece-rate workers, it should have inquired
from the secretary of labor about their prescribed specific wage rates. In any event,
there being no such prescribed rates, petitioner, after consultation with its workers,
should have submitted for the labor secretary’s approval time and motion studies as
basis for the wage rates of its employees. This responsibility of the employer is clear
under Section 8, Rule VII, Book III of the Omnibus Rules Implementing the Labor Code:
“Section 8. Payment by result. (a) On petition of any interested party, or upon its
initiative, the Department of Labor shall use all available devices, including the use of
time and motion studies and consultations with representatives of employers’ and
workers’ organizations, to determine whether the employees in any industry or
enterprise are being compensated in accordance with the minimum wage requirements
of this Rule.
(b) The basis for the establishment of rates for piece, output or contract work shall
be the performance of an ordinary worker of minimum skill or ability.
(c) An ordinary worker of minimum skill or ability is the average worker of the
lowest producing group representing 50% of the total number of employees engaged
in similar employment in a particular establishment, excluding learners, apprentices
and handicapped workers employed therein.
(d) Where the output rates established by the employer do not conform with the
standards prescribed herein, or with the rates prescribed by the Department of Labor
in an appropriate order, the employees shall be entitled to the difference between the
amount to which they are entitled to receive under such prescribed standards or rates
and that actually paid them by employer.”
In the present case, petitioner as the employer unquestionably failed to discharge
the foregoing responsibility. Petitioner did not submit to the secretary of labor a
proposed wage rate -- based on time and motion studies and reached after consultation
with the representatives from both workers’ and employers’ organization -- which would
have applied to its piece-rate workers. Without those submissions, the labor arbiter had
the duty to use the daily minimum wage rate for non-agricultural workers prevailing at
the time of private respondent’s dismissal, as prescribed by the Regional Tripartite
Wages and Productivity Boards. Put differently, petitioner did not take the initiative of
proposing an appropriate wage rate for its piece-rate workers. In the absence of such
wage rate, the labor arbiter cannot be faulted for applying the prescribed minimum wage
rate in the computation of private respondent’s separation pay. In fact, it acted and
ruled correctly and legally in the premises.
It is clear, therefore, that the applicable minimum wage for an eight-hour working
day is the basis for the computation of the separation pay of piece-rate workers like
private respondent. The computed daily wage should not be reduced on the basis of
unsubstantiated claims that her daily working hours were less than eight. Aside from its

8.
bare assertion, petitioner presented no clear proof that private respondent’s regular
working day was less than eight hours. Thus, the labor arbiter correctly used the full
amount of P118.00 per day in computing private respondent’s separation pay. We
agree with the following computation:[15]
“Considering therefore that complainant had been laid-off for more than six (6)
months now, we strongly feel that it is already reasonable for the respondent to pay
the complainant her separation pay of one month for every year of service, a fraction
of six (6) months to be considered as one whole year. Separation pay should be
computed based on her minimum salary as will be determined hereunder.
Separation pay 1 month = 16 years
P118.00 x 26 x 16 years = P49,088.00”
The amount “P118.00” represents the applicable daily minimum wage per Wage
Order Nos. NCR-02 and NCR-02-A; “26”, the number of working days in a month after
excluding the four Sundays which are deemed rest days; “16”, the total number of years
spent by private respondent in the employ of petitioner.
Second Issue: Computation of Separation Pay
Petitioner questions not only the basis for computing private respondent’s monthly
wage; it also contends that private respondent’s separation pay should not have been
computed at one month’s pay for every year of service. Because private respondent
should be considered retrenched, the separation pay should be “one month’s pay or at
least one/half (1/2) month pay for every year of service, whichever is higher, and not
one (1) month’s pay for every year of service as public respondent had ruled.”[16]
Petitioner misapprehended the ground relied upon by public respondent for
awarding separation pay. In this case, public respondent held that private respondent
was constructively dismissed, pursuant to Article 286 of the Labor Code which reads:
“ART. 286. When employment not deemed terminated. -- Thebonafide suspension
of the operation of a business or undertaking for a period not exceeding six (6)
months, or the fulfillment by the employee of a military or civic duty shall not
terminate employment. In all such cases, the employer shall reinstate the employee to
his former position without loss of seniority rights if he indicates his desire to resume
his work not later that one (1) month from his resumption of operations of his
employer or from his relief from the military or civic duty.”
Petitioner failed to discern that public respondent, in finding that the services of
private respondent were terminated, merely adopted by analogy the rule on constructive
dismissal. Since private respondent was not reemployed within six (6) months from the

9.
“suspension” of her employment, she is deemed to have been constructively
dismissed.[17]
Otherwise, private respondent will remain in a perpetual “floating
status.” Because petitioner had not shown by competent evidence any just cause for
the dismissal of private respondent, she is entitled to reinstatement[18]
or, if this is not
feasible, to separation pay equivalent to one (1) month salary for every year of
service. Private respondent, however, neither asked for reinstatement[19]
nor appealed
from the labor arbiter’s finding that she was not illegally dismissed; she merely prayed
for the grant of her monetary claims. Thus, we sustain the award of separation pay
made by public respondent,[20]
for employees constructively dismissed are entitled to
separation pay. Because she did not ask for more, we cannot give her more. We
repeat: she appealed neither the decision of the labor arbiter nor that of the
NLRC. Hence, she is not entitled to any affirmative relief.
Furthermore, we cannot sustain petitioner’s claim that private respondent was
retrenched. For retrenchment to be considered a ground for termination, the employer
must serve a written notice on the workers and the Department of Labor and
Employment at least one month before the intended date thereof.[21]
Petitioner did not
comply with this requirement.
Third Issue: Determination of Salary Differential
In light of the foregoing discussion, we must also dismiss petitioner’s challenge to
the computation of salary differential. As earlier observed, private respondent is entitled
to the minimum wage prevailing at the time of the termination of her employment. The
same rate of minimum wage, P118.00, should be used in computing her salary
differential resulting from petitioner’s underpayment of her wages. Thus, the labor
arbiter correctly deducted private respondent’s actually received wage of P60 a day
from the prescribed daily minimum wage of P118.00, and multiplied the difference by 26
working days, and subsequently by 16 years, equivalent to her length of service with
petitioner. Thus, the amount of P31,149.56 as salary differential.[22]
Petitioner argues that “the work of the private respondent is seasonal, being
dependent upon the availability of job-orders” and not “twenty-six (26) days a
month.”[23]
Further, petitioner contends that private respondent herself admitted she was
“a piece worker whose work [was] seasonal.”[24]
Contrary to the assertion of petitioner, neither the assailed Decision nor the
pleadings of private respondent show that private respondent’s work was
seasonal. More important, petitioner utterly failed to substantiate its allegation that
private respondent’s work was seasonal. We observe that the labor arbiter based the
computation of the salary differential on a 26-day month on the presumption that private
respondent’s work was continuous. In view of the failure of petitioner to support its
claim, we must sustain the correctness of this computation.
WHEREFORE, premises considered, the petition is DISMISSED and the assailed
Decision is AFFIRMED. Costs against petitioner.

10.
SO ORDERED
Narvasa, C.J., (Chairman), Romero, Melo, and Francisco, JJ., concur.
[1]
Second Division composed of Commissioner Rogelio I. Rayala, ponente, and Presiding Commissioner
Edna Bonto-Perez and Commissioner Domingo H. Zapanta, concurring.
[2]
Rollo, pp. 40-47.
[3]
Ibid., pp. 54-55.
[4]
Formerly NLRC NCR 00-01-00494-92.
[5]
Rollo, pp. 25-29.
[6]
Ibid., pp. 28-29.
[7]
Ibid., pp. 25-27.
[8]
Ibid., pp. 8-9; some of the words in the text are originally in upper case.
[9]
Ibid., p. 9.
[10]
Ibid., pp. 44-46.
[11]
Ibid., pp. 11-13; underscoring omitted.
[12]
The provision reads:
“Art. 101. Payment by results. - (a) The Secretary of Labor shall regulate the payment of wages by
results, including pakyao, piecework and other nontime work, in order to ensure the payment of
fair and reasonable wage rates, preferably through time and motion studies or in consultation with
representatives of workers’ and employers’ organizations.”
[13]
Issued in pursuance of Section 5, Rule IV of the National Wages and Productivity Commission Rules of
Procedure on Minimum Wage Fixing and took effect per Section 16 of the same Rules on
January 8, 1991.
[14]
Section 4 of the Rules Implementing Wage Order Nos. NCR-02 and NCR-02-A.
[15]
Labor arbiter’s decision, p. 4; rollo, p. 28.
[16]
Rollo, p. 15.
[17]
Manipon, Jr. vs. National Labor Relations Commission, 239 SCRA 451, 457, December 27,
1994; People’s Security, Inc. vs. NLRC, 226 SCRA 146, 152-153, September 8,
1993; International Hardware, Inc. vs. NLRC, 176 SCRA 256, 261, August 10, 1989.
[18]
“Article 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee
who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.” (As amended by Section 34 of RA 6715).
[19]
Rollo, pp. 142-145.
[20]
Toogue vs. National Labor Relations Commission, 238 SCRA 241, 246, November 18, 1994.
[21]
Article 283, Labor Code. See Catatista vs. NLRC, 247 SCRA 46, August 3, 1995.

11.
[22]
From the computation of the labor arbiter, the following figures were utilized:
“Underpayment Average (P60/day)
1/21/89 - 6/30/89 = 5.3 mos.
P64.00 (minimum wage [RA 6640] effective December 14, 1987) - P60.00
P4.00 x 26 x 5.3/mos. = P 551.20
7/1/89 - 10/31/90 = 16.0/mos.
P89.00 (minimum wage [RA 6727], effective July 1, 1989) - P60.00 =
P29.00 x26 x 16.0/mos. = P12,064.00
11/1/90 - 1/7/91 = 2.23/mos.
P106.00 (minimum wage-Wage Order No. [NCR-01], effective November
1,1990)- P60.00 = P46.00 x 26 x 2.23/mos. = P15,773.68
11/23/91 - 11/29/91 = 0.2/mo.
P118.00 (minimum wage-Wage Order No. [NCR-02], effective January 8, 1991) P100.00 = P18.00 x 26 x
0.2/mo. = P 93.60
Total P 31,149.56.”
[23]
Rollo, pp. 16-17.
[24]
Ibid., p. 155.
Republic of the Philippines
Congress of the Philippines
Metro Manila
First Special Session
Begun and held in Metro Manila on Friday the seventh day of June
nineteen hundred and ninety-six.
REPUBLIC ACT No. 8188
AN ACT INCREASING THE PENALTY AND IMPOSING DOUBLE INDEMNITY FOR VIOLATION OF
THE PRESCRIBED INCREASES OR ADJUSTMENTS IN THE WAGE RATES. AMENDING FOR THE
PURPOSE SECTION TWELVE OF REPUBLIC ACT NUMBERED SIXTY-SEVEN HUNDRED TWENTY-
SEVEN. OTHERWISE KNOWN AS THE WAGE RATIONALIZATION ACT.
Be it enacted by the Senate and House of Representatives of the
Philippines in the Congress assembled :
SECTION 1. Section 12 of Republic Act Numbered Sixty-seven hundred twenty- seven is hereby
amended to read to as follows:
SEC 12 Any person.corporation. trust. firm. parmersnip. association or entity which refuses or fails to
pay any of the prescribed increases or adjustments in the wage rales made in accordance with this Act
shall be punished by a fine not less than Twenty-five thousand pesos (P25.000) nor more than One
hundred thousand pesos (P100.000) or imprisonment of not less than two (2) years nor more than four

12.
(4) years or both such fine and imprisonment at the discretion of the court:
Provided. That any person convicted under this Act shall not be entitled to the benefits provided for under
the Probation Law.
The employer concerned shall be ordered to pay an arnount equivalent to double the unpaid benefits
owing to the employees:Provided. That payment of indemnity shall not absolve the employer from the
criminal liability imposable under this Act.
"If the violation is committed by a corporation.trust or firm. partnership, association or any other
entity, the penalty of imprisonment shall be imposed upon the entity's responsible officers including but
not limited to the president, vicepresident, chief executive officer, general manager, managing director or
partner.
SECTION 2. All laws, presidential decrees, executive orders, rules and
regulations or parts thereof inconsistent with the provisions of this Act are hereby repealed or modified
accordingly.
SECTION 3. This Act shall take effect fifteen (15) days after its complete publication in a newspaper of
general circulation.
Approved.
JOSE DE VENENCIA JR.
Speaker of the House of Representative
NEPTALI GONZALES
President of the Senate
This Act, which is a consolidation of Senate Bill No. 407 and House Bill No. 5808 was finally passed by
the Senate and the House of Representatives on June 7, 1996.
CAMILO L. SABIO
Secretary General
House of Reprentatives
HEZEL P. GACUTAN
Secretary of the Senate
Approved: June 11,1996
FIDEL V RAMOS
President of the Philippines
Top
Republic of the Philippines

13.
DEPARTMENT OF LABOR AND EMPLOYMENT
Manila
DEPARTMENT ORDER NO. 10
Series of 1998
Guidelines on the imposition of Double Indemnity
For Non-Compliance with the Prescribed Increases or Adjustments
In Wage Rates
Pursuant to the rule-making authority of the Secretary of Labor and Employment under Article 5 of
the Labor Code, as amended, and Section 13 of the Republic Act No. 6727, and to ensure uniformity in
the implementation of the provisions of Republic Act No. 8188 entitled "An Act Increasing the Penalty and
Imposing Double Indemnity for Violation of the Prescribed Increases or Adjustments in the Wage Rates,
amending for the Purpose Section Twelve of Republic Act Numbered Sixty-Seven Hundred Twenty
Seven. Otherwise known as Wage Rationalization Act". This Guidelines is hereby promulgated for the
guidelines of and compliance by all concerned.
SECTION 1. Coverage - This Guidelines shall apply to any person, corporation, trust, firm, partnership,
association, organization, or entity in the capacity of an employer.
SECTION 2. Definition of Terms - As used in this Guidelines, the following terms shall mean:
a. "Act" refers to Republic Act No. 8188.
b. "Department" refers to the Department of Labor and Employment.
c. "Regional Director" refers to the Director of the Regional Office of the Department.
d. "Board" refers to the Regional Tripartite Wages and Productivity Board.
e. "Employer" refers to any person, corporation, trust, firm, partnership association or entity
acting directly or indirectly in the interest of the employer in relation to an employee.
f. "Employee" refers to any individual employed by an employer.
g. "Wage Rates" refers to the lowest basic pay that the employer can pay his workers
including cost of living allowances as fixed by the Board, but excludes other wage-related
benefits such as overtime pay, bonuses, night shift differential pay, holiday pay, premium
pay, 13th month pay, premium pay, leave benefits, among others.
h. "Wage Order " refers to the order promulgated by the board pursuant to its wage fixing
authority.
i. "Prescribed increases or Adjustments" refer to the amount of increase or adjustment in
the wage rate of workers fixed by the Board which the Employer is mandated to pay upon
effectivity of a wage order
j. "Violation" refers to the refusal or failure to pay an employee of the prescribed increases
or adjustments as may be established by the Regional Director.
k. "Unpaid Benefits" refer to the prescribed wage rates which the employer failed to pay
upon the effectivity of a wage order exclusive of other wage-related benefits. "Unpaid
benefits" as herein understood shall be the principal basis for computing the double
indemnity.
l. "Double Indemnity" refers to the payment to a concerned employee of the prescribed
increases or adjustments in the wage rates, which was not paid by an employer in
amount equivalent to twice the unpaid benefits owing to such employee.

14.
m. "Notice of Inspection Result" refers to the inspection form duly accomplished and issued
by the labor standards enforcement officer to the employer or his representative after the
completion of the inspection. The notice shall specify the violations discovered, if any,
together with the officers recommendation and computation of the unpaid benefits due
each worker with an advice that the employer shall be liable for double indemnity in case
of refusal or failure to correct the violation within five (5) calendar days from receipt of
notice.
n. "Compliance order" refers to the order issued by the regional director, after due notice
and hearing conducted by himself or a duly authorized hearing officer finding that a
violation has been committed and directing the employer to pay the amount due each
worker within ten (10) calendar days from receipt thereof.
SECTION 3.Issuance of a Compliance Order. In cases where the Secretary of Labor and Employment of
the Regional Director has acquired jurisdiction over a violation as defined herein pursuant to the visitorial
and enforcement powers vested upon him by Article 128 (b) of the Labor Code as amended, he shall
have the power to issue a compliance order to give effect to the provisions of the Act. Such order shall be
subject to the following principles.
a. In case of routine inspection where the violation has been established after due notice
and hearing where appropriate the Regional Director shall, after (7) calendar days from
the employer's receipt of the notice of inspection result, issue a compliance order.
b. Ion case of complaint inspection, the Regional Director shall call for summary
investigation and after due notice and hearing shall, where appropriate issue a
compliance order.
c. The compliance order shall directly the employer to pay the amount due each worker
within ten (10) days from receipt thereof and to submit proof of compliance. The order
shall specify the amount due each worker and shall include the computation on which the
order was based.
d. Upon the finality of the compliance order, the Regional Director shall cause the issuance
of a writ of execution for its enforcement.
e. No compliance order shall be issued during the pendency of an application for exemption
from a wage order duly filed with the appropriate board.
SECTION 4.Double Indemnity, when to Start Period of Compution.
a. The computation for double indemnity as herein defined shall start from the effectivity of
the prescribed increases or adjustments as indicated in the wage order.
b. The basis for the computation of double indemnity shall be limited to the unpaid benefits
as defined herein.
c. Where there is partial compliance with the prescribed increase or adjustment the basis
for computing double indemnity shall be the balance of unpaid benefits reckoned from the
effectivity of the wage order.
SECTION 5. Supersession Clause - All rules, regulations, issuances, or parts thereof which are
consistent with this guidelines are deemed superseded or modified accordingly.

15.
SECTION 6. Separability Clause - If any provision or portion of this guidelines is declared void or
unconstitutional, the remaining portions or provisions hereof shall continue to be valid and effective.
SECTION 7. Effectivity - This Guidelines shall take effect fifteen (15) days after after its complete
publication in at least one (1) newspaper of general circulation.
04 May 1998
CRESENCIANO B. TRAJANO
Secretary
)_____
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 109328 August 16, 1994
ASSOCIATED LABOR UNIONS-TUCP representing its members, DMPIEU-ALU-TUCP, LOCAL
302 and/or GERONIMO DE LOS SANTOS, petitioners,
vs.
THE HON. NATIONAL LABOR RELATIONS COMMISSION (FIFTH DIVISION), ATTY. NOEL
AUGUSTO S. MAGBANUA in his capacity as Labor Arbiter, and DEL MONTE PHILIPPINES,
INC., respondents.
Seno, Mendoza & Associates for petitioners.
Nuevas&Nuevas Law Offices for private respondent.
MENDOZA, J.:
This is a special civil action of certiorari to set aside the decision and resolution dated June 22, 1992
and September 14, 1992 respectively of the National Labor Relations Commission (Fifth Division). 1
The antecedent facts are as follows:
On July 1, 1989, Republic Act No. 6727, otherwise known as the Wage Rationalization Act, took
effect, granting a P25.00/day increase in the statutory minimum wage of all workers and employees
in the private sector, subject to certain conditions.

16.
In implementation of the law, private respondent Del Monte Philippines, Inc. gave a P25.00/day
increase to the P54.00/day wages of its temporary employees or "broilers." Because the regular
employees, members of petitioner union, who were then receiving P100.80 a day were not granted a
similar increase, they complained to the management of private respondent.
On February 14, 1990, the parties executed a Memorandum Agreement wherein private respondent,
"in positive response to the union's representations and notwithstanding that it has no legal or
contractual obligation," granted the members of petitioner union a P10.00/day wage increase
effective January 1, 1990, subject to the latter's right to claim P15.00/day as balance, through
compulsory arbitration. 2
On June 5, 1990, petitioners (Associated Labor Union-TUCP, representing its members, DMPIEU-
ALU-TUCP, Local 302 and Geronimo de los Santos) filed a complaint against private respondent in
the National Labor Relations Commission (NLRC) Regional Arbitration Branch X in Cagayan de Oro
City. They alleged that a wage distortion 3
had been created by the grant to its temporary employees of
a P25.00/day salary increase under Republic Act No. 6727, thereby reducing to P21.80 from the previous
P46.80, the difference in salaries between the regular employees (herein petitioners) and the temporary
employees.
On November 27, 1990, the Labor Arbiter, Noel Augusto S. Miranda, dismissed the complaint for
lack of merit. He found no wage distortion in view of a series of salary increases which respondent
had granted to petitioners
vis-a-vis the temporary employees, as shown by the following table:
Pay of Union Pay of Temporary Difference
Members Employees
A. Prior to July 1, 1989 P100.80/day P54.00/day P46.80
B. Effective July 1, 1989 P100.80/day P79.00/day P21.80 (Under R.A. No. 6727
giving P25.00/day
increase to the tempo-
rary employees)
C. Effective Sept. 1, 1989 P115.80/day P79.00/day P36.80
(Under CBA giving
P15.00/day increase to
the union members)
D. Effective Jan. 1, 1990 P125.80/day P79.00/day P46.80
(Under Agreement on
Feb. 14, 1990 giving
P10.00/day increase
to the union members)
E. Effective Sept. 1, 1990 P140.80/day P79.00/day P61.80
(Under CBA giving
P15.00/day increase
to the union members)
On appeal the NLRC affirmed the Labor Arbiter's findings and denied petitioners' motion for
reconsideration. Hence this petition.

17.
Petitioners contend that the increases mandated by the parties' Collective Bargaining Agreement
and the voluntary agreement dated February 14, 1990 should not be considered as having corrected
the wage distortion, since employee benefits derived from law are exclusive, distinct, and separate
from those obtained through negotiation and agreement.
The contention has no merit.
Art. 124 of the Labor Code, as amended by Republic Act No. 6727, expressly provides that where
the application of any prescribed wage increase by virtue of a law or wage order issued by any
Regional Board results in distortions of the wage structure within an establishment, the employer
and the union shall negotiate to correct the distortions. The law recognizes, therefore, the validity of
negotiated wage increases to correct wage distortions. The legislative intent is to encourage the
parties to seek solution to the problem of wage distortions through voluntary negotiation or
arbitration, rather than strikes, lockouts, or other concerted activities of the employees or
management. 4
Recognition and validation of wage increases given by employers either unilaterally or as
a result of collective bargaining negotiations for the purpose of correcting wage distortions are in keeping
with the public policy of encouraging employers to grant wage and allowance increases to their
employees which are higher than the minimum rates of increases prescribed by statute or administrative
regulation. 5
As this Court stated in Apex Mining, Inc. v. NLRC: 6
To compel employers simply to add on legislated increases in salary or allowances
without regard to what is already paid, would be to penalize employers who grant
their workers more than the statutorily prescribed minimum rates of increases.
Clearly, this would be counterproductive so far as securing the interest of labor is
concerned.
Thus in Cardona v. NLRC, 7
it was held that there was no wage distortion where the employer made
salary adjustments in terms of restructing of benefits and allowances and there was an increase pursuant
to the CBA.
There is thus, to use the language of the law, no "effective obliterat[ion of] the distinction embodied
in [private respondent's] wage structure based on skills, length of service, or other logical basis of
differentiation" in this case. For it is undisputed that the difference in wages between petitioners and
the temporary employees is now even greater than it used to be prior to the grant of the P25.00/day
increase to the latter pay pursuant to Republic Act No. 6727.
Finally, whether or not a wage distortion exists by reason of the grant of a wage increase to certain
employees is essentially a question of fact. In this case, the findings of the Labor Arbiter, affirmed by
the NLRC, that no wage distortion exists being based on substantial evidence, are entitled to respect
and finality. 8
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.
#Footnotes

18.
1 Per Commissioner Leon G. Gonzaga, Jr., Commissioners Musib M. Buat and
Oscar N. Bella, concurring.
2 Exhibit G, Rollo, p. 38.
3 Under Art. 124 of the Labor Code, as amended by Republic Act No. 6727, a "wage
distortion" is defined as "a situation where an increase in prescribed wage rates
results in the elimination or severe contraction of intentional quantitative differences
in wage or salary rates between and among employee groups in an establishment as
to effectively obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differention."
4 Ilaw at BuklodngMangagagawa v. NLRC, G.R. No. 91980, June 27, 1991, 198
SCRA 586, 595.
5 National Federation of Labor v. NLRC and Franklin Baker Company of the
Philippines (Davao Plant), G.R. No. 103586, July 21, 1994.
6 G.R. No. 86200, February 25, 1992, 206 SCRA 497, 501.
7 G.R. No. 89007, March 11, 1991, 195 SCRA 92, 97.
8 Cardona v. NLRC, supra; Metropolitan Bank and Trust Company Employees
Union-ALU-TUCP v. NLRC and Metropolitan Bank and Trust Company, G.R. No.
102636, September 10, 1993, 226 SCRA 268.
))))_____
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 93044 March 26, 1992
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), petitioner,
vs.
NATIONAL WAGES COUNCIL and BUKLOD NG MANGGAGAWA SA RCPI-NFL, respondents.
GUTIERREZ, JR., J.:
The focal issue for the Court's determination is whether or not petitioner Radio Communications of
the Philippines, Inc. (RCPI) was, as of December 31, 1985, a distressed employer entitled to
exemption from compliance with Wage Order No. 6 for the year 1985-1986.
On October 26, 1984, the President of the Philippines promulgated Wage Order No. 6
which provided for the increase of statutory minimum wage rates and cost of living allowances in the

19.
private sector. Distressed enterprises, however, were granted exemption from compliance with said
wage order for a period not exceeding two years.
On October 30, 1984, respondent National Wages Council (NWC) promulgated NWC Policy
Guidelines No. 8 which spelled out the following criteria for exemption:
Sec. 5.Criteria for Exemption.
A. Actual Losses
(1) In the case of stock corporation, partnership,single proprietorship
or non-stock/non-profit organization engaged in business activities or
charging fees for their services:
(a) a full exemption of one (1) year may be granted when
the accumulated losses as of the end of the period have impaired by
25% or more the paid up capital as of the end of the last full
accounting period in the case of corporation, or losses for the period
shall have impaired by 25% or more the total invested capital at the
beginning of the last full accounting period in the case of partnership
and single proprietorship (Emphasis supplied) (Rollo, p. 7)
RCPI filed an application for exemption for the year 1984-1985 which was approved by the NWC. In
approving the exemption, NWC stated:
After a thorough study of the supporting documents on file and the supplemental
pleadings relative to the above subject, the Executive Committee is of the opinion
that RCPI'S continued operational losses in 1984 and 1985 and the undertaking
under the Compromise Agreement dated October 24, 1985 under PD 1713 and
Wage Order No. 1, in addition to the requirements of Wage Order Nos. 2, 3, 5 & 6,
would directly contribute to the financial dislocation of the company, unless remedial
measures are instituted to avert such situation. (Rollo, p. 24)
RCPI thereafter filed its second application for exemption for the year 1985-1986. This time, the
NWC, on December 29, 1986, disapproved the application on the ground that RCPI did not quality
as a distressed establishment because it had retained earnings of P10,278,275 in its unaudited
balance sheet as of December 31, 1985.
RCPI filed four motions for reconsideration which were all denied by respondent NWC. In denying
the fourth motion for reconsideration, the NWC justified its action by pointing out that RCPI was not a
distressed company since it had retained earnings of P8,327,528 based on its audited balance sheet
as of December 31, 1985.
Hence, this petition.
RCPI alleges that respondent NWC acted with grave abuse of discretion amounting to excess of
jurisdiction in disapproving its second application for exemption.
To prove that its accumulated losses have impaired its capital by more than 25% thereby entitling it
to continued exemption for the second year, petitioner RCPI advances the following computation:

20.
Retained earnings as of December 31, 1984 P19,820,785
Deduct: Net loss for 1985 12,067,834
—————
7,752,951
Less: Appraisal Increment transferred to
Retained Earnings
As of 1984 P27,809,943
For 1985 484,577 28,294,520
—————
Accumulated losses absorbed by Appraisal
Increment P20,541,569
—————
Paid up capital 22,589,970
% of Impairment: 20,541,569
—————
22,589,970 90%
(Petitioner's Memorandum, Rollo, p. 278. Figures used are based on audited financial statements.)
The petitioner proceeds with the assertion that while it had retained earnings of P8,237,528 as of
1985, such figure is in its entirety composed of appraisal increments which are purely theoretical
increases resulting from the revaluation of its property equipment and not actual or realized profits
arising from business operations. (Rollo, p. 280) Hence, the petitioner contends that, while on paper
RCPI may theoretically appear to be reaping revenues because of a positive retained earning
balance, in reality it is suffering actual losses. (Rollo, p. 281) And since appraisal increments (not
being earnings, profit or income) were erroneously transferred to constitute the entire retained
earnings, then the same appraisal increments must be subtracted to get the actual accumulated loss
of RCPI. (Rollo, p. 283) This accumulated loss, not the retained earnings figure appearing in the
financial statement, is the basis for the computation of the minimum 25% capital impairment for
purposes of exemption (Rollo, p. 280).
Based on the foregoing computation, RCPI's accumulated losses had impaired its paid-up capital by
90% and therefore it qualified as a distressed establishment entitled to such exemption. (Rollo, p.
283)
This is not the first time this issue has come before us. In our resolution in
BuklodngManggagawasa RCPI-NFL v. Hon. Augusto Sanchez, G.R. No. 77503, July 13, 1988, this
Court sustained NWC's grant of exemption to RCPI under Wage Order No. 6 inspite of the fact that
RCPI's retained earnings balance as of 1984 was also in positive terms. The Court affirmed the
questioned NWC order which "found that private respondent(RCPI) was incurring losses in its
operations, justifying its aforesaid exemption, a finding that appears to be based on a thorough study
of the documents and pleadings on record."
Significantly, the Solicitor General after there extensions of time in the present case, from June 21,
1990 to August 24, 1990, stated that, after judicious scrutiny of the record and in consonance with
applicable law and jurispredunce, the could not, without violating the law, sustain the findings of
public respondent NWC. He asked to be excused from representing the NWC in this case.

21.
To be exempt from Wage Order No. 6, the impairment formula applied by NWC is:
Sec. 5. Criteria for Exemption:
A. Actual losses
1. In the case of stock corporation
xxxxxxxxx
a) A full exemption of one (1) year may be granted when accumulated losses as of
the end of the period have impaired by 25% or more the paid capital as of the end of
the last full accounting period in case of corporation, . . . .
b) A partial exemption of six (6) months may be granted when accumulated losses as
of the end of the period have impaired by 20% or more but less that 25% the paid up
capital in the case of corporation . . . . (NWC Policy Guidelines No. 8, emphasis
supplied) (Rollo, p. 55)
We note from the above that the impairment formula speaks of actual losses in contra-distinction
to actual profit or income. The formula requires accumulated losses, not for that year alone but for a
period of time backwards until the given cut off date.
Since the purpose of the wage exemption is to assist financially beleaguered companies, the
distinction between real or actual income and theoretical earnings arising from accounting principles
becomes important.
To arrive at a distinction, we first adopt certain definitions:
Retained earnings (or income) — accumulated net income, less distributions to
stockholders and transfers to paid-in capital accounts. . . . Also known by the older
title earned surplus (Eric L. Kohler, A Dictionary for Accountants, 5th Ed., p. 409)
Earnings — A general term embracing revenue profit, or income, (Id., p. 188)
Income — 1. Money or money equivalent earned or accrued . . . and arising
from sales or rentals of any type of goods or services, commissions, interest, gifts
recoveries from damages and windfallsfrom any outside source.
2. Sales of goods or services; in this sense, the term is less used than
formerly, revenue now being preferred.
3. An addition, a receipt; often in contrast with outgo; as, the income and outgo of
stores.
4. . . . (b) the remainder of revenue after deducting costs of sales and operating other
expenses (= net income) (Id., pp. 249-250).
Profit — 1. A general term for the excess of revenue, proceeds, or selling price over
related costs;any pecuniary benefit arising from a commercial operation, from the

22.
practice of a profession, or from one or more individual transactions of any person.
(Id., p. 379).
Revenue — 1.Sales of products, merchandise and services, and earnings from
interest, dividends, rents and wages; transactions resulting in increases in
assets.(Id., p. 410).
FURTHER:
Retained Earnings (or Earned Surplus) is the accumulated amount
of profits and earnings of the business which has not been capitalized, offset by
losses, or given out to stockholders as property dividends. (D.S. Pasion, Introductory
Accounting, p. 195).
The retained earnings is credited with the income of the period which may include:
a. earnings of the business in its line of endeavor, such as the selling of merchandise
or services;
b. compensation received for the lending of capital, and
c. profits or incomes of any kind resulting from the exchange of assets.
It is debited with the loss of the period which may include:
a. costs, expenses, and losses connected with its regular line of business:
b. expenses and losses suffered in the financing of the business from outside
sources, other than from stockholders;
c. expenses and losses of any kind in the exchange of asset; and
d. distribution of income earned to stockholders.
Profit is the excess of the incoming assets over outgoing capital . . . (Id., p. 291).
(Rollo, pp. 58-59)
To add to have above, the Statement of Financial Accounting Standards No. 12 issued by the
Accounting Standards Council defines certain terms as follows:
Appraised or appraisal value, also termed as replacement cost or reproduction cost,
is the revalued amount of property, plant and equipment determined by recognized
specialists.
Accumulated depreciation on appraisal, also, termed as observed depreciation, is the
accumulated depreciation based on the appraised or appraisal value per appraiser's
report.
Sound value, also net appraised value, is the value per appraisal computed by
deducting observed depreciation from appraised value.

23.
Net book value is computed by deducting accumulated depreciation on costs from
historical cost.
Appraisal increase is computed by deducting historical cost from appraised values.
Revaluation increment is the excess of sound value over net book value. (At p. 4)
The transfer from revaluation increment on property to retained earnings representing the
accumulated depreciation on appraisal increase already charged to operations was approved by the
RCPI Board of Directors on April 12, 1982. The depreciation on appraisal increase previously
deducted from actual income was added to retained earnings.
This transfer resulted in the P8,237,528.00 retained earnings pinpointed by the respondent NWC.,
Actually, this covers a six year period as follows:
Retained Earning as of 1979 P3,797,215.00
Add: Net Income (Loss)
1980 (P7,434,493)
1981 (3,149,329)
1982 2,630,447
1983 (1,579,372)
1984 (2,559,372)
1985 (12,067,834) (21,000,658.00)
T O T A L (17,203,443.00)
Dividends Declared
1980 P799,642
1982 2,053,907 (2,853,549.00)
Balance of Retained
Earnings/Deficit as of 1985 (P20,056,992.00)
Add: Transfer of Portion of
revaluation increment in
property to retained earnings
(depreciation on appraisal increase)
1980 P8,571,430
1981 7,526,837
1982 4,316,459
1983 3,927,412
1984 3,467,805
1985 484,577 28,294,520.00
RETAINED EARNINGS AS OF 1985 P8,237,528.00
(Rollo, pp. 141-142)
RCPI argues that the amount of P28,294,520.00 representing the portion of revaluation increment
(depreciation on appraisal increase) transferred to retained earnings should be deducted from the
balance of retained earnings to arrive at the operational loss of P20,056,992.00.
The public respondent states that this is wrong because it would be tantamount to double deduction
since said amount has already been yearly deducted from operations through additional depreciation
charges starting 1980.

24.
As earlier stated, the purpose of wage exemptions is to help financially distressed companies meet
their labor costs without endangering the existence or viability of the firm upon which both
management and labor depend for a living. Under the spirit of Wage Order No. 6, it is the actual
ability of a firm to spend for its current needs and costs and not how the assests and liabilities of a
firm may appear in the technical jargon of higher accounting principles which is important. For
instance, no matter how solid a firm may be in terms of essential fixed assets, its ability to pay daily
payrolls will depend only on actual income unless some of the fixed assets are sold for wages and
salaries.
True, the retained earnings account constitutes a company's accumulated profits or losses.
However, it is not enough to treat said earnings as "earnings" in the real sense of the word for
purposes of wage exemptions. We have to inquire into the true nature and composition of the
retained earnings account.
The figures of the respondent NWC show that if we do not include the transfer of portions of
revaluation increment in property to retained earnings, RCPI had an income deficit of P20,056,992
from 1980 to 1985. It is only when we add to the retained earnings account, the portion of the
revaluation increment in property for the same period for a total of P28,294,520.00 that we get a
positive retained earnings balance of P8,237,528.00. Without the transfer of the revaluation
increment in property to the retained earnings account, there would be no positive balance. There
would be a deficit.
Should we treat revaluation increment in property as income for purposes of determining wage
levels?
To a company striving to meet daily payrolls, it is not of any comfort to say that the "appraisal
increment transferred to retained earnings" represents actual earnings which were previously
deducted from the actual net income figure through additional depreciation expense resulting from
appraisal. In purely technical accounting terms, they may be considered as merely being returned
not to the net income account but to the retained earnings balance to which the net income account
is ultimately closed. This is to keep the books straight.
For purposes of compliance with the law on wage exemptions, however, the retained earnings
arising from appraisal increment do not represent hard cash but merely theoretical increases
resulting from upward valuations of old fixed assets. There is no income or profit from the sale of
goods or services. No income is realized from the reappraisal of fixed assets until such a time as the
machinery, equipment, and other fixed assets are sold or disposed of in the event of a liquidation of
assets.
As stated in the preamble clauses of Wage Order No. 6, it is intended to enable workers to cope with
price increases through the adjustment of their wages but "with due regard to insure increased
productivity and viability of business and industry."
The NWC ruling treats the revaluation increment as similar to the sale of fixed assets. In the same
way, however, that machinery and equipment should not be sold in order to meet increases in the
wages of workers (for this would destroy not only the company but the employment of the workers
themselves) so should a similar attitude be adopted when machinery or equipment is not sold but
merely revalued.
On December 16, 1986, the NWC, through then Secretary Augusto B. Sanchez — its chairman,
approved the application for exemption of RCPI and stated, among other things, that:

25.
The Executive Committee, therefore, recognizes the necessity to set aside
technicalities required by existing criteria under NWC Policy Guidelines Nos. 6 and 8
and bestow greater significance to the actual financial condition of RCPI. (Rollo, p.
24; Emphasis supplied)
NWC decided to give RCPI a breathing spell because of numerous obligations that the company had
to meet. Under a compromise agreement, RCPI bound itself to pay 30% of whatever was due the
employees under PD 1713 for the mandatory third year increases and Wage Order No. 1 for the first
and second year. The balance of 70% was subject to negotiations. (See G.R. No. 77503,
BuklodngManggagawa v. Sanchez, supra, Rollo, p. 168). NWC found that RCPI's compliance with
the Wage Orders would result in the company's financial dislocation and, accordingly, granted it the
prayed for exemption.
We see no reason from the records why a different treatment should apply in the following year.
Simply because there were changes or transfers of the same items to differently named accounts in
the books of the company, it does not follow that it thereby ceased to be entitled to exemptions.
WHEREFORE, the petition is hereby GRANTED. The questioned decision and resolutions of the
National Wages Council are SET ASIDE and the application for exemption from Wage Order No. 6
is GRANTED.
SO ORDERED.
Bidin, Davide, Jr. and Romero, JJ., concur.
Feliciano, J., is on leave.
Republic of the Philippines
Supreme Court
Manila
SECOND DIVISION
C. PLANAS COMMERCIAL G.R. No. 144619
and/or MARCIAL COHU,
Petitioners, Present:
- versus - *PUNO, Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
NATIONAL LABOR RELATIONS TINGA, and
COMMISSION (Second Division), **CHICO-NAZARIO, JJ.

26.
ALFREDO OFIALDA,
DIOLETO MORENTE Promulgated:
and RUDY ALLAUIGAN,
Respondents. November 11, 2005
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
D E C I S I O N
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari filed by C. Planas
Commercial and/or MarcialCohu, (petitioners) assailing the Decision of the Court
of Appeals (CA) dated January 19, 2000[1] which affirmed in toto the decision of
the National Labor Relations Commission (NLRC) and the Resolution dated
August 15, 2000[2]denying petitioners’ motion for reconsideration.
On September 14, 1993, DioletoMorente, Rudy Allauigan and Alfredo
Ofialda (private respondents) together with 5 others[3] filed a complaint for
underpayment of wages, nonpayment of overtime pay, holiday pay, service
incentive leave pay and premium pay for holiday and rest day and night shift
differential against petitioners with the Arbitration Branch of the NLRC. The case
was docketed as NLRC Case No. 00-09-05804-93.[4]
In their position paper, private respondents alleged that petitioner Cohu,
owner of C. Planas Commercial, is engaged in wholesale of plastic products and
fruits of different kinds with more than 24 employees; that private respondents
were hired by petitioners on January 14, 1990, May 14, 1990 and July 1, 1991,
respectively, as helpers/laborers; that they were paid below the minimum wage law
for the past 3 years; that they were required to work for more than 8 hours a day
without overtime pay; that they never enjoyed holiday pay and did not have a rest
day as they worked for 7 days a week; and they were not paid service incentive
leave pay although they had been working for more than one year. Private
respondent Ofialda asked for night shift differential as he had worked from 8 p.m.
to 8 a.m. the following day for more than one year.

27.
Petitioners filed their comment admitting that private respondents were their
helpers who used to accompany the delivery trucks and helped in the loading and
unloading of merchandise being distributed to clients; that they usually started their
work from 10 a.m. to 6 p.m.; that private respondents stopped working with
petitioners sometime in September 1993 as they were already working in other
establishments/stalls in Divisoria; that they only worked for 6 days a week; that
they were not entitled to holiday and service incentive leave pays for they were
employed in a retail and service establishment regularly employing less than ten
workers.
On December 6, 1994, a decision[5] was rendered by the Labor Arbiter
dismissing private respondents’ money claims for lack of factual and legal basis.
He made the following findings:
The basic issue raised before us is whether or not complainants are entitled
to the money claims.
The rule in this jurisdiction is that employers who are regularly employing
not more than ten workers in retail establishments are exempt from the coverage
of the minimum wage law.
In connection therewith and in consonance with Sec. 1, Rule 131 of the
Rules of Court, it is incumbent upon the party to support affirmative allegation
that an employer regularly employs more than ten (10) workers.
In the case at bar, complainants failed to substantiate their claim that the
respondent establishment regularly employs twenty (sic) (24) workers.
Accordingly, we have no factual basis to grant salary differentials to
complainants. In the same context, under Sec. 1 (b), Rule IV and Sec. 1(g), Rule
V of the Implementing Rules of the Labor Code, complainants are not entitled to
legal holiday pay and service incentive leave pay.
We also do not have sufficient factual basis to award overtime pay and
premium pay for holiday and rest day because complainants failed to substantiate
that they rendered overtime and during rest days.[6]
Private respondents filed their appeal with the NLRC which was opposed by
petitioners. However, pending the appeal, private respondents Morente[7] and
Allauigan[8] filed their respective motions to dismiss with release and quitclaim
before the NLRC.

28.
On September 30, 1997, the NLRC rendered its decision,[9] the dispostive
portion of which reads:
WHEREFORE, in view of all the foregoing considerations, the decision
appealed from should be, as it is hereby, MODIFIED by directing the respondent
to pay Alfredo Ofialda, DiolitoMorente and Rudy Allauigan the total amount of
Seventy-Five Thousand One Hundred Twenty Five Pesos (P75,125.00)
representing their combined salary differentials, holiday pay, and service
incentive leave pay.
The NLRC made the following ratiocinations:
… On claims for underpayment/non-payment of legally mandated wages
and fringe benefits where exemption from coverage of the minimum wage law is
put up as a defense, he who invokes such an exemption (usually the employer)
has the burden of showing the basis for the exemption like for instance the fact of
employing regularly less than ten workers.
In the instant case, complainants alleged that despite employing more than
twenty-four (24) workers in his establishment, hence covered by the minimum
wage law, nevertheless the individual respondent did not pay his workers the legal
rates and benefits due them since their employment. By way of answer,
respondents countered that they employ less than ten (10) persons, hence the
money claims of complainants lack factual and legal basis.
Stated differently, against complainants’ charge of underpayment in wages
and non-payment of fringe benefits legally granted to them, the respondents raised
the defense of exemption from coverage of the minimum wage law and in support
thereof alleged that they regularly employed less than ten (10) workers to serve as
basis for their exemption under the law, they (respondents) must prove that they
employed less than ten workers, instead of more than twenty-four (24) workers as
alleged by the complainants.
However, apart from their allegation, respondents presented no evidence
to show the number of workers they employed regularly. This failure is fatal to
respondents’ defense. This in turn brings us to the question of whether the
complainants were underpaid and unpaid of legal holiday pay and service
incentive leave pay due them.
Stated earlier are the different amounts that each complainant was
receiving by way of salary on certain periods of their employment with
respondents, which amounts according to complainants are “way below the
minimum wage then prevailing.” Considering that respondents failed to present

29.
the payrolls or vouchers which could prove otherwise, the money claims deserve
favorable consideration.
Taking note of the 3 year prescription, the period covered is from
September 14, 1990 to September 14, 1993 when the instant case was filed, and
based on a 6-day work per week, the underpayment (salary differential), legal
holiday pay, and service incentive leave pay due to complainants, as computed,
are as follows:
Salary Diff. Holiday Pay SILP
1. A.
OFIALDA
P14,934.00 P2,362.00 P1,180.00
2. D.
MORENTE
23,964.00 3,258.00 1,730.00
3. R. ALLAUIGAN 22,609.00 3,258.00 1,730.00
With respect to the other claims, i.e., overtime pay and premium pay for
holiday and rest day, We find no reason to disturb the Labor Arbiter’s ruling
thereon, that there is no sufficient factual basis to award the claims because
complainants failed to substantiate that they rendered overtime and during rest
days. These claims, unlike claims for underpayment and non-payment of fringe
benefits mandated by law, need to be proven by the claimants.[10]
Petitioners filed a petition for certiorari[11] with prayer for temporary
restraining order and preliminary injunction before this Court on November 26,
1997. Respondents were required to file their Comment but only public
respondent NLRC, through the Solicitor General, complied therewith. In a
Resolution dated June 28, 1999,[12] the petition was referred to the CA pursuant to
our ruling in St. Martin Funeral Homes vs. NLRC.
On January 19, 2000,[13] the CA denied the petition for lack of merit and
affirmed in toto the NLRC decision. It said:
Having claimed exemption from the coverage of the minimum wage laws
or order, it was incumbent upon petitioner to prove such claim. Apart from
simply denying private respondents’ allegation that it employs more than 24
workers in its business, petitioner failed to adduce evidence to prove that it is,
indeed, a “retail establishment” which employs less than ten (10) employees. Its
failure to present records of its workers and their respective wages gives rise to
the presumption that these are adverse to its claims. Indeed, it is hard to believe
that petitioner does not keep such records. More so, considering private

30.
respondents claim that petitioner “employs more than twenty four (24)
employees and engaged in both wholesale and retail business of fruits by volume
on CONTAINER BASIS, not by price of fruit, but by container size retail,
involving millions of pesos capital, fruits coming from China, Australia and the
United States” (p. 170, Rollo).
Needless to say, the inclusion of respondents Morente and Allauigan in the
NLRC award is in order. In its decision, public respondent awarded P75,125.00,
representing the combined salary differentials, holiday pay and service incentive
leave pay of all three (3) private respondents. Of this, P28,952.00 is earmarked
for respondent Morente, and P27,597.00 for respondent Allauigan, both of whom
executed quitclaims after receiving P3,000.00 and P6,000.00 respectively, from
petitioner.
On this score, the Court quotes with approval the arguments advanced by
the Solicitor General thus:
While a compromise agreement or amicable settlement is
not against public policy per se it must be shown however that it
was “voluntarily entered into and represents a reasonable
settlement, and the consideration for the quitclaim is credible and
reasonable” (Santiago v. NLRC, 198 SCRA 111 [1991]). For the
law usually looks with disfavor upon quitclaims and releases
executed by employees usually resulting from a compromise with
their employers. (Velasco v. DOLE, 200 SCRA 201 [1991]). This
is so because the employers and the employees obviously do not
stand on equal footing. Driven against the wall by the employer,
the employee is in no position to resist the money offered. (Lopez
Sugar Corp v. FFW-PLU, 189 SCRA 179 [1990]).
Thus, Fuentes v. NLRC, 167 SCRA 767 (1988) enunciates:
In the absence of any showing that the compromise
settlement and the quitclaims and releases entered into and made
by the employees were free, fair and reasonable- especially as to
the amount or consideration given by the employer in exchange
therefore, the fact that they executed the same and received their
monetary benefits thereunder does not militate against them. The
Law does not consider as valid any agreement to receive less
compensation than what a worker is entitled to receive.
In the case at bar, it will be noticed that the vouchers dated
September 13, 1995 and September 20, 1996 (pp. 194 and 197,
NLRC Record), submitted by petitioners (pp. 191-192, Record),
show that private respondent Allauigan was only paid P6,000.00
and Morente, P3,000.00 --- when they are legally entitled to

31.
receiveP28,952.00 and P27,597.00, respectively. Under the
circumstances, subject compromise settlements cannot be
considered valid and binding upon the NLRC as they do not
represent fair and reasonable settlements, nor do they demonstrate
voluntariness on the part of private respondents Morente and
Allauigan. These employees should still be paid the full amounts
of their salary differentials, holiday pay and service incentive leave
pay less the amounts they had already received under the
compromise settlements with petitioners (pp. 174-175,
Rollo).
Parenthetically, the Court notes that petitioner availed itself of this remedy
without first seeking a reconsideration of the assailed decision. As a general rule,
certiorari will not lie unless an inferior court, has through a motion for
reconsideration, a chance to correct the errors imputed to it. While the rule admits
of exceptions, petitioner has not shown any reason for this Court not to apply said
rule, which would have justified outright dismissal of the petition were it not for
the Court’s desire to resolve the case not on a technicality but on the merits.[14]
Petitioners’ motion for reconsideration was denied in a Resolution dated
August 15, 2000.[15]
Hence, the instant petition for review on certiorari filed by petitioners.
Petitioners insist that C. Planas Commercial is a retail establishment
principally engaged in the sale of plastic products and fruits to the customers for
personal use, thus exempted from the application of the minimum wage law; that it
merely leases and occupies a stall in the Divisoria Market and the level of its
business activity requires and sustains only less than ten employees at a time.
Petitioners contend that private respondents were paid over and above the
minimum wage required for a retail establishment, thus the Labor Arbiter is correct
in ruling that private respondents’ claim for underpayment has no factual and legal
basis. Petitioners claim that since private respondents alleged that petitioners
employed 24 workers, it was incumbent upon them to prove such allegation which
private respondents failed to do.
Petitioners also contend that the CA erred in applying strictly the rules of
evidence against them by holding that it was incumbent upon them to prove that
their company is exempted from the minimum wage law. They contend that they
could not present records of their workers and their respective wages because by

32.
the very nature of their business, the system of management is very loose and
informal, thus salaries and wages are paid by merely handing the money to the
worker without the latter being required to sign anything as proof of receipt. Thus,
it would be unreasonable to insist upon petitioner to present documents that they
do not possess or keep in the first place.
We are not persuaded.
R.A. No. 6727 known as the Wage Rationalization Act provides for the
statutory minimum wage rate of all workers and employees in the private sector.
Section 4 of the Act provides for exemption from the coverage, thus:
Sec. 4.
. . .
(c) Exempted from the provisions of this Act are household or domestic
helpers and persons employed in the personal service of another, including family
drivers.
Retail/service establishments regularly employing not more than ten (10)
workers may be exempted from the applicability of this Act upon application with
and as determined by the appropriate Regional Board in accordance with the
applicable rules and regulations issued by the Commission. Whenever an
application for exemption has been duly filed with the appropriate Regional
Board, action on any complaint for alleged non-compliance with this Act shall be
deferred pending resolution of the application for exemption by the appropriate
Regional Board.
In the event that applications for exemptions are not granted, employees
shall receive the appropriate compensation due them as provided for by this Act
plus interest of one percent (1%) per month retroactive to the effectivity of this
Act.
Clearly, for a retail/service establishment to be exempted from the coverage
of the minimum wage law, it must be shown that the establishment is regularly
employing not more than ten (10) workers and had applied for exemptions with
and as determined by the appropriate Regional Board in accordance with the
applicable rules and regulations issued by the Commission. Petitioners’ main
defense in controverting private respondents’ claim for underpayment of wages is

33.
that they are exempted from the application of the minimum wage law, thus the
burden of proving[16] such exemption rests on petitioners. Petitioners had not
shown any evidence to show that they had applied for such exemption and if they
had applied, the same was granted.
In Murillo vs. Sun Valley Realty, Inc.[17] where the respondents claim that
petitioners therein are not entitled to service incentive leave pay inasmuch as
establishment employing less than ten (10) employees are exempted by the Labor
Code and the Implementing Rules from paying service incentive leave pay, we
held:
…..the clear policy of the Labor Code is to include all establishments,
except a few classes, under the coverage of the provision granting service
incentive leave to workers. Private respondents' claim is that they fell within the
exception. Hence, it was incumbent upon them to prove that they belonged to a
class excepted by law from the general rule. Specifically, it was the duty of
respondents, not of petitioners, to prove that there were less than ten (10)
employees in the company. Having failed to discharge its task, private
respondents must be deemed to be covered by the general rule, notwithstanding
the failure of petitioners to allege the exact number of employees of the
corporation. In other words, petitioners must be deemed entitled to service
incentive leave.[18]
Moreover, in C. Planas Commercial vs. NLRC,[19] where herein petitioners
are also involved in a case filed by one of its employees, we ruled:
Petitioners invoke the exemption provided by law for retail establishments
which employ not more than ten (10) workers to justify their non-liability for the
salary differentials in question. They insist that PLANAS is a retail establishment
leasing a very small and cramped stall in the Divisoria market which cannot
accommodate more than ten (10) workers in the conduct of its business.
We are unconvinced. The records disclose de los Reyes' clear entitlement
to salary differentials. Well-settled is the rule that factual findings of labor
officials who are deemed to have acquired expertise in matters within their
jurisdiction are generally accorded not only respect but even finality and bind this
Court when supported by substantial evidence or that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion. Thus,
as long as their decisions are devoid of any unfairness or arbitratriness in the
process of their deduction from the evidence proferred by the parties before them,
all that is left is our stamp of finality by affirming the factual findings made by
them. In this case, the award of salary differentials by the NLRC in favor of de
los Reyes was made pursuant to RA 6727 otherwise known as the Wage

34.
Rationalization Act, and the Rules Implementing Wage Order Nos. NCR-01 and
NCR-01-A and Wage Order Nos. NCR-02 and NCR-02-A.
Petitioners claim exemption under the aforestated law. However, the best
proof that they could have adduced was their approved application for exemption
in accordance with applicable guidelines issued by the Commission. Section 4,
subpar. (c) of RA 6727 categorically provides:
Retail/service establishments regularly employing not more than
ten (10) workers may be exempted from the applicability of this Act
upon application with and as determined by the appropriate Regional
Board in accordance with the applicable rules and regulations issued by
the Commission. Whenever an application for exemption has been duly
filed with the appropriate Regional Board, action on any complaint for
alleged non-compliance with this Act shall be deferred pending
resolution of the application for exemption by the appropriate Regional
Board. In the event that applications for exemptions are not granted,
employees shall receive the appropriate compensation due them as
provided for by this Act plus interest of one percent (1%) per month
retroactive to the effectivity of this Act (emphasis supplied).
Extant in the records is the fact that petitioners had persistently raised the
matter of their exemption from any liability for underpayment without
substantiating it by showing compliance with the aforecited provision of law. It
bears stressing that the NLRC affirmed the Labor Arbiter’s award of salary
differentials due to underpayment on the ground that de los Reyes' claim therefor
was not even denied or rebutted by petitioners.
More importantly, NLRC correctly upheld the Labor Arbiter's finding
that PLANAS employed around thirty (30) workers. We have every reason to
believe that petitioners need at least thirty (30) persons to conduct their business
considering that Manager Cohu did not submit any employment record to prove
otherwise. As employer, Manager Cohu ought to be the keeper of the
employment records of all his workers. Thus, it was well within his means to
refute any monetary claim alleged to be unpaid. His inability to produce the
payrolls from their files without any satisfactory explanation can be interpreted no
less as suppression of vital evidence adverse to PLANAS.
Petitioners aver that the CA erred in ruling that private respondents Morente
and Allauigan are still entitled to monetary awards despite the latter’s execution of
release and quitclaims because the settlement was not voluntarily entered into by
private respondents. Petitioners insist that both private respondents Morente and
Allauigan voluntarily entered into an amicable settlement with them on September
17 and 18, 1995, respectively; that they were the ones who initiated the talks for
settlement and who pegged the amount; that they both voluntarily appeared before
the Labor Arbiter to move for the dismissal of their case insofar as their claims are

35.
concerned as well as submitted to the Labor Arbiter their respective quitclaims and
releases which were duly subscribed before the Labor Arbiter and duly notarized.
We find merit in petitioners’ argument.
It has been held that not all quitclaims are per se invalid or against public
policy, except (1) where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or (2) where the terms of settlement are
unconscionable on their face. In these cases, the law will step in to annul the
questionable transactions.[20] Such quitclaim and release agreements are regarded
as ineffective to bar the workers from claiming the full measure of their legal
rights.[21]
We find these two instances not present in private respondents Allauigan and
Morente’s case. They failed to refute petitioners’ allegation that the settlement was
voluntarily made as they had not filed any pleadings before the CA. Notably, we
have required private respondents to file their comment on the instant petition,
however, they failed to do so. They were then required to show cause why they
should not be disciplinarily dealt with or held in contempt.[22] However, they still
failed to file their comment, thus, they were imposed a fine of P1,000.00[23] which
was subsequently increased to P2,000.00 as there was still no compliance. In a
Resolution dated July 22, 2002, the Court ordered the National Bureau of
Investigation to arrest and detain private respondents and the private respondents to
file their comment.[24] As private respondents could not be located at their given
address and they are not known in their locality, the order of arrest and
commitment was returned unserved,[25] thus the Court required the Office of the
Solicitor General to file the comment in behalf of all the respondents.[26] The Court
finds such inaction on the part of private respondents Allauigan and Morente an
indication that they already relented in their claims and gives credence to
petitioners’ claim that they had voluntarily executed the release and quitclaim and
the motion to dismiss.
The CA found that the subject compromise agreements are not valid
considering that they did not represent the fair and reasonable settlements, i.e., that
private respondent Allauigan was only paid P6,000.00 and Morente, P3,000.00 ---
when they are legally entitled to receive P28,952.00 and P27,597.00, respectively.

36.
We do not agree. It bears stressing that at the time of the execution of the
release and quitclaim, the case filed by private respondents against petitioners was
already dismissed by the Labor Arbiter and it was pending appeal before the
NLRC. Private respondents could have executed the release and quitclaim because
of a possibility that their appeal with the NLRC may not be successful. Since there
was yet no decision rendered by the NLRC when the quitclaims were executed, it
could not be said that the amount of the settlement is unconscionable. In any
event, no deception has been established that would justify the annulment of
private respondents quitclaims.[27] In Mercer vs. NLRC,[28] we held that:
In Samaniego v. NLRC, we ruled that: “A quitclaim executed in favor of a
company by an employee amounts to a valid and binding compromise agreement
between them."
Recently, we held that in the absence of any showing that petitioner was
"coerced or tricked" into signing the above-quoted Quitclaim and Release or that
the consideration thereof was very low, she is bound by the conditions thereof.
As computed by the NLRC, private respondent Alfredo Ofialda is entitled to
the payment of P14,934.00 as salary differential, P2,362.00 as legal holiday pay
andP1,180.00 as service incentive leave pay, all in the total amount of P18,476.00.
WHEREFORE, the petition is PARTLY GRANTED. The Decision of the
Court of Appeals dated January 19, 2000 and its Resolution dated August 15, 2000
are AFFIRMED with MODIFICATION that petitioners are ordered to pay
private respondent Alfredo Ofialda the total amount of P18,476.00 and the
monetary awards in favor of private respondents Rudy Allauigan and
DioletoMorente are hereby DELETED.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice

37.
WE CONCUR:
REYNATO S. PUNO
Associate Justice
ROMEO J. CALLEJO, SR.
Associate Justice
DANTE O. TINGA
Associate Justice
(On leave)
MINITA V. CHICO-NAZARIO
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified
that the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Acting Chief Justice

38.
* Acting Chief Justice.
** On leave.
[1] Penned by Justice Artemio G. Tuquero, concurred in by Justices Ramon U. Mabutas, Jr. and Mercedes
Gozo-Dadole, Ninth Division; Rollo, pp. 115-122.
[2] Penned by Justice Ramon U. Mabutas, Jr., concurred in by Justices Mercedes Gozo-Dadole and Elvi
John S. Asuncion, Special Former Ninth Division; Rollo, p. 131.
[3] Jonel Patron, Rogelio Amar, Jaime Vili, JunnyVillamor and Roger Ofialda subsequently amicably settled
their claims.
[4] Rollo, pp. 24-34.
[5] Id., at pp. 36-40; penned by Labor Arbiter Geobel A. Bartolabac.
[6] Id., at pp. 39-40.
[7] Id., at p. 51.
[8] Id., at p. 52.
[9] Id., at pp. 54-62; penned by Commissioner Victoriano R. Calaycay, concurred in by Commissioners Raul
T. Aquino and Rogelio I. Rayala; NLRC Case No. 008537-95
[10] Id., at pp. 58-62.
[11] Docketed as G.R. No. 131348.
[12] Id., at p. 97.
[13] Id., at pp. 115-122.
[14] Id., at pp. 119-121.
[15] Id., at p. 131.
[16] Section 1 of Rule 131 of the Rules on Evidence
Burden of proof is the duty of a party to present evidence on the facts in issue necessary to establish his
claim or defense by the mount of evidence required by law.
[17] No. L-67272, June 30, 1988, 163 SCRA 271.
[18] Id., at p. 277.
[19] G.R. No. 121696, February 11, 1999, 303 SCRA 49.
[20] Unicane Workers Union-CLUP vs. National Labor Relations Commission, G.R. No. 107545, September
9, 1996, 261 SCRA 573, 585-586.
[21] JGB and Associates, Inc. vs. National Labor Relations Commission, G.R. No. 109390, March 7, 1996,
254 SCRA 457, 465.
[22] Resolution dated February 5, 2001; Rollo, p. 141.
[23] Resolution dated September 12, 2001.
[24] Rollo, pp.160-161.
[25] Id., at p. 168.
[26] Id., at p. 175-176.
[27] Veloso vs. Department of Labor and Employment, G.R. No. 87297, August 5, 1991, 200 SCRA 201, 205.
[28] G.R. No. 105606, March 16, 1995, 242 SCRA 376.
FIRST DIVISION
[G.R. No. 113097. April 27, 1998]
NASIPIT LUMBER COMPANY, INC., and PHILIPPINE WALLBOARD
CORPORATION, petitioners, vs. NATIONAL WAGES AND
PRODUCTIVITY COMMISSION, WESTERN AGUSAN WORKERS
UNION (WAWU-ULGWP LOCAL 101), TUNGAO LUMBER

39.
WORKERS UNION (TULWU-ULGWP LOCAL 102) and UNITED
WORKERS UNION (UWU-ULGWP LOCAL 103), respondents.
D E C I S I O N
PANGANIBAN, J.:
The Labor Code, as amended by RA 6727 (the Wage Rationalization Act), grants
the National Wages and Productivity Commission (NWPC) the power to prescribe rules
and guidelines for the determination of appropriate wages in the country. Hence,
“guidelines” issued by the Regional Tripartite Wages and Productivity Boards (RTWPB)
without the approval of or, worse, contrary to those promulgated by the NWPC are
ineffectual, void and cannot be the source of rights and privileges.
The Case
This is the principle used by the Court in resolving this petition for certiorari under
Rule 65 of the Rules of Court assailing the Decision[1] dated March 8, 1993,
promulgated by the NWPC[2] which disposed as follows:
“WHEREFORE, premises considered, the Decision appealed from is hereby
MODIFIED. The application for exemption of Anakan Lumber Company is
hereby GRANTED for a period of one (1) year retroactive to the date subject
Wage Orders took effect until November 21, 1991. The applications for
exemption of Nasipit Lumber Company and Philippine Wallboard Corporation
are hereby DENIED for lack of merit, and as such, they are hereby ordered to
pay their covered workers the wage increases under subject Wage Orders
retroactive to the date of effectivity of said Wage Orders plus interest of one
percent (1%) per month.
SO ORDERED.”
Petitioners also challenge the NWPC’s Decision[3] dated November 17, 1993 which
denied their motion for reconsideration.
The RTWPB’s August 1, 1991 Decision, which the NWPC modified, disposed as
follows:
“WHEREFORE, all foregoing premises considered, the instant petition for
exemption from compliance with Wage Order Nos. RX-01 and RX-01-A is
hereby approved under and by virtue of criteria No. 2, Section 3 of RTWPB
Guidelines No. 3 on Exemption, dated November 26, 1990, for a period of

40.
only one (1) year, retroactive to the date said Wage Order took effect up to
November 21, 1991.
SO ORDERED.”[4]
The Facts
The undisputed facts are narrated by the NWPC as follows:
“On October 20, 1990, the Region X [Tripartite Wages and Productivity] Board
issued Wage Order No. RX-01 which provides as follows:
‘Section 1. Upon the effectivity of this Wage Order, the increase in minimum
wage rates applicable to workers and employees in the private sector in
Northern Mindanao (Region X) shall be as follows:
a. The provinces of Agusan del Norte, Bukidnon, Misamis Oriental, and the
Cities of Butuan, Gingoog, and Cagayan de Oro - - - - -P13.00/day
b. The provinces of Agusan del Sur, Surigao del Norte and Misamis
Occidental, and the Cities of SurigaoOroquieta, Ozamis and Tangub - - - - -
P11.00/day
c. The province of Camiguin P9.00/day’
Subsequently, a supplementary Wage Order No. RX-01-A was issued by the
Board on November 6, 1990 which provides as follows:
‘Section 1. Upon the effectivity of the original Wage Order RX-01, all workers
and employees in the private sector in Region X already receiving wages
above the statutory minimum wage rates up to one hundred and twenty pesos
(P120.00) per day shall also receive an increase of P13, P11, P9 per day, as
provided for under Wage Order No. RX-01;’
Applicants/appellees Nasipit Lumber Company, Inc. (NALCO), Philippine
Wallboard Corporation (PWC), and Anakan Lumber Company (ALCO),
claiming to be separate and distinct from each other but for expediency and
practical purposes, jointly filed an application for exemption from the above-
mentioned Wage Orders as distressed establishments under Guidelines No.
3, issued by the herein Board on November 26, 1990, specifically Sec. 3(2)
thereof which, among others, provides:

41.
‘A. For purposes of this Guidelines the following criteria to determine whether
the applicant-firm is actually distressed shall be used.
x xx xxx xxx
2. Establishment belonging to distressed industry - an establishment that is
engaged in an industry that is distressed due to conditions beyond its
control as may be determined by the Board in consultation with DTI and
NWPC. (Underscoring supplied)
x xx xxx xxx
Applicants/appellees aver that they are engaged in logging and integrated
wood processing industry but are distressed due to conditions beyond their
control, to wit: 1) Depressed economic conditions due to worldwide
recession; 2) Peace and order and other emergency-related problems causing
disruption and suspension of normal logging operations; 3) Imposition of
environmental fee for timber production in addition to regular forest charges;
4) Logging moratorium in Bukidnon; 5) A reduction in the annual allowable
volume of cut logs of NALCO & ALCO by 59%; 6) Highly insufficient raw
material supply; 7) Extraordinary increases in the cost of fuel, oil, spare parts,
and maintenance; 8) Excessive labor cost/production ratio that is more or less
47%; and 9) Lumber export ban.
On the other hand, oppositor/appellant Unions jointly opposed the application
for exemption on the ground that said companies are not distressed
establishments since their capitalization has not been impaired by 25%.”[5]
Citing liquidity problems and business decline in the wood-processing industry, the
RTWPB approved the applicants’ joint application for exemption in this wise:
“1. The Board considered the arguments presented by petitioners and the
oppositors. The Board likewise took note of the financial condition of
petitioner firms. One of the affiliates, Anakan Lumber Company, is confirmed
to be suffering from capital impairment by: 14:80% in 1988, 71.35% in 1989
and 100% in 1990. On the other hand, NALCO had a capital impairment of
6.41%. 13.53% and 17.04% in 1988, 1989 and 1990, respectively, while PWC
had no capital impairment from 1988 to 1990. However, the Board also took
note of the fact that petitioners are claiming for exemption, not on the strength
of capital impairment, but on the basis of belonging to a distressed industry -
an establishment that is engaged in an industry that is distressed due to

42.
conditions beyond its control as may be determined by the Board in
consultation with DTI and NWPC.
2. Inquiries made by the Board from the BOI and the DTI confirm that all
petitioner-firms are encountering liquidity problems and extreme difficulty
servicing their loan obligations.
3. A perusal of the Provincial Trade and Industry Development Plan for
Agusan del Norte and Butuan City where petitioners are operating their
business, confirms the existence of a slump in the wood-processing industry
due to the growing scarcity of [a] large volume of raw materials to feed the
various plywood and lumber mills in the area. A lot of firms have closed and
shifted to other ventures, the report continued, although the competitive ones
are still in operation.
4. The Board took note of the fact that most of the circumstances
responsible for the financial straits of petitioners are largely external, over
which petitioners have very little control. The Board feels that as an
alternative to closing up their business[es] which could bring untold detriment
and dislocation to [their] 4,000 workers and their families, petitioners should
be extended assistance and encouragement to continue operating - so that
jobs could thereby be preserved during these difficult times. One such way is
for the Board to grant them a temporary reprieve from compliance with the
mandated wage increase specifically W.O. RX-01 and RX-01-A only.”[6]
Dissatisfied with the RTWPB’s Decision, the private respondents lodged an appeal
with the NWPC, which affirmed ALCO’s application but reversed the applications of
herein petitioners, NALCO and PWC. The NWPC reasoned:
“The Guidelines No. 3 dated November 26, 1990, issued by the herein Board
cannot be used as valid basis for granting applicants/appellees application for
exemption since it did not pass the approval of this Commission.
Under the Rules of Procedure on Minimum Wage Fixing dated June 4, 1990,
issued by this Commission pursuant to Republic Act 6727, particularly Section
1 of Rule VIII thereof provides that:
‘Section 1. Application For Exemption. Whenever a wage order provides for
exemption, applications thereto shall be filed with the appropriate Board which
shall process the same,subject to guidelines issued by the Commission.”
(Underscoring supplied)

43.
Clearly, it is the Commission that is empowered to set [the] criteria on
exemption from compliance with wage orders. While the Boards may issue
supplementary guidelines on exemption, the same should first pass the
Commission for the purpose of determining its conformity to the latter’s
general policies and guidelines relative thereto. In fact, under the “Guidelines
on Exemption from Compliance with the Prescribed Wage/Cost of Living
Allowance Increases Granted by the Regional Tripartite Wages and
Productivity Boards” dated February 25, 1991, issued by the Commission,
there is a provision that “(T)he Board may issue supplementary guidelines for
exemption x xx subject to review/approval by the Commission”. (Section
11). In the case at bar, after the Commission Secretariat made some
comments on said Guidelines No. 3, the same was never submitted again for
[the] Commission’s approval either justifying its original provisions or
incorporating the comments made thereon. Until and unless said Guidelines
No. 3 is approved by the Commission, it has no operative force and effect.
The applicable guidelines on exemption therefore is that one issued by the
Commission dated February 25, 1991, the pertinent portion of which reads:
“Section 3. CRITERIA FOR EXEMPTION
x xx xxx xxx
2. Distressed Employers/Establishment:
a. In the case of a stock corporation, partnership, single proprietorship or
non-stock, non-profit organization engaged in business activity or charging
fees for its services.
When accumulated losses at end of the period under review have impaired by
at least 25 percent the:
- Paid-up-capital at the end of the last full accounting period preceding the
application, in the case of corporations;
- Total invested capital at the beginning of the last full accounting period
preceding the application, in the case of partnership and single proprietor-
ships”(Underscoring supplied)
A perusal of the financial documents on record shows that for the year 1990,
which is the last full accounting period preceding the applications for
exemption, appellees NALCO, ALCO, and PWC incurred a capital impairment

44.
of 1.89%, 28.72%, and 5.03%, respectively. Accordingly, based on the
criteria set forth above in the NWPC Guidelines on Exemption, only the
application for exemption of ALCO should be approved in view of its capital
impairment of 28.72%.
We are not unmindful of the fact that during the Board hearing conducted,
both labor and management manifested their desire for a uniform decision to
apply to all three (3) firms. However, we cannot grant the same for want of
legal basis considering that we are required by the rules to decide on the
basis of the merit of application by an establishment having a legal personality
of its own.”[7]
In denying petitioners’ motion for reconsideration, public respondent explained:
“The fact that applicant companies relied in good faith upon Guidelines No. 3
issued by the Board a quo, the same is not sufficient reason that they should
be assessed based on the criteria of said Guidelines considering that it does
not conform to the policies and guidelines relative to wage exemption issued
by this Commission pursuant to Republic Act 6727. Consequently, it has no
force and effect. As such, said Guidelines No. 3 cannot therefore be a source
of a right no matter if one has relied on it in good faith. In like manner that the
workers, who are similarly affected, cannot be bound thereof.
Moreover, even assuming that Guidelines No. 3 conforms to the procedural
requirement, still, the same cannot be given effect insofar as it grants
exemption by industry considering that the subject Wage Order mentioned
only distressed establishments as one of those to be exempted thereof. It did
not mention exemption by industries. Well-settled is the rule that an
implementing guidelines [sic] cannot expand nor limit the provision of [the] law
it seeks to implement. Otherwise, it shall be considered ultra vires. And,
contrary to applicant companies’ claim, this Commission does not approve
rules implementing the Wage Orders issued by the Regional Tripartite Wages
and Productivity Boards. Perforce, it cannot be said that this Commission
has approved the Rules Implementing Wage Order No[s]. RX-01 and
RX-01-A.”[8]
Hence, this recourse.[9]
The Issue
Petitioners raise this solitary issue: