11. PEDRO CHAVEZ vs.

NATIONAL LABOR RELATIONS COMMISSION, SUPREME

PACKAGING, INC. and ALVIN LEE, Plant Manager, [G.R. NO. 146530 : January 17,
2005] (Minimum Wage, Definition of Wage)

The respondent company is in the business of manufacturing cartons and other packaging
materials for export and distribution. It engaged the services of the petitioner as truck
driver. As such, the petitioner was tasked to deliver the respondent company's products
from its factory to its various customers.

The respondent company furnished the petitioner with a truck. Most of the petitioner's
delivery trips were made at nighttime, commencing at 6:00 p.m. and returning thereto in
the afternoon two or three days after.

Sometime in 1992, the petitioner expressed to respondent his desire to avail himself of the
benefits that the regular employees were receiving such as overtime pay, nightshift
differential pay, and 13th month pay, among others. When the respondent failed to give
petitioner the benefits, the petitioner filed a complaint for regularization with the Regional
Arbitration of the NLRC. Before the case could be heard, respondent company terminated
the services of the petitioner.

Consequently, the petitioner filed an amended complaint against the respondents for illegal
dismissal, unfair labor practice and non-payment of overtime pay, nightshift differential pay,
13th month pay, among others.

The respondents, for their part, denied the existence of an employer-employee relationship
between the respondent company and the petitioner. They averred that the petitioner was
an independent contractor as evidenced by the contract of service which they entered into.
This contract of service was renewed twice. Except for the rates to be paid to the petitioner,
the terms of the contracts were substantially the same. The relationship of the respondent
company and the petitioner was allegedly governed by this contract of service.

The respondents, likewise, maintained that they did not dismiss the petitioner. Rather, the
severance of his contractual relation with the respondent company was due to his violation
of the terms and conditions of their contract. The petitioner allegedly failed to observe the
minimum degree of diligence in the proper maintenance of the truck he was using, thereby
exposing respondent company to unnecessary significant expenses of overhauling the said
truck.

ISSUE:

1) Whether there existed an employer-employee relationship between the respondent

company and the petitioner.

2) Whether the petitioner is an independent contractor.

3) Whether the respondents validly dismissed the petitioner.

RULING:

1. Yes. The elements to determine the existence of an employment relationship are:

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(1) the selection and engagement of the employee;

(2) the payment of wages;

(3) the power of dismissal; and

(4) the employer's power to control the employee's conduct. The most important element is
the employer's control of the employee's conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it. All the four elements are
present in this case.

First. Undeniably, it was the respondents who engaged the services of the petitioner without
the intervention of a third party.

Second. Wages are defined as "remuneration or earnings, however designated, capable of

being expressed in terms of money, whether fixed or ascertained on a time, task, piece or
commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work
done or to be done, or for service rendered or to be rendered." That the petitioner was paid
on a per trip basis is not significant. This is merely a method of computing compensation
and not a basis for determining the existence or absence of employer-employee
relationship. One may be paid on the basis of results or time expended on the work, and
may or may not acquire an employment status, depending on whether the elements of an
employer-employee relationship are present or not. In this case, it cannot be gainsaid that
the petitioner received compensation from the respondent company for the services that he
rendered to the latter.

Moreover, under the Rules Implementing the Labor Code, every employer is required to pay
his employees by means of payroll (Book III, Rule X, Sec. 6(a)). The payroll should
show, among other things, the employee's rate of pay, deductions made, and the amount
actually paid to the employee. Interestingly, the respondents did not present the payroll to
support their claim that the petitioner was not their employee, raising speculations whether
this omission proves that its presentation would be adverse to their case.

Third. The respondents' power to dismiss the petitioner was inherent in the fact that they
engaged the services of the petitioner as truck driver. They exercised this power by
terminating the petitioner's services albeit in the guise of "severance of contractual relation"
due allegedly to the latter's breach of his contractual obligation.

Fourth. As earlier opined, of the four elements of the employer-employee relationship, the
"control test" is the most important. Compared to an employee, an independent contractor
is one who carries on a distinct and independent business and undertakes to perform the
job, work, or service on its own account and under its own responsibility according to its
own manner and method, free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results thereof.17 Hence, while
an independent contractor enjoys independence and freedom from the control and
supervision of his principal, an employee is subject to the employer's power to control the
means and methods by which the employee's work is to be performed and accomplished. 18

The contract of service to the contrary notwithstanding, the factual circumstances earlier
discussed indubitably establish the existence of an employer-employee relationship between

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the respondent company and the petitioner. It bears stressing that the existence of an
employer-employee relationship cannot be negated by expressly repudiating it in a
contract and providing therein that the employee is an independent contractor when, as in
this case, the facts clearly show otherwise. Indeed, the employment status of a person
is defined and prescribed by law and not by what the parties say it should be.22

Having established that there existed an employer-employee relationship between the

respondent company and the petitioner, the Court shall now determine whether the
respondents validly dismissed the petitioner.

2)No. The Court is hard put to believe the respondents' allegation that the petitioner was an
independent contractor engaged in providing delivery or hauling services when he did not
even own the truck used for such services. Evidently, he did not possess substantial
capitalization or investment in the form of tools, machinery and work premises. Moreover,
the petitioner performed the delivery services exclusively for the respondent company for a
continuous and uninterrupted period of ten years.

3. No. As a rule, the employer bears the burden to prove that the dismissal was for a valid
and just cause.23 In this case, the respondents failed to prove any such cause for the
petitioner's dismissal. They insinuated that the petitioner abandoned his job.

To constitute abandonment, these two factors must concur:

(1) the failure to report for work or absence without valid or justifiable reason; and

(2) a clear intention to sever employer-employee relationship.24

Obviously, the petitioner did not intend to sever his relationship with the respondent
company for at the time that he allegedly abandoned his job, the petitioner just filed a
complaint for regularization, which was forthwith amended to one for illegal dismissal. A
charge of abandonment is totally inconsistent with the immediate filing of a complaint for
illegal dismissal, more so when it includes a prayer for reinstatement.25

Neither can the respondents' claim that the petitioner was guilty of gross negligence in the
proper maintenance of the truck constitute a valid and just cause for his dismissal.

Gross negligence implies a want or absence of or failure to exercise slight care or

diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences
without exerting any effort to avoid them.26 The negligence, to warrant removal from
service, should not merely be gross but also habitual.27 The single and isolated act of the
petitioner's negligence in the proper maintenance of the truck alleged by the respondents
does not amount to "gross and habitual neglect" warranting his dismissal.

The Court agrees with the following findings and conclusion of the Labor Arbiter:

'As against the gratuitous allegation of the respondent that complainant was not dismissed
from the service but due to complainant's breach of their contractual relation, i.e., his
violation of the terms and conditions of the contract, we are very much inclined to believe
complainant's story that his dismissal from the service was anchored on his insistent
demand that he be considered a regular employee. Because complainant in his right senses
will not just abandon for that reason alone his work especially so that it is only his job

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where he depends chiefly his existence and support for his family if he was not aggrieved by
the respondent when he was told that his services as driver will be terminated on February
23, 1995.28

Thus, the lack of a valid and just cause in terminating the services of the petitioner renders
his dismissal illegal. Under Article 279 of the Labor Code, an employee who is unjustly
dismissed is entitled to reinstatement, without loss of seniority rights and other privileges,
and to the payment of full backwages, inclusive of allowances, and other benefits or their
monetary equivalent, computed from the time his compensation was withheld from him up
to the time of his actual reinstatement.29 However, as found by the Labor Arbiter, the
circumstances obtaining in this case do not warrant the petitioner's reinstatement. A more
equitable disposition, as held by the Labor Arbiter, would be an award of separation pay
equivalent to one month for every year of service from the time of his illegal dismissal up to
the finality of this judgment in addition to his full backwages, allowances and other benefits.

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12. AKLAN ELECTRIC COOPERATIVE INCORPORATED (AKELCO) vs. NATIONAL
LABOR RELATIONS COMMISSION, [G.R. No. 121439. January 25, 2000.],
(Minimum Wage, Rule: No Work, No Pay (A fair days work for a fair days labor))

Petitioner temporarily transferring the Office from Lezo, Aklan to Kalibo, Aklan on the
ground that the office at Lezo was dangerous and unsafe. The continuous operation of the
petitioners business office in Lezo Aklan would pose a serious and imminent threat to
petitioners officials and other employees, hence the necessity of temporarily transferring
the operation of its business office from Lezo to Kalibo. Such transfer was done in the
exercise of a management prerogative. With the transfer of petitioners business office from
its former office, Lezo, to Kalibo, Aklan, its equipments, records and facilities were also
removed from Lezo and brought to the Kalibo office where petitioners official business was
being conducted.

Respondents, prior to the temporary transfer of the office of AKELCO, were continuously
performing their task and were duly paid of their salaries at their main office located at
Lezo, Aklan.

Respondents believe that the transfer of their office from Lezo, Aklan to Kalibo, Aklan being
illegal for failure to comply with the legal requirements under P.D. 269, the complainants
remained and continued to work at the Lezo Office until they were illegally locked out
therefrom by the respondents. Despite the illegal lock out however, complainants continued
to report daily to the location of the Lezo Office, prepared to continue in the performance of
their regular duties.

These complainants were requested to report to work at the Kalibo office, but despite these
lawful orders of the General Manager, the complainants did not follow and defied said orders
and issuance of the General Manager; the petitioner passed a Resolution resisting and
denying the claims of these complainants, under the principle of "no work no pay".

However, the complainants were paid of their wages and other fringe benefits from January,
1992 to May, 1992 and from March 19, 1993 up to the time complainants filed the instant
cases. In the interegnum, from June 16, 1992 to March 18, 1993, complainants were not
paid of their salaries, hence these claims.

ISSUE:

Whether or not private respondents refused to work under the lawful orders of the
petitioner AKELCO management; hence they are covered by the "no work, no pay" principle
and are thus not entitled to the claim for unpaid wages.

RULING:

Yes.

Page 5
It was not for private respondents to declare the managements act of temporarily
transferring the AKELCO office to Kalibo as an illegal act. There is no allegation nor proof
that the transfer was made in bad faith or with malice.

They, by their own allegations, have unilaterally committed acts in violation of

managements/respondents directives purely classified as management prerogative. They
have taken amongst themselves declaring managements acts of temporarily transferring
the holding of the AKELCO office from Lezo to Kalibo, Aklan as illegal. It is never incumbent
upon themselves to declare the same as such. It is lodged in another forum or body legally
mantled to do the same.

"The employer as owner of the business, also has inherent rights, among which are the
right to select the persons to be hired and discharge them for just and valid cause; to
promulgate and enforce reasonable employment rules and regulations and to modify,
amend or revoke the same; to designate the work as well as the employee or employees to
perform it; to transfer or promote employees; to schedule, direct, curtail or control
company operations; to introduce or install new or improved labor or money savings
methods, facilities or devices; to create, merge, divide, reclassify and abolish departments
or positions in the company and to sell or close the business.

Even as the law is solicitous of the welfare of the employees it must also protect the right of
an employer to exercise what are clearly management prerogatives. The free will of
management to conduct its own business affairs to achieve its purpose cannot be denied.
The transfer of assignment of a medical representative from Manila to the province has
therefore been held lawful where this was demanded by the requirements of the drug
companys marketing operations and the former had at the time of his employment
undertaken to accept assignment anywhere in the Philippines. (Abbot Laboratories (Phils.),
Inc., Et. Al. v. NLRC, Et Al., G.R. No. L-76959, Oct. 12, 1987).

It is the employers prerogative to abolish a position which it deems no longer necessary,

and the courts, absent any findings of malice on the part of the management, cannot erase
that initiative simply to protect the person holding office (Great Pacific Life Assurance
Corporation v. NLRC, Et Al., G.R. No. 88011, July 30, 1990)."cralaw virtua1aw library

Private respondents were dismissed by petitioner effective January 31, 1992 and were
accepted back by petitioner, as an act of compassion, subject to the condition of "no work,
no pay" effective March 1993 which explains why private respondents were allowed to draw
their salaries again. Notably, the letter-request of Mr. Leyson for the payment of backwages
and other fringe benefits in behalf of private respondents was made only in April 1993, after
a Board Resolution accepting them back to work out of compassion and humanitarian
reason. It took private respondents about ten months before they requested for the
payment of their backwages, and the long inaction of private respondents to file their claim
for unpaid wages cast doubts as to the veracity of their claim.

The age-old rule governing the relation between labor and capital, or management and
employee of a "fair days wage for a fair days labor" remains as the basic factor in
determining employees wages. If there is no work performed by the employee there can be

Page 6
no wage or pay unless, of course, the laborer was able, willing and ready to work but was
illegally locked out, suspended or dismissed, or otherwise illegally prevented from working,
a situation which we find is not present in the instant case. It would neither be fair nor just
to allow private respondents to recover something they have not earned and could not have
earned because they did not render services at the Kalibo office during the stated period.

Finally, we hold that public respondent erred in merely relying on the computations of
compensable services submitted by private respondents. There must be competent proof
such as time cards or office records to show that they actually rendered compensable
service during the stated period to entitle them to wages. It has been established that the
petitioners business office was transferred to Kalibo and all its equipments, records and
facilities were transferred thereat and that it conducted its official business in Kalibo during
the period in question. It was incumbent upon private respondents to prove that they
indeed rendered services for petitioner, which they failed to do. It is a basic rule in evidence
that each party must prove his affirmative allegation. Since the burden of evidence lies with
the party who asserts the affirmative allegation, the plaintiff or complainant has to prove his
affirmative allegations in the complaint and the defendant or the respondent has to prove
the affirmative allegation in his affirmative defenses and counterclaim.

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13. FIRST DIVISION

[G.R. No. 128845. June 1, 2000.]

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE) vs. HON. LEONARDO

A. QUISUMBING; and INTERNATIONAL SCHOOL, INC., [G.R. No. 128845. June 1,
2000.] (Minimum Wage, Rule: Equal Pay for Work of Equal Value)

Private respondent International School, Inc. (the School, for short), pursuant to
Presidential Decree 732, is a domestic educational institution established primarily for
dependents of foreign diplomatic personnel and other temporary residents. To enable the
School to continue carrying out its educational program and improve its standard of
instruction, Section 2(c) of the same decree authorizes the School to employ its own
teaching and management personnel selected by it either locally or abroad, from Philippine
or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for
the protection of employees.

The School grants foreign-hires certain benefits not accorded local- hires. These include
housing, transportation, shipping costs, taxes, and home leave travel allowance. Foreign-
hires are also paid a salary rate twenty-five percent (25%) more than local-hires. The
School justifies the difference on two "significant economic disadvantages" foreign-hires
have to endure, namely: (a) the "dislocation factor" and (b) limited tenure.

The compensation scheme is simply the Schools adaptive measure to remain competitive
on an international level in terms of attracting competent professionals in the field of
international education.

Petitioner claims that the point-of-hire classification employed by the School is

discriminatory to Filipinos and that the grant of higher salaries to foreign-hires constitutes
racial discrimination.

The Acting Secretary, holding in favor of the respondent, upheld the point-of-hire
classification for the distinction in salary rates:

The principle "equal pay for equal work" does not find application in the present case. The
international character of the School requires the hiring of foreign personnel to deal with
different nationalities and different cultures, among the student population.

Taking cognizance of the existence of a system of salaries and benefits accorded to foreign
hired personnel which system is universally recognized. Certain amenities have to be
provided to these people in order to entice them to render their services in the Philippines
and in the process remain competitive in the international market.

Page 8
Furthermore, we took note of the fact that foreign hires have limited contract of
employment unlike the local hires who enjoy security of tenure. To apply parity therefore, in
wages and other benefits would also require parity in other terms and conditions of
employment which include the employment contract.

ISSUE:

Whether the point-of-hire classification for the distinction in salary rates between the local
hired and foreign hired employee is a valid classification?

RULING:

No. Receiving salaries less than their counterparts hired abroad, the local-hires of private
respondent School, mostly Filipinos, cry discrimination. That the local-hires are paid more
than their colleagues in other schools is, of course, beside the point. The point is that
employees should be given equal pay for work of equal value. That is a principle long
honored in this jurisdiction. That is a principle that rests on fundamental notions of justice.
That is the principle we uphold today.

That public policy abhors inequality and discrimination is beyond contention. Our
Constitution and laws reflect the policy against these evils. The Constitution in the Article
on Social Justice and Human Rights exhorts Congress to "give highest priority to the
enactment of measures that protect and enhance the right of all people to human dignity,
reduce social, economic, and political inequalities." The very broad Article 19 of the Civil
Code requires every person, "in the exercise of his rights and in the performance of his
duties, [to] act with justice, give everyone his due, and observe honesty and good faith."

International law, which springs from general principles of law, likewise proscribes
discrimination. General principles of law include principles of equity, i.e., the general
principles of fairness and justice, based on the test of what is reasonable. The Universal
Declaration of Human Rights, the International Covenant on Economic, Social. and Cultural
Rights, the International Convention on the Elimination of All Forms of Racial Discrimination,
the Convention against Discrimination in Education, the Convention (No. 111) Concerning
Discrimination in Respect of Employment and Occupation all embody the general
principle against discrimination, the very antithesis of fairness and justice. The Philippines,
through its Constitution, has incorporated this principle as part of its national laws.

Institutionalize in this jurisdiction the long honored legal truism of "equal pay for equal
work." Persons who work with substantially equal qualifications, skill, effort and
responsibility, under similar conditions, should be paid similar salaries. This rule applies to
the School, its "international character" notwithstanding.

If an employer accords employees the same position and rank, the presumption is that
these employees perform equal work. This presumption is borne by logic and human
experience. If the employer pays one employee less than the rest, it is not for that
employee to explain why he receives less or why the others receive more. That would be
adding insult to injury. The employer has discriminated against that employee; it is for the

Page 9
employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that
foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups
have similar functions and responsibilities, which they perform under similar working
conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to
rationalize the distinction in salary rates without violating the principle of equal work for
equal pay.

"Salary" is defined in Blacks Law Dictionary (5th ed.) as "a reward or recompense for
services performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the"
[c]onsideration paid at regular intervals for the rendering of services." In Songco v. National
Labor Relations Commission, 24 we said that:jgc:chanrobles.com.ph

"salary" means a recompense or consideration made to a person for his pains or industry in
another mans business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation
for services rendered. (Emphasis supplied.)

While we recognize the need of the School to attract foreign-hires, salaries should not be
used as an enticement to the prejudice of local- hires. The local-hires perform the same
services as foreign-hires and they ought to be paid the same salaries as the latter. For the
same reason, the "dislocation factor" and the foreign-hires limited tenure also cannot serve
as valid bases for the distinction in salary rates. The dislocation factor and limited tenure
affecting foreign-hires are adequately compensated by certain benefits accorded them which
are not enjoyed by local-hires, such as housing, transportation, shipping costs, taxes and
home leave travel allowances.

The Constitution enjoins the State to "protect the rights of workers and promote their
welfare," "to afford labor full protection." The State, therefore, has the right and duty to
regulate the relations between labor and capital. These relations are not merely contractual
but are so impressed with public interest that labor contracts, collective bargaining
agreements included, must yield to the common good. Should such contracts contain
stipulations that are contrary to public policy, courts will not hesitate to strike down these
stipulations.

In this case, we find the point-of-hire classification employed by respondent School to

justify the distinction in the salary rates of foreign-hires and local hires to be an invalid
classification. There is no reasonable distinction between the services rendered by foreign-
hires and local-hires. The practice of the School of according higher salaries to foreign-hires
contravenes public policy and, certainly, does not deserve the sympathy of this Court.

Page
10
14. BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS
v. NATIONAL LABOR RELATIONS COMMISSION and BANKARD, INC., [G.R. NO.
140689. February 17, 2004] (Minimum Wage, Rule: Equal Pay for Work of Equal
Value)

Respondent classifies its employees by levels. It approved a New Salary Scale for the
purpose of making its hiring rate competitive in the industrys labor market. The New Salary
Scale increased the hiring rates of new employees. Accordingly, the salaries of employees
who fell below the new minimum rates were also adjusted to reach such rates under their
levels.

Petitioner, the duly certified exclusive bargaining agent of the regular rank and file
employees of Bankard, want to press for the increase in the salary of its old, regular
employees.

Bankard took the position, however, that there was no obligation on the part of the
management to grant to all its employees the same increase in an across-the-board
manner.

ISSUE:

Whether the unilateral adoption by an employer of an upgraded salary scale that increased
the hiring rates of new employees without increasing the salary rates of old employees
resulted in wage distortion within the contemplation of Article 124 of the Labor Code.

RULING:

No.

Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among
others, Article 124 of the Labor Code) on June 9, 1989, the term wage distortion was
explicitly 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
differentiation.4

Prubankers Association v. Prudential Bank and Trust Company 5 laid down the four elements
of wage distortion, to wit:

(1.) An existing hierarchy of positions with corresponding salary rates;

(2) A significant change in the salary rate of a lower pay class without a concomitant
increase in the salary rate of a higher one;

(3) The elimination of the distinction between the two levels; and

(4) The existence of the distortion in the same region of the country.

Page
11
First Element lacking.

Normally, a company has a wage structure or method of determining the wages of its
employees. In a problem dealing with wage distortion, the basic assumption is that there
exists a grouping or classification of employees that establishes distinctions among them on
some relevant or legitimate bases.6

Involved in the classification of employees are various factors such as the degrees of
responsibility, the skills and knowledge required, the complexity of the job, or other logical
basis of differentiation. The differing wage rate for each of the existing classes of employees
reflects this classification.

To determine the existence of wage distortion, the historical classification of the employees
prior to the wage increase must be established. Likewise, it must be shown that as between
the different classification of employees, there exists a historical gap or difference.

The employees of private respondent have been historically classified into levels, i.e. I to
V, and not on the basis of their length of service. Put differently, the entry of new
employees to the company ipso facto place[s] them under any of the levels mentioned in
the new salary scale. Petitioner cannot make a contrary classification of private respondents
employees without encroaching upon recognized management prerogative of formulating
a wage structure, in this case, one based on level .7

It is thus clear that there is no hierarchy of positions between the newly hired and regular
employees of Bankard, hence, the first element of wage distortion provided in Prubankers is
wanting. While seniority may be a factor in determining the wages of employees, it cannot
be made the sole basis in cases where the nature of their work differs.

As National Federation of Labor v. NLRC, et al.10 teaches, the formulation of a wage

structure through the classification of employees is a matter of management judgment and
discretion.

Third Element lacking.

Even assuming that there is a decrease in the wage gap between the pay of the old
employees and the newly hired employees, said gap is not significant as to obliterate or
result in severe contraction of the intentional quantitative differences in the salary rates
between the employee group. As already stated, the classification under the wage
structure is based on the rank of an employee, not on seniority. For this reason, wage
distortion does not appear to exist.

Apart from the findings of facts that some of the elements of wage distortion are absent,
petitioner cannot legally obligate Bankard to correct the alleged wage distortion as the
increase in the wages and salaries of the newly-hired was not due to a prescribed law or
wage order.

The wordings of Article 124 are clear. If it was the intention of the legislators to cover all
kinds of wage adjustments, then the language of the law should have been broad, not
restrictive as it is currently phrased:

Page
12
Article 124. Standards/Criteria for Minimum Wage Fixing.

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. Any dispute arising from the wage distortions shall be
resolved through the grievance procedure under their collective bargaining
agreement and, if it remains unresolved, through voluntary arbitration.

Article 124 is entitled Standards/Criteria for Minimum Wage Fixing. It is found

in CHAPTER V on WAGE STUDIES, WAGE AGREEMENTS AND WAGE
DETERMINATION which principally deals with the fixing of minimum wage. Article 124
should thus be construed and correlated in relation to minimum wage fixing, the intention of
the law being that in the event of an increase in minimum wage, the distinctions embodied
in the wage structure based on skills, length of service, or other logical bases of
differentiation will be preserved.

If the compulsory mandate under Article 124 to correct wage distortion is applied
to voluntary and unilateral increases by the employer in fixing hiring rates which is
inherently a business judgment prerogative, then the hands of the employer would be
completely tied even in cases where an increase in wages of a particular group is justified
due to a re-evaluation of the high productivity of a particular group, or as in the present
case, the need to increase the competitiveness of Bankards hiring rate. An employer would
be discouraged from adjusting the salary rates of a particular group of employees for fear
that it would result to a demand by all employees for a similar increase, especially if the
financial conditions of the business cannot address an across-the-board increase.

Wage distortion is a factual and economic condition that may be brought about by different
causes. The mere factual existence of wage distortion does not, however,ipso facto result to
an obligation to rectify it,absent a law or other source of obligation which requires its
rectification.

Bankards right to increase its hiring rate, to establish minimum salaries for specific jobs,
and to adjust the rates of employees affected thereby is embodied under Section 2, Article
V (Salary and Cost of Living Allowance) of the parties Collective Bargaining Agreement
(CBA).

This CBA provision, which is based on legitimate business-judgment prerogatives of the

employer, is a valid and legally enforceable source of rights between the parties.

In fine, absent any indication that the voluntary increase of salary rates by an employer was
done arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any
legitimate purpose other than to discriminate against the regular employees, this Court will
not step in to interfere with this management prerogative. Employees are of course not
precluded from negotiating with its employer and lobby for wage increases through
appropriate channels, such as through a CBA.

Page
13
15. ARMS TAXI AND/OR DOROTHEA TANONGON vs. NATIONAL LABOR RELATIONS
COMMISSION AND LUDIVICO C. CULLA, [G.R. No. 104523. March 8, 1993.]
(Minimum Wage, Rule: Form: Agreement for Compensation of Service)

The spouses Tanongon own and operate taxicabs under the names of "Arms Taxi" and "Lin-
lin Taxi." However, the taxicabs are registered under the "kabit" system in the name of Aida
dela Cruz who holds a certificate of public convenience to operate a taxicab service.

Culla was hired by the Tanongon spouses to work as mechanic, shop manager, garage
caretaker, dispatcher, and liaison man in their taxi business, at a monthly salary of
P5,000.00 plus commission on the daily or monthly gross income of the business in addition
to the payment of his Social Security System (SSS) premiums.

On June 11, 1986, without Cullas consent, the Tanongon spouses asked one of their taxi
drivers to force open his quarters in the Tanongon compound. They removed his personal
belongings and brought them to his residence .

Culla filed with the Arbitration Branch of the then Ministry of Labor and Employment, a
complaint alleging that his dismissal from employment were illegal because there was no
prior investigation or written notice of the charges against him. His dismissal was allegedly
due to his demands "for the payment of the benefits, percentage and privileges and
premiums to the SSS". He prayed for reinstatement with backwages, plus his commission of
fifteen percent (15%) of the gross income of the taxi business.

The Tanongon spouses denied that they were the operators of the Arms Taxi and Lin-lin
Taxi. They denied the existence of an employer-employee relationship between them and
Culla. They averred that they bought Lin-lin Taxi from one Jose Lim, but its ownership has
not yet been transferred to them as their application with the Land Transportation Office is
still pending.

For her part, Aida dela Cruz admitted ownership and operation of a fleet of taxicabs and
that she had entered into an agreement with Dorothea Tanongon for the latter to manage
for a fee the operation of several of her taxi units. Denying that she hired Culla, Dela Cruz
averred that at most, Culla could be considered as an independent contractor paid on a
piece-work basis and therefore, he was not entitled to regular benefits, much less to the
alleged 15% commission.

ISSUE:

Whether or not respondent is entitled to 15 % commission of the gross income of the taxi
business under the agreement for compensation of services with the petitioner.

RULING:

No.

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"There is nothing on record to substantiate this claim. If, as complainant claims, he is
entitled to a commission as part of his wage and/or in addition to his basic pay, we cannot
understand why he never made any claims therefor during his six years of service."

Culla argues in his petition that the payment to him of P5,000.00 a month for his services
was in partial fulfillment of Tanongons promise to pay him a 15% commission, removing
said agreement from coverage of the Statute of Frauds.

Cullas reference to the Statute of Frauds under Art. 1403, par. 2 of the Civil Code is
misplaced. An agreement for compensation of services rendered is not one of the contracts
mentioned in Art. 1403 which must be in writing to be enforceable by action.

The payment of a P5,000.00 monthly salary to the petitioner for his services may not be
considered as partial compliance by his employers with the alleged agreement to pay him a
commission or percentage of the daily earnings of their taxi business because, as correctly
pointed out by the Solicitor General, a salary is different from a commission (Ibid., p. 222).
While a salary is a fixed compensation for regular work or for continuous service rendered
over a period of time , a commission is a percentage or allowance made to a factor or
agent for transacting business for another. Thus, before invoking the exception to the
Statute of Frauds, petitioner should have proven that he had received a commission, or part
of it, in the past.

Furthermore, as aptly noted by the NLRC, if it were true that there had been an agreement
regarding the payment of a 15% commission to him, the petitioner would not have waited
almost six (6) years to claim it. Considerable delay in asserting ones right is strongly
persuasive of the lack of merit of ones claim (Quinsay v. Intermediate Appellate Court, 195
SCRA 268).

Regarding the Tanongon spouses allegation in G.R. No. 104523, that the petitioner was
never their employee, hence, the NLRC gravely abused its discretion in granting his
monetary claims, that allegation raises a factual issue. The finding thereon of the NLRC, in
the absence of abuse of discretion, is not only invested with respect, but even with finality,
since it is supported by substantial evidence (Great Pacific Life Assurance Corporation v.
National Labor Relations Commission, 187 SCRA 694).

As an employee of the Tanongon spouses, was the petitioner entitled to security of tenure?
He was. Art. 280 of the Labor Code provides:jgc:chanrobles.com.ph

"ARTICLE 280. Regular and Casual Employment. The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of
the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.

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"An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment shall continue while
such actually exists," (Emphasis supplied.).

Petitioner was not a project employee. He was a garage supervisor, liaison man, dispatcher,
mechanic and driver, a jack of all trades, doing work that was necessary and desirable in
the taxi business of the Tanongon spouses. As such, he was a regular employee entitled to
security of tenure (Tucor Industries Inc. v. National Labor Relations Commission, 197 SCRA
296). His employment may be terminated only in accordance with law. Because he was
summarily dismissed from his job, he is entitled to reinstatement without loss of seniority
and other privileges and to receive three (3) years backwages. In view, however, of the
strained relations between the petitioner and the Tanongon spouses (p. 11, Labor Arbiters
Decision, p. 184, Rollo), making his reinstatement no longer advisable nor feasible,
petitioner should receive separation pay in addition to three years backwages (Torillo v.
Leogardo, Jr., 197 SCRA 471).

The full backwages claimed by Culla and provided in Section 34 of Republic Act No. 6715,
which took effect on March 21, 1989, cannot be granted to him for his summary dismissal
occurred on June 11, 1986, three (3) years before R.A. No. 6715 took effect. The new law
may not be applied retroactively (Sealand Service, Inc., v. NLRC, 190 SCRA 347; Lantion v.
NLRC, 181 SCRA 513).

As petitioners dismissal was effected without prior notice and investigation of the charges
against him, in violation of his right to due process, his employers should indemnify him for
damages in the sum of One Thousand Pesos (P1,000.00) pursuant to Rule XIV, Secs. 2, 5
and 6 of the rules implementing Batas Pambansa Blg. 130 and the rulings of this Court in
Great Pacific Life Assurance Corporation v. NLRC, 187 SCRA 694, 700, Shoemart, Inc. v.
NLRC, 176 SCRA 385, and Wenphil v. NLRC, 170 SCRA 69.

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