Facts: Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine coastwise transportation, employing therein several steamships of Philippine registry. They had a collective bargaining contract with the respondent Cebu Seamen's Association, Inc.
The respondent union filed with the CIR a petition against the States Marine Corporation alleging that the officers and men working on board the petitioners' vessels have not been paid their sick leave, vacation leave and overtime pay; that the petitioners threatened or coerced them to accept a reduction of salaries, observed by other shipowners; that after the Minimum Wage Law had taken effect, the petitioners required their
employees on board their vessels, to pay the sum of P.40 for every meal, while the masters and officers were not required to pay their meals and that because Captain Carlos Asensi had refused to yield to the general reduction of salaries, the petitioners dismissed said captain who now claims for reinstatement and the payment of back wages from December 25, 1952, at the rate of P540.00, monthly.
The petitioners' shipping companies, answering, averred that very much below 30 of the men and officers in their employ were members of the respondent union; that the work on board a vessel is one of comparative ease; that petitioners have suffered financial losses in the operation of their vessels and that there is no law which provides for the payment of sick leave or vacation leave to employees or workers of private firms; that as regards the claim for overtime pay, the petitioners have always
observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law), notwithstanding the fact that it does not apply to those who provide means of transportation; that the shipowners and operators in Cebu were paying the salaries of their officers and men, depending upon the margin of profits they could realize and other factors or circumstances of the business; that in enacting Rep. Act No. 602 (Minimum Wage Law), the Congress had in mind that the amount of P.40 per meal, furnished the employees should be deducted from the daily wages; that Captain Asensi was not dismissed for alleged union activities, but with the expiration of the terms of the contract between said officer and the petitioners, his services were terminated.
A decision was rendered in favor of the respondent union. The companies filed the present writ of certiorari, bearing in mind the deep-rooted
principle that the factual findings of the Court of Industrial Relations should not be disturbed, if supported by substantial evidence, the different issues are taken up, in the order they are raised in the brief for the petitioners.
Issue: WON the cost of said meals may not be legally deducted from the wages or salaries of the aforesaid crew members by the herein petitioners.
Held: It was shown by substantial evidence, that since the beginning of the operation of the petitioner's business, all the crew of their vessels have been signing "shipping articles" in which are stated opposite their names, the salaries or wages they would receive. All seamen, whether members of the crew or deck officers or engineers, have been furnished free meals by the ship owners or operators. It is, therefore, apparent that, aside from the
payment of the respective salaries or wages, set opposite the names of the crew members, the petitioners bound themselves to supply the crew with ship's provisions, daily subsistence or daily rations, which include food.
We hold that such deductions are not authorized. In the coastwise business of transportation of passengers and freight, the men who compose the complement of a vessel are provided with free meals by the shipowners, operators or agents, because they hold on to their work and duties, regardless of "the stress and strain concomitant of a bad weather, unmindful of the dangers that lurk ahead in the midst of the high seas."
It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew members in question, were mere "facilities"
which should be deducted from wages, and not "supplements" which, according to said section 19, should not be deducted from such wages, because it is provided therein: "Nothing in this Act shall deprive an employee of the right to such fair wage ... or in reducing supplements furnished on the date of enactment."
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or ordinary earning or wage, is supplement; and when said benefit or privilege is part of the laborers' basic wages, it is a facility.
The order CIR to the company to continue granting this privilege, was upheld by this Court.
Millares et al., vs NLRC 305 SCRA 501
Facts: Petitioners numbering one hundred sixteen occupied the positions of Technical Staff, Unit Manager, Section Manager, Department Manager, Division Manager and Vice President in the mill site of respondent Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur.
In 1992 PICOP suffered a major financial setback allegedly brought about by the joint impact of restrictive government regulations on logging and the economic crisis. To avert further losses, it undertook a retrenchment program and terminated the services of petitioners. Accordingly, petitioners received separation pay computed at the rate of one (1) month basic pay for every year of service. Believing however that the allowances they allegedly regularly received on a monthly basis during their employment should have been included in the computation thereof they lodged a complaint for separation pay differentials.
Issue: Whether the allowances are included in the definition of "facilities"
in Art. 97, par. (f), of the Labor Code, being necessary and indispensable for their existence and subsistence.
Held: The allowances are not part of the wages of the employees. Wage is defined in letter (f) as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee.
When an employer customarily furnishes his employee board, lodging or other facilities, the fair and reasonable value thereof, as determined by the Secretary of Labor and Employment, is included in "wage." Customary is founded on long-established and constant practice connoting regularity.
The receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and forming part of salary because the nature of the grant is a factor worth considering. The court agrees with the observation of the Office of the Solicitor General that the subject allowances were temporarily, not regularly, received by petitioners.
Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term as including articles or services for the benefit of the employee or his family but excluding tools of the trade or articles or service primarily for the benefit of the employer or necessary to the conduct of the employer's business.
In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose. Revenue Audit Memo Order No. 1-87 pertinently provides —3.2… transportation, representation or entertainment expenses shall not constitute taxable compensation if: (a) It is for necessary travelling and representation or entertainment expenses paid or incurred by the employee in the pursuit of the trade or business of the employer, and (b) The employee is required to, and does, make an accounting/liquidation for such expense in accordance with the specific requirements of substantiation for such category or expense.Board and lodging allowances furnished to an employee not in excess of the latter's needs and given free of charge, constitute income to the latter except if such allowances or benefits are furnished to the employee for the convenience of the employer and as necessary incident to proper performance of his duties in which case such benefits or allowances do not constitute taxable income.
The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of the Rules Implementing the Labor Code may from time to time fix in appropriate issuances the "fair and reasonable value of board, lodging and other facilities customarily furnished by an employer to his employees."
Petitioners' allowances do not represent such fair and reasonable value as determined by the proper authority simply because the Staff/Manager's allowance and transportation allowance were amounts given by respondent company in lieu of actual provisions for housing and
transportation needs whereas the Bislig allowance was given in consideration of being assigned to the hostile environment then prevailing in Bislig. The inevitable conclusion is that subject allowances did not form part of petitioners' wages.
SHS PERFORATED MATERIALS, INC vs. MANUEL F. DIAZ Facts: Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up corporation organized and existing under the laws of the Republic of the Philippines and registered with the Philippine Economic Zone Authority.
Petitioner Winfried Hartmannshenn (Hartmannshenn), a German national, is its president, in which capacity he determines the administration and direction of the day-to-day business affairs of SHS. Petitioner Hinrich Johann Schumacher, also a German national, is the treasurer and one of the board directors. As such, he is authorized to pay all bills, payrolls, and other just debts of SHS of whatever nature upon maturity. Schumacher is also the Executive Vice-President of the European Chamber of Commerce of the Philippines (ECCP) which is a separate entity from SHS. Both entities have an arrangement where ECCP handles the payroll requirements of SHS to simplify business operations and minimize operational expenses. Thus, the wages of SHS employees are paid out by ECCP, through its Accounting Services Department headed by Juliet Taguiang (Taguiang).
Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager for Business Development on probationary status from July 18, 2005 to January 18, 2006, with a monthly salary of P100,000.00. Respondent’s duties, responsibilities, and work hours were described in the Contract of Probationary Employment. Respondent was also instructed by
Hartmannshenn to report to the SHS office and plant at least two (2) days every work week to observe technical processes involved in the
manufacturing of perforated materials, and to learn about the products of the company, which respondent was hired to market and sell.
During respondent’s employment, Hartmannshenn was often abroad and, because of business exigencies, his instructions to respondent were either sent by electronic mail or relayed through telephone or mobile phone.
When he would be in the Philippines, he and the respondent held
meetings. As to respondent’s work, there was no close supervision by him.
Hartmannshenn expressed his dissatisfaction over respondent’s poor performance. In numerous electronic mail messages, respondent acknowledged his poor performance and offered to resign from the company.
Respondent, however, denied sending such messages but admitted that he had reported to the SHS office and plant only eight (8) times from July 18, 2005 to November 30, 2005. In preparation for his trip to the Philippines, Hartmannshenn tried to call respondent on his mobile phone, but the latter failed to answer. Respondent claimed that he never received the
messages.
Hartmannshenn instructed Taguiang not to release respondent’s salary.
Later that afternoon, respondent called and inquired about his salary.
Taguiang informed him that it was being withheld and that he had to immediately communicate with Hartmannshenn. Again, respondent denied having received such directive. The next day, respondent served on SHS a demand letter and a resignation letter and demanded salary for the period covering November 16 to 30, 2005, which has yet been unpaid and is still currently being withheld albeit illegally. It is precisely because of illegal and unfair labor practices such as these that I offer my resignation with neither regret nor remorse.6
Diaz met with Hartmannshenn in Alabang. The latter told him that he was extremely disappointed for the following reasons: his poor work
performance; his unauthorized leave and malingering from November 16 to November 30, 2005; and failure to immediately meet Hartmannshenn upon his arrival from Germany.
Petitioners averred that respondent was unable to give a proper
explanation for his behavior. Hartmannshenn then accepted respondent’s resignation and informed him that his salary would be released upon explanation of his failure to report to work, and proof that he did, in fact, work for the period in question. He demanded that respondent surrender all company property and information in his possession. Respondent agreed to these "exit" conditions through electronic mail. Instead of complying with the said conditions, however, respondent sent another electronic mail message to Hartmannshenn and Schumacher on December 1, 2005, appealing for the release of his salary.
Respondent, on the other hand, claimed that the meeting with
Hartmannshenn took place in the evening of December 1, 2005, at which meeting the latter insulted him and rudely demanded that he
accept P25,000.00 instead of his accrued wage and stop working for SHS, which demands he refused. Later that same night, he sent an electronic mail message appealing for the release of his salary. Another demand letter for respondent’s accrued salary for November 16 to November 30, 2005, 13th month pay, moral and exemplary damages, and attorney’s fees were sent on December 2, 2005.
To settle the issue amicably, petitioners’ counsel advised respondent’s counsel by telephone that a check had been prepared in the amount of P50,000.00, and was ready for pick-up on December 5, 2005.
Respondent countered that his counsel received petitioners’ formal reply letter only on December 20, 2005, stating that his salary would be released subsequent to the turn-over of all materials owned by the company in his possession. Respondent filed a Complaint7 against the petitioners for illegal dismissal; non-payment of salaries/wages and 13th month pay with prayer for reinstatement and full backwages; exemplary damages, and attorney’s fees, costs of suit, and legal interest.
THE RULING OF THE LABOR ARBITER: Declared complainant as having been illegally dismissed and further ordering his immediate reinstatement without loss of seniority rights and benefits. It is also ordered that
complainant be deemed as a regular employee. The LA found that respondent was constructively dismissed because the withholding of his salary was contrary to Article 116 of the Labor Code as it was not one of the exceptions for allowable wage deduction by the employer under Article 113 of the Labor Code. He had no other alternative but to resign because he could not be expected to continue working for an employer who withheld wages without valid cause. The LA also held that respondent’s probationary employment was deemed regularized because petitioners failed to conduct a prior evaluation of his performance and to give notice two days prior to his termination as required by the Probationary Contract of Employment and Article 281 of the Labor Code. Petitioners’ contention that they lost trust and confidence in respondent as a managerial
employee was not given credence for lack of notice to explain the supposed loss of trust and confidence and absence of an evaluation of respondent’s performance. The LA believed that the respondent complied with the obligations in his contract as evidenced by his electronic mail messages to petitioners.
THE RULING OF THE NLRC: On appeal, the NLRC reversed the decision of the LA.
The Decision dated June 15, 2006 is hereby REVERSED and SET ASIDE and a new one is hereby entered. The NLRC explained that the withholding of respondent’s salary was a valid exercise of management prerogative. The act was deemed justified as it was reasonable to demand an explanation for failure to report to work and to account for his work accomplishments.
The NLRC held that the respondent voluntarily resigned as evidenced by the language used in his resignation letter and demand letters. Given his professional and educational background, the letters showed respondent’s resolve to sever the employer-employee relationship, and his
understanding of the import of his words and their consequences.
Consequently, respondent could not have been regularized having
voluntarily resigned prior to the completion of the probationary period. The NLRC further noted that respondent’s 13th month pay was already
integrated in his salary in accordance with his Probationary Contract of Employment and, therefore, no additional amount should be due him.