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B. Wages

1. Definition, components, and exclusions

a. Wage vs. salary

1) Concepts

Wage – paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor and Employment, of board, lodging, or other facilities customarily furnished by the employer to the employee. “Fair and reasonable value” shall not include any profit to the employer, or to any person affiliated with the employer. (Article 97 [f], Labor Code)

Salary – is defined in Black’s 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.” (International School Alliance of Educators [ISAE] v. Quisumbing, G.R. No. 128845, 01 June 2000)

The word “salary’ is defined as “a reward or recompense for services performed. In a more limited sense, a fixed periodical compensation paid for services rendered.” (Ifurung v. Carpio, En Banc, G.R. No. 232131, 24 April 2018)

Broadly, the word “salary” means a recompense or consideration made to a person for his pains or industry in another man’s 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. (Songco v. NLRC, G.R. No. L-50999, 23 March 1990)

General rule: The words “wages” and “salary” are in essence synonymous… “Salary,” the etymology of which is the Latin word “salarium,” is often used interchangeably with “wage”, the etymology of which is the Middle English word “wagen”. Both words generally refer to one and the same meaning, that is, a reward or recompense for services performed. Likewise, “pay” is the synonym of “wages” and “salary” (Black’s Law Dictionary, 5th Ed.). Inasmuch as the words “wages”, “pay” and “salary” have the same meaning, and commission is included in the definition of “wage”, the logical conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base should include also their earned sales commissions. (Songco v. NLRC, supra.)

Exception: When distinction matters: Garnishment, Execution

The laborer’s wage shall not be subject to execution or attachment, except for debts incurred for food, shelter, clothing and medical attendance. (ART. 1708, Civil Code)

Article 1708 used the word “wages” and not “salary” in relation to “laborer” when it declared what are to be exempted from attachment and execution. The term “wages” as distinguished from “salary”, applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day, week, month, or season, while “salary” denotes a higher degree of employment, or a superior grade of services, and implies a position of office: by contrast, the term wages “indicates considerable pay for a lower and less responsible character of employment,” while “salary” is suggestive of a larger and more important service (GAA v. CA, G.R. No. L-44169, 03 December 1985)

Article 1708 does not operate in favor of any person but those who are laboring men or women in the sense that their work is manual. Persons belonging to this class usually look to the reward of a day’s labor for immediate or present support, and such persons are more in need of the exemption than any others. (Ibid.)

2) Basic salary

The term “basic salary” used in P.D. No. 851 and Memorandum Order No. 28 is not to be confused with the term “fixed or guaranteed wage.” The term “basic salary” is used to distinguish wage or salary from “fringe benefits” which are not integrated into “basic salary” for certain specific purposes. (Philippine Duplicators, Inc. v. NLRC, Philippine Duplicators Employees Union-TUPAS, G.R. No. 110068, 11 November 1993)

In San Miguel Corporation v. Inciong, the catch-all phrase “allowances” and “monetary benefits” which are deemed not considered or integrated as part of “basic salary” was construed to refer to “any and all additions which may be in the form of allowances or ‘fringe’ benefits.” These fringe benefits include payments for sick leave, vacation leave or maternity leave; premium pay for work performed on rest day and special holidays; premium pay for regular holidays and night differential pay; and cost of living allowances. (Ibid.)

3) Sales commissions

Sales commissions form part of the “wage” or “salary” of salesmen and are not in the nature of an “allowance” or “additional fringe” benefit. Once more, we note that in the instant case, sales commissions form the bulk of the salaries or wages of petitioner’s salesmen. (Ibid.)

b. Distinguish: facilities and supplements

1) Reason for distinction

Under the law, only the value of the facilities may be deducted from the employees’ wages but not the value of supplements. (Our Haus Realty Development Corporation v. Parian, G.R. No. 204651, 06 August 2014)

a) Concept of facilities

Facilities – are items of expense necessary for the laborer’s and his family’s existence and subsistence so that by express provision of law, they form part of the wage and when furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay for them just the same. (Atok-Big Wedge Mutual Benefit Association v. Atok-Big Wedge Mining Company, Incorporated, G.R. No. L-7349, 19 July 1955)

Facilities include articles or services for the benefit of the employee or his family but exclude tools of the trade or articles or services primarily for the benefit of the employer or necessary to the conduct of the employer’s business. (Our Haus Realty Development Corporation v. Parian, supra.)

b) Concept of supplements

Supplements – constitute extra remuneration or special privileges or benefits given to or received by the laborers over and above their ordinary earnings or wages. (Atok-Big Wedge Mutual Benefit Association v. Atok-Big Wedge Mining Company, Incorporated, supra.)

The law also prescribes that the computation of wages shall exclude whatever benefits, supplements or allowances given to employees. Supplements are paid to employees on top of their basic pay and are free of charge. Since it does not form part of the wage, a supplement’s value may not be included in the determination of whether an employer complied with the prescribed minimum wage rates. (Ibid.)

c) Purpose as key differentiator

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 distinction lies not so much in the kind of benefit or item (food, lodging, bonus or sick leave) given, but in the purpose for which it is given. (Our Haus Realty Development Corporation v. Parian, supra.)

Ultimately, the real difference lies not on the kind of the benefit but on the purpose why it was given by the employer. If it is primarily for the employee’s gain, then the benefit is a facility; if its provision is mainly for the employer’s advantage, then it is a supplement. Again, this is to ensure that employees are protected in circumstances where the employer designates a benefit as deductible from the wages even though it clearly works to the employer’s greater convenience or advantage. (Ibid.)

2) Facilities

a) Requirements

(1) Proof must be shown that such facilities are customarily furnished by the trade;

One of the badges to show that a facility is customarily furnished by the trade is the existence of a company policy or guideline showing that provisions for a facility were designated as part of the employees’ salaries. (Our Haus Realty Development Corporation v. Parian, G.R. No. 204651, 06 August 2014)

Apart from company policy, the employer may also prove compliance with the first requirement by showing the existence of an industry-wide practice of furnishing the benefits in question among enterprises engaged in the same line of business. If it were customary among construction companies to provide board and lodging to their workers and treat their values as part of their wages, we would have more reason to conclude that these benefits were really facilities. (Ibid.)

(2) Not chargeable if facility is a legal or regulatory requirement

Our Haus could not really be expected to prove compliance with the first requirement since the living accommodation of workers in the construction industry is not simply a matter of business practice. Peculiar to the construction business are the occupational safety and health (OSH) services which the law itself mandates employers to provide to their workers. This isto ensure the humane working conditions of construction employees despite their constant exposure to hazardous working environments. Under Section 16 of DOLE Department Order (DO) No. 13, series of 1998,43 employers engaged in the construction business are required to provide the following welfare amenities: … 16.1 Adequate supply of safe drinking water… 16.2 Adequate sanitary and washing facilities… 16.3 Suitable living accommodation for workers, and as may be applicable, for their families… 16.4 Separate sanitary, washing and sleeping facilities for men and women workers. (Ibid.)

Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation of DOLE DO No. 13, mandates that the cost of the implementation of the requirements for the construction safety and health of workers, shall be integrated to the overall project cost. The rationale behind this is to ensure that the living accommodation of the workers is not substandard and is strictly compliant with the DOLE’s OSH criteria. (Ibid.)

As part of the project cost that construction companies already charge to their clients, the value of the housing of their workers cannot be charged again to their employees’ salaries. Our Haus cannot pass the burden of the OSH costs of its construction projects to its employees by deducting it as facilities. This is Our Haus’ obligation under the law. (Ibid.)

Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose test set by jurisprudence. Under this test, if a benefit or privilege granted to the employee is clearly for the employer’s convenience, it will not be considered as a facility but a supplement. Here, careful consideration is given to the nature of the employer’s business in relation to the work performed by the employee. This test is used to address inequitable situations wherein employers consider a benefit deductible from the wages even if the factual circumstances show that it clearly redounds to the employers’ greater advantage. (Ibid.)

While the rules serve as the initial test in characterizing a benefit as a facility, the purpose test additionally recognizes that the employer and the employee do not stand at the same bargaining positions on benefits that must or must not form part of an employee’s wage. In the ultimate analysis, the purpose test seeks to prevent a circumvention of the minimum wage law. (Ibid.)

b) Purpose test

Under the purpose test, substantial consideration must be given to the nature of the employer’s business in relation to the character or type of work performed by the employees involved. (Ibid.)

Our Haus is engaged in the construction business, a labor-intensive enterprise. The success of its projects is largely a function of the physical strength, vitality and efficiency of its laborers. Its business will be jeopardized if its workers are weak, sickly, and lack the required energy to perform strenuous physical activities. Thus, by ensuring that the workers are adequately and well fed, the employer is actually investing on its business. (Ibid.)

Unlike in office enterprises where the work is focused on desk jobs, the construction industry relies heavily and directly on the physical capacity and endurance of its workers. This is not to say that desk jobs do not require muscle strength; we simply emphasize that in the construction business, bulk of the work performed are strenuous physical activities. (Ibid.)

Moreover, in the construction business, contractors are usually faced with the problem of meeting target deadlines. More often than not, work is performed continuously, day and night, in order to finish the project on the designated turn-over date. Thus, it will be more convenient to the employer if its workers are housed near the construction site to ensure their ready availability during urgent or emergency circumstances. Also, productivity issues like tardiness and unexpected absences would be minimized. This observation strongly bears in the present case since three of the respondents are not residents of the National Capital Region. The board and lodging provision might have been a substantial consideration in their acceptance of employment in a place distant from their provincial residences. (Ibid.)

Based on these considerations, we conclude that even under the purpose test, the subsidized meals and free lodging provided by Our Haus are actually supplements. Although they also work to benefit the respondents, an analysis of the nature of these benefits in relation to Our Haus’ business shows that they were given primarily for Our Haus’ greater convenience and advantage. If weighed on a scale, the balance tilts more towards Our Haus’ side. Accordingly, their values cannot be considered in computing the total amount of the respondents’ wages. Under the circumstances, the daily wages paid to the respondents are clearly below the prescribed minimum wage rates in the years 2007-2010. (Ibid.)

(1) The provision of deductible facilities must be voluntarily accepted in writing by the employee;

A facility may only be deducted from the wage if the employer was authorized in writing by the concerned employee. As it diminishes the take-home pay of an employee, the deduction must be with his express consent. (Ibid.)

(2) The facilities must be charged at fair and reasonable value.

Our Haus admitted that it deducted the amount of ₱290.00 per week from each of the respondents for their meals. But it now submits that it did not actually withhold the entire amount as it did not figure in the computation the money it expended for the salary of the cook, the water, and the LPG used for cooking, which amounts to ₱249.40 per week per person. From these, it appears that the total meal expense per week for each person is ₱529.40, making Our Haus’ ₱290.00 deduction within the 70% ceiling prescribed by the rules. (Ibid.)

However, Our Haus’ valuation cannot be plucked out of thin air. The valuation of a facility must be supported by relevant documents such as receipts and company records for it to be considered as fair and reasonable. (Ibid.)

In the present case, Our Haus never explained how it came up with the values it assigned for the benefits it provided; it merely listed its supposed expenses without any supporting document. Since Our Haus is using these additional expenses (cook’s salary, water and LPG) to support its claim that it did not withhold the full amount of the meals’ value, Our Haus is burdened to present evidence to corroborate its claim. The records however, are bereft of any evidence to support Our Haus’ meal expense computation. Even the value it assigned for the respondents’ living accommodations was not supported by any documentary evidence. Without any corroborative evidence, it cannot be said that Our Haus complied with this third requisite. (Ibid.)

3) Supplements

a) Covered by non-diminution of benefits rule

Generally, employees have a vested right over existing benefits voluntarily granted to them by their employer. Thus, any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer. (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 176985, 01 April 2013)

c. Bonus, 13th month pay

1) Concept of bonus

From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right. The grant of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee’s basic salaries or wages. (Eastern Telecommunications Philippines, Inc., G.R. No. 185665, 08 February 2012)

A bonus, however, becomes a demandable or enforceable obligation when it is made part of the wage or salary or compensation of the employee. (Ibid.)

Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its payment. If it is additional compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or if a certain level of productivity is achieved, it can not be considered part of the wage. Where it is not payable to all but only to some employees and only when their labor becomes more efficient or more productive, it is only an inducement for efficiency, a prize therefor, not a part of the wage. (Metro Transit Organization, Inc. v. NLRC, G.R. No. 116008, 11 July 1995)

2) Concept of 13th month pay

13th month pay is a legally mandated benefit in favor of rank-and-file employees under P.D. 851 (the 13th Month Pay Law) and thus obligatory on the employer to pay not later than December 24.

“Thirteenth-moth pay” shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year. (Section 2 [a], Rules and Regulations Implementing P.D. 851)

“Basic salary” shall include all remunerations or earnings paid by an employer to an employee for services rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee. (Section 2 [b], Rules and Regulations Implementing P.D. 851).

3) The term “its equivalent” as 13th month pay

Although P.D. 851 as amended by Memorandum Order No. 28 requires all employers to pay all their rank and file employees a thirteenth month pay, the rule is subject to certain exceptions. Excluded from the coverage are “employers already paying their employees a thirteenth month pay or more in a calendar year or its equivalent at the time of the issuance of the law. 17 Construing the term “its equivalent”, the same was defined as inclusive of “Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less that 1/12th of the basic salary but shall not include cash and stock dividend, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits. When an employer pays less than 1/12th of the employee’s basic salary, the employer shall pay the difference.  (Philippine Airlines, Inc. [PAL] v. NLRC, G.R. Nos. 114280, 115224, 26 July 1996)

Applying the aforecited definitions, it would seem that the year-end bonus being granted by PAL to the employees may be considered as an equivalent of the thirteenth month pay considering the similarity in the purpose for granting the same. As advanced by ALPAP, the rationale for PAL’s grant of a year-end bonus was to give regard for the loyalty, dedication and hardwork of the employee. Confirming this purpose is the declaration made by the PAL President, Feliciano Belmonte Jr. in his letter addressed to the employees of PAL dated October 30, 1991, announcing the granting of a Christmas bonus equivalent to 125% of the employee’s monthly pay for a “job well done.” (Ibid.)

d. Holiday pay

1) Covered employees

The holiday pay rules shall apply to all employees except:

1) Those of the government and any of the political subdivision, including government-owned and controlled corporation;

2) Those of retail and service establishments regularly employing less than ten (10) workers;

3) Domestic helpers and persons in the personal service of another;

4) Managerial employees as defined in Book Three of the Code;

5) Field personnel and other employees whose time and performance is unsupervised by the employer including those who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for performing work irrespective of the time consumed in the performance thereof. (Section 1, Rule IV, Book III, Omnibus Rules Implementing the Labor Code)

a) Status of monthly-paid employees

Employees who are uniformly paid by the month, irrespective of the number of working days therein, with a salary of not less than the statutory or established minimum wage shall be paid for all days in the month whether worked or not. (Paragraph 1, Section 2, Rule IV, Book III, Ibid.)

For this purpose, the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days divided by twelve. (Paragraph 2, Section 2, Rule IV, Book III, Ibid.)

2) The 12 Regular holidays

1) January 1 – New Year’s Day

2) Maundy Thursday (movable date)

3) Good Friday (movable date)

4) April 9 – Araw ng Kagitingan

5) May 1 – Labor Day

6) June 12 – Independence Day

7) National Heroes’ Day – Last Monday of August

8) Eid’l Fitr (movable date)

9) Eid’l Adha (movable date)

10) Bonifacio Day – November 30

11) Christmas Day – December 25

12) Rizal Day – December 30

3) The benefit

a) Unworked regular holiday

Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than ten (10) workers. (Article 94 [a], Labor Code)

b) Worked regular holiday

The employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent to twice his regular rate. (Article 94 [b], Ibid.)

Any employee who is permitted or suffered to work on any regular holiday, not exceeding eight (8) hours, shall be paid at least two hundred percent (200%) of his regular daily wage. If the holiday work falls on the scheduled rest day of the employee, he shall be entitled to an additional premium pay of at least 30% of his regular holiday rate of 200% based on his regular wage rate. (Section 4, Rule IV, Book III, Omnibus Rules Implementing the Labor Code)

c) Overtime pay for holiday work

For work performed in excess of eight hours on a regular holiday, an employee shall be paid an additional compensation for the overtime work equivalent to his rate for the first eight hours on such holiday work plus at least 30% thereof. (Paragraph 1, Section 5, Rule IV, Book III, Ibid.)

d) Overtime pay for holiday work falling on a scheduled rest day

Where the regular holiday work exceeding eight hours falls on the scheduled rest day of the employee, he shall be paid an additional compensation for the overtime work equivalent to his regular holiday-rest day for the first 8 hours plus 30% thereof. The regular holiday rest day rate of an employee shall consist of 200% of his regular daily wage rate plus 30% thereof. (Paragraph 2, Section 5, Rule IV, Book III, Ibid.)

4) Rules on absences

1) All covered employees shall be entitled to the benefit provided herein when they are on leave of absence with pay. Employees who are on leave of absence without pay on the day immediately preceding a regular holiday may not be paid the required holiday pay if he has not worked on such regular holiday. (Section 6 [a], Rule IV, Book III, Ibid.)

2) Where the day immediately preceding the holiday is a non-working day in the establishment or the scheduled rest day of the employee, he shall not be deemed to be on leave of absence on that day, in which case he shall be entitled to the holiday pay if he worked on the day immediately preceding the non-working day or rest day. (Section 6 [c], Rule IV, Book III, Ibid.)

5) Temporary or periodic shutdown and temporary cessation of work

In cases of temporary or periodic shutdown and temporary cessation of work of an establishment, as when a yearly inventory or when the repair or cleaning of machineries and equipment is undertaken, the regular holidays falling within the period shall be compensated in accordance with this Rule. (Section 7 [a], Rule IV, Book III, Ibid.)

The regular holiday during the cessation of operation of an enterprise due to business reverses as authorized by the Secretary of Labor and Employment may not be paid by the employer. (Section 7 [b], Rule IV, Book III, Ibid.)

6) Certain employees

a) Faculty

Private school teachers, including faculty members of colleges and universities, may not be paid for the regular holidays during semestral vacations. They shall, however, be paid for the regular holidays during Christmas vacation. (Section 8 [a], Rule IV, Book III, Ibid.)

b) Workers paid by results or output

Where a covered employee, is paid by results or output, such as payment on piece work, his holiday pay shall not be less than his average daily earnings for the last seven (7) actual working days preceding the regular holiday; Provided, However, that in no case shall the holiday pay be less than the applicable statutory minimum wage rate. (Section 8 [b], Rule IV, Book III, Ibid.)

c) Seasonal workers

Seasonal workers may not be paid the required holiday pay during off-season when they are not at work. (Section 8 [c], Rule IV, Book III, Ibid.)

d) Workers with no regular working days

Workers who have no regular working days shall be entitled to the benefits provided in this Rule. (Section 8 [d], Rule IV, Book III, Ibid.)

7) Regular holiday falling on rest days

A regular holiday falling on the employee’s rest day shall be compensated accordingly. (Section 9 [a], Rule IV, Book III, Ibid.)

8) Successive regular holidays

Where there are two (2) successive regular holidays, like Holy Thursday and Good Friday, an employee may not be paid for both holidays if he absents himself from work on the day immediately preceding the first holiday, unless he works on the first holiday, in which case he is entitled to his holiday pay on the second holiday. (Section 10, Rule IV, Book III, Ibid.)

2. Principles

a. No work, no pay

If there is no work performed by the employee there can be no wage or pay, unless of course the laborer was able, willing and ready to work but was illegally locked out, dismissed or suspended. The “No work, no pay” principle contemplates a “no work” situation where the employees voluntarily absent themselves. (Republic v. Pacheco, En Banc, G.R. No. 178021, 25 January 2012)

The age-old rule governing the relation between labor and capital, or management and employee of a “fair day’s wage for a fair day’s labor” remains as the basic factor in determining employees’ wages. If there is no work performed by the employee there can be 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. (Aklan Electric Cooperative Incorporated [AKELCO] v. NLRC, Retiso, G.R. No. 121439, 25 January 2000)

b. Equal pay for equal work

The long honored legal truism of “equal pay for equal work,” meaning, “persons who work with substantially equal qualification, skill, effort and responsibility, under similar conditions, should be paid similar salaries,” has been institutionalized in our jurisdiction. Such that “if an employer accords employees the same position and rank, the presumption is that these employees perform equal work” as “borne by logic and human experience.” The ramification is that “(i)f 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 employer to explain why the employee is treated unfairly.” (Philex Gold Philippines, Inc. v. Philex Bulawan Supervisors Union, G.R. No. 149758, 25 August 2005, citing International School Alliance of Educators v. Quisumbing, G.R. No. 128845, 01 June 1, 2000)

c. Fair wage for fair work

The age-old rule governing the relation between labor and capital or management and employee is that a “fair day’s wage for a fair day’s labor.” If there is no work performed by the employee there can be no wage or pay, unless of course, the laborer was able, willing and ready to work but was illegally locked out, dismissed or suspended. It is hardly fair or just for an employee or laborer to fight or litigate against his employer on the employer’s time. (J.P. Heilbronn Co. v. National Labor Union, En Banc, G.R. No. L-5121, 30 January 1953)

Under the principle of a fair day’s wage for a fair day’s labor, the petitioners were not entitled to the wages during the period of the strike (even if the strike might be legal), because they performed no work during the strike. Verily, it was neither fair nor just that the dismissed employees should litigate against their employer on the latter’s time. Thus, the Court deleted the award of backwages and held that the striking workers were entitled only to reinstatement in Philippine Diamond Hotel and Resort, Inc. (Manila Diamond Hotel) v. Manila Diamond Hotel Employees Union, considering that the striking employees did not render work for the employer during the strike. (Olisa v. Escario, G.R. No. 160302, 27 September 2010)

d. Non-diminution of benefits

1) Concept

The principle of non-diminution of benefits is actually founded on the Constitutional mandate to protect the rights of workers, to promote their welfare, and to afford them full protection. In turn, said mandate is the basis of Article 4 of the Labor Code which states that “all doubts in the implementation and interpretation of this Code, including its implementing rules and regulations, shall be rendered in favor of labor.” (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 176985, 01 April 2013)

The application of the prohibition against the diminution of benefits presupposes that a company practice, policy or tradition favorable to the employees has been clearly established; and that the payments made by the employer pursuant to the practice, policy, or tradition have ripened into benefits enjoyed by them. (Philippine Journalists, Inc. v. Journal Employees Union [JEU], G.R. No. 192601, 03 June 2013)

2) Requisites

There is diminution of benefits when the following requisites are present:

1) The grant or benefit is founded on a policy or has ripened into a practice over a long period of time;

2) The practice is consistent and deliberate;

3) The practice is not due to error in the construction or application of a doubtful or difficult question of law; and

4) The diminution or discontinuance is done unilaterally by the employer. (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., supra.)

3) Company practice

To be considered as a practice, policy or tradition, however, the giving of the benefits should have been done over a long period of time, and must be shown to have been consistent and deliberate. It is relevant to mention that we have not yet settled on the specific minimum number of years as the length of time sufficient to ripen the practice, policy or tradition into a benefit that the employer cannot unilaterally withdraw. (Philippine Journalists, Inc. v. Journal Employees Union [JEU], supra.)

To be considered as a regular company practice, the employee must prove by substantial evidence that the giving of the benefit is done over a long period of time, and that it has been made consistently and deliberately. Jurisprudence has not laid down any hard-and-fast rule as to the length of time that company practice should have been exercised in order to constitute voluntary employer practice. The common denominator in previously decided cases appears to be the regularity and deliberateness of the grant of benefits over a significant period of time. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employees are not covered by any provision of the law or agreement requiring payment thereof. In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of the employer to grant the benefit over a considerable period of time. (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., supra.)

3. Minimum wage

The minimum wage rates for agricultural and non-agricultural employees and workers in each and every region of the country shall be those prescribed by the Regional Tripartite Wages and Productivity Boards. (Article 99, Labor Code)

a. Payment by hours worked

The Secretary of Labor and Employment shall regulate the payment of wages by results, including pakyao, piecework, and other non-time 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. (Article 101, Labor Code)

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 of the Labor Code provides that “the Secretary of Labor shall regulate the payment of wages by results, including pakyao, piecework and other non-time 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. (Pulp and Paper, Inc. v. NLRC, G.R. No. 116593, 24 September 1997)

b. Payment by results

The Secretary of Labor and Employment shall regulate the payment of wages by results, including pakyao, piecework, and other non-time 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. (Article 101, Labor Code)

All workers paid by results, including those who are paid on piecework, takay, pakyaw, or task basis, shall receive not less than the applicable statutory minimum wage rates prescribed under the Act for the normal working hours which shall not exceed eight hours work a day, or a proportion thereof for work of less than the normal working hours. (Section 9, Chapter 1, Rule VII, Book III, Omnibus Rules Implementing the Labor Code)

4. Payment of wages

a. Forms of payment

ART. 102. Forms of Payment. No employer shall pay the wages of an employee by means of promissory notes, vouchers, coupons, tokens, tickets, chits, or any object other than legal tender, even when expressly requested by the employee. (Article 102, Labor Code)

Payment of wages by check or money order shall be allowed when such manner of payment is customary on the date of effectivity of this Code, or is necessary because of special circumstances as specified in appropriate regulations to be issued by the Secretary of Labor and Employment or as stipulated in a collective bargaining agreement. (Ibid.)

b. Time of payment

Wages shall be paid at least once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days. If on account of force majeure or circumstances beyond the employer’s control, payment of wages on or within the time herein provided cannot be made, the employer shall pay the wages immediately after such force majeure or circumstances have ceased. No employer shall make payment with less frequency than once a month.

The payment of wages of employees engaged to perform a task which cannot be completed in two (2) weeks shall be subject to the following conditions, in the absence of a collective bargaining agreement or arbitration award:

1) That payments are made at intervals not exceeding sixteen (16) days, in proportion to the amount of work completed;

2) That final settlement is made upon completion of the work. (Article 103, Ibid.)

c. Place of payment

Payment of wages shall be made at or near the place of undertaking, except as otherwise provided by such regulations as the Secretary of Labor and Employment may prescribe under conditions to ensure greater protection of wages. (Article104, Ibid.)

d. Direct payment of wages

Wages shall be paid directly to the workers to whom they are due, except:

1) In cases of force majeure rendering such payment impossible or under other special circumstances to be determined by the Secretary of Labor and Employment in appropriate regulations, in which case, the worker may be paid through another person under written authority given by the worker for the purpose; or

2) Where the worker has died, in which case, the employer may pay the wages of the deceased worker to the heirs of the latter without the necessity of intestate proceedings. The claimants, if they are all of age, shall execute an affidavit attesting to their relationship to the deceased and the fact that they are his heirs, to the exclusion of all other persons. If any of the heirs is a minor, the affidavit shall be executed on his behalf by his natural guardian or next-of-kin. The affidavit shall be presented to the employer who shall make payment through the Secretary of Labor and Employment or his representative. The representative of the Secretary of Labor and Employment shall act as referee in dividing the amount paid among the heirs. The payment of wages under this Article shall absolve the employer of any further liability with respect to the amount paid. (Article 105, Ibid.)

e. Worker preference in case of bankruptcy

In the event of bankruptcy or liquidation of an employer’s business, his workers shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government and other creditors may be paid. (Article 101, Ibid.)

5. Prohibitions regarding wages

a. Non-interference in disposal of wags

No employer shall limit or otherwise interfere with the freedom of any employee to dispose of his wages. He shall not in any manner force, compel, or oblige his employees to purchase merchandise, commodities or other property from any other person, or otherwise make use of any store or services of such employer or any other person. (Article 112, Ibid.)

b. Wage deduction

No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his employees, except:

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

2) For union dues, in cases where the right of the worker or his union to checkoff has been recognized by the employer or authorized in writing by the individual worker concerned; and

3) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and Employment. (Article 113, Ibid.)

c. Deposits for loss or damage

No employer shall require his worker to make deposits from which deductions shall be made for the reimbursement of loss of or damage to tools, materials, or equipment supplied by the employer, except when the employer is engaged in such trades, occupations or business where the practice of making deductions or requiring deposits is a recognized one, or is necessary or desirable as determined by the Secretary of Labor and Employment in appropriate rules and regulations. (Article 114, Ibid.)

1) Limitations on deductions

No deduction from the deposits of an employee for the actual amount of the loss or damage shall be made unless the employee has been heard thereon, and his responsibility has been clearly shown. (Article 115, Ibid.)

d. Withholding of wages and kickbacks, prohibited

It shall be unlawful for any person, directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other. (Article 116, Ibid.)

e. Deductions to ensure employment

It shall be unlawful to make any deduction from the wages of any employee for the benefit of the employer or his representative or intermediary as consideration of a promise of employment or retention in employment. (Article 117, Ibid.)

f. Retaliatory measures, prohibited

It shall be unlawful for an employer to refuse to pay or reduce the wages and benefits, discharge or in any manner discriminate against any employee who has filed any complaint or instituted any proceeding under this Title or has testified or is about to testify in such proceedings. (Article 118, Ibid.)

6. Wage determination

a. Wage order

1) Regional Tripartite Wages and Productivity Boards (RTWPB)

Whenever conditions in the region so warrant, the [Regional Tripartite Wages and Productivity Boards] shall investigate and study all pertinent facts; and based on the standards and criteria herein prescribed, shall proceed to determine whether a Wage Order should be issued. (Article 123, Labor Code)

2) 15-day publication for effectivity

Any such Wage Order shall take effect after fifteen (15) days from its complete publication in at least one (1) newspaper of general circulation in the region. (Ibid.)

3) Appealable within calendar 10 days

Any party aggrieved by the Wage Order issued by the Regional Board may appeal such order to the National Wages and Productivity Commission (NWPC) within ten (10) calendar days from the publication of such order. It shall be mandatory for the Commission to decide such appeal within sixty (60) calendar days from the filing thereof. (Paragraph 3, Article 123, Ibid.)

a) Does not stay the order

The filing of the appeal does not stay the order unless the person appealing such order shall file with the Commission, an undertaking with a surety or sureties satisfactory to the Commission for the payment to the employees affected by the order of the corresponding increase, in the event such order is affirmed. (Paragraph 4, Article 123, Ibid.)

4) Frequency of Wage Order

a) General rule: 12-month gap

Any Wage Order issued by the Board may not be disturbed for a period of twelve (12) months from its effectivity, and no petition for wage increase shall be entertained within the said period. (Section 3, Rule IV, Rules of Procedure on Minimum Wage Fixing)

b) Exception: supervening conditions

In the event, however, that supervening conditions, such as extraordinary increase in prices of petroleum products and basic goods/services, demand a review of the minimum wage rates as determined by the Board and confirmed by the Commission, the Board shall proceed to exercise its wage fixing function even before the expiration of the said period. (Ibid.)

5) Implementing Rules/Regulations

The Board shall prepare the necessary rules and regulations to implement the Wage Order, subject to approval of the Secretary of Labor and Employment. (Section 5, Rule IV, Ibid.)

b. Wage distortion

1) Concept

Wage distortion – refers to 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. (Paragraph 7, Article 124, Labor Code)

2) Correction of Wage Distortion

a) If organized

Where the application of any prescribed wage increase by virtue of a Wage Order issued by the 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 wage distortions shall be resolved through the grievance procedure under their collective bargaining agreement and, if it remains unresolved, through voluntary arbitration. Unless otherwise agreed by the parties in writing, such dispute shall be decided by the voluntary arbitrator or panel of voluntary arbitrators within ten (10) days from the time said dispute was referred to voluntary arbitration. (Section 1, Rule VII, Ibid.)

b) If unorganized and no collective argreements

In cases where there are no collective agreements or recognized labor unions, the employers and workers shall endeavor to correct such distortions. Any dispute arising therefrom shall be settled through the National Conciliation and Mediation Board and, if it remains unresolved after ten (10) days of conciliation, shall be referred to the appropriate branch of the National Labor Relations Commissions (NLRC). It shall be mandatory for the NLRC to conduct continuous hearings and decide the dispute within twenty (20) days from the time said dispute is submitted for compulsory arbitration. (Paragraph 2, Section 1, Rule VII, Ibid.)

The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of any increase in prescribed wage rates pursuant to the provisions of law or wage order. (Paragraph 6, Article 124, Labor Code)

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