Cases: 13th month pay

1. Kinds of employees

a. Rank-and-file employees

Ramil v. Stoneleaf, Inc.

G.R. No. 222416, 17 June 2020

[BACKGROUND]

[The employee was hired as a Spa Supervisor and Massage Therapist by the employer, a Spa and Wellness Center. She received a monthly salary of P10,000.00 and P100.00 per massage service rendered. She was also an incorporator/director in the Company’s Articles of Incorporation. Sometime later, she was terminated from his employment. When he filed for illegal dismissal with monetary claims, one of the issues pertained to her claim for 13th month pay. To which the employer argued against alleging that she was a managerial employee.]

[RESOLUTION]

The Court concurs with the NLRC’s conclusion that [the employee] is not a managerial employee, but a rank-and-file employee. Specifically, she is a fiduciary rank-and-file employee. Wesleyan University Phils. v. Reyes defines a fiduciary rank-and-file employee as one who in the normal and routine exercise of his/her functions regularly handle significant amounts of money or property. Cashiers, auditors, and property custodians are some of the employees in the second class.

Here, [the employee] regularly handles significant amounts of money or property in the normal and routine exercise of her functions. She was in charge of the facilities of the spa by making sure it is in good condition and that the items needed are in full stock all the time. She was also in charge of the sales of the spa when she took over the duties of the receptionist/cashier. In fact, [the employer] admitted in its Comment that she was entrusted with the finances of the spa, including the handling of cash receipts, billings statements, and the care of the spa’s property. Therefore, [the employee] is a fiduciary rank-and-file employee, and she is entitled to service incentive leave pay, holiday pay, and pro-rated 13th month pay. She is also entitled to attorney’s fees equivalent to 10% of the monetary award, because she was compelled to file a complaint to protect her interests.

The Court disagrees with [the employer’s] argument that [the employee] is a corporate officer. While the Articles of Incorporation states that she is one of the incorporators, [the employer] was unable to rebut [the employee’s] claim that she has no capital contribution to the corporation. She is merely an incorporator on paper, but not in fact. There was no proof that she participated in any corporate meeting or exercised functions related to a corporate officer.

The Court observes that [the employer] was not able to demonstrate how [the employee] recommends managerial actions that would make her a managerial employee. What is clear was [the employer’s] admission that [the employee] oversees the daily operation of the spa and supervises the employees. [The employer] admitted the scope of assignment given to her.

In sum, [the employee] was able to overcome the burden of proving that she is a fiduciary rank-and-file employee, while [the employer] was unable to show evidence that she is a corporate officer. [The employee] is entitled to service incentive leave pay, holiday pay, pro-rated 13th month pay, and attorney’s fees equivalent to 10% of the monetary award. Pursuant to Nacar v. Gallery Frames, the monetary awards are subject to 6% interest per annum from the finality of this decision until fully paid.

b. Field personnel

David v. Macasio

G.R. No. 195466, 02 July 2014

[ISSUE: Whether or not a worker engaged on “pakyaw” or task basis is entitled to 13th month pay]

[RESOLUTION]

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA legally erred in finding that the NLRC gravely abused its discretion in denying this benefit to Macasio.

The governing law on 13th month pay is PD No. 851.

As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must be one of those expressly enumerated to be exempted. Section 3 of the Rules and Regulations Implementing P.D. No. 85154 enumerates the exemptions from the coverage of 13th month pay benefits. Under Section 3(e), “employers of those who are paid on xxx task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof” are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and Regulations Implementing PD No. 851 exempts employees “paid on task basis” without any reference to “field personnel.” This could only mean that insofar as payment of the 13th month pay is concerned, the law did not intend to qualify the exemption from its coverage with the requirement that the task worker be a “field personnel” at the same time.

[In conclusion, 13th month pay was granted to the complainant.]

WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as the payment of 13th month pay to respondent is concerned…

c. “Paid on task basis”

David v. Macasio

G.R. No. 195466, 02 July 2014

[BACKGROUND]

[The employee was a butcher for the employer, a hog dealer. When he claimed 13th month pay, the employer responded that he is not entitled thereto since he is paid on a “pakyaw” or task basis. The Labor Arbiter and the NLRC ruled in favor of the employer. However, the Court of Appeals ruled in favor of the employee.]

The CA explained that as a task basis employee, [he] is excluded from the coverage of holiday, SIL and 13th month pay only if he is likewise a “field personnel.”

[RESOLUTION]

With respect to the payment of 13th month pay however, we find that the CA legally erred in finding that the NLRC gravely abused its discretion in denying this benefit to [the employee].

The governing law on 13th month pay is PD No. 851.

As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must be one of those expressly enumerated to be exempted. Section 3 of the Rules and Regulations Implementing P.D. No. 85154 enumerates the exemptions from the coverage of 13th month pay benefits. Under Section 3(e), “employers of those who are paid on xxx task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof” are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and Regulations Implementing PD No. 851 exempts employees “paid on task basis” without any reference to “field personnel.” This could only mean that insofar as payment of the 13th month pay is concerned, the law did not intend to qualify the exemption from its coverage with the requirement that the task worker be a “field personnel” at the same time.

d. Piece-rate, fixed or commission-based

Philippine Agricultural Commercial and Industrial Workers Union (PACIWU-TUCP) v. NLRC, Vallacar Transit, Inc.

G.R. No. 107994, 14 August 1995

[ISSUE: Whether or not bus drivers and conductors paid on “purely commission basis” but are automatically entitled to basic wage, is entitled to 13th month pay.]

[RESOLUTION]

[E]very employee receiving a commission in addition to a fixed or guaranteed wage or salary, is entitled to a 13th month pay. For purposes of entitling rank and file employees a 13th month pay, it is immaterial whether the employees concerned are paid a guaranteed wage plus commission or a commission with guaranteed wage inasmuch as the botton line is that they receive a guaranteed wage…

In the case at bench, while the bus drivers and conductors of respondent company are considered by the latter as being compensated on a commission basis, they are not paid purely by what they receive as commission. As admitted by respondent company, the said bus drivers and conductors are automatically entitled to the basic minimum pay mandated by law in case the commissions they earned be less than their basic minimum for eight (8) hours work. Evidently therefore, the commissions form part of the wage or salary of the bus drivers and conductors. A contrary interpretation would allow an employer to skirt the law and would result in an absurd situation where an employee who receives a guaranteed minimum basic pay cannot be entitled to a 13th month pay simply because he is technically referred to by his employer per the CBA as an employee compensated on a purely commission basis. Such would be a narrow interpretation of the law, certainly not in accord with the liberal spirit of our labor laws. Moreover, what is controlling is not the label attached to the remuneration that the employee receives but the nature of the remuneration and the purpose for which the 13th month pay was given to alleviate the plight of the working masses who are receiving low wages…

x x x

Misplaced legal hermeneutics cannot be countenanced to evade paying the rank and file what is due to them under the law.

Commission is the recompense, compensation, reward of an employee, agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit of the principal. While said commissions may be in the form of incentives or encouragement to inspire said bus drivers and conductors to put a little more zeal and industry on their jobs, still, it is safe to say that the same are direct remunerations for services rendered, given the small remuneration they receive for the services they render, which is precisely the reason why private respondent allowed the drivers and conductors a guaranteed minimum wage. The conclusion is ineluctable that said commissions are part of their salary…

x x x

In sum, the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed minimum wage in case their commissions be less than the statutory minimum, and commissions only in case where the same is over and above the statutory minimum, must be equivalent to one-twelfth (1/12) of their total earnings during the calendar year.

3. The Computation

a. Basic salary

Reyes v. NLRC, Universal Robina Corporation Grocery Division

G.R. No. 160233, 08 August 2007

[RESOLUTION]

Insofar as what constitutes “basic salary,” the foregoing discussions equally apply to the computation of petitioner’s 13th month pay. As held in San Miguel Corporation v. Inciong:

Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as the basis in the determination of his 13th-month pay. Any compensations or remunerations which are deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.

Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations are deemed not part of the basic salary:

a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instruction No. 174;

b) Profit sharing payments;

c) All allowances and monetary benefits which are not considered or integrated as part of the regular basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975…

b The benefit and formula

Central Azucarera de Tarlac v. Central Azucarera de Tarlac Labor Union-NLU

G.R. No. 188949, 26 July 2010

[BACKGROUND]

On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No. 851 was issued. The Supplementary Rules clarifies that overtime pay, earnings, and other remuneration that are not part of the basic salary shall not be included in the computation of the 13th-month pay.

On November 16, 1987, the Revised Guidelines on the Implementation of the 13th-Month Pay Law was issued. Significantly, under this Revised Guidelines, it was specifically stated that the minimum 13th-month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year.

Furthermore, the term “basic salary” of an employee for the purpose of computing the 13th-month pay was interpreted to include all remuneration or earnings paid by the employer for services rendered, but does not include allowances and monetary benefits which are not integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances. However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th-month pay if, by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees.

Based on the foregoing, it is clear that there could have no erroneous interpretation or application of what is included in the term “basic salary” for purposes of computing the 13th-month pay of employees. From the inception of P.D. No. 851 on December 16, 1975, clear-cut administrative guidelines have been issued to insure uniformity in the interpretation, application, and enforcement of the provisions of P.D. No. 851 and its implementing regulations.

___________________

St. Michael Academy v. NLRC, Bolosiño

G.R. No. 119512, 13 July 1998

[RESOLUTION]

Public respondent NLRC modified the Labor Arbiter’s monetary awards to [the employees] by applying the three-year prescriptive period on several money claims and deleting the award of service incentive leave pay as well as moral and exemplary damages. Not satisfied, [the employers] maintain that public respondent NLRC gravely abused its discretion when it affirmed the Labor Arbiter’s award of 13th month pay and unpaid vacation leave pay to [the employees] despite the latter’s failure to specifically pray for them in their pleadings. [The employers] contend that a prayer “for such other benefits provided by the Labor Code” should be limited to those benefits which follow as a matter of course based on the allegations of the parties and the evidence presented. They urge that it should clearly appear that a party is entitled to the benefit but, through inadvertence or ignorance, failed to specifically include it in the prayer.

We [the Supreme Court] hold that the respondent Commission did not gravely abuse its discretion in granting 13th month pay differential to [the employees]. We have granted statutory benefits to employees although they have failed to pray for them in their complaint. Technical rules of pleading are not enforced strictly in labor cases especially where they will defeat the substantive rights of employees. We find no reason to depart from this ruling demanded by broad consideration of substantial justice. Nevertheless, we take exception to the complete award of 13th month pay to each [of the employees] as there appears a clear mistake in the computation. The payroll sheets show the 13th month pay actually paid by [the employers] to [the employees]. For the second half of 1989, [the employees] did not receive their proportionate 13th month pay; for the year 1990, they received only one-half; for 1991, they were paid an incomplete amount; for 1992, they also received one-half of the 13th month pay plus one-month subsidy.

It appears that public respondent computed the 13th month pay differential by multiplying the daily wage rate by the number of days each [of the employees] worked in [the employer’s school]. This is incorrect. According to No. 4 (a) of the Revised Guidelines on the Implementation of the 13th Month Law (Presidential Decree 851) dated November 16, 1987, the 13th month pay of an individual is (not less than) one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year. Moreover, in No. 6 thereof, it is provided that an employee who has resigned or whose services were terminated at any time before the time for payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from the service.

Following these guidelines, the proportionate 13th month pay of [the employees] for the second half of 1989 should be computed by multiplying their basic monthly wage at that time by 7/12. For the year 1990, [the employees], except Golo, should be given the remaining half of the 13th month pay. For the year 1991, [the employees], except Rebadulla, should be given the differential. For 1992, no differential is due to [the employees] since [the employers] paid all of them an amount over and above their proportionate 13th month pay.

Commissions

Philippine Duplicators, Inc. v. NLRC, Philippine Duplicators Employees Union-TUPAS

En Banc, G.R. No. 110068, 15 February 1995

[ISSUE: Whether or not the sales commissions provided by the Company, should be included in the basic salary for 13th month pay computation.]

[RESOLUTION]

The Third Division [of the Supreme Court] in Duplicators found that:

In the instant case, there is no question that the sales commission earned by the salesmen who make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the “wage” or salary of petitioner’s salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salesmen’s wages or salaries being composed of the sales or incentive commissions earned on actual sales closed by them. No doubt this particular galary structure was intended for the benefit of the petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each of its salesmen for rendering services to petitioner corporation.

In other words, the sales commissions received for every duplicating machine sold constituted part of the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their job. The portion of the salary structure representing commissions simply comprised an automatic increment to the monetary value initially assigned to each unit of work rendered by a salesman. Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to the Philippine Duplicators’ salesmen represented only 15%-30% of an employee’s total earnings in a year…

x x x

Considering the above circumstances, the Third Division held, correctly, that the sales commissions were an integral part of the basic salary structure of Philippine Duplicators’ employees salesmen. These commissions are not overtime payments, nor profit-sharing payments nor any other fringe benefit. Thus, the salesmen’s commissions, comprising a pre-determined percent of the selling price of the goods sold by each salesman, were properly included in the term “basic salary” for purposes of computing their 13th month pay.

In Boie-Takeda the so-called commissions “paid to or received by medical representatives of Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.,” were excluded from the term “basic salary” because these were paid to the medical representatives and rank-and-file employees as “productivity bonuses.”4 The Second Division characterized these payments as additional monetary benefits not properly included in the term “basic salary” in computing their 13th month pay. We note that productivity bonuses are generally tied to the productivity, or capacity for revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and have no clear director necessary relation to the amount of work actually done by each individual employee. More generally, a bonus is an amount granted and paid ex gratia to the employee; its payment constitutes an act of enlightened generosity and self-interest on the part of the employer, rather than as a demandable or enforceable obligation…

x x x

If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that such productivity bonus, when given, should not be deemed to fall within the “basic salary” of employees when the time comes to compute their 13th month pay.

It is also important to note that the purported “commissions” paid by the Boie-Takeda Company to its medical representatives could not have been “sales commissions” in the same sense that Philippine Duplicators paid its salesmen Sales commissions. Medical representatives are not salesmen; they do not effect any sale of any article at all. In common commercial practice, in the Philippines and elsewhere, of which we take judicial notice, medical representatives are employees engaged in the promotion of pharmaceutical products or medical devices manufactured by their employer. They promote such products by visiting identified physicians and inform much physicians, orally and with the aid of printed brochures, of the existence and chemical composition and virtues of particular products of their company. They commonly leave medical samples with each physician visited; but those samples are not “sold” to the physician and the physician is, as a matter of professional ethics, prohibited from selling such samples to their patients. Thus, the additional payments made to Boie-Takeda’s medical representatives were not in fact sales commissions but rather partook of the nature of profit-sharing bonuses.

The doctrine set out in the decision of the Second Division is, accordingly, that additional payments made to employees, to the extent they partake of the nature of profit-sharing payments, are properly excluded from the ambit of the term “basic salary” for purposes of computing the 13th month pay due to employees. Such additional payments are not “commissions” within the meaning of the second paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.

x x x

[W]hat particular types of earnings and remuneration are or are not properly included or integrated in the basic salary are questions to be resolved on a case to case basis, in the light of the specific and detailed facts of each case. In principle, where these earnings and remuneration are closely akin to fringe benefits, overtime pay or profit-sharing payments, they are properly excluded in computing the 13th month pay. However, sales commissions which are effectively an integral portion of the basic salary structure of an employee, shall be included in determining his 13th month pay.

We recognize that both productivity bonuses and sales commissions may have an incentive effect. But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to the productivity or profit generation of the employer corporation. Productivity bonuses are not directly dependent on the extent an individual employee exerts himself. A productivity bonus is something extra for which no specific additional services are rendered by any particular employee and hence not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent or energy of an employee’s endeavors. Commissions are paid upon the specific results achieved by a salesman-employee. It is a percentage of the sales closed by a salesman and operates as an integral part of such salesman’s basic pay.

Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by [the former DOLE Secretary], is properly understood as holding that that second paragraph provides no legal basis for including within the term “commission” there used additional payments to employees which are, as a matter of fact, in the nature of profit-sharing payments or bonuses. If and to the extent that such second paragraph is so interpreted and applied, it must be regarded as invalid as having been issued in excess of the statutory authority of the Secretary of Labor. That same second paragraph however, correctly recognizes that commissions, like those paid in Duplicators, may constitute part of the basic salary structure of salesmen and hence should be included in determining the 13th month pay; to this extent, the second paragraph is and remains valid.

3. Company practice

Sevilla Trading Company v. A.V.A. Tomas E. Semana

G.R. No. 152456, 29 April 2004

[BACKGROUND]

For two to three years prior to 1999, petitioner Sevilla Trading Company (Sevilla Trading, for short), a domestic corporation engaged in trading business, organized and existing under Philippine laws, added to the base figure, in its computation of the 13th-month pay of its employees, the amount of other benefits received by the employees which are beyond the basic pay. These benefits included:

(a) Overtime premium for regular overtime, legal and special holidays;

(b) Legal holiday pay, premium pay for special holidays;

(c) Night premium;

(d) Bereavement leave pay;

(e) Union leave pay;

(f) Maternity leave pay;

(g) Paternity leave pay;

(h) Company vacation and sick leave pay; and

(i) Cash conversion of unused company vacation and sick leave.

Petitioner claimed that it entrusted the preparation of the payroll to its office staff, including the computation and payment of the 13th-month pay and other benefits. When it changed its person in charge of the payroll in the process of computerizing its payroll, and after audit was conducted, it allegedly discovered the error of including non-basic pay or other benefits in the base figure used in the computation of the 13th-month pay of its employees…

x x x

Petitioner then effected a change in the computation of the thirteenth month pay, as follows:

13th-month pay 12 months = net basic pay

where: net basic pay = gross pay – (non-basic pay or other benefits)

Now excluded from the base figure used in the computation of the thirteenth month pay are the following:

a) Overtime premium for regular overtime, legal and special holidays;

b) Legal holiday pay, premium pay for special holidays;

c) Night premium;

d) Bereavement leave pay;

e) Union leave pay;

f) Maternity leave pay;

g) Paternity leave pay;

h) Company vacation and sick leave pay; and

i) Cash conversion of unused vacation/sick leave.

Hence, the new computation reduced the employees’ thirteenth month pay. The daily piece-rate workers represented by private respondent Sevilla Trading Workers Union – SUPER (Union, for short), a duly organized and registered union, through the Grievance Machinery in their Collective Bargaining Agreement, contested the new computation and reduction of their thirteenth month pay…

x x x

[RESOLUTION]

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its employees’ thirteenth month pay, without the payments for sick, vacation and maternity leave, premium for work done on rest days and special holidays, and pay for regular holidays. The considerable length of time the questioned items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Sec. 10 of the Rules and Regulations Implementing P.D. No. 851, and Art. 100 of the Labor Code of the Philippines which prohibit the diminution or elimination by the employer of the employees’ existing benefits. [Tiangco vs. Leogardo, Jr., 122 SCRA 267 (1983)]

With regard to the length of time the company practice should have been exercised to constitute voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold that jurisprudence has not laid down any rule requiring a specific minimum number of years. In the above quoted case of Davao Fruits Corporation vs. Associated Labor Unions,10 the company practice lasted for six (6) years. In another case, Davao Integrated Port Stevedoring Services vs. Abarquez,11 the employer, for three (3) years and nine (9) months, approved the commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr.,12 the employer carried on the practice of giving a fixed monthly emergency allowance from November 1976 to February 1980, or three (3) years and four (4) months. In all these cases, this Court held that the grant of these benefits has ripened into company practice or policy which cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of including non-basic benefits such as paid leaves for unused sick leave and vacation leave in the computation of their 13th-month pay for at least two (2) years. This, we rule likewise constitutes voluntary employer practice which cannot be unilaterally withdrawn by the employer without violating Art. 100 of the Labor Code:

Art. 100. Prohibition against elimination or diminution of benefits. – Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.

a. Full month

Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda

G.R. No. 145561, 15 June 2005

More importantly, it has not been refuted that Honda has not implemented any pro-rating of the 13th month pay before the instant case. Honda did not adduce evidence to show that the 13th month, 14th month and financial assistance benefits were previously subject to deductions or pro-rating or that these were dependent upon the company’s financial standing. As held by the Voluntary Arbitrator:

The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to adopt a pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M substantial losses in 1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is an implicit acceptance that prior to the strike, a full month basic pay computation was the “present practice” intended to be maintained in the CBA.

The memorandum dated November 22, 1999 which Honda issued shows that it was the first time a pro-rating scheme was to be implemented in the company. It was a convenient coincidence for the company that the work stoppage held by the employees lasted for thirty-one (31) days or exactly one month. This enabled them to devise a formula using 11/12 of the total annual salary as base amount for computation instead of the entire amount for a 12-month period.

That a full month payment of the 13th month pay is the established practice at Honda is further bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both attested that when they were absent from work due to motorcycle accidents, and after they have exhausted all their leave credits and were no longer receiving their monthly salary from Honda, they still received the full amount of their 13th month, 14th month and financial assistance pay.

b. Incorrect computation

Central Azucarera de Tarlac v. Central Azucarera de Tarlac Labor Union-NLU

G.R. No. 188949, 26 July 2010

[BACKGROUND]

[The employer has incorrectly computed the 13th month pay resulting in paying the employees more than what is required by law for a period of 30 years.]

[RESOLUTION]

As correctly ruled by the CA, the practice of [the employer] in giving 13th-month pay based on the employees’ gross annual earnings which included the basic monthly salary, premium pay for work on rest days and special holidays, night shift differential pay and holiday pay continued for almost thirty (30) years and has ripened into a company policy or practice which cannot be unilaterally withdrawn.

Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that benefits given to employees cannot be taken back or reduced unilaterally by the employer because the benefit has become part of the employment contract, written or unwritten. The rule against diminution of benefits applies if it is shown that the grant of the benefit is based on an express policy or has ripened into a practice over a long period of time and that the practice is consistent and deliberate. Nevertheless, the rule will not apply if the practice is due to error in the construction or application of a doubtful or difficult question of law. But even in cases of error, it should be shown that the correction is done soon after discovery of the error.

The argument of [the employer] that the grant of the benefit was not voluntary and was due to error in the interpretation of what is included in the basic salary deserves scant consideration. No doubtful or difficult question of law is involved in this case. The guidelines set by the law are not difficult to decipher. The voluntariness of the grant of the benefit was manifested by the number of years the employer had paid the benefit to its employees. [The employer] only changed the formula in the computation of the 13th-month pay after almost 30 years and only after the dispute between the management and employees erupted. This act of [the employer] in changing the formula at this time cannot be sanctioned, as it indicates a badge of bad faith…

Furthermore, petitioner cannot use the argument that it is suffering from financial losses to claim exemption from the coverage of the law on 13th-month pay, or to spare it from its erroneous unilateral computation of the 13th-month pay of its employees. Under Section 7 of the Rules and Regulations Implementing P.D. No. 851, distressed employers shall qualify for exemption from the requirement of the Decree only upon prior authorization by the Secretary of Labor.20 In this case, no such prior authorization has been obtained by petitioner; thus, it is not entitled to claim such exemption.

4. Burden of proof

Minsola v. New City Builders, Inc.

G.R. No. 207613

[RESOLUTION]

Minsola is entitled to… 3th Month Pay Differentials…

Notably, in determining the employee’s entitlement to monetary claims, the burden of proof is shifted from the employer or the employee, depending on the monetary claim sought.

In claims for payment of salary differential, service incentive leave, holiday pay and 13th month pay, the burden rests on the employer to prove payment. This standard follows the basic rule that in all illegal dismissal cases the burden rests on the defendant to prove payment rather than on the plaintiff to prove non-payment. This likewise stems from the fact that all pertinent personnel files, payrolls, records, remittances and other similar documents – which will show that the differentials, service incentive leave and other claims of workers have been paid – are not in the possession of the worker but are in the custody and control of the employer.

On the other hand, for overtime pay, premium pays for holidays and rest days, the burden is shifted on the employee, as these monetary claims are not incurred in the normal course of business. It is thus incumbent upon the employee to first prove that he actually rendered service in excess of the regular eight working hours a day, and that he in fact worked on holidays and rest days.

In the instant case, the records show that Minsola was given a daily wage of Php 260.00, as shown by his employment contract dated December 16, 2008. It must be noted that this amount falls below the prevailing minimum wage of Php 382.00, mandated by Wage Order No. NCR-15, effective August 28, 2008 to June 30, 2010. Clearly, Minsola is entitled to salary differentials from December 16, 2008 until January 19, 2010, in the amount of Php 41,616.64.55 Likewise, Minsola is entitled to service incentive leave pay differentials in the amount of Php 310.00, as the amount of service incentive leave pay he received on December 19, 2009 was only Php 1,600.00, instead of Php 1,900. He is also entitled to a 13th month pay differential of Php 2,652.00.

5. Granted even if not prayed in complaint

St. Michael Academy v. NLRC, Bolosiño

G.R. No. 119512, 13 July 1998

[The NLRC] did not gravely abuse its discretion in granting 13th month pay differential to the [complainants]. [The Supreme Court has] granted statutory benefits to employees although they have failed to pray for them in their complaint. Technical rules of pleading are not enforced strictly in labor cases especially where they will defeat the substantive rights of employees. [The Supreme Court finds] no reason to depart from this ruling demanded by broad consideration of substantial justice…

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