Cases: Service incentive leave

What is a Labor Law Case or Labor Jurisprudence? A Labor Law Case or Labor Jurisprudence is a decision/resolution on a labor dispute by the Supreme Court of the Philippines. Per Article 8 of the Civil Code, judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines. 

Table of Contents

These are the related Labor Law Cases or Jurisprudence.

1. Covered employees

a. Covered employees

1) Rank-and-file employees

Ramil v. Stoneleaf Inc.
G.R. No. 222416, 17 June 2020
[BACKGROUND]
On June 7, 2009, [the employee] was hired as a Spa Supervisor and Massage Therapist at respondent’s establishment, Stoneleaf Spa and Wellness Center. Respondent Stoneleaf, Inc. (Stoneleaf) paid [the employee] a monthly salary of P10,000.00 and P100.00 per massage service rendered. [The employee] was also an incorporator/director in Stoneleaf’s Articles of Incorporation.
In January 2010, [the employee] inquired about the payment of contributions for Social Security System (SSS), Philippine Health Insurance Corporation (Philhealth), and Pag-Ibig Fund [Pagtutulungan sa kinabukasan: Ikaw, Bangko, Industriya at Gobyerno Fund] (Pag-Ibig), which were necessary in processing the spa’s permit. She also questioned the deduction of 12% value-added tax from her commission. As a result, she got the ire of Stoneleaf President, respondent [J.P. De Guzman].
On August 27, 2012, Stoneleaf’s receptionist/cashier, [J. Abarquez], was on official leave, and [the employee] took over her duties. In the afternoon of that day, a regular client came in for massage service. However, the service was not recorded in the computer as required by company procedure. After closing of business day, [the employee] reported to De Guzman through a short messaging system (SMS) that there were only three clients, when in fact there were four. The cash box contained P1,300.00 instead of P1,650.00.
When Abarquez reported for work the following day, she checked the previous day’s transactions. Another spa employee, [R. Beloy], told Abarquez about [the employee’s] anomalous transaction. Abarquez and Beloy reported the matter to De Guzman. Julius Tabangcora (Tabangcora), another spa employee, confirmed that he rendered a massage service to a client on August 27, 2012, but it was not reflected in the computer and the billing was not on file.
De Guzman investigated the matter and discovered [the employee’s] dishonest act. When [the employee] was confronted, she denied the allegation against her. On September 27, 2012, Stoneleaf terminated [the employee’s] employment due to serious misconduct, betrayal of trust, and loss of confidence.
[The employee] filed a complaint for illegal dismissal against Stoneleaf, De Guzman, and [M. Dones] before the labor tribunal. She alleged that she was not given a copy of the charge against her, and she was fired on the same day that she was notified of her dismissal. She averred that she was denied of substantial and procedural due process. She claimed to be entitled to reinstatement with backwages, last salary for September 16-30, 2012, proportionate 13th month pay, unpaid commission, labor standard benefits, moral and exemplary damages of P100,000.00, and 10% attorney’s fees.
x x x
The LA ruled that [the employee] was dismissed for a valid cause, that is, loss of trust and confidence for her dishonest act. Stoneleaf was able to support the dismissal through documentary evidence and found the following: (1) on August 27, 2012, a massage service on a client was not recorded in the computer; (2) [the employee] instructed Abarquez to cover-up the shortage on August 27, 2012 with undeclared sales; (3) [the employee] took the credit for services rendered by Dia Camilon, another spa employee; (4) [the employee] sold to others the ointments that were used in the spa; (5) [the employee] took home the towels in the spa; and (6) [the employee] did not reflect the sales in the computer and took the money instead.
However, [the employee] was dismissed without due process, which entitled her to an indemnity of P5,000.00. The LA resolved that the alleged meeting cannot take the place of the required notice. [the employee] was also entitled to attorney’s fees since she was forced to litigate her case.
[DECISION/RESOLUTION – BY THE SUPREME COURT]
Foremost, the Court clarifies that the Court shall no longer discuss the legality of the dismissal and the propriety of the award of nominal damages of P5,000.00, because the labor tribunals and the CA are consistent in its findings that [the employee] was dismissed for a valid cause but without due process. Thus, she is entitled to nominal damages. Factual findings of administrative agencies are generally accorded respect and even finality by the Court, especially when these findings are affirmed by the CA. Furthermore, [the employee] did not appeal the LA’s ruling dismissing the complaint for illegal dismissal for lack of merit. It was Stoneleaf who filed an appeal questioning the monetary awards.
The main issue to be resolved is whether or not petitioner [the employee] is entitled to service incentive leave pay, holiday pay, pro-rated 13th month pay, and attorney’s fees. Under the Labor Code of the Philippines (Labor Code), rank-and­-file employees are entitled to these monetary awards, but not managerial employees. Stoneleaf claims that [the employee] is a managerial employee/staff, while the latter argues otherwise. The Court must determine to which class of employees [the employee] belongs.
Article 82 of the Labor Code enumerates the employees excluded from the coverage of labor standards benefits.
ART. 82. Coverage. – The provisions of this Title shall apply to employees in all establishments and undertakings whether for profit or not, but not to government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results as determined by the Secretary of Labor in appropriate regulations.
As used herein, “managerial employees” refer to those whose primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof, and to other officers or members of the managerial staff…
The Omnibus Rules Implementing the Labor Code states that managerial employees and members of the managerial staff are those who meet the following conditions:
(b) Managerial employees, if they meet all of the following conditions:
(1) Their primary duty consists of the management of the establishment in which they are employed or of a department or sub-division thereof.
(2) They customarily and regularly direct the work of two or more employees therein.
(3) They have the authority to hire or fire employees of lower rank; or their suggestions and recommendations as to hiring and firing and as to the promotion or any other change of status of other employees, are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management policies of their employer;
(2) Customarily and regularly exercise discretion and independent judgment; and
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of the management of the establishment in which he is employed or subdivision thereof; or (ii) execute under general supervision work along specialized or technical lines requiring special training, experience, or knowledge; or (iii) execute, under general supervision, special assignments and tasks; and
(4) Who do not devote more than 20 percent of their hours worked in a work week to activities which are not directly and closely related to the performance of the work described in paragraphs (1), (2) and (3) above.
In determining whether [the employee] is a managerial employee/staff, her actual work performed, and not her job title, must be considered.
In her Petition, [the employee] enumerated the scope of her assignment as Spa Supervisor and Massage Therapist as follows:
• Ensure the spa is in tiptop condition
• Ensure that there are enough therapists to serve customer/s
• Ensure that the items needed in massage service is in full stock all the time in coordination with the assigned inventory clerk, making the sourcing of supplier of merchandise for the spa also part of the job
• In charge of delegating every responsibility of all the staff
• Entertains the guests and promotes the spa services
• Handles the complaints of customers
• Trains the staff on the spa services
• Evaluates the competency of applicants to petitioner De Guzman for his approval
• Enforces company policy and spa regulations
The records show that [the employee] does not have the prerogative to lay down management policies and to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions. The scope of her assignment pertains to the daily operation of the spa by making sure that the business runs smoothly. However, her tasks do not include the regular exercise of discretion. Her authority is limited to the execution of company procedures and policies. She has plenty of administrative work, but none of it involves the use of independent judgment. Her duties are also subject to De Guzman’s approval.
The Court agrees with the NLRC’s observations as follows:
Applying the above criteria, complainant’s duties and responsibilities do not x x x fall under any of the categories enumerated above. Complainant’s work was not directly related to management policies. No circumstances were shown by respondents to reveal that complainant regularly exercised discretion and independent judgment. Neither did complainant participate in policy formulation nor in the hiring or firing of employees.
It must be pointed out that the test of  “supervisory” or “managerial status” depends on whether a person possesses authority to act in the interest of his employer, and whether such authority is not merely routinary or clerical in nature, but requires the use of independent judgment. Simply put, the functions of the position are not managerial in nature if they only execute approved and established policies leaving little or no discretion at all whether to implement said policies or not.
In the instant case, the position held by complainant and its concomitant duties failed to overcome the above mentioned test. Her assigned tasks do not at all indicate that complainant can exercise the powers equivalent to managerial actions which require independent judgment. At the least, there is no evidence that she was vested with duties attributable to a managerial employee or to a member of the managerial staff.
What is more apparent, however, is that the functions of complainant seem to involve the execution of approved and established policies. While she may be tasked to source out suppliers of merchandise for the spa, there is no showing that she has the last say on whether to get from the supplier or not. Truly, she may evaluate the competency of applicants, but still this is subject to the approval of respondent De Guzman. Noteworthy, complainant reports to respondent De Guzman at the end of business hours to inform the latter how many clients were served by the spa and how much sales was made for the day.
Moreover, the respondents’ failure to controvert the complainant’s claim that she gets a commission of [P]100.00 for every massage service rendered is a clear manifestation that complainant was one of the massage therapists of the spa. This finds support in the sworn statement of Arcega, wherein the latter attested that complainant assigns to herself clients who give tips and claim that the customer specifically asked for her. Indeed, if it were true that she is a managerial employee or a member of the managerial staff, complainant would not have been entitled to commissions for every massage rendered.
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, Stoneleaf 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 Stoneleaf’s argument that [the employee] is a corporate officer. While the Articles of Incorporation states that she is one of the incorporators, Stoneleaf 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 Stoneleaf was not able to demonstrate how [the employee] recommends managerial actions that would make her a managerial employee. What is clear was Stoneleaf’s admission that [the employee] oversees the daily operation of the spa and supervises the employees. Stoneleaf 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 Stoneleaf 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. Special kinds of employees

1) Those engaged via “pakyaw” or task basis

Auto Bus Transport Systems, Inc. v. Bautista
G.R. No. 156367, 16 May 2005
The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor Code vis-à-vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. – This rule shall apply to all employees except:
(d) Field personnel and other employees whose performance is unsupervised by the employer including those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed amount for performing work irrespective of the time consumed in the performance thereof; …
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to employees classified as “field personnel.” The phrase “other employees whose performance is unsupervised by the employer” must not be understood as a separate classification of employees to which service incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as those “whose actual hours of work in the field cannot be determined with reasonable certainty.”
The same is true with respect to the phrase “those who are engaged on task or contract basis, purely commission basis.” Said phrase should be related with “field personnel,” applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow. Hence, employees engaged on task or contract basis or paid on purely commission basis are not automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel.
Therefore, [the employer]’s contention that [the employee] is not entitled to the grant of service incentive leave just because he was paid on purely commission basis is misplaced. What must be ascertained in order to resolve the issue of propriety of the grant of service incentive leave to [the employee] is whether or not he is a field personnel.
According to Article 82 of the Labor Code, “field personnel” shall refer to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. This definition is further elaborated in the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees Association which states that:
As a general rule, [field personnel] are those whose performance of their job/service is not supervised by the employer or his representative, the workplace being away from the principal office and whose hours and days of work cannot be determined with reasonable certainty; hence, they are paid specific amount for rendering specific service or performing specific work. If required to be at specific places at specific times, employees including drivers cannot be said to be field personnel despite the fact that they are performing work away from the principal office of the employee.
To this discussion by the BWC, [the employer] differs and postulates that under said advisory opinion, no employee would ever be considered a field personnel because every employer, in one way or another, exercises control over his employees. [The employer] further argues that the only criterion that should be considered is the nature of work of the employee in that, if the employee’s job requires that he works away from the principal office like that of a messenger or a bus driver, then he is inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress that the definition of a “field personnel” is not merely concerned with the location where the employee regularly performs his duties but also with the fact that the employee’s performance is unsupervised by the employer. As discussed above, field personnel are those who regularly perform their duties away from the principal place of business of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. Thus, in order to conclude whether an employee is a field employee, it is also necessary to ascertain if actual hours of work in the field can be determined with reasonable certainty by the employer. In so doing, an inquiry must be made as to whether or not the employee’s time and performance are constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals:
It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors assigned at strategic places who board the bus and inspect the passengers, the punched tickets, and the conductor’s reports. There is also the mandatory once-a-week car barn or shop day, where the bus is regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are problems thereon as reported by the driver and/or conductor. They too, must be at specific place as [sic] specified time, as they generally observe prompt departure and arrival from their point of origin to their point of destination. In each and every depot, there is always the Dispatcher whose function is precisely to see to it that the bus and its crew leave the premises at specific times and arrive at the estimated proper time. These, are present in the case at bar. The driver, the complainant herein, was therefore under constant supervision while in the performance of this work. He cannot be considered a field personnel.
We agree in the above disquisition. Therefore, as correctly concluded by the appellate court, [the employee] is not a field personnel but a regular employee who performs tasks usually necessary and desirable to the usual trade of [the employer’s] business. Accordingly, [the employee] is entitled to the grant of service incentive leave.
David v. Macasio
G.R. No. 195466, 02 July 2014
[The LA concluded that the employee was engaged on “pakyaw” or task basis, and thus he is not entitled to overtime, holiday, SIL and 13th month pay.]
… as early as 1987 in the case of Cebu Institute of Technology v. Ople the phrase “those who are engaged on task or contract basis” in the rule has already been interpreted to mean as follows:
[the phrase] should however, be related with “field personnel” applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow xxx Clearly, petitioner’s teaching personnel cannot be deemed field personnel which refers “to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner’s claim that private respondents are not entitled to the service incentive leave benefit cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from the coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including the holiday and SIL pay) only if they qualify as “field personnel.” The IRR therefore validly qualifies and limits the general exclusion of “workers paid by results” found in Article 82 from the coverage of holiday and SIL pay. This is the only reasonable interpretation since the determination of excluded workers who are paid by results from the coverage of Title I is “determined by the Secretary of Labor in appropriate regulations.”
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to employees classified as “field personnel.” The phrase “other employees whose performance is unsupervised by the employer” must not be understood as a separate classification of employees to which service incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as those “whose actual hours of work in the field cannot be determined with reasonable certainty.”
The same is true with respect to the phrase “those who are engaged on task or contract basis, purely commission basis.” Said phrase should be related with “field personnel,” applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of granting Macasio’s petition.
In Serrano, the Court, applying the rule on ejusdem generis declared that “employees engaged on task or contract basis xxx are not automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel.” The Court explained that the phrase “including those who are engaged on task or contract basis, purely commission basis” found in Section 1(d), Rule V of Book III of the IRR should not be understood as a separate classification of employees to which SIL shall not be granted. Rather, as with its preceding phrase – “other employees whose performance is unsupervised by the employer” – the phrase “including those who are engaged on task or contract basis” serves to amplify the interpretation of the Labor Code definition of “field personnel” as those “whose actual hours of work in the field cannot be determined with reasonable certainty.”

2. Conditions for entitlement

a. At leas one year of service

1) Whether continuous or broken

Imbuido v. NLRC
G.R. No. 114734, 31 March 2000
With regard to [the employee’s] claim for service incentive leave pay, we agree with the labor arbiter that [the employee] is entitled to service incentive leave pay, as provided in Article 95 of the Labor Code, which reads:
Art. 95 – Right to service incentive leave –
(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay.
x x x           x x x          x x x
Having already worked for more than three (3) years at the time of her unwarranted dismissal, petitioner is undoubtedly entitled to service incentive leave benefits, computed from 1989 until the date of her actual reinstatement. As we ruled in the recent case of Fernandez vs. NLRC, “[s]ince a service incentive leave is clearly demandable after one year of service – whether continuous or broken – or its equivalent period, and it is one of the ‘benefits’ which would have accrued if an employee was not otherwise illegally dismissed, it is fair and legal that its computation should be up to the date of reinstatement as provided under Section [Article] 279 of the Labor Code, as amended, which reads:
Art. 279. Security of Tenure. – An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation is withheld from him up to the time of his actual reinstatement.”

3. Prescriptive period

a. Commencement

1) When the employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the employee’s services

Auto Bus Transport Systems, Inc. v. Bautista
G.R. No. 156367, 16 May 2005
The question now that must be addressed is up to what amount of service incentive leave pay [the employee] is entitled to.
The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-year prescriptive period under Article 291 of the Labor Code is applicable to [the employee’s] claim of service incentive leave pay.
Article 291 of the Labor Code states that all money claims arising from employer-employee relationship shall be filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred.
In the application of this section of the Labor Code, the pivotal question to be answered is when does the cause of action for money claims accrue in order to determine the reckoning date of the three-year prescriptive period.
It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff.
To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the third element of a cause of action transpired. Stated differently, in the computation of the three-year prescriptive period, a determination must be made as to the period when the act constituting a violation of the workers’ right to the benefits being claimed was committed. For if the cause of action accrued more than three (3) years before the filing of the money claim, said cause of action has already prescribed in accordance with Article 291.
Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established that the benefits being claimed have been withheld from the employee for a period longer than three (3) years, the amount pertaining to the period beyond the three-year prescriptive period is therefore barred by prescription. The amount that can only be demanded by the aggrieved employee shall be limited to the amount of the benefits withheld within three (3) years before the filing of the complaint.
It is essential at this point, however, to recognize that the service incentive leave is a curious animal in relation to other benefits granted by the law to every employee. In the case of service incentive leave, the employee may choose to either use his leave credits or commute it to its monetary equivalent if not exhausted at the end of the year. Furthermore, if the employee entitled to service incentive leave does not use or commute the same, he is entitled upon his resignation or separation from work to the commutation of his accrued service incentive leave. As enunciated by the Court in Fernandez v. NLRC:
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides that “[e]very employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay.” Service incentive leave is a right which accrues to every employee who has served “within 12 months, whether continuous or broken reckoned from the date the employee started working, including authorized absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or that provided in the employment contracts, is less than 12 months, in which case said period shall be considered as one year.” It is also “commutable to its money equivalent if not used or exhausted at the end of the year.” In other words, an employee who has served for one year is entitled to it. He may use it as leave days or he may collect its monetary value. To limit the award to three years, as the solicitor general recommends, is to unduly restrict such right.
Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim his service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary equivalent if the employee did not make use of said leave credits but instead chose to avail of its commutation. Accordingly, if the employee wishes to accumulate his leave credits and opts for its commutation upon his resignation or separation from employment, his cause of action to claim the whole amount of his accumulated service incentive leave shall arise when the employer fails to pay such amount at the time of his resignation or separation from employment.
Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can conclude that the three (3)-year prescriptive period commences, not at the end of the year when the employee becomes entitled to the commutation of his service incentive leave, but from the time when the employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the employee’s services, as the case may be.
The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in keeping with the rudimentary principle that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman’s welfare should be the primordial and paramount consideration.18 The policy is to extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor.
In the case at bar, [the employee] had not made use of his service incentive leave nor demanded for its commutation until his employment was terminated by [the employer]. Neither did [the employer] compensate his accumulated service incentive leave pay at the time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one month from the time of his dismissal, that [the employee] demanded from his former employer commutation of his accumulated leave credits. His cause of action to claim the payment of his accumulated service incentive leave thus accrued from the time when his employer dismissed him and failed to pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for service incentive leave pay only commenced from the time the employer failed to compensate his accumulated service incentive leave pay at the time of his dismissal. Since [the employee] had filed his money claim after only one month from the time of his dismissal, necessarily, his money claim was filed within the prescriptive period provided for by Article 291 of the Labor Code.
Rodriguez v. Park N Ride Inc. Nicest (Phils.) Inc.
G.R. No. 222980, 20 March 2017
[BACKGROUND]
[… with respect to service incentive leave pay, the Court of Appeals limited the award thereof to three (3) years (2006 to 2009) only due to the prescriptive period under Article 291 of the Labor Code. x x x]
[DECISION/RESOLUTION – BY THE SUPREME COURT]
Auto Bus Transport System, Inc. v. Bautista clarified the correct reckoning of the prescriptive period for service incentive leave pay:
It is essential at this point, however, to recognize that the service incentive leave is a curious animal in relation to other benefits granted by the law to every employee. In the case of service incentive leave, the employee may choose to either use his leave credits or commute it to its monetary equivalent if not exhausted at the end of the year. Furthermore, if the employee entitled to service incentive leave does not use or commute the same, he is entitled upon his resignation or separation from work to the commutation of his accrued service incentive leave. As enunciated by the Court in Fernandez v. NLRC:
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides that “[e]very employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay.” Service incentive leave is a right which accrues to every employee who has served “within 12 months, whether continuous or broken reckoned from the date the employee started working, including authorized absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or that provided in the employment contracts, is less than 12 months, in which case said period shall be considered as one year.” It is also “commutable to its money equivalent if not used or exhausted at the end of the year.” In other words, an employee who has served for one year is entitled to it. He may use it as leave days or he may collect its monetary value. To limit the award to three years, as the solicitor general recommends, is to unduly restrict such right.
Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim his service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary equivalent if the employee did not make use of said leave credits but instead chose to avail of its commutation.1âwphi1 Accordingly, if the employee wishes to accumulate his leave credits and opts for its commutation upon his resignation or separation from employment, his cause of action to claim the whole amount of his accumulated service incentive leave shall arise when the employer fails to pay such amount at the time of his resignation or separation from employment.
Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can conclude that the three (3)-year prescriptive period commences, not at the end of the year when the employee becomes entitled to the commutation of his service incentive leave, but from the time when the employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the employee’s services, as the case may be.
The above construal of Art. 291, vis-a-vis the rules on service incentive leave, is in keeping with the rudimentary principle that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman’s welfare should be the primordial and paramount consideration. The policy is to extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor…
Thus, the prescriptive period with respect to petitioner’s claim for her entire service incentive leave pay commenced only from the time of her resignation or separation from employment. Since petitioner had filed her complaint on October 7, 2009, or a few days after her resignation in September 2009, her claim for service incentive leave pay has not prescribed. Accordingly, petitioner must be awarded service incentive leave pay for her entire 25 years of service-from 1984 to 2009-and not only three (3) years’ worth (2006 to 2009) as determined by the Court of Appeals.

4. Burden of proof

a. When on the employer

1) In the ordinary course of business

Minsola v. New City Builders, Inc.
G.R. No. 207613, 31 January 2018
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 [the employee] 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 1,900.56 He is also entitled to a 13th month pay differential of Php 2,652.00.

Table of Contents

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