San Miguel Corp. v. Inciong

FIRST DIVISION
[G.R. No. L-49774. February 24, 1981.]
SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT) ,

petitioner, vs. Hon. AMADO G. INCIONG, Deputy Minister of Labor
and CAGAYAN COCA-COLA FREE WORKERS UNION , respondents.
DECISION
DE CASTRO , J : p
Petition for certiorari and prohibition with preliminary injunction to review the
Order 1 dated December 19, 1978 rendered by the Deputy Minister of Labor in STF ROX
Case No. 009-77 docketed as "Cagayan Coca-Cola Free Workers Union vs. Cagayan
Coca-Cola Plant, San Miguel Corporation," which denied herein petitioner's motion for
reconsideration and ordered the immediate execution of a prior Order 2 dated June 7,
1978.
On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private respondent
herein, led a complaint against San Miguel Corporation (Cagayan Coca-Cola Plant),
petitioner herein, alleging failure or refusal of the latter to include in the computation of
13th-month pay such items as sick, vacation or maternity leaves, premium for work
done on rest days and special holidays, including pay for regular holidays and night
differentials.
An Order 3 dated February 15, 1977 was issued by Regional O ce No. X where
the complaint was led requiring herein petitioner San Miguel Corporation (Cagayan
Coca-Cola Plant) "to pay the difference of whatever earnings and the amount actually
received as 13th month pay excluding overtime premium and emergency cost of living
allowance."
Herein petitioner appealed from that Order to the Minister of Labor in whose
behalf the Deputy Minister of Labor Amado G. Inciong issued an Order 4 dated June 7,
1978 a rming the Order of Regional O ce No. X and dismissing the appeal for lack of
merit. Petitioner's motion for reconsideration having been denied, it led the instant
petition.
On February 14, 1979, this Court issued a Temporary Restraining Order 5
enjoining respondents from enforcing the Order dated December 19, 1978.
The crux of the present controversy is whether or not in the computation of the
13th-month pay under Presidential Decree 851, payments for sick, vacation or
maternity leaves, premium for work done on rest days and special holidays, including
pay for regular holidays and night differentials should be considered.
Public respondent's consistent stand on the matter since the effectivity of
Presidential Decree 851 is that "payments for sick leave, vacation leave, and maternity
bene ts, as well as salaries paid to employees for work performed on rest days,
special and regular holidays are included in the computation of the 13th-month pay." 6
On its part, private respondent cited innumerable past rulings, opinions and decisions
rendered by then Acting Labor Secretary Amado G. Inciong to the effect that, "in
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computing the mandatory bonus, the basis is the total gross basic salary paid by the
employer during the calendar year. Such gross basic salary includes: (1) regular salary
or wage; (2) payments for sick, vacation and maternity leaves; (3) premium for work
performed on rest days or holidays; (4) holiday pay for worked or unworked regular
holiday; and (5) emergency allowance if given in the form of a wage adjustment." 7
Petitioner, on the other hand, assails as erroneous the aforesaid order, rulings
and opinions; vigorously contends that Presidential Decree 851 speaks only of basic
salary as basis for the determination of the 13th-month pay; submits that payments for
sick, vacation, or maternity leaves, night differential pay, as well as premium paid for
work performed on rest days, special and regular holidays do not form part of the basic
salary; and concludes that the inclusion of those payments in the computation of the
13th-month pay is clearly not sanctioned by Presidential Decree 851. LLjur
The Court finds petitioner's contention meritorious.

The provision in dispute is Section 1 of Presidential Decree 851 and provides:
"All employers are hereby required to pay all their employees receiving a
basic salary of not more than P1,000 a month, regardless of the nature of the
employment, a 13th-month pay not later than December 24 of every year."
Section 2 of the Rules and Regulations for the implementation of Presidential

Decree 851 provides:
"a) Thirteenth-month pay shall mean one twelfth (1/12) of the basic
salary of an employee within a calendar year;
"b) Basic salary shall include all remunerations on 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, pro t sharing payments and all allowances and monetary
bene ts which are not considered or integrated as part of the regular or basic
salary of the employee at the time of the promulgation of the Decree on
December 16, 1975."
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 Instructions No. 174;
b) Profit sharing payments;.
c) All allowances and monetary bene ts 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.
Under a later set of Supplementary Rules and Regulations Implementing

Presidential Decree 851 issued by the then Labor Secretary Blas Ople, overtime pay,
earnings and other remunerations are excluded as part of the basic salary and in the
computation of the 13th-month pay.
The exclusion of cost-of-living allowances under Presidential Decree 525 and
Letter of Instructions No. 174, and pro t sharing payments indicate the intention to
strip basic salary of other payments which are properly considered as "fringe" bene ts.
Likewise, the catch-all exclusionary phrase "all allowances and monetary bene ts which
are not considered or integrated as part of the basic salary" shows also the intention to
strip basic salary of any of all additions which may be in the form of allowances or
"fringe" bene ts. Moreover, the Supplementary Rules and Regulations Implementing
Presidential Decree 851 is even more emphatic in declaring that earnings and other
remunerations which are not part of the basic salary shall not be included in the
computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations
Implementing Presidential Decree 851 which de nes basic salary to include all
remunerations or earnings paid by an employer to an employee, this cloud is dissipated
in the later and more controlling Supplementary Rules and Regulations which
categorically, exclude from the de nition of basic salary earnings and other
remunerations paid by employer to an employee. A cursory perusal of the two sets of
Rules indicates that what has hitherto been the subject of a broad inclusion is now a
subject of broad exclusion. The Supplementary Rules and Regulations cure the seeming
tendency of the former rules to include all remunerations and earnings within the
definition of basic salary.
The all-embracing phrase "earnings and other remunerations" which are deemed
not part of the basic salary includes within its meaning payments for sick, vacation, or
maternity leaves, premium for works performed on rest days and special holidays, pays
for regular holidays and night differentials. As such they are deemed not part of the
basic salary and shall not be considered in the computation of the 13th-month pay. If
they were not so excluded, it is hard to nd any "earnings and other remunerations"
expressly excluded in the computation of the 13th-month pay. Then the exclusionary
provision would prove to be idle and with no purpose. prLL
This conclusion nds strong support under the Labor Code of the Philippines. To
cite a few provisions:
"Art. 87 — overtime work. Work may be performed beyond eight (8) hours a
day provided that the employee is paid for the overtime work, additional
compensation equivalent to his regular wage plus at least twenty- ve (25%)
percent thereof."
It is clear that overtime pay is an additional compensation other than and added
to the regular wage salary or basic salary, for reason of which such is categorically
excluded from the de nition of basic salary under the Supplementary Rules and
Regulations Implementing Presidential Decree 851.
In Article 93 of the same Code, paragraph.
"c.) work performed on any special holiday shall be paid an additional
compensation of at least thirty percent (30%) of the regular wage of the
employee."
It is likewise clear that premium for special holiday which is at least 30% of the
regular wage is an additional compensation other than and added to the regular wage
or basic salary. For similar reason it shall not be considered in the computation of the
13th-month pay.

WHEREFORE, the Orders of the Deputy Labor Minister dated June 7, 1978 and
December 19, 1978 are hereby set aside and a new one entered as above indicated.
The Temporary Restraining Order issued by this Court on February 14, 1979 is hereby
made permanent. No pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ.,
concur.
Footnotes
1. p. 24, Rollo.
2. pp. 22-23, Rollo.

3. p. 20, Rollo.
4. Supra.
5. p. 28-A, Rollo.
6. Stated in its Order dated June 7, 1978, supra.
7. L/q. Rizal Rubber Company, Inc., 4 February 1976, p. 44, Rollo; L/q. Makati Supermarket,
January 12, 1976, p. 44, Rollo; etc. Rollo, pp 44-46.

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FIRST DIVISION

[G.R. No. L-49774. February 24, 1981.]

SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT) ,

The Court finds petitioner's contention meritorious.

Section 2 of the Rules and Regulations for the implementation of Presidential

"b) Basic salary shall include all remunerations on earnings paid by an

c) All allowances and monetary bene ts which are not considered or

Under a later set of Supplementary Rules and Regulations Implementing

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2. pp. 22-23, Rollo.

CD Technologies Asia, Inc. 2019 cdasiaonline.com

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