Davao Fruits Corporation v. Associated Labor Unions
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns the computation of the thirteenth-month pay for rank-and-file employees of Davao Fruits Corporation. The Associated Labor Unions (ALU), representing the employees, filed a complaint seeking the thirteenth-month pay differential for 1982. The union argued that the company had, since 1975, consistently included payments for sick, vacation, and maternity leaves, premiums for work on rest days and special holidays, and pay for regular holidays in its thirteenth-month pay computation. However, in 1982, the company allegedly excluded these items, contrary to established practice. 2. Procedural History: The complaint was initially filed with the Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao City. Labor Arbiter Pedro C. Ramos rendered a decision on March 7, 1984, ordering the company to pay the 1982 thirteenth-month pay differential. Davao Fruits Corporation appealed this decision to the National Labor Relations Commission (NLRC). The NLRC affirmed the Labor Arbiter's decision and dismissed the company's appeal for lack of merit. 3. The Petition: Davao Fruits Corporation filed a petition for review with the Supreme Court, which was treated as a special civil action for certiorari under Rule 65 of the Revised Rules of Court. The company argued that it had erroneously included certain items in the thirteenth-month pay computation in prior years due to a doubtful question of law, which it claimed to have discovered after the Supreme Court's decision in San Miguel Corporation v. Inciong. The core issue presented to the Court was whether payments for sick, vacation, and maternity leaves, premiums for work on rest days and special holidays, and pay for regular holidays could be excluded from the thirteenth-month pay computation, irrespective of long-standing company practice, under Presidential Decree No. 851 and its implementing rules.
Issue(s)
Whether payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays may be excluded in the computation of the thirteenth month pay under P.D. No. 851, considering the long-standing company practice of including these payments. Whether the principle of solutio indebiti is applicable in this labor dispute, specifically concerning the employer's attempt to rectify past inclusion of certain items in the thirteenth-month pay calculation.
Ruling
The petition is dismissed, and the questioned decision of the NLRC is affirmed.
Ratio Decidendi
On the exclusion of certain payments from the thirteenth month pay: The Court held that Presidential Decree No. 851 mandates the payment of a thirteenth-month pay, computed based on the "basic salary." The "basic salary" is defined as "all remunerations or earnings paid by an employer to an employee for services rendered" but excludes cost of living allowances, 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 at the time of the promulgation of the Decree on December 16, 1975." Supplementary rules clarify that overtime pay and other remunerations not part of the basic salary are excluded. Therefore, payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays are explicitly excluded from the "basic salary." However, the Court emphasized that the petitioner's consistent inclusion of these items from 1975 to 1981 established a company practice favorable to the employees. This practice, voluntarily and continuously observed, ripened into a benefit that could not be reduced, diminished, discontinued, or eliminated by the employer, pursuant to Section 10 of the Rules and Regulations Implementing P.D. No. 851 and Article 100 of the Labor Code of the Philippines. On the applicability of solutio indebiti: The Court ruled that the principle of solutio indebiti, a civil law concept, is not applicable in labor law. Furthermore, even under its civil law definition, solutio indebiti requires the obligee to return what was received. In this case, the petitioner was not seeking the return of payments made from 1975 to 1981 but rather wanted to "rectify" its past error by excluding certain items from the 1982 thirteenth-month pay. Therefore, the principle of solutio indebiti was deemed inapplicable to the instant case.
Main Doctrine
Payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays, are excluded in the computation of the thirteenth month pay, as they are not part of the 'basic salary' as defined by Presidential Decree No. 851 and its implementing rules. However, a long-standing company practice of including these items, established unilaterally and voluntarily by the employer, ripens into a benefit that cannot be diminished or eliminated.