Central Azucarera de Tarlac v. Central Azucarera de Tarlac Labor Union-National Labor Union
REITERATIONFacts
1. The Antecedents: Central Azucarera de Tarlac (CAT), a sugar manufacturing corporation, and the Central Azucarera de Tarlac Labor Union-NLU (CATLU), the bargaining representative for CAT's rank-and-file employees, are embroiled in a dispute over the computation of the 13th-month pay. CAT had consistently computed this pay by dividing the total basic annual salary by twelve (12), including basic monthly salary, overtime pay, night premium pay, and vacation and sick leaves. This practice was followed for approximately thirty years until 2006. 2. Procedural History: In December 2006, CAT altered its 13th-month pay computation, dividing total earnings by twelve (12) and basing it on the actual earnings during the eight months the employees worked that year, which was less than the usual full year. CATLU objected, arguing for a divisor of eight (8) and the inclusion of guaranteed monthly pay, as per company practice. After failed grievance proceedings and conciliation, CATLU filed a complaint for money claims with the National Labor Relations Commission (NLRC). The Labor Arbiter dismissed the complaint, ruling CAT could rectify its error. However, the NLRC reversed this, ordering CAT to adhere to its established practice. CAT's subsequent petition for certiorari before the Court of Appeals (CA) was dismissed, affirming the NLRC's decision. 3. The Petition: CAT filed the present petition for review on certiorari under Rule 45 of the Rules of Court, assailing the CA's decision. CAT argued that its previous computation of the 13th-month pay was an error that it had the right to correct, even after a long period, as it was not a voluntary act but a mistaken application of Presidential Decree No. 851. CAT contended that the established practice was not a company policy that could not be unilaterally withdrawn and that the guidelines for computing basic salary were not difficult to interpret. The petition seeks to reinstate the Labor Arbiter's decision dismissing the complaint.
Issue(s)
Whether the petitioner committed an error in the computation of the 13th-month pay. Whether the established practice of including certain remunerations in the computation of the 13th-month pay ripened into a company policy that cannot be unilaterally withdrawn. Whether the petitioner can unilaterally change the computation of the 13th-month pay based on an alleged error in interpretation.
Ruling
The petition is denied for lack of merit. The Decision of the Court of Appeals is affirmed.
Ratio Decidendi
On the alleged error in the computation of the 13th-month pay: The Court held that there could have been no erroneous interpretation or application of what is included in the term "basic salary" for purposes of computing the 13th-month pay. Presidential Decree (P.D.) No. 851 and its implementing rules and supplementary regulations, including the Revised Guidelines on the Implementation of the 13th-Month Pay Law, provide clear guidelines. The definition of "basic salary" for the purpose of the 13th-month pay has been interpreted to include all remuneration or earnings paid for services rendered, but excludes allowances and monetary benefits not integrated into the regular or basic salary, such as overtime pay, premium, night differential, and holiday pay. However, these salary-related benefits should be included if, by agreement, company practice, or policy, they are treated as part of the basic salary. The Court found that the practice of petitioner in giving 13th-month pay based on gross annual earnings, which included basic monthly salary, premium pay, night shift differential, and holiday pay, continued for almost thirty (30) years and had ripened into a company policy or practice. On whether the established practice ripened into a company policy: The Court affirmed the CA's ruling that the practice of petitioner in giving 13th-month pay based on the employees' gross annual earnings, which included premium pay for work on rest days and special holidays, night shift differential pay, and holiday pay, continued for almost thirty (30) years and had ripened into a company policy or practice which cannot be unilaterally withdrawn. This is in accordance with Article 100 of the Labor Code, the Non-Diminution Rule, which 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 applies if the grant of the benefit is based on an express policy or has ripened into a consistent and deliberate practice over a long period. On the petitioner's right to unilaterally change the computation: The Court found the argument of petitioner that the grant of the benefit was not voluntary and was due to an error in interpretation to be without merit. No doubtful or difficult question of law was involved, as the guidelines set by the law are clear. The voluntariness of the grant was manifested by the number of years the employer had paid the benefit. Petitioner changed the formula only after almost 30 years and after a dispute arose, which the Court considered an indication of bad faith. Furthermore, petitioner could not claim exemption from the law due to financial losses without prior authorization from the Secretary of Labor, which was not obtained.
Main Doctrine
A company practice of including overtime pay, premium pay, night differential, and paid leave credits in the computation of the 13th-month pay, established over a long period, ripens into a company policy that cannot be unilaterally withdrawn by the employer, absent a showing that such practice was due to an error in the construction or application of a doubtful or difficult question of law, and that the correction was made soon after the discovery of the error.