Globe Mackay Cable and Radio Corporation vs. National Labor Relations Commission

The payment of COLA is mandated only for days employees are paid their basic wage; where the CBA fixes a five-day work week and monthly basic pay on 22 days, the monthly COLA is computed on 22 days, not 30. Prior full COLA payments do not constitute a binding voluntary employer practice absent long, consistent, and deliberate practice and clear administrative guidelines.

Globe Mackay Cable and Radio Corporation employed monthly-paid workers represented by FFW-Globe Mackay Employees Union under a Collective Bargaining Agreement that fixed a five-day work week and computed monthly basic pay on twenty-two days. Wage Order No. 6, effective 30 October 1984, increased the cost-of-living allowance of non-agricultural workers in the private sector. The Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 provided that covered employees are entitled to their daily living allowance during the days they are paid their basic wage, even if unworked. The dispute required applying that rule to the company's CBA-based work week and prior COLA payments.

Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance of non-agricultural workers in the private sector. Petitioner Globe Mackay Cable and Radio Corporation complied by paying its monthly-paid employees the mandated P3.00 per day COLA. In computing the monthly COLA, however, Globe Mackay multiplied the P3.00 daily COLA by 22 days, the number of working days in the company. Respondent FFW-Globe Mackay Employees Union disagreed, claiming that the daily COLA rate of P3.00 should be multiplied by 30 days to arrive at the monthly COLA rate. The Union further alleged that prior to the effectivity of Wage Order No. 6, Globe Mackay had computed and paid the monthly COLA on the basis of thirty days per month and that this constituted an employer practice that could not be unilaterally withdrawn.

After several grievance proceedings proved futile, the Union filed a complaint against Globe Mackay, its President F. White, and its Vice-President J. Santiago for illegal deduction, underpayment, unpaid allowances, and violation of Wage Order No. 6. White and Santiago were sought to be held personally liable for the money claims demanded.

Labor Arbiter Adelaido F. Martinez sustained Globe Mackay's position. He held that the individual petitioners, having acted in their corporate capacity, should not have been impleaded, and that the monthly COLA should be computed on the basis of 22 days because the evidence showed that there were only 22 paid days in a month for monthly-paid employees in the company. The Labor Arbiter reasoned that compelling the company to use 30 days in a month to compute the allowance while retaining 22 days for vacation and sick leave, overtime pay, and other benefits would be inconsistent and palpably unjust; if 30 days were used as a divisor, it would have to be used for the computation of all benefits, which would not be fair to the complainants and would contravene the CBA.

On appeal, the NLRC reversed the Labor Arbiter. It held that the P3.00 daily COLA under Wage Order No. 6 should be paid and computed on the basis of thirty days instead of twenty-two days since workers paid on a monthly basis are entitled to COLA on Saturdays, Sundays, and legal holidays even if unworked. It also held that the full allowance enjoyed by Globe Mackay's monthly-paid employees before the CBA executed between the parties in 1982 constituted a voluntary employer practice that could not be unilaterally withdrawn, and that White and Santiago were properly impleaded as respondents.

The CBA between Globe Mackay and the Union provided that eight net working hours shall constitute the regular work day for five days; that forty net hours of work, 5 working days, shall constitute the regular work week; and that all overtime worked in excess of eight net hours daily or in excess of 5 days weekly shall be computed on an hourly basis at the rate of time and one half. The Labor Arbiter found that in determining the hourly rate of monthly-paid employees for purposes of computing overtime pay, the monthly wage is divided by the number of actual work days in a month and then by eight working hours. If a monthly-paid employee rendered overtime work, he was paid his basic salary rate plus one-half thereof. The Labor Arbiter examined the specimen payroll of employee Jesus L. Santos, who worked on Saturday and Sunday and was paid base pay plus 50% premium over and above his monthly basic pay; if the sixth and seventh days of the week were deemed paid even if unworked and included in the monthly salary, Santos should not have been paid his base pay for Saturday and Sunday but should have received only the 50% overtime premium. The specimen payrolls of employees Dennis Dungon and Rene Sanvictores similarly showed that in computing vacation and sick leaves, Globe Mackay consistently used twenty-two days.

The Labor Arbiter thus found that Globe Mackay observed a five-day work week and that its monthly-paid employees received their basic wage for only twenty-two days. The NLRC, by contrast, proceeded from the premise that monthly-paid employees were entitled to COLA on Saturdays, Sundays, and legal holidays even if unworked.

• Grave Abuse of Discretion: Petitioners filed the special civil action for certiorari anchored on the charge of grave abuse of discretion by the NLRC in reversing the Labor Arbiter's Decision.
• COLA Computation: Petitioner Corporation's position, sustained by the Labor Arbiter, was that the monthly COLA should be computed on 22 days, the number of paid days in a month for monthly-paid employees, rather than on 30 days.
• Officer Liability: Petitioner Corporation maintained, and the Labor Arbiter sustained, that the individual petitioners acted in their corporate capacity and should not have been impleaded.

• COLA Computation: Respondent Union argued that the daily COLA rate of P3.00 under Wage Order No. 6 should be multiplied by 30 days to arrive at the monthly COLA rate.
• Employer Practice: Respondent Union alleged that prior to Wage Order No. 6, Petitioner Corporation had computed and paid the monthly COLA on the basis of thirty days per month, constituting an employer practice that could not be unilaterally withdrawn.
• Personal Liability: Respondent Union sought to hold White and Santiago personally liable for the money claims in its complaint for illegal deduction, underpayment, unpaid allowances, and violation of Wage Order No. 6.

• COLA Computation: Whether the monthly COLA under Wage Order No. 6 for monthly-paid employees should be computed on the basis of 22 days or 30 days.
• Employer Practice: Whether Petitioner Corporation's prior payment of full COLA before the 1982 CBA constituted a voluntary employer practice that cannot be unilaterally withdrawn.
• Grave Abuse of Discretion: Whether the NLRC committed grave abuse of discretion in reversing the Labor Arbiter's Decision.
• Officer Liability: Whether White and Santiago may be held personally liable for the money claims.

• COLA Computation: No. The COLA should be computed on 22 days, not 30. Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 mandates COLA only for days basic wage is paid, and the CBA fixed monthly basic pay on 22 days.
• Employer Practice: No. Prior full payment did not constitute a voluntary employer practice because it was not practiced over a long period and was not shown to be consistent and deliberate; before Wage Order No. 4, there were no clear administrative guidelines.
• Grave Abuse of Discretion: Yes. The NLRC committed grave abuse of discretion in reversing the Labor Arbiter; its Decision was set aside and the Labor Arbiter's Decision reinstated.
• Officer Liability: Not reached. The Court found no further need to discuss the liability of the officers after resolving the COLA and employer-practice issues.

• COLA Computation: Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 provides that all covered employees shall be entitled to their daily living allowance during the days that they are paid their basic wage, even if unworked. The primordial consideration for entitlement to COLA is that basic wage is being paid; on days employees are not paid basic wage, COLA is not mandated. University of Pangasinan Faculty Union vs. University of Pangasinan supplied the principle "No Pay, No ECOLA." For monthly-paid employees whose monthly salary covers all days in a month, they are deemed paid basic wages for all those days and entitled to COLA on those days even if unworked. Here, however, the CBA between Petitioner Corporation and Respondent Union provided that monthly basic pay is computed on the basis of five days a week, or 22 days a month. The CBA stated that eight net working hours constitute the regular work day for five days; forty net hours of work, 5 working days, constitute the regular work week; and overtime in excess of eight net hours daily or in excess of 5 days weekly is computed on an hourly basis at time and one half. The Labor Arbiter found that the hourly rate of monthly-paid employees for overtime was determined by dividing the monthly wage by the number of actual work days in a month and then by eight working hours; overtime was paid at the basic salary rate plus one-half. The specimen payroll of Jesus L. Santos showed that when he worked on Saturday and Sunday, he was paid base pay plus 50% premium over and above his monthly basic pay; if the sixth and seventh days were deemed paid even if unworked and included in the monthly salary, Santos should not have been paid base pay for Saturday and Sunday but only the 50% overtime premium. The specimen payrolls of Dennis Dungon and Rene Sanvictores likewise showed that vacation and sick leaves were computed using 22 days. Under these peculiar circumstances, where the company observes a five-day work week, the COLA should be computed on the basis of 22 days, the period during which monthly-paid employees receive their basic wage. The CBA is the law between the parties and, if not acceptable, may be the subject of future re-negotiation.
• Employer Practice: Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984) should not be construed as constitutive of a voluntary employer practice that cannot now be unilaterally withdrawn. To be considered as such, the practice should have been practiced over a long period of time and must be shown to have been consistent and deliberate. Adequate proof was wanting. Oceanic Pharmacal Employees Union (FFW) vs. Inciong was cited for the test of long practice, where the employer agreed to continue giving holiday pay knowing fully well that the employees were not covered by the law requiring payment of holiday pay. Moreover, before Wage Order No. 4, there was a lack of administrative guidelines for the implementation of the Wage Orders. It was only when the Rules Implementing Wage Order No. 4 were issued on 21 May 1984 that a formula for the conversion of the daily allowance to its monthly equivalent was laid down. Under Section 3 of those Rules, for workers who do not work and are not considered paid on Saturdays and Sundays, the formula is P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P253.70. As the Labor Arbiter analyzed, when applied to a company observing a five-day work week, the monthly equivalent of a daily allowance is arrived at by multiplying the daily allowance by 262 divided by 12, which results in the equivalent of 21.8 days in a month. Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law. Payment may be said to have been made by reason of a mistake in the construction or application of a doubtful or difficult question of law under Article 2155, in relation to Article 2154, of the Civil Code. Since it is a past error that is being corrected, no vested right may be said to have arisen, nor any diminution of benefit under Article 100 of the Labor Code may be said to have resulted by virtue of the correction.
• Grave Abuse of Discretion: The NLRC's reversal contravened Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 and disregarded the CBA's five-day work week and 22-day monthly basic pay. The prior full COLA payment did not constitute a binding voluntary employer practice. Certiorari was therefore granted, the NLRC Decision dated 10 March 1986 was set aside, and the Labor Arbiter's Decision dated 9 May 1985 was reinstated.
• Officer Liability: With the conclusions reached on the COLA computation and employer-practice issues, there was no further need to discuss the liability of the officers of Petitioner Corporation.

• No Pay, No ECOLA — COLA is mandated only for days employees are paid their basic wage, even if unworked; on days employees are not paid basic wage, COLA is not mandated. The Court applied this by holding that because the CBA fixed a five-day work week and monthly basic pay on 22 days, the monthly COLA should be computed on 22 days, not 30.
• CBA as law between the parties — A collective bargaining agreement governs the parties' rights and obligations, and its terms control unless and until renegotiated. The Court applied the CBA's provisions on five-day work week and 22-day monthly basic pay to resolve the COLA computation, stating that if the CBA was not acceptable, it could be the subject of future re-negotiation.
• Voluntary employer practice — To be binding and non-withdrawable, an employer practice must be practiced over a long period of time and must be shown to have been consistent and deliberate. The Court held that Petitioner Corporation's prior full COLA payments, made before the 1982 CBA and under Wage Orders Nos. 1 to 5, did not meet this test, especially given the lack of administrative guidelines before Wage Order No. 4.
• Payment by mistake in the construction or application of a doubtful or difficult question of law — Under Article 2155, in relation to Article 2154, of the Civil Code, payment made by reason of a mistake in the construction or application of a doubtful or difficult question of law may give rise to the obligation to return. The Court applied this to hold that Petitioner Corporation could not be faulted for its erroneous COLA computation absent clear administrative guidelines, and that no vested right or diminution of benefits under Article 100 of the Labor Code resulted from correcting the past error.

• "The primordial consideration, therefore, for entitlement to COLA is that basic wage is being paid. In other words, the payment of COLA is mandated only for the days that the employees are paid their basic wage, even if said days are unworked. So that, on the days that employees are not paid their basic wage, the payment of COLA is not mandated." — This passage states the ratio for the COLA computation, grounding the 22-day computation in the rule that COLA follows payment of basic wage.
• "Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day work week, it will have to be held that the COLA should be computed on the basis of twenty two (22) days, which is the period during which the monthly-paid employees of Petitioner Corporation receive their basic wage. The CBA is the law between the parties and, if not acceptable, can be the subject of future re-negotiation." — This is the core holding on the proper COLA computation and the binding effect of the CBA.
• "To be considered as such, it should have been practiced over a long period of time, and must be shown to have been consistent and deliberate. Adequate proof is wanting in this respect." — This defines the requisites for a voluntary employer practice and explains why prior full COLA payments did not bar the correction.
• "Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law. Payment may be said to have been made by reason of a mistake in the construction or application of a \"doubtful or difficult question of law.\"" — This applies Civil Code Articles 2154 and 2155 to excuse the company's prior computation and to negate any vested right or diminution of benefits.

• University of Pangasinan Faculty Union vs. University of Pangasinan, L-63122, February 20, 1984, 127 SCRA 691 — Cited for the principle that the intention of the law is to grant ECOLA upon the payment of basic wages, hence "No Pay, No ECOLA."
• Oceanic Pharmacal Employees Union (FFW) vs. Inciong, L-50568, November 7, 1979, 94 SCRA 270 — Cited for the test of long practice in determining whether an employer practice is voluntary and binding; the employer's agreement to continue giving holiday pay knowing fully well that employees were not covered by the law requiring payment of holiday pay.

• Wage Order No. 6 — Increased the cost-of-living allowance of non-agricultural workers in the private sector, effective 30 October 1984; it was the source of the P3.00 daily COLA at issue.
• Section 5, Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 — Provides that all covered employees shall be entitled to their daily living allowance during the days that they are paid their basic wage, even if unworked. The Court applied this to hold that COLA is payable only for days basic wage is paid, and thus on 22 days under the CBA.
• Article XV(a), Article XV(b), and Article XVI, Section 1(b), Collective Bargaining Agreement — Fixed the regular work day at eight net working hours for five days, the regular work week at forty net hours or five working days, and overtime computation at time and one half. The Court relied on these provisions to find that monthly basic pay was computed on 22 days.
• Section 3, Rules Implementing Wage Order No. 4 — Laid down the formula for conversion of the daily allowance to its monthly equivalent for workers who do not work and are not considered paid on Saturdays and Sundays: P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P253.70. The Court used this to show that the formula resulted in the equivalent of 21.8 days in a month for a five-day work week.
• Article 2155, Civil Code — Provides that payment by reason of a mistake in the construction or application of a doubtful or difficult question of law may come within the scope of the preceding article. The Court applied this to excuse Petitioner Corporation's erroneous COLA computation absent clear administrative guidelines.
• Article 2154, Civil Code — Provides that if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. Cited in relation to Article 2155.
• Article 100, Labor Code — Prohibits the elimination or diminution of supplements or other employee benefits being enjoyed at the time of promulgation of the Labor Code. The Court held that correcting the past error did not result in any diminution of benefit under this provision.

Yap, C.J., Paras, J., and Sarmiento, J., concurred. Padilla, J., took no part.

• Commissioner Cleto T. Villaltuya (NLRC) — Dissented and voted to affirm in toto the Labor Arbiter's Decision. No separate Supreme Court dissenting opinion is reproduced in the text.