Pulp and Paper, Inc. vs. National Labor Relations Commission and Epifania Antonio

In the absence of wage rates based on time and motion studies determined by the labor secretary or submitted by the employer for approval, piece-rate workers must be paid the applicable daily minimum wage prescribed by the Regional Tripartite Wages and Productivity Commission; an employee laid off beyond six months without recall is constructively dismissed and entitled to separation pay, while retrenchment requires the statutory written notice.

Pulp and Paper Distributors Inc. employed Epifania Antonio as a wrapper/packer from September 1975. The employment relationship was governed by the Labor Code's provisions on payment by results, minimum wage, suspension of employment, and termination, including the six-month limit on bona fide suspension of business operations and the notice requirement for retrenchment. At the time of Antonio's separation, Wage Order Nos. NCR-02 and NCR-02-A and their implementing rules prescribed the minimum wage for non-agricultural workers.

Epifania Antonio was employed by Pulp and Paper Distributors Inc. as a wrapper/packer beginning in September 1975. She claimed that she was a regular employee and that on November 29, 1991, for unknown reasons, she was verbally advised of her termination and handed a prepared Quitclaim and Release, which she refused to sign. She thereafter filed a complaint for illegal dismissal and underpayment of wages, alleging that she rarely received a salary in accordance with the minimum wage law and that she was not paid overtime pay, holiday pay, and five-day service incentive leave pay.

Pulp and Paper Distributors Inc. denied terminating Antonio. It alleged that beginning in 1989 customer orders became fewer and dwindled to the point that it was no longer practical to maintain the existing number of packers/wrappers; maintaining the same number would mean less pay because the work allocation was no longer the same. The company therefore temporarily laid off some packers/wrappers, including Antonio, who last worked on June 29, 1991. According to the company, on November 29, 1991, five months after Antonio last worked, management decided to release her and give her a chance to look for another job while no work was available; she was given the option, and because she did not sign the Quitclaim and Release, the company did not insist and did not terminate her services. The company added that she was called on November 29, 1991 not to work but to receive her 13th month pay of P636.70, as shown by the voucher she signed.

As to the underpayment claim, the company did not actually deny it but reserved the position that, should the amount be determined, it was willing to settle, considering that Antonio was paid by results and the company was not in a proper position to determine whether she had been underpaid. The company also contended that Antonio was a piece-rate worker, not a time-worker; that her salary depended on the number of reams of bond paper she packed per day; that her work depended on the number and availability of purchase orders from customers; and that packers/wrappers often worked only three to four hours a day.

The labor arbiter found that Antonio had been laid off on June 29, 1991 and had not been recalled; that more than six months elapsed before she filed her complaint on January 21, 1992; and that the company had not shown any just cause for her dismissal. The labor arbiter computed her separation pay at P49,088.00, using the daily minimum wage of P118.00 under Wage Order Nos. NCR-02 and NCR-02-A, 26 working days per month after excluding four Sundays, and 16 years of service. It computed her salary differential at P31,149.56, using the applicable minimum wage rates and her actual wage of P60.00 a day, 26 working days, and 16 years of service. The labor arbiter also used the full eight-hour working day because the company presented no clear proof that Antonio's regular working day was less than eight hours.

• Piece-Rate Worker Status: Petitioner argued that private respondent was a piece-rate worker, not a time-worker; her salary depended on the number of reams of bond paper she packed per day and on the availability of purchase orders, and she often worked only three to four hours a day. Thus, her separation pay should be based on her latest actual compensation per piece or the minimum wage per piece under Article 101 of the Labor Code, whichever is higher, and not on the daily minimum wage applicable to time-workers.
• Separation Pay Rate: Petitioner maintained that because private respondent should be considered retrenched, her separation pay should be one month's pay or at least one-half month pay for every year of service, whichever is higher, and not one month's pay for every year of service.
• Seasonal Work and 26-Day Month: Petitioner argued that private respondent's work was seasonal, dependent on the availability of job orders, and not twenty-six days a month; it claimed that private respondent herself admitted she was a piece worker whose work was seasonal.
• Grave Abuse of Discretion: Petitioner contended that the NLRC committed grave abuse of discretion and serious reversible error in affirming in toto the awards of separation pay and underpayment without bases in fact and law.

• Computation of Minimum Wage for Piece-Rate Workers: Whether the NLRC acted correctly in affirming the labor arbiter's use of the daily minimum wage for non-agricultural workers, rather than a piece-rate wage, in computing private respondent's separation pay and salary differential.
• Computation of Separation Pay: Whether a worker terminated for lack of work after being laid off beyond six months is entitled to separation pay at the rate of one month's pay for every year of service, or only to retrenchment separation pay.
• Determination of Salary Differential: Whether the NLRC acted correctly in affirming the labor arbiter's computation of salary differential using the applicable minimum wage, a 26-day working month, and 16 years of service.

• Computation of Minimum Wage for Piece-Rate Workers: No. In the absence of wage rates based on time and motion studies determined by the labor secretary or submitted by the employer for approval, piece-rate workers must be paid the applicable daily minimum wage determined by the Regional Tripartite Wages and Productivity Commission; petitioner failed to submit such rates, so P118.00 was correctly applied.
• Computation of Separation Pay: No. Private respondent was constructively dismissed under Article 286 after not being recalled within six months from lay-off; she was not retrenched because no written notice was served, and separation pay at one month's salary per year of service was proper.
• Determination of Salary Differential: No. The labor arbiter correctly used the applicable minimum wage and deducted the actual P60.00 daily wage, multiplied by 26 working days and 16 years, yielding P31,149.56; petitioner failed to substantiate seasonal work or less than eight-hour workdays.

• Computation of Minimum Wage for Piece-Rate Workers: Article 101 of the Labor Code requires the Secretary of Labor to regulate payment of wages by results, including pakyao, piecework, and other nontime work, preferably through time and motion studies or in consultation with representatives of workers' and employers' organizations. Section 8, Rule VII, Book III of the Omnibus Rules Implementing the Labor Code provides that, on petition of any interested party or upon its initiative, the Department of Labor shall use time and motion studies and consultations to determine whether employees are being compensated in accordance with minimum wage requirements; the basis for piece, output, or contract work is the performance of an ordinary worker of minimum skill or ability; and if output rates do not conform, employees are entitled to the difference. Section 8 of the Rules Implementing Wage Order Nos. NCR-02 and NCR-02-A further provides that workers paid by results shall receive not less than the applicable minimum wage rates for normal working hours not exceeding eight hours a day. Petitioner, as employer, failed to inquire about prescribed specific wage rates, failed to submit a proposed wage rate based on time and motion studies after consultation, and failed to prove that private respondent's regular working day was less than eight hours. Thus, the labor arbiter correctly used the P118.00 daily minimum wage for non-agricultural workers under Wage Order Nos. NCR-02 and NCR-02-A, and no grave abuse of discretion attended the award.
• Computation of Separation Pay: Petitioner misapprehended the ground relied upon by public respondent for awarding separation pay. The NLRC held that private respondent was constructively dismissed, applying by analogy Article 286 of the Labor Code, which provides that a bona fide suspension of the operation of a business or undertaking for a period not exceeding six months shall not terminate employment and that the employer shall reinstate the employee if he indicates his desire to resume work not later than one month from the resumption of operations. Private respondent was laid off on June 29, 1991; she filed her complaint on January 21, 1992, more than six months later, and petitioner failed to recall her. She could not be kept in perpetual floating status. Because petitioner showed no just cause for dismissal, private respondent was entitled to reinstatement or, if not feasible, separation pay equivalent to one month salary for every year of service. She neither asked for reinstatement nor appealed, so the award of separation pay was sustained. Petitioner's claim of retrenchment was rejected because Article 283 of the Labor Code requires the employer to serve written notice on the workers and the Department of Labor and Employment at least one month before the intended date of retrenchment, and petitioner did not comply.
• Determination of Salary Differential: The same minimum wage rate of P118.00 was properly used in computing private respondent's salary differential resulting from petitioner's underpayment of her wages. The labor arbiter correctly deducted private respondent's actually received wage of P60.00 a day from the prescribed daily minimum wage and multiplied the difference by 26 working days and by 16 years, equivalent to her length of service with petitioner, yielding P31,149.56. Petitioner's assertion that private respondent's work was seasonal and not twenty-six days a month was contradicted by the assailed Decision and private respondent's pleadings and was unsupported by evidence. The labor arbiter based the computation on a 26-day month on the presumption that private respondent's work was continuous, and petitioner's failure to substantiate its claim sustained the correctness of the computation.

• Minimum Wage for Piece-Rate Workers — In the absence of wage rates based on time and motion studies determined by the labor secretary or submitted by the employer for approval, piece-rate workers must be paid not less than the applicable daily minimum wage prescribed by the Regional Tripartite Wages and Productivity Commission. The employer bears the responsibility to initiate time and motion studies or submit proposed rates; failure to do so justifies using the daily minimum wage. Applied: petitioner failed to submit such rates, so the P118.00 daily minimum wage was correctly used.
• Constructive Dismissal by Prolonged Lay-Off — A bona fide suspension of business operations not exceeding six months does not terminate employment, but if the employer fails to recall the employee after six months, the employee is deemed constructively dismissed and cannot be kept in perpetual floating status. Applied: Antonio was laid off on June 29, 1991, was not recalled after six months, and filed her complaint on January 21, 1992.
• Retrenchment Notice Requirement — Retrenchment as a ground for termination requires the employer to serve written notice on the workers and the Department of Labor and Employment at least one month before the intended date. Failure to comply precludes reliance on retrenchment. Applied: petitioner did not comply with the notice requirement.
• Separation Pay for Constructively Dismissed Employees — Employees constructively dismissed are entitled to separation pay; absent just cause, the employee may be entitled to reinstatement or separation pay equivalent to one month salary for every year of service. Applied: the award of separation pay was sustained, but no additional relief was granted because private respondent did not appeal and only prayed for monetary claims.
• Burden of Proof on Employer for Work Hours and Seasonality — Bare assertions that a piece-rate worker worked less than eight hours or only seasonally do not overcome the presumption of continuous work and the use of a 26-day month; the employer must substantiate such claims. Applied: petitioner failed to substantiate its claims, so the full minimum wage and 26-day month were sustained.

• "In the absence of wage rates based on time and motion studies determined by the labor secretary or submitted by the employer to the labor secretary for his approval, wage rates of piece-rate workers must be based on the applicable daily minimum wage determined by the Regional Tripartite Wages and Productivity Commission." — This states the ratio decidendi on the first issue: the default minimum wage rule for piece-rate workers when no approved time-and-motion rates exist.
• "Since private respondent was not reemployed within six (6) months from the 'suspension' of her employment, she is deemed to have been constructively dismissed." — This is the controlling formulation on prolonged lay-off and constructive dismissal.
• "For retrenchment to be considered a ground for termination, the employer must serve a written notice on the workers and the Department of Labor and Employment at least one month before the intended date thereof." — This states the statutory notice requirement that petitioner failed to satisfy, defeating its retrenchment theory.
• "Petitioner did not submit to the secretary of labor a proposed wage rate — based on time and motion studies and reached after consultation with the representatives from both workers' and employers' organization — which would have applied to its piece-rate workers." — This explains why the labor arbiter properly resorted to the daily minimum wage instead of a piece-rate wage.

• Manipon, Jr. vs. National Labor Relations Commission, 239 SCRA 451, 457, December 27, 1994 — Cited as support for treating failure to reemploy within six months from suspension as constructive dismissal.
• People's Security, Inc. vs. NLRC, 226 SCRA 146, 152-153, September 8, 1993 — Cited for the same constructive dismissal principle.
• International Hardware, Inc. vs. NLRC, 176 SCRA 256, 261, August 10, 1989 — Cited for the same constructive dismissal principle.
• Toogue vs. National Labor Relations Commission, 238 SCRA 241, 246, November 18, 1994 — Cited for the rule that employees constructively dismissed are entitled to separation pay.
• Catatista vs. NLRC, 247 SCRA 46, August 3, 1995 — Cited in connection with Article 283's written notice requirement for retrenchment.

• Article 101, Labor Code — Payment by results; the Secretary of Labor shall regulate payment of wages by results, including pakyao, piecework, and other nontime work, to ensure fair and reasonable wage rates, preferably through time and motion studies or in consultation with representatives of workers' and employers' organizations. Applied: absent prescribed rates, the daily minimum wage applies.
• Article 286, Labor Code — When employment not deemed terminated; a bona fide suspension of the operation of a business or undertaking for a period not exceeding six months, or the fulfillment by the employee of a military or civic duty, shall not terminate employment; the employer shall reinstate the employee if he indicates his desire to resume work not later than one month from resumption of operations. Applied by analogy: failure to recall after six months resulted in constructive dismissal.
• Article 279, Labor Code — Security of tenure; an employee unjustly dismissed is entitled to reinstatement without loss of seniority rights and other privileges and to full backwages. Applied: no just cause was shown; private respondent was entitled to reinstatement or separation pay, but she did not seek reinstatement.
• Article 283, Labor Code — Retrenchment; requires the employer to serve written notice on the workers and the Department of Labor and Employment at least one month before the intended date. Applied: petitioner failed to comply, so its retrenchment claim was rejected.
• Section 8, Rule VII, Book III, Omnibus Rules Implementing the Labor Code — Payment by result; the Department of Labor uses time and motion studies and consultations to determine compliance with minimum wage requirements; the basis for piece, output, or contract work is the performance of an ordinary worker of minimum skill or ability; if output rates do not conform, employees are entitled to the difference. Applied: petitioner failed to submit a proposed wage rate, so the minimum wage was used.
• Section 8, Rules Implementing Wage Order Nos. NCR-02 and NCR-02-A — Workers paid by results shall receive not less than the applicable minimum wage rates for normal working hours not exceeding eight hours a day, or a proportion thereof for work of less than normal working hours; adjusted rates are computed by a prescribed formula. Applied: the P118.00 daily minimum wage was used.
• Rule I, Section 12, Book VI, Implementing Rules and Regulations of the Labor Code — Suspension of Relationship; the employer-employee relationship is deemed suspended in case of suspension of operation of the business or undertaking for a period not exceeding six months. Applied: the NLRC relied on this to find constructive dismissal after six months.
• Section 4, Rules Implementing Wage Order Nos. NCR-02 and NCR-02-A — Set the minimum daily wage for non-agricultural workers at P118.00. Applied: the labor arbiter used P118.00 in computing separation pay and salary differential.

Narvasa, C.J.; Romero, J.; Melo, J.; Francisco, J.