Terminal Facilities and Services Corporation vs. NLRC

In the absence of any collective bargaining agreement provision specifying a divisor for computing cost of living allowance, a monthly-paid employee is presumed to be paid even on rest days, thereby falling under Group III of the MOLE table of computations and entitled to the corresponding monthly allowance of P517.08; a company practice of using a 26-day divisor for computing salary deductions for absences does not control the determination of the applicable allowance group classification.

TEFASCO is a domestic corporation engaged in wharf services and facilities operating for profit, with business operations in Davao City. ALU is the exclusive bargaining agent of TEFASCO's on-and-off rank-and-file workers as well as its monthly-paid employees. Wage Order No. 6, issued by then President Ferdinand E. Marcos, increased the statutory minimum wage rates and cost of living allowances in the private sector. Pursuant to the wage order and its implementing rules, the Ministry (now Department) of Labor and Employment released a table of computations classifying employees into groups based on monthly basic wage rates and total number of working days per year, with corresponding monthly allowance amounts — Group II covering employees whose unworked rest days are not considered paid, and Group III covering employees whose rest days and holidays, although unworked, are considered paid days.

TEFASCO is a domestic corporation engaged in wharf services and facilities operating for profit in Davao City. ALU serves as the exclusive bargaining agent of TEFASCO's on-and-off rank-and-file workers and monthly-paid employees. On September 5, 1985, ALU filed a complaint with the NLRC Labor Arbitration Branch, Regional Office No. XI, Davao City, charging TEFASCO with underpayment of emergency cost of living allowance. ALU alleged that TEFASCO paid each monthly-paid employee only P455.00 per month as emergency cost of living allowance, which was less than the prescribed amount of P517.08 per month under the table of computations released by the Ministry of Labor and Employment. The complaint was filed after TEFASCO refused to adjust the union members' allowances.

In its position paper, TEFASCO countered that the covered employees belonged to Group II under the table of computations — which includes establishments that consider rest days as unworked and unpaid — and not Group III as alleged by ALU, which includes establishments that consider rest days and holidays as paid days although unworked. TEFASCO explained that the basis of its computation of basic wages and allowance was 26 days per month for monthly-paid employees, the four rest days excluded. It invoked Section 5 of the Implementing Rules of Wage Order No. 6, which 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, arguing that only when an employee is paid basic wage on an unworked day is the cost of living allowance for that unworked day also due.

TEFASCO illustrated its company practice by reference to a pay slip of employee Andres Aguinaldo for the period October 1–15, 1985, showing a monthly basic salary of P1,059.00. The half-month salary of P529.50, less one day's absence deduction of P40.60, yielded a basic pay of P488.90. Dividing P1,059.00 by P40.60 produced approximately 26, demonstrating that TEFASCO used a 26-day divisor to determine the daily equivalent for salary deductions. TEFASCO maintained that this practice, in the absence of a collective bargaining agreement or company policy to the contrary, was permissible provided it was not contrary to law, and that it placed its employees under Group II — those whose rest days are unworked and not considered paid, with approximately 314 work days per year or 26 days per month.

Labor Arbiter Jose O. Libron, in a decision dated April 29, 1986, found that ALU's members had been receiving a monthly basic wage of not less than P1,095.00 each, which amount is prescribed under Group III, making their rest days and holidays, although unworked, considered paid. The Labor Arbiter found the P455.00 monthly allowance legally insufficient and ordered TEFASCO to pay each complaining member a monthly living allowance differential of P62.08 computed from November 1, 1984 until the full P517.08 allowance was implemented. The NLRC affirmed this decision with modification on March 20, 1989, adjusting only which employees should receive the P517.08 allowance starting November 1, 1984, since not all were receiving P1,095.00 as of that date. TEFASCO's motion for reconsideration was denied on October 31, 1989, prompting the present petition.

• Misapplication of Chartered Bank Doctrine: Petitioner argued that the NLRC decided the case not in accord with the ruling in Chartered Bank Employees Association vs. Ople, 138 SCRA 272, which petitioner maintained supported its position that a divisor of less than 365 days could be used to determine that employees' rest days are unpaid.
• Insufficient Evidence: Petitioner contended that the findings and conclusions of the NLRC were not supported by substantial evidence.
• Group II Classification: Petitioner maintained that its employees belonged to Group II under the MOLE table of computations, not Group III, because it used a divisor of 26 days per month to determine the daily wage equivalent for deducting absences, demonstrating that monthly salaries did not include pay for unworked rest days.
• Validity of Company Practice: Petitioner argued that in the absence of a collective bargaining agreement or company policy, resort to the employer's practice was permissible provided it was not contrary to law, and that its 26-day divisor practice was consistent with Section 5 of the Implementing Rules of Wage Order No. 6.

• Jurisdictional Error / Grave Abuse of Discretion: Whether the NLRC committed jurisdictional error in its resolutions dated March 20, 1989 and October 31, 1989.
• Accord with Chartered Bank Doctrine: Whether the NLRC's decision was in accord with the ruling in Chartered Bank Employees Association vs. Ople.
• Sufficiency of Evidence: Whether the findings and conclusions of the NLRC were supported by substantial evidence.
• Applicability of Company Divisor Practice: Whether the company practice of using a 26-day divisor for computing salary deductions for absences should also govern the determination of the monthly cost of living allowance group classification.

• Jurisdictional Error / Grave Abuse of Discretion: No. The NLRC committed no grave abuse of discretion; its resolutions were affirmed.
• Accord with Chartered Bank Doctrine: No. Chartered Bank Employees Association vs. Ople was distinguished as inapplicable because it involved holiday pay, premium, and overtime pay with a CBA-specified divisor of 251 days, whereas this case involves cost of living allowance with no CBA provision on divisors.
• Sufficiency of Evidence: Yes. The NLRC's findings were supported by substantial evidence, including pay records showing employees received monthly basic wages of not less than P1,095.00, placing them under Group III.
• Applicability of Company Divisor Practice: No. The company practice of using a 26-day divisor for computing absence deductions does not control the determination of the applicable COLA group classification; in the absence of any CBA provision, the presumption that monthly-paid employees are paid even on rest days must prevail.

• Jurisdictional Error / Grave Abuse of Discretion: The NLRC did not act without or in excess of jurisdiction or with grave abuse of discretion. It correctly applied the MOLE table of computations, which TEFASCO itself did not dispute as to existence and validity. The table classifies employees receiving a basic monthly rate of not less than P1,095.00 with 365 working days per year under Group III, entitling them to P517.08 monthly allowance. The NLRC's affirmation of the Labor Arbiter's ruling, with modification only as to which employees qualified as of November 1, 1984, was a proper application of the wage order and its implementing rules.

• Accord with Chartered Bank Doctrine: The Chartered Bank case was distinguished on two grounds. First, that case involved claims for holiday pay, premium, and overtime pay differentials, while the instant case involves cost of living allowance under Wage Order No. 6 — a different statutory benefit. Second, in Chartered Bank, the divisor of 251 days was provided for in the collective bargaining agreement between the bank and the employees' association, whereas in the instant case, there was no CBA provision regarding any divisor, not even for computing daily wage for purposes of salary deductions for absences. The Court found no application of the 251-day or any less-than-365-day divisor principle to the determination of monthly cost of living allowance. The Chartered Bank ruling was premised on the CBA's own divisor provision and the benefits given by law to all workers; neither premise was present here.

• Sufficiency of Evidence: The records, including the pay slips annexed to the position papers (Annexes "B" to "B-7"), showed that ALU's members received monthly basic wages of not less than P1,095.00. Under the undisputed MOLE table of computations, employees receiving that amount with 365 working days per year fall under Group III, where rest days and holidays, although unworked, are considered paid. TEFASCO admitted paying only P455.00 monthly as allowance, which was legally insufficient against the prescribed P517.08, yielding a monthly differential of P62.08.

• Applicability of Company Divisor Practice: The Court ruled that the company practice of using a 26-day divisor to determine deductions from the monthly salary of an employee who incurs absences does not mean the same procedure should be followed in determining the monthly cost of living allowance due. The two computations serve different purposes — one governs salary deductions for absences, the other determines the statutory allowance group classification. In the absence of any CBA provision specifying a divisor, the presumption that a monthly-paid employee is considered paid even on rest days must prevail. This presumption is reinforced by the constitutional mandate to afford full protection to labor and the Labor Code's directive under Article 4 that all doubts in the implementation and interpretation of labor laws shall be resolved in favor of labor. The Court invoked the principle from Ditan vs. Philippine Overseas Employment Administration that when the law allows two opposite interpretations — one strictly favoring the employer and the other liberally favoring the worker — the choice must be in favor of the worker.

• Presumption of Payment on Rest Days for Monthly-Paid Employees — In the absence of any provision in a collective bargaining agreement specifying a divisor for computing cost of living allowance, a monthly-paid employee is presumed to be paid even on unworked rest days. This presumption places the employee under Group III of the MOLE table of computations (365 working days per year), entitling them to the corresponding higher monthly allowance. The Court applied this presumption because TEFASCO's CBA contained no provision on divisors, and the company's practice of using a 26-day divisor for absence deductions could not be extended to govern COLA classification.

• Constitutional Mandate of Full Protection to Labor — Under Paragraph 1, Section 3, Article XIII of the 1987 Constitution, the State shall afford full protection to labor, local and overseas, organized and unorganized. When the law allows two opposite interpretations — one favoring the employer and the other favoring the worker — the Court must choose the interpretation liberally in favor of labor, consistent with the social justice policy.

• Article 4, Labor Code — Construction in Favor of Labor — All doubts in the implementation and interpretation of the provisions of the Labor Code, including its implementing rules and regulations, shall be resolved in favor of labor. The Court applied this principle to resolve the ambiguity arising from the absence of a CBA-specified divisor, holding that the presumption of payment on rest days must prevail.

• Distinguishing Company Practice from Statutory Entitlement — A company practice of using a particular divisor for one purpose (computing salary deductions for absences) does not automatically extend to a different statutory purpose (determining cost of living allowance group classification). The Court established that these are distinct computations serving different functions and cannot be conflated absent an express provision in a CBA or law.

• "In the absence of any provision in any collective bargaining agreement of the parties, the presumption that a monthly paid employee is considered paid even on rest days must prevail." — This is the controlling ratio decidendi of the case, establishing the presumption that resolves the classification of monthly-paid employees under the MOLE table of computations when no CBA provision specifies a divisor.

• "We, however, do not find any application as regards the divisor of 251 days or less than 365 days in the instant case to determine the monthly cost of living allowance provided for in Wage Order No. 6." — This passage distinguishes the Chartered Bank doctrine and clarifies that the divisor principle from that case does not extend to cost of living allowance determinations.

• "The law in this case allows two opposite interpretations, one strictly in favor of the employers and the other liberally in favor of the worker. The choice is obvious." — This articulates the Court's application of the constitutional and statutory mandate to resolve interpretive ambiguity in favor of labor, drawn from the Ditan ruling and applied to the instant case.

• Chartered Bank Employees Association vs. Ople, 138 SCRA 272 (1985) — Distinguished. The Court held that this case, which involved holiday pay, premium, and overtime pay differentials with a CBA-specified divisor of 251 days, was not applicable to the instant case involving cost of living allowance under Wage Order No. 6, where no CBA provision on divisors existed. The two cases differ in both the nature of the benefit claimed and the presence or absence of a CBA-specified divisor.

• Ditan vs. Philippine Overseas Employment Administration, G.R. No. 79560, December 3, 1990 — Followed. The Court relied on the principle articulated in Ditan that when the law allows two opposite interpretations — one favoring the employer and the other favoring the worker — the choice must be in favor of the worker, consistent with the constitutional mandate of social justice and protection of labor.

• Section 5, Implementing Rules of Wage Order No. 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. TEFASCO invoked this provision to argue that cost of living allowance is due only for days when basic wage is paid, including unworked days for which wage is nonetheless paid. The Court did not dispute this provision but held that the company's 26-day divisor practice for absence deductions could not be used to determine whether rest days were "paid" for COLA purposes.

• Paragraph 1, Section 3, Article XIII, 1987 Constitution — Mandates that the State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. The Court invoked this provision to justify resolving the interpretive ambiguity in favor of the workers.

• Article 4, Labor Code — Provides that all doubts in the implementation and interpretation of the provisions of the Labor Code, including its implementing rules and regulations, shall be resolved in favor of labor. The Court applied this provision to support the presumption that monthly-paid employees are paid even on rest days in the absence of a CBA-specified divisor.

Fernan, C.J., Bidin and Davide, Jr., JJ., concurred. Feliciano, J., took no part.