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UNION OF FILIPRO EMPLOYEES v. BENIGNO VIVAR

FACTS:

The labor dispute involved the exclusion of sales personnel from the holiday pay award and the change of the divisor in the computation of benefits from 251 to 261 days. The respondent, Filipro, Inc. (now Nestle Philippines, Inc.), sought a ruling on its rights and obligations with regard to the holiday pay claims of its monthly paid employees. The case was submitted for voluntary arbitration and an arbitrator was appointed. The arbitrator directed the company to pay holiday pay to its monthly paid employees, subject to certain exclusions and limitations. Filipro filed a motion for clarification to further limit the award and exclude sales personnel from the holiday pay. The arbitrator declared that the holiday pay award would have retroactive effect and that sales personnel are not entitled to holiday pay. The arbitrator also ruled that the divisor for the computation of benefits should be changed and ordered reimbursement for overpayments. Both the company and the union filed motions for reconsideration, which were treated as appeals by the arbitrator and forwarded to the NLRC. However, the arbitrator later declined jurisdiction, stating that he had resigned. The union filed a petition raising the issues of entitlement to holiday pay for sales personnel and whether the divisor should be changed.

The labor union, representing the sales personnel, filed a complaint seeking payment of holiday pay. The respondent company argued that the sales personnel are excluded from the holiday pay benefit as they are considered field personnel. The Department of Labor and Employment (DOLE) ruled in favor of the union and ordered the payment of holiday pay. The respondent company appealed to the Court of Appeals, which affirmed the decision of the DOLE. The respondent company then filed a petition for review with the Supreme Court.

The Supreme Court noted that the Labor Code excludes field personnel from the entitlement to holiday pay as their actual hours of work cannot be determined with certainty. The Court interpreted this provision and determined that field personnel are those whose time and performance are unsupervised by the employer. The petitioner argued that the sales personnel are supervised by the company through the SOD schedule and imposition of sanctions. However, the Court rejected these arguments, stating that the SOD schedule does not constitute supervision. The Court also observed that the company evaluates the sales personnel's performance based on results and not actual hours of field work. Based on these findings, the Supreme Court upheld the decision that the sales personnel are field personnel excluded from the entitlement to holiday pay.

ISSUES:

  1. Whether or not sales personnel are entitled to holiday pay benefits.

  2. Whether or not the divisor for computing holiday pay should be changed from 251 to 261 days.

  3. Whether Nestle's invocation of solutio indebiti is valid due to its use of 251 days as divisor.

  4. Whether the reckoning period for the application of the holiday pay award should be from the date of effectivity of the Labor Code or from the date of the Chartered Bank decision.

  5. Whether or not the implementing rule and policy instruction regarding holiday pay benefits are valid.

RULING:

  1. Sales personnel are not entitled to holiday pay benefits. The criteria for granting incentive bonuses for sales personnel indicate that they are evaluated based on the results of their work and not on the actual hours of field work. The nature of the job of a salesman, as explained in San Miguel Brewery, Inc. v. Democratic Labor Organization, makes it difficult to determine their actual hours of work, and they are therefore excluded from holiday pay benefits.

  2. The divisor for computing holiday pay should not be changed from 251 to 261 days. The use of 251 days' divisor by the employer indicates that holiday pay is not yet included in the salary of the employee. Changing the divisor would result in a lower daily rate, which violates the prohibition on non-diminution of benefits. The daily rate should remain constant for the purpose of computing overtime and other benefits, and it should also serve as the basis for computing the unpaid holidays.

  3. The invocation of solutio indebiti by Nestle is not valid. The Labor Code mandates that all doubts in the implementation and interpretation of the Code shall be resolved in favor of labor. Prior to September 1, 1980, when Nestle was on a 6-day working schedule, the divisor used was 303, indicating that the 10 holidays were not paid. Nestle had the chance to rectify the error when it shifted to a 5-day working schedule but did not do so. Therefore, it is too late to allege payment by mistake.

  4. The reckoning period for the application of the holiday pay award should be from 1984. The implementing rule and policy instruction, which excluded monthly paid employees from holiday pay benefits, were null and void as declared in the IBAA case. However, prior to their declaration of nullity, Nestle's non-payment of the holiday benefit was in compliance with these valid rules. The doctrine of operative fact, which recognizes the consequences of a declared invalid law, applies in this case. Requiring Nestle to nullify acts done in good faith since 1975 would be unduly harsh. Therefore, 1984 is a fair reckoning period.

  5. The Court holds that the implementing rule and policy instruction regarding holiday pay benefits are null and void.

PRINCIPLES:

  • Sales personnel are excluded from holiday pay benefits because their actual hours of work are difficult to determine. They are evaluated based on the results of their work.

  • The divisor for computing holiday pay should reflect whether or not holiday pay is already included in the employee's salary. If holiday pay is not yet included, the divisor should be lower. Changing the divisor to a higher number will result in a lower daily rate, which violates the prohibition on non-diminution of benefits. The daily rate should remain constant for the purpose of computing other benefits.

  • The doctrine of operative fact recognizes the consequences of a declared invalid law and aims to avoid undue harshness and resulting unfairness.

  • Nullity of implementing rule and policy instruction - The Court declared the implementing rule and policy instruction null and void, implying that any provisions or directives stemming from these documents are likewise invalid.

  • Granting of holiday pay benefits - The Court ruled that respondent Nestle is required to grant holiday pay benefits to its employees.