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DAVAO FRUITS CORPORATION v. ASSOCIATED LABOR UNIONS FOR

FACTS:

The case involves a complaint filed by the Associated Labor Unions (ALU) against the petitioner, seeking payment of thirteenth-month pay differentials for 1982. ALU argued that the petitioner had excluded certain items, such as sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays, in the computation of the thirteenth month pay for that year.

In response, the petitioner claimed that it had mistakenly included these items in the computation of the thirteenth month pay in prior years and only discovered the error in 1981. The Labor Arbiter ruled in favor of ALU, ordering the petitioner to pay the thirteenth-month pay differential. Dissatisfied with the decision, the petitioner appealed to the National Labor Relations Commission (NLRC), which affirmed the decision and dismissed the appeal. The petitioner then sought redress from the Supreme Court through a petition for certiorari.

The main issue in the case was whether payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays could be excluded from the computation of thirteenth-month pay, regardless of long-standing company practice. The implementation of Presidential Decree No. 851, which mandates employers to pay their employees a thirteenth-month pay, was also relevant to the case. The rules and regulations implementing the law define "basic salary" as including all remunerations or earnings paid by the employer to the employee, but excluding certain allowances and monetary benefits.

ISSUES:

RULING:

PRINCIPLES:

  • Presidential Decree No. 851 mandates all employers to pay their employees a thirteenth month pay.

  • The computation of thirteenth month pay is set forth in Section 2 of the "Rules and Regulations Implementing Presidential Decree No. 851."

  • The term "basic salary" includes all remunerations or earnings paid by the employer to the employee, but excludes cost-of-living allowances, profit-sharing payments, and all allowances and monetary benefits not considered as part of the basic salary of the employee as of December 16, 1975.

  • Payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays are considered as part of the basic salary and cannot be excluded in the computation of thirteenth month pay.