G.R. No. 122827 - Millares vs. National Labor Relations Commission

Petitioners, totaling 116 employees occupying various positions from Technical Staff to Vice President at the mill site of Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur, were affected by retrenchment.
In 1992, PICOP experienced a significant financial setback attributed to restrictive government regulations on logging and an economic crisis. In response, PICOP implemented a retrenchment program to prevent further losses.
As a result of the retrenchment, petitioners were terminated and received separation pay computed at the rate of one (1) month’s basic pay for every year of service.

Petitioners contended that the computation of their separation pay should have included certain allowances they customarily received during their employment, not just the basic pay.
The allowances in dispute were:

Staff/Manager’s Allowance – Provided as a substitute to free housing facilities when vacancies in company-provided accommodations occurred, including complementary benefits such as free water and electricity consumption.
Transportation Allowance – Granted to key officers and managers who used their personal vehicles for official business, subject to the condition of submission of detailed expense reports (liquidation).
Bislig Allowance – Awarded to Division Managers and corporate officers assigned in Bislig to mitigate the effects of the hostile environment in that locality; this allowance ceased once the recipient was transferred out of Bislig.

The Executive Labor Arbiter, applying Article 97, paragraph (f) of the Labor Code, opined that because the allowances were customarily and regularly received, they formed part of petitioners’ wages, thus warranting inclusion in the separation pay computation.
Conversely, the National Labor Relations Commission (NLRC) determined that the allowances were based on contingencies – ceasing once their conditions were no longer met – and therefore should not form part of the basic salary used in computing separation pay.
On 26 September 1995, the NLRC reaffirmed its ruling by denying a motion for reconsideration.

Petitioners argued that their allowances fell under the “facilities” provision of Article 97(f) of the Labor Code and that they were provided in a regular, permanent, and customarily received manner.
They cited several precedents (Santos, Soriano, Insular Life Assurance Company, Planters Products, Inc., and Songco) which supported the inclusion of regular allowances in the wage base for the computation of separation pay in cases of illegal dismissal or retrenchment.
Petitioners maintained that the monetary equivalent of the allowances should have been integrated in calculating the separation pay differentials they were entitled to receive.

Whether the allowances (Staff/Manager’s, Transportation, and Bislig allowances) should be considered part of petitioners’ wages for the purpose of computing separation pay.
Whether the temporary and contingent nature of the allowances, which ceased once certain conditions were met, excludes them from the basic salary definition under Article 97, paragraph (f) of the Labor Code.
Whether the precedents cited by petitioners (Santos, Soriano, Insular Life, Planters Products, and Songco) should override the NLRC’s interpretation and findings regarding the exclusion of these contingent allowances.