Case Summary (G.R. No. L-49774)
Disputed Issue
Whether “basic salary” under PD 851 and its implementing rules includes payments for leaves (sick, vacation, maternity), rest-day and holiday work premiums, regular holiday pay, and night differentials in the computation of the 13th-month pay.
Applicable Statutory and Regulatory Provisions
• PD 851, Section 1 – Requires employers to pay a 13th-month bonus to employees earning up to ₱1,000 basic monthly salary.
• Rules for PD 851, Section 2(a) – Defines 13th-month pay as one-twelfth of an employee’s basic salary within a calendar year.
• Section 2(b) – Defines basic salary to include all remunerations for services rendered but excludes cost-of-living allowances (PD 525, LOI 174), profit sharing payments, and “all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary” as of December 16, 1975.
• Supplementary Rules – Emphatically exclude overtime pay, earnings, and other remunerations not part of basic salary from the 13th-month computation.
• Labor Code Article 87 – Overtime pay defined as basic wage plus at least 25%.
• Labor Code Article 93(c) – Special holiday work premium of at least 30% of regular wage.
Court’s Analysis
The Court held that under PD 851 and the implementing rules, “basic salary” is the sole basis for 13th-month pay. The initial rules’ broad definition permitting inclusion of all remunerations gave way to the supplementary regulations’ clear exclusions. The catch-all exclusionary clause—“all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary”—demonstrates legislative intent to omit fringe payments from the 13th-month formula. Leave ben
...continue readingCase Syllabus (G.R. No. L-49774)
Facts
- On January 3, 1977, the Cagayan Coca-Cola Free Workers Union filed a complaint against San Miguel Corporation (Cagayan Coca-Cola Plant) for failing or refusing to include in the 13th-month pay computation items such as sick, vacation, and maternity leaves, premiums for work on rest days and special holidays, pay for regular holidays, and night differentials.
- Regional Office No. X issued an Order on February 15, 1977 directing the petitioner to “pay the difference of whatever earnings and the amount actually received as 13th-month pay excluding overtime premium and emergency cost of living allowance.”
- The petitioner appealed this order to the Minister of Labor.
Procedural History
- On June 7, 1978, Deputy Minister Amado G. Inciong affirmed the Regional Office’s Order and dismissed the petitioner’s appeal for lack of merit.
- The petitioner’s motion for reconsideration was denied by an Order dated December 19, 1978, which also ordered immediate execution of the prior Order.
- On February 14, 1979, the Supreme Court issued a Temporary Restraining Order enjoining enforcement of the December 19, 1978 Order.
- The petitioner then filed a petition for certiorari and prohibition with preliminary injunction to challenge the Deputy Minister’s Orders.
Issue
- Whether, under Presidential Decree No. 851 and its implementing regulations, payments for sick, vacation, or maternity leaves, premiums for work on rest days and special holidays, pay for regular holidays, and night differentials form part of the “basic salary” used to compute the 13th-month pay.
Positions of the Parties
- Public Respondent (Deputy Minister of Labor):
- Consistently held since the effectivity of PD 851 that leave payments, rest-day and holiday premiums, and similar remunerations are included in the 13th-month pay computation.
- Private Respondent (Cagayan Coca-Cola Free Workers Union):
- Cited past rulings and opinions by Acting Labor Secretary Inciong stating that gross basic salary for 13th-month pay includes r