LABOR LAW REVIEW

23. food products, hired contractual employees from PESO

Resources Development Corporation (PESO) to perform
GOYA, INC vs. GOYA, INC. EMPLOYEES UNION- temporary and occasional services in its factory in
FFW Parang, Marikina City. This prompted respondent Goya,
Inc. Employees Union FFW (Union) to request for a
G.R. No. 170054 January 21, 2013
grievance conference on the ground that the contractual
workers do not belong to the categories of employees

DOCTRINE: stipulated in the existing Collective Bargaining Agreement

(CBA). When the matter remained unresolved, the
Thus, where the CBA is clear and unambiguous, it
grievance was referred to the National Conciliation and
becomes the law between the parties and compliance
Mediation Board (NCMB) for voluntary arbitration.
therewith is mandated by the express policy of the law.
As repeatedly held, the exercise of management The Union argued that Goya is guilty of Unfair

prerogative is not unlimited; it is subject to the Labor Practice (ULP) for gross violation of the CBA.

limitations found in law, collective bargaining agreement

or the general principles of fair play and justice.
VOLUNTARY ARBITRATOR:

The voluntary arbitrator dismissed the Unions

FACTS: charge of ULP but Goya was directed to observe and

Sometime in January 2004, petitioner Goya, Inc. comply with the CBA. While the Union moved for partial

(Company), a domestic corporation engaged in the consideration of the VA decision, Goya immediately filed

manufacture, importation, and wholesale of top quality a petition for review before the Court of Appeals to set

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aside the VAs directive to observe and comply with the The CA did not commit serious error when it
CBA commitment pertaining to the hiring of casual sustained the ruling that the hiring of contractual
employees. employees from PESO was not in keeping with the intent
and spirit of the CBA. In this case, a complete and final
adjudication of the dispute between the parties
COURT OF APPEALS: necessarily called for the resolution of the related and

Goya argued that hiring contractual employees is incidental issue of whether the Company still violated the

a valid management prerogative. The Court of Appeals CBA but without being guilty of ULP as, needless to state,
dismissed the petition. ULP is committed only if there is gross violation of the
agreement. Goya kept on harping that both the VA and
the CA conceded that its engagement of contractual
ISSUE: workers from PESO was a valid exercise of management

Whether the act of hiring contractual employees is prerogative. It is confused. To emphasize, declaring that

a valid exercise of management prerogative a particular act falls within the concept of management
prerogative is significantly different from acknowledging
that such act is a valid exercise thereof. What the VA and
RULING: the CA correctly ruled was that the Company’s act of
contracting out/outsourcing is within the purview of
NO. The petition must fail.
management prerogative. Both did not say, however,
LABOR LAW:management prerogative; ULP;
that such act is a valid exercise thereof.
collective bargaining agreement.

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Obviously, this is due to the recognition that the

CBA provisions agreed upon by Goya and the Union
delimit the free exercise of management prerogative
pertaining to the hiring of contractual employees. A
collective bargaining agreement is the law between the 24.
GALLEGO VS BAYER
parties. A collective bargaining agreement or CBA refers
GR NO. 179807, 2009
to the negotiated contract between a legitimate labor
Doctrine: Permissible job contracting or
organization and the employer concerning wages, hours
subcontracting refers to an arrangement
of work and all other terms and conditions of whereby a principal agrees to farm out with a
contractor or subcontractor the performance of
employment in a bargaining unit. As in all contracts, the
a specific job, work, or service within a definite
parties in a CBA may establish such stipulations, clauses, or predetermined period, regardless of whether
terms and conditions as they may deem convenient such job, work or, service is to be performed or
completed within or outside the premises of the
provided these are not contrary to law, morals, good principal. Under this arrangement, the
customs, public order or public policy. Thus, where the following conditions must be met: (a) the
contractor carries on a distinct and
CBA is clear and unambiguous, it becomes the law independent business and undertakes the
between the parties and compliance therewith is contract work on his account under his own
responsibility according to his own manner and
mandated by the express policy of the law. As repeatedly method, free from the control and direction of
held, the exercise of management prerogative is not his employer or principal in all matters
connected with the performance of his work
unlimited; it is subject to the limitations found in law,
except as to the results thereof; (b) the
collective bargaining agreement or the general principles contractor has substantial capital or
investment; and (c) the agreement between the
of fair play and justice. Petition is DENIED.
principal and contractor or subcontractor

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assures the contractual employees’ entitlement then appealed to the Court of Appeals via Certiorari,
to all labor and occupational safety and health which was dismissed. Hence, this petition.
standards, free exercise of the right to self-
organization, security of tenure, and social ISSUE:
welfare benefits.
1. Whether or not PRODUCT IMAGE is a labor-only
FACTS: contractor – NO
2. Whether or not PRODUCT IMAGE is Gallego’s
Petitioner RamyGallego was contracted by Bayer employer - YES
Philippines Inc. (BAYER) as crop protection technician.
When Gallego’s employment came to a halt, BAYER RULING:
reemployed Gallego through Product Image and
Marketing Services, Inc. (PRODUCT IMAGE) performing 1. In distinguishing between permissible job contracting
the same tasks as that of a crop protection technician. and prohibited labor-only contracting, the totality of the
facts and the surrounding circumstances of the case are
After a few years, Gallego claims that he was directed to to be considered, each case to be determined by its own
submit a resignation latter, but he refused. He was later facts, and all the features of the relationship assessed.
on transferred to Luzon; moreover, his co-workers
allegedly spread rumors there that he was not anymore Permissible job contracting or subcontracting refers to
connected with BAYER. Believing himself to be illegally an arrangement whereby a principal agrees to farm out
dismissed, he filed with the National Labor Relations with a contractor or subcontractor the performance of a
Commission (NLRC) claiming he is entitled for specific job, work, or service within a definite or
reinstatement, backwages, and etc. BAYER denied that predetermined period, regardless of whether such job,
existence of an employer-employee relationship between work or, service is to be performed or completed within
BAYER and Gallego since Gallego was actually under or outside the premises of the principal. Under this
the control and supervision of PRODUCT IMAGE, an arrangement, the following conditions must be met: (a)
independent contractor. the contractor carries on a distinct and independent
business and undertakes the contract work on his
The Labor Arbiter found BAYER, et al. guilty of illegal account under his own responsibility according to his
dismissal and ordered the reinstatement of Gallego. The own manner and method, free from the control and
NLRC reversed the decision of the Labor Arbiter. Gallego direction of his employer or principal in all matters

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connected with the performance of his work except as to products; (2) PRODUCT IMAGE has an independent
the results thereof; (b) the contractor has substantial business and provides services nationwide to big
capital or investment; and (c) the agreement between the companies such as Ajinomoto Philippines and Procter
principal and contractor or subcontractor assures the and Gamble Corporation; and (3) PRODUCT IMAGE’s
contractual employees’ entitlement to all labor and total assets from 1998 to 2000 amounted to P405,639,
occupational safety and health standards, free exercise P559,897, and P644,728, respectively. PRODUCT
of the right to self-organization, security of tenure, and IMAGE also posted a bond in the amount of P100,000 to
social welfare benefits. answer for any claim of its employees for unpaid wages
and other benefits that may arise out of the
In the case at bar, the Court finds substantial evidence implementation of its contract with BAYER.
to support the finding of the NLRC that PRODUCT
IMAGE is a legitimate job contractor. The Court notes PRODUCT IMAGE cannot thus be considered a labor-
that PRODUCT IMAGE was issued by the Department of only contractor.
Labor and Employment (DOLE) Certificate of
Registration Numbered NCR-8-0602-176. The DOLE 2. The existence of an employer-employee relationship is
certificate having been issued by a public officer, it determined on the basis of four standards, namely: (a)
carries with it the presumption that it was issued in the the manner of selection and engagement of the putative
regular performance of official duty. employee; (b) the mode of payment of wages; (c) the
presence or absence of power of dismissal; and (d) the
Gallego’s bare assertions fail to rebut this presumption. presence or absence of control of the putative employee’s
Further, since the DOLE is the agency primarily conduct. Most determinative among these factors is the
responsible for regulating the business of independent so-called "control test."
job contractors, the Court can presume, in the absence
of evidence to the contrary, that it had thoroughly First requisite - evidenced by a document entitled Job
evaluated the requirements submitted by PRODUCT Offer, whereby PRODUCT IMAGE offered to hire
IMAGE before issuing the Certificate of Registration. petitioner as crop protection technician effective April 7,
Independently of the DOLE’s Certification, among the 1997, which offer petitioner accepted.
circumstances that establish the status of PRODUCT
IMAGE as a legitimate job contractor are: (1) PRODUCT Second requisite- it was PRODUCT IMAGE that paid the
IMAGE had, during the period in question, a contract wages and other benefits of petitioner, pursuant to the
with BAYER for the promotion and marketing of BAYER

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stipulation in the contract between PRODUCT IMAGE GR NO. 205300, 2015

and BAYER.
FACTS:
Third and fourth requisite - both powers of control and
dismissal are vested in PRODUCT IMAGE. The Contract Fonterra Brands contracted the services of Zytron
of Promotional Services provides that PRODUCT IMAGE Marketing for the marketing and promotion of its milk
shall have the power to discipline its employees assigned and dairy products. Pursuant to the contract, Zytron
at BAYER, such that no control whatsoever shall be provided Fonterra with trade merchandising
exercised by BAYER over those personnel. representatives, including Leonardo Largado (Largado)
and TeotimoEstrellado (Estrellado). OnMay 3, 2006,
If at all, the only control measure retained by BAYER Fonterra sent Zytron a letter terminating its promotions
over petitioner was to act as his de facto supervisor in contract, effective June 5, 2006. Fonterra then entered
certifying to the veracity of the accomplishment reports into an agreement for manpower supply with A.C. Sicat
he submitted to PRODUCT IMAGE. This is by no means Marketing Desirous of continuing their work as TMRs,
the kind of control that establishes an employer- respondents submitted their job applications with A.C.
employee relationship as it pertains only to the results Sicat, which hired them for a term of five (5) months.
and not the manner and method of doing the work. When respondents’ 5-month contracts with A.C. Sicat
were about to expire, they allegedly sought renewal
In fine, PRODUCT IMAGE is the employer of petitioner. thereof, but were allegedly refused. This prompted
respondents to file complaints for illegal dismissal,
*** As to the issue of illegal dismissal, the Court finds regularization, non-payment of service incentive leave
that the petitioner unilaterally stopped reporting for and 13th month pay, and actual and moral damages,
work before filing a complaint for illegal dismissal. While against petitioner, Zytron, and A.C. Sicat.
in cases of illegal dismissal, the employer bears the
burden of proving that the dismissal is for a valid or Labor Arbiter: dismissed the complaint and ruled that:
authorized cause, the employee must first establish by (1) respondents were not illegally dismissed. As a matter
substantial evidence the fact of dismissal. of fact, they were the ones who refused to renew their
contract and that they voluntarily complied with the
requirements for them to claim their corresponding
25. monetary benefits in relation thereto; and (2) they were
FONTERRA BRANDS VS LARGADO

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consecutively employed by Zytron and A.C. Sicat, not by 2. Whether or not respondents were illegally
Fonterra. dismissed.

The NLRC affirmed the Labor Arbiter, finding that RULING:

respondents’ separation from Zytron was brought about
by the execution of the contract between Fonterra and NO TO BOTH ISSUES.
A.C. Sicat where the parties agreed to absorb
Zytron’spersonnel, including respondents. Too, The termination of respondents’ employment with
respondents failed to present any evidence that they Zytron was brought about by the cessation of their
protested this set-up. contracts with the latter. We give credence to the Labor
Arbiter’s conclusion that respondents were the ones who
CA: found that A.C. Sicat satisfies the requirements of refused to renew their contracts with Zytron, and the
legitimate job contracting, but Zytron does not. NLRC’s finding that they themselves acquiesced to their
According to the CA: (1) Zytron’s paid-in capital of transfer to A.C. Sicat.
250,000 cannot be considered as substantial capital; (2)
its Certificate of Registration was issued by the DOLE By refusing to renew their contracts with Zytron,
months after respondents’ supposed employment ended; respondents effectively resigned from the latter.
and (3) its claim that it has the necessary tools and Resignation is the voluntary act of employees who are
equipment for its business is unsubstantiated. compelled by personal reasons to dissociate themselves
Therefore, according to the CA, respondents were from their employment, done with the intention of
Fonterra’s employees. Additionally, the CA held that relinquishing an office, accompanied by the act of
respondents were illegally dismissed since Fonterra itself abandonment.
failed to prove that their dismissal is lawful.
Here, it is obvious that respondents were no longer
interested in continuing their employment with Zytron.
ISSUE: Their voluntary refusal to renew their contracts was
brought about by their desire to continue their
1. Whether or not Zytron and A.C. Sicat are labor- assignment in Fonterra which could not happen in view
only contractors, making Fonterra the employer of the conclusion of Zytron’s contract with Fonterra.
of herein respondents; Hence, to be able to continue with their assignment,
they applied for work with A.C. Sicat with the hope that

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they will be able to continue rendering services as TMRs Foremost, respondents were fixed-term employees. As
at Fonterra since A.C. Sicat is Fonterra’s new manpower previously held by this Court, fixed-term employment
supplier. contracts are not limited, as they are under the present
Labor Code, to those by nature seasonal or for specific
The CA correctly found that A.C. Sicat is engaged in projects with predetermined dates of completion; they
legitimate job contracting. It duly noted that A.C. Sicat also include those to which the parties by free choice
was able to prove its status as a legitimate job have assigned a specific date of termination. The
contractor for having presented the following evidence, determining factor of such contracts is not the duty of
to wit: 1. Certificate of Business Registration; 2. the employee but the day certain agreed upon by the
Certificate of Registration with the Bureau of Internal parties for the commencement and termination of the
Revenue; 3. Mayor’s Permit; 4. Certificate of Membership employment relationship.
with the Social Security System; 5. Certificate of
Registration with the Department of Labor and In the case at bar, it is clear that respondents were
Employment; 6. Company Profile; and 7. Certifications employed by A.C. Sicat as project employees.
issued by its clients. Respondents, by accepting the conditions of the contract
with A.C. Sicat, were well aware of and even acceded to
Furthermore, A.C. Sicat has substantial capital, having the condition that their employment thereat will end on
assets totaling 5,926,155.76 as of December 31, 2006. said pre-determined date of termination. They cannot
Too, its Agreement with Fonterra clearly sets forth that now argue that they were illegally dismissed by the
A.C. Sicat shall be liable for the wages and salaries of its latter when it refused to renew their contracts after its
employees or workers, including benefits, premiums, expiration. This is so since the non-renewal of their
and protection due them, as well as remittance to the contracts by A.C. Sicat is a management prerogative,
proper government entities of all withholding taxes, and failure of respondents to prove that such was done
Social Security Service, and Medicare premiums, in in bad faith militates against their contention that they
accordance with relevant laws. were illegally dismissed. The expiration of their contract
with A.C. Sicat simply caused the natural cessation of
We agree with the findings of the CA that the their fixed-term employment thereat. We, thus, see no
termination of respondents’ employment with the latter reason to disturb the ruling of the CA in this respect.
was simply brought about by the expiration of their
employment contracts.

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26. vacation leave benefits, and 13th month pay to the

MILAN VS NLRC employees.
GR NO 202961, 2015
Solid Mills filed its Department of Labor and
An employer is allowed to withhold terminal Employment termination report on September 2, 2003.
pay and benefits pending the employee's return
of its properties. Later, Solid Mills, through Alfredo Jingco, sent to
petitioners individual notices to vacate SMI Village.
FACTS:
Petitioners were no longer allowed to report for work by
Petitioners (Emer Milan, Randy Masangkay, Wilfredo October 10, 2003. They were required to sign a
Javier, Ronaldo David, BonifacioMatundan Nora memorandum of agreement with release and quitclaim
Mendoza Et al) are respondent Solid Mills, Inc.' s (Solid before their vacation and sick leave benefits, 13th
Mills) employees. month pay, and separation pay would be
released. Employees who signed the memorandum of
As Solid Mills’ employees, petitioners and their families agreement were considered to have agreed to vacate SMI
were allowed to occupy SMI Village, a property owned by Village, and to the demolition of the constructed houses
Solid Mills. According to Solid Mills, this was "[o]ut of inside as condition for the release of their termination
liberality and for the convenience of its employees . . . benefits and separation pay.
[and] on the condition that the employees . . . would
vacate the premises anytime the Company deems fit." Petitioners refused to sign the documents and
demanded to be paid their benefits and separation pay.
In September 2003, petitioners were informed that
effective October 10, 2003, Solid Mills would cease its Hence, petitioners filed complaints before the Labor
operations due to serious business losses. NAFLU Arbiter for alleged non-payment of separation pay,
(collective bargaining agent) recognized Solid Mills’ accrued sick and vacation leaves, and 13th month pay.
closure due to serious business losses in a
memorandum of agreement. The memorandum of Petitioners’ contentions: They argued that their accrued
agreement provided for Solid Mills’ grant of separation benefits and separation pay should not be withheld
pay less accountabilities, accrued sick leave benefits, because their payment is based on company policy and
practice. Moreover, the 13th month pay is based on law,

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specifically, Presidential Decree No. 851. Their independent from the issue of payment of petitioners’
possession of Solid Mills property is not an monetary benefits.
accountability that is subject to clearance
procedures. They had already turned over to Solid Mills Labor Arbiter: ruled in favor of petitioners. According to
their uniforms and equipment when Solid Mills ceased the Labor Arbiter, Solid Mills illegally withheld
operations. petitioners’ benefits and separation pay. Petitioners’
right to the payment of their benefits and separation pay
Petitioners argue that respondent Solid Mills and was vested by law and contract. Petitioners’ possession
NAFLU’s memorandum of agreement has no provision should not be construed as petitioners’
stating that benefits shall be paid only upon return of "accountabilities" that must be cleared first before the
the possession of respondent Solid Mills’ property. It release of benefits. Their possession "is not by virtue of
only provides that the benefits shall be "less any employer-employee relationship." It is a civil issue,
accountabilities," which should not be interpreted to which isoutside the jurisdiction of the Labor Arbiter.”
include such possession. The fact that majority of
NAFLU’s members were not occupants of respondent NLRC: because of petitioners’ failure to vacate Solid
Solid Mills’ property is evidence that possession of the Mills’ property, Solid Mills was justified in withholding
property was not contemplated in the their benefits and separation pay. Solid Mills granted
agreement. "Accountabilities" should be interpreted to the petitioners the privilege to occupy its property on
refer only to accountabilities that wereincurred by account of petitioners’ employment. It had the
petitioners while they were performing their duties prerogative to terminate such privilege. The termination
asemployees at the worksite. Moreover, applicable laws, of Solid Mills and petitioners’ employer-employee
company practice, or policies do not provide that 13th relationship made it incumbent upon petitioners to turn
month pay, and sick and vacation leave pay benefits, over the property to Solid Mills.
may be withheld pending satisfaction of liabilities by the
employee. CA: ruled that Solid Mills’ act of allowing its employees
to make temporary dwellings in its property was a
Petitioners also point out that the National Labor liberality on its part. It may be revoked any time at its
Relations Commission and the Court of Appeals have no discretion. As a consequence of Solid Mills’ closure and
jurisdiction to declare that petitioners’ act of withholding the resulting termination of petitioners, the employer-
possession of respondent Solid Mills’ property is illegal. employee relationship between them ceased to exist.
The regular courts have jurisdiction over this issue. It is There was no more reason for them to stay in Solid

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Mills’ property. Moreover, the memorandum of Article 217 provides that the Labor Arbiter, in his or her
agreement between Solid Mills and the union original jurisdiction, and the National Labor Relations
representing petitioners provided that Solid Mills’ Commission, in its appellate jurisdiction, may determine
payment of employees’ benefits should be "less issues involving claims arising from employer-employee
accountabilities." relations.

ISSUE: Petitioners’ claim that they have the right to the

immediate release of their benefits as employees
1. Whether or not it is within the jurisdiction of the separated from respondent Solid Mills is a question
LA and the NLRC to rule on the illegality of arising from the employer-employee relationship
possession of the property by the petitioners. between the parties.

2. Whether or not the respondent company may Claims arising from an employer-employee relationship
validly withhold the benefits of the petitioner are not limited to claims by an employee. Employers
subject to the return of the property. may also have claims against the employee, which arise
from the same relationship.
RULING:
As a general rule, therefore, a claim only needs to be
1. YES. sufficiently connected to the labor issue raised and must
arise from an employer-employee relationship for the
The National Labor Relations Commission may labor tribunals to have jurisdiction.
preliminarily determine issues related to rights arising
from an employer-employee relationship. In this case, respondent Solid Mills claims that its
properties are in petitioners’ possession by virtue of
The National Labor Relations Commission has their status as its employees. Respondent Solid Mills
jurisdiction to determine, preliminarily, the parties’ allowed petitioners to use its property as an act of
rights over a property, when it is necessary to determine liberality. Put in other words, it would not have allowed
an issue related to rights or claims arising from an petitioners to use its property had they not been its
employer-employee relationship. employees. The return of its properties in petitioners’
possession by virtue of their status as employees is an
issue that must be resolved to determine whether

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benefits can be released immediately. The issue raised Withholding of the wages, except for a debt due, shall
by the employer is, therefore, connected to petitioners’ not be made by the employer.)
claim for benefits and is sufficiently intertwined with the
parties’ employer-employee relationship. Thus, it is "Debt" in this case refers to any obligation due from the
properly within the labor tribunals’ jurisdiction. employee to the employer. It includes any accountability
that the employee may have to the employer. There is no
2. YES reason to limit its scope to uniforms and equipment, as
petitioners would argue.
Institution of clearance procedures has legal basIs
More importantly, respondent Solid Mills and NAFLU,
Requiring clearance before the release of last payments the union representing petitioners, agreed that the
to the employee is a standard procedure among release of petitioners’ benefits shall be "less
employers, whether public or private. Clearance accountabilities."
procedures are instituted to ensure that the properties,
real or personal, belonging to the employer but are in "Accountability," in its ordinary sense, means obligation
the possession of the separated employee, are returned or debt. The ordinary meaning of the term
tothe employer before the employee’s departure. "accountability" does not limit the definition of
accountability to those incurred in the worksite. As long
As a general rule, employers are prohibited from as the debt or obligation was incurred by virtue of the
withholding wages from employees. (Art. 116). The Labor employer-employee relationship, generally, it shall be
Code also prohibits the elimination or diminution of included in the employee’s accountabilities that are
benefits. (Art. 100) subject to clearance procedures.

However, our law supports the employers’ institution of It may be true that not all employees enjoyed the
clearance procedures before the release of wages. As an privilege of staying in respondent Solid Mills’ property.
exception to the general rule that wages may not be However, this alone does not imply that this privilege
withheld and benefits may not be diminished. (Art 113) when enjoyed was not a result of the employer-employee
relationship. Those who did avail of the privilege were
The Civil Code provides that the employer is authorized employees of respondent Solid Mills. Petitioners’
to withhold wages for debts due: (Article 1706. possession should, therefore, be included in the term
"accountability."

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being reduced. It is only subjected to the condition that

Accountabilities of employees are personal. They need the employees return properties properly belonging to
not be uniform among all employees in order to be the employer. This is only consistent with the equitable
included in accountabilities incurred by virtue of an principle that "no one shall be unjustly enriched or
employer-employee relationship. Petitioners do not benefited at the expense of another."
categorically deny respondent Solid Mills’ ownership of
the property, and they do not claim superior right to it. For these reasons, we cannot hold that petitioners are
What can be gathered from the findings of the Labor entitled to interest of their withheld separation benefits.
Arbiter, National Labor Relations Commission, and the These benefits were properly withheld by respondent
Court of Appeals is that respondent Solid Mills allowed Solid Mills because of their refusal to return its
the use of its property for the benefit of petitioners as its property.
employees. Petitioners were merely allowed to possess
and use it out of respondent Solid Mills’ liberality. The
employer may, therefore, demand the property at will. 27.
DAVAO FRUITS CORPO. VS ALU
The return of the property’s possession became an 225 SCRA 562, 2013
obligation or liability on the part of the employees when
the employer-employee relationship ceased. Thus, FACTS:
respondent Solid Mills has the right to withhold
petitioners’ wages and benefits because of this existing Respondent Associated Labor Unions (ALU), for and in
debt or liability. behalf of all the rank-and-file workers and employees of
petitioner Davao Fruits Association filed a complaint
The law does not sanction a situation where employees before the Ministry of Labor and Employment, Regional
who do not even assert any claim over the employer’s Arbitration Branch XI, Davao City, against petitioner, for
property are allowed to take all the benefits out of their "Payment of the Thirteenth-Month Pay Differentials."
employment while they simultaneously withhold Respondent ALU sought to recover from petitioner the
possession of their employer’s property for no rightful thirteenth month pay differential for 1982 of its rank-
reason. Withholding of payment by the employer does and-file employees, equivalent to their sick, vacation
not mean that the employer may renege on its obligation and maternity leaves, premium for work done on rest
to pay employees their wages, termination payments, days and special holidays, and pay for regular holidays
and due benefits. The employees’ benefits are also not which petitioner, allegedly in disregard of company

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practice since 1975, excluded from the computation of items had been included by petitioner indicates a
the thirteenth month pay for 1982. unilateral and voluntary act on its part, sufficient in
In its answer, petitioner claimed that it erroneously itself to negate any claim of mistake.
included items subject of the complaint in the
computation of the thirteenth month pay for the years A company practice favorable to the employees had
prior to 1982, upon a doubtful and difficult question of indeed been established and the payments made
law. According to petitioner, this mistake was discovered pursuant thereto, ripened into benefits enjoyed by them.
only in 1981 after the promulgation of the Supreme And any benefit and supplement being enjoyed by the
Court decision in the case of San Miguel Corporation v. employees cannot be reduced, diminished, discontinued
Inciong (103 SCRA 139). or eliminated by the employer, by virtue of Section 10 of
the Rules and Regulations Implementing P.D. No. 851,
ISSUE: and Article 100 of the labor of the Philippines, which
prohibit the diminution or elimination by the employer
WON in the computation of the thirteenth month pay of the employees' existing benefits (Tiangco v. Leogardo,
given by employers to their employees under P.D. No. Jr., 122 SCRA 267, [1983]).
851, payments for sick, vacation and maternity leaves, Petitioner cannot invoke the principle
premiums for work done on rest days and special of solutioindebiti which as a civil law concept that is not
holidays, and pay for regular holidays may be excluded applicable in Labor Law. Besides, in solutioindebiti, the
in the computation and payment thereof, regardless of obligee is required to return to the obligor whatever he
long-standing company practice. received from the latter (Civil Code of the Philippines,
Arts. 2154 and 2155). Petitioner in the instant case,
RULING: does not demand the return of what it paid respondent
ALU from 1975 until 1981; it merely wants to "rectify"
NO. the error it made over these years by excluding
unilaterally from the thirteenth month pay in 1982 the
From 1975 to 1981, petitioner had freely, voluntarily items subject of litigation. Solutioindebiti, therefore, is
and continuously included in the computation of its not applicable to the instant case.
employees' thirteenth month pay, the payments for sick,
vacation and maternity leaves, premiums for work done
on rest days and special holidays, and pay for regular 28.
holidays. The considerable length of time the questioned DAVAO INTEGRATED VS ABARQUEZ

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220 SCRA 197, 1983 During the effectivity of the CBA on October 16,
1985 until three (3) months after its renewal on April 15,
Doctrine: Well-settled is it that the said 1989, or until July 1989 (a total of 3 years and 9
privilege of commutation or conversion to cash, months), all the field workers of petitioner who are
being an existing benefit, the petitioner- members of the regular labor pool and the present
company may not unilaterally withdraw, or regular extra labor pool who had rendered at least 750
diminish such benefits. It is a fact that hours up to 1,500 hours were extended sick leave with
petitioner-company had, on several instances pay benefits. Any unenjoyed portion thereof at the end
in the past, granted and paid the cash of the current year was converted to cash and paid at
equivalent of the unenjoyed portion of the sick the end of the said one-year period pursuant to the
leave benefits of some intermittent workers. CBA. The number of days of their sick leave per year
Under the circumstances, these may be depends on the number of hours of service per calendar
deemed to have ripened into company practice year in accordance with the CBA.
or policy which cannot be peremptorily
withdrawn. The commutation of the unenjoyed portion of
the sick leave with pay benefits of the intermittent
FACTS: workers or its conversion to cash was, however,
discontinued or withdrawn when petitioner-company
Petitioner Davao Integrated Port Stevedoring under a new assistant manager, Mr. Marzo, stopped
Services and private respondent Union, entered into a the payment of its cash equivalent on the ground
CBA which, under Sections 1 and 3, Article VIII thereof, that they are not entitled to the said benefits under
provide for sick leave with pay benefits each year to its Sections 1 and 3 of the 1989 CBA. The Union objected
employees who have rendered at least 1 year of service to the said discontinuance of commutation or
with the company. Upon its renewal, the provisions for conversion to cash of the unenjoyed sick leave with pay
sick leave with pay benefits were reproduced under benefits of petitioner's intermittent workers contending
Sections 1 and 3, Article VIII of the new CBA, but the that it is a deviation from the true intent of the parties
coverage of the said benefits was expanded to include that negotiated the CBA; that it would violate the
the "present Regular Extra Labor Pool as of the signing principle in labor laws that benefits already extended
of this Agreement.” shall not be taken away and that it would result in
discrimination between the non-intermittent and the
intermittent workers of the petitioner-company.

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Whether or not the benefits given by the petitioner

Upon failure of the parties to amicably settle the have not yet ripened into an established company
issue on the interpretation of Sections 1 and 3, Article practice and can therefore be withdrawn.
VIII of the 1989 CBA, the Union brought the matter for
voluntary arbitration before the NCMB Regional
Arbitration Branch XI at Davao City. The parties RULING:
mutually designated public respondent Ruben
Abarquez, Jr. to act as voluntary arbitrator. Abarquez, NO, well-settled is it that the said privilege of
Jr. issued an Award in favor of the Union ruling that the commutation or conversion to cash, being an
regular intermittent workers are entitled to commutation existing benefit, the petitioner-company may not
of their unenjoyed sick leave with pay benefits under the unilaterally withdraw, or diminish such benefits. It
CBA. Petitioner-company disagreed with the is a fact that petitioner-company had, on several
aforementioned ruling and argued that it is clear from instances in the past, granted and paid the cash
the language and intent of the last sentence of Section equivalent of the unenjoyed portion of the sick leave
1, Article VIII of the 1989 CBA that only the regular benefits of some intermittent workers. Under the
workers whose work are not intermittent are entitled to circumstances, these may be deemed to have
the benefit of conversion to cash of the unenjoyed ripened into company practice or policy which
portion of sick leave. Petitioner-company further argued cannot be peremptorily withdrawn.
that while the intermittent workers were paid the cash
equivalent of their unenjoyed sick leave with pay A CBA as used in Article 252 of the Labor Code,
benefits during the previous management of Mr. Beltran refers to a contract executed upon request of either the
who misinterpreted Sections 1 and 3 of Article VIII of the employer or the exclusive bargaining representative
1985 CBA, it was well within petitioner-company's rights incorporating the agreement reached after negotiations
to rectify the error it had committed and stop the with respect to wages, hours of work and all other terms
payment of the said sick leave with pay benefits. An and conditions of employment, including proposals for
error in payment, according to petitioner-company, adjusting any grievances or questions arising under
can never ripen into a practice. such agreement.A CBA, as a labor contract within the
contemplation of Article 1700 of the Civil Code of the
ISSUE: Philippines which governs the relations between labor
and capital, is not merely contractual in nature but
impressed with public interest, thus, it must yield to the

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common good. As such, it must be construed liberally vacation leave benefits, among others, are by their
rather than narrowly and technically, and the courts nature, intended to be replacements for regular income
must place a practical and realistic construction upon which otherwise would not be earned because an
it, giving due consideration to the context in which it is employee is not working during the period of said leaves.
negotiated and purpose which it is intended to serve. They are non-contributory in nature, in the sense that
It is thus erroneous for petitioner to isolate the employees contribute nothing to the operation of the
Section 1, Article VIII of the 1989 CBA from the other benefits. By their nature, upon agreement of the parties,
related section on sick leave with pay benefits, they are intended to alleviate the economic condition of
specifically Section 3 thereof, in its attempt to justify the the workers.
discontinuance or withdrawal of the privilege of
commutation or conversion to cash of the unenjoyed Whatever doubt there may have been early on
portion of the sick leave benefit to regular intermittent was clearly obliterated when petitioner-company
workers. The manner they were deprived of the privilege recognized the said privilege and paid its intermittent
previously recognized and extended to them by workers the cash equivalent of the unenjoyed portion of
petitioner-company during the lifetime of the CBA of their sick leave with pay benefits during the lifetime of
October 16, 1985 until three (3) months from its renewal the CBA of October 16, 1985 until three (3) months from
on April 15, 1989, or a period of three (3) years and nine its renewal on April 15, 1989.
(9) months, is not only tainted with arbitrariness but
likewise discriminatory in nature.
29.
It is not disputed that both classes of workers are SEVILLA TRADING VS SEMANA
entitled to sick leave with pay benefits provided they 428 SCRA 239, 2004
comply with the conditions set forth under Section 1 in
relation to the last paragraph of Section 3, to wit: (1) the FACTS:
employee-applicant must be regular or must have
rendered at least one year of service with the company; Sevilla Trading Company is a domestic corporation
and (2) the application must be accompanied by a engaged in trading business, organized and existing
certification from a company-designated physician. under Philippine laws. Two to three years prior to 1999,
Sevilla Trading added to the base figure, in computing
Sick leave benefits, like other economic benefits the 13th month pay of its employees, the amount of
stipulated in the CBA such as maternity leave and other benefits received by the employees which are

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beyond the basic pay including among others, overtime

premium for overtime and holidays, night premium, Whether or not the change in the computation of the
bereavement leave pay, union leave pay, etc.. Petitioner 13th month pay of the employees constitutes a
alleged that the computation for the 13th month pay was diminution of benefits.
entrusted to its office staff. When it changed its person-
in-charge, the latter allegedly discovered the error in the RULING:
computation of the 13th month pay of the employees, Yes, there is diminution of the benefits received by the
citing PD No. 851 which states that only the regular or employees. The Petitioner’s stance of mistake or error in
basic pay of an employee shall be included in the said the computation of the thirteenth month pay is
computation. unmeritorious. Financial statements submitted by the
Petitioner requires the services of a certified public
In the new computation, it reduced the employees’ 13th accountant to audit its finances. It is quite impossible
month pay. Hence, private respondent Sevilla Trading that the error was only discovered in 1999. This is
Workers Union Super, a duly organized union, through merely basic accounting. When Petitioner included over
the Grievance Machinery in their Collective Bargaining the years non-basic benefits of its employees, such as
Agreement, contested the new computation. The issue maternity leave pay or cash equivalent to unused
was brought before the Respondent Accredited vacation or sick leave pay, this may only be construed
Voluntary Arbitrator Tomas E. Semana of the National as a voluntary act on its part. Putting the blame on the
Conciliation and Mediation Board, for consideration and Payroll Personnel is inexcusable. The Court has held in
resolution. The Union alleged that Petitioner violated the its previous jurisprudence that the grant of these
rule prohibiting elimination or diminution of employees benefits has ripened into company practice or policy
benefits under Art. 100 of the Labor Code. A.V.A. which cannot be peremptorily withdrawn. The practice
Semana decided in favor of the Union. The Petitioner of Sevilla Trading constitutes voluntary employer
received a copy of the Decision of December 20, 2000 practice which cannot be unilaterally withdrawn by the
and filed a Manifestation and Motion for Time to File employer without violating Art. 100 of the Labor Code.
Petition for Certiorari on January 19, 2001. A month
later, Petitioner filed a Petition for Certiorari under Rule
65. The appellate Court however denied due course. 30.
Hence, this appeal. VERGARA VS COCA-COLA
GR NO 176985, 2013
ISSUE:

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FACTS: Whether SMI should be included in the computation of

petitioner’s retirement benefits on the ground of
Petitioner Ricardo E. Vergara, Jr. was an employee of consistent company practice. NOPE.
respondent Coca-Cola Bottlers Philippines, Inc. from RULING:
May 1968 until he retired on January 31, 2002 as a The principle of non-diminution of benefits is actually
District Sales Supervisor (DSS) for Las Piñas City, Metro founded on the Constitutional mandate to protect the
Manila. As stipulated in respondent’s existing rights of workers, to promote their welfare, and to afford
Retirement Plan Rules and Regulations at the time, the them full protection.
Annual Performance Incentive Pay of RSMs, DSSs, and There is diminution of benefits when the following
SSSs shall be considered in the computation of requisites are present: (1) the grant or benefit is founded
retirement benefits. on a policy or has ripened into a practice over a long
Claiming his entitlement to an additional period of time; (2) the practice is consistent and
Ph₱474,600.00 as Sales Management Incentives deliberate; (3) the practice is not due to error in the
(SMI)7 and to the amount of Ph₱496,016.67 which construction or application of a doubtful or difficult
respondent allegedly deducted illegally, representing the question of law; and (4) the diminution or
unpaid accounts of two dealers within his jurisdiction, discontinuance is done unilaterally by the employer.18
petitioner filed a complaint before the NLRC for To be considered as a regular company practice, the
payment. employee must prove by substantial evidence that the
The LA rendered a Decision10 in favor of petitioner, giving of the benefit is done over a long period of time,
directing respondent to reimburse the amount illegally and that it has been made consistently and
deducted from petitioner’s retirement package and to deliberately.19Jurisprudence has not laid down any
integrate therein his SMI privilege. Upon appeal of hard-and-fast rule as to the length of time that company
respondent, however, the NLRC modified the award and practice should have been exercised in order to
deleted the payment of SMI. constitute voluntary employer practice.20 The common
The CA dismissed petitioner’s case on January 9, 2007 denominator in previously decided cases appears to be
and denied his motion for reconsideration two months the regularity and deliberateness of the grant of benefits
thereafter. over a significant period of time.
No substantial evidence to prove that the grant of SMI to
ISSUE: all retired DSSs regardless of whether or not they qualify
to the same had ripened into company practice. Despite
more than sufficient opportunity given him while his

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case was pending before the NLRC, the CA, and even to did not qualify for the SMI, respondent’s General
this Court, petitioner utterly failed to adduce proof to Manager in its Calamba plant still granted his
establish his allegation that SMI has been consistently, (Velazquez) request, along with other numerous
deliberately and voluntarily granted to all retired DSSs concessions, to achieve industrial peace in the plant
without any qualification or conditions whatsoever. The which was then experiencing labor relations problems.
only two pieces of evidence that he stubbornly presented Lastly, Balles confirmed that petitioner failed to meet the
throughout the entirety of this case are the sworn trade receivable qualifiers of the SMI. She also cited the
statements of Renato C. Hidalgo (Hidalgo) and Ramon V. cases of Ed Valencia (Valencia) and Emmanuel Gutierrez
Velazquez (Velasquez), former DSSs of respondent who (Gutierrez), both DSSs of respondent who retired on
retired in 2000 and 1998, respectively. They claimed January 31, 2002 and December 30, 2002, respectively.
that the SMI was included in their retirement package She noted that, unlike Valencia, Gutierrez also did not
even if they did not meet the sales and collection receive the SMI as part of his retirement pay, since he
qualifiers.24 However, juxtaposing these with the failed to qualify under the policy guidelines. The verity of
evidence presented by respondent would reveal the all these statements and representations stands and
frailty of their statements. holds true to Us, considering that petitioner did not
The declarations of Hidalgo and Velazquez were present any iota of proof to debunk the same.
sufficiently countered by respondent through the Therefore, respondent's isolated act of including the SMI
affidavits executed by Norman R. Biola (Biola), Moises D. in the retirement package of Velazquez could hardly be
Escasura (Escasura), and Ma. Vanessa R. Balles classified as a company practice that may be considered
(Balles).25 Biola pointed out the various stop-gap an enforceable obligation.
measures undertaken by respondent beginning 1999 in
order to arrest the deterioration of its accounts
receivables balance, two of which relate to the policies 31.
on the grant of SMI and to the change in the TRADERS ROYAL BANK VS NLRC
management structure of respondent upon its re- 189 SCRA 214, 1990
acquisition by San Miguel Corporation. Escasura
represented that he has personal knowledge of the FACTS:
circumstances behind the retirement of Hidalgo and
Velazquez. He attested that contrary to petitioner’s Respondent union filed a letter-complaint against
claim, Hidalgo was in fact qualified for the SMI. As for petitioner TRB for the diminution of benefits being
Velazquez, Escasura asserted that even if he (Velazquez) enjoyed by the employees since time immemorial, e.g.

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mid-year bonus, from 2 months gross pay to 2 months bonuses over and above their lawful salaries and
basic and year-end bonus from 3 months gross to only 2 allowances is entirely dependent on the profits, if any,
months. realized by the Bank from its operations during the past
year.
However, petitioner insisted that it had paid the From 1979-1985, the bonuses were less because the
employees holiday pay. The practice of giving them income of the Bank had decreased. In 1986, the income
bonuses at year’s end, would depend on how profitable of the Bank was only 20.2 million pesos, but the Bank
the operation of the bank had been. still gave out the usual two (2) months basic mid-year
and two months gross year-end bonuses. The petitioner
NLRC found TRB guilty of diminution of benefits due pointed out, however, that the Bank weakened
to the private respondents and ordered it to pay the said considerably after 1986 on account of political
employees’ claims for differentials in their holiday, mid- developments in the country. Suspected to be a Marcos-
year, and year-end bonuses. owned or controlled bank, it was placed under
sequestration by the present administration and is now
ISSUE: managed by the Presidential Commission on Good
Government (PCGG).
Whether or not bonuses are part of labor standards. In the light of these submissions of the petitioner,
the contention of the Union that the granting of bonuses
RULING: to the employees had ripened into a company practice
No. A bonus is a “gratuity or act of liberality of the giver that may not be adjusted to the prevailing financial
which the recipient has no right to demand as a matter condition of the Bank has no legal and moral bases. Its
of right”. It is something given in addition to what is fiscal condition having declined, the Bank may not be
ordinarily received by or strictly due the recipient. The forced to distribute bonuses which it can no longer
granting of a bonus is basically a management afford to pay and, in effect, be penalized for its past
prerogative which cannot be forced upon the employer generosity to its employees.
“who may not be obliged to assume the onerous burden Private respondent's contention, that the decrease in
of granting bonuses or other benefits aside from the the midyear and year-end bonuses constituted a
employee’s basic salaries or wages”. diminution of the employees' salaries, is not correct, for
bonuses are not part of labor standards in the same
It is clear that the petitioner may not be obliged to class as salaries, cost of living allowances, holiday pay,
pay bonuses to its employees. The matter of giving them

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 LABOR LAW REVIEW

and leave benefits, which are provided by the Labor

Code. b) "Basic Salary" shall include all remunerations
or earnings paid by an employer to an employee
for services rendered but may not include cost of
32. living allowances granted pursuant to
BOIE-TAKEDA VS DE LA SERNA Presidential Decree No. 525 or Letter of
228 SCRA 329, 1993 Instructions No. 174, profit sharing payments,
and all allowances and monetary benefits which
DOCTRINE: If the commissions were in the are not considered or integrated as part of the
nature of profit-sharing bonuses (productivity regular or basic salary of the employee at the
bonuses), then these do not form part of the time of the promulgation of the Decree on
“basic salary” and should not be included in December 16, 1975.
the computation of the 13th month pay.
The Supplementary Rules and Regulations
FACTS: implementing P.D. 851 were subsequently issued by
Minister Ople which inter alia set out items of
Sections 1 and 2 of Presidential Decree No. 851, the compensation not included in the computation of the
Thirteenth Month Pay Law, read as follows: 13th month pay, viz.:

Sec 1. All employees are hereby required to pay Sec. 4. Overtime pay, earnings and other
all their employees receiving basic salary of not remunerations which are not part of the basic
more than P1,000.00 a month, regardless of the salary shall not be included in the computation
nature of the employment, a 13th month pay not of the 13th month pay.
later than December 24 of every year.
Sec. 2. Employers already paying their On November 16, 1987, Revised Guidelines on the
employees a 13th month pay or its equivalent Implementation of the 13th Month Pay Law were
are not covered by this Decree. promulgated by then Labor Secretary Franklin Drilon
defining “basic salary”, to wit:
The Rules and Regulations Implementing P.D. 851 The basic salary of an employee for the purpose of
promulgated by then Labor Minister Blas Ople on computing the 13th month pay shall include all
December 22, 1975 defined basic salary as: remunerations or earnings paid by the employer

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 LABOR LAW REVIEW

for services rendered but does not include month pay law for the period covering 1986, 1987 and
allowances and monetary benefits which are not 1988.
considered or integrated as part of the regular or
basic salary, such as the cash equivalent of Boie-Takeda and Philippine Fuji Xerox Corp, thru their
unused vacation and sick leave credits, overtime, common counsel, contested that under P.D. 851, the
premium, night differential and holiday pay, and 13th month pay is based solely on basic salary. As
cost-of-living allowances. However, these salary- defined by the law itself and clarified by the
related benefits should be included as part of the implementing and Supplementary Rules as well as by
basic salary in the computation of the 13th month the Supreme Court in a long line of decisions,
pay if by individual or collective agreement, remunerations which do not form part of the basic or
company practice or policy, the same are treated regular salary of an employee, such as commissions,
as part of the basic salary of the employees. should not be considered in the computation of the 13th
month pay. This being the case, the Revised Guidelines
This was the state of the law when during a routine on the Implementation of the 13th Month Pay Law
inspection in the premises of Boie-Takeda, it was found issued by then Secretary Drilon providing for the
out that Boie-Takeda had not been including the inclusion of commissions in the 13th month pay, were
commissions earned by its medical representatives in issued in excess of the statutory authority conferred by
the computation of their 13th month pay. Boie-Takeda P.D. 851.
was then served with a Notice of Inspection Results
requiring it to effect restitution or correction of "the ISSUE:
underpayment of 13th month pay for the year(s) 1986,
1987 and 1988 of Med Rep (Revised Guidelines on the WON the commissions are included in computing 13th
Implementation of 13th month pay # 5) in the total month pay.
amount of P558,810.89.
RULING:
A similar Routine Inspection was conducted in the
premises of Philippine Fuji Xerox Corp. In the Notice of No.
Inspection Results,Philippine Fuji Xerox Corp. commited
the following violation, to wit: Underpayment of 13th In the case of San Miguel Corp. vs.Inciong, 103 SCRA
month pay of 62 employees, more or less — pursuant to 139, this Court delineated the coverage of the term
Revised Guidelines on the Implementation of the 13th

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"basic salary" as used in P.D. 851. We said at some as part of the basic salary and in the
length: computation of the 13th month pay.

Under Presidential Decree 851 and its The exclusion of the cost-of-living allowances
implementing rules, the basic salary of an under Presidential Decree 525 and Letter of
employee is used as the basis in the Instructions No. 174, and profit-sharing
determination of his 13th month pay. Any payments indicate the intention to strip basic
compensations or remunerations which are salary of other payments which are properly
deemed not part of the basic pay is excluded as considered as "fringe" benefits. Likewise, the
basis in the computation of the mandatory catch-all exclusionary phrase "all allowances
bonus. and monetary benefits which are not considered
or integrated as part of the basic salary" shows
Under the Rules and Regulations implementing also the intention to strip basic salary of any
Presidential Decree 851, the following and all additions which may be in the form of
compensations are deemed not part of the basic allowances or "fringe" benefits.
salary:
a) Cost-of-living allowances granted Moreover, the Supplementary Rules and
pursuant to Presidential Decree 525 and Regulations Implementing Presidential Decree
Letter of Instructions No. 174; 851 is even more emphatic in declaring that
b) Profit-sharing payments; earnings and other remunerations which are not
c) All allowances and monetary benefits part of the basic salary shall not be included in
which are not considered or integrated the computation of the 13th-month pay.
as part of the regular basic salary of the
employee at the time of the promulgation While doubt may have been created by the prior
of the Decree on December 16, 1975. Rules and Regulations Implementing
Presidential Decree 851 which defines basic
Under a later set of Supplementary Rules and salary to include all remunerations or earnings
Regulations Implementing Presidential Decree paid by an employer to an employee, this cloud
851 Presidential Decree 851 issued by then is dissipated in the later and more controlling
Labor Secretary Blas Ople, overtime pay, Supplementary Rules and Regulations which
earnings and other remunerations are excluded categorically exclude from the definitions of

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 LABOR LAW REVIEW

basic salary earnings and other remunerations Commissions are given for extra efforts exerted in
paid by an employer to an employee. A cursory consummating sales or other related transactions. They
perusal of the two sets of Rules indicates that are, as such, additional pay, which this Court has made
what has hitherto been the subject of a broad clear do not form part of the "basic salary."
inclusion is now a subject of broad exclusion.
The Supplementary Rules and Regulations cure
the seeming tendency of the former rules to
include all remunerations and earnings within
the definition of basic salary.

The all embracing phrase "earnings and other

remunerations" which are deemed not part of
the basic salary includes within its meaning
payments for sick, vacation, or maternity leaves,
premium for works performed on rest days and
special holidays, pays for regular holidays and
night differentials. As such they are deemed not
part of the basic salary and shall not be
considered in the computation of the 13th-
month pay.

Quite obvious from the foregoing is that the term "basic

salary" is to be understood in its common, generally-
accepted meaning, i.e., as a rate of pay for a standard
work period exclusive of such additional payments as
bonuses and overtime.

In remunerative schemes consisting of a fixed or

guaranteed wage plus commission, the fixed or
guaranteed wage is patently the "basic salary" for this is
what the employee receives for a standard work period.

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