2S LABSTAN Case Digests

TOPIC HOURS OF WORK: Service Incentive Leave AUTHOR #30_Valino

CASE TITLE JPL MARKETING PROMOTIONS vs COURT OF APPEALS GR NO 151966

TICKLER DATE July 8, 2005

DOCTRINE

FACTS JPL Marketing and Promotions (JPL) is a domestic corporation engaged in the business of recruitment and
placement of workers. Private respondents Gonzales, Abesa, and Aninipot were employed by JPL as
merchandisers on separate dates and assigned at different establishments as attendants to the display of
California Marketing Corporation (CMC), one of petitioner’s clients.

JPL notified private respondent that CMC would stop its direct merchandising activity in the Bicol Region,
Isabela, and Cagayan Valley effective 15 August 1996. They were advised to wait for further notice as they would
be transferred to other clients. However, private respondents filed before the NLRC complaints for illegal
dismissal, praying for separation pay, 13th month pay, service incentive leave pay and payment for moral
damages. Executive Labor Arbiter Rivera dismissed the complaints for lack of merit. The LA found that Gonzales
and Abesa applied with and were employed by the store where they were originally assigned by JPL even before
the lapse of the 6 -month period given by law to JPL to provide private respondents a new assignment. Thus,
they may be considered to have unilaterally severed their relation with JPL, and cannot charge JPL with illegal
dismissal. The LA held that it was incumbent upon them to wait until they were reassigned by JPL, and if after
six months they were not reassigned, they can file an action for separation pay but not for illegal dismissal. The
claims for 13th month pay and service incentive leave pay was also denied since private respondents were paid
way above the applicable minimum wage during their employment.

Private respondents appealed to the NLRC. NLRC agreed with LA Ruling but ruled that they were entitled to
separation pay, service incentive leave pay and 13th month pay. JPL filed a petition for certiorari with CA,
claiming that private respondents are not by law entitled to separation pay, service incentive leave pay and
13th month pay. CA dismissed the petition.

JPL contention: The instant case does not fall under any of the instances where separation pay is due, to wit:
installation of labor-saving devices, redundancy, retrenchment or closing or cessation of business operation, or
disease of an employee whose continued employment is prejudicial to him or co-employees, or illegal dismissal
of an employee but reinstatement is no longer feasible.

Private Respondent: They claim that their dismissal, while not illegal, was tainted with bad faith. They alleged
that they were deprived of due process because the notice of termination was sent to them only 2 days before
the actual termination.

ISSUE/S Whether or not private respondents are entitled to separation pay, 13th month pay and service incentive leave
pay.
RULING/S Not entitled to separation pay

Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of dismissals due to any
of these reasons: (a) installation of labor saving devices; (b) redundancy; (c) retrenchment; (d) cessation of the
employer's business; and (e) when the employee is suffering from a disease and his continued employment is
prohibited by law or is prejudicial to his health and to the health of his co-employees. However, separation
pay shall be allowed as a measure of social justice in those cases where the employee is validly dismissed for

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 2S LABSTAN Case Digests
causes other than serious misconduct or those reflecting on his moral character, but only when he was illegally
dismissed.

The common denominator of the instances where payment of separation pay is warranted is that the
employee was dismissed by the employer. In the instant case, there was no dismissal to speak of. Private
respondents were simply not dismissed at all, whether legally or illegally. What they received from JPL was not
a notice of termination of employment, but a memo informing them of the termination of CMC’s contract with
JPL. More importantly, they were advised that they were to be reassigned. At that time, there was no
severance of employment to speak of.

Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months, wherein an employee/employees are placed on the so-
called "floating status." When that "floating status" of an employee lasts for more than six months, he may be
considered to have been illegally dismissed from the service. Thus, he is entitled to the corresponding benefits
for his separation, and this would apply to suspension either of the entire business or of a specific component
thereof. However, private respondents sought employment from other establishments even before the
expiration of the 6-month period provided by law. As they admitted in their comment, all three of them applied
for and were employed by another establishment after they received the notice from JPL. JPL did not terminate
their employment; they themselves severed their relations with JPL. Thus, they are not entitled to separation
pay.

Entitled to 13th month pay and service incentive leave

Payment of 13th month pay and service incentive leave are benefits mandated by law and should be given to
employees as a matter of right.

Presidential Decree No. 851, requires an employer to pay its rank and file employees a 13th month pay not
later than 24 December of every year. However, employers not paying their employees a 13th month pay or
its equivalent are not covered by said law. The term "its equivalent" was defined by the law’s implementing
guidelines as including Christmas bonus, mid-year bonus, cash bonuses and other payment amounting to not
less than 1/12 of the basic salary but shall not include cash and stock dividends, cost-of-living-allowances and
all other allowances regularly enjoyed by the employee, as well as non-monetary benefits.

On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave benefit
of 5 days with pay, enjoyed by an employee who has rendered at least one year of service. Unless specifically
excepted, all establishments are required to grant service incentive leave to their employees. The term "at
least one year of service" shall mean service within 12 months, whether continuous or broken reckoned from
the date the employee started working. The Court has held in several instances that "service incentive leave is
clearly demandable after one year of service."

Private respondents were not given their 13th month pay and service incentive leave pay while they were
under the employ of JPL. Instead, JPL provided salaries which were over and above the minimum wage. The
Court rules that the difference between the minimum wage and the actual salary received by private
respondents cannot be deemed as their 13th month pay and service incentive leave pay as such difference is
not equivalent to or of the same import as the said benefits contemplated by law. Thus, private respondents
are entitled to the 13th month pay and service incentive leave pay.
NOTES

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