DOLE PHILIPPINES, INC., PETITIONER, VS. THE HON. VICENTE LEOGARDO, JR. (IN HIS CAPACITY AS DEPUTY MINISTER OF LABOR), AND ASSOCIATED LABOR UNION (ALU), RESPONDENTS.

Petition for certiorari
to annul and set aside the order of respondent Deputy Minister of Labor, dated
October 26, 1981, which affirmed the order of the Regional Director of the Ministry
of Labor, Davao City, requiring petitioner Dole
Philippines, Inc. to pay its employees the year-end productivity bonus agreed
upon in their Collective Bargaining Agreement in addition to the 13th month pay
prescribed under Presidential Decree No. 851.

The salient facts are as
follows:

On June 6, 1975, Standard
Philippines Fruit Corporation or STANFILCO, a company merged in 1981 with petitioner
Dole Philippines, Inc., entered into a collective bargaining agreement with the
Associated Labor Union, ALU for short, effective for a period of three (3)
years, beginning June 1, 1975 to May 31, 1978. 
The Collective Bargaining Agreement provided, among others, the grant of
a year-end productivity bonus to all workers within the collective bargaining
unit.  Section 1, Article XVII thereof
reads as follows:

“ARTICLE XVII

YEAR-END PRODUCTIVITY BONUS

SECTION I. 
The COMPANY agrees to grant each worker within the bargaining unit a
year-end productivity bonus equivalent to ten (10) days of his basic daily wage
if eighty percent (80%) or more of the average total banana production for the
two (2) preceding calendar years together with the current year’s estimate is
attained.  This bonus is exclusive of any
bonus which the Company may be presently giving or may give in the future to
its workers pursuant to the COMPANY’s rights under
Section 4, Article I of this Agreement.”

Section 4, Article I of
the agreement referred to above provides:

“SECTION 4.  All terms
and conditions of employment of workers not specifically excluded in Section I
of this Article are embodied in this Agreement, and the same shall govern the
relationship between the COMPANY and such workers.  On the other hand, all such benefits and/or
privileges as are not expressly provided for in this Agreement but which are
now being accorded, may in the future be accorded, or might have previously
been accorded to the workers, no matter how long or how often, shall be deemed
purely acts of grace and dependent upon the sole judgment and discretion of the
COMPANY to grant, modify or withdraw, and shall not be construed as
establishing an obligation on the part of the COMPANY.”

The 80% production level stated in Article XVII of said CBA
having been attained in 1975, the workers were paid the stipulated year-end
productivity bonus on December 11,
1975.

Shortly thereafter, or on December 16, 1975, Presidential Decree 851 took
effect.  Section 1 thereof required all
employers to pay their employees receiving a basic salary of not more than
P1,000.00 a month, regardless of the nature of their employment, a 13th month
pay not later than December 24 of every year. 
Section 2 of the law, however, exempted from its coverage those
employers already paying their employees a 13th month pay or its equivalent.

On June 22, 1975,
Secretary (now Minister) of Labor, Hon. Blas F. Ople, issued the “Rules and Regulations Implementing
Presidential Decree 851.” Section 3(c) thereof provides that “the
term ‘its equivalent’ x x x
shall include Christmas bonus, mid-year bonus, profit-sharing payments and
other cash bonuses amount­ing to not less than 1/12th of the basic salary but
shall not include cash and stock dividends, cost of living allowance and other
allowances regularly enjoyed by the employee as well as non-monetary benefits x
x x.”

The rules further added
that “where an employer pays less than 1/12th of the employee’s basic
salary, the employer shall pay the difference.”

To comply with the provision of P.D. 851 on the 13th month pay,
STANFILCO paid its workers on December
29, 1975 the difference between 1/12th of their yearly basic salary
and their year-end productivity bonus.  In doing so, STANFILCO relied on Section 2 of
the decree, as interpreted by the MOLE’s implementing
rules.  The same method of computation
was followed in the payment of the year-end productivity bonus and the 13th
month pay for the years 1976, 1977 and 1978.

Questioning this procedure, respondent ALU, joined by STANFILCO
technical employees as well as its rank-and-file workers, filed on February 19, 1979 a complaint with
the South Cotabato District Labor Office at General
Santos City,
docketed as LR-003-G.S.-79, ALU charging STANFILCO with unfair labor practice
and non-implementation of the CBA provision on the year-end productivity
bonus.  The following day, February 20, 1979, Oscar Rabino, Oscar Serenuela, Raul Montejo and all the rank-and-file workers of STANFILCO
instituted another complaint before the same district labor office, docketed as
LR-010-G.S.-79, charging the company with non-payment of the production
incentive bonus for the years 1975, 1976, 1977 and 1978.

The issues having been joined, the two (2) cases were
consolidated and the parties were required to file their position papers.

On May 25, 1979,
the Regional Director of MOLE, Davao
City, issued an order sustaining
respondents’ position that the year-end productivity bonus, being a contractual
commitment, is separate and distinct from the 13th month pay and must,
therefore, be paid separately in full. 
The decretal portion of the order reads:

“WHEREFORE, in view of all the foregoing, judgment is hereby
rendered:

“1)    DISMISSING the complaint of the office and
technical employees;

“2)    DISMISSING the claim of ALU for damages and interest
including its charges against respondent for unfair labor practice;

“3)    ABSOLVING respondent Thomas M. Leahy from
any personal liability;

“4)    GRANTING the complaint of OSCAR RABINO and
his group as the complaint of all rank and file workers covered by the CBA, and
which will also include all rank and file workers under the complaint filed by
ALU;

“5)    ORDERING respondent to pay the bonuses under
the CBA for the years 1975, 1976, 1977 and 1978.”

On appeal, the respondent Deputy Minister of Labor affirmed the
order.

In mandating the payment of the 13th month compensation to
employees earning less than P1,000.00, PD 851 obviously seeks to remedy the sad
plight of labor in a milieu of world-wide inflation vis-a-vis
a static wage level.  However, cognizant
of the fact that the remedy sought to be enforced had long been granted by some
employers out of their own volition and magnanimity, the law has expressly
exempted from its coverage those employers “who are already paying their
employees a 13th month pay or its equivalent.”^[1]

While the intention to exclude those certain employers from the
operation of the law is quite clear, the parties advance conflicting views as
to the meaning of the phrase “or its equivalent.”

Section 3(e) of the Rules and Regulations Implementing PD No.
851, issued by the Minister of Labor on December 22, 1975 explicitly states
that the term “or its equivalent x x x shall include Christmas bonus, mid-year bonus,
profit-sharing payments and other cash bonuses amounting to not less than
one-twelfth of the basic salary.  Where
an employer pays less than 1/12 of the employee’s basic salary, the employer
shall pay the difference.”

In “National
Federation of Sugar Workers versus Ovejera, et
al.”^[2], the interpretation given by the MOLE received
the imprimatur of this Court, thus:

“Having been issued by the agency charged with the
implementation of PD No. 851 as its contemporaneous interpretation of the law,
the quoted rule shall be accorded great weight.”

Furthermore, to resolve the growing number of controversies
stemming from the interpretation of Section 2, PD No. 851, this Court in the
above-cited case, speaking thru Justice Plana,
established definitely the legal equivalent of the 13th month pay in this wise:

“The evident intention of the law, as revealed by the law
itself, was to grant an additional income in the form of a 13th month pay to
employees not already receiving the same. 
Otherwise put, the intention was to grant some relief – not to all
workers – but only to the unfortunate ones not actually paid a 13th month
salary or what amounts to it, by whatever name called; but it was not
envisioned that a double burden would be imposed on the employer already paying
his employees a 13th month pay or its equivalent – whether out of pure
generosity or on the basis of a binding
agreement, and, in the latter case, regardless
of the conditional character of the grant
(such as making the payment dependent
on profit), so long as there is
actual payment.  Otherwise,
what was con­ceived to be a 13th month salary would in effect become a 14th or
possibly 15th month pay.” (Underscoring supplied).

Continuing, this Court said:

“Pragmatic considerations also weigh heavily in favor of
crediting both voluntary and contractual bonuses for the purpose
of determining liability for the 13th month pay x x x.” (Underscoring ours).

Tested against this norm,
it becomes clear that the year-end productivity bonus granted by petitioner to
private respondents pursuant to their CBA is, in legal contemplation, an
integral part of their 13th month pay, notwithstanding its conditional
nature.  When, therefore, petitioner, in
order to comply with the mandate of PD No. 851, credited the year-end
productivity bonus as part of the 13th month pay and adopted the procedure of
paying only the difference between said bonus and 1/12th of the worker’s yearly
basic salary, it acted well within the letter and spirit of the law and its
implementing rules.  For in the event
that “an employer pays less than one-twelfth of the employees’ basic
salary, all that said employer is required to do under the law is to pay the
difference.”^[3]

To hold otherwise would
be to impose an unreasonable and undue burden upon those employers who had demonstrated
their sensitivity and concern for the welfare of their employees.  A contrary stance would indeed create an
absurd situation whereby an employer who started giving his employees the 13th
month pay only because of the unmistakable force of the law would be in a far
better position than another who, by his own magnanimity or by mutual
agreement, had long been extending to his employees the benefits contemplated
under PD No. 851, by whatever nomenclature these benefits have come to be
known.  Indeed, PD No. 851, a legislation
benevolent in its purpose, never intended to bring about such oppressive
situation.

WHEREFORE, this petition is hereby granted and,
accordingly, the order of respondent Deputy Minister of Labor, dated October
26, 1981, is set aside.  No costs.

SO ORDERED.

Aquino, Concepcion,
Jr., Guerrero, De Castro, Melencio-Herrera, Plana, Vasquez, Relova and
Gutierrez, JJ., concur.

Fernando, C.J., concur in the
dissenting opinion of J. Makasiar.

Teehankee, J., reserves his votes.

Abad Santos, J., dissent for the reason given in concurring opinion in
the La Carlota case.

^[1]
Section 2, PD 851.

^[2]
G.R. No. 59743, May 31, 1982.

^[3]
Section 3(e) of the Rules.