BROKENSHIRE MEMORIAL HOSPITAL, INC., PETITIONER, VS. THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION AND THE BROKENSHIRE MEMORIAL HOSPITAL EMPLOYEES AND WORKERS UNION-FFW, RES…

Brokenshire Memorial Hospital versus National Labor Relations Commission

The Case

This is a special civil action of certiorari brought by Brokenshire Memorial Hospital against the National Labor Relations Commission and the Brokenshire Memorial Hospital Employees and Workers Union, Federation of Free Workers. The hospital asks the Supreme Court to annul the Commission's resolution affirming a Labor Arbiter's decision that ordered the hospital to pay its employees a yearly Christmas bonus on top of the thirteenth month pay required by Presidential Decree Number 851. The case matters because it settles, for the third time, a question of recurring importance to every private employer: whether the thirteenth month pay is owed in addition to bonuses the employer was already giving before the decree took effect. The Court's answer is no, and the doctrine it restates is the one a reviewee must carry into the examination room.

Procedural History

The union filed a complaint against the hospital for unlawful diminution of benefits, invoking Article 100 of the Labor Code and the implementing rules of Presidential Decree Number 851. The Labor Arbiter of Regional Arbitration Branch Eleven of the Ministry of Labor and Employment rendered judgment on March 23, 1983, ordering the hospital to pay all its employees, as it had done in 1979, an extra Christmas bonus of 100 pesos per year for 1980, 1981 and 1982. The hospital appealed. On December 14, 1984, the National Labor Relations Commission affirmed the Labor Arbiter's decision. The hospital then came to the Supreme Court by petition for certiorari, and the Court reversed both rulings.

Facts

At the time Presidential Decree Number 851 took effect on December 16, 1975, the hospital had for many years been giving its employees an annual Christmas bonus, and it continued to do so afterwards. After 1979, however, the hospital stopped giving the bonus, saying that its poor financial condition no longer made the grant possible.

The union protested the discontinuance and filed a complaint for unlawful diminution of benefits. The hospital answered that the bonus was never an established and continuing obligation but was contingent on its financial condition in any given year, which is why the matter was not dealt with at all in the collective bargaining agreement. It added that it should not be made to bear the double burden of giving both the thirteenth month pay and the bonus, relying on the Court's earlier ruling in National Federation of Sugar Workers versus Ovejera.

The Labor Arbiter ruled for the union, and the Commission affirmed, reasoning that in the earlier case the union was claiming a thirteenth month pay on top of bonuses already given, whereas here the hospital had discontinued a favorable practice enjoyed by the employees at the time the implementing rules took effect. The hospital later sent the Minister of Labor and Employment a notice of closure because of its critically grave financial condition, and on March 2, 1985 it ceased to operate for lack of operating capital following the garnishment of its bank deposits.

Issues

• Whether or not an employer already paying its employees a thirteenth month pay or its equivalent may be compelled to pay the thirteenth month pay prescribed by Presidential Decree Number 851 on top of the bonuses it had been granting before the decree took effect.
• Whether or not the National Labor Relations Commission correctly distinguished the case at bar from the earlier ruling in National Federation of Sugar Workers versus Ovejera.

Applicable Provisions

Section 2 of Presidential Decree Number 851, as quoted in the decision, provides:

Employers already paying their employees a 13th month pay or its equivalent are not covered by this Decree.

This exemption is the textual foundation of the Court's ruling, because it shows that the law never intended to burden twice an employer already giving the equivalent benefit.

Section 3 of the Rules Implementing Presidential Decree Number 851, as quoted in the decision, provides:

The term "its equivalent" 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 allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits. Where an employer pays less than 1/12 of the employee's basic salary, the employer shall pay the difference.

This rule tells us that a Christmas bonus counts as the equivalent of the thirteenth month pay, and that where the bonus falls short of one twelfth of the basic salary, the employer pays only the difference.

Ruling

On the first issue, the Court ruled that the hospital cannot be obliged to bear the double burden of giving both the thirteenth month pay required by the decree and the Christmas bonus it had theretofore been granting. The evident intention of the law was to grant additional income to employees not already receiving the same, not to impose a double burden on the employer already paying a thirteenth month pay or its equivalent, whether out of pure generosity or on the basis of a binding agreement, and regardless of the conditional character of the grant, so long as there is actual payment. Otherwise, what was conceived to be a thirteenth month salary would in effect become a fourteenth or possibly a fifteenth month pay.

On the second issue, the Court held that the distinction drawn by the Commission was insubstantial and unjustifiable. The message of the earlier ruling is clear and unequivocal: an employer may not be obliged to assume a double burden of paying the thirteenth month pay in addition to bonuses or other pecuniary benefits given by way of fringe benefits, and the decree accorded him the option either to exempt himself from the obligation to give the thirteenth month pay or to discontinue the payment of the bonuses or fringe benefits deemed to be the equivalent of that pay. The Court also noted that the Labor Arbiter's reading of the hospital's financial statements was erroneous, since what should have shown a deficit was read as a surplus.

Doctrine

An employer already paying its employees a thirteenth month pay or its equivalent is not covered by Presidential Decree Number 851. A Christmas bonus, a mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than one twelfth of the basic salary are the equivalent of the thirteenth month pay, and where the employer pays less than one twelfth, he pays only the difference. The employer has the option either to exempt himself from the obligation to give the thirteenth month pay or to discontinue the payment of the bonuses or fringe benefits deemed to be its equivalent. The conditional nature of the bonus does not matter, so long as there is actual payment.

Disposition

The Court reversed and set aside the Labor Arbiter's decision and the Commission's resolution affirming it, and dismissed the union's complaint, with costs against the union.

Remember This

Memorize the line that the thirteenth month pay may not be exacted on top of bonuses already given, lest it become a fourteenth or fifteenth month pay. Examiners use this case to test the employer's option under the exemption clause and the rule that a bonus counts as the equivalent of the thirteenth month pay, with only the difference payable.