UNION OF FILIPRO EMPLOYEES (UFE), PETITIONER, VS. BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION AND NESTLE PHILIPPINES, INC. (FORMERLY FILIPRO, INC.), RESPONDENTS.

This labor dispute stems from the exclusion
of sales personnel from the
holiday pay award and the change of the divisor in the computation of
benefits from 251 to 261 days.

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines,
Inc.) filed with the National Labor Relations Commission (NLRC) a
petition for declaratory relief seeking a ruling on its rights and
obligations respecting claims of its monthly paid employees for holiday
pay in the light of the Court’s decision in Chartered Bank Employees
Association v. Ople (138 SCRA 273 [1985]).

Both Filipro and the Union of Filipino Employees (UFE) agreed to submit
the case for voluntary arbitration and appointed respondent Benigno
Vivar, Jr. as voluntary arbitrator.

On January 2, 1980, Arbitrator Vivar rendered a decision directing
Filipino to:

“pay its monthly paid employees holiday pay pursuant to
Article 94
of the Code, subject only to the exclusions and limitations specified
in Article 82 and such other legal restrictions as are provided for in
the Code,” (Rollo, p. 31)

Filipro filed a motion for clarification seeking (1) the limitation of
the award to three years, (2) the exclusion of salesmen, sales
representatives, truck drivers, merchandisers and medical
representatives (hereinafter referred to as sales personnel) from the
award of the holiday pay; and (3) deduction from the holiday pay award
of overpayment for overtime, night differential, vacation and sick leave
benefits due to the use of 251 divisor. (Rollo, pp. 138-145)

Petitioner UFE answered that the award should be made effective from the
date of effectivity of the Labor Code, that their sales personnel are
not field personnel and are therefore entitled to holiday pay, and that
the use of 251 as divisor is an established employee benefit which
cannot be diminished.

On January 14, 1986, the respondent arbitrator issued an order declaring
that the effectivity of the holiday pay award shall retroact to
November 1, 1974, the date of effectivity of the Labor Code. He
adjudged, however, that the company’s sales personnel are field
personnel and, as such, are not entitled to holiday pay. He likewise
ruled that with the grant of 10 days’ holiday pay, the divisor should be
changed from 251 to 261 and ordered the reimbursement of overpayment
for overtime, night differential, vacation and sick leave pay due to the
use of 251 days as divisor.

Both Nestle and UFE filed their respective motions for partial
reconsideration. Respondent Arbitrator treated the two motions as
appeals and forwarded the case to the NLRC which issued a resolution
dated May 25, 1987 remanding the case to the respondent arbitrator on
the ground that it has no jurisdiction to review decisions in voluntary
arbitration cases pursuant to Article 263 of the Labor Code as amended
by Section 10, Batas Pambansa Blg. 130 and as implemented by Section 5
of the rules implementing B.P. Blg. 130.

However, in a letter dated July 6, 1987, the respondent arbitrator
refused to take cognizance of the case reasoning that he had no more
jurisdiction to continue as arbitrator because he had resigned from
service effective May 1, 1986.

Hence, this petition.

The petitioner union raises the following issues:

1) Whether or not Nestle’s sales personnel are entitled to
holiday pay; and

2) Whether or not, concomitant with the award of holiday pay,
the divisor should be changed from 251 to 261 days and whether or not
the previous use of 251 as divisor resulted in overpayment for overtime,
night differential, vacation and sick leave pay.

The petitioner insists that respondent’s sales personnel are not field
personnel under Article 82 of the Labor Code. The respondent company
controverts this assertion.

Under Article 82, field personnel are not entitled to holiday pay. Said
article defines field personnel as “non-agricultural employees who
regularly perform their duties away from the principal place of business
or branch office of the employer and whose actual hours of work in the
field cannot be determined with reasonable certainty.”

The controversy centers on the interpretation of the clause “whose
actual hours of work in the field cannot be determined with reasonable
certainty.”

It is undisputed that these sales personnel start their field work at
8:00 a.m. after having reported to the office and come back to the
office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.

The petitioner maintains that the period between 8:00 a.m. to 4:00 or
4:30 p.m. comprises the sales personnel’s working hours which can be
determined with reasonable certainty.

The Court does not agree. The law requires that the actual hours of work
in the field be reasonably ascertained. The company has no way of
determining whether or not these sales personnel, even if they report to
the office before 8:00 a.m. prior to field work and come back at 4:30
p.m., really spend the hours in between in actual field work.

We concur with the following disquisition by the respondent arbitrator:

“The requirement for the salesmen and other similarly
situated
employees to report for work at the office at 8:00 a.m. return at 4:00
or 4:30 p.m. is not within the realm of work in the field as defined in
the Code but an exercise of purely management prerogative of providing
administrative control over such personnel. This does not in any manner
provide a reasonable level of determination on the actual field work of
the employees which can be reasonably ascertained. The theoretical
analysis that salesmen and other similarly-situated workers regularly
report for work at 8:00 a.m. and return to their home station at 4:00 or
4:30 p.m., creating the assumption that their field work is supervised,
is surface projection. Actual field work begins after 8:00 a.m. when
the sales personnel follow their field itinerary, and ends immediately
before 4:00 or 4:30 p.m. when they report back to their office. The
period between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of
work in the field, the extent or scope and result of which are subject
to their individual capacity and industry and which ‘cannot be
determined with reasonable certainty.’ This is the reason why effective
supervision over field work of salesmen and medical representatives,
truck drivers and merchandisers is practically a physical impossibility.
Consequently, they are excluded from the ten holidays with pay award.’
(Rollo, pp. 36-37)

Moreover, the requirement that “actual hours of work in the field cannot
be determined with reasonable certainty” must be read in conjunction
with Rule IV, Book III of the Implementing Rules which provides:

“Rule IV Holidays with Pay

Section 1. Coverage – This rule shall apply to all employees except:

xxx xxx xxx

(e) Field personnel and other employees whose time and performance is
unsupervised by the employer xxx (Underlining supplied)

While contending that such rule added another element not found in the
law (Rollo, p. 13), the petitioner nevertheless attempted to show that
its affected members are not covered by the abovementioned rule. The
petitioner asserts that the company’s sales personnel are strictly
supervised as shown by the SOD (Supervisor of the Day) schedule and the
company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp.
53-55).

Contrary to the contention of the petitioner, the Court finds that the
aforementioned rule did not add another element to the Labor Code
definition of field personnel. The cause “whose time and performance is
unsupervised by the employer” did not amplify but merely interpreted and
expounded the clause “whose actual hours of work in the field cannot be
determined with reasonable certainty.” The former clause is still
within the scope and purview of Article 82 which defines field
personnel. Hence, in deciding whether or not an employee’s actual
working hours in the field can be determined with reasonable certainty,
query must be made as to whether or not such employee’s time and
performance is constantly supervised by the employer.

The SOD schedule adverted to by the petitioner does not in the least
signify that these sales personnel’s time and performance are
supervised. The purpose of this schedule is merely to ensure that the
sales personnel are out of the office not later than 8:00 a.m. and are
back in the office not earlier than 4:00 p.m.

Likewise, the Court fails to see how the company can monitor the number
of actual hours spent in field work by an employee through the
imposition of sanctions on absenteeism contained in the company circular
of March 15, 1984.

The petitioner claims that the fact that these sales personnel are given
incentive bonus every quarter based on their performance is proof that
their actual hours of work in the field can be determined with
reasonable certainty.

The Court thinks otherwise.

The criteria for granting incentive bonus are: (1) attaining or
exceeding sales volume based on sales target; (2) good collection
performance; (3) proper compliance with good market hygiene; (4) good
merchandising work; (5) minimal market returns and (6) proper truck
maintenance. (Rollo, p. 190)

The above criteria indicate that these sales personnel are given
incentive bonuses precisely because of the difficulty in measuring their
actual hours of field work. These employees are evaluated by the result
of their work and not by the actual hours of field work which are
hardly susceptible to determination.

In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613
[1963]), the Court had occasion to discuss the nature of the job of a
salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla.,
118 F. 2d 202, the Court stated:

“The reasons for excluding an outside salesman are fairly
apparent. Such a salesman, to a greater extent, works individually.
There are no restrictions respecting the time he shall work and he can
earn as much or as little, within the range of his ability, as his
ambition dictates. In lieu of overtime he ordinarily receives
commissions as extra compensation. He works away from his employer’s
place of business, is not subject to the personal supervision of his
employer, and this employer has no way of knowing the number of hours he
works per day.”

While in that case the issue was whether or not salesmen were entitled
to overtime pay, the same rationale for their exclusion as field
personnel from holiday pay benefits also applies.

The petitioner union also assails the respondent arbitrator’s ruling
that, concomitant with the award of holiday pay, the divisor should be
changed from 251 to 261 days to include the additional 10 holidays and
the employees should reimburse the amounts overpaid by Filipro due to
the use of 251 days’ divisor.

Arbitrator Vivar’s rationale for his decision is as follows:

“xxx The new doctrinal policy established which ordered
payment of
ten holidays certainly adds to or accelerates the basis of conversion
and computation by ten days. With the inclusion of ten holidays as paid
days, the divisor is no longer 251 but 261 or 262 if election day is
counted. This is indeed an extremely difficult legal question of
interpretation which accounts for what is claimed as falling within the
concept of ‘solutio indebiti.’

When the claim of the Union for payment of ten holidays was granted,
there was a consequent need to abandon that 251 divisor. To maintain it
would create an impossible situation where the employees would benefit
with additional ten days with pay but would simultaneously enjoy higher
benefits by discarding the same ten days for purposes of computing
overtime and night time services and considering sick and vacation leave
credits. Therefore, reimbursement of such overpayment with the use of
251 as divisor arises concomitant with the award of ten holidays with
pay.’ (Rollo, p. 34)

The divisor assumes an important role in determining whether or not
holiday pay is already included in the monthly paid employee’s salary
and in the computation of his daily rate. This is the thrust of our
pronouncement in Chartered Bank Employees Association v. Ople (supra).
In that case, We held:

“It is argued that even without the presumption found in the
rules
and in the policy instruction, the company practice indicates that the
monthly salaries of the employees are so computed as to include the
holiday pay provided by law. The petitioner contends otherwise.

One strong argument in favor of the petitioner’s stand is
the fact
that the Chartered Bank, in computing overtime compensation for its
employees, employs a ‘divisor’ of 251 days. The 251 working days divisor
is the result of subtracting all Saturdays, Sundays and the ten (10)
legal holidays from the total number of calendar days in a year. If the
employees are already paid for all non-working days, the divisor should
be 365 and not 251.”

In the petitioner’s case, its computation of daily rate, since September
1, 1980, is as follows:

monthly rate x 12 months

251 days

Following the criterion laid down in the Chartered Bank case, the use of
251 days’ divisor by respondent Filipro indicates that holiday pay is
not yet included in the employee’s salary, otherwise the divisor should
have been 261.

It must be stressed that the daily rate, assuming there are no
intervening salary increases, is a constant figure for the purpose of
computing overtime and night differential pay and commutation of sick
and vacation leave credits. Necessarily, the daily rate should also be
the same basis for computing the 10 unpaid holidays.

The respondent arbitrator’s order to change the divisor from 251 to 261
days would result in a lower daily rate which is violative of the
prohibition on non-diminution of benefits found in Article 100 of the
Labor Code. To maintain the same daily rate if the divisor is adjusted
to 261 days, then the dividend, which represents the employee’s annual
salary, should correspondingly be increased to incorporate the holiday
pay. To illustrate, if prior to the grant of holiday pay, the employee’s
annual salary is P25,100, then dividing such figure by 251 days, his
daily rate is P100.00 After the payment of 10 days’ holiday pay, his
annual salary already includes holiday pay and totals P26,100 (P25,100 +
1,000). Dividing this by 261 days, the daily rate is still P100.00.
There is thus no merit in respondent Nestle’s claim of overpayment of
overtime and night differential pay and sick and vacation leave
benefits, the computation of which are all based on the daily rate,
since the daily rate is still the same before and after the grant of
holiday pay.

Respondent Nestle’s invocation of solutio indebiti, or payment by
mistake, due to its use of 251 days as divisor must fail in light of the
Labor Code mandate that “all doubts in the implementation and
interpretation of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor.” (Article 4).
Moreover, prior to September 1, 1980, when the company was on a 6-day
working schedule, the divisor used by the company was 303, indicating
that the 10 holidays were likewise not paid. When Filipro shifted to a
5-day working schedule on September 1, 1980, it had the chance to
rectify its error, if ever there was one, but did not do so. It is now
too late to allege payment by mistake.

Nestle also questions the voluntary arbitrator’s ruling that holiday pay
should be computed from November 1, 1974. This ruling was not
questioned by the petitioner union as obviously, said decision was
favorable to it. Technically, therefore, respondent Nestle should have
filed a separate petition raising the issue of effectivity of the
holiday pay award. This Court has ruled that an appellee who is not an
appellant may assign errors in his brief where his purpose is to
maintain the judgment on other grounds, but he cannot seek modification
or reversal of the judgment or affirmative relief unless he has also
appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989],
citing La Campana Food Products, Inc. v. Philippine Commercial and
Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in order to fully
settle the issues so that the execution of the Court’s decision in this
case may not be needlessly delayed by another petition, the Court
resolved to take up the matter of effectivity of the holiday pay award
raised by Nestle.

Nestle insists that the reckoning period for the application of the
holiday pay award is 1985 when the Chartered Bank decision, promulgated
on August 28, 1985, became final and executory, and not from the date of
effectivity of the Labor Code. Although the Court does not entirely
agree with Nestle, we find its claim meritorious.

In Insular Bank of Asia and America Employees’ Union (IBAAEU) v.
Inciong, 132 SCRA 663 [1984], hereinafter referred to as the IBAA case,
the Court declared that Section 2, Rule IV, Book III of the implementing
rules and Policy Instruction No. 9, issued by the then Secretary of
Labor on February 16, 1976 and April 23, 1976, respectively, and which
excluded monthly paid employees from holiday pay benefits, are null and
void. The Court therein reasoned that, in the guise of clarifying the
Labor Code’s provisions on holiday pay, the aforementioned implementing
rule and policy instruction amended them by enlarging the scope of their
exclusion. The Chartered Bank case reiterated the above ruling and
added the ‘divisor’ test.

However, prior to their being declared null and void, the implementing
rule and policy instruction enjoyed the presumption of validity and
hence, Nestle’s non-payment of the holiday benefit up to the
promulgation of the IBAA case on October 23, 1984 was in compliance with
these presumably valid rule and policy instruction.

In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429
[1971], the Court discussed the effect to be given to a legislative or
executive act subsequently declared invalid:

x x x x x x x x x

“xxx It does not admit of doubt that prior to the
declaration of
nullity such challenged legislative or executive act must have been in
force and had to be complied with. This is so as until after the
judiciary, in an appropriate case, declares its invalidity, it is
entitled to obedience and respect. Parties may have acted under it and
may have changed their positions. What could be more fitting than that
in a subsequent litigation regard be had to what has been done while
such legislative or executive act was in operation and presumed to be
valid in all respects. It is now accepted as a doctrine that prior to
its being nullified, its existence as a fact must be reckoned with. This
is merely to reflect awareness that precisely because the judiciary is
the government organ which has the final say on whether or not a
legislative or executive measure is valid, a period of time may have
elapsed before it can exercise the power of judicial review that may
lead to a declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no recognition of what
had transpired prior to such adjudication.

“In the language of an American Supreme Court decision: ‘The

actual existence of a statute, prior to such a determination [of
unconstitutionality], is an operative fact and may have consequences
which cannot justly be ignored. The past cannot always be erased by a
new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, – with respect
to particular relations, individual and corporate, and particular
conduct, private and official.’ (Chicot County Drainage Dist. v. Baxter
States Bank, 308 US 371, 374 [1940]). This language has been quoted with
approval in a resolution in Araneta v. Hill (93 Phil. 1002 [1953]) and
the decision in Manila Motor Co., Inc. v. Flores (99 Phil., 738 [1956]).
An even more recent instance is the opinion of Justice Zaldivar
speaking for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095
[1967]).” (At pp. 434-435)

The “operative fact” doctrine realizes that in declaring a
law or
rule null and void, undue harshness and resulting unfairness must be
avoided. It is now almost the end of 1991. To require various companies
to reach back to 1975 now and nullify acts done in good faith is unduly
harsh. 1984 is a fairer reckoning period under the facts of this case.

Applying the aforementioned doctrine to the case at bar, it is not
far-fetched that Nestle, relying on the implicit validity of the
implementing rule and policy instruction before this Court nullified
them, and thinking that it was not obliged to give holiday pay benefits
to its monthly paid employees, may have been moved to grant other
concessions to its employees, especially in the collective bargaining
agreement. This possibility is bolstered by the fact that respondent
Nestle’s employees are among the highest paid in the industry. With this
consideration, it would be unfair to impose additional burdens on
Nestle when the non-payment of the holiday benefits up to 1984 was not
in any way attributed to Nestle’s fault.

The Court thereby resolves that the grant of holiday pay be effective,
not from the date of promulgation of the Chartered Bank case nor from
the date of effectivity of the Labor Code, but from October 23, 1984,
the date of promulgation of the IBAA case.

WHEREFORE, the order of the voluntary
arbitrator is
hereby MODIFIED. The divisor to be used in computing holiday pay shall
be 251 days. The holiday pay as above directed shall be computed from
October 23, 1984. In all other respects, the order of the respondent
arbitrator is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., Melencio-Herrera, Paras, Feliciano, Padilla,
Bidin, Medialdea, Griño-Aquino, Regalado, Davide, Jr., and
Romero, JJ., concur.

Cruz and Nocon, JJ., no
part.