Case Digest: Central azucarerra vs. Central azucarerra union-nlu

CENTRAL AZUCARERA DE TARLAC, 

vs.  

CENTRAL AZUCARERA DE TARLAC LABOR UNION-NLU,

 G.R. No. 188949,  July 26, 2010

Justice Nachura

Labor Law; Labor Standard; 13 month pay;

FACTS:

The formula used by petitioner in computing the 13th-month pay was: Total Basic Annual Salary divided by twelve (12). Included in petitioner’s computation of the Total Basic Annual Salary were the following: basic monthly salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night premium pay; and vacation and sick leaves for each year. Throughout the years, petitioner used this computation until 2006 from 1975.

                After the strike and temporary cessation of operations in 2005, all the striking union was allowed to return to work. Subsequently, petitioner declared another temporary cessation of operations for the months of April and May 2006. After the suspension was lifted on June 2006, the workers were allowed to report for work on a fifteen day-per-month rotation basis until September 2005. In December 2006, petitioner gave the employees their 13th-month pay based on the employee’s total earnings during the year divided by 12. In December 2006, petitioner gave the employees their 13th-month pay based on the employee’s total earnings during the year divided by 12.

Respondent objected to this computation. It claimed that the divisor should have been eight (8) instead of 12, because the employees worked for only 8 months in 2006.

Petitioner and respondent tried to thresh out their differences in accordance with the grievance procedure as provided in their collective bargaining agreement. Despite four (4) conciliatory meetings, the parties still failed to settle the dispute, hence a complaint by for money claims based on the alleged diminution/erroneous computation of 13^th month pay   before the Labor arbiter (LA).

The LA dismissed the complaint. NLRC reversed. MR denied. Petitioner then filed a petition for certiorari under Rule 65 of the Rules of Court before the CA. CA dismissed the petition and affirm the NLRC. Hence petition before the SC (R45)

ISSUE:

Whether the computation of 13^th month pay by the petitioner is correct.

HELD:

YES. "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year; the term "basic salary" of an employee for the purpose of computing the 13th-month pay was interpreted to include all remuneration or earnings paid by the employer for services rendered, but does not include allowances and monetary benefits which are not integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances. However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th-month pay if, by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees.

As correctly ruled by the CA, the practice of petitioner in giving 13th-month pay based on the employees’ gross annual earnings which included the basic monthly salary, premium pay for work on rest days and special holidays, night shift differential pay and holiday pay continued for almost thirty (30) years and has ripened into a company policy or practice which cannot be unilaterally withdrawn. Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that benefits given to employees cannot be taken back or reduced unilaterally by the employer because the benefit has become part of the employment contract, written or unwritten.