Durabuilt Recapping Plant & Company v. NLRC

a. Normal hours of work - Labor Code, arts. 83-84; Omnibus Rules Implementing the Labor Code, Book III, Rule I, secs. 3-4

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Case DigestWeek 2 - Labor Standards: Hours of Work, Wages & Benefits

Durabuilt Recapping Plant & Company v. NLRC

G.R. No. L-76746 · July 27, 1987 · Third Division

a. Normal hours of work - Labor Code, arts. 83-84; Omnibus Rules Implementing the Labor Code, Book III, Rule I, secs. 3-4

Petitioner: Durabuilt Recapping Plant & Company and Eduardo LaoRespondent: National Labor Relations Commission, Hon. Comm. Ricardo C. Castro, Hon. Arbiter Amelia M. Guloy, Kapisanan ng mga Manggagawa sa Durabuilt, and Reynaldo Bodegas

Gist

Durabuilt, a tire-recapping company, let the Labor Arbiter's reinstatement-with-full-backwages order become final by failing to appeal it, so the only live question was how those backwages should be computed; the Supreme Court set aside a straight 26-working-day-per-month computation and held that days the plant did not actually operate — government-called VLCP power-saving shutdowns and a documented December 1983 retrenchment — are not to be counted, because no employee, dismissed or retained, could have earned a wage on them.

Core Doctrine

A fair day's wage for a fair day's labor: if no work is performed there can be no wage or pay, unless the worker was able, willing and ready to work but was illegally locked out or suspended. Backwages therefore run only over days the employer's business was in actual operation; where the failure to work was not the employer's fault, the economic loss is not shifted to the employer, and each party bears his own loss. The rule that backwages are fixed 'without qualification or deduction' governs only the rate — no deduction for outside earnings, no addition for co-workers' later increases — and is not an inflexible rule of computation.

Note: Three source cautions. (1) The Week 2 study notes quote Article 279 to the respondents in its Republic Act No. 6715 form ("full backwages, inclusive of allowances... actual reinstatement"), language that did not exist until 1989, two years after this 1987 decision; the published full text of the decision does not cite Article 279 at all. (2) Those notes also render the "fair day's wage" exception clause as "illegally locked out, dismissed or suspended," whereas the lawphil text of this decision reads "illegally locked out, or suspended." The lawphil wording is followed throughout, since the presence or absence of "dismissed" bears directly on the holding. (3) The published report is internally inconsistent about the two amounts: the statement of facts gives the examiners' computation as P24,316.38 and Durabuilt's counter-computation as P3,834.05 (which is what its own breakdown adds up to), while the block quoted from the Solicitor General's comment gives them as P24,316.68 and P3,834.16. The figures from the statement of facts are used below, and the quoted passage is left as printed. Note also that the docket number appears in the report both as NLRC Case No. NCR-73162083 (opening paragraph) and NLRC Case No. NCR-7-3162083 (fallo).

Facts

Durabuilt Recapping Plant & Company, whose general manager was Eduardo Lao, employed Reynaldo Bodegas in its tire-recapping plant. In 1982 Bodegas logged only 250.75 days of attendance on account of absences.
Chronic power interruption in the early 1980s led the government, through the Ministry of Trade and Industry, to call on industry to adopt the Voluntary Loan Curtailment Plan (VLCP), under which brownouts were scheduled by area. The plan was voluntary in name only — consumers "had no choice then due to the prevailing energy crisis."
On November 23, 1982, Durabuilt signed its statement of conformity to the VLCP, and beginning March 21, 1983 its plant was not in actual operation every Wednesday. Since May 1978 the Ministry of Labor and Employment had provided in Policy Instruction No. 36 that brownouts running more than twenty minutes need not be treated as hours worked where employees may leave or use the time for themselves. The shutdowns were announced, dated, government-endorsed and already covered by a standing issuance.
Durabuilt terminated Bodegas, and on July 11, 1983 he and Kapisanan ng mga Manggagawa sa Durabuilt sued for illegal dismissal.
In December 1983, while the case was pending, Durabuilt retrenched for lack of raw materials, its reports to the Ministry of Labor and Employment and the SSS and its own payrolls showing the working week cut from six days to four. Bodegas, already dismissed, was not among those laid off.
While the case was still pending Durabuilt reinstated Bodegas and declared itself willing to pay backwages. The Court later treated this as evident good faith.
On February 13, 1984, Labor Arbiter Amelia M. Guloy found the dismissal illegal and ordered reinstatement with full backwages. Durabuilt failed to appeal seasonably, and entry of final judgment was made July 8, 1985. Everything Durabuilt could still say had to be said about computation rather than liability.
On August 8, 1985, Ministry examiners computed backwages, ECOLA, 13th-month and leave benefits at P24,316.38, on a straight 26 working days per month. Durabuilt opposed: the plant had been idled by the VLCP, other outages, machine repairs and lack of raw materials, and by the December 1983 retrenchment. On its computation Bodegas was owed P3,834.05.
Labor Arbiter Guloy denied the opposition on October 23, 1985 and the NLRC affirmed on May 16, 1986, both reasoning that the February 13, 1984 decision was final and could no longer be modified. The Solicitor General sided with Durabuilt, confirming the outages, the VLCP participation and the retrenchment, invoking Policy Instruction No. 36, and noting the non-operation "was never disputed by private respondent." The respondents answered only that the judgment was final — precisely the gap the Court exploited. Decided July 27, 1987.

Issue

Whether days on which the business did not actually operate — through a government-called power-curtailment programme, other outages, machine repairs, lack of raw materials, and a documented retrenchment, none attributable to the employer's fault — must be excluded from an illegally dismissed employee's backwages, consistent with a fair day's wage for a fair day's labor and with the Code's conception of hours worked.

Secondary issues. Whether the rule fixing backwages "without qualification or deduction" precludes any such exclusion; and whether excluding those days at the computation stage impermissibly modifies a final and executory decision.

Ruling

Main issue. YES — days when the business was not in actual operation, for reasons not attributable to the employer's fault, must be excluded; backwages are computed on the number of days the business was in actual operation.

Secondary issues. NO on both counts. The "without qualification or deduction" rule concerns only the exclusion of the employee's outside earnings and of co-workers' later wage increases from the base, and "was not to establish an inflexible rule of computation." Determining how many compensable days fall within a period already fixed by a final judgment executes that judgment rather than modifying it. The computation is to run on a daily rather than a monthly pay schedule, and the award remained capped at three years' backpay under the rule then prevailing.

"WHEREFORE, … the petition is hereby GRANTED. … The petitioner is ordered to pay private respondent his backwages from the time he was terminated up to the time he was actually reinstated computed on the basis of the number of days when petitioner's business was in actual operation. The number of days where no work was required and could be done by petitioner's employees on account of shutdowns due to electrical power interruptions, machine repair, and lack of raw materials are not considered hours worked… In no case shall the award exceed three year's backpay as above computed. SO ORDERED."

Ratio

The Court first defused the respondents' authority. Fixing backwages "without qualification or deduction," per Insular Life, Feati University Club and Mercury Drug, "simply means that the workers are to be paid their backwages fixed as of the time of their dismissal or strike without deduction for their earnings elsewhere," adopted to spare the parties a second trial over interim earnings — not to fix an inflexible computation rule.
Because that rule governs the rate rather than the number of days, the Court was free to ask how many days of actual employment lie inside the period the final judgment fixed. Answering that executes the judgment, so its immutability was no obstacle.
The governing principle came from SSS v. SSS Supervisors' Union-CUGCO: "[t]he age-old rule … of a 'fair day's wage for a fair day's labor' remains as the basic factor in determining employees' wages, and for that matter backwages," because "[i]f there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, or suspended."
With it the loss-allocation corollary: "where the failure of workers to work was not due to the employer's fault, the burden of economic loss suffered by the employees should not be shifted to the employer. Each party must bear his own loss."
The Court adopted the Solicitor General's unrebutted findings on the VLCP participation from March 21, 1983 and on the December 1983 retrenchment, borne out by filings with two government agencies and by payrolls. The exclusion asked for was already settled administrative policy under Policy Instruction No. 36.
On those days no work was required of, and none could be done by, any Durabuilt employee, so no wage accrued to anyone. It would "neither be fair nor just" to let Bodegas recover what he "has not earned and could not have earned," or to let him "enrich himself at the expense of the petitioner company."
Hence the methodological corollary from Compania Maritima v. United Seamen's Union: "[t]he computation of backwages should be based on daily rather than on monthly pay schedules where … such basis is more realistic and accurate." A monthly schedule cannot express a calendar with holes in it.
The fallo translates the conclusion into the vocabulary of hours worked: the excluded days "are not considered hours worked." They are not deducted from the award; they never enter the base.

Doctrine

"The age-old rule … of a 'fair day's wage for a fair day's labor' remains as the basic factor in determining employees' wages, and for that matter backwages." "If there is no work performed by the employee there can be no wage or pay unless … the laborer was able, willing and ready to work but was illegally locked out, or suspended." Where "the failure of workers to work was not due to the employer's fault … [e]ach party must bear his own loss." Backwages are therefore computed on the number of days the business was in actual operation, and shutdown days are "not considered hours worked." The rule that backwages are fixed "without qualification or deduction" is a rule about the rate, not "an inflexible rule of computation."

Limits. The ruling requires substantiated, unrebutted proof that non-operation was beyond the employer's control — here a government programme with a fixed weekly schedule and a retrenchment documented in the company's own filings, with the Solicitor General vouching for both. It does not license shaving days off on bare assertion. It is limited to whole non-operating days: brief interruptions within a working day remain compensable under Section 4(d), Rule I, Book III of the Omnibus Rules, and Policy Instruction No. 36 keeps a brownout of twenty minutes or less inside hours worked. Methodologically, the computation must run on a daily schedule wherever that is more realistic. Finally, the fallo's three-year ceiling reflects the Mercury Drug rule then prevailing; R.A. No. 6715 (1989) and Bustamante v. NLRC (1996) abandoned that cap, so the computation holding survives while the three-year limit does not. Note also that the Court never cites Article 83 or Article 84 — the connection to hours of work is made in the fallo's language, not in the citations.

Full Digest — Recitation Format

Gist

Durabuilt, a tire-recapping company, did not timely appeal the Labor Arbiter's order reinstating illegally dismissed worker Reynaldo Bodegas with full backwages — the Article 279 relief — and that order became final and executory on July 8, 1985; the dispute here concerns only how those backwages should be computed. Government examiners fixed them at P24,316.38 using a straight 26-working-day month; the Labor Arbiter and the NLRC refused to disturb the figure, reasoning that a final judgment can no longer be altered. The Supreme Court granted Durabuilt's petition and set the computation aside, holding that days when the business did not actually operate — the government-called Voluntary Loan Curtailment Plan (VLCP) brownout-sharing shutdowns every Wednesday from March 21, 1983, and a documented December 1983 retrenchment that cut the week from six working days to four — must be excluded, since on those days no employee, dismissed or retained, could have earned anything. The doctrine central to the Topic/Subtopic is a fair day's wage for a fair day's labor: where no work is performed through no fault of the employer, no wage is due, and each party bears his own loss. The Court applies that equitable principle by name but never cites Articles 83 or 84 — yet its fallo speaks in their vocabulary, directing that the excluded days "are not considered hours worked," which is why the syllabus files the case under Normal Hours of Work.

Facts

Durabuilt Recapping Plant & Company is a tire-recapping business; Eduardo Lao was its General Manager and is joined as co-petitioner. Reynaldo Bodegas was employed as a worker in the recapping plant, and Kapisanan ng mga Manggagawa sa Durabuilt was the legitimate labor organization representing Durabuilt's workers.
In 1982, Bodegas logged a total of only 250.75 days of attendance on account of absences. Durabuilt later produced this figure to show that even in a normal year he did not work the twenty-six days a month the examiners assumed.
Through the early 1980s, and in 1983 especially, the country suffered chronic electrical power interruption that disrupted business operations. To alleviate it the government, through the Ministry of Trade and Industry, called on the industrial sector to resort to the Voluntary Loan Curtailment Plan (VLCP), under which brownouts were scheduled by area. The plan was voluntary in name only — power consumers "had no choice then due to the prevailing energy crisis."
On November 23, 1982, Durabuilt heeded that call and signed its statement of conformity to the VLCP. This dated document is what converted the shutdowns from a self-serving assertion at the execution stage into documentary proof of a commitment made months before Bodegas was ever dismissed.
Beginning March 21, 1983, and every Wednesday thereafter, Durabuilt's plant — which recaps rubber tires — was not in actual operation under the VLCP. The then Minister of Trade and Industry wrote to express his gratitude to Durabuilt for participating. Since May 1978 the Ministry of Labor and Employment had also provided, in Policy Instruction No. 36, that brownouts running more than twenty minutes need not be treated as hours worked where the employees can leave the workplace or use the time for their own interest. The shutdowns were therefore neither self-serving nor concealed; they were announced, dated, government-endorsed, and already covered by a standing labor issuance, which is what later made them impossible for the respondents to rebut.
At some point before July 11, 1983 — the record does not fix the date — Durabuilt terminated Bodegas's employment.
On July 11, 1983, Bodegas and Kapisanan ng mga Manggagawa sa Durabuilt filed a complaint for illegal dismissal against Durabuilt and Lao, docketed as NLRC Case No. NCR-7-3162083.
In December 1983, while that case was pending and Bodegas was out of work, Durabuilt carried out a retrenchment of workers because of the economic crisis then prevailing, laying off workers for lack of raw materials. The evidence consisted of its reports to the Ministry of Labor and Employment and to the Social Security System, and of its own payrolls, which show the working week reduced from the normal six working days to four for a great number of its workers. Bodegas could not have been among those laid off, since by then he had already been dismissed. This is the second block of non-operating days, and unlike the VLCP Wednesdays it is proved by filings the company had made to two government agencies at the time, not by a government programme.
At some point while the illegal dismissal case was still pending — the record does not fix the date — Durabuilt reinstated Bodegas and declared itself willing to pay backwages. The Court would later treat this as evident good faith, and it is why the Solicitor General argued for mitigated rather than full liability.
On February 13, 1984, Labor Arbiter Amelia M. Guloy found the dismissal illegal and ordered Durabuilt and Lao to reinstate Bodegas to his former position with full backwages computed from the time of termination up to actual reinstatement, without loss of seniority rights and other benefits.
Durabuilt failed to appeal seasonably, and on July 8, 1985 an entry of final judgment was made. This is the hinge of the case: the merits of the dismissal were now untouchable, so everything Durabuilt could still say had to be said about computation rather than liability — and it is also why the respondents thought the immutability of final judgments answered the whole petition.
On August 8, 1985, the Acting Chief of Research and Information and the Corporation Auditing Examiner of the then Ministry of Labor and Employment submitted a computation of backwages, ECOLA, 13th-month pay, and sick and vacation leave benefits in favour of Bodegas in the total amount of P24,316.38, worked out on a straight 26 working days per month — the ordinary divisor that follows from the six-day week built on Article 83's eight-hour day.
Durabuilt filed an opposition to the computation, on the ground that a straight twenty-six-day month assumed continuous operation that never happened: the plant had been idled by the VLCP shutdowns, other electrical power interruptions, machine repairs, and lack of raw materials, and by the December 1983 retrenchment, and Bodegas himself had only 250.75 days of attendance in 1982 due to absences. Its rationale was that backwages are granted on equity, for earnings a worker actually lost — and on a day the plant was dark he lost nothing, because nobody earned anything. On its computation Bodegas was entitled to only P3,834.05, broken down as salaries P1,993.00, ECOLA P1,433.50, and 13th-month pay P407.55.
On October 23, 1985, Labor Arbiter Guloy denied the opposition, ruling that the backwages had to be computed in full in accordance with the February 13, 1984 decision, which had already become final and executory.
Durabuilt appealed to the NLRC, which on May 16, 1986, through Commissioner Ricardo C. Castro, dismissed the appeal and affirmed the order. Its reasoning tracked the Arbiter's: because Durabuilt had not appealed the February 13, 1984 decision, that decision became final on July 8, 1985 and could no longer be altered or modified by carving out periods of brownouts or material shortages.
Durabuilt and Lao then went to the Supreme Court on certiorari alleging grave abuse of discretion, assailing the May 16, 1986 resolution. The Court framed the case narrowly: the sole issue raised is the proper basis for the computation of backwages in favour of an illegally dismissed employee.
The Solicitor General — assisted by Assistant Solicitor General Zoilo A. Andin and Trial Attorney Alexander G. Gesmundo — sided with the petitioners in a comment the Court later quoted "with approval." He confirmed the chronic 1983 power disruptions, treated Durabuilt's participation in the government-called VLCP as valid and its December 1983 retrenchment as plausible and substantiated, invoked Policy Instruction No. 36 as standing labor policy on brownouts, observed that non-operation during the power interruptions "was never disputed by private respondent," and urged that paying the examiners' figure rather than Durabuilt's would be not merely unconscionable but "grossly unfair to other employees who were not paid when petitioners' business was not in operation." He closed by pressing Durabuilt's evident good faith — reinstatement while the case was pending, and willingness to pay — as a ground for mitigated liability. The respondents never met this evidence on its own terms; they answered only that the judgment was final — which is precisely the gap the Court exploited.
On July 27, 1987, the Supreme Court, Third Division, decided the case.

Arguments of the Parties

A. Petitioners Durabuilt and Eduardo Lao. The petitioners conceded the illegal dismissal, the reinstatement order, and their obligation to pay backwages; what they denied was that the obligation could be measured against days that never existed. Their premise was that backwages are granted on grounds of equity, for earnings a worker has actually lost by reason of his dismissal — so the measure is what he would have received had he not been dismissed, no more. On the VLCP Wednesdays and during the December 1983 retrenchment he would have received nothing, because no work was required of, or could be performed by, any employee: the plant was shut under a government-called power-saving scheme, and the payrolls show the retained workforce itself cut to four days a week. To pay Bodegas for those days would put a dismissed man ahead of the colleagues who stayed, which is unjust enrichment. For this they invoked the rule of a fair day's wage for a fair day's labor as stated in SSS v. SSS Supervisors' Union-CUGCO — if there is no work performed there can be no wage or pay. They added the corroborating detail that Bodegas had managed only 250.75 days of attendance in 1982, so even his own working history did not support a twenty-six-day month.

B. Respondents NLRC, Labor Arbiter Guloy, Kapisanan ng mga Manggagawa sa Durabuilt, and Reynaldo Bodegas. The respondents did not argue that the plant had in fact been running; they argued that it was too late to ask. Their first line was the immutability of final judgments: the February 13, 1984 decision awarding full backwages from termination to actual reinstatement became final and executory on July 8, 1985 through Durabuilt's own failure to appeal, and a final judgment cannot afterwards be modified, altered, or whittled down by excluding brownout or shutdown periods; an employer who sleeps on its appeal cannot re-open the award at the computation stage. Their second line was the settled backwages policy of the Insular Life line of cases: awards are fixed "without qualification or deduction," meaning backwages are neither reduced by the employee's earnings elsewhere nor increased by benefits his non-dismissed co-workers later received — and, they urged, that phrase barred any deduction, non-operating days included. Underlying both was the statutory premise that an unjustly dismissed employee has a vested right to be made whole from the moment his compensation was withheld until he is actually reinstated.

C. Common Ground. Neither side disputed the fact or the duration of the illegal dismissal, the order of reinstatement, the finality of the February 13, 1984 decision, or the existence and dates of the VLCP shutdowns and the December 1983 retrenchment — the respondents never rebutted the evidence of non-operation, only its legal relevance. The dispute was purely the proper method of computing backwages.

Issue

A. Main Issue (Topic/Subtopic-Centered). Should days on which Durabuilt's business did not actually operate — because of a government-called power-curtailment programme, other power interruptions, machine repairs, lack of raw materials, and a documented retrenchment, none of them attributable to the employer's fault — be excluded from the computation of an illegally dismissed employee's backwages, consistent with the principle of a fair day's wage for a fair day's labor and with the Labor Code's conception of hours worked?

B. Secondary Issues. Whether the rule fixing backwages "without qualification or deduction" precludes any exclusion of non-operating days from the computation; and whether excluding those days at the computation stage impermissibly modifies a decision that had already become final and executory.

C. Ancillary/Incidental Issues. None separately resolved. The Court did not pass on the compensability of the short interruptions themselves — the standard for which is supplied by Section 4(d), Rule I, Book III of the Omnibus Rules — because the days in issue were whole non-operating days.

Ruling

Main Issue: YES — days on which the business was not in actual operation, for reasons not attributable to the employer's fault, must be excluded; backwages are to be computed on the basis of the number of days when the business was in actual operation. Secondary Issue: NO on both counts — the "without qualification or deduction" rule concerns only the exclusion of the employee's outside earnings and of co-workers' subsequent wage increases from the backwages base, and was never meant as an inflexible rule of computation; and determining how many compensable days fall within the period already fixed by a final judgment executes that judgment rather than modifying it. The Court added that the computation is to be run on a daily rather than a monthly pay schedule, that basis being the more realistic and accurate one here, and the award remained capped at three years' backpay under the rule then prevailing.

Dispositive portion (verbatim):

"WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The order of the Labor Arbiter, Amelia M. Guloy in NLRC Case No. NCR-7-3162083, dated October 23, 1985, as affirmed by the NLRC is SET ASIDE. The petitioner is ordered to pay private respondent his backwages from the time he was terminated up to the time he was actually reinstated computed on the basis of the number of days when petitioner's business was in actual operation. The number of days where no work was required and could be done by petitioner's employees on account of shutdowns due to electrical power interruptions, machine repair, and lack of raw materials are not considered hours worked for purposes of computing the petitioner's obligation to respondent employee. In no case shall the award exceed three year's backpay as above computed. SO ORDERED."

Ratio

The Court began by defusing the respondents' main authority. The policy of fixing backwages "without qualification or deduction," established in a line of cases including Insular Life Assurance Co., Ltd. Employees' Association-NATU v. Insular Life Assurance Co., Ltd., Feati University Club v. Feati University, and Mercury Drug Co., Inc. v. CIR, "simply means that the workers are to be paid their backwages fixed as of the time of their dismissal or strike without deduction for their earnings elsewhere" and without qualification by increases or benefits their non-dismissed co-workers later received. It was adopted to spare the parties a second trial over interim earnings — and "was not to establish an inflexible rule of computation of any Backwages due an employee."
Because that rule governs the rate rather than the number of days, it left the Court free to ask a question the tribunals below had treated as foreclosed: how many days of actual employment lie inside the period the final judgment had fixed. Answering that question executes the February 13, 1984 decision instead of altering it, so the immutability of the final judgment was no obstacle.
The Court then supplied the governing principle from outside that line of cases, taking it from SSS v. SSS Supervisors' Union-CUGCO: "[t]he age-old rule governing the relation between labor and capital, or management and employee of a 'fair day's wage for a fair day's labor' remains as the basic factor in determining employees' wages, and for that matter backwages," because "[i]f there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, or suspended."
To that it joined the loss-allocation corollary drawn from the same authority and from Pan-American World Airways, Inc. v. CIR: "where the failure of workers to work was not due to the employer's fault, the burden of economic loss suffered by the employees should not be shifted to the employer. Each party must bear his own loss."
Applying these, the Court adopted the Solicitor General's unrebutted findings — that the government, through the Ministry of Trade and Industry, had called on industry to adopt the VLCP and Durabuilt's participation from March 21, 1983, under a statement of conformity dated November 23, 1982, was valid; and that the December 1983 retrenchment was plausible, being borne out by reports to the Ministry of Labor and Employment and the Social Security System and by payrolls showing the week cut from six working days to four.
Part of what made those findings decisive was that the exclusion asked for was already settled administrative policy. The Solicitor General pointed out that "as early as May 1978" the Ministry of Labor and Employment, through Policy Instruction No. 36, had provided that brownouts running more than twenty minutes may not be treated as hours worked where the employees can leave the workplace or use the time effectively for their own interest — and that Durabuilt's non-operation during the power interruptions "was never disputed by private respondent."
On those days, therefore, no work was required of, and none could be done by, any Durabuilt employee, so no wage accrued to anyone. It would "neither be fair nor just" to let Bodegas recover what he "has not earned and could not have earned," or to penalise the company beyond the losses it had already suffered from the raw-material shortage and the government's energy-saving programmes; he "cannot be allowed to enrich himself at the expense of the petitioner company."
The Court added the practical corollary that dictates the method of computation: drawing on Compania Maritima v. United Seamen's Union of the Philippines, 65 SCRA 393, it held that "[t]he computation of backwages should be based on daily rather than on monthly pay schedules where, as in the case at bar, such basis is more realistic and accurate." This is the sentence that actually kills the twenty-six-day month: a monthly schedule cannot express a calendar with holes in it.
Finally, quoting the Solicitor General once more, the Court noted what "strengthens petitioners['] claim for mitigated liability" — their evident good faith in reinstating Bodegas while the illegal dismissal case was still pending and in professing willingness to pay backwages — and observed that there was no indication that Bodegas was a "victim of arbitrary and high handed action."
The fallo translates that conclusion into the vocabulary of hours worked: the excluded days "are not considered hours worked for purposes of computing the petitioner's obligation." The days are not deducted from the award; they never enter the base, because no employee was required to be on duty, at a prescribed workplace, or suffered or permitted to work on them.

Doctrine

B. Doctrines/Rules/Principles. "The age-old rule governing the relation between labor and capital, or management and employee[,] of a 'fair day's wage for a fair day's labor' remains as the basic factor in determining employees' wages, and for that matter backwages." "If there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, or suspended." Where "the failure of workers to work was not due to the employer's fault, the burden of economic loss suffered by the employees should not be shifted to the employer. Each party must bear his own loss." Backwages of an illegally dismissed employee are therefore computed on the basis of the number of days the employer's business was in actual operation, and days of shutdown are, in the fallo's own words, not considered hours worked for that purpose. The rule that backwages are fixed "without qualification or deduction" is a rule about the rate — no netting of outside earnings, no add-on of co-workers' later increases — and is "not... an inflexible rule of computation."

C. Distinctions/Limitations/Qualifications. The ruling requires substantiated, unrebutted proof that non-operation was due to circumstances beyond the employer's control — here a government-called power-curtailment programme with a fixed weekly schedule and a retrenchment documented by the company's own payrolls, with the Solicitor General vouching for both. It does not license an employer to shave days off a backwages computation on bare assertion. It is also limited to whole non-operating days: brief interruptions inside a working day remain compensable under Section 4(d), Rule I, Book III of the Omnibus Rules where resumption is imminent enough to require the employee's presence or the interval is too short to be used gainfully for himself, and, in the specific case of power failures, Policy Instruction No. 36 keeps a brownout of twenty minutes or less within hours worked and excludes a longer one only where the employees are genuinely released to leave or to use the time for themselves. A further methodological limit: the computation must be run on a daily rather than a monthly pay schedule wherever that is the more realistic and accurate basis (Compania Maritima v. United Seamen's Union of the Philippines, 65 SCRA 393) — a monthly divisor cannot represent a working calendar with days missing from it. Finally, the fallo's ceiling — "[i]n no case shall the award exceed three year's backpay" — reflects the Mercury Drug rule then prevailing; Republic Act No. 6715 (1989) and Bustamante v. NLRC (1996) since abandoned that cap, so the computation holding survives while the three-year limit does not.

D. Topic/Subtopic Integration (Mandatory). As classified in Section I, this case is ANALOGOUS: the Court never cites Article 83, Article 84, or the Omnibus Rules, and the dispute concerns backwages for a dismissed employee rather than the routine computation of hours worked under Book III. But the connection is more than thematic, and it is more than analogical too — the decision does reach into the hours-of-work materials once, quoting Policy Instruction No. 36 on when a brownout counts as hours worked, which is a Book III compensability rule in everything but name. The computation the Court struck down was built on the Article 83 baseline — an eight-hour day and a six-day week, converted into a straight twenty-six-day month — and the fallo rejects it in Article 84's own language, holding the shutdown days "not considered hours worked." The "fair day's wage for a fair day's labor" principle is precisely the equitable rationale underlying the hours-worked and compensability framework of Articles 83 and 84: pay follows work actually or constructively rendered, and the employer buys the employee's time rather than the bare subsistence of the relationship. Durabuilt extends that rationale into the distinct, remedial context of backwages, exactly as the syllabus caption for this row indicates.

Separate Opinions

None. The Decision, penned by Justice Gutierrez, Jr., was concurred in by Justices Fernan (Chairman), Feliciano, Bidin, and Cortes.

Cited Laws & Provisions

Every statute, rule, and issuance the decision turns on — the text as written, and the work it does in this case.

Labor Code

Article 279, Labor Code

Security of tenure — backwages of an unjustly dismissed employee

Labor Code (P.D. No. 442, as amended), Book VI, Title I (renumbered as Article 294 by DOLE D.A. No. 01, s. 2015)

In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

Two cautions. First, renumbering: what everyone still calls Article 279 is now Article 294 under DOLE Department Advisory No. 01, series of 2015. Second, and more important for reading this 1987 case, the text above is the article as amended by Republic Act No. 6715 in 1989 — two years after Durabuilt was decided. In July 1987 the article did not yet carry the words "full backwages, inclusive of allowances" or "actual reinstatement"; it spoke simply of reinstatement without loss of seniority rights and of backwages computed from the withholding of compensation to reinstatement. The published full text of Durabuilt does not quote or cite Article 279; the article is the unstated legal source of the award being computed. The one Labor Code article the decision does name appears inside the block it quotes from the Solicitor General's comment — "While it is true that as a general rule order of reinstatement carries with it an award of backwages (Art. 280, Labor Code)". That is the Solicitor General's citation, not the Court's own, and it does not match the Code as it stood in 1987: Article 279 was already the security-of-tenure provision that Republic Act No. 6715 would amend by its Section 34, while Article 280 was "Regular and casual employment." The conflict is flagged rather than corrected, because the published text reads as printed.

Why it is cited here

Article 279 is the security-of-tenure provision, and it is the reason there is any money in this case at all. It does two things: it forbids termination except for just or authorized cause, and it prescribes the remedy when the employer terminates anyway — reinstatement plus backwages. The Labor Arbiter's unappealed 13 February 1984 decision, ordering Reynaldo Bodegas reinstated without loss of seniority rights and paid full backwages from termination to actual reinstatement, is an Article 279 award and nothing else.

Notice what the article does not supply, because that omission is the whole case. It fixes the two endpoints of the backwages period — from the withholding of compensation to reinstatement — and says nothing whatever about how the days between those endpoints are to be counted or priced. It contains no multiplier, no divisor, and no working-day convention. The Ministry of Labor and Employment examiners filled that silence with a straight twenty-six working days a month; Durabuilt said the silence should be filled by the employer's actual operating calendar.

This is the provision Bodegas and Kapisanan ng mga Manggagawa sa Durabuilt leaned on before the Labor Arbiter and the NLRC, arguing that an unjustly dismissed employee has a vested statutory right to full backwages and that, the February 1984 decision having become final on 8 July 1985, no tribunal could shave days off it. The Supreme Court accepted the premise and rejected the conclusion: computing an award is not modifying it. Because Article 279 prescribes a period and not a formula, holding that the period is populated only by days the plant actually ran leaves the final judgment intact and merely executes it. Had the article instead read, say, "backwages equivalent to the monthly salary multiplied by the number of months of separation," the straight twenty-six-day computation would have been unanswerable and Durabuilt would have lost.

Jurisprudence

SSS v. SSS Supervisors' Union-CUGCO, 117 SCRA 746

A fair day's wage for a fair day's labor

Social Security System v. SSS Supervisors' Union-CUGCO, 117 SCRA 746 (1982)

The age-old rule governing the relation between labor and capital, or management and employee of a "fair day's wage for a fair day's labor" remains as the basic factor in determining employees' wages, and for that matter backwages. If there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, or suspended.

The wording above is the passage as it appears in the published text of Durabuilt itself, which is where a student meets it. One Week 2 study source renders the same sentence with the exception clause reading "illegally locked out, dismissed or suspended." The lawphil text of Durabuilt does not carry the word "dismissed" in that clause. The difference is not cosmetic — see the discussion below — so the lawphil rendering is followed here.

Why it is cited here

This is the maxim the whole page is named for, and the only doctrinal authority the holding actually rests on. Stated plainly: wages are the price of labor, so labor not rendered earns no wage. It is the same idea lawyers shorten to "no work, no pay," and it is the equitable floor beneath the entire hours-of-work scheme — an employer pays for time the employee gives it, not for the bare existence of the employment relationship.

Durabuilt put this rule at the front of its petition, and the Solicitor General agreed with it. The argument was arithmetical rather than moral: on the Wednesdays the plant was dark under the Voluntary Loan Curtailment Plan, and during the December 1983 retrenchment when the payrolls show the week cut from six working days to four, no worker at Durabuilt earned anything. If Bodegas were paid for those days he would end up better off than the colleagues who were never dismissed at all — which is why the Court added that he "cannot be allowed to enrich himself at the expense of the petitioner company."

The subtle work is done by the exception clause, and this is where the case is won or lost. The rule spares the worker who "was able, willing and ready to work but was illegally locked out, or suspended" — and Bodegas had been illegally dismissed, so at first reading the exception looks made for him. The Court's answer is that the exception protects a worker who was ready for work that existed and was denied to him. On a VLCP Wednesday there was no work to be ready for; his willingness had nothing to attach to. That is also why it matters that the lawphil text of the exception does not include the word "dismissed": on the printed wording, illegal dismissal is not even nominally within the saving clause.

The same decision supplies the corollary the Court quotes next, drawn from this case and from Pan-American World Airways, Inc. v. CIR, 17 SCRA 813 — where the failure of workers to work was not due to the employer's fault, the burden of that economic loss is not shifted to the employer, and each party must bear his own loss. Power rationing and a raw-material shortage are nobody's fault as between these two parties, so neither is made to insure the other against them.

Jurisprudence

Insular Life Assurance Co., Ltd. Employees' Association-NATU v. Insular Life Assurance Co., Ltd., 76 SCRA 501

Backwages fixed 'without qualification or deduction'

76 SCRA 501 (1977); applied with Feati University Club v. Feati University, 58 SCRA 395, and Mercury Drug Co., Inc. v. CIR, 56 SCRA 694

Why it is cited here

This line of cases is the respondents' entire case, and understanding what it really decides is the second half of the lesson. To spare labor tribunals from turning every execution into a second trial, the Supreme Court adopted a policy of fixing backwages at a just and reasonable level "without qualification or deduction." Bodegas, the union, the Labor Arbiter and the NLRC all read that phrase as a prohibition on subtracting anything at all from a backwages computation — including non-operating days.

The Court explained that the phrase means something narrower and quite specific. It "simply means that the workers are to be paid their backwages fixed as of the time of their dismissal or strike without deduction for their earnings elsewhere" during the layoff, and without qualification by wage increases or other benefits that co-workers who were never dismissed happened to receive in the meantime. Its purpose is evidentiary: the dismissed employee is spared the burden of proving what he earned elsewhere, and the employer is spared the impossible burden of disproving it, so that execution is not delayed for years by that inquiry. The Court was emphatic that the policy was "not to establish an inflexible rule of computation of any Backwages due an employee."

That distinction decides the secondary issue. The Insular Life rule operates on the rate — what a day of backwages is worth, and what may or may not be netted against it. Durabuilt was not attacking the rate; it was attacking the number of days. Nothing in the rule tells a tribunal that a day the factory never opened counts as a working day. Read the way the NLRC read it, the rule would have converted a device meant to simplify proof into a guarantee that a dismissed employee is paid for days on which employment itself produced nothing — the opposite of the equity on which backwages rest, which the Court elsewhere traced through New Manila Candy Workers Union (NACONWA-PAFLU) v. CIR, 86 SCRA 37, and Capital Garment Corporation v. Ople, 117 SCRA 473, as compensation "for earnings which a worker or employee has lost due to his dismissal from work."

DOLE Issuance

Policy Instruction No. 36, series of 1978

Effect of brownouts and power interruptions on hours worked

Ministry of Labor and Employment, Policy Instructions No. 36-78 (May 1978), quoted in the decision

2. Brownouts running for more than twenty minutes may not be treated as hours worked provided that any of the following conditions are present;

a) The employees can leave their work place or go elsewhere whether within or without the work premises; or

b) The employees can use the time effectively for their own interest.

This is paragraph 2 of the issuance reproduced verbatim as it appears in the published text of Durabuilt, inside the Solicitor General's comment that the Court quoted "with approval." The decision reproduces only that paragraph, so only that paragraph is set out here. The issuance's companion rule — that brownouts of short duration not exceeding twenty minutes are compensable hours whether or not the employees use them productively — is described in prose below rather than quoted, because the decision does not carry its wording.

Why it is cited here

This is the only hours-of-work issuance the decision actually quotes, and it is the reason a backwages case sits under the Normal Hours of Work heading at all. Policy Instruction No. 36 was the Ministry of Labor and Employment's answer to the energy crisis: it drew a line, in minutes, between a power interruption the employer must still pay for and one it need not. A brownout of twenty minutes or less stays compensable no matter what the workers do with it. A brownout longer than that drops out of hours worked, but only on a condition — the workers must actually be released, either free to leave the workplace or free to use the time for themselves.

Durabuilt needed this issuance because its opponents' position had an intuitive appeal that the "fair day's wage" maxim alone does not dispose of. An employee kept idle by his employer's power supply is not obviously in a different position from one kept idle by his employer's decision, and Section 4(d) of the Omnibus Rules is written to protect him. Policy Instruction No. 36 supplies the missing premise: a long, released interruption is simply not working time, and the Ministry had said so nine years before this dispute arose. That is why the Solicitor General cited it "as early as May 1978" — to show that the exclusion Durabuilt wanted was administrative policy of long standing, not an argument invented for the execution stage.

Applied to the facts the issuance is not close. The VLCP Wednesdays were not twenty-minute brownouts; they were whole scheduled days on which the plant did not open, so both conditions in paragraph 2 were satisfied many times over — every worker could leave and every worker could use the day for himself. Note the direction of the reasoning, because it is the examinable point: the issuance does not authorise a deduction from wages. It decides that the hours were never hours worked. That is precisely the phrasing the fallo adopts when it says the shutdown days "are not considered hours worked," and it is what lets the Court reach its result without touching the final judgment.

Labor Code

Article 84, Labor Code

Hours worked

Labor Code (P.D. No. 442, as amended), Book III, Title I, Chapter I

Hours worked shall include (a) all time during which an employee is required to be on duty or to be at a prescribed workplace; and (b) all time during which an employee is suffered or permitted to work.

Rest periods of short duration during working hours shall be counted as hours worked.

The Court never cites Article 84, and the case is not an hours-of-work case in the ordinary sense. It is nonetheless the article the syllabus files this decision under, and the fallo borrows its exact vocabulary: the excluded days "are not considered hours worked."

Why it is cited here

Article 84 supplies the Labor Code's definition of the thing an employer pays for. Two limbs, and an employee needs only one of them: time he is required to be on duty or at a prescribed workplace — so waiting counts, if he is made to wait where the employer says — and time he is suffered or permitted to work, which catches work the employer tolerates without expressly ordering it. The article is deliberately written around the employer's demand on the employee's time, not around output, so an idle hour spent standing by at the plant is compensable while an idle hour spent at home is not.

Run Bodegas's situation through that definition on a VLCP Wednesday and the answer is immediate. The plant was closed; no one was required to be on duty or at any prescribed workplace; no one was suffered or permitted to work. Neither limb is satisfied for any employee, so no employee accrued a single compensable hour. The dismissed employee is measured against exactly the same yardstick as the retained one — which is the fairness intuition the Court expresses as "a fair day's wage for a fair day's labor."

This is why the fallo is phrased the way it is. The Court did not say the excluded days are "deducted"; it said they "are not considered hours worked for purposes of computing the petitioner's obligation." That phrasing sidesteps the Insular Life objection entirely. Nothing is being subtracted from a fixed award — those days never entered the base to begin with, because Article 84's definition never reached them.

Implementing Rules

Sections 3 and 4, Rule I, Book III, Omnibus Rules

Hours worked; principles in determining hours worked

Omnibus Rules Implementing the Labor Code, Book III, Rule I

SECTION 3. Hours worked. — The following shall be considered as compensable hours worked: (a) All time during which an employee is required to be on duty or to be at the employer's premises or to be at a prescribed work place; and (b) All time during which an employee is suffered or permitted to work.

SECTION 4. Principles in determining hours worked. — The following general principles shall govern in determining whether the time spent by an employee is considered hours worked for purposes of this Rule:

(a) All hours are hours worked which the employee is required to give his employer, regardless of whether or not such hours are spent in productive labor or involve physical or mental exertion;

(b) An employee need not leave the premises of the work place in order that his rest period shall not be counted, it being enough that he stops working, may rest completely and may leave his work place, to go elsewhere, whether within or outside the premises of his work place;

(c) If the work performed was necessary, or it benefited the employer, or the employee could not abandon his work at the end of his normal working hours because he had no replacement, all time spent for such work shall be considered as hours worked, if the work was with the knowledge of his employer or immediate supervisor; and

(d) The time during which an employee is inactive by reason of interruptions in his work beyond his control shall be considered working time either if the imminence of the resumption of work requires the employee's presence at the place of work or if the interval is too brief to be utilized effectively and gainfully in the employee's own interest.

Not cited in the decision. It is listed in the syllabus caption for this topic, and it is the rule that turns the case's equitable maxim into a workable test, which is why it is set out here in full.

Why it is cited here

Section 3 restates Article 84 almost word for word, adding "the employer's premises" to the first limb. Section 4 is the part worth memorising, because it is where the Code's abstract definition becomes a set of decision rules. Paragraph (a) makes clear that productivity is irrelevant — hours the employee is required to give are hours worked even if nothing is produced. Paragraph (c) sweeps in unordered work the employer knew of and benefited from.

Paragraph (d) is the one this case runs against, and reading the two together is the whole point of putting Durabuilt under this heading. Section 4(d) governs precisely the situation Durabuilt was describing — an employee "inactive by reason of interruptions in his work beyond his control." Note that the rule's default is pro-employee: such interruptions are still working time in two situations, namely where the imminence of resumption requires the employee to stay at the workplace, or where the gap is too brief for him to use effectively and gainfully for himself. A ten-minute brownout in the middle of a shift is paid time under this rule, and so is a machine breakdown the workers must stand by through.

What defeats Bodegas is scale, not category. The VLCP shutdowns were whole scheduled days — every Wednesday from 21 March 1983 — announced in advance, with no one required to stand by and every worker free to use the day for himself. The December 1983 retrenchment cut the working week from six days to four for a great number of workers. Neither limb of Section 4(d) is met, so the days fall outside compensable hours worked. This is the practical line the student should carry away: short, unforeseeable interruptions inside a working day are compensable; announced, whole-day closures that release the workforce are not — and a backwages computation must respect the same line.

Labor Code

Article 83, Labor Code

Normal hours of work

Labor Code (P.D. No. 442, as amended), Book III, Title I, Chapter I

The normal hours of work of any employee shall not exceed eight (8) hours a day.

Health personnel in cities and municipalities with a population of at least one million (1,000,000) or in hospitals and clinics with a bed capacity of at least one hundred (100) shall hold regular office hours for eight (8) hours a day, for five (5) days a week, exclusive of time for meals, except where the exigencies of the service require that such personnel work for six (6) days or forty-eight (48) hours, in which case, they shall be entitled to an additional compensation of at least thirty percent (30%) of their regular wage for work on the sixth day. For purposes of this Article, "health personnel" shall include resident physicians, nurses, nutritionists, dietitians, pharmacists, social workers, laboratory technicians, paramedical technicians, psychologists, midwives, attendants and all other hospital or clinic personnel.

Also not cited in the decision. It is included because the computation the Court struck down is built directly on the working-time baseline this article sets.

Why it is cited here

Article 83 fixes the standard unit of labor — eight hours in a day — and by long practice a six-day working week on top of it. Everything else in Book III is measured against that baseline: overtime is work beyond it, night-shift differential is work inside particular hours of it, and the familiar 313- or 26-day divisors used to convert a daily wage into a monthly figure are derived from it.

That derivation is exactly what went wrong below. The Ministry of Labor and Employment examiners computed P24,316.38 on a straight twenty-six working days per month, which is simply the Article 83 baseline — an eight-hour day, six days a week, less Sundays — assumed to have run uninterrupted for the whole period of dismissal. The figure was not arbitrary; it was the ordinary convention. Its defect was that it treated a legal maximum as though it were a factual record of days worked.

Durabuilt's evidence attacked precisely that assumption, and it did so with the employer's own documents: payrolls showing the week reduced from six working days to four during the December 1983 retrenchment, and the government-called VLCP shutdown every Wednesday from March 1983. Once those days are removed, the twenty-six-day month is no longer a description of anything. The lesson is that Article 83 states a ceiling on hours that may be required, not a guarantee of hours that will be available — and a computation of money owed must be built on the second, not the first.

Jurisprudence

Mercury Drug Co., Inc. v. CIR, 56 SCRA 694

The three-year cap on backwages (since abandoned)

56 SCRA 694 (1974), cited in the same line of cases as Insular Life and Feati University Club

Why it is cited here

The last sentence of the fallo — "In no case shall the award exceed three year's backpay as above computed" — is not something Durabuilt asked for and not something the parties argued about. It is the Mercury Drug rule, applied as a matter of course in 1987. To avoid the endless litigation that fixing exact backwages produced, the Court had settled on awarding a flat maximum of three years' backwages without qualification or deduction, and that ceiling travelled with every reinstatement order of the period.

It belongs on this page for two reasons. First, it shows what the Court was doing in the same breath as its holding: the three-year cap and the "without qualification or deduction" policy come from one family of cases and share one purpose — making backwages administrable. Reading Insular Life as an absolute bar on excluding days would have been doubly odd, because the very line of authority it belongs to was in the business of trimming awards for workability.

Second, and importantly for exam purposes, the cap is dead law. Republic Act No. 6715 (1989) rewrote Article 279 to grant "full backwages" from withholding of compensation up to actual reinstatement, and in Bustamante v. NLRC (1996) the Supreme Court abandoned the three-year limit for dismissals governed by the amended article. Durabuilt's holding on how to count the days survives; its three-year ceiling does not. Do not carry that sentence of the fallo forward into a modern problem.

Cited laws & provisions

Article 279, Labor Code

Labor Code

Security of tenure — backwages of an unjustly dismissed employee

Labor Code (P.D. No. 442, as amended), Book VI, Title I (renumbered as Article 294 by DOLE D.A. No. 01, s. 2015)

Why it is cited here

Full entry below ↓

SSS v. SSS Supervisors' Union-CUGCO, 117 SCRA 746

Jurisprudence

A fair day's wage for a fair day's labor

Social Security System v. SSS Supervisors' Union-CUGCO, 117 SCRA 746 (1982)

Why it is cited here

Full entry below ↓

Insular Life Assurance Co., Ltd. Employees' Association-NATU v. Insular Life Assurance Co., Ltd., 76 SCRA 501

Jurisprudence

Backwages fixed 'without qualification or deduction'

76 SCRA 501 (1977); applied with Feati University Club v. Feati University, 58 SCRA 395, and Mercury Drug Co., Inc. v. CIR, 56 SCRA 694

Why it is cited here

Full entry below ↓

Policy Instruction No. 36, series of 1978

DOLE Issuance

Effect of brownouts and power interruptions on hours worked

Ministry of Labor and Employment, Policy Instructions No. 36-78 (May 1978), quoted in the decision

2. Brownouts running for more than twenty minutes may not be treated as hours worked provided that any of the following conditions are present;

a) The employees can leave their work place or go elsewhere whether within or without the work premises; or

b) The employees can use the time effectively for their own interest.

Why it is cited here

Full entry below ↓

Article 84, Labor Code

Labor Code

Hours worked

Labor Code (P.D. No. 442, as amended), Book III, Title I, Chapter I

Rest periods of short duration during working hours shall be counted as hours worked.

Why it is cited here

Full entry below ↓

Sections 3 and 4, Rule I, Book III, Omnibus Rules

Implementing Rules

Hours worked; principles in determining hours worked

Omnibus Rules Implementing the Labor Code, Book III, Rule I

(a) All hours are hours worked which the employee is required to give his employer, regardless of whether or not such hours are spent in productive labor or involve physical or mental exertion;

Not cited in the decision. It is listed in the syllabus caption for this topic, and it is the rule that turns the case's equitable maxim into a workable test, which is why it is set out here in full.

Why it is cited here

Full entry below ↓

Article 83, Labor Code

Labor Code

Normal hours of work

Labor Code (P.D. No. 442, as amended), Book III, Title I, Chapter I

The normal hours of work of any employee shall not exceed eight (8) hours a day.

Also not cited in the decision. It is included because the computation the Court struck down is built directly on the working-time baseline this article sets.

Why it is cited here

Full entry below ↓

Mercury Drug Co., Inc. v. CIR, 56 SCRA 694

Jurisprudence

The three-year cap on backwages (since abandoned)

56 SCRA 694 (1974), cited in the same line of cases as Insular Life and Feati University Club

Why it is cited here

Full entry below ↓

Facts

Durabuilt Recapping Plant & Company, whose general manager was Eduardo Lao, employed Reynaldo Bodegas in its tire-recapping plant. In 1982 Bodegas logged only 250.75 days of attendance on account of absences.
Chronic power interruption in the early 1980s led the government, through the Ministry of Trade and Industry, to call on industry to adopt the Voluntary Loan Curtailment Plan (VLCP), under which brownouts were scheduled by area. The plan was voluntary in name only — consumers "had no choice then due to the prevailing energy crisis."
On November 23, 1982, Durabuilt signed its statement of conformity to the VLCP, and beginning March 21, 1983 its plant was not in actual operation every Wednesday. Since May 1978 the Ministry of Labor and Employment had provided in Policy Instruction No. 36 that brownouts running more than twenty minutes need not be treated as hours worked where employees may leave or use the time for themselves. The shutdowns were announced, dated, government-endorsed and already covered by a standing issuance.
Durabuilt terminated Bodegas, and on July 11, 1983 he and Kapisanan ng mga Manggagawa sa Durabuilt sued for illegal dismissal.
In December 1983, while the case was pending, Durabuilt retrenched for lack of raw materials, its reports to the Ministry of Labor and Employment and the SSS and its own payrolls showing the working week cut from six days to four. Bodegas, already dismissed, was not among those laid off.
While the case was still pending Durabuilt reinstated Bodegas and declared itself willing to pay backwages. The Court later treated this as evident good faith.
On February 13, 1984, Labor Arbiter Amelia M. Guloy found the dismissal illegal and ordered reinstatement with full backwages. Durabuilt failed to appeal seasonably, and entry of final judgment was made July 8, 1985. Everything Durabuilt could still say had to be said about computation rather than liability.
On August 8, 1985, Ministry examiners computed backwages, ECOLA, 13th-month and leave benefits at P24,316.38, on a straight 26 working days per month. Durabuilt opposed: the plant had been idled by the VLCP, other outages, machine repairs and lack of raw materials, and by the December 1983 retrenchment. On its computation Bodegas was owed P3,834.05.
Labor Arbiter Guloy denied the opposition on October 23, 1985 and the NLRC affirmed on May 16, 1986, both reasoning that the February 13, 1984 decision was final and could no longer be modified. The Solicitor General sided with Durabuilt, confirming the outages, the VLCP participation and the retrenchment, invoking Policy Instruction No. 36, and noting the non-operation "was never disputed by private respondent." The respondents answered only that the judgment was final — precisely the gap the Court exploited. Decided July 27, 1987.

Issue

Ruling

"WHEREFORE, … the petition is hereby GRANTED. … The petitioner is ordered to pay private respondent his backwages from the time he was terminated up to the time he was actually reinstated computed on the basis of the number of days when petitioner's business was in actual operation. The number of days where no work was required and could be done by petitioner's employees on account of shutdowns due to electrical power interruptions, machine repair, and lack of raw materials are not considered hours worked… In no case shall the award exceed three year's backpay as above computed. SO ORDERED."

Ratio

The Court first defused the respondents' authority. Fixing backwages "without qualification or deduction," per Insular Life, Feati University Club and Mercury Drug, "simply means that the workers are to be paid their backwages fixed as of the time of their dismissal or strike without deduction for their earnings elsewhere," adopted to spare the parties a second trial over interim earnings — not to fix an inflexible computation rule.
Because that rule governs the rate rather than the number of days, the Court was free to ask how many days of actual employment lie inside the period the final judgment fixed. Answering that executes the judgment, so its immutability was no obstacle.
The governing principle came from SSS v. SSS Supervisors' Union-CUGCO: "[t]he age-old rule … of a 'fair day's wage for a fair day's labor' remains as the basic factor in determining employees' wages, and for that matter backwages," because "[i]f there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, or suspended."
With it the loss-allocation corollary: "where the failure of workers to work was not due to the employer's fault, the burden of economic loss suffered by the employees should not be shifted to the employer. Each party must bear his own loss."
The Court adopted the Solicitor General's unrebutted findings on the VLCP participation from March 21, 1983 and on the December 1983 retrenchment, borne out by filings with two government agencies and by payrolls. The exclusion asked for was already settled administrative policy under Policy Instruction No. 36.
On those days no work was required of, and none could be done by, any Durabuilt employee, so no wage accrued to anyone. It would "neither be fair nor just" to let Bodegas recover what he "has not earned and could not have earned," or to let him "enrich himself at the expense of the petitioner company."
Hence the methodological corollary from Compania Maritima v. United Seamen's Union: "[t]he computation of backwages should be based on daily rather than on monthly pay schedules where … such basis is more realistic and accurate." A monthly schedule cannot express a calendar with holes in it.
The fallo translates the conclusion into the vocabulary of hours worked: the excluded days "are not considered hours worked." They are not deducted from the award; they never enter the base.

Doctrine

Full Digest — Recitation Format

Gist

Facts

Durabuilt Recapping Plant & Company is a tire-recapping business; Eduardo Lao was its General Manager and is joined as co-petitioner. Reynaldo Bodegas was employed as a worker in the recapping plant, and Kapisanan ng mga Manggagawa sa Durabuilt was the legitimate labor organization representing Durabuilt's workers.
In 1982, Bodegas logged a total of only 250.75 days of attendance on account of absences. Durabuilt later produced this figure to show that even in a normal year he did not work the twenty-six days a month the examiners assumed.
Through the early 1980s, and in 1983 especially, the country suffered chronic electrical power interruption that disrupted business operations. To alleviate it the government, through the Ministry of Trade and Industry, called on the industrial sector to resort to the Voluntary Loan Curtailment Plan (VLCP), under which brownouts were scheduled by area. The plan was voluntary in name only — power consumers "had no choice then due to the prevailing energy crisis."
On November 23, 1982, Durabuilt heeded that call and signed its statement of conformity to the VLCP. This dated document is what converted the shutdowns from a self-serving assertion at the execution stage into documentary proof of a commitment made months before Bodegas was ever dismissed.
Beginning March 21, 1983, and every Wednesday thereafter, Durabuilt's plant — which recaps rubber tires — was not in actual operation under the VLCP. The then Minister of Trade and Industry wrote to express his gratitude to Durabuilt for participating. Since May 1978 the Ministry of Labor and Employment had also provided, in Policy Instruction No. 36, that brownouts running more than twenty minutes need not be treated as hours worked where the employees can leave the workplace or use the time for their own interest. The shutdowns were therefore neither self-serving nor concealed; they were announced, dated, government-endorsed, and already covered by a standing labor issuance, which is what later made them impossible for the respondents to rebut.
At some point before July 11, 1983 — the record does not fix the date — Durabuilt terminated Bodegas's employment.
On July 11, 1983, Bodegas and Kapisanan ng mga Manggagawa sa Durabuilt filed a complaint for illegal dismissal against Durabuilt and Lao, docketed as NLRC Case No. NCR-7-3162083.
In December 1983, while that case was pending and Bodegas was out of work, Durabuilt carried out a retrenchment of workers because of the economic crisis then prevailing, laying off workers for lack of raw materials. The evidence consisted of its reports to the Ministry of Labor and Employment and to the Social Security System, and of its own payrolls, which show the working week reduced from the normal six working days to four for a great number of its workers. Bodegas could not have been among those laid off, since by then he had already been dismissed. This is the second block of non-operating days, and unlike the VLCP Wednesdays it is proved by filings the company had made to two government agencies at the time, not by a government programme.
At some point while the illegal dismissal case was still pending — the record does not fix the date — Durabuilt reinstated Bodegas and declared itself willing to pay backwages. The Court would later treat this as evident good faith, and it is why the Solicitor General argued for mitigated rather than full liability.
On February 13, 1984, Labor Arbiter Amelia M. Guloy found the dismissal illegal and ordered Durabuilt and Lao to reinstate Bodegas to his former position with full backwages computed from the time of termination up to actual reinstatement, without loss of seniority rights and other benefits.
Durabuilt failed to appeal seasonably, and on July 8, 1985 an entry of final judgment was made. This is the hinge of the case: the merits of the dismissal were now untouchable, so everything Durabuilt could still say had to be said about computation rather than liability — and it is also why the respondents thought the immutability of final judgments answered the whole petition.
On August 8, 1985, the Acting Chief of Research and Information and the Corporation Auditing Examiner of the then Ministry of Labor and Employment submitted a computation of backwages, ECOLA, 13th-month pay, and sick and vacation leave benefits in favour of Bodegas in the total amount of P24,316.38, worked out on a straight 26 working days per month — the ordinary divisor that follows from the six-day week built on Article 83's eight-hour day.
Durabuilt filed an opposition to the computation, on the ground that a straight twenty-six-day month assumed continuous operation that never happened: the plant had been idled by the VLCP shutdowns, other electrical power interruptions, machine repairs, and lack of raw materials, and by the December 1983 retrenchment, and Bodegas himself had only 250.75 days of attendance in 1982 due to absences. Its rationale was that backwages are granted on equity, for earnings a worker actually lost — and on a day the plant was dark he lost nothing, because nobody earned anything. On its computation Bodegas was entitled to only P3,834.05, broken down as salaries P1,993.00, ECOLA P1,433.50, and 13th-month pay P407.55.
On October 23, 1985, Labor Arbiter Guloy denied the opposition, ruling that the backwages had to be computed in full in accordance with the February 13, 1984 decision, which had already become final and executory.
Durabuilt appealed to the NLRC, which on May 16, 1986, through Commissioner Ricardo C. Castro, dismissed the appeal and affirmed the order. Its reasoning tracked the Arbiter's: because Durabuilt had not appealed the February 13, 1984 decision, that decision became final on July 8, 1985 and could no longer be altered or modified by carving out periods of brownouts or material shortages.
Durabuilt and Lao then went to the Supreme Court on certiorari alleging grave abuse of discretion, assailing the May 16, 1986 resolution. The Court framed the case narrowly: the sole issue raised is the proper basis for the computation of backwages in favour of an illegally dismissed employee.
The Solicitor General — assisted by Assistant Solicitor General Zoilo A. Andin and Trial Attorney Alexander G. Gesmundo — sided with the petitioners in a comment the Court later quoted "with approval." He confirmed the chronic 1983 power disruptions, treated Durabuilt's participation in the government-called VLCP as valid and its December 1983 retrenchment as plausible and substantiated, invoked Policy Instruction No. 36 as standing labor policy on brownouts, observed that non-operation during the power interruptions "was never disputed by private respondent," and urged that paying the examiners' figure rather than Durabuilt's would be not merely unconscionable but "grossly unfair to other employees who were not paid when petitioners' business was not in operation." He closed by pressing Durabuilt's evident good faith — reinstatement while the case was pending, and willingness to pay — as a ground for mitigated liability. The respondents never met this evidence on its own terms; they answered only that the judgment was final — which is precisely the gap the Court exploited.
On July 27, 1987, the Supreme Court, Third Division, decided the case.

Arguments of the Parties

Issue

Ruling

Dispositive portion (verbatim):

"WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The order of the Labor Arbiter, Amelia M. Guloy in NLRC Case No. NCR-7-3162083, dated October 23, 1985, as affirmed by the NLRC is SET ASIDE. The petitioner is ordered to pay private respondent his backwages from the time he was terminated up to the time he was actually reinstated computed on the basis of the number of days when petitioner's business was in actual operation. The number of days where no work was required and could be done by petitioner's employees on account of shutdowns due to electrical power interruptions, machine repair, and lack of raw materials are not considered hours worked for purposes of computing the petitioner's obligation to respondent employee. In no case shall the award exceed three year's backpay as above computed. SO ORDERED."

Ratio

The Court began by defusing the respondents' main authority. The policy of fixing backwages "without qualification or deduction," established in a line of cases including Insular Life Assurance Co., Ltd. Employees' Association-NATU v. Insular Life Assurance Co., Ltd., Feati University Club v. Feati University, and Mercury Drug Co., Inc. v. CIR, "simply means that the workers are to be paid their backwages fixed as of the time of their dismissal or strike without deduction for their earnings elsewhere" and without qualification by increases or benefits their non-dismissed co-workers later received. It was adopted to spare the parties a second trial over interim earnings — and "was not to establish an inflexible rule of computation of any Backwages due an employee."
Because that rule governs the rate rather than the number of days, it left the Court free to ask a question the tribunals below had treated as foreclosed: how many days of actual employment lie inside the period the final judgment had fixed. Answering that question executes the February 13, 1984 decision instead of altering it, so the immutability of the final judgment was no obstacle.
The Court then supplied the governing principle from outside that line of cases, taking it from SSS v. SSS Supervisors' Union-CUGCO: "[t]he age-old rule governing the relation between labor and capital, or management and employee of a 'fair day's wage for a fair day's labor' remains as the basic factor in determining employees' wages, and for that matter backwages," because "[i]f there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, or suspended."
To that it joined the loss-allocation corollary drawn from the same authority and from Pan-American World Airways, Inc. v. CIR: "where the failure of workers to work was not due to the employer's fault, the burden of economic loss suffered by the employees should not be shifted to the employer. Each party must bear his own loss."
Applying these, the Court adopted the Solicitor General's unrebutted findings — that the government, through the Ministry of Trade and Industry, had called on industry to adopt the VLCP and Durabuilt's participation from March 21, 1983, under a statement of conformity dated November 23, 1982, was valid; and that the December 1983 retrenchment was plausible, being borne out by reports to the Ministry of Labor and Employment and the Social Security System and by payrolls showing the week cut from six working days to four.
Part of what made those findings decisive was that the exclusion asked for was already settled administrative policy. The Solicitor General pointed out that "as early as May 1978" the Ministry of Labor and Employment, through Policy Instruction No. 36, had provided that brownouts running more than twenty minutes may not be treated as hours worked where the employees can leave the workplace or use the time effectively for their own interest — and that Durabuilt's non-operation during the power interruptions "was never disputed by private respondent."
On those days, therefore, no work was required of, and none could be done by, any Durabuilt employee, so no wage accrued to anyone. It would "neither be fair nor just" to let Bodegas recover what he "has not earned and could not have earned," or to penalise the company beyond the losses it had already suffered from the raw-material shortage and the government's energy-saving programmes; he "cannot be allowed to enrich himself at the expense of the petitioner company."
The Court added the practical corollary that dictates the method of computation: drawing on Compania Maritima v. United Seamen's Union of the Philippines, 65 SCRA 393, it held that "[t]he computation of backwages should be based on daily rather than on monthly pay schedules where, as in the case at bar, such basis is more realistic and accurate." This is the sentence that actually kills the twenty-six-day month: a monthly schedule cannot express a calendar with holes in it.
Finally, quoting the Solicitor General once more, the Court noted what "strengthens petitioners['] claim for mitigated liability" — their evident good faith in reinstating Bodegas while the illegal dismissal case was still pending and in professing willingness to pay backwages — and observed that there was no indication that Bodegas was a "victim of arbitrary and high handed action."
The fallo translates that conclusion into the vocabulary of hours worked: the excluded days "are not considered hours worked for purposes of computing the petitioner's obligation." The days are not deducted from the award; they never enter the base, because no employee was required to be on duty, at a prescribed workplace, or suffered or permitted to work on them.

Doctrine

Separate Opinions

None. The Decision, penned by Justice Gutierrez, Jr., was concurred in by Justices Fernan (Chairman), Feliciano, Bidin, and Cortes.