THE Supreme Court (SC) declared that President Benigno Aquino III's family-owned sugar estate, the Central Azucarera de Tarlac (CAT), acted in bad faith when it wrongly computed the 13th month pay of its employees.
In a 10-page decision penned by Associate Justice Antonio Eduardo Nachura, the SC Second Division affirmed the May 28, 2009 ruling of the Court of Appeals ordering CAT to revert to its long-established formula in computing the employees' 13th month pay.
The High Court dismissed the argument of CAT that there was an error in the computation, which was discovered only by the management when the workers' union - CAT Labor Union - questioned the calculation of their 13th month pay for 2006.
It noted that petitioner only changed the formula after almost 30 years and only after the dispute between the management and employees erupted.
Citing Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, the court said benefits given to employees cannot be taken back or reduced unilaterally by the employer as the benefit has become part of the employment contract, written or unwritten.
"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pay and holiday pay continued for almost 30 days and has ripened into a company policy which cannot be unilaterally withdrawn," the Court said.
"This act of petitioner in changing the formula at this time cannot be sanctioned, as it indicates a badge of bad faith," the court added.
The tribunal also said CAT cannot use the argument that it is suffering from financial losses in claiming exemption from the coverage of the law on 13th month pay as it would require prior authorization by the secretary of labor.
The sugar milling company failed to obtain such authorization from the labor secretary, thus, it is not entitled to such exemption, the SC said.
Concurring with Nachura's ponencia were Associate Justices Antonio Carpio, Diosdado Peralta and Roberto Abad.
The company is registered with the Philippine Stock Exchange as a corporation that operates a sugar mill and refinery, distillery and carbon dioxide plants in Barrio San Miguel, Tarlac City.
President Aquino, in previous interviews, admitted that he owns about 301,792 shares or one percent of the company.
Records showed that prior to the year 2006, CAT granted its employees the mandatory 13th month pay since 1975 as mandated Presidential Decree No. 851.
The formula used by CAT in computing the 13th month pay was to divide the total basic annual salary by 12. This computation of basic annual salary included the basic monthly salary; first eight hours overtime pay on Sunday and legal/special holiday; night premium pay; and vacation and sick leaves for each year.
It was applied from 1975 until 2004, when the workers staged a strike to demand the reinstatement of some 327 unionists, including their leaders who were fired by the management of Hacienda Luisita.
The strike prompted the CAT to stop its operations until December 2005, when all the striking union members were allowed to return to work.
But CAT declared another suspension of operations for the months of April and May 2006 which was lifted in June 2006. From June to September 2006, the employees were allowed to report only a 15-day per month rotation basis.
In December 2006, CAT gave the employees their 13th month pays based on their total earnings during the year divided by 12.
This prompted employees to protest the computation, saying that their total earning should have been divided by eight and not 12 since they worked only for eight months in 2006.
They added that the company did not observe the practice of giving its employees the guaranteed amount equivalent to their one month pay, in instances where the computed 13th month pay was less than their basic monthly salary.
Negotiations between the two parties failed, prompting the employees to file a complaint against CAT before the National Labor Relations Commission for money claims based on the erroneous computation of their 13th month pay.
The CAT initially won the case but the NLRC reversed the ruling of the labor arbiter and directed it to adhere to its previous formula in computing the employees' 13th month pay.
The NLRC's ruling was affirmed by the appellate court, prompting CAT to elevate the matter before the SC. (JCV/Sunnex)