G.R. No. 152456 ; April 28, 2004
Sevilla Trading Company, petitioner, vs. A.V.A. Tomas E. Semana, Sevilla Trading Workers UnionSUPER, respondents.

FACTS

Petitioner Sevilla Trading Company, for two to three years prior to 1999, included various non-basic benefits in the base figure for computing its employees’ 13th-month pay. These included overtime premiums, holiday pays, night differential, and various paid leaves (bereavement, union, maternity, paternity, company vacation/sick leave, and cash conversion thereof). Upon discovering this alleged computational error, the company rectified its formula to exclude these items, thereby reducing the 13th-month pay. The Union contested this reduction through the grievance machinery, arguing it constituted a diminution of benefits under Article 100 of the Labor Code.
The parties submitted the issue to Voluntary Arbitrator Tomas E. Semana, who ruled in favor of the Union. He ordered the company to include the contested benefits in the computation and to pay corresponding backwages. Sevilla Trading filed a Petition for Certiorari under Rule 65 with the Court of Appeals, which was dismissed for being the wrong remedy. The CA sustained the Arbitrator’s decision, prompting this appeal.

ISSUE

Whether the employer may unilaterally discontinue the practice of including non-basic benefits in the computation of the 13th-month pay after having done so for two to three years.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The legal logic is anchored on the principle that a voluntary employer practice, once established, cannot be unilaterally withdrawn if it constitutes a benefit enjoyed by the employees. While Presidential Decree No. 851 (the 13th-Month Pay Law) defines “basic salary” for computation and generally excludes such allowances and benefits, the employer’s deliberate and repeated act of including them over a significant period creates a separate, enforceable benefit under labor law.
The Court ruled that the practice, maintained for at least two years, had ripened into a company practice. Jurisprudence does not prescribe a fixed minimum period; practices lasting for similar durations (e.g., three years in other cases) have been upheld as binding. This practice became a supplement enjoyed by the employees, which is protected under Article 100 of the Labor Code, prohibiting the elimination or diminution of benefits. The employer’s claim of merely correcting a prior error is unavailing, as the correction resulted in the withdrawal of an established benefit. The proper remedy from the Arbitrator’s decision was a petition for review under Rule 43, not certiorari under Rule 65, but the Court proceeded to resolve the substantive issue.