G.R. No. 114280 & G.R. No. 115224 July 26, 1996
PHILIPPINE AIRLINES, INC. (PAL) vs. NATIONAL LABOR RELATIONS COMMISSION and AIRLINE PILOTS ASSOCIATION OF THE PHILIPPINES (ALPAP); AIRLINE PILOTS ASSOCIATION OF THE PHILIPPINES (ALPAP) vs. NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE AIRLINES, INC. (PAL)

FACTS

The Airline Pilots Association of the Philippines (ALPAP) filed an unfair labor practice complaint against Philippine Airlines, Inc. (PAL) for its refusal to pay thirteenth-month pay to its pilots from 1988 to 1990, invoking Presidential Decree No. 851 and Memorandum Order No. 28. PAL defended its position by asserting that its pilots, as supervisory employees, were excluded from the coverage of the law which applied only to rank-and-file employees. Furthermore, PAL contended that the year-end bonus it traditionally paid was already the legal equivalent of the thirteenth-month pay, thus exempting it under the law.
The Labor Arbiter ruled in favor of ALPAP, ordering PAL to pay the thirteenth-month pay for 1988-1990, plus moral and exemplary damages and attorney’s fees. On appeal, the National Labor Relations Commission (NLRC) affirmed the liability but modified the award. It extended the coverage to include 1986 and 1987, deleted the moral and exemplary damages, and initially awarded then later deleted legal interest, while reducing attorney’s fees to 5%. Both parties filed separate petitions for certiorari before the Supreme Court.

ISSUE

The primary issue is whether the NLRC committed grave abuse of discretion in holding PAL liable to pay its pilots thirteenth-month pay despite PAL’s claims that the pilots are supervisory employees and that the year-end bonus constitutes equivalent compensation.

RULING

The Supreme Court denied both petitions and affirmed the NLRC resolutions. On the coverage of the law, the Court held that Memorandum Order No. 28, which modified P.D. 851, explicitly requires employers to pay thirteenth-month pay to all their rank-and-file employees. The Court found that PAL pilots are not rank-and-file employees; they are managerial or supervisory personnel. However, this classification does not automatically disqualify them. The entitlement to thirteenth-month pay can arise from company policy or collective bargaining agreement. The Court noted that PAL paid thirteenth-month pay to all its other employees, including managerial staff, thereby establishing a company practice that had ripened into a benefit enjoyed by the pilots.
On the issue of equivalency, the Court rejected PAL’s claim that the year-end bonus was equivalent to the thirteenth-month pay. It ruled that a bonus, being a gratuity dependent on the employer’s discretion and the company’s profitability, is inherently conditional and uncertain in amount. In contrast, the thirteenth-month pay is a mandatory statutory benefit with a definite computation. Therefore, the year-end bonus could not serve as a substitute to exempt PAL from its obligation. The Court also upheld the deletion of moral and exemplary damages for lack of evidence of bad faith, and found the 5% attorney’s fees award to be reasonable under the Labor Code.