G.R. No. L-31341 and L-31343. March 31, 1976.
PHILIPPINE AIR LINES EMPLOYEES ASSOCIATION (PALEA) and PHILIPPINE AIR LINES SUPERVISORS’ ASSOCIATION (PALSA), petitioners, vs. PHILIPPINE AIR LINES, INC., respondent. PHILIPPINE AIR LINES, INC., petitioner, vs. PHILIPPINE AIR LINES EMPLOYEES’ ASSOCIATION, PHILIPPINE AIR LINES SUPERVISORS’ ASSOCIATION, and the COURT OF INDUSTRIAL RELATIONS, respondents.

FACTS

The consolidated petitions arose from a dispute over the correct method of computing the basic daily and hourly wage rates for PAL’s monthly-salaried employees, which affects overtime, holiday, and other premium pays. PALEA and PALSA filed a case in the Court of Industrial Relations (CIR) seeking to revise PAL’s long-standing formula, which divided the monthly salary multiplied by 12 by 365 calendar days to get the daily rate. The unions contended this was erroneous as it included unpaid off-days in the divisor. They demanded a formula using the number of actual working days (e.g., 26 or 20 days) as the divisor, as stipulated in their collective bargaining agreements (CBAs).
The CIR initially upheld PAL’s formula, ruling the unions were estopped from challenging it after years of acquiescence. Upon reconsideration, the CIR en banc reversed itself and sustained the unions’ proposed method. However, it limited the payment of resulting salary differentials to be effective only from July 1, 1957. Both parties appealed: the unions assailed the date of effectivity, while PAL assailed the reversal on the wage computation method itself.

ISSUE

The core issues were: (1) Whether PAL’s wage computation formula using 365 days as a divisor is correct, and (2) What is the proper prescriptive period for claiming the resulting pay differentials, which determines the date of effectivity.

RULING

The Supreme Court affirmed the CIR’s ruling adopting the unions’ wage computation method but modified the effectivity date. The legal logic proceeded as follows. First, the Court found the unions’ method legally sound. PAL’s use of 365 calendar days as a divisor improperly reduced the daily rate by including non-working days for which employees were not paid a regular wage. The correct divisor under the CBAs was the number of actual working days in a month, as this accurately reflects the compensation for days actually worked.
Second, on prescription, the Court rejected the application of the three-year period under the Eight-Hour Labor Law. The employees’ claim was not based solely on statute but was principally a demand for PAL’s compliance with specific wage computation provisions in the series of CBAs executed between the parties. Since the obligation arose from written contracts, Article 1144(1) of the Civil Code, providing a ten-year prescriptive period, governed. Consequently, the reckoning date for the payment of differentials should be ten years prior to the filing of the complaint on February 14, 1963, or from February 14, 1953. The Court emphasized that in case of doubt, labor legislation and contracts must be construed in favor of the worker’s welfare under Article 1702 of the Civil Code.