Erning's Vaciador Shop v. Fernandez

THIRD DIVISION

[G.R. No. 234483. June 10, 2019.]

ERNING'S VACIADOR SHOP/JOY CHRISTINE B. FERNANDEZ-LOPOS AND ERNESTO FERNANDEZ, petitioners, vs.JAIME A. FERNANDEZ, JULIUS A. FERNANDEZ AND GERALD A. BERGONIO, respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Third Division, issued a Resolution datedJune 10, 2019, which reads as follows:

"G.R. No. 234483 (Erning's Vaciador Shop/Joy Christine B. Fernandez-Lopos and Ernesto Fernandez vs. Jaime A. Fernandez, Julius A. Fernandez and Gerald A. Bergonio). — This treats of the Petition for Review on Certiorari 1 under Rule 45 of the Revised Rules of Court seeking the reversal of the Decision 2 dated October 3, 2016, and Resolution 3 dated September 18, 2017, rendered by the Court of Appeals (CA) in CA-G.R. SP No. 137912, which affirmed the ruling of the National Labor Relations Commission (NLRC), holding petitioners Joy Christine B. Fernandez-Lopos (Joy) and Ernesto Fernandez (Ernesto) liable to pay the salary differentials of respondents Jaime A. Fernandez (Jaime), Julius A. Fernandez (Julius), and Gerald Bergonio (Gerald).

The Antecedents

Erning's Vaciador Shop (Shop) is a service establishment that is engaged in providing sharpening and other allied services. It is a sole proprietorship that is owned and managed by the petitioners. It regularly employs three workers. 4

Respondents Jaime and Julius were hired by the petitioners as machine operators in August 2008 and December 2003, respectively, 5 while Gerald was hired as a driver on January 3, 2013. 6 They received a daily wage of P250.00. 7

On July 4, 2013, the respondents filed a complaint against the petitioners for underpayment of salary, and nonpayment of benefits. The respondents claimed that the petitioners failed to pay them their Service Incentive Leave Pay, Holiday Pay, Overtime Pay, and 13th month pay. Likewise, the respondents alleged that the petitioners failed to enroll them with the SSS, PhilHealth and Pag-Ibig. 8

Allegedly, when the petitioners learned about such complaint, they locked the shop, and refused to give the respondents any work, beginning August 8, 2013. 9

This prompted the respondents to amend their Complaint to one for illegal dismissal. 10 CAIHTE

In their defense, the petitioners vehemently denied the charge of illegal dismissal and underpayment of salaries. The petitioners related that the respondents are their relatives, who they hired in June 2008, January 2011, and January 2013, respectively. The petitioners paid the respondents a daily wage of P250.00, gave them a daily snack allowance of P25.00, and gave commissions for performing allied services. In addition, the petitioners provided free housing and allowed the respondents to use their facilities. Moreover, the petitioners paid, in whole, their contributions with the SSS, Home Development Mutual Fund (HDMF), and PhilHealth, which amounts were not deducted from the respondents' basic wages. 11

The petitioners, likewise, rebutted the respondents' claim that they were barred from entering the shop. Rather, the petitioners averred that at around 3:00 p.m. of August 7, 2013, the respondents simply stopped working on the pretext that the tool for pulling out the sharpening stone was missing. The respondents came to work on August 8 and 9, 2013, but stubbornly refused to perform their job. Despite this, the petitioners still paid them their salaries. 12

Ruling of the Labor Arbiter

On December 27, 2013, the Labor Arbiter (LA) rendered a Decision, 13 dismissing the complaint for illegal dismissal due to the absence of an employer-employee relationship between the petitioners and the respondents.

The dispositive portion of the LA decision states:

WHEREFORE, premises considered, the instant case is hereby dismissed without prejudice to its refiling before the proper forum.

SO ORDERED. 14

Dissatisfied with the ruling, the respondents filed an appeal before the NLRC.

Ruling of the NLRC

On March 28, 2014, the NLRC issued a Resolution, 15 reversing the LA's ruling. The NLRC concluded that an employment relationship existed between the petitioners and the respondents. However, the NLRC held that the respondents were not illegally dismissed. Rather, the respondents simply refused to report for work because of the animosity between them and the petitioners. The NLRC ratiocinated that there was a dearth of evidence proving that the respondents were barred from entering the work premises on August 8, 2013. On the contrary, the evidence showed that they were present at the shop, but simply refused to perform any work.

As to the matter of underpayment of wages, the NLRC held that the respondents indeed received a meager wage of P250.00 per day, which is below the prevailing wage rate of P414.00, with P30.00 ECOLA.

The NLRC denied the respondents' claims for holiday pay and service incentive leave pay, due to the latter's failure to prove that they were entitled to such benefits. As for their 13th month pay, the NLRC found that the petitioners paid the said benefit.

The dispositive portion of the NLRC ruling reads:

WHEREFORE, premises considered, the complainants' Appeal is hereby declared with partial merit. Respondents [Shop], [Ernesto] and [Joy] are hereby ordered to pay Complainants their salary differentials.

The computation of this Commission's Computation and Examination Unit (CEU) forms part of this resolution. 16

The NLRC, likewise, ordered the payment of the following monetary awards, to wit:

Computation of Monetary Awards per Decision of the 2nd Division Office of Comm. Teresita D. Castillon-Lora

 

1.	JAIME A. FERNANDEZ SALARY DIFFERENTIAL
	1/11-6/2/12
	367 - 250 = 117 X 26 X 17.07	=	51,926.94
	6/3/12-8/8/13
	389 - 250 = 139 X 26 X 14.17	=	51,210.38
			––––––––––
			P103,137.32
2.	JULIUS A. FERNANDEZ SALARY DIFFERENTIAL
	8/8/10-6/2/12
	367 - 250 = 117 X 26 X 21.80	=	66,315.60
	6/3/12-8/8/13
	389 - 250 = 139 X 26 X 14.17	=	51,210.38
			––––––––––
			P117,525.98
3.	GERALD A. BERGONIO SALARY DIFFERENTIAL
	10/11-6/2/12
	367 - 250 = 117 X 26 X 19.07		58,010.94
	6/3/12-8/8/13
	389 - 250 = 139 X 26 X 14.17	=	51,210.38
			––––––––––
			P109,221.32
			––––––––––––
	TOTAL AWARD	=	P329,884.6217
			–––––––––––––

 

Dissatisfied with the ruling, the petitioners filed a Motion for Reconsideration, which was denied by the NLRC in its Resolution 18 dated August 29, 2014. DETACa

Aggrieved, the petitioners filed a Petition for Certiorari under Rule 65 of the Rules of Court before the CA.

In their petition, the petitioners prayed that they be exonerated from the obligation to pay the respondents' salary differentials, and that Ernesto be dropped from the case considering that he longer owned and managed the business.

Ruling of the CA

On October 3, 2016, the CA rendered the assailed Decision, 19 partially granting the petition.

The CA agreed with the NLRC's finding that there exists an employer-employee relationship between the petitioners and the respondents. Likewise, the CA agreed with the NLRC that the respondents were indeed underpaid, and are, thus, entitled to wage differentials. However, the CA adjusted the reckoning point for the computation of Gerald's salary differentials to January 3, 2013, instead of October 2011. According to the CA, the documents presented by the petitioners showed that they employed Gerald on January 3, 2013. Gerald's claim that he has been working with the petitioners beginning October 2011 was not substantially proven. 20 Finally, the CA found Joy and Ernesto jointly and severally liable for the payment of the respondents' salary differentials on the ground that the evidence showed that Ernesto was still part of the shop. 21

The dispositive portion of the assailed CA Decision states:

FOR THESE REASONS, the petition is PARTLY GRANTED. The salary differential of [Gerald] is computed from January 3, 2013 to August 8, 2013 in the total amount of P30,758.00.

SO ORDERED.22

Dissatisfied with the ruling, the petitioners filed a Motion for Reconsideration, which was denied by the CA in its Resolution 23 dated September 18, 2017.

Undeterred, the petitioners filed the instant Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court.

The Issues

The issues raised for the Court's resolution may be summarized into two main matters, namely: (i) the underpayment of the respondents' wages; and (ii) the propriety of impleading Ernesto as a party to the instant case.

The petitioners claim that they are exempted from the provisions of the minimum wage law considering that their business — Erning's Vaciador Shop — is a service establishment that regularly employs three workers and provides services to end users. They admit that they failed to submit the required documents to entitle them to claim the exemption, but aver that the same lapse may be excused on the ground of substantial compliance. They emphasize that they possessed all the elements to avail of the exemption under the law, but simply failed to comply with the documentary requirements, considering that they were unaware of such requisites because they were only operating a small-scale business. 24

Alternatively, the petitioners pray that should the Court render them liable to pay the respondents the minimum wage, the Court should at least deduct the value of the facilities provided by the petitioners in favor of the respondents such as SSS, HDMF, and PhilHealth remittances it had given the respondents without collecting from them their respective shares; and the facilities of free housing, usage of electricity and water, snack allowances, and commissions they have given the respondents. 25

Finally, they urge that Ernesto should be dropped as a petitioner considering he no longer participates in the management of the shop. 26

In their Comment, 27 the respondents first point out that the petitioners failed to raise a question of law, which thereby renders their petition dismissible. 28 Next, they counter that the CA correctly affirmed the NLRC ruling stating that the respondents were underpaid and are thus entitled to salary differentials. The respondents point out that no less than the petitioners admitted that they failed to comply with the documentary requirements before availing of the exemption from the minimum wage law. 29 The CA, likewise, correctly retained Ernesto as a party to the instant case, due to the dearth of evidence showing that he is not part of the business. 30 aDSIHc

The respondents further state that the CA was, likewise, correct in rejecting the petitioners' plea for the reduction of the value of the provisions for lodging, utilities, snack allowances, commissions, and free contributions to the SSS, HDMF, and PhilHealth from the wages of the respondents.

Anent the salary differentials of Gerald, the respondents' proffer that his failure to prove the beginning date of his employment should not be taken against him, as the agreement to the terms of their employment were not reduced to writing. 31

Finally, the respondents pray that the Court modifies the CA ruling by awarding double indemnity, as provided for in Republic Act (R.A.) No. 8188, 32 which states that the petitioners' deliberate circumvention of the law should render them liable for double indemnity, which is equivalent to double the unpaid benefits owing to the employees. 33

Ruling of the Court

The instant petition is bereft of merit.

The petitioners are liable to pay the

It is a basic reality that an employee shall always be remunerated for the services he/she renders. More than this, the State also ensures that all employees shall not only be paid for the work they perform, but that they shall receive a decent wage that will adequately support their cost of living. It is in this regard that Congress created R.A. No. 6727 or the Wage Rationalization Act.

Significantly, Section 2 of R.A. No. 6727 affirms the policy of the State "to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families," and "guarantee the rights of labor to its just share in the fruits of production." In this respect, the law provides the standards for the determination of the statutory minimum wage for all employees in the private sector.

However, retail/service establishments that regularly employ not more than ten workers are exempt from the provisions of the minimum wage law. This is affirmed in Section 4 of R.A. No. 6727, which states that:

Retail/service establishments regularly employing not more than ten (10) workers may be exempted from the applicability of this Act upon application with and as determined by the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission. Whenever an application for exemption has been duly filed with the appropriate Regional Board, action on any complaint for alleged non-compliance with this Act shall be deferred pending resolution of the application for exemption by the appropriate Regional Board.

It must be noted that "for a retail/service establishment to be exempted from the coverage of the minimum wage law, it must be shown that the said establishment is regularly employing not more than ten (10) workers and had applied for exemptions with and as determined by the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission." 34 Added to this, it is incumbent upon the establishment to prove that it had in fact applied for such exemption, and that said exemption was actually granted. 35

The records show that as of June 2013, the respondents were paid a daily wage of P250.00. This fact was admitted by the petitioners. 36 However, it must be noted that during this time, WAGE Order No. NCR 18 mandated the payment of a minimum wage worth P414.00 plus ECOLA. Clearly, the respondents were underpaid.

The petitioners escape from the burden of paying the respondents the minimum wage, by claiming that their business is exempt from the provisions of the minimum wage law. Added to this, they conveniently claim that they should not be prejudiced by their failure to submit an application for exemption considering that they operate a small-scale business, and as such, they were not aware of the provisions of the law. They urge that what matters is that they possess all the elements for exemption.

Such argument fails to persuade.

To begin with, nothing is more settled than the principle that ignorance of the law excuses no one from compliance therewith. To allow employers to conveniently claim exemptions on their purported naïveté of the provisions of the minimum wage law would be detrimental to the employees. This would certainly run afoul to the constitutional requirement to afford a strict protection to labor. ETHIDa

More importantly, the fact that the shop is a service establishment that employs less than 10 employees is not in itself sufficient to automatically exempt it from the provisions of the minimum wage law. In addition to the nature of the business and number of employees, the law further requires the submission of an application for exemption before the Regional Board.

In fact, jurisprudence shows that the Court has interpreted Section 4 of R.A. No. 6727 in a strict light. Particularly, in C. Planas Commercial v. NLRC (Second Division), 37 the employer sought for an exemption from the minimum wage law, proffering the same arguments raised by herein petitioners, i.e., that it operates a small retail establishment, and that the nature of its business and its system of management is very loose and informal, as such, salaries and wages were paid by merely handing the money to the worker without the latter being required to sign anything as proof of receipt. Purportedly, this kind of loose system of management made it impossible for them to keep records. 38

The Court regarded such argument untenable, and stressed that in order for a retail/service establishment to be exempted from the coverage of the minimum wage law, it must prove that it applied for exemptions with the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission. Added to this, the Court emphasized that the burden rests on the employer claiming the exemption to prove its entitlement thereto. The failure of therein employers to show that they had actually applied for such exemption, and that an exemption had in fact been granted, shall be fatal to its cause. 39 Moreover, the Court emphasized that the best evidence to prove the employer's exemption from the minimum wage law is "[its] approved application for exemption in accordance with applicable guidelines issued by the Commission." 40

Equally noteworthy is the Court's ruling in the case of Mayon Hotel and Restaurant v. Adana, 41 where the Court declared that an employer cannot exempt himself from liability to pay minimum wages because of the poor financial condition of the company. The payment of minimum wages is not dependent on the employer's ability to pay. 42

Considering that the petitioners failed to prove that they in fact applied for, and were granted, an exemption from the provisions of the minimum wage law, then they should be held liable for the minimum wages due to the respondents.

The value of the facilities

Alternatively, the petitioners claim that should the Court hold them accountable to pay the respondents the minimum wage, then the value of the facilities they furnished to the respondents should be deducted from the wage due.

This contention deserves scant consideration.

In certain instances, the law allows an employer to provide for subsidized meals and snacks to his employees, and thereafter deduct the value thereof from the employees' wages. This is encapsulated in Section 1 of Department of Labor and Employment (DOLE) Memorandum Circular No. 2, which states that:

Section 1 of DOLE Memorandum Circular No. 2 provides that an employer may provide subsidized meals and snacks to his employees provided that the subsidy shall not be less than 30% of the fair and reasonable value of such facilities. In such cases, the employer may deduct from the wages of the employees not more than 70% of the value of the meals and snacks enjoyed by the latter, provided that such deduction is with the written authorization of the employees concerned. 43

This rule, however, does not give the employer an unbridled license to conveniently reduce the wages of his employees, on the simple pretext that he provided such purported benefits.

It bears stressing that before an employer may deduct the value of facilities from the employees' wages, the former must comply with the following requisites: "first, proof must be shown that such facilities are customarily furnished by the trade; second, the provision of deductible facilities must be voluntarily accepted in writing by the employee; and finally, facilities must be charged at reasonable value. Mere availment is not sufficient to allow deductions from employees' wages." 44

Notably, in SLL International Cables Specialist, et al. v. NLRC (4th Division), et al., 45 the Court rejected the employer's request for a reduction in the payment of its employees' wages due to the failure of the former to present the following, among others: (i) a company policy or guideline showing that the meals and lodging were part of the employees' salaries; (ii) a written authorization from the employees; (iii) evidence of how the employer arrived at the valuations of said benefits; and (iv) proof that the employees actually enjoyed the said facilities. 46

Similarly, in Mayon, 47 the Court dismissed therein employer's argument that the cost of the food and snacks it provided to its employees as facilities should have been included in reckoning the payment of the latter's wages. 48 Affirming the strict nature of such deductions, the Court explained that prior to deducting the value of the employees' meals from their wages, it must be shown that they voluntarily accepted the same. The Court even added that there should likewise be proof that the employees were at least interviewed by the DOLE as to the quality and quantity of food. 49 cSEDTC

More importantly, the Court decreed in Mayon that meals and snacks may not be deducted as facilities without compliance with certain legal requirements. 50 The Court enumerated the requirements before the employer may deduct the value from the employee's wages, namely: "(i) proof that such facilities are customarily furnished by the trade; (ii) the provision of deductible facilities is voluntarily accepted in writing by the employee; and (iii) the facilities are charged at fair and reasonable value." 51

Added to this, in Mabeza v. NLRC, 52 therein employer sought to deduct from the wages the value of the provisions for meals, lodging, electric consumption and water. The Court rejected such plea on the ground that the employer "failed to present any company policy or guideline to show that the meal and lodging are part of the salary; failed to provide proof of the employee's written authorization; and, failed to show how he arrived at the valuations." 53

Interestingly, in Mabeza, the Court conceded that even if such benefits are in fact deductible facilities, the employers cannot indiscriminately deduct the values thereof from their employees' wages, absent proof of the presence of the elements that: the facilities are customarily furnished by the trade; the provision of deductible facilities must be voluntarily accepted in writing by the employee; and that the facilities must be charged at fair and reasonable value. Also, the Court stressed in Mabeza the importance of arriving at a fair valuation of the facilities. 54

It becomes all too apparent, therefore, that should the employer wish to claim a deduction of facilities from the employees' wages, he/she must first comply with the requirements of the labor regulations and jurisprudence to obtain the consent of the employee. Due to the failure of the petitioners to comply with these basic and essential requirements, they cannot claim a deduction of the said facilities from the respondents' wages.

The CA correctly adjusted the

It must be noted at the outset that the CA's ruling regarding the reckoning point for determining Gerald's salary adjustment had already attained finality. The respondents failed to file a partial motion for reconsideration questioning said CA ruling, and thus, said issue is deemed final and executory.

Be that as it may, the Court finds that the CA did not err in reducing the award of salary differentials, based on the finding that Gerald's employment was shown to have begun on January 3, 2013. This ruling was based on the SSS documents submitted by the petitioners.

Although Gerald pleads for the Court's liberality by tilting the scales in his favor, this cannot be done considering that the evidence presented by the petitioners, which consisted of documentary evidence, is more convincing than Gerald's bare and uncorroborated statement. Certainly, records and documents prevail against any unsubstantiated oral statements.

Accordingly, the CA correctly ruled that the reckoning point for the computation of Gerald's salary differentials shall be from January 3, 2013 to August 8, 2013. 55 The Court cannot blindly adhere to Gerald's uncorroborated and unsubstantiated statement, which was clearly rebutted by documentary proof.

Ernesto was correctly impleaded in

Anent the last issue raised, the Court finds no reason to reverse the CA's ruling in impleading Ernesto as a party to the instant case, and rendering him jointly and severally liable with Joy for the payment of the respondents' salary differentials.

The shop is a sole proprietorship owned and managed by father and daughter, Ernesto and Joy. It is elementary that a sole proprietorship does not possess a juridical personality separate and distinct from that of the owner of the enterprise. 56 "The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual and requires its proprietor or owner to secure licenses and permits, register its business name, and pay taxes to the national government. The law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an action in court." 57 SDAaTC

Anent the claim that Ernesto no longer manages the business, it cannot be gainsaid that no less than the petitioners consistently stressed from their first pleading filed with the LA, down to the instant Petition for Review on Certiorari, that the shop is a family-owned enterprise. Added to this, there is no evidence showing that Ernesto no longer participates in the business. On the contrary, the CA observed that his signature even appeared on the employment identification card of respondent Julius, as the authorized signatory of the business. 58 This clearly rebuts the petitioners' claim that Ernesto is no longer part of the shop. As such, he too should be held accountable for the salary differentials due to the respondents.

WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The Decision dated October 3, 2016 and the Resolution dated September 18, 2017 rendered by the Court of Appeals in CA-G.R. SP No. 137912 are AFFIRMED in toto.

SO ORDERED."

Very truly yours,

(SGD.) WILFREDO V. LAPITANDivision Clerk of Court

 

Footnotes

1.Rollo, Volume I, pp. 3-33.

2. Penned by Associate Justice Mario V. Lopez, with Associate Justices Rosmari D. Carandang (now a Member of this Court) and Myra V. Garcia-Fernandez, concurring; id. at 35-46.

3.Id. at 48-51.

4.Id. at 36.

5.Id.

6.Id. at 43.

7.Id. at 42.

8.Id. at 36.

9.Id.

10.Id.

11.Id. at 15.

12.Id. at 37.

13. Rendered by LA Edgardo M. Madriaga; id. at 339-354.

14.Id. at 354.

15. Rendered by Commissioner Teresita D. Castillon-Lora; id. at 142-158.

16.Id. at 158.

17.Id. at 159-160.

18.Id. at 161-166.

19. Id. at 35-46.

20. Id. at 43.

21. Id. at 44-45.

22. Id. at 45.

23. Id. at 48-51.

24. Id. at 13-14.

25. Id. at 15.

26. Id. at 25.

27. Rollo, Vol. II, pp. 713-735.

28. Id. at 722.

29. Id. at 723.

30. Id. at 729.

31. Id. at 732.

32. AN ACT INCREASING THE PENALTY AND IMPOSING DOUBLE INDEMNITY FOR VIOLATION OF THE PRESCRIBED INCREASES OR ADJUSTMENTS IN THE WAGE RATES, AMENDING FOR THE PURPOSE SECTION TWELVE OF REPUBLIC ACT NUMBERED SIXTY-SEVEN HUNDRED TWENTY-SEVEN, OTHERWISE KNOWN AS THE WAGE RATIONALIZATION ACT. Approved on May 4, 1998.

33. Rollo, Vol. II, p. 727.

34. C. Planas Commercial v. NLRC (Second Division), 511 Phil. 232, 244 (2005).

35. Id.

36. Rollo, Vol. I, p. 36.

37. 511 Phil. 232 (2005).

38. Id. at 239.

39. Id. at 243.

40. Id. at 244.

41. 497 Phil. 892 (2005).

42. Id. at 929-930, citing Rancho v. Mun. of Ilagan, 130 Phil. 1, 2 (1968).

43.SLL International Cables Specialist, et al. v. NLRC (4th Div.), et al., 659 Phil. 472, 482 (2011).

44. Id. at 483, citing Mayon Hotel & Restaurant v. Adana, supra note 41, at 927-928 (2005); Mabeza v. NLRC, 338 Phil. 386, 399 (1997).

45. 659 Phil. 472 (2011).

46. Id.

47. Supra note 41.

48. Id. at 926-927.

49. Id. at 927.

50. Id. at 927-928.

51. Id.

52. 338 Phil. 386 (1997).

53. Id. at 399.

54. Id., citing LABOR CODE OF THE PHILIPPINES, Article 97 (f).

55. Rollo, Vol. I, p. 43.

56. Stanley Fine Furniture, et al. v. Gallano, et al., 748 Phil. 624, 636 (2014).

57. Id., citing Excellent Quality Apparel, Inc. v. Win Multi Rich Builders, Inc., 598 Phil. 94, 101 (2009) and Mangila v. CA, 435 Phil. 870, 886 (2002).

58. Rollo, Vol. I, pp. 44-45.