Kamayan Point Hotel vs National Labor Relations Commission

A Summary of a Decision of the Supreme Court of the Philippines

G.R. No. 75289 August 31, 1989

Facts of the case:

Kamayan Point Hotel had been giving its employees the so-called "14th Month Pay" from 1979 to 1981. In 1982 however, it suffered losses due to a bad business decision and eventually closed business in 1984. In 1982, due to said financial difficulty, it was not able to give said 14th Month Pay to its employees so that in 1983, private respondent Federation of Free Workers (FFW) filed a complaint with the Labor Arbiter for its non-payment. The Labor Arbiter rendered a decision in favor of FFW, which decision on appeal to the National Labor Relations Commission (NLRC) was affirmed with modification. Both the FFW, Labor Arbiter and NLRC were one in contending that although there was no law granting the 14th Month Pay, still the employees of Kamayan Point Hotel were still entitled to it by virtue of said practice having ripened into a company practice that can no longer be withdrawn without violating the statutory prohibition against diminution of benefits.

Issue:

Whether or not the non-granting of the 14th Month Pay which had been granted before amounted to a violation of the statutory prohibition against diminution of benefits as contained in Article 100 of the Labor Code of the Philippines which provides "Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code".

Ruling:

The Supreme Court ruled that such was not a diminution of benefits being enjoyed at the time of the promulgation of the Labor Code on the following reasons:

1. The first reason was obviously because the Labor Code took effect in 1974 while said benefit was given only starting 1979, so that it cannot be said that said benefit was already being enjoyed by Kamayan Point's employees at the time of promulgation of the Labor Code. Thus, that particular provision has no application in the case at bar.
2. Since there is no law making the granting of a 14th Month Pay mandatory, the same can only be considered as additional benefit which is gratuitous in nature, and for which, the employees cannot make demands.
3. Kamayon Point cannot be obliged to assume a "double burden" by requiring it to grant 14th Month Pay on top of the mandatory 13th Month Pay and similar benefits merely because it had, out of its liberality, given the same before. Since it is no longer in the financial position to grant said benefit, it cannot be punished because of liberality in the past, by compelling it to give what it is not capable of giving.