G.R. No.

90445 October 2, 1990

UST FACULTY UNION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION AND UNIVERSITY OF SANTO TOMAS,
INC., respondents.

Eduardo J. Mariño, Jr. for petitioner.

Abad, Leaño & Associates for private respondent.

- The controversy has to do with the payment of the 13th month pay
FACTS
To settle a labor dispute regarding the share of the faculty members in the increase in tuition
fees under PD No. 451, the University of Santo Tomas and the UST Faculty Union, represented
by Dean Andres Narvasa, now Justice and Professor Cecilio Pe, later Court of Appeals Justice,
respectively entered into an agreement on March 25, 1985.

- Under the Agreement and Collective Bargaining Agreement that the parties shall
eventually execute. UST shall grant to all its faculty members the additional benefits
which that additional benefits shall amount to PHP 35,000,000.00, divided and
receivable over a period of three years within SCHOOL YEARS 1985-1986 and 1987-
1988, it being explicitly understood and stipulated by both parties hereto that UST’s total
commitments under and by virtue of the Agreemen and the Collective Bargaining
Agreement to be hereafter executed, cannot and shall not exceed nor be less than the
amunt of PHP 35,000,000.00

- For School Year 1985-1986, UST shall grant the following:

o Christmas gift of P2,000.00 each to all full-time faculty members — i.e., those
with an average assignment of at least 15 units in the current school year —
provided that they have been employed for at least 12 months as of December 1,
1985; and of P1,000.00 each to all part-time faculty members — i.e., those with
an average teaching assignment of less than 15 units in the current school year
— or faculty members employed for less than 12 months as of December 1,
1985
- Christmas gift of P2,000.00 each to all full-time faculty members — i.e., those with an
average assignment of at least 15 units in the current school year — provided that they
have been employed for at least 12 months as of December 1, 1985; and of P1,000.00
each to all part-time faculty members — i.e., those with an average teaching assignment
of less than 15 units in the current school year — or faculty members employed for less
than 12 months as of December 1, 1985
- If at the end of School Year 1987-1988 there should be any unspent balance of the
aggregate of P35,000,000.00, such unspent balance shall be distributed proportionately
to all faculty members.
 Further, UST had not been previously paying its faculty members 13month pay. As in this
case provided that under PD No. 851, it provides that:

Sec. 1. All employers are hereby required to pay all their employees receiving a basic salary of
not more than P1,000 a month, regardless of the nature of the employment, a 13th month pay
not later than December 24 of every year.

Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not
covered by this Decree

Thus, since the faculty members of UST were receiving salaries greater than 1,000 a month,
UST was not required to pay them any 13th month pay.
Sometime on August 198, President Aquino issued a Memorandum Order No. 28 which
provided that the Sec 1 of PD 851 is hereby modified to the extent of all employers are hereby
required to pay all their rank-and-file employees a 13 th month pay not later than December 24 of
every year.
Thus starting with the year 1986 the UST was required by law to pay its faculty members
the 13th month pay. At the same time the faculty expected compliance with the
Agreement of March 25, 1985 to pay Christmas gifts of P2,000.00 for full-time faculty
members and P1,000.00 for part-time faculty members. It was because of this that the
controversy arose.
On Dec 3 1986, Prof. Pe wrote a letter to the rector of UST expressing the faculty members
apprehension regarding reports that the 13th month pay is being reduced by deducting therefrom
the amount of the said Christmans gift.
The rector replied the next day, Dec 4 1986, attaching a memorandum of its legal counsel which
concluded that the Christmas bonus already paid to the employees shall be credited as
compliance with the 13th month pay.
On December 9, 1986, Prof. Pe wrote the rector another letter expressing the union's
disagreement with the university legal counsel's opinion and reiterating its position that the
Christmas gift is not a bonus and should be paid in addition to the 13th month pay. 
The letter further stated:
it was readily agreed that the University would pay the faculty members the
aggregate amount of P35 million demanded by the Union. It was only thereafter
that we proceeded, in a subsequent meeting held in the same place, to take up the
matter of allocation, that is, how the sum of P35 million would be paid and what
form. As finally agreed, the payment in cash would be made over a period of three
(3) years in the form of salary increases, increase of contribution to the
Retirement Fund, Christmas gift, hospitalization benefits, and educational
benefits. All this embodied in our Agreement.
So clear was our agreement that the University's obligation was to pay the faculty
members the total amount of P35 million — no more, no less — (see par. 1.0 of the
March 25 Agreement) that it is expressly and explicitly stipulated therein that at
the end of School Year 1987-88 there should be any unspent balance of the
 aggregate P35,000,000.00, such unspent balance shall be distributed
proportionately to all faculty members. (See par. 6.0) The allocation was not
intended to affect in any way the obligation of the University to pay P35 million, no
part of which should therefore be considered as a bonus.
UST did not heed the union’s demand, the latter filed a complaint with the arbitration branch of
the NLRC seeking to compel UST to pay the faculty members the full amount of their 13th month
pay and not deduct therefrom the P2,000 or 1,000 given as Christmas gift.
The Labor Arboter rendered a decision dismissiong the Union’s complaint. The arbiter ruled
that the Christmas gift may be considered an equivalent of the 13 th month pay pursuant
to the rules implementing PD No. 851.
The union appealed to the NLRC. The NLRC dismissed the appeal and the arbiter’s decision.
The union moved for reconsideration but it was later on denied.

But the issue was ventilated not only before the NLRC. Individual faculty members filed
complaints before the Grievance Adjudication Committee created pursuant to the CBA.
In a unanimous decision, the Committee ruled "that the P2,000/1,000 of the CBA is not a
Christmas Bonus creditable to the 13th month pay but part of the P35 million which in
the Compromise Agreement was agreed upon by the Faculty Union and the respondent
University as a settlement of all existing claims of the Union." UST refused to accept the
judgment.

These led to the filing of the instant petition. After comments were filed by private and
public respondents, and petitioner filed a reply, the petition was given due course and
the parties were required to file their memoranda. After the parties complied, the case
was deemed submitted.

ISSUE
W/N UST IS DIRECTED TO PAY ITS FACULTY MEMBERS 13TH MONTH PAY IN
ACCORDANCE WITH PD NO 85, AS AMENDED BY MO NO 28 AND THE CHRISTMAS GIFT
UNDER THEIR AGREEMENT.
RULING
YES. UST is DIRECTED to pay its faculty members 13th month pay in accordance with P.D.
No. 851, as amended by Memorandum Order No. 28, and the Christmas gift under the
Agreement.

The court explicitly explained that in providing for a 13th month pay, P.D. No. 851 intended
to uniformly provide low-paid employees with additional income. This is clear from the preamble
to the decree which states:

WHEREAS, it is necessary to further protect the level of real wages from the
ravage of world-wide inflation;

WHEREAS, there has been no increase in the legal minimum wage rates since
1970;
 WHEREAS, the Christmas season is an opportune time for society to show its
concern for the plight of the working masses so they may properly celebrate
Christmas and New Year.

The law wanted to uniformly provide low-paid employees with additional income
because on the average their salaries for twelve (12) months were grossly inadequate to
meet the expenses for day-to-day subsistence. This additional income took the form of
an extra month's salary to be given in December.

Thus the court also added, where such additional income, whether granted by the
employer voluntarily or agreed upon by the employer and the employees in a CBA, or its
equivalent is already given by the employer, whether in December or in some other date,
the 13th month pay need not be given. If, on the other hand, an amount less than that
required by law is given, the employer has only to pay his employees the deficiency. In
both instances, the purpose of the law is met. The modification introduced by
Memorandum Order No. 28 did not substantially alter the purpose of the law but expands
the coverage of the 13th month pay, now to uniformly provide all rank-and-file employees
additional income.

The imposition of a "double burden" does not obtain in the present case even if UST pays both
the 13th month pay and the Christmas gift of P2,000.00 or P1,000.00. The Christmas gift is part
of the lump sum of P35M which the school has obliged itself to pay the faculty members in full
settlement of their share in the increase of tuition fees pursuant to P.D. No. 451. It is not a
bonus, incentive or additional income. Neither is the giving of the Christmas gift an act
of liberality on the part of the university. The Christmas gift was partial payment,
according to a schedule agreed upon by UST and the faculty union, of the university's
outstanding obligation to the faculty members for their share in the increase in tuition
fees under P.D. No. 451.

Once the university has fully paid the P35M to the faculty members within the time frame
and in the forms specified in the agreement, its obligation to pay a Christmas gift of
P2,000.00 or P1,000.00, as part of the P35M compromise package, ceases. UST would
then have to comply only with P.D. No. 851 as amended by Memorandum Order No. 28 by
paying the 13th month pay.

The Christmas gift is clearly not an "equivalent" of the 13th month pay under the rules
implementing P.D. No. 851. It is not akin to a "Christmas bonus," "mid-year bonus," "profit-
sharing payments" or "other cash bonuses." 

In sum, UST has to pay its faculty members both the 13th month pay and the Christmas
gift of P2,000.00 or P1,000.00 for the years 1986 and 1987. Payment of the Christmas gift
provided in the agreement cannot be credited as partial compliance with P.D. No. 851, as
amended. Consequently, the court find that the NLRC gravely abused its discretion when
it affirmed the dismissal of the union's complaint.

WHEREFORE, the petition is GRANTED and the decision of the NLRC are SET ASIDE. UST is
DIRECTED to pay its faculty members 13th month pay in accordance with P.D. No. 851, as
amended by Memorandum Order No. 28, and the Christmas gift under the Agreement for the
years 1986 and 1987.
OPINION IN THIS CASE

bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of employer's business and made possible the realization of
profits. It is an act of generosity of the employer . . . It is also granted by an enlightened
employer to spur the employee to greater efforts for the success of the business and
realization of bigger profits

13th Month Pay Vs. Christmas Bonus

There is a legal difference between 13th month pay and a Christmas bonus in the
Philippines. The 13th month salary is a mandatory payment, enforced by Philippine law,
whereas a Christmas bonus is an amount given to an employee in excess of what the
law requires as a reward or incentive for their performance. 

13th month pay is a government-mandated form of compensation in the Philippines given
to employees at the end of the year. While it may seem like a Christmas bonus, 13th month
pay isn't a discretionary benefit; it's part of employment law, so employers are obliged to pay it.

“”””””””””””””””Are resigned, separated, or terminated employees still entitled to 13th month pay?
Yes. Resigned or terminated employees are still entitled to the benefit even if they left
before the time of payment of the 13th month””””””””””””””””””

Is 13th Month Pay Taxable in the Philippines?

Yes, 13th month pay is taxable in the Philippines if it exceeds PHP 90,000 (~$1714). If
an employee’s 13th month pay is below the threshold, they will receive the salary in full,
tax-free.
Prior to 2018 and the signing of the Tax Reform for Acceleration and Inclusion (TRAIN)
law, the threshold was PHP 82,000. The TRAIN law lowered personal income tax and
raised consumption tax.
‍
What is the law for 13th month pay?
In Labor Advisory 8, Labor Secretary Silvestre Bello III released the guidelines using the
basic wage in Metro Manila, which is at PHP537. Under the law, the 13th-month pay
shall not be less than one-twelfth (1/12) of the total basic salary earned by an
employee within a calendar year.

Are probationary employees entitled to 13th month?

If you're a rank-and-file employee, meaning you're not in a managerial position, and
you've been working at your company for at least one (1) month during the calendar
year, then you're eligible to receive your 13th month pay! It doesn't matter if you're
probationary or have been regularized.