CASE DIGEST: Our Haus Realty v. Parian


OUR HAUS REALTY DEVELOPMENT CORPORATION, petitioner, vs. ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS, BERNARDO TENEDERO and JERRY SABULAO, respondents
GR No. 204651                   |              August 6, 2014

 

TOPIC: Wages

FACTS:

Respondents were all laborers working for petitioner Our Haus Realty Development Corporation, a company engaged in the construction business.

Sometime in May 2010, Our Haus experienced financial distress. To alleviate its condition, Our Haus suspended some of its construction projects and asked the affected workers, including the respondents, to take vacation leaves.

Eventually, respondents were asked to report back to work but instead of doing so, they filed a complaint for underpayment of their daily wages with the LA. They claimed that except for Tenedoro, their wages were below the prescribed minimum rates.

Our Haus argued that the respondents’ wages complied with the law’s minimum requirement. In determining the total amount of the respondents’ daily wages, the petitioner considered the value of the benefits that respondents also enjoy -- their subsidized meals and their free lodging. Our Haus also rejected the respondents’ other monetary claims for lack of proof that they were entitled to it.

On the other hand, respondents argued that the value of their meals should not be considered in determining their wages’ total amount since the requirements set under Sec. 4 of DOLE Memorandum Circular No. 2 were not complied with. The respondents pointed out that Our Haus never presented any proof that they agreed in writing to the inclusion of their meals’ value in their wages. Also, Our Haus failed to prove that the value of the facilities it furnished was fair and reasonable. Finally, instead of deducting the maximum amount of 70% of the value of the meals, Our Haus actually withheld its full value.

The LA ruled in favor of Our Haus. He held that if the reasonable values of the board and lodging would be taken into account, the respondents’ daily wages would meet the minimum wage rate. As to the other benefits, the LA found that the respondents were not able to substantiate their claims for it.

The NLRC, in turn, reversed the LA’s decision. The NLRC noted that the respondents did not authorize Our Haus in writing to charge the values of their board and lodging to their wages. Thus, it cannot be credited.  The NLRC also ruled that respondents are entitled 13th month payments and SIL payments. However, it sustained the LA’s ruling that the respondents were not entitled to overtime pay since the exact dates and times when they rendered overtime work had not been proven.

Our Haus moved for reconsideration and submitted 5 kasunduans as new evidence to show that the respondents authorized Our Haus in writing to charge the values of their meals and lodging to their wages. The NLRC denied Our Haus’ motion, thus it appealed to the CA.

In its petition, Our Haus made a distinction between deduction and charging. According to them, a written authorization is only necessary if the facility’s value will be deducted and will not be needed if it will merely be charged or included in the computation of wages. Our Haus claimed that it did not actually deduct the values of the meals and housing benefits. It only considered these in computing the total amount of wages paid to the respondents for purposes of compliance with the minimum wage law. Hence, the written authorization requirement should not apply.

The CA affirmed in toto the NLRC’s rulings. It found no real distinction between deduction and charging and ruled that the legal requirements before any deduction or charging can be made, apply to both. Our Haus, however, failed to prove that it complied with any of the requirements laid down in Mabeza v. National Labor Relations Commission. Accordingly, it cannot consider the values of its meal and housing facilities in the computation of the respondents’ total wages.

ISSUE:

Whether or not the facility’s value should be included in the computation of respondent’s wages

RULING:

To justify its noncompliance with the requirements for the deductibility of a facility Our Haus made a substantial dinstinction between deduction and the charging of a facility’s value to the wages. It explained that in deduction, the amount of the wage would still be lessened by the facility’s value, thus needing the employee’s consent. On the other hand, in charging, there is no reduction of the employee’s  wages since the facility’s value will just be theoretically added to the wage for purposes of complying with the minimum wage requirement.

Our Haus’ argument is a vain attempt to circumvent the minimum wage law by trying to create a distinction where none exists.

In reality, deduction and charging both operate to lessen the actual take-home pay of an employee; they are two sides of the same coin. In both, the employee receives a lessened amount because supposedly, the facility’s value, which is part of his wage, had already been paid to him in kind. As there is no substantial distinction between the two, the requirements set by law must apply to both.

These requirements as summarized in Mabeza v. NLRC are the following:

a.       proof must be shown that such facilities are customarily furnished by the trade;

b.      the provision of deductible facilities must be voluntarily accepted in writing by the employee; and

c.       the facilities must be charged at fair and reasonable value.

One of the badges to show that a facility is customarily furnished by the trade is the existence of a company policy or guideline showing that provisions for a facility were designated as part of the employees’ salaries.

In this case, the records reveal that the board and lodging were given on a per project basis. Our Haus did not show if these benefits were also provided in its other construction projects, thus negating its claimed customary nature. If Our Haus really had the practice of freely giving lodging, electricity and water provisions to its employees, then Our Haus should not deduct its values from the respondents’ wages. Otherwise, this will run contrary to the affiants’ claim that these benefits were traditionally given free of charge.

Apart from company policy, the employer may also prove compliance with the first requirement by showing the existence of an industry-wide practice of furnishing the benefits in question among enterprises engaged in the same line of business. However, Our Haus could not really be expected to prove compliance with the first requirement since the living accommodation of workers in the construction industry is not simply a matter of business practice they are mandated by the law itself to ensure the humane working conditions of construction employees despite their constant exposure to hazardous working environments.

Moreover, the law mandates that the cost of the implementation of the requirements for the construction safety and health of workers, shall be integrated to the overall project cost. As part of the project cost that construction companies already charge to their clients, the value of the housing of their workers cannot be charged again to their employees’ salaries. Our Haus cannot pass the burden of the OSH costs of its construction projects to its employees by deducting it as facilities. This is Our Haus’ obligation under the law.

Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose test. Under this test, if a benefit or privilege granted to the employee is clearly for the employer’s convenience, it will not be considered as a facility but a supplement. Here, careful consideration is given to the nature of the employer’s business in relation to the work performed by the employee. This test is used to address inequitable situations wherein employers consider a benefit deductible from the wages even if the factual circumstances show that it clearly redounds to the employers’ greater advantage.

Under the law, only the value of the facilities may be deducted from the employees’ wages but not the value of supplements. Facilities include articles or services for the benefit of the employee or his family but exclude tools of the trade or articles or services primarily for the benefit of the employer or necessary to the conduct of the employer’s business. The law also prescribes that the computation of wages shall exclude whatever benefits, supplements or allowances given to employees. Supplements are paid to employees on top of their basic pay and are free of charge. Since it does not form part of the wage, a supplement’s value may not be included in the determination of whether an employer complied with the prescribed minimum wage rates.

In the present case, the board and lodging provided by Our Haus cannot be categorized as facilities but as supplements. In SLL International Cables Specialist v. NLRC, the court distinguished the two terms. It said that the distinction lies not so much in the kind of benefit or items given, but in the purpose for which it is given. If it is primarily for the employee’s gain, then the benefit is a facility; if its provision is mainly for the employer’s advantage, then it is a supplement.

Our Haus is engaged in the construction business, a labor-intensive enterprise. The success of its projects is largely a function of the physical strength, vitality and efficiency of its laborers. Its business will be jeopardized if its workers are weak, sickly, and lack the required energy to perform strenuous physical activities. Thus, by ensuring that the workers are adequately and well fed, the employer is actually investing on its business.

Moreover, in the construction business, contractors are usually faced with the problem of meeting target deadlines. More often than not, work is performed continuously, day and night, in order to finish the project on the designated turn-over date. Thus, it will be more convenient to the employer if its workers are housed near the construction site to ensure their ready availability during urgent or emergency circumstances. Also, productivity issues like tardiness and unexpected absences would be minimized.

Based on these considerations, we conclude that even under the purpose test, the subsidized meals and free lodging provided by Our Haus are actually supplements. Although they also work to benefit the respondents, an analysis of the nature of these benefits in relation to Our Haus’ business shows that they were given primarily for Our Haus’ greater convenience and advantage. If weighed on a scale, the balance tilts more towards Our Haus’ side. Accordingly, their values cannot be considered in computing the total amount of the respondents’ wages.

 

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