In a significant ruling that refines the evidentiary standards in automated payroll systems, the Philippine Supreme Court addressed when salaries are deemed paid under bank auto-credit arrangements. While the Court did not create new law, it applied existing doctrines to a modern payroll context and emphasized the necessity of concrete, corroborative proof when salary payments are disputed.
The case stemmed from a long-standing labor dispute between Philippine Airlines (PAL) and its unionized flight crew under the Airline Pilots’ Association of the Philippines (ALPAP). Several pilots, including captains, first officers, second officers, and flight engineers, were dismissed on 7 June 1998 amid a collective bargaining conflict. They subsequently filed multiple complaints before the National Labor Relations Commission (NLRC) for illegal dismissal, unfair labor practices, unpaid salaries and benefits, separation pay, damages, and attorney’s fees.
PAL contended that it had fully paid the affected pilots by transferring their salaries to Allied Banking Corporation, presenting payroll summaries and listings as evidence. The employees, however, denied receiving their salaries and argued that PAL failed to provide proof of actual crediting to their accounts.
The Court reaffirmed the long-standing rule: when an employer claims payment of salaries or benefits, the burden of proof rests on the employer to show that payment was indeed made. Merely preparing a payroll or submitting a credit advisory to the bank does not automatically constitute conclusive proof of payment.
To guide future disputes, the Court outlined a three-stage process for salary payments via bank credit:
- Preparation of the payroll by the employer;
- Submission and receipt by the bank of the payroll or credit instruction; and
- Actual crediting of the amounts to the individual employee’s bank account.
The Court explained that while the second stage — submission to the bank — may serve as substantial evidence of payment, it must be corroborated by other reliable proof, such as:
- Employee payslips or bank deposit acknowledgments;
- Payroll reconciliation records;
- Employee confirmation of receipt;
- Clear audit trails.
Absent such supporting documents, the mere submission of a credit advisory does not suffice to discharge the employer’s obligation. The Court emphasized that actual crediting to the employee’s account — the third stage — is the strongest and clearest form of proof of payment.
Ultimately, the Court partially granted the petitions, modifying the NLRC and CA decisions. It ordered the computation of each pilot’s individual claims to be reassessed based on available documentary evidence, applying the principles above.
Why This Matters to Employers and HR Teams?
This decision offers crucial guidance for companies using automated payroll systems. To protect against future claims, it is essential to document and preserve clear records of payroll submissions to the bank, as these now carry evidentiary weight. Companies are encouraged to revisit and strengthen their payroll protocols to ensure compliance with this clarified standard.
This guide provides a general overview of the above transactions at the time of writing only and is not intended to be a comprehensive legal advice. This should also not be taken as an opinion on the topic. For more details and information, you may coordinate with any GVES Law Partner regarding the matter.
Atty. Justin Mitchel R. Avila is an Associate of GVES Law.