MANILA, Philippines ? The Supreme Court has ruled that the sugar mill in the sprawling plantation owned by President Aquino?s family had acted in ?bad faith? when it reduced its workers? 13th month pay following a violent strike that left 14 people dead.

In a unanimous July 26 decision that was released yesterday, the court?s second division ordered Central Azucarera de Tarlac (CAT), which operates the sugar mill and refinery in Hacienda Luisita, to honor its long-established formula in computing the bonus.

Noting that the benefit enjoyed for 30 years was only reduced after the bloody strike in 2004, the court declared that ?this act of petitioner in changing the formula at this time cannot be sanctioned as it indicates a badge of bad faith.?

The court also is to decide on the long pending petition for a temporary restraining order filed by Hacienda Luisita against a directive from the Department of Agrarian Reform (DAR) seeking the distribution of the 5,000-hectare sugar plantation to its workers.

The DAR has ruled that the stock distribution arrangement in lieu of land distribution did not improve but rather diminished the living conditions of the hacienda?s 8,000 workers, contrary to the vision of the 1987 Comprehensive Agrarian Reform Program (CARP).

The Aquino family has said that the DAR ruling was a reprisal against former President Corazon Aquino who joined calls for the resignation of then President Gloria Macapagal-Arroyo following allegations she stole the 2004 election, a charge Arroyo has denied.

CARP was the centerpiece of a social amelioration program promised by the late President Aquino, mother of the newly elected Chief Executive. Economists say land reform is a key to lifting a third of the nation?s population from extreme poverty.

Mr. Aquino did not spell out a policy on agrarian reform in his State of the Nation Address on Monday.

Business plantation-style

A new version of CARP passed last year called for the redistribution within five years of more than 1 million of the most productive agricultural lands that have escaped agrarian reform for over two decades since the first Aquino administration.

The sugar mill is run by Mr. Aquino?s cousin, Fernando Cojuangco, as chief operating officer. Cojuangco is also COO of the holding company of Hacienda Luisita.

Cojuangco last year told The New York Times that his family, which secured ownership of the hacienda in 1958 under a deal guaranteed by the government on condition that it would be eventually distributed to its farmers, had no intention of giving up the estate.

?It?s the kind of business that has to be done plantation-style,? the Times quoted Cojuangco as saying.

Voluntariness of grant

The Central Azucarera de Tarlac Labor Union (CATL) had questioned the diminution of its members? 13th month pay in a petition in 2006.

?The voluntariness of the grant of the benefit was manifested by the number of years the employer had paid the benefit to its employee. Petitioner (CAT) only changed the formula in the computation of the 13th month pay after almost 30 years and only after the dispute between the management and employees erupted,? the court said, speaking through Associate Justice Eduardo Nachura.

Senior Associate Justice Antonio Carpio and Associate Justices Diosdado Peralta and Roberto Abad concurred in the decision.

The court noted that employees of Central Azucarera de Tarlac, one of the country?s biggest sugar refineries, had been receiving the mandatory 13th month pay since 1975.

Since 1975, the management had computed the 13th month pay as total basic annual salary divided by 12 months. The total basic annual salary included basic monthly salary, premium pay for work on rest days and special holidays, night shift differential pay and holiday pay.

Violent dispersal

But the computation was changed in 2006.

On Nov. 6, 2004, the workers staged a strike to demand the reinstatement of some 327 union members and leaders fired by the management of Hacienda Luisita. The strike led to a violent dispersal that killed 14 people, including young children, and wounded scores others.

Central Azucarera de Tarlac did not resume operations until December 2005 when all the striking union members were allowed to return to work. However, the management again temporarily suspended operations in April and May 2006.

From June to September 2006, employees were told to report only for 15 days a month on a rotation basis.

The company said the total annual earnings should have been divided by eight and not 12 months since they only worked for eight months in 2006.

Rule on diminution

On Aug. 14, 2008, the union eventually won its money claims case in the National Labor Relations Commission and the Court of Appeals affirmed the NLRC decision last year. The CAT management appealed to the Supreme Court.

?The rule against diminution of benefits applies if it is shown that the grant of the benefit is based on an express policy or has ripened into a practice over a long period of time and that the practice is consistent and deliberate,? said the Supreme Court.

?Nevertheless, the rule will not apply if the practice is due to error in the construction or application of a doubtful or difficult question of law. But even in cases of error, it should be shown that the correction is done soon after discovery of the error,? it added.

The court also reprimanded Central Azucarera de Tarlac, saying the management cannot use the argument that it was suffering from financial losses as an excuse to be exempted from the mandatory requirement of granting 13th month pay.