Labor Standards Reviewer 2008

UNIVERSITY OF THE PHILIPPINESCOLLEGE OF LAW

Bar Operations 2008

LABOR LAW I

Bar Operations Head │ Arianne Reyes

Academics Head │ Henry AgudaRyan Balisacan

Subject Head │ Dielle KapunanRowena Salonga

LABOR LAW I LABOR STANDARDS

TABLE OF CONTENTS

Section Topic Page no.SECTION 1 Introduction 2SECTION 2 Labor Code of the Philippines 4SECTION 3 Work Relationship 6SECTION 4 Employee Classification 8SECTION 5 Recruitment and Placement of workers 13SECTION 6 Alien employment 16SECTION 7 Employment of Apprentice, learners and handicapped workers 27SECTION 8 Condition of employment – Hours of work 19SECTION 9 Condition of employment – Weekly Rest Period 22SECTION 10 Condition of employment – Holidays 22SECTION 11 Condition of employment – Service Incentive Leave 24SECTION 12 Wages 25SECTION 13 Minimum Wages 33SECTION 14 Women Workers 37SECTION 15 Minors 39SECTION 16 House helpers 41SECTION 17 Home workers 42SECTION 18 Termination of Employment 42SECTION 19 Retirement 54

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PART I

INTRODUCTION

LABOR LAW - The law governing the rights and duties of theemployer and employees

(1) with respect to the terms and conditions of employmentand

(2) with respect to labor disputes arising from collectivebargaining respecting such terms and conditions

Classifications:

LABOR STANDARDS minimum requirements prescribed by existinglaws, rules and regulations relating to wages, hours of work, cost-of-living allowance, and other monetary and welfare benefits,including occupational safety, and health standards. MaternityChildren’s Hospital v. Sec. of Labor (89)

LABOR RELATIONS Regulates the institutional relationship betweenthe workers organized into a union and the employers

WELFARE LAWS Designed to take care of the contingencies whichmay affect the workers

Basis:

1987 ConstitutionArt II Sec 5 protection of life, liberty, & propertyArt II Sec 18 State affirms labor as a primary

social economic forceArt XIII Sec1 Congress shall give highest priority to

enact measures that protect humandignity

LAW AND WORKER – SC reaffirmed its concern for the lowly workerwho, often at the mercy of his employer must look up to the law forhis protection Cebu Royal Plant v. Deputy Minister of Labor (89)

LABOR CASE – not every relation between management and laboris a labor case. Definition is strict. It is only a labor case if it dealswith the Labor Code, CBA and its associated laws/legislationLapanday Agricultural Development v CA (01)

CASE DECISION – it should faithfully comply with Section 14, ArticleVIII of the Constitution which provides that no decision shall berendered by any court [or quasi-judicial body] without expressingtherein clearly and distinctly the facts of the case and the law onwhich it is based.

MANAGEMENT FUNCTION –1. The law recognizes this right as an inherent part of

ownership (Duncan v Glaxo)2. The law imposes a LIMITATION in the manner that it is

exercised (Valiao v CA 04)

COMPROMISE and WAIVER - FINAL and BINDING upon the parties.NLRC shall only assume jurisdiction in cases of non-compliance orprima facie evidence that it was obtained through FRAUD,MISREPRESENTATION, OR COERCION. (Art 227)

Rules: may be valid subject to certain tests1. Equal bargaining positions2. Nature of controversy3. Amount is not unconscionable (no huge disparity

between initial claim and compromised amount)Leading case: Periquet v NLRC (90)

SOURCES OF LAW

a. LABOR CODE AND RELATED SPECIAL LEGISLATIONb. CONTRACT (Art 1305 [a contract is the meeting of the

minds…]; Art 1306 [may establish stipulations as theymay deem conventient provided they are non contrary tolaw, morals,…]

c. COLLECTIVE BARGAINING AGREEMENT (CBA) DOLE Phils.,v Pawis ng Makabayang Obrero (03)

d. PAST PRACTICES American Wire and Cable Co., Inc (05) Done for a long period of time Instituted by the employer (ER) voluntarily

e. COMPANY POLICIES China Banking Corporation vBorromeo (04)

LAW AND THE CONSTITUTION

A. LABOR SECTOR CHARACTERIZEDArticle II Section 18The State affirms labor as a primary social economic force.It shall protect the rights of workers and promote their welfare.

B. PROTECTION OF LABOR GUARANTEESArt XIII SEC 3 (operative provision in Consti) full protection to labor (domestic or overseas) guaranteed rights: labor standards in bold; otherwise, labor

relations

7 Cardinal Rights of WorkersSCPTHLP

right to self-organizationcollective bargaining and negotiationspeaceful concerted activities including the

right to strike in accordance with lawsecurity of tenurehumane conditions of workliving wageparticipate in policy and decision-making

processes affecting their rights andbenefits as may be provided by law.

C. SOCIAL JUSTICEArticle II, Section 10Article XIII Section 1Article XIII, Section 2Social justice is "neither communism, nor despotism, nor atomism,nor anarchy," but the humanization of laws and the equalization ofsocial and economic forces by the State so that justice in its rationaland objectively secular conception may at least be approximated.Calalang v. Williams (40)

Limits of use:

Not to undermine property rights resulting in confiscation Guido v.Rural Progress Adm. (49)May only protect the laborers who come with clean hands Phil.Long Distance Telephone Co. v. NLRC (88)Never result to an injustice or oppression of the employer Phil.Geothermal Inc. v NLRC (94)

Basis of limitation:Law also guarantees the ER reasonable returns from his investmentAsian Alcohol Corp. v. NLRC (99)

CONSTI RIGHTS AND LABOR LAW

LABOR, MANAGEMENT AND THE CONSTITUTIONThe law in protecting the rights of the employees authorizes neitheroppression nor self-destruction of the employer. It should be madeclear that when the law tilts the scale of justice in favor of labor, it isbut a recognition of the inherent economic inequality betweenlabor and management. Never should the scale be so tilted if theresult is an injustice to the employer. Justitia nemini neganda est(Justice is to be denied to none). Phil. Geothermal Inc. v. NLRC (94)

MANAGEMENT AND THE CONSTITUTION

Contracting out is management prerogative so long as done in goodfaith, must not have been resorted to circumvent the law or mustnot have been the result of malicious or arbitrary action. ManilaElectric Company v. Quisumbing (99)LABOR AS PROPERTYOne’s employment is a "property right", and the wrongfulinterference therewith is an actionable wrong. Sibal v. Notre Dameof Greater Manila (90)

DUE PROCESS REQUIREMENT



A worker’s employment is property in the constitutional sense. Hecannot be deprived of his work without due process of law.

Maneja v. NLRC (98)Due process requirements are two-fold: substantive and theprocedural.Substantive - dismissal must be for a valid or authorized cause asprovided by law (Articles 279, 281, 282-284, New Labor CodeProcedural - notice and hearing

Salaw v. NLRC (91)Notice - intended to inform the employee concerned of theemployer's intent to dismiss and the reason for the proposeddismissalHearing - affords the employee an opportunity to answer hisemployer's charges against him and accordingly to defend himselftherefrom before dismissal is effected

Century Textile Mills, Inc. v. NLRC (89)LIBERT OF CONTRACT andSTATE INTERFERENCEThe prohibition to impair the obligation of contracts is not absoluteand unqualified. In spite of the constitutional prohibition and thefact that both parties are of full age and competent to contract, itdoes not necessarily deprive the State of the power to interfere

1. where the parties do not stand upon an equality, or2. where the public health demands that one party to thecontract shall be protected against himself.

The State still retains an interest in his welfare, however reckless hemay be. Legislation appropriate to safeguarding said interests maymodify or abrogate contracts already in effect. For not only areexisting laws read into contracts in order to fix the obligations asbetween the parties, but the reservation of essential attributes ofsovereign power is also read into contracts as a postulate of thelegal order. Leyte Land Transportation Co. v Leyte Farmers &Workers Union (48)

WELFARE STATEwelfare state concept found in:1. constitutional clause on the promotion of social justice to

ensure the well-being and economic security of all the people,2. the pledge of protection to labor with specific authority to

regulate the relations between landowners and tenants andbetween labor and capital

Alalayan v. National Power Corporation (68)LAISSEZ-FAIREConstitution is primarily a document of social justice, and althoughit has recognized the importance of the private sector, it has notembraced fully the concept of laissez faire or relied on pure marketforces to govern the economy Employees Confederation of thePhilippines v. NWPC (91)

PARTICIPATION IN DECISION MAKING PROCESSWhile such "obligation" [to participate in decision-making] was

not yet founded in law when the Code was formulated [which,before the amendment, merely said to promote the enlightenmentof workers concerning their rights and obligations as ees], theattainment of a harmonious labor-management relationship andthe then already existing state policy of enlightening workersconcerning their rights as employees demand no less than theobservance of transparency in managerial moves affectingemployees' rights. Philippine Airlines, Inc. v. NLRC (93)

Certainly, such participation by the Union in the saidcommittees is not in the nature of a co-management control of thebusiness of MERALCO. What is granted by the Secretary isparticipation and representation. Thus, there is no impairment ofmanagement prerogatives. Manila Electric Co. v. Quisumbing (99)

LABOR AND THE CIVIL CODE

ROLE OF LAWLABOR CONTRACTS

Art. 1700, CC The relations between capital and labor are notmerely contractual. They are so impressed with public interest thatlabor contracts must yield to the common good. Therefore, suchcontracts are subject to special laws…

PAL Employees Savings and Loan Assn., Inc. v. NLRC (96)

Generally speaking, contracts are respected as the lawbetween the contracting parties, and they may establish suchstipulations, clauses, terms and conditions as they may see fit; andfor as long as such agreements are not contrary to law, morals,good customs, public policy or public order, they shall have theforce of law between them. And under the Civil Code, contracts oflabor are explicitly subject to the police power of the State becausethey are not ordinary contracts but are impressed with publicinterest. Inasmuch as in this particular instance the contract inquestion would have been deemed in violation of pertinent laborlaws, the provisions of said laws would prevail over the terms of thecontract, and private respondent would still be entitled to overtimepay.

EMPLOYER-EMPLOYEE STANDARD OF CONDUCT

Art. 1701 Neither capital nor labor shall act oppressively againstthe other, or impair the interest or convenience of the public.

1. Fair Treatmentthe right of an employer to dismiss an employee differs from andshould not be confused with the manner in which such right isexercised. It must not be oppressive and abusive since it affectsone's person and property. General Bank and Trust Co., v. Court ofAppeals (85)

2. Mutual ObligationThe employer's obligation to give him workers just compensationand treatment carries with it the corollary right to expect from theworkers adequate work, diligence and good conduct. Firestone Tireand Rubber Co. v. Lariosa (87)

3. Law ComplianceIt is also important to emphasize that the return-to-work order not

so much confers a right as it imposes a duty; and while as a right it

may be waived, it must be discharged as a duty even against the

worker's will. Sarmiento v. Tuico (88)

4. EE Obedience and Compliance to ER’s OrdersThe lack of a written or formal designation should not be an excuse

to disclaim any responsibility for any damage suffered by the

employer due to his negligence. The measure of the responsibility

of an employee is that if he performed his assigned task efficiently

and according to the usual standards, then he may not be held

personally liable for any damage arising therefrom. Failing in this,

the employee must suffer the consequences of his negligence if not

lack of due care in the performance of his duties. PCIB v. Jacinto

(91)

To sanction disregard or disobedience by employees of a rule ororder laid down by management, on the pleaded theory that therule or order is unreasonable, illegal, or otherwise irregular for onereason or another, would be disastrous to the discipline and orderthat it is in the interest of both employer and his employees topreserve and maintain in the working establishment and withoutwhich no meaningful operation and progress is possible. Deliberatedisregard or disobedience of rules, defiance of managementauthority cannot be countenanced. This is not to say that theemployees have no remedy against rules or orders they regard asunjust or illegal. They may object thereto, ask to negotiate thereon,bring proceedings for redress against the employer before theMinistry of Labor. But until and unless the rules or orders aredeclared to be illegal or improper by competent authority, theemployees ignore or disobey them at their peril GTE DirectoriesCorp. v. Sanchez (91)

5. ER’s ObligationAn employer can terminate the services of an employee only forvalid and just causes which must be supported by clear andconvincing evidence. The employer has the burden of proving thatthe dismissal was indeed for a valid and just cause. Failure to do soresults in a finding that the dismissal was unjustified. Maneja v.NLRC (98)



LABOR AND INTERNATIONAL COVENANTS

Universal Declaration of Human Rights – Arts. 3, 7, 17, 22, 23,24, 25

International Covenant on Economic, Social and Cultural Rights –Part III, Arts. 6, 7, 9, 11

International Covenant on Civil and Political Rights – Part II, Art. 8

Conventions and Recommendations if the International LaborOrganization (ILO)

INTERNATIONAL CONVENTIONS

International law, which springs from general principles of law,likewise proscribes discrimination. General principles of law includeprinciples of equity, i.e., the general principles of fairness andjustice, based on the test of what is reasonable. Numerous treatiesembody the general principle against discrimination, the veryantithesis of fairness and justice. The Philippines, through itsConstitution, has incorporated this principle as part of its nationallaws. International School Alliance of Educators v. Quisumbing(2000)

PART II

THE LABOR CODE OF THE PHILIPPINES

POLICY DECLARATION – reiterates Article XIII Sec 3 of theConstitution

APPLICABILITYArt 6 - All rights and benefits granted to workers … apply alike to allworkers, whether agricultural or non-agricultural.

Art 276 - Government employees - The terms and conditions ofemployment of all government employees… shall be governed bythe Civil Service Law, rules and regulations. Their salaries shall bestandardized by the National Assembly as provided for in the newconstitution. However, there shall be no reduction of existingwages, benefits and other terms and conditions of employmentbeing enjoyed by them at the time of the adoption of this Code.

ART IX, Sec 2 (1), 1987 Constituion - The civil service embraces allbranches, … of the Government, including government-owned orcontrolled corporations with original charters.

The rule is that only government-owned or controlled corporationswith original charters come under the Civil Service. Since NASECO isorganized under the Corporation Law and not by virtue of a speciallegislative charter, its relations with its personnel are governed bythe Labor Code and come under the jurisdiction of the NLRCCabrera v. NLRC (91)

APPLICATION OF THE LABOR CODE

Applicability – Art. 6

Not of universal application. only applies to:

All workers – agricultural and non-agricultural

GOCCs – organized under general laws e.g. Corporation Code

All branches of government, and GOCCs, profit or non – profitorganizations ONLY with regard to wages 97 (b)

all private and government employees ONLY with regard toEmployee’s Compensation and State Insurance Fund(167 f)

NOT APPLICABLE TO

Government employees – should be Civil Service Law and EO 180

GOCC with original charter – Art. 9 – B, Sec. 2(1) of theConstitution

International Agencies and specialized agencies or UN – treaty orinternational conventions

▪ grant of immunity from suit ex. IRRI, ICMC

▪ by specific treaty – grant of immunity, but such treatymust include provisions for resolution of disputes

▪ if injustice is created due to exemption from suit,REMEDY: ask Phil Gov’t to withdraw the grant ofimmunity from suit.

International AgenciesIn order to assure independence, they are immune from suit, thus,

Phil. Laws do not apply to them. ..”The grant of immunity is by

virtue of the Convention on the Privileges and Immunities of

Specialized Agencies of the U.N., which has become part of the law

of the land under the Constitution.” Ebro III v. NLRC (96)

SCHOOL TEACHERS

On the issue of whether the individual petitioners were permanent

employees, it is the Manual of Regulations for Private Schools, and

not the Labor Code, which is applicable. National Mines and Allied

Workers’ Union v NLRC (98)

On issues where the manual expressly provides for the rules, suchas probationary employment, the labor code does not apply.On issues where the manual is silent, such as termination of schoolteachers, the labor code applies.

RELIGIOUS CORPORATIONS

The labor code does not cover ecclesiastical affairs, defined as onewhich involves the relationship between the church and itsmembers and relate to matters of faith, religious doctrines, worshipand governance of the congregation.However, the Labor Code is comprehensive enough to includereligious corporations on its secular affairs, as provided by Article278 of the Labor Code which states that “the provisions of this Titleshall apply to all establishments or undertakings, whether for profitor not.” Obviously, the cited article does not make any exception infavor of a religious corporation. Austria v. NLRC (99)

RULE MAKING POWERArticle 5 gives the Secretary of Labor general grant of authority; thetail end of Labor Code gives him the right to promulgate workingconditions.Art. 5. Rules and regulations. The Department of Labor and othergovernment agencies charged with the administration andenforcement of this Code or any of its parts shall promulgate thenecessary implementing rules and regulations. Such rules andregulations shall become effective fifteen (15) days afterannouncement of their adoption in newspapers of generalcirculation.

LIMITATION1. must be issued under authority of law2. must not be contrary to law and the Consitution (in other

words, must not amend the Labor Code, Constitution orother laws in promulgating such rules and regulations)

illustration of #1SONZA argues that Policy Instruction No. 40 issued by then Ministerof Labor Blas Ople on 8 January 1979 finally settled the status ofworkers in the broadcast industry. Under this policy, the types ofemployees in the broadcast industry are the station and programemployees. Policy Instruction No. 40 is a mere executive issuancewhich does not have the force and effect of law. A mere executiveissuance cannot exclude independent contractors from the class ofservice providers to the broadcast industry. Such classification isnot binding on this Court, especially when the classification has nobasis either in law or in fact. Sonza v ABS-CBN Broadcasting Corp.(04)

Illustration of #2"it must be pointed out that the Secretary of Labor has exceededhis authority when he included paragraph (k) in Section 1 of theRules Implementing P.D. 1123. "By virtue of such rule-makingauthority, the Secretary of Labor issued on May 1, 1977 a set ofrules which exempts not only distressed employers but also 'thosewho have granted in addition to the allowance under P.D. 525, atleast P60.00 monthly wage increase on or after January 1, 1977,provided that those who paid less than this amount shall pay thedifference.' "Clearly, the inclusion of paragraph k contravenes thestatutory authority granted to the Secretary of Labor, and the sameis therefore void, as ruled by this Court in a long line of cases, . . ."Kapisanan ng mga Manggagawang Pinagyakap v. NLRC (87)

LAW INTERPRETATION


Doubts in (implementation and interpretation of the Code)construction resolved in favor of labor Art. 4, Labor CodeIn case of doubt, all labor legislation and all labor contracts shall beconstrued in favor of the safety and decent living for the laborer.Art. 170, Civil Code

Liberal ConstructionThe interpretation herein made gives meaning and substance to theliberal and compassionate spirit of the law enunciated in Article 4 ofthe Labor Code

Salinas v NLRC (99)Exception: (estoppel)The policy being questioned is not a policy against marriage. Anemployee of the company remains free to marry anyone of his orher choosing. However, an employee’s personal decision does notdetract the employer from exercising management prerogatives toensure maximum profit and business success.… the assailed company policy which forms part of respondentsEmployee Code of Conduct and of its contracts with its employees,such as that signed by Tescon, was made known to him prior to hisemployment. Tecson, therefore, was aware of that restriction whenhe signed his employment contract and when he entered into arelationship with Bettsy. Since Tecson knowingly and voluntarilyentered into a contract of employment with Glaxo, the stipulationstherein have the force of law between them and, thus, should becomplied with in good faith."29 He is therefore estopped fromquestioning said policy. Duncan Association v Glaxo Wellcome (04)

Rationale – in favor of laborArt. 4 of the Labor Code provides that all doubts in theimplementation and interpretation of its provisions, including itsimplementing rules and regulations, shall be resolved in favor oflabor. For the working man’s welfare should be the primordial andparamount consideration. Asian Transmission Corporation v CA(04)

Doubtas a rule, doubts should be resolved in favor of the claimant-employee. Clemente v. GSIS (87)

labor lest we engage in judicial legislation. Bravo v. ECC (86)

Factual Considerations and RationalityBut that care and solicitude (for protection of laborer’s rights)cannot justify disregard of relevant facts or eschewal of rationalityin the construction of the text of applicable rules in order to arriveat a disposition in favor of an employee. PAL v NLRC (91)

Equity and Moral ConsiderationThe rule embodied in the Labor Code is that a person dismissed forcause as defined therein is not entitled to separation pay. The citedcases constitute the exception, based on equity. Equity has beendefined as justice outside law, being ethical rather than jural andbelonging to the sphere of morals than of law. It is grounded on theprecepts of conscience and not on any sanction of positive law.Hence, it cannot prevail against the express provision of the laborlaws allowing dismissal of employees for cause and without anyprovision for separation pay. Manning International Corp. v. NLRC(91)

FairnessAs a general rule, the sympathy of the Court is on the side of the

laboring classes, because of the one-sided relation between labor

and capital. The Court must take care, however, that in the contest

between labor and capital, the results achieved are fair and in

conformity with the rules. Reliance Surety and Insurance Co. Inc v

NLRC (91)

Balancing Conflicting ClaimsNo less than the Constitution recognizes the right of enterprises toadopt and enforce such a policy to protect its right to reasonablereturns on investments and to expansion and growth. Indeed,while our laws endeavor to give life to the constitutional policy onsocial justice and the protection of labor, it does not mean thatevery labor dispute will be decided in favor of the workers. The lawalso recognizes that management has rights which are also entitledto respect and enforcement in the interest of fair play. DuncanAssociation v Glaxo Wellcome (04)

THE LABOR CODE OF THE PHILIPPINES

POLICY DECLARATION – reiterates Article XIII Sec 3 of theConstitution

APPLICABILITYArt 6 - All rights and benefits granted to workers … apply alike to allworkers, whether agricultural or non-agricultural.

Art 276 - Government employees - The terms and conditions ofemployment of all government employees… shall be governed bythe Civil Service Law, rules and regulations. Their salaries shall bestandardized by the National Assembly as provided for in the newconstitution. However, there shall be no reduction of existingwages, benefits and other terms and conditions of employmentbeing enjoyed by them at the time of the adoption of this Code.

ART IX, Sec 2 (1), 1987 Constituion - The civil service embraces allbranches, … of the Government, including government-owned orcontrolled corporations with original charters.

The rule is that only government-owned or controlled corporationswith original charters come under the Civil Service. Since NASECO isorganized under the Corporation Law and not by virtue of a speciallegislative charter, its relations with its personnel are governed by

APPLICATION OF THE LABOR CODEApplicability – Art. 6 Not of universal application. only applies to: All workers – agricultural and non-agricultural GOCCs – organized under general laws e.g.

Corporation Code All branches of government, and GOCCs, profit or

non – profit organizations ONLY with regard towages 97 (b)

all private and government employees ONLY withregard to Employee’s Compensation and StateInsurance Fund(167 f)

NOT APPLICABLE TO Government employees – should be Civil Service

Law and EO 180 GOCC with original charter – Art. 9 – B, Sec. 2(1)

of the Constitution International Agencies and specialized agencies or

UN – treaty or international conventions▪ grant of immunity from suit ex. IRRI, ICMC▪ by specific treaty – grant of immunity, but such

treaty must include provisions for resolution ofdisputes

▪ if injustice is created due to exemption from suit,REMEDY: ask Phil Gov’t to withdraw the grant of


No DoubtWhile we do not dispute petitioner's contention that under the law,in case of doubt in the implementation and interpretation of theprovisions of the Labor Code, including its implementing rules andregulations, the doubt shall be resolved in favor of the laborer, wefind that the same has no application in this case since the pertinentprovisions of the Labor Code leave no room for doubt either in theirinterpretation or application. Bonifacio v. GSIS (86)

Sweeping Interpretationwe cannot adopt a sweeping interpretation of the law in favor of

the Labor Code and come under the jurisdiction of the NLRCCabrera v. NLRC (91)

immunity from suit.



PART III

WORK RELATIONSHIP

Art. 97 Definition(a) "Person" means an individual, partnership, association,

corporation, business trust, legal representative or anyorganized group of person.

(b) "Employer" includes any person acting directly or indirectly inthe interest of an employer in relation to an employee andshall include the Government and all its branches, subdivisionsand instrumentalities, all government-owned or controlledcorporations and institutions, as well as non-profit privateinstitutions or organizations."Employee" includes any individual employed by an employer.

Art. 167 Definition of Terms(f) "Employer" means any person, natural or juridical, employing

the services of the employee.(g) "Employee" means any person compulsorily covered by the

GSIS under Commonwealth Act numbered one hundredeighty-six, as amended, including members of the ArmedForces of the Philippines, and any person employed as casual,emergency, temporary, substitute or contractual; or anyperson compulsorily covered by the SSS under Republic Actnumbered eleven hundred sixty-one, as amended.

Art. 212 Definitions(e) "Employer" includes any person acting in the interest of an

employer, directly or indirectly. The term shall not include anylabor organization or any of its officers or agents except whenacting as employer.

(f) "Employee" includes any person in the employ of an employer.The term shall not be limited to the employees of a particularemployer, unless this Code so explicitly states. It shall includeany individual whose work has ceased as a result of or inconnection with any current labor dispute or because of anyunfair labor practice if he has not obtained any othersubstantially equivalent and regular employment.

EMPLOYEE

As can be seen from this description, a distinction existsbetween those who have the authority to devise, implement andcontrol strategic and operational policies (top and middlemanagers) and those whose task is simply to ensure that suchpolicies are carried out by the rank-and-file employees of anorganization (first-level managers/supervisors). What distinguishesthem from the rank-and-file employees is that they act in theinterest of the employer in supervising such rank-and-fileemployees.

"Managerial employees" may therefore be said to fall into twodistinct categories: the "managers" per se, who compose theformer group described above, and the "supervisors" who form thelatter group. Whether they belong to the first or the secondcategory, managers, vis-a-vis employers, are, likewise, employees.

EMPLOYER-EMPLOYEE RELATIONSHIP

1. FACTUAL TEST/FACTORS/CONTROL TESTCase law has consistently held that the elements of an employer-employee relationship are: (a) the selection and engagement of theemployee; (b) the payment of wages; (c) the power of dismissal;and (d) the employer’s power to control the employee on themeans and methods by which the work is accomplished. The lastelement, the so-called “control test”, is the most importantelement.Applying the control test to the present case, we find that SONZA isnot an employee but an independent contractor. The control test isthe most important test our courts apply in distinguishing anemployee from an independent contractor. This test is based on theextent of control the hirer exercises over a worker. The greater thesupervision and control the hirer exercises, the more likely theworker is deemed an employee. The converse holds true as well –

the less control the hirer exercises, the more likely the worker isconsidered an independent contractor.[Being an exclusive talent does not by itself mean that SONZA is anemployee of ABS-CBN. Even an independent contractor can validlyprovide his services exclusively to the hiring party. In the broadcastindustry, exclusivity is not necessarily the same as control. The hugetalent fees partially compensates for exclusivity, as in the presentcase. Sonza v ABS-CBN Broadcasting Corp. (04)

2. ESTABLISHEDThere is indubitable evidence showing that BSMI is an independentcontractor, engaged in the management of projects, businessoperations, functions, jobs and other kinds of business ventures,and has sufficient capital and resources to undertake its principalbusiness. As a legitimate job contractor, there can be no doubt as tothe existence of an employer-employee relationship between thecontractor and the workers.

Unfortunately, after a study and evaluation of its personnelorganization, BSMI was impelled to terminate the services of therespondents on the ground of redundancy. This right to hire andfire is another element of the employer-employee relationship[45]which actually existed between the respondents and BSMI, and notwith Wack Wack. Wack-Wack Golf and Country Club v NLRC (05)

3. AGREEMENTPetitioner insists that the most significant determinant of anemployer-employee relationship, i.e., the right to control, is absent.The contract of services between MAERC and SMC provided thatMAERC was an independent contractor and that the workers hiredby it "shall not, in any manner and under any circumstances, beconsidered employees of the Company, and that the Company hasno control or supervision whatsoever over the conduct of theContractor or any of its workers in respect to how they accomplishtheir work or perform the Contractor's obligations under theContract."

In deciding the question of control, the language of thecontract is not determinative of the parties' relationship; rather, it isthe totality of the facts and surrounding circumstances of each case.Thus, The existence of an employer-employees relation is aquestion of law and being such, it cannot be made the subject ofagreement. San Miguel v Abella (05)

4. METHOD WAGE PAYMENTSuffice it to say, the fact that Laudato was paid by way ofcommission does not preclude the establishment of an employer-employee relationship. Lazaro v SSS (04)

5. HOURS OF WORKNeither does it follow that a person who does not observe normalhours of work cannot be deemed an employee. In CosmopolitanFuneral Homes, Inc. v. Maalat, the employer similarly denied theexistence of an employer-employee relationship, as the claimantaccording to it, was a “supervisor on commission basis” who did notobserve normal hours of work. This Court declared that there wasan employer-employee relationship, noting that “[the] supervisor,although compensated on commission basis, [is] exempt from theobservance of normal hours of work for his compensation ismeasured by the number of sales he makes.” Lazaro v SSS (04)

6. PROOFIt has long been established that in administrative and quasi-judicialproceedings, substantial evidence is sufficient as a basis forjudgment on the existence of employer-employee relationship. Noparticular form of evidence is required to prove the existence ofsuch employer-employee relationship. Any competent and relevantevidence to prove the relationship may be admitted.

Substantial evidence has been defined to be such relevantevidence as a reasonable mind might accept as adequate to supporta conclusion, and its absence is not shown by stressing that there iscontrary evidence on record, direct or circumstantial, for theappellate court cannot substitute its own judgment or criterion forthat of the trial court in determining wherein lies the weight ofevidence or what evidence is entitled to belief.

In a business establishment, an identification card is usuallyprovided not only as a security measure but mainly to identify theholder thereof as a bona fide employee of the firm that issues it.Together with the cash vouchers covering petitioner’s salaries forthe months stated therein, we agree with the labor arbiter that



these matters constitute substantial evidence adequate to supporta conclusion that petitioner was indeed an employee of privaterespondent. Domasig v NLRC (96)

7. ABSENCEApplying the aforementioned test, an employer-employeerelationship is notably absent in this case. It is undisputed thatpetitioner Abante was a commission salesman who received 3%commission of his gross sales. Yet no quota was imposed on him bythe respondent; such that a dismal performance or even a deadresult will not result in any sanction or provide a ground fordismissal. He was not required to report to the office at any time orsubmit any periodic written report on his sales performance andactivities. Although he had the whole of Mindanao as his base ofoperation, he was not designated by respondent to conduct hissales activities at any particular or specific place. Respondentcompany did not prescribe the manner of selling the merchandise;he was left alone to adopt any style or strategy to entice hiscustomers. While it is true that he occasionally reported to theManila office to attend conferences on marketing strategies, it wasintended not to control the manner and means to be used inreaching the desired end, but to serve as a guide and to upgrade hisskills for a more efficient marketing performance. We reiterate therule that there could be no employer-employee relationship wherethe element of control is absent. Where a person who works foranother does so more or less at his own pleasure and is not subjectto definite hours or conditions of work, and in turn is compensatedaccording to the result of his efforts and not the amount thereof, norelationship of employer-employee exists. Abante v Lamadrid (04)

8. DENIALDenying the existence of an employer-employee relationship,petitioner insists that the parties’ agreement was for a contract oflease of services. We disagree. Petitioner is barred to negate theexistence of an employer-employee relationship. In its petition filedbefore this Court, petitioner invoked our rulings on the right of anemployer to dismiss an employee for just cause. Petitionermaintained that private respondent was justifiably dismissed due toabandonment of work. By adopting said rulings, petitionerimpliedly admitted that it was in fact the employer of privaterespondent. According to the control test, the power to dismiss anemployee is one of the indications of an employer-employeerelationship. Petitioner’s claim that private respondent was legallydismissed for abandonment was in fact a negative pregnant: anacknowledgement that there was no mutual termination of thealleged contract of lease and that private respondent was itsemployee. The fact that petitioner paid private respondent oncommission basis did not rule out the presence of an employee-employer relationship. Article 97(f) of the Labor Code clearlyprovides that an employee’s wages can be in the form ofcommissions. R transport v Ejanedra (04)

INDEPENDENT CONTRACTOR AND LABORCONTRACTOR ONLY

A. INDEPENDENT CONTRACTOR

Contractor or sub-contractor - Whenever an employer enters into acontract with another person for the performance of the former'swork, the employees of the contractor and of the latter's sub-contractor, if any, shall be paid in accordance with the provisions ofthis Code.

In the event that the contractor or sub-contractor fails to pay thewages of his employees in accordance with this Code, the employershall be jointly and severally liable with his contractor or sub-contractor to such employees to the extent of the work performedunder the contract, in the same manner and extent that he is liableto employees directly employed by him.

The Secretary of Labor and Employment may, by appropriateregulations, restrict or prohibit the contracting out of labor toprotect the rights of workers established under this Code. In soprohibiting or restricting, he may make appropriate distinctionsbetween labor-only contracting as well as differentiations withinthese types of contracting, and determine who among the parties

involved shall be considered the employer for purposes of thisCode, to prevent any violation or circumvention of any provision ofthis Code.

There is "labor-only" contracting where the person supplyingworkers to an employer does not have substantial capital orinvestment in the form of tools, equipment, machineries, workpremises, among others, and the workers recruited and placed bysuch person are performing activities which are directly related tothe principal business of such employer. In such cases, the personor intermediary shall be considered merely as an agent of theemployer who shall be responsible to the workers in the samemanner and extent as if the latter were directly employed by him.(Art 106)

Indirect employer - The provisions of the immediately precedingArticle shall likewise apply to any person, partnership, associationor corporation which, not being an employer, contracts with anindependent contractor for the performance of any work, task, jobor project. (Art 107)

Solidary liability - The provisions of existing laws to the contrarynotwithstanding, every employer or indirect employer shall be heldresponsible with his contractor or subcontractor for any violation ofany provision of this Code. For purposes of determining the extentof their civil liability under this Chapter, they shall be considered asdirect employers. (art 109)

MANAGEMENT FUNCTION

Additionally, We recognize that contracting out is not unlimited;rather, it is a prerogative that management enjoys subject to well-defined legal limitations. As we have previously held, the companycan determine in its best business judgment whether it shouldcontract out the performance of some of its work for as long as theemployer is motivated by good faith, and the contracting out mustnot have been resorted to circumvent the law or must not havebeen the result of malicious or arbitrary action. The Labor Code andits implementing rules also contain specific rules governingcontracting out (Department or Labor Order No. 10, May 30, 1997,Sections 1-25). Manila Electric Co. v. Quisumbing (99)

REQUIREMENTS – INDEPENDENT CONTRACTOR

“Labor-only contracting” as defined in Section 5, Department OrderNo. 18-02, Rules Implementing Articles 106-109 of the Labor Coderefers to an arrangement where the contractor or subcontractormerely recruits, supplies or places workers to perform job, work orservice for a principal, and any of the following elements is present:

(i) The contractor or subcontractor does not have substantialcapital or investment which relates to the job, work or service to beperformed and the employees recruited, supplied or placed by suchcontractor or subcontractor are performing activities which aredirectly related to the main business of the principal; or

(ii) The contractor does not exercise the right to control over theperformance of the work of the contractual employee. ManilaWater Co. v Pena (04)

Desirable – UnnecessaryWe perceive at the outset the disposition of the NLRC that

janitorial services are necessary and desirable to the trade orbusiness of petitioner Coca-Cola. But this is inconsistent with ourpronouncement in Kimberly Independent Labor Union v. Drilonwhere the Court took judicial notice of the practice adopted inseveral government and private institutions and industries of hiringjanitorial services on an “independent contractor basis.” In thisrespect, although janitorial services may be considered directlyrelated to the principal business of an employer, as with everybusiness, we deemed them unnecessary in the conduct of theemployer’s principal business. Coca-Cola Bottlers Phil., Inc. v. NLRC(99)

Employer – EmployeeIn legitimate job contracting, no employer-employee relation

exists between the principal and the job contractor's employees.



The principal is responsible to the job contractor's employees onlyfor the proper payment of wages. But in labor-only contracting, anemployer-employee relation is created by law between theprincipal and the labor-only contractor's employees, such that theformer is responsible to such employees, as if he or she had directlyemployed them. Besides, the Court has already taken judicial noticeof the general practice adopted in several government and privateinstitutions of securing janitorial services on an independentcontractor basis. Phil. Airlines, Inc. v. NLRC (98)

Liability of indirect EmployerThe only time the indirect employer may be made solidarily

liable with the contractor is when the contractor fails to pay hisemployees their wages and other benefits claimed. Lanzadares v.Amethyst Security (2003)

B. LABOR ONLY CONTRACTOR

Requisites(a) when he does not have substantial capital or investment in theform of tools, equipment, machineries, work premises and othermaterials, and(b) when the workers recruited and placed by him perform activitiesthat relate directly to the principal business or operations of theemployer in which the workers are habitually employed.Sec. 9(a), Rule VIII, Book III, of the Omnibus Rules ImplementingArticle 106 of the Labor Code Ponce v. NLRC (98)

ProhibitionLabor-only contracting, a prohibited act, is an arrangement wherethe contractor or subcontractor merely recruits, supplies or placesworkers to perform a job, work or service for a principal. Vinoya v.NLRC (2000)

Effect of FindingAs we held in Industrial Timber Corporation, et. al. vs. NLRC et.

al.:Hence a finding that a contractor is a "labor-only"contractor is equivalent to a finding that there exists asemployer-employee relationship between the owner ofthe project and the employees of the "labor-only"contractor since that relationship is defined andprescribed by law itself.

Accordingly, private respondents, are considered employees of thepetitioner. Further, private respondents, having performedactivities which are directly related to petitioner's business, aredeemed regular employees of petitioner pursuant to Article 280 ofthe Labor Code. And as regular employees, they must be accordedsecurity of tenure in their employment. Verily, their services can beterminated only based on "just" and "authorized" causes underArticles 282, 283 and 284 of the Labor Code. Phil. Airlines, Inc. v.NLRC (98)

INDEPENDENT CONTRACTINGUnder DOLE Department Order No. 10 (1997), contracting

shall be legitimate if the following circumstances concur:

1. The contractor or subcontractor carries on a distinct andindependent business and undertakes to perform the job, workor service on its own account and under its own responsibility,according to its own manner and method, and free from thecontrol and direction of the principal in all matters connectedwith the performance of the work except as to the resultsthereof;

2. The contractor or subcontractor has substantial capital orinvestment; and

3. The agreement between the principal and contractor orsubcontractor assures the contractual employees entitlementto all labor and occupational safety and health standards, freeexercise of the right to self-organization, security of tenure, andsocial and welfare benefits.

LABOR – ONLY CONTRACTING

1. the person supplying workers to an employer does not havesubstantial capital or investment

2. in the form of tools, equipment, machineries, work premises,among others,

3. the workers recruited and placed by such person areperforming activities which are directly related to theprincipal business of such employer.

PART IV

EMPLOYEE CLASSIFICATION

REGULAR EMPLOYMENT Test – written agreement to contrary notwithstanding and

regardless of oral agreement of parties provided by law Employee engaged to perform activities which are usually

necessary or desirable to the usual business or trade ofemployer

Other Regular Employees1. Casual Employment after 1 year of service whether

continuous or broken (conditions – Art. 280)2. Probationary Employee – allowed to work even after the

completion of the probationary period (Art. 281)3. Learner – allowed or suffered to work during the first 2

months of learner period, if training is terminated by theemployer before the end of the stipulated period.

Not synonymous to permanent employment (no such thing aspermanent employment since he can be terminated for cause)

EXCEPT:1. PROJECT EMPLOYMENT

Employment fixed on a specific project orundertaking, completion or termination ofwhich is DETERMINED AT THE TIME OFENGAGEMENT OF EMPLOYEE

Must have been forewarned of the name ofthe project and the duration of the project

Whether or not the project has a directrelation to the business of the employer, notimportant, BUT:

a. Employee MUST be informed ofthe name and duration of theproject

b. Project and the Principal businessof employer are two separatethings

c. No attempt to deny Security ofTenure to worker

2. SEASONAL EMPLOYMENT Work or services to be performed seasonal in

nature, employment is for the duration of theseason

No continuing need for worker

CASUAL EMPLOYMENT When not regular, project, or seasonal Requirement and Effect = Regular Employees

1. One (1) year service whether continuous or broken2. With respect to activity employed3. Employment shall continue while such activity exists

(Regular in a limited sense)** Project, Seasonal and Casual Employees – may be doing afunction that is by definition regular but are not regular becausethey fall in the exception

PROBATIONARY EMPLOYMENT Period – duration – not exceed 6 months from the date the

employee started working, unless covered by anapprenticeship agreement stipulating a longer period

Termination of Employment1. Just causes2. Fail to qualify as regular employee in accordance with

reasonable standards made known by the employer tothe employee at the time of engagement

Effect of Work beyond 6 months – deemed Regular employeeby automatic application of the law (even if there is noappointment [Kimberly Clark v. Drilon]

Purpose:1. Observance Period



- For the employer to know whether employeeis qualified

- For the employee to demonstrate to theemployer his skills

2. Restrictive Parties may agree for a longer period if company policy

requires or the nature of work requires Direct rationale connection: unduly long – unfair to the worker Nothing prohibits the employer to abbreviate or shorten the

period If agreed to extend for the benefit of worker – Ex gratia No obligation to pay the unfinished portion

COVERAGEapplies to all establishments or undertakings whether for profit ornot. (Art 278 LC)

EMPLOYEE CLASSIFICATION

1. Regular2. EE has been engaged to perform activities which are

usually necessary and desirable in the usual business ortrade of the ER (Art. 280)

3. A casual employee who has rendered at least 1 year ofservice, whether continuous or broken, with respect tothe activity in which he is employed and his employmentshall continue while such activity exists (Art. 280)

4. A probationary employee who is allowed to work afterthe probationary period (Art. 281)

5. All learners who has been allowed or suffered to workduring the first 2 months shall be deemed regularemployees if training is terminated by the ER before theend of the stipulated period through no fault of thelearner. [Art. 75 (d)]

6. Casual7. If not covered by the preceding paragraph (280 LC)

8. Project9. Employment has been fixed for a specific project or

undertaking the completion or termination of which hasbeen determined at the time of engagement of the EE(280 LC)

10. Seasonal11. The work or services to be performed is seasonal in

nature and the employment is for the duration of theseason. (280 LC)

12. Probationary13. Employment shall not exceed 6 months from the date the

EE started working unless covered by apprenticeshipagreement stipulating a longer period (281 LC)

RECOGNITION AND TYPES

Article 280 of the Labor Code comprehends three kinds ofemployees: (a) regular employees or those whose work is necessaryor desirable to the usual business of the employer; (b) projectemployees or those whose employment has been fixed for aspecific project or undertaking the completion or termination ofwhich has been determined at the time of the engagement of theemployee or where the work or services to be performed isseasonal in nature and the employment is for the duration of theseason; and, (c) casual employees or those who are neither regularnor project employees.

A regular employee is one who is engaged to perform activitieswhich are necessary and desirable in the usual business or trade ofthe employer as against those which are undertaken for a specificproject or are seasonal. There are two separate instances wherebyit can be determined that an employment is regular: (1) if theparticular activity performed by the employee is necessary ordesirable in the usual business or trade of the employer; and, (2) ifthe employee has been performing the job for at least a year.

In the case of St. Theresa’s School of Novaliches Foundation vs.NLRC,[43] we held that Article 280 of the Labor Code does notproscribe or prohibit an employment contract with a fixed period.…There is thus nothing essentially contradictory between a definiteperiod of employment and the nature of the employee’s duties.

In the leading case of Brent School Inc. v. Zamora,[44] we laiddown the guideline before a contract of employment may be heldas valid, to wit:

…[S]tipulations in employment contracts providing for termemployment or fixed period employment are valid when the periodwere agreed upon knowingly and voluntarily by the parties withoutforce, duress or improper pressure, being brought to bear upon theemployee and absent any other circumstances vitiating his consent,or where it satisfactorily appears that the employer and employeedealt with each other on more or less equal terms with no moraldominance whatever being exercised by the former over the latter.Pangilingan v General Milling Corp (04)

EMPLOYER DETERMINATION

It is of no moment that petitioner was told when he was hired thathis employment would only be casual, that he was paid throughcash vouchers, and that he did not comply with regularemployment procedure. Precisely, the law overrides suchconditions which are prejudicial to the interest of the worker whoseweak bargaining position needs the support of the State. Whatdetermines whether a certain employment is regular or casual isnot the will and word of the employer, to which the desperateworker often accedes, much less the procedure of hiring theemployee or the manner of paying his salary. It is the nature of theactivities performed in relation to the particular business or tradeconsidering all circumstances, and in some cases the length of timeof its performance and its continued existence. De Leon v. NLRC(89)

Article 280 reinforces the Constitutional mandate to protectthe interest of labor as it sets the legal framework for ascertainingone’s nature of employment, and distinguishing different kinds ofemployees. Its language manifests the intent to safeguard thetenurial interest of worker who may be denied the enjoyment ofrights and benefits due to an employee, regardless of the nature ofhis employment, XXXXXX Thus, the nature of one’s employment does not dependon the will or word of the employer. Nor on the procedure of hiringand the manner of designating the employee, but on the nature ofthe activities to be performed by the employee, considering theemployer’s nature of business and the duration and scope of thework to be done. San Miguel Corporation v. NLRC (98)

A. REGULAR EMPLOYEESTYPE

A regular employee is one who is engaged to perform activitieswhich are necessary and desirable in the usual business or trade ofthe employer as against those which are undertaken for a specificproject or are seasonal. There are two separate instances wherebyit can be determined that an employment is regular: (1) if theparticular activity performed by the employee is necessary ordesirable in the usual business or trade of the employer; and, (2) ifthe employee has been performing the job for at least a year.Pangilingan v General Milling Corp (04)

NATURE OF WORKREGULAR WORKERS EVEN IN THE FOLLOWING INSTANCES: While it may be true that some phases of petitioner company's

processing operations is dependent on the supply of fruits fora particular season, the other equally important aspects of itsbusiness, such as manufacturing and marketing are notseasonal. The fact is that large-scale food processingcompanies such as petitioner company continue to operateand do business throughout the year even if the availability offruits and vegetables is seasonal. Phil. Fruit and VegetableIndustries, Inc. v. NLRC (99)

That petitioner employees are "pakyao" or piece workers doesnot imply that they are not regular employees entitled toreinstatement. With more reason, the work of processed foodrepackers is necessary in the day-to-day operation[s] ofrespondent Empire Food Products. Labor Congress of the Phil.v. NLRC (98)

The primary standard of determining regular employment is thereasonable connection between the particular activity performedby the employee in relation to the usual business or trade of theemployer. The connection can be determined by considering thenature of the work performed and its relation to the scheme of the



particular business or trade in its entirety. Likewise, the repeatedand continuing need for the performance of the job has beendeemed sufficient evidence of the necessity, if not indispensabilityof the activity to the business Some of the petitioners had renderedmore than two decades of service to the MWSS. The continuousand repeated rehiring of these bill collectors indicate the necessityand desirability of their services, as well as the importance of therole of bill collectors in the MWSS. Lopez v MWSS (05)

HIRING PERIOD EXTENDED

We have held that where the employment of project employees isextended long after the supposed project has been finished, theemployees are removed from the scope of project employees andconsidered regular employees. Audio Electric Co., Inc. v. NLRC (99)

CONTRACT TO CONTRACT (REPEATED RENEWAL OF CONTRACT)The petitioner cannot rightfully say that since the privaterespondent's employment hinged from contract to contract, it wasergo, "temporary", depending on the term of each agreement.Under the Labor Code, an employment may only be said to be"temporary" "where [it] has been fixed for a specific undertakingthe completion of or termination of which has been determined atthe time of the engagement of the employee or where the work orservices to be performed is seasonal in nature and the employmentis for the duration of the season." Quite to the contrary, the privaterespondent's work, that of "typist-clerk" is far from being "specific"or "seasonal", but rather, one, according to the Code, "where theemployee has been engaged to perform activities which are usuallynecessary or desirable in the usual business." And under the Code,where one performs such activities, he is a regular employee, "[t]heprovisions of written agreement to the contrary notwithstanding . ..It is true that in Biboso v. Victorias Milling Company, Inc., werecognized the validity of contractual stipulations as to the durationof employment, we can not apply it here because clearly, thecontract-to-contract arrangement given to the private respondentwas but an artifice to prevent her from acquiring security of tenureand to frustrate constitutional decrees. Beta Electric Corp. v. NLRC(90)

LENGTH OF TIME

Not controlling, merely serves as a badge of regular employmentMaraguinot v. NLRC (98)

B. PROJECT EMPLOYEES – whose employment has been fixed for aspecific project or undertaking the completion or termination ofwhich has been determined at the time of engagement of theemployee [Art. 280 (1)]

DEFINEDThe principal test for determining whether particular employees areproperly characterized as "project employees," as distinguishedfrom "regular employees," is whether or not the "projectemployees" were assigned to carry out a "specific project orundertaking," the duration (and scope) of which were specified atthe time the employees were engaged for that project. As defined,project employees are those workers hired (1) for a specific projector undertaking, and (2) the completion or termination of suchproject or undertaking has been determined at the time ofengagement of the employee.

Project employees - employed in connection with a particularproject. Non-project or regular employees - employed withoutreference to any particular project. Kiamco v. NLRC (99)

PROJECT EMPLOYEES

Private respondents, as well as the other 30 workers, wereneeded as additional hands for the renovation work and notfor ordinary upkeep and maintenance. The erection of the fireescape and other small jobs after the renovation cannot bedeemed maintenance but more of casual work. Phil. Jai-Alaiand Amusement Corp. v. Clave (83)

private respondents were project employees whose work wascoterminous with the project for which they were hired.Sandoval Shipyards, Inc. v. NLRC (85)

A project employee is one whose employment has been fixedfor a specific project or undertaking, the completion or

termination of which has been determined at the time of theengagement of the employee or where the work or service tobe performed is seasonal in nature and the employment is forthe duration of the season. In the instant case, petitioner wasengaged to perform data encoding and keypunching, and heremployment was fixed for a specific project or undertaking thecompletion or termination of which had been determined atthe time of her engagement, as may be observed from theseries of employment contracts between petitioner andprivate respondent, all of which contained a designation of thespecific job contract and a specific period of employment.Imbuido v NLRC (00)

RATIONALE

The rationale of this rule is that if a project has already beencompleted, it would be unjust to require the employer to maintainthem in the payroll while they are doing absolutely nothing exceptwaiting until another project is begun, if at all. In effect, thesestand-by workers would be enjoying the status of privilegedretainers, collecting payment for work not done, to be disbursed bythe employer from profits not earned. This is not fair by anystandard and can only lead to a coddling of labor at the expense ofmanagement. De Ocampo v. NLRC (90)

EMPLOYER OBLIGATION

The law is clear to the effect that in all cases involving employeesengaged on probationary' basis, the employer shall make known tothe employee at the time he is hired, the standards by which he willqualify as a regular employee. Nowhere in the employmentcontract executed between petitioner company and respondentGrulla is there a stipulation that the latter shall undergo aprobationary period for three months before he can quality as aregular employee. There is also no evidence on record showing thatthe respondent Grulla had been apprised of his probationary statusand the requirements which he should comply in order to be aregular employee. In the absence of these requisites, there isjustification in concluding that respondent Grulla was a regularemployee at the time he was dismissed by petitioner, and as suchcannot be done without just and authorized cause. A. M. Oreta andCo., Inc. v. NLRC (89)

SPECIFIED PERIOD

The Court has upheld the legality of fixed-term employment. Itruled that the decisive determinant in term employment should notbe the activities that the employee is called upon to perform butthe day certain agreed upon by the parties for the commencementand termination of their employment relationship. But, this Courtwent on to say that where from the circumstances it is apparentthat the periods have been imposed to preclude acquisition oftenurial security by the employee, they should be struck down ordisregarded as contrary to public policy and morals. PurefoodsCorp. V. NLRC (87)

WORKPOOL EMPLOYEES

A project EE or a member of a work pool may acquire the status of aregular employee when the following concur:

1. There is a continuous rehiring of projectemployees even after cessation of a project; and

2. The tasks performed by the alleged “projectemployee” are vital, necessary, and indispensableto the usual business or trade of the employer.

However, the length of time during which the EE wascontinuously rehired is not controlling, but merely serves as a badgeof regular employment.A work pool may exist although the workers in the pool do notreceive salaries and are free to seek other employment duringtemporary breaks in the business, provided, that the worker shallbe available when called to report for a project. Although primarilyapplicable to regular seasonal workers, this set-up can likewise beapplied to project workers insofar as the effect of temporarycessation of work is concerned. This is beneficial to both theemployer and employee for it prevents the unjust situation of“coddling labor at the expense of capital” and at the same timeenables the workers to attain the status of regular employees.Maraguinot v. NLRC (98)

Members of a work pool from which a construction company drawsits project employees, if considered employees of the construction



company while in the work pool, are non-project employees, oremployees for an indefinite period. If they are employed in aparticular project, the completion of the project or any phasethereof will not mean severance of the employer-employeerelationship. Aguilar Corp. v. NLRC (97)

LENGTH OF SERVICE

The above-quoted provisions make it clear that a project employeeis one whose “employment has been fixed for a specific project orundertaking the completion or termination of which has beendetermined at the time of the engagement of the employee orwhere the work or services to be performed is seasonal in natureand the employment is for the duration of the season.” In D.M.Consunji, Inc. v. NLRC, this Court has ruled that “the length ofservice of a project employee is not the controlling test ofemployment tenure but whether or not ‘the employment has beenfixed for a specific project or undertaking the completion ortermination of which has been determined at the time of theengagement of the employee.’”In the present case, the contracts of employment of Puente attestto the fact that he was hired for specific projects. His employmentwas coterminous with the completion of the projects for which hehad been hired. Those contracts expressly provided that his tenureof employment depended on the duration of any phase of theproject or on the completion of the construction projects.Furthermore, petitioners regularly submitted to the labordepartment reports of the termination of services of projectworkers Such compliance with the reportorial requirement confirmsthat respondent was a project employee. Filipinas Pre-FabricatedBuilding Systems v Puente (05)

C. CASUAL EMPLOYEESAn employment shall be deemed casual if it is not covered by thepreceding paragraph: Provided, that, any employee who hasrendered at least one year of service, whether such service iscontinuous or broken, shall be considered a regular employee withrespect to the activity in which he is employed and his employment

shall continue while such activity exists. (Art. 281, 2nd paragraph)

NATURE OF WORK

What determines regularity or casualness is not the employmentcontract, written or otherwise, but the nature of the job. If the jobis usually necessary or desirable to the main business of theemployer, then employment is regular. AM Oreta & Co., Inc v. NLRC(89)

ONE YEAR SERVICE

The fact that the petitioners have been hired on a "temporary orseasonal" basis merely is no argument either. As we held inPhilippine Bank of Communications v. NLRC, a temporary or casualemployee, under Article 218 of the Labor Code, becomes regularafter service of one year, unless he has been contracted for aspecific project. And we cannot say that merchandising is a specificproject for the obvious reason that it is an activity related to theday-to-day operations of California.The records show that the petitioners had been given an initial six-month contract, renewed for another six months. Accordingly,under Article 281 of the Code, they had become regular employees— of California — and had acquired a secure tenure. Hence, theycannot be separated without due process of law. Tabas v.California Manufacturing Co. Inc. (89)

CONTRACT FIXED PERIOD

TESTS VALIDITY

Article 280 of the Labor Code does not proscribe or prohibit anemployment contract with a fixed period providedthe same is entered into by the parties, without any force, duress orimproper pressure being brought to bear upon the employee andabsent any other circumstance vitiating consent. It does notnecessarily follow that where the duties of the employee consist ofactivities usually necessary or desirable in the usual business of theemployer, the parties are forbidden from agreeing on a period oftime for the performance of such activities. There is thus nothingessentially contradictory between a definite period of employmentand the nature of the employee's duties.

It goes without saying that contracts or employment govern therelationship of the parties. In this case, private respondent'scontract provided for a fixed term of nine (9) months, from June 1,1991 to March 31, 1992. Such stipulation, not being contrary tolaw, morals, good customs, public order and public policy, is valid,binding and must be respected. St. Theresa’s School v. NLRC (98)

However, the Court upholds the principle that where from thecircumstances it is apparent that periods have been imposed topreclude acquisition of tenurial security by the employee, theyshould be disregarded for being contrary to public policy. Servidadv. NLRC (99)

SEASONAL EMPLOYEES

For respondents to be excluded from those classified as regularemployees, it is not enough that they perform work or services thatare seasonal in nature. They must have been employed only for theduration of one season. While the records sufficiently show that therespondents’ work in the hacienda was seasonal in nature, therewas, however, no proof that they were hired for the duration of oneseason only. In fact, the payrolls, submitted in evidence by thepetitioners, show that they availed the services of the respondentssince 1991. Absent any proof to the contrary, the general rule ofregular employment should, therefore, stand. It bears stressing thatthe employer has the burden of proving the lawfulness of hisemployee’s dismissal.The disparity in facts between the Mercado case and the instantcase is best exemplified by the fact that the former decision ruledon the status of employment of farm laborers, who, as found by thelabor arbiter, work only for a definite period for a farm worker,after which they offer their services to other farm owners,considering the area in question being comparatively small,comprising of seventeen and a half (171/2) hectares of land, suchthat the planting of rice and sugar cane thereon could not possiblyentail a whole year operation. In Mercado, although respondentconstantly availed herself of the petitioners’ services from year toyear, it was clear from the facts therein that they were not in herregular employ. Petitioners therein performed different phases ofagricultural work in a given year. However, during that period, theywere free to work for other farm owners, and in fact they did. Inother words, they worked for respondent, but were neverthelessfree to contract their services with other farm owners. HaciendaBino v Cuenca (05)

C. PROBATIONARY EMPLOYEES

Probationary employments hall not exceed six months from thedate the employee started working, unless it is covered by anapprenticeship agreement stipulating a longer period. The servicesof an employee who has been engaged on a probationary basis maybe terminated for a just cause or when he fails to qualify as aregular employee in accordance with reasonable standards madeknown by the employer to the employee at the time of hisengagement. An employee who is allowed to work after aprobationary period shall be considered a regular employee. Art.281There is a probationary employment where the employee upon hisengagement, is made to undergo a trial period during which theemployer determines his fitness to qualify for regular employment,based on reasonable standards made known to him at the time of

engagement. Art. 61, 2nd Sentence, Book VI, Rule 1, Sec. 6,Omnibus Rules

DEFINITION

A probationary employee is one who is on trial by an employerduring which the employer determines whether or not he isqualified for permanent employment. International CatholicMigration Commission v. NLRC (89)

PURPOSE

We find merit in the contention of the petitioner that "privaterespondent had not been hired as manager of any firm before hisemployment with petitioner. The highest previous position heattained was that of Finance Officer. His position with petitioner'sIloilo Branch was his first as Manager. Moreover, Warner, Barnes &Co., private respondent's previous employer, and petitioner areengaged in different kinds of business. Managing petitioner's IloiloBranch was an entirely new experience for private respondent. It



was, therefore, necessary for private respondent to undergo aperiod of probation to test his qualifications, skill and experience."Indeed, the employer has the right or is at liberty to choose as towho will be hired and who will be declined. It is within the exerciseof this right to select his employees that the employer may set or fixa probationary period within which the latter may test and observethe conduct of the former before hiring him permanently. "Theright of a laborer to sell his labor to such persons as he may chooseis, in its essence, the same as the right of an employer to purchaselabor from any person whom it chooses. The employer and theemployee have thus an equality of right guaranteed by theConstitution. 'If the employer can compel the employee to workagainst the latter's will, this is servitude. If the employee cancompel the employer to give him work against the employer's will,this is oppression.'" Grand Motors Corp. v. MOLE (84)

EMPLOYER RIGHT SET PERIOD/OBLIGATION

Indeed, an employer, in the exercise of its managementprerogative, may hire an employee on a probationary basis in orderto determine his fitness to perform work Mitsubishi Motors Corp vChrysler (04)

DURATION/EXCEPTION

Central to the matter at hand is Article 281 of the Labor Code whichprovides that:ART. 281. PROBATIONARY EMPLOYMENT. Probationaryemployment shall not exceed six (6) months from the date theemployee started working, unless it is covered by an apprenticeshipagreement stipulating a longer period. The services of an employeewho has been engaged on a probationary basis may be terminatedfor a just cause or when he fails to qualify as a regular employee inaccordance with reasonable standards made known by theemployer to the employee at the time of his engagement. Anemployee who is allowed to work after a probationary period shallbe considered a regular employee. XXX

The first issue we must resolve is whether petitioner wasallowed to work beyond his probationary period and was thereforealready a regular employee at the time of his alleged dismissal. Werule in the negative.

Petitioner claims that under the terms of his contract, hisprobationary employment was only for five months as indicated bythe remark "Please be informed that after five months, yourperformance shall be evaluated and any adjustment in salary shalldepend on your work performance." The argument lacks merit. Ascorrectly held by the labor arbiter, the appointment contract alsostated in another part thereof that petitioner’s employment statuswas "probationary (6 mos.)." The five-month period referred to theevaluation of his work. Alcira v NLRC (04)

Generally, the probationary period of employment is limited tosix (6) months. The exception to this general rule is when theparties to an employment contract may agree otherwise, such aswhen the same is established by company policy or when the sameis required by the nature of work to be performed by the employee.In the latter case, there is recognition of the exercise of managerialprerogatives in requiring a longer period of probationaryemployment, such as in the present case where the probationaryperiod was set for eighteen (18) months, i.e. from May, 1980 toOctober, 1981 inclusive, especially where the employee must learna particular kind of work such as selling, or when the job requirescertain qualifications, skills, experience or training. Busier v.Leogardo (84)

Honasan was certainly under observation during her three-weekon-the-job training. If her services proved unsatisfactory then, shecould have been dropped as early as during that period. But shewas not. On the contrary, her services were continued, presumablybecause they were acceptable, although she was formally placedthis time on probation.

Even if it be supposed that the probation did not end with thethree-week period of on-the-job training, there is still no reasonwhy that period should not be included in the stipulated six-monthperiod of probation. Honasan was accepted for on-the-job trainingon April 15, 1991. Assuming that her probation could be extendedbeyond that date, it nevertheless could continue only up to October15, 1991, after the end of six months from the earlier date. Under

this more lenient approach, she had become a regular employee ofHoliday Inn and acquired full security of tenure as of October 15,1991. Holiday Inn Manila v. NLRC (93)The contract signed by petitioners is akin to a probationaryemployment, during which the bank determined the employees'fitness for the job. When the bank renewed the contract after thelapse of the six-month probationary period, the employees therebybecame regular employees. No employer is allowed to determineindefinitely the fitness of its employees. Bernardo v. NLRC (99)

CRITERIA REGULARIZATIONIn all cases of probationary employment, the employer shall makeknown to the employee the standards under which he will qualify asa regular employee at the time of his engagement. Where nostandards are made known to the employee at that time, he shallbe deemed a regular employee.

Conversely, an employer is deemed to substantially complywith the rule on notification of standards if he apprises theemployee that he will be subjected to a performance evaluation ona particular date after his hiring. We agree with the labor arbiterwhen he ruled that:

In the instant case, petitioner cannot successfully say that hewas never informed by private respondent of the standards that hemust satisfy in order to be converted into regular status. This rans(sic) counter to the agreement between the parties that after fivemonths of service the petitioner’s performance would be evaluated.It is only but natural that the evaluation should be made vis-à-visthe performance standards for the job. Private respondent TrifonaMamaradlo speaks of such standard in her affidavit referring to thefact that petitioner did not perform well in his assigned work andhis attitude was below par compared to the company’s standardrequired of him. Alcira v NLRC (04)

EXTENSION CONTRACT

It is an elementary rule in the law on labor relations that aprobationary employee who is engaged to work beyond theprobationary period of 6 months, as provided under Art. 281 LaborCode, as amended, or for any length of time set forth by theemployer, shall be considered as a regular employee. Phil.Federation, etc. v. NLRC (98)

ABSORBED EMPLOYEES

We agree with the Regional Director that private respondents couldnot be considered probationary employees because they werealready well-trained in their respective functions. This conclusion isfurther bolstered by the factual findings of the Labor Minister thatsaid order of the Director was supported by substantial evidence. Asstressed by the Solicitor General, while private respondents werestill with the CCAS they were already clerks. Respondent Gelig hadbeen a clerk for CCAS for more than ten (10) years, whilerespondent Quijano had slightly less than ten (10) years of service.They were, therefore, not novices in their jobs but experiencedworkers. Cebu Stevedoring Co. Inc v. Regional Director (88)

DOUBLE PROBATION

There is no basis for subjecting an employee to a new probationaryor temporary employment where he had already become a regularemployee when he was absorbed by a sister company. A’ PrimeSecurity Services, Inc. v. NLRC (2000)

TERMINATION AND SALARY

A probationary employee enjoys only a temporaryemployment status. This means that he is terminable at any time,permanent employment not having been attained in the meantime.The employer could well decided he no longer needed theprobationary employee’s services or his performance fell short ofexpectations, etc. As long as the termination was made before thetermination of the six-month probationary period, the employerwas well within his rights to sever the employer-employeerelationship. A contrary interpretation would defect the clearmeaning of the term “probationary”.

De la Cruz, Jr. v. NLRC (2003)

Article 281 of the Labor Code does not preclude the employer fromterminating the probationary employment on justifiable causes.

We find unmeritorious, therefore, public respondent'sargument that the security of tenure of probationary employees



within the period of their probation, as in the case of herein privaterespondent, justified the award of salary for the unexpired portionof her probationary employment. The termination of privaterespondent predicated on a just cause negates the application onthe right of security of tenure of probationary employees.International Catholic Migration Commission v. NLRC (89)

However, the Court cannot sustain his dismissal on this groundbecause petitioner failed to specify the reasonable standards bywhich private respondent's alleged poor performance wasevaluated, much less to prove that such standards were madeknown to him at the time of his recruitment in Manila. Neitherprivate respondent's Agency-Worker Agreement with ORIENTEXPRESS nor his Employment Contract with NADRICO evermentioned that he must first take and pass a Crane Operators'License Examination in Saudi Arabia before he would be allowed toeven touch a crane. Neither did he know that he would be assignedas floorman pending release of the results of the examination; moreimportantly, that he would be subjected to a performanceevaluation by his superior one (1) month after his hiring todetermine whether the company was amenable to continuing withhis employment. Hence, respondent Flores could not be faulted forharboring the impression that he was hired as crane operator forone (1) year to commence upon his arrival at the work-site and toterminate at the end of one (1) year. No other condition was laidout except that he was to be on probation for three (3) months.

Due process dictates that an employee be apprisedbeforehand of the condition of his employment and of the terms ofadvancement therein. Precisely, implicit in Art. 281 of the Code isthe requirement that reasonable standards be previously madeknown by the employer to the probationary employee at the timeof his engagement, as correctly suggested by the POEA. Such anessential requirement was not met by petitioner, even assumingthat Flores' alleged unsatisfactory performance was true. OrientExpress Placement Philippines v. NLRC (97)

RULE PRIVATE SCHOOL TEACHERS

To extend a regular appointment:(1) the faculty member must satisfactorily complete the

probationary period of four semesters or two years, within which hisperformance shall be observed and evaluated for the purpose ofdetermining his competency and fitness to be extended permanentstatus; and

(2) the faculty member must pass the PBET or an equivalent civilservice examination.Escorpizo v. University of Baguio (99)*Neither are they entitled to LEAVS during the 3 year probationaryperiod, pursuant to the Manual of Regulations for Private Schools . St.Michael Academy v. NLRC (98)

PART V

RECRUITMENT AND PLACEMENT OF

WORKERS

I. Definitions

A. "Recruitment and placement" refers to any act of14. canvassing,15. enlisting,16. contracting,17. transporting,18. utilizing, or19. hiring procuring workers,

and also includes1. referrals,2. contract services,3. promising, or4. advertising for employment, locally or abroad, whether

for profit or not

Provided, That any person or entity which, in any manner, offers orpromises for a fee employment to two or more persons shall bedeemed engaged in recruitment and placement. (Art 13b)

– The number of persons dealt with is not anessential ingredient of the act of recruitment and

placement of workers. Any of the acts mentioned in the basicrule in Article 13(b) will constitute recruitment andplacement even if only one prospective worker is involved. The

proviso merely lays down a rule of evidence thatwhere a fee is collected in consideration of a promise oroffer of employment to two or more prospective workers, theindividual or entity dealing with them shall be deemed to be

engaged in the act of recruitment and placement. Thewords "shall be deemed" create that presumption. (People v.Panis, 1988)

B. “Referrals”

People v. Meris (2000)In People v. Agustin, the Court ruled: Hence, the

inevitable query is whether or not appellant Agustin merelyintroduced complainants to the Goce couple or her actions wentbeyond that. The testimonial evidence hereon show that she indeedfurther committed acts constitutive of illegal recruitment. All fourprosecution witnesses testified that it was Agustin whom theyinitially approached regarding their plans of working overseas. Itwas from her that they learned about the fees they had to pay, aswell as the papers that they had to submit. It was after they hadtalked to her that they met the accused spouses who owned theplacement agency. As such, the Court concluded that appellant thatappellant was an employee of the Goce spouses, as she was actuallymaking referrals to the agency. She was therefore, engaged inrecruitment activities. The same factual circumstance obtains in thiscase. Although accused-appellant was not an employee of thealleged illegal recruiter Julie Micua, the evidence show that she wasthe one who approached complainants and prodded them to seekemployment abroad. It was through her that they met Julia Micua.This is clearly an act of referral. Worse, accused-appellant declaredthat she was capable of placing them in jobs overseas. Suffice it tosay that complainants' recruitment would not have beenconsummated were it not for the direct participation of accused-appellant in the recruitment process.

C. "Workers" are any member of the labor force, whetheremployed or unemployed (Art. 13a)

D. A "Private employment agency" is any person or entity engagedin the recruitment and placement of workers for a fee which is



charged, directly or indirectly, from the workers or employers orboth (Art 13c)

E. A “License” is a document issued by the Department of Laborauthorizing a person or entity to operate a private employmentagency (Art 13d)

F. A "Private recruitment entity" is any person or associationengaged in the recruitment and placement of workers, locally oroverseas, without charging, directly or indirectly, any fee from theworkers or employers. (Art 13e)

G. An “Authority” is a document issued by the Department of Laborauthorizing a person or association to engage in recruitment andplacement activities as a private recruitment entity. (Art 13f)

II. Entities allowed to recruit and place

A. General rule

Only public employment offices and the OEDB for overseasemployment, shall engage in the recruitment and placement ofworkers (Art 16). The Secretary of Labor shall have the power andauthority to organize and establish new employment offices inaddition to existing employment offices under the Department ofLabor as the need arises. (Art 14g)

B. Exception

Persons or entities allowed under Chapter 2 of the Labor Code (Art16).

For this purpose, the Labor Code expressly authorizes theparticipation of the private employment sector in the recruitmentand placement of workers, locally and overseas, BUT suchrecruitment and placement shall be done under such guidelines,rules and regulations, as may be issued by the Secretary of Laborand Employment. (Art 25) Private sector participation inrecruitment and placement is sought to be rationalized pursuant tonational development objectives (Art 12f) and in order to harnessand maximize the use of private sector resources and initiative inthe development and implementation of a comprehensiveemployment program (Art 25)

C. License/ authority of allowed entities

1. Citizenship Requirement - Only Filipino Citizens orcorporations, partnership or entities at least 75 % of theauthorized and voting capital stock of which is ownedand controlled by Filipino citizens shall be permitted toparticipate in the recruitment and placement of workers,locally or overseas. (Art 27)

2. Capitalization Requirement - All applicants for authorityto hire or renewal of license to recruit are required tohave such substantial capitalization as determined by theSecretary of Labor. (Art 28)

3. Non-transferability of license or authority – Nolicense or authority shall be used directly orindirectly by any person other than the one inwhose favor it was issued or at any place other than that

stated in the license or authority, nor may such license orauthority be transferred, conveyed, or assigned to any

other person or entity. Any transfer of businessaddress, appointment or designation of any agent orrepresentative including the establishment of additional officesanywhere shall be subject to the prior approval of the

Department of Labor. (Art 29)1. Registration Fees – The Secretary of Labor shall

promulgate a schedule of fees for the registration of allapplicants for license or authority. (Art 30)

D. SPECIAL CIRCUMSTANCE: DIRECT HIRING FOR WORK ABROAD –General Rule

No employer may directly hire a Filipino worker for overseasemployment. Every employment for work abroad must be coursed

through the Boards and entities authorized by the Department ofLabor and Employment. (Art 18)

E. BAN ON DIRECT HIRING - Exception

Direct hiring by members of the diplomatic service, officials andemployees of international organizations and such other employersas may be allowed by the Department and Labor and Employmentis not covered by the ban. (Art 18)

III. Entities prohibited to recruit and place

a. Persons and entities other than public employmentoffices if not authorized under Chapter 2 of the LaborCode (Art 16)

b. Employers hiring directly for work abroad without goingthrough DOLE-authorized boards and entities (Art 18)

c. Travel agencies and sales agencies of airline companiesare prohibited from engaging in the business ofrecruitment and placement of workers for overseasemployment whether for profit or not. (Art 26)

IV. Techniques of regulation

A. Bonds

All applicants for license or authority shall post such cash and suretybonds as determined by the Secretary of Labor to guaranteecompliance with prescribed recruitment procedures, rules anregulations, and terms and conditions of employment as may beappropriate. (Art 31)

B. Workers fees

Any person applying with a private fee-charging employmentagency for employment assistance shall not be charged any feeuntil he has obtained employment through its efforts or has actuallycommenced employment. Such fee shall be always covered withthe appropriate receipt clearly showing the amount paid. TheSecretary of Labor shall promulgate a schedule of allowable fees.(Art 32)

C. Reports submission

Whenever the public interest so requires, the Secretary of Laborand Employment may direct all persons or entities within thecoverage of this Title to submit a report on the status ofemployment, including job vacancies; details of job requisitions,separation from jobs, wages, other terms and conditions, and otheremployment data. (Art 33)

D. Suspension and/ or cancellation of license or authority

The Secretary of Labor shall have the power to suspend or cancelany license or authority to recruit employees for overseasemployment for violation of rules and regulations issued by theDepartment of Labor, the Overseas Employment DevelopmentBoard, and the National Seamen Board, or for violation of theprovisions of this and other applicable laws, General Orders andLetters of Instructions. (Art 35)

ILLEGAL RECRUITMENT

- Under the Labor Code, there are two penalprovisions relative to recruitment and placement:

first, is the commission of the Prohibited Acts under Art 34 by aholder of a license or authority; second, is the

undertaking of recruitment activities under Art 13bor the commission of the Prohibited Acts under Art 34 by a non-holder of a license or authority. Only the second case isconsidered an act of illegal recruitment. Note that under

the Labor Code, a holder of a license or authoritycannot commit illegal recruitment.

- The Prohibited Activities under Art 34 of the LaborCode are:



a. To CHARGE or accept directly or indirectly any amountgreater than that specified in the schedule of allowablefees prescribed by the Secretary of Labor andEmployment, or to make a worker pay any amountgreater than that actually received by him as a loan oradvance;

b. To FURNISH or publish any false notice or informationor document in relation to recruitment or employment;

c. To GIVE any false notice, testimony, information ordocument or commit any act or misrepresentation forthe purpose of securing a license or authority under thisCode;

d. To INDUCE or attempt to induce a worker alreadyemployed to quit his employment in order to offer himanother unless the transfer is designed to liberate aworker from oppressive terms and conditions ofemployment;

e. To INFLUENCE or attempt to influence any person orentity not to employ any worker who has not applied foremployment through his agency;

f. To ENGAGE in the recruitment or placement of workersin jobs harmful to public health or morality or to thedignity of the Republic of the Philippines;

g. To OBSTRUCT or attempt to obstruct inspection by theSecretary of Labor and Employment or by his dulyauthorized representatives;

h. To FAIL to file reports on the status of employment,placement vacancies, remittance of foreign exchangeearnings, separation from jobs, departures and suchother matters or information as may be required by theSecretary of Labor and Employment;

i. To SUBSTITUTE or alter employment contractsapproved and verified by the Department of Labor andEmployment from the time of actual signing thereof bythe parties up to and including the period of expiration ofthe same without the approval of the Department ofLabor and Employment.

j. To BECOME officer or member of the Board of anycorporation engaged in travel agency or to be engageddirectly or indirectly in the management of a travelagency; and

k. To WITHHOLD or deny travel documents fromapplicant workers before departure for monetary orfinancial considerations other than those authorizedunder this Code and its implementing rules andregulations.

People v. Ordoño, 2000Illegal recruitment is committed when two elements

concur, namely: (1) the offender has no valid license or authorityrequired by law to enable one to lawfully engage in recruitment andplacement of workers; and (2) he undertakes either any activitywithin the meaning of “recruitment and placement” defined underArt. 13 (b), or any of the prohibited practices enumerated underArt. 34 of the LaborCode.

A. Illegal recruitment under the Labor Code

1. Illegal recruitment

Any recruitment activities, including the prohibitedpractices enumerated under Article 34 of this Code, to beundertaken by non-licensees or non-holders of authorityshall be deemed illegal and punishable under Article 39of this Code. The Secretary of Labor and Employment or

any law enforcement officer may initiate complaintsunder this Article. (Art 38a)

Economic sabotage

Illegal recruitment when committed by a syndicate or inlarge scale shall be considered an offense involvingeconomic sabotage and shall be penalized in accordancewith Article 39 hereof. Illegal recruitment is deemedcommitted by a SYNDICATE if carried out by a group ofthree (3) or more persons conspiring and/orconfederating with one another in carrying out anyunlawful or illegal transaction, enterprise or schemedefined under the first paragraph hereof. Illegalrecruitment is deemed committed in large scale ifcommitted against three (3) or more persons individuallyor as a group. (Art 38b). Note, however, that the findingof large-scale illegal recruitment must depend onwhether there are at least three complainants in a singlecomplaint who alleges illegal recruitment whethercommitted to them singly or collectively. Single illegalrecruitment cases cannot be cumulated to add up to acharge of large-scale illegal recruitment. Consider thefollowing cases:

People v. Reyes, 1995There are, it is said, 14 other cases filed/pending in the

courts against the accused for illegal recruitment. These casescannot be taken into account for the purpose of Art. 38(b). Whenthe Labor Code speaks of illegal recruitment "committed againstthree (3) or more persons individually or as a group," it must beunderstood as referring to the number of complainants in each casewho are complainants therein, otherwise, prosecutions for singlecrimes of illegal recruitment can be cumulated to make out a caseof large scale illegal recruitment. In other words, a conviction forlarge scale illegal recruitment must be based on a finding in eachcase of illegal recruitment of three or more persons whetherindividually or as a group. Moreover, even if Blanza and Garcia hadbeen illegally recruited so as to make the number of personsillegally recruited four and make the crime that of illegalrecruitment of a large scale, since this was not alleged in theinformation and this is the more serious offense which includes thatwhich was charged, the appellant can only be found guilty of theless serious offense charged, pursuant to Rule 120, §4.

People v. Meris (2000)Illegal recruitment is conducted in a large scale if

perpetrated against three (3) or more persons individually or as agroup. This crime requires proof that the accused: (1) engaged inthe recruitment and placement of workers defined under Article 13or in any of the prohibited activities under Article 34 of the LaborCode; (2) does not have a license or authority to lawfully engage inthe recruitment or and placement of workers; and (3) committedthe infraction against three or more, persons, individually or as agroup.

The power of the Secretary of Labor to issue warrantsof arrest or search which was formerly embodied inparagraph c of Article 38 has already been nullified in thefollowing case:

Salazar v. AchacosoWe reiterate that the Secretary of Labor, not being a

judge, may no longer issue search or arrest warrants. Hence, theauthorities must go through the judicial process. To that extent, wedeclare Article 38, paragraph (c), of the Labor Code,unconstitutional and of no force and effect.

B. Illegal recruitment under the Migrant Workers Act of 1995(RA 8042)

4. Illegal recruitment committed by a non-licensee or non-holder of authority

ILLEGAL RECRUITMENT shall mean any act of canvassing,enlisting, contracting, transporting, utilizing, hiring, orprocuring workers and includes: referring, contract



services, promising or advertising for employmentabroad, whether for profit or not, when undertaken by anon-licensee or non-holder of authority contemplatedunder Article 13(f) of Presidential Decree No. 442, asamended, otherwise known as the Labor Code of thePhilippines: Provided, That any such non-licensee or non-holder who, in any manner, offers or promises for a feeemployment abroad to two or more persons shall bedeemed so engaged. (Sec 6, MWA)

i) Illegal recruitment committed regardless of whether ornot licensee or holder of authority

ILLEGAL RECRUITMENT shall likewise include thefollowing acts, whether committed by any person,whether a non-licensee, non-holder, licensee or holder ofauthority:

a. To CHARGE or accept directly or indirectly any amountgreater than that specified in the schedule of allowablefees prescribed by the Secretary of Labor andEmployment, or to make a worker pay any amountgreater than that actually received by him as a loan oradvance;

b. To FURNISH or publish any false notice or informationor document in relation to recruitment or employment;

c. To GIVE any false notice, testimony, information ordocument or commit any act of misrepresentation for thepurpose of securing a license or authority under theLabor Code;

d. To INDUCE or attempt to induce a worker alreadyemployed to quit his employment in order to offer himanother unless the transfer is designed to liberate aworker from oppressive terms and conditions ofemployment;

e. To INFLUENCE or attempt to influence any person orentity not to employ any worker who has not applied foremployment through his agency;

f. To ENGAGE in the recruitment or placement of workersin jobs harmful to public health or morality or to thedignity of the Republic of the Philippines;

g. To OBSTRUCT or attempt to obstruct inspection by theSecretary of Labor and Employment or by his dulyauthorized representative;

h. To FAIL to submit reports on the status of employment,placement vacancies, remittance of foreign exchangeearnings, separation from jobs, departures and suchother matters or information as may be required by theSecretary of Labor and Employment;

i. To SUBSTITUTE or alter to the prejudice of the worker,employment contracts approved and verified by theDepartment of Labor and Employment from the time ofactual signing thereof by the parties up to and includingthe period of the expiration of the same without theapproval of the Department of Labor andEmployment;

j. For an OFFICER or agent of a recruitment or placementagency to become an officer or member of the Board ofany corporation engaged in travel agency or to beengaged directly or indirectly in the management of atravel agency;

k. To WITHHOLD or deny travel documents fromapplicant workers before departure for monetary orfinancial considerations other than those authorizedunder the Labor Code and its implementing rules andregulations;

l. FAILURE to actually deploy without valid reason asdetermined by the Department of Labor andEmployment; and

m. FAILURE to reimburse expenses incurred by theworker in connection with his documentation andprocessing for purposes of deployment, in cases wherethe deployment does not actually take place without theworker's fault. (Sec 6, MWA)

Economic sabotage

Illegal recruitment when committed by a syndicate or inlarge scale shall be considered an offense involvingeconomic sabotage. Illegal recruitment is deemedcommitted by a SYNDICATE if carried out by a group ofthree (3) or more persons conspiring or confederatingwith one another. It is deemed committed in large scale ifcommitted against three (3) or more persons individuallyor as a group. (Sec 6, MWA)

RULE OF LIABILITY: The persons CRIMINALLY LIABLE for the aboveoffenses are the principals, accomplices and accessories. In case ofjuridical persons, the officers having control, management ordirection of their business shall be liable. (Sec 6, MWA)

C. Enforcement and sanctions

(c) Regulatory power - The Secretary shall have the power torestrict and regulate the recruitment and placementactivities of all agencies is authorized to issue orders andpromulgate rules and regulations to carry out theobjectives and implement the provisions of this Title. (Art36)

(ci) Visitorial power - The Secretary or his duly authorizedrepresentatives may at any time inspect the premises,books of accounts and records of any person or entitycovered by this Title, require it to submit reportsregularly on prescribed forms, and act on violations ofany provision of this Title. (Art 37)

(cii) Penalties –a. The penalty of life imprisonment and a fine of OneHundred thousand Pesos (P100,000) shall be imposed ifillegal recruitment constitutes economic sabotage asdefined herein:

b. Any license or holder of authority found violating orcausing another to violate any provision of this Title or itsimplementing rules and regulations shall, upon convictionthereof, suffer the penalty of imprisonment of not lessthan two years nor more than five years or a fine of notless than P10,000 nor more than P50,000 or both suchimprisonment and fine, at the discretion of the court;

c. Any person who is neither a licensee nor a holder ofauthority under this Title found violating any provisionthereof or its implementing rules and regulations shall,upon conviction thereof, suffer the penalty ofimprisonment of not less than four years nor more thaneight years or a fine of not less than P20,000 nor morethan P100,000 or both such imprisonment and fine, atthe discretion of the court;

d. If the offender is a corporation, partnership,association or entity, the penalty shall be imposed uponthe officer or officers of the corporation, partnership,association or entity responsible for violation; and if suchofficer is an alien, he shall, in addition to the penaltiesherein prescribed, be deported without furtherproceedings;

e. In every case, conviction shall cause and carry theautomatic revocation of the license or authority and allthe permits and privileges granted to such person orentity under this Title, and the forfeiture of the cash andsurety bonds in favor of the Overseas EmploymentDevelopment Board or the National Seamen Board, as



the case may be, both of which are authorized to use thesame exclusively to promote their objectives.

PART VI

ALIEN EMPLOYMENT

A. CoverageArt. 40 of the Labor Code which requires employment permit refersto non-resident aliens. The employment permit is required for entryinto the country for employment purposes and is issued afterdetermination of the non-availability of a person in the Philippineswho is competent, able and willing at the time of application toperform the services for which the alien is desired. A resident aliendoes not fall within the ambit of the provision. (Almodiel v. NLRC,1993)

B. Requisite: Employment Permit

1. Who may apply for – Any alien seeking admission to thePhilippines for employment purposes and any domestic or foreignemployer who desires to engage an alien for employment in thePhilippines shall obtain an employment permit from theDepartment of Labor. (Art 40)

2. Requisite for issuance, in general – The employment permit maybe issued to a non-resident alien or to the applicant employer aftera determination of the non-availability of a person in the Philippineswho is competent, able and willing at the time of application toperform the services for which the alien is desired. (Art 40). Notealso that, in issuing employment permits to non-resident aliens,consideration must also be given to the fact that the Constitutionmandates that “the State shall promote the preferential use ofFilipino labor, domestic materials and locally produced goods” (ArtXII, Sec 12, Constitution)

General Milling Corp. v. Torres, 1991The Labor Code itself specifically empowers the Secretary

of Labor to make a determination as to the availability of theservices of a "person in the Philippines who is competent, able andwilling at the time of application to perform the services for whichan alien is desired." In short, the Department of Labor is the agencyvested with jurisdiction to determine the question of availability oflocal workers. The constitutional validity of legal provisions grantingsuch jurisdiction and authority and requiring proof of non-availability of local nationals able to carry out the duties of theposition involved, cannot be seriously questioned.

3. Requisite for issuance, enterprises registered in preferred areas ofinvestment – The employment permit may be issued uponrecommendation of the government agency charged with thesupervision of said registered enterprise. (Art 40)

C. Prohibition against transfer of employmentAfter the issuance of an employment permit, the alien shall nottransfer to another job or change his employer without priorapproval of Secretary of Labor and Employment. (Art 41)

D. Consequences of violationAny non-resident alien who shall take up employment in violationof the provision of this Title and its implementing rules andregulations shall be punished in accordance with the provisions ofArticles 289 and 290 of the Labor Code. In addition, the alienworker shall be subject to deportation after service of his sentence.(Art 41)

PART VII

EMPLOYMENT OF APPRENTICE,

LEARNERS AND HANDICAPPED WORKERS

A. PolicyIt is hereby declared the policy of the State to provide relevant,accessible, high quality and efficient technical education and skillsdevelopment in support of the development of high quality Filipinomiddle-level manpower responsive to and in accordance withPhilippine development goals and priorities. The state shallencourage active participation of various concerned sectors,particularly private enterprises, being direct participants in animmediate beneficiaries of a trained and skilled workforce, inproviding technical education and skills development opportunities.(Sec 2, RA 7796)

B. Goals and objectives

a. Promote and strengthen the quality of technical education andskills development programs to attain internationalcompetitiveness

b. Focus technical education and skills development or meeting thechanging demands for quality middle-level manpower

c. Encourage critical and creative thinking by disseminating thescientific and technical knowledge base of middle-level manpowerdevelopment programs

d. Recognize and encourage the complementary roles of public andprivate institutions in technical education and skills developmentand training systems;

e. Inculcate desirable values through the development of moralcharacter with emphasis on work ethic, self-discipline, self reliance,and nationalism. (Sec 3, RA 7796)

I. APPRENTICE

A. Definition“Apprenticeship” refers to training within employment withcompulsory related theoretical instructions involving a contractbetween an apprentice and an employer during an establishedperiod assured by an apprenticeable occupation. (Sec. 4j, RA 7796)

“Apprenticeable Occupation” is an occupation officially endorsed bya tripartite body and approved for apprenticeship by the Authority(Sec 4m, RA 7796)

B. SPECIAL CIRCUMSTANCE: Employment of children

Children below fifteen (15) years of age shall not be employedexcept:

1. When a child works directly under the sole responsibility of hisparents or legal guardian and where only members of theemployer’s family are employed: Provided, however, That hisemployment neither endangers his life, safety, health and morals,nor impairs his normal development: Provided, further, That theparent or legal guardian shall provide the said minor child with theprescribed primary and/or secondary education

2. When a child’s employment or participation in public andentertainment or information through cinema, theater, radio ortelevision is essential: Provided, the employment contract isconcluded by the child’s parents or guardian, with the expressagreement of the child concerned, if possible, and the approval ofthe Department of Labor and Employment: and Provided, That thefollowing requirements in all instances are strictly complied with:



a. The employer shall ensure the protection,health, safety and morals of the child

b. The employer shall institute measures to prevent thechild’s exploitation or discrimination taking into accountthe system and level of remuneration, and the durationand arrangement of working time

c. The employer shall formulate and implement,subject to the approval and supervision of competentauthorities, a continuing program for training and skills

acquisition of the child.

In the above exceptional cases where any such child may beemployed, the employer shall first secure, before engaging suchchild, a work permit from the Department of Labor andEmployment which shall ensure observance of the aboverequirements. (Sec. 12, RA 7610, as amended by RA 7658)

C. Terms and conditions of employment

1. Apprenticeship agreements – Apprenticeship agreements,including the main rates of apprentices, shall conform to the rulesissued by the Minister of Labor and Employment. The period ofapprenticeship shall not exceed six months. Apprenticeshipagreements providing for wage rates below the legal minimumwage, which in no case shall start below 75% per cent of theapplicable minimum wage, may be entered into only in accordancewith apprenticeship program duly approved by the Minister ofLabor and Employment. The Ministry shall develop standard modelprograms of apprenticeship. (Art 61; Nitto Enterprises v. NLRC,1995)

2. No-compensation apprenticeships – The Secretary of Labor mayauthorize the hiring of apprentices without compensation whosetraining on the job is required by the school or training programcurriculum or as a requisite for graduation or board examination.(Art 72)

3. Deductibility of training costs - An additional deduction fromtaxable income of one-half of the value of labor training expensesincurred for developing the productivity and efficiency ofapprentices shall be granted to the person or enterprise organizingan apprenticeship program provided such program is dulyrecognized by the Department of Labor and Employment; providedfurther that such deduction shall not exceed 10 percent of directlabor wage; and provided finally that the person or enterprise whowish to avail of this incentive should pay his apprentices theminimum wages. (Art 71)

D. EnforcementUpon complaint of any interested person or upon its own initiative,the appropriate agency of the Department of Labor andEmployment or its authorized representative shall investigate anyviolation of any apprenticeship agreement (Art 65)

The decision of the authorized agency of the Department by anyaggrieved person to the Secretary of Labor and Employment withinfive days from receipt of the decision. The decision of the Secretaryshall be final and executory. (Art 66)

II. LEARNERS

A. Defined“Learners” refer to persons hired as trainees in semi-skilled andother industrial occupation which are non-apprenticeable.Learnership programs must be approved by the Authority.

B. RequisitesLearners may be employed when no experienced workers areavailable the employment of learners is necessary to preventcurtailment of employment opportunities, and the employmentdoes not create unfair competition in terms of labor costs or impairor lower working standards. (Art 74)

C. Terms and conditions of employment

1. Learnership agreement – Any employer desiring to employerlearners shall enter into a learnership agreement with them, whichagreement shall include:

a. The NAMES and addresses of the learners;

b. The DURATION of the learnership period, whichshall not exceed three months;

c. The WAGES or salary rates of the learners whichshall begin at not less than 75 percent of theapplicable minimum wage; and

d. A COMMITMENT to employ the learners, if they sodesire, as regular employees upon completion of thelearnership.

The learnership agreement shall be subject to inspection by theSecretary or his duly authorized representatives. (Art 75)

2. Regularization – All learners who have been allowed or sufferedto work during the first two months shall be deemed regularemployees if training is terminated by the employer before the endof the stipulated period through no fault of the learner. (Art 75)

3. Special circumstance: Learners in piecework – Learners employedin piece or incentive rate jobs during the training period shall bepaid in full for the work done. (Art 76)

III.HANDICAPPED WORKERS

A. CoverageThe Magna Carta for Disabled Persons or RA 7277 shall cover alldisabled persons and, to the extent herein provided, departments,officers and agencies of the National Government or non-government organizations involved in the attainment of theobjectives of this Act. (Sec 3, RA 7277)

B. Definitions

“Disabled Persons” - those suffering from restriction ordifferent abilities, as a result of a mental, physical orsensory impairment, to perform an activity in the manneror within the range considered normal for a human being(Sec 4a, RA 7277)

“Impairment - any loss, dimunition or aberration ofpsychological, physiological, or anatomical structure orfunction (Sec 4b, RA 7277)

“Disability” - shall mean

physical or mental impairment that substantiallylimits one or more psychological, physiological oranatomical function of an individual or activities ofsuch individual;

a record of such an impairment; or

being regarded as having such an impairment (Sec4c, RA 7277)

4. “Handicap” - refers to a disadvantage for a given individual,resulting from an impairment or a disability, that limits orprevents the function or activity, that is considerednormal given the age and sex of the individual (Sec 4d, RA7277)

C. Rights and privileges of disabled persons

Equal Opportunity for Employment (Sec 5, RA 7277)

No disabled person shall be denied access toopportunities for suitable employment. Aqualified disabled employee shall be subject to the

same terms and conditions of employment and the samecompensation, privileges, benefits, fringe benefits, incentivesor allowances as a qualified able-bodied person



Reserved contractual positions (Sec 5, RA 7277)

Five percent (5%) of all casual, emergency andcontractual positions in the Departments of Social Welfare andDevelopment; health, Education, Culture and Sports; andother government agencies, offices or corporations

engaged in social development shall be reserved fordisabled persons.

Sheltered employment (Sec 6, RA 7277)If suitable employment for disabled persons cannot befound through open employment as provided in theimmediately preceding Section, the State shall endeavorto provide it by means of sheltered employment. In theplacement of disabled persons in sheltered employment,it shall accord due regard to the individual qualities,vocational goals and inclinations to ensure a goodworking atmosphere and efficient production.

Apprenticeship opportunity (Sec 7, RA 7277)

Subject to the provisions of the Labor Code asamended, disabled persons shall be eligible as apprenticesor learners: Provided, that their handicap is not as muchas to effectively impede the performance of job operations in the

particular occupation for which they are hired; provided,further, That after the lapse of the period ofapprenticeship, if found satisfactory in the job performance,they shall be eligible for employment.

D. Incentives for employers

1. Tax incentives for employment of disabled persons (Sec8, RA 7277)

Private entities that employ disabled persons who meetthe required skills or qualifications, either ad regularemployee, apprentice or learner, shall be entitled to anadditional deduction, from their gross income, equivalentto 25% of the total amount paid as salaries and wages todisabled persons: Provided, however, That such entitiespresent proof as certified by the Department of Laborand Employment and the Department f Health as to hisdisability, skills, and qualifications.

2. Tax incentives for construction of disabled-friendlyfacilities (Sec 8, RA 7277)

Private entities that improve or modify their physicalfacilities in order to provide

reasonable accommodation for disabled persons shallalso be entitled to an additional deduction from their net

taxable income, equivalent to 50% of thedirect costs of the improvements or modifications.

This Section, however, does not apply to improvements ormodifications or facilities required under BatasPambansa Bilang 344. (Sec 8, RA 7277)

Bernardo v. NLRC, 1999In this light, the Magna Carta for Disabled Persons

mandates that a qualified disabled employee should be given thesame terms and conditions of employment as a qualified able-bodied person. Since the Magna Carta accords them the rights ofqualified able-bodied persons, they are thus covered by Article 280of the Labor Code. In the present case, the handicap of petitioners(deaf-mutes) is not a hindrance to their work. The eloquent proof ofthis statement is the repeated renewal of their employmentcontracts. Why then should they be dismissed, simply because theyare physically impaired? The Court believes, that, after showingtheir fitness for the work assigned to them, they should be treatedand granted the same rights like any other regular employees.

PART VIII

Conditions of Employment

Hours of Work

I. Hours Regulation

Rationale and EnforcementThe Eight-Hour Labor Law was designed not only to safeguard thehealth and welfare of the laborer or EE, but in a way to minimizeunemployment by forcing employers, in cases where more than 8-hour operation is necessary, to utilize different shifts of laborers orEEs working only for eight hours each.(Manila Terminal Co. Inc v. CIR, 1952)

II. Coverage

The provisions of this Title shall apply to employees in allestablishments and undertakings whether for profit or not. (Art. 82)

Does NOT cover: (Art. 82)1. government employees,2. managerial employees,3. field personnel,4. members of the family of the ER who are dependent on him

for support,5. domestic helpers,6. persons in the personal service of another, and7. workers who are paid by results as determined by the

Secretary of Labor in appropriate regulations.

“managerial employees” - those whose primary duty consists of themanagement of the establishment in which they are employed or ofa department or subdivision thereof, and to other officers ormembers of the managerial staff. (Art. 82)

"Field personnel" - non-agricultural employees who regularlyperform their duties away from the principal place of business orbranch office of the employer and whose actual hours of work inthe field cannot be determined with reasonable certainty. (Art. 82)

Rationale Exemption – Managerial Employees

The philosophy behind the exemption of managerial EEs from the 8-Hour Labor Law is that such workers are not usually employed forevery hour of work but their compensation is determinedconsidering their special training, experience or knowledge whichrequires the exercise of discretion and independent judgment, orperform work related to management policies or general businessoperations along specialized or technical lines. For these workers itis not feasible to provide a fixed hourly rate of pay or maximumhours of labor.(National Waterworks and Severage Authority v. NAWASAConsolidated Unions, 1965)

Tests – Field PersonnelThe clause "whose time and performance is unsupervised by theemployer" did not amplify but merely interpreted and expoundedthe clause "whose actual hours of work in the field cannot bedetermined with reasonable certainty." The former clause is stillwithin the scope and purview of Article 82 which defines fieldpersonnel. Hence, in deciding whether or not an EE's actual workinghours in the field can be determined with reasonable certainty,query must be made as to whether or not such EE's time andperformance is constantly supervised by the employer.(Union of Filipro Employees v. Vivar, 1992)

“Actual hours work in the field…” is to be read in conjunction withRule IV, Book III of the Implementing Rules. Therefore field



personnel are EEs whose time and performance is unsupervised bythe employer.(Salazar v. NLRC, 1996)

If required to be at specific places at specific times, EEs includingdrivers cannot be said to be field personnel despite the fact thatthey are performing work away from principal office of EE.(Auto Bus Transport Systems, Inc. v. Bautista, 2005)

Rationale Exemption – Piece WorkerPhilosophy underlying the exclusion of piece workers from the 8-hour law is that said workers are paid depending upon the workthey do irrespective of the amount of time employed in doing saidwork.(Red V Coconut Products Ltd., v. CIR, 1966)

III. Normal Hours of Work

The normal hours of work of any employee shall not exceed eight(8) hours a day.(Art. 83)

Special Rule for Health Personnel:Health personnel in cities and municipalities with a population of atleast one million (1,000,000) or in hospitals and clinics with a bedcapacity of at least one hundred (100) shall hold regular office hoursfor eight (8) hours a day, for five (5) days a week, exclusive of timefor meals.(Art. 83)

Exception to the Special Rule:Exigencies of the service require work for six 6 days or 48 hours, inwhich case, they shall be entitled to an additional compensation ofat least 30% of their regular wage for work on the sixth day.(Art. 83)

"health personnel"1. resident physicians,2. nurses,3. nutritionists,4. dietitians,5. pharmacists,6. social workers,7. laboratory technicians,8. paramedical technicians,9. psychologists,10. midwives,11. attendants, and12. all other hospital or clinic personnel.(Art. 83)

DISTINCTION BETWEEN THE TWO CLASSES

COMMERCIAL/INDUSTRIAL

HEALTH

Normal WorkDay

8 hrs/day 8 hrs/day

Normal WorkWeek

6 days 5 days

IV. Hours WorkedInclude:1. all time during which an employee is required to be on duty or tobe at a prescribed workplace; and

2. all time during which an employee is suffered or permitted towork.(Art. 84)

* Rest periods of short duration during working hours shall becounted as hours worked. (Art. 84)

Idle Time

The idle time that an employee may spend for resting & diningwhich he may leave the spot or place of work though not the

premises of his ER, is not counted as working time only where thework is broken or is not continuous.(National Development Co. v. CIR, 1962)

A laborer need not leave the premises of the factory, shop or boatin order that his period of rest shall not be counted, it being enoughthat he "cease to work", may rest completely and leave or mayleave at his will the spot where he actually stays while working, togo somewhere else, whether within or outside the premises of saidfactory, shop or boat. If these requisites are complied with, theperiod of such rest shall not be counted.(Luzon Stevedoring Co. v. Luzon Marine Department Union, 1957)

Continuous Work

The provision of section 1 of Commonwealth Act No. 444, whichstates that "when the work is not continuous, the time during whichthe laborer is not working and can leave his working place and canrest completely shall not be counted", finds no application in thepresent case, where the laborer's work is continuous, and duringthe time that he is not working he can not leave and completelyrest owing to the place and nature of his work.(State Marine Corporation v. Cebu Seamen’s Association, 1963)

Waiting Time

The thirty (30)-minute assembly is a deeply-rooted, routinarypractice of the employees, and the proceedings attendant theretoare not infected with complexities as to deprive the workers thetime to attend to other personal pursuits.(Arica v. NLRC, 1989)

Travel Time

The fact that he picks up employees of Philnor at certain specifiedpoints along EDSA in going to the project site and drops them off atthe same points on his way back from the field office going home toMarikina, Metro Manila is not merely incidental to petitioner's jobas a driver. On the contrary, said transportation arrangement hadbeen adopted, not so much for the convenience of the employees,but primarily for the benefit of the employer, herein privaterespondent. Since the assigned task of fetching and deliveringemployees is indispensable and consequently mandatory, then thetime required of and used by petitioner in going from his residenceto the field office and back, that is, from 5:30 A.M. to 7:00 A.M. andfrom 4:00 P.M. to around 6:00 P.M., which the labor arbiterrounded off as averaging three hours each working day, should bepaid as overtime work.(Rada v NLRC, 1992)

Entry Time Cards

It is impossible for an EE to arrive at the workplace & leave atexactly the same time day in day out (daily time records). The veryuniformity & regularity of the entries are “badges ofuntruthfulness.”(Prangan v. NLRC, 1998; Nicario v. NLRC, 1998)

It is an error to rely solely on the computations of compensableservices submitted by private resources. There must be competentproof such as time cards / office records to show that they actuallyrendered compensable service during the stated period to entitlethem to wages.(Aklan Electric Coop., Inc. v. NLRC, 2000)

V. Meal Period

Subject to such regulations as the Secretary of Labor may prescribe,it shall be the duty of every employer to give his employees not lessthan sixty (60) minutes time-off for their regular meals. (Art. 85)

Meal Time – Free Time

During meal period, the laborers are required to stand by foremergency work, or where said meal hour is not one of completerest, such period is considered overtime.



(Pan-American Airways v. Pan-American Employees Association,1961)

The eight-hour work period does not include the meal break.Employees are not prohibited from going out of the premises aslong as they return to their posts on time.(Phil. Airlines, Inc. v. NLRC, 1999)

VI. Overtime Work and Offsetting Prohibition

Overtime work - Work may be performed beyond eight (8) hours aday provided that the employee is paid for the overtime work, anadditional compensation equivalent to his regular wage plus at least25% thereof. Work performed beyond eight hours on a holiday orrest day shall be paid an additional compensation equivalent to therate of the first eight hours on a holiday or rest day plus at least30% thereof. (Art. 87)

Undertime not offset by overtime - Undertime work on anyparticular day shall not be offset by overtime work on any otherday. Permission given to the employee to go on leave on someother day of the week shall not exempt the employer from payingthe additional compensation required in this Chapter.(Art. 88)

Emergency overtime work - Any employee may be required by theemployer to perform overtime work in any of the following cases:(Art. 89)a. When the country is at war or when any other national or local

emergency has been declared by the National Assembly or theChief Executive;

b. When it is necessary to prevent loss of life or property or incase of imminent danger to public safety due to an actual orimpending emergency in the locality caused by seriousaccidents, fire, flood, typhoon, earthquake, epidemic, or otherdisaster or calamity;

c. When there is urgent work to be performed on machines,installations, or equipment, in order to avoid serious loss ordamage to the employer or some other cause of similarnature;

d. When the work is necessary to prevent loss or damage toperishable goods; and

e. Where the completion or continuation of the work startedbefore the eighth hour is necessary to prevent seriousobstruction or prejudice to the business or operations of theemployer. (Art. 89)

* Any employee required to render overtime work under this Articleshall be paid the additional compensation required in this Chapter.(Art. 89)

Computation of additional compensation - For purposes ofcomputing overtime and other additional remuneration as requiredby this Chapter, the "regular wage" of an employee shall include thecash wage only, without deduction on account of facilities providedby the employer.

Definition and Rationale – Overtime Pay

Why is there extra compensation for overtime? Because he is madeto work longer than what is commensurate with his agreedcompensation. The effects of spending additional time to work ismulti-faceted: he puts in more effort, physical and/or mental; he isdelayed in going home to his family to enjoy the comforts thereof;he might have no time for relaxation, amusement or sports; hemight miss important pre-arranged engagements; etc. It is thus theadditional work, labor or service employed and the adverse effectsthat justify the extra compensation.

Overtime work - the lengthening of hours devoted to the interestsof the employer and the requirements of his enterprise.(Philippine National Bank v. PNB Employees Association, 1982)

Overtime work consists of hours worked on a given day in excess ofthe applicable work period, which here is eight (8) hours. It is notenough that the hours worked fall on disagreeable or inconvenienthours. In order that work may be considered as overtime work, the

hours worked must be in excess of and in addition to the eight (8)hours worked during the prescribed daily work period, or the forty(40) hours worked during the regular work week Monday throughFriday.(Caltex Regular Employees v. Caltex Phil. Inc., 1995)

No Computation Formula Basic ContractA contract of employment, which provides for a weekly wage for aspecified number of hours, sufficient to cover both the statutoryminimum wage and overtime compensation, if computed on thebasis of the statutory minimum, and which makes no provision for afixed hourly rate or that the weekly wage includes overtimecompensation, does not meet the requirements of the Act.(Manila Terminal Co. Inc v. CIR, 1952)

Built-in Compensation

Written contracts with a "built-in" overtime pay in the ten-hourworking day and that their basic monthly pay was adjusted toreflect the higher amount covering the guaranteed two-hour extratime whether worked or unworked are valid.(Engineering Equipment Inc v. MOLE, 1985)

Proof of WorkEntitlement to overtime pay must first be established by proof thatsaid overtime work was actually performed, before an employeemay avail of said benefit.(Lagatic v. NLRC, 1998)

Where the veracity of the alleged documents as payrolls aredoubtful considering that the laborers paid therein never affixedtheir signatures to show that they actually received the amountsindicated, the fact that a particular laborer’s name does not appearis no proof that he did not work in the workplace.

Unwavering testimonies of laborer’s employment prevail overincomplete & inconsistent documentary evidence of employer.

To constiture abandonment, there must be clear proof of deliberate& unjustified intent to sever the ER-EE relationship. Mere absenceof the employee is not sufficient. The burden of proof to show adeliberate & unjustified refusal of an employee to resume hisemployment without any intention of returning rests on the ER.(Villar v. NLRC, 2000)

Employer Obligation

ER is duty-bound to keep faithful & complete records of his businessaffairs, not the least of which would be the salaries of the workers.(Social Security System v. Court of Appeals, 2000)

VII. Night Work

“Night shift differential” - Every employee shall be paid a night shiftdifferential of not less than ten percent (10%) of his regular wagefor each hour of work performed between ten o’clock in theevening and six o’clock in the morning. (Art. 86)

At least 110% for each hour of work between 10pm and 6am

Rationale Prohibition

Nightwork cannot be regarded as desirable, either from the point ofview of the employer or of the wage earner. It is uneconomicalunless overhead costs are unusually heavy. Frequently the scale ofwages is higher as an inducement to employees to acceptemployment on the night shift, and the rate of production isgenerally lower.

Reasons for prohibiting night work:

Health risks

Disarrangement of social life

Moral dangers

Night work lawks to enforce act fixing max period ofemployment

Unprofitable; inferior to day work both in quality &quantity



(Shell Oil Co. Ltd v. National Labor Union, 1948)

PART IX

Conditions of Employment

Weekly Rest Period

I. Rationale

Division between public utilities & others is not arbitrary. Publicutilities exempt from the prohibition (against compelling employeesto work on Subdays & holidays without additional payment) of Sec.4, CA444 are required to perform a continuous service to the pubicsince the public good so demands & are not allowed to collect anextra charge for services performed on those days; while others arenot required to do so & are free to operate of not their shops,business or industries on Sundays & legal holidays. If they operate &compel their laborer to work on those days it is but just & naturalthat they should pay extra compensation to them because it is to bepresumed that they can make money or business by operating onthose days even if they have to pay such extra enumeration.(Manila Electric Co. v. Public Utilities Employees Assn., 1947)

II. Coverage

Coverage - The provisions of this Title shall apply to employees in allestablishments and undertakings whether for profit or not.(Art. 82)

Except for:1. government employees,2. managerial employees,3. field personnel,4. members of the family of the employer who are dependent on

him for support,5. domestic helpers,6. persons in the personal service of another, and7. workers who are paid by results as determined by the

Secretary of Labor in appropriate regulations. (Art. 82)

Right to weekly rest day - It shall be the duty of every employer,whether operating for profit or not, to provide each of hisemployees a rest period of not less than 24 consecutive hours afterevery 6 consecutive normal work days.(Art. 91a)

III. Scheduling of Rest Day

Right to weekly rest day - The employer shall determine andschedule the weekly rest day of his employees subject to collectivebargaining agreement and to such rules and regulations as theSecretary of Labor and Employment may provide. However, theemployer shall respect the preference of employees as to theirweekly rest day when such preference is based on religiousgrounds.(Art. 91b)

IV. Compulsory Work and Compensation

When employer may require work on a rest day - The employer mayrequire his employees to work on any day:a. In case of actual or impending emergencies caused by serious

accident, fire, flood, typhoon, earthquake, epidemic or otherdisaster or calamity to prevent loss of life and property, orimminent danger to public safety;

b. In cases of urgent work to be performed on the machinery,equipment, or installation, to avoid serious loss which theemployer would otherwise suffer;

c. In the event of abnormal pressure of work due to specialcircumstances, where the employer cannot ordinarily beexpected to resort to other measures;

d. To prevent loss or damage to perishable goods;e. Where the nature of the work requires continuous operations

and the stoppage of work may result in irreparable injury orloss to the employer; and

f. Under other circumstances analogous or similar to theforegoing as determined by the Secretary of Labor andEmployment.

(Art. 92)

Work on rest day 30% premiumNo regular rest day 30% premium for work performed

on Sundays & holidaysWork on specialholiday

30% premium (All Saint’s Day, Dec31, Ninoy Aquino Day (Aug. 21))

Work when specialholiday falls on restday

50% premium

Where the collectivebargainingagreement or otherapplicableemployment contractstipulates thepayment of a higherpremium pay thanthat prescribed underthis Article

The employer shall pay suchhigher rate

(Art. 93

PART X

Conditions of Employment Holiday

I. Coverage

Right to holiday pay - Every worker shall be paid his regular dailywage during regular holidays, except in retail and serviceestablishments regularly employing less than 10 workers.(Art. 94a)

Coverage and Purpose

The Secretary of Labor cannot exempt Mantrade from payingholiday pay just because its employees are uniformly paid by themonth irrespective of the number of working days therein. TheLabor Code only exempts retail and service establishments regularlyemploying less than 10 workers.(Mantrade / FMC Division Employees and Workers Union v.Bacungan, 1986)

Muslim holidays are provided for in the code of Muslim personallaws.

Art. 170 of the same code: 169 must be read in conjunction withArt. 94.

There should be no distinction between Muslims & non-Muslimsas regards to the payment of benefits for Muslim holidays.

Wages & other emoluments granted by law to the working manare determined on the basis of the criteria laid down by laws &not on the basis of the worker’s faith.

Art. 3(3), PD 1083: nothing herein shall be construed to operateto the prejudice of a non-Muslim.

(San Miguel Corp. v. Court of Appeal, 2002)

Holiday pay - legislative benefit enacted as part of the constitutionalimperative that the state shall afford protection to labor.

Holiday pay purpose:

not merely to prevent diminution of the monthly income ofthe workers on account of work interruptions,

to enable the worker to participate in the national celebrationsheld during the days identified as with great historical &cultural significance.



Unlike a bonus, which is a management prerogative, holiday pay is astatutory benefit demandable under the law.(Asian Transunion Corp. v. Court of Appeals, 2004)

II. Holidays

REPUBLIC ACT NO. 9492AN ACT RATIONALIZING THE CELEBRATION OF NATIONAL HOLIDAYSAMENDING FOR THE PURPOSE SECTION 26, CHAPTER 7, BOOK I OFEXECUTIVE ORDER NO. 292, AS AMENDED, OTHERWISE KNOWN ASTHE ADMINISTRATIVE CODE OF 1987

Sec. 1Section 26, Chapter 7, Book I of Executive Order No. 292, asamended, otherwise known as the Administrative Code of 1987, ishereby amended to read as follows:"Sec. 26, Regular Holidays and Nationwide Special Days. – (1) Unlessotherwise modified by law, and or proclamation, the followingregular holidays and special days shall be observed in the country:

a. Regular Holidays

New year’s Day - January 1

Maundy Thursday - Movable date

Good Friday - Movable date

Eidul Fitr - Movable date

Araw ng Kagitingan - Monday nearest April 9 (Bataaan andCorregidor Day)

Labor Day - Monday nearest May 1

Independence Day - Monday nearest June 12

National Heroes Day - Last Monday of August

Bonifacio Day - Monday nearest November 30

Christmas Day - December 25

Rizal Day - Monday nearest December 30

1. Nationwide Special Holidays:

Ninoy Aquino Day - Monday nearest August 21

All Saints Day - November 1

Last Day of the Year - December 31

2. In the event the holiday falls on a Wednesday, the holiday willbe observed on the Monday of the week. If the holiday falls ona Sunday, the holiday will be observed on the Monday thatfollows:

Provided, That for movable holidays, the President shallissue a proclamation, at least six months prior to the holidayconcerned, the specific date that shall be declared as anonworking day

Provided, however, The Eidul Adha shall be celebrated as aregional holiday in the Autonomous Region in MuslimMindanao."

Sec. 2All laws, orders, presidential issuances, rules and regulations or partthereof inconsistent with this Act are hereby repealed or modifiedaccordingly.

III. Holiday Pay

The employer may require an employee to work on any holiday butsuch employee shall be paid a compensation equivalent to twice hisregular rate.(Art. 94b)

Coverage: (Sec. 1 Rule 4 of IRR)All employees

Except: (Sec. 1 Rule 4 of IRR)1. Those of the government and any of the political subdivision,

including government-owned and controlled corporation;2. Those of retail and service establishments regularly employing

less than 10 workers;3. Domestic helpers and persons in the personal service of

another;4. Managerial employees as defined in Book 3 of the Code;5. Field personnel and6. other employees whose time and performance is unsupervised

by the employer including those who are engaged on task or

contract basis, purely commission basis, or those who are paida fixed amount for performing work irrespective of the timeconsumed in the performance thereof.

Work on any regularholiday, not exceeding 8hours

200% of regular daily wage

Work on any regular holidaywhich falls on the scheduledrest day, not exceeding 8hours

30% + 200% of regular dailywage

Overtime on a regularholiday

Additional 30% of the 200%of regular daily wage

Overtime on a regularholiday which falls on thescheduled rest day

Additional 30% of the 230%of regular daily wage

(Sec. 1 Rule 4 of IRR)

Faculty Private School

It is readily apparent that the declared purpose of the holiday paywhich is the prevention of diminution of the monthly income of theemployees on account of work interruptions is defeated when aregular class day is cancelled on account of a special public holidayand class hours are held on another working day to make up fortime lost in the school calendar. Otherwise stated, the facultymember, although forced to take a rest, does not earn what heshould earn on that day. Be it noted that when a special publicholiday is declared, the faculty member paid by the hour is deprivedof expected income, and it does not matter that the school calendaris extended in view of the days or hours lost, for their income thatcould be earned from other sources is lost during the extendeddays. Similarly, when classes are called off or shortened on accountof typhoons, floods, rallies, and the like, these faculty membersmust likewise be paid, whether or not extensions are ordered.(Jose Rizal College v. NLRC, 1987)

Divisor as Factor

The daily rate, assuming there are no intervening salary increases, isa constant figure for the purpose of computing overtime and nightdifferential pay and commutation of sick and vacation leave credits.Necessarily, the daily rate should also be the same basis forcomputing the 10 unpaid holidays.(Union of Filipro Employees v. Vivar, 1991)

Since the rest days of petitioners fall on a Sunday, the number ofunworked but paid legal holidays should be reduced to 9, instead of10, since one legal holiday under EO 203 always falls on the lastSunday of August.

Transasia’s consistent use of 286 divisor in the computation of itsEEs’ benefits & deductions established that holiday pay is alreadyincluded in their monthly salaries.(Transasia Phils. Employe Assn. v. NLRC 1999)

Computation

The cited provisions of PD 442 simply declare that night shiftdifferential and additional remuneration for overtime, rest day,Sunday and holiday work shall be computed on the basis of theemployee's regular wage. In like fashion, the 1991 POEA Rulesmerely require employers to guarantee payment of wages andovertime pay. Thus, petitioners' stance is bereft of any legalsupport.(Agga v. NLRC, 1998)

Sunday

In fixing the salary, Wellington used what it calls the "314 factor;"that is to say, it simply deducted 51 Sundays from the 365 daysnormally comprising a year and used the difference, 314, as basisfor determining the monthly salary. The monthly salary thus fixedactually covers payment for 314 days of the year, including regularand special holidays, as well as days when no work is done by



reason of fortuitous cause, as above specified, or causes notattributable to the employees.

There is no provision of law requiring any employer to make suchadjustments in the monthly salary rate set by him to take accountof legal holidays falling on Sundays in a given year, or, contrary tothe legal provisions bearing on the point, otherwise to reckon a yearat more than 365 days. As earlier mentioned, what the law requiresof employers opting to pay by the month is to assure that "themonthly minimum wage shall not be less than the statutoryminimum wage multiplied by 365 days divided by twelve," and topay that salary "for all days in the month whether worked or not,"and "irrespective of the number of working days therein."(Wellington Investment Inc. v. Trajano, 1995)

Proof of Payment

Indeed if petitioner wanted to prove its payment of holiday paysand salary differentials, it could have easily presented proofs ofsuch monetary benefits. But it did not. It had failed to comply withthe mandate of the law. As public respondent ruled, the burden ofproof in this regard belongs to the employer, not to the employee.(Building Care Corp. v. NLRC, 1998)

PART XI

Conditions of Employment Leaves

I. Coverage

Right to service incentive leave - Every employee who has renderedat least one year of service shall be entitled to a yearly serviceincentive leave of five days with pay.(Art. 95a)

This provision shall not apply to:

those who are already enjoying the benefit herein provided,

those enjoying vacation leave with pay of at least five days and

those employed in establishments regularly employing lessthan 10 employees or in establishments exempted fromgranting this benefit by the Secretary of Labor andEmployment after considering the viability or financialcondition of such establishment.

(Art. 95b)

Piece-rate workers being paid at a fixed amount for performingwork irrespective of time consumed in the performance thereof fallunder one of the exceptions stated in Section 1(d), Rule V,Implementing Regulations, Book III, Labor Code.(Makati Haberdashery Inc. v. NLRC, 1989)

II. Entitlement and Arbitration

Right to service incentive leave - Every employee who has renderedat least one year of service shall be entitled to a yearly serviceincentive leave of five days with pay.(Art. 95a)

The grant of benefit in excess of that provided herein shall not bemade a subject of arbitration or any court or administrative action.(Art. 95c)

III. Computation and Liability

Under Arts. 107 and 109, the indirect employer is jointly andseverally liable with the contractor for the workers’ wages, in thesame manner and extent that it is liable to its direct employees.This liability of the Client covers the payment of the serviceincentive leave pay of the complainants during the time they wereposted at the Cebu Branch of the Client. As service had beenrendered, the liability accrued, even if the complainants wereeventually transferred or reassigned. The service incentive leave isexpressly granted by these pertinent provisions of the Labor Code.(Sentinel Security Agency, Inc. v. NLRC, 1998)

It is essential to recorgnize that the service incentive leave is acurious animal in relation to other benefits granted by the law toevery employee. In case of SIL, the EE may choose to either use hisleave credits or commute it to its monetary equivalent if notexhausted at the end of the year. If the EE does not use or commutethe same, he is entitled upon his resignation or separation fromwork to the commutation of his accrued SIL.(Auto Bus Transport Systems, Inc. v. Bautista, 2005)

Paternity Leave

RA 8187 Paternity Leave Act of 1995 and Implementing Rules

Coverage:Sec. 2



Notwithstanding any law, rules, and regulations to the contrary,every MARRIED male employee in the private and public sectorsshall be entitled to a paternity leave of 7 days with full pay for thefirst four 7 deliveries of the LEGITIMATE spouse with whom he iscohabiting. The male employee applying for paternity leave shallnotify his employer of the pregnancy of his legitimate spouse andthe expected date of such delivery.

For purposes of this Act, delivery shall include childbirth or anymiscarriage.

Maternity Leave

R.A. No. 8282. Sec. 14-AA female employee who has paid at least 3 monthly contributions inthe 12-month period immediately preceding the semester of herchildbirth, or miscarriage shall be paid a daily maternity benefitequivalent to one 100% of her average salary credit for 60 days or78 days in case of caesarean delivery subject to the followingconditions:

a. That the employee shall have notified her employer of herpregnancy and the probable date of her childbirth whichnotice shall be transmitted to the SSS in accordance with therules and regulations it may provide.

b. The full payment shall be advanced by the employer within30 days from the filing of the maternity leave application.

c. That payment of daily maternity benefits shall be a bar to therecovery of sickness benefits provided by this Act for thesame period for which daily maternity benefits have beenreceived.

d. That the maternity benefits provided under this section shallbe paid only for the first 4 deliveries or miscarriages.

e. That the SSS shall immediately reimburse the employer ofone 100% of the amount of maternity benefits advanced tothe employee by the employer upon receipt of satisfactoryproof of such payment and legality thereof;

f. That if an employee should give birth or suffer miscarriagewithout the required contributions having been remitted forher by her employer to the SSS, or without the latter havingbeen previously notified by the employer of time of thepregnancy, the employer shall pay to the SSS damagesequivalent to the benefits which said employee memberwould otherwise have been entitled to.

Vacation and Sick Leave

The payment of vacation and sick leave is governed by the policy ofthe employer or the agreement between the employer andemployee.

(St. Michael Academy v. NLRC, 1998)

PART XII

WAGES

WAGES – IN GENERAL

I. Coverage

“Employer” - includes any person acting directly or indirectly in theinterest of an employer in relation to an employee and shall includethe government and all its branches, subdivisions andinstrumentalities, all government-owned or controlled corporationsand institutions, as well as non-profit private institutions, ororganizations.(Sec 97(b))

“Employee” includes any individual employed by an employer.(Sec 97(c))

“Employ” includes to suffer or permit to work.(Sec 97(e))

This Title shall NOT apply to:20. farm tenancy or leasehold21. domestic service, &22. persons working in their respective homes in needle work

or in any cottage industry duly registered in accordancewith law.

(Sec 98)

II. Wage

Definition

5. paid to any employee shall mean the remuneration orearnings, however designated,d. capable of being expressed in terms of money, whether

fixed or ascertained on a time, task, piece, or commissionbasis, or other method of calculating the same,

e. which is payable by an employer to an employee under awritten or unwritten contract of employment

f. for work done or to be done, or for services rendered orto be rendered and

g. includes the fair and reasonable value, as determined bythe Secretary of Labor and Employment, of:1. board,2. lodging, or3.other facilitiescustomarily furnished by the employer to the employee.

4. “Fair and reasonable value” - shall not include any profitto the employer, or to any person affiliated with theemployer.

Fair Day Pay

A "fair day’s wage for a fair day’s labor" remains as the basic factorin determining employees’ wages. If there is no work performed bythe employee there can be no wage or pay unless, of course, thelaborer was able, willing and ready to work but was illegally lockedout, suspended or dismissed, or otherwise illegally prevented fromworking.(Aklan Electric Cooperative, Inc. v. NLRC, 2000)



Discrimination

If an ER accords the same position and rank, the presumption is thatthe EEs perform equal work. Equal work must receive equal pay.(International School Alliance of Educators v. Quisumbing, 2000;Philex Gold Phils., Inc. v. Philex Buawan Supervisors Union, 2005)

Facilities and Supplements

“Supplements” - extra remuneration/ special benefits given to orreceived by the EEs over and above their ordinary earnings orwages.

“Facilities” - items of expense necessary for the laborer's and hisfamily's existence and subsistence, so that by express provision oflaw they form part of the wage and when furnished by theemployer are deductible therefrom, since if they are not furnished,the laborer would spend and pay for them just the same.(States Marine Corp. v. Cebu Seamen's Assoc., Inc., 1963)

2. When an employer customarily furnishes his employee board,lodging or other facilities, the fair and reasonable valuethereof, as determined by the Secretary of Labor andEmployment, is included in "wage."(Millares v. NLRC, 1999)

3. "Customary" is founded on long-established and constantpractice connoting regularity. The receipt of an allowance on amonthly basis does not ipso facto characterize it as regular andforming part of salary because the nature of the grant is afactor worth considering.(Millares v. NLRC, 1999)

Tips

2. It denotes a voluntary act, however it has been said that a tiplacked the essential element of a gift, namely, the freebestowing of a gratuity without consideration, and that itdespite its apparent voluntariness, there is an element ofcompulsion in tipping.(Ace Navigation Co., Inc. v. CA, 2000)

3. Value depends on the giver, and it is given in addition to thecompensation given by the ER; cannot be demanded.(Ace Navigation Co., Inc. v. CA, 2000)

Cash Wage/Commissions

The words "wages" and "salary" are in essence synonymous,both words generally refer to one and the same meaning, thatis, a reward or recompense for services performed. Likewise,"pay" is the synonym of "wages" and "salary".(Songco v. NLRC, 1990)

While commissions are incentives to inspire employees to putmore industry on the jobs assigned to them, still thesecommissions are direct remuneration for services rendered.Commissions have been defined as the recompense,compensation or reward of an agent, salesman, executor,trustee, receiver, factor, broker or bailee, when the same iscalculated as a percentage on the amount of his transactionsor on the profit to the principal. The nature of the work of asalesman and the reason for such type of remuneration forservices rendered demonstrate clearly that commissions arepart of a salesman's wage or salary.(Iran v. NLRC, 1998)

Wages and Salary

“Wages” - compensation for manual labor, skilled or unskilled, paidat stated times, and measured by the day, week, month, or season.5. indicates considerable pay for a lower and less responsible

character of employment.

“Salary” - denotes a higher degree of employment, or a superiorgrade of services, and implies a position of office.ii) suggestive of a larger and more important service(Gaa v. CA, 1985)

Gratuity and Wages

“Gratuity Pay” - a money benefit given to the workers whosepurpose is to reward employees or laborers, who have renderedsatisfactory and efficient service to the company.

not intended to pay a worker for actual services rendered.

the grant of such benefit is not mandatory so as to beconsidered a part of labor standard law

gratuity pay not based on the actual number of days workedover the period of years forming its basis.

(Plastic Town Center Corp. v. NLRC, 1989)

PAYMENT OF WAGES

I. Form

Forms of payment NOT allowed:(ciii) promissory notes,(civ) vouchers,(cv) coupons,(cvi) tokens,(cvii) tickets,(cviii) chits, or(cix) any object other than legal tender

(Art 102)

Payment by check or money order allowed:

when customary on the date of the effectivity of thisCode, or

necessary because of special circumstances as specifiedin appropriate regulations or as stipulated in a CBA.(Art 102)

Payment through banks; Conditions:

written permission of the majority of the EEs/workersconcerned

25 or more EEs

establishment located within 1 km radius of acommercial, savings or rural bank

payment of wages within the period fixed in the LC.(RA 6727, Sec 7)

Labor Advisory on Payment of Salaries through Automated TellerMachine (ATM)

“Based on Article 104, as well as the provisions of Sec. 4, Rule VIII,Book III of the Code’s Implementing Rules and considering present-day circumstances, practices and technology, employers may adopta system of payment other than in the workplace, such as throughautomated teller machine (ATM) of banks, provided that thefollowing conditions are met:

1. The ATM system of payment is with the written consent ofthe employees concerned.

2. The employees are given reasonable time to withdraw theirwages from the bank facility which time, if done duringworking hours, shall be considered compensable hoursworked.

3. The System shall allow workers to receive their wages withinthe period or frequency and in the amount prescribed underthe Labor Code, as amended.

4. There is a bank or ATM facility within a radius of onekilometer to the place of work

5. Upon request of the concerned employee/s, the employershall issue a record of payment of wages, benefits anddeductions for particular period.

6. There shall be no additional expenses and no dimunition ofbenefits and privileges as a result of the ATM system ofpayment

7. The employer shall assume responsibility in case the wageprotection provisions of law and regulations are notcomplied with under the arrangement.

Full Payment

The law does not consider as valid any agreement whereby aworker agrees to receive less compensation than what he isentitled to recover. A deed of release or quitclaim cannot baran EE from demanding benefits to which he is legally entitled.(Lopez Sugar Corp. v. Franco, 2005)



The fact of partial payment does not shift the burden of proofto the EE because partial payment does not extinguish theobligation.(G&M (Phil.), Inc. v. Batomalaque, 2005)

Payroll Payment

Under the IRR, every ER is required to pay his EEs by means ofpayroll. The payroll should show the EE's rate of pay, deductionsmade, and the amount actually paid to the EEs.

Cash Wage

Wages shall be paid only by means of legal tender. The onlyinstance when an employer is permitted to pay wages in formsother than legal tender, that is, by checks or money order, is whenthe circumstances prescribed in the second paragraph of Article 102are present.- payment in tuna liver and intestines not allowed(Congson v. NLRC, 1959)

II. Time Payment

GR: Wages paid at least

once every 2 weeks or

twice a month at intervals not exceeding 16 days.

Exception:Force majeure or circumstances beyond the ER's control

ER may pay immediately after such force majeure orcircumstances have ceased

ER must pay at least once a month(Art 103)

Payment of wages of EEs engaged to perform a task which cannotbe completed in 2 weeks;Conditions in absence of a CBA or arbitration award:

Payments are made at intervals not exceeding 16 days, inproportion to the amount of work completed;

Final settlement is made upon completion of workcompleted.

(Art 103)

III. Place of Payment

Payment of wages shall be made at or near the place ofundertaking,EXCEPT as otherwise provided by such regulations as the Secretaryof Labor may prescribe under conditions to ensure greaterprotection of wages.(Art 104)

Labor Advisory on Payment of Salaries through Automated TellerMachine (ATM)

“Based on Article 104, as well as the provisions of Sec. 4, Rule VIII,Book III of the Code’s Implementing Rules and considering present-day circumstances, practices and technology, employers may adopta system of payment other than in the workplace, such as throughautomated teller machine (ATM) of banks, provided that thefollowing conditions are met:

1. The ATM system of payment is with the written consent ofthe employees concerned.

2. The employees are given reasonable time to withdraw theirwages from the bank facility which time, if done duringworking hours, shall be considered compensable hoursworked.

3. The System shall allow workers to receive their wages withinthe period or frequency and in the amount prescribed underthe Labor Code, as amended.

4. There is a bank or ATM facility within a radius of onekilometer to the place of work

5. Upon request of the concerned employee/s, the employershall issue a record of payment of wages, benefits anddeductions for particular period.

6. There shall be no additional expenses and no diminution ofbenefits and privileges as a result of the ATM system ofpayment

7. The employer shall assume responsibility in case the wageprotection provisions of law and regulations are notcomplied with under the arrangement.

IV. Direct Payment

General Rule: Wages shall be paid directly to the workers to whomthey are due.

Exceptions:3. Force majeure rendering payment impossible or under

other special circumstances to be determined by theSOLE in appropriate regulations- worker may be paid through another person underwritten authority given by the worker; or

4. Worker has died- ER may pay the wages to the heirs without necessity forintestate proceedings; payment through SOLE or hisrepresentative.- Claimants to execute an affidavit attesting to theirrelationship to the deceased and the fact that they arehis heirs.

(Sec 105)

V. Contractor - Subcontractor

In the event that the contractor or subcontractor fails to pay thewages of his employees in accordance with this Code, the employershall be jointly and severally liable with his contractor orsubcontractor to such employees to the extent of the workperformed under the contract, in the same manner and extent thathe is liable to employees directly employed by him.(Art 106)

PROHIBITION REGARDING WAGES

I. Non-interference in Disposal of Wages

No employer shall limit or otherwise interfere with the freedom ofany employee to dispose of his wages.

He shall not in any manner force, compel, or oblige his employeesto purchase merchandise, commodities or other property from anyother person, or otherwise make use of any store or services ofsuch employer or any other person.(Art 112)

II. Wage Deduction

General Rule: No employer, in his own behalf or in behalf of anyperson, shall make any deduction from the wages of his employees

Exceptions:1. The worker is insured with his consent by the employer,

and the deduction is to recompense the employer for theamount paid by him as premium on the insurance;

2. For union dues, in cases where the right of the worker orhis union to check-off has been recognized by theemployer or authorized in writing by the individualworker concerned; and

3. In cases where the employer is authorized by law orregulations issued by the Secretary of Labor andEmployment.

(Art 113)

It shall be unlawful to make any deduction from the wages of anyemployee for the benefit of the employer or his representative orintermediary as consideration of a promise of employment orretention in employment.(Art 117)

2. Article 222 Labor Code requires an individual writtenauthorization as a prerequisite to wage deductions seeks to



protect the employee against unwarranted practices thatwould diminish his compensation without his knowledge andconsent.(Radio Communication of the Phil., Inc. v. Sec. of Labor, 1989)

3. Assuming there was a call for payment of the unpaidsubscription, the NLRC cannot validly set it off against thewages and other benefits due petitioner.(Apodaca v. NLRC, 1989)

Check-off

An employer may be compelled to "check-off" union dues from the

wages of his employee when it has been authorized to do so by the

employee. This is upon the theory that it is necessary to promote

the welfare and integrity of the union to which he belongs. It is a

forward step to promote social justice as envisaged by our

Constitution.

(Manila Trading and Supply Co. v. Manila Trading Labor Association,

1953)

III. Deposit

General Rule: No employer shall require his worker to makedeposits from which deductions shall be made for thereimbursement of loss of or damage to tools, materials, orequipment supplied by the employer

Exception:ER is engaged in such trades, occupations or business where thepractice of making deductions or requiring deposits is a recognizedone, or is necessary or desirable as determined by the SOLE inappropriate rules and regulations.(Art 114)

Deduction from the deposits of an employee for the actual amountof the loss or damageConditions:

EE has been heard thereon, and

his responsibility has been clearly shown(Art 115)

Five J Taxi v. NLRC, 1994The article providing the rule on deposits for loss or damage to

tools, materials or equipment supplied by the employer does notapply to or permit deposits to defray any deficiency which the taxidriver may incur in the remittance of his "boundary." And whenworker stops working for employer, the alleged purpose for theunauthorized deposits no longer exists. In other case, any balancedue to private respondents after proper accounting must bereturned to them with legal interest.

IV. Withholding of Wages & Record Keeping

It shall be unlawful for any person, directly or indirectly, to:

withhold any amount from the wages of a worker

or induce him to give up any part of his wages by force,stealth, intimidation, threat or by any other meanswhatsoever without the worker’s consent.

(Art 116)

Garnishment or Attachment

What EE ha worked for, his ER must pay. Thus, an ER cannot simplyrefuse to pay the wages or benefits of its EEs because he has eitherdefaulted in paying a loan guaranteed by the ER, or violated theirmemorandum of agreement, or failed to render an accounting ofhis ER's property.(Special Steel Corp. v. Villareal, 2004)

Art 1708 NCC: "laborers' wages shall not be subject to execution orattachment, except for debts incurred for food, shelter, clothingand medical attendance". Writ of garnishment issued by CFI, whilepurporting to include all moneys and properties of the employingcompany, cannot affect what the co. has in its possession to pay

the wages of its laborers pursuant to its contract w/ them or theirlabor union w/o contravening the letter and spirit of article 1708.(Pacific Customs Brokerage, Inc. v. Inter-Island Dockmen and LaborUnion, 1951)

The exemption in Article 1708 of the New Civil Code operates infavor of those who are laboring men or women in the sense thattheir work is manual. Persons belonging to this class usually look tothe reward of a day's labor for immediate or present support, andsuch persons are more in need of the exemption than any others.(GAA v. CA, 1985)

Record Keeping

It shall be unlawful for any person to make any statement, report,or record filed or kept pursuant to the provisions of this Codeknowing such statement, report or record to be false in anymaterial respect.(Art 119)

Sec 11 of Rule X, Book II, IRR:All employment records of the employees of an employer shall bekept and maintained in or about the premises of the workplace.“premises of a workplace” - main or branch office or establishment,if any, depending upon where the employees are regularlyassigned.The keeping of the employee's records in another place isprohibited.

OTHER FORMS OF REMUNERATION

I. Service Charges

ART. 96. Service charges. - All service charges collected by hotels,restaurants and similar establishments shall be distributed:85% = all covered employees

* equally distributed among EEs

15% = management

In case the service charge is abolished, the share of the coveredemployees shall be considered integrated in their wages.(Art 96)

Book III Rule VI Omnibus RulesCoverage only establishments collecting service

charges such as hotels, restaurants, lodginghouses, night clubs, cocktail lounge,massage clinics, bars, casinos and gamblinghouses and similar enterprises, includingthose entities operating primarily as privatesubsidiaries of the Government.

Employeescovered

shall apply to all employees of coveredemployers REGARDLESS OF THEIRPOSITIONS, DESIGNATIONS OREMPLOYMENT STATUS, and IRRESPECTIVEOF THE METHOD BY WHICH THEIR WAGESARE PAID

Exception MANAGERIAL EMPLOYEES (defined as onewho is vested with powers or prerogativesto lay down and execute managementpolicies and/or to hire, transfer, suspend,lay-off, recall, discharge, assign, or disciplineemployees or to effectively recommendsuch managerial actions.)

Distribution 85% - employees to be distributed EQUALLY15% - management (for the disposition bymanagement to answer for losses andbreakages and distribution to managerialemployees at the discretion of themanagement in the latter case)

Frequency ofDistribution

shall be distributed and paid to theemployees not less than once every twoweeks or twice a month at intervals notexceeding 16 days

Permanency ofservice charges

In case the service charge is abolished, theshare of covered employees shall beconsidered integrated in their wages. The



basis of the amount to be integrated shallbe the average monthly share of eachemployee for the past 12 monthsimmediately preceding the abolition orwithdrawals of such charges

Relation toagreements

Nothing in this rule shall prevent theemployer and his employees from enteringinto any agreement with terms morefavorable to the employees than thoseprovided herein, or be used to diminish anybenefit granted to the employees underexisting laws, agreement and voluntaryemployer practice.

Service charges collected during the period of his preventivesuspension:forms part of his earnings; EE entitled not only to full backwages butalso to other benefits, including a just share in the service charges,to be computed from the start of his preventive suspension until hisreinstatement.(Maranaw Hotels, etc. v. NLRC, 1999)

II. Thirteenth Month Pay

Coverage

Revised Guidelines on the implementation of the 13th Month pay

Removal of the Salary Ceiling (Aug 13, 1986, Pres. Aquino's MemoOrder No. 28)

General Rule: ALL EMPLOYERS are hereby required to pay all their

rank and file employees a 13th month pay not later than December24 of every year, provided that they have worked for at least one(1) month during a calendar year.

Exempted EMPLOYERS

The Government and any of its political subdivisions,including government-owned and controlled corporations,except those corporations operating essentially as privatesubsidiaries of the Government;

Employers already paying their employees a 13th monthpay or more in a calendar year or its equivalent at the time ofthis issuance;

“ITS EQUIVALENT” : includes Christmas bonus, mid-yearbonus, cash bonuses and other payments amounting to notless than 1/12 of the basic salary but shall NOT INCLUDEcash and stock dividends, cost of living allowances and allother allowances regularly enjoyed by the employee aswell a non-monetary benefits.

3. Employers of household helpers and persons in the personalservice of another relation to such workers and;

4. Employers of those who are paid on purely commission,boundary or task basis and those who are paid a fixedamount for performing specific work, except where theworkers are paid on piece-rate basis in which case the

employer shall grant the required 13th month pay to suchworkers.

Workers paid on a piece – rate basis: those who are paid astandard amount for every piece or unit of work produced that ismore or less regularly replicated, without regard to the time spentin producing the same.

Amount and Date of Payment

Minimum Amount

minimum 13th month = not be less than 1/12 of the total basicsalary earned by an employee within a calendar year for the year1987

computation of the 13th month pay shall include the cost of livingallowances (COLA) integrated into the basic salary of a coveredemployee pursuant to EO 178.

Basic salary

include all remuneration’s or earning paid by this employer forservices rendered

does not include allowances and monetary benefits which are notconsidered or integrated as part of the regular or basic salary, suchas the cash equivalent of:

➢ unused vacation and sick leave credits,

➢ overtime,

➢ premium,

➢ night differential and

➢ holiday pay and

➢ cost-of-living allowances.salary-related benefits included if by individual or collectiveagreement, company practice or policy, the same are treated aspart of the basic salary of the employees.

Time of payment

Paid not later than December 24 of each year.

Exception: An employer, however, may give to his employees ½ ofthe required 13th Month Pay before the opening of the regularschool year and the other half on or before the 24th of Decemberevery year.

The frequency of payment of this monetary benefit may be thesubject of agreement between the employer and the recognizedCBA of the employees.

13th Month Pay for Certain Type of Employees

Paid by Results

Employees who are paid on piece work basis are by law entitled tothe 13th Month Pay

Employees who are paid a fixed or guaranteed wage pluscommission are entitled to 13th month paybasis: both their fixed or guaranteed wage and commission.

Those with Multiple Employers

Government employees working part time in a private enterprise,including private educational institutions, as well as employeesworking in two or more private firms, whether on full or part timebases, are entitled to the required 13th Month Pay from all theirprivate employers regardless of their total earnings from each or alltheir employers.

Private School Teachers

Private school teachers, including faculty members of universitiesand colleges, are entitled to the required 13th month pay,regardless of the number of months they teach or are paid within ayear, if they have rendered service for at least one (1) month withina year.

Resigned or Separated Employee

An employee who has resigned or whose services were terminatedat any time before the time for payment of the 13th month pay isentitled to this monetary benefit in proportion to the length of timehe worked during the year, reckoned from the time he startedworking during the calendar year up to the time of his resignationor termination from service.

Manner of Wage Payment

PD 851, as amended by Memorandum Order No. 28, provides thatemployees are entitled to the thirteenth-month pay benefit



regardless of their designation and irrespective of the method bywhich their wages are paid.(Jackson Building v. NLRC, 1995)

Wage Difference

The difference between the minimum wage and the actual salaryreceived by the EE cannot be deemed as his 13th month pay as suchdifference is not equivalent to or of the same import as the saidbenefit contemplated by law.(JPL Marketing Promotions v. CA, 2005)

Househelpers

Ultra Villa Food House v. Geniston, 1999

The Revised Guidelines on the Implementation of the 13thMonth Pay Law also excludes employers of household helpers fromthe coverage of Presidential Decree No. 851.

Nevertheless, would be ust to award private respondent 13thmonth pay in view of petitioner's practice of according privaterespondent such benefit. Indeed, petitioner admitted that she gaveprivate respondent 13th month pay every December.

Government Employees

An analysis of the "whereases" of PD No. 851 shows that thePresident had in mind only workers in private employment when heissued the decree. There was no intention to cover persons workingin the government service.(Alliance of Government Workers v. NLRC, 1995)

Terminated Employees

The payment of the 13th month pay may be demanded by theemployee upon the cessation of employer-employee relationship.This is consistent with the principle of equity that as the employercan require the employee to clear himself of all liabilities andproperty accountability, so can the employee demand the paymentof all benefits due him upon the termination of the relationship.(Archilles Manufacturing Corp. v. NLRC, 1995)

Rationale of Whereas Clauses and Limitations of PD 851

– It is necessary to further protect the level of real wagesfrom the ravage of world-wide inflation;

– There has been no increase in the legal minimum wagerates since 1970;

– The Christmas season is an opportune time for society toshow its concern for the plight of the working masses sothey may properly celebrate Christmas and New Year.

Basic Wage or Commissions

In remunerative schemes consisting of a fixed or guaranteed wageplus commission, the fixed or guaranteed wage is patently the"basic salary" for this is what the employee receives for a standardwork period. Commissions are given for extra efforts exerted inconsummating sales or other related transactions. They are, assuch, additional pay, which this Court has made clear do not formpart of the "basic salary."(Boie Takeda v. Dela Serna, 1993)

Philippine Duplicators Inc v. NLRC, 1995The sales commissions received for every duplicating machine

sold constituted part of the basic compensation or remuneration ofthe salesmen of Philippine Duplicators for doing their job. Theportion of the salary structure representing commissions simplycomprised an automatic increment to the monetary value initiallyassigned to each unit of work rendered by a salesman.

The sales commissions were an integral part of the basic salarystructure of Philippine Duplicators' employees salesmen. Thesecommissions are not overtime payments, nor profit-sharingpayments nor any other fringe benefit. Thus, the salesmen'scommissions, comprising a pre-determined percent of the sellingprice of the goods sold by each salesman, were properly included in

the term "basic salary" for purposes of computing their 13th monthpay.

Commissions are considered part of wages. While commissions are,indeed, incentives or forms of encouragement to inspire employeesto put a little more industry on the jobs particularly assigned tothem, still these commissions are direct remunerations for servicesrendered.(Iran v. NLRC, 1998)

1/12 of standard monthly wage x length of service = basic salary

(Honda Phils. Inc. v. Samahan ng Malayang Manggagawa saHonda, 2005)

Substitute Payment

Under Section 3 of PD No. 851, such benefits in the form of food orfree electricity, assuming they were given, were not a propersubstitute for the 13th month pay required by law. Neither mayyear-end rewards for loyalty and service be considered in lieu of13th month pay.(Framanlis Farms, Inc. v. MOLE, 1989)

14th Month Pay

There is no law that mandates the payment of the 14th month pay.This is emphasized in the grant of exemption under PresidentialDecree 851 (13th Month Pay Law) which states: "Employers alreadypaying their employees a 13th month pay or its equivalent are notcovered by this Decree." Necessarily then, only the 13th month payis mandated.(Kamaya Port Hotel v. NLRC, 1989)III. Bonus

Management Function

The grant of a bonus is a prerogative, not an obligation, of theemployer (Traders Royal Bank vs. NLRC). The matter of giving abonus over and above the worker's lawful salaries and allowances isentirely dependent on the financial capability of the employer togive it.(Businessday Information Systems and Services, Inc. v. NLRC, 1993)

Nature of Bonus – When Demandable

When part of the salary or wage

When there is a contractual agreement promising to paysuch

When it is established company practice

Bonus becomes demandable so when it is made a part of the wageor salary or compensation. In such a case the latter would be a fixedamount and the former would be a contingent one dependent uponthe realization of profits. If there be none, there would be nobonus.(Luzon Stevedoring Corporation v. CIR, 1965)

If one enters into a contract of employment under an agreementthat he shall be paid a certain salary by the week or some otherstated period and, in addition, a bonus, in case he serves for aspecified length of time, there is no reason for refusing to enforcethe promise to pay the bonus, if the employee has served duringthe stipulated time, on the ground that it was a promise of a meregratuity.(Marcos v. NLRC, 1995)

A bonus may be considered demandable based on equitableconsiderations as when the giving of such bonus has been thecompany's long and regular practice. To be considered a "regularpractice," the giving of the bonus should have been done over along period of time, and must be shown to have been consistentand deliberate.(Manila Electric Co. v. Quisumbing, 1999)



IV. Productivity Incentives Act of 1990 (RA 6971)

POLICY (2)23. To encourage higher levels of productivity, maintain

industrial peace and harmony and promote the principleof shared responsibility in the relations between workersand employers, recognizing the right of labor to its justshare in the fruits of production and the right of businessenterprises to reasonable returns of investments and toexpansion and growth, and accordingly to providecorresponding incentives to both labor and capital forundertaking voluntary programs to ensure greatersharing by the workers in the fruits of their labor

COVERAGE (3)24. Applies to all business enterprises with or without

existing and duly recognized or certified labororganizations, including government-owned andcontrolled corporations performing proprietary functions

25. It shall cover all employees and workers including casual,regular, supervisory and managerial employees.

DEFINITION (4)Business Enterprise: industrial, agricultural, or agro-industrial

establishments engaged in the production manufacturing,processing, repacking, or assembly of goods, including service-oriented enterprises, duly certified as such by appropriategovernment agencies.

Labor-management Committee: a negotiating body in a businessenterprise composed of the representatives of labor andmanagement created to establish a productivity incentivesprogram, and to settle disputes arising therefrom inaccordance with Section 9 hereof.

Productivity Incentives Program: a formal agreement established bythe labor-management committee containing a process thatwill promote gainful employment, improve working conditionsand result in increased productivity, including cost savings,whereby the employees are granted salary bonusesproportionate to increases in current productivity over theaverage for the preceding three (3) consecutive years. Theagreement shall be ratified by at least a majority of theemployees who have rendered at least six (6) months ofcontinuous service.

LABOR MANAGEMENT COMMITTEE (5)a. A business enterprise or its employees, through their

authorized representatives, may initiate the formation of alabor-management committee that shall be composed of anequal number of representatives from the management andfrom the rank-and-file employees: Provided, That bothmanagement and labor shall have equal voting rights:Provided, further, That at the request of any party to thenegotiation, the National Wages and ProductivityCommission of the Department of Labor and Employmentshall provide the necessary studies, technical informationand assistance, and expert advice to enable the parties toconclude productivity agreements.

b. In business enterprises with duly recognized or certifiedlabor organizations, the representatives of labor shall bethose designated by the collective bargaining agent(s) of thebargaining unit(s).

c. In business enterprises without duly recognized or certifiedlabor organizations, the representatives of labor shall beelected by at least a majority of all rank-and-file employeeswho have rendered at least six (6) months of continuousservice.

PRODUCTIVITY INCENTIVES PROGRAM (6)a. The productivity incentives program shall contain provisions

for the manner of sharing and the factors in determiningproductivity bonuses: Provided, That the productivitybonuses granted to labor under this program shall not beless than half of the percentage increase in the productivityof the business enterprise.

b. Productivity agreements reached by the parties as providedin this Act supplement existing collective bargainingagreements.

c. If, during the existence of the productivity incentivesprogram or agreement, the employees will join or form aunion, such program or agreement may, in addition to theterms and conditions agreed upon by labor andmanagement, be integrated in the collective bargainingagreement that may be entered into between them.

BENEFITS AND TAX INCENTIVES (7)a. Subject to the provisions of Section 6 hereof, a business

enterprise which adopts a productivity incentives program,duly and mutually agreed upon by the parties to the labor-management committee, shall be granted a specialdeduction from gross income equivalent to 50% of the totalproductivity bonuses given to employees under the programover and above the total allowable ordinary and necessarybusiness deductions for said bonuses under the NationalInternal Revenue Code, as amended.

b. Grants for manpower training and special duties given torank-and-file employees pursuant to a program prepared bythe labor-management committee for the development ofskills identified as necessary by the appropriate governmentagencies shall also entitle the business enterprise to a specialdeduction from gross income equivalent to 50% of the totalgrants over and above the allowable ordinary and necessarybusiness deductions for said grants under the NationalInternal Revenue Code, as amended.

c. Any strike or lockout arising from any violation of theproductivity incentives program shall suspend the effectivitythereof pending settlement of such strike or lockout:Provided, That the business enterprise shall not be deemedto have forfeited any tax incentives accrued prior to the dateof occurrence of such strike or lockout, and the workers shallnot be required to reimburse the productivity bonusesalready granted to them under the productivity incentivesprogram. Likewise, bonuses which have already accruedbefore the strike or lockout shall be paid the workers withinsix (6) months from their accrual.

d. Bonuses provided for under the productivity incentivesprogram shall be given to the employees not later than everysix (6) months from the start of such program over andabove existing bonuses granted by the business enterpriseand by law: Provided, That the said bonuses shall not bedeemed as salary increases due the employees and workers.

e. The special deductions from gross income provided forherein shall be allowed starting the next taxable year afterthe effectivity of this Act.

NOTIFICATION (8)A business enterprise which adopts a productivity incentives

program shall submit copies of the same to the National Wages andProductivity Commission and to the Bureau of Internal Revenue fortheir information and record.

DISPUTES AND GRIEVANCES (9)Whenever disputes, grievances, or other matters arise from

the interpretation or implementation of the productivity incentivesprogram, the labor-management committee shall meet to resolvethe dispute, and may seek assistance of the National Conciliationand Mediation Board of the Department of Labor and Employmentfor such purpose. Any dispute which remains unresolved within 20days from the time of its submission to the labor-managementcommittee shall be submitted for voluntary arbitration in line withthe pertinent provisions of the Labor Code, as amended.

The productivity incentives program shall include the name(s)of the voluntary arbitrator or panel of voluntary arbitratorspreviously chosen and agreed upon by the labor-managementcommittee.

NON-DIMUNITION OF BENEFITS (12)Nothing in this Act shall be construed to diminish or reduce

any benefits and other privileges enjoyed by the workers underexisting laws, decrees, executive orders, company policy or practice,or any agreement or contract between the employer andemployees.



Wage Recovery, Liabilities, and Worker Preference

I. Liability of Employer and Other Parties

In the event that the contractor or sub-contractor fails to pay wagesof employees in accordance with this Code, the employer shall beJOINTLY AND SEVERALLY liable with his contractor or sub-contractorto such employees to the extent of the work performed under thecontract, in the same manner and extent that he is liable toemployees directly employed by him.(Art 106)

In labor-only contracting, the person or intermediary shall beconsidered merely as an agent of the employer who shall beresponsible to the workers in the same manner an extent as if thelatter were directly employed by him.(Art 106)Art. 107Indirect employer - The provisions of the immediately precedingarticle shall likewise apply to any person, partnership, association orcorporation which, not being an employer, contracts with anindependent contractor for the performance of any work, task, jobor project.

The joint and several liability of the contractor and the principal ismandated by the Labor Code to assure compliance with theprovisions therein including the minimum wage. The contractor ismade liable by virtue of his status as direct employer. The principal,on the other hand, is made the indirect employer of thecontractor’s employees to secure payment of their wages shouldthe contractor be unable to pay them. Even in the absence of anemployer-employee relationship, the law itself establishes onebetween the principal and the employees of the agency for alimited purpose i.e. in order to ensure that the employees are paidthe wages due them. In the above-mentioned cases, the solidaryliability of the principal and contractor was held to apply to theaforementioned Wage Order Nos. 5 and 6.(Lapanday Agricultural Development Corporation v. Court ofAppeals, 2000)

II. Worker Preference – Bankruptcy

Art. 110 Labor CodeIn the event of bankruptcy or liquidation of an employer's

business, his workers shall enjoy first preference as regards theirwages and other monetary claims, any provision of law to thecontrary notwithstanding.

Such unpaid wages and monetary claims shall be paid in fullbefore the claims of the Government and other creditors may bepaid. (As amended by R. A. 6715)

Art. 1707, Civil CodeThe laborer's wages shall be a lien on the goods manufactured

or the work done.

Art. 2241, Civil CodeWith reference to specific movable property of the debtor, the

following claims or liens shall be preferred:6. Claims for laborers' wages, on the goods manufactured or the

work done;

Art. 2242, Civil CodeWith reference to specific immovable property and real rights

of the debtor, the following claims, mortgages and liens shall bepreferred, and shall constitute an encumbrance on the immovableor real right:

3. Claims of laborers, masons, mechanics and other workmen, aswell as of architects, engineers and contractors, engaged inthe construction, reconstruction or repair of buildings, canalsor other works, upon said buildings, canals or other works;

Art. 2244, Civil CodeWith reference to other property, real and personal, of the

debtor, the following claims or credits shall be preferred in the ordernamed:

4. Compensation due the laborers or their dependents underlaws providing for indemnity for damages in cases of labor

accident, or illness resulting from the nature of theemployment;

Republic v. Peralta (87)We believe and so hold that Article 110 of the Labor Code did

not sweep away the overriding preference accorded under thescheme of the Civil Code to tax claims of the government or anysubdivision thereof which constitute a lien upon properties of theInsolvent. It is frequently said that taxes are the very lifeblood ofgovernment. The effective collection of taxes is a task of highestimportance for the sovereign. It is critical indeed for its ownsurvival. It follows that language of a much higher degree ofspecificity than that exhibited in Article 110 of the Labor Code isnecessary to set aside the intent and purpose of the legislator thatshines through the precisely crafted provisions of the Civil Code. Itcannot be assumed simpliciter that the legislative authority, byusing in Article 110 the words "first preference" and "any provisionof law to the contrary notwithstanding" intended to disrupt theelaborate and symmetrical structure set up in the Civil Code.Neither can it be assumed casually that Article 110 intended tosubsume the sovereign itself within the term "other creditors" instating that "unpaid wages shall be paid in full before othercreditors may establish any claim to a share in the assets ofemployer." Insistent considerations of public policy prevent us fromgiving to "other creditors" a linguistically unlimited scope thatwould embrace the universe of creditors save only unpaidemployees.

We, however, do not believe that Article 110 has had noimpact at all upon the provisions of the Civil Code. Bearing in mindthe overriding precedence given to taxes, duties and fees by theCivil Code and the fact that the Labor Code does not impress anylien on the property of an employer, the use of the phrase "firstpreference" in Article 110 indicates that what Article 110 intendedto modify is the order of preference found in Article 2244, whichorder relates, as we have seen, to property of the Insolvent that isnot burdened with the liens or encumbrances created or recognizedby Articles 2241 and 2242. We have noted that Article 2244,number 2, establishes second priority for claims for wages forservices rendered by employees or laborers of the Insolvent "forone year preceding the commencement of the proceedings ininsolvency." Article 110 of the Labor Code establishes "firstpreference" for services rendered "during the period prior to thebankruptcy or liquidation," a period not limited to the yearimmediately prior to the bankruptcy or liquidation. Thus, verysubstantial effect may be given to the provisions of Article 110without grievously distorting the framework established in the CivilCode by holding, as we so hold, that Article 110 of the Labor Codehas modified Article 2244 of the Civil Code in two respects: (a)firstly, by removing the one year limitation found in Article 2244,number 2; and (b) secondly, by moving up claims for unpaid wagesof laborers or workers of the Insolvent from second priority to firstpriority in the order of preference established by Article 2244.

Phil. Export etc. v. Court of Appeals (95)A final observation On 21 March 1989, Article 110 of the Labor

Code was amended by Republic Act No. 6715 so as to read:"Article 110. Worker preference in case of bankruptcy -In the event of bankruptcy or liquidation of an employer'sbusiness, his workers shall enjoy first preference asregards their wages and other monetary claims, anyprovisions of law to the contrary notwithstanding. Suchunpaid wages and monetary claims shall be paid in fullbefore claims of the Government and other creditors maybe paid."Since then, the Court has had a number of occasions to rule on

the effects of the amendment. In Development Bank of thePhilippines vs. National Labor Relations Commission, the Court hassaid:

"The amendment expands worker preference to covernot only unpaid wages but also other monetary claimsto which even claims of the Government must bedeemed subordinate.xxx"Notably, the terms 'declaration' of bankruptcy or'judicial' liquidation have been eliminated. Does thismean then that liquidation proceedings have been doneaway with?



"We opine in the negative, upon the followingconsiderations:

"1. Because of its impact on the entire system of credit,Article 110 of the Labor Code cannot be viewed inisolation but must be read in relation to the Civil Codescheme on classification and preference of credits.

"2. In the same way that the Civil Code provisions onclassification of credits and the Insolvency Law havebeen brought into harmony, so also must the kindredprovisions of the Labor Law be made to harmonize withthose laws.

"3. In the event of insolvency, a principal objectiveshould be to effect an equitable distribution of theinsolvent's property among his creditors. To accomplishthis there must first be some proceeding where noticeto all of the insolvent's creditors may be given andwhere the claims of preferred creditors may bebindingly adjudicated (De Barretto vs. Villanueva).

"4. A distinction should be made between a preferenceof credit and a lien. A preference applies only to claimswhich do not attach to specific properties. A lien createsa charge on a particular property. The right of firstpreference as regards unpaid wages recognized byArticle 110 does not constitute a lien on the property ofthe insolvent debtor in favor of workers. It is but apreference of credit in their favor, a preference inapplication. It is a method adopted to determine andspecify the order in which credits should be paid in thefinal distribution of the proceeds of the insolvent'sassets. It is a right to a first preference in the dischargeof the funds of the judgment debtor.

"In fine, the right to preference given to workers underArticle 110 of the Labor Code cannot exist in anyeffective way prior to the time of its presentation indistribution proceedings. It will find application when, inproceedings such as insolvency such unpaid wages shallbe paid in full before the claims of the Government andother creditors' may be paid. But, for an orderlysettlement of a debtor's assets, all creditors must beconvened, their claims ascertained and inventoried, andthereafter the preferences determined in the course ofjudicial proceedings which have for their object thesubjection of the property of the debtor to the paymentof his debts or other lawful obligations. Thereby, anorderly determination of preference of creditors' claimsis assured (Philippine Savings Bank vs. Lantin); theadjudication made will be binding on all parties-in-interest, since those proceedings are proceedings inrem; and the legal scheme of classification, concurrenceand preference of credits in the Civil Code, theInsolvency Law, and the Labor Code is preserved inharmony."

Receivership

The law (PD 902-A) is clear: upon the creation of a managementcommittee or the appointment of a rehabilitation receiver, all claims foractions "shall be suspended accordingly." No exception in favor of laborclaims is mentioned in the law. Since the law makes no distinction orexemptions, neither should this Court. Ubi lex non distinguit nec nosdistinguere debemos. Allowing labor cases to proceed clearly defeatsthe purpose of the automatic stays and severally encumbers themanagement committee's and resources.(Rubberworld (Phils.), Inc. v. NLRC, 1999)

III. Wage Recovery and Attorney's FeesArt. 128. Visitorial and enforcement powers

Art. 129. Recovery of wages, simple money claims and otherbenefits – In connection with Art. 217. ; Jurisdiction ofLabor Arbiters and the Commission

Art. 111.Attorney's fees

a. In cases of unlawful withholding of wages, the culpable partymay be assessed attorney's fees equivalent to 10 % of theamount of wages recovered.

b. It shall be unlawful for any person to demand or accept, inany judicial or administrative proceedings for the recovery ofthe wages, attorney’s fees, which exceed 10% of the amountof wages recovered.

PART XIII

Minimum Wages

I. Wages and the Constitution

Art XIII Sec 3, 1987 Constitution guarantees the right the the EE toa living wage.

The law guarantees the laborer fair and just wage. The minimumwage can by no means imply only the actual minimum. Somemargin or leeway must be provided, over and above the minimum,to take care of contingencies, such as increase of prices ofcommodities and increase in wants, and provide means for adesirable improvement in his mode of living.(Atok Big Wedge Mining Co., Inc. v. Atok Big Wedge Mutual BenefitAssoc., 1953)

Beneficiaries

The establishment of the maximum wage benefits directly the low-paid employees, who now receive inadequate wages on which tosupport themselves and their families. It benefits all wage earnersindirectly by setting a floor below which their remuneration cannotfail. It raises the standards of competition among employers, sinceit would protect the fair-minded employer who voluntarily pays awage that supports the wage earner from the competition of theemployer, who operates at lower cost by reasons of paying hisworkers a wage below subsistence.(People v. Gatchalian, 1959)

II. Agencies for Wage-Fixing Machinery

A. National Wages and Productivity Commission

Created thru Art. 12026. attached to the DOLE for policy and program

coordination.

Powers and Functions of the Commission (Art. 121)a. To act as the national consultative and advisory body to the

President of the Philippines and Congress on matters relatingto wages, incomes and productivity;

b. To formulate policies and guidelines on wages, incomes andproductivity improvement at the enterprise, industry andnational levels;

c. To prescribe rules and guidelines for the determination ofappropriate minimum wage and productivity measures atthe regional, provincial or industry levels;

d. To review regional wage levels set by the Regional TripartiteWages and Productivity Boards to determine if these are inaccordance with prescribed guidelines and nationaldevelopment plans;

e. To undertake studies, researches and surveys necessary forthe attainment of its functions and objectives, and to collectand compile data and periodically disseminate informationon wages and productivity and other related information,including, but not limited to, employment, cost-of-living,labor costs, investments and returns;



f. To review plans and programs of the Regional TripartiteWages and Productivity Boards to determine whether theseare consistent with national development plans;

g. To exercise technical and administrative supervision over theRegional Tripartite Wages and Productivity Boards;

h. To call, from time to time, a national tripartite conference ofrepresentatives of government, workers, and employers forthe consideration of measures to promote wagerationalization and productivity; and

i. To exercise such powers and functions as may be necessaryto implement this Act.

Composition of the Commission:27. Secretary of Labor and Employment as ex-officio

chairman28. Director-General of the NEDA as ex-officio vice-chairman29. 2 members each from workers and employer sectors who

shall be appointed by the President uponrecommendation of the Secretary of Labor30. to be made on the basis of the list of nominees

submitted by the workers & employers sectors,respectively, and

31. who shall serve for a term of 5 years.

Note: members of the Commission representing laborand management shall have the same rank, emoluments& other benefits as those prescribed by law for labor andmgt reps in the ECC

The Executive Director of the Commission Secretariat shall alsobe a member of the Commission.

The Commission shall be assisted by a Secretariat composedof

1. Executive Director(as head) - same rank/salary/benefits as aDept Asst. Secretary

2. Deputy Directors, appointed by the Pres. upon recom. of theSOLE - same rank, salary, benefits and other emoluments asthat of a Bureau Director.

Prohibition against Injunction (Art. 126)No preliminary or permanent injunction or temporary

restraining order may be issued by any COURT, TRIBUNAL OROTHER ENTITY against any proceedings before the Commission orthe Regional Boards.

B. Regional tripartite Wages and Productivity Board

Created thru Art. 122

32. referred to as Regional Boards in all regions, includingautonomous regions as may be established by law.33. The Commission shall determine

offices/headquarters of the respective RegionalBoards.

Powers and Functions in their respective territorial jurisdiction (Art.122)

a. To develop plans, programs and projects relative to wages,incomes and productivity improvement for their respectiveregions;

34. to be implemented thru the respective regionaloffices of the DOLE within their territorial jurisdiction

35. Regional Boards shall have technical supervision overthe regional office of the DOLE with respect to theimplementation of said plans, programs and projects.

b. To determine and fix minimum wage rates applicable in theirrespective regions, provinces or industries therein and toissue the corresponding wage orders, subject to guidelinesissued by the Commission;

c. To undertake studies, researches, and surveys necessary forthe attainment of their functions, objectives and programsand to collect and compile data on wages, incomes,productivity and other related information and periodicallydisseminate the same;

d. To coordinate with the other Regional Boards as may benecessary to attain the policy and intention of this Code;

e. To receive, process and act on applications for exemptionfrom prescribed wage rates as may be provided by law orany Wage Order; and

f. To exercise such other powers and functions as may benecessary to carry out their mandate under this Code.

Composition of each Regional Board :

36. Regional Director of DOLE as chairman37. Regional Directors of NEDA & DTI as vice-chairman38. 2 members each from workers and employers sectors

who shall be appointed by the President uponrecommendation of the SOLE to be made on the basis ofthe list of nominees submitted by the workers andemployers sectors, respectively, and who shall serve for aterm of 5 years.

Each Regional Board to be headed by its chairman shall beassisted by a Secretariat. (As amended by RA 6727)

Functions

NWPC lays down the guidelines which the RTWPB implements.(Nasipit Lumber Co. v. NLRC, 1998)

III. Area of Minimum Wages and Criteria

STANDARDS/CRITERIA FOR MINIMUM WAGE FIXING (ART. 124):39. The regional minimum wage to be established by the

Regional Board shall be as nearly adequate as iseconomically feasible to maintain the minimumstandards of living necessary for the health, efficiencyand general well-being of the employees within theframework of the national economic and socialdevelopment program.

40. Factors in determining regional minimum wages:a. The demand for living wages;b. Wage adjustment vis-a-vis the consumer price index;c. The cost of living and changes or increases therein;d. The needs of workers and their families;e. The need to induce industries to invest in the

countryside;f. Improvements in standards of living;g. The prevailing wage levels;h. Fair return of the capital invested and capacity to pay of

employers;i. Effects in employment generation and family income;

andj. The equitable distribution of income and wealth along

the imperatives of economic and social development.41. The wages prescribed in accordance with the provisions

of this Title shall be the standard prevailing minimumwages in every region. These wages shall include wagesvarying with industries, provinces or localities if in thejudgment of the Regional Board conditions make suchlocal differentiation proper and necessary to effectuatethe purpose of this Title.

42. Any person, company, corporation , partnership or anyother entity engaged in business shall file and registerannually with the appropriate Regional Board,Commission and the National Statistics Office an itemizedlisting of their labor component specifying the names oftheir workers and employees below the managerial level,including learners, apprentices anddisabled/handicapped workers who were hired under theterms prescribed in the employment contracts, and theircorresponding salaries and wages.

43. WAGE DISTORTION44. Where the application of any prescribed wage

increase by virtue of a law or wage order issued byany regional board results in distortions of wagestructure within an establishment, the employerand the union shall negotiate to correct thedistortions.

45. Any dispute arising from wage distortions shall beresolved through the grievance procedure undertheir collective bargaining agreement and, if it



remains unresolved, through voluntary arbitration.46. Unless otherwise agreed by the parties in

writing, such dispute shall be decided by thevoluntary arbitrator or panel of voluntaryarbitrators within 10 calendar days from thetime said dispute was referred to voluntaryarbitration.

47. In cases where there are no collective bargainingagreements or recognized labor unions, theemployers and workers shall endeavor to correctsuch distortions.48. Any dispute arising therefrom shall be settled

through the National Conciliation andMediation Board and, if it remains unresolvedafter 10 calendar days of conciliation, shall bereferred to the appropriate branch of theNational Labor Relations Commission (NLRC).

49. It shall be mandatory for the NLRC to conductcontinuous hearings and decide the disputewithin 20 calendar days from the time saiddispute is submitted for compulsory arbitration

50. The pendency of a dispute arising from a wagedistortion shall not delay the applicability of anyincrease in prescribed wage rates pursuant toprovisions of law or wage order.

51. Wage distortion - a situation where an increase inprescribed wage rates results in the elimination orsevere contraction of intentional quantitativedifferences in wage or salary rates between andamong employee groups in an establishment as toeffectively obliterate the distinctions embodied insuch wage structure based on skills, length ofservice, or other logical bases of differentiation.

52. All workers paid by result, including those who are paidon piecework, takay, pakyaw, or task basis, shall receivenot less than the prescribed wage rates per eight 8 hoursof work a day, or a proportion thereof for working lessthan 8 hrs.

53. All recognized learnership and apprenticeshipagreements shall be considered automatically modifiedinsofar as their wage clauses are concerned to reflect theprescribed wage rates.

10.04 WAGE ORDER

Art. 12354. Whenever the conditions so warrant, the Regional Board

shall investigate and study all pertinent facts; and basedon the standard and criteria herein prescribed, shallproceed to determine whether a Wage Order should beissued.

55. Any such wage order shall take effect after 15 days fromits complete publication in at least 1 newspaper ofgeneral circulation in the region.

56. In the performance of its wage-determination functions,the Regional Board shall conduct publichearings/consultations, giving notices to employees’ &employers' groups, provincial, city and municipal officialsand other interested parties.

57. Any party aggrieved by the Wage Order issued by theRegional Board may appeal to the Commission within 10days from the publication of such order. It shall bemandatory for the Commission to decide such appealwithin 60 days from the filing thereof.

58. The filing of appeal does not stay the order unless theperson appealing shall file with the Commission, anundertaking with a surety or sureties for the payment tothe employees affected by the order of thecorresponding increase, in the event such order isaffirmed. (As amended by RA 6727)

MINIMUM WAGE FIXING

Agencies:1. NWPC

a. Prescribe rules, guidelines for the determinationof appropriate minimum wage and what factorsshould be considered

b. Review Regular wage levels set by RTWPB if theyare in accordance to prescribed guidelines

c. REMEMBER, NWPC does not set the minimumwage.

2. RTWPBa. Determine and fix the minimum wage rates

applicable to the region, provinces, industriesb. Issue the corresponding wage order subject to

guidelines issued by the NWPC

NOTES:59. Composition TRIPARTITE: Employer, employee

and government60. Functions are delineated

Procedure:

RTWPB61. When conditions warrant, investigate and

study pertinent facts, based criteria (Art. 124)62. Conduct public hearings/consultations, notice

to employer and employees groups, provinces,city, municipal officials and other interestedparties

63. Decide to ISSUE or NOT TO ISSUE a wage order64. If it decides to ISSUE a wage order, the wage

order takes effect after 15 days from completepublication in at least 1 newspaper of generalcirculation in the region

65. Appeal wage order to NWPC within 10calendar days; mandatory for the NWPC todecide within 60 calendar days from filing

66. Filing of an appeal DOES NOT STAY orderunless appellant filed an undertaking withsurety, sureties, guarantees payment ofemployees if the wage order is affirmed

Methods of Fixing

The Act is meant to rationalize wages, that is, by having permanentboards to decide wages rather than leaving wage determination toCongress year after year and law after law. The Court is not ofcourse saying that the Act is an effort of Congress to pass the buck,or worse, to abdicate its duty, but simply, to leave the question ofwages to the expertise of experts.(Employers Confederation of the Philippines v. NWPC, 1991)

Requirements for Validity

Regional Board shall conduct public hearings andconsultations, giving notices to interested parties

The Wage Order shall take effect only after publication ina newspaper of general circulation in the region.

(Cagayan Sugar Miling Co. v. Secretary, 1998)

Piece Worker

In the absence of wage rates based on time and motion studiesdetermined by the labor secretary or submitted by the employer tothe labor secretary for his approval, wage rates of piece-rateworkers must be based on the applicable daily minimum wagedetermined by the Regional Tripartite Wages and ProductivityCommission.(Pulp and Paper, Inc. v. NLRC, 1997)

The term “wage” is broadly defined in Art. 97 of the Labor Code asremuneration or earnings, capable of being expressed in terms of



money whether fixed or ascertained on a time, task, piece orcommission basis.(Lambo v. NLRC, 1999)

Wage Distortion

Wage Distortion - a situation where an increase in prescribed wagerates results in the elimination or severe contraction of intentionalquantitative differences in wage or salary rates between and amongemployee groups in an establishment as to effectively obliterate thedistinctions embodied in such wage structure based on skills, lengthof service, or other logical bases of differentiation.

1. Cause: implementation of a wage order increase prescribeminimum wage rate

2. Result:67. Elimination OR severe contraction of intentional

quantitative wages/salary rates between or amongemployees

68. Effectively obliterates distinctions on wage structurewhich was based on skills, length of service or otherlogical differences.

3. Procedure for Settlementa. Organized Establishment

1. CBA Grievance Procedure2. Voluntary Arbitration

b. Unorganized Establishment1. Employer and employee, with aid of National

Conciliation Mediation Board (NCMB) settlesconciliation mediation

2. NLRC – Compulsory Arbitration

NOTES:69. Both the employer and employee cannot use economic

weapons (Employer cannot declare a lock-out; Employeecannot declare a strike) because the law has provided fora procedure for settling

70. Cases say that:1. Parties are encouraged to settle the dispute voluntarily2. Neither party can use economic weapons3. Original decree of differential need not be restored4. NLRC has no authority to impose directly or indirectly

under guise of rectifying a wage distortion upon theemployer a new scheme of classification

The law recognizes the validity of negotiated wage increases tocorrect wage distortions. The legislative intent is to encourage theparties to seek solution to the problem of wage distortions throughvoluntary negotiation or arbitration, rather than strikes, lockouts, orother concerted activities of the employees or management.(Associated Labor Union v. NLRC, 1994)

The concept of wage distortion assumes an existing groupingor classification of employees which establishes distinctions amongsuch employees on some relevant or legitimate basis.

The remedy in Article 124 of the Labor Code, for a wagedistortion consisted of negotiations between employer andemployees for the rectification of the distortion by re-adjusting thewage rates of the differing classes of employees. As a practicalmatter, this ordinarily meant a wage increase for one or more ofthe affected classes of employees so that some gap or differentialwould be re-established. There was no legal requirement that thehistorical gap which existed before the implementation of the WageOrders be restored in precisely the same form or amount.(National Federation of Labor v. NLRC, 1994)

Wage distortion involves four elements:1. An existing hierarchy of positions with corresponding

salary rates2. A significant change in the salary rate of a lower pay

class without a concomitant increase in the salary rateof a higher one

3. The elimination of the distinction between the twolevels

4. The existence of the distortion in the same region ofthe country

(Prubankers Assn. v. Prudential Bank and Co. (99)

Effect of Benefits

Art. 100Prohibition against elimination or diminution of benefits

Nothing in this Book shall be construed to eliminate or in anyway diminish supplements or other employee benefits beingenjoyed at the time of the promulgation of this Code.

Prubankers Assn. v. Prudential Bank and Co. (99)Petitioner also insists that the Bank has adopted a uniform

wage policy, which has attained the status of an establishedmanagement practice; thus, it is estopped from implementing awage order for a specific region only. We are not persuaded. Saidnationwide uniform wage policy of the Bank had been adoptedprior to the enactment of RA 6727. After the passage of said law,the Bank was mandated to regionalize its wage structure. Althoughthe Bank implemented Wage Order Nos. NCR-01 and NCR-02nationwide instead of regionally even after the effectivity of RA6727, the Bank at the time was still uncertain about how to followthe new law. In any event, that single instance cannot beconstitutive of "management practice."

Night shift differential on anormal day (10pm-6am)

110% (Additional 10% of theregular daily wage)

Overtime on normal day 125% (At least an additional25% of regular daily wage)per hour

Work on any regularholiday, not exceeding 8hours

200% of regular daily wage

Work on any regular holidaywhich falls on the scheduledrest day, not exceeding 8hours

230% (Additional 30% of200% of regular daily wage)

Overtime on a regularholiday

230% (Additional 30% of the200% of regular daily wage)per hour

Overtime on a regularholiday which falls on thescheduled rest day

260% (Additional 30% of the230% of regular daily wage)per hour



PART XIV

WOMEN WORKERS

I. WOMEN AND THE CONSTITUTION

The State recognizes the role of women in nation-building, and shallensure the fundamental equality before the law of women andmen.(Art II Sec 14, 1987 Constitution)

WOMEN WORKERS

The Constitution, cognizant of the disparity in rights betweenmen and women in almost all phases of social and political life,provides a gamut of protective provisions:1. Section 14, Article II on the Declaration of Principles and StatePolicies: recognizes the role of women in nation-building andcommands the State to ensure, at all times, the fundamentalequality before the law of women and men.2. Section 3 of Article XIII: requires the State to afford full protectionto labor and to promote full employment and equality ofemployment opportunities for all, including an assurance ofentitlement to tenurial security of all workers.3. Section 14,Article XIII: mandates that the State shall protectworking women through provisions for opportunities that wouldenable them to reach their full potential.

II. COVERAGEGeneral Rule: shall apply to all employers, whether operating forprofit or not, including educational, religious and charitableinstitutionsException:

1. Government2. Government-owned or controlled corporations and3. Employers of household helpers and persons in their

personal service insofar as such workers are concerned.(Book III, Rule XIII, Sec. 1, Omnibus Rules)

III. PROHIBITED ACTS

NIGHT WORK AND EXCEPTION

General Rule: Night work ProhibitionNo woman, regardless of age, shall be employed or permitted orsuffered to work, with or without compensation:

1. In any industrial undertaking or branch thereof between10pm & 6am of the following day

2. In any commercial or non-industrial undertaking or branchthereof, other than agricultural, between 12mn & 6am ofthe following day.

3. In any agricultural undertaking at night time unless she isgiven a period of rest of not less than 9 consecutive hours.

(Art. 130)

Exceptions:1. In cases of actual or impending emergencies caused by

serious accident, fire, flood, typhoon, earthquake, epidemicor other disasters or calamity, to prevent loss of life orproperty or in cases of force majeure or imminent danger topublic safety;

2. In case of urgent work to be performed on machineries,equipment or installation, to avoid serious loss which theemployer would otherwise suffer;

3. Where the work is necessary to prevent serious loss ofperishable goods;

4. Where the woman employee holds a responsible position ofmanagerial or technical nature, or where the womanemployee has been engaged to provide health and welfareservices;

5. Where the nature of the work requires the manual skill anddexterity of woman worker and the same cannot beperformed with equal efficiency by male worker;

6. Where the women employees are immediate members ofthe family operating the establishment or undertaking; and

7. Under other analogous cases exempted by the Secretary ofLabor and Employment in appropriate regulations.

(ART. 131)

DISCRIMINATION

It shall be unlawful for any employer to discriminate against anywoman employee with respect to terms and conditions ofemployment solely on account of her sex.

Acts of discrimination:1. Payment of a lesser compensation, including wage, salary or

other form of remuneration and fringe benefits, to a femaleemployee as against a male employee, for work of equalvalue; and

2. Favoring a male employee over a female employee withrespect to promotion, training opportunities, study andscholarship grant solely on account of their sexes.

Criminal liability for the willful commission of any unlawfulacts as provided in this article or any violation of the rules andregulations issued pursuant to Sec. 2 hereof shall be penalized asprovided in Articles 288 and 289 of this Code: Provided, That theinstitution of any criminal action under this provision shall not barthe aggrieved employee from filing an entirely separate and distinctaction for money claims, which may include claims for damages andother affirmative reliefs. The action hereby authorized shall proceedindependently of each other.(Art. 135)

MARRIAGE

It shall be unlawful for an employer:1. to require as a condition of employment or continuation of

employment that a woman employee shall not get married,or

2. to stipulate expressly or tacitly that upon getting married awoman employee shall be deemed resigned or separatedor

3. to actually dismiss, discharge, discriminate or otherwiseprejudice a woman employee merely by reason of hermarriage.

(Art. 136)

GENERAL

It shall be unlawful for any employer:1. To deny any woman employee the benefits provided for in

this Chapter or to discharge any woman employed by him forthe purpose of preventing her from enjoying any of thebenefits provided under this Code;

2. To discharge such woman on account of her pregnancy,while on leave or in confinement due to her pregnancy; or

3. To discharge or refuse the admission of such woman uponreturning to her work for fear that she may again bepregnant.

(Art. 137)

IV. FACILITIES

Facilities for women:The Secretary of Labor and Employment shall establish standardsthat will ensure the safety and health of women employees. Inappropriate cases, he shall require any employer to:

1. Provide seats proper for women and permit them to usesuch seats when they are free from work and during workinghours, provided they can perform their duties in this positionwithout detriment to efficiency;

2. Establish separate toilet rooms and lavatories for men andwomen and provide at least a dressing room for women;

3. Establish a nursery in a workplace for the benefit of thewoman employees therein; and

4. Determine appropriate minimum age and other standardsfor retirement or termination in special occupations such asthose of flight attendants and the like.

(Art. 132)

Family planning services; incentives for family planning:



1. Establishments which are required by law to maintain a clinicor infirmary shall provide free family planning services totheir employees which shall include, but not limited to, theapplication or use of contraceptive pills and intra-uterinedevices.

b. In coordination with other agencies of the governmentengaged in the promotion of family planning, theDepartment of Labor and Employment shall develop andprescribe incentive bonus schemes to encourage familyplanning among female workers in any establishment orenterprise.

(Art. 134)

V. SPECIAL CLASSIFICATION, SPECIAL WOMEN WORKERS

Any woman who is permitted or suffered to work with or withoutcompensation in any night club, cocktail lounge, massage clinic, baror similar establishment, under the effective control or supervisionof the employer for a substantial period of time as determined bythe Secretary of Labor and Employment, shall be considered as anemployee of such establishments for purposes of labor and sociallegislation.(Art. 138)

VI. MATERNITY LEAVE

A female employee who has paid at least three (3) monthlycontributions in the twelve-month period immediately precedingthe semester of her childbirth, or miscarriage shall be paid a dailymaternity benefit equivalent to one hundred percent (100%) of heraverage salary credit for sixty (60) days or seventy-eight days in caseof caesarean delivery subject to the following conditions:

1. That the employee shall have notified her employer of herpregnancy and the probable date of her childbirth whichnotice shall be transmitted to the SSS in accordance with therules and regulations it may provide.

2. The full payment shall be advanced by the employer withinthirty (30) days from the filing of the maternity leaveapplication.

3. That payment of daily maternity benefits shall be a bar to therecovery of sickness benefits provided by this Act for thesame period for which daily maternity benefits have beenreceived.

4. That the maternity benefits provided under this section shallbe paid only for the first four (4) deliveries or miscarriages.

5. That the SSS shall immediately reimburse the employer ofone hundred percent (100%) of the amount of maternitybenefits advanced to the employee by the employer uponreceipt of satisfactory proof of such payment and legalitythereof;

6. That if an employee should give birth or suffer miscarriagewithout the required contributions having been remitted forher by her employer to the SSS, or without the latter havingbeen previously notified by the employer of time of thepregnancy, the employer shall pay to the SSS damagesequivalent to the benefits which said employee memberwould otherwise have been entitled to.

Paternity Leave Act of 1996 (RA 8187)

Every MARRIED male employee in the private and public sectorsshall be entitled to a paternity leave of seven (7) days with full payFOR THE FIRST FOUR (4) DELIVERIES OF THE LEGITIMATE SPOUSEWITH WHOM HE IS COHABITING.

- The male employee applying for paternity leave shallnotify his employer of the pregnancy of his legitimatespouse and the expected date of such delivery.

*‘Delivery’ includes childbirth or any miscarriage.)\(Sec.2)

VII. SEXUAL HARASSMENT

POLICY

The State shall:1. value the dignity of every individual,2. enhance the development of its human resources,

3. guarantee full respect for human rights, and4. uphold the dignity of workers, employees, applicants foremployment, students or those undergoing training,instruction or education.

All forms of sexual harassment in the employment, educationor training environment are hereby declared unlawful.

Work, education or training-related sexual harassment iscommitted:

a. by an employer, employee, manager, supervisor, agent ofthe employer, teacher, instructor, professor, coach,trainor or any other person who, having authority,influence or moral ascendancy over another

b. in a work or training or education environment,c. demands requests or otherwise requires any sexual favor

from other,d. regardless of whether the demand, request for

requirement for submission is accepted by the object ofsaid act.

In a work-related or employment environment, sexual harassmentis

committed when:a. The sexual favor is made as a condition in the hiring or in

the employment, re-employment or continuedemployment of said individual or in granting saidindividual favorable compensation, terms, conditions,promotions, or privileges, or the refusal to grant thesexual favor results in limiting, segregating or classifyingthe employee which in any way would discriminate,deprive or diminish employment opportunities orotherwise adversely affect said employee;

b. The above acts would impair the employee’s rights orprivileges under existing labor laws; or

c. The above acts would result in an intimidating, hostile, oroffensive environment for the employee.

In an education or training environment, sexual harassment iscommitted:

a. Against one who is under the care, custody or supervisionof the offender

b. Against one whose education, training, apprenticeship ortutorship is entrusted to the offender;

c. When the sexual favor is made a condition to the givingof a passing grade, or the granting of honors andscholarships, or the payment of a stipend, allowance orother benefits, privileges, or considerations; or

d. When the sexual advances result in an intimidating,hostile or offensive environment for the result, trainee orapprentice.

Any person who directs or induces another to commit any act ofsexual harassment as herein defined, or who cooperates in thecommission thereof by another without which it would not havebeen committed, shall also be held liable under this Act.

(Sec. 14 – A RA 8282)

DUTY OF THE EMPLOYER OR HEAD OF OFFICE IN A WORK-RELATED,EDUCATION OR TRAINING ENVIRONMENT OR INSTITUTION

1. to prevent or deter the commission of acts of sexualharassment and

2. to provide the procedures for the resolution, settlementor prosecution of acts of sexual harassment.

The employer or head of office shall:a. Promulgate appropriate rules and regulations in

consultation with and jointly approved by the employeesor students or trainees, through their duly designatedrepresentatives prescribing the procedure for theinvestigation of sexual harassment cases and theadministrative sanctions therefore.

The said rules and regulations issuedpursuant to this subsections (a) shall include, amongothers, guidelines on proper decorum in theworkplace and educational or training institutions



b. Create a committee on decorum and investigation ofcases on sexual harassment. The Committee shall conductmeetings, as the case may be, with officers andemployees, teachers, instructors, professors, coaches,trainors and students or trainees to increaseunderstanding and prevent incidents of sexualharassment. It shall also conduct the investigation ofalleged cases constituting sexual harassment.

In the case of work-related environment, thecommittee shall be composed of at least 1representative each from the management, theunion, if any, the employees from the supervisoryrank, and from the rank and file employees.

In the case of the educational or traininginstitution, the committee shall be composed of atleast 1 representative from the administration, thetrainors, teachers, instructors, professors or coachesand students or trainees, as the case may be.

The employer or head of office, educationalor training institution shall disseminate or post a copyof this Act for the information of all concerned.

LIABILITY OF THE EMPLOYER, HEAD OF OFFICE, EDUCATIONAL OR TRAINING

INSTITUTION

The employer or head of office, educational or traininginstitution shall be solidarily liable for damages arising from theacts of sexual harassment committed in the employment, educationor training environment if the employer or head of office,educational or training institution is informed of such acts by theoffended party and no immediate action is taken thereon.

INDEPENDENT ACTION FOR DAMAGES

- the victim of work, education or training-related sexualharassment can institute a separate and independent action fordamages and other affirmative relief.

PENALTIES

- violations of this act shall be penalized by imprisonment ofnot less than 1 month nor more than 6 months, or a fine or not lessthan P10,0000 nor more than P20,000.00, or both such fine andimprisonment at the discretion of the court.

Prescription of Action: 3 years.

Sexual Harassment as a valid and just Cause for TerminationAs a managerial employee, petitioner is bound by more

exacting work ethics. He failed to live up to his higher standard ofresponsibility when he succumbed to his moral perversity. Andwhen such moral perversity is perpetuated against his subordinate,he provides a justifiable ground for his dismissal for lack of trust andconfidence. It is the right, nay the duty of every employer toprotect its employees from oversexed superiors. (Libres v. NLRC,1999)

Abuse of Power by the EmployerThe gravamen of the offense in sexual harassment is not theviolation of the employee's sexuality but the abuse of power by theemployer. Any employee, male or female, may rightfully cry "foul"provided the claim is well substantiated. Strictly speaking, there isno time period within which he or she is expected to complainthrough the proper channels. The time to do so may vary dependingupon the needs, circumstances, and more importantly, theemotional threshold of the employee. (Phil. Aelous AutomotiveUnited Corp. v. NLRC, 2000)

PART XV

MINORS

I. MINORS AND THE CONSTITUTION

The State recognizes the vital role of the youth in nation-buildingand shall promote and protect their physical, moral, spiritual,intellectual, and social well-being. It shall inculcate in the youthpatriotism and nationalism, and encourage their involvement inpublic and civic affairs. (Art II Sec 13, 1987 Constitution)

II. LAW

RA 7610 “Special Protection of Children Against Child Abuse,Exploitation and Discrimination Act”

POLICY OF THE STATE

1. provide special protection to children from all forms of abuse,neglect, cruelty, exploitation and discrimination, and otherconditions prejudicial to their development;

2. provide sanctions for their commission and carry out aprogram for prevention and deterrence of and crisisintervention in situations of child abuse, exploitation anddiscrimination.

3. intervene on behalf of the child when the parent, guardian,teacher or person having care or custody of the child fails or isunable to protect the child against abuse, exploitation anddiscrimination or when such acts against the child arecommitted by the said parent, guardian, teacher or personhaving care and custody of the same.

4. protect and rehabilitate children gravely threatened orendangered by circumstances which affect or will affect theirsurvival and normal development and over which they have nocontrol.

5. The best interests of children shall be the paramountconsideration of all actions concerning them, whetherundertaken by public or private social welfare institutions,courts of law, administrative authorities, and legislativebodies, consistent with the principle of First Call for Children asenunciated I the United Nations Convention on the Rights ofthe Child. Every effort shall be exerted to promote the welfareof children and enhance their opportunities for a useful andhappy life.

DEFINITION OF TERMS

Children are those:1. below 18 years of age, or2. those over but are unable to fully take care of themselves orprotect themselves from abuse, neglect, cruelty, exploitation ordiscrimination because of a physical or mental disability orcondition

Child Abuse – maltreatment, whether habitual or not, of the childwhich includes any of the following:

1. Psychological and physical abuse, neglect, cruelty, sexualabuse and emotional maltreatment;

2. Any act by deeds or words which debases, degrades ordemeans the intrinsic worth and dignity of a child as ahuman being;

3. Unreasonable deprivation of his basic needs for survival,such as food and shelter; or

4. Failure to immediately give medical treatment to an injuredchild resulting in serious impairment of his growth anddevelopment or in his permanent incapacity or death.

“Circumstances which gravely threaten or endanger the survivaland normal development of children”, include, but are not limitedto, the following:

a. Being in a community where there is armed conflict or beingaffected by armed conflict-related activities;

b. Working under conditions hazardous to life, safety andmorals which unduly interfere with their normaldevelopment



c. Living in or fending for themselves in the streets of urban orrural areas without the care of parents or a guardian or anyadult supervision needed for their welfare.

d. Being a member of an indigenous cultural community and/orliving under conditions of extreme poverty or in an areawhich is underdeveloped and/or lacks or has inadequateaccess to basic services needed for a good quality of life;

e. Being a victim of a man-made or natural disaster or calamity;or

f. Circumstances analogous to those abovestated whichendanger the life, safety or normal development of children.

“Comprehensive program against child abuse, exploitation anddiscrimination” refers to the coordinated program of services andfacilities to protect children against:

a. Child prostitution and other sexual abuse;b. Child trafficking;c. Obscene publications and indecent shows;d. Other acts of abuse; ande. Circumstances which threaten or endanger the survival and

normal development of children.

WORKING CHILDREN

General Rule: Children below fifteen (15) years of age shall not beemployed.Exceptions:1. works directly under the sole responsibility of his parents or legalguardian and where only members of the employer’s family areemployed, provided:

- his employment neither endangers his life, safety, health andmorals, nor impairs his normal development, and- the parent or legal guardian shall provide the said minor childwith the prescribed primary and/or secondary education;

2. child’s employment or participation in public and entertainmentor information through cinema, theater, radio or television isessential, provided:- the employment contract is concluded by the child’s parents orguardian, with the express agreement of the child concerned, ifpossible- the approval of the Department of Labor and Employment- the following requirements in all instances are strictly compliedwith:

a. The employer shall ensure the protection, health, safetyand morals of the child

b. The employer shall institute measures to prevent thechild’s exploitation or discrimination taking intoaccount the system and level of remuneration, and theduration and arrangement of working time

c. The employer shall formulate and implement, subjectto the approval and supervision of competentauthorities, a continuing program for training and skillsacquisition of the child.

The employer shall first secure, before engaging such child, a workpermit from the Department of Labor and Employment which shallensure observance of the above requirements.(Sec. 12, RA 7610, as amended by RA 7658)

NON-FORMAL EDUCATION FOR WORKING CHILDREN

The Department of Education, Culture and Sports shallpromulgate a course design under its non-formal educationprogram aimed at promoting the intellectual, moral and vocationalefficiency of working children who have not undergone or finishedelementary or secondary education. Such course design shallintegrate the learning process deemed most effective under givencircumstances.(SEC. 13)

PROHIBITION ON THE EMPLOYMENT OF CHILDREN IN CERTAIN

ADVERTISEMENTS

No employment of child models in all commercialadvertisements promoting:

1. alcoholic beverages2. intoxicating drinks,

3. tobacco and its byproducts, and4. violence.

(SEC. 14)

DUTY OF EMPLOYER

Every employer shall comply with the duties provided for inArticles 108 and 109 of PD 603.(SEC. 15)

1. Article 108, PD 603 - Duty of Employer to Submit Report2. Article 109, PD 603 - Register of Children

PENALTIES

Violations of this provision shall be penalized by a fine of notless than P1,000.00 but not more than P10,000.00 or imprisonmentof not less than 3 months but not more than 3 years, or both at thediscretion of the court, In case of repeated violations of theprovisions of this Article, the offender’s license to operate shall berevoked.(SEC. 16)

III. DISCRIMINATION

No employer shall discriminate against any person in respect toterms and conditions of employment on account of his age.(Art. 140)



PART XVI

HOUSEHELPERS

I. COVERAGE

Coverage: All persons rendering services in households forcompensation.

"Domestic or household services" shall mean service in theemployer's home, which is usually necessary or desirable for themaintenance and enjoyment thereof and includes ministering tothe personal comfort and convenience of the members of theemployer's household, including services of family drivers.(Art. 141)

II. HOUSEHELPERS

- All persons rendering services in households for compensation.

The term `househelper' is synonymous to the term `domesticservant' and shall refer to any person, whether male or female, whorenders services in and about the employer's home and whichservices are usually necessary or desirable for the maintenance andenjoyment thereof, and ministers exclusively to the personalcomfort and enjoyment of the employer's family. (Apex Mining Co.v. NLRC)

"Domestic or household services" shall mean service in theemployer's home, which is usually necessary or desirable for themaintenance and enjoyment thereof and includes ministering tothe personal comfort and convenience of the members of theemployer's household, including services of family drivers.(Art. 141)

III. NON-HOUSEHOLD WORK ASSIGNMENT

No househelper shall be assigned to work in a commercial,industrial or agricultural enterprise at a wage or salary rate lowerthan that provided for agricultural or non-agricultural worker asprescribed herein.(Art. 145)

Domestic Work

The work that petitioner performed in the temple could not becategorized as mere domestic work. The petitioner attended to thevisitors, mostly Chinese, who came to pray or seek advice beforeBuddha for personal or business problems; arranged meetingsbetween these visitors and Su and supervised the preparation ofthe food for the temple visitors; acted as to urist guide of foreignvisitors; acted as liaison with some government offices; and madethe payment for the temple's Meralco, MWSS and PLDT bills.Indeed, these tasks may not be deemed activities of a householdhelper. They were essential and important to the operation andreligious functions of the temple. (Barcenas v. NLRC, 1990)

IV. CONDITIONS OF EMPLOYMENT

Contract for Domestic Service

The original contract for domestic service shall not last for morethan two years but it may be renewed for such periods as may beagreed upon by the parties.(Art. 142)

Minimum Wage(Art. 143)

Minimum Cash WageMinimum wage rates= basic cash wages + lodging, food and medicalattendance.(Art. 144)

Assignment to non-household work.

No househelper shall be assigned to work in a commercial,industrial or agricultural enterprise at a wage or salary rate lowerthan that provided for agricultural or non-agricultural worker asprescribed herein(Art. 145)

Opportunity for education.If below 18 the employer shall give him or her an opportunity for atleast elementary education. The cost of such education shall be partof the househelper's compensation, unless there is a stipulation tothe contrary.(Art. 146).

Treatment of househelpers.- just and humane manner. In no case shall physical violence beused upon the househelper.(Art. 147).

Board, lodging and medical attendance.ER furnish free of charge suitable and sanitary living quarters +adequate food and medical attendance.(Art. 148)

Indemnity for unjust termination of servicesIf the period of household if period of service fixed = no terminationby either party except for just

unjust dismissal = compensation already earned plus that of 15 daysby way of indemnity.

leaves w/o justifiable reason = any unpaid salary due him or her notexceeding 15 days.(Art. 149).

Service of termination notice.If the duration of the household service is not determined either bystipulation or by the nature of the service, the employer or thehousehelper may give notice to put an end to the relationship fivedays before the intended termination of the service.(Art. 150)

Employment certification.Upon the severance of the household service relation, the employershall give the househelper a written statement of the nature andduration of the service and his or her efficiency and conduct ashousehelper.(Art. 151)

Employment records.The employer may keep such records as he may deem necessary toreflect the actual terms and conditions of employment of hishousehelper which the latter shall authenticate by signature orthumbmark upon request of the employer. (Art. 152) See ARTICLES1689 – 1699. NCC

No Overtime Pay for Househelpers

Domestic or household service" shall mean services in theemployers home which is usually necessary or desirable for themaintenance and enjoyment thereof and includes ministering tothe personal comfort and convenience of the members of theemployers household, including services of family drivers. ChapterIII, Title III, Book III, however, is silent on the grant of overtime pay,holiday pay, premium pay and service incentive leave to thoseengaged in the domestic or household service. Moreover, thespecific provisions mandating these benefits are found in Book III,Title I of the Labor Code, and Article 82, which defines the scope ofthe application of these provisions, expressly excludes domestichelpers from its coverage. (Ultra Villa Food Haus v. Geniston, 1999)



PART XVII

HOMEWORKERS

I. COVERAGE AND REGULATION

Regulations of industrial homeworkThe employment of industrial homeworkers and field personnelshall be regulated by the Government through appropriateregulations issued by the Secretary of Labor and Employment toensure the general welfare and protection of homeworkers andfield personnel and the industries employing them.(Art. 153)

Regulations of Secretary of Labor and EmploymentThe regulations or orders to be issued pursuant to this Chapter shallbe designed to assure the average employee of an undertaking theminimum terms and conditions of employment applicable to theindustrial homeworkers or field personnel involved.(Art. 154)

Coverage-apply to any person who performs industrial homework for anemployer, contractor or sub-contractor. (1)

Industrial Homework- a system of production under which work foran employer or contractor is carried out by a homework at his/herhome. Materials may or may not be furnished by the employer orcontractor. (2a)(Department Order No. 005 – 92)

II. EMPLOYER

Distribution of homework.

"employer" of homeworkers- includes any person, natural orartificial, who for his account or benefit or on behalf of any personresiding outside the country, directly or indirectly, or through anyemployee, agent, contractor, sub-contractor or any other person:

1. Delivers, or causes to be delivered, any goods, articles ormaterials to be processed or fabricated in or about a homeand thereafter to be returned or to be disposed of ordistributed in accordance with his directions; or

2. Sells any goods, articles or materials for the purpose of havingthe same processed or fabricated in or about a home andthen rebuys them after such processing or fabrication, eitherhimself or through some other person. (Art. 155)

PART XVIII

TERMINATION OF EMPLOYMENT

GENERAL CONCEPTS

I. SECURITY OF TENURE

General Rule: In case of regular employment, the ER shall NOTterminate the services of an EE (Art 279)

Exceptions: (Art 279)

4. Termination for just cause5. Termination authorized by this Title

If EE is unjustly dismissed, he is entitled to:

6. Reinstatementwithout loss of seniority rights and other privileges, AND

7. Full backwagesinclusive of allowances, and other benefits or their monetaryequivalent computed from the time compensation waswithheld up to the time of actual reinstatement. (Art 279)

The entitlement of workers to SECURITY of TENURE is recognized inArt XIII, Sec. 3, 1987 Constitution

A. Nature of Security of Tenure:

5. A right guaranteed by the Constitution - should not be lightlydenied on so nebulous a basis as mere speculation.(Civil Service Corp. Workers Union v. City Service Corp.1985)

6. NOT an absolute right – a worker may still be dismissed forcause(Manila Electric Co. vs. NLRC, 1991)

7. Qualified by the Doctrine of Strained Relations – Wherereinstatement is not feasible, expedient or practical, as wherereinstatement would only exacerbate the tension and strainedrelations between the parties, or where the relationshipbetween the employer and employee has been undulystrained by reason of their irreconcilable differences,particularly where the illegally dismissed employee held amanagerial or key position in the company, it would be moreprudent to order payment of separation pay instead ofreinstatement.(Quijano vs. Mercury Drug Corp., 1998)

8. Does NOT give an EE an absolute right to his position - When atransfer is not unreasonable, nor inconvenient, nor prejudicialto an employee; and it does not involve a demotion in rank ordiminution of his pay, benefits, and other privileges, theemployee may not complain that it amounts to constructivedismissal.(Lanzadares vs. Amethyst Security, 2003)

71. B. Coverage

Applies to ALL establishments or undertakings, whether for profit ornot. (Art 278)

h. Regular EE – Art 279

i. Contract EE – security of tenure to a limited extent, i.e. theyremain secure in their employment during the period theirrespective contracts of employment remain in effect(Labajo vs. Alejandro, 1988)

j. Probationary EE – security of tenure to a limited extent



Limitations on power of ER to terminate a probationaryEE:

exercised in accordance with the specificrequirements of the contract

dissatisfaction of the ER must be real and in goodfaith, not feigned so as to circumvent the contractor the law

no unlawful discrimination in the dismissal(Lopez vs. Javier, 1996)

k. Managerial EE – entitled to security of tenure, and cannot bearbitrarily dismissed at any time, and without cause asreasonably established in an appropriate investigation.(Inter Orient Maritime Enterprises, Inc. vs. NLRC, 1994)

C. Management Rights and Security of Tenure

Requisites for Validity of Management Prerogative regardingDismissal:

4. Exercised in good faith for the advancement of the ER'sinterest, and

5. NOT for the purpose of defeating or circumventing therights of the EEs under special laws or under validagreements(San Miguel Brewery, etc. v. Ople, 1989)

The dismissals of the EEs must be made within the parametersof law and pursuant to the tenets of equity and fair play. TheER's right to terminate the services of an EE for just orauthorized cause must be exercised in GF. It must NOT amountto interfering with, restraining or coercing EEs in the exerciseof their right to self-organization because it would amount toULP under Art 248.(Colegio de San Juan de Letran v. Assn. of Employees, etc.,2000)

D. Guidelines on Imposition of Penalties

6. ER's prerogative to discipline or dismiss its EE must NOTbe exercised wantonly, but must be controlled bysubstantive due process and tempered by thefundamental policy of protection to labor enshrined inthe Constitution.(Farrol v. CA, 2000)

7. The penalty must be commensurate with the act,conduct or omission imputed to the employee andimposed in connection with the employer’s disciplinaryauthority.(Farrol v. CA, 2000)

8. [P]olicies, rules and regulations on work-related activitiesof the employees must always be fair and reasonable,and the corresponding penalties, when prescribed, mustbe commensurate to the offense involved and to thedegree of the infraction.(VH Manufacturing, Inc. v. NLRC, 2000; St. Michael'sInstitute v. Santos, 2001)

9. Employers are allowed a wider latitude of discretion interminating the employment of managerial personnel orthose of similar rank performing functions which by theirnature require the employer’s trust and confidence, thanin the case of ordinary rank-and-file employees.(Etcuban, Jr. v. Sulpicio Lines, Inc., 2005)

10. Substantial proof is sufficient as basis for the impositionof any disciplinary action upon the EE. The standard ofsubstantial evidence is satisfied where the ER hasreasonable ground to believe that the EE is responsiblefor the misconduct and participation therein renders his

unworthy of trust and confidence demanded by hisposition.(Reyno v. Manila Electric Co., 2004)

E. Factors

iii) Value of articles pilfered(Associated Labor Union v. NLRC, 1999)

iv) Whether is EE is a managerial or confidential EE.- managerial or confidential EE: greater trust is placed bymanagement, and greater fidelity to duty iscorrespondingly expected.

- rank-and-file EE: generally mere wage earners whosedismissal from employment can have severe financialconsequences on their families.

(Associated Labor Union v. NLRC, 1999)

v) Length of service(PLDT, Inc. v. NLRC, 1999)

vi) Number of violations committed during his employ.(PLDT, Inc. v. NLRC, 1999)

F. Rules – Managerial and Rank-and-File EEs

Managerial EE/Confidential EE

sufficient that there is some basis for such loss of confidence,such as when the employer has reasonable ground to believethat the employee concerned is responsible for the purportedmisconduct, and the nature of his participation therein rendershim unworthy of the trust and confidence demanded by hisposition; proof beyond reasonable doubt is NOT required(Caoile v. NLRC, 1998)

employment for a long time taken against the EE(Salvador v. Phil. Mining Service Corp., 2003)

Rank-and-file EE

(cx) loss of trust and confidence as ground for valid dismissalrequires proof of involvement in the alleged events inquestion, and that mere uncorroborated assertions andaccusations by the employer will not be sufficient(Caoile v. NLRC, 1998)

TERMNATION OF EMPLOYMENT BY EMPLOYEE

I. CAUSES

A. Just causes for termination by EE: SICA(no written notice to ER required)

Serious insult by the ER or his representative on thehonor and person of the EE;

Inhuman and unbearable treatment accorded the EE bythe ER or his representative;

Commission of a crime or offense by the ER or hisrepresentative against the person of the EE or any of theimmediate family members of his family; and

Other causes analogous to any of the foregoing. (Art 285(b))

B. Termination by EE without just cause:

EE to serve written notice on ER at least 1 month in advance. (Art285(a))

Effect of failure to serve notice: ER may hold EE liable for damages(Art 285(a))



C. Resignation

Definition

The voluntary act of an EE who finds himself in a situation where hebelieves that personal reasons cannot be sacrificed in favor of theexigency of the service and he has no other choice but to dissociatehimself from his employment.(Habana vs. NLRC, 1998)

Requisites of Resignation:

5. Unconditional(Azcor Manufacturing, Inc. v. NLRC, 1999)

6. Intention to relinquish a portion of the term of officeaccompanied by an act of relinquishment.(Azcor Manufacturing, Inc. v. NLRC, 1999)- No valid resignation where it was made without properdiscernment (Metro Transit Organization, Inc. v. NLRC,1998)

4. Voluntary(Pascua v. NLRC, 1998)

4. Acceptance of ER – necessary to make the resignationeffective(Shie Jie Corp./Seastar Ex-im Corp. v. National Federationof Labor, 2005; Reyes v. CA, 2003)- Resignations, once accepted and being the sole act ofthe employee, may not be withdrawn without theconsent of the employer.(Intertrod Maritime, Inc. v. NLRC, 1991)

Rule: Filing of an illegal dismissal case is inconsistent withresignation (Valdez v. NLRC, 98)

Willi Hahn Enterprises v. Maghuyop, 2004:The rule that the filing of a complaint for illegal dismissal is

inconsistent with resignation is not applicable to the instant case.The filing of an illegal dismissal case by respondent was evidently amere afterthought. It was filed not because she wanted to returnto wok but to claim separation pay and back wages.

Constructive Dismissal

DefinitionAn involuntary resignation resorted to when continuedemployment is rendered impossible, unreasonable, or unlikely;when there is a demotion in rank and/or a diminution in pay; orwhen a clear discrimination, insensibility or disdain by an employerbecomes unbearable to the employee.(Phil. Wireless, Inc. v. NLRC, 1998)

if the employee was forced to remain without work orassignment for a period exceeding six months, then he is ineffect constructively dismissed.(Valdez v. NLRC, 1998)

II. No Termination

Circumstances that shall NOT terminate employment:

Bona fide suspension of the operation of a business orundertaking NOT exceeding 6 months; OR

Fulfillment by the EE of a military or civic duty. (Art 286)

ER shall reinstate the EE to his former position without loss ofseniority rights if EE indicates his desire to resume to work notlater than 1 month from the resumption of operations of hisER or from relief from the military or civic duty.(Art 286)

ER-EE relationship deemed SUSPENDED in case of suspensionof operation, unless suspension is for the purpose of defeatingthe rights of the EEs, or mandatory fulfillment of military orcivic duty.(Bk VI, Rule I, Sec 12, Omnibus Rules)

Payment of wages and grant of other benefits and privilegeswhile EE is on military or civic duty shall be subject to:

a. special laws and decreesb. individual or collective bargaining agreementc. voluntary ER practice or policy(Bk VI, Rule I, Sec 12, Omnibus Rules)

When the bona fide suspension of the operation of a businessor undertaking exceeds six months, then the employment ofthe employee shall be deemed terminated.(Valdez v. NLRC, 1998)

TERMINATION OF EMPLOYMENT BY EMPLOYER

PRELIMINARY MATTERS

I. Basis of Right and Requirements

A. Basis:

The right of an employer to freely select or discharge hisemployees, is subject to regulation by the State basically in theexercise of its paramount police power. (Commonwealth ActsNos. 103 and 213.) But an employer cannot legally becompelled to continue with the employment of a person whoadmittedly was guilty of misfeasance or malfeasance towardshis employer, and whose continuance in the service of thelatter is patently inimical to his interests. The law, in protectingthe rights of the laborer, authorizes neither oppression norself-destruction of the employer.(Manila Trading and Supply Co., Inc. v. Zulueta, 1940)

[I]t has been established that the right to dismiss or otherwiseimpose disciplinary sanctions upon an employee for just andvalid cause, pertains in the first place to the employer, as wellas the authority to determine the existence of said cause inaccordance with the norms of due process.(Makati Haberdashery, Inc. v. NLRC, 1989)

B. Requisites for Valid Dismissal

Substantive Due Process – Dismissal for any of the just orvalid causes under Arts 282 – 284

Procedural Due Process – EE must be given notice withadequate opportunity to be heard before he is notified ofhis actual dismissal for cause.(Fujitsu v. CA, 2005)- ER may NOT substitute the required prior notice &opportunity to be heard with the mere payment of 30days' salary.(PNB v. Cabanag, 2005)

Grounds for Termination

Serious misconduct or willful disobedience

Gross or habitual neglect of duties

Fraud or willful breach of trust

Commission of a crime or offense against the person ofthe ER or any immediate member of his family or dulyauthorized representative

Analogous Causes

Installation of labor saving devices

Redundancy

Retrenchment to prevent losses

Closing or cessation of operation

Disease

II. Just Causes(Art 282)

A. Serious Misconduct or Willful Disobedience

Art 282 Termination by EmployerAn employer may terminate an employment for any of thefollowing causes:(a) Serious misconduct or willful disobedience by the employee ofthe lawful orders of his employer or representative in connectionwith his work;

1. Serious Misconduct



DefinitionImproper or wrong conduct; the transgression of some establishedand definite rule of action, a forbidden act, a dereliction of duty,willful in character, and implies wrongful intent and not mere errorin judgment.To be serious, the misconduct must be of such grave andaggravated character. It must be in connection with the employee'swork to constitute just cause for separation.(Austria v. NLRC, 1999; Samson v. NLRC, 2000; Villamor Golf Club v.Pehid, 2005; Lakpue Drug, Inc. v. Belga, 2005)

Requisites:

Serious

Related to the performance of the EE's duties; AND

Shows that the EE has become unfit to continue workingfor the ER.(Philippine Aeolus Automotive United Corp. v. NLRC,2000; Coca-Cola Bottlers, Phil., Inc. v. Kapisanan ngMalayang Manggagawa sa Coca- Cola, 2005)

2. Willful Disobedience

Requisites:

EE's assailed conduct must have been willful, that is,characterized by a wrongful and perverse attitude; AND

The order violated must have been:a. reasonableb. lawfulc. made known to the EEd. pertain to the duties which he had been engaged todischarge.(Westin Phil. Plaza Hotel v. NLRC, 1999; Micro SalesOperation Network v. NLRC, 2005)

Not every case of willful disobedience may be penalized bydismissal; the penalty must be proportionate.(Bascon v. CA, 2004)

Tierra International Production Corp. v. NLRC, 1996:According to the report of the company's Site

Administration Officer, private respondents were given three"options:" (1) to go back to work; (2) to apologize to theirsupervisor; and (3) to be repatriated. What private respondentswere given were not really "options." They were given the choice ofapologizing for their refusal to work and then resume working asordered, or, else, resign and be sent back home. Under thecircumstances they really had no choice but to resign. It was notpride or arrogance which made them refuse to work as ordered, butthe assertion of their right not to be made to work outside of whatthey had been hired to do. For asserting their right, privaterespondents should not be punished. We, therefore, hold thatprivate respondents' dismissal was illegal and that for this reasonthey are entitled to be paid their salaries corresponding to theunexpired portion of their employment contract, in addition to theirunpaid salaries prior to their dismissal, as found by both the POEAand the NLRC.

B. Gross and Habitual Neglect of Duties

Art 282 Termination by EmployerAn employer may terminate an employment for any of thefollowing causes:

(b) Gross and habitual neglect by the employee of his duties;

Definition of Gross Negligence and Habitual Neglect:

– Gross negligence is negligence characterized by want of evenslight care, acting or omitting to act in a situation where thereis a duty to ac, not inadvertently but willfully and intentionallywith a conscious indifference to consequences insofar as otherpersons may be affected.(Tres Reyes v. Maxim's Tea House, 2003; Cebu Filveneer Corp.v. NLRC, 1998; Citibank v. Gatchalian, 1995)

➢ Gross negligence connotes want of care in the performance ofone's duties, while habitual neglect implies repeated failure toperform one's duties for a period of time, depending upon thecircumstances.(Chua v. NLRC, 2005)

Requisites for Neglect of Duty to be a Ground for Dismissal:

Gross – want of care in the performance one's duties;

Habitual – repeated failure to perform one's duties for aperiod of time, depending upon the circumstances(Chua v. NLRC, 2005)

Neglect of duty must be BOTH gross and habitual

Simple Negligence

Under the Labor Code simple negligence is NOT a ground forthe dismissal of an EE.(RDS Trucking v. NLRC, 1998)

Mere involvement in an accident, absent any showing of faultor recklessness on the part of the EE, is NOT a valid ground fordismissal.(Paguio Transport Corp. v. NLRC, 1998)

C. Fraud – Willful Breach of Trust

Art 282 Termination by EmployerAn employer may terminate an employment for any of thefollowing causes:(c) Fraud or willful breach by the employee of the trust reposed inhim by his employer or duly authorized representative;

Requisites of Loss of Confidence

(PLDT v. Tolentino, 2004; Jardine Davies, Inc. v. NLRC, 1999)

EE concerned holds a position of trust and confidence- person is entrusted with confidence on delicatematters, such as care and protection, handling or custodyof the employer's property(Panday v. NLRC, 1992)

Act complained of must be "work-related"- act would show the employee concerned to be unfit tocontinue working for the employer

Basis for such loss of confidence- proof beyond reasonable doubt NOT necessary- sufficient that employer has reasonable ground tobelieve that the employee concerned is responsible forthe purported misconduct, and the nature of hisparticipation therein renders him unworthy of the trustand confidence demanded of his position

Guidelines for Application of Doctrine of Loss of Confidence

a. Loss of confidence should NOT be simulated;b. It should NOT be used as a subterfuge for causes which areimproper, illegal or unjustified;c. It should NOT be arbitrarily asserted in the face of overwhelmingevidence to the contrary;d. It must be genuine, NOT a mere afterthought to justify earlieraction taken in bad faith;e. The EE involved holds a position of trust and confidence.(Vitarich v. NLRC, 1999; Coca-Cola Bottlers, Phils., Inc. v. Kapisananng Malayang Manggagawa sa Coca-Cola, 2005)

Willful Breach of Trust

“Willful Breach” - breach done intentionally, knowingly,purposely, without justifiable excuse, as distinguished from anact done carelessly, thoughtlessly, heedlessly or inadvertently.(Atlas Consolidated Mining and Development Corp. v. NLRC,1998)

There must be actual breach of duty which must beestablished by substantial evidence.(Atlas Consolidated Mining and Development Corp. v. NLRC,1998)



Coverage

The term “trust and confidence” is restricted to MANAGERIAL EEs(Fujitsu Computer Products Corp. v. CA, 2005)

Lack of Damage

The lack of material or pecuniary damages would NOT in any waymitigate a person's liability nor obliterate the loss of trust andconfidence.(Cadiz v. CA, 2005)

D. Commission of Crime

Art 282 Termination by EmployerAn employer may terminate an employment for any of thefollowing causes:(d) Commission of a crime or offense by the employee against theperson of his employer or any immediate member of his family orhis duly authorized representative;

E. Analogous Cases

Art 282 Termination by EmployerAn employer may terminate an employment for any of thefollowing causes:(e) Other causes analogous to the foregoing.

Quarrelsome - Bossy

➢ An EE's attitude problem is a valid ground for dismissal,equivalent to loss of trust and confidence:An EE who cannot get along with his fellow co-EEs isdetrimental to the company for he can upset and restrain theworking environment. Management has the prerogative totake the necessary action to correct the situation and protectits organization.(Heavylift Manila, Inc. v. CA)

Cathedral School of Technology v. NLRC, 1992:The reason for which private respondent's services were

terminated, namely, her unreasonable behavior and unpleasantdepartment in dealing with the people she closely works with in thecourse of her employment, is analogous to the other "just causes"enumerated under the Labor Code, as amended.

Petitioners' averments on private respondent's disagreeablecharacter — "quarrelsome, bossy, unreasonable and very difficult todeal with" — are supported by the various testimonies of severalco-employees and students of the school. The conduct sheexhibited on that occasion smacks of sheer disrespect and defianceof authority and assumes the proportion of serious misconduct orinsubordination, any of which constitutes just cause for dismissalfrom employment.

Probable Cause

Although after preliminary investigation probable cause hasbeen found and the accused has been detained, this is NOTlegal basis for immediate termination of employment.(Standard Electric Manufacturing Corp. v. Standard ElectricUnion, 2005)

Conviction – Moral Turpitude

International Rice Research Institute v. NLRC, 1993:Article 282 of the Labor Code enumerates the just causes

wherein an employer may terminate an employment. Verily,conviction of a crime involving moral turpitude is not one of thesejustifiable causes. Neither may said ground be justified under Article282 (c) nor under 282 (d) by analogy. Fraud or willful breach by theemployees of the trust reposed in him by his employer or dulyauthorized representative under Article 282 (c) refers to any fault orculpability on the part of the employee in the discharge of his dutyrendering him absolutely unworthy of the trust and confidence

demanded by his position. It cannot be gainsaid that the breach oftrust must be related to the performance of the employee'sfunction. On the other hand, the commission of a crime by theemployee under Article 282 (d) refers to an offense against theperson of his employer or any immediate member of his family orhis duly authorized representative. Analogous causes must have anelement similar to those found in the specific just causeenumerated under Article 282. Clearly lacking in the ground invokedby petitioner is its relation to his work or to his employer.

In the case at bar, the commission of the crime of homicidewas outside the perimeter of the IRRI complex, having beencommitted in a restaurant after office hours and against a non-IRRIemployee. Thus, the conviction of Micosa for homicide was notwork-related, his misdeed having no relation to his position aslaborer and was not directed or committed against IRRI or itsauthorized agent.

Violation of a company rule prohibiting the infliction of harmor physical injury against any person under the particularcircumstances provided for in the same rule may be deemedanalogous to "serious misconduct".(Oania v. NLRC, 1995)

Gross inefficiency is closely related to gross neglect for bothinvolve specific acts or omission on the part of the employeeresulting in damage to the employer or to his business.(Lim v. NLRC, 1996)

F. Others – Just Causes Claimed by Employer

1. Abandonment

Definition

The deliberate and unjustified refusal of an EE to resume hisemployment; it is a form of neglect of duty.(Nueva Ecija Electric Cooperative v. NLRC, 2005)

A deliberate, unjustified refusal of an employee to resume hiswork, coupled with a clear absence of any intention ofreturning to his work.(Escobin v. NLRC, 1998)

Requisites:

5. Failure to report for work or absence without valid orjustifiable reason; and

6. A clear intention, as manifested by some overt act, tosever the ER-EE relationship.(Floren Hotel v. NLRC, 2005; Leonardo v. NLRC, 2000)

Inference

Abandonment of position CANNOT be lightly inferred, much lesslegally presumed from certain equivocal acts such as interimemployment.(Hacienda Dapdap v. NLRC, 1998)

No Abandonment

Instances that do NOT constitute abandonment:

Mere absence from work, especially where the employee hasbeen verbally told not to report, cannot by itself constituteabandonment.(Mendoza v. NLRC, 1999)

EEs do not need to take their meals within the companypremises. The act of going home to have dinner does NOTconstitute abandonment.(PAL v. NLRC, 1999)

The act of leaving his workplace to relieve himself can hardlybe characterized as abandonment, much less a willful orintentional disobedience of company rules since he wasmerely answering the call of nature over which he had nocontrol.(Dimabayo v. NLRC, 1999)



Employer has Burden of Proving Abandonment

The unflinching rule in illegal dismissal cases is that the employerbears the burden of proof. To establish a case of abandonment, theemployer must prove the employee's deliberate and unjustifiedrefusal to resume employment without any intention of returning.Specifically, the employer has to show the concurrence of thefollowing: (1) the employee's intention to abandon employmentand (2) overt acts from which such intention may be inferred — aswhen the employee shows no desire to resume works.(Mendoza v. NLRC, 1999)

Filing of Case for Illegal Dismissal Inconsistent with Abandonment

The immediate filing of a complaint for illegal dismissal against theemployer is a clear indication that the employee has not given upon his work.(CMP Federal Security Agency, Inc. v. NLRC, 1999)

2. Loans

Borrowing Money

Borrowing money is neither dishonest, nor immoral, nor illegal,much less criminal. (Medical Doctors, Inc. [Makati Medical Center]v. NLRC)However, said act becomes a serious misconduct that may justly beasserted as a ground for dismissal when reprehensible behaviorsuch as the use of a trust relationship as a leverage for borrowingmoney is involved.(Pearl S. Buck Foundation, Inc. v. NLRC, 1990)

Medical Doctors, Inc. v. NLRC, 1985:The act of borrowing money by a hospital probationary clerk from apatient is NOT a ground for termination of employment as herborrowing was due to economic necessity protected by theConstitution. She paid what she borrowed, and was recommendedfor permanent appointment.

3. Courtesy Resignation

Batongbacal v. Associated Bank, 1988:Resignation per se means voluntary relinquishment of a position oroffice. Adding the word "courtesy" did not change the essence ofresignation. That courtesy resignations were utilized in governmentreorganization did not give private respondent the right to use it aswell in its own reorganization and rehabilitation plan. There is noguarantee that all employers will not use it to rid themselvesarbitrarily of employees they do not like, in the guise of"streamlining" its organization. On the other hand, employeeswould be unduly exposed to outright termination of employmentwhich is anathema to the constitutional mandate of security oftenure.

4. Work Attitude

Absences

An employee’s habitual absenteeism without leave, which violatedcompany rules and regulations is sufficient cause to justifytermination from service.(Manila Electric Co. v. NLRC, 1996)

5. Term Employment

Brent Ruling – Criteria under which “term employment” does NOTCircumvent Security of Tenure

The fixed period of employment was knowingly andvoluntarily agreed upon by the parties without any force,duress, or improper pressure being brought to bear uponthe employee and absent any other circumstancesvitiating his consent; OR

It satisfactorily appears that the employer and theemployee dealt with each other on more or less equalterms with no moral dominance exercised by the formeror the latter.

(Brent School v. Zamora, 1990; Romares v. NLRC, 1998;Medenilla v. Phil. Veterans Bank, 2000)

If a contract is for a fixed term and the EE is dismissed withoutjust cause, he is entitled to the payment of his salariescorresponding to the unexpired portion of the employmentcontract.(Medenilla v. Phil. Veterans Bank, 2000)

6. Past Infractions

Past Offenses

Previous offenses may be so used as valid justification for dismissalfrom work only if the infractions are related to the subsequentoffense upon which basis the termination of employment isdecreed.(Stellar Industrial Service, Inc. v. NLRC, 1996; La Carlota PlantersAssn. v. NLRC, 1998)

7. Professional Training

Residency Training

Felix v. Buenaseda, 1995:A residency or resident physician position in a medical

specialty is never a permanent one. Residency connotes trainingand temporary status. It is the step taken by a physician right afterpost-graduate internship (and after hurdling the Medical LicensureExaminations) prior to his recognition as a specialist or sub-specialist in a given field.

Under this system, residents, specially those in universityteaching hospitals enjoy their right to security of tenure only to theextent that they periodically make the grade, making the situationquite unique as far as physicians undergoing post-graduateresidencies and fellowships are concerned.

8. Love and Morals

Immorality

When a teacher engages in extra-marital relationship, especiallywhen the parties are both married, such behavior amounts toimmorality, justifying his termination from employment.(Santos v. NLRC, 1998)

Love

Chua-Qua v. Clave, 1990:Private respondent utterly failed to show that petitioner took

advantage of her position to court her student. If the two eventuallyfell in love, despite the disparity in their ages and academic levels,this only lends substance to the truism that the heart has reasons ofits own which reason does not know. But, definitely, yielding to thisgentle and universal emotion is not to be so casually equated withimmorality. The deviation of the circumstances of their marriagefrom the usual societal pattern cannot be considered as a defianceof contemporary social mores.

9. Violation of Company Rules

Company policies and regulations, unless shown to be grosslyoppressive or contrary to law, are generally valid and binding on theparties and must be complied with until finally revised or amended,unilaterally or preferably through negotiation, by competentauthority.(Aparente, Sr. v. NLRC, 2000)

10. Criminal Case

Effect of Acquittal

Dismissal of the criminal case against an EE shall NOT necessarily bea bar to his dismissal from employment on the ground of loss oftrust and confidence.(Ramos v. NLRC, 1998)



ConvictionSampaguita Garments Corp. v. NLRC, 1994:

The private respondent's conviction of the crime of theft ofproperty belonging to the petitioner has affirmed the existence of avalid ground for her dismissal and thus removed the justification forthe administrative decision ordering her reinstatement with backwages.

Dismissal – Criminal Case

Conviction of an EE in a criminal case is NOT indispensable towarrant his dismissal and the fact that a criminal complaint againstthe EE has been dropped by the fiscal is NOT binding and conclusiveupon a labor tribunal.(Lacoste v. Inciong, 1988)

Guilt or Innocence

The guilt or innocence in a criminal case is NOT determinative of theexistence of a just or authorized cause for dismissal.(Chua v. NLRC, 1993)

11. Abolition of Position

The abolition of a position deemed no longer necessary is amanagement prerogative, which must be done without malice andarbitrariness.(Benguet Electric Cooperative v. Fianza, 2004)

12. Dishonesty

Nuguit v. NLRC, 2003:As custodian of the petty cash fund, he had the duty to

ascertain that the circumstances which brought about any claimtherefrom were in order. He cannot now shirk from thisresponsibility by indirectly pinning the blame on the approvingofficer and asserting that the transgression was the result of mereinadvertence.

Transfers – Discharge and Suspension

The ER has the right to transfer or assign EEs from one area ofoperation to another, or one office to another or in pursuit of itslegitimate business interest, provided there is no demotion in rankor diminution of salary, benefits and other privileges and notmotivated by discrimination or made in bad faith, or effected as aform of punishment or demotion without sufficient cause. Thismatter is a prerogative inherent in the ER's right to effectivelycontrol and manage the enterprise.(Lazanderas v. Amethyst Security and General Services, 2003;Castillo v. NLRC, 1999; Westin Phil. Plaza Hotel v. NLRC, 1999)

When Transfer amounts to Constructive Dismissal

A transfer amounts to constructive dismissal when the transfer isunreasonable, inconvenient, or prejudicial to the employee, and itinvolves a demotion in rank or diminution of salaries, benefits andother privileges.(Mendoza v. Rural Bank, 2004; OSS Security and Allied Services, Inc.v. NLRC, 2000)

Constructive Discharge

Definition

A quitting because continued employment is renderedimpossible, unreasonable or unlikely; as, an offer involving ademotion in rank and a diminution in pay.(Mobile Protective and Detective Agency v. Ompad, 2005;Philippine-Japan Active carbon Corp. v. NLRC, 1989)

There is constructive dismissal when there is a demotion inrank and/or diminution in pay, or when a clear discrimination,insensibility or disdain by an employer becomes unbearable tothe employee.(Dusit Hotel Nikko v. National Union in Hotel, Restaurant andAllied Industries, 2005)

Constructive dismissal is present when an employee'sfunctions, which were originally supervisory in nature were

reduced, and such reduction is not grounded on valid groundssuch as genuine business necessity.(Go v. CA, 2004)

Mark Roche International v. NLRC, 1999:Respondent was illegally dismissed but there was not

constructive dismissal as it did not involve a demotion in rank ordiminution in pay. They were simply told, without prior warning ornotice, that there was no more work for them.

Employer has Burden of Proof

In constructive dismissals, the employer has the burden has theburden of proving that the transfer and demotion of an employeeare for just and valid grounds such as genuine business necessity.(Globe Telecom, Inc. v. Florendo, 2003)

Preventive Suspension

Definition

Preventive suspension is a disciplinary measure for the protectionof the company's property pending investigation of any allegedmalfeasance or misfeasance committed by the employee. Theemployer may place the worker concerned under preventivesuspension if his continued employment poses a serious andimminent threat to the life or property of the employer or of his co-workers.(PAL v. NLRC, 1998)

Preventive Suspension Limited to 30 days

Preventive suspension for an indefinite period amounts to adismissal, and is violative of Rule XIV, Sec. 4, IRR, which limits thepreventive suspension to 30 days.(Kwikway Engineering Works v. NLRC, 1991)

III. Other Causes – Business Related Causes

Recognition of Right

Uichico v, NLRC, 1997:The law recognizes the right of every business entity to

reduce its workforce if the same is made necessary by compellingeconomic factors which would endanger its existence or stability.The fundamental law itself guarantees, even during the process oftilting the scales of social justice towards workers and employees,“the right of enterprises to reasonable returns of investment and toexpansion and growth.” To hold otherwise would not only beoppressive and inhuman, but also counter-productive andultimately subversive of the nation's thrust towards a resurgence inour economy which would ultimately benefit the majority of ourpeople. Where appropriate and where conditions are in accord withlaw and jurisprudence, the Court has authorized valid reductions inthe volume of business which has rendered certain employeesredundant.

Art 283 Closure of Establishment and Reduction of Personnel

The ER may also terminate the employment of any employee dueto:

Installation of labor saving devices

Redundancy

Retrenchment to prevent losses, OR

Closing or cessation of operation of the establishment orundertaking,unless the closing is for the purpose of circumventing theprovisions of this Title xxx

Manner of Termination

ER to serve a written notice to:

➢ Wokers, AND

➢ DOLEat least 1 month before the intended date of termination.(Art 283)



A. Installation of Labor Saving Devices

Worker Affected to receive:separation pay = 1 month pay or at least 1 month pay for every year

of service

B. Redundancy

DefinitionRedundancy exists where the services of an employee are in excessof what is reasonably demanded by the actual requirements of theenterprise. A position is redundant where it is superfluous, andsuperfluity of a position or positions may be the outcome of anumber of factors, such as over hiring of workers, decreasedvolume of business, or dropping of a particular product line orservice activity previously manufactured or undertaken by theenterprise.(Wiltshire File Co., Inc. v. NLRC, 1991; Tierra InternationalConstruction Corp. v. NLRC, 1992)

In redundancy, what is looked into is:a. the position itself,b. the nature of the services performed by the employee, andc. the necessity of such position.(Tierra International Construction Corp. v. NLRC, 1992; EdgeApparel, Inc. v. NLRC, 1998)

Redundancy does NOT refer to duplication of work. That noother person was holding the same position which thedismissed employee held prior to the termination of hisservices does not show that his position had not becomeredundant.(Escareal v. NLRC, 1992)

Worker Affected to receive:separation pay = 1 month pay or at least 1 month pay for every year

of service

Business Judgment

The determination of the continuing necessity of a particular officeror position in a business corporation is management's prerogative,and the courts will not interfere with the exercise of such so long asno abuse of discretion or merely arbitrary or malicious action on thepart of management is shown.(Wiltshire File Co., Inc. v. NLRC, 1991; DOLE Philippines, Inc. v. NLRC,2001; Asufrin v. San Miguel Corp., 2004)

Financial Loss

Art. 283 does NOT require that the ER should be suffering fromfinancial losses before he can terminate and EE on the ground ofredundancy.The fact that a company is suffering from financial losses merelyprovides stronger justification for the termination.(Escareal v. NLRC, 1992)

Criteria – Selection of Employees

A company must have fair and reasonable criteria in implementingits redundancy program, such as but not limited to:

a. preferred status (ex. temporary EE)b. efficiency, andc. seniority(Panlilio v. NLRC, 1997; Golden Thread Knitting Industries, Inc. v.NLRC, 1999)

Employment of an Independent Contractor – Effect

An employer's good faith in implementing a redundancy program isnot necessarily destroyed by availment of the services of anindependent contractor to replace the services of the terminatedemployees. The reduction of the number of workers in a companymade necessary by the introduction of an independent contractor isjustified when the latter is undertaken in order to effectuate moreeconomic and efficient methods of production.(Asian Alcohol Corp. v. NLRC, 1999)

Procedure – Requirements

The ER must comply with the following requisites:

Written notice served on both the EEs and the DOLE atleast 1 month prior to the intended date ofretrenchment;

Payment of separation pay equivalent to at least onemonth pay or at least one month pay for every year ofservice, whichever is higher;

Good faith in abolishing the redundant positions; and

Fair and reasonable criteria in ascertaining what positionsare to be declared redundant and accordingly abolished.(Asian Alcohol Corp. v. NLRC, 1999)

Venue of Complaint

The appropriate forum for such controversy would, however, be theDOLE and NOT an investigation or hearing to be held by theemployer itself.(Wiltshire File Co., Inc. v. NLRC, 1991)

C. Retrenchment to Prevent Losses

Definition

Retrenchment is the termination of employment initiated by theemployer through no fault of the employees and without prejudiceto the latter, resorted to by management during periods of businessrecession, industrial depression, or seasonal fluctuations or duringlulls occasioned by lack of orders, shortage of materials, conversionof the plant for a new production program or the introduction ofnew methods or more efficient machinery, or of automation.(FF Marine Corp., v. NLRC, 2005)

Retrenchment Redundancy Closure

Reduction ofpersonnel usuallydue to poorfinancial returnsso as to cut downon costs ofoperations interms of salariesand wages

The service of anEE is in excess ofwhat is requiredby an enterprise

The reversal ofthe fortune of theER whereby thereis a completecessation ofbusinessoperations and/orand actuallocking-up of thedoors of the,usually due tofinancial losses

Resorted toprimarily to avoidor minimizebusiness losses

Aims to preventfurther financialdrain upon the ER

Coverage

14. Contemplates termination of employment to minimizeestablished business losses and to prevent impending businesslosses(Balbalec v. NLRC, 1995)

15. Applies to non-stock, non-profit organizations(Philippine Tuberculosis Society, Inc. v. NLRC, 1998)

Temporary Retrenchment

Article 286 may be applied but only by analogy to set a specificperiod that employees may remain temporarily laid-off or infloating status. The temporary lay-off wherein the employeeslikewise cease to work should also not last longer than six months.After six months, the employees should either be recalled to workor permanently retrenched following the requirements of the law,and that failing to comply with this would be tantamount todismissing the employees and the employer would thus be liable forsuch dismissal.



Procedure - Requisites

Necessity of the retrenchment to prevent losses andproof of such losses;

Written notice to the EEs and to the DOLE at least onemonth prior to the intended date of retrenchment; and

Payment of separation pay equivalent to one month payor at least ½ month pay for every year of service,whichever is higher.(Guerrero v. NLRC, 1996)

Standards

The losses expected should be substantial and NOTmerely de minimis in extent;

The substantial loss apprehended must be reasonablyimminent, as such imminence can be perceivedobjectively and in good faith by the employer;

It must be reasonably necessary and likely to effectivelyprevent the expected loss; and

Sufficient and convincing evidence must prove thealleged losses, if already incurred, or the expectedimminent losses sought to be forestalled.(Lopez Sugar Corp. v. Federation of Free Workers, 1990;Blucor Plywood Corp. v. Amarilla, 2005)

Nature of Loss

Losses must be substantial and not merely de minimis inextent(Lopez Sugar Corp. v. Federation of Free Workers, 1990)

The ER must prove serious business losses, and not just anykind of loss. Otherwise, a company may feign excuses to suitits whims and prejudices or to rid itself of unwanted EEs.(Bogo-Medellin Sugar Cane Planters Assn., Inc. v. NLRC, 1998)

Working Capital Ratio or Current Ratio:

Tests the liquidity of the ER

Measures the number of times that the current liabilities couldbe paid with the current assets

(Cama v. Joni's Food Services, Inc., 2004)

Sliding Income – decreasing gross revenues

not necessarily losses, much less serious business losses(San Miguel Jeepney Service v. NLRC, 1996)

Proof of Loss

Financial statements audited by independent external auditorsconstitute the normal method of proof of the profit and lossperformance of a company.(Lopez Sugar Corp. v. Federation of Free Workers, 1990)

Financial statements for 2 corporate years is insufficient proofof serious business losses.(Bogo-Medellin Sugar Cane Planters Assn., Inc. v. NLRC, 1998)

The condition of business losses is normally show by auditedfinancial documents like yearly balance sheets and profit andloss statements as well as annual income tax returns. Financialstatements must be prepared and signed by independentauditors.(Damas International, Inc. v. Daguman, 2005)

Effect of Rehiring

Re-hiring or reemployment does NOT negate the imminent losseswhich prompted the ER to retrench.(Atlantic Gulf and Pacific Co. of Manila v. Meris, 2005)

D. Closing of Business

Right

An ER may close or cease his business operations or undertakingeven if he is not suffering from serious business losses or financialreverses, as long as he pays his employees their termination pay inthe amount corresponding to their length of service.

(Catatista v. NLRC, 1995)

Requirements

Service of a written notice to the employees and to the[D]OLE at least 1 month before the bona fide incharacter; and

Payment to the employees of termination pay amountingto at least one-half ½ month pay for every year of service,or 1 month pay, whichever is higher.(Caffco International Ltd. v. Office MOLE, 1992)

Partial Closure

The phrase "closure or cessation of operation of an establishmentor undertaking not due to serious business losses or reverses"under Article 283 of the Labor Code includes both the completecessation of all business operations and the cessation of only part ofa company’s business.(Cheniver Deco Print Technics Corp. v. NLRC, 2000)

Temporary Cessation of Operation

The bona fide suspension of operation of a business or undertakingfor a period not exceeding 6 months shall NOT terminateemployment.(Art 286)

ER to reinstate EE to his former position without loss of seniorityrights if he indicates his intention to resume his work not later than1 month from the resumption of operations of the ER.(Art 286)

I. Temporary suspension of operations is recognized as a validexercise of management prerogative provided it is not carriedout in order to circumvent the provisions of the Labor Code orto defeat the rights of the employees under the Code.(San Pedro Hospital of Digos v. Sec. of Labor, 1996)

II. The burden of proving that such a temporary suspension isbona fide falls upon the employer.(San Pedro Hospital of Digos v. Sec. of Labor, 1996)

Effect on ER-EE Relationship

Employers who contemplate terminating the services of theirworkers must base their decisions on more than just flimsy excuses,considering that the dismissal of an employee from work involvesnot only the loss of his position but, what is more important, hismeans of livelihood. The same principle applies in temporarysuspension of operations, as in this case, considering that it involveslaying off employees for a period of six months.(San Pedro Hospital of Digos v. Sec. of Labor, 1996)

IV. Disease

ER my terminate an EE who:1. Has been found to be suffering from any disease; AND2. whose continued employment is prohibited by law or is

prejudicial to his health as well as as to the health of hisco-employees.(Art 284)

Separation pay = at least 1 month salary or to ½ salary for everyyear of service, whichever is greater.

V. Special Case of Business Transfers

Nature of Labor Contract

Sundowner Development Corp. v. Drilon, 1989:

Unless expressly assumed, labor contracts such asemployment contracts and collective bargaining agreementsare NOT enforceable against a transferee of an enterprise,labor contracts being in personam, thus binding only betweenthe parties.

No law requires a bona fide purchaser of assets of an on-goingconcern to absorb in its employ the employees of the latter.

The parties are liable to the employees if the transactionbetween the parties is colored or clothed with bad faith.



PROCEDURAL DUE PROCESS

In General

Agabon v. NLRC, 2004

Procedural Requirements

Basis for termination Requirements

Just Cause – Art 282 1. Notice specifying thegrounds for which dismissalis sought2. Hearing or opportunity tobe heard3. Notice of the decision todismiss

Authorized Cause –Arts 283 & 284

Notice to:1. Employee, &2. DOLEat least 30 days prior to theeffectivity of the separation

Four PossibleSituations

Effect Liability of ER

Just or AuthorizedCause + DueProcess

Termination valid

No liability* separation pay if forauthorized cause

No Just orAuthororizedCause+ Due Process

Termination invalid

Reinstatement + FullBackwages

* if reinstatement NOTpossible = separationpay

No Just orAuthorized Cause+ No Due Process

Termination invalid

Reinstatement + FullBackwages

* if reinstatement NOTpossible = separationpay

Just or AuthorizedCause + No DueProcess

Termination valid

Liable for non-compliance withprocedural req'ts

*separation pay if forauthorized cause

Right to Counsel

The right to counsel, a very basic requirement of substantive dueprocess, has to be observed. Indeed, the rights to counsel and todue process of law are two of the fundamental rights guaranteed bythe 1987 Constitution to any person under investigation, be theproceeding administrative, civil, or criminal.(Salaw v. NLRC, 1991)

Hearing

No formal hearing necessary when the EE already admitted hisresponsibility for the act he was accused of. (Magos v. NLRC,1998)

A formal or trial type hearing is not at all times and in allinstances essential to due process, the requirements of whichare satisfied where the parties are afforded fair andreasonable opportunity to explain their side of thecontroversy. It is deemed sufficient for the ER to follow thenatural sequence of notice, hearing and judgment. (NationalSemi-Conductor (HK) Distribution Ltd. v. NLRC, 1998)

Ample Opportunity in due process means that kind ofassistance that management must accord the EE to enable himto prepare adequately for his defense including legalrepresentation. (La Carlota Planters Assn., Inc. v. NLRC, 1998)

Effect of Failure of Procedural Due Process

Prior to 1989 termination illegal

Wenphil Corp. v.NLRC, 1989- Belated DueProcess Rule

if termination for just cause= termination valid(NO reinstatement and backwages)

+

ER to indemnify EE

* how computed: depends on thefactual circumstances

Serrano v. NLRC,2000

if termination for just or valid cause= termination valid + payment offull backwages

* how computed: from the time ofdismissal until the Court finds thedismissal to be for just cause

Agabon v. NLRC,2004

if termination for just or authorizedcause= termination valid

+

ER to indemnify EE

* sanction in the nature ofindemnification or penalty anddepends on the facts of each case,taking into special considerationthe gravity of the due processviolation* indemnity in the form of nominaldamages* indemnity stiffer to discouragethe practice of “dismiss now, paylater”

Burden of Proof

The burden of proving that the termination of an employee isfor a valid or authorized cause rests on the employer. In anyevent, the employer must comply with due processrequirements before any termination is done.(Gothong Lines, Inc. v. NLRC, 1999)

Unsubstantiated suspicions and baseless conclusions byemployers are not legal justification for dismissing employees.(Maranaw Hotel and Resort Corp. v. NLRC, 1999)

Degree

The ground for an employer's dismissal of an employee need beestablished only by substantial evidence; proof beyond reasonabledoubt not required.(Manila Electric Co., Inc. v. NLRC, 1991)

Prescription Period

An action for reinstatement by reason of illegal dismissal is onebased on an injury which may be brought within 4 years from thetime of dismissal pursuant to Art. 1146 of the Civil Code.

Offer to Reinstate

The fact that his ER later made an offer to re-employ the EE did notcure the vice of earlier arbitrary dismissal.(Ranara v. NLRC, 1992)

SANCTIONS and REMEDIES



Art 279If EE is unjustly dismissed, he is entitled to:

1. Reinstatement- without loss of seniority rights and other privileges, AND

2. Full Backwages- inclusive of allowances, and to other benefits or theirmonetary equivalent computed from the time hiscompensation was withheld up to the time of actualreinstatement.

Reinstatement and backwages are separate and distinct reliefsgiven to an illegally dismissed EE.(Judy Phils., Inc. v. NLRC, 1998)

I. Reinstatement

Definition

Reinstatement is aimed to restore the situation as nearly aspossible to status quo ante the unfair labor practice. Thisrequires that those deprived of a recognized and protectedinterest by violations of the law should be made whole so as toprevent the violator from profiting from his misdeeds(Union of Supervisor, etc. v. Secretary of Labor, 1984)

Employee Right

An illegally dismissed employee is entitled to reinstatement as amatter of right.However, where reinstatement is not feasible, expedient orpractical, as where reinstatement would only exacerbate thetension and strained relations between the parties, or where therelationship between the employer and employee has been undulystrained by reason of their irreconcilable differences, particularlywhere the illegally dismissed employee held a managerial or keyposition in the company, it would be more prudent to orderpayment of separation pay instead of reinstatement.(Quijano v. Mercury Drug Corp., 1998)

Effect of failure to Ask Relief

The relief of reinstatement, to which the EE is entitled to under thelaw, may be granted in his favor although he failed to specificallypray for it in his complaint.(General Baptist Bible College v. NLRC, 1993)

Exceptions

1. Business Conditions

The reinstatement remedy must always be adapted toeconomic-business conditions.(Union of Supervisors, etc. v. Sec. of Labor, 1984)

Sec. 13, Book IV, of the IRR provides that in the absence of aretirement plan, agreement or policy an employee may beretired upon reaching the age of 60 years. Thus, t an employeemay retire, or may be retired by his employer, upon reaching60. An employee held to be illegally dismissed cannot bereinstated if he had already reached the age of 60 years at thetime of his second complaint (pressing for reinstatement)before the Labor Arbiter's Office.(Espejo v. NLRC, 1996)

2. Strained Relations

Doctrine of Strained Relations:Where reinstatement is not feasible, expedient or practical, aswhere reinstatement would only exacerbate the tension andstrained relations between the parties, or where therelationship between the employer and employee has beenunduly strained by reason of their irreconcilable differences,particularly where the illegally dismissed employee held amanagerial or key position in the company, it would be moreprudent to order payment of separation pay instead ofreinstatement. (Quijano vs. Mercury Drug Corp., 1998)

The parties to a case should not be forced into a situationwhere a peaceful relationship is not feasible. As the petitionerappears to have lost its trust in private respondent, who inturn is not seeking reinstatement, it would be an act ofoppression to compel them to return to the status quo ante.(Pearl S. Buck Foundation, Inc. v. NLRC, 1990)

Sentinel Security Agency, Inc. v. NLRC, 1998:The Agency cannot reassign them to the Client, as the former

has recruited new security guards; the complainants, on the otherhand, refuse to accept other assignment. Verily, complainants donot pray for reinstatement; in fact they refused to be reinstated.Such refusal is indicative of strained relations. Thus, separation payis awarded in lieu of reinstatement.

No Strained Relations

Strained relations in order that it may justify the award ofseparation pay in lieu of reinstatement with backwages, should besuch, that they are so compelling & so serious in character, that thecontinued employment of an employee is so obnoxious to theperson/business of the employer & that the continuation of suchemployment has become inconsistent with peace & tranquilitywhich is an ideal atmosphere in every workplace.(Sibal v. Notre Dame of Greater Manila, 1990)

Options and Rationale

The order of immediate reinstatement pending appeal, incases of illegal dismissal is an ancillary relief under RA 6715granted to a dismissed employee to cushion him & his familyagainst the impact of economic dislocation or abrupt loss ofearnings. If the employee chooses not to report for workpending the resolution of the case on appeal, he foregoes sucha temporary relief and is not paid of his salary.(Jardine Davies, Inc. v. NLRC, 1993)

The provision of Article 223 is clear that an award forreinstatement shall be immediately executory even pendingappeal and the posting of a bond by the employer shall notstay the execution for reinstatement. The legislative intent isquite obvious, i.e., to make an award of reinstatementimmediately enforceable, even pending appeal. To require theapplication for and issuance of a writ of execution asprerequisites for the execution of a reinstatement awardwould certainly betray and run counter to the very object andintent of Article 223, i.e., the immediate execution of areinstatement order. The reason is simple. An application for awrit of execution and its issuance could be delayed fornumerous reasons.(Pioneer Texturizing Corp. v. NLRC, 1997)

The posting of a bond by the ER shall NOT stay the executionfor reinstatement.(International Container Services, Inc. v. NLRC, 1998)

II. Backwages

Definition

The term "backwages" has been defined as that for earningslost by a worker due to his illegal dismissal. Backwages aregenerally granted on grounds of equity. Payment thereof is aform of relief that restores the income lost by reason of suchunlawful dismissal. It is not private compensation or damages,but is awarded in furtherance and effectuation of the publicobjectives of the labor Code. Nor is it a redress of a privateright but, rather, in the nature of a command to the employerto make public reparation for dismissing an employee, eitherdue to the former's unlawful act or bad faith. (St. Theresa'sSchool of Novaliches Foundation v. NLRC, 1998)

The term ‘back wages without qualification and deduction’means that the workers are to be paid their back wages fixedas of the time of the dismissal or strike without deduction fortheir earnings elsewhere during their layoff and withoutqualification of their wages as thus fixed; i.e., received by theirco-workers who are not dismissed or did not go on strike.Awards including salary differentials are not allowed. Thesalary base properly used should, however, include not onlythe basic salary but also the emergency cost of livingallowances and also transportation allowances if the workers



are entitled thereto. (General Baptist Bible College v. NLRC,1993)

Remedy Basis ofComputation

Backwages Representscompensationthat should beearned but notcollected becauseof unjustdismissal

Actual periodwhen EE wasunlawfullyprevented fromworking

Separation Pay(due to strained

relations)

Granted whenreinstatement isnot longeradvisable becauseof strainedrelations

Length of EE'sservice

Unpaid Salary Salaries earnedprior to dismissal

Salaries actuallyearned

Effect of Failure to Claim

The failure to claim back wages in a complaint for illegal dismissalhas been held to be a mere procedural lapse which cannot defeat aright granted under substantive law.(De la Cruz v. NLRC, 1998)

Effect of Failure to Order

Auror Land, etc. v. NLRC, 1997:In this case, the failure of the Labor Arbiter and the public

respondent NLRC to award back wages to the private respondent,who is legally entitled thereto having been illegally dismissed,amounts to a “plain error” which we may rectify in this petition,although private respondent did not bring any appeal regarding thematter, in the interest of substantial justice.

Period - Computation

PRIOR TO 1974 Backwages reduced by wagesactually earned by EE fromemployment during the periodof his separation, or the wageshe could have earned had hebeen diligent enough to find ajob

Mercury Drug Co., Inc.v. CIR, 1974

Backwages for a period of 3years without qualification anddeduction

RA 6715, 1989 “FULL BACKWAGES”

Ferrer v. NLRC, 1993 Mercury Drug Rule no longerapplicable, but Court stillallowed ER to deduct anyamount earned by EE duringperiod of illegal termination.

Bustamante v. NLRCand Evergreen Farms,

1996

Backwages to be awarded to anillegally dismissed EE, shouldNOT, as a general rule, bediminished or reduced by theearnings derived by himelsewhere during the period ofillegal dismissal.

Effect of Inflation

The effects of extraordinary inflation are not to be applied withoutan official declaration thereof by competent authorities.(Lantion v. NLRC, 1990)

III. Financial Assistance

GR: A person dismissed for cause is NOT entitled to separation pay.

Exception: Separation pay allowed as a measure of social justice ininstances where the EE is dismissed for causes other than seriousmisconduct or those reflecting on his moral character.(PLDT Co. . NLRC, 1988)

When Not Allowed

Financial assistance is NOT allowed when:1. The cause of the dismissal is serious misconduct on the

part of the EE, or2. Other causes reflecting adversely on the EE's moral

character.

IV. Separation Pay

Basis Amount

Installation of labor savingdevices

1 month pay or at least 1month pay for every year ofservice

Redundancy 1 month pay or at least 1month pay for every year ofservice

Retrenchment to preventlosses

1 month pay or at least ½month pay for every year ofservice, whichever is higher

Closure or cessation ofoperations NOT due toserious business losses

1 month pay or at least ½month pay for every year ofservice, whichever is higher

Disease 1 month salary or ½ monthsalary for every year ofservice, whichever isgreater

Strained Relations – in lieuof Reinstatement

1 month pay for every yearof service

Computation

Millares v. NLRC,1999:In case of retrenchment to prevent losses, Art. 283 of the

Labor Code imposes on the employer an obligation to grant to theaffected employees separation pay equivalent to one (1) month payor at least one-half (1/2) month pay for every year of service,whichever is higher. Since the law speaks of "pay," the questionarises, "What exactly does the term connote?" We correlate Art.283 with Art. 97 of the same Code on definition of terms. "Pay" isnot defined therein but "wage." In Songco the Court explained thatboth words (as well as salary) generally refer to one and the samemeaning, i.e., a reward or recompense for services performed.Specifically, "wage" is defined in letter (f) as the remuneration orearnings, however designated, capable of being expressed in termsof money, whether fixed or ascertained on a time, task, piece, orcommission basis, or other method of calculating the same, which ispayable by an employer to an employee under a written orunwritten contract of employment for work done or to be done, orfor services rendered or to be rendered and includes the fair andreasonable value, as determined by the Secretary of Labor, of board,lodging, or other facilities customarily furnished by the employer tothe employee.

We invite attention to the above-underlined clause. Stateddifferently, when an employer customarily furnishes his employeeboard, lodging or other facilities, the fair and reasonable valuethereof, as determined by the Secretary of Labor and Employment,is included in "wage." In order to ascertain whether the subjectallowances form part of petitioner's "wages," we divide thediscussion on the following — "customarily furnished;" "board,lodging or other facilities;" and, "fair reasonable value asdetermined by the Secretary of Labor."

"Customary" is founded on long-established and constantpractice connoting regularity. The receipt of an allowance on amonthly basis does not ipso facto characterize it as regular andforming part of salary because the nature of the grant is a factorworth considering.



Although it is quite easy to comprehend "board" and"lodging," it is not so with "facilities." Thus Sec. 5, Rule VII, Book III,of the Rules Implementing the Labor Code gives meaning to theterm as including articles or services for the benefit of the employeeor his family but excluding tools of the trade or articles or serviceprimarily for the benefit of the employer or necessary to theconduct of the employer's business. XXX In determining whether aprivilege is a facility, the criterion is not so much its kind but itspurpose.

Effect of Acceptance

A dismissed employee who has accepted separation pay is notnecessarily estopped from challenging thevalidity of his or her dismissal. Neither does it relieve the employerof legal obligations.(Anino v. NLRC, 1998)

Liability of Corporate Officers

In cases of illegal dismissal, corporate directors and officers aresolidarily liable with the corporation, where terminations ofemployment are done with malice or in bad faith.(Bogo-Medelin Sugarcane Planters Assn., Inc. v. NLRC, 1998)

V. Damages

Award of moral and exemplary damages for an illegallydismissed employee is proper where the employee had beenharassed and arbitrarily terminated by the employer. Moraldamages may be awarded to compensate one for diverseinjuries such as mental anguish, besmirched reputation,wounded feelings and social humiliation occasioned by theemployer’s unreasonable dismissal of the employee.(Cruz v. NLRC, 2000)

To warrant an award of moral damages, it must be shown thatthe dismissal of the employee was attended to by bad faith, orconstituted an act oppressive to labor, or was done in amanner contrary to morals, good customs or public policy.(Nueva Ecija Electric Cooperative, Inc. v. NLRC, 2000)

Moral damages are recoverable only where the dismissal ofthe employee was tainted by bad faith or fraud, or where itconstituted an act oppressive to labor, and done in a mannercontrary to morals, good customs, or public policy. Exemplarydamages may be awarded only if the dismissal was done in awanton, oppressive, or malevolent manner. None of thesecircumstances exist in the present case.(Permex, Inc. v. NLRC, 2000)

Determination of Amount

In determining the amount of damages recoverable, the business,social and financial position of the offended parties and thebusiness and financial position of the offender are taken intoaccount. (Nueva Ecija Electric Cooperative, Inc. v. NLRC, 2000)

PART XIX

RETIREMENT

Retirement Plan or Agreement

An EE may be retired upon reaching the retirement age established in:

1. Collective Bargaining Agreement, OR2. Other applicable employment contract

EE entitled to receive retirement benefits under:1. existing laws2. any collective bargaining agreement3. other agreements- An EE's retirement benefits under any CBA and other agreementsshall not be less than those provided therein

No Retirement Plan or Agreement

An EE may retire if he has:1. Reached the age of 60 or more, but not beyond 65;2. Served at least 5 years in the establishment

EE entitled to at least ½ month salary for every year of service

a fraction of at least 6 months = 1 year

½ month salary = 15 days+ 1/12 of the 13th month pay+ cash equivalent of not more than 5 days ofservice incentive leaves

the parties my provide for broaderinclusions

Underground Mining EE – may retire upon reaching the age of 50 ormore, but not more than 60, if he has served at least 5 yearsExempted

1. Retail2. Service3. Agricultural4. establishments or operations employing not more than 10

EEs or workers

RationaleIt is intended to help the employee enjoy the remaining years of his life,releasing him from the burden of worrying for his financial support, andare a form of reward for his loyalty.(Producers Bank of the Phils. v. NLRC, 1998)

Eligibility

Before a right to retirement benefits or pension vests in an employee,he must have met the stated conditions of eligibility with respect to thenature of employment, age and length of service. This is a conditionprecedent to his acquisition of rights thereunder.(Brion v. South Phil. Union Mission of the Seventh Day AdventistChurch, 1999)

Accrual of BenefitsEntitlement to retirement benefits may accrue either (a) under existinglaws or (b) under a collective bargaining agreement or otheremployment contract. It is at once apparent that Article 287 does notitself purport to impose any obligation upon employers to set upretirement scheme for their employees over and above that alreadyestablished under existing laws.(Llora Motors, Inc. v. Drilon, 1989)

Private Plan – Employer ObligationThere are 3 kinds of retirement schemes:

1. compulsory and contributory in character2. set up by agreement between the employer and the

employees in collective bargaining agreements or otheragreements between them (Llora v. Drilon).

3. one that is voluntarily given by the employer, expressly as inan announced company policy or impliedly as in a failure tocontest the EE’s claim for retirement benefits (AlliedInvestigation Bureau, Inc. v. Ople)

Special Thanks to:

Office of the College Secretary

UP College of Law

UP Law Center

UP College of Law Library

UP Law BarOps 2007

Subject Committee │ Res Rosario * Mike Rivera *Grace Pastorfide * Suzy Ojeda

Information Management │

Committee

Chino Baybay [Head] * Simoun Salinas [Deputy] * Rania Joya[Design & Lay-out] * Ludee Pulido [Documentations]

Documents

Labor Standards Reviewer 2008