Part I : Introductory Materials
Labor Standards
SECTION 1 – LABOR LAW IN GENERAL
1.01 LABOR LAW DEFINED
The law governing the rights and duties of the
employer and employees
(1) with respect to the terms and conditions of
employment and
(2) with respect to labor disputes arising from
collective bargaining respecting such terms
and conditions
1.02 LAW CLASSIFICATION
1. Labor Standards
Provide minimum terms and conditions of
employment, below which it cannot be allowed
to fall.
Terms and conditions society deem necessary to
maintain health, safety, and decent living of
workers
Books 1, 2, 3, 5 & 6
Must be observed in the entirety
Maternity Children’s Hospital v. Sec. of
Labor (89)
Labor standards are the minimum
requirements prescribed by existing laws, 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.
2. Labor Relations
Regulates the institutional relationship between
the workers organized into a union and the
employers
Book V – Right to Self – Organization and Right
to bargain collectively
3. Welfare Laws
Designed to take care of the contingencies
which may affect the workers, e.g. where there
is loss of income for reasons beyond control,
i.e. sickness, death, accident, etc.
 Social Security Act of 1997, RA 8282
 Government Service Insurance System of
1997, RA 8291
 Employment Compensation and State
Insurance Fund
 National Health Insurance Act of 1995, RA
7875
1.03 BASIS OF ENACTMENT
1987 Constitution
Art II Sec 5
The maintenance of peace and order, the protection
of life, liberty, and property, and the promotion of
the general welfare are essential for the enjoyment
by all the people of the blessings of democracy.
Art II Sec 18
The State affirms labor as a primary social economic
force. It shall protect the rights of workers and
promote their welfare.
Art XIII Sec 1
The Congress shall give highest priority to the
enactment of measures that protect and enhance
the right of all the people to human dignity, reduce
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social, economic, and political inequalities, and
remove cultural inequities by equitably diffusing
wealth and political power for the common good.
To this end, the State shall regulate the
acquisition, ownership, use, and disposition of
property and its increments.
1.04 LAW AND WORKER
Cebu Royal Plant v. Deputy Minister of Labor
(87)
The SC reaffirmed its concern for the lowly
worker who, often at the mercy of his employer
must look up to the law for his protection. Fittingly,
the law regards him with tenderness and even favor
and always with faith and hope in his capacity to
help in shaping the nation’s future.
1.05 CASE DECISION
Anino v. NLRC (98)
The Court finds occasion to remind courts and
quasi-judicial bodies that “[a] decision should
faithfully comply with Section 14, Article VIII of the
Constitution which provides that no decision shall be
rendered by any court [or quasi-judicial body]
without expressing therein clearly and distinctly the
facts of the case and the law on which it is based.
xxx It is a requirement of due process and fair play
that the parties to a litigation be informed of how it
was decided, with an explanation of the factual and
legal reasons that led to the conclusions of the court
[or quasi-judicial body]. A decision that does not
clearly and distinctly state the facts and the law on
which it is based leaves the parties in the dark as to
how it was reached and is especially prejudicial to
the losing party, who is unable to pinpoint the
possible errors of the court [or quasi-judicial body]
for review by a higher tribunal.”
In the present case, the NLRC was definitely
wanting in the observance of the aforesaid
constitutional requirement. Its assailed five-page
decision consisted of about three pages of quotation
from the labor arbiter’s decision, including the
dispositive portion, and barely a page (two short
paragraphs of two sentences each) of its own
discussion of its reasons for reversing the arbiter’s
findings.
1.06 MANAGEMENT FUNCTION
RECOGNITION
Deles v. NLRC (2000)
However, petitioner loses sight of the fact that
the right of an employer to regulate all aspects of
employment is well settled. This right, aptly called
management prerogative, gives employers the
freedom to regulate, according to their discretion
and best judgment, all aspects of employment,
including work assignment, working methods,
processes to be followed, working regulations,
transfer of employees, work supervision, lay-off of
workers and the discipline, dismissal and recall of
workers. In general, management has the
prerogative to discipline its employees and to impose
appropriate penalties on erring workers, pursuant to
company rules and regulations.
LIMITATIONS
Part I : Introductory Materials
Labor Standards
Great Pacific Employees Union v. Great Pacific
Life Assurance (99)
It bears emphasis that the employer is free to
regulate all aspects of employment according to his
own discretion and judgment. This prerogative
flowed from the established rule that labor laws do
not authorize substitution of judgment of the
employer in the conduct of his business. Recall f
workers clearly falls within the ambit of management
prerogative. The employer can exercise this
prerogative without fear of liability so long as it is
done in good faith for the advancement of his
interest and not for the purpose of defeating or
circumventing the rights of the employees under
special laws or valid agreements. It is valid as it is
not performed in a malicious, harsh, oppressive,
vindictive or wanton manner or out of malice or
spite.
Pantranco North Express, Inc. v. NLRC (99)
The State affords the constitutional blanket of
rendering protection to labor, but it must also
protect the right of employers to exercise what are
clearly management prerogatives, so long as the
exercise is without abuse of discretion.
Bontia v. NLRC (96)
The rule is well settled that labor laws
discourage interference with an employer's
judgment in the conduct of his business. Even as the
law is solicitous of the welfare of employees, it must
also protect the right of an employer to exercise
what are clearly management prerogatives As long
as the company' s exercise of the same is in good
faith in order to advance its interests and not for the
purpose of defeating or circumventing the rights of
the employees under the law or valid agreements,
such exercise will be upheld.
However, management prerogatives are not
absolute but are subject to legal limits, collective
bargaining agreements, or general principles of fair
play and justice. And, while it is the special privilege
of management to dismiss or lay off an employee,
the exercise of that prerogative must be made
without abuse of discretion, for what is at stake is
not only the employee' s position but also his means
of livelihood. Courts may, therefore, look into the
employer' s exercise of a management prerogative if
the same is clearly shown to be tainted with grave
abuse of discretion, 15 ever mindful that, under the
foregoing principles and the policy of the State,
doubts should be resolved in favor of the
disadvantaged employee.
1.07 COMPROMISE AND WAIVER
Article 227
Any compromise settlement, including those
involving labor standards law, voluntarily agreed
upon by the parties with the assistance of the
Bureau or the regional office of the Department of
Labor, shall be FINAL and BINDING upon the
parties. The National Labor relations Commission or
any court shall not assume jurisdiction over
issues involved therein except in case of non-
compliance thereof or if there is prima facie
evidence that the settlement was obtained
through FRAUD, MISREPRESENTATION, OR
COERCION.
Rules
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Asian Alcohol Corp. v. NLRC (99)
It is true that this Court has generally held that
quitclaims and releases are contrary to public policy
and therefore, void. Nonetheless, voluntary
agreements that represent a reasonable settlement
are binding on the parties and should not later be
disowned. It is only where there is clear proof that
the waiver was wangled from an unsuspecting or
gullible person, or the terms of the settlement are
unconscionable, that the law will step in to bail out
the employee. While it is our duty to prevent the
exploitation of employees, it also behooves us to
protect the sanctity of contracts that do not
contravene our laws.
More Maritime Agencies, Inc. v. NLRC (99)
In American Home Assurance Co. v. NLRC, this
Court held:
“The law does not consider as valid any
agreement to receive less compensation that
what a worker is entitled to recover nor prevent
him from demanding benefits to which he is
entitled. Quitclaims executed by the employees
are thus commonly frowned upon as contrary to
public policy and ineffective to bar claims for the
full measure of the worker’s legal rights,
considering the economic disadvantage of the
employee and the inevitable pressure upon him
by financial necessity.”
Thus, it is never enough to assert that the parties
have voluntarily entered into such a quitclaim.
Golden Donuts, Inc. v. NLRC (2000)
A compromise, once approved by final orders of
the court has the force of res judicata between the
parties and should not be disturbed except for vices
of consent or forgery." A compromise is basically a
contract perfected by mere consent. "Consent is
manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are
to constitute the contract." A compromise
agreement is not valid when a party in the case has
not signed the same or when someone signs for and
in behalf of such party without authority to do so.
1.08 SOURCES OF LAW
LABOR CODE AND RELATED SPECIAL LEGISLATION
Article 1305 Civil Code
A contract is a meeting of the minds between two
persons whereby one binds himself, with respect to
the other, to give something or to render some
service.
Article 1306 Civil Code
The contracting parties may establish such
stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not
contrary to law, morals, good customs, public order,
or public policy.
CONTRACT
Collective Bargaining Agreement
Plastic Town Center Corp. v. NLRC (89)
The subject for interpretation in this petition for
review is not the Labor Code or its implementing
rules and regulations but the provisions of the
collective bargaining agreement entered into by
management and the labor union. As a contract,
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Labor Standards
it constitutes the law between the parties (Fegurin v.
National Labor Relations Commission) and in
interpreting contracts, the rules on contract must
govern.
Contracts which are not ambiguous are to be
interpreted according to their literal meaning and
should not be interpreted beyond their obvious
intendment (Herrera v. Petrophil Corp.).
PAST PRACTICES
Davao Fruits Corporation v. Associated Labor
Union (93)
From 1975 to 1981, petitioner had freely,
voluntarily and continuously included in the
computation of its employees' thirteenth month pay,
the payments for sick, vacation and maternity
leaves, premiums for work done on rest days and
special holidays, and pay for regular holidays. The
considerable length of time the questioned items had
been included by petitioner indicates a unilateral and
voluntary act on its part, sufficient in itself to negate
any claim of mistake.
A company practice favorable to the employees
had indeed been established and the payments
made pursuant thereto, ripened into benefits
enjoyed by them. And any benefit and supplement
being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the
employer, by virtue of Section 10 of the Rules and
Regulations Implementing P.D. No. 851, and Article
100 of the Labor Code of the Philippines, which
prohibit the diminution or elimination by the
employer of the employees' existing benefits
(Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).
SECTION 2 - LABOR AND THE
CONSTITUTION
2.01 HISTORICAL BACKGROUND/RATIONALE
Antamoc Goldfields Mining Co. v. CIR (40)
It should be observed at the outset that our
Constitution was adopted in the midst of surging
unrest and dissatisfaction resulting from economic
and social distress which was threatening the
stability of governments the world over. Alive to the
social and economic forces at work, the framers of
our Constitution boldly met the problems and
difficulties which faced them and endeavored to
crystallize, with more or less fidelity, the political,
social and economic propositions of their age, and
this they did, with the consciousness that the
political and philosophical aphorism of their
generation will, in the language of a great jurist, 'be
doubted by the next and perhaps entirely discarded
by the third.' Embodying the spirit of the present
epoch, general provisions were inserted in the
Constitution which are intended to bring about the
needed social and economic equilibrium between
component elements of society through the
application of what may be termed as the justitia
communis advocated by Grotius and Leibnits many
years ago to be secured through the
counterbalancing of economic and social forces and
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opportunities which should be regulated, if not
controlled, by the State or placed, as it were, in
custodia societatis.
2.02 NATURE OF PROVISION
Phil. Airlines, Inc. v. Santos (93)
It is a fact that the sympathy of the Court is on
the side of the laboring classes, not only because the
Constitution imposes such sympathy, but because of
the one-sided relation between labor and capital.
The purpose is to place the workingman on an equal
plane with management — with all its power and
influence — in negotiating for the advancement of
his interests and the defense of his rights. Under the
policy of social justice, the law bends over backward
to accommodate the interests of the working class
on the humane justification that those with less
privileges in life should have more privileges in law.
Phil. Geothermal, Inc. v. NLRC (94)
The law in protecting the rights of the
employees authorizes neither oppression nor self-
destruction of the employer. There may be cases
where the circumstances warrant favoring labor over
the interests of management but never should the
scale be so tilted if the result is an injustice to the
employer. Justitia nemini neganda est (Justice is to
be denied to none).
2.03 1987 CONSTITUTION
LABOR SECTOR - CHARACTERIZED
Article II Section 18
The State affirms labor as a primary social
economic force. It shall protect the rights of
workers and promote their welfare.
PROTECTION OF LABOR – GUARANTEES
Article XIII, Sec. 3
The State shall afford full protection to labor,
local and overseas, organized and unorganized, and
promote full employment and equality of
employment opportunities for all.
It shall guarantee the rights of all workers to
self-organization, collective bargaining and
negotiations, and peaceful concerted activities,
including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane
conditions of work, and a living wage. They shall
also participate in policy and decision-making
processes affecting their rights and benefits as may
be provided by law.
The State shall promote the principle of shared
responsibility between workers and employers and
the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster
industrial peace.
7 Cardinal Rights of Workers
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Labor Standards
S right to self-organization
C collective bargaining and negotiations
P peaceful concerted activities including
T the right to strike in accordance with
H law
L security of tenure
P humane conditions of work
living wage
participate in policy and decision-making
processes affecting their rights and
benefits as may be provided by law.
Aris (Phil.) Inc. v. NLRC (91)
These provisions are the quintessence of the
aspirations of the workingman for recognition of his
role in the social and economic life of the nation, for
the protection of his rights, and the promotion of his
welfare. Thus, in the Article on Social Justice and
Human Rights of the Constitution, which principally
directs Congress to give highest priority to the
enactment of measures that protect and enhance
the right of all people to human dignity, reduce
social, economic, and political inequalities, and
remove cultural inequities by equitably diffusing
wealth and political power for the common good, the
State is mandated to afford full protection to labor,
local and overseas, organized and unorganized, and
promote full employment and equality of
employment opportunities for all; to guarantee the
rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance
with law, security of tenure, human conditions of
work, and a living wage, to participate in policy and
decision-making processes affecting their rights and
benefits as may be provided by law; and to promote
the principle of shared responsibility between
workers and employers and the preferential use of
voluntary modes in settling disputes. Incidentally, a
study of the Constitutions of various nations readily
reveals that it is only our Constitution which devotes
a separate article on Social Justice and Human
Rights. Thus, by no less than its fundamental law,
the Philippines has laid down the strong foundations
of a truly just and humane society. This Article
addresses itself to specified areas of concern—labor,
agrarian and natural resources reform, urban land
reform and housing, health, working women, and
people's organizations—and reaches out to the
underprivileged sector of society, for which reason
the President of the Constitutional Commission of
1986, former Associate Justice of this Court Cecilia
Muñoz-Palma, aptly describes this Article as the
"heart of the new Charter."
These duties and responsibilities of the State
are imposed not so much to express sympathy for
the workingman as to forcefully and meaningfully
underscore labor as a primary social and economic
force, which the Constitution also expressly affirms
with equal intensity. Labor is an indispensable
partner for the nation's progress and stability.
XXX The validity of the questioned law is not
only supported and sustained by the foregoing
considerations. As contended by the Solicitor
General, it is a valid exercise of the police power of
the State. Certainly, if the right of an employer to
freely discharge his employees is subject to
regulation by the State, basically in the exercise of
its permanent police power on the theory that the
preservation of the lives of the citizens is a basic
duty of the State, that is more vital than the
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preservation of corporate profits. Then, by and
pursuant to the same power, the State may
authorize an immediate implementation, pending
appeal, of a decision reinstating a dismissed or
separated employee since that saving act is
designed to stop, although temporarily since the
appeal may be decided in favor of the appellant, a
continuing threat or danger to the survival or even
the life of the dismissed or separated employee and
his family.
SOCIAL JUSTICE
Article II, Section 10
The State shall promote social justice in all phases of
national development.
Article XIII Section 1
The Congress shall give highest priority to the
enactment of measures that protect and enhance
the right of all the people to human dignity, reduce
social, economic, and political inequalities, and
remove cultural inequities by equitably diffusing
wealth and political power for the common good.
Article XIII, Section 2
The promotion of social justice shall include the
commitment to create economic opportunities based
on freedom of initiative and self-reliance.
DEFINITION
Calalang v. Williams (40)
Social justice is "neither communism, nor
despotism, nor atomism, nor anarchy," but the
humanization of laws and the equalization of social
and economic forces by the State so that justice in
its rational and objectively secular conception may
at least be approximated.
LIMITS OF USE
Guido v. Rural Progress Adm. (49)
Hand in hand with the announced principle,
herein invoked, that "the promotion of social justice
to insure the well-being and economic security of all
the people should be the concern of the state," is a
declaration, with which the former should be
reconciled, that "the Philippines is a Republican
state" created to secure to the Filipino people "the
blessings of independence under a regime of justice,
liberty and democracy." Democracy, as a way of life
enshrined in the Constitution, embraces as its
necessary components freedom of conscience,
freedom of expression, and freedom in the pursuit of
happiness. Along with these freedoms are included
economic freedom and freedom of enterprise within
reasonable bounds and under proper control. In
paving the way for the breaking up of existing large
estates, trusts in perpetuity, feudalism, and their
concomitant evils, the Constitution did not propose
to destroy or undermine property rights, or to
advocate equal distribution of wealth, or to authorize
the taking of what is in excess of one's personal
needs and the giving of it to another. Evincing much
concern for the protection of property, the
Constitution distinctly recognizes the preferred
position which real estate has occupied in law for
ages. Property is bound up with every aspect of
social life in a democracy as democracy is
conceived in the Constitution. The Constitution
realizes the indispensable role which property,
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Labor Standards
owned in reasonable quantities and used
legitimately, plays in the stimulation to economic
effort and the formation and growth of a solid social
middle class that is said to be the bulwark of
democracy and the backbone of every progressive
and happy country.
Phil. Long Distance Telephone Co. v. NLRC (88)
The policy of social justice is not intended to
countenance wrongdoing simply because it is
committed by the underprivileged. At best it may
mitigate the penalty but it certainly will not condone
the offense. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an
impediment to the punishment of the guilty. Those
who invoke social justice may do so only if their
hands are clean and their motives blameless and not
simply because they happen to be poor. This great
policy of our Constitution is not meant for the
protection of those who have proved they are not
worthy of it, like the workers who have tainted the
cause of labor with the blemishes of their own
character.
Garcia v. NLRC (94)
The constitutional policy of providing full
protection to labor is not intended to oppress or
destroy management. The employer cannot be
compelled to retain employees it no longer needs, to
be paid for work unreasonably refused and not
actually performed. NASECO bent over backward
and exerted every effort to help the petitioners look
for other work, postponed the effective date of their
separation, and offered them a generous termination
pay package. The unflagging commitment of this
Court to the cause of labor will not prevent us from
sustaining the employer when it is in the right, as in
this case.
Phil. Geothermal Inc. v. NLRC (94)
While it is true that compassion and human
consideration should guide the disposition of cases
involving termination of employment since it affects
one's source or means of livelihood, it should not be
overlooked that the benefits accorded to labor do
not include compelling an employer to retain the
services of an employee who has been shown to be
a gross liability to the employer. The law in
protecting the rights of the employees authorizes
neither oppression nor self-destruction of the
employer. It should be made clear that when the law
tilts the scale of justice in favor of labor, it is but a
recognition of the inherent economic inequality
between labor and management. The intent is to
balance the scale of justice; to put the two parties
on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over
the interests of management but never should the
scale be so tilted if the result is an injustice to the
employer. Justitia nemini neganda est (Justice is to
be denied to none).
EMPLOYER PROTECTION
Asian Alcohol Corp. v. NLRC (99)
Out of its concern for those with less privilege in
life, this Court has inclined towards the worker and
upheld his cause in his conflicts with the employer.
This favored treatment is directed by the social
justice policy of the Constitution. But while titling
the scales of justice in favor of workers, the
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fundamental law also guarantees the right of the
employer to reasonable returns from his investment.
Corollarily, the law allows an employer to downsize
his business to meet clear and continuing economic
threats. Thus, this Court has upheld reductions in
the work force to forestall business losses or stop
the hemorrhaging of capital.
The right of management to dismiss workers
during periods of business recession and to install
labor saving devices to prevent losses is governed
by Art. 283 of the Labor Code, as amended.
Balbalec v. NLRC (95)
The law recognizes the right of every business
entity to reduce its workforce if the same is made
necessary by compelling economic factors which
would endanger its existence or stability. In spite of
overwhelming support granted by the social justice
provisions of our Constitution in favor of labor, the
fundamental law itself guarantees, even during the
process of tilting the scales of social justice towards
workers and employees, "the right of enterprises to
reasonable returns of investment and to expansion
and growth." To hold otherwise would not only be
oppressive and inhuman, but also counterproductive
and ultimately subversive of the nation's thrust
towards a resurgence in our economy which would
ultimately benefit the majority of our people. Where
appropriate and where conditions are in accord with
law and jurisprudence, the Court has authorized
valid reductions in the workforce to forestall
business losses, the hemorrhaging of capital, or
even to recognize an obvious reduction in the
volume of business which has rendered certain
employees redundant.
2.04 CONSTITUTIONAL RIGHTS AND LABOR
LAW
LABOR AS PROPERTY
Phil. Movie Workers Assn. v. Premiere
Productions, Inc. (53)
The right to labor is a constitutional as well as a
statutory right. Every man has a natural right to the
fruits of his own industry. A man who has been
employed to undertake certain labor and has put
into it his time and effort is entitled to be protected.
The right of a person to his labor is deemed to be
property within the meaning of constitutional
guarantees. That is his means of livelihood. He
cannot be deprived of his labor or work without due
process of law (11 Am. Jur., 333, pp. 1151-1153; 11
Am. Jur., section 344, pp. 1168- 1171).
Sibal v. Notre Dame of Greater Manila (90)
Thus, in the case of Callanta v. Carnation
Philippines, Inc. (145 SCRA 268), this Court held
that one's employment, profession, trade or calling
is a "property right", and the wrongful interference
therewith is an actionable wrong. The right is
considered to be property within the protection of a
constitutional guaranty of due process of law.
DUE PROCESS REQUIREMENT
Century Textile Mills, Inc. v. NLRC (89)
The twin requirements of notice and hearing
constitute essential elements of due process in
cases of employee dismissal: the requirement of
notice is intended to inform the employee
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Labor Standards
concerned of the employer's intent to dismiss and
the reason for the proposed dismissal; upon the
other hand, the requirement of hearing affords the
employee an opportunity to answer his employer's
charges against him and accordingly to defend
himself therefrom before dismissal is effected.
Neither of these two requirements can be dispensed
with without running afoul of the due process
requirement of the 1987 Constitution.
Maneja v. NLRC (98)
The requisites of a valid dismissal are (1) the
dismissal must be for any of the causes expressed in
Article 282 of the Labor Code, and (2) the employee
must be given an opportunity to be heard and to
defend himself. The substantive and procedural
laws must be strictly complied with before a worker
can be dismissed from his employment because
what is at stake is not only the employee’s position
but his livelihood.
XXX Well-settled is the dictum that the twin
requirements of notice and hearing constitute the
essential elements of due process in the dismissal of
employees. It is a cardinal rule in our jurisdiction
that the employer must furnish the employees with
two written notices before the termination of
employment can be effected: (a) the first apprises
the employee of employer’s decision to dismiss him.
The requirement of a hearing, on the other hand, is
complied with as long as there was an opportunity to
be heard, and not necessarily that an actual hearing
was conducted.
XXX It bears stressing that a worker’s
employment is property in the constitutional sense.
He cannot be deprived of his work without due
process of law. Substantive due process mandates
that an employee can only be dismissed based on
just or authorized causes. Procedural due process
requires further that he can only be dismissed after
he has been given an opportunity to be heard. The
import of due process necessitates the compliance of
these two aspects.
LIABILITY OF CONTRACT AND STATE INTERFERENCE
Leyte Land Transportation Co. v. Leyte Farmers
and Workers Union (48)
In answer to the contention of the petitioner
that the doctrine laid down in the appealed decision
in effect "has deprived the company of its rights to
enter into contract of employment as it and the
employee may agree," it is sufficient to quote the
following pronouncements of the United States
Supreme Court: "The fact that both parties are of
full age and competent to contract does not
necessarily deprive the State of the power to
interfere where the parties do not stand upon an
equality, or where the public health demands that
one party to the contract shall be protected against
himself. The State still retains an interest in his
welfare, however reckless he may be. The whole is
no greater than the sum of all the parts, and where
the individual health, safety and welfare are
sacrificed or neglected, the State must suffer."
(West Coast Hotel Company vs. Parrish, quoting
Holden vs. Hardy. The former, by the way, expressly
overrules the case of Adkins vs. Children's Hospital)
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Victoriano vs. Elizalde Rope Workers Union
(74)
It should not be overlooked, however, that the
prohibition to impair the obligation of contracts is
not absolute and unqualified. In spite of the
constitutional prohibition, the State continues to
possess authority to safeguard the vital interests of
its people. Legislation appropriate to safeguarding
said interests may modify or abrogate contracts
already in effect. For not only are existing laws read
into contracts in order to fix the obligations as
between the parties, but the reservation of essential
attributes of sovereign power is also read into
contracts as a postulate of the legal order. xxx This
has special application to contracts regulating
relations between capital and labor which are not
merely contractual, and said labor contracts, for
being impressed with public interest, must yield to
the common good.
Phil. National Construction Corp. v. NLRC (93)
The mandate of the law for a liberal
interpretation of labor contracts in favor of the
working man was applied in the case of Ditan vs.
POEA Administrator 8 where We made the following
pronouncement:
"A strict interpretation of the cold facts before us
might support the position taken by the
respondents. However, we are dealing here not
with an ordinary transaction but with a labor
contract which deserves special treatment and a
liberal interpretation in favor of the worker . . .
the Constitution mandates the protection of labor
and the sympathetic concern of the State for the
working class conformably to the social justice
policy . . .
xxx xxx xxx
Under the policy of social justice, the law bends
over backward to accommodate the interests of
the working class on the humane justification
that those with less privileges in life should have
more privileges in law . . ."
MANAGEMENT AND THE CONSTITUTION
National Sugar Refineries Corp. v. NLRC (93)
While the Constitution is committed to the policy
of social justice and the protection of the working
class, it should not be supposed that every labor
dispute will be automatically decided in favor of
labor. Management also has its own rights which, as
such, are entitled to respect and enforcement in the
interest of simple fair play. Out of its concern for
those with less privileges in life, this Court has
inclined more often than not toward the worker and
upheld his cause in his conflicts with the employer.
Such favoritism, however, has not blinded us to the
rule that justice is in every case for the deserving, to
be dispensed in the light of the established facts and
the applicable law and doctrine.
Manila Electric Company v. Quisumbing (99)
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
company can determine in its best business
judgment whether it should contract out
performance of some of its work for as long as
Part I : Introductory Materials
Labor Standards
the employer is motivated by good faith, and the
contracting out must not have been resorted to
circumvent the law or must not have been the result
of malicious or arbitrary action. The Labor Code and
its implementing rules also contain specific rules
governing contracting out.
Given these realities, we recognize that a
balance already exists in the parties’ relationship
with respect to contracting out; MERALCO has its
legally defined and protected management
prerogatives while workers are guaranteed their own
protection through specific labor provisions and the
recognition of limits to the exercise of management
prerogatives.
WELFARE STATE
Alalayan v. National Power Corporation (68)
The welfare state concept is not alien to the
philosophy of our Constitution. It is implicit in quite a
few of its provisions. There is the clause on the
promotion of social justice to ensure the well-being
and economic security of all the people, as well as
the pledge of protection to labor with specific
authority to regulate the relations between
landowners and tenants and between labor and
capital.
LAISSEZ-FAIRE
Agricultural Credit & Cooperative Financing
Admin. v. Confederation of Unions (69)
The influence exerted by American
constitutional doctrines unavoidable when the
Philippines was still under American rule
notwithstanding, an influence that has not altogether
vanished even after independence, the laissez faire
principle never found full acceptance in this
jurisdiction, even during the period of its flowering in
the United States.
Employees Confederation of the Philippines v.
NWPC (91)
Apparently, ECOP is of the mistaken impression
that Republic Act No. 6727 is meant to "get the
Government out of the industry" and leave labor and
management alone in deciding wages. The Court
does not think that the law intended to deregulate
the relation between labor and capital for several
reasons: (1) The Constitution calls upon the State to
protect the rights of workers and promote their
welfare; (2) the Constitution also makes it a duty of
the State "to intervene when the common goal so
demands" in regulating property and property
relations; (3) the Charter urges Congress to give
priority to the enactment of measures, among other
things, to diffuse the wealth of the nation and to
regulate the use of property; (4) the Charter
recognizes the "just share of labor in the fruits of
production;" (5) under the Labor Code, the State
shall regulate the relations between labor and
management; (6) under Republic Act No. 6727
itself, the State is interested in seeing that workers
receive fair and equitable wages; and (7) the
Constitution is primarily a document of social justice,
and although it has recognized the importance of the
private sector, it has not embraced fully the concept
of laissez faire or otherwise, relied on pure market
forces to govern the economy; We can not give to
the Act a meaning or intent that will conflict with
these basic principles.
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PARTICIPATION IN DECISION MAKING PROCESS
Philippine Airlines, Inc. v. NLRC (93)
Indeed, industrial peace cannot be achieved if
the employees are denied their just participation in
the discussion of matters affecting their rights. Thus,
even before Article 211 of the Labor Code (P.D. 442)
was amended by Republic Act No. 6715, it was
already declared a policy of the State: "(d) To
promote the enlightenment of workers concerning
their rights and obligations . . .as employees." This
was, of course, amplified by Republic Act No. 6715
when it decreed the "participation of workers in
decision and policy making processes affecting their
rights, duties and welfare." PAL's position that it
cannot be saddled with the "obligation" of sharing
management prerogatives as during the formulation
of the Code, Republic Act No. 6715 had not yet been
enacted, cannot thus be sustained. While such
"obligation" was not yet founded in law when the
Code was formulated, the attainment of a
harmonious labor-management relationship and the
then already existing state policy of enlightening
workers concerning their rights as employees
demand no less than the observance of transparency
in managerial moves affecting employees' rights.
Manila Electric Co. v. Quisumbing (99)
We do not find merit in MERALCO’s contention
that the above-quoted ruling of the Secretary is an
intrusion into the management prerogatives of
MERALCO. It is worthwhile to note that all the Union
demands and what the Secretary’s order granted is
that the Union be allowed to participate in policy
formulation and decision-making process on matters
affecting the Union members’ rights, duties and
welfare as required in Article 211 (A) (g) of the
Labor Code. And this can only be done when the
Union is allowed to have representatives in the
Safety Committee, Uniform Committee and other
committees of a similar nature. Certainly, such
participation by the Union in the said committees is
not in the nature of a co-management control of the
business of MERALCO. What is granted by the
Secretary is participation and representation. Thus,
there is no impairment of management prerogatives.
SECTION 3 - LABOR AND THE CIVIL CODE
3.01 ROLE OF LAW
The New Civil Code Art. 1700
The relations between capital and labor are not
merely contractual. They are so impressed with
public interest that labor contracts must yield to the
common good. Therefore, such contracts are subject
to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop,
wages, working conditions, hours of labor and
similar subjects.
LABOR CONTRACTS
PAL Employees Savings and Loan Assn., Inc.
v. NLRC (96)
In connection with the foregoing, we should
add that even if there had been a meeting of the
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Labor Standards
minds in the instant case, the employment contract
could not have effectively shielded petitioner from
the just and valid claims of private respondent.
Generally speaking, contracts are respected as the
law between the contracting parties, and they may
establish such stipulations, clauses, terms and
conditions as they may see fit; and for as long as
such agreements are not contrary to law, morals,
good customs, public policy or public order, they
shall have the force of law between them. However,
“… while it is the inherent an inalienable right of
every man to have the utmost liberty of contracting,
and agreements voluntarily and fairly made will be
held valid and enforced in the courts, the general
right to contract is subject to the limitation that the
agreement must not be in violation of the
Constitution, the statute or some rule of law.” And
under the Civil Code, contracts of labor are explicitly
subject to the police power of the State because
they are not ordinary contracts but are impressed
with public interest. Inasmuch as in this particular
instance the contract in question would have been
deemed in violation of pertinent labor laws, the
provisions of said laws would prevail over the terms
of the contract, and private respondent would still be
entitled to overtime pay.
Philippine Telephone and Telegraph Co. v.
NLRC (97)
Petitioner’s policy is not only in derogation of
the provisions of Article 136 of the Labor Code on
the right of a woman to be free from any kind of
stipulation against marriage in connection with her
employment, but it likewise assaults good morals
and public policy, tending as it does to deprive a
woman of the freedom to choose her status, a
privilege that by all accounts inheres in the
individual as an intangible and inalienable right.
Hence, while it is true that the parties to a contract
may establish any agreements, terms, and
conditions that they may deem convenient, the
same should not be contrary to law, orals, good
customs, public order, or public policy. Carried to its
logical consequences, it may even be said that
petitioner’s policy against legitimate marital bonds
would encourage illicit or common-law relations and
subvert the sacrament of marriage.
Parenthetically, the Civil Code provisions on the
contract of labor state that the relations between the
parties, that is, of capital and labor, are not merely
contractual, impressed as they are with so much
public interest that the same should yield to the
common good. It goes on to intone that neither
capital nor labor should visit acts of oppression
against the other, nor impair the interest or
convenience of the public. In the final reckoning,
the danger of just such a policy against marriage
followed by petitioner PT&T is that it strikes at the
very essence, ideals and purpose of marriage as an
inviolable social institution and, ultimately, of the
family as the foundation of the nation. That it must
be effectively interdicted here in all its indirect,
disguised or dissembled forms as discriminatory
conduct derogatory of the laws of the lands is not
only in order but imperatively required.
Art. 1701
Neither capital nor labor shall act oppressively
against the other, or impair the interest or
convenience of the public.
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FAIR TREATMENT
General Bank and Trust Co., v. Court of Appeals
(85)
Basically, the right of an employer to dismiss an
employee differs from and should not be confused
with the manner in which such right is exercised. It
must not be oppressive and abusive since it affects
one's person and property. (Remerco Garments
Manufacturing v. MOLE)
MUTUAL OBLIGATION
Firestone Tire and Rubber Co. v. Lariosa (87)
The employer's obligation to give him workers
just compensation and treatment carries with it the
corollary right to expect from the workers adequate
work, diligence and good conduct.
LAW COMPLIANCE
Sarmiento v. Tuico (88)
It 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.
EMPLOYEES OBEDIENCE AND COMPLIANCE TO
EMPLOYERS ORDERS
PCIB v. Jacinto (91)
Any employee who is entrusted with
responsibility by his employer should perform the
task assigned to him with care and dedication. The
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.
3.02 EMPLOYER-EMPLOYEE STANDARD OF
CONDUCT
GTE Directories Corp. v. Sanchez (91)
To sanction disregard or disobedience by
employees of a rule or order laid down by
management, on the pleaded theory that the rule or
order is unreasonable, illegal, or otherwise irregular
for one reason or another, would be disastrous to
the discipline and order that it is in the interest of
both the employer and his employees to preserve
and maintain in the working establishment and
without which no meaningful operation and progress
is possible.
San Miguel Corp. v. Ubaldo (93)
Quoting the words of this Court in a recent
case:
"To sanction disregard or disobedience by
employees of a rule or order laid down by
management, on the pleaded theory that the
rule or order is unreasonable, illegal, or
otherwise irregular for one reason or another,
would be disastrous to the discipline and order that
it is in the interest of both employer and his
employees to preserve and maintain in the working
establishment and without which no meaningful
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Labor Standards
operation and progress is possible. Deliberate International Covenant on Civil and Political
disregard or disobedience of rules, defiance of Rights – Part II, Art. 8
management authority cannot be countenanced.
This is not to say that the employees have no
remedy against rules or orders they regard as
Conventions and Recommendations if the
unjust or illegal. They may object thereto, ask to International Labor Organization (ILO)
negotiate thereon, bring proceedings for redress
against the employer before the Ministry of INTERNATIONAL CONVENTIONS
Labor. But until and unless the rules or orders
are declared to be illegal or improper by International School Alliance of Educators v.
competent authority, the employees ignore or
Quisumbing (2000)
disobey them at their peril."
That public policy abhors inequality and
With a view of maintaining the viability of a
discrimination is beyond contention. Our Constitution
business enterprise, the employees are expected to
and laws reflect the policy against these evils. The
recognize the rules or orders which have not been
Constitution in the Article on Social Justice and
declared to be illegal or improper by competent
Human Rights exhorts Congress to "give highest
authority. In the case at bar, the private
priority to the enactment of measures that protect
respondents committed acts contrary to the rules
and enhance the right of all people to human
and regulations set out by the company, which
dignity, reduce social, economic, and political
eventually caused serious damage to the
inequalities." The very broad Article 19 of the Civil
establishment.
Code requires every person, "in the exercise of his
It is a recognized principle that company policies
rights and in the performance of his duties, [to] act
and regulations are, unless shown to be grossly
with justice, give everyone his due, and observe
oppressive or contrary to law, generally binding and
honesty and good faith."
valid on the parties and must be complied with until
International law, which springs from general
finally revised or amended unilaterally or preferably
principles of law, likewise proscribes discrimination.
through negotiation or by competent authority.
General principles of law include principles of equity,
XXX Deliberate disregard or disobedience of
i.e., the general principles of fairness and justice,
rules by the employees cannot be countenanced.
based on the test of what is reasonable. The
Whatever maybe the justification behind the
Universal Declaration of Human Rights, the
violations is immaterial at this point, because the
International Covenant on Economic, Social, and
fact still remains that an infraction of the company
Cultural Rights, the International Convention on the
rules has been committed.
Elimination of All Forms of Racial Discrimination, the
Convention against Discrimination in Education, the
EMPLOYER OBLIGATION
Convention (No. 111) Concerning Discrimination in
Respect of Employment and Occupation - all embody
Lagniton v. NLRC (93)
the general principle against discrimination, the very
The days are gone when the employee was at
antithesis of fairness and justice. The Philippines,
the mercy of his employer and could be dismissed
through its Constitution, has incorporated this
for the flimsiest reasons or for no reason at all. The
principle as part of its national laws.
tyrannical employer is an anachronism in this
In the workplace, where the relations between
enlightened era. The employee today, once
capital and labor are often skewed in favor of
defenseless and often oppressed, has found new
capital, inequality and discrimination by the
strength in the protection of the law and the proud
employer are all the more reprehensible.
realization that he performs a symbiotic role with the
The Constitution specifically provides that labor
employer in their common enterprise. As such, he
is entitled to "humane conditions of work." These
must be treated not as a disdained subordinate but
conditions are not restricted to the physical
with the respect and fairness, if not affection and
workplace - the factory, the office or the field - but
gratitude, that is due to an equal partner.
include as well the manner by which employers treat
their employees.
Maneja v. NLRC (98)
The Constitution also directs the State to
An employer can terminate the services of an
promote "equality of employment opportunities for
employee only for valid and just causes which must
all." Similarly, the Labor Code provides that the
be supported by clear and convincing evidence. The
State shall "ensure equal work opportunities
employer has the burden of proving that the
regardless of sex, race or creed." It would be an
dismissal was indeed for a valid and just cause.
affront to both the spirit and letter of these
Failure to do so results in a finding that the
provisions if the State, in spite of its primordial
dismissal was unjustified.
obligation to promote and ensure equal employment
opportunities, closes its eyes to unequal and
discriminatory terms and conditions of employment.
Discrimination, particularly in terms of wages, is
SECTION 4 - LABOR AND INTERNATIONAL frowned upon by the Labor Code. Article 135, for
COVENANTS example, prohibits and penalizes the payment of
lesser compensation to a female employee as
Universal Declaration of Human Rights – Arts. against a male employee for work of equal value.
3, 7, 17, 22, 23,24, 25 Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order
International Covenant on Economic, Social to encourage or discourage membership in any labor
and Cultural Rights – Part III, Arts. 6, 7, 9, organization.
11 Notably, the International Covenant on
Economic, Social, and Cultural Rights, supra, in
Article 7 thereof, provides:

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Labor Standards
The States Parties to the present Covenant
recognize the right of everyone to the enjoyment of
just and favourable conditions of work, which
ensure, in particular:
a.....Remuneration which provides
workers, as a minimum, with:
i.....Fair wages and equal remuneration for
work of equal value without distinction of
any kind, in particular women being
guaranteed conditions of work not inferior
to those enjoyed by men, with equal pay
for equal work;
The foregoing provisions impregnably
institutionalize in this jurisdiction the long honored
legal truism of "equal pay for equal work." Persons
who work with substantially equal qualifications,
skill, effort and responsibility, under similar
conditions, should be paid similar salaries. This rule
applies to the School, its "international character"
notwithstanding.
SECTION 5 - THE LABOR CODE OF THE
PHILIPPINES
5.01 DECREE TITLE
A DECREE INSTITUTING A LABOR CODE, THEREBY
REVISING AND CONSOLIDATING LABOR AND
SOCIAL LAWS TO AFFORD PROTECTION TO
LABOR, PROMOTE EMPLOYMENT AND HUMAN
RESOURCES DEVELOPMENT AND ENSURE
INDUSTRIAL PEACE BASED ON SOCIAL
JUSTICE.
Art. 1
Name of Decree - This Decree shall be known as the
"Labor Code of the Philippines," 10/02/1999
5.02 EFFECTIVITY
Art. 2
Date of effectivity - This Code shall take effect six
months after its promulgation.
5.03 POLICY DECLARATION
Art. 3
Declaration of Basic Policy – The State shall afford
protection to labor, promote full employment,
ensure equal work, opportunities regardless of sex,
race or creed, and regulate the relations between
workers and employers. The State shall assure the
rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane
conditions of work.
5.04 APPLICABILITY
Art. 6
Applicability - All rights and benefits granted to
workers under this Code shall, except as may
otherwise be provided herein, apply alike to all
workers, whether agricultural or non-agricultural.
Art. 276
Government employees - The terms and conditions
of employment of all government employees,
including employees of government-owned and
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controlled corporations, shall be governed by the
Civil Service Law, rules and regulations. Their
salaries shall be standardized by the National
Assembly as provided for in the new constitution.
all However, there shall be no reduction of existing
wages, benefits and other terms and conditions of
employment being enjoyed by them at the time of
the adoption of this Code.
Art IX, B, Sec 2(1), 1987 Constitution:
The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,
including government-owned or controlled
corporations with original charters.
TEST – GOVERNMENT OWNED AND CONTROLLED
CORPORATIONS
PNOC Energy Development Corp. v. NLRC (91)
Thus, under the present state of the law, the
test in determining whether a government-owned or
controlled corporation is subject to the Civil Service
Law are the manner of its creation, such that
government corporations created by special charter
are subject to its provisions while those incorporated
under the General Corporation Law are not within its
coverage.
Cabrera v. NLRC (91)
Our finding is that the respondent NLRC erred in
dismissing the petitioners' complaint for lack of
jurisdiction because the rule now is that only
government-owned or controlled corporations with
original charters come under the Civil Service. The
NASECO having been organized under the
Corporation Law and not by virtue of a special
legislative charter, its relations with its personnel are
governed by the Labor Code and come under the
jurisdiction of the National Labor Relations
Commission.
APPLICATION OF THE LABOR CODE
 Not of universal application
 Labor Code, PD 442 as amended
Applicability – Art. 6
 All workers – agricultural and non-agricultural
 GOCC – organized under general laws in
corporation – Corporation Code
 Wages (97b) – government, all branches,
subdivision & instrumentalities, GOCC, profit or
non – profit organizations
 ECSIF – all private and government employees
(167 f)
Offspring of GOCC – test: HOW ORGANIZED
 Labor code – NOT APPLICABLE
» Government employees – what’s
applicable? Civil Service 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
▪ if injustice is created due to exemption
from suit, REMEDY: withdraw the grant
of immunity from suit.
International Agencies
Part I : Introductory Materials
Labor Standards
Ebro III v. NLRC (96)
The grant of immunity is by virtue of the
Convention on the Privileges and Immunities of
Specialized Agencies of the U.N. adopted by the
Senate on May 17, 1949. This has become part of
the law of the land under the Constitution on
generally accepted principles of international law.
SCHOOL TEACHERS
National Mines and Allied Workers’ Union v
NLRC (98)
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.
RELIGIOUS CORPORATIONS
Austria v. NLRC (99)
An ecclesiastical affair is “one that concerns
doctrine, creed or form of worship of the church, or
the adoption and enforcement within a religious
association of needful laws and regulations for the
government of the membership, and the power of
excluding from such associations those deemed
unworthy of membership. Based on this definition,
an ecclesiastical affair involves the relationship
between the church and its members and relate to
matters of faith, religious doctrines, worship and
governance of the congregation.
XXX Under the Labor Code, the provision which
governs the dismissal of employees, is
comprehensive enough to include religious
corporations, such as the SDA, in its coverage.
Article 278 of the Labor Code on post-employment
states that “the provisions of this Title shall apply to
all establishments or undertakings, whether for
profit or not.” Obviously, the cited article does not
make any exception in favor of a religious
corporation. This is made more evident by the fact
that the Rules Implementing the Labor Code,
particularly, Section 1, Rule 1, Book VI on the
Termination of Employment and Retirement,
categorically includes religious institutions in the
coverage of the law, to wit:
SECTION 1. Coverage. – This Rule shall apply to
all establishments and undertakings, whether
operated to profit or not, including educational,
medical, charitable and religious institutions and
organizations, in cases of regular employment
with the exception of Government and its political
subdivisions including government-owned or
controlled corporations.
With this clear mandate, the SDA cannot hide
behind the mantle of protection of the doctrine of
separation of church and state to avoid its
responsibilities as an employer under the Labor
Code.
5.05 RULE MAKING POWER
LIMITATION – RULE MAKING POWER
Kapisanan ng mga Manggagawang Pinagyakap
v. NLRC (87)
The labor arbiter in rendering the questioned
decision relied primarily on Section 1 (k) of the
Labor Department's rules and regulations
implementing Presidential Decree No. 1123. This
exemption paragraph (k) was, however, declared
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void by this Court in Philippine Apparel Workers
Union vs. National Labor Relations Commission,
ruling that: ". . ., it must be pointed out that the
Secretary of Labor has exceeded his authority when
he included paragraph (k) in Section 1 of the Rules
Implementing P.D. 1123. "By virtue of such rule-
making authority, the Secretary of Labor issued on
May 1, 1977 a set of rules which exempts not only
distressed employers but also 'those who have
granted in addition to the allowance under P.D. 525,
at least P60.00 monthly wage increase on or after
January 1, 1977, provided that those who paid less
than this amount shall pay the difference.' "Clearly,
the inclusion of paragraph k contravenes the
statutory authority granted to the Secretary of
Labor, and the same is therefore void, as ruled by
this Court in a long line of cases, . . ."
Pagpalain Haulers, Inc. v. Trajano (99)
Neither can Pagpalain contend that Department
Order No. 9 is an invalid exercise of rule-making
power by the Secretary of Labor. For an
administrative order to be valid, it must 1) be issued
on the authority of law and 2) it must not be
contrary to the law and the Constitution.
Department Order No. 9 has been issued on
authority of law. Under the law, the Secretary is
authorized to promulgate rules and regulations to
implement the Labor Code. Specifically, Article 5 of
the Labor Code provides that “[t]he Department of
Labor and other government agencies charged with
the administration and enforcement of this Code or
any of its parts shall promulgate the necessary
implementing rules and regulations.” Consonant
with this article, the Secretary of Labor and
Employment promulgated the Omnibus Rules
Implementing the Labor Code. By virtue of this self-
same authority, the Secretary amended the above-
mentioned omnibus rules by issuing Department
Order No. 9, Series of 1997.
Moreover, Pagpalain has failed to show that
Department Order No. 9 is contrary to the law or the
Constitution. At the risk of being repetitious, the
Labor Code does not require a local or chapter to
submit books of account in order for it to be
registered as a legitimate labor organization. There
is, thus, no inconsistency between the Labor Code
and Department order No. 9. Neither has Pagpalain
shown that said order contravenes any provision of
the Constitution.
5.06 LAW INTERPRETATION
Art. 4, Labor Code
Construction in favor of labor - All doubts in the
implementation and interpretation of the provisions
of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor.
Art. 170, Civil Code
In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety
and decent living for the laborer.
LIBERAL CONSTRUCTION
Salinas v. NLRC (99)
It is basic and irrefragable rule that in carrying
out and interpreting the provisions of the Labor
Code and its implementing regulations, the
workingman’s welfare should be the primordial
Part I : Introductory Materials
Labor Standards
and paramount consideration. The interpretation
herein made gives meaning and substance to the
liberal and compassionate spirit of the law
enunciated in Article 4 of the Labor Code that “all
doubts in the implementation and interpretation of
the provisions of the Labor Code including its
implementing rules and regulations shall be resolved
in favor of labor.”
IN FAVOR OF LABOR – RATIONALE
Abella v. NLRC (87)
In any event, it is well-settled that in the
implementation and interpretation of the provisions
of the Labor Code and its implementing regulations,
the workingman's welfare should be the primordial
and paramount consideration. It is the kind of
interpretation which gives meaning and substance to
the liberal and compassionate spirit of the law as
provided for in Article 4 of the New Labor Code
which states that `all doubts in the implementation
and interpretation of the provisions of this Code
including its implementing rules and regulations shall
be resolved in favor of labor." The policy is to extend
the applicability of the decree to a greater number of
employees who can avail of the benefits under the
law, which is in consonance with the avowed policy
of the State to give maximum aid and protection to
labor.
DOUBT
Clemente v. GSIS (87)
This Court has held in appropriate cases that the
conservative posture of the respondents is not
consistent with the liberal interpretation of the Labor
Code and the social justice guarantee embodied in
the Constitution in favor of the workers. It clashes
with the injunction in the Labor Code (Article 4, New
Labor Code) that, as a rule, doubts should be
resolved in favor of the claimant-employee.
NO DOUBT
Bonifacio v. GSIS (86)
While we do not dispute petitioner's contention
that under the law, in case of doubt in the
implementation and interpretation of the provisions
of the Labor Code, including its implementing rules
and regulations, the doubt shall be resolved in favor
of the laborer, we find that the same has no
application in this case since the pertinent provisions
of the Labor Code leave no room for doubt either in
their interpretation or application.
SWEEPING INTERPRETATION
Bravo v. ECC (86)
We are aware of the mandate that social
legislation should be applied in consonance with the
principles of social justice and protection to labor.
However, we cannot adopt a sweeping interpretation
of the law in favor of labor lest we engage in judicial
legislation.
FACTUAL CONSIDERATIONS AND RATIONALITY
Philippine Airlines Inc v NLRC (91)
That there should be care and solicitude in the
protection and vindication of the rights of
workingmen cannot be gainsaid; but that care and
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solicitude can not justify disregard of relevant facts
or eschewal of rationality in the construction of the
text of applicable rules in order to arrive at a
disposition in favor of an employee who is perceived
as otherwise deserving of sympathy and
commiseration.
EQUITY AND MORAL CONSIDERATION
Manning International Corp. v. NLRC (91)
There is another reason to strike down the
NLRC's "new judgment" of April 15, 1988, and that
is, that in disregard of the relevant provisions of the
law, it is made to rest on "considerations of equity
and social justice." This is impermissible. As this
Court held in the analogous situation of an employee
whom the NLRC found had been dismissed by her
employer for cause (dishonesty) but whom it
nonetheless awarded separation pay on equitable
and compassionate grounds:
"The rule embodied in the Labor Code is that a
person dismissed for cause as defined therein is not
entitled to separation pay. The cases above cited
constitute the exception, based upon considerations
of equity. Equity has been defined as justice outside
law, being ethical rather than jural and belonging to
the sphere of morals than of law. It is grounded on
the precepts of conscience and not on any sanction
of positive law. Hence, it cannot prevail against the
expressed provision of the labor laws allowing
dismissal of employees for cause and without any
provision for separation pay."
FAIRNESS
Reliance Surety and Insurance Co. Inc v NLRC
(91)
As a general rule, the sympathy of the Court is
on the side of the laboring classes, not only because
the Constitution imposes sympathy but 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.
BALANCING CONFLICTING CLAIMS
Phil. Airlines, Inc. v. NLRC (1992)
That there should be care and solicitude in the
protection and vindication of the rights of
workingmen cannot be gainsaid; but that care and
solicitude can not justify disregard of relevant facts
or eschewal of rationality in the construction of the
text of applicable rules in order to arrive at a
disposition in favor of an employee who is perceived
as otherwise deserving of sympathy and
commiseration.
SECTION 6 - WORK RELATIONSHIP
6.01 WORK RELATIONSHIP
DEFINITIONS
Art. 97 Definition
(a) "Person" means an individual, partnership,
association, corporation, business trust, legal
Part I : Introductory Materials
Labor Standards
representative or any organized group of
person.
(b) "Employer" includes any person acting directly
or indirectly in the interest of an employer in
relation to an employee and shall include the
Government and all its branches, subdivisions
and instrumentalities, all government-owned or
controlled corporations and institutions, as well
as non-profit private institutions 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 hundred eighty-six, as amended,
including members of the Armed Forces of the
Philippines, and any person employed as casual,
emergency, temporary, substitute or
contractual; or any person compulsorily covered
by the SSS under Republic Act numbered 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 any labor
organization or any of its officers or agents
except when acting as employer.
(f) "Employee" includes any person in the employ
of an employer. The term shall not be limited to
the employees of a particular employer, unless
this Code so explicitly states. It shall include any
individual whose work has ceased as a result of
or in connection with any current labor dispute
or because of any unfair labor practice if he has
not obtained any other substantially equivalent
and regular employment.
EMPLOYEE
United Pepsi-Cola Supervisory Union (UPSU) v.
Laguesma (98)
As can be seen from this description, a
distinction exists between those who have the
authority to devise, implement and control strategic
and operational policies (top and middle managers)
and those whose task is simply to ensure that such
policies are carried out by the rank-and-file
employees of an organization (first-level
managers/supervisors). What distinguishes them
from the rank-and-file employees is that they act in
the interest of the employer in supervising such
rank-and-file employees.
"Managerial employees" may therefore be said
to fall into two distinct categories: the "managers"
per se, who compose the former group described
above, and the "supervisors" who form the latter
group. Whether they belong to the first or the
second category, managers, vis-a-vis employers,
are, likewise, employees.
EMPLOYER-EMPLOYEE RELATIONSHIP
FACTORS
Chavez vs. NLRC (2005); Caurdanetaan Piece
Workers Union v. Laguesma (98)
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To determine the existence of an employer-
employee relation, this Court has consistently
applied the “four-fold” test which has the following
elements: (1) the power to hire, (2) the payment of
wages, (3) the power to dismiss, and (4) the power
to control – the last being the most important
element.
Lim v. NLRC (99)
The existence of an employer-employee
relationship is principally determined by the
following indicia: (1) selection and engagement of
the employee; (2) payment of wages; (3) power of
dismissal; and (4) employer’s power to control the
employee with respect to the result to be done and
to the means and methods by which the work is to
be accomplished.
CONTROL TEST
Religious of the Virgin Mary v. NLRC (99)
The argument has no merit. AS this Court has
consistently ruled, the power of control is the most
decisive factor in determining the existence of an
employer – employee relationship. In Encyclopedia
Britannica (Phils.), Inc. v. NLRC, we held:
In determining the existence of an employer-
employee relationship the following elements
must be present: (1) selection and engagement
of the employee; (2) payment of wages; (3)
power of dismissal; and (4) the power to control
the employees’ conduct. Of the above, control of
employee’s conduct is commonly regarded as the
most crucial and determinative indicator of the
presence or absence of an employer-employee
relationship. Under the control test, an
employer-employee relationship exists where the
person for whom the services are performed
reserves the right to control not only the end to
be achieved, but also the manner and means to
be used in reaching that end.
In this case, CDSPB reserved the right to control
and supervise the operations of the Girls’
Department. Although CDSPB “actually exercised
minimal supervision over petitioner, [it]could
exercise substantial supervision and control as it did
when [it] preterminated the Agreement.” There
was, therefore, no basis in finding that petitioner
had a “greater degree of autonomy ad independence
in running the affairs” of the school. The presence
of the school director, whose vast powers have
already been noted, negates any suggestions or
semblance of autonomy.
Nor is there any merit in the claim that “actual
and effective control” was exercised by petitioner
since the designation of the parish priest as director
was “a mere formality, as he did perform functions
which are purely ministerial and figurative in
nature.” Time and again we have held that “the
‘control test’ only requires the existence of the right
to control the manner of doing the work not
necessarily the actual exercise of the power by him,
which he can delegate.” Indeed, although the
letters of appointment were signed by the
principal/representative of petitioner, they bore the
name/letterhead of CDSPB and clearly indicated
therein that the employees were hired as
teachers/personnel by CDSPB, and not by RVM.
Moreover, CDSPB itself admits that its name – not
petitioner’s – appears in the employees’ payroll
ledger cards.
PROOF
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Labor Standards
Domasig v NLRC (96)
It has long been established that in
administrative and quasi-judicial proceedings,
substantial evidence is sufficient as a basis for
judgment on the existence of employer-employee
relationship. No particular form of evidence is
required to prove the existence of such.
ECONOMIC TEST
Sevilla v. CA(88)
We have considered, in addition to the standard
of right-of-control, the existing economic conditions
prevailing between the parties, like the inclusion of
the employee in the payrolls, in determining the
existence of an employer-employee relationship.
AGREEMENT
Tabas v. California Manufacturing Co. (90)
The existence of an employer-employees
relation is a question of law and being such, it
cannot be made the subject of agreement.
Insular Life Assurance Co. Ltd. v. NLRC (98)
It is axiomatic that the existence of an
employer-employee relationship cannot be negated
by expressly repudiating it in the management
contract and providing therein that the "employee" is
an independent contractor when the terms of the
agreement clearly show otherwise. For, the
employment status of a person is defined and
prescribed by law and not by what the parties say it
should be. In determining the status of the
management contract, the "four-fold test" on
employment earlier mentioned has to be applied.
EFFECT OF RELATIONSHIP
Philippine Fuji Xerox Corp. v NLRC (96)
It is wrong to say that if a task is not directly
related to the employer's business, or it falls under
what may be considered "housekeeping activities,"
the one performing the task is a job contractor. The
determination of the existence of an employer-
employee relationship is defined by law according to
the facts of each case, regardless of the nature of
the activities involved.
NATURE/CHARACTER
Dunlop Slazenger (Phils.), Inc. v. Secretary,
DOLE (98)
Determining the status of supervisory and rank-
and-file employees is not a hard row to hoe in labor
law. The test of supervisory status as we have
repeatedly ruled is whether an employee possesses
authority to act in the interest of his employer,
which authority should not be merely routinary or
clerical in nature but requires the use of independent
judgment. Corollarily, what determines the nature
of employment is not the employee’s title, but his
job description.
PIERCING THE CORPORATE VEIL
Pamplona Plantation Co., Inc v. Tinghil (2005)
The legal fiction of separate corporate entities
cannot be invoked to further an end subversive of
justice.
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The principle requiring the piercing of the
corporate veil mandates the courts to see through
the protective shroud that distinguishes one
corporation from seemingly separate one. xxx
In the present case, the corporations have basically
the same incorporators and directors and are headed
by the same official. Both use only on office and one
payroll and are under one management. In their
individual affidavits, respondents allege that they
worked under the supervision and control of
petitioner Bondoc—the common managing director
of both the petitioner-company and the leisure
corporation. Some of the laborers of the plantation
also work in the golf course. Thus, the attempt to
make the two corporations appear as two separate
entities, insofar as the workers are concerned,
should be viewed as a devious but obvious mens o
defeat the ends of the law. Such a ploy should not
be permitted to cloud the truth and perpetrate
injustice.
6.02 INDEPENDENT CONTRACTOR AND LABOR
CONTRACTOR ONLY
REFERENCE
Art. 106, Labor Code
Contractor or sub-contractor - Whenever an
employer enters into a contract with another person
for the performance of the former's work, the
employees of the contractor and of the latter's sub-
contractor, if any, shall be paid in accordance with
the provisions of this Code.
In the event that the contractor or sub-contractor
fails to pay the wages of his employees in
accordance with this Code, the employer shall be
jointly and severally liable with his contractor or sub-
contractor to such employees to the extent of the
work performed under the contract, in the same
manner and extent that he is liable to employees
directly employed by him.
The Secretary of Labor and Employment may, by
appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of
workers established under this Code. In so
prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting as well
as differentiations within these types of contracting,
and determine who among the parties involved shall
be considered the employer for purposes of this
Code, to prevent any violation or circumvention of
any provision of this Code.
There is "labor-only" contracting where the person
supplying workers to an employer does not have
substantial capital or investment in the form of tools,
equipment, machineries, work premises, among
others, and the workers recruited and placed by
such person are performing activities which are
directly related to the principal business of such
employer. In such cases, the person or intermediary
shall be considered merely as an agent of the
employer who shall be responsible to the workers in
the same manner and extent as if the latter were
directly employed by him.
Art. 107, Labor Code
Indirect employer - The provisions of the
immediately preceding Article shall likewise apply
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Labor Standards
to any person, partnership, association or
corporation which, not being an employer, contracts
with an independent contractor for the performance
of any work, task, job or project.
Art. 109, Labor Code
Solidary liability - The provisions of existing laws to
the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his
contractor or subcontractor for any violation of any
provision of this Code. For purposes of determining
the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
INDEPENDENT CONTRACTOR
National Power Corp. v. Court of Appeals (98)
Job (independent) contracting is present if the
following conditions are met: (a) the contractor
carries on an independent business and undertakes
the contract work on his own account under his own
responsibility according to his own manner and
method, free from the control and direction of his
employer or principal in all matters connected with
the performance of the work except to the result
thereof; and (b) the contractor has substantial
capital or investments in the form of tools,
equipment, machineries, work premises and other
materials which are necessary in the conduct of his
business. Absent these requisites, what exists is a
“labor only” contract under which the person acting
as contractor is considered merely as an agent or
intermediary of the principal who is responsible to
the workers in the same manner and to the same
extent as if they had been directly employed by him.
MANAGEMENT FUNCTION
Manila Electric Co. v. Quisumbing (99)
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
company can determine in its best business
judgment whether it should contract out the
performance of some of its work for as long as the
employer is motivated by good faith, and the
contracting out must not have been resorted to
circumvent the law or must not have been the result
of malicious or arbitrary action. The Labor Code and
its implementing rules also contain specific rules
governing contracting out (Department or Labor
Order No. 10, May 30, 1997, Sections 1-25).
REQUIREMENTS – INDEPENDENT CONTRACTOR
Lim v. NLRC (99)
Under DOLE Department Order No. 10 (1997),
contracting shall be legitimate if the following
circumstances concur:
i) The contractor or subcontractor carries on a
distinct and independent business and
undertakes to perform the job, work or
service on its own account and under its
own responsibility, according to its own
manner and method, and free from the
control and direction of the principal in all
matters connected with the performance of
the work except as to the results thereof;
ii) The contractor or subcontractor has
substantial capital or investment; and
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iii) The agreement between the principal and
contractor or subcontractor assures the
contractual employees entitlement to all
labor and occupational safety and health
standards, free exercise of the right to self-
organization, security of tenure, and social
and welfare benefits.
Escario v. NLRC (2000)
In contrast, there is permissible job contracting
when a principal agrees to put out or farm out with a
contractor or a subcontractor the performance or
completion of a specific job, work or service within a
definite or predetermined period, regardless of
whether such job or work or service is to be
performed or completed within or outside the
premises of the principal. In this arrangement, the
following conditions must concur:
(a)....The contractor carries on a distinct and
independent business and undertakes the
contract work on his account under his own
responsibility according to his own manner and
method, free from the control and direction of his
employer or principal in all matters connected
with the performance of his work except as to
the results thereof; and
(b)....The contractor has substantial capital or
investment in the form of tools, equipment,
machineries (sic), work premises, and other
materials which are necessary in the conduct of
his business. [RULES TO IMPLEMENT THE LABOR
CODE, Book III, Rule VIII, Sec. 8.]
In the recent case of Alexander Vinoya vs. NLRC
et al., this Court ruled that in order to be considered
an independent contractor it is not enough to show
substantial capitalization or investment in the form
of tools, equipment, machinery and work premises.
In addition, the following factors need be
considered: (a) whether the contractor is carrying on
an independent business; (b) the nature and extent
of the work; (c) the skill required; (d) the term and
duration of the relationship; (e) the right to assign
the performance of specified pieces of work; (f) the
control and supervision of the workers; (g) the
power of the employer with respect to the hiring,
firing and payment of workers of the contractor; (h)
the control of the premises; (i) the duty to supply
premises, tools, appliances, materials, and labor;
and (j) the mode, manner and terms of payment.
Desirable – Unnecessary
Coca-Cola Bottlers Phil., Inc. v. NLRC (99)
We perceive at the outset the disposition of the
NLRC that janitorial services are necessary and
desirable to the trade or business of petitioner Coca-
Cola. But this is inconsistent with our
pronouncement in Kimberly Independent Labor
Union v. Drilon where the Court took judicial notice
of the practice adopted in several government and
private institutions and industries of hiring janitorial
services on an “independent contractor basis.” In
this respect, although janitorial services may be
considered directly related to the principal business
of an employer, as with every business, we deemed
them unnecessary in the conduct of the employer’s
principal business.
Judicial Notice
Coca-Cola Bottlers Phil., Inc. v. NLRC (99)
We perceive at the outset the disposition of
the NLRC that janitorial services are necessary
Part I : Introductory Materials
Labor Standards
and desirable to the trade or business of petitioner (b) The employees recruited, supplied or placed
Coca-Cola. But this is inconsistent with our by such contractor or subcontractor are
performing activities which are directly related to
pronouncement in Kimberly Independent Labor
the main business of the principal.
Union v. Drilon where the Court took judicial notice
of the practice adopted in several government and
Requisites
private institutions and industries of hiring janitorial
services on an “independent contractor basis.” In
Ponce v. NLRC (98)
this respect, although janitorial services may be
Sec. 9(a), Rule VIII, Book III, of the Omnibus
considered directly related to the principal business
Rules Implementing Article 106 of the Labor Code,
of an employer, as with every business, we deemed
provides, in turn, that a person who supplies
them unnecessary in the conduct of the employer’s
workers to another shall be deemed to be merely
principal business.
engaged in "labor-only contracting," a disallowed
This judicial notice, of course, rests on the
act, (a) when he does not have substantial capital or
assumption that the independent contractor is a
investment in the form of tools, equipment,
legitimate job contractor so that there can be no
machineries, work premises and other materials,
doubt as to the existence of an employer-employee
and (b) when the workers recruited and placed by
relationship between the contractor and the worker.
him perform activities that relate directly to the
In this situation, the only pertinent question that
principal business or operations of the employer in
may arise will no longer deal with whether there
which the workers are habitually employed. Such
exists an employment bond but whether the
supplier of labor is considered merely as an agent or
employee may be considered regular or casual as to
intermediary of the employer who can
deserve the application of Art. 280 of the Labor
correspondingly be held responsible to the workers
Code.
in the same manner and extent as if the latter are
directly employed by him.
Employer – Employee
Effect of Finding
Phil. Airlines, Inc. v. NLRC (98)
From the foregoing disquisition, it is evident
Phil. Airlines, Inc. v. NLRC (98)
that petitioner was engaged in permissible job
Based on these findings, we sustain the
contracting and that the individual private
conclusion of public respondent that G.C. Services
respondents, for the entire duration of their employ,
Enterprises is merely a "labor-only" contractor who
were employees not of petitioner but of STELLAR. In
acted as mere supplier of manpower for petitioner at
legitimate job contracting, no employer-employee
its maintenance department. As we held in Industrial
relation exists between the principal and the job
Timber Corporation, et. al. vs. NLRC et. al.:
contractor's employees. The principal is responsible Hence a finding that a contractor is a "labor-
to the job contractor's employees only for the proper only" contractor is equivalent to a finding that
payment of wages. But in labor-only contracting, an there exists as employer-employee relationship
employer-employee relation is created by law between the owner of the project and the
between the principal and the labor-only contractor's employees of the "labor-only" contractor since
employees, such that the former is responsible to that relationship is defined and prescribed by law
itself.
such employees, as if he or she had directly
employed them. Besides, the Court has already Accordingly, private respondents, are
taken judicial notice of the general practice adopted considered employees of the petitioner. Further,
in several government and private institutions of private respondents, having performed activities
securing janitorial services on an independent which are directly related to petitioner's business,
contractor basis. are deemed regular employees of petitioner
pursuant to Article 280 of the Labor Code. And as
LABOR ONLY CONTRACTOR regular employees, they must be accorded security
of tenure in their employment. Verily, their services
Prohibition can be terminated only based on "just" and
"authorized" causes under Articles 282, 283 and 284
Maraguinot v. NLRC (98) of the Labor Code.
As labor-only contracting is prohibited, the law
considers the person or entity engaged in the same Liability of indirect Employer
a mere agent or intermediary of the direct employer.
But even by the preceding standards, the associate Lanzadares v. Amethyst Security (2003)
producers of VIVA cannot be considered labor-only The only time the indirect employer may be
contractors as they did not supply, recruit nor hire made solidarily liable with the contractor is when the
the workers. contractor fails to pay his employees their wages
and other benefits claimed.
Vinoya v. NLRC (2000)
Labor-only contracting, a prohibited act, is an
arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to
perform a job, work or service for a principal. In
labor-only contracting, the following elements are
present:
(a) The contractor or subcontractor does not
have substantial capital or investment to actually
perform the job, work or service under its own
account and responsibility;

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Labor Standards
INDEPENDENT CONTRACTING:
Under DOLE Department Order No. 10
(1997), contracting shall be legitimate if the
following circumstances concur:
1. The contractor or subcontractor carries on
a distinct and independent business and
undertakes to perform the job, work or
service on its own account and under its
own responsibility, according to its own
manner and method, and free from the
control and direction of the principal in all
matters connected with the performance of
the work except as to the results thereof;
2. The contractor or subcontractor has
substantial capital or investment; and
3. The agreement between the principal and
contractor or subcontractor assures the
contractual employees entitlement to all
labor and occupational safety and health
standards, free exercise of the right to self-
organization, security of tenure, and social
and welfare benefits.
LABOR – ONLY CONTRACTING:
1. the person supplying workers to an
employer does not have substantial
capital or investment
2. in the form of tools, equipment,
machineries, work premises, among
others,
3. the workers recruited and placed by such
person are performing activities which
are directly related to the principal
business of such employer.
SECTION 7 - EMPLOYEE CLASSIFICATION
7.01 COVERAGE
The provisions of this Title shall apply to all
establishments or undertakings whether for profit or
not. (278 LC)
7.02 EMPLOYEE CLASSIFICATION
 Regular
» EE has been engaged to perform activities
which are usually necessary and desirable
in the usual business or trade of the ER
(Art. 280)
» A casual employee who has rendered at
least 1 year of service, whether continuous
or broken, with respect to the activity in
which he is employed and his employment
shall continue while such activity exists
(Art. 280)
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» A probationary employee who is allowed to
work after the probationary period (Art.
281)
» All learners who has been allowed or
suffered to work during the first 2 months
shall be deemed regular employees if
training is terminated by the ER before the
end of the stipulated period through no
fault of the learner. [Art. 75 (d)]
 Casual
» If not covered by the preceding paragraph
(280 LC)
 Project
» Employment has been fixed for a specific
project or undertaking the completion or
termination of which has been determined
at the time of engagement of the EE (280
LC)
 Seasonal
» The work or services to be performed is
seasonal in nature and the employment is
for the duration of the season. (280 LC)
 Probationary
» Employment shall not exceed 6 months
from the date the EE started working unless
covered by apprenticeship agreement
stipulating a longer period (281 LC)
RECOGNITION AND TYPES
Philippine Federation of Credit Cooperatives,
Inc v. NLRC (98)
This provision of law comprehends three kinds
of employees: (a) regular employees or those whose
work is necessary or desirable to the usual business
of the employer; (b) project employees or those
whose employment has been fixed for a specific
project or undertaking the completion or termination
of which has been determined at the time of the
engagement of the employee or where the work or
services to be performed is seasonal in nature and
the employment is for the duration of the season;
and (c) casual employees or those who are neither
regular nor project employees. With regard to
contractual employees, the Court in the leading case
of Brent School, Inc. v. Zamora, laid down the
guidelines before a contract of employment may be
held as valid, to wit: "stipulations in employment
contracts providing for term employment or fixed
period employment are valid when the period were
agreed upon knowingly and voluntarily by the
parties without force, duress or improper pressure
being brought to bear upon the employee and
absent any other circumstances vitiating his consent,
or where it satisfactorily appears that the employer
and employee dealt with each other on more or less
equal terms with no moral dominance whatever
being exercised by the former over the latter."
EMPLOYER DETERMINATION
De Leon v. NLRC (89)
It is of no moment that petitioner was told when
he was hired that his employment would only be
casual, that he was paid through cash vouchers, and
that he did not comply with regular employment
procedure. Precisely, the law overrides such
conditions which are prejudicial to the interest of the
worker whose weak bargaining position needs
the support of the State. What determines
whether a certain employment is regular or
Part I : Introductory Materials
Labor Standards
casual is not the will and word of the employer, to
which the desperate worker often accedes, much
less the procedure of hiring the employee or the
manner of paying his salary. It is the nature of the
activities performed in relation to the particular
business or trade considering all circumstances, and
in some cases the length of time of its performance
and its continued existence.
Violeta v. NLRC (97); Romares v. NLRC (98)
Art. 280 was emplaced in our statute books to
prevent the circumvention of the employees’ right to
be secure in his tenure by indiscriminately and
completely ruling out all written and oral agreements
inconsistent with the concept of regular employment
defined therein. Where an employee has been
engaged to perform activities which are usually
necessary or desirable in the usual business of the
employer, such employee is deemed a regular
employee and is entitled to security of tenure
notwithstanding the contrary provisions of his
contract of employment.
Phil Federation of Credit Cooperatives, Inc. v.
NLRC (98)
Regardless of the designation that an employer
may have conferred upon a worker’s employment
status, it is, however, uncontroverted that the latter,
having completed the probationary period and
allowed to work thereafter, became regular
employee who may be dismissed only for just or
authorized causes of the Labor Code. Therefore, the
dismissal, premised on the alleged expiration of the
contract, is illegal an entitles the worker to the
reliefs prayed for.
AGREEMENT
Tabas v. California Manufacturing Co., Inc. v.
NLRC (89)
The existence of an employer-employees
relation is a question of law and being such, it
cannot be made the subject of agreement. Hence,
the fact that the manpower supply agreement
between Livi and California had specifically
designated the former as the petitioners' employer
and had absolved the latter from any liability as an
employer, will not erase either party's obligations as
an employer, if an employer-employee relation
otherwise exists between the workers and either
firm. At any rate, since the agreement was between
Livi and California, they alone are bound by it, and
the petitioners cannot be made to suffer from its
adverse consequences.
San Miguel Corporation v. NLRC (98)
Article 280 reinforces the Constitutional
mandate to protect the interest of labor as it sets
the legal framework for ascertaining one’s nature of
employment, and distinguishing different kinds of
employees. Its language manifests the intent to
safeguard the tenurial interest of worker who may
be denied the enjoyment of rights and benefits due
to an employee, regardless of the nature of his
employment, by virtue of lopsided agreements with
the economically powerful employer who can
maneuver to keep an employee on a casual or
contractual status for as long as it is convenient to
the employer.
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XXX Thus, the nature of one’s employment does
not depend on the will or word of the employer. Nor
on the procedure of hiring and the manner of
designating the employee, but on the nature of the
activities to be performed by the employee,
considering the employer’s nature of business and
the duration and scope of the work to be done.
7.03 REGULAR EMPLOYEES
TYPE
Romares v. NLRC (98)
In determining the status of petitioner as a
regular employee, reference is made to Article 280
of the Labor Code, as amended. Thus, the two kinds
of regular employees are (1) those who are engaged
to perform activities which are necessary or
desirable in the usual business or trade of the
employer; and (2) those casual employees who have
rendered at least one year of service, whether
continuous or broken, with respect to the activity in
which they are employed.
NATURE OF WORK
Phil. Fruit and Vegetable Industries, Inc. v.
NLRC (99)
An employment shall be deemed regular where
the employee: a) has been engaged to perform
activities which are usually necessary or desirable in
the usual business or trade of the employer; or b)
has rendered at least one year of service, whether
such service is continuous or broken, with respect to
the activity in which he is employed.
XXX It should be noted that complainants'
employment has not been fixed for a specific project
or undertaking the completion or termination of
which has been determined at the time of their
appointment or hiring. Neither is their employment
seasonal in nature. While it may be true that some
phases of petitioner company's processing
operations is dependent on the supply of fruits for a
particular season, the other equally important
aspects of its business, such as manufacturing and
marketing are not seasonal. The fact is that large-
scale food processing companies such as petitioner
company continue to operate and do business
throughout the year even if the availability of fruits
and vegetables is seasonal.
De Leon v. NLRC (89); E. Ganzon, Inc. v. NLRC
(99); Hacienda Fatima v. National Federation
of Sugarcane Workers (2003)
The primary standard, therefore, of determining
a regular employment is the reasonable connection
between the particular activity performed by the
employee in relation to the usual business or trade
of the employer. The test is whether the former is
usually necessary or desirable in the usual business
or trade of the employer. The connection can be
determined by considering the nature of the work
performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if
the employee has been performing the job for at
least one year, even if the performance is not
continuous or merely intermittent, the law deems
the repeated and continuing need for its
performance as sufficient evidence of the
necessity if not indispensability of that activity to
the business. Hence the employment is also
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Labor Standards
considered regular, but only with respect to such
activity and while such activity exists.
Magante v. NLRC (90)
The determining factor of the status of
complainant-petitioner or any worker is the nature of
the work performed by the latter and the place
where he performed his assignment.
Tacloban Sagkahan Rice etc. v. NLRC (90)
Furthermore, the services performed or to be
performed by private respondents are not seasonal
in nature. While it may be true that the harvest of
palay is seasonal, the milling operations which is the
main business of petitioners are not seasonal. The
fact is that big rice mills such as the one owned by
petitioners continue to operate and do business
throughout the year even if there are only two or
three harvest seasons within the year. It is a
common practice among farmers and rice dealers to
store their palay and to have the same milled as the
need arises. Thus, the milling operations have no
let-up.
Private respondents have justifiably argued
thus:
"The contention of petitioner in saying that
respondents/appellees belong to petitioner's pool
of casual workers who work only when there is
work to be done at the mills particularly during
the milling season is indeed untenable for
petitioner had been engaged in the rice and corn
mill business way back in 1949 whose
capitalization involves millions of pesos. The
work done by the palay mill for the capitalization
of petitioner is so much that it keeps its
employees working the whole year round by
buying the palay during harvest season for
milling. Rice and corn milling business is not
seasonal in nature, contemplated in the Labor
Code. It is the planting and harvesting of rice
that is seasonal. . . ."
Kimberly etc. v. Drilon (90)
While the actual regularization of these
employees entails the mechanical act of issuing
regular appointment papers and compliance with
such other operating procedures as may be adopted
by the employer, it is more in keeping with the
intent and spirit of the law to rule that the status of
regular employment attaches to the casual worker
on the day immediately after the end of his first year
of service. To rule otherwise, and to instead make
their regularization dependent on the happening of
some contingency or the fulfillment of certain
requirements, is to impose a burden on the
employee which is not sanctioned by law.
That the first stated position is the situation
contemplated and sanctioned by law is further
enhanced by the absence of a statutory limitation
before regular status can be acquired by a casual
employee. The law is explicit. As long as the
employee has rendered at least one year of service,
he becomes a regular employee with respect to the
activity in which he is employed. The law does not
provide the qualification that the employee must
first be issued a regular appointment or must first be
formally declared as such before he can acquire a
regular status. Obviously, where the law does not
distinguish, no distinction should be drawn.
Ecal v. NLRC (91)
Since petitioners perform tasks which are
usually necessary or desirable in the main business
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of Hi-Line, they should be deemed regular
employees of the latter 13 and as such are entitled
to all the benefits and rights appurtenant to regular
employment.
Mercado v. NLRC (91)
The first paragraph answers the question of who
are regular employees. It states that, regardless of
any written or oral agreement to the contrary, an
employee is deemed regular where he is engaged in
necessary or desirable activities in the usual
business or trade of the employer, except for project
employees.
Datu and Co., Inc. v. NLRC (96)
In De Leon vs. NLRC this Court ruled that when
the activities performed by the employee are usually
necessary or desirable in the usual business or trade
of the employer, the employment is deemed regular
notwithstanding contrary agreement. The
determination of whether employment is casual or
regular does not depend on the will or word of the
employer, and the procedure of hiring and manner
of paying, but on the nature of the activities
performed by an employee, and to some extent, the
length of performance, and its continued existence.
International Pharmaceutical, Inc. v. NLRC
(98)
In Brent School, Inc. v. Zamora, although the
work done under a contract is necessary and usually
desirable in relation to the usual business of the
employer, a contract for a fixed period may be made
so long as it is entered into freely, voluntarily, and
knowingly by the parties.
TEST: Whether work was “necessary & desirable
to the main business of ER”
In the contract, there was no mention of any
project or consultancy. The work she performed was
manifestly necessary and desirable to the usual
business of petitioner, considering that she is
engaged in the manufacture and production of
medicinal preparations.
STANDARD: reasonable connection between the
particular activity performed by the ER in relation to
the usual business or trade of the ER.
- connection can be determined by considering the
nature of the work performed and its relation to the
scheme of the particular business or trade in its
entirety
Labor Congress of the Phil. v. NLRC (98)
That petitioner employees are "pakyao" or piece
workers does not imply that they are not regular
employees entitled to reinstatement. Private
respondent Empire Food Products, Inc. is a food and
fruit processing company. In Tabas v. California
Manufacturing Co., Inc., this Honorable Court held
that the work of merchandisers of processed food,
who coordinate with grocery stores and other outlets
for the sale of the processed food is necessary in the
day-to-day operation[s] of the company. With more
reason, the work of processed food repackers is
necessary in the day-to-day operation[s] of
respondent Empire Food Products.
Highway Copra Trades v. NLRC (98)
Article 280 of the Labor Code describes a
regular employee as one who is either (1)
engaged to perform activities which are
necessary or desirable in the usual business or
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Labor Standards
trade of the employer; and (2) those casual
employees who have rendered at least one year of
service, whether continuous or broken, with respect
to the activity in which he is employed.
The Labor Code draws a fine line between
regular and casual employees to protect the
interests of labor. We ruled in Baguio Country Club
Corporation vs. NLRC that "its language evidently
manifests the intent to safeguard the tenurial
interest of the worker who may be denied the rights
and benefits due a regular employee by virtue of
lopsided agreements with the economically powerful
employer who can maneuver to keep an employee
on a casual status for as long as convenient." Thus,
notwithstanding any agreements to the contrary, an
employment is deemed regular when the activities
performed by the employee are usually necessary or
desirable in the usual business or trade of the
employer. The primary standard, therefore, of
determining a regular employment is the reasonable
connection between the particular activity performed
by the employee in relation to the usual business or
trade of the employer, i.e. if the work is usually
necessary or desirable in the usual business or trade
of the employer. The connection can be determined
by considering the nature of the work performed and
its relation to the scheme of the particular business
or trade in its entirety.
San Miguel Corp. v. NLRC (98)
A regular employee is distinguished from a
project employee by the fact that the latter is
employed to carry out a specific project or
undertaking, the duration or scope of which was
specified at the time the employees were engaged. A
"project" has reference to a particular job or
undertaking that may or may not be within the
regular or usual business of the employer. In either
case, the project must be distinct, separate and
identifiable from the main business of the employer,
and its duration must be determined or
determinable.
Millares v. NLRC (2000)
The primary standard to determine a regular
employment is the reasonable connection between
the particular activity performed by the employee in
relation to the usual business or trade of the
employer. The test is whether the former is usually
necessary or desirable in the usual business or trade
of the employer.
The connection can be determined by
considering the nature of the work performed and its
relation to the scheme of the particular business or
trade in its entirety. Also, if the employee has been
performing the job for at least one year, even if the
performance is not continuous or merely
intermittent, the law deems the repeated and
continuing need for its performance as sufficient
evidence of the necessity if not indispensability of
that activity to the business. Hence, the employment
is also considered regular, but only with respect to
such activity and while such activity exists.
HIRING PERIOD EXTENDED
Audio Electric Co., Inc. v. NLRC (99)
We have held that where the employment of
project employees is extended long after the
supposed project has been finished, the employees
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are removed from the scope of project employees
and considered regular employees.
Lao Construction v. NLRC (98)
The principal test in determining whether
particular employees are “project employees”
distinguished from “regular employees” is whether
the “project employees” are assigned to carry out
“specific project or undertaking,” the duration (and
scope) of which are specified at the time the
employees are engaged for the project. “Project” in
the realm of business and industry refers to a
particular job or undertaking that is within the
regular or usual business of employer, but which is
distinct and separate and identifiable as such from
the undertakings of the company. Such job or
undertaking begins and ends at determined or
determinable times.
While it may be allowed that in the instant case
the workers were initially hired for specific projects
or undertakings of the company and hence can be
classified as project employees, the repeated re-
hiring and the continuing need for their services over
a long span of time have undeniable made them
regular employees. Thus, we held that where the
employment of project employees is extended long
after the supposed project has been finished, the
employees are removed from the scope of project
employees and are considered regular employees.
While length of time may not be a controlling
test for project employment, it can be a strong
factor in determining whether the employee was
hired for a specific undertaking or in fact tasked to
perform functions which are vital, necessary and
indispensable to the usual business or trade of
employer.
Bernardo v. NLRC (99)
As held by the Court, "Articles 280 and 281 of
the Labor Code put an end to the pernicious practice
of making permanent casuals of our lowly employees
by the simple expedient of extending to them
probationary appointments, ad infinitum." The
contract signed by petitioners is akin to a
probationary employment, during which the bank
determined the employees' fitness for the job. When
the bank renewed the contract after the lapse of the
six-month probationary period, the employees
thereby became regular employees. No employer is
allowed to determine indefinitely the fitness of its
employees.
CONTRACT TO CONTRACT (REPEATED RENEWAL OF
CONTRACT)
Beta Electric Corp. v. NLRC (90)
The petitioner cannot rightfully say that since
the private respondent's employment hinged from
contract to contract, it was ergo, "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 undertaking the completion of or termination
of which has been determined at the time of the
engagement of the employee or where the work or
services to be performed is seasonal in nature and
the employment is for the duration of the season."
Quite to the contrary, the private respondent's work,
that of "typist-clerk" is far from being "specific"
or "seasonal", but rather, one, according to the
Code, "where the employee has been engaged to
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Labor Standards
perform activities which are usually necessary or
desirable in the usual business." And under the
Code, where one performs such activities, he is a
regular employee, "[t]he provisions of written
agreement to the contrary notwithstanding . . .
It is true that in Biboso v. Victorias Milling
Company, Inc., we recognized the validity of
contractual stipulations as to the duration of
employment, we can not apply it here because
clearly, the contract-to-contract arrangement given
to the private respondent was but an artifice to
prevent her from acquiring security of tenure and to
frustrate constitutional decrees.
LENGTH OF TIME
Maraguinot v. NLRC (98)
However, the length of time during which the
employee was continuously re-hired is not
controlling, but merely serves as a badge of regular
employment.
7.04 PROJECT EMPLOYEES
PROJECT EMPLOYEES – whose employment has been
fixed for a specific project or undertaking the
completion or termination of which has been
determined at the time of engagement of the
employee [Art. 280 (1)]
DEFINED
Magcalas v. NLRC (97)
Regular employees cannot at the same time be
project employees. Art. 280 of the Labor Code
states that regular employees are those whose work
is necessary or desirable to the usual business of the
employer. The two exceptions following the general
description of regular employees refer to either
project or seasonal employees. It has been ruled in
the case of ALU-TUCP v. NLRC that: “In the realm of
business and industry, we note that “project” could
refer to one or the other of at least two
distinguishable types of activities. First, a project
could refer to particular job or undertaking that is
within the regular or usual business of the employer
company, but which is distinct and separate, and
identifiable as such, from the other undertakings of
the company. Such job or undertaking begins and
ends at determined or determinable times. The
typical example of this type of project is a particular
construction jib or project of a construction
company. A construction company ordinarily carries
out 2 or more discrete (should distinct) identifiable
construction projects: e.g. a 25-story hotel in
Makati; a residential condominium building I Baguio
City; and a domestic air terminal in Iloilo City.
Employees who are ired for the carrying out of 12 of
these separate projects, the scope and duration of
which has been determined and made known to the
employees at the time of employment, are properly
treated as “project employees” and their service
may be lawfully terminated at completion of the
project.”
The term "project" could also refer to, secondly,
a particular job or undertaking that is not within the
regular business of the corporation. Such a job or
undertaking must also be identifiably separate and
distinct from the ordinary or regular business
operations of the employer. The job or undertaking
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also begins and ends at determined or determinable
times.
Lao Construction v. NLRC (97)
The principal test in determining whether
particular employees are “project employees”
distinguished from regular employees is whether the
”project employees” are assigned to carry out
“specific project or undertaking,” the duration (and
scope) of which are specified at the time the
employees are engaged for the project. “Project” in
the realm of business and industry refers to a
particular job or undertaking that is within the
regular or usual business of ER, but which is distinct
and separate and identifiable as such from the
undertakings of the company. Such job or
undertaking begins and ends at determined or
determinable times.
ALU – TUCP v. NLRC (94)
In the realm of business and industry, we note
that "project" could refer to one or the other of at
least 2 distinguishable types of activities. Firstly, a
project could refer to a particular job or undertaking
that is within the regular or usual business of the ER
company, but which is distinct and separate, and
identifiable as such, from the other undertakings of
the company. Such job or undertaking begins and
ends at determined or determinable times.
The term "project" could also refer to, secondly,
a particular job or undertaking that is not within the
regular business of the corporation. Such a job or
undertaking must also be identifiably separate and
distinct from the ordinary or regular business
operations of the employer. The job or undertaking
also begins and ends at determined or determinable
times.
Whichever type of project employment is found
in a particular case, a common basic requisite is that
the designation of named employees as "project
employees" and their assignment to a specific
project, are effected and implemented in good faith,
and not merely as a means of evading otherwise
applicable requirements of labor laws.
Kiamco v. NLRC (99)
In Violeta v. NLRC we held —
The principal test for determining whether
particular employees are properly characterized as
"project employees," as distinguished from
"regular employees," is whether or not the "project
employees" were assigned to carry out a "specific
project or undertaking," the duration (and scope)
of which were specified at the time the employees
were engaged for that project. As defined, project
employees are those workers hired (1) for a
specific project or undertaking, and (2) the
completion or termination of such project or
undertaking has been determined at the time of
engagement of the employee.
Under Policy Instruction No. 20 of the Secretary
of Labor, project employees are those employed in
connection with a particular project. Non-project or
regular employees are those employed without
reference to any particular project.
PROJECT EMPLOYEES
Phil. Jai-Alai and Amusement Corp. v. Clave
(83)
Private respondents were hired for a specific
project — to renovate the main building, where
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Labor Standards
major repairs such as painting the main building,
repair of the roof, cleaning of clogged water pipes
and drains, and other necessary repairs were
required. It was made known, and so understood at
the start of the hiring, that their services would last
until the completion of the renovation. They
rendered service from February 2 to December 11,
1976, almost 11 months, but less than a year. In its
Report to the Department of Labor, petitioner gave
the reason for termination as "due to termination of
project." It was only private respondents, out of the
32 hired for the renovation, who questioned their
termination, the 30 other workers having acquiesced
to their termination. Private respondents merely
alleged in their letter-complaint that "kami'y inalis sa
trabaho ng walang dahilan." There could be no other
reason, however, than that the termination of
private respondents was because their services were
no longer needed and they had nothing more to do
since the project for which they were hired had been
completed. The fact was not that private
respondents were hired as maintenance helpers,
because petitioner corporation had a regular
maintenance force. Private respondents, as well as
the other 30 workers, were needed as additional
hands for the renovation work and not for ordinary
upkeep and maintenance. The erection of the fire
escape and other small jobs after the renovation
cannot be deemed maintenance but more of casual
work.
The casual or limited character of private
respondents' employment, therefore, is evident.
They were engaged for a specific project or
undertaking and fall within the exception provided
for in Article 231 of the Labor Code, supra. Not being
regular employees, it cannot be justifiably said that
petitioner had dismissed them without just cause.
They are not entitled to reinstatement with full
backwages.
Sandoval Shipyards, Inc. v. NLRC (85)
We hold that private respondents were project
employees whose work was coterminous with the
project for which they were hired. Project
employees, as distinguished from regular or non-
project employees, are mentioned in Art. 281 LC as
those "where the employment has been fixed for a
specific project or undertaking the completion or
termination of which has been determined at the
time of the engagement of the EE."
Magante v. NLRC (91)
As aptly observed by the Solicitor-General,
petitioner has established that since the very
inception of his employment in 1980, he was never
deployed from project to project of private
respondent but had been regularly assigned to
perform carpentry work under the supervision of a
certain Bernardo Padaon who, since 1964 until his
resignation on January 2, 1982 worked for private
respondent as the supervisor of its Carpentry
Department. This goes to show two things: that
petitioner was assigned to perform tasks which are
usually necessary or desirable in the usual business
or trade of private respondent; and that said
assignments did not end on a project to project
basis, although the contrary was made to appear by
private respondent through the signing of separate
employment contracts allegedly for different projects
because it is indeed obvious that petitioner
continued to perform the same kind of work
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throughout his period of employment allegedly
considered to have been done on a project to project
basis.
Although petitioner had only rendered almost
two years of service, nevertheless this should not
detract from his status of being a regular employee
because as correctly stated by the labor arbiter, the
determining factor of the status of complainant-
petitioner or any worker is the nature of the work
performed by the latter and the place where he
performed his assignment.
Tucor Industries, Inc. v. NLRC (91)
The term "specific project or undertaking" under
Article 280 of the Labor Code contemplates an
activity which was commonly or habitually
performed or such type of work which is not done on
a daily basis but only for a specific duration of time
or until the completion of the project. The services
employed are thus necessary or desirable in the
employer's usual business only for the period of time
it takes to complete the project. Without the
performance of such services on a regular basis, the
employer's main business is not expected to grind to
a halt.
In the case at bar, private respondents were
assigned to do carpentry work, packing and driving,
activities which are usually necessary and desirable
in petitioners' usual business and which thus had to
be done on a regular basis.
Rada v. NLRC (92)
A non-project employee is different in that the
employee is hired for more than one project. A non-
project employee, vis-a-vis a project employee, is
best exemplified in the case of Fegurin, et al. vs.
National Labor Relations Commission, et al. wherein
four of the petitioners had been working with the
company for nine years, one for eight years, another
for six years, the shortest term being three years. In
holding that petitioners are regular employees, this
Court therein explained:
"Considering the nature of the work of
petitioners, that of carpenter, laborer or mason,
their respective jobs would actually be
continuous and on-going. When a project to
which they are individually assigned is
completed, they would be assigned to the next
project or a phase thereof. In other words, they
belonged to a work pool' from which the
company would draw workers for assignment to
other projects at its discretion. They are,
therefore, actually 'non-project employees.'"
From the foregoing, it is clear that petitioner is a
project employee considering that he does not
belong to a "work pool" from which the company
would draw workers for assignment to other projects
at its discretion. It is likewise apparent from the
facts obtaining herein that petitioner was utilized
only for one particular project, the MNEE Stage 2
Project of respondent company. Hence, the
termination of herein petitioner is valid by reason of
the completion of the project and the expiration of
his employment contract.
Mamansag v. NLRC (93)
Private respondent company is a market
research group that conducts public surveys about
commercial consumer goods, products,
merchandises and/or services of its clients. Said
market researches and surveys are dependent
upon the contracts it can secure from its clients
consisting of corporations, organizations,
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Labor Standards
government and individuals. Because of the very
nature of its business, private respondent company
had to resort to engaging the services of contractual
workers, such as petitioners, to conduct interviews
on specific project basis for a definite short period of
time. Generally, said contractual employment is not
continuous but intermittent, sporadic with long
intervals of idle periods in between projects due to
lack of work or job contracts. To require a market
research and survey firm to indefinitely maintain in
its payroll petitioners, despite the absence of
contracted projects, would be counterproductive and
lead to the bankruptcy of said firm.
Private respondent company, in entering into
specific and limited contracts with petitioners, was
only exercising its management prerogative to
conduct its business in the most efficient manner
thereby avoiding unnecessary expenses and
maximizing profitability without, however, defeating
or circumventing the rights of its employees.
An examination of the petitioners' contract of
employment showed that they were hired by private
respondent company for a specific project and the
completion or termination of said project was
determined at the start of their employment.
Petitioners cannot be hired for an indefinite period of
time and carried on the company's payroll even
without projects to work, with without respondent
company incurring financial losses.
As field interviewers of private respondent
company, the latter depends for its business on the
contract it is able to obtain from its clients.
Necessarily, the duration of the employment of its
employees is not permanent but co-terminus with
the projects to which they are assigned and from
whose payrolls they are paid. The fact that
petitioners worked for several projects of private
respondent company is no basis to consider them as
regular employees. By the very nature of their
employer's business, they will always remain project
employees regardless of the number of projects in
which they have worked.
Fernandez v. NLRC (94)
Inasmuch as the documentary evidence clearly
showed gaps of a month or months between the
hiring of petitioner in the numerous projects wherein
he was assigned, the ineluctable conclusion is that
petitioner has not continuously worked with private
respondent but only intermittently as he was hired
solely for specific projects. As such, he is governed
by Policy Instruction No. 20, the pertinent portions
of which read as follows:
"Generally, there are two types of employees in
the construction industry, namely 1) Project
Employees and 2) Non-project Employees.
"Project employees are those employed in
connection with a particular construction project.
Non-project employees are those employed by a
construction company without reference to a
particular project.
"Project employees are not entitled to
termination pay if they are terminated as a result
of the completion of the project or any phase
thereof in which they are employed, regardless
of the number of projects in which they have
been employed by a particular construction
company."
XXX The proviso in the second paragraph of
Article 280 of the Labor Code has recently been
explained in Mercado v. NLRC, where it was held
that said proviso deems as regular employees only
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those "casual" employees who have rendered at
least one year of service regardless of the fact that
such service may be continuous or broken. It is not
applicable to "project" employees, who are
specifically excepted therefrom.
Uy v. NLRC (96)
PROJECT EE’s - workers hired : for a specific
project or undertaking; completion/termination of
project has been determined at time of engagement
of EE
Phil. Airlines, Inc. v. NLRC (98)
The position of STELLAR that individual private
respondents were its project employees is totally
unfounded. A regular employee is distinguished
from a project employee by the fact that the latter is
employed to carry out a specific project or
undertaking, the duration or scope of which was
specified at the time the employees were engaged.
A “project” has reference to a particular job or
undertaking that may or may not be within the
regular or usual business of the employer. In either
case, the project must be distinct, separate and
identifiable from the main business of the employer
and its duration must be determined or
determinable.
Villa v. NLRC (98)
A project employment terminates as soon as the
project is completed. Thus an employer is allowed
by law to reduce the work force into a number suited
for the remaining work to be done upon the
completion or proximate accomplishment of the
project. However, the law requires that, upon
completion of the project, the employer must
present proof of termination of the services of the
project employees at the nearest public employment
office. This is specially provided for as regards
construction workers obviously to obviate
indiscriminate termination of employment in
derogation of the worker’s right to security of
tenure. After the termination of the project, an
employer may wind up its operations only to
complete the project. In such a case, the remaining
employees do not necessarily lose their status as
project employees. However, if the employees’
services are extended long after the supposed
project had been completed, the employees are
removed from the scope of project employees and
they shall be considered regular employees.
Phil. Fruits and Vegetables Industries, Inc. v.
NLRC (99)
It should be noted that complainants'
employment has not been fixed for a specific project
or undertaking the completion or termination of
which has been determined at the time of their
appointment or hiring. Neither is their employment
seasonal in nature. While it may be true that some
phases of petitioner company's processing
operations is dependent on the supply of fruits for a
particular season, the other equally important
aspects of its business, such as manufacturing and
marketing are not seasonal. The fact is that large-
scale food processing companies such as petitioner
company continue to operate and do business
throughout the year even if the availability of fruits
and vegetables is seasonal.
Imbuido v. NLRC (2000)
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Labor Standards
We agree with the findings of the NLRC that
petitioner is a project employee. The principal test
for determining whether an employee is a project
employee or a regular employee is whether the
project employee was assigned to carry out a
specific project or undertaking, the duration and
scope of which were specified at the time the
employee was engaged for that project. A project
employee is one whose employment has been fixed
for a specific project or undertaking, the completion
or termination of which has been determined at the
time of the engagement of the employee or where
the work or service to be performed is seasonal in
nature and the employment is for the duration of the
season. In the instant case, petitioner was engaged
to perform activities which were usually necessary or
desirable in the usual business or trade of the
employer, as admittedly, petitioner worked as a data
encoder for private respondent, a corporation
engaged in the business of data encoding and
keypunching, and her employment was fixed for a
specific project or undertaking the completion or
termination of which had been determined at the
time of her engagement, as may be observed from
the series of employment contracts between
petitioner and private respondent, all of which
contained a designation of the specific job contract
and a specific period of employment.
RATIONALE
Maraguinot v. NLRC (98)
The Court’s ruling is meant to give life to the
institutional policy of strengthening the labor sector,
but, we stress, not at the expense of management.
Lest it be misunderstood, this ruling does not mean
that simply because an employee is a project or
work pool employee has been: (1) continuously, as
opposed to intermittently, re-hired by the same
employer, for the same tasks or nature of tasks; and
(2) these tasks are vital, necessary and
indispensable to the usual business or trade of the
employer, then the employee must be deemed a
regular employee, pursuant to Art. 280 of the Labor
Code and jurisprudence. To rule otherwise would
allow circumvention of labor laws in industries not
falling within the ambit of Policy Instruction No. 20/
Department Order No. 19, hence allowing the
prevention of acquisition of tenurial security by
project or work pool employees who have already
gained the status of regular employees by the
employer’s conduct.
Phil. Airlines, Inc. v. NLRC (98)
The position of STELLAR that individual private
respondents were its project employees is totally
unfounded. A regular employee is distinguished
from a project employee by the fact that the latter is
employed to carry out a specific project or
undertaking, the duration or scope of which was
specified at the time the employees were engaged.
A “project” has reference to a particular job or
undertaking that may or may not be within the
regular or usual business of the employer. In either
case, the project must be distinct, separate and
identifiable from the main business of the employer
and its duration must be determined or
determinable.
De Ocampo v. NLRC (90)
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Coming now to the last question, we stress the
rule in Cartagenas v. Romago Electric Co., that
contract workers are not considered regular
employees, their services being needed only when
there are projects to be undertaken. The rationale of
this rule is that if a project has already been
completed, it would be unjust to require the
employer to maintain them in the payroll while they
are doing absolutely nothing except waiting until
another project is begun, if at all. In effect, these
stand-by workers would be enjoying the status of
privileged retainers, collecting payment for work not
done, to be disbursed by the employer from profits
not earned. This is not fair by any standard and can
only lead to a coddling of labor at the expense of
management.
EMPLOYER OBLIGATION
A. M. Oreta and Co., Inc. v. NLRC (89)
The law is clear to the effect that in all cases
involving employees engaged on probationary' basis,
the employer shall make known to the employee at
the time he is hired, the standards by which he will
qualify as a regular employee. Nowhere in the
employment contract executed between petitioner
company and respondent Grulla is there a stipulation
that the latter shall undergo a probationary period
for three months before he can quality as a regular
employee. There is also no evidence on record
showing that the respondent Grulla had been
apprised of his probationary status and the
requirements which he should comply in order to be
a regular employee. In the absence of these
requisites, there is justification in concluding that
respondent Grulla was a regular employee at the
time he was dismissed by petitioner. As such, he is
entitled to security of tenure during his period of
employment and his services cannot be terminated
except for just and authorized causes enumerated
under the Labor Code and under the employment
contract.
IMPLICATION
ALU-TUCP v. NLRC (94)
In other words, the employment of each 'project
worker' is dependent and co-terminous with the
completion or termination of the specific activity or
undertaking [for which] he was hired which has been
pre-determined at the time of engagement. Since,
there is no showing that they (13 complainants)
were engaged to perform work-related activities to
the business of respondent which is steel-making,
there is no logical and legal sense of applying to
them the proviso under the second paragraph of
Article 280 of the Labor Code, as amended.
xxx In the case of Mercado, Sr. vs. National
Labor Relations Commission, this Court ruled that
the proviso in the second paragraph of Article 280
relates only to casual employees and is not
applicable to those who fall within the definition of
said Article's first paragraph, i.e., project employees.
The familiar grammatical rule is that a proviso is to
be construed with reference to the immediately
preceding part of the provision to which it is
attached, and not to other sections thereof, unless
the clear legislative intent is to restrict or qualify not
only the phrase immediately preceding the
proviso but also earlier provisions of the statute
or even the statute itself as a whole.
Part I : Introductory Materials
Labor Standards
SECURITY OF TENURE
Southern Cotabato v. NLRC (87)
It is not disputed that private respondents were
project employees. As such, they were entitled to
security of tenure guaranteed by the Constitution
and the Labor Code for the duration of the project
they were hired for, or the phases thereof to which
they were assigned or in connection with which they
rendered services. The length of their employment
id determined by the completion of the task for
which they were hired.
SPECIFIED PERIOD
Purefoods Corp. V. NLRC (87)
In the leading case of Brent School v. Zamora,
which was reaffirmed in numerous subsequent
cases, the Court has upheld the legality of fixed-
term employment. It ruled that the decisive
determinant in term employment should not be the
activities that the employee is called upon to
perform but the day certain agreed upon by the
parties for the commencement and termination of
their employment relationship. But, this Court went
on to say that where from the circumstances it is
apparent that the periods have been imposed to
preclude acquisition of tenurial security by the
employee, they should be struck down or
disregarded as contrary to public policy and morals.
WORKPOOL EMPLOYEES
Maraguinot v. NLRC (98)
A project EE or a member of a work pool may
acquire the status of a regular employee when the
following concur:
1. There is a continuous rehiring of project
employees even after cessation of a
project; and
2. The tasks performed by the alleged
“project employee” are vital, necessary,
and indispensable to the usual business or
trade of the employer.
However, the length of time during which the EE
was continuously rehired is not controlling, but
merely serves as a badge of regular employment.
A work pool may exist although the workers in
the pool do not receive salaries and are free to seek
other employment during temporary breaks in the
business, provided, that the worker shall be
available when called to report for a project.
Although primarily applicable to regular seasonal
workers, this set-up can likewise be applied to
project workers insofar as the effect of temporary
cessation of work is concerned. This is beneficial to
both the employer and employee for it prevents the
unjust situation of “coddling labor at the expense of
capital” and at the same time enables the workers to
attain the status of regular employees.
Aguilar Corp. v. NLRC (97)
Members of a work pool from which a
construction company draws its project employees,
if considered employees of the construction company
while in the work pool, are non-project employees,
or employees for an indefinite period. If they are
employed in a particular project, the completion of
the project or any phase thereof will not mean
severance of the employer-employee relationship.
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LENGTH OF SERVICE
Palomares v. NLRC (97)
Length of service is not the controlling
determinant of the employment tenure of a project
employee. It is based on whether or not the
employment has been fixed for a specific project or
undertaking, the completion of which has been
determined at the time of the engagement of the
employee. Furthermore, the 2nd paragraph of Art.
280, providing that an employee who has rendered
service for at least 1 year, shall be considered a
regular employee, pertains to casual employees and
not to project employees such as petitioners.
Villa v. NLRC (98)
Thus, the fact that petitioners worked for NSC
under different project employment contracts for
several years cannot be made basis to consider
them a regular employees, for they remain project
employees regardless of the number of projects in
which they have worked.
7.05 CASUAL EMPLOYEES
Art. 281, 2nd paragraph
An employment shall be deemed casual if it is not
covered by the preceding paragraph: Provided,
that, any employee who has rendered at least one
year of service, whether such service is continuous
or broken, shall be considered a regular employee
with respect to the activity in which he is employed
and his employment shall continue while such
activity exists.
NATURE OF WORK
AM Oreta & Co., Inc v. NLRC (89)
What determines regularity or casualness is not
the employment contract, written or otherwise, but
the nature of the job. If the job is usually necessary
or desirable to the main business of the employer,
then employment is regular.
ONE YEAR SERVICE
Tabas v. California Manufacturing Co. Inc. (89)
The fact that the petitioners have been hired on
a "temporary or seasonal" basis merely is no
argument either. As we held in Philippine Bank of
Communications v. NLRC, a temporary or casual
employee, under Article 218 of the Labor Code,
becomes regular after service of one year, unless he
has been contracted for a specific project. And we
cannot say that merchandising is a specific project
for the obvious reason that it is an activity related to
the day-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, they cannot be separated without due
process of law.
Phil. Geothermal, Inc. v. NLRC (90)
Assuming therefore, that an employee could
properly be regarded as a casual (as
distinguished from a regular employee) he
becomes entitled to be regarded as a regular
employee of the employer as soon as he has
Part I : Introductory Materials
Labor Standards
completed one year of service. Under the
circumstances, employers may not terminate the
service of a regular employee except for a just cause
or when authorized under the Labor Code. It is not
difficult to see that to uphold the contractual
arrangement between the employer and the
employee would in effect be to permit employers to
avoid the necessity of hiring regular or permanent
employees indefinitely on a temporary or casual
status, thus to deny them security of tenure in their
jobs. Article 106 of the Labor Code is precisely
designed to prevent such result. 17
Mercado v. NLRC (91)
The second paragraph of Art. 280 demarcates
as "casual" employees, all other employees who do
not fall under the definition of the preceding
paragraph. The proviso, in said second paragraph,
deems as regular employees those "casual"
employees who have rendered at least one year of
service regardless of the fact that such service may
be continuous or broken.
International Pharmaceutical, Inc. v. NLRC
(98)
Quintia became a regular employee of petitioner
after two years after her contract expired and her
services were continued for more than two years in
the usual trade or business of the employer.
Cebu Engineering and Development Co., v.
NLRC (98)
Private respondent belonged to a work pool
from which CEDCO drew its employees and assigned
them to different projects. He was not only hired for
a specific project. He was a regular employee
assigned to different projects. He was in fact a
mainstay of the company. Contrary to petitioner's
claim, his services were not terminated on 30
November 1992. He continued working after that.
Hence, according to the law, on 1 December 1992,
after a year of continuous work, he became a
regular employee regardless of any contract to the
contrary. It is in keeping with the intent and spirit of
the law to rule that the status of regular
employment attaches to the casual worker on the
day immediately after the end of the first year of
service.
Highway Copra Traders v. NLRC (98)
The Labor Code draws a fine line between
regular and casual employees to protect the
interests of labor. We ruled in Baguio Country Club
Corporation vs. NLRC that "its language evidently
manifests the intent to safeguard the tenurial
interest of the worker who may be denied the rights
and benefits due a regular employee by virtue of
lopsided agreements with the economically powerful
employer who can maneuver to keep an employee
on a casual status for as long as convenient." Thus,
notwithstanding any agreements to the contrary, an
employment is deemed regular when the activities
performed by the employee are usually necessary or
desirable in the usual business or trade of the
employer.
7.06 CONTRACT FIXED PERIOD
TESTS VALIDITY
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Brent School v. Zamora (90)
Accordingly, and since the entire purpose behind
the development of legislation culminating in the
present Article 280 of the Labor Code clearly
appears to have been, as already observed, to
prevent circumvention of the employee's right to be
secure in his tenure, the clause in said article
indiscriminately and completely ruling out all written
or oral agreements conflicting with the concept of
regular employment as defined therein should be
construed to refer to the substantive evil that the
Code itself has singled out: agreements entered into
precisely to circumvent security of tenure. It should
have no application to instances where a fixed period
of employment was agreed upon knowingly and
voluntarily by the parties, without any force, duress
or improper pressure being brought to bear upon the
employee and absent any other circumstances
vitiating his consent, or where it satisfactorily
appears that the employer and employee dealt with
each other on more or less equal terms with no
moral dominance whatever being exercised by the
former over the latter. Unless thus limited in its
purview, the law would be made to apply to
purposes other than those explicitly stated by its
framers; it thus becomes pointless and arbitrary,
unjust in its effects and apt to lead to absurd and
unintended consequences.
Cielo v. NLRC (91)
In Brent School, Inc. vs. Zamora, the Court
affirmed the general principle that "where from the
circumstances it is apparent that periods have been
imposed to preclude acquisition of tenurial security
by the employee, they should be struck down or
disregarded as contrary to public policy, morals,
etc."
International Pharmaecuticals, Inc. v. NLRC
(98)
On the other hand the written contract in this
case provided that it was subject to renewal by
mutual consent of the parties at least thirty days
before its expiration on March 18, 1984. There is no
evidence to show that the parties mutually agreed to
renew their contract. On the other hand, to sustain
petitioner's contention that there was an implied
extension after the expiration of the original contract
would make it possible for employers like petitioner
to circumvent Art. 280 of the Labor Code and thus
prevent an employee from becoming regular through
the simple expedient of making him sign a contract
for a term and then extend to him a contract term,
after term, after term.
St. Theresa’s School v. NLRC (98)
Article 280 of the Labor Code does not proscribe
or prohibit an employment contract with a fixed
period provided the same is entered into by the
parties, without any force, duress or improper
pressure being brought to bear upon the employee
and absent any other circumstance vitiating consent.
It does not necessarily follow that where the duties
of the employee consist of activities usually
necessary or desirable in the usual business of the
employer, the parties are forbidden from agreeing
on a period of time for the performance of such
activities. There is thus nothing essentially
contradictory between a definite period of
employment and the nature of the employee's
duties.
Part I : Introductory Materials
Labor Standards
It goes without saying that contracts or
employment govern the relationship of the parties.
In this case, private respondent's contract provided
for a fixed term of nine (9) months, from June 1,
1991 to March 31, 1992. Such stipulation, not being
contrary to law, morals, good customs, public order
and public policy, is valid, binding and must be
respected.
Servidad v. NLRC (99)
The language of the contract in dispute is truly a
double-bladed scheme to block the acquisition of the
employee of tenurial security. Thereunder, private
respondent has two options. It can terminate the
employee by reason of expiration of contract, or it
may use "failure to meet work standards" as the
ground for the employee's dismissal. In either case,
the tenor of the contract jeopardizes the right of the
worker to security of tenure guaranteed by the
Constitution.
In the case of Brent School, Inc. vs. Zamora, et
al., the Court upheld the principle that where from
the circumstances it is apparent that periods have
been imposed to preclude acquisition of tenurial
security by the employee, they should be
disregarded for being contrary to public policy.
SEASONAL EMPLOYEES
Phil. Tobacco etc. v. NLRC (98)
The Court has previously ruled in Manila Hotel
Company v. CIR that seasonal workers who are
called to work from time to time and are temporarily
laid off during-off season are not separated from
service in said period, but are merely considered on
leave until re-employed.
San Miguel Corp. v. NLRC (98)
Thus, under Article 280 of the Labor Code, an
employment is deemed regular when the activities
performed by the employee are usually necessary or
desirable in the usual business or trade of the
employer even if the parties enter into an agreement
tating otherwise. But considered not regular under
said Article (1) the so-called "project employment"
the termination of which is more or less
determinable at the time of employment, such as
those connected, which by its nature is only for one
season of the year and the employment is limited for
the duration of that season, such as the Christmas
holiday season. Nevertheless, an exception to this
exception is made: any employee who has rendered
at least one (1) year of service, whether continuous
or intermitent, with respect to the activity he
performed and while such activity actually exists,
must be deemed regular.
SECTION 8 – Probationary Employees
8.01 PROBATIONARY EMPLOYEES
Art. 281
Probationary employments hall not exceed six
months from the date the employee started working,
unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an
employee who has been engaged on a probationary
basis may be terminated for a just cause or when he
fails to qualify as a regular employee in accordance
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with reasonable standards made known by the
employer to the employee at the time of his
engagement. An employee who is allowed to work
after a probationary period shall be considered a
regular employee.
Art. 61, 2nd Sentence, Book VI, Rule 1, Sec. 6,
Omnibus Rules
There is a probationary employment where the
employee upon his engagement, is made to undergo
a trial period during which the employer determines
his fitness to qualify for regular employment, based
on reasonable standards made known to him at the
time of engagement.
DEFINITION
International Catholic Migration Commission v.
NLRC (89); De la Cruz, Jr. v. NLRC (2003)
A probationary employee, as understood under
Article 282 (now Article 281) of the Labor Code, is
one who is on trial by an employer during which the
employer determines whether or not he is qualified
for permanent employment.
PURPOSE
Grand Motors Corp. v. MOLE (84)
We find merit in the contention of the petitioner
that "private respondent had not been hired as
manager of any firm before his employment with
petitioner. The highest previous position he attained
was that of Finance Officer. His position with
petitioner's Iloilo Branch was his first as Manager.
Moreover, Warner, Barnes & Co., private
respondent's previous employer, and petitioner are
engaged in different kinds of business. Managing
petitioner's Iloilo Branch was an entirely new
experience for private respondent. It was, therefore,
necessary for private respondent to undergo a
period of probation to test his qualifications, skill and
experience." Indeed, the employer has the right or is
at liberty to choose as to who will be hired and who
will be declined. It is within the exercise of this right
to select his employees that the employer may set
or fix a probationary period within which the latter
may test and observe the conduct of the former
before hiring him permanently. "The right of a
laborer to sell his labor to such persons as he may
choose is, in its essence, the same as the right of an
employer to purchase labor from any person whom
it chooses. The employer and the employee have
thus an equality of right guaranteed by the
Constitution. 'If the employer can compel the
employee to work against the latter's will, this is
servitude. If the employee can compel the employer
to give him work against the employer's will, this is
oppression.'"
International Catholic Migration Commission v.
NLRC (89)
A probationary appointment is made to afford
the employer an opportunity to observe the fitness
of a probationer while at work, and to ascertain
whether he will become a proper and efficient
employee. The word "probationary", as used to
describe the period of employment, implies the
purpose of the term or period, but not its length.
Being in the nature of a "trial period" the
essence of a probationary period of employment
fundamentally lies in the purpose or objective
Part I : Introductory Materials
Labor Standards
sought to be attained by both the employer and the
employee during said period. The length of time is
immaterial in determining the correlative rights of
both in dealing with each other during said period.
While the employer, as stated earlier, observes the
fitness, propriety and efficiency of a probationer to
ascertain whether he is qualified for permanent
employment, the probationer, on the other, seeks to
prove to the employer, that he has the qualifications
to meet the reasonable standards for permanent
employment.
Phil. Federation of Credit Cooperatives, Inc. v.
NLRC (98)
Art. 281 of the Labor Code, as amended, allows
the employer to secure the services of an employee
on a probationary basis which allows him to
terminate the latter for just cause or upon failure to
qualify in accordance with reasonable standards set
forth by the employer at the time of his
engagement. As defined in the case of International
Catholic Migration v. NLRC, "a probationary
employee is one who is on trial by an employer
during which the employer determines whether or
not he is qualified for permanent employment. A
probationary employment is made to afford the
employer an opportunity to observe the fitness of a
probationer while at work, and to ascertain whether
he will become a proper and efficient employee."
Escorpizo v. University of Baguio (99)
A probationary employee is one who, for a given
period of time, is being observed and evaluated to
determine whether or not he is qualified for
permanent employment. A probationary
appointment affords the employer an opportunity to
observe the skill, competence and attitude of a
probationer. The word "probationary", as used to
describe the period of employment, implies the
purpose of the term or period. While the employer
observes the fitness, propriety and efficiency of a
probationer to ascertain whether he is qualified for
permanent employment, the probationer at the
same time, seeks to prove to the employer that be
has the qualifications to meet the reasonable
standards for permanent employment.
Cebu Marine Beach Resort v. NLRC (2003)
That the workers failed to qualify for their
positions, suffice it to state that at the time they
were dismissed, they were still in a “trial period” or
probationary period. Being in the nature of a trial
period, the essence of a probationary period of
employment fundamentally lies in the purpose or
objective sought to be attained by both the
employer and the employee during the period.
While the employer observes the fitness, propriety
and efficiency of a probationer to ascertain whether
he is qualified for permanent employment, the
probationer, on the other hand seeks to prove to the
employer that he has the qualifications to meet the
reasonable standards for permanent employment
which were obviously made known to him.
To reiterate, in this case, far from allowing the
respondents to prove that they possessed the
qualifications to meet the reasonable standards for
their permanent employment, petitioners
peremptorily dismissed them from the service.
EMPLOYER RIGHT SET PERIOD/OBLIGATION
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Grand Motors Corp. v. MOLE (84)
The employer has the right or is at liberty to
choose as to who will be hired and who will be
declined. It is within the exercise of this right to
select his employees that the employer may set or
fix a probationary period within which the latter may
test and observe the conduct of the former before
hiring him permanently.
Orient Express Placement Philippines v. NLRC
(97)
Under Art. 281 of the Labor Code, the services
of an employee hired on a probationary basis may
be terminated when he fails to qualify as a regular
employee in accordance with reasonable standards
made known by the employer to the employee at the
time of his engagement. However, the Court cannot
sustain his dismissal on this ground because
petitioner failed to specify the reasonable standards
by which private respondent’s alleged poor
performance was evaluated, much less to prove that
such standards were made known to him at the time
of his recruitment in Manila.
Due process dictates that an employee be
apprised beforehand of the condition of his
employment and of the terms of advancement
therein. Precisely, implicit in Art. 281 of the Code is
the requirement that reasonable standards be
previously made known by the employer to the
probationary employee at the time of his
engagement as correctly suggested by the POEA.
DURATION/EXCEPTION
Busier v. Leogardo (84)
Generally, the probationary period of
employment is limited to six (6) months. The
exception to this general rule is when the parties to
an employment contract may agree otherwise, such
as when the same is established by company policy
or when the same is required by the nature of work
to be performed by the employee. In the latter case,
there is recognition of the exercise of managerial
prerogatives in requiring a longer period of
probationary employment, such as in the present
case where the probationary period was set for
eighteen (18) months, i.e. from May, 1980 to
October, 1981 inclusive, especially where the
employee must learn a particular kind of work such
as selling, or when the job requires certain
qualifications, skills, experience or training.
Policy Instruction No. 11 of the Minister of Labor
and Employment has clarified any and all doubts on
the period of probationary employment. It states as
follows:
"Probationary Employment has been the
subject of misunderstanding in some quarter.
Some people believe six (6) months is the
probationary period in all cases. On the other
hand, employees who have already served the
probationary period are sometimes required to
serve again on probation.
Under the Labor Code, six (6) months is the
general probationary period, but the
probationary period is actually the period needed
to determine fitness for the job. This period, for
lack of a better measurement is deemed to be
the period needed to learn the job.
The purpose of this policy is to protect the
worker at the same time enable the employer to
make a meaningful employee selection. This
purpose should be kept in mind in enforcing this
provision of the Code. This issuance shall take
effect immediately."
Part I : Introductory Materials
Labor Standards
International Catholic Migration Commission v.
NLRC (89)
It is well settled that the employer has the right
or is at liberty to choose who will be hired and who
will be denied employment. In that sense, it is within
the exercise of the right to select his employees that
the employer may set or fix a probationary period
within which the latter may test and observe the
conduct of the former before hiring him
permanently.
XXX There is nothing under Article 281 of the
Labor Code that would preclude the employer from
extending a regular or a permanent appointment to
an employee once the employer finds that the
employee is qualified for regular employment even
before the expiration of the probationary period.
Conversely, if the purpose sought by the employer is
neither attained nor attainable within the said
period, Article 281 of the Labor Code does not
likewise preclude the employer from terminating the
probationary employment on justifiable causes as in
the instant case.
Holiday Inn Manila v. NLRC (93)
Probation is the period during which the
employer may determine if the employee is qualified
for possible inclusion in the regular force. In the case
at bar, the period was for three weeks, during
Honasan's on-the-job training. When her services
were continued after this training, the petitioners in
effect recognized that she had passed probation and
was qualified to be a regular employee.
Honasan was certainly under observation during
her three-week on-the-job training. If her services
proved unsatisfactory then, she could have been
dropped as early as during that period. But she was
not. On the contrary, her services were continued,
presumably because they were acceptable, although
she was formally placed this time on probation.
Even if it be supposed that the probation did not
end with the three-week period of on-the-job
training, there is still no reason why that period
should not be included in the stipulated six-month
period of probation. Honasan was accepted for on-
the-job training on April 15, 1991. Assuming that
her probation could be extended beyond that date, it
nevertheless could continue only up to October 15,
1991, after the end of six months from the earlier
date. Under this more lenient approach, she had
become a regular employee of Holiday Inn and
acquired full security of tenure as of October 15,
1991.
Bernardo v. NLRC (99)
As held by the Court, "Articles 280 and 281 of
the Labor Code put an end to the pernicious practice
of making permanent casuals of our lowly employees
by the simple expedient of extending to them
probationary appointments, ad infinitum." The
contract signed by petitioners is akin to a
probationary employment, during which the bank
determined the employees' fitness for the job. When
the bank renewed the contract after the lapse of the
six-month probationary period, the employees
thereby became regular employees. No employer is
allowed to determine indefinitely the fitness of its
employees.
Escorpizo v. University of Baguio (99)
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A probationary employee is one who, for a given
period of time, is being observed and evaluated to
determine whether or not he is qualified for
permanent employment. A probationary
appointment affords the employer an opportunity to
observe the skill, competence and attitude of a
probationer. The word "probationary", as used to
describe the period of employment, implies the
purpose of the term or period. While the employer
observes the fitness, propriety and efficiency of a
probationer to ascertain whether he is qualified for
permanent employment, the probationer at the
same time, seeks to prove to the employer that be
has the qualifications to meet the reasonable
standards for permanent employment.
A’ Prime Security Services, Inc. v. NLRC (2000)
There is no basis for subjecting an employee to
a new probationary or temporary employment where
he had already become a regular employee when he
was absorbed by a sister company.
De la Cruz, Jr. v. NLRC (2003)
A probationary employee enjoys only a
temporary employment 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
the probationary employee’s services or his
performance fell short of expectations, etc. As long
as the termination was made before the termination
of the six-month probationary period, the employer
was well within his rights to sever the employer-
employee relationship. A contrary interpretation
would defect the clear meaning of the term
“probationary”.
EXTENSION CONTRACT
Mariwasa Manufacturing Inc v. Leogardo (89)
For aught that appears of record, the extension
of Dequila's probation was ex gratia, an act of
liberality on the part of his employer affording him a
second chance to make good after having initially
failed to prove his worth as an employee. Such an
act cannot now unjustly be turned against said
employer's account to compel it to keep on its
payroll one who could not perform according to its
work standards. The law, surely, was never meant to
produce such an inequitable result.
By voluntarily agreeing to an extension of the
probationary period, Dequila in effect waived any
benefit attaching to the completion of said period if
he still failed to make the grade during the period of
extension. The Court finds nothing in the law which
by any fair interpretation prohibits such a waiver.
And no public policy protecting the employee and
the security of his tenure is served by proscribing
voluntary agreements which, by reasonably
extending the period of probation, actually improve
and further a probationary employee's prospects of
demonstrating his fitness for regular employment.
Phil. Federation, etc. v. NLRC (98)
It is an elementary rule in the law on labor
relations that a probationary employee who is
engaged to work beyond the probationary period of
6 months, as provided under Art. 281 Labor Code,
as amended, or for any length of time set forth
by the employer, shall be considered as a regular
employee.
Part I : Introductory Materials
Labor Standards
ABSORBED EMPLOYEES
Cebu Stevedoring Co. Inc v. Regional Director
(88)
We agree with the Regional Director that private
respondents could not be considered probationary
employees because they were already well-trained in
their respective functions. This conclusion is further
bolstered by the factual findings of the Labor
Minister that said order of the Director was
supported by substantial evidence. As stressed by
the Solicitor General, while private respondents were
still with the CCAS they were already clerks.
Respondent Gelig had been a clerk for CCAS for
more than ten (10) years, while respondent Quijano
had slightly less than ten (10) years of service. They
were, therefore, not novices in their jobs but
experienced workers.
TERMINATION AND SALARY
International Catholic Migration Commission v.
NLRC (89)
If the purpose sought by the employer is neither
attained nor attainable within the said period, Article
281 of the Labor Code does not preclude the
employer from terminating the probationary
employment on justifiable causes.
We find unmeritorious, therefore, public
respondent's argument that the security of tenure of
probationary employees within the period of their
probation, as in the case of herein private
respondent, justified the award of salary for the
unexpired portion of her probationary employment.
The termination of private respondent predicated on
a just cause negates the application in this case of
the pronouncement in the case of Biboso v. Victorias
Milling Co., Inc., on the right of security of tenure of
probationary employees.
work-site and to terminate at the end of one (1)
year. No other condition was laid out except that he
was to be on probation for three (3) months.
As aforesaid, no standard whatsoever by which
such probationary period could be hurdled was
specified and made known to him. Due process
dictates that an employee be apprised beforehand of
the condition of his employment and of the terms of
advancement therein. Precisely, implicit in Art. 281
of the Code is the requirement that reasonable
standards be previously made known by the
employer to the probationary employee at the time
of his engagement, as correctly suggested by the
POEA. Obviously, such an essential requirement was
not met by petitioner, even assuming that Flores'
alleged unsatisfactory performance was true.
Besides, unsatisfactory performance is not one of
the just causes for dismissal under the Labor Code.
RULE PRIVATE SCHOOL TEACHERS
Escorpizo v. University of Baguio (99)
Under the University Memorandum Circular No.
1, series of 1988, the following conditions must
concur in order that a probationary teacher may be
extended a regular appointment; (1) the faculty
member must satisfactorily complete the
probationary period of four semesters or two years,
within which his performance shall be observed and
evaluated for the purpose of determining his
competency and fitness to be extended permanent
status; and (2) the faculty member must pass the
PBET or an equivalent civil service examination.
St. Michael Academy v. NLRC (98)
Clearly, probationary teachers are not entitled
to the leaves specified in Section 2 of the School
Manual. The probationary period for private school
teachers is three years as provided in the Manual of
Regulations for Private Schools.

Orient Express Placement Philippines v. NLRC

(97)
Under Art. 281 of the Labor Code, the services
of an employee hired on a probationary basis may
be terminated when he fails to qualify as a regular
employee in accordance with reasonable standards
made known by the employer to the employee at the
time of his engagement. However, the Court cannot
sustain his dismissal on this ground because
petitioner failed to specify the reasonable standards
by which private respondent's alleged poor
performance was evaluated, much less to prove that
such standards were made known to him at the time
of his recruitment in Manila. Neither private
respondent's Agency-Worker Agreement with
ORIENT EXPRESS nor his Employment Contract with
NADRICO ever mentioned that he must first take
and pass a Crane Operators' License Examination in
Saudi Arabia before he would be allowed to even
touch a crane. Neither did he know that he would be
assigned as floorman pending release of the results
of the examination or in the event that he failed;
more importantly, that he would be subjected to a
performance evaluation by his superior one (1)
month after his hiring to determine whether the
company was amenable to continuing with his
employment. Hence, respondent Flores could not be
faulted for precisely harboring the impression that
he was hired as crane operator for a definite period
of one (1) year to commence upon his arrival at the

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Part I : Introductory Materials
Labor Standards
EMPLOYEE CLASSIFICATION – LAW the exception
STRUCTURE
PROBATIONARY EMPLOYMENT
REGULAR EMPLOYMENT
Period – duration – not exceed 6 months

Test – written agreement to contrary from the date the employee started
notwithstanding and regardless of oral working, unless covered by an
agreement of parties provided by law apprenticeship agreement stipulating a

Employee engaged to perform activities longer period
which are usually necessary or desirable to
Termination of Employment
the usual business or trade of employer 1. Just causes

Other Regular Employees 2. Fail to qualify as regular employee in
1. Casual Employment after 1 year of accordance with reasonable standards
service whether continuous or broken made known by the employer to the
(conditions – Art. 280) employee at the time of engagement
2. Probationary Employee – allowed to
Effect of Work beyond 6 months – deemed
work even after the completion of the Regular employee by automatic application
probationary period (Art. 281) of the law (even if there is no appointment
3. Learner – allowed or suffered to work [Kimberly Clark v. Drilon]
during the first 2 months of learner
Purpose:
period, if training is terminated by the 1. Observance Period
employer before the end of the - For the employer to know
stipulated period. whether employee is qualified

Not synonymous to permanent employment - For the employee to
(no such thing as permanent employment demonstrate to the employer his skills
since he can be terminated for cause) 2. Restrictive

EXCEPT:
Parties may agree for a longer period if
1. PROJECT EMPLOYMENT company policy requires or the nature of

Employment fixed on a specific work requires
project or undertaking,
Direct rationale connection: unduly long –
completion or termination of unfair to the worker
which is DETERMINED AT THE
Nothing prohibits the employer to
TIME OF ENGAGEMENT OF abbreviate or shorten the period
EMPLOYEE
If agreed to extend for the benefit of worker

Must have been forewarned of – Ex gratia
the name of the project and
No obligation to pay the unfinished portion
the duration of the project

Whether or not the project has
a direct relation to the
business of the employer, not
important, BUT:
a. Employee MUST be
informed of the
name and duration
of the project
b. Project and the
Principal business of
employer are two
separate things
c. No attempt to deny
Security of Tenure
to worker
2. SEASONAL EMPLOYMENT

Work or services to be
performed seasonal in nature,
employment is for the duration
of the season

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 broken
2. With respect to activity employed
3. Employment shall continue while such
activity exists (Regular in a limited
sense)
** Project, Seasonal and Casual Employees –
may be doing a function that is by definition
regular but are not regular because they fall in

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Part II : Labor Standards Law
Labor Standards

SECTION 9 – EMPLOYMENT POLICY

9.01 PRE-EMPLOYMENT POLICY

STRUCTURE OF THE LAW:
Art. 12 Employment Policies of the State:
To PROMOTE and maintain a state of full 1. Main Part – Basic Rule
employment through improved manpower ACTS:
training, allocation and utilization; canvassing,
To PROTECT every citizen desiring to work locally or enlisting,
overseas by securing for him the best possible contracting,
terms and conditions of employment; transporting,
To FACILITATE a free choice of available utilizing,
employment by persons seeking work in hiring or
conformity with the national interest; procuring workers,
To FACILITATE and regulate the movement of includes:
workers in conformity with the national interest; referrals,
To REGULATE the employment of aliens, including contract services,
the establishment of a registration and/or work
Acts accompanied by a promise or
permit system; advertising for employment – locally or
To STRENGTHEN the network of public employment abroad
offices and rationalize the participation of the
Consideration – whether for profit
private sector in the recruitment and placement or not
of workers, locally and overseas, to serve
national development objectives; 2. Proviso
To INSURE careful selection of Filipino workers for actor – person or entity
overseas employment in order to protect the act – offers, promises employment
good name of the Philippines abroad.
3. Consideration – for a fee
no. of workers – 2 or more
effect – deemed engaged in recruitment
or placement
SECTION 10 – RECRUITMENT AND
PLACEMENT OF WORKERS NO. OF CONSIDE
WORKERS RATION
10.01 RECRUITMENT AND PLACEMENT OF BASIC RULE 0 none
WORKERS
PROVISO 2 fee
DEFINITIONS
10.02 EMPLOYMENT AGENCY - ENTITY
Art. 13(b)
"Recruitment and placement" refers to any act of Art. 13(c)
canvassing, enlisting, contracting, transporting, "Private employment agency": any person or entity
utilizing, hiring or procuring workers, and includes engaged in the recruitment and placement of
referrals, contract services, promising or advertising workers for a fee which is charged, directly or
for employment, locally or abroad, whether for profit indirectly, from the workers or employers or both.
or not: Provided, That any person or entity which, in
any manner, offers or promises for a free Art. 13 (d)
employment to two or more persons shall be “License”: a document issued by the Department
deemed engaged in recruitment and placement. of Labor authorizing a person or entity to operate a
private employment agency
Art. 13(a)
"Workers": any member of the labor force, whether Art. 13(e)
employed or unemployed. "Private recruitment entity": any person or
association engaged in the recruitment and
DEFINITION - RELATIONSHIP placement of workers, locally or overseas, without
charging, directly or indirectly, any fee from the
People v. Panis (88) workers or employers.
The number of persons dealt with is not an
essential ingredient of the act of recruitment and Art. 13 (f)
placement of workers. Any of the acts mentioned in “Authority”: a document issued by the Department
the basic rule in Article 13(b) will constitute of Labor authorizing a person or association to
recruitment and placement even if only one engage in recruitment and placement activities as a
prospective worker is involved. The proviso merely private recruitment entity.
lays down a rule of evidence that where a fee is
collected in consideration of a promise or offer of 10.03 ALLOWED ENTITIES
employment to two or more prospective workers,
the individual or entity dealing with them shall be GENERAL RULE
deemed to be engaged in the act of recruitment and
placement. The words "shall be deemed" create that Art. 16
presumption.

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Part II : Labor Standards Law
Labor Standards
Private recruitment - Except as provided in Chapter
II of this Title, no person or entity, other than the
public employment offices and the OEDB for
overseas employment, shall engage in the
recruitment and placement of workers.
Art. 18
Ban on direct hiring - No employer may hire a
Filipino worker for overseas employment except
through the Boards and entities authorized by the
Department of Labor and Employment. Direct hiring
by members of the diplomatic service, officials and
employees of international organizations and such
other employers as may be allowed by the
Department and Labor and Employment is exempt
from this provision.
Art. 25
Private sector participation in the recruitment and
placement of workers - …the private employment
sector shall participate in the recruitment and
placement of workers, locally and overseas, under
such guidelines, rules and regulations, as may be
issued by the Secretary of Labor and Employment.
Art. 12 (f)
To strengthen the network of public employment
offices and rationalize the participation of the private
sector in the recruitment and placement of workers,
locally and overseas, to serve national development
objectives.
ALLOWED ENTITIES
1. Private
Art. 13 (c)
"Private employment agency": any person or entity
engaged in the recruitment and placement of
workers for a fee which is charged, directly or
indirectly, from the workers or employers or both.
Art. 13 (e)
"Private recruitment entity": any person or
association engaged in the recruitment and
placement of workers, locally or overseas, without
charging, directly or indirectly, any fee from the
workers or employers.
2. Public
Art. 12 (f)
To strengthen the network of public employment
offices and rationalize the participation of the private
sector in the recruitment and placement of workers,
locally and overseas, to serve national development
objectives.
Art. 14 (g)
Employment promotion – The Secretary of Labor
shall have the power and authority … “To organize
and establish new employment offices in addition to
existing employment offices under the Department
of Labor as the need arises.”
10.4 PROHIBITED ENTITY
Art. 16
Private recruitment - Except as provided in Chapter
II of this Title, no person or entity, other than the
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public employment offices and the OEDB for
overseas employment, shall engage in the
recruitment and placement of workers.
Art. 18
Ban on direct hiring - No employer may hire a
Filipino worker for overseas employment except
through the Boards and entities authorized by the
Department of Labor and Employment. Direct hiring
by members of the diplomatic service, officials and
employees of international organizations and such
other employers as may be allowed by the
Department and Labor and Employment is exempt
from this provision.
Art. 26
Travel agencies prohibited to recruit – Travel
agencies and sales agencies of airline companies are
prohibited from engaging in the business of
recruitment and placement of workers for overseas
employment whether for profit or not.
LICENSING – CITIZENSHIP, CAPITALIZATION,
DURATION, TRANSFERABILITY AND FEES
Art. 25.
Private Sector Participation in the Recruitment and
Placement of Workers - Pursuant to national
development objectives and in order to harness and
maximize the use of private sector resources and
initiative in the development and implementation of
a comprehensive employment program, the private
employment sector shall participate in the
recruitment and placement of workers, locally and
overseas, under such guidelines, rules and
regulations, as may be issued by the Secretary of
Labor and Employment.
Art. 26
Travel agencies prohibited to recruit – Travel
agencies and sales agencies of airline companies are
prohibited from engaging in the business of
recruitment and placement of workers for overseas
employment whether for profit or not.
Art. 27.
Citizenship Requirement - Only Filipino Citizens or
corporations, partnership or entities at least 75 % of
the authorized and voting capital stock of which is
owned and controlled by Filipino citizens shall be
permitted to participate in the recruitment and
placement of workers, locally or overseas.
Art. 28.
Capitalization – All applicants for authority to hire or
renewal of license to recruit are required to have
such substantial capitalization as determined by the
Secretary of Labor.
Art. 29.
Non-transferability of license or authority – No
license or authority shall be used directly or
indirectly by any person other than the one in whose
favor it was issued or at any place other than that
stated in the license or authority, nor may such
license or authority be transferred, conveyed, or
assigned to any other person or entity. Any transfer
of business address, appointment or designation of
nay agent or representative including the
establishment of additional offices anywhere shall
Part II : Labor Standards Law
Labor Standards
b subject to the prior approval of the Department of
Labor.
Art. 30.
Registration Fees – The Secretary of Labor shall
promulgate a schedule of fees for the registration of
all applicants for license or authority.
10.05 TECHNIQUES OF REGULATION
BONDS
Art. 31.
Bonds – All applicants for license or authority shall
post such cash and surety bonds as determined by
the Secretary of Labor to guarantee compliance with
prescribed recruitment procedures, rules an
regulations, and terms and conditions of
employment as may be appropriate.
WORKERS FEES
Art. 32.
Fees to be paid by workers – Any person applying
with a private fee-charging employment agency for
employment assistance shall not be charged any fee
until he has obtained employment through its efforts
or has actually commenced employment. Such fee
shall be always covered with the appropriate receipt
clearly showing the amount paid. The Secretary of
Labor shall promulgate a schedule of allowable fees.
REPORTS SUBMISSION
Art. 33
Reports on employment status - Whenever the
public interest so requires, the Secretary of Labor
and Employment may direct all persons or entities
within the coverage of this Title to submit a report
on the status of employment, including job
vacancies; details of job requisitions, separation
from jobs, wages, other terms and conditions, and
other employment data.
SUSPENSION AND/OR CANCELLATION OF LICENSE OR
AUTHORITY
Art. 35.
Suspension and/or cancellation of License or
Authority – The Secretary of Labor shall have the
power to suspend or cancel any license or authority
to recruit employees for overseas employment for
violation of rules and regulations issued by the
Department of Labor, the Overseas Employment
Development Board, and the National Seamen
Board, or for violation of the provisions of this and
other applicable laws, General Orders and Letters of
Instructions.
10.06 ILLEGAL RECRUITMENT
Art. 38
Illegal Recruitment –
(a) Any recruitment activities, including the
prohibited practices enumerated under Article
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34 of this Code, to be undertaken by non-
licensees or non-holders of authority shall be
deemed illegal and punishable under Article
39 of this Code. The Secretary of Labor and
Employment or any law enforcement officer
may initiate complaints under this Article.
(b) Illegal recruitment when committed by a
syndicate or in large scale shall be
considered an offense involving economic
sabotage and shall be penalized in
accordance with Article 39 hereof.
Illegal recruitment is deemed committed
by a SYNDICATE if carried out by a group of
three (3) or more persons conspiring and/or
confederating with one another in carrying
out any unlawful or illegal transaction,
enterprise or scheme defined under the first
paragraph hereof. Illegal recruitment is
deemed committed in large scale if
committed against three (3) or more persons
individually or as a group.
(c) The Secretary of Labor or his duly authorized
representative shall have the power to
recommend the arrest and detention of such
non-licensee or non-holder of authority if
after investigation it is determined that his
activities constitute a danger to national
security and public order or will lead to
further exploitation of job-seekers. The
Secretary shall order the search of the office
or premises and seizure of documents,
paraphernalia, properties and other
implements used in illegal recruitment
activities and the closure of companies,
establishments and entities found to be
engaged in the recruitment of workers for
overseas employment, without having been
licensed or authorized to do so.
Salazar v. Achacoso
We reiterate that the Secretary of Labor, not
being a judge, may no longer issue search or arrest
warrants. Hence, the authorities must go through
the judicial process. To that extent, we declare
Article 38, paragraph (c), of the Labor Code,
unconstitutional and of no force and effect.
Art. 34
Prohibited practices - It shall be unlawful for any
individual, entity, licensee or holder of authority:
(CFGI-IEOF-SBW)
a. To CHARGE or accept directly or indirectly any
amount greater than that specified in the
schedule of allowable fees prescribed by the
Secretary of Labor and Employment, or to
make a worker pay any amount greater than
that actually received by him as a loan or
advance;
b. To FURNISH or publish any false notice or
information or document in relation to
recruitment or employment;
c. To GIVE any false notice, testimony,
information or document or commit any act or
misrepresentation for the purpose of securing
a license or authority under this Code;
d. To INDUCE or attempt to induce a worker
already employed to quit his employment in
order to offer him another unless the transfer
is designed to liberate a worker from
oppressive terms and conditions of
employment;
Part II : Labor Standards Law
Labor Standards
e. To INFLUENCE or attempt to influence any
person or entity not to employ any worker who
has not applied for employment through his
agency;
f. To ENGAGE in the recruitment or placement of
workers in jobs harmful to public health or
morality or to the dignity of the Republic of the
Philippines;
g. To OBSTRUCT or attempt to obstruct
inspection by the Secretary of Labor and
Employment or by his duly authorized
representatives;
h. To FAIL to file reports on the status of
employment, placement vacancies, remittance
of foreign exchange earnings, separation from
jobs, departures and such other matters or
information as may be required by the
Secretary of Labor and Employment;
i. To SUBSTITUTE or alter employment contracts
approved and verified by the Department of
Labor and Employment from the time of actual
signing thereof by the parties up to and
including the period of expiration of the same
without the approval of the Department of
Labor and Employment.
j. To BECOME officer or member of the Board of
any corporation engaged in travel agency or to
be engaged directly or indirectly in the
management of a travel agency; and
k. To WITHHOLD or deny travel documents from
applicant workers before departure for
monetary or financial considerations other
than those authorized under this Code and its
implementing rules and regulations.
RA 8042 MIGRANT WORKERS AND OVERSEAS
FILIPINOS ACT OF 1995
Sec. 6
For purposes of this Act, ILLEGAL RECRUITMENT
shall mean any act of:
canvassing,
enlisting,
contracting,
transporting,
utilizing,
hiring, or
procuring workers
and includes:
referring,
contract services,
promising or advertising for employment
abroad,
whether for profit or not, when undertaken by a
non-licensee or non-holder of authority
contemplated under Article 13(f) of Presidential
Decree No. 442, as amended, otherwise known as
the Labor Code of the Philippines:
Provided, That any such non-licensee or non-
holder who, in any manner, offers or promises for a
fee employment abroad to two or more persons shall
be deemed so engaged.
It shall likewise include the following acts,
whether committed by any person, whether a non-
licensee, non-holder, licensee or holder of authority:
a. To CHARGE or accept directly or indirectly any
amount greater than that specified in the
schedule of allowable fees prescribed by the
Secretary of Labor and Employment, or to
make a worker pay any amount greater than
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that actually received by him as a loan or
advance;
b. To FURNISH or publish any false notice or
information or document in relation to
recruitment or employment;
c. To GIVE any false notice, testimony,
information or document or commit any act of
misrepresentation for the purpose of securing
a license or authority under the Labor Code;
d. To INDUCE or attempt to induce a worker
already employed to quit his employment in
order to offer him another unless the transfer
is designed to liberate a worker from
oppressive terms and conditions of
employment;
e. To INFLUENCE or attempt to influence any
person or entity not to employ any worker who
has not applied for employment through his
agency;
f. To ENGAGE in the recruitment or placement of
workers in jobs harmful to public health or
morality or to the dignity of the Republic of the
Philippines;
g. To OBSTRUCT or attempt to obstruct
inspection by the Secretary of Labor and
Employment or by his duly authorized
representative;
h. To FAIL to submit reports on the status of
employment, placement vacancies, remittance
of foreign exchange earnings, separation from
jobs, departures and such other matters or
information as may be required by the
Secretary of Labor and Employment;
i. To SUBSTITUTE or alter to the prejudice of the
worker, employment contracts approved and
verified by the Department of Labor and
Employment from the time of actual signing
thereof by the parties up to and including the
period of the expiration of the same without
the approval of the Department of Labor and
Employment;
j. For an OFFICER or agent of a recruitment or
placement agency to become an officer or
member of the Board of any corporation
engaged in travel agency or to be engaged
directly or indirectly in the management of a
travel agency;
k. To WITHHOLD or deny travel documents from
applicant workers before departure for
monetary or financial considerations other
than those authorized under the Labor Code
and its implementing rules and regulations;
l. FAILURE to actually deploy without valid
reason as determined by the Department of
Labor and Employment; and
m. FAILURE to reimburse expenses incurred by
the worker in connection with his
documentation and processing for purposes of
deployment, in cases where the deployment
does not actually take place without the
worker's fault. Illegal recruitment when
committed by a syndicate or in large scale
shall be considered an offense involving
economic sabotage.
Illegal recruitment is deemed committed by a
SYNDICATE if carried out by a group of three (3) or
more persons conspiring or confederating with one
another. It is deemed committed in large scale if
committed against three (3) or more persons
individually or as a group.
Part II : Labor Standards Law
Labor Standards
The persons CRIMINALLY LIABLE for the above
offenses are the principals, accomplices and
accessories. In case of juridical persons, the officers
having control, management or direction of their
business shall be liable.
10.07 ENFORCEMENT AND SANCTIONS
Art. 36
Regulatory power - The Secretary shall have the
power to restrict and regulate the recruitment and
placement activities of all agencies is authorized to
issue orders and promulgate rules and regulations to
carry out the objectives and implement the
provisions of this Title.
Art. 37
Visitorial power - The Secretary or his duly
authorized representatives may at any time inspect
the premises, books of accounts and records of any
person or entity covered by this Title, require it to
submit reports regularly on prescribed forms, and
act on violations of any provision of this Title.
Art. 39
Penalties –
a. The penalty of life imprisonment and a fine of
One Hundred thousand Pesos (P100,000) shall
be imposed if illegal recruitment constitutes
economic sabotage as defined herein:
b. Any license or holder of authority found
violating or causing another to violate any
provision of this Title or its implementing rules
and regulations shall, upon conviction thereof,
suffer the penalty of imprisonment of not less
than two years nor more than five years or a
fine of not less than P10,000 nor more than
P50,000 or both such imprisonment and fine,
at the discretion of the court;
c. Any person who is neither a license nor a
holder of authority under this Title found
violating any provision thereof or its
implementing rules and regulations shall, upon
conviction thereof, suffer the penalty of
imprisonment of not less than four years nor
more than eight years or a fine of not less
than P20,000 nor more than P100,000 or both
such imprisonment and fine, at the discretion
of the court;
d. If the offender is a corporation, partnership,
association or entity, the penalty shall be
imposed upon the officer or officers of the
corporation, partnership, association or entity
responsible for violation; and if such officer is
an alien, he shall, in addition to the penalties
herein prescribed, be deported without further
proceedings;
e. In every case, conviction shall cause and carry
the automatic revocation of the license or
authority and all the permits and privileges
granted to such person or entity under this
Title, and the forfeiture of the cash and surety
bonds in favor of the Overseas Employment
Development Board or the National Seamen
Board, as the case may be, both of which are
authorized to use the same exclusively to
promote their objectives.
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ELEMENTS OF CRIME
People v. Guevarra (99)
Under the Labor Code, recruitment and
placement refer to "any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring or
procuring workers, and includes referrals, contract
services, promising or advertising for employment,
locally or abroad, whether for profit or not: Provided,
[t]hat any person or entity which, in any manner,
offers or promises for a fee employment to two or
more persons shall be deemed engaged in
recruitment and placement.
Recruitment for overseas employment is not in
itself necessarily immoral or unlawful. It is the lack
of the necessary license or permit, or the
engagement of prohibited activities enumerated in
the Labor Code that render such recruitment
activities unlawful or criminal. Illegal recruitment is
qualified into large scale recruitment when three or
more persons are victimized. If such recruitment is
carried out by a group of three (3) or more persons
conspiring and/or confederating with one another in
carrying out any unlawful or illegal transaction,
enterprise or scheme, it becomes one committed by
a syndicate. Illegal recruitment committed by a
syndicate or in large scale amounts to an offense
involving economic sabotage, punishable by life
imprisonment and a fine of one hundred thousand
pesos (P100,000.00).
People v. Ordoño (2000)
Illegal recruitment is committed when two
elements concur, namely: (1) the offender has no
valid license or authority required by law to enable
one to lawfully engage in recruitment and placement
of workers; and (2) he undertakes either any activity
within the meaning of “recruitment and placement”
defined under Art. 13 (b), or any of the prohibited
practices enumerated under Art. 34 of the Labor
Code.
LARGE SCALE
People v. Reyes (95)
There are, it is said, 14 other cases
filed/pending in the courts against the accused for
illegal recruitment. These cases cannot be taken into
account for the purpose of Art. 38(b). When the
Labor Code speaks of illegal recruitment "committed
against three (3) or more persons individually or as
a group," it must be understood as referring to the
number of complainants in each case who are
complainants therein, otherwise, prosecutions for
single crimes of illegal recruitment can be cumulated
to make out a case of large scale illegal recruitment.
In other words, a conviction for large scale illegal
recruitment must be based on a finding in each case
of illegal recruitment of three or more persons
whether individually or as a group.
Moreover, even if Blanza and Garcia had been
illegally recruited so as to make the number of
persons illegally recruited four and make the crime
that of illegal recruitment of a large scale, since this
was not alleged in the information and this is the
more serious offense which includes that which was
charged, the appellant can only be found guilty of
the less serious offense charged, pursuant to Rule
120, §4.
People v. Sanchez (98)
Part II : Labor Standards Law
Labor Standards
Art. 13(b) of the Labor Code defines recruitment
and placement as "any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring or
procuring workers, and includes referrals, contract
services, promising or advertising for employment,
locally or abroad, whether for profit or not: Provided,
That any person or entity which, in any manner,
offers or promises for a fee employment to two or
more persons shall be deemed engaged in
recruitment and placement." The essential elements
then of the crime of illegal recruitment in large scale
are that: (1) the accused engages in acts of
recruitment and placement of workers defined under
Article 13(b) or in any prohibited activities under
Article 34 of the Labor Code; (2) the accused has
not complied with the guidelines issued by the
Secretary of Labor and Employment, particularly
with respect to the securing of a license an authority
to recruit and deploy workers, either locally or
overseas, and (3) the accused commits the unlawful
acts against three or more persons, individually or
as a group.
People v. Meris (2000)
Illegal recruitment is conducted in a large scale
if perpetrated against three (3) or more persons
individually or as a group. This crime requires proof
that the accused: (1) engaged in the recruitment
and placement of workers defined under Article 13
or in any of the prohibited activities under Article 34
of the Labor Code; (2) does not have a license or
authority to lawfully engage in the recruitment or
and placement of workers; and (3) committed the
infraction against three or more, persons,
individually or as a group.
REFERRALS
People v. Meris (2000)
In People v. Agustin, the Court ruled:
Hence, the inevitable query is whether or not
appellant Agustin merely introduced
complainants to the Goce couple or her actions
went beyond that. The testimonial evidence
hereon show that she indeed further committed
acts constitutive of illegal recruitment. All four
prosecution witnesses testified that it was
Agustin whom they initially approached
regarding their plans of working overseas. It was
from her that they learned about the fees they
had to pay, as well as the papers that they had
to submit. It was after they had talked to her
that they met the accused spouses who owned
the placement agency.
As such, the Court concluded that appellant that
appellant was an employee of the Goce spouses, as
she was actually making referrals to the agency. She
was therefore, engaged in recruitment activities.
The same factual circumstance obtains in this
case. Although accused-appellant was not an
employee of the alleged illegal recruiter Julie Micua,
the evidence show that she was the one who
approached complainants and prodded them to seek
employment abroad. It was through her that they
met Julia Micua. This is clearly an act of referral.
Worse, accused-appellant declared that she was
capable of placing them in jobs overseas. Suffice it
to say that complainants' recruitment would not
have been consummated were it not for the direct
participation of accused-appellant in the recruitment
process.
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SECTION 11 - ALIEN EMPLOYMENT
11.01 COVERAGE
NON-RESIDENT ALIEN
Almodiel v NLRC (93)
Art. 40 of the Labor Code which requires
employment permit refers to non-resident aliens.
The employment permit is required for entry into the
country for employment purposes and is issued after
determination of the non-availability of a person in
the Philippines who is competent, able and willing at
the time of application to perform the services for
which the alien is desired. A resident alien does not
fall within the ambit of the provision.
Art. 40
Employment permit of non-resident aliens - Any
alien seeking admission to the Philippines for
employment purposes and any domestic or foreign
employer who desires to engage an alien for
employment in the Philippines shall obtain an
employment permit from the Department of Labor.
The employment permit may be issued to a
non-resident alien or to the applicant employer after
a determination of the non-availability of a person in
the Philippines who is competent, able and willing at
the time of application to perform the services for
which the alien is desired.
For an enterprise registered in preferred areas
of investment, may be issued upon recommendation
of the government agency charged with the
supervision of said registered enterprise.
Art. 41
Prohibition against transfer of employment –
a. After the issuance of an employment permit,
the alien shall not transfer to another job or
change his employer without prior approval of
Secretary of Labor and Employment.
b. Any non-resident alien who shall take up
employment in violation of the provision of this
Title and its implementing rules and
regulations shall be punished in accordance
with the provisions of Articles 289 and 290 of
the Labor Code.
In addition, the alien worker shall be subject to
deportation after service of his sentence.
Art. 42
Submission of list - Any employer employing non-
resident foreign nationals on the effective date of
this Code shall submit a list of such nationals to the
Secretary of Labor and Employment within 30 days
after such date indicating their names, citizenship,
foreign and local addresses, nature of employment
and status of stay in the country. The Secretary of
Labor and Employment shall then determine if they
are entitled to an employment permit.
11.02 TECHNIQUE OF REGULATION –
EMPLOYMENT PERMIT
Art XII Sec 12
The State shall promote the preferential use of
Filipino labor, domestic materials and locally
produced goods, and adopt measures that help
them competitive.
Part II : Labor Standards Law
Labor Standards
AUTHORITY EMPLOYMENT PERMIT – ISSUANCE
General Milling Corp. v. Torres (91)
The Labor Code itself specifically empowers
respondent Secretary to make a determination as to
the availability of the services of a "person in the
Philippines who is competent, able and willing at the
time of application to perform the services for which
an alien is desired." In short, the Department of
Labor is the agency vested with jurisdiction to
determine the question of availability of local
workers. The constitutional validity of legal
provisions granting such jurisdiction and authority
and requiring proof of non-availability of local
nationals able to carry out the duties of the position
involved, cannot be seriously questioned.
SECTION 12 - EMPLOYMENT OF
APPRENTICE, LEARNERS AND
HANDICAPPED WORKERS
12.01 POLICY OBJECTIVES
Sec. 2, RA 7796
Declaration of Policy – It is hereby declared the
policy of the State to provide relevant, accessible,
high quality and efficient technical education and
skills development in support of the development of
high quality Filipino middle-level manpower
responsive to and in accordance with Philippine
development goals and priorities.
The state shall encourage active participation of
various concerned sectors, particularly private
enterprises, being direct participants in an
immediate beneficiaries of a trained and skilled
workforce, in providing technical education and skills
development opportunities.
Sec. 3, RA 7796
Statement of Goals and Objectives – It is the goal
and objective of this Act to:
a. Promote and strengthen the quality of technical
education and skills development programs to
attain international competitiveness
b. Focus technical education and skills
development or meeting the changing
demands for quality middle-level manpower
c. Encourage critical and creative thinking by
disseminating the scientific and technical
knowledge base of middle-level manpower
development programs
d. Recognize and encourage the complementary
roles of public and private institutions in
technical education and skills development and
training systems;
e. Inculcate desirable values through the
development of moral character with emphasis
on work ethic, self-discipline, self reliance, and
nationalism.
A. APPRENTICE
12.02 APPRENTICE
DEFINED
Sec. 4 (j) (RA 7796)
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“Apprenticeship” training within employment with
compulsory related theoretical instructions involving
a contract between an apprentice and an employer
during an established period assured by an
apprenticeable occupation.
APPRENTICEABLE OCCUPATION
Sec. 4 (m) (RA7796)
“Apprenticeable Occupation: is an occupation
officially endorsed by a tripartite body and approved
for apprenticeship by the Authority
QUALIFICATION
Sec. 12 (RA 7610, as amended by RA 7658)
Employment of Children – Children below fifteen
(15) years of age shall not be employed except:
1. When a child works directly under the sole
responsibility of his parents or legal guardian
and where only members of the employer’s
family are employed: Provided, however, That
his employment neither endangers his life,
safety, health and morals, nor impairs his
normal development: Provided, further, That
the parent or legal guardian shall provide the
said minor child with the prescribed primary
and/or secondary education; or
2. When a child’s employment or participation in
public and entertainment or information
through cinema, theater, radio or television is
essential: Provided, the employment contract
is concluded by the child’s parents or guardian,
with the express agreement of the child
concerned, if possible, and the approval of the
Department of Labor and Employment: and
Provided, That the following 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 the child’s exploitation or
discrimination taking into account the
system and level of remuneration, and the
duration and arrangement of working time
c. The employer shall formulate and
implement, subject to the approval and
supervision of competent authorities, a
continuing program for training and skills
acquisition of the child.
In the above exceptional cases where any
such child may be employed, the employer shall
first secure, before engaging such child, a work
permit from the Department of Labor and
Employment which shall ensure observance of
the above requirements.
ALLOWED EMPLOYMENT
Program Approval
Nitto Enterprises v. NLRC (95)
Contents of apprenticeship agreement. —
Apprenticeship agreements, including the main rates
of apprentices, shall conform to the rules issued by
the Minister of Labor and Employment. The period of
apprenticeship shall not exceed six months.
Apprenticeship agreements providing for wage rates
below the legal minimum wage, which in no case
shall start below 75% per cent of the applicable
minimum wage, may be entered into only in
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Labor Standards
accordance with apprenticeship program duly
approved by the Minister of Labor and Employment.
The Ministry shall develop standard model programs
of apprenticeship.
TERMS AND CONDITIONS OF EMPLOYMENT
Art. 61
Contents of apprenticeship agreement. —
Apprenticeship agreements, including the main rates
of apprentices, shall conform to the rules issued by
the Minister of Labor and Employment. The period of
apprenticeship shall not exceed six months.
Apprenticeship agreements providing for wage rates
below the legal minimum wage, which in no case
shall start below 75% per cent of the applicable
minimum wage, may be entered into only in
accordance with apprenticeship program duly
approved by the Minister of Labor and Employment.
The Ministry shall develop standard model programs
of apprenticeship.
Art. 72
Apprentices without compensation
The Secretary of Labor may authorize the hiring of
apprentices without compensation whose training on
the job is required by the school or training program
curriculum or as a requisite for graduation or board
examination.
COSTS
Art. 71
Deductibility of training costs - An additional
deduction from taxable income of one-half of the
value of labor training expenses incurred for
developing the productivity and efficiency of
apprentices shall be granted to the person or
enterprise organizing an apprenticeship program
provided such program is duly recognized by the
Department of Labor and Employment; provided
further that such deduction shall not exceed 10
percent of direct labor wage; and provided finally
that the person or enterprise who wish to avail of
this incentive should pay his apprentices the
minimum wages.
ENFORCEMENT
Art. 65
Investigation of violation of apprenticeship
agreement
Upon complaint of any interested person or upon its
own initiative,
the appropriate agency of the Department of Labor
and Employment or its authorized representative
shall investigate any violation of any apprenticeship
agreement
Art. 66
Appeal to the Secretary of Labor and Employment
The decision of the authorized agency of the
Department
by any aggrieved person
to the Secretary of Labor and Employment
within five days from receipt of the decision.
The decision of the Secretary shall be final and
executory.
Art. 67
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Exhaustion of administrative remedies
before instituting any action for the enforcement of
any apprenticeship agreement, or damages for
breach of any such agreement
B. Learners
12.03 LEARNERS
DEFINED
Sec. 4 (n), RA 7796
“Learners” refer to persons hired as trainees in semi-
skilled and other industrial occupation which are
non-apprenticeable. Learnership programs must be
approved by the Authority.
ALLOWED EMPLOYMENT
Art. 74
When Learners may be hired – Learners may be
employed
when no experienced workers are available
the employment of learners is necessary to
prevent curtailment of employment opportunities,
and
the employment does not create unfair
competition in terms of labor costs or impair or
lower working standards.
TERMS AND CONDITIONS OF EMPLOYMENT
Art. 75
Learnership agreement – Any employer desiring to
employer learners shall enter into a learnership
agreement with them, which agreement shall
include:
a. The NAMES and addresses of the learners;
b. The DURATION of the learnership period, which
shall not exceed three months;
c. The WAGES or salary rates of the learners
which shall begin at not less than 75 percent
of the applicable minimum wage; and
d. A COMMITMENT to employ the learners, if they
so desire, as regular employees upon
completion of the learnership. All learners who
have been allowed or suffered to work during
the first two months shall be deemed regular
employees if training is terminated by the
employer before the end of the stipulated
period through no fault of the learner.
The learnership agreement shall be subject to
inspection by the Secretary or his duly authorized
representatives.
Art. 76
Learners in piecework – Learners employed in piece
or incentive rate jobs during the training period shall
be paid in full for the work done.
C. Handicapped Workers
12.04 HANDICAPPED WORKER
Law : RA 7277 “Magna Carta for Disabled
Persons”
POLICY
Part II : Labor Standards Law
Labor Standards
Declaration of Policy – The grant of the rights and
privileges for disabled persons shall be guided by the
following principles: (2)
a. Disabled persons are part of Philippine society,
thus the State shall give full support to the
improvement of the total well-being of
disabled persons and their integration into the
mainstream of society. Toward this end, the
State shall adopt policies ensuring the
rehabilitation, self-development and self-
reliance of disabled persons. It shall develop
their skills and potentials to enable them to
compete favorably for available opportunities.
b. Disabled persons have the same rights as
other people to take their proper place in
society. They should be able to live freely and
as independently as possible. This must be
the concern of everyone – the family,
community and all government and non-
government organizations. Disabled persons’
rights must never be perceived as welfare
services by the Government.
c. The rehabilitation of the disabled persons shall
be the concern of the Government in order to
foster their capacity to attain a more
meaningful, productive and satisfying life. To
reach out to greater number of disabled
persons, the rehabilitation services and
benefits shall be expected beyond the
traditional urban-based centers to community
based programs, that will ensure full
participation of different sectors as supported
by national and local government agencies.
d. The State also recognizes the role of the
private sector in promoting the welfare of
disabled persons and shall encourage
partnership in programs that address their
needs and concerns.
e. To facilitate integration of disabled persons
into the mainstream of society, the State shall
advocate for and encourage respect for
disabled persons. The State shall exert all
efforts to remove all social, cultural, economic,
environmental and attitudinal barriers that are
prejudicial to disabled persons.
COVERAGE
shall cover all disabled persons and, to the extent
herein provided, departments, officers and agencies
of the National Government or non-government
organizations involved in the attainment of the
objectives of this Act. (3)
DEFINED
 Disabled Persons - those suffering from
restriction or different abilities, as a result of a
mental, physical or sensory impairment, to
perform an activity in the manner or within the
range considered normal for a human being
[4(a)]
 Impairment - any loss, dimunition or aberration
of psychological, physiological, or anatomical
structure or function [4(b)]
 Disability - shall mean
» a physical or mental impairment that
substantially limits one or more
psychological, physiological or anatomical
function of an individual or activities of such
individual;
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» a record of such an impairment; or
» being regarded as having such an
impairment [4(c)]
 Handicap - refers to a disadvantage for a given
individual, resulting from an impairment or a
disability, that limits or prevents the function or
activity, that is considered normal given the
age and sex of the individual [4(d)]
RIGHTS AND PRIVILEGES OF DISABLED PERSONS
Equal Opportunity for Employment (5)
No disable person shall be denied access to
opportunities for suitable employment. A qualified
disabled employee shall be subject to the same
terms and conditions of employment and the same
compensation, privileges, benefits, fringe benefits,
incentives or allowances as a qualified able-bodied
person
Five percent (5%) of all casual, emergency and
contractual positions in the Departments of Social
Welfare and Development; health, Education,
Culture and Sports; and other government agencies,
offices or corporations engaged in social
development shall be reserved for disabled persons.
Sheltered Employment (6)
If suitable employment for disabled persons
cannot be found through open employment as
provided in the immediately preceding Section, the
State shall endeavor to provide it by means of
sheltered employment. In the placement of disabled
persons in sheltered employment, it shall accord due
regard to the individual qualities, vocational goals
and inclinations to ensure a good working
atmosphere and efficient production.
Apprenticeship (7)
Subject to the provisions of the Labor Code as
amended, disabled persons shall be eligible as
apprentices or learners: Provided, that their
handicap s not as much as 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 of
apprenticeship, if found satisfactory in the job
performance, they shall be eligible for employment.
Incentives for Employers (8)
a. To encourage the active participation of the
private sector in promoting the welfare of
disabled persons and to ensure gainful
employment for qualified disabled persons,
adequate incentives shall be provided to
private entities which employ disabled
persons.
b. Private entities that employ disabled persons
who meet the required skills or qualifications,
either ad regular employee, apprentice or
learner, shall be entitled to an additional
deduction, from their gross income, equivalent
to 25% of the total amount paid as salaries
and wages to disabled persons: Provided,
however, That such entities present proof
as certified by the Department of Labor and
Part II : Labor Standards Law
Labor Standards
Employment and the Department f Health as
to his disability, skills, and qualifications.
c. Private entities that improve or modify their
physical facilities in order to provide
reasonable accommodation for disabled
persons shall also be entitled to an additional
deduction from their net taxable income,
equivalent to 50% of the direct costs of the
improvements or modifications. This Section,
however, does not apply to improvements or
modifications or facilities required under Batas
Pambansa Bilang 344.
REGULAR WORKERS
Bernardo v. NLRC (99)
In this light, the Magna Carta for Disabled
Persons mandates that a qualified disabled employee
should be given the same terms and conditions of
employment as a qualified able-bodied person.
Section 5 of the Magna Carta provides:
Sec. 5. Equal Opportunity for Employment. — No
disabled person shall be denied access to
opportunities for suitable employment. A qualified
disabled employee shall be subject to the same
terms and conditions of employment and the same
compensation, privileges, benefits, fringe benefits,
incentives or allowances as a qualified able bodied
person.
The fact that the employees were qualified
disabled persons necessarily removes the
employment contracts from the ambit of Article 80.
Since the Magna Carta accords them the rights of
qualified able-bodied persons, they are thus covered
by Article 280 of the Labor Code.
XXX The noble objectives of Magna Carta for
Disabled Persons are not based merely on charity or
accommodation, but on justice and the equal
treatment of qualified persons, disabled or not. In
the present case, the handicap of petitioners (deaf-
mutes) is not a hindrance to their work. The
eloquent proof of this statement is the repeated
renewal of their employment contracts. Why then
should they be dismissed, simply because they are
physically impaired? The Court believes, that, after
showing their fitness for the work assigned to them,
they should be treated and granted the same rights
like any other regular employees.
SECTION 13 CONDITIONS
OF EMPLOYMENT – HOURS OF WORK
13.01 HOURS REGULATON
RATIONALE AND ENFORCEMENT
Manila Terminal Co. Inc v CIR (52)
The Eight-Hour Labor Law was designed not
only to safeguard the health and welfare of the
laborer or employee, but in a way to minimize
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unemployment by forcing employers, in cases where
more than 8-hour operation is necessary, to utilize
different shifts of laborers or employees working
only for eight hours each.
13.02 COVERAGE
Art. 82
Coverage
 COVERED: employees in all establishments and
undertakings, whether for profit or not
 NOT COVERED:
» government employees
» managerial employees
» field personnel
» members of the family of the employer who
are dependent on him for support
» domestic helpers
» persons in the personal service of another
and
» workers who are paid by results as
determined by the Secretary of Labor and
Employment in appropriate regulations.
 MANAGERIAL EMPLOYEES: those whose
primary duty consists of the management of
the establishment in which they are employed
or of a department or subdivision thereof, and
to other officers or members of the managerial
staff.
 FIELD PERSONNEL: non-agricultural employees
who regularly perform their duties away from
the principal place of business or branch office
of the employer and whose actual hours of
work in the field cannot be determined with
reasonable certainty.
RATIONALE EXEMPTION – MANAGERIAL EMPLOYEES
Natl Waterworks & Sewerage Authority v.
NASA Consolidated Unions (65)
The philosophy behind the exemption of
managerial employees from the 8-Hour Labor Law is
that such workers are not usually employed for
every hour of work but their compensation is
determined considering their special training,
experience or knowledge which requires the exercise
of discretion and independent judgment, or perform
work related to management policies or general
business operations along specialized or technical
lines. For these workers it is not feasible to provide a
fixed hourly rate of pay or maximum hours of labor.
Salazar v. NLRC (96)
Hence, although petitioner cannot strictly be
classified as a managerial employee under Art. 82 of
the Labor Code, and sec. 2(b), Rule I, Book III of
the Omnibus Rules Implementing the Labor Code,
nonetheless he is still not entitled to payment of the
aforestated benefits because he falls squarely under
another exempt category — "officers or members of
a managerial staff" as defined under sec. 2(c) of the
abovementioned implementing rules.
A case in point is National Sugar Refineries
Corporation v. NLRC. On the issue of "whether
supervisory employees, as defined in Article 212
(m), Book V of the Labor Code, should be considered
as officers or members of the managerial staff under
Article 82, Book III of the same Code and hence not
entitled to overtime, rest day and holiday pay,"
this Court ruled:
A cursory perusal of the Job Value
Contribution Statements of the union members will
Part II : Labor Standards Law
Labor Standards
readily show that these supervisory employees are private respondent and other fishermen in its
under the direct supervision of their respective employ should be classified as field personnel who
department superintendents and that generally
have no statutory right to service incentive leave
they assist the latter in planning, organizing,
staffing, directing, controlling, communicating and
pay.
in making decisions in attaining the company's set In contrast, in the case at bar, during the entire
goals and objectives. These supervisory course of their fishing voyage, fishermen employed
employees are likewise responsible for the by the petitioner have no choice but to remain on
effective and efficient operation of their respective board its vessel. Although they perform non-
departments. . . . agricultural work away from the petitioner’s business
From the foregoing, it is apparent that the offices, the fact remains that throughout the
members of respondent union discharge duties and duration of their work they are under the effective
responsibilities which ineluctably qualify them as control and supervision of the petitioner through the
officers or members of the managerial staff, as vessel’s patron or master as the NLRC correctly held.
defined in Section 2, Rule I, Book III of the
aforestated Rules to Implement the Labor Code, RATIONALE EXEMPTION – PIECE WORKER
viz.:
(1) their primary duty consists of the
Red V Coconut Products Ltd. v. CIR (66)
performance of work directly related to
management policies of their employer; (2) they
Furthermore, although the Eight-Hour Labor
customarily and regularly exercise discretion and Law provides that it does not cover those workers
independent judgment; (3) they regularly and who prefer to be paid on piece-work basis (Sec. 2,
directly assist the managerial employee whose CA 444), nothing in said law precludes an agreement
primary duty consists of the management of a for the payment of overtime precludes an agreement
department of the establishment in which they for the payment of overtime compensation to piece-
are employed; (4) they execute, under general
workers. And in agreeing to the provision for
supervision, work along specialized or technical
lines requiring special training, experience, or
payment of shift differential to the petitioners-
knowledge; (5) they execute, under general workers aforementioned, in the bargaining
supervision, special assignments and tasks; and agreement, as well as in actually paying to them
(6) they do not devote more than 20% of their said differentials, though not in full, the company in
hours worked in a work-week to activities which effect freely adhered to an application and
are not directly and clearly related to the implementation of the Eight-Hour Labor Law, or its
performance of their work hereinbefore
objectives, to said workers.
described.
Under the facts obtaining in this case, we are
13.03 NORMAL HOURS OF WORK
constrained to agree with petitioner that the union
members should be considered as officers or
Art. 83 Normal hours of work –
members of the managerial staff and are, therefore,
The normal hours of work of any employee shall
exempt from the coverage of Article 82. Perforce,
not exceed eight hours a day.
they are not entitled to overtime, rest day and
Health personnel in cities or municipalities with
holiday pay.
a population of at least one million or in hospitals or
clinics with a bed capacity of at least one hundred
TEST – FIELD PERSONNEL
shall hold regular office hours for eight hours a day,
for five days a week, or a total of forty hours a
Union of Filipro Employees v. Vivar (92)
week, exclusive of time for meals, except where the
XXX Contrary to the contention of the petitioner,
exigencies of the service require that such personnel
the Court finds that the aforementioned rule did not
work for six days, forty-eight hours, in which case
add another element to the Labor Code definition of
they shall be entitled to an additional compensation
field personnel. The clause "whose time and
of at least 30 percent of their regular wage for work
performance is unsupervised by the employer" did
on the sixth day.
not amplify but merely interpreted and expounded
the clause "whose actual hours of work in the field
HEALTH PERSONNEL: resident physicians, nurses,
cannot be determined with reasonable certainty."
nutritionists, dieticians, pharmacists, social workers,
The former clause is still within the scope and
laboratory technicians, paramedical technicians,
purview of Article 82 which defines field personnel.
psychologists, midwives, attendants and all other
Hence, in deciding whether or not an employee's
hospital or clinic personnel.
actual working hours in the field can be determined
with reasonable certainty, query must be made as to
DISTINCTION BETWEEN THE TWO CLASSES
whether or not such employee's time and
COMMERCIAL/INDU HEALTH
performance is constantly supervised by the
STRIAL
employer.
Normal 8 hrs/day 8
Work Day hrs/day
Salazar v. NLRC (96)
Normal 6 days 5 days
“Actual hours work in the field…” is to be read in
Work Week
conjunction with Rule IV, Book III of the
Implementing Rules. Therefore field personnel are
employees whose time and performance is
unsupervised by the employer.
13.04 HOURS WORKED
Mercidar Fishing Corp. v NLRC (98)
Petitioner argues essentially that since the work
Art. 84
of private respondent is performed away from its
Hours worked - shall include
principal of business, it has no way of verifying his
actual hours of work on the vessel. It contends that

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Part II : Labor Standards Law
Labor Standards
a. All time during which an employee is required
to be on duty or to be at a prescribed
workplace, and
b. All time during which an employee is suffered
or permitted to work.
Rest periods of short duration during working
hours shall be counted as hours worked.
ENTRY TIME CARDS
Prangan v. NLRC (98)
In the instant petition, the NLRC, in declaring
that petitioner only worked for four hours, relied
solely on the supposed daily time records of the
petitioner submitted by the private respondent. We,
however, are of the opinion that these documents
cannot be considered substantial evidence as to
conclude that petitioner only worked for four hours.
Private respondent hardly bothered to
controvert petitioner's assertion, much less bolster
its own contention. As petitioner's employer, private
respondent has unlimited access to all relevant
documents and records on the hours of work of the
petitioner. Yet, even as it insists that petitioner only
worked for four hours and not twelve, no
employment contract, payroll, notice of assignment
or posting, cash voucher or any other convincing
evidence which may attest to the actual hours of
work of the petitioner was even presented. Instead,
what the private respondent offered as evidence was
only petitioner's daily time record, which the latter
categorically denied ever accomplishing, much less
signing.
In said alleged daily time record, it showed that
petitioner started work at 10:00 p.m. and would
invariably leave his post at exactly 2:00 a.m.
Obviously, such unvarying recording of a daily time
record is improbable and contrary to human
experience. It is impossible for an employee to
arrive at the workplace and leave at exactly the
same time, day in day out. The very uniformity and
regularity of the entries are "badges of
untruthfulness and as such indices of dubiety.
Nicario v. NLRC (98)
This Court, in previously evaluating the
evidentiary value of daily time records, especially
those which show uniform entries with regard to the
hours of work rendered by an employee, has ruled
that "such unvarying recording of a daily time record
is improbable and contrary to human experience. It
is impossible for an employee to arrive at the
workplace and leave at exactly the same time, day
in day out. The uniformity and regularity of the
entries are 'badges of untruthfulness and as such
indices of dubiety.' The observations made by the
Solicitor General regarding the unreliability of the
daily time records would therefore seem more
convincing. On the other hand, respondent company
failed to present substantial evidence, other than the
disputed DTRs, to prove that petitioner indeed
worked for only eight hours a day.
IDLE TIME
National Development Co. v. CIR (62)
It will be noted that, under the law, the idle
time that an employee may spend for resting and
during which he may leave the spot or place of work
though not the premises 2 of his employer, is not
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counted as working time only where the work is
broken or is not continuous.
Luzon Stevedoring Co. v. Luzon Marine
Department Union (57)
A laborer need not leave the premises of the
factory, shop or boat in order that his period of rest
shall not be counted, it being enough that he "cease
to work", may rest completely and leave or may
leave at his will the spot where he actually stays
while working, to go somewhere else, whether
within or outside the premises of said factory, shop
or boat. If these requisites are complied with, the
period of such rest shall not be counted.
CONTINUOUS WORK
State Marine Corporation v. Cebu Seamen’s
Association (63)
The provision of section 1 of Commonwealth Act
No. 444, which states that "when the work is not
continuous, the time during which the laborer is not
working and can leave his working place and can
rest completely shall not be counted", finds no
application in the present case, where the laborer's
work is continuous, and during the time that he is
not working he can not leave and completely rest
owing to the place and nature of his work.
WAITING TIME
Arica v. NLRC (89)
Furthermore, the thirty (30)-minute assembly is
a deeply-rooted, routinary practice of the
employees, and the proceedings attendant thereto
are not infected with complexities as to deprive the
workers the time to attend to other personal
pursuits.
TRAVEL TIME
Rada v NLRC (92)
The fact that he picks up employees of Philnor
at certain specified points along EDSA in going to the
project site and drops them off at the same points
on his way back from the field office going home to
Marikina, Metro Manila is not merely incidental to
petitioner's job as a driver. On the contrary, said
transportation arrangement had been adopted, not
so much for the convenience of the employees, but
primarily for the benefit of the employer, herein
private respondent. Since the assigned task of
fetching and delivering employees is indispensable
and consequently mandatory, then the time required
of and used by petitioner in going from his residence
to the field office and back, that is, from 5:30 A.M.
to 7:00 A.M. and from 4:00 P.M. to around 6:00
P.M., which the labor arbiter rounded off as
averaging three hours each working day, should be
paid as overtime work.
13.05 MEAL PERIOD
Art. 85
Meal periods - Subject to such regulations as the
Secretary may prescribe, it shall be the duty of
every employer to give his employees not less than
sixty minutes time-off for their regular meals.
Part II : Labor Standards Law
Labor Standards
MEAL TIME – FREE TIME
Pan-American Airways v Pan-American
Employees Association (61)
Where during the so-called meal period, the
laborers are required to stand by for emergency
work, or where said meals hour is not one of
complete rest, such period is considered overtime.
Phil. Airlines, Inc. v. NLRC (99)
Thus, the eight-hour work period does not
include the meal break. Nowhere in the law may it
be inferred that employees must take their meals
within the company premises. Employees are not
prohibited from going out of the premises as long as
they return to their posts on time. Private
respondent's act, therefore, of going home to take
his dinner does not constitute abandonment.
13.06 OVERTIME WORK AND OFFSETTING
PROHIBITION
Art. 87
Overtime work – Work may be performed beyond
eight hours a day provided that the employee is paid
for the overtime work an additional compensation
equivalent to his regular wage plus at least twenty-
five percent thereof. Work performed beyond eight
hours on a holiday or rest day shall be paid an
additional compensation equivalent to the rate for
the first eight hours on a holiday or rest day plus at
least 30 percent thereof.
Art. 88
Undertime not offset by overtime - Undertime work
on any particular day shall not be offset by overtime
work on any other day. Permission given to the
employee to go on leave on some other day of the
week shall not exempt the employer from paying the
additional compensation required in this Chapter.
Art. 89
Emergency overtime work - Any employee may be
required by the employer to perform overtime work
in any of the following cases:
a. When the country is at WAR or when any other
national or local emergency has been declared
by Congress or the Chief Executive;
b. When it is necessary to prevent LOSS of life or
property or in case of imminent danger to
public safety due to an actual or impending
emergency in the locality caused by serious
accidents, fire, flood, typhoon, earthquake,
epidemic or other disaster or calamity;
c. When there is URGENT work to be performed
on machines, installation or equipment, in
order to avoid serious loss or damage to the
employer or some other cause of similar
nature;
d. When the work is necessary to prevent loss or
damage to PERISHABLE goods;
e. Where the completion or continuation of the
work started before the 8th hour is necessary
to prevent SERIOUS obstruction or prejudice
to the business or operations of the employer.
Any employee required to render overtime work
under this Article shall be paid the ADDITIONAL
compensation required in this Chapter.
Art. 90
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Computation of additional compensation – For
purposes of computing overtime and other additional
remuneration as required by this Chapter, the
"regular wage" of an employee shall include the cash
wage only, without deduction on account of facilities
provided by the employer.
RATIONALE – OVERTIME PAY
Philippine National Bank v. PNB Employees
Association (82)
Why is a laborer or employee who works beyond
the regular hours of work entitled to extra
compensation called in this enlightened time,
overtime pay? Verily, there can be no other reason
than that he is made to work longer than what is
commensurate with his agreed compensation for the
statutorily fixed or voluntarily agreed hours of labor
he is supposed to do. It is thus the additional work,
labor or service employed and the adverse effects of
his longer stay in his place of work that justify and is
the real reason for the extra compensation that is
called overtime pay.
Overtime work is actually the lengthening of
hours devoted to the interests of the employer and
the requirements of his enterprise.
Caltex Regular Employees v. Caltex Phil. Inc.
(95)
Overtime work consists of hours worked on a
given day in excess of the applicable work period,
which here is eight (8) hours. It is not enough that
the hours worked fall on disagreeable or
inconvenient hours. 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 through Friday.
NO FORMULA BASIC CONTRACT
Manila Terminal Co. Inc v. CIR (52)
A contract of employment, which provides for a
weekly wage for a specified number of hours,
sufficient to cover both the statutory minimum wage
and overtime compensation, if computed on the
basis of the statutory minimum, and which makes no
provision for a fixed hourly rate or that the weekly
wage includes overtime compensation, does not
meet the requirements of the Act.
BUILT-IN COMPENSATION
Engineering Equipment Inc v. MOLE (85)
Written contracts with a "built-in" overtime pay
in the ten-hour working day and that their basic
monthly pay was adjusted to reflect the higher
amount covering the guaranteed two-hour extra
time whether worked or unworked are valid.
COMPUTATION
Agga v. NLRC (98)
The cited provisions of PD 442 simply declare
that night shift differential and additional
remuneration for overtime, rest day, Sunday and
holiday work shall be computed on the basis of the
employee's regular wage. In like fashion, the
1991 POEA Rules merely require employers to
guarantee payment of wages and overtime pay.
Part II : Labor Standards Law
Labor Standards
Thus, petitioners' stance is bereft of any legal work is such that least 30 percent of his
support. he has no regular regular wage for work
workdays and no performed on Sundays and
PROOF regular rest days holidays.
can be scheduled
Lagatic v. NLRC (98) c. any special Additional compensation of at
Entitlement to overtime pay must first be holiday least 30 percent of the
established by proof that said overtime work was regular wage
actually performed, before an employee may avail of Where such holiday work falls
said benefit. on the employee's
scheduled rest day, he
13.07 NIGHT WORK shall be entitled to an
additional compensation
Art. 86 of at least 50 percent of
Night shift differential - not less than ten percent of his regular wage.
his regular wage for each hour of work performed d. Where the The employer shall pay such
between ten o'clock in the evening and six o'clock in collective higher rate
the morning. bargaining
agreement or
RATIONALE PROHIBITION other applicable
employment
Shell Oil Co. Ltd v. National Labor Union (48) contract stipulates
"Nightwork cannot be regarded as desirable, the payment of a
either from the point of view of the employer or of higher premium
the wage earner. It is uneconomical unless overhead pay than that
costs are unusually heavy. Frequently the scale of prescribed under
wages is higher as an inducement to employees to this Article
accept employment on the night shift, and the rate
of production is generally lower." Manila Electric Company v. Public Utilities
"The case against nightwork, then, may be said Employees Association (47)
to rest upon several grounds. In the first place, Perfecto, J. dissenting - Furthermore, it is a fact
there are the remotely injurious effects of that Sundays and legal holidays are set aside by law
permanent nightwork manifested in the later years as days of rest. The life, existence, and happiness of
of the worker's life. Of more immediate importance a person do not depend only on the satisfaction of
to the average worker is the disarrangement of his his physical needs. There are moral, intellectual and
social life, including the recreational activities of his spiritual needs as imperative as the physical ones…
leisure hours and the ordinary associations of normal The deprivation of that opportunity to satisfy mental,
family relations. From an economic point of view, moral, and spiritual needs should not be ignored,
nightwork is to be discouraged because of its and should be properly compensated.
adverse effect upon efficiency and output. A moral
argument against nightwork in the case of women is 14.02 COVERAGE
that the night shift forces the workers to go to and
from the factory in darkness. Recent experiences of Art. 82
industrial nations have added much to the evidence Coverage - SUPRA
against the continuation of nightwork, except in
extraordinary circumstances and unavoidable Art. 91
emergencies. The immediate prohibition of Right to weekly rest day
nightwork for all laborers is hardly practicable; its a. It shall be the duty of every employer, whether
discontinuance in the case of women employees is operating for profit or not, to provide a rest
unquestionably desirable. 'The night was made for period of not less than twenty-four consecutive
rest and sleep and not for work' is a common saying hours after every six consecutive normal work
among wage-earning people, and many of them days.
dream of an industrial order in which there will be no
night shift." 14.03 SCHEDULING OF REST DAY

SECTION 14 CONDITION OF EMPLOYMENT
– WEEKLY REST PERIOD
14.01 RATIONALE
a. scheduled rest Additional compensation of at
day least 10 percent of regular
wage. An employee shall be
entitled to such additional
compensation for work
performed on Sunday only
when it is his established rest
day.
b. nature of the Additional compensation of at
Art. 91 (b)
The employer shall determine and schedule the
weekly rest day of his employees subject to
collective bargaining agreement and to such rules
and regulations as the Secretary of Labor may
provide. However, the employer shall respect the
preference of employees as to their weekly rest day
when such preference is based on religious grounds.
14.04 COMPULSORY WORK AND
COMPENSATION
Art. 92
When employer may require work on a rest day –
The employer may require his employees to work
on any day:

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a. In case of actual or impending EMERGENCIES
caused by serious accidents, fire, flood,
typhoon, earthquake, epidemic or other
disaster or calamity to prevent loss of life and
property or imminent danger to public safety;
b. In case of URGENT work to be performed on
the machinery, equipment or installation to
avoid serious loss which the employer would
otherwise suffer;
c. In the event of ABNORMAL pressure of work
due to special circumstances, where the
employer cannot ordinarily be expected 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 or loss to
the employer; and
f. Under other circumstances ANALOGOUS or
similar to the foregoing as determined by the
Secretary of Labor and Employment.
COMPUTATION
Agga v. NLRC (98)
The cited provisions of PD 442 simply declare
that night shift differential and additional
remuneration for overtime, rest day, Sunday and
holiday work shall be computed on the basis of the
employee's regular wage. In like fashion, the 1991
POEA Rules merely require employers to guarantee
payment of wages and overtime pay. Thus,
petitioners' stance is bereft of any legal support.
Art. 93
Compensation for rest day, Sunday or holiday work
SECTION 15 - CONDITION
OF EMPLOYMENT – HOLIDAYS
15.01 COVERAGE
Art. 94
Right to holiday pay - (a) Every worker shall be paid
his regular daily wage during regular holidays,
except in retail and service establishment regularly
employing less than ten workers;
COVERAGE – EMPLOYEES
Mantrade/FMC Division Employees and
Workers Union v. Bacungan (86)
The Secretary of Labor cannot exempt Mantrade
from paying holiday pay just because its employees
are uniformly paid by the month irrespective of the
number of working days therein. The Labor Code
only exempts retail and service establishments
regularly employing less than 10 workers.
15.02 HOLIDAYS
EXECUTIVE ORDER NO. 203
PROVIDING A LIST OF REGULAR HOLIDAYS AND
SPECIAL DAYS TO BE OBSERVED THROUGHOUT THE
PHILIPPINES AND FOR OTHER PURPOSES
Sec. 1.
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Unless otherwise modified by law, order or
proclamation, the following regular holidays and
special days shall be observed in this country:
A. Regular Holidays
New Year's Day - January 1
Maundy Thursday - Movable date
Good Friday - Movable date
Araw ng Kagitingan (Bataan and Corregidor
Day) - April 9
Labor Day - May 1
Independence Day - June 12
National Heroes Day - Last Sunday of August
Bonifacio Day - November 30
Christmas Day - December 25
Rizal Day - December 30
B. Nationwide Special Days
All Saints Day - November 1
Last Day of the Year - December 31
Sec. 2.
Henceforth, the terms "legal or regular holiday"
and "special holiday", as used in laws, orders, rules
and regulations or other issuances shall now be
referred to as "regular holiday" and "special day",
respectively.
15.03 HOLIDAY PAY
Art 94(b)
The employer may require an employee to work on
any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate;
FACULTY PRIVATE SCHOOL
Jose Rizal College v. NLRC (87)
It is readily apparent that the declared purpose
of the holiday pay which is the prevention of
diminution of the monthly income of the employees
on account of work interruptions is defeated when a
regular class day is cancelled on account of a special
public holiday and class hours are held on another
working day to make up for time lost in the school
calendar. Otherwise stated, the faculty member,
although forced to take a rest, does not earn what
he should earn on that day. Be it noted that when a
special public holiday is declared, the faculty
member paid by the hour is deprived of expected
income, and it does not matter that the school
calendar is extended in view of the days or hours
lost, for their income that could be earned from
other sources is lost during the extended days.
Similarly, when classes are called off or shortened
on account of typhoons, floods, rallies, and the like,
these faculty members must likewise be paid,
whether or not extensions are ordered.
DIVISOR AS FACTOR
Union of Filipro Employees v. Viva (91)
It must be stressed that the daily rate,
assuming there are no intervening salary increases,
is a constant figure for the purpose of computing
overtime and night differential pay and commutation
of sick and vacation leave credits. Necessarily, the
daily rate should also be the same basis for
computing the 10 unpaid holidays.
Transasia Phils. Emplower Assn. v. NLRC
(99)
Part II : Labor Standards Law
Labor Standards
Trans-Asia's inclusion of holiday pay in
petitioners' monthly salary is clearly established by
its consistent use of the divisor of "286" days in the
computation of its employees' benefits and
deductions. The use by Trans-Asia of the "286" days
divisor was never disputed by petitioners. A simple
application of mathematics would reveal that the ten
(10) legal holidays in a year are already accounted
for with the use of the said divisor. As explained by
Trans-Asia, if one is to deduct the unworked 52
Sundays and 26 Saturdays (derived by dividing 52
Saturdays in half since petitioners are required to
work half-day on Saturdays) from the 365 calendar
days in a year, the resulting divisor would be 286
days (should actually be 287 days). Since the ten
(10) legal holidays were never included in
subtracting the unworked and unpaid days in a
calendar year, the only logical conclusion would be
that the payment for holiday pay is already
incorporated into the said divisor. Thus, when
viewed against this very convincing piece of
evidence, the arguments put forward by petitioners
to support their claim of non-payment of holiday
pay, i.e., the pre-condition stated in the Employees'
Manual for entitlement to holiday pay, the absence
of a stipulation in the employees' appointment
papers for the inclusion of holiday pay in their
monthly salary, the stipulation in the CBA
recognizing the entitlement of the petitioners to
holiday pay with a concomitant provision for the
granting of an "allegedly" very generous holiday pay
rate, would appear to be merely inferences and
suppositions which, in the apropos words of the
labor arbiter, "paled in the face of the prevailing
company practices and circumstances abovestated."
The Court notes that there is a need to adjust
the divisor used by Trans-Asia to 287 days, instead
of only 286 days, in order to properly account for the
entirety of regular holidays and special days in a
year as prescribed by Executive Order No. 203 in
relation to Section 6 of the Rules Implementing
Republic Act 6727.
COMPUTATION
Agga v. NLRC (98)
The cited provisions of PD 442 simply declare
that night shift differential and additional
remuneration for overtime, rest day, Sunday and
holiday work shall be computed on the basis of the
employee's regular wage. In like fashion, the 1991
POEA Rules merely require employers to guarantee
payment of wages and overtime pay. Thus,
petitioners' stance is bereft of any legal support.
SUNDAY
Wellington Investment Inc v. Trajano (95)
In fixing the salary, Wellington used what it calls
the "314 factor;" that is to say, it simply deducted
51 Sundays from the 365 days normally comprising
a year and used the difference, 314, as basis for
determining the monthly salary. The monthly salary
thus fixed actually covers payment for 314 days of
the year, including regular and special holidays, as
well as days when no work is done by reason of
fortuitous cause, as above specified, or causes not
attributable to the employees.
There is no provision of law requiring any
employer to make such adjustments in the monthly
salary rate set by him to take account of legal
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holidays falling on Sundays in a given year, or,
contrary to the legal provisions bearing on the point,
otherwise to reckon a year at more than 365 days.
As earlier mentioned, what the law requires of
employers opting to pay by the month is to assure
that "the monthly minimum wage shall not be less
than the statutory minimum wage multiplied by 365
days divided by twelve," and to pay that salary "for
all days in the month whether worked or not," and
"irrespective of the number of working days
therein."
PROOF OF PAYMENT
Building Care Corp v. NLRC (98)
Indeed if petitioner wanted to prove its payment
of holiday pays and salary differentials, it could have
easily presented proofs of such monetary benefits.
But it did not. It had failed to comply with the
mandate of the law. As public respondent ruled, the
burden of proof in this regard belongs to the
employer, not to the employee.
SECTION 16 - CONDITION
OF EMPLOYMENT – SERVICE INCENTIVE
LEAVE
A. Service Incentive Leave
16.01 COVERAGE
Art 95.
Right to Service Incentive Leave –
a. Every employee who has rendered at least one
year of service shall be entitled to a yearly
service incentive leave of five days with pay
b. This provision shall not apply to those who are
already enjoying the benefit herein provided,
those enjoying vacation leave with pay at least
five days and those employed in
establishments regularly employing less than
ten employees or in establishments exempted
from granting this benefit by the Secretary of
Labor after considering the viability or financial
condition of such establishment.
Makati Haberdashery Inc. v. NLRC (89)
On the other hand, while private respondents
are entitled to Minimum Wage, COLA and 13th
Month Pay, they are not entitled to service incentive
leave pay because as piece-rate workers being paid
at a fixed amount for performing work irrespective of
time consumed in the performance thereof, they fall
under one of the exceptions stated in Section 1(d),
Rule V, Implementing Regulations, Book III, Labor
Code. For the same reason private respondents
cannot also claim holiday pay (Section 1(e), Rule IV,
Implementing Regulations, Book III, Labor Code).
16.02 ENTITLEMENT AND ARBITRATION
Art 95.
Right to Service Incentive Leave –
a. Every employee who has rendered at least one
year of service shall be entitled to a yearly
service incentive leave of five days with
pay
Part II : Labor Standards Law
Labor Standards
c. The grant of benefit in excess of that provided
herein shall not be made a subject of
arbitration or any court or administrative
action.
16.03 COMPUTATION AND LIABILITY
Sentinel Security Agency, Inc. v. NLRC (98)
Under Arts. 107 and 109, the indirect employer
is jointly and severally liable with the contractor for
the workers’ wages, in the same manner and extent
that it is liable to its direct employees. This liability
of the Client covers the payment of the service
incentive leave pay of the complainants during the
time they were posted at the Cebu Branch of the
Client. As service had been rendered, the liability
accrued, even if the complainants were eventually
transferred or reassigned. The service incentive
leave is expressly granted by these pertinent
provisions of the Labor Code
B. Paternity Leave
Reference: 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 sectors
shall be entitled to a paternity leave of SEVEN (7)
days with full pay for the first four (4) deliveries of
the LEGITIMATE spouse with whom he is
cohabiting. The male employee applying for
paternity leave shall notify his employer of the
pregnancy of his legitimate spouse and the expected
date of such delivery.
For purposes of this Act, delivery shall include
childbirth or any miscarriage.
C. Maternity Leave
Reference: Sec. 14 – A RA 8282
A female employee who has paid at least three
(3) monthly contributions in the twelve-month
period immediately preceding the semester of her
childbirth, or miscarriage shall be paid a daily
maternity benefit equivalent to one hundred percent
(100%) of her average salary credit for sixty (60)
days or seventy-eight days in case of caesarean
delivery subject to the following conditions:
a. That the employee shall have notified her
employer of her pregnancy and the probable
date of her childbirth which notice shall be
transmitted to the SSS in accordance with the
rules and regulations it may provide.
b. The full payment shall be advanced by the
employer within thirty (30) days from the filing
of the maternity leave application.
c. That payment of daily maternity benefits shall
be a bar to the recovery of sickness benefits
provided by this Act for the same period for
which daily maternity benefits have been
received.
d. That the maternity benefits provided under
this section shall be paid only for the first four
(4) deliveries or miscarriages.
e. That the SSS shall immediately reimburse the
employer of one hundred percent (100%) of
the amount of maternity benefits advanced to
the employee by the employer upon receipt of
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satisfactory proof of such payment and legality
thereof;
f. That if an employee should give birth or suffer
miscarriage without the required contributions
having been remitted for her by her employer
to the SSS, or without the latter having been
previously notified by the employer of time of
the pregnancy, the employer shall pay to the
SSS damages equivalent to the benefits which
said employee member would otherwise have
been entitled to.
D. Vacation and Sick Leave
POLICY
St. Michael Academy v. NLRC
The payment of vacation and sick leave is
governed by the policy of the employer or the
agreement between the employer and employee.
SECTION 17 - WAGES
A. Wages – In General
17.01 COVERAGE
Art. 97
Definitions - As used in this Title:
(b) "Employer" includes
any person
acting directly or indirectly in the interest of
an employer in relation to an employee
and shall include
the Government and all its branches,
subdivisions and instrumentalities
all Government-owned and controlled
corporations and institutions, as well as
non-profit private institutions or
organizations.
(c) "Employee" includes any individual employed
by an employer.
(e) "Employ" means to suffer or permit to work.
Application of Title – Art. 98:
This Title shall not apply to:
farm tenancy or leasehold
domestic service
persons working in their respective homes in
needlework or in any cottage industry duly
registered in accordance with law.
GOVERNMENT AGENCY
Phil. Fisheries Development Authority v. NLRC
(92)
Notwithstanding that the petitioner is a
government agency, its liabilities, which are joint
and solidary with that of the contractor, are provided
in Articles 106, 107 and 109 of the Labor Code. This
places the petitioner's liabilities under the scope of
the NLRC. Moreover, Book Three, Title II on Wages
specifically provides that the term "employer"
includes any person acting directly or indirectly in
the interest of an employer in relation to an
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employee and shall include the Government and all
its branches, subdivisions and instrumentalities, all
government-owned or controlled corporation and
institutions as well as non-profit private institutions,
or organizations (Art. 97 [b], Labor Code; Eagle
Security Agency, Inc. v. NLRC; Rabago v. NLRC)
17.02 WAGE
Art. 97(f)
“Wage” paid to any employee shall mean the
remuneration or earnings, however designated,
capable of being expressed in terms of money,
whether fixed on a time, task, piece, commission
basis, or other method of calculating the same,
which is payable by an employer to an employee
under a written or unwritten contract of employment
for work done or to be done or for services rendered
or to be rendered and includes the fair and
reasonable value, as determined by the Secretary of
Labor, of board, lodging or other facilities
customarily furnished by the employer to the
employee.
"Fair and reasonable value" shall not include any
profit to the employer or to any person affiliated
with the employer.
FAIR DAY PAY
Aklan Electronic Cooperative, Inc. v. NLRC
(2000)
The age-old rule governing the relation between
labor and capital, or management and employee of a
"fair day’s wage for a fair day’s labor" remains as
the basic factor in determining employees’ wages. If
there is no work performed by the employee there
can be no wage or pay unless, of course, the laborer
was able, willing and ready to work but was illegally
locked out, suspended or dismissed, or otherwise
illegally prevented from working, a situation which
we find is not present in the instant case. It would
neither be fair nor just to allow private respondents
to recover something they have not earned and
could not have earned because they did not render
services at the Kalibo office during the stated period.
FACILITIES AND SUPPLEMENTS
Atok Big Wedge Mining Co. Inc. v. Atok Big
Wedge Mutual Benefit Assoc. (53)
A person's needs increase as his means
increase. This is true not only as to food but as to
everything else - education, clothing, entertainment,
etc. The law guarantees the laborer a fair and just
wage. The minimum must be fair and just. The
"minimum wage" can by no means imply only the
actual minimum. Some margin or leeway must be
provided, over and above the minimum, to take care
of contingencies, such as increase of prices of
commodities and increase in wants, and to provide
means for a desirable improvement in his mode of
living.
Millares v. NLRC (99)
In Songco the Court explained that both words
(as well as salary) generally refer to one and the
same meaning, i.e., a reward or recompense for
services performed. Specifically, "wage" is defined in
letter (f) as the remuneration or earnings, however
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designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of
calculating the same, which is payable by an
employer to an employee under a written or
unwritten contract of employment for work done or
to be done, or for services rendered or to be
rendered and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by
the employer to the employee.
Stated differently, when an employer
customarily furnishes his employee board, lodging or
other facilities, the fair and reasonable value thereof,
as determined by the Secretary of Labor and
Employment, is included in "wage." In order to
ascertain whether the subject allowances form part
of petitioner's "wages," we divide the discussion on
the following — "customarily furnished;" "board,
lodging or other facilities;" and, "fair reasonable
value as determined by the Secretary of Labor."
"Customary" is founded on long-established and
constant practice connoting regularity. The receipt of
an allowance on a monthly basis does not ipso facto
characterize it as regular and forming part of salary
because the nature of the grant is a factor worth
considering. We agree with the observation of the
Office of the Solicitor General that the subject
allowances were temporarily, not regularly, received
by petitioners because —
In the case of the housing allowance, once a
vacancy occurs in the company-provided housing
accommodations, the employee concerned
transfers to the company premises and his
housing allowance is discontinued . . . .
On the other hand, the transportation allowance
is in the form of advances for actual transportation
expenses subject to liquidation . . . given only to
employees who have personal cars.
The Bislig allowance is given to Division
Managers and corporate officers assigned in Bislig,
Surigao del Norte. Once the officer is transferred
outside Bislig, the allowance stops.
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 the term as including
articles or services for the benefit of the employee or
his family but excluding tools of the trade or articles
or service primarily for the benefit of the employer
or necessary to the conduct of the employer's
business. The Staff/Manager's allowance may fall
under "lodging" but the transportation and Bislig
allowances are not embraced in "facilities" on the
main consideration that they are granted as well as
the Staff/Manager's allowance for respondent
PICOP's benefit and convenience, i.e., to insure that
petitioners render quality performance. In
determining whether a privilege is a facility, the
criterion is not so much its kind but its purpose. That
the assailed allowances were for the benefit and
convenience of respondent company was supported
by the circumstance that they were not subjected to
withholding tax.
States Marine Corporation v. Cebu Seamen’s
Association, Inc. (63)
'Supplements', constitute extra remuneration/
special benefits given to or received by the EEs over
and above their ordinary earnings or wages,
'Facilities' are items of expense necessary for the
laborer's and his family's existence and
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subsistence, so that by express provision of law
they form part of the wage and when furnished by
the employer are deductible therefrom, since if they
are not furnished, the laborer would spend and pay
for them just the same."
CASH WAGE/COMMISSIONS
Songco v. NLRC (90)
The words "wages" and "salary" are in essence
synonymous, both words generally refer to one and
the same meaning, that is, a reward or recompense
for services performed. Likewise, "pay" is the
synonym of "wages" and "salary"
Iran v. NLRC (98)
While commissions are incentives to inspire
employees to put more industry on the jobs
assigned to them, still these commissions 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 is
calculated as a percentage on the amount of his
transactions or on the profit to the principal. The
nature of the work of a salesman and the reason for
such type of remuneration for services rendered
demonstrate clearly that commissions are part of a
salesman's wage or salary.
WAGES AND SALARY
Gaa v. Court of Appeals (85)
Article 1708 used the word "wages" and not
"salary" in relation to "laborer" when it declared
what are to be exempted from attachment and
execution. The term "wages" as distinguished from
"salary", applies to the compensation for manual
labor, skilled or unskilled, paid at stated times, and
measured by the day, week, month, or season, while
"salary" denotes a higher degree of employment, or
a superior grade of services, and implies a position
of office: by contrast, the term "wages" indicates
considerable pay for a lower and less responsible
character of employment, while "salary" is
suggestive of a larger and more important service
(35 Am. Jur. 496).
Arms Taxi v. NLRC (93)
While a salary is a fixed compensation for
regular work or for continuous service rendered over
a period of time (Moreno's Philippine Law Dictionary,
3rd Ed., p. 852 citing Lee Tee vs. Ching Chiong,
17518-R, January 13, 1959), a commission is a
percentage or allowance made to a factor or agent
for transacting business for another (Supra, p. 171
citing People vs. Sua Bok, 1 O.G. 689)
Iran v. NLRC (98)
There is no law mandating that commissions be
paid only after the minimum wage has been paid to
the employee. Verily, the establishment of a
minimum wage only sets a floor below which an
employee’s remuneration cannot fall, not that
commissions are excluded from wages in
determining compliance with the minimum wage
law. This conclusion is bolstered by Philippine
Agricultural Commercial and industrial Workers
Union v. NLRC, where this Court acknowledged that
drivers and conductors who are compensated purely
on a commission basis are automatically entitled to
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the basic minimum pay mandated by law should said
commissions be less than their basic minimum for
eight hours work. It can, thus, be inferred that were
said commissions equal to or even exceed the
minimum wage, the employer need not pay, in
addition, the basic minimum pay prescribed by law.
It follows then that commissions are included in
determining compliance with minimum wage
requirements.
GRATUITY AND WAGES
Plastic Town Center Corp. v. NLRC (89)
From the foregoing, gratuity pay is therefore,
not intended to pay a worker for actual services
rendered. It is a money benefit given to the workers
whose purpose is "to reward employees or laborers,
who have rendered satisfactory and efficient service
to the company." (Sec. 2, CBA) While it may be
enforced once it forms part of a contractual
undertaking, the grant of such benefit is not
mandatory so as to be considered a part of labor
standard law unlike the salary, cost of living
allowances, holiday pay, leave benefits, etc., which
are covered by the Labor Code. Nowhere has it ever
been stated that gratuity pay should be based on the
actual number of days worked over the period of
years forming its basis.
B. Payment of Wages
17.03 FORM
Art. 102.
Forms of payment - No employer shall pay the
wages of an employee by means of: promissory
notes vouchers
coupons
tokens
tickets
chits
or any object other than legal tender
even when expressly requested by the employee.
Payment of wages by check or money order shall be
allowed when:
such manner is customary on the date of
effectivity of this Code; or
is necessary because of special circumstances
as specified in appropriate regulations to be
issued by the SOLE; or
as stipulated in a collective bargaining
agreement.
CASH WAGE
Congson v. NLRC (59)
Undoubtedly, petitioner's practice of paying the
private respondents the minimum wage by means of
legal tender combined with tuna liver and intestines
runs counter to the abovecited provision of the Labor
Code. The fact that said method of paying the
minimum wage was not only agreed upon by both
parties in the employment agreement but even
expressly requested by private respondents, does
not shield petitioner. Article 102 of the Labor Code is
clear. Wages shall be paid only by means of legal
tender. The only instance when an employer is
permitted to pay wages in forms other than legal
tender, that is, by checks or money order, is
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when the circumstances prescribed in the second
paragraph of Article 102 are present.
17.04 TIME OF PAYMENT
Art. 103
Time of payment - Wage shall be paid at least once
every 2 weeks or twice a month at intervals not
exceeding 16 days. If on account of force majeure or
circumstances beyond the employer's control,
payment of wages on or within the time herein
provided cannot be made, the employer shall pay
the wages immediately after such force majeure or
circumstances have ceased. No employer shall make
payment with less frequency that once a month.
The payment of wages of employees engaged to
perform a task which cannot be completed in 2
weeks shall be subject to the following conditions in
the absence of a collective bargaining agreement or
arbitration award:
1. That payments are made at intervals not
exceeding 16 days, in proportion to the
amount of work completed; and
2. That final settlement is made upon completion
of the work.
17.05 PLACE OF PAYMENT
Art. 104
Place of payment - Payment of wages shall be made
at or near the place of undertaking, except as
otherwise provided by such regulations as the
Secretary of Labor may prescribe under conditions to
ensure greater protection of wages.
Sec. 7, RA 6727 (Wage Rationalization Act)
Upon written permission of the majority of the
employees or workers concerned, all private
establishments, companies, businesses and other
entities with 25 or more employees and located
within 1 kilometer radius to a commercial,
savings or rural bank shall pay the wages and
other benefits of their employees through any of
the said banks and within the period of payment
of wages fixed by PD 422, as amended,
otherwise known as the Labor Code of the
Philippines.
Labor Advisory on Payment of Salaries thru
Automated Teller Machine (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 adopt a system of payment other
than in the workplace, such as through
automated teller machine (ATM) of banks,
provided that the following conditions are met:
1. The ATM system of payment is with the
written consent of the employees
concerned.
2. The employees are given reasonable time
to withdraw their wages from the bank
facility which time, if done during working
hours, shall be considered compensable
hours worked.
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3. The System shall allow workers to receive
their wages within the period or frequency
and in the amount prescribed under the
Labor Code, as amended.
4. There is a bank or ATM facility within a
radius of one kilometer to the place of work
5. Upon request of the concerned employee/s,
the employer shall issue a record of
payment of wages, benefits and deductions
for particular period.
6. There shall be no additional expenses and
no dimunition of benefits and privileges as
a result of the ATM system of payment
7. The employer shall assume responsibility in
case the wage protection provisions of law
and regulations are not complied with
under the arrangement.
17.06 DIRECT PAYMENT
Art. 105
Direct payment of wages - Wages shall be paid
directly to the workers to whom they are due
except:
a. In cases of force majeure rendering such
payments impossible or under other special
circumstances to be determined by the
Secretary of Labor in appropriate regulations,
in which case the worker may be paid through
another person under written authority given
by the worker for the purpose; or
b. Where the worker has died, the employer may
pay the wages of the deceased worker to the
heirs of the latter without the necessity of
intestate proceedings.
Procedure: Claimants, if all of age, shall execute an
affidavit attesting to their
relationship to the deceased and the fact
that they are his heirs, to the exclusion of all
other persons.
If any of the heirs is a minor: the affidavit
shall be executed on his
behalf by his natural guardian or next of
kin.
The affidavit shall be presented to the
employer who shall make payment through the
Secretary of Labor or his representative. The
representative of the Secretary of Labor shall act as
referee in dividing the amount paid among the heirs.
The payment of wages under this Article shall
absolve the employer of any further liability with
respect to the amount paid.
17.07 CONTRACTOR - SUBCONTRACTOR
Art. 106.
Contractor or sub-contractor
Whenever an employer enters into a contract with
another person for the performance of the formers
work, the employees of the contractor and of the
latter’s subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or sub-
contractor fails to pay wages of employees in
accordance with this Code, the employer shall be
JOINTLY AND SEVERALLY liable with his contractor
or sub-contractor to such employees to the
extent of the work performed under the contract,
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in the same manner and extent that he is liable to
employees directly employed by him.
The Secretary of Labor may, by appropriate
regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-
only contracting and job contracting as well as
differentiations within these types of contracting,
and determine who among the parties involved shall
be considered the employer for purposes of this
Code, to prevent any violation or circumvention of
any provision of this Code.
There is "labor-only" contracting where the
person supplying workers to an employer does not
have substantial capital or investment in the form of
tools, equipment, machineries, work premises,
among others, and the workers recruited and placed
by such person are performing activities which are
directly related to the principal business of such
employer. In such cases, the person or intermediary
shall be considered merely as an agent of the
employer who shall be responsible to the workers in
the same manner an extent as if the latter were
directly employed by him.
Art. 107
Indirect employer - The provisions of the
immediately preceding article shall likewise apply to
any person, partnership, association or corporation
which, not being an employer, contracts with an
independent contractor for the performance of any
work, task, job or project.
Art. 108
Posting of bond - An employer or indirect employer
may require the contractor or sub-contractor to
furnish a bond equal to the cost of labor under
contract, on condition that the bond will answer for
the wages due the employees should the
contractor/sub-contractor, as the case may be, fail
to pay the same.
Art. 109.
Solidary liability – The provisions of existing laws to
the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his
contractor/subcontractor for any violation of any
provision of this Code. For purposes of determining
the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
C. Prohibition regarding Wages
17.08 NON-INTERFERENCE – DISPOSAL WAGES
Art. 112
Non-interference in disposal of wages - No employer
shall limit or otherwise interfere with the freedom of
any employee to dispose of his wages. He shall not
in any manner force, compel or oblige his employees
to purchase merchandise, commodities or other
property from the employer or from any other
person or otherwise make use of any store or
services of such employer or any other person.
17.09 WAGE DEDUCTION
Art. 113
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Wage deduction - No employer, in his own behalf or
in behalf of any person, shall make any deduction
from the wages of his employees, except:
1. In cases where the worker is insured with his
consent by the employer, and the deduction is
to recompense the employer for the amount
paid by him as premium on the insurance;
2. For union dues, in cases where the right of the
worker or his union to check off has been
recognized by the employer or authorized in
writing by the individual worker concerned;
and
3. In cases where the employer is authorized by
law or regulations issued by the Secretary of
Labor.
Art. 117
Deduction to ensure employment (Art. 117) - It shall
be unlawful to make any deduction from the wages
of any employee for the benefit of the employer or
his representative or intermediary as consideration
of a promise of employment/ retention in
employment.
WAGE DEDUCTION
Radio Communication of the Phil., Inc. v. Sec.
of Labor (89)
Article 222 Labor Code requires an individual
written authorization as a prerequisite to wage
deductions seeks to protect the employee against
unwarranted practices that would diminish his
compensation without his knowledge and consent.
However, for all intents and purposes, the
deductions required of the petitioner and employees
do not run counter to the express mandate of the
law since the same are not unwarranted or without
their knowledge and consent. Also, the deductions
for the union service fee in question are authorized
by law and do not require individual check-off
authorizations.
Apodaca v. NLRC (89)
Lastly, assuming further that there was a call
for payment of the unpaid subscription, the NLRC
cannot validly set it off against the wages and other
benefits due petitioner. Article 113 of the Labor Code
allows such a deduction from the wages of the
employees by the employer, only in three instances,
to wit:
"ART. 113. Wage Deduction. — No employer,
in his own behalf or in behalf of any person, shall
make any deduction from the wages of his
employees, except:
(a) In cases where the worker is insured with his
consent by the employer, and the deduction is to
recompense the employer for the amount paid by
him as premium on the insurance;
(b) For union dues, in cases where the right of
the worker or his union to check-off has been
recognized by the employer or authorized in
writing by the individual worker concerned; and
(c) In cases where the employer is authorized by
law or regulations issued by the Secretary of
Labor."
Jardin v. NLRC (2000)
With regard to the amount deducted daily by
private respondent from petitioners for washing of
the taxi units, we view the same as not illegal in the
context of the law. We note that after a tour of
duty, it is incumbent upon the driver to restore
the unit he has driven to the same clean
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condition when he took it out. Car washing after a
tour of duty is indeed a practice in the taxi industry
and is in fact dictated by fair play. Hence, the drivers
are not entitled to reimbursement of washing
charges.
CHECK – OFF
ART. 113
Wage Deduction. — No employer, in his own behalf
or in behalf of any person, shall make any deduction
from the wages of his employees, except:
b. For union dues, in cases where the right of the
worker or his union to check-off has been
recognized by the employer or authorized in
writing by the individual worker concerned;
and
Manila Trading and Supply Co. v. Manila
Trading Labor Association (53)
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.
17.10 DEPOSIT
Art. 114
Deposits for loss or damage - No employer shall
require his worker to make deposits from which
deduction shall be made, for the reimbursement of
loss of or damage to tools, materials or equipment
supplied by the employer
Exception:
 when the employer is engaged in such trades,
occupations or businesses where the practice of
making deductions or requiring deposits is a
recognized one; or
 is necessary or desirable as determined by the
Secretary of Labor in appropriate rules and
regulations
Art. 115
Limitations - No deduction from the deposits of an
employee for the actual amount of the loss or
damage shall be made unless the employee has
been heard thereon, and his responsibility has been
clearly shown.
Dentech Manufacturing Corp. v. NLRC (89)
Article 114 of the Labor Code prohibits an
employer from requiring his employees to file a cash
bond or to make deposits, subject to certain
exceptions.
Five J Taxi v. NLRC (94)
The article providing the rule on deposits for
loss or damage to tools, materials or equipment
supplied by the employer does not apply to or
permit deposits to defray any deficiency which the
taxi driver may incur in the remittance of his
"boundary." And when worker stops working for
employer, the alleged purpose for the unauthorized
deposits no longer exists. In other case, any balance
due to private respondents after proper accounting
must be returned to them with legal interest.
17.11 WITHHOLDING OF WAGES
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Art. 116
Withholding of wages and kickbacks prohibited - 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
dismissal or by any other means whatsoever without
the worker's consent.
GARNISHMENT/ATTACHMENT
Pacific Customs Brokerage, Inc. v. Inter-Island
Dockmen and Labor Union (51)
Art 1708 NCC: "laborers' wages shall not be
subject to execution or attachment, except for debts
incurred for food, shelter, clothing and medical
attendance". Writ of garnishment issued by CFI,
while purporting to include all moneys and
properties of the employing company, cannot affect
what the co. has in its possession to pay the wages
of its laborers pursuant to its contract w/ them or
their labor union w/o contravening the letter and
spirit of article 1708.
Gaa v. Court of Appeals (85)
Article 1708 used the word "wages" and not
"salary" in relation to "laborer" when it declared
what are to be exempted from attachment and
execution. The term "wages" as distinguished from
"salary", applies to the compensation for manual
labor, skilled or unskilled, paid at stated times, and
measured by the day, week, month, or season, while
"salary" denotes a higher degree of employment, or
a superior grade of services, and implies a position
of office: by contrast, the term "wages" indicates
considerable pay for a lower and less responsible
character of employment, while "salary" is
suggestive of a larger and more important service
(35 Am. Jur. 496).
XXX We do not think that the legislature
intended the exemption in Article 1708 of the New
Civil Code to operate in favor of any but those who
are laboring men or women in the sense that their
work is manual. Persons belonging to this class
usually look to the reward of a day's labor for
immediate or present support, and such persons are
more in need of the exemption than any others.
RECORD KEEPING
South Motorist Enterprises v. Tosoc (90)
It failed to present employment records giving
as an excuse that they were sent to the main office
in Manila, in violation of Section 11 of Rule X, Book
II of the Omnibus Rules Implementing the Labor
Code providing that:
"All employment records of the employees of an
employer shall be kept and maintained in or about
the premises of the workplace. The premises of a
workplace shall be understood to mean the main
or branch office or establishment, if any,
depending upon where the employees are
regularly assigned. The keeping of the employee's
records in another place is prohibited."
D. Other Forms of Remuneration
17.12 SERVICE CHARGES
Art. 96
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Service Charges -All service charges collected by
hotels, restaurants and similar establishments shall
be distributed at the rate of 85% for all covered
employees and 15% management. The share of the
employees shall be EQUALLY DISTRIBUTED among
them. In case the service charge is abolished, the
share of covered employees shall be considered
integrated in their wages.
Maranaw Hotels, etc. v. NLRC (99)
As regards the share of Damalerio in the service
charges collected during the period of his preventive
suspension, the same form part of his earnings, and
his dismissal having been adjudged to be illegal, he
is entitled not only to full backwages but also to
other benefits, including a just share in the service
charges, to be computed from the start of his
preventive suspension until his reinstatement.
Book III Rule VI Omnibus Rules
Coverage only establishments collecting
service charges such as hotels,
restaurants, lodging houses, night
clubs, cocktail lounge, massage
clinics, bars, casinos and
gambling houses and similar
enterprises, including those
entities operating primarily as
private subsidiaries of the
Government.
Employees shall apply to all employees of
covered covered employers REGARDLESS
OF THEIR POSITIONS,
DESIGNATIONS OR EMPLOYMENT
STATUS, and IRRESPECTIVE OF
THE METHOD BY WHICH THEIR
WAGES ARE PAID
Exception MANAGERIAL EMPLOYEES
(defined as one who is vested
with powers or prerogatives to lay
down and execute management
policies and/or to hire, transfer,
suspend, lay-off, recall, discharge,
assign, or discipline employees or
to effectively recommend such
managerial actions.)
Distributio 85% - employees to be
n distributed EQUALLY
15% - management (for the
disposition by management to
answer for losses and breakages
and distribution to managerial
employees at the discretion of the
management in the latter case)
Frequency shall be distributed and paid to
of the employees not less than once
Distributio every two weeks or twice a month
n at intervals not exceeding 16 days
Permanen In case the service charge is
cy of abolished, the share of covered
service employees shall be considered
charges integrated in their wages. The
basis of the amount to be
integrated shall be the average
monthly share of each employee
for the past 12 months
immediately preceding the
abolition or withdrawals of such
charges
Relation to Nothing in this rule shall prevent
agreement the employer and his employees
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s from entering into any agreement
with terms more favorable to the
employees than those provided
herein, or be used to diminish any
benefit granted to the employees
under existing laws, agreement
and voluntary employer practice.
17.13 THIRTEENTH MONTH PAY
COVERAGE
Revised Guidelines on the implementation of
the 13th Month pay
Removal of the Salary Ceiling (Aug 13, 86, Pres.
Aquino's Memo Order No. 28)
ALL EMPLOYERS are hereby required to pay all their
rank and file employees a 13th month pay not later
than December 24 of every year, provided that they
have worked for at least one (1) month during a
calendar year.
Who are Rank and File Employees?
A managerial employee is one who is vested
with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign, or
discipline employees, or to effectively recommend
such managerial actions. ALL EMPLOYEES NOT
FALLING WITHIN THIS DEFINITION ARE
CONSIDERED RANK-AND-FILE EMPLOYEES.
Exempted EMPLOYERS
1. The Government and any of its political
subdivisions, including government-owned and
controlled corporations, except those
corporations operating essentially as private
subsidiaries of the Government;
2. Employers already paying their employees a
13th month pay or more in a calendar year or
its equivalent at the time of this issuance;
“ITS EQUIVALENT” : includes Christmas
bonus, mid-year bonus, cash bonuses and
other payments amounting to not less than
1/12 of the basic salary but shall NOT
INCLUDE cash and stock dividends, cost of
living allowances and all other allowances
regularly enjoyed by the employee as well a
non-monetary benefits.
3. Employers of household helpers and persons in
the personal service 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 fixed amount for performing
specific work, except where the workers are
paid on piece-rate basis in which case the
employer shall grant the required 13th month
pay to such workers.
Workers paid on a piece – rate basis: those
who are paid a standard amount for every piece
or unit of work produced that is more or less
regularly replicated, without regard to the time
spent in producing the same.
AMOUNT AND PAYMENT DATE
Part II : Labor Standards Law
Labor Standards
Minimum Amount
The minimum 13th month pay required by law
shall not be less than 1/12 of the total basic salary
earned by an employee within a calendar year for
the year 1987, the computation of the 13th month
pay shall include the cost of living allowances (COLA)
integrated into the basic salary of a covered
employee pursuant to EO 178.
Basic salary = for the purpose of computing the
13th month pay shall include all remuneration’s or
earning paid by this employer for services rendered
but does not include allowances and monetary
benefits which are not considered or integrated as
part of the regular or basic salary, such as the cash
equivalent of unused vacation and sick leave credits,
overtime, premium, night differential and holiday
pay and cost-of-living allowances. However, these
salary-related benefits should be included as part of
the basic salary in the computation of the 13th
month pay if by individual or collective agreement,
company practice or policy, the same are treated as
part of the basic salary of the employees.
Time of payment
The required 13th Month Pay shall be paid not
later than December 24 of each year. An employer,
however, may give to his employees one-half (1/2)
of the required 13th Month Pay before the opening
of the regular school year and the other half on or
before the 24th of December every year. The
frequency of payment of this monetary benefit may
be the subject of agreement between the employer
and the recognized collective bargaining agent 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 to the 13th Month Pay
Employees who are paid a fixed or guaranteed
wage plus commission are also entitled to the
mandated 13th month pay based on their total
earnings during the calendar year, i.e. on 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 employees working in two or
more private firms, whether on full or part time
bases, are entitled to the required 13th Month Pay
from all their private employers regardless of their
total earnings from each or all their employers.
Private School Teachers
Private school teachers, including faculty
members of universities and colleges, are entitled to
the required 13th month pay, regardless of the
number of months they teach or are paid within a
year, if they have rendered service for at least one
(1) month within a year.
Resigned or Separated Employee
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An employee who has resigned or whose
services were terminated at any time before the
time for payment of the 13th month pay is entitled
to this monetary benefit in proportion to the length
of time he worked during the year, reckoned from
the time he started working during the calendar year
up to the time of his resignation or termination from
service.
MANNER OF WAGE PAYMENT
Jackson Building v. NLRC (95)
Presidential Degree No. 851, as amended by
Memorandum Order No. 28, provides that
employees are entitled to the thirteenth-month pay
benefit regardless of their designation and
irrespective of the method by which their wages are
paid.
HOUSEHELPERS
Ultra Villa Food House v. Geniston (99)
Moreover, the specific provisions mandating
these benefits are found in Book III, Title I of the
Labor Code, and Article 82, which defines the scope
of the application of these provisions, expressly
excludes domestic helpers from its coverage. The
limitations set out in the said article are echoed in
Book III of the Omnibus Rules Implementing the
Labor Code. Clearly then, petitioner is not obliged by
law to grant private respondent any of these
benefits.
Employing the same line of analysis, it would
seem that private respondent is not entitled to 13th
month pay. The Revised Guidelines on the
Implementation of the 13th Month Pay Law also
excludes employers of household helpers from the
coverage of Presidential Decree No. 851.
Nevertheless, we deem it just to award private
respondent 13th month pay in view of petitioner's
practice of according private respondent such
benefit. Indeed, petitioner admitted that she gave
private respondent 13th month pay every
December.
GOVERNMENT EMPLOYEES
Alliance of Government Workers v. NLRC (95)
An analysis of the "whereases" of PD No. 851
shows that the President had in mind only workers in
private employment when he issued the decree.
There was no intention to cover persons working in
the government service.
TERMINATED EMPLOYEES
Archilles Manufacturing Corp. v. NLRC (95)
On the issue of the propriety of the award of a
13th month pay, paragraph 6 of the Revised
Guidelines on the Implementation of the 13th Month
Pay Law (P. D. 851) provides that "(a)n employee
who has resigned or whose services were terminated
at any time before the payment of the 13th month
pay is entitled to this monetary benefit in proportion
to the length of time he worked during the year,
reckoned from the time he started working during
the calendar year up to the time of his resignation or
termination from the service . . .. The payment of
the 13th month pay may be demanded by the
employee upon the cessation of employer-
employee relationship. This is consistent with the
Part II : Labor Standards Law
Labor Standards
principle of equity that as the employer can require
the employee to clear himself of all liabilities and
property accountability, so can the employee
demand the payment of all benefits due him upon
the termination of the relationship." Furthermore,
Sec. 4 of the original Implementing Rules of P. D.
851 mandates employers to pay their employees to
pay their employees a 13th month pay not later than
the 24th of December every year. In effect, this
statutory benefit is automatically vested in the
employee who has at least worked for one month
during the calendar year. As correctly stated by the
Solicitor General, such benefit may not be lost or
forfeited even in the event of the employee's
subsequent dismissal for cause without violating his
property rights.
RATIONALE
Whereas Clauses and Limitations - PD NO. 851
 It is necessary to further protect the level of
real wages from the ravage of world-wide
inflation;
 There has been no increase in the legal
minimum wage rates since 1970;
 The Christmas season is an opportune time for
society to show its concern for the plight of the
working masses so they may properly celebrate
Christmas and New Year.
MANAGEMENT FUNCTION
Businessday Information Systems and
Services, Inc. v. NLRC (93)
Clearly, there was impermissible discrimination
against the private respondents in the payment of
their separation benefits. The law requires an
employer to extend equal treatment to its
employees. It may not, in the guise of exercising
management prerogatives, grant greater benefits to
some and less to others. Management prerogatives
are not absolute prerogatives but are subject to
legal limits, collective bargaining agreements, or
general principles of fair play and justice (UST vs.
NLRC). Article 283 of the Labor Code, as amended,
protects workers whose employment is terminated
because of closure of the establishment or reduction
of personnel (Abella vs. NLRC).
With regard to the private respondents' claim
for the mid-year bonus, it is settled doctrine that the
grant of a bonus is a prerogative, not an obligation,
of the employer (Traders Royal Bank vs. NLRC). The
matter of giving a bonus over and above the
worker's lawful salaries and allowances is entirely
dependent on the financial capability of the employer
to give it. The fact that the company's business was
no longer profitable (it was in fact moribund) plus
the fact that the private respondents did not work up
to the middle of the year (they were discharged in
May 1988) were valid reasons for not granting them
a mid-year bonus. Requiring the company to pay a
mid-year bonus to them also would in effect penalize
the company for its generosity to those workers who
remained with the company till the end" of its days.
(Traders Royal Bank vs. NLRC) The award must
therefore be deleted.
BASIC WAGE/COMMISSIONS
Boie Takeda v. Dela Serna (93)
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In the case of San Miguel Corp. vs. Inciong, this
Court delineated the coverage of the term "basic
salary" as used in P.D. 851. We said at some length:
Under Presidential Decree 851 and its
implementing rules, the basic salary of an employee
is used as the basis in the determination of his 13th
month pay. Any compensations or remunerations
which are deemed not part of the basic pay is
excluded as basis in the computation of the
mandatory bonus.
Under the Rules and Regulations implementing
Presidential Decree 851, the following
compensations are deemed not part of the basic
salary:
a) cost-of-living allowances granted pursuant to
Presidential Decree 525 and Letter of
Instructions No. 174;
b) Profit-sharing payments;
c) All allowances and monetary benefits which
are not considered or integrated as part of the
regular basic salary of the employee at the
time of the promulgation of the Decree on
December 16, 1975.
Under a later set of Supplementary Rules and
Regulations Implementing PD 851 issued by then
Labor Secretary Blas Ople, overtime pay, earnings
and other remunerations are excluded as part of the
basic salary and in the computation of the 13th
month pay.
The exclusion of the cost-of-living allowances
under PD 525 and Letter of Instructions No. 174,
and profit-sharing payments indicate the intention to
strip basic salary of other payments which are
properly considered as "fringe" benefits. Likewise,
the catch-all exclusionary phrase "all allowances and
monetary benefits which are not considered or
integrated as part of the basic salary" shows also the
intention to strip basic salary of any and all additions
which may be in the form of allowances or "fringe"
benefits.
Moreover, the Supplementary Rules and
Regulations Implementing Presidential Decree 851 is
even more emphatic in declaring that earnings and
other remunerations which are not part of the basic
salary shall not be included in the computation of
the 13th-month pay.
While doubt may have been created by the prior
Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all
remunerations or earnings paid by an employer to
an employee, this cloud is dissipated in the later and
more controlling Supplementary Rules and
Regulations which categorically exclude from the
definitions of basic salary earnings and other
remunerations paid by an employer to an employee.
A cursory perusal of the two sets of Rules indicates
that what has hitherto been the subject of a broad
inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the
seeming tendency of the former rules to include all
remunerations and earnings within the definition of
basic salary.
The all embracing phrase "earnings and other
remunerations" which are deemed not part of the
basic salary includes within its meaning payments
for sick, vacation, or maternity leaves, premium for
works performed on rest days and special holidays,
pays for regular holidays and night differentials. As
such they are deemed not part of the basic salary
and shall not be considered in the computation of
the 13th-month pay. If they were not excluded, it
Part II : Labor Standards Law
Labor Standards
is hard to find any "earnings and other
remunerations" expressly excluded in the
computation of the 13th month pay. Then the
exclusionary provision would prove to be idle and
with no purpose.
Quite obvious from the foregoing is that the
term "basic salary" is to be understood in its
common, generally-accepted meaning, i.e., as a rate
of pay for a standard work period exclusive of such
additional payments as bonuses and overtime. This
is how the term was also understood in the case of
Pless v. Franks, which held that in statutes providing
that pension should not less than 50 percent of
"basic salary" at the time of retirement, the quoted
words meant the salary that an employee (e.g., a
policeman) was receiving at the time he retired
without taking into consideration any extra
compensation to which he might be entitled for extra
work.
In remunerative schemes consisting of a fixed
or guaranteed wage plus commission, the fixed or
guaranteed wage is patently the "basic salary" for
this is what the employee receives for a standard
work period. Commissions are given for extra efforts
exerted in consummating sales or other related
transactions. They are, as such, additional pay,
which this Court has made clear do not form part of
the "basic salary."
Philippine Duplicators Inc v. NLRC (95)
The sales commissions received for every
duplicating machine sold constituted part of the
basic compensation or remuneration of the salesmen
of Philippine Duplicators for doing their job. The
portion of the salary structure representing
commissions simply comprised an automatic
increment to the monetary value initially assigned to
each unit of work rendered by a salesman.
The sales commissions were an integral part of
the basic salary structure of Philippine Duplicators'
employees salesmen. These commissions are not
overtime payments, nor profit-sharing payments nor
any other fringe benefit. Thus, the salesmen's
commissions, comprising a pre-determined percent
of the selling price of the goods sold by each
salesman, were properly included in the term "basic
salary" for purposes of computing their 13th month
pay.
In Boie-Takeda the so-called commissions "paid
to or received by medical representatives of Boie-
Takeda Chemicals or by the rank and file employees
of Philippine Fuji Xerox Co.," were excluded from the
term "basic salary" because these were paid to the
medical representatives and rank-and-file employees
as "productivity bonuses." The Second Division
characterized these payments as additional
monetary benefits not properly included in the term
"basic salary" in computing their 13th month pay.
We note that productivity bonuses are generally tied
to the productivity, or capacity for revenue
production, of a corporation; such bonuses closely
resemble profit-sharing payments and have no clear
director necessary relation to the amount of work
actually done by each individual employee. More
generally, a bonus is an amount granted and paid ex
gratia to the employee; its payment constitutes an
act of enlightened generosity and self-interest on the
part of the employer, rather than as a demandable
or enforceable obligation.
It is also important to note that the purported
"commissions" paid by the Boie-Takeda Company to
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its medical representatives could not have been
"sales commissions" in the same sense that
Philippine Duplicators paid its salesmen Sales
commissions. Medical representatives are not
salesmen; they do not effect any sale of any article
at all. In common commercial practice, in the
Philippines and elsewhere, of which we take judicial
notice, medical representatives are employees
engaged in the promotion of pharmaceutical
products or medical devices manufactured by their
employer.
Iran v. NLRC (98)
This definition explicitly includes commissions as
part of wages. While commissions are, indeed,
incentives or forms of encouragement to inspire
employees to put a little more industry on the jobs
particularly assigned to them, still these
commissions are direct remunerations for services
rendered. In fact, commissions have been defined as
the recompense, compensation or reward of an
agent, salesman, executor, trustee, receiver, factor,
broker or bailee, when the same is calculated as a
percentage on the amount of his transactions or on
the profit to the principal. The nature of the work of
a salesman and the reason for such type of
remuneration for services rendered demonstrate
clearly that commissions are part of a salesman's
wage or salary.
SUBSTITUTE PAYMENT
Framanlis Farms, Inc. v. MOLE (89)
Under Section 3 of PD No. 851, such benefits in
the form of food or free electricity, assuming they
were given, were not a proper substitute for the
13th month pay required by law. Neither may year-
end rewards for loyalty and service be considered in
lieu of 13th month pay. Section 10 of the Rules and
Regulations Implementing Presidential Decree No.
851 provides that: "Nothing herein shall be
construed to authorize any employer to eliminate or
diminish in any way supplements or other employee
benefits or favorable practice being enjoyed by the
employee at the time of promulgation of this
issuance."
14TH MONTH PAY
Kamaya Port Hotel v. NLRC (89)
There is no law that mandates the payment of
the 14th month pay. This is emphasized in the grant
of exemption under Presidential Decree 851 (13th
Month Pay Law) which states: "Employers already
paying their employees a 13th month pay or its
equivalent are not covered by this Decree."
Necessarily then, only the 13th month pay is
mandated. Having enjoyed the additional income in
the form of the 13th month pay, private
respondents' insistence on the 14th month pay for
1982 is already an unwarranted expansion of the
liberality of the law.
17.14 BONUS
MANAGEMENT FUNCTION
Businessday Information Systems and
Services, Inc. v. NLRC (93)
Clearly, there was impermissible
discrimination against the private respondents in
Part II : Labor Standards Law
Labor Standards
the payment of their separation benefits. The law
requires an employer to extend equal treatment to
its employees. It may not, in the guise of exercising
management prerogatives, grant greater benefits to
some and less to others. Management prerogatives
are not absolute prerogatives but are subject to
legal limits, collective bargaining agreements, or
general principles of fair play and justice (UST vs.
NLRC). Article 283 of the Labor Code, as amended,
protects workers whose employment is terminated
because of closure of the establishment or reduction
of personnel (Abella vs. NLRC).
With regard to the private respondents' claim
for the mid-year bonus, it is settled doctrine that the
grant of a bonus is a prerogative, not an obligation,
of the employer (Traders Royal Bank vs. NLRC). The
matter of giving a bonus over and above the
worker's lawful salaries and allowances is entirely
dependent on the financial capability of the employer
to give it. The fact that the company's business was
no longer profitable (it was in fact moribund) plus
the fact that the private respondents did not work up
to the middle of the year (they were discharged in
May 1988) were valid reasons for not granting them
a mid-year bonus. Requiring the company to pay a
mid-year bonus to them also would in effect penalize
the company for its generosity to those workers who
remained with the company till the end" of its days.
(Traders Royal Bank vs. NLRC) The award must
therefore be deleted.
NATURE – BONUS
Luzon Stevedoring Corporation v. CIR (65)
A bonus is an amount granted and paid to an
employee for his industry and loyalty which
contributed to the success of the employer's
business and made possible the realization of profits.
It is not a demandable and enforceable obligation. It
is so when it is made a part of the wage or salary or
compensation. In such a case the latter would be a
fixed amount and the former would be a contingent
one dependent upon the realization of profits. If
there be none, there would be no bonus.
Marcos v. NLRC (95)
A bonus is not a gift or gratuity, but is paid for
some services or consideration and is in addition to
what would ordinarily be given. The term "bonus" as
used in employment contracts, also conveys an idea
of something which is gratuitous, or which may be
claimed to be gratuitous, over and above the
prescribed wage which the employer agrees to pay.
While there is a conflict of opinion as to the
validity of an agreement to pay additional sums for
the performance of that which the promisee is
already under obligation to perform, so as to give
the latter the right to enforce such promise after
performance, the authorities hold that if one enters
into a contract of employment under an agreement
that he shall be paid a certain salary by the week or
some other stated period and, in addition, a bonus,
in case he serves for a specified length of time,
there is no reason for refusing to enforce the
promise to pay the bonus, if the employee has
served during the stipulated time, on the ground
that it was a promise of a mere gratuity.
This is true if the contract contemplates a
continuance of the employment for a definite term,
and the promise of the bonus is made at the time
the contract is entered into. If no time is fixed for
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the duration of the contract of employment, but the
employee enters upon or continues in service under
an offer of a bonus if he remains therein for a
certain time, his service, in case he remains for the
required time, constitutes an acceptance of the offer
of the employer to pay the bonus and, after that
acceptance, the offer cannot be withdrawn, but can
be enforced by the employee.
Phil. National Construction Corp. v. NLRC (99)
A bonus is a gift from the employer and the
grant thereof is a management prerogative.
Petitioner may not be compelled to award a bonus to
private respondents whom it found guilty of serious
misconduct.
We held in Traders Royal Bank v. NLRC:
“A bonus is a gratuity or an act of liberality of the
giver which the recipient has no right to demand
as a matter of right. It is something given in
addition to what is ordinarily received by or strictly
due the recipient. The granting of a bonus is
basically a management prerogative which cannot
be forced upon the employer who may not be
obliged to assume the onerous burden of granting
bonuses or other benefits aside from the
employee’s basic salaries or wages.”
We further held in Metro Transit Organization,
Inc. v. NLRC, that a bonus becomes a demandable
or enforceable obligation only when it is made part
of the wage or salary or compensation of the
employee, thus:
“The general rule is that a bonus is a gratuity or
an act of liberality which the recipient has no right
to demand as a matter of right. A bonus,
however, is a demandable or enforceable
obligation when it is made part of the wage or
salary or compensation of the employee. Whether
or not a bonus forms part of wages depends upon
the circumstances and conditions for its payment.
If it is additional compensation which the
employer promised and agreed to give without
any conditions imposed for its payment, such as
success of business or greater production or
output, then it is part of the wage. But if it is paid
only if profits are realized or if a certain level of
productivity is achieved, it cannot be considered
part of the wage. Where it is not payable to all
but only to some employees and only when their
labor becomes more efficient or more productive,
it is only an inducement for efficiency, a prize
therefore not a part of the wage.”
The presumption is that it is not a demandable
obligation from the employer and the latter may not
be compelled to grant the same to undeserving
employees.
WHEN DEMANDABLE
Luzon Stevedoring Corp. v. CIR (65)
As a rule a bonus is an amount granted and paid
to an employee for his industry and loyalty which
contributed to the success of the employer's
business and made possible the realization of profits.
It is an act of generosity for which the employee
ought to be thankful and grateful. It is also granted
by an enlightened employer to spur the employee to
greater efforts for the success of the business and
realization of bigger profits. From the legal point of
view, a bonus is not a demandable and enforceable
obligation. It is so when it is made a part of the
wage or salary or compensation. In such a case the
latter would be a fixed amount and the former would
be a contingent one dependent upon the
realization of profits. If there be none, there
would be no bonus.
Part II : Labor Standards Law
Labor Standards
Liberation Steamship Co. Inc. v. CIR (68)
While normally discretionary, the grant of a
gratuity or bonus by reason of its long and regular
concession may become regarded as part of regular
compensation. (Phil. Education Co., Inc., vs. CIR).
For this reason, where there is a resale of the
vessels to another party during the pendency of the
motion for reconsideration, the court may order the
reopening of the case insofar as the demands for
gratuity are concerned, in order to determine
whether aforecited conditions operated in the instant
case.
Philippine Duplicators Inc. v. NLRC (95)
Productivity bonuses are generally tied to the
productivity or profit generation of the employer
corporation. Productivity bonuses are not directly
dependent on the extent an individual employee
exerts himself. A productivity bonus is something
extra for which no specific additional services are
rendered by any particular employee and hence not
legally demandable, absent a contractual
undertaking to pay it. Sales commissions, on the
other hand, such as those paid in Duplicators, are
intimately related to or directly proportional to the
extent or energy of an employee's endeavors.
Commissioners are paid upon the specific results
achieved by a salesman-employee. It is a
percentage of the sales closed by a salesman and
operates as an integral part of such salesman's basic
pay.
Manila Electric Co. v. Quisumbing (99)
As a rule, a bonus is not a demandable and
enforceable obligation; it may nevertheless be
granted on equitable considerations as when the
giving of such bonus has been the company's long
and regular practice. To be considered a "regular
practice," the giving of the bonus should have been
done over a long period of time, and must be shown
to have been consistent and deliberate. Thus we
have ruled in National Sugar Refineries Corporation
vs. NLRC:
The test or rationale of this rule on long practice
requires an indubitable showing that the employer
agreed to continue giving the benefits knowing
fully well that said employees are not covered by
the law requiring payment thereof.
17.15 PRODUCTIVITY INCENTIVES ACT
1990 (RA 6971)
POLICY (2)
 To encourage higher levels of productivity,
maintain industrial peace and harmony and
promote the principle of shared responsibility in
the relations between workers and employers,
recognizing the right of labor to its just share in
the fruits of production and the right of
business enterprises to reasonable returns of
investments and to expansion and growth, and
accordingly to provide corresponding incentives
to both labor and capital for undertaking
voluntary programs to ensure greater sharing
by the workers in the fruits of their labor
COVERAGE (3)
 Applies to all business enterprises with or
without existing and duly recognized or
certified labor organizations, including
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government-owned and controlled corporations
performing proprietary functions
 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 appropriate government agencies.
Labor-management Committee: a negotiating body
in a business enterprise composed of the
representatives of labor and management
created to establish a productivity incentives
program, and to settle disputes arising
therefrom in accordance with Section 9 hereof.
Productivity Incentives Program: a formal agreement
established by the labor-management
committee containing a process that will
promote gainful employment, improve working
conditions and result in increased productivity,
including cost savings, whereby the employees
are granted salary bonuses proportionate to
increases in current productivity over the
average for the preceding three (3) consecutive
years. The agreement shall be ratified by at
least a majority of the employees who have
rendered at least six (6) months of continuous
service.
LABOR MANAGEMENT COMMITTEE (5)
a. A business enterprise or its employees,
through their authorized representatives, may
initiate the formation of a labor-management
committee that shall be composed of an equal
number of representatives from the
management and from the rank-and-file
employees: Provided, That both management
and labor shall have equal voting rights:
Provided, further, That at the request of any
party to the negotiation, the National Wages
and Productivity Commission of the
Department of Labor and Employment shall
provide the necessary studies, technical
OF information and assistance, and expert advice
to enable the parties to conclude productivity
agreements.
b. In business enterprises with duly recognized or
certified labor organizations, the
representatives of labor shall be those
designated by the collective bargaining
agent(s) of the bargaining unit(s).
c. In business enterprises without duly
recognized or certified labor organizations, the
representatives of labor shall be elected by at
least a majority of all rank-and-file employees
who have rendered at least six (6) months of
continuous service.
PRODUCTIVITY INCENTIVES PROGRAM (6)
a. The productivity incentives program shall
contain provisions for the manner of sharing
and the factors in determining productivity
bonuses: Provided, That the productivity
bonuses granted to labor under this
program shall not be less than half of the
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Labor Standards
percentage increase in the productivity of the
business enterprise.
b. Productivity agreements reached by the
parties as provided in this Act supplement
existing collective bargaining agreements.
c. If, during the existence of the productivity
incentives program or agreement, the
employees will join or form a union, such
program or agreement may, in addition to the
terms and conditions agreed upon by labor
and management, be integrated in the
collective bargaining agreement 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 amended.
productivity incentives program, duly and
mutually agreed upon by the parties to the
labor-management committee, shall be
granted a special deduction from gross income
equivalent to 50% of the total productivity
bonuses given to employees under the
program over and above the total allowable
ordinary and necessary business deductions
for said bonuses under the National Internal
Revenue Code, as amended.
b. Grants for manpower training and special
duties given to rank-and-file employees
pursuant to a program prepared by the labor-
management committee for the development
of skills identified as necessary by the
appropriate government agencies shall also
entitle the business enterprise to a special
deduction from gross income equivalent to
50% of the total grants over and above the
allowable ordinary and necessary business
deductions for said grants under the National
Internal Revenue Code, as amended.
c. Any strike or lockout arising from any violation
of the productivity incentives program shall
suspend the effectivity thereof pending
settlement of such strike or lockout: Provided,
That the business enterprise shall not be
deemed to have forfeited any tax incentives
accrued prior to the date of occurrence of such
strike or lockout, and the workers shall not be
required to reimburse the productivity bonuses
already granted to them under the productivity
incentives program. Likewise, bonuses which
have already accrued before the strike or
lockout shall be paid the workers within six (6)
months from their accrual.
d. Bonuses provided for under the productivity
incentives program shall be given to the
employees not later than every six (6) months
from the start of such program over and above
existing bonuses granted by the business
enterprise and by law: Provided, That the said
bonuses shall not be deemed as salary
increases due the employees and workers.
e. The special deductions from gross income
provided for herein shall be allowed starting
the next taxable year after the effectivity of
this Act.
NOTIFICATION (8)
A business enterprise which adopts a Code, to prevent any violation or circumvention of
productivity incentives program shall submit copies
of the same to the National Wages and Productivity
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Commission and to the Bureau of Internal Revenue
for their information and record.
DISPUTES AND GRIEVANCES (9)
Whenever disputes, grievances, or other
matters arise from the interpretation or
implementation of the productivity incentives
program, the labor-management committee shall
meet to resolve the dispute, and may seek
assistance of the National Conciliation and Mediation
Board of the Department of Labor and Employment
for such purpose. Any dispute which remains
unresolved within 20 days from the time of its
submission to the labor-management committee
shall be submitted for voluntary arbitration in line
with the pertinent provisions of the Labor Code, as
The productivity incentives program shall
include the name(s) of the voluntary arbitrator or
panel of voluntary arbitrators previously chosen and
agreed upon by the labor-management committee.
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 under existing laws,
decrees, executive orders, company policy or
practice, or any agreement or contract between the
employer and employees.
E. Wage Recovery, Liabilities, and Worker
Preference
17.16 LIABILITY OF EMPLOYER AND OTHER
PARTIES
Employer, Independent Contractor and Sub-
Contractor and Labor-Only Contracting
Art. 106.
Contractor or sub-contractor
Whenever an employer enters into a contract with
another person for the performance of the formers
work, the employees of the contractor and of the
latters subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or sub-contractor
fails to pay wages of employees in accordance with
this Code, the employer shall be JOINTLY AND
SEVERALLY liable with his contractor or sub-
contractor to such employees to the extent of the
work performed under the contract, in the same
manner and extent that he is liable to employees
directly employed by him.
The Secretary of Labor may, by appropriate
regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-
only contracting and job contracting as well as
differentiations within these types of contracting,
and determine who among the parties involved shall
be considered the employer for purposes of this
any provision of this Code.
There is "labor-only" contracting where
the person supplying workers to an employer
does not have substantial capital or investment in
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the form of tools, equipment, machineries, work
premises, among others, and the workers recruited
and placed by such person are performing activities
which are directly related to the principal business of
such employer. In such cases, the person or
intermediary shall be considered merely as an agent
of the employer who shall be responsible to the
workers in the same manner an extent as if the
latter were directly employed by him.
Art. 107
Indirect employer - The provisions of the
immediately preceding article shall likewise apply to
any person, partnership, association or corporation
which, not being an employer, contracts with an
independent contractor for the performance of any
work, task, job or project.
Art. 108
Posting of bond - An employer or indirect employer
may require the contractor or sub-contractor to
furnish a bond equal to the cost of labor under
contract, on condition that the bond will answer for
the wages due the employees should the
contractor/sub-contractor, as the case may be, fail
to pay the same.
Art. 109.
Solidary liability – The provisions of existing laws to
the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his
contractor/subcontractor for any violation of any
provision of this Code. For purposes of determining
the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
LIABILITIES
Philippine Airlines v. NLRC (98)
In 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 only
for the proper payment of wages. But in labor-only
contracting, an employer-employee relation is
created by law between the principal and the labor-
only contractor's employees, such that the former is
responsible to such employees, as if he or she had
directly employed them. Besides, the Court has
already taken judicial notice of the general practice
adopted in several government and private
institutions of securing janitorial services on an
independent contractor basis.
Sentinel Security Agency, Inc. v. NLRC (98)
Under these provisions, the indirect employer,
who is the Client in the case at bar, is jointly and
severally liable with the contractor for the workers'
wages, in the same manner and extent that it is
liable to its direct employees. This liability of the
Client covers the payment of the service incentive
leave pay of the complainants during the time they
were posted at the Cebu branch of the Client. As
service had been rendered, the liability accrued,
even if the complainants were eventually transferred
or reassigned.
Lapanday Agricultural Development
Corporation v. Court of Appeals (2000)
Articles 106 and 107 of the Labor Code provides
the rule governing the payment of wages of
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employees in the event that the contractor fails to
pay such wages.
It will be seen from the above provisions that
the principal (petitioner) and the contractor
(respondent) are jointly and severally liable to the
employees for their wages. This Court held in Eagle
Security, Inc. vs. NLRC and Spartan Security and
Detective Agency, Inc. vs. NLRC that the joint and
several liability of the contractor and the principal is
mandated by the Labor Code to assure compliance
with the provisions therein including the minimum
wage. The contractor is made liable by virtue of his
status as direct employer. The principal, on the other
hand, is made the indirect employer of the
contractor’s employees to secure payment of their
wages should the contractor be unable to pay them.
Even in the absence of an employer-employee
relationship, the law itself establishes one between
the principal and the employees of the agency for a
limited purpose i.e. in order to ensure that the
employees are paid the wages due them. In the
above-mentioned cases, the solidary liability of the
principal and contractor was held to apply to the
aforementioned Wage Order Nos. 5 and 6.
BASIS
Lim v. NLRC (99)
The scourge of exploitation of labor, as shown
by numerous petitions before us, remains pervasive.
It is imperative for all government agencies
concerned to exert all-out efforts to prevent any
further violation or circumvention of the provisions
of the Labor Code through deceptive devices and
malpractices. Unscrupulous employers could not be
allowed to hide behind labor-only contracting in
order to escape the just claims of their workers and
other employees.
17.17 WORKER PREFERENCE - BANKRUPTCY
Art. 110 Labor Code
In the event of bankruptcy or liquidation of an
employer's business, his workers shall enjoy first
preference as regards their wages and other
monetary claims, any provision of law to the
contrary notwithstanding.
Such unpaid wages and monetary claims shall
be paid in full before the claims of the Government
and other creditors may be paid. (As amended by R.
A. 6715)
Art. 1707, Civil Code
The laborer's wages shall be a lien on the goods
manufactured or the work done.
Art. 2241, Civil Code
With 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 Code
With reference to specific immovable property
and real rights of the debtor, the following claims,
mortgages and liens shall be preferred, and shall
constitute an encumbrance on the immovable or real
right:
3. Claims of laborers, masons, mechanics and
other workmen, as well as of architects,
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engineers and contractors, engaged in the
construction, reconstruction or repair of
buildings, canals or other works, upon said
buildings, canals or other works;
Art. 2244, Civil Code
With reference to other property, real and
personal, of the debtor, the following claims or
credits shall be preferred in the order named:
4. Compensation due the laborers or their
dependents under laws providing for indemnity
for damages in cases of labor accident, or
illness resulting from the nature of the
employment;
(Pls. See complete texts of Arts. 2241, 2242, &
2244)
CIVIL CODE – LABOR CODE
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 the scheme of the Civil
Code to tax claims of the government or any
subdivision thereof which constitute a lien upon
properties of the Insolvent. It is frequently said that
taxes are the very lifeblood of government. The
effective collection of taxes is a task of highest
importance for the sovereign. It is critical indeed for
its own survival. It follows that language of a much
higher degree of specificity than that exhibited in
Article 110 of the Labor Code is necessary to set
aside the intent and purpose of the legislator that
shines through the precisely crafted provisions of the
Civil Code. It cannot be assumed simpliciter that the
legislative authority, by using in Article 110 the
words "first preference" and "any provision of law to
the contrary notwithstanding" intended to disrupt
the elaborate and symmetrical structure set up in
the Civil Code. Neither can it be assumed casually
that Article 110 intended to subsume the sovereign
itself within the term "other creditors" in stating that
"unpaid wages shall be paid in full before other
creditors may establish any claim to a share in the
assets of employer." Insistent considerations of
public policy prevent us from giving to "other
creditors" a linguistically unlimited scope that would
embrace the universe of creditors save only unpaid
employees.
We, however, do not believe that Article 110
has had no impact at all upon the provisions of the
Civil Code. Bearing in mind the overriding
precedence given to taxes, duties and fees by the
Civil Code and the fact that the Labor Code does not
impress any lien on the property of an employer, the
use of the phrase "first preference" in Article 110
indicates that what Article 110 intended to modify is
the order of preference found in Article 2244, which
order relates, as we have seen, to property of the
Insolvent that is not burdened with the liens or
encumbrances created or recognized by Articles
2241 and 2242. We have noted that Article 2244,
number 2, establishes second priority for claims for
wages for services rendered by employees or
laborers of the Insolvent "for one year preceding the
commencement of the proceedings in insolvency."
Article 110 of the Labor Code establishes "first
preference" for services rendered "during the period
prior to the bankruptcy or liquidation," a period not
limited to the year immediately prior to the
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bankruptcy or liquidation. Thus, very substantial
effect may be given to the provisions of Article 110
without grievously distorting the framework
established in the Civil Code by holding, as we so
hold, that Article 110 of the Labor Code has 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 wages of laborers or
workers of the Insolvent from second priority to first
priority 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's business, his workers
shall enjoy first preference as regards their wages
and other monetary claims, any provisions of law
to the contrary notwithstanding. Such unpaid
wages and monetary claims shall be paid in full
before claims of the Government and other
creditors may be paid."
Since then, the Court has had a number of
occasions to rule on the effects of the amendment.
In Development Bank of the Philippines vs. National
Labor Relations Commission, the Court has said:
"The amendment expands worker preference to
cover not only unpaid wages but also other
monetary claims to which even claims of the
Government must be deemed subordinate.
xxx
"Notably, the terms 'declaration' of bankruptcy
or 'judicial' liquidation have been eliminated.
Does this mean then that liquidation proceedings
have been done away with?
"We opine in the negative, upon the following
considerations:
"1. Because of its impact on the entire system of
credit, Article 110 of the Labor Code cannot be
viewed in isolation but must be read in relation
to the Civil Code scheme on classification and
preference of credits.
"2. In the same way that the Civil Code
provisions on classification of credits and the
Insolvency Law have been brought into
harmony, so also must the kindred provisions of
the Labor Law be made to harmonize with those
laws.
"3. In the event of insolvency, a principal
objective should be to effect an equitable
distribution of the insolvent's property among his
creditors. To accomplish this there must first be
some proceeding where notice to all of the
insolvent's creditors may be given and where the
claims of preferred creditors may be bindingly
adjudicated (De Barretto vs. Villanueva).
"4. A distinction should be made between a
preference of credit and a lien. A preference
applies only to claims which do not attach to
specific properties. A lien creates a charge on a
particular property. The right of first preference
as regards unpaid wages recognized by Article
110 does not constitute a lien on the property of
the insolvent debtor in favor of workers. It is but
a preference of credit in their favor, a preference
in application. It is a method adopted to
determine and specify the order in which credits
should be paid in the final distribution of the
proceeds of the insolvent's assets. It is a right to
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a first preference in the discharge of the funds of
the judgment debtor.
"6. Even if Article 110 and its Implementing
Rule, as amended, should be interpreted to
mean 'absolute preference,' the same should be
given only prospective effect in line with the
cardinal rule that laws shall have no retroactive
effect, unless the contrary is provided (Article 4,
Civil Code). Thereby, any infringement on the
constitutional guarantee on non-impairment of
the obligation of contracts (Section 10, Article
III, 1987 Constitution) is also avoided. In point
of fact, DBP's mortgage credit antedated by
several years the amendatory law, RA No. 6715.
To give Article 110 retroactive effect would be to
wipe out the mortgage in DBP's favor and
expose it to a risk which it sought to protect
itself against by requiring a collateral in the form
of real property.
"In fine, the right to preference given to workers
under Article 110 of the Labor Code cannot exist
in any effective way prior to the time of its
presentation in distribution proceedings. It will
find application when, in proceedings such as
insolvency such unpaid wages shall be paid in
full before the claims of the Government and
other creditors' may be paid. But, for an orderly
settlement of a debtor's assets, all creditors
must be convened, their claims ascertained and
inventoried, and thereafter the preferences
determined in the course of judicial proceedings
which have for their object the subjection of the
property of the debtor to the payment of his
debts or other lawful obligations. Thereby, an
orderly determination of preference of creditors'
claims is assured (Philippine Savings Bank vs.
Lantin); the adjudication made will be binding on
all parties-in-interest, since those proceedings
are proceedings in rem; and the legal scheme of
classification, concurrence and preference of
credits in the Civil Code, the Insolvency Law,
and the Labor Code is preserved in harmony."
RECEIVERSHIP
Rubberworld (Phils.), Inc. v. NLRC (99)
The law is clear: upon the creation of a
management committee or the appointment of a
rehabilitation receiver, all claims for actions "shall be
suspended accordingly." No exception in favor of
labor claims is mentioned in the law. Since the law
makes no distinction or exemptions, neither should
this Court. Ubi lex non distinguit nec nos distinguere
debemos. Allowing labor cases to proceed clearly
defeats the purpose of the automatic stays and
severally encumbers the management committee's
and resources. The said committee would need to
defend against these suits, to the detriment of its
primary and urgent duty to work towards
rehabilitating the corporation and making it viable
again. The rule otherwise would open the floodgates
to other similarly situated claimants and forestall if
not defeat the rescue efforts. Besides, even if the
NLRC awards the claims of private respondents, as it
did, its ruling could not be enforced as long as the
petitioner is under the management committee.
In Chua v. National Labor Relations
Commission, we ruled that labor claims cannot
proceed independently of a bankruptcy liquidation
proceeding, since these claims "would spawn
needless controversy, delays, and confusion." With
more reason, allowing labor claims to continue in
spite of a SEC suspension order in a rehabilitation
case would merely lead to such results.
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Article 217 of the Labor Code should be
construed not in isolation but in harmony with PD
902-A, according to the basic rule in statutory
construction that implied repeals are not favored.
Indeed, it is axiomatic that each and every statute
must be construed in a way that would avoid conflict
with existing laws. True, the NLRC has the power to
hear and decide labor disputes, but such authority is
deemed suspended when PD 902-A is put into effect
by the Securities and Exchange Commission.
The preferential right of workers and employees
under Article 110 of the Labor code may be invoked
only upon the institution of insolvency or judicial
liquidation proceeding. Indeed, it is well-settled that
"a declaration of bankruptcy or a judicial liquidation
must be present before preferences over various
money claims may be enforced." But debtors resort
to preference of credit — giving preferred creditors
the rights to have their claims paid ahead of those of
other claimants — only when their assets are
insufficient to pay their debts fully. The purpose of
rehabilitation proceedings is precisely to enable the
company to gain a new lease on life and thereby
allow creditors to be paid their claims from its
earnings. In insolvency proceedings, on the other
hand, the company stops operating, and the claims
of creditors are satisfied from the assets of the
insolvent corporation. The present case involves the
rehabilitation, not the liquidation, of petitioner-
corporation. Hence, the preference of credit granted
to workers or employees under Article 110 of the
Labor Code is not applicable.
17.18 WAGE RECOVERY AND ATTORNEY’S FEES
Art. 128.
Visitorial and enforcement powers
Art. 129.
Recovery of wages, simple money claims and other
benefits – In connection with Art. 217.
Jurisdiction of Labor Arbiters and the Commission
Art. 111.
Attorney's fees
a. In cases of unlawful withholding of wages, the
culpable party may be assessed attorney's
fees equivalent to 10 % of the amount of
wages recovered.
b. It shall be unlawful for any person to demand
or accept, in any judicial or administrative
proceedings for the recovery of the wages,
attorney’s fees, which exceed 10% of the
amount of wages recovered.
SECTION 18 MINIMUM WAGES
18.01 WAGES AND THE CONSTITUTION
Art XIII Sec 3, 1987 Constitution
The State shall afford full protection to labor,
local and overseas, organized and unorganized, and
promote full employment and equality of
employment opportunities for all.
It shall guarantee the rights of all workers to
self-organization, collective bargaining and
negotiations, and peaceful concerted activities,
including the right to strike in accordance with
law. They shall be entitled to security of tenure,
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humane conditions of work, and a living wage. They
shall also participate in policy and decision-making
processes affecting their rights and benefits as may
be provided by law.
The State shall promote the principle of shared
responsibility between workers and employers and
the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster
industrial peace.
BENEFICIARIES
People v. Gatchalian (59)
"The establishment of the maximum wage
benefits directly the low-paid employees, who now
receive inadequate wages on which to support
themselves and their families. It benefits all wage
earners indirectly by setting a floor below which their
remuneration cannot fail. It raises the standards of
competition among employers, since it would protect
the fair-minded employer who voluntarily pays a
wage that supports the wage earner from the
competition of the employer, who operates at lower
cost by reasons of paying his workers a wage below
subsistence. If, in fact, the employer cannot pay a
subsistence wage. then he should not continue his
operation unless he improves his methods and
equipment so as to make the payment of the
minimum wage feasible for him; otherwise the
employer is wasting the toil of the worker and the
material resources used in the employment. Second
methods of operation, progressive and fair-minded
management, and an adequate minimum wage go
hand in hand." (Explanatory Note to H.B. No. 1476)
Composition of the Commission:
EFFECT INABILITY PAY
Phil. Apparel Workers Union v. NLRC (81)
The stability of the economy does not depend
on the employer alone, but on government economic
policies concerning productivity in all areas and not
only in the clothing or textile industries. There is not
even an intimation that the company is losing. It is
the living wage of the workers which is the basis of a
stable economy. If the company cannot pay a living
wage, it has no business operating at the expense of
the lives of its workers from the very start.
b. To formulate policies and guidelines on wages,
incomes and productivity improvement at the
enterprise, industry and national levels;
c. To prescribe rules and guidelines for the
determination of appropriate minimum wage
and productivity measures at the regional,
provincial or industry levels;
d. To review regional wage levels set by the
Regional Tripartite Wages and Productivity
Boards to determine if these are in accordance
with prescribed guidelines and national
development plans;
e. To undertake studies, researches and surveys
necessary for the attainment of its functions
and objectives, and to collect and compile data
and periodically disseminate information on
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
Tripartite Wages and Productivity Boards to
determine whether these are consistent with
national development plans;
g. To exercise technical and administrative
supervision over the Regional Tripartite Wages
and Productivity Boards;
h. To call, from time to time, a national tripartite
conference of representatives of government,
workers, and employers for the consideration
of measures to promote wage rationalization
and productivity; and
i. To exercise such powers and functions as may
be necessary to implement this Act.
 Secretary of Labor and Employment as ex-
officio chairman
 Director-General of the NEDA as ex-officio vice-
chairman
 2 members each from workers and employer
sectors who shall be appointed by the President
upon recommendation of the Secretary of
Labor
» to be made on the basis of the list of
nominees submitted by the workers &
employers sectors, respectively, and
» who shall serve for a term of 5 years.

Note: members of the Commission representing

labor and management shall have the same rank,
emoluments & other benefits as those prescribed
by law for labor and mgt reps in the ECC

The Executive Director of the Commission

Secretariat shall also be a member of the
18.02 AGENCIES FOR WAGE FIXING
Commission.
MACHINERY
The Commission shall be assisted by a
Secretariat composed of
NATIONAL WAGES AND PRODUCTIVITY COMMISSION
1. Executive Director(as head) - same
rank/salary/benefits as a Dept Asst. Secretary
Created thru Art. 120
2. Deputy Directors, appointed by the Pres. upon
 attached to the DOLE for policy and program
recom. of the SOLE - same rank, salary,
coordination.
benefits and other emoluments as that of a
Bureau Director.
Powers and Functions of the Commission (Art. 121)
a. To act as the national consultative and
Prohibition against Injunction (Art. 126)
advisory body to the President of the
No preliminary or permanent injunction or
Philippines and Congress on matters relating
temporary restraining order may be issued by any
to wages, incomes and productivity;
COURT, TRIBUNAL OR OTHER ENTITY against
any proceedings before the Commission or the
Regional Boards.

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REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY
BOARD
Created thru Art. 122
 referred to as Regional Boards in all regions,
including autonomous regions as may be
established by law.
» The Commission shall determine
offices/headquarters of the respective
Regional Boards.
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 respective regions;
 to be implemented thru the respective
regional offices of the DOLE within their
territorial jurisdiction
 Regional Boards shall have technical
supervision over the regional office of the
DOLE with respect to the implementation of
said plans, programs and projects.
b. To determine and fix minimum wage rates
applicable in their respective regions,
provinces or industries therein and to issue the
corresponding wage orders, subject to
guidelines issued by the Commission;
c. To undertake studies, researches, and surveys
necessary for the attainment of their functions,
objectives and programs and to collect and
compile data on wages, incomes, productivity
and other related information and periodically
disseminate the same;
d. To coordinate with the other Regional Boards
as may be necessary to attain the policy and
intention of this Code;
e. To receive, process and act on applications for
exemption from prescribed wage rates as may
be provided by law or any Wage Order; and
f. To exercise such other powers and functions
as may be necessary to carry out their
mandate under this Code.
Composition of each Regional Board :
 Regional Director of DOLE as chairman
 Regional Directors of NEDA & DTI as vice-
chairman
 2 members each from workers and employers
sectors who shall be appointed by the President
upon recommendation of the SOLE to be made
on the basis of the list of nominees submitted
by the workers and employers sectors,
respectively, and who shall serve for a term of
5 years.
Each Regional Board to be headed by its
chairman shall be assisted by a Secretariat. (As
amended by RA 6727)
FUNCTIONS
Nasipit Lumber Co. v. NLRC(98)
The Labor Code, as amended by RA 6727 grants
the NWPC, not the RTWPB, the power to "prescribe
the rules and guidelines" for the determination of
minimum wage and productivity measures. While
the RTWPB has the power to issue wage orders
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under Article 122 (b) of the Labor Code, such orders
are subject to the guidelines prescribed by the
NWPC. One of these guidelines is the "Rules on
Minimum Wage Fixing," which was issued on June 4,
1990. Rule IV, Section 2 thereof, allows the RTWPB
to issue wage orders exempting enterprises from the
coverage of the prescribed minimum wages.
However, the NWPC has the power not only to
prescribe guidelines to govern wage orders, but also
to issue exemptions therefrom, as the said rule
provides that "[w]henever a wage order provides for
exemption, applications thereto shall be filed with
the appropriate Board which shall process the same,
subject to guidelines issued by the Commission." In
short, the NWPC lays down the guidelines which the
RTWPB implements.
18.03 AREA MINIMUM WAGES AND CRITERIA
STANDARDS/CRITERIA FOR MINIMUM WAGE FIXING
(ART. 124):
 The regional minimum wage to be established
by the Regional Board shall be as nearly
adequate as is economically feasible to
maintain the minimum standards of living
necessary for the health, efficiency and
general well-being of the employees within
the framework of the national economic and
social development program.
 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; and
j. The equitable distribution of income and
wealth along the imperatives of economic
and social development.
 The wages prescribed in accordance with the
provisions of this Title shall be the standard
prevailing minimum wages in every region.
These wages shall include wages varying with
industries, provinces or localities if in the
judgment of the Regional Board conditions
make such local differentiation proper and
necessary to effectuate the purpose of this
Title.
 Any person, company, corporation ,
partnership or any other entity engaged in
business shall file and register annually with
the appropriate Regional Board, Commission
and the National Statistics Office an itemized
listing of their labor component specifying the
names of their workers and employees below
the managerial level, including learners,
apprentices and disabled/handicapped workers
who were hired under the terms prescribed in
the employment contracts, and their
corresponding salaries and wages.
 WAGE DISTORTION
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Labor Standards
» Where the application of any prescribed  Any such wage order shall take effect after 15
wage increase by virtue of a law or wage days from its complete publication in at least 1
order issued by any regional board results newspaper of general circulation in the region.
in distortions of wage structure within an  In the performance of its wage-determination
establishment, the employer and the union functions, the Regional Board shall conduct
shall negotiate to correct the distortions. public hearings/consultations, giving notices to
» Any dispute arising from wage distortions employees’ & employers' groups, provincial,
shall be resolved through the grievance city and municipal officials and other interested
procedure under their collective bargaining parties.
agreement and, if it remains unresolved,  Any party aggrieved by the Wage Order issued
through voluntary arbitration. by the Regional Board may appeal to the
▪ Unless otherwise agreed by the parties Commission within 10 days from the
in writing, such dispute shall be decided publication of such order. It shall be mandatory
by the voluntary arbitrator or panel of for the Commission to decide such appeal
voluntary arbitrators within 10 calendar within 60 days from the filing thereof.
days from the time said dispute was  The filing of appeal does not stay the order
referred to voluntary arbitration. unless the person appealing shall file with the
» In cases where there are no collective Commission, an undertaking with a surety or
bargaining agreements or recognized labor sureties for the payment to the employees
unions, the employers and workers shall affected by the order of the corresponding
endeavor to correct such distortions. increase, in the event such order is affirmed.
▪ Any dispute arising therefrom shall be (As amended by RA 6727)
settled through the National Conciliation
and Mediation Board and, if it remains
unresolved after 10 calendar days of
conciliation, shall be referred to the
appropriate branch of the National Labor
Relations Commission (NLRC).
▪ It shall be mandatory for the NLRC to
conduct continuous hearings and decide
the dispute within 20 calendar days
from the time said dispute is submitted
for compulsory arbitration
» The pendency of a dispute arising from a
wage distortion shall not delay the
applicability of any increase in prescribed
wage rates pursuant to provisions of law or
wage order.
» Wage distortion - a situation where an
increase in prescribed wage rates results in
the elimination or severe contraction of
intentional quantitative differences in wage
or salary rates between and among
employee groups in an establishment as to
effectively obliterate the distinctions
embodied in such wage structure based on
skills, length of service, or other logical
bases of differentiation.

 All workers paid by result, including those who

are paid on piecework, takay, pakyaw, or task
basis, shall receive not less than the prescribed
wage rates per eight 8 hours of work a day, or
a proportion thereof for working less than 8
hrs.

 All recognized learnership and apprenticeship

agreements shall be considered automatically
modified insofar as their wage clauses are
concerned to reflect the prescribed wage rates.

18.04 WAGE ORDER

Art. 123
 Whenever the conditions so warrant, the
Regional Board shall investigate and study all
pertinent facts; and based on the standard and
criteria herein prescribed, shall proceed to
determine whether a Wage Order should be
issued.

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MINIMUM WAGE FIXING
Agencies:
1. NWPC
a. Prescribe rules, guidelines for the
determination of appropriate minimum
wage and what factors should be
considered
b. Review Regular wage levels set by RTWPB
if they are in accordance to prescribed
guidelines
c. REMEMBER, NWPC does not set the
minimum wage.
2. RTWPB
a. Determine and fix the minimum wage
rates applicable to the region, provinces,
industries
b. Issue the corresponding wage order
subject to guidelines issued by the NWPC
NOTES:
 Composition TRIPARTITE: Employer,
employee and government
 Functions are delineated
Procedure:
RTWPB
 When conditions warrant, investigate and
study pertinent facts, based criteria (Art.
124)
 Conduct public hearings/consultations,
notice to employer and employees groups,
provinces, city, municipal officials and
other interested parties
 Decide to ISSUE or NOT TO ISSUE a wage
order
 If it decides to ISSUE a wage order, the
wage order takes effect after 15 days from
complete publication in at least 1
newspaper of general circulation in the
region
 Appeal wage order to NWPC within 10
calendar days; mandatory for the NWPC to
decide within 60 calendar days from filing
 Filing of an appeal DOES NOT STAY order
unless appellant filed an undertaking with
surety, sureties, guarantees payment of
employees if the wage order is affirmed
METHODS OF FIXING
Employers Confederation of the Philippines v.
NWPC (91)
It is the Court's thinking, reached after the
Court's own study of the Act, that the Act is meant
to rationalize wages, that is, by having permanent
boards to decide wages rather than leaving wage
determination to Congress year after year and law
after law. The Court is not of course 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 of wages to the expertise of experts.
VALIDITY
Cagayan Sugar Milling Co. v. Secretary of Labor
(98)
There was no ambiguity in the provision of
Wage Order RO2-02 as it provided in clear and
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categorical terms for an increase in statutory
minimum wage of workers in the region. Hence, the
subsequent passage of RO2-02-A providing instead
for an across the board increase in wages did not
clarify the earlier Order but amended the same. In
truth, it changed the essence of the original Order.
In passing RO2-02-A without going through the
process of public consultation and hearings, the
Regional Board deprived petitioner and other
employers of due process as they were not given the
opportunity to ventilate their positions regarding the
proposed wage increase. In wage-fixing, factors
such as fair return of capital invested, the need to
induce industries to invest in the countryside and the
capacity of employers to pay are, among others,
taken into consideration. Hence, our legislators
provide for the creation of Regional Tripartite Boards
composed of representatives from the government,
the workers and the employers to determine the
appropriate wage rates per region to ensure that all
sides are heard. For the same reason, Article 123 of
the Labor Code also provides that in the
performance of their wage-determining functions,
the Regional Board shall conduct public hearings and
consultations, giving notices to interested parties.
Moreover, it mandates that the Wage Order shall
take effect only after publication in a newspaper of
general circulation in the region. It is a fundamental
rule, borne out of a sense of fairness, that the public
is first notified of a law or wage order-before it can
be held liable for violation thereof. In the case at
bar, it is indisputable that there was no public
consultation or hearing conducted prior to the
passage of RO2-02-A. Neither was it published in a
newspaper of general circulation as attested in the
February 3, 1995 minutes of the meeting of the
Regional Wage Board that the non-publication was
by consensus of all the board members. Hence,
RO2-02-A must be struck down for violation of
Article 123 of the Labor Code.
PIECE WORKER
Pulp and Paper, Inc. v. NLRC (97)
In the absence of wage rates based on time and
motion studies determined by the labor secretary or
submitted by the employer to the labor secretary for
his approval, wage rates of piece-rate workers must
be based on the applicable daily minimum wage
determined by the Regional Tripartite Wages and
Productivity Commission. To ensure the payment of
fair and reasonable wage rates, Article 101 of the
Labor Code provides that “ the Secretary of Labor
shall regulate the payment of wages by results,
including pakyao, piecework, and other noontime
work.” The same statutory provision also states that
the wage rates should be based, preferably, on time
and motion studies, or those arrived at in
consultation with representatives of workers' and
employers' organizations. In the absence of such
prescribed wage rates for piece-rate workers, the
ordinary minimum wage rates prescribed by
Regional Tripartite Wages and Productivity Board
should apply.
Lambo v. NLRC (99)
There is no dispute that petitioners were
employees of private respondents although they
were paid not on the case of time spent on the
job but according to the quantity and the quality
of work produced by them. There are two
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categories of employees paid by results: 91) those
whose time and performance are supervised by the
employer. (Here there is an element of control and
supervision over the manner as to how the work is
to be performed. A piece-rate worker belongs to
this category especially if he performs his work in
the company premises.); and (2) those whose time
and performance are unsupervised. (Here, the
employer’s control is over the result of the work.
Workers on pakyao and takay basis belong to this
group.) Both classes of workers are paid per unit
accomplished. Piece-rate payment is generally
practices in garment factories where work is done in
the company premises, while payment on pakyao
and takay basis is commonly observed in the
agricultural industry, such as in sugar plantations
where the work is performed in bulk or in volumes
difficult to quantify.
XXX The term “wage” is broadly defined in Art.
97 of the Labor Code as remuneration or earnings,
capable of being expressed in terms of money
whether fixed or ascertained on a time, task, piece
or commission basis.
WAGE DISTORTION
Wage Distortion
1. Cause: implementation of a wage order
increase prescribe minimum wage rate
2. Result:
 Elimination OR severe contraction of
intentional quantitative wages/salary rates
between or among employees
 Effectively obliterates distinctions on wage
structure which was based on skills, length
of service or other logical differences.
3. Procedure for Settlement
a. Organized Establishment
1. CBA Grievance Procedure
2. Voluntary Arbitration
b. Unorganized Establishment
1. Employer and employee, with aid of
National Conciliation Mediation Board
(NCMB) settles conciliation mediation
2. NLRC – Compulsory Arbitration
NOTES:
 Both the employer and employee cannot
use economic weapons (Employer cannot
declare a lock-out; Employee cannot
declare a strike) because the law has
provided for a procedure for settling
 Cases say that:
1. Parties are encouraged to settle the
dispute voluntarily
2. Neither party can use economic
weapons
3. Original decree of differential need not
be restored
4. NLRC has no authority to impose
directly or indirectly under guise of
rectifying a wage distortion upon the
employer a new scheme of
classification
Associated Labor Union v. NLRC (94)
The law recognizes the validity of negotiated
wage increases to correct wage distortions. The
legislative intent is to encourage the parties to seek
solution to the problem of wage distortions through
voluntary negotiation or arbitration, rather than
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strikes, lockouts, or other concerted activities of the
employees or management.
National Federation of Labor v. NLRC (94)
A statutory definition of "wage distortion" is now
found in Article 124 of the Labor Code as amended
by Republic Act No. 6727.
xxx As used herein, a wage distortion shall
mean a situation where an increase in prescribed
wage rates results in the elimination or severe
contraction of intentional quantitative differences in
wage or salary rates between and among employee
groups in an establishment as to effectively
obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other
logical bases of differentiation."
From the above quoted material, it will be seen
that the concept of wage distortion assumes an
existing grouping or classification of employees
which establishes distinctions among such
employees on some relevant or legitimate basis.
This classification is reflected in a differing wage rate
for each of the existing classes of employees. The
wage distortion anticipated in Wage Orders Nos. 3,
4, 5 and 6 was a "distortion" (or "compression")
which ensued from the impact of those Wage Orders
upon the different wage rates of the several classes
of employees. Thus distortion ensued where the
result of implementation of one or another of the
several Wage Orders was the total elimination or the
severe reduction of the differential or gap existing
between the wage rates of the differing classes of
employees. 10
It is important to note that the remedy
contemplated in the Wage Orders, and now in Article
124 of the Labor Code, for a wage distortion
consisted of negotiations between employer and
employees for the rectification of the distortion by
re-adjusting the wage rates of the differing classes
of employees. As a practical matter, this ordinarily
meant a wage increase for one or more of the
affected classes of employees so that some gap or
differential would be re-established. There was no
legal requirement that the historical gap which
existed before the implementation of the Wage
Orders be restored in precisely the same form or
amount.
Prubankers Assn. v. Prudential Bank and Co.
(99)
The statutory definition of wage distortion is
found in Article 124 of the Labor Code, as amended
by Republic Act No. 6727,
Elaborating on this statutory definition, this
Court ruled: "Wage distortion presupposes a
classification of positions and ranking of these
positions at various levels. One visualizes a
hierarchy of positions with corresponding ranks
basically in terms of wages and other emoluments.
Where a significant change occurs at the lowest level
of positions in terms of basic wage without a
corresponding change in the other level in the
hierarchy of positions, negating as a result thereof
the distinction between one level of position from
the next higher level, and resulting in a parity
between the lowest level and the next higher level or
rank, between new entrants and old hires, there
exists a wage distortion. . . . . The concept of a
wage distortion assumes an existing grouping or
classification of employees which establishes
distinctions among such employees on some
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Labor Standards
relevant or legitimate basis. This classification is
reflected in a differing wage rate for each of the
existing classes of employees"
Wage distortion involves four elements:
1. An existing hierarchy of positions with
corresponding salary rates
2. A significant change in the salary rate of a
lower pay class without a concomitant
increase in the salary rate of a higher one
3. The elimination of the distinction between
the two levels
4. The existence of the distortion in the same
region of the country
Contrary to petitioner's postulation, a disparity
in wages between employees holding similar
positions but in different regions does not constitute
wage distortion as contemplated by law. As
previously enunciated, it is the hierarchy of positions
and the disparity of their corresponding wages and
other emoluments that are sought to be preserved
by the concept of wage distortion. Put differently, a
wage distortion arises when a wage order engenders
wage parity between employees in different rungs of
the organizational ladder of the same establishment.
It bears emphasis that wage distortion involves a
parity in the salary rates of different pay classes
which, as a result, eliminates the distinction between
the different ranks in the same region.
18.05 EFFECT OF BENEFITS
Art. 100
Prohibition against elimination or diminution of
benefits
Nothing in this Book shall be construed to
eliminate or in any way diminish supplements or
other employee benefits being enjoyed at the time
of the promulgation of this Code.
Davao Fruits Corporation v. Associated Labor
Unions (93)
A company practice favorable to the employees
had indeed been established and the payments
made pursuant thereto, ripened into benefits
enjoyed by them. And any benefit and supplement
being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the
employer, by virtue of Section 10 of the Rules and
Regulations Implementing P.D. No. 851, and Article
100 of the Labor Code of the Philippines, which
prohibit the diminution or elimination by the
employer of the employees' existing benefits
(Tiangco v. Leogardo, Jr. ).
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 established management practice; thus, it is
estopped from implementing a wage order for a
specific region only. We are not persuaded. Said
nationwide uniform wage policy of the Bank had
been adopted prior to the enactment of RA 6727.
After the passage of said law, the Bank was
mandated to regionalize its wage structure. Although
the Bank implemented Wage Order Nos. NCR-01 and
NCR-02 nationwide instead of regionally even after
the effectivity of RA 6727, the Bank at the time was
still uncertain about how to follow the new law. In
any event, that single instance cannot be
constitutive of "management practice."
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SECTION 19 - WOMEN WORKERS
19.01 WOMEN AND THE CONSTITUTION
Art II Sec 14, 1987 Constitution
The State recognizes the role of women in nation-
building, and shall ensure the fundamental equality
before the law of women and men.
WOMEN WORKERS
Philippine Telegraph and Telephone Co. v.
NLRC (97)
The Constitution, cognizant of the disparity in
rights between men and women in almost all phases
of social and political life, provides a gamut of
protective provisions. To cite a few of the primordial
ones, Section 14, Article II on the Declaration of
Principles and State Policies, expressly recognizes
the role of women in nation-building and commands
the State to ensure, at all times, the fundamental
equality before the law of women and men. Corollary
thereto, Section 3 of Article XIII (the progenitor
whereof dates back to both the 1935 and 1973
Constitution) pointedly requires the State to afford
full protection to labor and to promote full
employment and equality of employment
opportunities for all, including an assurance of
entitlement to tenurial security of all workers.
Similarly, Section 14 of Article XIII mandates that
the State shall protect working women through
provisions for opportunities that would enable them
to reach their full potential.
19.02 COVERAGE
Book III, Rule XIII, Sec. 1, Omnibus Rules
This Rule shall apply to all employers, whether
operating for profit or not, including educational,
religious and charitable institutions,
EXCEPT:
 Government
 Government-owned or controlled corporations
and
 Employers of household helpers and persons in
their personal service insofar as such workers
are concerned.
18.03 PROHIBITED ACTS
NIGHT WORK AND EXCEPTION
Art. 130.
Night work prohibition. - No woman, regardless of
age, shall be employed or permitted or suffered to
work, with or without compensation:
a. In any industrial undertaking or branch thereof
between 10pm & 6am of the following day
b. In any commercial or non-industrial
undertaking or branch thereof, other than
agricultural, between 12mn & 6am of the
following day.
c. In any agricultural undertaking at night
time unless she is given a period of rest of
not less than 9 consecutive hours.
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Art. 131.
Exceptions
a. In cases of actual or impending emergencies
caused by serious accident, fire, flood,
typhoon, earthquake, epidemic or other
disasters or calamity, to prevent loss of life or
property or in cases of force majeure or
imminent danger to public safety;
b. In case of urgent work to be performed on
machineries, equipment or installation, to
avoid serious loss which the employer would
otherwise suffer;
c. Where the work is necessary to prevent
serious loss of perishable goods;
d. Where the woman employee holds a
responsible position of managerial or technical
nature, or where the woman employee has
been engaged to provide health and welfare
services;
e. Where the nature of the work requires the
manual skill and dexterity of woman worker
and the same cannot be performed with equal
efficiency by male worker;
f. Where the women employees are immediate
members of the family operating the
establishment or undertaking; and
g. Under other analogous cases exempted by the
Secretary of Labor and Employment in
appropriate regulations.
DISCRIMINATION
Art. 135.
Discrimination prohibited – It shall be unlawful for
any employer to discriminate against any woman
employee with respect to terms and conditions of
employment solely on account of her sex.
The following are acts of discrimination:
1. Payment of a lesser compensation, including
wage, salary or other form of remuneration
and fringe benefits, to a female employee as
against a male employee, for work of equal
value; and
2. Favoring a male employee over a female
employee with respect to promotion, training
opportunities, study and scholarship grant
solely on account of their sexes.
Criminal liability for the willful commission of
any unlawful acts as provided in this article or any
violation of the rules and regulations issued pursuant
to Sec. 2 hereof shall be penalized as provided in
Articles 288 and 289 of this Code: Provided, That
the institution of any criminal action under this
provision shall not bar the aggrieved employee from
filing an entirely separate and distinct action for
money claims, which may include claims for
damages and other affirmative reliefs. The action
hereby authorized shall proceed independently of
each other.
MARRIAGE
Art. 136.
Stipulation against marriage- It shall be unlawful for
an employer to require as a condition of
employment or continuation of employment
that a woman employee shall not get married, or to
stipulate expressly or tacitly that upon getting
married a woman employee shall be deemed
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resigned or separated or to actually dismiss,
discharge, discriminate or otherwise prejudice a
woman employee merely by reason of her marriage.
GENERAL
Art. 137.
Prohibited acts. - (a) 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 for the purpose
of preventing her from enjoying any of the
benefits 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 upon returning to her work for fear
that she may again be pregnant.
19.04 FACILITIES
Art. 132.
Facilities for women. - The Secretary of Labor and
Employment shall establish standards that will
ensure the safety and health of women employees.
In appropriate cases, he shall by regulations require
any employer to:
1. Provide seats proper for women and permit
them to use such seats when they are free
from work and during working hours, provided
they can perform their duties in this position
without detriment to efficiency;
2. Establish separate toilet rooms and lavatories
for men and women and provide at least a
dressing room for women;
3. Establish a nursery in a workplace for the
benefit of the woman employees therein; and
4. Determine appropriate minimum age and
other standards for retirement or termination
in special occupations such as those of flight
attendants and the like.
Art. 134.
Family planning services; incentives for family
planning. –
a. Establishments which are required by law to
maintain a clinic or infirmary shall provide free
family planning services to their employees
which shall include, but not limited to, the
application or use of contraceptive pills and
intra-uterine devices.
b. In coordination with other agencies of the
government engaged in the promotion of
family planning, the Department of Labor and
Employment shall develop and prescribe
incentive bonus schemes to encourage family
planning among female workers in any
establishment or enterprise.
19.05 SPECIAL CLASSIFICATION, SPECIAL
WOMEN WORKERS
Art. 138.
Classification of certain women workers. - Any
woman who is permitted or suffered to work with or
without compensation in any night club, cocktail
lounge, massage clinic, bar or similar
establishment, under the effective control or
supervision of the employer for a substantial
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period of time as determined by the Secretary of
Labor and Employment, shall be considered as an
employee of such establishments for purposes of
labor and social legislation.
19.06 MATERNITY LEAVE
Sec. 14 – A RA 8282
A female employee who has paid at least three (3)
monthly contributions in the twelve-month period
immediately preceding the semester of her
childbirth, or miscarriage shall be paid a daily
maternity benefit equivalent to one hundred percent
(100%) of her average salary credit for sixty (60)
days or seventy-eight days in case of caesarean
delivery subject to the following conditions:
d. That the employee shall have notified her
employer of her pregnancy and the probable
date of her childbirth which notice shall be
transmitted to the SSS in accordance with the
rules and regulations it may provide.
e. The full payment shall be advanced by the
employer within thirty (30) days from the filing
of the maternity leave application.
f. That payment of daily maternity benefits shall
be a bar to the recovery of sickness benefits
provided by this Act for the same period for
which daily maternity benefits have been
received.
g. That the maternity benefits provided under
this section shall be paid only for the first four
(4) deliveries or miscarriages.
h. That the SSS shall immediately reimburse the
employer of one hundred percent (100%) of
the amount of maternity benefits advanced to
the employee by the employer upon receipt of
satisfactory proof of such payment and legality
thereof;
i. That if an employee should give birth or suffer
miscarriage without the required contributions
having been remitted for her by her employer
to the SSS, or without the latter having been
previously notified by the employer of time of
the pregnancy, the employer shall pay to the
SSS damages equivalent to the benefits which
said employee member would otherwise have
been entitled to.
Paternity Leave Act of 1996 (RA 8187)
Sec. 2:
Notwithstanding any law, rules and regulations
to the contrary, every MARRIED male employee in
the private and public sectors shall be entitled to a
paternity leave of seven (7) days with full pay
FOR THE FIRST FOUR (4) DELIVERIES OF THE
LEGITIMATE SPOUSE WITH WHOM HE IS
COHABITING. The male employee applying for
paternity leave shall notify his employer of the
pregnancy of his legitimate spouse and the expected
date of such delivery.
For the purposes of this Act, delivery shall
include childbirth or any miscarriage.
19.07 SEXUAL HARASSMENT
POLICY
The State shall value the dignity of every
individual, enhance the development of its human
resources, guarantee full respect for human rights,
and uphold the dignity of workers, employees,
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applicants for employment, students or those
undergoing training, instruction or education.
Towards this end, all forms of sexual harassment in
the employment, education or training environment
are hereby declared unlawful.
Work, Education or Training-related Sexual
Harassment Defined
 Work, education or training-related sexual
harassment is committed
» by an employer, employee, manager,
supervisor, agent of the employer, teacher,
instructor, professor, coach, trainor or any
other person who, HAVING AUTHORITY,
INFLUENCE OR MORAL ASCENDANCY OVER
ANOTHER
» IN A WORK OR TRAINING OR EDUCATION
ENVIRONMENT,
» demands requests or otherwise requires
any sexual favor from other,
» regardless of whether the demand, request
for requirement for submission is accepted
by the object of said act.
 In a work-related or employment environment,
sexual harassment is committed when:
a. The sexual favor is made as a condition in
the hiring or in the employment, re-
employment or continued employment of
said individual or in granting said individual
favorable compensation, terms, conditions,
promotions, or privileges, or the refusal to
grant the sexual favor results in limiting,
segregating or classifying the employee
which in any way would discrimnate,
deprive or diminish employment
opportunities or otherwise adversely affect
said employee;
b. The above acts would impair the
employee’s rights or privileges under
existing labor laws; or
c. The above acts would result in an
intimidating, hostile, or offensive
environment for the employee.
 In an education or training environment, sexual
harassment is committed:
a. Against one who is under the care, custody
or supervision of the offender
b. Against one whose education, training,
apprenticeship or tutorship is entrusted to
the offender;
c. When the sexual favor is made a condition
to the giving of a passing grade, or the
granting of honors and scholarships, or the
payment of a stipend, allowance or other
benefits, privileges, or considerations; or
d. When the sexual advances result in an
intimidating, hostile or offensive
environment for the result, trainee or
apprentice.
 Any person who directs or induces another to
commit any act of sexual harassment as herein
defined, or who cooperates in the commission
thereof by another without which it would not
have been committed, shall also be held liable
under this Act.
DUTY OF THE EMPLOYER OR HEAD OF OFFICE IN A
WORK-RELATED, EDUCATION OR TRAINING
ENVIRONMENT
Part II : Labor Standards Law
Labor Standards
 It shall be the duty of the employer or the head
of the work-related, educational or training
environment or institution,
1. to prevent or deter the commission of acts
of sexual harassment and
2. to provide the procedures for the
resolution, settlement or prosecution of acts
of sexual harassment.
 Towards this end, the employer or head of
office shall:
a. Promulgate appropriate rules and regulations
in consultation with and jointly approved by
the employees or students or trainees,
through their duly designated representatives
prescribing the procedure for the
investigation of sexual harassment cases and
the administrative sanctions therefore.
▪ The said rules and regulations issued
pursuant to this subsections (a) shall
include, among others, guidelines on
proper decorum in the workplace and
educational or training institutions
b. Create a committee on decorum and
investigation of cases on sexual
harassment. The Committee shall conduct
meetings, as the case may be, with officers
and employees, teachers, instructors,
professors, coaches, trainors and students
or trainees to increase understanding and
prevent incidents of sexual harassment. It
shall also conduct the investigation of
alleged cases constituting sexual
harassment.
▪ In the case of work-related
environment, the committee shall be
composed of at least 1 representative
each from the management, the union,
if any, the employees from the
supervisory rank, and from the rank and
file employees.
▪ In the case of the educational or
training institution, the committee shall
be composed of at least 1 (2000)
representative from the administration,
the trainors, teachers, instructors,
professors or coaches and students or
trainees, as the case may be.
▪ The employer or head of office,
educational or training institution shall
disseminate or post a copy of 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
training institution shall be SOLIDARILY LIABLE for
damages arising from the acts of sexual harassment
committed in the employment, education or training
environment if the employer or head of office,
educational or training institution is informed of such
acts by the offended party and no immediate action
is taken thereon.
INDEPENDENT ACTION FOR DAMAGES
Nothing in this Act shall preclude the victim of
work, education or training-related sexual
harassment from instituting a separate and
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independent action for damages and other
affirmative relief.
PENALTIES
Any person who violates the provisions of this
Act shall, upon conviction, be penalized by
imprisonment of not less than 1 month nor more
than 6 months, or a fine or not less than P10,0000
nor more than P20,000.00, or both such fine and
imprisonment at the discretion of the court.
Any action arising from the violations of the
provisions of this Act shall prescribe in 3 years.
Libres v. NLRC (99)
Republic Act No. 7877 was not yet in effect at
the time of the occurrence of the act complained of.
It was still being deliberated upon in Congress when
petitioner’s case was decided by the Labor Arbiter.
As a rule, laws shall have no retroactive effect unless
otherwise provided, or except in a criminal case
when their application will favor the accused.
Hence, the Labor Arbiter have to rely on the MEC
report and the common connotation of sexual
harassment as it is generally understood by the
public.
The disparity in the periods of filing the
complaints in the two cases did not in any way
reduce this case into insignificance. On the
contrary, it even invited the attention of the Court to
focus on sexual harassment as a just and valid cause
for termination. xxx “As a managerial employee,
petitioner is bound by more exacting work ethics.
He failed to live up to his higher standard of
responsibility when he succumbed to his moral
perversity. And when such moral perversity is
perpetuated against his subordinate, he provides a
justifiable ground for his dismissal for lack of trust
and confidence. It is the right, nay the duty of every
employer to protect its employees from oversexed
superiors.”
Phil. Aelous Automotive United Corp. v. NLRC
The gravamen of the offense in sexual
harassment is not the violation of the employee's
sexuality but the abuse of power by the employer.
Any employee, male or female, may rightfully cry
"foul" provided the claim is well substantiated.
Strictly speaking, there is no time period within
which he or she is expected to complain through the
proper channels. The time to do so may vary
depending upon the needs, circumstances, and more
importantly, the emotional threshold of the
employee.
SECTION 20 - MINORS
20.01 MINORS AND THE CONSTITUTION
Art II Sec 13, 1987 Constitution
The State recognizes the vital role of the youth
in nation-building and shall promote and protect
their physical, moral, spiritual, intellectual, and
social well-being. It shall inculcate in the youth
patriotism and nationalism, and encourage their
involvement in public and civic affairs.
20.02 LAW
Part II : Labor Standards Law
Labor Standards
RA 7610 “Special Protection of Children Against Child
Abuse, Exploitation and Discrimination Act”
POLICY
 It is hereby declared to be the policy of the
State to provide special protection to children
from all forms of abuse, neglect, cruelty,
exploitation and discrimination, and other
conditions prejudicial to their development;
provide sanctions for their commission and
carry out a program for prevention and
deterrence of and crisis intervention in
situations of child abuse, exploitation and
discrimination. The State shall intervene on
behalf of the child with the parent, guardian,
teacher or person having care or custody of the
child fails or is unable to protect the child
against abuse, exploitation and discrimination
or when such acts against the child are
committed b the said parent, guardian, teacher
or person having care and custody of the same.
 It shall be the policy of the State to protect and
rehabilitate children gravely threatened or
endangered by circumstances which affect or
will affect their survival and normal
development and over which they have no
control.
 The best interests of children shall be the
paramount consideration of all actions
concerning them, whether undertaken by
public or private social welfare institutions,
courts of law, administrative authorities, and
legislative bodies, consistent with the principle
of First Call for Children as enunciated I the
United Nations Convention on the Rights of the
Child. Every effort shall be exerted to promote
the welfare of children and enhance their
opportunities for a useful and happy life.
DEFINITION OF TERMS
Children - persons below 18 years of age or those
over but are unable to fully take care of themselves
or protect themselves from abuse, neglect, cruelty,
exploitation or discrimination because of a physical
or mental disability or condition
Child Abuse – maltreatment, whether habitual or
not, of the child which includes any of the following:
1. Psychological and physical abuse, neglect,
cruelty, sexual abuse and emotional
maltreatment;
2. Any act by deeds or words which debases,
degrades or demeans the intrinsic worth and
dignity of a child as a human 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 injured child resulting in serious
impairment of his growth and development or
in his permanent incapacity or death.
“Circumstances which gravely threaten or
endanger the survival and normal development
of children”, include, but are not limited to, the
following:
a. Being in a community where there is armed
conflict or being affected by armed conflict-
related activities;
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b. Working under conditions hazardous to life,
safety and morals which unduly interfere with
their normal development
c. Living in or fending for themselves in the
streets of urban or rural areas without the care
of parents or a guardian or any adult
supervision needed for their welfare.
d. Being a member of an indigenous cultural
community and/or living under conditions of
extreme poverty or in an area which is
underdeveloped and/or lacks or has
inadequate access 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
which endanger the life, safety or normal
development of children.
“Comprehensive program against child abuse,
exploitation and discrimination” refers to the
coordinated program of services and facilities 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; and
e. Circumstances which threaten or endanger the
survival and normal development of children.
WORKING CHILDREN
Sec. 12 (RA 7610, as amended by RA 7658)
Employment of Children – Children below fifteen
(15) years of age shall not be employed except:
3. When a child works directly under the sole
responsibility of his parents or legal guardian
and where only members of the employer’s
family are employed: Provided, however, That
his employment neither endangers his life,
safety, health and morals, nor impairs his
normal development: Provided, further, That
the parent or legal guardian shall provide the
said minor child with the prescribed primary
and/or secondary education; or
4. When a child’s employment or participation in
public and entertainment or information
through cinema, theater, radio or television is
essential: Provided, the employment contract
is concluded by the child’s parents or guardian,
with the express agreement of the child
concerned, if possible, and the approval of the
Department of Labor and Employment: and
Provided, That the following 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 the child’s exploitation or
discrimination taking into account the
system and level of remuneration, and the
duration and arrangement of working time
c. The employer shall formulate and
implement, subject to the approval and
supervision of competent authorities, a
continuing program for training and skills
acquisition of the child.
In the above exceptional cases where any
such child may be employed, the employer shall
first secure, before engaging such child, a work
Part II : Labor Standards Law
Labor Standards
permit from the Department of Labor and
Employment which shall ensure observance of the
above requirements.
NON-FORMAL EDUCATION FOR WORKING CHILDREN
(SEC. 13)
The Department of Education, Culture and
Sports shall promulgate a course design under its
non-formal education program aimed at promoting
the intellectual, moral and vocational efficiency of
working children who have not undergone or finished
elementary or secondary education. Such course
design shall integrate the learning process deemed
most effective under given circumstances.
PROHIBITION ON THE EMPLOYMENT OF CHILDREN IN
CERTAIN ADVERTISEMENTS (SEC. 14)
No person shall employ child models in all
commercial advertisements promoting alcoholic
beverages, intoxicating drinks, tobacco and its
byproducts, and violence.
DUTY OF EMPLOYER (SEC. 15)
Every employer shall comply with the duties
provided for in Articles 108 and 109 of PD 603.
Article 108, PD 603
Duty of Employer to Submit Report
Article 109, PD 603
Register of Children
PENALTIES (SEC. 16)
Any person who shall violate any provision of
this Article shall suffer the penalty of a fine of not
less than P1,000.00 but not more than P10,000.00
or imprisonment of not less than 3 months but not
more than 3 years, or both at the discretion of the
court, Provided, that in case of repeated violations of
the provisions of this Article, the offender’s license to
operate shall be revoked.
20.03 DISCRIMINATION
Art. 140
Prohibition against child discrimination. - No
employer shall discriminate against any person in
respect to terms and conditions of employment on
account of his age.
SECTION 21 – HOUSEHELPERS
21.01 COVERAGE
Art. 141
 all persons rendering services in households for
compensation.
"Domestic or household services" shall mean service
in the employer's home, which is usually necessary
or desirable for the maintenance and enjoyment
thereof and includes ministering to the personal
comfort and convenience of the members of the
employer's household, including services of family
drivers.
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21.02 HOUSEHELPERS
Art. 141
 all persons rendering services in households for
compensation.
"Domestic or household services" shall mean service
in the employer's home, which is usually necessary
or desirable for the maintenance and enjoyment
thereof and includes ministering to the personal
comfort and convenience of the members of the
employer's household, including services of family
drivers.
21.03 NON-HOUSEHOLD WORK ASSIGNMENT
Art. 145.
No househelper shall be assigned to work in a
commercial, industrial or agricultural enterprise at a
wage or salary rate lower than that provided for
agricultural or non-agricultural worker as prescribed
herein
Barcenas v. NLRC(90)
Moreover, the work that petitioner performed in
the temple could not be categorized as mere
domestic work. Thus, We find that petitioner, being
proficient in the Chinese language, attended to the
visitors, mostly Chinese, who came to pray or seek
advice before Buddha for personal or business
problems; arranged meetings between these visitors
and Su and supervised the preparation of the food
for the temple visitors; acted as tourist guide of
foreign visitors; acted as liaison with some
government offices; and made the payment for the
temple's Meralco, MWSS and PLDT bills. Indeed,
these tasks may not be deemed activities of a
household helper. They were essential and important
to the operation and religious functions of the
temple.
Apex Mining Co. v. NLRC
The term `househelper' as used herein is
synonymous to the term `domestic servant' and
shall refer to any person, whether male or female,
who renders services in and about the employer's
home and which services are usually necessary or
desirable for the maintenance and enjoyment
thereof, and ministers exclusively to the personal
comfort and enjoyment of the employer's family.
21.04 CONDITIONS OF EMPLOYMENT
Art. 142.
Contract of domestic service. - original contract shall
not last for more than two years but it may be
renewed for such periods as may be agreed upon by
the parties.
Art. 143
Minimum Wage
Art. 144
Minimum Cash Wage – The minimum wage rates
prescribed under this Chapter shall be the basic cash
wages which shall be paid to the househelpers in
addition to lodging, food and medical attendance.
Art. 145.
Assignment to non-household work. - No
househelper shall be assigned to work in a
commercial, industrial or agricultural enterprise
Part II : Labor Standards Law
Labor Standards
at a wage or salary rate lower than that provided for
agricultural or non-agricultural worker as prescribed
herein
Art. 146.
Opportunity for education. - If below 18 the
employer shall give him or her an opportunity for at
least elementary education. The cost of such
education shall be part of the househelper's
compensation, unless there is a stipulation to the
contrary.
Art. 147.
Treatment of househelpers. - just and humane
manner. In no case shall physical violence be used
upon the househelper.
Art. 148.
Board, lodging and medical attendance. - ER furnish
free of charge suitable and sanitary living quarters
as well as adequate food and medical attendance.
Art. 149.
Indemnity for unjust termination of services. - If the
period of household if period of service fixed = no
termination by either party except for just
unjust dismissal = compensation already earned
plus that of 15 days by way of indemnity.
leaves w/o justifiable reason = any unpaid salary
due him or her not exceeding 15 days.
Art. 150.
Service of termination notice. - If the duration of
household service is not determined either
stipulation or by the nature of the service,
employer or the househelper may give notice to
an end to the relationship five days before
intended termination of the service.
Art. 151.
Employment certification. - Upon the severance of
the household service relation, the employer shall
give the househelper a written statement of the
nature and duration of the service and his or her
efficiency and conduct as househelper.
Art. 152.
Employment records. - The employer may keep such
records as he may deem necessary to reflect the
actual terms and conditions of employment of his
househelper which the latter shall authenticate by
signature or thumbmark upon request of the
employer.
SEE ALSO ARTICLES 1689 – 1699 OF THE CIVIL
CODE
Ultra Villa Food Haus v. Geniston (99)
Accordingly, the terms and conditions of private
respondent's employment are governed by Chapter
III, Title III, Book III of the Labor Code as well as by
the pertinent provisions of the Civil Code. Thus,
Article 141 of the Labor Code provides:
Art. 141. Coverage. — This Chapter shall apply to
all persons rendering services in households for
compensation.
Domestic or household service" shall mean
services in the employers home which is usually
necessary or desirable for the maintenance and
enjoyment thereof and includes ministering to the
personal comfort and convenience of the members
of the employers household, including services of
family drivers.
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Chapter III, Title III, Book III, however, is silent
on the grant of overtime pay, holiday pay, premium
pay and service incentive leave to those engaged in
the domestic or household service.
Moreover, the specific provisions mandating
these benefits are found in Book III, Title I of the
Labor Code, and Article 82, which defines the scope
of the application of these provisions, expressly
excludes domestic helpers from its coverage:
SECTION 22 – HOMEWORKERS
22.01 COVERAGE AND REGULATION
Art. 153.
Regulations of industrial homework. - The
employment of industrial homeworkers and field
personnel shall be regulated by the Government
through appropriate regulations issued by the
Secretary of Labor and Employment to ensure the
general welfare and protection of homeworkers and
field personnel and the industries employing them.
Art. 154.
Regulations of Secretary of Labor and Employment. -
The regulations or orders to be issued pursuant to
this Chapter shall be designed to assure the average
employee of an undertaking the minimum terms and
conditions of employment applicable to the industrial
the homeworkers or field personnel involved.
by
the Department Order No. 005 – 92
put
the Coverage: This Rule shall apply to any person who
performs industrial homework for an employer,
contractor or sub-contractor. (1)
Industrial Homework: A system of production under
which work for an employer or contractor is carried
out by a homework at his/her home. Materials may
or may not be furnished by the employer or
contractor. (2a)
22. 02 EMPLOYER
Art. 155.
Distribution of homework. - For purposes of this
Chapter, the "employer" of homeworkers includes
any person, natural or artificial, who for his account
or benefit or on behalf of any person residing outside
the country, directly or indirectly, or through any
employee, agent, contractor, sub-contractor or any
other person:
1. Delivers, or causes to be delivered, any goods,
articles or materials to be processed or
fabricated in or about a home and thereafter
to be returned or to be disposed of or
distributed in accordance with his directions;
or
2. Sells any goods, articles or materials for the
purpose of having the same processed or
fabricated in or about a home and then rebuys
them after such processing or fabrication,
either himself or through some other
person.
Part II : Labor Standards Law
Labor Standards
Security of tenure is a right of paramount value.
Precisely, it is given specific recognition and
guarantee by the Constitution no less. The State
SECTION 23 - TERMINATION OF shall afford protection to labor and "shall assure the
EMPLOYMENT rights of workers to .. security of tenure", so runs
the Constitutional mandate. (Art. II, Sec. 9.) It
A. General Concepts stands to reason that a right so highly ranked as
security of tenure should not lightly be denied on so
nebulous a basis as mere speculation.
23.01 SECURITY OF TENURE OR TENURIAL
SECURITY
Manila Electric Co., v. NLRC (91)
Such an offense is obviously of so serious a
Art. 279
character as to merit the penalty of dismissal from
Security of Tenure
employment. The Labor Code pronounces "fraud or
In cases of regular employment, the employer shall
willful breach by the employee of the trust reposed
not terminate the services of an employee except for
in him by his employer or duly authorized
a just cause or when authorized by this Title. An
representative," or "serious misconduct" on the part
employee who is unjustly dismissed from work shall
of the employee to be lawful ground to terminate
be entitled to reinstatement without loss of seniority
employment. And this Court has held that the
rights and other privileges and to his full backwages,
"dismissal of a dishonest employee is as much in the
inclusive of allowances, and to his other benefits or
interests of labor as it is of management. The labor
their monetary equivalent computed from the time
force in any company is protected and the workers'
his compensation was withheld from him up to the
security of tenure strengthened when pilferage of
time of his actual reinstatement.
equipment, goods and products which endangers the
viability of an employer and, therefore, the workers'
Art. XIII, Sec. 3, 1987 Constitution
continued employment is minimized or eliminated
The State shall afford full protection to labor, local
and consequently labor-management relations based
and overseas, organized and unorganized, and
on mutual trust and confidence are promoted."
promote full employment and equality of
employment opportunities for all.
Alhambra Industries, Inc. v. NLRC (94)
It shall guarantee the rights of all workers to
TODAY employment is no longer just an
self-organization, collective bargaining and
ordinary human activity. For most families the main
negotiations, and peaceful concerted activities,
source of their livelihood, employment has now
including the right to strike in accordance with law.
leveled off with property rights which no one may be
They shall be entitled to security of tenure, humane
deprived of without due process of law.
conditions of work, and a living wage. They shall
Termination of employment is not anymore a
also participate in policy and decision-making
mere cessation or severance of contractual
processes affecting their rights and benefits as may
relationship but an economic phenomenon affecting
be provided by law.
members of the family. This explains why under the
The State shall promote the principle of shared
broad principles of social justice the dismissal of
responsibility between workers and employers and
employees is adequately protected by the laws of
the preferential use of voluntary modes in settling
the state.
disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster
Quijano v. Mercury Drug Corp. (98)
industrial peace.
Well-entrenched is the rule that an illegally
dismissed employee is entitled to reinstatement as a
POLICY STATEMENT
matter of right. Over the years, however, the case
law developed that where reinstatement is not
City Trust Banking Corp. v. NLRC (96)
feasible, expedient or practical, as where
Backwages are for earnings which a worker has
reinstatement would only exacerbate the tension
lost due to his illegal dismissal. After she was
and strained relations between the parties, or where
reinstated, she was entitled to receive the
the relationship between the employer and
differential between the salary of internal auditor
employee has been unduly strained by reason of
and manager of the Auditing Department for the
their irreconcilable differences, particularly where
position was not a substantial equivalent to that of
the illegally dismissed employee held a managerial
internal auditor.
or key position in the company, it would be more
This petition is the fourth filed with this Court.
prudent to order payment of separation pay instead
It has no doubt, prolonged the granting of complete
of reinstatement. Some unscrupulous employers,
relief to private respondent. Litigation must come to
however, have taken advantage of the overgrowth of
an end. In labor cases, the cause of an illegally
this doctrine of "strained relations" by using it as a
dismissed employee must always be a concern of
cover to get rid of its employees and thus defeat
everyone if we ae to give effect to the constitutional
their right to job security.
policy of protecting labor and the duty of this Court
To protect labor's security of tenure, we
to see to it that justice is served not only fairly but
emphasize that the doctrine of "strained relations"
also swiftly.
should be strictly applied so as not to deprive an
illegally dismissed employee of his right to
NATURE OF SECURITY OF TENURE
reinstatement. Every labor dispute almost always
results in "strained relations", and the phrase cannot
TERMINAL SECURITY RIGHT
be given an overarching interpretation,
otherwise, an unjustly dismissed employee can
City Service Corp. Workers Union v. City
never be reinstated.
Service Corp. (85)

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Part II : Labor Standards Law
Labor Standards
Condo Suite Club Travel, Inc. v. NLRC (2000)
The fundamental guarantee of security of tenure
dictates that no worker shall be dismissed except for
just and authorized cause provided by law, and after
de process.
Lanzadares v. Amethyst Security (2003)
Security of tenure, although provided in the
Constitution does not give an employee an absolute
vested right in a position as would deprive the
company of its prerogative to change their
assignment or transfer them where they will be most
useful. When a transfer is not unreasonable, nor
inconvenient, nor prejudicial to an employee; and it
does not involve a demotion in rank or diminution of
his pay, benefits, and other privileges, the employee
may not complain that it amounts to constructive
dismissal
IMPORTANCE OF EMPLOYMENT
EMPLOYMENT
Gonzales v. NLRC (99)
Employment is not merely a contractual
relationship; it has assumed the nature of property
right. It may spell the difference whether or not a
family will have food on their table, roof over their
heads and education for their children. It is for this
reason that the State has taken up measures to
protect employees from unjustified dismissals. It is
also because of this that the right to security of
tenure is not only a statutory right but, more so, a
constitutional right.
STATE REGULATION – RATIONALE
Llosa-Tan v. Silahis International Hotel (90)
It is well settled that dismissal based on loss of
trust and confidence arising from alleged misconduct
of employee, is not to be used as a shield to dismiss
an employee arbitrarily (Callanta v. Carnation
Philippines, Inc.). Although the power to dismiss is a
normal prerogative of the employer, the same is not
without limitations (Rance v. NLRC). The right of the
employer must not be exercised arbitrarily and
without just cause. Otherwise, the constitutional
guarantee of security of tenure of the workers would
be rendered nugatory. While dismissing or laying off
of an employee is a management's prerogative, it
must nevertheless be done without abuse of
discretion (Atlas Consolidated Mining Corp. v. NLRC).
Furthermore, the right of employer to freely select or
discharge his employees is regulated by the State,
because the preservation of the lives of the citizens
is a basic duty of the State, more vital than the
preservation of the corporate profit (Euro-Linea,
Phils., Inc. v. NLRC). In addition, security of tenure
is a right of paramount value guaranteed by the
Constitution and should not be denied on mere
speculation (Tolentino v. NLRC). Protection to labor
and social justice provisions of the Constitution and
the labor laws and rules and regulations are
interpreted in favor of the exercise of labor rights
(Euro-Linea, Phils., Inc. v. NLRC)
COVERAGE
Art. 278
Coverage
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The provisions of this Title shall apply to ALL
establishments or undertakings, whether for profit or
not.
CONTRACT EMPLOYEE
Labajo v. Alejandro (88)
As probationary and contractual employees,
private respondents enjoyed security of tenure, but
only to a limited extent — i. e., they remained
secure in their employment during the period of time
their respective contracts of employment remained
in effect. That temporary security of tenure,
however, ended the moment their employment
contracts expired on 31 March 1985 and petitioners
declined to renew the same for the next succeeding
school year. Consequently, as petitioners were not
under obligation to renew those contracts of
employment, the separation of private respondents
in this case cannot be said to have been without
justifiable cause, much less illegal.
PROBATIONARY EMPLOYEE
Skillworld Management and Marketing Corp. v.
NLRC (90)
While it may be true that Manuel was a
probationary employee at the time of his dismissal
he may not be dismissed without cause. This is
settled in the cases of Manila Hotel Corporation v.
NLRC and in the case of Alga Moher International
Placement Services v. Hon. D. Atienza, where We
held:
"There is no dispute that as a probationary
employee, private respondent had but a limited
tenure. Although on probationary basis, however,
Cruz still enjoys the constitutional protection on
security of tenure. During his tenure of
employment therefore, or before his contract
expires, respondent Cruz cannot be removed
except for cause as provided for by law."
Lopez v. Javier (1996)
While probationary employees do not enjoy
permanent status, they are, nonetheless, accorded
the constitutional protection of security of tenure.
Article XIII, Section 3 of the Constitution which
provides that the State “shall guarantee the rights of
all workers to….security of tenure…” does not
distinguish as to the kind of worker who is entitled to
be protected in this right.
Furthermore, in Manila Hotel Corp. v. NLRC, et.
al. various limitations on the power of an employer
to terminate a probationary employment contract
were laid down, thus: First, it must be exercised in
accordance with the specific requirements of the
contract. If a particular time is prescribed, the
termination must be done within such time. Should
the contract require a written notice, then such form
should be used. Secondly, the dissatisfaction of he
employer must be real and in good faith, not feigned
so as to circumvent the contract or the law; and
thirdly, there must be no unlawful discrimination in
the dismissal.
MANAGERIAL EMPLOYEE
Inter Orient Maritime Enterprises, Inc. v. NLRC
(94)
It is well settled in this jurisdiction that
confidential and managerial employees cannot be
arbitrarily dismissed at any time, and without
Part II : Labor Standards Law
Labor Standards
cause as reasonably established in an appropriate
investigation. Such employees, too, are entitled to
security of tenure, fair standards of employment and
the protection of labor laws.
MANAGEMENT RIGHTS AND SECURITY OF TENURE
San Miguel Brewery, etc. v. Ople (89)
Public respondent was correct in holding that
the CDS is a valid exercise of management
prerogatives: "Except as limited by special laws, an
employer is free to regulate, according to his own
discretion and judgment, all aspects of employment,
including hiring, work assignments, working
methods, time, place and manner of work, tools to
be used, processes to be followed, supervision of
workers, working regulations, transfer of employees,
work supervision, lay-off of workers and the
discipline, dismissal and recall of work. . . . (NLU vs.
Insular La Yebana Co.; Republic Savings Bank vs.
CIR)" (Perfecto V. Hernandez, Labor Relations Law,
1985 Ed., p. 44.) Every business enterprise
endeavors to increase its profits. In the process, it
may adopt or devise means designed towards that
goal. So long as a company's management
prerogatives are exercised in good faith for the
advancement of the employer's interest and not for
the purpose of defeating or circumventing the rights
of the employees under special laws or under valid
agreements, this Court will uphold them (LVN
Pictures Workers vs. LVN; Phil. American
Embroideries vs. Embroidery and Garment Workers;
Phil. Refining Co. vs. Garcia). San Miguel
Corporation's offer to compensate the members of
its sales force who will be adversely affected by the
implementation of the CDS, by paying them a so-
called "back adjustment commission" to make up for
the commissions they might lose as a result of the
CDS, proves the company's good faith and lack of
intention to bust their union.
GUIDELINES ON IMPOSITION OF PENALTIES
Farrol v. Court of Appeals (2000)
Assuming further that there was breach of trust
and confidence, it appears that this is the first
infraction committed by petitioner. Although the
employer has the prerogative to discipline or dismiss
its employee, such prerogative cannot be exercised
wantonly, but must be controlled by substantive due
process and tempered by the fundamental policy of
protection to labor enshrined in the Constitution.
Infractions committed by an employee should merit
only the corresponding sanction demanded by the
circumstances. The penalty must be commensurate
with the act, conduct or omission imputed to the
employee and imposed in connection with the
employer’s disciplinary authority.
VH Manufacturing, Inc. v. NLRC (2000)
While an employer enjoys a wide latitude of
discretion in the promulgation of policies, rules and
regulations on work-related activities of the
employees, those directives, however, must always
be fair and reasonable, and the corresponding
penalties, when prescribed, must be commensurate
to the offense involved and to the degree of the
infraction. In the case at bar, the dismissal meted
out on private respondent for allegedly sleeping on
the job, under the attendant circumstances, appears
to be too harsh a penalty, considering that he was
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being held liable for first time, after nine (9) long
years of unblemished service, for an alleged offense
which caused no prejudice to the employer, aside
from absence of substantiation of the alleged
offense.
St. Michael’s Institute v. Santos (2001)
The employer’s right to conduct the affairs of his
business according to its own discretion and
judgment, is well-recognized. An employer has a
free reign and enjoys wide latitude of discretion to
regulate all aspects of employment, including the
prerogative to instill discipline in its employees and
to impose penalties, including dismissal, upon erring
employees. This is a management prerogative,
where the free will of the management to conduct its
own affairs to achieve its purpose takes form. The
only criterion to guide the exercise of its
management prerogative is that the policies, rules
and regulations on work-related activities of the
employees must always be fair anf reasonable and
the corresponding penalties, when prescribed,
commensurate to the offense involved and o the
degree of the infraction.
Etcuban, Jr. v. Sulpicio Lines, Inc. (2005)
Finally, the petitioner theorizes that even
assuming that there was evidence to support the
charges against him, his dismissal from the service
is unwarranted, harsh and is not commensurate to
his misdeeds, considering the following: first, his 16
long years of service with the company; second, no
loss or damages was suffered by the company since
the tickets were unissued; third, he had no previous
derogatory record; and, lastly, the amount involved
is miniscule.[48] Citing jurisprudence,[49] he
appeals for compassion and requests that he be
merely suspended, or at the very least, given
separation pay for his length of service.[50]
We find no merit in the petitioner’s contention.
We are not unmindful of the foregoing doctrine,
but after a careful scrutiny of the cited cases, the
Court is convinced that the petitioner’s reliance
thereon is misplaced. It must be stressed that in all
of the cases cited, the employees involved were all
rank-and-file or ordinary workers. As pointed out
earlier, the rules on termination of employment,
penalties for infractions, insofar as fiduciary
employees are concerned, are not necessarily the
same as those applicable to the termination of
employment of ordinary employees. Employers,
generally, are allowed a wider latitude of discretion
in terminating the employment of managerial
personnel or those of similar rank performing
functions which by their nature require the
employer’s trust and confidence, than in the case of
ordinary rank-and-file employees.
The fact that the petitioner has worked with the
respondent for more than 16 years, if it is to be
considered at all, should be taken against him. The
infraction that he committed, vis-a-vis his long years
of service with the company, reflects a regrettable
lack of loyalty. Loyalty that he should have
strengthened instead of betrayed. If an employee’s
length of service is to be regarded as a justification
for moderating the penalty of dismissal, it will
actually become a prize for disloyalty, perverting the
meaning of social justice and undermining the
efforts of labor to cleanse its ranks of all
undesirables.[52]
Part II : Labor Standards Law
Labor Standards
The argument that the petitioner was not guilty
of anything because the tickets were never issued or
that he had received nothing from the passengers
that he could short-change the company would not
mitigate his liability, nor efface the respondent’s loss
of trust and confidence in him. Whether or not the
respondent was financially prejudiced is immaterial.
Also, what matters is not the amount involved, be it
paltry or gargantuan; rather the fraudulent scheme
in which the petitioner was involved, which
constitutes a clear betrayal of trust and confidence.
In fact, there are indications that this fraudulent act
had been done before, and probably would have
continued had it not been discovered.
Moreover, the records show that the petitioner
is not as blameless as he claimed to be. In 1979 and
1980, he was suspended by the respondent for
several company infractions, which the petitioner did
not deny. It must also be stressed that when an
employee accepts a promotion to a managerial
position or to an office requiring full trust and
confidence, he gives up some of the rigid guaranties
available to an ordinary worker. Infractions which, if
committed by others, would be overlooked or
condoned or penalties mitigated may be visited with
more serious disciplinary action.
It cannot be over emphasized that there is no
substitute for honesty for sensitive positions which
call for utmost trust. Fairness dictates that the
respondent should not be allowed to continue with
the employment of the petitioner who has breached
the confidence reposed on him.[55] Unlike other just
causes for dismissal, trust in an employee, once lost,
is difficult, if not impossible, to regain.[56] There
can be no doubt that the petitioner’s continuance in
the extremely sensitive fiduciary position of Chief
Purser would be patently inimical to the respondent’s
interests. It would be oppressive and unjust to order
the respondent to take him back, for the law, in
protecting the rights of the employee, authorizes
neither oppression nor self-destruction of the
employer.
FACTORS
Associate Labor Union v. NLRC (99)
There is no question that the employer has the
inherent right to discipline, including that of
dismissing its employees for just causes. This right
is, however, subject to reasonable regulation by the
State in the exercise of its police power. The finding
of the NLRC that an employee violated the company
rules and regulations is subject to scrutiny by the
Court to determine if the dismissal is justified and, if
so, whether the penalty imposed is commensurate
to the gravity of his offense.
In this case, we agree with the Labor Arbiter
that dismissal would be proportionate to the gravity
of the offense committed by petitioner considering
the value of the articles he pilfered and the fact that
he had no previous derogatory record during his two
(2) years of employment in the company. The Labor
Arbiter is certainly mistaken in regarding the articles
taken to be mere scraps and hence without value to
the company. They were of some value but not
enough to warrant dismissal.
Moreover, it should also be taken into account
that petitioner is not a managerial or confidential
employee in whom greater trust is placed by
management and from whom greater fidelity to duty
is correspondingly expected. It is easy to see why an
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unfaithful employee who is holding a position of trust
and confidence in a company poses a greater danger
to its security than a mere clerk or machine operator
like petitioner.
There is another reason why violations by non-
confidential employees of company rules and
regulations such as that involved in this case are
considered minor. Such employees are generally
mere wage earners whose dismissal from
employment can have severe financial consequences
on their families especially at a time like the present
when unemployment is quite high. Consequently,
whatever missteps may have been committed by
them ought not to be visited with a consequence so
severe as dismissal.
Philippine Long Distance Telephone Co., Inc. v.
NLRC (99)
Likewise, it must be noted that willful defiance
of company rules must be characterized by perverse
attitude that would be considered as inimical to the
interest of his employer. Even when an employee is
found to have transgressed the employer's rules, in
the actual imposition of penalties upon the erring
employee, due consideration must still be given to
his length of service and the number of violations
committed during his employ.
Dismissal is the ultimate penalty that can be
meted to an employee. Where a penalty less
punitive would suffice, whatever missteps may have
been committed by the worker ought not to be
visited with a consequence so severe such as
dismissal from employment. For the Constitution
guarantees the right of workers to "security of
tenure." The misery and pain attendant to the loss of
jobs then could be avoided if there be acceptance of
the view that under certain circumstances of the
case the workers should not be deprived of their
means of livelihood.
Dimabayao v. NLRC (99)
In light of our ruling in Gold City Integrated Port
Services we cannot sustain the NLRC for upholding
private respondents' dismissal of petitioner.
Petitioner's act of leaving his work place to relieve
himself can hardly be characterized as
abandonment, much less a willful or intentional
disobedience of company rules since he was merely
answering the call of nature over which he had no
control. Restraining one's bowel movement can
result in great discomfort and affect adversely the
efficiency, and even the health, of the worker.
Petitioner's disobedience to his employer's orders
can easily be categorized as trivial and unimportant,
and as such, does not merit a penalty as harsh as
dismissal.
Likewise, there was no gross and habitual
neglect of his duties by petitioner since he merely
relieved himself which, as already adverted to, could
not have constituted abandonment of work. Neither
could it have disrupted the operations of the
company as to cause it irreparable damage.
Witnesses testified during the hearing before the
Arbitration Branch of the NLRC that petitioner was
absent from his work station only for a few minutes
and that on 20 October 1992 he even took the
initiative of asking his co-worker to take over his
post before proceeding to the latrine. The violation
of petitioner, if at all it was, could not be that
serious as to warrant his dismissal from the
service.
Part II : Labor Standards Law
Labor Standards
DISMISSAL AS PENALTY
Golden Thread Knitting Industries, Inc. v. NLRC
(99)
Dismissal is the ultimate penalty that can be
meted to an employee. It must therefore be based
on a clear and not on an ambiguous or ambivalent
ground. From our assessment of the records, we find
that petitioners exercised their authority to dismiss
without due regard to the pertinent exacting
provisions of the Labor Code. The right to terminate
should be utilized with extreme caution because its
immediate effect is to put an end to an employee's
present means of livelihood while its distant effect,
upon a subsequent finding of illegal dismissal, is just
as pernicious to the employer who will most likely be
required to reinstate the subject employee and grant
him full back wages and other benefits.
RULES – MANAGERIAL AND RANK AND FILE EMPLOYEES
Libres v. NLRC (99)
The disparity in the periods of filing the
complaints in the two cases did not in any way
reduce this case into insignificance. On the
contrary, it even invited the attention of the Court to
focus on sexual harassment as a just and valid cause
for termination. Whereas petitioner Libres was only
meted a 30-day suspension by t he NLRC, Villarama
in the other case was penalized with termination. As
Mister Justice Puno elucidated, “As a managerial
employee, petitioner is bound by more exacting
work ethics. He failed to live up to his higher
standard of responsibility when he succumbed to his
moral perversity. And when such moral perversity is
perpetuated against his subordinate, he provides a
justifiable ground for his dismissal for lack of trust
and confidence. It is the right, nay the duty of every
employer to protect its employees from oversexed
superiors.”
Caoile v. NLRC (98)
Law and jurisprudence have long recognized the
right of employers to dismiss employees by reason
of loss of trust and confidence. As provided for in the
Labor Code, "Art. 282. An employer may terminate
an employment for any of the following causes: . . .
(c) Fraud or willful breach of the trust reposed in
him by his employer or his duly authorized
representative. . . ." In the case of supervisors or
personnel occupying positions of responsibility, this
Court has repeatedly held that loss of trust and
confidence justifies termination. Obviously, as a just
cause provided by law, this ground for terminating
employment, springs from the voluntary or willful
act of the employee, or "by reason of some
blameworthy act or omission on the part of the
employee".
Loss of confidence as a just cause for
termination of employment is premised from the fact
that an employee concerned holds a position of trust
and confidence. This situation holds where a person
is entrusted with confidence on delicate matters,
such as the custody, handling, or care and
protection of the employer's property. But, in order
to constitute a just cause for dismissal, the act
complained of must be "work-related" such as would
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show the employee concerned to be unfit to continue
working for the employer.
Now it must be noted that recent decisions of
this Court has distinguished the treatment of
managerial employees from that of rank-and-file
personnel, insofar as the application of the doctrine
of loss of trust and confidence is concerned. Thus,
with respect to rank-and-file personnel, loss of trust
and confidence as ground for valid dismissal requires
proof of involvement in the alleged events in
question, and that mere uncorroborated assertions
and accusations by the employer will not be
sufficient. But, as regards a managerial employee,
mere existence of a basis for believing that such
employee has breached the trust of his employer
would suffice for his dismissal. Hence, in the case of
managerial employees, proof beyond reasonable
doubt is not required, it being sufficient that there is
some basis for such loss of confidence, such as when
the employer has reasonable ground to believe that
the employee concerned is responsible for the
purported misconduct, and the nature of his
participation therein renders him unworthy of the
trust and confidence demanded by his position.
B. Termination of Employment by Employee
23.02 CAUSES
JUST CAUSES
Art. 285.
Termination by employee
(b) An employee may an end to the relationship
WITHOUT serving any notice on the employer
for any of the following just causes:
1. Serious insult by the employer or his
representative on the honor and person of
the employee;
2. Inhuman and unbearable treatment
accorded the employee by the employer or
his representative
3. Commission of a crime or offense by the
employer or his representative against the
person of the employee or any of the
immediate members of his family; and
4. Other causes analogous to any of the
foregoing.
WITHOUT JUST CAUSE
REQUISITES
Art. 285 (a)
An employee may terminate without just cause the
employee-employer relationship by serving a written
notice n the employer at least one (1) month in
advance. The employer upon whom no such notice
was served may hold the employee liable for
damages.
RESIGNATION
DEFINITION
Habana v. NLRC (98)
Voluntary resignation is defined as the voluntary
act of an employee who "finds himself in a
situation where he believes that personal reasons
cannot be sacrificed in favor of the exigency of
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Labor Standards
the service and he has no other choice but to
disassociate himself from his employment.
REQUISITES
Azcor Manufacturing, Inc. v. NLRC (99)
To constitute a resignation, it must be
unconditional and with the intent to operate as such.
There must be an intention to relinquish a portion of
the term of office accompanied by an act of
relinquishment. In the instant case, the fact that
Capulso signified his desire to resume his work when
he went back to petitioner AZCOR after recuperating
from his illness, and actively pursued his case for
illegal dismissal before the labor courts when he was
refused admission by his employer, negated any
intention on his part to relinquish his job at AZCOR.
Metro Transit Organization, Inc. v. NLRC (98)
There is no valid resignation where it was made
without proper discernment, such as when an
employee’s writing and handing in of his resignation
letter to his employer was only triggered by that
singular moment when he was left with no
alternative but to accede, having been literally
forced into it by being presented with the more
unpleasant fate of being terminated.
Reyes v. CA (2003)
While it is true that petitioner tendered his
resignation letter to respondents requesting that he
be given the same benefits granted by the company
to resigned/retrenched employees, there is no
showing that respondents accepted his resignation.
Acceptance of a resignation tendered by an
employee is necessary to make the resignation
effective.[24] No such acceptance, however, was
shown in the instant case. What appears in the
record is a letter terminating the services of
petitioner due to retrenchment effective January 20,
1998. Verily, said letter should be interpreted as a
non-acceptance of petitioner’s resignation effective
December 31, 1997. As correctly pointed out by the
Labor Arbiter, if respondents considered petitioner
resigned as of December 31, 1997, then there would
be no need to retrench him.
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 a mere
afterthought. It was filed not because she wanted to
return to wok but to claim separation pay and back
wages.
VOLUNTARY RESIGNATION
Cheniver Deco Print Technics Corporation v.
NLRC (2000)
Petitioner’s contention that private respondents
resigned from their jobs, does not appear
convincing. As public respondent observed, the
subsequent transfer of petitioner to another place
hardly accessible to its workers resulted in the
latter’s untimely separation from the service not to
their own liking, hence, not construable as
resignation. Resignation must be voluntary and
made with the intention of relinquishing the office,
accompanied with an act of relinquishment.8
[Pascua vs. NLRC, 287 SCRA 554, 567 (1998).]
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Indeed, it would have been illogical for private
respondents herein to resign and then file a
complaint for illegal dismissal. Resignation is
inconsistent with the filing of the said complaint.
[Valdez vs. NLRC, 286 SCRA 87, 94 (1998).]
Admiral Realty Co., Inc. v. NLRC (99)
Respondent claims that she was constructively
dismissed from her office as its location was
transferred from under the steps of the stairs to the
kitchen. Such transfer caused her mental torture
which forced her to resign. However, it was not
shown that her transfer was prompted by ill will of
management. Indeed, the manager of the hotel
swore that the transfer affected not only the Cost
Control office but also other offices.
The transfer involved only a change in location
of the office. It does not involve a change in
petitioner's position. Even a transfer in position is
valid when based on sound judgment, unattended by
demotion in rank or diminution of pay or bad faith.
With respect to the memorandum requiring the
private respondent to explain why disciplinary action
should not be taken against her for violations of
hotel rules, we find that the memorandum was not
unreasonable nor an act of harassment that left
petitioner with no choice but to resign.
There is no showing that petitioner was coerced
into resigning from the company. On the contrary,
respondent resigned without any element of coercion
attending her option. She voluntarily resigned from
employment and signed the quitclaim and waiver
after receiving all the benefits for her separation. To
allow respondent to repudiate the same will be to
countenance unjust enrichment on her part. "The
Court will not permit such a situation."
Phil. Wireless Inc.v. NLRC (98)
The Court has held that constructive dismissal is
“an involuntary resignation resorted to when
continued employment is rendered impossible,
unreasonable, or unlikely; when there is a demotion
in rank and/or a dimunition in pay; or when a clear
discrimination, insensibility or disdain by an
employer becomes unbearable to the employee.” In
this particular case, respondent voluntarily resigned
from his employment. He was not pressured into
resigning.
Voluntary resignation is defined as the act of an
employee who finds himself in a situation where he
believes that personal reasons cannot be sacrificed
in favor of the exigency of the service and he has no
other choice but to disassociate himself from his
employment.
Pascua v. NLRC (98)
Basic is the doctrine that resignation must be
voluntary and made with the intention of
relinquishing the office, accompanied with an act of
relinquishment.
Azcor Manufacturing Inc. v. NLRC (99)
To constitute a resignation, it must be
unconditional and with the intent to operate as such.
There must be an intention to relinquish a portion of
the term of office accompanied by an act of
relinquishment. In the instant case, the fact that
Capulso signified his desire to resume his work when
he went back to petitioner AZCOR after
recuperating from his illness, and actively
pursued his case for illegal dismissal before the
Part II : Labor Standards Law
Labor Standards
labor courts when he was refused admission by his
employer, negated any intention on his part to
relinquish his job at AZCOR.
Moreover, a closer look at the subject
resignation letters readily reveals the following: (a)
the resignation letter allegedly tendered by Capulso
to Filipinas Paso was identically worded with that
supposedly addressed by him to AZCOR; (b) both
were pre-drafted with blank spaces filled up with the
purported dates of effectivity of his resignation; and,
(c) it was written in English, a language which
Capulso was not conversant with considering his low
level of education. No other plausible explanation
can be drawn from these circumstances than that
the subject letters of resignation were prepared by a
person or persons other than Capulso. And the fact
that he categorically disowned the signatures therein
and denied having executed them clearly indicates
that the resignation letters were drafted, without his
consent and participation.
Even assuming for the sake of argument that
the signatures were, genuine, we still cannot give
credence to those letters in the absence of any
showing that Capulso was aware that what he was
signing then were in fact resignation letters or that
he fully understood the contents thereof. Having
introduced those resignation letters in evidence, it
was incumbent upon petitioners to prove clearly and
convincingly their genuineness and due execution,
especially considering the serious doubts an their
authenticity. Petitioners miserably failed in this
respect.
Intertrod Maritime Inc. v. NLRC (91)
Resignation is the voluntary act of an employee
who "finds himself in a situation where he believes
that personal reasons cannot be sacrificed in favor of
the exigency of the service, then he has no other
choice but to disassociate himself from his
employment." The employer has no control over
resignations and so, the notification requirement was
devised in order to ensure that no disruption of work
would be involved by reason of the resignation. This
practice has been recognized because "every
business enterprise endeavors to increase its profits
by adopting a device or means designed towards
that goal."
Resignations, once accepted and being the sole
act of the employee, may not be withdrawn without
the consent of the employer.
Once an employee resigns and his resignation is
accepted, he no longer has any right to the job. If
the employee later changes his mind, he must ask
for approval of the withdrawal of his resignation
from his employer, as if he were re-applying for the
job. It will then be up to the employer to determine
whether or not his service would be continued. If the
employer accepts said withdrawal, the employee
retains his job. If the employer does not, as in this
case, the employee cannot claim illegal dismissal for
the employer has the right to determine who his
employees will be. To say that an employee who has
resigned is illegally dismissed, is to encroach upon
the right of employers to hire persons who will be of
service to them.
VALIDITY OF POLICY
Manila Broadcasting Co. v. NLRC (98)
What is involved in this case is an unwritten
company policy considering any employee who files
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a certificate of candidacy for any elective or local
office as resigned from the company. Although §11
(b) of R.A. No. 6646 does not require mass media
commentators and announcers such as private
respondent to resign from their radio or TV stations
but only to go on leave for the duration of the
campaign period, we think that the company may
nevertheless validly require them to resign as a
matter of policy. In this case, the policy is justified
on the following grounds:
 Working for the government and the company
at the same time is clearly disadvantageous
and prejudicial to the rights and interest not
only of the company but the public as well. In
the event an employee wins in an election, he
cannot fully serve, as he is expected to do, the
interest of his employer. The employee has to
serve two (2) employers, obviously detrimental
to the interest of both the government and the
private employer.
 In the event the employee loses in the election,
the impartiality and cold neutrality of an
employee as broadcast personality is suspect,
thus readily eroding and adversely affecting the
confidence and trust of the listening public to
employer's station.
XXX As important a rule as one which considers
an employee who runs for public office resigned
must be written and published so as to lend
certainty to its existence and definiteness to its
scope. Otherwise, the impression may be fostered
that the enforcement of the policy is discretionary on
the part of the heads of the various offices and units
of the company. Moreover, such an unwritten rule is
susceptible of misinterpretation and is not likely to
be taken seriously by those to whom it is addressed.
CONSTRUCTIVE DISMISSAL
Valdez v. NLRC (98)
Under Article 286 of the Labor Code, the bona
fide suspension of the operation of a business or
undertaking for a period not exceeding six months
shall not terminate employment. Consequently,
when the bona fide suspension of the operation of a
business or undertaking exceeds six months, then
the employment of the employee shall be deemed
terminated. By the same token and applying said
rule by analogy, if the employee was forced to
remain without work or assignment for a period
exceeding six months, then he is in effect
constructively dismissed.
XXX It would have been illogical for herein
petitioner to resign and then file a complaint for
illegal dismissal. Resignation is inconsistent with the
filing of the said complaint.
Resignation is defined as the voluntary act of an
employee who finds himself in a situation where he
believes that personal reasons cannot be sacrificed
in favor of the exigency of the service, and, that he
has no other choice but to disassociate himself from
his employment. Resignation is a formal
pronouncement of relinquishment of an office. It
must be made with the intention of relinquishing the
office accompanied by an act of relinquishment.
23.03 NO TERMINATION – PERFORMANCE OF
MILITARY OR CIVIC DUTY
Art. 286
When Employment NOT Deemed Terminated
Part II : Labor Standards Law
Labor Standards
a. The bona fide suspension of the operation of a
business or undertaking for a period not
exceeding six months, or
b. The fulfillment by the employee of a military or
civic duty shall not terminate employment.
In all such cases, the employer shall reinstate
the employee, to his former position without loss of
seniority rights if he indicates his desire to resume
his work not later than 1 month from the resumption
of operations of his employer or from his relief from
the military or civic duty.
C. Termination of Employment by Employer
PRELIMINARY MATTERS
23.04 BASIS OF RIGHT AND REQUIREMENTS
BASIS
Manila Trading and Supply Co., Inc. v. Zulueta
(40)
The whole controversy is centered around the
right of the Court of Industrial Relations to order the
readmission of a laborer who, it is admitted, had
been found derelict in the performance of his duties
towards his employer. We concede that the right of
an employer to freely select or discharge his
employees, is subject to regulation by the State
basically in the exercise of its paramount police
power. (Commonwealth Acts Nos. 103 and 213.) But
much as we should expand beyond economic
orthodoxy, we hold that an employer cannot legally
be compelled to continue with the employment of a
person who admittedly was guilty of misfeasance or
malfeasance towards his employer, and whose
continuance in the service of the latter is patently
inimical to his interests. The law, in protecting the
rights of the laborer, authorizes neither oppression
nor self-destruction of the employer. There may, of
course, be cases where the suspension or dismissal
of an employee is whimsical or unjustified or
otherwise illegal in which case he will be protected.
Each case will be scrutinized carefully and the proper
authorities will go to the core of the controversy and
not close their eyes to the real situation. This is not
however the case here.
Makati Haberdashery, Inc. v. NLRC (89)
Under the circumstances, it is evident that there
is no illegal dismissal of said employees. Thus, We
have ruled that:
"No employer may rationally be expected to
continue in employment a person whose lack of
morals, respect and loyalty to his employer,
regard for his employer's rules, and appreciation
of the dignity and responsibility of his office, has
so plainly and completely been bared.
"That there should be concern, sympathy, and
solicitude for the rights and welfare of the working
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class, is meet and proper. That in controversies
between a laborer and his master, doubts
reasonably arising from the evidence, or in the
interpretation of agreements and writings should
be resolved in the former's favor, is not an
unreasonable or unfair rule. But that disregard of
the employer's own rights and interests can be
justified by that concern and solicitude is unjust
and unacceptable." (Stanford Microsystems, Inc.
v. NLRC).
The law is protecting the rights of the laborer
authorizes neither oppression nor self-destruction of
the employer. More importantly, while the
Constitution is committed to the policy of social
justice and the protection of the working class, it
should not be supposed that every labor dispute will
automatically be decided in favor of labor.
Finally, it has been established that the right to
dismiss or otherwise impose disciplinary sanctions
upon an employee for just and valid cause, pertains
in the first place to the employer, as well as the
authority to determine the existence of said cause in
accordance with the norms of due process.
Ocean East Agency Corp. v. NLRC (1998)
Respondent’s defiance of a lawful order posed
serious and considerable prejudice to the business of
the employer. This Court finds that petitioner’s
order was made within the sphere of its
management prerogative. “The exercise of an
employer to regulate all aspects of employment
must be in keeping with good faith and not to be
used as a pretext for defeating the rights of
employees under the laws and applicable contracts.”
A perusal of the records shows a clear, valid and
legal cause for the termination of respondent’s
employment.
REQUIREMENTS
Art. 282.
Termination by employer. – An employer may
terminate an employment for any of the following
causes:
a. Serious misconduct or willful disobedience by
the employee of the lawful orders of his
employer or representative in connection with
his work;
b. Gross and habitual neglect by the employee of
his duties:
c. Fraud or willful breach by the employee of the
trust reposed in him by his employer or duly
authorized representative;
d. Commission of a crime or offense by the
employee against the person of his employer
or any immediate member of his family or his
duly authorize representative; and
e. Other causes analogous to the foregoing.
ARTICLE 283.
Closure of establishment and reduction of personnel.
The employer may also terminate the
employment of any employee due to the:
a. Installation of labor saving devices,
b. Redundancy,
c. Retrenchment to prevent losses or
d. Closing or cessation of operation of the
establishment or undertaking unless the
closing is for the purpose of circumventing the
provisions of this Title,
by serving a written notice on the workers and
the Ministry of Labor and Employment at least
one (1) month before the intended date thereof.
Part II : Labor Standards Law
Labor Standards
In case of termination due to the installation of
labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service,
whichever is higher.
In case of retrenchment to prevent losses and in
cases of closures or cessation of operations of
establishment or undertaking not due to serious
business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of
service, whichever is higher
A fraction of at least six (6) months shall be
considered one (1) whole year.
Art. 284.
Disease as a ground for termination. – An employer
may terminate the services of an employee who has
been found to be suffering from any disease and
whose continued employment is prohibited by law or
is prejudicial to his health as well as to the health of
his co-employees: Provided, That he is paid
separation pay equivalent to at least one (1) month
salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at
least six (6) months being considered as one (1)
whole year.
Art. 277 (b)
Subject to the constitutional right of workers to
security of tenure and their right to be protected
against dismissal except for just and authorized
cause and without prejudice to the requirement of
notice under Art. 283 of this Code the employer shall
furnish the worker whose employment is sought to
be terminated a written notice containing a
statement of the causes for termination and shall
afford the latter ample opportunity to be heard and
to be defend himself with the assistance of his
representative if he so desires in accordance with
company rules and regulations promulgated
pursuant to guidelines set by the Department of
Labor and Employment. Any decision taken by the
employer shall be without prejudice to the right of
the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional
branch of the National Labor Relations Commission.
The burden of proving that the termination was for a
valid or authorized cause shall rest on the employer.
The Secretary of the Department of Labor and
Employment may suspend the effects of the
termination pending resolution of the dispute in the
event of a prima facie finding by the appropriate
official of the Department of Labor and Employment
before whom such dispute is pending that the
termination may cause a serious labor dispute or is
in implementation of a mass lay-off.
SUBSTANTIVE AND PROCEDURAL DUE PROCESS
Orlando Farms Growers v. NLRC (98)
It is settled that in termination disputes, the
employer bears the burden of proving that the
dismissal is for just cause, failing which it would
mean that the dismissal is not justified and the
employer is entitled to reinstatement. The dismissal
of employees must be made within the parameters
of the law and pursuant to the basic tenets of equity,
justice and fair play. In Brahm Industries, Inc. v.
NLRC, the Court explained that there are two (2)
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facets of valid termination of employment; (a) the
legality of the act of dismissal, i.e., the dismissal
must be under any of the just causes provided under
Art. 282 of the Labor Code; and (b) the legality of
the manner of dismissal, which means that there
must be observance of the requirements of due
process, otherwise known as the two-notice rule.
Thus, "the employer is required to furnish the
employee with a written notice containing a
statement of the cause for termination and to afford
said employee ample opportunity to be heard and to
defend himself with the assistance of his
representative, if he so desires. The employer is also
required to notify the worker in writing of the
decision to dismiss him, stating clearly the reasons
therefore."
Salaw v. NLRC (91)
Under the Labor Code, as amended, the
requirements for the lawful dismissal of an employee
by his employer are two-fold: the substantive and
the procedural. Not only must the dismissal be for a
valid or authorized cause as provided by law
(Articles 279, 281, 282-284, New Labor Code), but
the rudimentary requirements of due process -
notice and hearing - must also be observed before
an employee may be dismissed. One does not
suffice; without their concurrence, the termination
would, in the eyes of the law, be illegal.
The inviolability of notice and hearing for a valid
dismissal of an employee can not be over-
emphasized. Those twin requirements constitute
essential elements of due process in cases of
employee dismissal. The requirement of notice is
intended to inform the employee concerned of the
employer's intent to dismiss him and the reason for
the proposed dismissal; on the other hand, the
requirement of hearing affords the employee the
opportunity to answer his employer's charges
against him and accordingly to defend himself
therefrom before dismissal is effected. Neither one
of these two requirements can be dispensed with
without running afoul of the due process
requirement of the Constitution.
Arboleda v. NLRC (99)
The main issue being the legality of petitioner's
dismissal, it may be worth to look into the requisites
for the validity of a dismissal, namely, (a) the
employee must be afforded due process, i.e., he
must be given an opportunity to be heard and
defend himself, and (b) the dismissal must be for a
valid cause as provided in Art. 282 of the Labor
Code.
The essence of due process in administrative
proceedings is an opportunity to explain one's side
or an opportunity to seek reconsideration of the
action or ruling complained of. Before an employee
can be validly dismissed, the Labor code requires the
employer to furnish the employee with two (2)
written notices: (a) a written notice containing a
statement of the cause for termination to afford the
employee ample opportunity to be heard and defend
himself with the assistance of his representative, if
he so desires; and, (b) if the employer decides to
terminate the services of the employee, the
employer must notify him in writing of the decision
to dismiss him, stating clearly the reasons therefor.
Part II : Labor Standards Law
Labor Standards
FRAMEWORK ANALYSIS withheld up to actual reinstatement.
PROPER FORUM? APPEAL PROCEDURE
 Labor Arbiter = 217 (a) (2)
 Voluntary Arbitrator = 260 – 261 SUPREME COURT
 Regular Courts


COMPLAINT
ILLEGAL DISMISSAL COURT OF APPEALS

PRESCRIPTION

 Art. 1141, NCC = injury rights plaintiff – 4yrs
from date of dismissal NLRC

COMPLIANCE – SUBSTANTIVE DUE PROCESS

 Just Cause = Art. 279
 Just Causes = 282 LABOR ARBITER / VOLUNTYARY ARBITRATOR
» Serious misconduct, willful disobedience of GROUNDS FOR TERMINATION – SUBSTANTIVE
lawful order DUE PROCESS
» Gross and habitual neglect of duties
» Fraud, willful breach of trust reposed by 23.05 JUST CAUSES
employer
» Commission of creime, offense against Article 282 of the Labor Code, as amended, the
person orf employer or immediate following are deemed just causes to terminate an
member of family or authorized employee:
representative
» Other analogous cases a. Serious misconduct or willful disobedience by
 Authorized Causes = 279 the employee of the lawful orders of his
 Authorized Causes = 283 employer or representative in connection with
» Installation of labor saving device his work;
» Redundancy b. Gross and habitual neglect by the employee of
» Retrenchment to prevent losses his duties:
» Closing, cessation of business, not c. Fraud or willful breach by the employee of the
purpose circumvention of law trust reposed in him by his employer or duly
 Disease = 284 authorized representative;
d. Commission of a crime or offense by the
PROPER FORUM employee against the person of his employer
or any immediate member of his family or his
CAUSE OF ACTION NOT PRESCRIBED duly authorize representative; and
e. Other causes analogous to the foregoing.
COMPLIANCE PROCEDURAL DUE PROCESS
 Just causes A. SERIOUS MISCONDUCT
» OLD RULE = on just cause and authorized
cause Definition and Acts
▪ Art. 277 (b) = notice and hearing and
notice Samson v. NLRC (2000)
» NEW RULE = Serrano v. NLRC, GR No. Misconduct is improper or wrong conduct. It is
117040, May 4, 2000 the transgression of some established and definite
 Other Causes = 283 rule of action, a forbidden act, a dereliction of duty,
» Notice served Employee and DOLE willful in character, and implies wrongful intent and
Secretary not mere error in judgment. The misconduct to be
 Disease = 284 serious must be of such grave and aggravated
» Nature of disease and treatment character and not merely trivial and unimportant.
Such misconduct, however serious, must,
If termination is VALID = END OF CASE nevertheless, be in connection with the employee’s
work to constitute just cause for his separation.
If Termination is INVALID
Remedies/Sanctions: PNCC v. NLRC (99)
In the case at bar, private respondents were
 279 = Reinstatement without loss of seniority caught in the act of accepting bribe in the form of
rights and other privileges cash and a dog from a motorist who was suspected
» 223 = of illegally transporting dogs. As tollway guards,
▪ Reinstatement immediately executory private respondents had the duty to maintain peace
even pending appeal and order at the North Luzon Expressway and to
▪ Employer option physical or payroll ensure that all tollway rules and regulations are
reinstatement followed. But private respondents did the contrary
▪ Same terms and conditions of by yielding to bribery. They were the first to violate
employment prior to dismissal the rules they were tasked to enforce. Undoubtedly,
▪ Bond cannot stay execution order private respondents’ act constituted serious
 279 = Full Backwages, inclusive of misconduct which warranted their dismissal from
allowances, other benefits, or other monetary the service. It is for this reason that we find
equivalent from date compensation was private respondents undeserving of the

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Part II : Labor Standards Law
Labor Standards
compassion accorded by the law to workers who are
bound to join the ranks of the unemployed.
Golden Thread Knitting Industrial Inc. v. NLRC
(99)
We find that petitioners were unable to
substantiate the charge of serious misconduct
against Macaspac and Albasin. The incident report of
the two (2) security guards was on its face
categorical on the culpability of subject respondents,
yet it is perplexing that the report was not utilized as
supporting evidence in the criminal proceedings.
As previously stated, the incident report was
addressed to the Manager of the company.
Considering that it was the Manager who instructed
petitioner Bico to lodge the criminal complaint, and if
the report was submitted after the incident, then
there was no reason for it not to form part of the
evidence in the criminal proceedings. As it is, we can
gather from the narration of petitioner Bico that the
person who revealed to him the identities of the
culprits was not one of the security guards but Mejia
who supplied the supporting affidavit. These
circumstances inevitably lead us to the conclusion
that the incident report was merely concocted by
petitioners in view of the filing of the labor cases
against them.
Often, misdeeds are committed either in the
presence of an ally, if nobody is around to blow the
whistle, or when darkness has adequately shrouded
the surroundings. Moreover, it has not been shown
that Macaspac and Albasin were such feckless
individuals who would resort to destruction of
company properties in total disregard of its dire
consequences. On the contrary, they were union
members fighting for their rights as employees.
Even the reason advanced by Mejia for their
misconduct banks on speculation. Further still, it
does not appear that the criminal case filed by
petitioner Bico primarily on the strength of the
affidavit of Mejia ever prospered at the prosecutor's
level.
Austria v. NLRC (99)
Misconduct has been defined as improper or
wrong conduct. It is the transgression of some
established and definite rule of action, a forbidden
act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error in
judgment. For misconduct to be considered serious it
must be of such grave and aggravated character and
not merely trivial or unimportant. Based on this
standard, we believe that the act of petitioner in
banging the attaché case on the table, throwing the
telephone and scattering the books in the office of
Pastor Buhat, although improper, cannot be
considered as grave enough to be considered as
serious misconduct. After all, as correctly observed
by the Labor Arbiter, though petitioner committed
damage to property, he did not physically assault
Pastor Buhat or any other pastor present during the
incident of 16 October 1991. In fact, the alleged
offense committed upon the person of the
employer's representatives was never really
established or proven by private respondents.
Hence, there is no basis for the allegation that
petitioner's act constituted serious misconduct or
that the same was an offense against the person of
the employer's duly authorized representative. As
such, the cited actuation of petitioner does not
justify the ultimate penalty of dismissal from
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employment. While the Constitution does condone
wrongdoing by the employee, it nevertheless urges a
moderation of the sanctions that may be applied to
him in light of the many disadvantages that weigh
heavily on him like an albatross on his neck. Where
a penalty less punitive would suffice, whatever
missteps may have been committed by the worker
ought not be visited with a consequence so severe
such as dismissal from employment. For the
foregoing reasons, we believe that the minor
infraction committed by petitioner does not merit the
ultimate penalty of dismissal.
Philippine Aeolus Automotive United Corp. v.
NLRC (2000)
The Supreme Court, in a litany of decisions on
serious misconduct warranting dismissal of an
employee, has ruled that for misconduct or improper
behavior to be a just cause for dismissal (a) it must
be serious; (b) must relate to the performance of
the employee’s duties; and, (c) must show that the
employee has become unfit to continue working for
the employer. The act of private respondent in
throwing a stapler and uttering abusive language
upon the person of the plant manager may be
considered, from a lay man's perspective, as a
serious misconduct. However, in order to consider it
a serious misconduct that would justify dismissal
under the law, it must have been done in relation to
the performance of her duties as would show her to
be unfit to continue working for her employer. The
acts complained of, under the circumstances they
were done, did not in any way pertain to her duties
as a nurse. Her employment identification card
discloses the nature of her employment as a nurse
and no other.
Naguit, Jr. vs. NLRC (2003)
Petitioner’s attempt at exoneration deserves
scant consideration. As custodian of the petty cash
fund, he had the duty to ascertain that the
circumstances which brought about any claim
therefrom were in order. He cannot now shirk from
the responsibility by indirectly pinning the blame on
the approving officer and asserting that the
transgression was the result of mere advertence.
Petitioner thus committed dishonesty and breached
Meralco’s trust, which dishonesty calls for reprimand
to dismissal under MERALCO’s rules.
WILLFUL DISOBEDIENCE
DEFINITION AND REQUISITES
Cebu Filveneer Corp. v. NLRC (98)
The omission of the private respondent can
hardly be described as "willful" to justify her
dismissal. For one, the omission did not last for long.
For another, the subsequent actions of the private
respondent upon learning of the encashment of the
unauthorized check by Mr. Kun negate any
implication that she willfully or intentionally
defaulted in reporting to prejudice petitioners.
Indeed, she reported the matter to petitioner
Cordaro and wrote to the PNB MEPZ Branch to
retrieve the encashed check. A breach is willful if it is
done intentionally, knowingly and purposely.
Petitioners merely proved the omission of the private
respondent but there is no evidence whatsoever
that it was done intentionally.
Part II : Labor Standards Law
Labor Standards
Westin Phil. Plaza Hotel v. NLRC (99)
Under Article 282 (a) of the Labor Code, as
amended, an employer may terminate an
employment for serious misconduct or willful
disobedience by the employee of the lawful orders of
his employer or representative in connection with his
work. But disobedience to be a just cause for
dismissal envisages the concurrence of at least two
(2) requisites: (a) the employee's assailed conduct
must have been willful or intentional, the willfulness
being characterized by a wrongful and perverse
attitude; and, (b) the order violated must have been
reasonable, lawful, made known to the employee
and must pertain to the duties which he has been
engaged to discharge.
Dimabayao v. NLRC (99)
In light of our ruling in Gold City Integrated Port
Services we cannot sustain the NLRC for upholding
private respondents' dismissal of petitioner.
Petitioner's act of leaving his work place to relieve
himself can hardly be characterized as
abandonment, much less a willful or intentional
disobedience of company rules since he was merely
answering the call of nature over which he had no
control. Restraining one's bowel movement can
result in great discomfort and affect adversely the
efficiency, and even the health, of the worker.
Petitioner's disobedience to his employer's orders
can easily be categorized as trivial and unimportant,
and as such, does not merit a penalty as harsh as
dismissal.
Tierra International Production Corp. v. NLRC
(96)
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 their supervisor; and (3) to be
repatriated. What private respondents were given
were not really "options." They were given the
choice of apologizing for their refusal to work and
then resume working as ordered, or, else, resign and
be sent back home. Under the circumstances they
really had no choice but to resign. It was not pride
or arrogance which made them refuse to work as
ordered, but the assertion of their right not to be
made to work outside of what they had been hired
to do. For asserting their right, private respondents
should not be punished. We, therefore, hold that
private respondents' dismissal was illegal and that
for this reason they are entitled to be paid their
salaries corresponding to the unexpired portion of
their employment contract, in addition to their
unpaid salaries prior to their dismissal, as found by
both the POEA and the NLRC.
Legahi v. NLRC (99)
For willful disobedience to be considered as just
cause for dismissal, the employee's conduct must be
willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude
and the order violated must have been reasonable,
lawful, made known to the employee and must
pertain to the duties which he has been engaged to
discharge.
Vitarich Corp. v. NLRC (99); Rosario v. Victory
Rice mill (2003)
In AHS/Philippines, Inc. v. CA, we explained - …
willful disobedience of the employer’s lawful orders,
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as a just cause for dismissal of an employee,
envisages the concurrence of at least two (2)
requisites: the employees assailed conduct must be
willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude;
and the order violated must have been reasonable,
lawful, made known to the employee and must
pertain to the duties which he had been engaged to
discharge.
Rosario v. Victory Rice mill (2003)
In this case, the order to petitioner was simple,
i.e., to deliver the merchandise to the Felix
Hardware. It was clearly reasonable, lawful, made
known to petitioner and pertained to his duty as
driver of respondent. Petitioner did not even proffer
a justifiable explanation for his disobedience thereto.
Every employee is charged with the implicit duty of
caring for the employer’s property. Petitioner’s
conduct showed that he could not even be trusted
with this task. Further, his hostile attitude towards
his co-workers which eventually led him to inflict
physical injuries on one of them cannot be
countenanced. As correctly put by the NLRC,
petitioner’s “continuance in the service of
respondent company is partly inimical not only to its
interests but also to the interest of its other
employees.
PNOC-EDC v. Abella (2005)
Insubordination or willful disobedience by an
employee, to constitute a just cause for terminating
his employment, the orders, regulations, or
instructions of the employer or representative must
be:
1. reasonable and lawful;
2. sufficiently known to the employee; and
3. in connection with the duties which the
employee has been engaged to discharge.
There is no doubt in this case that the assailed
transfer orders fulfill the second and third elements
above-stated. Private respondent Abella was well
informed of the orders of transfer and said orders
were well in connection with the security functions of
the private respondent. It is only the issue of
reasonableness and lawfulness of said orders that
have to be elucidated on.
The reasonableness and lawfulness of an order,
regulation, or instruction depend on the
circumstances availing in each case. Reasonableness
pertains to the kind or character of directives and
commands and to the manner in which they are
made.
The petitioners aver that the orders were well
within their managerial prerogative to make and that
there was never any agreement that private
respondent Abella had to be posted in a fixed place.
The appellate court, on the other hand, stated
that its finding that the private respondent was not
guilty of insubordination and abandonment was
based on the fact that the dismissal of private
respondent Abella was effected with bad faith, as it
was intended to punish him for refusal to heed his
employer’s unreasonable orders.
The records of the present case fail to show any
hint of truth to the declaration of the appellate court.
A thorough review of the records of the case
shows that there is a valid reason behind the
transfer of the private respondent to MIGP in
Kidapawan, North Cotabato. As stated in the
telegraphic message received by the private
respondent,
Part II : Labor Standards Law
Labor Standards
Acesite Coproration v. NLRC (2005)
Willful disobedience entails the concurrence of
at least two (2) requisites: the employee’s assailed
conduct has been willful or intentional, the
willfulness being characterized by a “wrongful and
perverse attitude;” and the order violated must have
been reasonable, lawful, made known to the
employee and must pertain to the duties which he
had been engaged to discharge.
In Gonzales’ case, his assailed conduct has not
been shown to have been characterized by a
perverse attitude, hence, the first requisite is
wanting. His receipt of the telegram disapproving
his application for emergency leave starting April 30,
1998 has not been shown. And it cannot be said
that he disobeyed the May 5, 1998 telegram since
he received it only on May 7, 1998. On the
contrary, that he immediately hired back to Manila
upon receipt thereof negates a perverse attitude.
As to Gonzales’ alleged concealment of his
candidacy (for provincial board member) as a
ground for Acesite’s loss of trust and confidence in
him, the same is not impressed with merit. It
should be noted that Acesite’s ground for
terminating the services of Gonzales as stated in the
Notice of Termination is his alleged acts of
insubordination/disobedience. The concealment of
candidacy angle harped upon by Acesite can only
thus be considered as mere afterthought to further
justify his illegal dismissal.
With regards to Gonzales’ perceived feigning of
illness, the same is purely speculatory.
If there is anything that Gonzales can be faulted
for, it is his being too presumptuous that his
application for leave would be approved.
B. GROSS AND HABITUAL NEGLECT OF DUTIES
Requisites
National Sugar refineries Corp. v. NLRC (98)
Neglect of duty, to be a ground for dismissal,
must be both gross and habitual.[4] In the instant
case, Pabiona’s neglect of duty was gross. As her
position related to money matters, she was expected
and required to be extra vigilant in the
performance of her job as it involved the
financial interest of the company. She was also
habitually remiss in her duties. She issued a Refined
Sugar Delivery Order to Shantung Commercial
without first examining the corresponding Raw Sugar
Quedan and Delivery Order. Consequently,
Shantung Commercial was able to withdraw a larger
quantity of refined sugar than what was allowable to
it. In another instance, Pabiona again issued a
Refined Sugar Delivery Order to Shantung
Commercial without the corresponding Raw Sugar
Quedan. Thus, NASUREFCO was not able to collect
raw sugar from Shantung Commercial equivalent to
the refined sugar it had withdrawn. Thirdly, Pabiona
made it appear that in 1989 Dacongcogon Producers
endorsed more than 200,000 piculs of raw sugar to
NASUREFCO thereby allowing it to qualify in the
Volume Incentive Program under which NASUREFCO
would pay P1.00 per picul of raw sugar to every
planter that endorsed 200,000 piculs or more of raw
sugar to NASUREFCO. The fact that NASUREFCO
did not suffer losses from the anomalies committed
by Pabiona because of timely discovery does not
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excuse the latter as she was very much aware that
her acts would be greatly prejudicial to NASUREFCO.
Judy Philippines Inc. v. NLRC (98)
Petitioner anchors its right to terminate the
employment of Virginia Antiola on the ground of
"gross neglect of duties," under Article 282 (b) of
the Labor Code. Gross negligence implies a want or
absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without
exerting any effort to avoid them.
We affirm the finding of the NLRC that "Article
282 (b) of the Labor Code requires that . . . such
neglect must not only be gross, it should be 'Gross
and habitual neglect' in character." As aptly
pronounced by the NLRC, "the penalty of dismissal is
quite severe here" noting that the labor arbiter
himself admits that she committed the infraction for
the first time.
PLDT v. NLRC (99)
Likewise, it must be noted that willful defiance
of company rules must be characterized by perverse
attitude that would be considered as inimical to the
interest of his employer. Even when an employee is
found to have transgressed the employer's rules, in
the actual imposition of penalties upon the erring
employee, due consideration must still be given to
his length of service and the number of violations
committed during his employ.
GROSS NEGLIGENCE DEFINED
Tres Reyes v. Maxim’s Tea House (2003)
Under the Labor Code, gross negligence is a
valid ground for an employer to terminate an
employee. Gross negligence is negligence
characterized by want of even slight care, acting or
omitting to act in a situation where there is a duty to
ac, not inadvertently but willfully and intentionally
with a conscious indifference to consequences
insofar as other persons may be affected. In this
case, however, there is no substantial basis to
support a finding that petitioner committed gross
negligence.
National Bookstore, Inc. v. CA (2002)
Gross negligence has been defined as the want
or absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without
exerting any effort to avoid them.[19] A perusal of
the records of the case does not in any way show
that private respondents were even remotely
negligent of their duties so as to cause the loss of
petitioner National Bookstore’s funds. Private
respondents were able to illustrate with candor and
sincerity the procedure they took prior to the loss
which was witnessed by an employee of petitioner
National Bookstore. They were in fact subjected to a
thorough body search by petitioner National
Bookstore’s lady guard before leaving their place of
work on the date in issue, a claim not controverted
by petitioners. Moreover, it was not even shown that
they had access to the vault where the money
was kept.
Part II : Labor Standards Law
Labor Standards
Significantly, in order to constitute a just cause
for the employee’s dismissal, the neglect of duties
must not only be gross but also habitual. Thus, the
single or isolated act of negligence does not
constitute a just cause for the dismissal of the
employee.[20] Verily, assuming arguendo that
private respondents were negligent, although we
find otherwise, it could only be a single or an
isolated act that cannot be categorized as habitual,
hence, not a just cause for their dismissal.
Philippine Aeolus Automotive United Corp. v.
NLRC (2000)
Gross negligence implies a want or absence of
or failure to exercise slight care or diligence, or the
entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any
effort to avoid them. The negligence, to warrant
removal from service, should not merely be gross
but also habitual. Likewise, the ground "willful
breach by the employee of the trust reposed in him
by his employer" must be founded on facts
established by the employer who must clearly and
convincingly prove by substantial evidence the facts
and incidents upon which loss of confidence in the
employee may fairly be made to rest. All these
requirements prescribed by law and jurisprudence
are wanting in the case at bar.
Cebu Filveneer Corp. v. NLRC (98)
Gross negligence implies a want or absence of
or failure to exercise slight care or diligence or the
entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any
effort to avoid them.
Citibank N. A. v. Gatchalian (95)
Gross negligence implies a want or absence of
or failure to exercise slight care or diligence, or the
entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any
effort to avoid them.
Simple Negligence
RDS Trucking v. NLRC (98)
Our findings and conclusion in this labor case
are not affected by the outcome of that criminal
case. A mere reading of the MeTC decision clearly
reveals that private respondent was in fact acquitted
of the charge of malicious mischief. The trial court
categorically found that there was "no direct
evidence to show that the accused deliberately
caused damage" to the truck of petitioners. Although
private respondent was held liable for simple
imprudence resulting in damage to property from
the mere fact that he was not able to satisfactorily
explain the cause of damage to the truck, such is
not sufficient to validate his illegal dismissal. Under
the Labor Code simple negligence is not a ground for
the dismissal of an employee. Article 282 (b)
explicitly provides that negligence must not only be
gross but must be both "gross and habitual" in
character to justify depriving an employee of his
means of livelihood. In this case, the alleged
negligence of private respondent cannot be
considered "gross and habitual." As already
discussed the infractions imputed against private
respondent, who has not been accorded any
semblance of due process prior to his termination,
have not been substantially proven by petitioners to
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the satisfaction of the labor arbiter, public
respondent NLRC, and finally, this Court.
Paguio Transport Corp. v. NLRC (98)
Private respondent's admission that he was
involved in the November 4, 1993 accident did not
give petitioner a just cause to dismiss him. Mere
involvement in an accident, absent any showing of
fault or recklessness on the part of an employee, is
not a valid ground for dismissal.
C. FRAUD – WILLFUL BREACH OF TRUST
Loss of Confidence – Requisites
Jardine Davies, Inc. v. NLRC (99)
It is settled that loss of confidence as a just
cause for terminating employment must be premised
on the fact that an employee concerned holds a
position of trust and confidence. This situation
obtains where a person is entrusted with confidence
on delicate matters, such as care and protection,
handling or custody of the employer's property, as in
this case. But, in order to constitute a just cause for
dismissal, the act complained of must be "work-
related" such as would show the employee
concerned to be unfit to continue working for the
employer. Likewise, it must be noted that proof
beyond reasonable doubt is not required to dismiss
an employee on the ground of loss of confidence. It
is sufficient that there is some basis for such loss of
confidence, such as when the employer has
reasonable ground to believe that the employee
concerned is responsible for the purported
misconduct, and the nature of his participation
therein renders him unworthy of the trust and
confidence demanded of his position.
POSITION OF TRUST AND CONFIDENCE
Panday v. NLRC (92)
The case of Lepanto Consolidated Mining Co. v.
Court of Appeals, 1 SCRA 125 [1961], provides us
with a definition of a 'position of trust and
confidence'. It one where a person is 'entrusted with
confidence on delicate matters, or with the custody,
handling, or care and protection of the employer's
property . . ..'
Farrol v. Court of Appeals (2000)
A perusal of RCPI’s dismissal notice reveals that
it merely stated a conclusion to the effect that the
withholding was deliberately done to hide alleged
malversation or misappropriation without, however,
stating the facts and circumstances in support
thereof. It further mentioned that the position of
cashier requires utmost trust and confidence but
failed to allege the breach of trust on the part of
petitioner and how the alleged breach was
committed. On the assumption that there was
indeed a breach, there is no evidence that petitioner
was a managerial employee of respondent RCPI. It
should be noted that the term "trust and confidence"
is restricted to managerial employees. It may not
even be presumed that when there is a shortage,
there is also a corresponding breach of trust.
Cash shortages in a cashier’s work may happen,
Part II : Labor Standards Law
Labor Standards
and when there is no proof that the same was
deliberately done for a fraudulent or wrongful
purpose, it cannot constitute breach of trust so as to
render the dismissal from work invalid.
Sulpicio Lines, Inc. v. Gulde (2002)
The basic requisite for dismissal on the ground
of loss of trust and confidence is that the employee
concerned must be one holding a position of trust
and confidence. However, loss of confidence must
not be indiscriminately used as a shield by the
employer against a claim that the dismissal of an
employee was arbitrary. Loss of confidence as a just
cause for termination of employment is premised on
the fact that the employee concerned holds a
position of responsibility or trust and confidence. He
must be invested with confidence on delicate
matters, such as custody handling or care and
protection of the property and assets of the
employer. And, in order to constitute a just cause for
dismissal, the act complained of must be work-
related and shows that the employee concerned is
unfit to continue to work for the employer.
Further, well-settled is the rule that "for loss of
trust and confidence to be a valid ground for
dismissal of an employee, it must be substantial and
founded on clearly established facts sufficient to
warrant the employee’s separation from
employment."
In this case, contrary to the allegations of
petitioner, there is no sufficient evidence to show
that respondent conspired with the thieves in
stealing four (4) pieces of basketball from
petitioner’s truck. As found by the CA:
[I]t ca be gleaned that the evidence
presented in the case did not clearly prove that
petitioner willfully breach his duty. It was not
proven the indeed he connived with the thieves.
The same was even commented upon by the
NLRC when it said that the allegations that
petitioner (respondent herein) knew the thieves
were not even found in the police report. (p. 29.
Rollo) Additionally, the reason given by the truck
helper as to his inaction in preventing the
thieves from taking the basketballs is not
incredible. His reaction given the situation is not
beyond human reaction to similar circumstances.
It is a natural reaction to think about one’s
safety first before the safety of another’s
property.
Likewise, contrary to petitioner’s claim,
respondent did not stop the truck to allow the
looters to disembark. Rather, respondent made
a brief stop at the house of a co-employee in
Calao Street near the Agusan Institute of
Technology to deliver his medicines.In fact, as
testified by Manapat, respondent’s companion,
respondent was not aware that the two pilferers
boarded the truck and he learned about the theft
only when Manapat told him about it.
In fine, petitioner failed to present sufficient
evidence to show that respondent committed acts
that would warrant his dismissal for loss of trust and
confidence. It is significant to note that respondent
had been in petitioner’s employ for thirteen (13)
years and it has not been shown that during this
period he had been guilty of any infraction against
petitioner. It is difficult to believe that he would
deliberately jeopardize his job for something as
worthless as basketballs.
Santos v. San Miguel Corporation (2003)
Article 282(c) of the same Code provides that
"willful breach by the employee of the trust reposed
in him by his employer" is a cause for the
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termination of employment by an employer.[26] This
ground should be duly established.[27] Substantial
evidence is sufficient as long as such loss of
confidence is well-founded or if the employer has
reasonable ground to believe that the employee
concerned is responsible for the misconduct and her
act rendered her unworthy of the trust and
confidence demanded of her position.[28] It must be
shown, though, that the employee concerned holds a
position of trust.[29] The betrayal of this trust is the
essence of the offense for which an employee is
penalized.[30]
Petitioner argues that her position as Finance
Director of respondent's Beer Division is not one of
trust but one that is merely functional and advisory
in nature. She possesses no administrative control
over the plants and region finance officers, including
cashiers. She reports to two superiors.
Petitioner's argument is misplaced. As Finance
Director, she is in charge of the custody, handling,
care and protection of respondent's funds. The
encashment of her personal checks and her private
use of such funds, albeit for short periods of time,
are contrary to the fiduciary nature of her duties.
Moreover, petitioner has functional control over
all the plant and region finance officers, including
cashiers, within the Luzon Operations Area. In fact,
she is the highest ranking managerial employee for
the finance section of the Luzon Beer Division
Operations. Obviously, her position is a factor in
abetting the encashment of her personal checks.
Indeed, we find substantial ground for
respondent's loss of confidence in petitioner. She
does not deny encashing her personal checks at
respondent's sales offices and diverting for her own
private use the latter's resources. The audit
investigation accounted for all the checks she
encashed, some of which were dishonored for
insufficiency of funds. The Investigating Panel
concluded that petitioner not only encashed her
personal checks at respondent's sales offices, but
also used company funds to temporarily satisfy her
insufficient accounts. This Court has held that
misappropriation of company funds, although the
shortages had been fully restituted, is a valid ground
to terminate the services of an employee of the
company for loss of trust and confidence.
GUIDELINES
Greenhills Products, Inc. v. NLRC (98)
The guidelines for the doctrine of loss of
confidence to apply are: (1) loss of confidence
should not be simulated; (2) it should not be used as
a subterfuge for causes which are improper, illegal,
or unjustified; (3) it may not be arbitrarily asserted
in the face of overwhelming evidence to the
contrary; and (4) it must be genuine, not a mere
afterthought to justify an earlier action taken in bad
faith. 8 Petitioner contended that respondent's
dismissal was for a valid cause arguing that the
latter stole company properties and, thereafter,
disposed of them for a consideration in favor of
Roberto Caramelo.
Vitarich v. NLRC (99)
Being a mere afterthought to justify its earlier
action of terminating Recodo, the allegations of
policy violations do not constitute just causes of
dismissal on account of the lack of confidence
contemplated in Midas Touch Food Corporation v.
Part II : Labor Standards Law
Labor Standards
NLRC under which the guidelines for the application
of the doctrine of loss of confidence are: (a) loss of
confidence which should not be simulated; (b) it
should not be used as a subterfuge for causes which
are improper, illegal or unjustified; (c) it should not
be arbitrarily asserted in the face of overwhelming
evidence to the contrary; and (d) it must be
genuine, not a mere afterthought to justify earlier
action taken in bad faith.
ATTITUDE
San Antonio v. NLRC (95)
The Court is not prepared to conclude that
petitioner has been guilty of willful disobedience in
failing to comply posthaste with the transfer order.
In Gold City Integrated Port Services, Inc. v. NLRC,
the Court, on the subject "willful disobedience," has
explained:
"Willful disobedience of the employer's lawful
orders', as a just cause for the dismissal of an
employee, envisages the concurrence of at least
two (2) requisites: the employee's assailed
conduct must have been willful or intentional,
the wilfulness being characterized by a 'wrongful
and perverse attitude'; and the order violated
must have been reasonable, lawful, made known
to the employee and must pertain to the duties
which he had been engaged to discharged."
Willful Breach
Atlas Consolidated Mining and Development
Corp. v. NLRC (98); Felix v. NLRC (2004)
Settled is the rule that under Article 283 (c) of
the Labor Code, the breach of trust must be willful.
A breach is willful if it is done intentionally,
knowingly and purposely, without justifiable excuse,
as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently. It must
rest on substantial grounds and not on the
employer's arbitrariness, whims, caprices or
suspicion; otherwise, the employee would eternally
remain at the mercy of the employer. It should be
genuine and not simulated; nor should it appear as a
mere afterthought to justify earlier action taken in
bad faith or a subterfuge for causes which are
improper, illegal or unjustified. It has never been
intended to afford an occasion for abuse because of
its subjective nature.
There must therefore be an actual breach of
duty committed by the employee which must be
established by substantial evidence.
D. COMMISSION OF CRIME; 282 (D)
E. ANALOGOUS CASES; 282 (E)
QUARRELSOME – BOSSY
Cathedral School of Technology v. NLRC (92)
The reason for which private respondent's
services were terminated, namely, her unreasonable
behavior and unpleasant department in dealing with
the people she closely works with in the course of
her employment, is analogous to the other "just
causes" enumerated under the Labor Code, as
amended.
Petitioners' averments on private respondent's
disagreeable character — "quarrelsome, bossy,
unreasonable and very difficult to deal with" — are
supported by the various testimonies of several co-
employees and students of the school. The conduct
she exhibited on that occasion smacks of sheer
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disrespect and defiance of authority and assumes
the proportion of serious misconduct or
insubordination, any of which constitutes just cause
for dismissal from employment.
CONVICTION – MORAL TURPITUDE
International Rice Research Institute v. NLRC
(93)
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 these justifiable
causes. Neither may said ground be justified under
Article 282 (c) nor under 282 (d) by analogy. Fraud
or willful breach by the employees of the trust
reposed in him by his employer or duly authorized
representative under Article 282 (c) refers to any
fault or culpability on the part of the employee in the
discharge of his duty rendering him absolutely
unworthy of the trust and confidence demanded by
his position. It cannot be gainsaid that the breach of
trust must be related to the performance of the
employee's function. On the other hand, the
commission of a crime by the employee under Article
282 (d) refers to an offense against the person of his
employer or any immediate member of his family or
his duly authorized representative. Analogous causes
must have an element similar to those found in the
specific just cause enumerated under Article 282.
Clearly lacking in the ground invoked by petitioner is
its relation to his work or to his employer.
In the case at bar, the commission of the crime
of homicide was outside the perimeter of the IRRI
complex, having been committed in a restaurant
after office hours and against a non-IRRI employee.
Thus, the conviction of Micosa for homicide was not
work-related, his misdeed having no relation to his
position as laborer and was not directed or
committed against IRRI or its authorized agent.
XXX As to what crime involves moral turpitude,
is for the Supreme Court to determine. Thus, the
precipitate conclusion of IRRI that conviction of the
crime of homicide involves moral turpitude is
unwarranted considering that the said crime which
resulted from an act of incomplete self-defense from
an unlawful aggression by the victim has not been
so classified as involving moral turpitude.
Oania v. NLRC (95)
Violation of a company rule prohibiting the
infliction of harm or physical injury against any
person under the particular circumstances provided
for in the same rule may be deemed analogous to
"serious misconduct" stated in Art. 282 (a) above.
To repeat, however, there is no substantial evidence
definitely pointing to petitioners as the perpetrators
of the mauling of Malong. What is an established fact
is that, after investigation, private respondent
dismissed them and, thereafter, a criminal complaint
was filed against petitioners. Likewise, it is of record
that Malong desisted from suing the perpetrators
before the regular courts.
Lim v. NLRC (96)
Gross inefficiency falls within the purview of
:other causes analogous to the foregoing,” and
constitutes just cause to terminate an employee
under Art. 282, labor Code. One is analogous to
another if it is susceptible of comparison with the
latter either in general or in some specific detail,
Part II : Labor Standards Law
Labor Standards
or has a close relationship with the latter. Gross
inefficiency is closely related to gross neglect for
both involve specific acts of omission on the part of
the employee resulting in damage to the employer
or to his business.
F. OTHERS – JUST CAUSES CLAIMED BY EMPLOYER
1. ABANDONMENT
DEFINED
Escobin v. NLRC (98)
This contention is untenable. Abandonment, as
a just and valid cause for dismissal, requires a
deliberate, unjustified refusal of an employee to
resume his work, coupled with a clear absence of
any intention of returning to his work. No evidence
was presented to establish that petitioners
relinquished their jobs.
REQUISITES
Metro Transit Corp., Inc. v. NLRC (99)
Indeed, for abandonment of work to be a just
and valid ground for dismissal, there must be a
deliberate and unjustified refusal on the part of an
employee to resume his employment. The burden of
proof is on the employer to show an unequivocal
intent on the part of the employee to discontinue
employment. To warrant a finding of abandonment,
there must be evidence not only of the failure of an
employee to report for work or his absence without
valid or justifiable reason, but also of his intention to
sever the employer-employee relationship. The
second element is the more determinative factor,
being manifested by overt acts.
Leonardo v. NLRC (2000) and Fuerte v. Aquino
(2000)
Neither can we say that FUERTE’s actions are
indicative of abandonment. To constitute such a
ground for dismissal, there must be (1) failure to
report for work or absence without valid or
justifiable reason; and (2) a clear intention, as
manifested by some overt acts, to sever the
employer-employee relationship. We have
accordingly held that the filing of a complaint for
illegal dismissal, as in this case, is inconsistent with
a charge of abandonment.
INFERENCE – PRESCRIPTION
Hacienda Dapdap v. NLRC (98)
No such grave abuse of discretion was
committed by the NLRC as it correctly applied the
consistent ruling in labor cases that a charge of
abandonment is totally inconsistent with the
immediate filing of a complaint for illegal dismissal.
It is indeed inconceivable that an employee like
herein respondent who has been working at Hda.
Dapdap I since 1977 and cultivating a substantial
portion of a 6-hectare lot therein for himself would
just abandon his work in 1992 for no apparent
reason. As quoted by the Court in Judric Canning
Corporation v. Inciong, "To get a job is difficult; to
run from it is foolhardy." Nor could intent to
abandon be presumed from private respondent's
subsequent employment with another employer as
petitioner alleges. The fact that the start of such
employment, i.e., after 1 March 1992 as petitioner
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alleges, coincides with the date of the original
complaint strongly indicates that such employment
was only meant to help respondent and his family
survive during the pendency of his case. It has been
said that abandonment of position cannot be lightly
inferred, much less legally presumed from certain
equivocal acts such as an interim employment.
SPECIFIC ACTS
Premiere Development Bank v. NLRC (98)
We agree with both the NLRC and the Solicitor
General that respondent did not abandon her job. To
constitute abandonment, two elements must concur:
(1) the failure to report for work or absence without
valid or justifiable reason, and (2) a clear intention
to sever the employer-employee relationship, with
the second element as the more determinative
factor and being manifested by some overt acts.
Abandoning one's job means the deliberate,
unjustified refusal of the employee to resume his
employment and the burden of proof is on the
employer to show a clear and deliberate intent on
the part of the employee to discontinue
employment. The law, however, does not enumerate
what specific overt acts can be considered as strong
evidence of the intention to sever the employee-
employer relationship. An employee who merely
took steps to protest her indefinite suspension and
to subsequently file an action for damages, cannot
be said to have abandoned her work nor is it
indicative of an intention to sever the employer-
employee relationship. Her failure to report for work
was due to her indefinite suspension. Petitioner's
allegation of abandonment is further belied by the
fact that private respondent filed a complaint for
illegal dismissal. Abandonment of work is
inconsistent with the filing of said complaint.
NO ABANDONMENT
Phil. Airlines, Inc. v. NLRC (99)
Thus, the eight-hour work period does not
include the meal break. Nowhere in the law may it
be inferred that employees must take their meals
within the company premises. Employees are not
prohibited from going out of the premises as long as
they return to their posts on time. Private
respondent's act, therefore, of going home to take
his dinner does not constitute abandonment.
CMP Federal Security Agency, Inc v. NLRC (99)
Contrariwise, when Caranto was relieved from
his post on 6 May 1994 he immediately pursued his
claim against CMP by amending his complaint six (6)
days after to include illegal dismissal among his
charges. This can hardly be expected from one who
has voluntarily "abandoned" his job, as claimed by
CMP. The immediate filing of a complaint for illegal
dismissal against the employer is a clear indication
that the employee has not given up on his work.
Mendoza v. NLRC (99)
We cannot concur with the NLRC. The
unflinching rule in illegal dismissal cases is that the
employer bears the burden of proof. To establish a
case of abandonment, the employer must prove the
employee's deliberate and unjustified refusal to
resume employment without any intention of
returning. Specifically, the employer has to show
the concurrence of the following: (1) the
Part II : Labor Standards Law
Labor Standards
employee's intention to abandon employment and
(2) overt acts from which such intention may be
inferred — as when the employee shows no desire to
resume works. The private respondent failed to
establish any of these.
The employer herein argues that the lack of a
notice of termination is proof that petitioner
abandoned her job. We disagree. Mere absence from
work, especially where the employee has been
verbally told not to report, cannot by itself constitute
abandonment. To repeat, the employer has the
burden of proving overt acts on the employee's part
which demonstrate a desire or an intention to
abandon her work. It failed to discharge this burden.
Furthermore, the filing of a complaint for illegal
dismissal within a reasonable period negates
abandonment. In the present case, the Complaint
was filed about two weeks after petitioner has been
dismissed or had been deemed resigned.
2. LOANS
BORROWING MONEY
Pearl S. Buck Foundation, Inc. v. NRLC (90)
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 be asserted as a ground for dismissal
when reprehensible behavior such as the use of a
trust relationship as a leverage for borrowing money
is involved. A recipient of largesse may be so
grateful that out of a sense of "utang na loob" she
may lend money to an employee or relative of a
benefactor believing that the loan would be paid
anyway. In this case, the fact that Aliarte has
retracted her complaint is of no moment. She loaned
money to the respondent, not once but twice and
there can be no other assumption where the money
came from except from the trust funds intended for
the ward.
3. COURTESY RESIGNATION
Batongbacal v. Associated Bank (88)
While it may be said that the private
respondent's call for courtesy resignations was
prompted by its determination to survive, we cannot
lend legality to the manner by which it pursued its
goal. By directing its employees to submit letters of
courtesy resignation, the bank in effect forced upon
its employees an act which they themselves should
voluntarily do. It should be emphasized that
resignation per se means voluntary relinquishment
of a position or office. Adding the word "courtesy"
did not change the essence of resignation. That
courtesy resignations were utilized in government
reorganization did not give private respondent the
right to use it as well in its own reorganization and
rehabilitation plan. There is no guarantee that all
employers will not use it to rid themselves arbitrarily
of employees they do not like, in the guise of
"streamlining" its organization. On the other hand,
employees would be unduly exposed to outright
termination of employment which is anathema to the
constitutional mandate of security of tenure.
4. WORK ATTITUDE
ABSENCES
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Manila Electric Co. v. NLRC (96)
Habitual absenteeism should not and cannot be
tolerated by petitioner herein which is a public utility
company engaged in the business of distributing and
selling electric energy within its franchise areas and
that the maintenance of Meralco’s distribution
facilities (electric lines) by responding to customer’s
complaints is of paramount importance to the
consuming public.
An employee’s habitual absenteeism without
leave, which violated company rules and regulations
is sufficient cause to justify termination from service.
5. TERM EMPLOYMENT
Brent School v. Zamora (90)
Such interpretation puts the seal on Bibiso upon
the effect of the expiry of an agreed period of
employment as still good rule — a rule reaffirmed in
the recent case of Escudero vs. Office of the
President where, in the fairly analogous case of a
teacher being served by her school a notice of
termination following the expiration of the last of
three successive fixed-term employment contracts,
the Court held:
"Reyes' (the teacher's) argument is not
persuasive. It loses sight of the fact that her
employment was probationary, contractual in
nature, and one with a definitive period. At the
expiration of the period stipulated in the contract,
her appointment was deemed terminated and the
letter informing her of the non-renewal of her
contract is not a condition sine qua non before Reyes
may be deemed to have ceased in the employ of
petitioner UST. The notice is a mere reminder that
Reyes' contract of employment was due to expire
and that the contract would no longer be renewed. It
is not a letter of termination. The interpretation that
the notice is only a reminder is consistent with the
court's finding in Labajo, supra. . . ."
Romares v. NLRC (98)
The Brent ruling also laid down the criteria
under which "term employment" cannot be said to
be in circumvention of the law on security of tenure:
1. The fixed period of employment was
knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper
pressure being brought to bear upon the employee
and absent any other circumstances vitiating his
consent; or
2. It satisfactorily appears that the employer
and the employee dealt with each other on more or
less equal terms with no moral dominance exercised
by the former or the latter.
None of these requisites were complied with.
Medenilla v. Phil. Veterans Bank (2000)
Since findings by the Labor Arbiter are binding
on this Court if supported by substantial evidence,
the Court rules that there was illegal dismissal
absent just cause, which is one of the facets of a
dismissal. Such illegal dismissal warrants
reinstatement and payment of backwages. However,
since petitioners’ reinstatement is now considered
impractical because the new Philippine Veterans
Bank has been rehabilitated by virtue of RA 7169,
the Court limits the relief to be granted to the
petitioners to the unpaid wages during the
remaining period of their employment contract.
Part II : Labor Standards Law
Labor Standards
As held by this Court, if the contract is for a
fixed term and the employee is dismissed without
just cause, he is entitled to the payment of his
salaries corresponding to the unexpired portion of
the employment contract. In the case under
scrutiny, the unpaid wages should be reckoned on
February 18, 1991 to January 1, 1992. January 1,
1992 is considered the date of expiration of the
period of liquidation since January 2, 1992 was the
effectivity of RA 7169, entitled "An Act to
Rehabilitate the Philippine Veterans Bank".
6. PAST INFRACTIONS
PAST OFFENSES
La Carlota Planters Assn. v. NLRC (98)
The correct rule has always been that such
previous offenses may be so used as valid
justification for dismissal from work only if the
infractions are related to the subsequent offense
upon which basis the termination of employment is
decreed. The previous infraction, in other words,
may be used if it has a bearing to the proximate
offense warranting dismissal.
Ramoran v. Jardine CMG Life Insurance Co.,
Inc. (2000)
Finally, there is no basis to mitigate petitioner’s
liability inasmuch as this is not the first time that
petitioner was charged with falsification by
respondent Jardine. She had in fact earlier served a
five (5)-day suspension from November 8-13, 1993
for admittedly tampering with the entries in Official
Receipt No. 1013 issued by Limited Vision Center on
July 7, 1993, in support of her application for the
optical loan she had obtained from respondent
Jardine. Under its company rules, respondent
Jardine was, strictly speaking, entitled to dismiss
petitioner on that ground. However, due to
petitioner’s voluntary admission of the offense and
for humanitarian reasons, she was only given a five
(5)-day suspension. In a memorandum, respondent
Jardine warned the petitioner that "any future
violation of the same nature, irrespective of the time
frame [sic] that it is repeated or committed, would
result in the imposition of the maximum penalty of
dismissal." As aptly remarked by the appellate court
"the seeds of mistrust had been sown, awaiting only
the proper occasion for it to grow and fester."
Petitioner, thus, had only herself to blame when she
was finally dismissed, for cause, by respondent
Jardine for the reason that she falsified her subject
overtime authorization slips dated December 6 and
14, 1993 in violation of the Company Rules and
Regulations.
7. ANIMOSITY
Santos v. NLRC (98)
Accordingly, teachers must abide by a standard
of personal conduct which not only proscribes the
commission of immoral acts, but also prohibits
behavior creating a suspicion of immorality because
of the harmful impression it might have on the
students. Likewise, they must observe a high
standard of integrity and honesty.
From the foregoing, it seems obvious that when
a teacher engages in extra-marital relationship,
especially when the parties are both married, such
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behavior amounts to immorality, justifying his
termination from employment.
8. PROFESSIONAL TRAINING
RESIDENCY TRAINING
Felix v. Buenaseda (95)
A residency or resident physician position in a
medical specialty is never a permanent one.
Residency connotes training and temporary status.
It is the step taken by a physician right after post-
graduate internship (and after hurdling the Medical
Licensure Examinations) prior to his recognition as a
specialist or sub-specialist in a given field.
This upward movement from residency to
specialist rank, institutionalized in the residency
training process, guarantees minimum standards
and skills and ensures that the physician claiming to
be a specialist will not be set loose on the
community without the basic knowledge and skills of
his specialty. Because acceptance and promotion
requirements are stringent, competitive, and based
on merit, acceptance to a first year residency
program is no guaranty that the physician will
complete the program. Attrition rates are high.
Some programs are pyramidal. Promotion to the
next post-graduate year is based on merit and
performance determined by periodic evaluations and
examinations of knowledge, skills and bedside
manner. Under this system, residents, specially
those in university teaching hospitals 18 enjoy their
right to security of tenure only to the extent that
they periodically make the grade, making the
situation quite unique as far as physicians
undergoing post-graduate residencies and
fellowships are concerned.
9. LOVE AND MORALS
IMMORALITY
Santos v. NLRC (98)
Accordingly, teachers must abide by a standard
of personal conduct which not only proscribes the
commission of immoral acts, but also prohibits
behavior creating a suspicion of immorality because
of the harmful impression it might have on the
students. Likewise, they must observe a high
standard of integrity and honesty.
From the foregoing, it seems obvious that when
a teacher engages in extra-marital relationship,
especially when the parties are both married, such
behavior amounts to immorality, justifying his
termination from employment.
LOVE
Chua-Qua v. Clave (90)
With the finding that there is no substantial
evidence of the imputed immoral acts, it follows that
the alleged violation of the Code of Ethics governing
school teachers would have no basis. Private
respondent utterly failed to show that petitioner took
advantage of her position to court her student. If the
two eventually fell in love, despite the disparity in
their ages and academic levels, this only lends
substance to the truism that the heart has reasons
of its own which reason does not know. But,
definitely, yielding to this gentle and universal
emotion is not to be so casually equated with
Part II : Labor Standards Law
Labor Standards
immorality. The deviation of the circumstances of
their marriage from the usual societal pattern cannot
be considered as a defiance of contemporary social
mores.
It would seem quite obvious that the avowed
policy of the school in rearing and educating children
is being unnecessarily bannered to justify the
dismissal of petitioner. This policy, however, is not
at odds with and should not be capitalized on to
defeat the security of tenure granted by the
Constitution to labor. In termination cases, the
burden of proving just and valid cause for dismissing
an employee rests on the employer and his failure to
do so would result in a finding that the dismissal is
unjustified.
10. VIOLATION OF COMPANY RULES
Aparente Sr. v. NLRC (2000)
The petitioner’s dismissal is justified by
Company rules and regulations. It is true that his
violation of company rules is his first offense.
Nonetheless, the damage caused to private
respondent amounted to more than P5,000.00, thus,
the penalty of discharge is properly imposable as
provided by Section 12 of Rule 005-85 of CCBPI’s
Code of Disciplinary Rules and Regulations.
It is recognized that company policies and
regulations, unless shown to be grossly oppressive
or contrary to law, are generally valid and binding on
the parties and must be complied with until finally
revised or amended, unilaterally or preferably
through negotiation, by competent authority. The
Court has upheld a company’s management
prerogatives so long as they are exercised in good
faith for the advancement of the employer’s interest
and not for the purpose of defeating or
circumventing the rights of the employees under
special laws or under valid agreements.
Article 282 (a) of the Labor Code of the
Philippines sanctions termination by the employer of
the employee’s services for serious misconduct or
willful disobedience by the employee of the lawful
orders of his employer or representative in
connection with his work. In the instant case,
petitioner Aparente was terminated from service
after having been found guilty of driving without a
valid driver’s license, which is a clear violation of the
company’s rules and regulations.
In order that an employer may dismiss an
employee on the ground of willful disobedience,
there must be concurrence of at least two requisites:
The employee’s assailed conduct must have been
willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude;
and the order violated must have been reasonable,
lawful, made known to the employee and must
pertain to the duties which he had been engaged to
discharge. We have found these requisites to be
present in the case at bar.
11. CRIMINAL CASE
EFFECT OF ACQUITTAL
Ramos v. NLRC (98)
The NLRC initially reversed the ruling of the
labor arbiter on the grounds that: (1) petitioner was
denied procedural due process and (2) the criminal
case for estafa filed against her has been dismissed
by the Manila Prosecutor’s office for insufficiency of
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evidence, particularly, for lack of proof that the
USECO was damaged by the acts attributed to
petitioner.
These are patent errors. Petitioner was not
denied due process. Similarly, it is a well
established ruled that the dismissal of the criminal
case against an employee shall not necessarily be a
bar to his dismissal from employment on the ground
of loss of trust and confidence. The NLRC corrected
these patent errors when it granted private
respondent’s second motion for reconsideration.
CONVICTION
Sampaguita Garments Corp. v. NLRC (94)
The private respondent's conviction of the crime
of theft of property belonging to the petitioner has
affirmed the existence of a valid ground for her
dismissal and thus removed the justification for the
administrative decision ordering her reinstatement
with back wages. Nevertheless, the petitioner is still
subject to sanction for its failure to accord the
private respondent the right to an administrative
investigation in conformity with the procedural
requirements of due process.
DISMISSAL – CRIMINAL CASE
Lacorte v. Inciong (88)
The purpose of the proceedings before the fiscal
is to determine if there is sufficient evidence to
warrant the prosecution and conviction of the
accused. In assessing the evidence before him, the
fiscal considers the basic rule that to successfully
convict the accused the evidence must be beyond
reasonable doubt and not merely substantial. On the
other hand, to support findings and conclusion of
administrative bodies only substantial evidence is
required. It does not follow that once the fiscal
dismisses the complaint for qualified theft,
respondent officials should also have decided in
favor of petitioner. For one, the evidence presented
before the two bodies may not be necessarily
identical. Secondly, the appreciation of the facts and
evidence presented is an exercise of discretion on
the part of administrative officials over which one
cannot impose his conclusion on the other. As we
have already ruled, "the conviction of an employee
in a criminal case is not indispensable to warrant his
dismissal, and the fact that a criminal complaint
against the employee has been dropped by the fiscal
is not binding and conclusive upon a labor tribunal.
Starlite etc. v. NLRC (89)
There is no dispute that loss of confidence,
when adequately proven, constitutes a valid ground
for dismissing an employee [Manila Midtown
Commercial Corporation v. Nuwhrain] and proof
beyond reasonable doubt is not required to
terminate him on this charge [Gatmaitan v. MRR]. It
is sufficient that there is some basis for such loss of
confidence [Galsim v. PNB; Central Textile Mills v.
NLRC] and that the employer has reasonable ground
to believe or entertain the moral conviction that the
employee concerned is responsible for the
misconduct and that the nature of his participation
therein would render him absolutely unworthy of the
trust and confidence demanded of his position
[Nevans v. CIR]. The doctrine goes on further to
include the basic rule that the conviction of an
employee in a criminal case is not indispensable
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Labor Standards
to warrant his dismissal by his employer and that
the fact that a criminal complaint against the
employee has been dropped by the city fiscal is not
binding and conclusive upon a labor tribunal [Sea
Land Service Inc. v. NLRC].
GUILT OR INNOCENCE
Chua-Qua v. Clave (90)
While the criminal complaint where petitioner
was included as one of the accused was dismissed
for insufficiency of evidence, the Court considers
that the dismissal of the criminal complaint did not
preclude a finding by the competent administrative
authorities, that petitioner had indeed committed
acts inimical to the interest of his employer.
In Pepsi Cola Bottling Company of the
Philippines v. Guanzon, we held that: "Private
respondent's guilt or innocence in the criminal case
is not determinative of the existence of a just or
authorized cause for his dismissal". This doctrine
follows from the principle that the quantum and
weight of evidence necessary to sustain conviction in
criminal cases are quite different from the quantum
of evidence necessary for affirmance of a decision of
the Labor Arbiter and of the NLRC.
Quiambao v. NLRC (96)
This case is to be distinguished from those cases
in which it was held that the acquittal of the
employee in the criminal case was not a bar to his
dismissal on the ground of loss of confidence. The
rulings in those cases were based on findings that
the evidence in the criminal case was not sufficient
to satisfy the requirement of proof beyond
reasonable doubt but otherwise adequate to support
a finding that there was substantial evidence that
the employee was guilty. In contrast, in the case at
bar, there is entire want of evidence to justify the
dismissal of the petitioner. The NLRC merely relied
on the fact that the Ministry of Justice found
petitioner probably guilty of estafa. In fact, the NLRC
found that the charges against him had not been
substantiated.
12. ABOLITION OF POSITION
San Miguel Corp. v. NLRC (99)
Abolition of departments or positions in the
company is one of the recognized management
prerogatives. Noteworthy is the fact that the private
respondent does not question the validity of the
business move of petitioner. In the absence of proof
that the act of petitioner was ill-motivated, it is
presumed that petitioner San Miguel Corporation
acted in good faith.
TRANSFERS – DISCHARGE AND SUSPENSION
Westin Phil. Plaza Hotel v. NLRC (99)
On the issue of legality and reasonableness of
the order of transfer, it must be emphasized that
this Court has recognized and upheld the prerogative
of management to transfer an employee from one
office to another within the business establishment,
provided that there is no demotion in rank or a
diminution of his salary, benefits and other
privileges. This is a privilege inherent in the
employer's right to control and manage its
enterprise effectively. Besides, it is the employer's
prerogative, based on its assessment and perception
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of its employee's qualifications, aptitudes and
competence, to move him around in the various
areas of its business operations in order to ascertain
where the employee will function with utmost
efficiency and maximum productivity or benefit to
the company. An employee's right to security of
tenure does not give him such a vested right in his
position as would deprive the company of its
prerogative to change his assignment or transfer
him where he will be most useful.
Castillo v. NLRC (99)
Petitioner claims that she was constructively
dismissed. We agree with the respondent
Commission's finding rejecting the same. Well-
settled is the rule that it is the prerogative of the
employer to transfer and reassign employees for
valid reasons and according to the requirement of its
business. An owner of a business enterprise is given
considerable leeway in managing his business. Our
law recognizes certain rights collectively called
management prerogative as inherent in the
management of business enterprises. One of the
prerogatives of management is the right to transfer
employees in their work station. This Court has
consistently recognized and upheld the prerogative
of management to transfer an employee from one
office to another within the business establishment,
provided that there is no demotion in rank or a
diminution of his salary, benefits and other
privileges.
The Court, as a rule, will not interfere with an
employer's prerogative to regulate all aspects of
employment which includes among others, work
assignment, working methods, and place and
manner of work. The rule well-settled that labor laws
discourage interference with an employer's
judgment in the conduct of his business.
Of course, the managerial prerogative to
transfer personnel must be exercised without grave
abuse of discretion, putting to mind the basic
elements of justice and fair play. It cannot be used
as a subterfuge by the employer to rid himself of an
undesirable worker.
OSS Security and Allied Services, Inc. v. NLRC
(2000)
Thus, the transfer of an employee ordinarily lies
within the ambit of management prerogatives.
However, a transfer amounts to constructive
dismissal when the transfer is unreasonable,
inconvenient, or prejudicial to the employee, and it
involves a demotion in rank or diminution of salaries,
benefits and other privileges. In the case at bench,
nowhere in the record does it show that that the
transfer of private respondent was anything but
done in good faith, without grave abuse of
discretion, and in the best interest of the business
enterprise.
13. CONSTRUCTIVE DISCHARGE
DEFINED
Philippine –Japan Active Carbon Corp. v. NLRC
(89)
A constructive discharge is defined as: "A
quitting because continued employment is rendered
impossible, unreasonable or unlikely; as, an offer
involving a demotion in rank and a diminution in
pay." (Moreno's Philippine Law Dictionary, 2nd
Part II : Labor Standards Law
Labor Standards
Ed., p. 129, citing the case of Alia vs. Salani Una
Transportation Co. )
XXX It is the employer's prerogative, based on
its assessment and perception of its employees'
qualifications, aptitudes, and competence, to move
them around in the various areas of its business
operations in order to ascertain where they will
function with maximum benefit to the company. An
employee's right to security of tenure does not give
him such a vested right in his position as would
deprive the company of its prerogative to change his
assignment or transfer him where he will be most
useful. When his transfer is not unreasonable, nor
inconvenient, nor prejudicial to him, and it does not
involve a demotion in rank or a diminution of his
salaries, benefits, and other privileges, the employee
may not complain that it amounts to a constructive
dismissal.
Hagonoy Rural Bank, Inc. v. NLRC (98)
The next issue that needs be addressed is
whether the first nine private respondents were
illegally dismissed. We agree with the Labor Arbiter
and the NLRC in holding the affirmative view. While
it may be true that the private respondents had
chosen to go on leave for one month effective 16
October 1992, the choice was not of their complete
free will because the other alternative given by the
petitioner was suspension. The threat of suspension
thus became the proximate cause of the "leave." It
was a coerced option imposed by the petitioner. That
the petitioner had in fact in mind private
respondents' suspension was finally made evident by
its refusal to take them back after the expiration of
the leave. The petitioner extended their leave for
another month with a promise to pay them salaries.
After the expiration of the "extended" leave, the
petitioner still refused to accept them back.
Ineluctably, the private respondents were
constructively dismissed from 16 October 1992.
Phil. Wireless, Inc. v. NLRC (99)
The Court has held that constructive dismissal is
“an involuntary resignation resorted to when
continued employment is rendered impossible,
unreasonable, or unlikely; when there is a demotion
in rank and/or a dimunition in pay; or when a clear
discrimination, insensibility or disdain by an
employer becomes unbearable to the employee.” In
this particular case, respondent voluntarily resigned
from his employment. He was not pressured into
resigning.
Voluntary resignation is defined as the act of an
employee who finds himself in a situation where he
believes that personal reasons cannot be sacrificed
in favor of the exigency of the service and he has no
other choice but to disassociate himself from his
employment.
Respondent considered his transfer/promotion
as a demotion due to the fact that he had no support
staff to assist him in his work and whom he could
supervise. There is no demotion where there is no
reduction in position, rank or salary as a result of
such transfer.
CONSTRUCTIVE DISCHARGE AND ILLEGAL DISMISSAL
Mark Roche International v. NLRC (99)
Constructive dismissal or a constructive
discharge has been defined as a quitting because
continued employment is rendered impossible,
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unreasonable or unlikely, as an offer involving a
demotion in rank and; a diminution in pay. In the
instant case, private respondents were not demoted
in rank nor their pay diminished considerably. They
were simply told without prior warning or notice that
there was no more work for them. After receiving
the notice of hearing of the petition for certification
election on 27 October 1992, petitioners
immediately told private respondents that they were
no longer employed. Evidently it was the filing of the
petition for certification election and organization of
a union within the company which led petitioners to
dismiss private respondents and not petitioners'
allegations of absence or abandonment by private
respondents. The formation of a labor union has
never been a ground for valid termination, and
where there is an absence of clear, valid and legal
cause, the law considers the termination illegal.
PREVENTIVE SUSPENSION - REMOVAL
Globe-Mackay Cable and Radio Corp. v. NLRC
(92)
Under such circumstances, preventive
suspension was the proper remedial recourse
available to the company pending Salazar's
investigation. By itself, preventive suspension does
not signify that the company has adjudged the
employee guilty of the charges she was asked to
answer and explain. Such disciplinary measure is
resorted to for the protection of the company's
property pending investigation of any alleged
malfeasance or misfeasance committed by the
employee.
Phil. Airlines v. NLRC (98)
Preventive suspension is a disciplinary measure
for the protection of the company's property pending
investigation of any alleged malfeasance or
misfeasance committed by the employee. The
employer may place the worker concerned under
preventive suspension if his continued employment
poses a serious and imminent threat to the life or
property of the employer or of his co-workers.
RATIONALE
Kwikway Engineering Works v. NLRC (91)
Further, the preventive suspension of
respondent Vargas for an indefinite period amounted
to a dismissal and is violative of Section 4, Rule XIV
of the Implementing Rules of the Labor Code which
limits the preventive suspension to thirty (30) days.
The said rule also provides that "the employer shall
thereafter reinstate the worker in his former or in a
substantially equivalent position or the employer
may extend the period of suspension provided that
during the period of extension, he pays the wages
and other benefits due to the worker." (Pacific
Cement Company Inc. v. NLRC).
OTHER CAUSES – BUSINESS RELATED CAUSES
23.06 OTHER CAUSES- BUSINESS RELATED
CAUSES
Art. 283
Closure of establishment and reduction of personnel.
The employer may also terminate the
employment of any employee due to the:
Part II : Labor Standards Law
Labor Standards
e. Installation of labor saving devices, measure is made necessary or compelled by
f. Redundancy, economic factors that would otherwise endanger its
g. Retrenchment to prevent losses or stability or existence. In exercising its right to
h. Closing or cessation of operation of retrench employees, the firm may choose to close
the establishment or undertaking all, or a part of, its business to avoid further losses
unless the closing is for the or mitigate expenses. In Caffco International Limited
purpose of circumventing the vs. Office of the Minister-Ministry of Labor and
provisions of this Title, Employment, the Court has aptly observed that —
by serving a written notice on the workers and the Business enterprises today are faced with the
Ministry of Labor and Employment at least one (1) pressures of economic recession, stiff competition,
month before the intended date thereof. and labor unrest. Thus, businessmen are always
In case of termination due to the installation of pressured to adopt certain changes and programs in
labor saving devices or redundancy, the worker order to enhance their profits and protect their
affected thereby shall be entitled to a separation pay investments. Such changes may take various forms.
equivalent to at least his one (1) month pay or to at Management may even choose to close a branch, a
least one (1) month pay for every year of service, department, a plant, or a shop (Phil. Engineering
whichever is higher. Corp. vs. CIR).
In case of retrenchment to prevent losses and in
cases of closures or cessation of operations of
establishment or undertaking not due to serious
business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of A. INSTALLATION OF LABOR SAVING DEVICES
service, whichever is higher
A fraction of at least six (6) months shall be B. REDUNDANCY
considered one (1) whole year.
BUSINESS JUDGMENT
CAUSES PROCEDURAL SEPARATION
REQUIREMENT PAY Wiltshire File Co., Inc. v. NLRC (91)
Installation 1 month advance at least 1 The characterization of private respondent's
of Labor notice to DOLE month pay or 1 services as no longer necessary or sustainable, and
Saving and Employee month pay for therefore properly terminable, was an exercise of
Devices (twin every year of business judgment on the part of petitioner
requirements) service company. The wisdom or soundness of such
whichever is characterization or decision was not subject to
higher discretionary review on the part of the Labor Arbiter
Redundancy SAME at least 1 nor of the NLRC so long, of course, as violation of
month pay or 1 law or merely arbitrary and malicious action is not
month pay for shown. It should also be noted that the position held
every year of by private respondent, Sales Manager, was clearly
service managerial in character. In D.M. Consunji, Inc. v.
whichever is National Labor Relations Commission, the Court
higher held:
Retrenchme SAME 1 month pay or "An employer has a much wider discretion in
nt to ½ month pay terminating the employment relationship of
Prevent for every year managerial personnel as compared to rank and file
Losses of service employees. However, such prerogative of
whichever is management to dismiss or lay off an employee must
higher be made without abuse of discretion, for what is at
Closing, SAME 1 month pay or stake is not only the private respondent's position
Cessation of ½ month pay but also his means of livelihood . ."
Operation for every year The determination of the continuing necessity of
(unless of service a particular officer or position in a business
purpose is whichever is corporation is management's prerogative, and the
to higher courts will not interfere with the exercise of such so
circumvent long as no abuse of discretion or merely arbitrary or
Security of malicious action on the part of management is
Tenure shown.
guarantee)
not due to Almodiel v. NLRC (93)
serious A survey of existing case law will disclose that in
business Wiltshire File Co., Inc. v. NLRC, the position of Sales
losses or Manager was abolished on the ground of redundancy
financial as the duties previously discharged by the Sales
reverses. Manager simply added to the duties of the General
Manager to whom the Sales Manager to whom the
RECOGNITION OF RIGHT – BUSINESS RELATED CAUSES Sales Manager used to report. In adjudging said
termination as legal, this Court said that
Edge Apparel, Inc. v. NLRC (98) redundancy, for purposes of our Labor Code,
The law acknowledges the right of every exists where the services of an employee are in
business entity to reduce its work force if such excess of what is reasonably demanded by the

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Part II : Labor Standards Law
Labor Standards
actual requirements of the enterprise. The
characterization of an employee's services as no
longer necessary or sustainable, and therefore,
properly terminable, was an exercise of business
judgment on the part of the employer. The wisdom
or soundness of such characterization or decision
was not subject to discretionary review on the part
of the Labor Arbiter nor of the NLRC so long, of
course, as violation of law or merely arbitrary and
malicious action is not shown.
XXX Indeed, an employer has no legal obligation
to keep more employees than are necessary for the
operation of its business.
Asian Alcohol Corp. v. NLRC (99)
The right of management to dismiss workers
during periods of business recession and to install
labor saving devices to prevent losses is governed
by Art. 283 of the labor Code, as amended.
Under the foregoing provision, retrenchment
and redundancy are just causes for the employer to
terminate the services of workers to preserve the
viability of the business. In exercising its right,
however, management must faithfully comply with
the substantive and procedural requirements laid
down law and jurisprudence.
Not one of the private respondents refuted the
foregoing facts. They only contend that the new
management should have followed the policy of "first
in, last out" in choosing which positions to declare as
redundant or whom to retrench to prevent further
business losses. No law mandates such a policy. And
the reason is simple enough. A host of relevant
factors come into play in determining cost efficient
measures and in choosing the employees who will be
retained or separated to save the company from
closing shop. In determining these issues,
management has to enjoy a pre-eminent role. The
characterization of positions as redundant is an
exercise of business judgment on the part of the
employers. It will be upheld as long as it passes the
test of arbitrariness.
FINANCIAL LOSS
Escareal v. NLRC (92)
In Wiltshire File Co., Inc. vs. NLRC, this Court
held that redundancy, for purposes of the Labor
Code, exists where the services of an employee are
in excess of what is reasonably demanded by the
actual requirements of the enterprise; a position is
redundant when it is superfluous, and superfluity of
a position or positions may be the outcome of a
number of factors, such as the overhiring of
workers, a decreased volume of business or the
dropping of a particular product line or service
activity previously manufactured or undertaken by
the enterprise. Redundancy in an employer's
personnel force, however, does not necessarily or
even ordinarily refer to duplication of work. That no
other person was holding the same position which
the dismissed employee held prior to the termination
of his services does not show that his position had
not become redundant.
While concededly, Article 283 of the Labor Code
does not require that the employer should be
suffering financial losses before he can terminate the
services of the employee on the ground of
redundancy, it does not mean either that a company
which is doing well can effect such a dismissal
whimsically or capriciously. The fact that a company
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is suffering from business losses merely provides
stronger justification for the termination.
LAW REQUIRED POSITION
Escareal v. NLRC (92)
Private respondent PRC had no valid and
acceptable basis to declare the position of Pollution
Control and Safety Manager redundant as the same
may not be considered as superfluous; by the
express mandate of the provisions earlier cited, said
positions are required by law. Thus, it cannot be
gainsaid that the services of the petitioner are in
excess of what is reasonably required by the
enterprise. Otherwise, PRC would not have allowed
ten (10) long years to pass before opening its eyes
to that fact; neither would it have increased the
petitioner's salary to P23,100.00 a month effective 1
April 1988. The latter by itself is an unequivocal
admission of the specific and special need for the
position and an open recognition of the valuable
services rendered by the petitioner. Such admission
and recognition are inconsistent with the proposition
that petitioner's positions are redundant. If based on
the ground of redundancy, a substitution of the
petitioner by Miguelito S. Navarro would be invalid
as the creation of said position is mandated by the
law; the same cannot therefore be declared
redundant. If the change was effected to consolidate
the functions of the pollution control and safety
officer with the duties of the Industrial Engineering
Manager, as private respondent postulates, such
substitution was done in bad faith for as had already
been pointed out, Miguelito S. Navarro was hardly
qualified for the position.
REDUNDANCY/RETRENCHMENT
AG & P United Rank and File Assn. v. NLRC (96)
At this point, it is necessary to distinguish
"redundancy" from" retrenchment." Both are
mentioned in Art. 283 of the Labor Code as just
causes for the closing of establishments or reduction
of personnel. "Redundancy" exists when the services
of an employee are in excess of what is required by
an enterprise. "Retrenchment," on the other hand, is
one of the economic grounds for dismissing
employees and is resorted to primarily to avoid or
minimize business losses. Private respondent's
"redundancy program," while denominated as such,
is more precisely termed "retrenchment" because it
is primarily intended to prevent serious business
losses.
Caffco International Ltd. v. Office MOLE (92)
When an employer decides to reduce the
number of its personnel in order to prevent further
losses, he is exercising his right to retrench
employees to prevent losses in his business
operations. On the other hand, where for purposes
of economy, a company decides to reorganize its
departments by imposing on employees of one
department the duties performed by the employees
of the other department, thus rendering unnecessary
the job of the latter, the services of the employees
whose functions are now being performed by the
others, may be validly terminated on the ground of
redundancy.
Sebuguero v. NLRC (95)
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Labor Standards
Redundancy exists where the services of an
employee are in excess of what is reasonably
demanded by the actual requirements of the
enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as
overhiring of workers, decreased volume of
business, or dropping of a particular product line or
service activity previously manufactured or
undertaken by the enterprise.
Retrenchment, on the other hand, is used
interchangeably with the term "lay-off." It is the
termination of employment initiated by the employer
through no fault of the employees and without
prejudice to the latter, resorted to by management
during periods of business recession, industrial
depression, or seasonal fluctuations, or during lulls
occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production
program or the introduction of new methods or more
efficient machinery, or of automation. Simply put, it
is an act of the employer of dismissing employees
because of losses in the operation of a business, lack
of work, and considerable reduction on the volume
of his business, a right consistently recognized and
affirmed by this Court.
WHEN REDUNDANCY
Wiltshire File Co., Inc. v. NLRC (91)
We believe that redundancy, for purposes of our
Labor Code, exists where the services of an
employee are in excess of what is reasonably
demanded by the actual requirements of the
enterprise. Succinctly put, a position is redundant
where it is superfluous, and superfluity of a position
or positions may be the outcome of a number of
factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular
product line or service activity previously
manufactured or undertaken by the enterprise. 4
The employer has no legal obligation to keep in its
payroll more employees than are necessary for the
operation of its business.
Tierra International Construction Corp. v. NLRC
(92)
Termination of an employee's services because
of a reduction of work force due to a decrease in the
scope or volume of work of the employer is
synonymous to, or a shade of termination because
of redundancy under Article 283 (formerly 284) of
the Labor Code. Redundancy exists where the
services of an employee are in excess of what is
reasonably demanded by the actual requirements of
the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as
overhiring of workers, decreased volume of
business, or dropping of a particular product line or
service activity previously manufactured or
undertaken by the enterprise.
Escareal v. NLRC (92)
In Wiltshire File Co., Inc. vs. NLRC, this Court
held that redundancy, for purposes of the Labor
Code, exists where the services of an employee are
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in excess of what is reasonably demanded by the
actual requirements of the enterprise; a position is
redundant when it is superfluous, and superfluity of
a position or positions may be the outcome of a
number of factors, such as the overhiring of
workers, a decreased volume of business or the
dropping of a particular product line or service
activity previously manufactured or undertaken by
the enterprise. Redundancy in an employer's
personnel force, however, does not necessarily or
even ordinarily refer to duplication of work. That no
other person was holding the same position which
the dismissed employee held prior to the termination
of his services does not show that his position had
not become redundant.
Edge Apparel, Inc. v. NLRC (98)
Redundancy exists where the services of an
employee are in excess of what would reasonably be
demanded by the actual requirements of the
enterprise. A position is redundant when it is
superfluous, and superfluity of a position or positions
could be the result of a number of factors, such as
the overhiring of workers, a decrease in the volume
of business or the dropping of a particular line or
service previously manufactured or undertaken by
the enterprise. An employer has no legal obligation
to keep on the payroll employees more than the
number needed for the operation of the business.
CRITERIA – SELECTION OF EMPLOYEE
Tierra International Construction Corp. v. NLTC
(92)
We agree with the petitioner that the law does
not make any distinction between a technical and a
non-technical position for purposes of determining
the validity of termination due to redundancy.
Neither does the law nor the stipulations of the
employment contract here involved require that
junior employees should first be terminated. In
redundancy, what is looked into is the position itself,
the nature of the services performed by the
employee and the necessity of such position. As held
in Wiltshire File Co., Inc. vs. NLRC:
"The determination of the continuing necessity
of a particular officer or position in a business
corporation is management's prerogative, and the
courts will not interfere with the exercise of such so
long as no abuse of discretion or merely arbitrary or
malicious action on the part of management is
shown."
Almodiel v. NLRC (93)
In the case at bar, since petitioner does not
allege that Ang Tan Chai does not qualify for the
position, the Court cannot substitute its discretion
and judgment for that which is clearly and
exclusively management prerogative. To do so would
take away from the employer what rightly belongs to
him as aptly explained in National Federation of
Labor Unions v. NLRC:
"It is a well-settled rule that labor laws do not
authorize interference with the employer's judgment
in the conduct of his business. The determination
of the qualification and fitness of workers for
hiring and firing, promotion or reassignment are
Part II : Labor Standards Law
Labor Standards
exclusive prerogatives of management. The Labor
Code and its implementing Rules do not vest in the
Labor Arbiters nor in the different Divisions of the
NLRC (nor in the courts) managerial authority. The
employer is free to determine, using his own
discretion and business judgment, all elements of
employment, "from hiring to firing" except in cases
of unlawful discrimination or those which may be
provided by law. There is none in the instant case."
Panlilio v. NLRC (97)
We have held that it is important for a company
to have fair and reasonable criteria in implementing
its redundancy program, such as but not limited to,
(a) preferred status, (b) efficiency and (c) seniority.
Unfortunately for FPS, such appraisal was not done
in the instant case.
PROOF
Golden Thread Knitting Industries, Inc. v. NLRC
(99)
The characterization of an employee's services
as no longer necessary or sustainable, and therefore
properly terminable, is an exercise of business
judgment on the part of the employer. The wisdom
or soundness of such characterization or decision is
not subject to discretionary review on the part of the
Labor Arbiter nor the NLRC provided, of course, that
violation of law or arbitrary or malicious action is not
shown. In the instant case, we question petitioners'
exercise of management prerogative because it was
not shown that Rivera and Macaspac's positions
were indeed unnecessary, much less was petitioners'
claim supported by any evidence. It is not enough
for a company to merely declare that it has become
overmanned. It must produce adequate proof that
such is the actual situation in order to justify the
dismissal of the affected employees for redundancy.
EMPLOYMENT OF INDEPENDENT CONTRACTOR – EFFECT
Asian Alcohol Corp. v. NLRC (99)
In any event, we have held that an employer's
good faith in implementing a redundancy program is
not necessarily destroyed by availment of the
services of an independent contractor to replace the
services of the terminated employees. We have
previously ruled that the reduction of the number of
workers in a company made necessary by the
introduction of an independent contractor is justified
when the latter is undertaken in order to effectuate
more economic and efficient methods of production.
In the case at bar, private respondents failed to
proffer any proof that the management acted in a
malicious or arbitrary manner in engaging the
services of an independent contractor to operate the
Laura wells. Absent such proof, the Court has no
basis to interfere with the bona fide decision of
management to effect more economic and efficient
methods of production.
PROCEDURE – REQUIREMENT
Asian Alcohol Corp. v. NLRC (99)
For the implementation of a redundancy
program to be valid, the employer must comply with
the following requisites: (1) written notice served on
both the employees and the Department of Labor
and Employment at least one month prior to the
intended date of retrenchment; (2) payment of
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separation pay equivalent to at least one month pay
or at least one month pay for every year of service,
whichever is higher; (3) good faith in abolishing the
redundant positions; and (4) fair and reasonable
criteria in ascertaining what positions are to be
declared redundant and accordingly abolished.
HEARING
Wiltshire File Co., Inc. v. NLRC (91)
Where, as in the instant case, the ground for
dismissal or termination of services does not relate
to a blameworthy act or omission on the part of the
employee, there appears to us no need for an
investigation and hearing to be conducted by the
employer who does not, to begin with, allege any
malfeasance or non-feasance on the part of the
employee. In such case, there are no allegations
which the employee should refute and defend
himself from. Thus, to require petitioner Wiltshire to
hold a hearing, at which private respondent would
have had the right to be present, on the business
and financial circumstances compelling retrenchment
and resulting in redundancy, would be to impose
upon the employer an unnecessary and inutile
hearing as a condition for legality of termination.
VENUE OF COMPLAINT
Wiltshire File Co., Inc. v. NLRC (91)
This is not to say that the employee may not
contest the reality or good faith character of the
retrenchment or redundancy asserted as grounds for
termination of services. The appropriate forum for
such controversion would, however, be the
Department of Labor and Employment and not an
investigation or hearing to be held by the employer
itself It is precisely for this reason that an employer
seeking to terminate services of an employee or
employees because of "closure of establishment and
reduction of personnel", is legally required to give a
written notice not only to the employee but also to
the Department of Labor and Employment at least
one month before effectivity date of the termination.
In the instant case, private respondent did
controvert before the appropriate labor authorities
the grounds for termination of services set out in
petitioner's letter to him dated 17 June 1985.
C. RETRENCHMENT TO PREVENT LOSSES
DISTINCTION REDUNDANCY AND RETRENCHMENT
AG & P United Rank and File Assn. v. NLRC (96)
At this point, it is necessary to distinguish
"redundancy" from" retrenchment." Both are
mentioned in Art. 283 of the Labor Code as just
causes for the closing of establishments or reduction
of personnel. "Redundancy" exists when the services
of an employee are in excess of what is required by
an enterprise. "Retrenchment," on the other hand, is
one of the economic grounds for dismissing
employees and is resorted to primarily to avoid or
minimize business losses. Private respondent's
"redundancy program," while denominated as such,
is more precisely termed "retrenchment" because it
is primarily intended to prevent serious business
losses.
TEMPORARY RETRENCHMENT
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Labor Standards
Sebuguero v. NLRC (95)
Article 283 of the Labor Code, however, speaks
of a permanent retrenchment as opposed to a
temporary lay-off as is the case here. There is no
specific provision of law which treats of a temporary
retrenchment or lay-off and provides for the
requisites in effecting it or a period or duration
therefor. These employees cannot forever be
temporarily laid-off. To remedy this situation or fill
the hiatus, Article 286 may be applied but only by
analogy to set a specific period that employees may
remain temporarily laid-off or in floating status. Six
months is the period set by law that the operation of
a business or undertaking may be suspended
thereby suspending the employment of the
employees concerned. The temporary lay-off
wherein the employees likewise cease to work
should also not last longer than six months. After six
months, the employees should either be recalled to
work or permanently retrenched following the
requirements of the law, and that failing to comply
with this would be tantamount to dismissing the
employees and the employer would thus be liable for
such dismissal.
REQUIREMENTS – STANDARDS
Lopez Sugar Corporation v. Federation of Free
Workers (90)
We consider it may be useful to sketch the
general standards in terms of which the acts of
petitioner employer must be appraised. Firstly, the
losses expected should be substantial and not
merely de minimis in extent. If the loss purportedly
sought to be forestalled by retrenchment is clearly
shown to be insubstantial and inconsequential in
character, the bonafide nature of the retrenchment
would appear to be seriously in question. Secondly,
the substantial loss apprehended must be
reasonably imminent, as such imminence can be
perceived objectively and in good faith by the
employer. There should, in other words, be a certain
degree of urgency for the retrenchment, which is
after all a drastic recourse with serious
consequences for the livelihood of the employees
retired or otherwise laid-off. Because of the
consequential nature of retrenchment, it must,
thirdly, be reasonably necessary and likely to
effectively prevent the expected losses. The
employer should have taken other measures prior or
parallel to retrenchment to forestall losses, i.e., cut
other costs than labor costs. An employer who, for
instance, lays off substantial numbers of workers
while continuing to dispense fat executive bonuses
and perquisites or so-called "golden parachutes",
can scarcely claim to be retrenching in good faith to
avoid losses. To impart operational meaning to the
constitutional policy of providing "full protection" to
labor, the employer's prerogative to bring down
labor costs by retrenching must be exercised
essentially as a measure of last resort, after less
drastic means — e.g., reduction of both
management and rank-and-file bonuses and
salaries, going on reduced time, improving
manufacturing efficiencies, trimming of marketing
and advertising costs, etc. — have been tried and
found wanting.
Lastly, but certainly not the least important,
alleged losses if already realized, and the expected
imminent losses sought to be forestalled, must be
proved by sufficient and convincing evidence. The
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reason for requiring this quantum of proof is readily
apparent: any less exacting standard of proof would
render too easy the abuse of this ground for
termination of services of employees.
Guerrero v. NLRC (96)
The requisites for valid retrenchment under the
foregoing provision are:
1. necessity of the retrenchment to prevent
losses and proof of such losses;
2. written notice to the employees and to the
Department of Labor and Employment at
least one month prior to the intended date
of retrenchment; and
3. payment of separation pay equivalent to
one month pay or at least 1/2 month pay
for every year of service, whichever is
higher.
Asian Alcohol Corp. v. NLRC (99)
The requirements for valid retrenchment which
must be proved by clear and convincing evidence
are: (1) that the retrenchment is reasonably
necessary and likely to prevent business losses,
which, if already incurred, are not merely de
minimis, but substantial, serious, actual and real, or
if only expected, are reasonably imminent as
perceived objectively and in good faith by the
employer; (2) that the employer served written
notice both to the employees and to the Department
of Labor and Employment at least one month prior
to the intend date of retrenchment; (3) that the
employer pays the retrenched employees separation
pay equivalent to one month pay or at least 1/2
month pay for every year of service, whichever is
higher; (4) that the employer exercises its
prerogative to retrench employees in good faith for
the advancement of its interest of its interest and
not to defeat or circumvent the employees' right to
security of tenure; and (5) that the employer used
fair and reasonable criteria in ascertaining who
would be dismissed and who would be retained
among the employees, such as status (i.e., whether
they are temporary, casual, regular or managerial
employees), efficiency, seniority, physical fitness,
age, and financial hardship for certain workers.
Complex Electronics Employees Assn. v. NLRC
(99)
In the instant case, notwithstanding the
financial losses suffered by Complex, such was,
however, not the main reason for its closure.
Complex admitted in its petition that the main
reason for the cessation of the operations was the
pull-out of the materials, equipment and machinery
from the premises of the corporation as dictated by
its customers. It was actually still capable of
continuing the business but opted to close down to
prevent further losses. Under the facts and
circumstances of the case, we find no grave abuse of
discretion on the part of the public respondent in
awarding the employees one (1) month pay for
every year of service as termination pay.
NATURE OF LOSS
Lopez Sugar Corporation v. Federation of Free
Workers (90)
We consider it may be useful to sketch the
general standards in terms of which the acts of
Part II : Labor Standards Law
Labor Standards
petitioner employer must be appraised. Firstly, the
losses expected should be substantial and not
merely de minimis in extent. If the loss purportedly
sought to be forestalled by retrenchment is clearly
shown to be insubstantial and inconsequential in
character, the bonafide nature of the retrenchment
would appear to be seriously in question. Secondly,
the substantial loss apprehended must be
reasonably imminent, as such imminence can be
perceived objectively and in good faith by the
employer. There should, in other words, be a certain
degree of urgency for the retrenchment, which is
after all a drastic recourse with serious
consequences for the livelihood of the employees
retired or otherwise laid-off.
Revidad v. NLRC (95)
At the other end of the spectrum, it seems
equally clear that not every asserted possibility of
loss is sufficient legal warrant for the reduction of
personnel. In the nature of things, the possibility of
incurring the losses is constantly present, in greater
or lesser degree, in the carrying on of business
operations, since some, indeed many, of the factors
which impact upon the profitability outside the
control of the employer.
Balbalec v. NLRC (95)
The above-quoted article not only contemplates
the termination of employment of workers or
employees to minimize established business losses
but also to prevent impending losses, for the law's
phraseology explicitly uses the phrase "retrenchment
to prevent losses." However, retrenchment strikes at
the very core of an individual's employment and the
burden clearly falls upon the employer to prove
economic or business losses with appropriate
supporting evidence. After all, not every asserted
potential loss is sufficient legal warrant for a
reduction of personnel and the evidence adduced in
support of a claim of actual or potential business
losses should satisfy certain established standards,
to wit:
4. The losses expected and sought to be
avoided must be substantial and not
merely de minimis;
5. The apprehended substantial losses must
be reasonably imminent, as such
imminence can be perceived objectively
and in good faith by the employer;
6. The retrenchment should reasonably be
necessary and likely to prevent
effectively the expected losses;
7. The losses, both the past and
forthcoming, must be proven by
sufficient and convincing evidence.
Edge Apparel, Inc. v. NLRC (98)
In order to be justified, the termination of
employment by reason of retrenchment must be due
to business losses or reverses which are serious,
actual and real. Not every loss incurred or expected
to be incurred by the employer will justify
retrenchment, since, in the nature of things, the
possibility of incurring losses is constantly present,
in greater or lesser degree, in carrying on the
business operations. Retrenchment is normally
resorted to by management during periods of
business reverses and economic difficulties
occasioned by such events as recession, industrial
depression, or seasonal fluctuations.
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The general standards or elements needed for
the retrenchment to be valid — i.e., that the losses
expected are substantial and not merely de minimis
in extent; that the expected losses are reasonably
imminent such as can be perceived objectively and
in good faith by the employer; that the
retrenchment is reasonably necessary and likely to
effectively prevent the expected losses; and that the
imminent losses sought to be forestalled are
substantiated — were adequately shown in the
present case.
Bogo-Medellin Sugar Can Planters Assn., Inc. v.
NLRC (98)
In a number of cases, the Court has laid down
the following requisites of a valid retrenchment: (1)
the losses incurred are substantial and not
deminimis: (2) the losses are actual or reasonably
imminent; (3) the retrenchment is reasonably
necessary and is likely to be effective in preventing
the expected imminent losses sought to be
forestalled, are proven by sufficient and convincing
evidence. In the present case, petitioners miserably
failed to prove (1) substantial losses and (2) the
reasonable necessity of the retrenchment.
SLIDING INCOME
San Miguel Jeepney Service v. NLRC (96)
As petitioners themselves admitted, what they
suffered were "sliding incomes", in other words,
decreasing gross revenues. What the law speaks of
is serious business losses or financial reverses.
Clearly, sliding incomes are not necessarily losses,
much less serious business losses within the
meaning of the law. In this connection, we are
reminded of our previous ruling that "the requisites
of a valid retrenchment are: (a) the losses expected
should be substantial and not merely de minimis in
extent; (b) the substantial losses apprehended must
be reasonably imminent; (c) the retrenchment must
be reasonably necessary and likely to effectively
prevent the expected losses; and (d) the alleged
losses, if already incurred, and the expected
imminent losses sought to be forestalled, must be
proved by sufficient and convincing evidence." We
have also held that adverse business conditions
justify the exercise of management prerogative to
retrench in order to avoid the not-so-remote
possibility of closure of the entire business. At the
other end of the spectrum, it seems equally clear
that not every asserted possibility of loss is sufficient
legal warrant for reduction of personnel. In the
nature of things, the possibility of incurring losses is
constantly present, in greater or lesser degree, in
the carrying on of business operations, since some,
indeed many, of the factors which impact upon the
profitability or viability of such operations may be
substantially outside the control of the employer.
PROOF OF LOSS
Lopez Sugar Corporation v. Federation of Free
Workers (90)
The principal difficulty with petitioner's case as
above presented was that no proof of actual
declining gross and net revenues was submitted. No
audited financial statements showing the financial
condition of petitioner corporation during the
above mentioned crop years were submitted.
Since financial statements audited by
Part II : Labor Standards Law
Labor Standards
independent external auditors constitute the normal
method of proof of the profit and loss performance
of a company, it is not easy to understand why
petitioner should have failed to submit such financial
statements.
Revidad v. NLRC (95)
The voluntary arbitrator's conclusions were
premised upon and substantiated by the audited
financial statements and the auditor's reports of AG
& P for the years 1987 to 1991. These, financial
statements audited by independent external auditors
constitute the normal and reliable method of proof of
the profit and loss performance of a company.
Contrary to petitioner's asseverations, proof of
actual financial losses incurred by the company is
not a condition sine qua non for retrenchment.
Retrenchment is one of the economic grounds to
dismiss employees, which is resorted to by an
employer primarily to avoid or minimize business
losses.
Catatista v. NLRC (95)
We see no grave abuse of discretion on the part
of NLRC when it found that "company haciendas
including Hacienda Binanlutan incurred huge losses
from years 1982 to 1983." Private respondent
showed that Hacienda Binanlutan itself suffered a
net loss of P22,624.88. It is significant to note that
petitioners failed to dispute these submissions of
private respondent which more than satisfy the first
and fourth requirements for a valid retrenchment.
The losses incurred are clearly substantial and
sufficiently proven by means of an income statement
of Hacienda Binanlutan and the financial statement
of the company haciendas. Said losses are not only
imminent but had, in fact, already been incurred by
private respondent since 1982. This was even more
alarming in 1984 considering the worldwide
economic situation, as well as the low sugar prices
during that year, events which were obviously
beyond the control of private respondent.
Central Azucarera de la Carlota v. NLRC (95)
We give little consideration to the certification
issued by the Sugar Regulatory Administration
illustrating the decline in petitioner's sugar
production. A similar allegation was made by Lopez
Sugar Corporation against the Federation of Free
Workers and we answered in this wise:
The principal difficulty with petitioner's case as
above presented was that no proof of actual
declining gross and net revenues were submitted.
No audited financial statements showing the
financial condition of petitioner corporation during
the above mentioned crop years were submitted.
Since financial statements audited by independent
external auditors constitute the normal method of
proof of the profit and loss performance of a
company, it is not easy to understand why petitioner
should have failed to submit such financial
statements.
Petitioner, in the case at bench, even admitted
that it did not present evidence to prove its business
losses. Its rationale that "because of the timely
retrenchments to prevent losses, these losses were
avoided and therefore cannot be proven to have
been incurred" is simply absurd.
Somerville Stainless Steel Corp. v. NLRC (98)
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These, however, fall far short of the stringent
requirement of the law that the employer prove
sufficiently and convincingly its allegation of
substantial losses. The failure of petitioner to show
its income or loss for the immediately preceding
years or to prove that it expected no abatement of
such losses in the coming years bespeaks the
weakness of its cause. The financial statement for
1992, by itself, does not sufficiently prove
petitioner's allegation that it "already suffered actual
serious losses," because it does not show whether its
losses increased or decreased. Although petitioner
posted a loss for 1992, it is also possible that such
loss was considerably less than those previously
incurred, thereby indicating the company's
improving condition.
Bogo-Medellin Sugar Can Planters Assn., Inc. v.
NLRC (98)
A comparative statement of revenue and
expenses for two years, by itself, is not conclusive
proof of serious business losses. The Court has
previously ruled that financial statements audited by
independent external auditors constitute the normal
method of proof of the profit and loss performance
of a company. While Petitioner Corporation avers
that it was not required to file audited financial
statements under. Section 232 of the Tax Code, it
failed to establish its exemption through any
evidence showing that its quarterly gross revenues
did not exceed P25,000. Thus, its claim that it did
not need to have its financial statements certified by
a certified public accountant is without basis in fact
and in law and does not excuse it from complying
with the usual requirement. Besides, the
requirement of the Tax Code is one thing, and the
requirement of the Labor Code is quite another.
Moreover, the financial statement of Petitioner
Corporation for two crop years is insufficient proof of
serious business losses that would justify the
retrenchment of private respondents.
BURDEN OF PROOF
Revidad v. NLRC (95)
On the bases of these consideration, it follows
that the employer bears the burden to prove his
allegation of economic or business reverses with
clear and satisfactory evidence, it being in the
nature of an affirmative defense.
Balbalec v. NLRC (95)
However, retrenchment strikes at the very core
of an individual's employment and the burden clearly
falls upon the employer to prove economic or
business losses with appropriate supporting
evidence. After all, not every asserted potential loss
is sufficient legal warrant for a reduction of
personnel and the evidence adduced in support of a
claim of actual or potential business losses should
satisfy certain established standards.
WHEN EFFECTED
Lopez Sugar Corporation v. Federation of Free
Workers (90)
In its ordinary connotation, the phrase "to
prevent losses" means that retrenchment or
termination of the services of some employees is
authorized to be undertaken by the employer
sometime before the losses anticipated are
Part II : Labor Standards Law
Labor Standards
actually sustained or realized. It is not, in other
words, the intention of the lawmaker to compel the
employer to stay his hand and keep all his
employees until sometime after losses shall have in
fact materialized; if such an intent were expressly
written into the law, that law may well be vulnerable
to constitutional attack as taking property from one
man to give to another. This is simple enough.
Revidad v. NLRC (95)
In its ordinary connotation, the phrase "to
prevent losses" means that retrenchment or
termination of the services of some employees is
authorized to be undertaken by the employer
sometime before the anticipated losses are actually
sustained or realized. It is not, in other words, the
intention of the lawmaker to compel the employer to
stay his hand and keep all his employees until after
losses shall have in fact materialized. If such an
intent were expressly written into the law, that law
may well be vulnerable to constitutional attack as
unduly taking property from one man to be given to
another.
Asian Alcohol Corp. v. NLRC (99)
It should be observed that Article 283 of the
Labor Code uses the phrase "retrenchment to
prevent losses". In its ordinary connotation, this
phrase means that retrenchment must be
undertaken by the employer before losses are
actually sustained. We have, however, interpreted
the law to mean that the employer need not keep all
his employees until after his losses shall have
materialized. Otherwise, the law could be vulnerable
of attack as undue taking of property for the benefit
of another.
PROCEDURE (FOR BOTH RETRENCHMENT AND
REDUNDANCY)
Revidad v. NLRC (95)
The circular is more than sufficient notice to AG
& P employees, as well as herein petitioners, of the
then impending decision of the company to carry out
its retrenchment program for the reasons therein
stated.
Anent the mandatory written notice to be filed
with the labor department one month before the
date of retrenchment, we are of the considered
opinion that the proceedings had before the
voluntary arbitrator, where both parties were given
the opportunity to be heard and present evidence in
their favor, constitute substantial compliance with
the requirement of the law. The purpose of this
notice is to enable the proper authorities to ascertain
whether the closure of the business is being done in
good faith and is not just a pretext for evading
compliance with the just obligations of the employer
to the affected employees. In fact, the voluntary
arbitration proceedings more than satisfied the
intendment of the law considering that the parties
were accorded the benefit of a hearing, in addition to
the right to present their respective position papers
and documentary evidence.
For that matter, hearing and investigation by
the employer, where the reason for termination is
retrenchment due to financial reverses and not to an
act attributable to the employee, is not even
required because it is considered a surplusage under
existing jurisprudence.
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Catatista v. NLRC (95)
Article 283 of the Labor Code provides, inter
alia, that the employer may terminate the
employment of his employees to prevent losses. For
an employer to validly terminate the service of his
employees under this ground, he has to comply with
two requirements, namely: (a) serving a written
notice on the workers and the Department of Labor
and Employment at least one month before the
taking effect of the closure, and (b) payment of
separation pay equivalent to one month pay or at
least one-half (l/2) month pay for every year of
service, whichever is higher, with a fraction of at
least six months to be considered one whole year.
Sebuguero v. NLRC (95)
Under the aforequoted Article 283 of the Labor
Code, there are three basic requisites for a valid
retrenchment:
1. the retrenchment is necessary to prevent
losses and such losses are proven;
2. written notice to the employees and to the
Department of Labor and Employment at
least one month prior to the intended date
of retrenchment; and
3. payment of separation pay equivalent to
one month pay or at least 1/2 month pay
for every year of service, whichever is
higher.
The requirement of notice to both the employees
concerned and the Department of Labor and
Employment (DOLE) is and must be written and
given at least one month before the intended date of
retrenchment. In this case, it is undisputed that the
petitioners were given notice of the temporary lay-
off. There is, however, no evidence that any written
notice to permanently retrench them was given at
least one month prior to the date of the intended
retrenchment. The NLRC found that GTI conveyed to
the petitioners the impossibility of recalling them
due to the continued unavailability of work. But what
the law requires is a written notice to the employees
concerned and that requirement is mandatory. The
notice must also be given at least one month in
advance of the intended date of retrenchment to
enable the employees to look for other means of
employment an therefore to ease the impact of the
loss of their jobs and the corresponding income.
That they were already on temporary lay-off at the
time notice should have been given to them is not
an excuse to forego the one-month written notice
because by this time, their lay-off is to become
permanent and they were definitely losing their
employment.
NON-STOCK NON-PROFIT ORGANIZATION
Phil. Tuberculosis Society, Inc. v. NLRC (98)
Although petitioner is a non-stock and non-
profit organization, retrenchment as a measure
adopted to stave off threats to its existence is
available to it. Article 278 of the Labor Code states
that the fiscal measures recognized therein which an
employer may validly adopt apply to "all
establishments or undertakings, whether for profit or
not."
RURAL BANK
Balbalec v. NLRC (95)
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Labor Standards
It should be noted, moreover, that unlike huge
commercial banks with large capitalization, the bank
involved in the case at bench is a small rural bank
barely afloat and surviving on a measly capitalization
of P500,000.00. Were we to deny private
respondent's urgent request to streamline its work
force to enable it to maintain stability and modest
profitability, we would be sending a small financial
institution teetering on the verge of financial ruin
tumbling down on the road to bankruptcy.
It need not be overemphasized that the State
recognizes the pivotal role of small rural banks, such
as the respondent bank, in the development of the
countryside through its loan portfolios and other
services to the rural folk. While courts must be
constantly vigilant in validating claims of business
losses to prevent unscrupulous employers from
feigning such losses in order to dismiss their
personnel, we are satisfied that respondent bank
undertook the drastic act of cutting down its
workforce in order to prevent imminent substantial
loss to its business.
APPOINTMENT OF REPLACEMENTS – EFFECT
Bogo-Medellin Sugar Cane Planters Assn., Inc
v. NLRC (98)
Petitioner Corporation also failed to rebut the
allegation that new employees were hired to replace
the private respondents after the latter had been
retrenched. The executive labor arbiter found that
Gavino Negapatan replaced Private Respondent
Montilla, while Reynaldo Parilla and Godofredo
Florita replaced the other private respondents who
had worked as sugar checkers or samplers. The
employment of these replacements clearly belies
petitioners' contention that the retrenchment was
necessary to prevent or offset the expected losses
effectively.
APPOINTMENT OF REPLACEMENTS – RE-HIRING EFFECT
Atlantic Gulf and Pacific Co. of Manila v. NLRC
(99)
“Petitioners contend that the ‘redundancy
program’ was actually a union-busting scheme of
management, aimed at removing union officers who
had declared a strike. This contention cannot stand
in the face of evidence of substantial losses suffered
by the company. Moreover, while it is true that the
company rehired or re-employed some of the
dismissed workers, it has been shown that such
action was made only as company projects became
available and that it was done in pursuance of the
company’s policy of giving preference to its former
workers in the rehiring of project employees. The
rehiring or re-employment does not negate the
imminence of losses, which prompted private
respondents to retrench.”
D. CLOSING OF BUSINESS
RIGHT
Catatista v. NLRC (95)
In any case, Article 283 of the Labor Code is
clear that an employer may close or cease his
business operations or undertaking even if he is not
suffering from serious business losses or financial
reverses, as long as he pays his employees their
termination pay in the amount corresponding to
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their length of service. It would, indeed, be
stretching the intent and spirit of the law, if we were
to unjustly interfere in management's prerogative to
close or cease its business operations just because
said business operation or undertaking is not
suffering from any loss. This Court, in the case of
Maya Farms Employees Organization, et al. v. NLRC,
et al., held that:
"The rule is well-settled that labor laws
discourage interference with an employer's
judgment in the conduct of his business. Even as the
law is solicitous of the welfare of employees, it must
also protect the right of an employer to exercise
what are clearly management prerogatives. As long
as the company's exercise of the same is in good
faith to advance its interest and not for the purpose
of defeating or circumventing the rights of
employees under the laws or valid agreements, such
exercise will be upheld."
In Dangan v. NLRC, this Court had occasion to
reiterate management's prerogative to close or
abolish a department or section of the employer's
establishment for economic reasons. We reasoned
out that since the greater right to close the entire
establishment and cease operations due to adverse
economic conditions is granted an employer, the
closure of a part thereof to minimize expenses and
reduce capitalization should similarly be recognized.
Likewise, this Court held in the case of Special
Events & Central Shipping Office Workers Union v.
San Miguel Corp. that the determination of the
usefulness of a section, being a company
prerogative, the closure may not be questioned,
specially in this case where it is impelled by
economic reasons due to the continuous losses
sustained in its operation, coupled with the lack of
demand for the service of such section.
REQUIREMENTS
Caffco International Ltd. v. Office MOLE (92)
Under Article 283 of the Labor Code, three (3)
requirements are necessary for a valid cessation of
business operations, namely: (a) service of a written
notice to the employees and to the MOLE at least
one (1) month before the bona fide in character; and
(c) payment to the employees of termination pay
amounting to at least one-half (1/2) month pay for
every year of service, or one (1) month pay,
whichever is higher (Mobil Employees Association et
al vs. NLRC et al.)
EXTENT OF CLOSURE
PARTIAL CLOSURE
Catatista v. NLRC (95)
The termination of employment of the
employees of Hacienda Binanlutan brought about by
the closure is to be considered as retrenchment as
Hacienda Binanlutan is only one of the six haciendas
of private respondent. 6 Clearly, private
respondent's purpose in converting said hacienda
into an ipil-ipil plantation and terminating the service
of petitioners is to cut down on losses which it had
adequately shown to have suffered through an
income statement for the fiscal year which ended
August 31, 1984.
Part II : Labor Standards Law
Labor Standards
Phil. Tobacco Flue Curing, etc. v. NLRC (98)
It must be noted that the present case involves
the closure of merely a unit or division, not the
whole business of an otherwise viable enterprise.
Although Article 283 uses the phrase "closure or
cessation of operation of an establishment or
undertaking," this Court previously ruled in Coca-
Cola Bottlers (Phil.), Inc. v. NLRC that said statutory
provision applies in cases of both complete and
partial cessation of the business operation:
. . . Ordinarily, the closing of a warehouse
facility and the termination of the services of
employees there assigned is a matter that is left to
the determination of the employer in the good faith
exercise of its management prerogatives. The
applicable law in such a case is Article 283 of the
Labor Code which permits "closure or cessation of
operation of an establishment or undertaking not
due to serious business losses or financial reverses,"
which, in our reading, includes both the complete
cessation of operations and the cessation of only
part of a company's business.
Cheniver Deco Print Technics Corporation v.
NLRC(2000)
Broadly speaking, there appears no complete
dissolution of petitioner’s business undertaking but
the relocation of petitioner’s plant to Batangas, in
our view, amounts to cessation of petitioner’s
business operations in Makati. It must be stressed
that the phrase "closure or cessation of operation of
an establishment or undertaking not due to serious
business losses or reverses" under Article 283 of the
Labor Code includes both the complete cessation of
all business operations and the cessation of only part
of a company’s business. In Philippine Tobacco Flue-
Curing & Redrying Corp. vs. NLRC, a company
transferred its tobacco processing plant in
Balintawak, Quezon City to Candon, Ilocos Sur. The
company therein did not actually close its entire
business but merely relocated its tobacco processing
and redrying operations to another place. Yet, this
Court considered the transfer as closure not due to
serious business losses for which the workers are
entitled to separation pay.
There is no doubt that petitioner has legitimate
reason to relocate its plant because of the expiration
of the lease contract on the premises it occupied.
That is its prerogative. But even though the transfer
was due to a reason beyond its control, petitioner
has to accord its employees some relief in the form
of severance pay.
TEMPORARY CESSATION OF OPERATION
BASIS
San Pedro Hospital of Digos v. Sec. of Labor
(96)
Temporary suspension of operations is
recognized as a valid exercise of management
prerogative provided it is not carried out in order to
circumvent the provisions of the Labor Code or to
defeat the rights of the employees under the Code.
The determination to case or suspend operations is a
prerogative of management that the State usually
does not interfere with, as no business can be
required to continue operating at a loss simply to
maintain the workers in employment. Such an act
would be tantamount to a taking of property without
due process of law, which the employer has a right
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to resist. But where it is shown that the closure is
motivated not by a desire to prevent further losses,
but to discourage the workers from organizing
themselves into a union for more effective
negotiation with management, the State is bound to
intervene.
The burden of proving that such a temporary
suspension is bona fide falls upon the employer. In
this instance, petitioner had to establish the fact of
its precarious financial health, that its cessation of
operation was really necessitated by its financial
condition, and that said condition would probably be
alleviated or improved, or its losses abated, by
undertaking such suspension of operation. Petitioner
could have at least party met the foregoing
requirements by submitting its financial statements
or records as proof of its financial crisis, since the
purported financial hemorrhage would definitely
have been reflected therein. Thus, petitioner's
unexplained and continued failure to submit its
financial statements could not but raise grave doubts
as to the truth of the claimed financial crisis and the
real purpose of the suspension of operations. It is
not enough to merely raise this issue nor to discuss
it only in passing. The precarious financial condition
must be established by evidence, e.g., balance
sheets and income statements, and the figures
therein must be interpreted and discussed at length.
It is a hornbook rule that employers who
contemplate terminating the services of their
workers must base their decisions on more than just
flimsy excuses, considering that the dismissal of an
employee from work involves not only the loss of his
position but, what is more important, his means of
livelihood. The same principle applies in temporary
suspension of operations, as in this case, considering
that it involves laying off employees for a period of
six months.
EFFECT ON EMPLOYER-EMPLOYEE RELATIONSHIP
San Pedro Hospital of Digos v. Sec. of Labor
(96)
It is a hornbook rule that employers who
contemplate terminating the services of their
workers must base their decisions on more than just
flimsy excuses, considering that the dismissal of an
employee from work involves not only the loss of his
position but, what is more important, his means of
livelihood. The same principle applies in temporary
suspension of operations, as in this case, considering
that it involves laying off employees for a period of
six months.
Valdez v. NLRC (98)
Under Article 286 of the Labor Code, the bona
fide suspension of the operation of a business or
undertaking for a period not exceeding six months
shall not terminate employment. Consequently,
when the bona fide suspension of the operation of a
business or undertaking exceeds six months, then
the employment of the employee shall be deemed
terminated. By the same token and applying said
rule by analogy, if the employee was forced to
remain without work or assignment for a period
exceeding six months, then he is in effect
constructively dismissed.
E. SPECIAL CASE OF BUSINESS TRANSFERS
NATURE OF LABOR CONTRACT
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Labor Standards
Sundowner Development Corp. v. Drilon (89)
The rule is that unless expressly assumed, labor
contracts such as employment contracts and
collective bargaining agreements are not enforceable
against a transferee of an enterprise, labor contracts
being in personam, thus binding only between the
parties. A labor contract merely creates an action in
personam and does not create any real right which
should be respected by third parties. This conclusion
draws its force from the right of an employer to
select his employees and to decide when to engage
them as protected under our Constitution, and the
same can only be restricted by law through the
exercise of the police power.
As a general rule, there is no law requiring a
bona fide purchaser of assets of an on-going concern
to absorb in its employ the employees of the latter.
However, although the purchase of the assets or
enterprise is not legally bound to absorb in its
employ the employees of the seller of such assets or
enterprise, the parties are liable to the employees if
the transaction between the parties is colored or
clothed with bad faith.
F. PROCEDURAL DUE PROCESS – NATURE AND
REQUIREMENTS
A. REQUIREMENTS
IN GENERAL
ESSENCE OF DUE PROCESS
Arboleda v. NLRC (99)
The essence of due process in administrative
proceedings is an opportunity to explain one's side
or an opportunity to seek reconsideration of the
action or ruling complained of. Before an employee
can be validly dismissed, the Labor code requires the
employer to furnish the employee with two (2)
written notices: (a) a written notice containing a
statement of the cause for termination to afford the
employee ample opportunity to be heard and defend
himself with the assistance of his representative, if
he so desires; and, (b) if the employer decides to
terminate the services of the employee, the
employer must notify him in writing of the decision
to dismiss him, stating clearly the reasons therefor.
RIGHT TO COUNSEL
Salaw v. NLRC (91)
It is true that administrative and quasi-judicial
bodies are not bound by the technical rules of
procedure in the adjudication of cases. However, the
right to counsel, a very basic requirement of
substantive due process, has to be observed.
Indeed, the rights to counsel and to due process of
law are two of the fundamental rights guaranteed by
the 1987 Constitution to any person under
investigation, be the proceeding administrative, civil,
or criminal. Thus, Section 12(1), Article III thereof
specifically provides: "Any person under
investigation for the commission of an offense shall
have the right to . . . have competent and
independent counsel preferably of his own choice. If
the person cannot afford the service of counsel, he
must be provided with one. These rights cannot be
waived except in writing and in the presence of
counsel." To underscore the inviolability of this
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provision, the third paragraph of the same section
explicitly states that, "any confession or admission
obtained in violation of this or the preceding section
shall be inadmissible in evidence against him."
NOTICE
Complex Electronics Employees Assn. v. NLRC
(99)
The purpose of the notice requirement is to
enable the proper authorities to determine after
gearing whether such closure is being done in good
faith, i.e., for bona fide business reasons, or
whether, to the contrary, the closure is being
resorted to as a means of evading compliance with
the just obligations of the employer to the
employees affected.
Serrano v. NLRC (2000)
Nothing in the law gives private respondent the
option to substitute the required prior written notice
with payment of thirty (30) days salary. It is not for
private respondent to make substitutions for a right
that a worker is legally entitled to. For instance, as
held in Farmanlis Farms, Inc. v. Minister of Labor,
under the law, benefits in the form of food or free
electricity, assuming they were given, were not a
proper substitute for the 13th month pay required
by law.
Indeed, a job is more than the salary that it
carries. Payment of thirty (30) days salary cannot
compensate for the psychological effect or the
stigma of immediately finding one’s self laid off from
work. It cannot be a fully effective substitute for the
thirty (30) days written notice required by law
especially when, as in this case, the fact is that no
notice was given to the Department of Labor and
Employment (DOLE).
Besides, as we held in our decision in this case,
the purpose of such previous notice is to give the
employee some time to prepare for the eventual loss
of his job as well as the DOLE the opportunity to
ascertain the verity of the alleged authorized cause
of termination. Such purpose would not be served by
the simple expedient of paying thirty (30) days
salary in lieu of notice of an employee’s impending
dismissal, as by then the loss of employment would
have been a fait accompli.
TWO NOTICE RULE
Maneja v. NLRC (98)
Well-settled is the dictum that the twin
requirements of notice and hearing constitute the
essential elements of due process in the dismissal of
employees. It is a cardinal rule in our jurisdiction
that the employer must furnish the employee with
two written notice before the termination of
employment can be effected: (a) the first apprises
the employee of the particular acts or omissions for
which his dismissal is sought; and, (b) the second
informs the employee of the employer's decision to
dismiss him. The requirement of a hearing, on the
other hand, is complied with as long as there was
an opportunity to be heard, and not necessarily
that an actual hearing was conducted.
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Labor Standards
Farrol v. Court of Appeals (2000)
As set forth in the foregoing procedures, the
employer must comply with the twin requirements of
two notices and hearing. The first notice is that
which apprises the employee of the particular acts or
omissions for which his dismissal is sought, and after
affording the employee an opportunity to be heard,
a subsequent notice informing the latter of the
employer’s decision to dismiss him from work.
HEARING – NOT REQUIRED
Magos v. NLRC (98)
Both the NLC and the Labor Arbiter found that
no formal hearing was conducted regarding
petitioner's dismissal. Although a hearing is essential
to due process, in Bernardo v. NLRC we did hold that
no formal hearing was necessary when the petitioner
had already admitted his responsibility for the act he
was accused of.
Even though petitioner in this case never
admitted the accusations of dishonesty against him,
he impliedly acknowledged his insubordination as
shown in his petition.
Caurdenetaan Piece Workers Union v.
Laguesma (98)
Due process is not violated where a person is
given the opportunity to be heard, but chooses not
to give his side of the case.
National Semi-Conductor (HK) Distribution Ltd.
v. NLRC
The essence of due process is simply an
opportunity to be heard, or as applied to
administrative proceedings, an opportunity to
explain one's side. In the instant case, petitioner
furnished private respondent notice as to the
particular acts which constituted the ground for his
dismissal. By requiring him to submit a written
explanation within 48 hours from receipt of the
notice, the company gave him the opportunity to be
heard in his defense. Private respondent availed of
this chance by submitting a written explanation.
Furthermore, investigations on the incident were
actually conducted on 9 January 1993 and 11
January 1993. Thus, it is clear the minimum
requirements of due process have been fulfilled by
petitioner.
That the investigations conducted by petitioner
may not be considered formal or recorded hearings
or investigations is immaterial. A formal or trial type
hearing is not all times and in all instances essential
to due process, the requirements of which are
satisfied where the parties are afforded fair and
reasonable opportunity to explain their side of the
controversy. It is deemed sufficient for the employer
to follow the natural sequence of notice, hearing and
judgment.
AMPLE OPPORTUNITY
La Carlota Planters Assn., Inc. v. NLRC (98)
In Balayan Colleges vs. NLRC, the Court has
observed that ample opportunity in due process
means that "kind of assistance that management
must accord the employee to enable him to prepare
adequately for his defense including legal
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representation." Here, private respondent has been
summarily dismissed, following his suspension,
without being accorded an opportunity to confront
the "witness" (Rene Baylon) against him and to
thereafter adduce evidence in his defense.
HEARING
Consolidated Rural Bank, Inc. v. NLRC (99)
Petitioner's avowal of denial of procedural due
process must fail, and so with its prayer for a
remand. The fact that counsel for petitioner was not
present during the clarificatory hearing on 19 July
1994, hence, unable to rebut the testimony given by
private respondent could hardly be attributed to
anybody else's fault but its own. Records show that
notice was given to the parties with warning that
failure to attend would be construed as a waiver of
the opportunity to be heard. However while counsel
for private respondent filed his Manifestation
begging off from the hearing on ground of a prior
engagement, counsel for petitioner on the other
hand simply chose not to appear on the assumption
that the hearing would be postponed on account of
opposing counsel's absence thus negligently and
completely overlooking the assurance in the very
same Manifestation that private respondent would
nevertheless appear on her own. Hence, the fact
that the Labor Arbiter proceeded with the hearing as
scheduled could not be branded as an arbitrary act
depriving petitioner of its right to present evidence.
Petitioner lost this additional opportunity entirely
through its own fault and negligence.
Similarly, the decision of the Labor Arbiter not
to schedule the case for another hearing could not
be considered as a grave abuse of discretion. First of
all, it is well-settled that the holding of a hearing is
discretionary with the Labor Arbiter and is something
which the parties cannot demand as a matter of
right. It is entirely within the bounds of the Labor
Arbiter's authority to decide a case based on mere
position papers and supporting documents without a
formal trial or hearing as is sanctioned by the New
Rules Procedure of the National Labor Relations
Commission. Thus we have consistently held that
the requirements of due process are satisfied when
the parties are given the opportunity to submit
position papers wherein they are supposed to attach
all the documents that would prove their claim in
case it be decided that no hearing should be
conducted or was necessary. Secondly, we note that
petitioner and private respondent themselves agreed
during the hearing of 3 March 1994 to forego with a
formal trial and opted instead to file only their
respective replies to each other's position paper.
Given these circumstances, petitioner certainly
cannot now be heard to have been deprived of due
process.
Libres v. NLRC (99)
Due process as a constitutional precept does not
always and in all situations require a trial type
proceeding. Due process is satisfied when a person
is notified of the charge against him and given an
opportunity to explain or defend himself. The
essence of due process is simply to be heard, or as
applied to administrative proceedings, an
opportunity to explain one’s side, or an opportunity
to seek a reconsideration of the action or ruling
complained of.
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Labor Standards
LACK OF VERIFICATION
St. Michael Academy v. NLRC (98)
While the procedure adopted by the private
respondents failed to comply strictly with Rule III
(Pleadings) and Rule V (Proceedings Before Labor
Arbiters) of the New Rules of Procedure of the NLRC,
we are constrained to heed the underlying policy of
the Labor Code relaxing the application of technical
rules of procedure in labor cases to help secure and
not defeat justice. To be sure, petitioners cannot
maintain that they were denied due process. The
essence of due process in administrative proceedings
is simply an opportunity to explain one's side or an
opportunity to seek a reconsideration of action or
ruling complained of. In labor cases, submission of
position papers and memoranda fulfills the
requirements of due process.
Petitioners' stance with respect to the lack of
verification of private respondents' position paper
deserves scant consideration. The defect is a formal,
rather than a substantial one and which further loses
significance in light of the exhaustive proceedings
undertaken by public respondent to resolve the
parties' dispute on the merits.
FAILURE TO FURNISH
Pepsi-Cola Products Phils., Inc. v. NLRC (98)
At all events, a plea of denial of procedural due
process, where the defect consists in the failure to
furnish an opponent with a copy of a party's position
paper, cannot be entertained when he who makes
the plea is effectively given the opportunity to be
heard in a Memorandum of Appeal. Even if a party
has not been heard at the stage of mediation and
fact-finding, he still can take that opportunity to
present his side when the Memorandum of Appeal is
given due course, as it has so been given in this
instance, by the NLRC. Thus, the fundamental rule of
due process that mandates notice and an
opportunity to be heard has here been amply met.
FAILURE OF DUE PROCESS
EFFECT OF FAILURE – SUBSTANTIVE – PROCEDURAL
Alhambra Industries, Inc. v. NLRC (94)
A termination without just cause entitles a
worker to reinstatement regardless of whether he
was accorded due process. On the other hand,
termination of a worker for cause, even without
procedural due process, does not warrant
reinstatement, but the employer incurs liability for
damages.
Serrano v. NLRC (2000)
It is contended that private respondent's non-
observance of the notice requirement should not be
visited with a severe consequence in accordance
with Art. III, §19(1) of the Constitution. The
contention is without merit. In the first place, Art.
III, §19(1) of the Constitution, prohibiting the
imposition of excessive fines, applies only to criminal
prosecutions. In the second place, the decision in
this case, providing for the payment of full
backwages for failure of an employer to give notice,
seeks to vindicate the employee's right to notice
before he is dismissed or laid off, while recognizing
the right of the employer to dismiss for any of the
just causes enumerated in Art. 282 or to terminate
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employment for any of the authorized causes
mentioned in Arts. 283-284. The order to pay full
backwages is a consequence of the employer's
action in dismissing an employee without notice
which makes said dismissal ineffectual. The
employee is considered not to have been terminated
from his employment until it is finally determined
that his dismissal/termination of employment was
for cause and, therefore, he should be paid his
salaries in the interim. This eliminates guesswork in
determining the degree of prejudice suffered by an
employee dismissed with cause but without notice
since the penalty is measured by the salary he failed
to earn on account of his dismissal/termination of
employment.
B. OTHER PROCEDURAL MATTERS
BURDEN AND DEGREE OF PROOF
BURDEN
Gothong Lines Inc. v. NLRC (99)
The constitutional guarantee of protection to
labor and security of tenure requires that an
employer terminate the services of an employee only
for valid and just causes which must be supported
by substantial evidence. The burden of proving that
the termination of an employee is for a valid or
authorized cause rests on the employer. In any
event, the employer must comply with due process
requirements before any termination is done.
Maranaw Hotel and Resort Corp. v. NLRC (99)
Albeit petitioner may have reasons to doubt the
honesty and trustworthiness of Damalerio, as a
result of what happened, absent sufficient proof of
guilt, he (Damalerio), who is a rank-and-file
employee, cannot be legally dismissed.
Unsubstantiated suspicions and baseless conclusions
by employers are not legal justification for
dismissing employees. The burden of proving the
existence of a valid and authorized cause of
termination is on the employer. Any doubt should be
resolved in favor of the employee, in keeping with
the principle of social justice enshrined in the
Constitution.
DEGREE
Manila Electric Co., Inc. v. NLRC (91)
And this Court has ruled that the ground for an
employer's dismissal of an employee need be
established only by substantial evidence, it not being
required that the former's evidence "be of such
degree as is required in criminal cases, i.e., proof
beyond reasonable doubt." 16 It is absolutely of no
consequence that the misconduct with which an
employee may be charged also constitutes a criminal
offense: theft, embezzlement, assault on another
employee or company officer, arson, malicious
mischief, etc. The proceedings being administrative,
the quantum of proof is governed by the
substantial evidence rule and not, as the
Part II : Labor Standards Law
Labor Standards
respondent Commission seems to imagine, by the
rule governing judgments in criminal actions.
Phil. Savings Bank v. NLRC (96)
In affirming the Labor Arbiter, the NLRC found
the evidence supporting the Labor Arbiter's factual
findings to be substantial and for this reason
apparently found it unnecessary to make a separate
discussion. Factual findings of administrative
agencies are generally accorded respect and even
finality in this Court if they are supported by
substantial evidence.
Loss of trust and confidence is a cause for
dismissing an employee who is entrusted with
fiducial matters, or with the custody, handling or
care and protection of the employer's property.
There is no dispute about this. But the employer
must clearly and convincingly establish the facts and
incidents upon which its loss of confidence in the
employee may be fairly made to rest otherwise, the
dismissal will be rendered illegal.
Reno Foods, Inc. v. NLRC (95)
Findings of facts of quasi-judicial agencies like
the NLRC which have acquired expertise in the
specific matters entrusted to their jurisdiction are
accorded by this Court not only with respect but
even finality if they are supported by substantial
evidence. Substantial evidence, which is the
quantum of evidence required to establish a fact in
cases before administrative and quasi-judicial
bodies, is that amount of relevant evidence which a
reasonable mind might accept as adequate to justify
a conclusion.
PRESCRIPTION PERIOD
Azcor Manufacturing Inc. v. NLRC (99)
In addition, an action for reinstatement by
reason of illegal dismissal is one based on an injury
which may be brought within four (4) years from the
time of dismissal pursuant to Art. 1146 of the Civil
Code. Hence, Capulso's case which was filed after a
measly delay of four (4) months should not be
treated with skepticism or cynicism. By law and
settled jurisprudence, he has four (4) years to file
his complaint for illegal dismissal. A delay of merely
four (4) months in instituting an illegal dismissal
case is more than sufficient compliance with the
prescriptive period. It may betray an unlettered
man's lack of awareness of his rights as a lowly
worker but, certainly, he must not be penalized for
his tarrying.
Coca-cola Bottlers Phils., Inc. v. Roque (99)
Davide, C. J., dissenting
Pursuant to Article 291 of the Labor Code, as
amended, the complaint should have been filed
within three (3) years for the accrual of Roque’s
cause of action (his dismissal in 1982) otherwise, his
claim shall be forever bared.
Besides even assuming for the sake of
argument that the regular courts have jurisdiction
over his claim for damages because of his illegal
dismissal, such claims necessarily arose upon an
injury to his (as plaintiff) rights. Under Article 1146
of the Civil Code, an action arising from injury to
plaintiff’s rights prescribe in four (4) years from the
accrual of the cause of action. It was only in 1 June
1989, or after the lapse of seven (7) years after his
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illegal dismissal, when Roque filed his complaint for
damages with the Regional Trial Court.
OFFER TO REINSTATE
Ranara v. NLRC (92)
The fact that his employer later made an offer
to re-employ him did not cure the vice of his earlier
arbitrary dismissal. The wrong had been committed
and the harm done. Notably, it was only after the
complaint had been filed that it occurred to Chang,
in belated gesture of good will, to invite Ranara back
to work in his store. Chang's sincerity is suspect. We
doubt if his offer would have been made if Ranara
had not complained against him. At any rate, sincere
or not, the offer of reinstatement could not correct
the earlier illegal dismissal of the petitioner. The
private Civil Case s incurred liability under the Labor
Code from the Ranara was illegally dismissed, and
the liability did not abate as a result of Chang's
repentance.
G. SANCTIONS AND REMEDIES
23.08 GENERAL RULE
TWIN REMEDIES
Valdez v. NLRC (98)
Under Article 279 of the Labor Code, as
amended, an employee who is unjustly dismissed
from work shall be entitled to reinstatement without
loss of seniority rights and other privileges and to his
full back wages, inclusive of allowances, and to other
benefits or their monetary equivalent computed from
the time his compensation was withheld from him up
to the time of his actual reinstatement.
Thus, it being clearly established that herein
petitioner was constructively dismissed, the decision
of the Labor Arbiter awarding him back wages and
separation pay in lieu of reinstatement, plus the
refund of his cash bond and tire deposit, is definitely
in order.
Phil. Airlines, Inc. v. NLRC (98)
In the case at bar, the alleged injury which
private respondents stand to suffer by reason of
their alleged illegal dismissal can be adequately
compensated and therefore, there exists no
"irreparable injury," as defined above which would
necessitate the issuance of the injunction sought for.
Article 279 of the Labor Code provides that an
employee who is unjustly dismissed from
employment shall be entitled to reinstatement,
without loss of seniority rights and other privileges,
and to the payment of full backwages, inclusive of
allowances, and to other benefits or their monetary
equivalent computed from the time his
compensation was withheld from him up to the time
of his actual reinstatement.
Judy Philippines, Inc. v. NLRC (98)
Part II : Labor Standards Law
Labor Standards
Under the law, an employee is entitled to
reinstatement and to his full backwages when he is
unjustly dismissed. Note, however, that
reinstatement and backwages are separate and
distinct reliefs given to an illegally dismissed
employee.
Reinstatement means restoration to a state or
condition from which one had been removed or
separated. One who is reinstated assumes the
position he had occupied prior to the dismissal and
is, as an ordinary rule, entitled only to the last salary
in that position.
Backwages, on the other hand, is a form of
relief that restores the income that was lost by
reason of unlawful dismissal.
Bongan v. NLRC (98)
In view thereof, "an employee who is unjustly
dismissed from work shall be entitled to
reinstatement without loss of seniority rights and to
his backwages computed from the time his
compensation was withheld from him up to the time
of his reinstatement." This apparently unqualified
rule, however, admits of an exception. Thus, an
illegally dismissed employee is entitled to: (1) either
reinstatement if viable or separation pay if
reinstatement is no longer viable, and (2)
backwages. Jurisprudence abound to the effect that
the grant of separation pay can substitute if
reinstatement is not feasible, such as in the case of
a strained employer-employee relationship or when
the work or position formerly held by the dismissed
employee no longer exists. To these specified
circumstances, we add another. In the instant case,
while in the course of the prosecution of his claim,
petitioner was already in the twilight years of his
employment. In Reyes v. Philippine Duplicators Inc.,
the Court held that a company should exercise
caution and care in dealing with its employees to
prevent suspicion that its dismissal of an employee
is only a scheme to evade its responsibility of
granting retirement benefits. Thus, for having been
illegally dismissed, petitioner shall be entitled, not
only to separation pay and full backwages, but
additionally, to his retirement benefits pursuant to
any collective bargaining agreement in the
workplace or, in the absence thereof, as provided in
Section 14, Book VI of the Implementing Rules of
the Labor Code.
Mendoza v. NLRC (99)
The notices served on her sufficiently apprised
her of the existence and the nature of the
accusations against her. The company president's
letter of June 2, 1995 informed her that there was a
complaint from Amado Roa and the other division
heads of the Sales Department for her "alleged
deliberate withholding or delaying of the release and
payment of the commissions . . ., unless and until
given a certain amount in consideration [of] the
expeditious release of the said commissions."
Celeridad's letter of June 24, 1995 reiterated the
same gripe. That she did not receive a copy of these
Complaints does not show that they were mere
fabrications of the private respondent. Procedural
due process only requires employers to furnish their
errant employees written notices stating the
particular acts or omissions constituting the grounds
for their dismissal, and to hear their side of the
story. Obviously, the employer complied with these.
It was, therefore, incumbent upon petitioner to
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exercise her right by asking the management for
copies of the letters.
Torillo v. Leogardo (91)
Article 280 (now Article 279) of the Labor Code
provides that "an employee who is unjustly
dismissed from work shall be entitled to
reinstatement without loss of seniority rights and
other privileges and to his full backwages . . ."
Backwages in general are granted on grounds of
equity for earnings which a worker or employee has
lost due to his illegal dismissal. Reinstatement, on
the other hand, means restoration to a state of
condition from which one had been removed or
separated.
Backwages and reinstatement are two reliefs
given to an illegally dismissed employee. They are
separate and distinct from each other. However, in
the event that reinstatement is no longer possible,
separation pay is awarded to the employee. Thus,
the award of separation pay is in lieu of
reinstatement and not of backwages. In other
words, an illegally dismissed employee is entitled to
(1) either reinstatement, if viable, or separation pay
if reinstatement is no longer viable and (2)
backwages.
The distinction between separation pay and
backwages has been exhaustively discussed by this
Court in Santos vs. NLRC, et. al., wherein we held:
“The normal consequences of a finding that an
employee has been illegally dismissed are, firstly,
that the employee becomes entitled to reinstatement
to his former position without loss of seniority rights
and, secondly, the payment of backwages
corresponding to the period from his illegal dismissal
up to actual reinstatement. The statutory intent on
this matter is clearly discernible. Reinstatement
restored the employee who was unjustly dismissed
to the position from which he was removed, that is,
to his status quo ante dismissal, while the grant of
backwages allows the same employee to recover
from the employer that which he had lost by way of
wages as a result of his dismissal. These twin
remedies-reinstatement and payment of backwages
— make the dismissed employee whole who can
then look forward to continued employment. Thus do
these two remedies give meaning and substance to
the constitutional right of labor to security of tenure.
The two forms of relief are distinct and separate, one
from the other. Though the grant of reinstatement
commonly carries with it an award of backwages,
the inappropriateness or non-availability of one does
not carry with it the inappropriateness or non-
availability of the other."
NATURE OF REMEDIES
Filflex Industrial and Manufacturing Corp. v.
NLRC (98)
An order for reinstatement must be specifically
declared and cannot be presumed; like back wages,
it is a separate and distinct relief given to an illegally
dismissed employee. There being no specific order
for reinstatement and the order being for
complainant's separation, there can be no basis for
the award of salaries/back wages during the
pendency of appeal.
De Guzman v. NLRC (99)
The general rule is that where there is a
finding of illegal dismissal, an employee is
Part II : Labor Standards Law
Labor Standards
entitled to reinstatement and to receive back wages
from the date of his dismissal up to the time of his
reinstatement.
The normal consequences of a finding that an
employee has been illegally dismissed are, firstly,
that the employee becomes entitled to reinstatement
to his former position without loss of seniority rights
and, secondly, the payment of back wages
corresponding to the period from his illegal dismissal
up to actual reinstatement. The rationale therefor is
clearly obvious. Reinstatement restores the
employee who was unjustly dismissed to the position
from which he was removed, i.e., to his status quo
ante dismissal, while the grant of back wages allows
the same employee to recover from the employer
that which he had lost by way of wages as a result
of his dismissal. These twin remedies of
reinstatement and payment of back wages make
whole the dismissed employee, who can then look
forward to continued employment. These two
remedies give meaning and substance to the
constitutional right of labor to security of tenure.
However, the two remedies are distinct and
separate. Though the grant of reinstatement
commonly carries with it an award of back wages,
the inappropriateness or non-availability of one does
not carry with it the inappropriateness or non-
availability of the other. Reinstatement is a
restoration to a state from which one has been
removed or separated. On the other hand, the
payment of backwages is a form of relief that
restores the income that was lost by reason of the
unlawful dismissal. The award of one is not a
condition precedent to an award of another. Back
wages may be ordered without ordering
reinstatement; conversely, reinstatement may be
payment ordered without of back wages.
RATIONALE FOR REMEDIES
Globe Mackay v. NLRC (92)
To go back to the instant case, there being no
evidence to show an authorized, much less a legal,
cause for the dismissal of private respondent, she
had every right, not only to be entitled to
reinstatement, but as well, to full backwages.
The intendment of the law in prescribing the
twin remedies of reinstatement and payment of
backwages is, in the former, to restore the dismissed
employee to her status before she lost her job, for
the dictionary meaning of the word "reinstate" is "to
restore to a state, condition, position, etc. from
which one had been removed" and in the latter, to
give her back the income lost during the period of
unemployment. Both remedies, looking to the past,
would perforce make her "whole."
23.09 REINSTATEMENT
DEFINED
Union of Supervisors, etc. v. Secretary of Labor
(84)
The Labor Code provision on reinstatement, to
wit:
"Art. 280. An employee who is unjustly
dismissed from work shall be entitled to
reinstatement without loss of seniority rights and
to his backwages computed from the time his
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compensation was withheld from him up to the
time of his reinstatement."
is aimed to restore the situation as nearly as
possible to status quo ante the unfair labor practice.
This requires that those deprived of a recognized
and protected interest by violations of the law should
be made whole so as to prevent the violator from
profiting from his misdeeds (N.L.R.B. v. Coats and
Clark, Inc.; N.L.R.B. v. J.H. Rutter-Rex
Manufacturing Co.). Yet the reinstatement remedy
must always be adapted to economic-business
conditions (N.L.R.B. v. R.C. Can Co.; N.L.R.B. v.
American Aggregate Co.).
RATIONALE
Escobin v. NLRC (98)
The normal consequences of illegal dismissal are
reinstatement and payment of back wages. These
remedies give life to the workers' constitutional right
to security of tenure.
Separation pay is generally not awarded except
in instances where reinstatement is no longer
feasible or appropriate, as in this case. As a
substitute for immediate and continued
reemployment, separation pay is meant to provide
the employee the "wherewithal during the period
that he is looking for another employment."
EMPLOYEE RIGHT
Quijano v. Mercury Drug Corp. (98)
We disagree. Well-entrenched is the rule that an
illegally dismissed employee is entitled to
reinstatement as a matter of right. Over the years,
however, the case law developed that where
reinstatement is not feasible, expedient or practical,
as where reinstatement would only exacerbate the
tension and strained relations between the parties,
or where the relationship between the employer and
employee has been unduly strained by reason of
their irreconcilable differences, particularly where
the illegally dismissed employee held a managerial
or key position in the company, it would be more
prudent to order payment of separation pay instead
of reinstatement. Some unscrupulous employers,
however, have taken advantage of the overgrowth of
this doctrine of "strained relations" by using it as a
cover to get rid of its employees and thus defeat
their right to job security.
EFFECT OF FAILURE TO ASK RELIEF
General Baptist Bible College v. NLRC (93)
Having been illegally dismissed from his position
as Academic Dean, Basa is entitled to reinstatement
to his former position without loss of seniority rights
and to payment of backwages from the time of his
illegal dismissal up to his actual reinstatement. In
resolving whether or not the relief of reinstatement
may be granted to Basa notwithstanding his failure
to pray for the same in his complaint, We rule in the
affirmative. We are for the granting of the relief he is
entitled to under the law, although he failed to
specifically pray for the same in his complaint.
We hereby note that Basa's failure to specifically
pray for the relief of reinstatement in a complaint
which he personally prepared and signed using a
standard form prepared by the NLRC Regional
Arbitration, Branch No. XI, Davao City, is a
procedural lapse which cannot put to naught a
right which he is entitled under a substantive
Part II : Labor Standards Law
Labor Standards
law. Technicalities have no room in labor cases, reinstatement without loss of seniority rights and
where the Rules of Court are applicable only in order to his backwages computed from the time his
compensation was withheld from him up to the
to effectuate the objectives of the Labor Code and
time of his reinstatement."
not to defeat them. The pertinent provisions of the
is aimed to restore the situation as nearly as
Revised Rules of Court of the Philippines and
possible to status quo ante the unfair labor practice.
prevailing jurisprudence may be applied by analogy
This requires that those deprived of a recognized
or in a suppletory character to effect an expeditious
and protected interest by violations of the law should
resolution of labor controversies in a practical and
be made whole so as to prevent the violator from
convenient manner. We are inclined to overlook a
profiting from his misdeeds (N.L.R.B. v. Coats and
procedural defect if only to promote substantial
Clark, Inc.; N.L.R.B. v. J.H. Rutter-Rex
justice.
Manufacturing Co.). Yet the reinstatement remedy
must always be adapted to economic-business
RULES ON REINSTATEMENT
conditions (N.L.R.B. v. R.C. Can Co.; N.L.R.B. v.
American Aggregate Co.].
NOT AN EMPLOYER OPTION
Espejo v. NLRC (96)
Iriga Telephone Co., Inc. v. NLRC (98)
The law recognizes as valid any retirement plan,
In sum, the labor arbiter ruled that, while
agreement or management policy regarding
Praxides was at fault for desisting from working for
retirement at an earlier or older age. In the case of
ITELCO, the former could not be totally blamed for
petitioner, CISP did not have any retirement plan for
doing so because of the maltreatment he suffered at
its employees. In such situation, Sec. 13, Book IV,
the hands of Atty. Ortega. He tried to restore the
of the Omnibus Rules Implementing the Labor Code
status quo by decreeing Praxides' reinstatement
provides that in the absence of a retirement plan,
without loss of seniority rights but without back
agreement or policy an employee may be retired
wages. The filing by Praxides of a criminal complaint
upon reaching the age of sixty (60) years.
against ITELCO's president and general manager
Construing this provision, we held that an employee
has, however, strained the relations between them,
may retire, or may be retired by his employer, upon
moving the NLRC to award separation pay in lieu of
reaching sixty (60). Thus, an employee held to be
reinstatement, in conformity with applicable
illegally dismissed cannot be reinstated if he had
jurisprudence on the matter. Certainly, this act does
already reached the age of sixty (60) years at the
not constitute abuse of discretion, much less grave
time of his second complaint (pressing for
abuse, on the part of the NLRC. Finally, as to the
reinstatement) before the Labor Arbiter's Office.
amount of the monetary award, this Court has ruled
that where reinstatement is no longer an option, a
STATUS OF EMPLOYMENT
separation pay equivalent to one month's salary for
every year of service is awarded as an alternative.
Kiamco v. NLRC (99)
The argument of private respondents that
DUE PROCESS
reinstatement and payment of back wages could not
be made since Kiamco was not a regular employee is
Alhambra Industries, Inc. v. NLRC (94)
apparently misplaced. As quoted above, the normal
The error is consequential. A termination
consequences of an illegal dismissal are the
without just cause entitles a worker to reinstatement
reinstatement of the aggrieved employee and the
regardless of whether he was accorded due process.
grant of back wages. These rights of an employee do
On the other hand, termination of a worker for
not depend on the status of his employment prior to
cause, even without procedural due process, does
his dismissal but rather to the legality and validity of
not warrant reinstatement, but the employer incurs
his termination. The fact that an employee is not a
liability for damages.
regular employee does not mean that he can be
Since the Labor Arbiter found a valid ground for
dismissed any time, even illegally, by his employer.
dismissal, taking into consideration the controverting
evidence of the parties, which finding was not set
STRAINED RELATIONS
aside by NLRC, the latter was in grave error when it
directed reinstatement. Where, on the basis of the
RATIONALE
evidence of the opposing parties the validity of the
dismissal is determinable at the level of the Labor
Pearl S. Buck Foundation, Inc. v. NLRC (90)
Arbiter, the latter should resolve that issue. And if
There is likewise no basis for the NLRC ruling
the Labor Arbiter finds just cause in the termination,
that Mrs. Querimit should be reinstated with
reinstatement would no longer serve any purpose.
backwages. A close scrutiny of the record reveals
After all, a finding by the Labor Arbiter as to the
that after filing her complaint for illegal dismissal,
validity of the ground for dismissal is much more
Mrs. Querimit executed an affidavit which states:
impartial and trustworthy than a determination by "That since I am not interested to be reinstated
the employer who assumes the role of accuser and to my employment by reason of the prejudicial
judge at the same time. and strained relations now existing between
myself and the management of Pearl S. Buck
EXCEPTIONS Foundation, Inc., I am claiming separation pay
for being illegally dismissed from employment to
be computed from the date I was employed up
BUSINESS CONDITIONS
to the date I was illegally dismissed; . . ."
Said statement should have cautioned both the
Union of Supervisors, etc. v. Sec. of Labor (84)
labor arbiter and the NLRC. The parties to a case
The Labor Code provision on reinstatement, to
should not be forced into a situation where a
wit:
"Art. 280. An employee who is unjustly
peaceful relationship is not feasible. As the
dismissed from work shall be entitled to petitioner appears to have lost its trust in private

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Part II : Labor Standards Law
Labor Standards
respondent, who in turn is not seeking
reinstatement, it would be an act of oppression to
compel them to return to the status quo ante.
Commercial Motors Corp. v. NLRC (90)
It would seem, however, that the circumstances
of this case render inappropriate Umlas'
reinstatement to his former position, as an item of
relief. A more equitable disposition is that which this
Court has more than once made in other cases of
the same nature: the award, in lieu of
reinstatement, of separation pay at the rate of one
month's salary for every year of service, "so that . . .
(the employee) can be spared the agony of having
to work anew with . . . (the employer) under an
atmosphere of antipathy and antagonism, and the . .
. (latter) does not have to endure the continued
service of . . . (the former) in whom it has lost
confidence."
INDICATORS
Sentinel Security Agency, Inc. v. NLRC
The only logical conclusion from the foregoing
discussion is that the Agency illegally dismissed the
complainants. Hence, as a necessary consequence,
the complainants are entitled to reinstatement and
back wages. However, reinstatement is no longer
feasible in this case. The Agency cannot reassign
them to the Client, as the former has recruited new
security guards; the complainants, on the other
hand, refuse to accept other assignment. Verily,
complainants do not pray for reinstatement; in fact
they refused to be reinstated. Such refusal is
indicative of strained relations. Thus, separation pay
is awarded in lieu of reinstatement.
ILLUSTRATIONS
Employees Association of the Philippine
American Life Assurance Co. v. NLRC (91)
While there is no denying that relations have
been strained between Caparas and Philamlife, their
differences are not of such a nature or degree as to
preclude the petitioner's reinstatement. The fact that
Caparas was the President of the Employees
Association of the Philippine American Life Insurance
Company (EMAPALICO) at the time he was
dismissed could be another reason why he should be
reinstated rather than simply given separation pay
and back wages.
In the several cases cited by the parties, it was
clear that the retention of the employee was not
advisable because of the irreconcilable enmity
between the employee and management.
In Century Textile Mills v. NLRC, the
reinstatement of the employee was not allowed
because he had tried to poison some of his co-
workers and would have continued, if retained, to
pose a threat to their lives. In Flores v. Nuestro
there was a previous altercation between the parties
that led to the filing of a complaint for slight physical
injuries by the employee against the employer, and
we felt that any possible confrontation between
them should be avoided. While a similar physical
hostility was not demonstrated in Divine Word High
School v. NLRC, the teacher's separation was
nevertheless sustained by this Court because we felt
that her retention in the high school faculty would
prejudice the educational and moral objectives of
the Catholic school.
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It is readily noticeable in the case at bar that
the differences of Caparas with Philamlife are neither
personal nor physical nor are they of so serious a
nature as to preclude his reinstatement. The
unsigned probationary appointment to a lower
position that was offered him was an irritant that
any employee similarly prejudiced had reason to
question. It bears emphasis that not only was
Caparas reacting merely as an individual employee
to the conditions laid down by Philamlife; he was
expressing the official position and opposition of the
EMAPALICO of which he was the President. In this
capacity, he had a right and a duty as well to protest
the acts of Philamlife insofar as they affected not
only him but also his co-workers.
NO STRAINED RELATIONS
Sibal v. Notre Dame of Greater manila (90)
Strained relations in order that it may justify the
award of separation pay in lieu of reinstatement with
backwages, should be such, that they are so
compelling & so serious in character, that the
continued employment of an employee is so
obnoxious to the person/business of the employer &
that the continuation of such employment has
become inconsistent with peace & tranquility which
is an ideal atmosphere in every workplace.
LIMITATIONS
Jardine Davies, Inc. v. NLRC (99)
In addition to back wages, illegally dismissed
employees are entitled to either reinstatement, if
feasible, or separation pay if reinstatement is no
longer viable. In our view, the circumstances
obtaining in this case would not warrant the
reinstatement of the private respondent.
Antagonism and imputation of criminal act caused a
severe strain in the relationship between petitioner
and private respondent, not to mention the
considerable length of time private respondent has
been out of petitioner’s employ. Thus, a more
equitable disposition would be an award of
separation pay equivalent to one (1) month’s pay for
every year of service with petitioner, a fraction of at
least 6 months being considered as 1 whole year.
IMPLEMENTATION – OPTIONS AND RATIONALE
RATIONALE
Jardine Davies, Inc. v. NLRC (93)
The order of immediate reinstatement pending
appeal, in cases of illegal dismissal is an ancillary
relief under RA 6715 granted to a dismissed
employee to cushion him & his family against the
impact of economic dislocation or abrupt loss of
earnings. If the employee chooses not to report for
work pending the resolution of the case on appeal,
he foregoes such a temporary relief and is not paid
of his salary.
IMMEDIATELY EXECUTORY OPTIONS
Part II : Labor Standards Law
Labor Standards
Pioneer Texturizing Corp. v. NLRC (97)
We note that prior to the enactment of R.A. No.
6715, Article 223 of the Labor Code contains no
provision dealing with the reinstatement of an
illegally dismissed employee. The amendment
introduced by R.A. No. 6715 is an innovation and a
far departure from the old law indicating thereby the
legislature's unequivocal intent to insert a new rule
that will govern the reinstatement aspect of a
decision or resolution in any given labor dispute. In
fact, the law as now worded employs the phrase
"shall immediately be executory" without
qualification emphasizing the need for prompt
compliance. As a rule, "shall" in a statute commonly
denotes an imperative obligation and is inconsistent
with the idea of discretion and that the presumption
is that the word "shall", when used in a statute, is
mandatory. An appeal or posting of bond, by plain
mandate of the law, could not even forestall nor stay
the executory nature of an order of reinstatement.
The law, moreover, is unambiguous and clear. Thus,
it must be applied according to its plain and obvious
meaning, according to its express terms.
And in conformity with the executory nature of
the reinstatement order, Rule V, Section 16 (3) of
the New Rules of Procedure of the NLRC strictly
requires the Labor Arbiter to direct the employer to
immediately reinstate the dismissed employee.
A closer examination, however, shows that the
necessity for a writ of execution under Article 224
applies only to final and executory decisions which
are not within the coverage of Article 223.
Article 224 states that the need for a writ of
execution applies only within five (5) years from the
date a decision, an order or award becomes final and
executory. It can not relate to an award or order of
reinstatement still to be appealed or pending appeal
which Article 223 contemplates. The provision of
Article 223 is clear that an award for reinstatement
shall be immediately executory even pending appeal
and the posting of a bond by the employer shall not
stay the execution for reinstatement. The legislative
intent is quite obvious, i.e., to make an award of
reinstatement immediately enforceable, even
pending appeal. To require the application for and
issuance of a writ of execution as prerequisites for
the execution of a reinstatement award would
certainly betray and run counter to the very object
and intent of Article 223, i.e., the immediate
execution of a reinstatement order. The reason is
simple. An application for a writ of execution and its
issuance could be delayed for numerous reasons. A
mere continuance or postponement of a scheduled
hearing, for instance, or an inaction on the part of
the Labor Arbiter or the NLRC could easily delay the
issuance of the writ thereby setting at naught the
strict mandate and noble purpose envisioned by
Article 223. In other words, if the requirements of
Article 224 were to govern, as we so declared in
Maranaw, then the executory nature of a
reinstatement order or award contemplated by
Article 223 will be unduly circumscribed and
rendered ineffectual.
Furthermore, the rule is that all doubts in the
interpretation and implementation of labor laws
should be resolved in favor of labor. In ruling that an
order or award for reinstatement does not require a
writ of execution the Court is simply adhering and
giving meaning to this rule. Henceforth, we rule that
an award or order for reinstatement is self-
executory. After receipt of the decision or resolution
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ordering the employee's reinstatement, the
employer has the right to choose whether to re-
admit the employee to work under the same terms
and conditions prevailing prior to his dismissal or to
reinstate the employee in the payroll. In either
instance, the employer has to inform the employee
of his choice. The notification is based on practical
considerations for without notice, the employee has
no way of knowing if he has to report for work or
not.
International Container Services, Inc. v. NLRC
(98)
The provision of Art. 223 is clear that an award
for reinstatement shall be immediately executory
even pending appeal and the posting of a bond by
the employer shall not stay the execution for
reinstatement.
23.10 BACKWAGES
DEFINITION
St. Theresa’s School of Novaliches Foundation
v. NLRC (98)
The term "backwages" has been defined as that
for earnings lost by a worker due to his illegal
dismissal. Backwages are generally granted on
grounds of equity. Payment thereof is a form of
relief that restores the income lost by reason of such
unlawful dismissal. It is not private compensation or
damages, but is awarded in furtherance and
effectuation of the public objectives of the labor
Code. Nor is it a redress of a private right but,
rather, in the nature of a command to the employer
to make public reparation for dismissing an
employee, either due to the former's unlawful act or
bad faith.
General Baptist Bible College v. NLRC (93)
The NLRC, however, erroneously referred to
unpaid salaries as “back wages” when it excluded
allowances therefrom. In order to obviate any
further controversy on this matter, We would like to
clarify the difference between the two terms. When
the term “back wages” was used in the NLRC
decision, what was actually meant was unpaid
salaries, which pertain to compensation due the
employee for services actually rendered before
termination. Back wages, on the other hand, refer to
his supposed earnings had he not been illegally
dismissed. Unpaid salaries refer to those earned
prior to dismissal whereas back wages refer to those
earnings lost after illegal dismissal. Thus,
reinstatement would always bring with it payment of
backwages but not necessarily payment of unpaid
salaries. Payment of unpaid salaries is only ordered
if there are still salaries collectible from his employer
by reason of service already rendered.
We also want to clarify that when there is an
award of back wages this actually refers to back
wages without qualifications and deductions, thus,
we held that:
“The term ‘back wages without qualification and
deduction’ means that the workers are to be
paid their back wages fixed as of the time of the
dismissal or strike without deduction for their
earnings elsewhere during their layoff and
without qualification of their wages as thus
fixed; i.e., received by their co-workers who are
not dismissed or did not go on strike. Awards
including salary differentials are not allowed. The
salary base properly used should, however, include
Part II : Labor Standards Law
Labor Standards
not only the basic salary but also the emergency
cost of living allowances and also transportation
allowances if the workers are entitled thereto.”
RATIONALE
Associated Labor Unions – TUCP v. NLRC (99)
As already stated, dismissal as a measure to
protect the interests of respondent company is
unwarranted under the facts of this case.
Suspension would have sufficed. Without deciding
for how long the suspension should be in cases such
as this, considering that petitioner has been
prevented from working in respondent company
since September 13, 1993, we hold that, for all
purposes, he has served a reasonable period of
suspension commensurate to the gravity of his
offense. Consequently, the Labor Arbiter’s order of
reinstatement of petitioner without back wages may
be considered appropriate.
Quebec v. NLRC (99)
Considering that the dismissal of private
respondents was illegal, the payment of back wages
is in order; and since their termination was after 21
March 1989, or after RA No. 6715 took effect, they
are also entitled to full back wages, inclusive of
allowances and other benefits allowed by law,
computed from the time their compensation was
withheld up to the finality of this judgment.
In lieu of reinstatement, however, separation
pay is to be awarded herein due to the fact that the
reinstatement of respondents to their previous
confidential jobs is no longer possible since the
Canhagimet Express was already sold by petitioner.
Separation pay is the amount that an employee
receives at the time of his severance from the
service and is designed to provide him with the
wherewithal during the period that he is looking for
another employment. The grant of separation pay
does not preclude an award for back wages for the
latter represents the amount of earnings lost by
reason of the unjustified dismissal.
EFFECT FAILURE TO CLAIM
De la Cruz v. NLRC (98)
It is evident that the award of back wages
resulting from the illegal dismissal of an employee is
a substantive right. Thus, the failure to claim back
wages in a complaint for illegal dismissal has been
held to be a mere procedural lapse which cannot
defeat a right granted under substantive law.
EFFECT FAILURE TO ORDER
Aurora Land, etc. v. NLRC (97)
The Court, however, is bewildered why only an
award for separation pay in lieu of reinstatement
was made by both the Labor Arbiter and the NLRC.
No back wages were awarded. It must be
remembered that back wages and reinstatement are
two reliefs that should be given to an illegally
dismissed employee. They are separate and distinct
from each other. In the event that reinstatement is
no longer possible, as in this case, separation pay is
awarded to the employee. The award of separation
pay is in lieu of reinstatement and not of back
wages. In other words, an illegally dismissed
employee is entitled to (1) either reinstatement, if
viable, and (2) back wages. Payment of back wages
is specifically designed to restore an employee’s
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income that was lost because of his unjust dismissal.
On the other hand, payment of separation pay is
intended to provide the employee money during the
period in which he will be looking for another
employment.
XXX It is true that private respondent did not
appeal the award of Labor Arbiter awarding
separation pay sans back wages. While as a
general rule a party who has not appealed is not
entitled to affirmative relief other than the ones
granted in the decision of the court below, law and
jurisprudence authorize a tribunal to consider errors,
although unassigned, if they involve (1) errors
affecting the lower court’s jurisdiction over the
subject matter, (2) plain errors not specified, and
(3) clerical errors. 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 the matter, in the
interest of substantial justice. The Supreme Court is
clothed with ample authority to review matters, even
if they are not assigned as errors on appeal, if it
finds that their consideration is necessary in arriving
at a just decision of the case. Rules of procedure
are mere tools designed to facilitate the attainment
of justice. Their strict and rigid application, which
would result in technicalities that tend to frustrate
rather than promote substantial justice, must always
be avoided. Thus, substantive rights like the award
of back wages resulting from illegal dismissal must
not be prejudiced by a rigid and technical application
of the rules.
PERIOD – COMPUTATION
Itogon Suyoc, etc. v. Sangilo (68)
Since the dismissal of respondents in 1958,
more than ten years had elapsed, it would not seem
out of place to restate the guidelines to be observed
in the ascertainment of the total back wages payable
under the judgment below. These are:
First. To be deducted from the back wages
accruing to each of the laborers to be reinstated is
the total amount of earnings obtained by him from
other employment(s) from the date of dismissal to
the date of reinstatement. Should the laborer decide
that it is preferable not to return to work, the
deduction should be made up to the time judgment
becomes final. And these, for the reason that
employees should not be permitted to enrich
themselves at the expense of their employer.
Besides, there is the “law’s abhorrence for double
compensation.”
Second. Likewise, in mitigation of the damages
that the dismissed respondents are entitled to,
account should be taken of whether in the exercise
of due diligence respondents might have obtained
income from suitable remunerative employment.
We are prompted to give out this last reminder
because it is really unjust that a discharged
employee should, with folded arms, remain inactive
in the expectation that a windfall would come to
him. A contrary view would breed idleness; it is
conducive to lack of initiative on the part of a
laborer.
Mercury Drug Co., Inc. v. CIR (74)
Part II : Labor Standards Law
Labor Standards
While this case was submitted for decision on
March 29, 1965, the delay in its resolution is not due
to the parties. However, it should be noted that
private respondent Dayao filed his ULP charge with
reinstatement and back wages about two years and
fifteen days after his separation on April 10, 1961.
As aforestated, the shortest prescriptive period for
the filing of all other actions for which the statute of
limitations does not fix a period, is four years. The
period of delay in instituting this ULP charge with
claim for reinstatement and back wages, although
within the prescriptive period, should be deducted
from the liability of the employer to him for back
wages. In order that the employee however should
be relieved from proving his income during the
period he was out of the service and the employer
from submitting counter-proofs, which may delay
the execution of the decision, the employer in the
case at bar should be directed to pay private
respondent Dayao back wages equivalent to one
year, eleven months, and fifteen days without
further disqualifications.
Teehankee (dissent) - an award of back wages
equivalent to 3 years should serve as the base figure
without deductions, subject to deductions where
there are mitigating circumstances in favor of the
ER, but subject to an increase by way of exemplary
damages where there are aggravating circumstances
on the ER’s part.
FEATI University v. Bautista (74)
As to the amount of back wages, the Court
applies the precedent recently stated in Mercury
Drug Co. v. CIR of fixing the amount of back wages
to a just and reasonable level without qualification or
deduction so as to avoid protracted delay in the
execution of the award for back wages due to
extended hearings and unavoidable delays and
difficulties encountered in determining the earnings
of the laid-off employees ordered to be reinstated
with back wages during the pendency of the case for
purposes of deducting the same from the gross back
wages awarded.
As has been noted, this formula of awarding
reasonable net back wages without deduction or
qualification relieves the employees from proving or
disproving their earnings during their lay-off and the
employers from submitting counterproofs, and
obviates the twin evils of idleness on the part of the
employee who would “with folded arms, remain
inactive in the expectation that a windfall would
come to him” and attrition and protracted delay in
satisfying such award on the part of unscrupulous
employers who have seized upon the further
proceedings to determine the actual earnings of the
wrongfully dismissed or laid –off employees to hold
unduly extended hearings for each and every
employee awarded back wages and thereby render
practically nugatory such award and compel the
employees to agree to unconscionable settlements of
their back wages award in order to satisfy their dire
need.
Pines City Educational Center v. NLRC (93)
We concur with these factual findings, there
being no showing that they were resolved arbitrarily.
Thus, the order for their reinstatement and payment
of full back wages and other benefits and privileges
from the time they were dismissed up to their actual
reinstatement is proper, conformably with Article
279 of the Labor Code, as amended by Section 34 of
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Republic Act No. 6715 which took effect on march
21, 1989. It should be noted that private
respondents were dismissed illegally on March 31,
1989, or after the effectivity of said amendatory law.
However, in ascertaining the total amount of back
wages payable to them, we go back to the rule prior
to the Mercury Drug rule that the total amount
derived from employment elsewhere by the
employee from the date of dismissal up to the date
of reinstatement, if any, should be deducted
therefrom. We restate the underlying reason that
employees should not be permitted to enrich
themselves at the expense of their employer. In
addition, the law abhors double compensation. To
this extent, our ruling in Alex Ferrer, et al. v. NLRC,
promulgated on July 5, 1993, is hereby modified.
Lopez v. NLRC (96)
With respect to the total amount of back wages
payable to petitioner, the case of Pines City
Educational Center, et al. v. NLRC which was cited in
the recent case of Zenaida Gaco v. NLRC, enunciated
the prevailing jurisprudence on the matter:
in ascertaining the total amount of back wages
payable to them, we go back to the rule prior to
the Mercury Drug rule that the total amount
derived from employment elsewhere by the
employee from the date of dismissal up to the
date of reinstatement, if any, should be
deducted therefrom. We restate the underlying
reason that employees should not be permitted
to enrich themselves at the expense of their
employer. In addition, the law abhors double
compensation.
Bustamante v. NLRC (96)
The Court deems it appropriate to reconsider
such earlier ruling on the computation of back wages
as enunciated in said Pines City Educational Center
case, by now holding that conformably with the
evident legislative intent as expressed in RA 6715,
back wages to be awarded to an illegally dismissed
employee, should not, as a general rule be
diminished or reduced by the earnings derived by
him elsewhere during the period of his illegal
dismissal. The underlying reason for this ruling is
that the employee, while litigating the legality
(illegality) of his dismissal, must still earn a living to
support himself and family, while full back wages
have to be paid by the employer as part of the price
or penalty he has to pay for illegally dismissing his
employee. The clear legislative intent of the
amendment in RA 6715 is to give more benefits to
workers than was previously given them under the
Mercury Drug rule or the “deduction of earnings
elsewhere” rule. Thus, a closer adherence to the
legislative policy behind RA 6715 points to “full back
wages” as meaning exactly that, i.e. without
deducting from back wages the earnings derived
elsewhere by the concerned employee during the
period of his illegal dismissal.
Food Traders House, Inc. v. NLRC (98)
As the law now stands, an illegally dismissed
employee is entitled to his full back wages, without
deduction of earrings earned elsewhere, from the
time his compensation was withheld until his actual
reinstatement. As such, earnings earned elsewhere
during the pendency of the case should not be
deducted from the computation of back wages.
The rationale is that –
the employee, while litigating the legality
(illegality) of his dismissal, must still earn a living
Part II : Labor Standards Law
Labor Standards
to support himself and family, while full back
wages have to be paid by the employer as part
of the price or penalty he has to pay for illegally
dismissing his employee. The clear legislative
intent of the amendment in RA 6715 is to give
more benefits to workers than was previously
given them under the Mercury Drug rule or the
“deduction of earnings elsewhere” rule. Thus, a
closer adherence to the legislative policy behind
RA 6715 points to “full back wages” as meaning
exactly that, i.e. without deducting from back
wages the earnings derived elsewhere by the
concerned employee during the period of his
illegal dismissal.
Torres v. NLRC (2000)
The respondent agency's contention that there
has been a change in the situation of the parties
making execution inequitable because petitioner
accepted employment from another agency without
resigning from it is patently without merit. In the
recent ruling of the Court, we said that the rule
enunciated in Pines City no longer controls. Now, the
rule is that back wages awarded to an illegally
dismissed employee shall not be diminished or
reduced by the earnings derived by him elsewhere
during the period of his illegal dismissal.
EFFECT OF INFLATION
Lantion v. NLRC (90)
In respect of the argument that the inflation
that has supervened justifies the imposition of
interest, this Court has held that the effects of
extraordinary inflation are not to be applied without
an agreement between the parties and without an
official declaration thereof by competent authorities
(Velasco v. manila Electric Co.; Commissioner of
Public Highways v. Burgos)
23.11 FINANCIAL ASSISTANCE
ALLOWED FINANCIAL ASSISTANCE
Phil. Long Distance Telephone Co. v. NLRC (88)
We hold that henceforth separation pay shall be
allowed as a measure of social justice only in those
instances where the employee is validly dismissed
for causes other than serious misconduct or those
reflecting on his moral character. Where the reason
for the valid dismissal is, for example, habitual
intoxication or an offense, involving moral turpitude,
like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give
the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on
the ground of social justice.
XXX The policy of social justice is not intended
to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may
mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an
imperative of every human society but only when
the recipient is not a rascal claiming an undeserved
privilege. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an
impediment to the punishment of the guilty. Those
who invoke social justice may do so only if their
hands are clean and their motives are blameless and
not simply because they happen to be poor. This
great policy of our Constitution is not meant for the
protection of those who have proved they are not
worthy of it, like the workers who have tainted the
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cause of labor with the blemishes of their own
character.
Fernan, C. J., dissenting:
XXX I am in accord with the opinion of Justice
Sarmiento that we should not rationalize compassion
and that of Justice Padilla that the awards of
financial assistance should be left to the discretion of
the National Labor Relations Commission as may be
warranted by the “environmental facts” of the case.
Salavarria v. Letran College (98)
We rule that the NLRC correctly awarded to
petitioner the amount of P45,000.00 as "severance
pay" which is synonymous with "separation pay." As
a general rule, an employee who is dismissed for
cause is not entitled to any financial assistance.
However, equity considerations provide an
exception. In PLDT v. NLRC, equity has been defined
as justice outside law, being ethical rather than jural
and belonging to the sphere of morals than of law. It
is grounded on the precepts of conscience and not
on any sanction of positive law, for equity finds no
room for application where there is law. Further, it
was held that the grant of separation pay is not
merely based on equity but on the provisions of the
Constitution regarding the promotion of social justice
and protection of the rights of the workers.
NOT ALLOWED
Phil. Construction Corp. v. NLRC (89)
While it is true that in some earlier case, We
held that employees dismissed for cause are
nevertheless entitled to separation pay on the
ground of social and compassionate justice, that
doctrine was abandoned by this Court in the recent
case of Philippine Long Distance Telephone Co. v.
NLRC, where We held that:
henceforth separation pay shall be allowed as a
measure of social justice only in those instances
where the employee is validly dismissed for
causes other than serious misconduct or those
reflecting on his moral character. Where the
reason for the valid dismissal is, for example,
habitual intoxication or an offense, involving
moral turpitude, like theft or illicit sexual
relations with a fellow worker, the employer may
not be required to give the dismissed employee
separation pay, or financial assistance, or
whatever other name it is called, on the ground
of social justice.
XXX The policy of social justice is not intended
to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may
mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an
imperative of every human society but only when
the recipient is not a rascal claiming an undeserved
privilege. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an
impediment to the punishment of the guilty. Those
who invoke social justice may do so only if their
hands are clean and their motives are blameless and
not simply because they happen to be poor. This
great policy of our Constitution is not meant for the
protection of those who have proved they are not
worthy of it, like the workers who have tainted the
cause of labor with the blemishes of their own
character.
Eastern Paper Mills, Inc. v. NLRC (89)
An award of separation pay to an employee
who was dismissed for a valid cause is legally
Part II : Labor Standards Law
Labor Standards
indefensible. It contravenes Rule 1, Sec. 7, Book VI
of the Omnibus Rules Implementing the LC.
The only cases when separation pay shall be
paid, although the employee was lawfully dismissed,
are when the cause of termination was not
attributable to the employee's fault but due to: (1)
the installation of labor-saving devices, (2)
redundancy, (3) retrenchment, (4) cessation of the
employer's business, or (5) when the employee is
suffering from a disease and his continued
employment is prohibited by law or is prejudicial to
his health and to the health of his co-employees.
(Art. 283 & 284, LC) Other than these cases, an
employee who is dismissed for a just and lawful
cause is not entitled to separation pay even if the
award were to be called by another name.
Chua v. NLRC (93)
Financial assistance, whatever form it may
assume, is permissible where the employee has
been validly dismissed, only in those instances
where the cause of dismissal was something other
than serious misconduct on the part of the employee
or other cause reflecting adversely on the
employee’s moral character.
23.12 SEPARATION PAY
WHEN – ALTERNATIVE
Imperial Textile Mills, Inc. v. NLRC (93)
With respect to the award of separation pay, we
declared in Santos v. NLRC, et al. that where the
decision ordering the reinstatement of the employee
may no longer be enforced, or is no longer feasible
because of the strained relations between the
parties, the employee may be awarded separation
pay as an alternative to reinstatement.
COMPUTATION
Millares v. NLRC (99)
In case of retrenchment to prevent losses, Art.
283 of the Labor Code imposes on the employer an
obligation to grant to the affected employees
separation pay equivalent to one (1) month pay or
at least one-half (1/2) month pay for every year of
service, whichever is higher. Since the law speaks of
"pay," the question arises, "What exactly does the
term connote?" We correlate Art. 283 with Art. 97 of
the same Code on definition of terms. "Pay" is not
defined therein but "wage." In Songco the Court
explained that both words (as well as salary)
generally refer to one and the same meaning, i.e., a
reward or recompense for services performed.
Specifically, "wage" is defined in letter (f) as the
remuneration or earnings, however designated,
capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece,
or commission basis, or other method of calculating
the same, which is payable by an employer to an
employee under a written or unwritten contract of
employment for work done or to be done, or for
services rendered or to be rendered and includes the
fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to
the employee.
We invite attention to the above-underlined
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clause. Stated differently, when an employer
customarily furnishes his employee board, lodging or
other facilities, the fair and reasonable value thereof,
as determined by the Secretary of Labor and
Employment, is included in "wage." In order to
ascertain whether the subject allowances form part
of petitioner's "wages," we divide the discussion on
the following — "customarily furnished;" "board,
lodging or other facilities;" and, "fair reasonable
value as determined by the Secretary of Labor."
"Customary" is founded on long-established and
constant practice connoting regularity. The receipt of
an allowance on a monthly basis does not ipso facto
characterize it as regular and forming part of salary
because the nature of the grant is a factor worth
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 the term as including
articles or services for the benefit of the employee or
his family but excluding tools of the trade or articles
or service primarily for the benefit of the employer
or necessary to the conduct of the employer's
business. XXX In determining whether a privilege is
a facility, the criterion is not so much its kind but its
purpose.
BASIS
Complex Electronics Employees Assn. v. NLRC
(99)
It is settled that in case of closures or cessation
of operation of business establishments not due to
serious business losses or financial reverses, the
employees are always given separation benefits.
In the instant case, notwithstanding the
financial losses suffered by Complex, such was,
however, not the main reason for its closure.
Complex admitted in its petition that the main
reason for the cessation of the operations was the
pull-out of the materials, equipment and machinery
from the premises of the corporation as dictated by
its customers. It was actually still capable of
continuing the business but opted to close down to
prevent further losses. Under the facts and
circumstances of the case, we find no grave abuse of
discretion on the part of the public respondent in
awarding the employees one (1) month pay for
every year of service as termination pay.
EFFECT OF ACCEPTANCE
Anino v. NLRC (98)
The recognized and accepted doctrine is that a
dismissed employee who has accepted separation
pay is not necessarily estopped from challenging the
validity of his or her dismissal. Neither does it relieve
the employer of legal obligations.
Waivers and quitclaims, on the other hand, are
generally looked upon with disfavor. In Agoy vs.
NLRC, the Court explained that the employee's
acknowledgment of his notice of termination without
any outright objection does not altogether mean
voluntariness on his part. Neither do the execution
of a final settlement and the receipt of amounts
agreed upon foreclose his right to pursue a claim for
illegal dismissal or unfair labor practice. The reasons
for such policy were laid down in AFP Mutual
Benefit Association, Inc. vs. AFP-MBAI-EU as
follows:
Part II : Labor Standards Law
Labor Standards
In labor jurisprudence, it is well established that
quitclaims and/or complete releases executed by the
employees do not estop them from pursuing their
claims arising from the unfair labor practice of the
employer. The basic reason for this is that such
quitclaims and/or complete releases are against
public policy and, therefore, null and void. The
acceptance of termination pay does not divest a
laborer of the right to prosecute his employer for
unfair labor practice acts. (Cariño vs. ACCFA;
Philippine Sugar Institute vs. CIR; Mercury Drug Co.
vs. CIR )
In the Cariño case, supra, the Supreme Court,
speaking thru Justice Sanchez, said:
Acceptance of those benefits would not amount
to estoppel. The reason is plain. Employer and
employee, obviously, do not stand on the same
footing. The employer drove the employee to the
wall. The latter must have to get hold of money.
Because, out of job, he had to face the harsh
necessities of life. He thus found himself in no
position to resist money proffered. His, then, is a
case of adherence, not of choice. One thing sure,
however, is that petitioners did not relent their
claim. They pressed it. They are deemed not to
have waived any of their rights. Renuntiatio non
praesumitur.
LIABILITY OF CORPORATE OFFICERS
LIABILITY RULE
Bogo-Medellin Sugarcane Planters Assn., Inc.
v. NLRC (98)
Unless they have exceeded their authority,
corporate officers are, as a general rule, not
personality liable for their official acts, because a
corporation, by legal fiction, has a personality
separate and distinct from its officers, stockholders
and members. However, this fictional veil may be
pierced whenever the corporate personality is used
as a means of perpetuating a fraud or an illegal act,
evading an existing obligation, or confusing a
legitimate issue. In cases of illegal dismissal,
corporate directors and officers are solidarily liable
with the corporation, where terminations of
employment are done with malice or in bad faith.
23.13 DAMAGES
MORAL/EXEMPLARY
Cruz v. NLRC (2000)
There is merit in petitioner’s submission that the
award of moral and exemplary damages in her favor
is warranted by her unjustified dismissal. Award of
moral and exemplary damages for an illegally
dismissed employee is proper where the employee
had been harassed and arbitrarily terminated by the
employer. Moral damages may be awarded to
compensate one for diverse injuries such as mental
anguish, besmirched reputation, wounded feelings
and social humiliation occasioned by the employer’s
unreasonable dismissal of the employee. This Court
has consistently accorded the working class a right
to recover damages for unjust dismissals tainted
with bad faith; where the motive of the employer in
dismissing the employee is far from noble. The
award of such damages is based not on the Labor
Code but on Article 220 of the Civil Code.
Nueva Ecija Electric Cooperative, Inc. v. NLRC
(2000)
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To warrant an award of moral damages, it must
be shown that the dismissal of the employee was
attended to by bad faith, or constituted an act
oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy.
Unfair labor practices violate the constitutional
rights of workers and employees to self-
organization, are inimical to the legitimate interests
of both labor and management, including their right
to bargain collectively and otherwise deal with each
other in an atmosphere of freedom and mutual
respect; and disrupt industrial peace and hinder the
promotion of healthy and stable labor-management
relations. As the conscience of the government, it is
the Court’s sworn duty to ensure that none trifles
with labor rights.
For this reason, we find it proper in this case to
impose moral and exemplary damages on private
respondent. However, the damages awarded by the
labor arbiter, to our mind, are excessive. In
determining the amount of damages recoverable,
the business, social and financial position of the
offended parties and the business and financial
position of the offender are taken into account. It is
our view that herein private respondents had not
fully acted in good faith. However, we are cognizant
that a cooperative promotes the welfare of its own
members. The economic benefits filter to the
cooperative members. Either equally or
proportionally, they are distributed among members
in correlation with the resources of the association
utilized. Cooperatives help promote economic
democracy and support community development.
Under these circumstances, we deem it proper to
reduce moral damages to only P10,000.00 payable
by private respondent NEECO I to each individual
petitioner. We also deem it sufficient for private
respondent NEECO I to pay each individual petitioner
P5,000.00 to answer for exemplary damages, based
on the provisions of Articles 2229 and 2232 of the
Civil Code.
Permex, Inc. v. NLRC (2000)
Nonetheless, we find that the award of moral
and exemplary damages by the public respondent is
not in order and must be deleted. Moral damages
are recoverable only where the dismissal of the
employee was tainted by bad faith or fraud, or
where it constituted an act oppressive to labor, and
done in a manner contrary to morals, good customs,
or public policy. Exemplary damages may be
awarded only if the dismissal was done in a wanton,
oppressive, or malevolent manner. None of these
circumstances exist in the present case. Misact
SECTION 24 - RETIREMENT
24.01 RETIREMENT
Art. 287
– Retirement (as amended by RA 8558)
Any employee may be retired upon reaching the
retirement age established in:
 The Collective Bargaining Agreement; or
 Other applicable employment contract.
Part II : Labor Standards Law
Labor Standards
In case of retirement, the employee shall be entitled
to receive such retirement benefits as he may have
earned:
 Under existing laws and
 Any collective bargaining agreement and
 Other agreements:
Provided, however, that an employee’s retirement
benefits under any Collective Bargaining Agreement
and other agreements shall not be less than those
provided herein.
In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the
establishment, an employee:
 Upon reaching the age of 60 years or more,
but not beyond 65 years which is hereby
declared the compulsory retirement age,
 Who has served at least 5 years in the said
establishment,
may retire and shall be entitled to retirement pay
equivalent to at least ½ month salary for every year
of service, a fraction of at least 6 months being
considered as 1 whole year.
Unless the parties provide for broader
inclusions, the term “one half (½) month salary”
shall mean 15 days plus 1/12 of the 13th month pay
and the cash equivalent of not more than 5 days of
service incentive leaves.
Retail, service, and agricultural establishments
or operations employing not more than 10
employees or workers are exempted from the
coverage of this provision.
Violation of this provision is hereby declared
unlawful and subject to the penal provisions under
Art. 288 of this Code.
BASIS
Aquino v. NLRC (92)
Retirement benefits, where not mandated by
law, may be granted by agreement of the employees
and their employer or as a voluntary act on the part
of the employer. Retirement benefits are intended
to help the employee enjoy the remaining years of
his life, lessening the burden of worrying for his
financial support, and are a form of reward for his
loyalty and service to the employer.
AGE
MAI Phils., Inc. v. NLRC (88)
Yet a third serious mistake, amounting to grave
abuse of discretion, too, may be ascribed to the
Commission; and that is, its refusal, or neglect to
consider the fact – again quite plain from the record
and to which MAI had adverted more than once –
that the matter of Nolasco’s reinstatement had
become moot and academic at the time that he filed
his second action before the labor arbiter’s office
against MAI on August 16, 1982; for as of that day,
he had already reached the age of 60 years, which is
the retirement age fixed by the Labor Code.
RATIONALE
Producers Bank of the Phils. v. NLRC (98)
Retirement results from a voluntary agreement
between the employer and the employee whereby
the latter after reaching a certain age agrees to
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sever his employment with the former. The very
essence of retirement is the termination of the
employer-employee relationship.
Hence, the retirement of an employee does not,
in itself, affect his employment status especially
when it involves all rights and benefits due to him,
since these must be protected as though there had
been no interruption of service. It must be borne in
mind that the retirement scheme was part of the
employment package and the benefits to be derived
therefrom constituted, as it were, a continuing
consideration for services rendered, as well as an
effective inducement for remaining with the
corporation. It is intended to help the employee
enjoy the remaining years of his life, releasing him
from the burden of worrying for his financial support,
and are a form of reward for his loyalty.
XXX When an employee has retired but his
benefits under the law or the CBA have not yet been
given, he still retains, for the purpose of prosecuting
his claims, the status of an employee entitled to the
protection of the Labor Code, one of which is the
protection of the labor union.
ELIGIBILITY
Brion v. South Phil. Union Mission of the
Seventh Day Adventist Church (99)
Again, it has been held that “pension and
retirement plans create a contractual obligation in
which the promise to pay benefits is made in
consideration of the continued faithful service of the
employee for the requisite period.” In other words,
before a right to retirement benefits or pension vests
in an employee, he must have met the stated
conditions of eligibility with respect to the nature of
employment, age and length of service. This is a
condition precedent to his acquisition of rights
thereunder.
Under the law, service for five years is enough
to entitle an employee who meets the requisite age
to retirement benefits.
24.02 ACCRUAL OF BENEFITS
Llora Motors, Inc. v. Drilon (89)
Examination of Article 287 shows that
entitlement to retirement benefits may accrue either
(a) under existing laws or (b) under a collective
bargaining agreement or other employment
contract. It is at once apparent that Article 287
does not itself purport to impose any obligation upon
employers to set up retirement scheme for their
employees over and above that already established
under existing laws. In other words, Article 287
recognizes that existing laws already provide for a
scheme by which retirement benefits may be earned
or accrue in favor of employees, as part of a broader
social security system that provides not only for
retirement benefits but also death and funeral
benefits, permanent disability benefits, sickness
benefits and maternity leave benefits.
24.03 PRIVATE PLAN
EMPLOYER OBLIGATION
GVM Security and Protective Agency v. NLRC
(93)
The first paragraph of Article 287 deals with
the retirement age of an employee, which is the
Part II : Labor Standards Law
Labor Standards
age established in (a) collective bargaining
agreement or (b) other applicable retirement The requirement for an emergency hospital or
contract. dental clinic shall not be applicable in case there is a
The second paragraph of said Article deals with hospital or dental clinic which is accessible from the
the retirement benefits to be received by a retiring employers establishment and he makes
employee and which are the retirement benefits as arrangement for the reservation therein of the
the employee may have earned under (a ) an necessary beds and dental facilities for the use of his
existing law, (b) collective bargaining or (c) other employees.
agreements.
As stressed in Llora Motors, Inc., Article 287 EMPLOYER ASSISTANCE – OBLIGATION (ART. 161)
does not in itself purport to impose any obligation
upon employers to set up a retirement scheme for It shall be the duty of any employer to provide
their employees over and above that already all the necessary assistance to ensure the adequate
established under existing laws, like Social Security and immediate medical and dental attendance and
Act. treatment to an injured or sick employee in case of
There are 3 kinds of retirement schemes. The emergency.
first type is compulsory and contributory in
character. The second type is one set up by
agreement between the employer and the
employees in collective bargaining agreements or
other agreements between them (Llora v. Drilon).
The third type is one that is voluntarily given by the
employer, expressly as in an announced company
policy or impliedly as in a failure to contest the EE’s
claim for retirement benefits (Allied Investigation
Bureau, Inc. v. Ople).

SECTION 25 - MEDICAL, DENTAL AND

OCCUPATIONAL SAFETY

FIRST AID TREATMENT (ART. 156)

Every employer shall keep in his establishment
such first-aid medicines and equipment as the
nature and conditions of work may require, in
accordance with such regulations as the Department
of Labor shall prescribe.
The Employer shall take steps for the training of
a sufficient number of employees in first-aid
treatment.

EMERGENCY MEDICAL AND DENTAL SERVICES

WHEN REQUIRED (ART. 157)

It shall be the duty of every employer to furnish his

employees in any locality with free medical and
dental attendance and facilities consisting of:

 The Secretary of Labor shall provide by

appropriate regulations the services that
shall be required where the number of
employees does not exceed fifty and shall
determine by appropriate order hazardous
workplaces for purposes of this Article

 In cases of hazardous workplaces, no

employer shall engage the services of a
physician or dentist who cannot stay in the
premises of the establishment for at least 2
hours, in the case of those employed on
full-time basis. Where the undertaking is
non-hazardous in nature, the physician and
dentist may be engaged on retained basis,
subject to such regulations as the Secretary
of Labor may prescribe to insure immediate
availability of medical and dental treatment
and attendance in case of emergency.

WHEN NOT REQUIRED (ART. 158)

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Part III : Social Legislation
Labor Standards

A. SOCIAL SECURITY ACT; GOVERNMENT diseases and work-related illnesses that may be
SERVICE INSURANCE ACT; EMPLOYEES considered compensable based on peculiar hazards
COMPENSATION AND STATE INSURANCE of employment.”
FUND 25.03 Coverage

COVERAGE
25.01 Policy Objectives
Philippine Blooming Mills Co., Inc. v. Social
LAW CONCEPT
Security System (68)
Membership in the SSS is not the result of a
Sulit v. Employees Compensation Commission
bilateral, consensual agreement where the rights
(81)
and obligations of the parties are defined by and
It now appears that after the government had
subject to their will. RA 1161 requires the
experimented for more than 20 years with such
compulsory coverage of employers and employees
employee-oriented application of the law, the
under the system. It is actually a legal imposition,
lawmaker found the result to be unsatisfactory
on said employers and employees designed to
because it destroyed the parity or balance between
provide Social Security to the workingmen.
the competing interests of the employer and
Membership in the SSS, is therefore, in compliance
employee with respect to workmen’s compensation.
with a lawful exercise of the police power of the
The balance was tilted unduly in favor of the
State, to which the principle of non-impairment of
workmen.
the obligation of contract is not a proper defense.
Hence, to restore a sensible equilibrium
between the employer’s obligation to pay workmen’s
Sta. Rita v. Court of Appeals (95)
compensation and the employee’s right to receive
Section 8 (j) (5) simply defines the term
reparation for work-connected death or disability,
“employment” and does not in any way relate to the
the old law was jettisoned and in its place we have
scope of coverage of the Social Security System.
the employee’s compensation and state insurance
That coverage is, upon the other hand, set out in
fund in the Labor Code, as amended.
Section 9 of RA No. 1161 as amended, which defines
the scope of SSS coverage.
Santos v. ECC (93)
Thus, the Standard Contract of Employment to
The reason behind the present doctrine is that
be entered into between foreign shipowners and
the New Labor Code has abolished the presumption
Filipino seafarers is the instrument by which the
of compensability for illness contracted by a worker
former express their assent to the inclusion of the
during employment. To be entitled to disability
latter in the coverage of the Social Security Act. In
benefits, the claimant has to present evidence to
other words, the extension of the coverage of the
prove that his ailment was the result of, or the risk
Social Security System to Filipino seafarers arises by
of contracting the same were aggravated by working
virtue of the assent given in the contract of
conditions or the nature of his work.
employment signed by the employer and seafarer;
However, while the presumption of
that the same contract binds petitioner, who is
compensability and theory of aggravation under the
solidarily liable with the foreign
Workmen’s Compensation Act may have been
shipowners/employers.
abandoned under the new Labor Code, the liberality
of the law in general in favor of the working man still
25.04 Effect of Separation from Employment
prevails. The Employee’s Compensation Act is
basically a social legislation designed to afford relief
to the working man and woman in our society. The
25. 05 Reporting Requirements
ECC, as the agency tasked with implementing the
social justice mandate guaranteed by the
Poblete Construction Co. v. Asian (67)
Constitution, should be mor eliberal in resolving
It was the duty of the employer to “report
compensation claims of employees especially where
immediately to the System” his name, age, civil
there is some basis in facts for inferring a work-
status, occupation, salary and dependents.
connection to the cause of death.
Compliance with this duty did not depend upon the
This interpretation gives meaning and substance
employee’s willingness to give his share of the
to the liberal and compassionate spirit of the law as
contribution. Section 24 is mandatory, to such an
embodied in Article 4 of the New Labor.
extent that if the employee should die or become
The policy is to extend the applicability of PD
sick or disabled without the report having been
626 to a greater number of employees who can avail
made by the employer, the latter is liable for an
of the benefits under the law, which is in consonance
amount equivalent to the benefits to which the
with the avowed policy of the state to give maximum
employee would have been entitled had such report
aid and protection to labor.
been made.
XXX The collection of the employee’s share is a
25.02 Definitions
duty imposed by law, and his unwillingness to have
it deducted from his salary does not excuse the
Latagan v. ECC (92)
employer’s failure to make the report aforesaid. It is
Article 167, par. (l), of the Labor Code, as
precisely in this situation that the employer is liable,
amended, defines a compensable sickness as “illness
and there is no question as to the amount of such
definitely accepted as an occupational disease listed
liability in this case.
by the Commission or any illness caused by
employment subject to proof that the risk of
25.06 Funding
contracting the same is increased by working
conditions. For this purpose, the Commission is
FUND OWNERSHIP
empowered to determine and approve occupational

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Part III : Social Legislation
Labor Standards
CMS Estate, Inc. v. Social Security System
(84)
The Social Security Law was enacted pursuant
to the policy of the government "to develop,
establish gradually and perfect a social security
system which shall be suitable to the needs of the
people throughout the Philippines, and shall provide
protection against the hazards of disability, sickness,
old age and death" (Sec. 2, RA 1161, as amended).
It is thus clear that said enactment implements the
general welfare mandate of the Constitution and
constitutes a legitimate exercise of the police power
of the State.
The taxing power of the State is exercised for
the purpose of raising revenues. However, under our
Social Security Law, the emphasis is more on the
promotion of the general welfare. The Act is not part
of out Internal Revenue Code nor are the
contributions and premiums therein dealt with and
provided for, collectible by the Bureau of Internal
Revenue. The funds contributed to the System
belong to the members who will receive benefits, as
a matter of right, whenever the hazards provided by
the law occur.
All that is required of appellant is to make
monthly contributions to the System for covered
employees in its employ. These contributions,
contrary to appellant's contention, are not 'in the
nature of taxes on employment.' Together with the
contributions imposed upon employees and the
Government, they are intended for the protection of
said employees against the hazards of disability,
sickness, old age and death in line with the
constitutional mandate to promote social justice to
insure the well-being and economic security of all
the people.
Because of the broad social purpose of the
Social Security Act, all doubts in construing the Act
should favor coverage rather than exemption.
25.07 Effect of Non-remittance
SSS FAILURE TO REMIT
Santiago v. Court of Appeals (84)
Clearly, if the employer neglects to pay the
premium contributions, the System may proceed
with the collection in the same manner as the
Bureau of Internal Revenue in case of unpaid taxes.
Plainly, too, notwithstanding non-remittance by
employers of the premium contributions, covered
employees are entitled to the benefits of the
coverage, such as death sickness, retirement, and
permanent disability benefits. These benefits
continue to be enjoyed by the employees by
operation of law and not, as petitioners allege,
because the premium contributions and salary loan
installment payments have already became the
money of the System upon payment by the
employees to the employer. It should be
remembered that funds contributed to the System
by compulsion of law are funds belonging to the
members, which are merely held in trust by the
government. The mentioned benefits, however, do
not include the salary loan privileges that member-
employees apply for. The System may or may not
grant those loans pursuant to its rules and
regulations. The salary loans are not covered by law
but by contract between the System as lender, and
the private employee, as borrower.
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Contrary to petitioners' contention, the penalty
of 3% per month imposed on the employer, if any
premium contribution is not paid to the System,
prescribed by Section 22 of the Act from the date
the contribution falls due until paid, does not
necessarily make the employer the agent of the
System. The prescribed penalty is intended to exact
compliance by the employer. It is evidently of a
punitive character to assure that employers do not
take lightly the State's exercise of the police power
in the implementation of the Republic's declared
policy to develop, establish gradually, and perfect a
Social Security System which shag be suitable to the
needs of the people throughout the Philippines and
to provide protection to employees against the
hazards of disability, sickness, old age, and death.'
Benedicto v. Abad (90)
The 20-year prescriptive period is found in
Section 22 of the Social Security Act which deals
generally with the remittance of contributions to the
SSS. Section 22 (b) does not deal with penal
sanctions for violations of provisions of the Social
Security Act nor of the rules and regulations
promulgated by the Social Security Commission. The
penal sanctions established by the Social Security
Act are found in Section 28 which forms part of the
final portion or chapter of the Act denominated as
"G. Miscellaneous Provisions." In contrast, Section
22 is found in chapter E entitled "Sources of Funds
— Employment Records and Reports." But an
examination of Section 28 entitled "Penal Clauses"
shows that none of the subsections thereof purports
to establish a prescriptive period in respect of such
criminal sanctions. If the 20-year period of
prescription had been intended by the legislative
authority to apply to the penal sanctions established
by the statute, one would expect it either to be
textually located in chapter G "Miscellaneous
Provisions" and not in chapter E "Sources of Funds,"
or at the very least to refer to the sections on penal
sanctions in chapter G. In other words, the context
of Section 22 (b) indicates that it does not relate to
criminal sanctions at all.
Secondly, close examination of Section 22 (b)
will show that the "necessary action against the
employer" referred to in the second paragraph
thereof is an action that is brought against the
employer for the collection of contributions payable
under the Social Security Act which the employer
has refused or neglected to pay.
Thirdly, a 20-year statute of limitation if made
applicable in respect of criminal liability of an
employer for failure to remit contributions to the
SSS would constitute a disproportionately long
statute of limitations if one compared it with either
the applicable prescriptive periods in respect of
crimes punishable under the Revised Penal Code or
the prescriptive periods applicable to crimes
punished by special statutes under Act No. 3326, as
amended.
It thus appears to us that to apply a single,
uniform 20-year prescriptive period to both civil
actions for collection of unremitted SSS premiums
and to criminal prosecutions for violations of
provisions of the Social Security Act and of rules and
regulations promulgated by the Social Security
Commission, would be both grossly disproportional
and too simplistic. Such a result cannot lightly be
assumed to have been intended by the legislative
authority in enacting Section 22 (b), second
Part III : Social Legislation
Labor Standards
paragraph, of the Social Security Act.
In the case at bar, the information was filed
against petitioner Benedicto ten (10) years after the
alleged violations had been discovered by the SSS.
We hold that the statutory crime here charged had
prescribed by then, the prescriptive period here
applicable being four (4) years.
The foregoing, however, is concerned only with
the extinguishment of the criminal liability for the
offense charged in the information. The extinction of
the criminal liability of petitioner by reason of
prescription has had no impact upon the related civil
action for enforcement of the civil liability of
petitioner. Said civil action, in accordance with the
provisions of Section 22 (b), second paragraph
quoted above of the Social Security Act, may be
brought within twenty (20) years from the time the
employer's delinquency was discovered. Since at the
time of the institution of the criminal proceedings
against petitioner Benedicto, so far as the record
shows, no reservation had been made for institution
of a separate civil action for recovery of the civil
liability arising from the criminal acts charged, such
civil action must be deemed to have been instituted
simultaneously with the commencement of the
criminal proceedings. Such civil action may proceed
notwithstanding the extinction of the criminal action
against petitioner Benedicto.
25.08 Benefits
GSIS RETIREMENT BENEFITS
Conte v. Commission on Audit (96)
Said Sec. 28 (b) as amended by RA 4968 in no
uncertain terms bars the creation of any insurance
or retirement plan — other than the GSIS — for
government officers and employees, in order to
prevent the undue and inequitous proliferation of
such plans. It is beyond cavil that Res. 56
contravenes the said provision of law and is
therefore invalid, void and of no effect. No ignore
this and rule otherwise would be tantamount to
permitting every other government office or agency
to put up its own supplementary retirement benefit
plan under the guise of such "financial assistance".
We are not unmindful of the laudable purposes
for promulgating Res. 56, and the positive results it
must have had, not only in reducing costs and
expenses on the part of the SSS in connection with
the pay-out of retirement benefits and gratuities, but
also in improving the quality of life for scores of
retirees. But it is simply beyond dispute that the SSS
had no authority to maintain and implement such
retirement plan, particularly in the face of the
statutory prohibition. The SSS cannot, in the guise
of rule-making, legislate or amend laws or worse,
render them nugatory.
ECSIF CASES
Manifestation
Government Service Insurance System v. CA
(98)
While it is true that the degree of private
respondent's physical condition at the time of her
retirement was not considered as permanent total
disability, yet, it cannot be denied that her condition
subsequently worsened after her head operation and
consequent retirement. In fact, she suffered
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afterwards from some ailments like headaches,
dizziness, weakness, inability to properly sleep,
inability to walk without support and failure to regain
her memory. All these circumstances ineluctably
demonstrate the seriousness of her condition,
contrary to the claim of petitioner. More than that, it
was also undisputed that private respondent was
made to take her medication for life.
A person's disability may not manifest fully at
one precise moment in time but rather over a period
of time. It is possible that an injury which at first
was considered to be temporary may later on
become permanent or one who suffers a partial
disability becomes totally and permanently disabled
from the same cause.
Distinction – Disability
GSIS v. Court of Appeals (99)
The labor Code classifies employees' disability
into three distinct categories, namely: a) temporary
total disability; b) permanent total disability; and c)
permanent partial disability. Section 2, Rule VII, of
the Rules and Regulation Implementing Title II, Book
IV of the Labor Code defines and clarifies these
categories, as follows:
Sec. 2. Disability. — (a) A total disability is
temporary if as a result of the injury or sickness
the employee is unable to perform any gainful
occupation for a continuous period not exceeding
120 days, except as otherwise provided for in Rule
X of these Rules.
(b) A disability is total and permanent if as a result
of the injury or sickness the employee is unable to
perform any gainful occupation for a continuous
period exceeding 120 days except as otherwise
provided for in Rule X of these Rules.
(c) A disability is partial and permanent if as a
result of the injury or sickness the employee
suffers a permanent partial loss of the use of any
part of his body.
In Vicente vs. Employees Compensation
Commission, the Court laid down the litmus test and
distinction between Permanent Total Disability and
Permanent Partial Disability, to wit:
. . . While "permanent total disability" invariably
results in an employee's loss of work or inability
to perform his usual work, "permanent partial
disability," on the other hand, occurs when an
employee loses the use of any particular
anatomical part of his body which disables him to
continue with his former work. Stated otherwise,
the test of whether or not an employee suffers
from "permanent total disability" is a showing of
the capacity of the employee to continue
performing his work notwithstanding the
disability he incurred. Thus, if by, reason of the
injury or sickness he sustained, the employee is
unable to perform his customary job for more
than 120 days and he does not come within the
coverage of Rule X of the Amended Rules on
Employees Compensability (which, in a more
detailed manner, describes what constitutes
temporary total disability). then the said
employee undoubtedly suffers from "permanent
total disability" regardless of whether or not he
loses the use of any part of his body.
Permanent Total Disability
GSIS v. Court of Appeals (98)
Judicial precedents likewise show that disability
is intimately related to one's earning capacity. It has
been a consistent pronouncement of this Court that
"permanent total disability means disablement of
an employee to earn wages in the same kind of
work, or work of a similar nature that she was
Part III : Social Legislation
Labor Standards
trained for or accustomed to perform, or any kind of
work which a person of her mentality attainment
could do." "It does not mean state of absolute
helplessness, but inability to do substantially all
material acts necessary to prosecution of an
occupation for remuneration or profit in substantially
customary and usual manner."
The Court has construed permanent total
disability as the "lack of ability to follow continuously
some substantially gainful occupation without
serious discomfort or pain and without material
injury or danger to life." It is, therefore, clear from
established jurisprudence that the loss of one's
earning capacity determines the disability
compensation one is entitled to.
Santos v. Employees Compensation
Commission (93)
Nazaro v. Employees Compensation
Commission (90)
Unknown Cause
Pano v. Employees Compensation Commission
(89)
Permanent – Total
Bejerano v. Employees Compensation
Commission (92)
It has been repeatedly held by this Court that
"permanent total disability means disablement of an
employee to earn wages in the same kind of work,
or work of a similar nature that she was trained for
or accustomed to perform, or any kind of work which
a person of her mentality and attainment could do."
It does not mean state of absolute helplessness,
but inability to do substantially all material acts
necessary to prosecution of an occupation for
remuneration or profit in substantially customary
and usual manner.
Permanent total disability is the lack of ability to
follow continuously some substantially gainful
occupation without serious discomfort or pain and
without material injury or danger to life.
It is therefore clear from the aforecited rulings
that the loss of one's earning capacity determines
the disability compensation one is entitled to. Thus,
this Court ruled:
In disability compensation, it is not the injury
which is compensated, but rather it is the incapacity
to work resulting in the impairment of one's earning
capacity (Ulibas vs. Republic; Roma vs. WCC).
A thorough examination of the records
convinces us that petitioner's claim is substantiated
with enough evidence to show that his disability is
permanent and total.
Occupational Disease
GSIS v. Court of Appeals (98)
While it is true that the degree of private
respondent's physical condition at the time of her
retirement was not considered as permanent total
disability, yet, it cannot be denied that her condition
subsequently worsened after her head operation and
consequent retirement. In fact, she suffered
afterwards from some ailments like headaches,
dizziness, weakness, inability to properly sleep,
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inability to walk without support and failure to regain
her memory. All these circumstances ineluctably
demonstrate the seriousness of her condition,
contrary to the claim of petitioner. More than that, it
was also undisputed that private respondent was
made to take her medication for life.
A person's disability may not manifest fully at
one precise moment in time but rather over a period
of time. It is possible that an injury which at first
was considered to be temporary may later on
become permanent or one who suffers a partial
disability becomes totally and permanently disabled
from the same cause.
In the same vein, this Court has ruled that
"disability should not be understood more on its
medical significance but on the loss of earning
capacity." Private respondent's persistent illness
indeed forced her to retire early which, in turn,
resulted in her unemployment, and loss of earning
capacity.
Judicial precedents likewise show that disability
is intimately related to one's earning capacity. It has
been a consistent pronouncement of this Court that
"permanent total disability means disablement of an
employee to earn wages in the same kind of work,
or work of a similar nature that she was trained for
or accustomed to perform, or any kind of work which
a person of her mentality attainment could do." "It
does not mean state of absolute helplessness, but
inability to do substantially all material acts
necessary to prosecution of an occupation for
remuneration or profit in substantially customary
and usual manner."
The Court has construed permanent total
disability as the "lack of ability to follow continuously
some substantially gainful occupation without
serious discomfort or pain and without material
injury or danger to life." It is, therefore, clear from
established jurisprudence that the loss of one's
earning capacity determines the disability
compensation one is entitled to.
25.09 Basis of Claim
BASIS – INCREASED RISKS
Riño v. Employees Compensation Commission
(2000)
Under the Labor Code, as amended, the
beneficiaries of an employee are entitled to death
benefits if the cause of death is a sickness listed as
occupational disease by the ECC; or any other illness
caused by employment, subject to proof that the risk
of contracting the same is increased by the working
conditions.
As we ruled in Sante v. Employees’
Compensation Commission, "x x x a claimant
must submit such proof as would constitute a
reasonable basis for concluding either that the
conditions of employment of the claimant caused the
ailment or that such working conditions had
aggravated the risk of contracting that ailment.
What kind and quantum of evidence would constitute
an adequate basis for a reasonable man (not
necessarily a medical scientist) to reach one or the
other conclusion, can obviously be determined only
on a case-to-case basis. That evidence must,
however, be real and substantial, and not merely
apparent; for the duty to prove work-causation
or work-aggravation imposed by existing law is
real x x x not merely apparent."
Part III : Social Legislation
Labor Standards
COMING AND GOING RULE
Lentejas v. Employees Compensation
Commission (91)
In a line of cases, this Court has held that an
injury sustained by the employee while on his way to
or from his place of work, and which is otherwise
compensable, is deemed to have arisen out of and in
the course of his employment. In Vda. de Torbela V.
Employees' Compensation Commission, the Court
held:
The claim is compensable. When an employee is
accidentally injured at a point reasonably
proximate to the place at work, while he is going
to and from his work, such injury is deemed to
have arisen out of and in the course of his
employment.
In Alano v. Employees' Compensation
Commission, the Court held as follows:
In this case, it is not disputed that the deceased
died while going to her place of work. She was at the
place where, as the petitioner puts it, her job
necessarily required to be if she was to reach her
place of work on time. There was nothing private or
personal about the school principal's being at the
place of the accident. She was there because her
employment required her to be there.
We note that under the foregoing cases, it is
quite clear that although Victorio might have been
on his way home from Barangay Banti at the time he
was attacked and killed by Arnulfo Luaton, that
circumstance did not by itself operate to render his
death non- compensable. We note, at the same
time, that in all the cases noted above from Vda. de
Torbela to Lazo, the events which caused or
precipitated injury or death did not involve the
intentional inflicting of harm or injury or death upon
the employee concerned. In the instant case,
however, as noted earlier, Victorio's death was the
result of a murderous assault upon him. Thus, the
precise technical issue here is whether or not the
circumstance that Victorio's death was the result of a
criminal attack by another person, not a member of
the staff of the Calbayog City Engineer's Office, had
the effect of rendering his death non-compensable
although such death had occurred in the course of
performance of official functions.
After careful examination of the Vda. de
Torbela, Alano and Lazo cases, we believe and so
hold that the case at bar falls within the scope of the
rule set out in those cases. There is no question that
the deceased in the instant case did not foresee, and
could not have foreseen, the attack on himself when
he undertook to go to Barangay Banti to inspect and
oversee the municipal construction work then on-
going in that place. In so far as the mind and will of
the victim were concerned, the homicidal intent on
the part of Arnulfo Luaton was as external and
fortuitous an event as a speeding mini-bus or a
recklessly negligent jeepney driver. In other words,
we do not think that the third person's criminal
intent should be regarded as a supervening cause
having the effect of nullifying the circumstance that,
when Victorio was attacked and killed, he was where
his work required him to be and that he was then in
the course of performing his official duties. It seems
pertinent to note that inflicting physical injuries or
death through negligence constitutes a criminal
offense both under the Revised Penal Code (Article
365) and a special statute (Republic Act No. 4136,
the Land Transportation and Traffic Code), just as
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much as homicide or murder.
25.10 Prescriptive Period
REMITTANCE
Benedicto v. Abad Santos (90)
We note, in the first place, that the 20-year
prescriptive period is found in Section 22 of the
Social Security Act which deals generally with the
remittance of contributions to the SSS. Section 22
(b) does not deal with penal sanctions for violations
of provisions of the Social Security Act nor of the
rules and regulations promulgated by the Social
Security Commission. The penal sanctions
established by the Social Security Act are found in
Section 28 which forms part of the final portion or
chapter of the Act denominated as "G. Miscellaneous
Provisions." In contrast, Section 22 is found in
chapter E entitled "Sources of Funds — Employment
Records and Reports." But an examination of Section
28 entitled "Penal Clauses" shows that none of the
subsections thereof purports to establish a
prescriptive period in respect of such criminal
sanctions. If the 20-year period of prescription had
been intended by the legislative authority to apply to
the penal sanctions established by the statute, one
would expect it either to be textually located in
chapter G "Miscellaneous Provisions" and not in
chapter E "Sources of Funds," or at the very least to
refer to the sections on penal sanctions in chapter G.
In other words, the context of Section 22 (b)
indicates that it does not relate to criminal sanctions
at all.
Secondly, close examination of Section 22 (b)
will show that the "necessary action against the
employer" referred to in the second paragraph
thereof is an action that is brought against the
employer for the collection of contributions payable
under the Social Security Act which the employer
has refused or neglected to pay.
Thirdly, a 20-year statute of limitation if made
applicable in respect of criminal liability of an
employer for failure to remit contributions to the
SSS would constitute a disproportionately long
statute of limitations if one compared it with either
the applicable prescriptive periods in respect of
crimes punishable under the Revised Penal Code or
the prescriptive periods applicable to crimes
punished by special statutes under Act No. 3326, as
amended. We note also that under the National
Internal Revenue Code (in the form it existed at the
time of the commission of the acts here involved) to
which Section 22 (b) of the Social Security Act
refers, penal sanctions for violations of provisions of
that Code prescribe in five (5) years and that the
period of prescription applicable in respect of civil
remedies for the collection of internal revenue taxes
is also five (5) years.
REGISTRATION
People v. Montiero (90)
25.11 Exclusivity of Benefits
EXCLUSIVITY
Ysmael Maritime Corp. v. Avelino (87)
OFFICIAL FUNCTIONS
Part III : Social Legislation
Labor Standards
Hinoquin v. Employees Compensation
Commission (89)
The concept of a "work place" referred to in the
Amended (Implementing) Rules cannot always be
literally applied to a soldier on active duty status.
Obviously, a soldier must go where his company is
stationed. A place in which soldiers have secured
lawful permission to be at cannot be very different,
legally speaking, from a place where they are
required to go by their commanding officer.
In this case, the 3 soldiers were on an overnight
pass not on vacation leave. Moreover, they were
required or authorized to carry their firearms with
which presumably they were to defend themselves if
NPA elements happened to attack them while en
route to and from Aritao or with which to attack and
seek to capture such NPA elements as they might
encounter.
A soldier on active duty status is really on 24
hours a day official duty status and is subject to
military discipline and military law 24 hours a day.
He is subject to call and to the orders of his superior
officers at all times, 7 days a week, except, of
course, when he is on vacation leave status. While
going to a fellow soldier's home for a few hours for a
meal and some drinks was not a specific military
duty, he was nonetheless in the course of
performance of official functions. Indeed, it appears
to us that a soldier should be presumed to be on
official duty unless he is shown to have clearly and
unequivocally put aside that status or condition
temporarily by, e.g., going on an approved vacation
leave. Even vacation leave may, it should be
remembered, be preterminated by superior orders.
25.12 Benefit Protection
25.13 Dispute Settlement
A. NATIONAL HEALTH INSURANCE ACT OF 1995
Law - National Health Insurance Act of 1995 - RA
7875
OBJECTIVES
Sec. 2 Declaration of Principles and Policies
Section 11, Article XIII of the 1987 Constitution
declares that the State shall adopt an integrated and
comprehensive approach to health development
which shall endeavor to make essential goods,
health and other social services available to all the
people at affordable cost. Priority for the needs of
the underprivileged, sick, elderly, disabled, women
and children shall be recognized. Likewise, it shall
be the policy of the State to provide fee medical care
to paupers.
(b) Universality – The Program shall provide all
citizens with the mechanism to gain financial access
to health services, in combination with other
government health programs. The National Health
Insurance Program shall give the highest priority to
achieving coverage of the entire population with at
least a basic minimum package of health insurance
benefits.
Sec. 5
Establishment and Purpose
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There is hereby created the National health
Insurance Program which shall provide health
insurance coverage and ensure affordable,
acceptable, available, and accessible health care
services for all citizens of the Philippines, in
accordance with the policies and specific provisions
of this Act. This social insurance program shall
serve as the means for the healthy to help pay for
the care of the sick and for those who can afford
medical care to subsidize those who cannot. It shall
initially consist of Programs I and II of Medicare and
be expanded progressively o constitute one universal
health insurance program for the entire population.
The Program shall include a sustainable system of
funds constitution, collection, management and
disbursement for financing the availment of a basic
minimum package and other supplementary
packages of health insurance benefits by a
progressively expanding proportion of the
population. The Program shall be limited to paying
for the utilization of health services by covered
beneficiaries or to purchasing health services in
behalf of such beneficiaries. It shall be prohibited
from providing health care directly, from buying and
dispensing drugs and pharmaceuticals, from
employing physicians and other professional for the
purpose of directly rendering care, and from owning
or investing in health care facilities.
COVERAGE
Sec. 7.
Enrollment. - The Program shall enroll beneficiaries
in order for them to be placed under coverage that
entitles them to avail of benefits with the assistance
of the financial arrangements provided by the
Program. The process of enrollment shall include:
 identification of beneficiaries,
 issuance of appropriate documentation
specifying eligibility to benefits, and
 indicating how membership was obtained or is
being maintained.
The enrollment shall proceed in accordance with
these specific policies:
a. All persons currently eligible for
benefits under Medicare Program I,
including SSS and GSIS members,
retirees, pensioners and their dependents,
shall immediately and automatically be
made members of the National Health
Insurance Program;
b. All persons eligible for benefits through
health insurance plans established by local
governments as part of Program II of
Medicare or in accordance with the
provisions of this Act, including indigent
members, shall also be enrolled in the
Program
c. All persons eligible for benefits as
members of local health insurance
plans established by t he Corporation
Part III : Social Legislation
Labor Standards
in accordance with the implementing rules
and regulations of this Act shall also be
deemed to have enrolled in the Program.
Enrollment of persons who have no
current health insurance coverage shall be
given priority by the corporations; and
d. All persons eligible for benefits as
members of other government-initiated
health insurance programs, community-
based health care organizations,
cooperatives, or private non-profit health
insurance planes shall be enrolled in the
Program upon accreditation by the
Corporation which shall devise and
provide incentives to ensure that such
accredited organizations will benefit form
their participation in the program.
FUNDING
Sec. 24 -
Creation of the National Health Insurance
Fund.
There is hereby created a National Health Insurance
Fund, hereinafter referred to as the Fund, that shall
consist of:
a. Contributions from Program
members;
b. Current balances of the Health
Insurance Funds of the SSS and the
GSIS collected under the Philippine
Medical Care Act of 1969, as
amended, including arrearages of the
Government of the Philippines with
the GSIS for the said Fund;
c. Other appropriations earmarked by
the national and local governments
purposely for the implementation of
the Program;
d. Subsequent appropriations
provided for under Sections 46 and 47
of this Act;
e. Donations and grants-in-aid; and
f. All accruals thereof.
Sec. 28 –
Contributions
All members of the Program shall contribute to the
Fund, in accordance with a reasonable, equitable
and progressive contribution schedule to be
determined by the Corporation on the basis of
applicable actuarial studies and in accordance with
the following guidelines:
a. Formal sector employees and
current Medicare members and
their employers shall continue
paying the same monthly
contributions as provided for
by law until such time that the
Corporation shall have
determined the contribution
scheduled mentioned herein:
Provided, That their monthly
contrubtion shall not exceed
3% of their respective monthly
salaries.
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b. Contributions from self-
employed member shall be
based primarily on household
earnings and assets; their total
contributions for one year shall
not, however, exceed three
percent (3%) of their
estimated actual net income
for the preceding year.
c. Contributions made in behalf of
indigent members shall not
exceed the minimum
contributions set for employed
members.
Sec. 29.
Payment for Indigent Contributions. - Contributions
for indigent members shall be subsidized partially by
the local government unit where the member
resides. The Corporation shall provide counterpart
financing equal to the LGU's subsidy for indigents:
Provided, That in the case of fourth, fifth and sixth
class LGUs, the National Government shall provide
up to ninety percent (90%) of the subsidy for
indigents for a period not exceeding five (5) years.
The share of the LGUs shall be progressively
increased until such time that its share becomes
equal to that of the National Government.
BENEFITS AND EXCLUSION
Sec. 10,
Benefit Package
Sec. 11
Excluded Personal Health Services. - The benefits
granted under this Act shall not cover expenses for
the services enumerated hereunder except when the
Corporation, after actuarial studies, recommend
their inclusion subject to the approval of the Board:
non-prescription drugs and devices;
outpatient psychotherapy and counseling for
mental disorders;
drug and alcohol abuse or dependency
treatment;
cosmetic surgery;
home and rehabilitation services;
optometric services;
normal obstetrical delivery; and
cost-ineffective procedures which shall be
defined by the Corporation.
Sec. 12.
Entitlement to Benefits. - A member whose premium
contributions for at least three (3) months have
been paid within the six (6) months prior to the first
day of his or his dependents' availment, shall be
entitled to the benefits of the Program:
Provided, That such member can
show that he contributes
thereto with sufficient
regularity, as evidenced in
their health insurance ID
card: and
Provided, further, That he is not
currently subject to legal
penalties as provided for
in Section 44 of this Act.
Part III : Social Legislation
Labor Standards
The following need not pay the monthly
contributions to be entitled to the Program's
benefits:
Retirees and pensioners of the SSS and
GSIS prior to the effectivity of this Act;
Members who reach the age of
retirement as provided for by law and
have paid at least one hundred twenty
(120) monthly contributions; and
Enrolled indigents.
HEALTH CARE PROVISIONS
Sec. 30.
Free Choice of Health Facility, Medical or Dental
Practitioner. - Beneficiaries requiring treatment or
confinement shall be free to choose from accredited
health care providers. Such choice shall, however,
be subject to limitations based on the area of
jurisdiction of the concerned Office and on the
appropriateness of treatment in the facility chosen or
by the desired provider.
Sec. 31.
Authority to Grant Accreditation. - The Corporation
shall have the authority to grant to health care
providers accreditation which confers the privilege of
participating in the Program.
Sec. 33.
Minimum Requirements for Accreditation. - The
minimum accreditation requirements for health care
providers are as follows:
 human resource, equipment and
physical structure in conformity with
the standards of the relevant facility,
as determined by the Department of
Health;
 acceptance of formal program of
quality assurance and utilization
review;
 acceptance of the payment
mechanisms specified in the
following section;
 adoption of referral protocols and
health resources sharing
arrangements;
 recognition of the rights of patients;
and
 acceptance of information system
requirements and regular transfer of
information.
Sec. 34.
Provider Payment Mechanisms. - The following
mechanisms for public and private providers shall be
allowed in the Program:
 Fee-for-service based on
mechanisms established by the
Corporation;
 Capitation of health care
professionals and facilities, or
networks of the same including
HMOs, medical cooperatives,
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and other legally formed health
service groups;
 A combination of both; and
 Any or all of the above,
subject to a global budget.
Each Office shall recommend the appropriate
payment mechanism within its jurisdiction for
approval by the Corporation. Special consideration
shall be given to payment for services rendered by
public and private health care providers serving
remote or medically underserved areas.
Sec. 37.
Quality Assurance. - Under the guidelines approved
by the Corporation and in collaboration with their
respective Offices, health care providers shall take
part in programs of quality assurance, utilization
review, and technology assessment that have the
following objectives: QUC
to ensure that the quality of personal health
services delivered, measured in terms of
inputs, process, and outcomes, are of
reasonable quality in the context of the
Philippines over time;
to ensure that the health care standards are
uniform within the Office's jurisdiction
and eventually throughout the nation;
and
to see to it that the acquisition and use of
scarce and expensive medical
technologies and equipment are
consistent with actual needs and
standards of medical practice, and that:
the performance of medical procedures and
the administration of drugs are
appropriate, necessary and
unquestionably consistent with accepted
standards of medical practice and ethics.
Drugs for which payments will be made
shall be those included in the Philippine
National Drug Formulary, unless explicit
exception is granted by the Corporation.
the performance of medical procedures and
the administration of drugs are
appropriate, consistent with accepted
standards of medical practice and ethics,
and respectful of the local culture.
Sec. 38.
Safeguards Against Over and Under Utilization. - It
is incumbent upon the Corporation to set up a
monitoring mechanism to be operationalized through
a contract with health care providers to ensure that
there are safeguards against: OUIUI
over-utilization of services;
unnecessary diagnostic and therapeutic procedures
and intervention;
irrational medication and prescriptions;
under-utilization of services; and
inappropriate referral practices.
The Corporation may deny or reduce the payment
for claims when such claims are attended by false or
incorrect information and when the claimant fails
without justifiable cause to comply with the
pertinent rules and regulations of this Act.
GRIEVANCE AND APPEAL
Sec. 39.
Part III : Social Legislation
Labor Standards
Grievance System. - A system of grievance is hereby and other records and to testify therein
established, wherein members, dependents, or on any question arising out of this Act.
health care providers of the Program who believe
they have been aggrieved by any decision of the Any case of contumacy shall be dealt with in
implementors of the Program, may seek redress of accordance with the provisions of the Revised
the grievance in accordance with the provisions of Administrative Code and the Rules of Court. The
this Article. Board or the Committee, as the case may be, shall
Sec. 40. prescribe the necessary administrative sanctions
Grounds for Grievances. - The following acts shall such as fines, warnings, suspension or revocation of
constitute valid grounds for grievance action: the right to participate in the Program.
ANDDO
any violation of the rights of patients;
a willful neglect of duties of Program
implementors that results in the loss or
non-enjoyment of benefits by members
or their dependents;
unjustifiable delay in actions on claims;
delay in the processing of claims that
extends beyond the period agreed upon;
and
any other act or neglect that tends to
undermine or defeat the purposes of this
Act.

Sec. 41
Grievance and Appeal Procedures. - A member, his
dependent, or a health care provider may file a
complaint for grievance based on any of the above
grounds, in accordance with the following
procedures:
A complaint for grievance must be filed with
the Office which shall rule on the
complaint ninety (90) calendar days from
receipt thereof.
Appeals from Office decisions must be filed
with the Board within thirty (30) days
from receipt of notice of dismissal or
disallowance by the Office.
The Offices shall have no jurisdiction over any
issue involving the suspension or
revocation of accreditation, the
imposition of fines, or the imposition of
charges on members or their dependents
in case of revocation of their entitlement.
All decisions by the Board as to entitlement
to benefits of members or to payments
of health care providers shall be
considered final and executory.

Sec. 42.
Grievance and Appeal Review Committee. - The
Board shall create a Grievance and Appeal Review
Committee, composed of three (3) to five (5)
members, hereinafter referred to as the Committee,
which, subject to the procedures enumerated above,
shall receive and recommend appropriate action on
complaints from members and health care providers
relative to this Act and its implementing rules and
regulations.

The Committee and the Board, in the exercise of

their quasi-judicial function, as specified in Section
17 hereof, can:
administer oaths,
certify to official acts and issue subpoena to
compel the attendance and testimony
of witnesses, and
subpoena duces tecum ad testificadum to
enjoin the production of books, papers

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