2009 PRE-WEEK BAR EXAM NOTES ON

LABOR LAW
By: Prof. JOSELITO GUIANAN CHAN

LABOR LAWS OF THE PHILIPPINES

PART - I

NEW LAWS

1. What are the new laws affecting labor law?

There are four laws that have been enacted which significantly impact on labor laws.  They
are as follows:

1.  REPUBLIC ACT NO. 9492 - AN ACT RATIONALIZING THE CELEBRATION

OF NATIONAL HOLIDAYS AMENDING FOR THE PURPOSE SECTION 26,
CHAPTER 7, BOOK I OF EXECUTIVE ORDER NO. 292, AS AMENDED,
OTHERWISE KNOWN AS THE ADMINISTRATIVE CODE OF 1987 [Approved on
JULY 25, 2007] chanrobles virtual law library

2. REPUBLIC ACT NO. 9481  - AN ACT STRENGTHENING THE WORKERS'

CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION, AMENDING FOR THE
PURPOSE PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE
KNOWN AS THE LABOR CODE OF THE PHILIPPINES (which lapsed into law on
May 25, 2007 and became effective on June 14, 2007)

3. REPUBLIC ACT NO. 9422 - AN ACT TO STRENGTHEN THE REGULATORY

FUNCTIONS OF THE PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION (POEA), AMENDING FOR THIS PURPOSE [Approved on
April 10, 2007]

4. REPUBLIC ACT NO. 9347 - AN ACT RATIONALIZING THE COMPOSITION

AND FUNCTIONS OF THE NATIONAL LABOR RELATIONS COMMISSION,
AMENDING FOR THIS PURPOSE ARTICLE 213, 214, 215 AND 216 OF P.D. NO.
442, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE
PHILIPPINES. [Lapsed into law on JULY 27, 2006, without the signature of the
President, in accordance with Article VI, Section 27 (1) of the Constitution]

2.  Pertinent text of the above-mentioned laws follows:

REPUBLIC ACT NO. 9492 - AN ACT RATIONALIZING THE CELEBRATION OF

NATIONAL HOLIDAYS AMENDING FOR THE PURPOSE SECTION 26,
CHAPTER 7, BOOK I OF EXECUTIVE ORDER NO. 292, AS AMENDED,
OTHERWISE KNOWN AS THE ADMINISTRATIVE CODE OF 1987
 [APPROVED ON JULY 25, 2007]

Regular Holidays and Nationwide Special Days. “ (1) Unless otherwise modified by law, and
or proclamation, the following regular holidays and special days shall be observed in the
country:

a) Regular Holidays

New year’s Day-January 1

Maundy Thursday-Movable date

Good Friday-Movable date

Eidul Fitr-Movable date

Araw ng Kagitingan-Monday nearest April 9

(Bataaan and Corregidor Day)

Labor Day-Monday nearest May 1

Independence Day-Monday nearest June 12

National Heroes Day-Last Monday of August

Bonifacio Day-Monday nearest November 30

Christmas Day-December 25

Rizal Day-Monday nearest December 30

b) Nationwide Special Holidays:

Ninoy Aquino Day-Monday nearest August 21

All Saints Day-November 1

Last Day of the Year-December 31

c) In the event the holiday falls on a Wednesday, the holiday will be observed on the Monday
of the week.  If the holiday falls on a Sunday, the holiday will be observed on the Monday
that follows: Provided, That for movable holidays, the President shall issue a proclamation, at
least six (6) months prior to the holiday concerned, the specific date that shall be declared as
a nonworking day:  Provided, however, The Eidul Adha shall be celebrated as a regional
holiday in the Autonomous Region in Muslim Mindanao. chanrobles virtual law library

--------------------oOo----------------------
  

REPUBLIC ACT NO. 9481  - AN ACT STRENGTHENING THE WORKERS'

CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION, AMENDING FOR THE
PURPOSE PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE
KNOWN AS THE LABOR CODE OF THE PHILIPPINES
(which lapsed into law on May 25, 2007 and became effective on June 14, 2007)

Note:  The following provisions of the Labor Code have been amended by R. A. No. 9481:

Article 234 - Requirements of Registration

Article 238 - Cancellation of Registration

Article 239 - Grounds for Cancellation of Union Registration

Article 245 - Ineligibility of Managerial Employees to Join any Labor Organization;

Right of Supervisory Employees

Article 256 - Representation Issue in Organized Establishments

Article 257 - Petitions in Unorganized Establishments

and INSERTED as new provisions the following:

Article 234-A – Chartering and Creation of a Local Chapter

Article 238-A – Effect of a Petition for Cancellation of Registration

Article 239-A – Voluntary Cancellation of Registration

Article 242-A – Reportorial Requirements

Article 245-A – Effect of Inclusion as Members of Employees  Outside the Bargaining

Unit

Article 258-A – Employer as Bystander

FULL TEXT OF R. A. NO. 9481 ACCOMPANIED BY SHORT COMMENT:

ART. 234. Requirements of Registration. - A federation, national union or industry or

trade union center or an independent union shall acquire legal personality and shall be
entitled to the rights and privileges granted by law to legitimate labor organizations
upon issuance of the certificate of registration based on the following requirements: 

(a) Fifty pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the labor
organization, the minutes of the organizational meetings and the list of the
workers who participated in such meetings;
 (c) In case the applicant is an independent union, the names of all its members
comprising at least twenty percent (20%) of all the employees in the bargaining unit
where it seeks to operate;

(d) If the applicant union has been in existence for one or more years, copies of its
annual financial reports; and chanrobles virtual law library

(e) Four copies of the constitution and by-laws of the applicant union, minutes of
its adoption or ratification, and the list of the members who participated in it.

Comment:

Labor organizations which are required to register.

Prior to its amendment by R. A. No. 9481, Article 234 makes a general reference to the
organization that may register as labor organization, viz: “[a]ny applicant labor organization,
association or group of unions or workers.”

As worded now, Article 234 as amended by R. A. No. 9481, makes specific reference to the
following organizations which may register as labor organization, to wit:

1.  Federation;

2. National Union;

3. Industry Union;

4. Trade Union Center;

5. Independent Union.

Acquisition of legal personality as legitimate labor organization.

Just like in the old provision, Article 234, as amended by R. A. No. 9481 legal personality is
acquired upon the issuance of the certificate of registration.

20% membership requirement applies only to registration of independent union. chanrobles

virtual law library

Requirements for registration of federation or national union under Article 237:

(a) Proof of the affiliation of at least ten (10) locals or chapters, each of which must be
a duly recognized collective bargaining agent in the establishment or industry in which
it operates, supporting the registration of such applicant federation or national union;
and chanrobles virtual

(b) The names and addresses of the companies where the locals or chapters operate and
the list of all the members in each company involved.”  (See Article 237, Labor Code).
ART. 234-A. Chartering and Creation of a Local Chapter. - A duly registered federation
or national union may directly create a local chapter by issuing a charter certificate
indicating the establishment of the local chapter. The chapter shall acquire legal
personality only for purposes of filing a petition for certification election from the date it
was issued a charter certificate.

The chapter shall be entitled to all other rights and privileges of a legitimate labor
organization only upon the submission of the following documents in addition to its
charter certificate:

(a) The names of the chapter’s officers, their addresses, and the principal office of
the chapter; and chanrobles virtual law library

(b) The chapter’s constitution and by-laws: Provided, That where

the chapter’s constitution and by-laws are the same as that of the
federation or the national union, this fact shall be indicated
accordingly.

The additional supporting requirements shall be certified under oath by the secretary
or treasurer of the chapter and attested by its president.

Comment:

TRADE UNION CENTER.

A “Trade Union Center” is any group of registered national unions or federations organized
for the mutual aid and protection of its members; for assisting such members in collective
bargaining; or for participating in the formulation of social and employment policies,
standards, and programs, and is duly registered with the Department of Labor and
Employment in accordance with Rule III, Section 2 of the Implementing Rules. (Section 1(p),
Rule I, Book V, of the Implementing Rules, as amended by Department Order No. 9; San
Miguel Corp. Employees Union-PTGWO vs. San Miguel Packaging Products Employees
Union – PDMP, G.R. No. 171153, Sept. 12, 2007). chanrobles virtual law library

Only federation or national union may directly create a local chapter.

Under Article 234-A, it is clear that the authority to directly create a local chapter is vested
only with a duly registered federation or national union which is empowered to issue a
charter certificate indicating the establishment of the local chapter.  No other entities are
granted the same authority under this provision.

TRADE UNION CENTERS ARE NOT ALLOWED TO CHARTER DIRECTLY.

Article 234, as amended by R. A. No. 9481, now includes the term Trade Union Center, but
interestingly, the provision indicating the procedure for chartering or creating a local or
chapter laid down in Article 234-A, still makes no mention of a “trade union center.”

Thus, applying the Latinmaxim expressio unius est exclusio alterius, it was held in the 2007
case of San Miguel Corp. Employees Union-PTGWO vs. San Miguel Packaging Products
Employees Union – PDMP, [G.R. No. 171153, Sept. 12, 2007],that trade union centers [like
the Pambansang Diwa ng Manggagawang Pilipino (PDMP)] are not allowed to charter
directly a local or a chapter.

ART. 238. Cancellation of Registration. - The certificate of registration of any legitimate

labor organization, whether national or local, may be cancelled by the Bureau, after due
hearing, only on the grounds specified in Article 239 hereof.

ART. 238-A. Effect of a Petition for Cancellation of Registration. - A petition for

cancellation of union registration shall not suspend the proceedings for certification
election nor shall it prevent the filing of a petition for certification election. chanrobles
virtual law library

In case of cancellation, nothing herein shall restrict the right of the union to seek just
and equitable remedies in the appropriate courts.

ART. 239. Grounds for Cancellation of Union Registration. - The following may
constitute grounds for cancellation of union registration:

(a) Misrepresentation, false statement or fraud in connection with the adoption or

ratification of the constitution and by-laws or amendments thereto, the minutes of
ratification, and the list of members who took part in the ratification;

(b) Misrepresentation, false statements or fraud in connection with the election of

officers, minutes of the election of officers, and the list of voters;

(c) Voluntary dissolution by the members.

ART. 239-A. Voluntary Cancellation of Registration. - The registration of a legitimate

labor organization may be cancelled by the organization itself. Provided, That at least
two-thirds of its general membership votes, in a meeting duly called for that purpose to
dissolve the organization: Provided, further, That an application to cancel registration is
thereafter submitted by the board of the organization, attested to by the president
thereof.

Article 242-A. Reportorial Requirements. - The following are documents required to be

submitted to the Bureau by the legitimate labor organization concerned:

(a) Its constitution and by-laws, or amendments thereto, the minutes of

ratification, and the list of members who took part in the ratification of the
constitution and by-laws within thirty (30) days from adoption or ratification of
the constitution and by-lam or amendments thereto;

 (b) Its list of officers, minutes of the election of officers, and list of voters within
thirty (30) days from election; chanrobles virtual law library

(c) Its annual financial report within thirty (30) days after the close of every fiscal
year; and
(d) Its list of members at least once a year or whenever required
by the Bureau.hanrobles virtual law library

Failure to comply with the above requirements shall not be a ground for cancellation of
union registration but shall subject the erring officers or members to suspension,
expulsion from membership, or any appropriate penalty.  (As inserted by Section 7,
Republic Act No. 9481 which lapsed into law on May 25, 2007 and became effective on
June 14, 2007).

Article 245. Ineligibility of Managerial Employees to Join any Labor Organization; Right
of Supervisory Employees. - Managerial employees are NOT eligible to join, assist or
form any labor organization. Supervisory employees shall not be eligible for
membership in the collective bargaining unit of the rank-and-file employees but may
join, assist or form separate collective bargaining units and/or legitimate labor
organizations of their own. The rank-and-file union and the supervisors’ union
operating within the same establishment may join the same federation or national
union.

Article 245-A. Effect of Inclusion as Members of Employees Outside the Bargaining Unit.
- The inclusion as union members of employees outside the bargaining unit shall not be
a ground for the cancellation of the registration of the union. Said employees are
automatically deemed removed from the list of membership of said union. (Introduced
as new provision by Section 9, Republic Act No. 9481 which lapsed into law on May 25,
2007 and became effective on June 14, 2007). chanrobles virtual law library

Article 256. Representation Issue in Organized Establishments. - In organized

establishments, when a verified petition questioning the majority status of the
incumbent bargaining agent is filed by any legitimate labor organization including a
national union or federation which has already issued a charter certificate to its local
chapter participating in the certification election or a local chapter which has been issued
a charter certificate by the national union or federation before the Department of Labor
and Employment within the sixty (60)-day period before the expiration of the collective
bargaining agreement, the Med-Arbiter shall automatically order an election by secret
ballot when the verified petition is supported by the written consent of at least twenty-five
percent (25%) of all the employees in the bargaining unit to ascertain the will of the
employees in the appropriate bargaining unit. To have a valid election, at least a
majority of all eligible voters in the unit must have cast their votes. The labor union
receiving the majority of the valid votes cast shall be certified as the exclusive
bargaining agent of all the workers in the unit. When an election which provides for
three or more choices results in no choice receiving a majority of the valid votes cast, a
run-off election shall be conducted between the labor unions receiving the two highest
number of votes: Provided, That the total number of votes for all contending unions is
at least fifty percent (50%) of the number of votes cast. In cases where the petition was
filed by a national union or federation, it shall not be required to disclose the names of
the local chapter’s officers and members.

At the expiration of the freedom period, the employer shall continue to recognize the
majority status of the incumbent bargaining agent where no petition for certification
election is filed. (As amended by Section 23, Republic Act No. 6715, March 21, 1989 and
Section 10, Republic Act No. 9481 which lapsed into law on May 25, 2007 and became
effective on June 14, 2007). chanrobles virtual law library

Article 257. Petitions in Unorganized Establishments. - In any establishment where there

is no certified bargaining agent, a certification election shall automatically be conducted
by the Med-Arbiter upon the filing of a petition by any legitimate labor organization,
including a national union or federation which has already issued a charter certificate to
its 1ocal/chapter participating in the certification election or a local/chapter which has
been issued a charter certificate by the national union or federation. In cases where the
petition was filed by a national union or federation, it shall not be required to disclose
the names of the local chapter’s officers and members. (As amended by Section 24,
Republic Act No. 6715, March 21, 1989 and Section 11, Republic Act No. 9481 which
lapsed into law on May 25, 2007 and became effective on June 14, 2007).

Article 258-A. Employer as Bystander. - In all cases, whether the petition for certification
election is filed by an employer or a legitimate labor organization, the employer shall
not be considered a party thereto with a concomitant right to oppose a petition for
certification election. The employer’s participation in such proceedings shall be limited
to:

(1) being notified or informed of petitions of such nature; and 

(2) submitting the list of employees during the pre-election conference should the
Med-Arbiter act favorably on the petition. (As amended by Section 12, Republic
Act No. 9481 which lapsed into law on May 25, 2007 and became effective on June
14, 2007). chanrobles virtual law library

--------------------oOo----------------------

REPUBLIC ACT NO. 9422 [S. No. 2501 & H. No. 5498]- AN ACT TO STRENGTHEN
THE REGULATORY FUNCTIONS OF THE PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION (POEA), AMENDING FOR THIS PURPOSE
Approved: April 10, 2007

Sec. 23, paragraph (b.1) of Republic Act. No. 8042, otherwise known as the Migrant
Workers and Overseas Filipinos Act of 1995 is hereby amended to read as follows:
chanrobles virtual law library

(b.1) Philippine Overseas Employment Administration - The

Administration shall regulate private sector participation in the
recruitment and overseas placement of workers by setting up a
licensing and registration system. It shall also formulate and
implement, in coordination with appropriate entities concerned,
when necessary, a system for promoting and monitoring the
overseas employment of Filipino workers taking into consideration
their welfare and the domestic manpower requirements.

In addition to its powers and functions, the Administration shall inform migrant workers
not only of their rights as workers but also of their rights as human beings, instruct and
guide the workers how to assert their rights and provide the available mechanism to
redress violation of their rights.

In the recruitment and placement of workers to service the requirements for trained
and competent Filipino workers of foreign governments and their instrumentalities, and
such other employers as public interests may require, the administration shall deploy
only to countries where the Philippines has concluded bilateral labor agreements or
arrangements: Provided, That such countries shall guarantee to protect the rights of
Filipino migrant workers; and: Provided, further, That such countries shall observe
and/or comply with the international laws and standards for migrant workers. 

Sec. 29 of the same law is hereby repealed.

The provision of Section 29 is as follows:

“Sec. 29. Comprehensive Deregulation Plan on Recruitment Activities. - Pursuant to a

progressive policy of deregulation whereby the migration of workers becomes strictly a
matter between the worker and his foreign employer, the DOLE, within one (1) year
from the effectivity of this Act, is hereby mandated to formulate a five-year
comprehensive deregulation plan on recruitment activities taking into account labor
market trends, economic conditions of the country and emerging circumstances which
may affect the welfare of migrant workers.”

Sec. 30 of the same law is also hereby repealed.

The provision of Section 30 is as follows:

Sec. 30. Gradual Phase-out of Regulatory Functions. - Within a period of

five (5) years from the effectivity of this Act, the DOLE shall phase-out
the regulatory functions of the POEA pursuant to the objectives of
deregulation.

--------------------oOo----------------------

REPUBLIC ACT NO. 9347 - AN ACT RATIONALIZING THE COMPOSITION AND

FUNCTIONS OF THE NATIONAL LABOR RELATIONS COMMISSION,
AMENDING FOR THIS PURPOSE ARTICLE 213, 214, 215 AND 216 OF P.D. NO.
442, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE
PHILIPPINES.
 Lapsed into law on JULY 27, 2006, without the signature of the President, in accordance
with Article VI, Section 27 (1) of the Constitution)

ART. 213. National Labor Relations Commission. - There shall be a National Labor
Relations Commission which shall be attached to the Department of Labor and
Employment SOLELY for program and policy coordination only, composed of a
Chairman and TWENTY-THREE (23) Members.

Eight (8) members each shall be chosen ONLY from among the nominees of the
workers and employers organizations, respectively. The Chairman and the SEVEN (7)
remaining members shall come from the public sector, with the latter to be chosen
PREFERABLY from among the INCUMBENT LABOR ARBITERS.  chanrobles virtual
law library

Upon assumption into office, the members nominated by the workers and employers
organizations shall divest themselves of any affiliation with or interest in the federation
or association to which they belong.

The Commission may sit en banc or in EIGHT (8) divisions, each composed of three (3)
members. The Commission shall sit en banc only for purposes of promulgating rules
and regulations governing the hearing and disposition of cases before any of its divisions
and regional branches and formulating policies affecting its administration and
operations. The Commission shall exercise its adjudicatory and all other powers,
functions, and duties through its divisions. Of the EIGHT (8) divisions, the first, second
third, FOURTH, FIFTH AND SIXTH divisions shall handle cases coming from the
National Capital Region and other parts of Luzon; and the SEVENTH, AND EIGHT
divisions, cases from the Visayas and Mindanao, respectively: Provided, That the
Commission sitting en banc may, on temporary or emergency basis, allow cases within
the jurisdiction of any division to be heard and decided by any other division whose
docket allows the additional workload and such transfer will not expose litigants to
unnecessary additional expenses. The divisions of the Commission shall have exclusive
appellate jurisdiction over cases within their respective territorial jurisdiction.

The concurrence of two (2) Commissioners of a division shall be necessary for the
pronouncement of a judgment or resolution. Whenever the required membership in a
division is not complete and the concurrence of two (2) Commissioners to arrive at a
judgment or resolution cannot be obtained, the Chairman shall designate such number
of additional Commissioners from the other divisions as may be necessary. chanrobles
virtual law library

The conclusions of a division on any case submitted to it for decision shall be reached in
consultation before the case is assigned to a member for the writing of the opinion. It
shall be mandatory for the division to meet for purposes of the consultation ordained
therein. A certification to this effect signed by the Presiding Commissioner of the
division shall be issued, and a copy thereof attached to the record of the case and served
upon the parties.

The Chairman shall be the Presiding Commissioner of the first division, and the
SEVEN (7) other members from the public sector shall be the Presiding Commissioners
of the second, third, fourth, fifth, sixth, seventh and eight divisions, respectively. In case
of the effective absence or incapacity of the Chairman, the Presiding Commissioner of
the second division shall be the Acting Chairman. chanrobles virtual law library

The Chairman, aided by the Executive Clerk of the Commission, shall have
administrative supervision over the Commission and its regional branches and all its
personnel, including the Labor Arbiters.

The Commission, when sitting en banc, shall be assisted by the same Executive Clerk,
and, when acting thru its Divisions, by said Executive Clerk for its first division and
SEVEN (7) other Deputy Executive Clerks for the second, third, fourth fifth, sixth,
seventh and eight divisions, respectively, in the performance of such similar or
equivalent functions and duties as are discharged by the Clerk of Court and Deputy
Clerks of Court of the Court of Appeals.

The Commission and its eight (8) divisions shall be assisted by the Commission
Attorneys in its Appellate and adjudicatory functions whose term shall be coterminous
with the Commissioners with whom they are assigned. The Commission Attorneys shall
be members of the Philippine Bar with at least one (1) year experience or exposure in
the field of labor-management relations. They shall receive annual salaries and shall be
entitled to the same allowances and benefits as those falling under Salary Grade twenty-
six (SG 26). There shall be as many Commission Attorneys as may be necessary for the
effective and efficient operations of the Commission but in no case more than three (3)
assigned to the Office of the Chairman and each Commissioner. chanrobles virtual law
library

No Labor Arbiter shall be assigned to perform the functions of the Commission

Attorney nor detailed to the office of any Commissioner.

ART. 214. Headquarters, Branches and Provincial Extension Units. - The Commission
and its first, second, third, fourth, fifth and sixth divisions shall have their main offices
in Metropolitan Manila, and the seventh and eight divisions in the cities of Cebu and
Cagayan de Oro, respectively. The Commission shall establish as many regional
branches as there are regional offices of the Department of Labor and Employment,
sub-regional branches or provincial extension units. There shall be as many Labor
Arbiters as may be necessary for the effective and efficient operation of the
Commission.

ART. 215. Appointment and Qualifications. - The Chairmans and other Commissioners
shall be members of the Philippine Bar and must have been engaged in the practice of
law in the Philippines for at least fifteen (15) years, with at least five (5) years
experience or exposure in the field of labor-management relations, and shall preferably
be residents of the region where they SHALL hold office. The Labor Arbiters shall
likewise be members of the Philippine Bar and must have been engaged in the practice
of law in the Philippines for at least ten (10) years, with at least five (5) years experience
or exposure in THE FIELD OF labor-management relations.

The Chairman, and the other Commissioners and the Labor Arbiters shall hold office
during good behavior until they reach the age of sixty-five (65) years, unless sooner
removed for cause as provided by law or become incapacitated to discharge the duties
of their office. Provided, however, That the President of the Republic of the Philippines
may extent the services of the Commissioners and Labor Arbiters up to the maximum
age of seventy (70) years upon the recommendation of the Commission en banc.

The Chairman, the Division Presiding Commissioners and other Commissioners shall
all be appointed by the President. Appointment to any vacancy in a specific division
shall come only from the nominees of the sector which nominated the predecessor. The
Labor Arbiters shall also be appointed by the President, upon recommendation of the
Commission en banc to a specific arbitration branch, preperably in the region where
they are residents, and shall be subject to the Civil Service Law, rules and regulations:
Provided, that the labor arbiters who are presently holding office in the region where
they are residents shall be deemed appointed thereat. chanrobles virtual law library

The Chairman and the Commission, shall appoint the staff and employees of the
Commission, and its regional branches as the needs of the service may require, subject
to the Civil Service Law, rules and regulations, and upgrade their current salaries,
benefits and other emoluments in accordance with law." chanrobles virtual law library

ART. 216. Salaries, benefits and other emoluments. The Chairman and members of the
Commission shall have the same rank, receive an annual salary equivalent to, and be
entitled to the same allowances, retirement and benefits as, those of the Presiding
Justice and Associate Justices of the Court of Appeals, respectively. Labor Arbiters
shall have the same rank, receive an annual salary equivalent to and be entitled to the
same allowances, retirement and other benefits and privileges as those of the judges of
the regional trial courts. In no case, however, shall the provision of this Article result in
the diminution of the existing salaries, allowances and benefits of the aforementioned
officials." chanrobles virtual law library

Sec. 5. Implementation. - The creation of the additional divisions shall be implemented

for a period of not more than three (3) years

PART - II

LAW ON LABOR STANDARDS

1. What is the protection-to-labor clause in the 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, 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. chanrobles virtual law library

“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.
chanrobles virtual law library
“The State shall regulate the relations between workers and employers, recognizing the right
of labor to its just share in the fruits of production and the right of enterprises to reasonable
returns on investments, and to expansion and growth.” (Section 3 (Labor), Article XIII
[Social Justice and Human Rights] of the 1987 Constitution) chanrobles virtual law library

2. What are the basic principles enunciated in the Labor Code on protection to labor?

a. 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. chanrobles virtual law library

b. Labor contracts are not ordinary contracts as the relation between capital and labor is
impressed with public interest. chanrobles virtual law library

c. In case of doubt, labor laws and rules shall be interpreted in favor of labor.

d. Labor Code applies to all workers, whether agricultural or non-agricultural.

e. Applicability of Labor Code to government-owned or controlled corporations: 

• When created with original or special charter - Civil Service laws, rules and
regulations;

• When created under the Corporation Code - Labor Code applies.

RECRUITMENT AND PLACEMENT OF WORKERS:

3. What is the relevant law on recruitment for overseas employment?

Migrant Workers and Overseas Filipinos Act of 1995 (R. A. No. 8042).

4. What are the entities authorized to engage in recruitment and placement? chanrobles virtual law
library

a. public employment offices;

b. Philippine Overseas Employment Administration (POEA);
c. private recruitment entities;
d. private employment agencies;
e. shipping or manning agents or representatives;
f. such other persons or entities as may be authorized by the Secretary of Labor and
Employment; and
g. construction contractors.

5. Money claims of OFWs.

(SEE PART TWO OF THIS 3-PART PRE-WEEK SERIES FOR MORE EXTENSIVE
DISCUSSION OF THIS TOPIC)
6. What is the nature of the liability of local recruitment agency and foreign principal?
chanrobles virtual law library

1. Local Agency is solidarily liable with foreign principal.

2. Severance of relations between local agent and foreign principal does not affect
liability of local recruiter.

7. Who has jurisdiction over claims for death and other benefits of OFWs?

Labor Arbiters have jurisdiction over claims for death, disability and other benefits arising
from employment of OFWs. Work-connection is required.

8. What is the basis of compensation for death benefits of OFWs?

Basis of compensation for death generally is whichever is greater between Philippine law or
foreign law.

9. Which has jurisdiction over disciplinary action cases of OFWs?

The POEA retains jurisdiction over disciplinary action cases.

10. Is direct-hiring of OFWs allowed? Why?

No. Employers cannot directly hire workers for overseas employment except through
authorized entities (see enumeration above).

The reason for the ban is to ensure full regulation of employment in order to avoid
exploitation. chanrobles virtual law library

(Note: Any non-resident foreign corporation directly hiring Filipino workers is doing
business in the Philippines and may be sued in the Philippines).

11. What is illegal recruitment?

1. Illegal recruitment under Article 38 applies to both local and overseas employment.

2. Illegal recruitment may be committed by any person whether licensees or non-licensees or

holders or non-holders of authority.

3. Elements of illegal recruitment:

a. First element: Recruitment and placement activities.

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: 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 as engaged in such act. chanrobles virtual law library
 b. Second element: Non-licensee or non-holder of authority - means any person,
corporation or entity which has not been issued a valid license or authority to engage in
recruitment and placement by the Secretary of Labor and Employment, or whose
license or authority has been suspended, revoked or canceled by the POEA or the
Secretary of Labor and Employment.

Some relevant principles:

 Mere impression that recruiter is capable of providing work abroad

is sufficient. chanrobles virtual law library
 "Referral" of recruits also constitutes recruitment activity.
 Absence of receipt to prove payment is not essential to prove
recruitment.
 Only one (1) person recruited is sufficient to constitute recruitment.
 Non-prosecution of another suspect is not material.
 A person convicted for illegal recruitment may still be convicted for
estafa.

12. When is illegal recruitment considered economic sabotage?

Illegal recruitment is considered economic sabotage - when the commission thereof is

attended by the qualifying circumstances as follows:

a. By a syndicate - if carried out by a group of 3 or more persons conspiring and

confederating with one another;

b. In large scale - if committed against 3 or more persons individually or as a group.

13. What is the prescriptive period of illegal recruitment cases?

Under R. A. 8042, the prescriptive period of illegal recruitment cases is five (5) years except
illegal recruitment involving economic sabotage which prescribes in twenty (20) years.
chanrobles virtual law library

14. What are the requirements before a non-resident alien may be employed in the
Philippines?

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 investments, said employment permit may
be issued upon recommendation of the government agency charged with the supervision of
said registered enterprise.
15. May an alien employee transfer his employment after issuance of permit?

After the issuance of an employment permit, the alien shall not transfer to another job or
change his employer without prior approval of the Secretary of Labor.

TRAINING AND EMPLOYMENT OF SPECIAL WORKERS

APPRENTICE:

16. What is an apprenticeship? Who is an apprentice?

“Apprenticeship” means any training on the job supplemented by related theoretical

instruction involving apprenticeable occupations and trades as may be approved by the
Secretary of Labor and Employment.

17. Who is an apprentice?

An “apprentice” is a worker who is covered by a written apprenticeship agreement with an

employer.

18. What are the qualifications of an apprentice?

a. be at least fifteen (15) years of age, provided those who are at least fifteen (15) years of age
but less than eighteen (18) may be eligible for apprenticeship only in non-hazardous
occupation;

b. be physically fit for the occupation in which he desires to be trained;

c. possess vocational aptitude and capacity for the particular occupation as established
through appropriate tests; and chanrobles virtual law library

d. possess the ability to comprehend and follow oral and written instructions.

19. What are the important principles related to apprenticeship?

a. Wage rate of apprentices - 75% of the statutory minimum wage.

b. Apprentices become regular employees if program is not approved by DOLE.

c. Ratio of theoretical instructions and on-the-job training - 100 hours of theoretical

instructions for every 2,000 hours of practical training on-the-job.

LEARNERS:

20. Who is a learner?

A “learner” is a person hired as a trainee in industrial occupations which are non-

apprenticeable and which may be learned through practical training on the job for a period
not exceeding three (3) months, whether or not such practical training is supplemented by
theoretical instructions.
Wage rate of learners is 75% of the statutory minimum wage.

21. What are the pre-requisites before learners may be hired?

Pre-requisites before learners may be validly employed:

a. when no experienced workers are available;

b. the employment of learners is necessary to prevent curtailment of employment

opportunities; and

c. the employment does not create unfair competition in terms of labor costs or impair
or lower working standards.

HANDICAPPED WORKERS:

22. Who is a handicapped worker?

A “handicapped worker” is one whose earning capacity is impaired:

a. by age; or
b. physical deficiency; or
c. mental deficiency; or
d. injury.

• If disability is not related to the work for which he was hired, he should not be so
considered as handicapped worker. He may have a disability but since the same is not related
to his work, he cannot be considered a handicapped worker insofar as that particular work is
concerned.

• Wage rate - 75% of the statutory minimum wage.

WORKING CONDITIONS: chanrobles virtual law library

23. What are the provisions of the Labor Code on working conditions?

The following provisions are covered under Book III of the Labor Code:

Article 83 - Normal hours of work;

Article 84 - Hours worked;
Article 85 - Meal periods;
Article 86 - Night shift differential;
Article 87 - Overtime work; chanrobles virtual law library
Article 88 - Undertime not offset by overtime;
Article 89 - Emergency overtime work;
Article 90 - Computation of additional compensation;
Article 91 - Right to weekly rest period;  chanrobles virtual law library
Article 92 - When employer may require work on a rest day;
Article 93 - Compensation for rest day, Sunday or holiday work;
Article 94 - Right to holiday pay;
 Article 95 - Right to service incentive leave; and
Article 96 - Service charges.

24. Who are covered (and not covered) by the said provisions on working conditions?

1. Employees covered - applicable to all employees in all establishments whether operated for
profit or not.

2. Employees not covered:

a. Government employees;
b. Managerial employees;
c. Other officers or members of a managerial staff;
d. Domestic servants and persons in the personal service of another;
e. Workers paid by results; chanrobles virtual law library
f. Non-agricultural field personnel; and
g. Members of the family of the employer.

25. What is the most important requirement in order for the Labor Code provisions on
working conditions to apply?

The existence of employer-employee relationship is necessary. Without this relationship, the

Labor Code does not apply.

26. What is the test of employment relationship?

There is no uniform test of employment relationship but the four (4) elements of an
employer-employee relationship are as follows:

(a) Selection and engagement of employee;

(b) Payment of wages;
(c) Power of dismissal; and
(d) Power of control (the most important test).

27. What is the quantum of evidence required to prove employment relationship?

The quantum of evidence required to prove employment relationship is mere substantial

evidence (e.g., I. D. card, Cash Vouchers for salaries, inclusion in payroll, reporting to SSS).

NORMAL HOURS OF WORK:

28. What is meant by “normal hours of work”?

1. "Normal" hours of work of employees -eight (8) hours per day.

2. "Work day" means 24 consecutive-hour period which commences from the time the
employee regularly starts to work. It does not necessarily mean the ordinary calendar day
from 12:00 midnight to 12:00 midnight unless the employee starts to work at this unusual
hour.
3. "Work week" is a week consisting of 168 consecutive hours or 7 consecutive 24-hour work
days beginning at the same hour and on the same calendar day each calendar week. chanrobles
virtual law library

4. Reduction of eight-hour working day - not prohibited by law provided there is no reduction
in pay of workers.

5. Shortening of work week - allowed provided employees voluntarily agree thereto; there is
no diminution in pay; and only on temporary duration.

6. Hours of work of part-time workers - payment of wage should be in proportion only to the
hours worked. chanrobles virtual law library

7. Hours of work of hospital and clinic personnel - The Supreme Court has voided Policy
Instructions No. 54 in San Juan de Dios Hospital Employees Association vs. NLRC (G. R.
No. 126383, Nov. 28, 1997). Consequently, the rule that hospital employees who worked for
only 40 hours/5 days in any given workweek should be compensated for full weekly wage for
7 days is no longer applicable.

Prerogative to change working hours.

Well-settled is the rule that management retains the prerogative, whenever exigencies of the
service so require, to change the working hours of its employees. (Sime Darby Pilipinas, Inc.
vs. NLRC, G.R. No. 119205, 15 April 1998, 289 SCRA 86).

The employer has the prerogative to control all aspects of employment in his business
organization such as 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 workers. (Consolidated Food Corporation, et al. vs. NLRC, et al., G. R. No. 118647,
Sept. 23, 1999).

In the 2001 case of Interphil Laboratories Employees Union-FFW vs. Interphil Laboratories,
Inc., [G. R. No. 142824, December 19, 2001], the parties to the CBA stipulated:

“Section 1. Regular Working Hours - A normal workday shall consist of not more than
eight (8) hours. The regular working hours for the Company shall be from 7:30 A.M. to
4:30 P.M. The schedule of shift work shall be maintained; however the company may
change the prevailing work time at its discretion, should such change be necessary in
the operations of the Company. All employees shall observe such rules as have been
laid down by the company for the purpose of effecting control over working hours.”
(Article VI of the CBA). chanrobles virtual law library

According to the Supreme Court, it is evident from the foregoing provision that the working
hours may be changed, at the discretion of the company, should such change be necessary for
its operations, and that the employees shall observe such rules as have been laid down by the
company. In the instant case, the Labor Arbiter found that respondent company had to adopt
a continuous 24-hour work daily schedule by reason of the nature of its business and the
demands of its clients. It was established that the employees adhered to the said work
schedule since 1988. The employees are deemed to have waived the eight-hour schedule
since they followed, without any question or complaint, the two-shift schedule while their
CBA was still in force and even prior thereto. The two-shift schedule effectively changed the
working hours stipulated in the CBA. As the employees assented by practice to this
arrangement, they cannot now be heard to claim that the overtime boycott is justified because
they were not obliged to work beyond eight hours. As the Labor Arbiter elucidated in his
report:

“Respondents' attempt to deny the existence of such regular overtime schedule is belied
by their own awareness of the existence of the regular overtime schedule of 6:00 A.M.
to 6:00 P.M. and 6:00 P.M. to 6:00 A.M. of the following day that has been going on
since 1988. Proof of this is the case undisputedly filed by the union for and in behalf of
its members, wherein it is claimed that the company has not been computing correctly
the night premium and overtime pay for work rendered between 2:00 A.M. and 6:00
A.M. of the 6:00 P.M. to 6:00 A.M. shift. xxx In fact, the union Vice-President
Carmelo C. Santos, demanded that the company make a recomputation of the overtime
records of the employees from 1987 xxx. Even their own witness, union Director
Enrico C. Gonzales, testified that when in 1992 he was still a Quality Control Inspector
at the Sucat Plant of the company, his schedule was sometime at 6:00 A.M. to 6:00
P.M., sometime at 6:00 A.M. to 2:00 P.M., at 2:00 P.M. to 10:00 P.M. and sometime at
6:00 P.M. to 6:00 A.M., and when on the 6 to 6 shifts, he received the commensurate
pay xxx. Likewise, while in the overtime permits, dated March 1, 6, 8, 9 to 12, 1993,
which were passed around daily for the employees to sign, his name appeared but
without his signatures, he, however, had rendered overtime during those dates and was
paid because unlike in other departments, it has become a habit to them to sign the
overtime schedule weekly xxx.”

29. May workdays be reduced on account of losses?

Yes, in situations where the reduction in the number of regular working days is resorted to by
the employer to prevent serious losses due to causes beyond his control, such as when there is
a substantial slump in the demand for his goods or services or when there is lack of raw
materials. This is more humane and in keeping with sound business operations than the
outright termination of the services or the total closure of the enterprise. (Explanatory
Bulletin on the Effect of Reduction of Workdays on Wages/Living Allowances issued by the
DOLE on July 23, 1985).

30. What is the effect of reduction of workdays on wages/living allowances?

In situations where there is valid reduction of workdays, the employer may deduct the wages
and living allowances corresponding to the days taken off from the workweek, in the absence
of an agreement specifically providing that a reduction in the number of workdays will not
adversely affect the remuneration of the employees. This view is consistent with the principle
of “no-work-no-pay.” Furthermore, since the reduction of workdays is resorted to as a cost-
saving measure, it would be unfair to require the employer to pay the wages and living
allowances even on unworked days that were taken off from the regular workweek.
(Explanatory Bulletin on the Effect of Reduction of Workdays on Wages/Living Allowances
issued by the DOLE on July 23, 1985).

31. What is meant by “hours worked”?

1. The following are the compensable hours worked:

a. All time during which an employee is required to be on duty or to be at the

employer’s premises or to be at a prescribed workplace; and

b. All time during which an employee is suffered or permitted to work.

2. Coffee breaks and rest period of short duration - considered compensable hours worked.
chanrobles virtual law library

3. Waiting time - considered compensable if waiting is an integral part of the employee's

work or he is required or engaged by the employer to wait.

4. Sleeping while on duty is compensable if the nature of the employee’s work allows
sleeping without interrupting or prejudicing work or when there is an agreement between the
employee and his employer to that effect. For example, a truck helper may sleep after
performing his task and while his truck is traveling on its way to its assignment. But the same
may not be done by the driver.

5. Working while on call - compensable if employee is required to remain on call in the

employer’s premises or so close thereto that he cannot use the time effectively and gainfully
for his own purpose.

6. Travel time:

a. Travel from home to work -not compensable working time

b. Travel that is all in the day’s work - compensable hours worked.
c. Travel away from home - compensable hours worked.

7. Attendance in lectures, meetings, and training periods sanctioned by employer - considered

hours worked. chanrobles virtual law library

8. Power interruptions or brown-outs, basic rules:

 Brown-outs of short duration not exceeding twenty (20)

minutes - compensable hours worked. chanrobles virtual law library
 Brown-outs running for more than twenty (20) minutes may
not be treated as hours worked provided any of the following
conditions are present:

a. The employees can leave their workplace or go elsewhere whether within or

without the work premises; or

b. The employees can use the time effectively for their own interest.

9. Attendance in CBA negotiations or grievance meeting - compensable hours worked.

10. Attendance in hearings in cases filed by employee - not compensable hours worked.

11. Participation in strikes - not compensable working time.

MEAL PERIOD:

32. What is “meal period”?

1. Every employee is entitled to not less than one (1) hour (or 60 minutes) time-off for regular
meals. Being time-off, it is not compensable hours worked and employee is free to do
anything he wants, except to work. If he is required to work while eating, he should be
compensated therefor.  chanrobles virtual law library

2. If meal time is shortened to not less than twenty (20) minutes - compensable hours worked.
If shortened to less than 20 minutes, it is considered coffee break or rest period of short
duration and, therefore, compensable.

NIGHT-SHIFT DIFFERENTIAL:

33. What is “night-shift differential”?

1. Night shift differential is equivalent to 10% of employee's regular wage for each hour of
work performed between 10:00 p.m. and 6:00 a.m. of the following day.  chanrobles virtual law library

2. Night shift differential and overtime pay, distinguished - When the work of an employee
falls at nighttime, the receipt of overtime pay shall not preclude the right to receive night
differential pay. The reason is, the payment of the night differential pay is for the work done
during the night; while the payment of the overtime pay is for work in excess of the regular
eight (8) working hours.

3. Computation of Night Shift Differential Pay:

a. Where night shift (10 p.m. to 6 a.m.) work is regular work.

1. On an ordinary day: Plus 10% of the basic hourly rate or a

total of 110% of the basic hourly rate.

2. On a rest day, special day or regular holiday: Plus 10% of the regular
hourly rate on a rest day, special day or regular holiday or a total of
110% of the regular hourly rate. chanrobles virtual law library

b. Where night shift (10 p.m. to 6 a.m.) work is overtime work.

1. On an ordinary day: Plus 10% of the overtime hourly rate on

an ordinary day or a total of 110% of the overtime hourly rate
on an ordinary day.

2. On a rest day or special day or regular holiday: Plus 10% of

the overtime hourly rate on a rest day or special day or regular
holiday.

c. For overtime work in the night shift. Since overtime work is not
usually eight (8) hours, the compensation for overtime night shift
 work is also computed on the basis of the hourly rate. chanrobles virtual law
library

1. On an ordinary day. Plus 10% of 125% of basic hourly rate

or a total of 110% of 125% of basic hourly rate. chanrobles virtual law
library

2. On a rest day or special day or regular holiday. Plus 10% of

130% of regular hourly rate on said days or a total of 110% of
130% of the applicable regular hourly rate.

OVERTIME WORK:

34. What is “overtime work”?

1. Work rendered after normal eight (8) hours of work is called overtime
work.

2. In computing overtime work, "regular wage" or "basic salary" means

"cash" wage only without deduction for facilities provided by the
employer.

3. "Premium pay" means the additional compensation required by law for

work performed within 8 hours on non-working days, such as rest days
and special days.

4. "Overtime pay" means the additional compensation for work performed

beyond 8 hours. Every employee entitled to premium pay is also entitled
to the benefit of overtime pay. chanrobles virtual law library

5. Illustrations on how overtime is computed:

a. For overtime work performed on an ordinary day, the overtime

pay is plus 25% of the basic hourly rate.

b. For overtime work performed on a rest day or on a special day,

the overtime pay is plus 30% of the basic hourly rate which includes
30% additional compensation as provided in Article 93 [a] of the
Labor Code.

c. For overtime work performed on a rest day which falls on a special

day, the overtime pay is plus 30% of the basic hourly rate which
includes 50% additional compensation as provided in Article 93 [c] of
the Labor Code.

d. For overtime work performed on a regular holiday, the overtime

pay is plus 30% of the basic hourly rate which includes 100%
additional compensation as provided in Article 94 [b] of the Labor
Code.
 e. For overtime work performed on a rest day which falls on a
regular holiday, the overtime pay is plus 30% of the basic hourly
rate which includes 160% additional compensation.

Judicial admission by employer of overtime work, effect.

In the 2000 case of Damasco vs. NLRC, [G. R. No. 115755, December 4,
2000], the employer admitted in his pleadings that the employee’s work
starts at 8:30 in the morning and ends up at 6:30 in the evening daily,
except holidays and Sundays. However, the employer claims that the
employee’s basic salary of P140.00 a day is more than enough to cover
the “one hour excess work” which is the compensation they allegedly
agreed upon. The Supreme Court ruled that in view of the employer’s
formal admission that the employee worked beyond eight hours daily, the
latter is entitled to overtime compensation. No further proof is required.
The employer already admitted she worked an extra hour daily. Judicial
admissions made by parties in the pleadings, or in the course of the trial
or other proceedings in the same case are conclusive, no further evidence
being required to prove the same, and cannot be contradicted unless
previously shown to have been made through palpable mistake or that no
such admission was made. (Citing Philippine American General Insurance
Inc. vs. Sweet Lines Inc., 212 SCRA 194, 204 [1992]). chanrobles virtual law library

Premium and overtime pay, distinguished.

“Premium pay” refers to the additional compensation required by law for

work performed within eight (8) hours on non-working days, such as rest
days and special days. (No. III, DOLE Handbook on Workers Statutory
Monetary Benefits).

“Overtime pay” refers to the additional compensation for work performed

beyond eight (8) hours a day. Every employee who is entitled to premium
pay is likewise entitled to the benefit of overtime pay. (No. IV, Ibid.).

UNDERTIME NOT OFFSET BY OVERTIME:

35. What is meant by “undertime not offset by overtime”?

1. Undertime work on any particular day shall not be offset by overtime

on any other day.

2. 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 by law such as overtime pay or night shift
differential pay.

EMERGENCY OVERTIME WORK:

36. When may an employee be compelled to perform overtime
work?

1. The general rule remains that no employee may be compelled to

render overtime work against his will.

2. Exceptions when employee may be compelled to render overtime work:

a. When the country is at war or when any other national or local

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

b. When overtime work is necessary to prevent loss of life or

property or in case of imminent danger to public safety due to actual
or impending emergency in the locality caused by serious accident,
fire, floods, typhoons, earthquake, epidemic or other disasters or
calamities;

c. When there is urgent work to be performed on machines,

installations or equipment, or in order to avoid serious loss or
damage to the employer or some other causes of similar nature;
chanrobles virtual law library

d. When the work is necessary to prevent loss or damage to

perishable goods;

e. When the completion or continuation of work started before the

8th hour is necessary to prevent serious obstruction or prejudice to
the business or operations of the employer; and

f. When overtime work is necessary to avail of favorable weather or

environmental conditions where performance or quality of work is
dependent thereon.

37. May an employee validly refuse to render overtime work

under any of the afore-said circumstances? chanrobles virtual law library

An employee cannot validly refuse to render overtime work if any of the

afore-mentioned circumstances is present. When an employee refuses to
render emergency overtime work under any of the foregoing conditions,
he may be dismissed on the ground of insubordination or willful
disobedience of the lawful order of the employer.

WEEKLY REST PERIOD:

38. What is “weekly rest period”?

1. Every employer shall give his employees a rest period of not less than
24 consecutive hours after every 6 consecutive normal work days.

2. If business is open on Sundays/holidays, rest day may be scheduled on

another day.

3. Preference of employee as to his rest day should be respected if based

on religious grounds.

4. Waiver of compensation for work on rest days and holidays is not valid.

39. When may an employer compel his employees to render work

on a rest day?

Under any of the following circumstances:

a. In case of actual or impending emergencies caused by serious

accident, fire, flood, typhoon, earthquake, epidemic or other disaster
or calamity, to prevent loss of life and property, or in case of force
majeure or imminent danger to public safety;  chanrobles virtual law library

b. In case of urgent work to be performed on machineries,

equipment, or installations, 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 serious loss of perishable goods;

e. Where the nature of the work is such that the employees have to
work continuously for seven (7) days in a week or more, as in the
case of the crew members of a vessel to complete a voyage and in
other similar cases; and chanrobles virtual law library

f. When the work is necessary to avail of favorable weather or

environmental conditions where performance or quality of work is
dependent thereon.

COMPENSATION FOR WORK ON REST DAY, SUNDAY OR HOLIDAY:

40. How is premium computed for work rendered on a rest day,

Sunday or holiday?

a. Premium pay for work on scheduled rest day.

A covered employee who is made or permitted to work on his scheduled
rest day shall be paid with an additional compensation of at least thirty
percent (30%) of his regular wage. chanrobles virtual law library

b. Premium pay for work on Sunday when it is employee’s rest day.

A covered employee shall be entitled to such additional compensation of

thirty percent (30%) of his regular wage for work performed on a Sunday
only when it is his established rest day. chanrobles virtual law library

c. Premium pay for work performed on Sundays and holidays when

employee has no regular workdays and no scheduled regular rest days.

Where the nature of the work of the employee is such that he has no
regular workdays and no regular rest days can be scheduled, he shall be
paid an additional compensation of at least thirty percent (30%) of his
regular wage for work performed on Sundays and holidays.

d. Premium pay for work performed on special holidays (now special

days) which fall on employee’s scheduled rest day. chanrobles virtual law library

Work performed on any special holiday (now special day) shall be paid
with an additional compensation of at least thirty percent (30%) of the
regular wage of the employee. Where such holiday work falls on the
employee’s scheduled rest day, he shall be entitled to additional
compensation of at least fifty percent (50%) of his regular wage.

e. Higher rate provided in agreements.

Where the collective bargaining agreement or other applicable

employment contract stipulates the payment of higher premium pay than
that prescribed by law, the employer shall pay such higher rate. chanrobles
virtual law library

HOLIDAY PAY:

41. What is holiday pay?

Holiday pay is a premium given to employees pursuant to law even if he

is not suffered to work on a regular holiday.

 If worker did not work on regular holiday, he is entitled to 100% of

his basic pay; chanrobles virtual law library
 If he worked, he is entitled to 200% thereof.

Entitlement of monthly-paid employees to regular holiday pay.

The Labor Code does not exclude monthly-paid employees from the
benefits of holiday pay. However, the implementing rules on holiday pay
excluded monthly-paid employees from the said benefits by inserting
under Rule IV, Book III of the said rules, Section 2 which provides that
monthly-paid employees are presumed to be paid for all days in the
month, whether worked or not. In Policy Instructions No. 9, the Secretary
of Labor categorically declared that the benefit is intended primarily for
daily-paid employees when the law clearly states that every worker
should be paid their regular holiday pay. This is a flagrant violation of the
mandatory directive of Article 4 of the Labor Code which states that
doubts in the implementation and interpretation of the Code, including its
implementing rules, shall be resolved in favor of labor. Moreover, it shall
always be presumed that the legislature intended to enact a valid and
permanent statute which would have the most beneficial effect that its
language permits. (Insular Bank of Asia and America Employees Union
[IBAAEU] vs. Inciong, et al., G. R. No. L-52415, Oct. 23, 1984). chanrobles
virtual law library

An administrative interpretation which diminishes the benefits of labor

more than what the statute delimits or withholds is obviously ultra vires.
(The Chartered Bank Employees Association vs. Ople, et al., G. R. No. L-
44717, Aug. 28, 1985).

But in the 2004 case of Odango vs. NLRC, (G. R. No. 147420, June 10,
2004), both the petitioners and respondent firm anchored their respective
arguments on the validity of Section 2, Rule IV of Book III of the Omnibus
Rules Implementing the Labor Code. Indeed, it is deplorable, said the
Supreme Court, that both parties (the petitioners and the respondent
employer) premised their arguments on an implementing rule that the
Court had declared void twenty years ago in Insular Bank of Asia vs.
Inciong, [supra]. This case is cited prominently in basic commentaries.
And yet, counsel for both parties failed to consider this. This does not
speak well of the quality of representation they rendered to their clients.
This controversy should have ended long ago had either counsel first
checked the validity of the implementing rule on which they based their
contentions. The High Court declared: chanrobles virtual law library

“We have long ago declared void Section 2, Rule IV of Book III of the
Omnibus Rules Implementing the Labor Code. In Insular Bank of
Asia v. Inciong, [G. R. No. L-52415, October 23, 1984; 217 Phil. 629
(1984)], we ruled as follows:

‘Section 2, Rule IV, Book III of the Implementing Rules and

Policy Instructions No. 9 issued by the Secretary (then Minister)
of Labor are null and void since in the guise of clarifying the
Labor Code’s provisions on holiday pay, they in effect amended
them by enlarging the scope of their exclusion.
 ‘The Labor Code is clear that monthly-paid employees are not
excluded from the benefits of holiday pay. However, the
implementing rules on holiday pay promulgated by the then
Secretary of Labor excludes monthly-paid employees from the
said benefits by inserting, under Rule IV, Book III of the
implementing rules, Section 2 which provides that monthly-paid
employees are presumed to be paid for all days in the month
whether worked or not.’

“Thus, Section 2 cannot serve as basis of any right or claim. Absent

any other legal basis, petitioners’ claim for wage differentials must
fail.

“Even assuming that Section 2, Rule IV of Book III is valid,

petitioners’ claim will still fail. The basic rule in this jurisdiction is “no
work, no pay.” The right to be paid for un-worked days is generally
limited to the ten legal holidays in a year. (See Article 94 of the
Labor Code and Executive Order No. 223). Petitioners’ claim is based
on a mistaken notion that Section 2, Rule IV of Book III gave rise to
a right to be paid for un-worked days beyond the ten legal holidays.
In effect, petitioners demand that ANTECO should pay them on
Sundays, the un-worked half of Saturdays and other days that they
do not work at all. Petitioners’ line of reasoning is not only a violation
of the “no work, no pay” principle, it also gives rise to an invidious
classification, a violation of the equal protection clause. Sustaining
petitioners’ argument will make monthly-paid employees a privileged
class who are paid even if they do not work. chanrobles virtual law library

“The use of a divisor less than 365 days cannot make ANTECO
automatically liable for underpayment. The facts show that
petitioners are required to work only from Monday to Friday and half
of Saturday. Thus, the minimum allowable divisor is 287, which is
the result of 365 days, less 52 Sundays and less 26 Saturdays (or 52
half Saturdays). Any divisor below 287 days means that ANTECO’s
workers are deprived of their holiday pay for some or all of the ten
legal holidays. The 304 days divisor used by ANTECO is clearly above
the minimum of 287 days.

“Finally, petitioners cite Chartered Bank Employees Association v.

Ople, [G.R. No. L-44717, 28 August 1985, 138 SCRA 273], as an
analogous situation. Petitioners have misread this case. chanrobles virtual
law library

“In Chartered Bank, the workers sought payment for un-worked legal
holidays as a right guaranteed by a valid law. In this case,
petitioners seek payment of wages for un-worked non-legal holidays
citing as basis a void implementing rule. The circumstances are also
markedly different. In Chartered Bank, there was a collective
 bargaining agreement that prescribed the divisor. No CBA exists in
this case. In Chartered Bank, the employer was liable for
underpayment because the divisor it used was 251 days, a figure
that clearly fails to account for the ten legal holidays the law requires
to be paid. Here, the divisor ANTECO uses is 304 days. This figure
does not deprive petitioners of their right to be paid on legal
holidays.” (Odango vs. NLRC, et al., G. R. No. 147420, June 10,
2004).

42. What are the regular holidays and special days?

REPUBLIC ACT NO. 9492 - AN ACT RATIONALIZING THE CELEBRATION

OF NATIONAL HOLIDAYS AMENDING FOR THE PURPOSE SECTION 26,
CHAPTER 7, BOOK I OF EXECUTIVE ORDER NO. 292, AS AMENDED,
OTHERWISE KNOWN AS THE ADMINISTRATIVE CODE OF 1987

[APPROVED ON JULY 25, 2007]

Regular Holidays and Nationwide Special Days. “ (1) Unless otherwise

modified by law, and or proclamation, the following regular holidays and
special days shall be observed in the country:

a) Regular Holidays

New year’s Day-January 1

Maundy Thursday-Movable date

Good Friday-Movable date

Eidul Fitr-Movable date

Araw ng Kagitingan-Monday nearest April 9

(Bataaan and Corregidor Day)

Labor Day-Monday nearest May 1

Independence Day-Monday nearest June 12

National Heroes Day-Last Monday of August

Bonifacio Day-Monday nearest November 30

Christmas Day-December 25

Rizal Day-Monday nearest December 30

b) Nationwide Special Holidays:

Ninoy Aquino Day-Monday nearest August 21

All Saints Day-November 1

Last Day of the Year-December 31

c) In the event the holiday falls on a Wednesday, the holiday will be

observed on the Monday of the week. If the holiday falls on a Sunday, the
holiday will be observed on the Monday that follows: Provided, That for
movable holidays, the President shall issue a proclamation, at least six (6)
months prior to the holiday concerned, the specific date that shall be
declared as a nonworking day: Provided, however, The Eidul Adha shall
be celebrated as a regional holiday in the Autonomous Region in Muslim
Mindanao. chanrobles virtual law library

43. What are the distinctions between “regular holidays” and

“special days”?

The following are the distinctions between “regular holidays” and “special
days”:

a. A covered employee who does not work during regular holidays is

paid 100% of his regular daily wage; while a covered employee who
does not work during a special day does not receive any
compensation under the principle of “no work, no pay.”

b. A covered employee who works during regular holidays is paid

200% of his regular daily wage; while a covered employee who
works during special days is only paid an additional compensation of
not less than 30% of the basic pay or a total of 130% and at least
50% over and above the basic pay or a total of 150%, if the worker
is permitted or suffered to work on special days which fall on his
scheduled rest day. chanrobles virtual law library

44. What is the distinction between “special holidays” and

“special days”?

There is none. “Special holidays” are now known as “special days.”

(NOTE: R. A. 9177 uses “Special Holidays” instead of “Special Days” in
describing All Saints Day and Last Day of the Year which were described
as such under Executive Order No. 203 [June 30, 1987]).

45. What is the application of the principle of “no work, no pay” to

entitlement to holiday pay?
The principle of “no work, no pay” applies to special days but not to
unworked regular holidays where the employees are always paid the
equivalent of 100% of their basic pay. chanrobles virtual law library

46. What are the premium pay for working on holidays?

1. Premium pay for work performed during special days - 30% on top of
basic pay. chanrobles virtual law library

2. Premium pay for work performed during special days falling on

scheduled rest day - 50% over and above the basic pay.

47. What are the effects of absences on entitlement to regular

holiday pay?

The following are the effect of absences on entitlement to regular holiday

pay:

a. Employees on leave of absence with pay - entitled to regular

holiday pay. chanrobles virtual law library

b. Employees on leave of absence without pay on the day

immediately preceding a regular holiday - may not be paid the
required holiday pay if he has not worked on such regular holiday.
chanrobles virtual law library

c. Employees on leave while on SSS or employee's compensation

benefits- Employers shall grant the same percentage of the holiday
pay as the benefit granted by competent authority in the form of
employee’s compensation or social security payment, whichever is
higher, if they are not reporting for work while on such benefits.
chanrobles virtual law library

d. When the day preceding regular holiday is a non-working day or

scheduled rest day - Employee shall not be deemed to be on leave of
absence on that day, in which case, he shall be entitled to the
regular holiday pay if he worked on the day immediately preceding
the non-working day or rest day.

48. What is the rule in case of absence during successive regular

holidays?

The rule in case of successive regular holidays is as follows: An employee

may not be paid for both holidays if he absents himself from work on the
day immediately preceding the first holiday, unless he works on the first
holiday, in which case, he is entitled to his holiday pay on the second
holiday.
49. What is the rule in case two regular holidays falling on the
same day?

DOLE Explanatory Bulletin on Workers’ Entitlement to Holiday Pay on 9

April 1993, Araw ng Kagitingan and Good Friday enunciated the following
rule in case of two regular holidays falling on the same day (e.g., Araw ng
Kagitingan and Good Friday falling on April 9, 1993):

1. If employee did not work: 200% of basic pay;

2. If employee worked: 300% of basic pay.

Said bulletin dated March 11, 1993, including the manner of computing
the holiday pay, was reproduced on January 23, 1998, when April 9, 1998
was both Maundy Thursday and Araw ng Kagitingan.

In the 2004 case of Asian Transmission Corporation vs. CA, [G. R. No.
144664, March 15, 2004], the petitioner sought the nullification of the
said March 11, 1993 Explanatory Bulletin. The Supreme Court, in
affirming the validity thereof, ruled that Article 94 of the Labor Code, as
amended, affords a worker the enjoyment of ten paid regular holidays.
The provision is mandatory, regardless of whether an employee is paid on
a monthly or daily basis.

Unlike a bonus, which is a management prerogative, holiday pay is a

statutory benefit demandable under the law. Since a worker is entitled to
the enjoyment of ten paid regular holidays, the fact that two holidays fall
on the same date should not operate to reduce to nine the ten holiday
pay benefits a worker is entitled to receive.

It is elementary, under the rules of statutory construction, that when the

language of the law is clear and unequivocal, the law must be taken to
mean exactly what it says. (Insular Bank of Asia and America Employees
Union (IBAAEU) vs. Inciong, G.R. No. L-52415, Oct. 23, 1984, 132 SCRA
663, 673).

In the case at bar, there is nothing in the law which provides or indicates
that the entitlement to ten days of holiday pay shall be reduced to nine
when two holidays fall on the same day. chanrobles virtual law library

50. What is the rule in case of regular Muslim holidays?

In the 2002 case of San Miguel Corporation vs. The Hon. CA, [G. R. No.
146775, January 30, 2002], a routine inspection conducted by the
Department of Labor and Employment in the premises of San Miguel
Corporation (SMC) in Sta. Filomena, Iligan City revealed that there was
underpayment by SMC of regular Muslim holiday pay to its employees.
Petitioner SMC asserts that Article 3(3) of Presidential Decree No. 1083
provides that “(t)he provisions of this Code shall be applicable only to
Muslims x x x.”

The Supreme Court, however, ruled that there should be no distinction

between Muslims and non-Muslims as regards payment of benefits for
Muslim holidays. The Court of Appeals did not err in sustaining
Undersecretary Español who stated: chanrobles virtual law library

“Assuming arguendo that the respondent’s position is correct, then

by the same token, Muslims throughout the Philippines are also not
entitled to holiday pays on Christian holidays declared by law as
regular holidays. We must remind the respondent-appellant that
wages and other emoluments granted by law to the working man are
determined on the basis of the criteria laid down by laws and
certainly not on the basis of the worker’s faith or religion.”

At any rate, Article 3(3) of Presidential Decree No. 1083 also declares that
“x x x nothing herein shall be construed to operate to the prejudice of a
non-Muslim.”

SERVICE INCENTIVE LEAVE:

51. What are the basic principles governing the grant of service
incentive leave?

1. Every covered employee who has rendered at least one (1) year of
service shall be entitled to a yearly service incentive leave of five (5) days
with pay.

2. Meaning of "one year of service" - service within twelve (12) months,

whether continuous or broken, reckoned from the date the employee
started working, including authorized absences and paid regular holidays,
unless the number of working days in the establishment as a matter of
practice or policy, or that provided in the employment contract, is less
than twelve (12) months, in which case, said period shall be considered
as one (1) year for the purpose of determining entitlement to the service
incentive leave.

3. Service incentive leave is commutable to cash if unused at the end of

the year. chanrobles virtual law library

4. The basis of computation of service incentive leave is the salary rate at

the date of commutation.

5. Grant of vacation leave or sick leave may be considered substitute for

service incentive leave. (Note: there is no provision in the Labor Code
granting vacation or sick leave).
In the 2000 case of Imbuido vs. NLRC, [G. R. No. 114734, March 31,
2000], where one of the issues pertained to the entitlement of an illegally
dismissed employee to service incentive leave pay, it was held that
having already worked for more than three (3) years at the time of her
unwarranted dismissal, petitioner is undoubtedly entitled to service
incentive leave benefits, computed from 1989 until the date of her actual
reinstatement. As ruled in Fernandez vs. NLRC, [285 SCRA 149, 176
(1998)] “[s]ince a service incentive leave is clearly demandable after one
year of service - whether continuous or broken - or its equivalent period,
and it is one of the ‘benefits’ which would have accrued if an employee
was not otherwise illegally dismissed, it is fair and legal that its
computation should be up to the date of reinstatement as provided under
Section [Article] 279 of the Labor Code, as amended.” chanrobles virtual law library

This Imbuido ruling was cited in the 2005 case of Integrated Contractor
and Plumbing Works, Inc. vs. NLRC, [G. R. No. 152427, August 9, 2005]
which involves a project employee who later on became a regular
employee after a series of re-hiring. Accordingly, it was held that private
respondent’s service incentive leave credits of five (5) days for every year
of service, based on the actual service rendered to the petitioner in
accordance with each contract of employment, should be computed up to
the date of reinstatement pursuant to Article 279.

But in another 2005 case, JPL Marketing Promotions vs. CA, [G. R. No.
151966, July 8, 2005], where an employee was never paid his service
incentive leave during all the time he was employed, it was held that the
same should be computed not from the start of employment but a year
after commencement of service, for it is only then that the employee is
entitled to said benefit. This is because the entitlement to said benefit
accrues only from the time he has rendered at least one year of service to
his employer. It must be noted that this benefit is given by law on the
basis of the service actually rendered by the employee, and in the
particular case of the service incentive leave, it is granted as a motivation
for the employee to stay longer with the employer. Moreover, the
computation thereof should only be up to the date of termination of
employment. There is no cause for granting said incentive to one who has
already terminated his relationship with the employer.

Rationale for leave credit accumulation and cash conversion.

In a case involving the accumulation of leave credits and their conversion

into cash, as provided in the Collective Bargaining Agreement, the
Supreme Court observed that the conversion of leave credits into their
cash equivalent is aimed primarily to encourage workers to work
continuously and with dedication for the company. Companies offer
incentives, such as the conversion of the accumulated leave credits into
their cash equivalent, to lure employees to stay with the company. Leave
credits are normally converted into their cash equivalent based on the last
prevailing salary received by the employee. (Republic Planters Bank, now
known as PNB-Republic Bank, vs. NLRC, et al., G. R. No. 117460, Jan. 6,
1997).

In the 2005 case of Auto Bus Transport System, Inc. vs. Bautista, [G. R.
No. 156367, May 16, 2005], the Supreme Court observed that the service
incentive leave is a curious animal in relation to other benefits granted by
the law to every employee. In the case of service incentive leave, the
employee may choose to either use his leave credits or commute it to its
monetary equivalent if not exhausted at the end of the year.
Furthermore, if the employee entitled to service incentive leave does not
use or commute the same, he is entitled upon his resignation or
separation from work to the commutation of his accrued service incentive
leave. chanrobles virtual law library

As enunciated by the Supreme Court in Fernandez vs. NLRC, [G.R. No.

105892, January 28, 1998, 349 Phil 65], the clear policy of the Labor
Code is to grant service incentive leave pay to workers in all
establishments, subject to a few exceptions. Section 2, Rule V, Book III of
the Implementing Rules and Regulations provides that “[e]very employee
who has rendered at least one year of service shall be entitled to a yearly
service incentive leave of five days with pay.” Service incentive leave is a
right which accrues to every employee who has served “within 12
months, whether continuous or broken reckoned from the date the
employee started working, including authorized absences and paid regular
holidays unless the working days in the establishment as a matter of
practice or policy, or that provided in the employment contracts, is less
than 12 months, in which case said period shall be considered as one
year.” It is also “commutable to its money equivalent if not used or
exhausted at the end of the year.” In other words, an employee who has
served for one year is entitled to it. He may use it as leave days or he
may collect its monetary value. To limit the award to three years, as the
solicitor general recommends, is to unduly restrict such right.

SERVICE CHARGES:

52. What are service charges?

The rule on service charges applies only to establishments collecting

service charges, such as hotels, restaurants, lodging houses, night clubs,
cocktail lounges, massage clinics, bars, casinos and gambling houses, and
similar enterprises, including those entities operating primarily as private
subsidiaries of the government. It applies to all employees of covered
employers, regardless of their positions, designations or employment
status, and irrespective of the method by which their wages are paid.

53. How is service charge distributed?

Service charges are distributed in accordance with the following
percentage of sharing:

a. eighty-five percent (85%) for the employees to be distributed equally

among them; and

b. fifteen percent (15%) for the management to answer for losses and
breakages and distribution to managerial employees.

• The P2,000.00 salary ceiling for entitlement thereto is no longer

applicable.

• The shares shall be distributed to employees not less often than

once every 2 weeks or twice a month at intervals not exceeding 16
days.

Service charge is not profit share and may thus not be deducted from
wage.

In the 2005 case of Mayon Hotel & Restaurant vs. Adana, [G. R. No.
157634, May 16, 2005], the employer alleged that the five (5) percent of
the gross income of the establishment being given to the respondent-
employees can be considered as part of their wages. The Supreme Court
was not persuaded. It quoted with approval the Labor Arbiter on this
matter, to wit:

“While complainants, who were employed in the hotel, receive[d]

various amounts as profit share, the same cannot be considered as
part of their wages in determining their claims for violation of labor
standard benefits. Although called profit share[,] such is in the
nature of share from service charges charged by the hotel. This is
more explained by [respondents] when they testified that what they
received are not fixed amounts and the same are paid not on a
monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). Also,
[petitioners] failed to submit evidence that the amounts received by
[respondents] as profit share are to be considered part of their
wages and had been agreed by them prior to their employment.
Further, how can the amounts receive[d] by [respondents] be
considered as profit share when the same [are] based on the gross
receipt of the hotel[?] No profit can as yet be determined out of the
gross receipt of an enterprise. Profits are realized after expenses are
deducted from the gross income.”

WAGES:

54. What are the attributes of wage?

1. Attributes of wage:
 a. it is the remuneration or earnings, however designated, for work
done or to be done or for services rendered or to be rendered;

b. it is 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; chanrobles virtual law library

c. it 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

d. it includes the fair and reasonable value, as determined by the

Secretary of Labor and Employment, 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.

2. “Wage”, “salary” and “pay”; distinction - they are synonymous in

meaning and usage.

3. Commission - may or may not be treated as part of wage depending on

the circumstances. chanrobles virtual law library

4. Actual work is the basis of claim for wages ("No work, no pay").

FACILITIES AND SUPPLEMENTS:

55. What are “facilities”?

1. “Facilities” shall include articles or services for the benefit of the

employee or his family but shall not include tools of the trade or articles
or services primarily for the benefit of the employer or necessary to the
conduct of the employer’s business.

2. Value of facilities - the fair and reasonable value of board, lodging and
other facilities customarily furnished by an employer to his employees
both in agricultural and non-agricultural enterprises.

56. What are “supplements”?

1. “Supplements” means extra remuneration or special privileges or

benefits given to or received by the laborers over and above their
ordinary earnings or wages.

In the same 2005 case of Mayon Hotel & Restaurant vs. Adana, [G. R. No.
157634, May 16, 2005] it was noted by the Supreme Court the
uncontroverted testimony of respondents on record that they were
required to eat in the hotel and restaurant so that they will not go home
and there is no interruption in the services of Mayon Hotel & Restaurant.
As ruled in Mabeza [infra], food or snacks or other convenience provided
by the employers are deemed as supplements if they are granted for the
convenience of the employer. The criterion in making a distinction
between a supplement and a facility does not so much lie in the kind
(food, lodging) but the purpose. Considering, therefore, that hotel
workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary
matter in the operations of a small hotel, such as petitioners’ business.
The deduction of the cost of meals from respondents’ wages, therefore,
should be removed.

Legal requirements must be complied with before deducting

facilities from wages.

As stated in Mabeza vs. NLRC, [G.R. No. 118506, April 18, 1997 (271
SCRA 670)], the employer simply cannot deduct the value from the
employee's wages without satisfying the following: (a) proof that such
facilities are customarily furnished by the trade; (b) the provision of
deductible facilities is voluntarily accepted in writing by the employee;
and (c) the facilities are charged at fair and reasonable value. chanrobles virtual
law library

Consequently, as held in Mayon Hotel & Restaurant [supra], even

granting that meals and snacks were provided by the hotel to its
employees and indeed constituted facilities, such facilities could not be
deducted without compliance with certain legal requirements. The records
are clear that petitioners failed to comply with these requirements. There
was no proof of respondents’ written authorization. Indeed, the Labor
Arbiter found that while the respondents admitted that they were given
meals and merienda, the quality of food served to them was not what was
provided for in the Facility Evaluation Orders and it was only when they
filed the cases that they came to know of this supposed Facility Evaluation
Orders. Considering the failure to comply with the above-mentioned legal
requirements, the Labor Arbiter therefore erred when he ruled that the
cost of the meals actually provided to respondents should be deducted as
part of their salaries, on the ground that respondents have availed
themselves of the food given by petitioners. The law is clear that mere
availment is not sufficient to allow deductions from employees’ wages.

Voluntary acceptance of facilities required.

In order that the cost of facilities furnished by the employer may be

charged against an employee, his acceptance of such facilities must be
voluntary. (Section 7, Rule VII, Book III, Rules to Implement the Labor
Code).
57. What is the distinction between “facilities” and
“supplements”?

“Facilities" and "supplements”, distinction: The benefit or privilege given

to the employee which constitutes an extra remuneration over and above
his basic or ordinary earning or wage, is supplement; and when said
benefit or privilege is part of the laborer’s basic wage, it is a facility. The
criterion is not so much with the kind of the benefit or item (food, lodging,
bonus or sick leave) given but its purpose. Thus, free meals supplied by
the ship operator to crew members, out of necessity, cannot be
considered as facilities but supplements which could not be reduced
having been given not as part of wages but as a necessary matter in the
maintenance of the health and efficiency of the crew personnel during the
voyage. chanrobles virtual law library

58. What is the rule on deductibility of “facilities” or

“supplements” from wages?

Facilities may be charged to or deducted from wages. Supplements, on

the other hand, may not be so charged. Thus, when meals are freely
given to crew members of a vessel while they were on the high seas, not
as part of their wages but as a necessary matter in the maintenance of
the health and efficiency of the crew personnel during the voyage, the
deductions made therefrom for the meals should be returned to them,
and the operator of the coastwise vessels affected should continue giving
the same benefit. (State Marine Cooperation and Royal Line, Inc. vs. Cebu
Seamen’s Association, Inc., G. R. No. L-12444, Feb. 28, 1963).

In another case where the company used to pay to its drivers and
conductors, who were assigned outside of the city limits, aside from their
regular salary, a certain percentage of their daily wage, as allowance for
food, it was ruled that the company should continue granting the said
privilege. (Cebu Autobus Company vs. United Cebu Autobus Employees
Association, G. R. No. L-9742, Oct. 27, 1955).

GRATUITY AND ALLOWANCES:

59. What is a gratuity?

“Gratuity” is a gift freely given by the employer in appreciation of certain

favors or services rendered. It is not part of wages since, strictly
speaking, it is not intended as compensation for actual work. It is further
not demandable as a matter of right.

60. Are allowances part of wage?

"Allowances" are not part of wages. Therefore, in the computation of the
amount of retirement and other benefits, allowances shall not be included
therein.

BONUS:

61. What is bonus? Is it demandable?

“Bonus” is an amount granted and paid ex gratia to the employee for his
industry or loyalty, hence, generally not demandable or enforceable. If
there is no profit, there should be no bonus. If profit is reduced, bonus
should likewise be reduced, absent any agreement making such bonus
part of the compensation of the employees.

62. When is bonus demandable and enforceable?

On the basis of equitable considerations, long practice, agreement (e.g.,

CBA) and other peculiar circumstances, bonus may become demandable
and enforceable. Consequently, if bonus is given as an additional
compensation which the employer agreed to give without any condition
such as success of business or more efficient or more productive
operation, it is deemed part of wage or salary, hence, demandable.

Unlike 13th month pay, bonus may be forfeited in case employee is found
guilty of an administrative charge.

Bonus, when considered a company 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. (Globe Mackay Cable and Radio
Corporation vs. NLRC, G.R. No. L-74156, 163 SCRA 71). chanrobles virtual law
library

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. (National Sugar Refineries Corporation v. NLRC, G.R.
No. 101761, 220 SCRA 452).

Thus, even if the bonus has been given for quite some time or since
“time-immemorial” as asserted by the union, in an amount equivalent to
two (2) months gross pay for mid-year bonus and three (3) months gross
pay for the year-end bonus, the employer may validly reduce it to two (2)
months basic pay for mid-year bonus, and two-months for year-end
bonus, without violating the non-diminution clause in the law since
bonuses are not part of labor standards in the same class as salaries,
cost-of-living allowances, holiday pay and leave benefits, provided under
the Labor Code. The contention of the union that the granting of said
bonuses had ripened into a company practice that may no longer be
adjusted to the prevailing condition of the bank has no legal and moral
bases. Its fiscal condition having declined, the bank may not be forced to
distribute bonuses which it can no longer afford to pay and, in effect, be
penalized for its past generosity to its employees. (Traders Royal Bank vs.
NLRC, et al., G. R. No. 88168, Aug. 30, 1990, 189 SCRA 274).

13th MONTH PAY:

63. What is 13th month pay?

“Thirteenth-month pay” shall mean one-twelfth (1/12) of the basic salary

of an employee within a calendar year. chanrobles virtual law library

The “basic salary” of an employee for the purpose of computing the 13th-
month pay shall include all remunerations or earnings paid by the
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. (No. 4 [a], Revised Guidelines on the Implementation of the
13th-Month Pay Law; No. X [C], DOLE Handbook on Workers Statutory
Monetary Benefits).

Premium pay is not included in the computation of the 13th-month pay.

(Davao Fruits Corporation vs. Associated Labor Union, G. R. No. 85073,
Aug. 24, 1993, 225 SCRA 562).

In the 2005 case of Honda Phils., Inc. vs. Samahan ng Malayang

Manggagawa sa Honda, [G. R. No. 145561, June 15, 2005], it was ruled
that for employees receiving regular wage, “basic salary” has been
interpreted to mean, not the amount actually received by an employee,
but 1/12 of their standard monthly wage multiplied by their length of
service within a given calendar year. Thus, excluded from the
computation of “basic salary” are payments for sick, vacation and
maternity leaves, night differentials, regular holiday pay and premiums
for work done on rest days and special holidays as held previously in San
Miguel Corporation [Cagayan Coca-Cola Plant] vs. Inciong, et al., [103
SCRA 139 (1981)].

In Hagonoy Rural Bank vs. NLRC, [349 Phil. 220 (1998)], St. Michael
Academy vs. NLRC, [354 Phil. 491 (1998)], Consolidated Food
Corporation vs. NLRC, [373 Phil. 751 (1999)] and similar cases, the 13th
month pay due an employee was computed based on the employee’s
basic monthly wage multiplied by the number of months worked in a
calendar year prior to separation from employment. (Honda Phils., Inc.
vs. Samahan ng Malayang Manggagawa sa Honda, G. R. No. 145561,
June 15, 2005).

But in a case where the employer, from 1975 to 1981, freely, voluntarily
and continuously included in the computation of its employees’ thirteenth-
month pay, payments for sick, vacation and maternity leaves, regular
holiday pay and premiums for work done on rest days and special
holidays, despite the fact that the law and the government issuances
expressly excluded the same, it was ruled that such act of the employer,
being favorable to the employees, had ripened into a practice and,
therefore, they can no longer be withdrawn, reduced, diminished,
discontinued or eliminated. (Davao Fruits Corporation vs. Associated
Labor Unions, et al., G. R. No. 85073, Aug. 24, 1993, 225 SCRA 562).

And the same holding was made in the 2004 case of Sevilla Trading
Company vs. A. V. A. Semana, G. R. No. 152456, April 28, 2004], where
the employer, for two to three years prior to 1999, added to the base
figure, in its computation of the 13th-month pay of its employees, the
amount of other benefits received by the employees which are beyond the
basic pay. These benefits included overtime premium for regular
overtime, legal and special holidays; legal holiday pay, premium pay for
special holidays; night premium; bereavement leave pay; union leave
pay; maternity leave pay; paternity leave pay; company vacation and sick
leave pay; and cash conversion of unused company vacation and sick
leave. Petitioner-employer claimed that it entrusted the preparation of the
payroll to its office staff, including the computation and payment of the
13th-month pay and other benefits. When it changed its person in charge
of the payroll in the process of computerizing its payroll, and after audit
was conducted, it allegedly discovered the error of including non-basic
pay or other benefits in the base figure used in the computation of the
13th-month pay of its employees. chanrobles virtual law library

The Supreme Court, however, was unconvinced. It affirmed the ruling of

the Voluntary Arbitrator that petitioner’s stance of mistake or error in the
computation of the thirteenth month pay is unmeritorious. Petitioner’s
submission of financial statements every year requires the services of a
certified public accountant to audit its finances. It is quite impossible to
suggest that they have discovered the alleged error in the payroll only in
1999. This implies that in previous years it does not know its cost of labor
and operations. This is merely basic cost accounting. Also, petitioner
failed to adduce any other relevant evidence to support its contention.
Aside from its bare claim of mistake or error in the computation of the
thirteenth month pay, petitioner merely appended to its petition a copy of
the 1997-2002 Collective Bargaining Agreement and an alleged
“corrected” computation of the thirteenth month pay. There was no
explanation whatsoever why its inclusion of non-basic benefits in the base
figure in the computation of their 13th-month pay in the prior years was
made by mistake, despite the clarity of statute and jurisprudence at that
time. (Sevilla Trading Company vs. A. V. A. Semana, et al., G. R. No.
152456, April 28, 2004).

64. Who are entitled to 13th month pay?

All rank-and-file employees are entitled to a 13th-month pay regardless

of the amount of basic salary that they receive in a month and regardless
of their designation or employment status, and irrespective of the method
by which their wages are paid, provided that they have worked for at
least one (1) month during a calendar year.

13th-month pay of resigned or separated employee.

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. Thus, if he
worked only from January up to September, his proportionate 13th-month
pay should be the equivalent of 1/12 of his total basic salary which he
earned during that period. (No. 6, Revised Guidelines on the
Implementation of the 13th-Month Pay Law; No. X [G], DOLE Handbook
on Workers Statutory Monetary Benefits; International School of Speech
vs. NLRC, et al., G. R. No. 112658, March 18, 1995; Villarama vs. NLRC,
et al., G. R. No. 106341, Sept. 2, 1994, 236 SCRA 280). chanrobles virtual law
library

In the 2005 case of Clarion Printing House, Inc. vs. NLRC, [G. R. No.
148372, June 27, 2005], an employee who was receiving P6,500.00 in
monthly salary and who had worked for at least six (6) months at the
time of her retrenchment, was held to be entitled to her proportionate
13th month pay computed as follows: chanrobles virtual law library

(Monthly Salary x 6 ) / 12 = Proportionate 13th month pay

(P6,500.00 x 6) / 12 = P3,250.00

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 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. (No. 6, Revised Guidelines on the
Implementation of the 13th-Month Pay Law).

Regarding pro-ration of the 13th month pay, the Supreme Court in Honda
Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda, [G. R. No.
145561, June 15, 2005], took cognizance of the fact that the said Revised
Guidelines on the Implementation of the 13th Month Pay Law provided for
a pro-ration of this benefit only in cases of resignation or separation from
work. As the rules state, under these circumstances, an employee is
entitled to a pay in proportion to the length of time he worked during the
year, reckoned from the time he started working during the calendar
year. (Section 6 thereof). The Court of Appeals thus held that:

“Considering the foregoing, the computation of the 13th month pay

should be based on the length of service and not on the actual wage
earned by the worker. In the present case, there being no gap in the
service of the workers during the calendar year in question, the
computation of the 13th month pay should not be pro-rated but
should be given in full.” (Emphasis supplied) chanrobles virtual law library

More importantly, it has not been refuted that Honda has not
implemented any pro-rating of the 13th month pay before the instant
case. Honda did not adduce evidence to show that the 13th month, 14th
month and financial assistance benefits were previously subject to
deductions or pro-rating or that these were dependent upon the
company’s financial standing. As held by the Voluntary Arbitrator:

“The Company (Honda) explicitly accepted that it was the strike held
that prompt[ed] them to adopt a pro-rata computation, aside [from]
being in [a] state of rehabilitation due to 227M substantial losses in
1997, 114M in 1998 and 215M lost of sales in 1999 due to strike.
This is an implicit acceptance that prior to the strike, a full month
basic pay computation was the “present practice” intended to be
maintained in the CBA.”

The memorandum dated November 22, 1999 which Honda issued shows
that it was the first time a pro-rating scheme was to be implemented in
the company. It was a convenient coincidence for the company that the
work stoppage held by the employees lasted for thirty-one (31) days or
exactly one month. This enabled them to devise a formula using 11/12 of
the total annual salary as base amount for computation instead of the
entire amount for a 12-month period.

That a full month payment of the 13th month pay is the established
practice at Honda is further bolstered by the affidavits executed by Feliteo
Bautista and Edgardo Cruzada. Both attested that when they were absent
from work due to motorcycle accidents, and after they have exhausted all
their leave credits and were no longer receiving their monthly salary from
Honda, they still received the full amount of their 13th month, 14th
month and financial assistance pay.

The case of Davao Fruits Corporation vs. Associated Labor Unions, et al.
[G.R. No. 85073, August 24, 1993, 225 SCRA 562] presented an example
of a voluntary act of the employer that has ripened into a company
practice. In that case, the employer, from 1975 to 1981, freely and
continuously included in the computation of the 13th month pay those
items that were expressly excluded by the law. It was held that this act,
which was favorable to the employees though not conforming to law, has
ripened into a practice and, therefore, can no longer be withdrawn,
reduced, diminished, discontinued or eliminated. Furthermore, in Sevilla
Trading Company vs. Semana, [G.R. No. 152456, 28 April 2004, 428
SCRA 239], it was stated:

“With regard to the length of time the company practice should have
been exercised to constitute voluntary employer practice which
cannot be unilaterally withdrawn by the employer, we hold that
jurisprudence has not laid down any rule requiring a specific
minimum number of years. In the above quoted case of Davao Fruits
Corporation vs. Associated Labor Unions, the company practice
lasted for six (6) years. In another case, Davao Integrated Port
Stevedoring Services vs. Abarquez, the employer, for three (3) years
and nine (9) months, approved the commutation to cash of the
unenjoyed portion of the sick leave with pay benefits of its
intermittent workers. While in Tiangco vs. Leogardo, Jr. the employer
carried on the practice of giving a fixed monthly emergency
allowance from November 1976 to February 1980, or three (3) years
and four (4) months. In all these cases, this Court held that the
grant of these benefits has ripened into company practice or policy
which cannot be peremptorily withdrawn. In the case at bar,
petitioner Sevilla Trading kept the practice of including non-basic
benefits such as paid leaves for unused sick leave and vacation leave
in the computation of their 13th-month pay for at least two (2)
years. This, we rule likewise constitutes voluntary employer practice
which cannot be unilaterally withdrawn by the employer without
violating Art. 100 of the Labor Code.” (Emphasis supplied)

Lastly, the foregoing interpretation of law and jurisprudence is more in

keeping with the underlying principle for the grant of this benefit. It is
primarily given to alleviate the plight of workers and to help them cope
with the exorbitant increases in the cost of living. To allow the pro-ration
of the 13th month pay in this case is to undermine the wisdom behind the
law and the mandate that the workingman’s welfare should be the
primordial and paramount consideration. [Citing Santos vs. Velarde, 450
Phil. 381, 390-391 [2003]). What is more, the factual milieu of this case
is such that to rule otherwise inevitably results to dissuasion, if not a
deterrent, for workers from the free exercise of their constitutional rights
to self-organization and to strike in accordance with law. (Section 3,
Article XIII-Social Justice and Human Rights, Philippine Constitution;
Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda, G.
R. No. 145561, June 15, 2005). chanrobles virtual law library

But the rule is different if an employee was never paid his 13th month
pay during his employment. A case in point is JPL Marketing Promotions
vs. CA, [G. R. No. 151966, July 8, 2005], where the Supreme Court ruled
that, in such a case, the computation for the 13th month pay should
properly begin from the first day of employment up to the last day of
work of the employee. This benefit is given by law on the basis of the
service actually rendered by the employee.

65. Who are exempted employers from the coverage of 13th

month pay?

The following are exempted employers:

a. 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.

b. Employers already paying their employees 13th-month pay or

more in a calendar year or its equivalent at the time of this issuance.

c. Employers of household helpers and persons in the personal

service of another in relation to such workers. chanrobles virtual law library

d. Employers of those who are paid on purely commission, boundary,

or task basis, and those who are paid a fixed amount for performing
a specific work, irrespective of the time consumed in the
performance thereof, except where the workers are paid on piece-
rate basis in which case, the employer shall be covered by the 13th
month pay law insofar as such workers are concerned.

66. What is meant by the phrase “its equivalent” in the 13th

month pay law?

The term “its equivalent” shall include Christmas bonus, mid-year bonus,
profit-sharing payments and other cash bonuses amounting to not less
than 1/12th 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 as non-monetary benefits. Where an
employer pays less than 1/12th of the employee’s basic salary, the
employer shall pay the difference.
In the 2005 case of JPL Marketing Promotions vs. CA, [G. R. No. 151966,
July 8, 2005], the petitioner-employer contends that the employees are
no longer entitled to the payment of 13th month pay as well as service
incentive leave pay because they were provided salaries which were over
and above the minimum wage. Admittedly, private respondent-employees
were not given their 13th month pay and service incentive leave pay
while they were under the employ of JPL. The Supreme Court ruled that
the difference between the minimum wage and the actual salary received
by private respondents cannot be deemed as their 13th month pay and
service incentive leave pay as such difference is not equivalent to or of
the same import as the said benefits contemplated by law. Thus, as
properly held by the Court of Appeals and by the NLRC, private
respondents are entitled to the 13th month pay and service incentive
leave pay.

67. When should the 13th month pay be paid?

The required 13th month pay shall be paid not later than December 24 of
each year.

68. What is the rule in case an employee has 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 basis, are entitled
to the required 13th-month pay from all their private employers
regardless of their total earnings from each or all their employers.

69. Is 13th month pay tax-exempt?

Yes. The 13th month pay is tax exempt (R.A. 7833).

70. May payment of bonus be credited as payment of 13th month

pay?

a. Marcopper Mining Corp. vs. Ople, et al. case - No

b. NFSW vs. Ovejera, et al. case - Yes

c. DOLE Philippines vs. Leogardo, et al. case - Yes

d. Brokenshire Memorial Hospital, Inc. vs. NLRC, et al. case - Yes

e. United CMC Textile Workers Union vs. Valenzuela, et al. case - No

f. Universal Corn Products vs. NLRC, et al. case - Yes

 g. FEU Employees Labor Union vs. FEU case (involving transportation
allowance which was treated as compliance with 13th month pay)

h. Framanlis Farms, Inc. vs. Minister of Labor, et al. case - No

i. Kamaya Point Hotel vs. NLRC, et al. case - Yes

j. UST Faculty Union vs. NLRC, et al. case - No

14th MONTH PAY:

71. What is a 14th month pay?

There is no law mandating the payment of 14th-month pay. It is,

therefore, in the nature of a bonus which may not be imposed upon the
employer. It is a gratuity to which the recipient has no right to make a
demand. (Kamaya Point Hotel vs. NLRC, et al., G. R. No. 75289, August
31, 1989, 177 SCRA 160).

MINIMUM WAGE:

72. What is meant by “statutory minimum wage”?

The term “statutory minimum wages” refers simply to the lowest basic
wage rate fixed by law that an employer can pay his workers.

73. How is the minimum wage fixed?

The minimum wage rates for agricultural and non-agricultural workers

and employees in every region shall be those prescribed by the Regional
Tripartite Wages and Productivity Boards (RTWPB) which shall in no case
be lower than the statutory minimum wage rates. chanrobles virtual law library

74. What is the basis of the computation of the “statutory

minimum wage”?

The basis of the minimum wage rates prescribed by law shall be the
normal working hours which shall not be more than eight (8) hours a day.

75. What is the principle of non-elimination or non-diminution of

benefits?

This principle mandates that the reduction or diminution or withdrawal by

employers of any benefits, supplements or payments as provided in
existing laws, individual agreements or collective bargaining agreements
between workers and employers or voluntary employer practice or policy,
is not allowed.
76. What is a “Wage Order”?

“Wage order” refers to the Order promulgated by the Regional Tripartite

Wages and Productivity Board (RTWPB) pursuant to its wage fixing
authority.

77. When is a “Wage Order” necessary?

Whenever conditions in a particular region so warrant, the RTWPB shall

investigate and study all pertinent facts and based on the standards and
criteria herein prescribed, shall proceed to determine whether a Wage
Order should be issued. chanrobles virtual law library

78. When does a “Wage Order” become effective?

Any Wage Order shall take effect after fifteen (15) days from its complete
publication in at least one (1) newspaper of general circulation in the
region.

79. What is the mode of appeal from a “Wage Order” issued by

the RTWPB?

Any party aggrieved by the Wage Order issued by the RTWPB may appeal
such order to the National Wages and Productivity Commission within ten
(10) calendar days from the publication of such order. The filing of the
appeal does not stay the order or suspend the effectivity thereof unless
the person appealing such order shall file with the Commission, an
undertaking with a surety or sureties satisfactory to the Commission for
the payment to the employees affected by the order of the corresponding
increase, in the event such order is affirmed.

80. What are the standards/criteria for minimum wage fixing?

In the determination of regional minimum wages, the Regional Board

shall, among other relevant factors, consider the following:

(a) The demand for living wages;

(b) Wage adjustment vis-à-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 on employment generation and family income; and

(j) The equitable distribution of income and wealth along the

imperatives of economic and social development.

81. What is “wage distortion”?

"Wage distortion" is 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. chanrobles virtual law library

The issue of whether or not a wage distortion exists is a question of fact

that is within the jurisdiction of the quasi-judicial tribunals.

PAYMENT OF WAGES:

82. What are the forms of payment of wages?

1. Under the Civil Code, it is mandated that the laborer’s wages shall be
paid in legal currency. Under the Labor Code and its implementing rules,
as a general rule, wages shall be paid in legal tender and the use of
tokens, promissory notes, vouchers, coupons or any other form alleged to
represent legal tender is prohibited even when expressly requested by the
employee.

2. Exceptions :

A. Payment through automated teller machine (ATM) of banks provided

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;

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; chanrobles virtual law library
 4. There is a bank or ATM facility within a radius of one (1) 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 a
particular period;

6. There shall be n additional expenses and no diminution 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. (Explanatory Bulletin issued by DOLE
Secretary Leonardo Quisumbing dated November 25, 1996).

B. Payment by check or money order, (the foregoing conditions on

existence of bank facility and other factors should also concur).

Payslips as evidence of payment.

Ideally, according to the Supreme Court in Kar Asia, Inc., et al. vs.
Corona, (G. R. No. 154985, Aug. 24, 2004), the signatures of the
employees should appear in the payroll as evidence of actual payment.
However, the absence of such signatures does not necessarily lead to the
conclusion that the amount due the employees was not received. More so
in a case where it appears that the payslips for the same period bear the
signatures of the employees plus a certification that they received the full
compensation for the services rendered. While ordinarily a payslip is only
a statement of the gross monthly income of the employee, his signature
therein coupled by an acknowledgement of full compensation alter the
legal complexion of the document. The payslip becomes a substantial
proof of actual payment. Moreover, there is no hard-and-fast rule
requiring that the employee’s signature in the payroll is the only
acceptable proof of payment. By implication, the employees, in signing
the payslips with their acknowledgement of full compensation,
unqualifiedly admitted the receipt thereof. chanrobles virtual law library

In the 2005 case of G & M [Phils.], Inc. vs. Cruz, (G. R. No. 140495, April
15, 2005), the Supreme Court affirmed the finding of both the Labor
Arbiter and the NLRC on the admissibility as evidence of the pay slips. As
a general rule, the Court is not duty-bound to delve into the accuracy of
the NLRC’s factual findings in the absence of a clear showing that these
were arbitrary and bereft of any rational basis. In the present case,
petitioner failed to demonstrate any arbitrariness or lack of rational basis
on the part of the NLRC.

Article 221 of the Labor Code provides that proceedings before the NLRC
are not covered by the technical rules of evidence and procedure. The
probative value of the copy of the pay slips is aptly justified by the NLRC,
as follows:

“… the payslips are original duplicates of computerized payslips

issued by the employer, Salim Al Yami Est., to its workers which
contain entries such as pay date, employee’s I.D. number, employee
name, category, basic rate, overtime hours and other relevant
information, including an itemization of earnings (basic pay,
overtime pay, meal allowance for the period covered) and
deductions. The fact that the payslips are not authenticated will not
militate against complainant’s claim, considering that in presenting
the payslips, complainant has established the fact of underpayment,
and the burden has shifted to the respondent to prove that
complainant was totally compensated for actual services rendered.”

Payroll.

Under Section 6[a], Rule X, Book III of the Rules Implementing the Labor
Code, every employer is required to pay his employees by means of
payroll. The payroll should show, among other things, the employee’s rate
of pay, deductions made, and the amount actually paid to the employee.
Interestingly, the failure of the employer to present the payroll to support
his claim that the petitioner was not his employee, raises speculation
whether this omission proves that its presentation would be adverse to
his case. (Chavez vs. NLRC, et al., G. R. No. 146530, Jan. 17, 2005 citing
Tan vs. Lagrama, 387 SCRA 393 [2002]).

83. What is the time of payment of wages?

1. Time of payment; exception. - The general rule is, wages shall be paid
not less often than once every two (2) weeks or twice a month at
intervals not exceeding sixteen (16) days. No employer shall make
payment with less frequency than once a month. The exception to above
rule is when payment cannot be made with such regularity due to force
majeure or circumstances beyond the employer’s control, in which case,
the employer shall pay the wages immediately after such force majeure
or circumstances have ceased.

84. What is the place of payment of wages?

1. As a general rule, the place of payment shall be at or near the place of

undertaking.

2. Exceptions:

a. When payment cannot be effected at or near the place of work by

reason of the deterioration of peace and order conditions, or by
 reason of actual or impending emergencies caused by fire, flood,
epidemic or other calamity rendering payment thereat impossible;

b. When the employer provides free transportation to the employees

back and forth; and chanrobles virtual law library

c. Under any other analogous circumstances, provided that the time

spent by the employees in collecting their wages shall be considered
as compensable hours worked.

3. Payment of wages in bars, massage clinics or nightclubs is prohibited

except in the case of employees thereof.

4. Payment through banks - allowed in businesses and other entities with

twenty five (25) or more employees and located within one (1) kilometer
radius to a commercial, savings or rural bank.

85. To whom should wages be paid?

1. General rule: payment of wages shall be made directly to the employee

entitled thereto and to nobody else.

2. Exceptions.

a. Where the employer is authorized in writing by the employee to

pay his wages to a member of his family;

b. Where payment to another person of any part of the employee’s

wages is authorized by existing law, including payments for the
insurance premiums of the employee and union dues where the right
to check-off has been recognized by the employer in accordance with
a collective agreement or authorized in writing by the individual
employees concerned; or  chanrobles virtual law library

c. In case of death of the employee, in which case, the same shall be

paid to his heirs without necessity of intestate proceedings.

Payment of wages and other monetary claims, burden of proof.

In Jimenez vs. NLRC, [G.R. No. 116960, April 2, 1996, 256 SCRA 84]
which involves a claim for unpaid wages/commissions, separation pay and
damages against an employer, the Supreme Court ruled that where a
person is sued for a debt admits that the debt was originally owed, and
pleads payment in whole or in part, it is incumbent upon him to prove
such payment. This is based on the principle of evidence that each party
must prove his affirmative allegations. Since petitioner asserts that
respondent has already been fully paid of his stipulated salary, the burden
is upon petitioner to prove such fact of full payment. (See also National
Semiconductor [HK] vs. NLRC, et al., G. R. No. 123520, June 26, 1998), 

Thus, it was stated in the Jimenez case that:

“As a general rule, one who pleads payment has the burden of
proving it. Even where the plaintiff must allege non-payment, the
general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove non-payment. The
debtor has the burden of showing with legal certainty that the
obligation has been discharged by payment.

“When the existence of a debt is fully established by the evidence

contained in the record, the burden of proving that it has been
extinguished by payment devolves upon the debtor who offers such
a defense to the claim of the creditor. Where the debtor introduces
some evidence of payment, the burden of going forward with the
evidence - as distinct from the general burden of proof - shifts to the
creditor, who is then under a duty of producing some evidence to
show non-payment.”

In the 2005 case of G & M [Phils.], Inc. vs. Cruz, [G. R. No. 140495, April
15, 2005], petitioner merely denied respondent’s claim of underpayment.
It did not present any controverting evidence to prove full payment.
Hence, the findings of the Labor Arbiter, the NLRC and the Court of
Appeals that respondent was not fully paid of his wages stand. chanrobles virtual
law library

The positive testimony of a creditor may be sufficient of itself to show

non-payment, even when met by indefinite testimony of the debtor.
Similarly, the testimony of the debtor may also be sufficient to show
payment, but, where his testimony is contradicted by the other party or
by a disinterested witness, the issue may be determined against the
debtor since he has the burden of proof. The testimony of the debtor
creating merely an inference of payment will not be regarded as
conclusive on that issue.

Hence, for failure to present evidence to prove payment, petitioners

defaulted in their defense and in effect admitted the allegations of private
respondents. (G & M [Phils.], Inc. vs. Cruz, G. R. No. 140495, April 15,
2005).

The reason for the rule, according to the 2000 case of Villar vs. NLRC,
[G.R. No. 130935, 11 May 2000], is that the pertinent personnel files,
payrolls, records, remittances and other similar documents – which will
show that overtime, differentials, service incentive leave and other claims
of workers have been paid – are not in the possession of the worker but
in the custody and absolute control of the employer. chanrobles virtual law library
RULE ON CONTRACTING OR SUBCONTRACTING:

86. What is contracting or subcontracting?

Contracting or subcontracting - It refers to an arrangement whereby a

principal agrees to put out or farm out with a contractor or subcontractor
the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or
service is to be performed or completed within or outside the premises of
the principal.

Employment and independent contracting, distinguished.

The 2005 case of Chavez vs. NLRC, [G. R. No. 146530, January 17,
2005], is instructive as far as the distinction between employment and
independent contracting is concerned. In debunking the contention of the
employer that the truck driver is an independent contractor and not an
employee, the Supreme Court ruled:

“Fourth. As earlier opined, of the four elements of the employer-

employee relationship, the ‘control test’ is the most important.
Compared to an employee, an independent contractor is one who
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, 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. Hence, while an independent contractor enjoys
independence and freedom from the control and supervision of his
principal, an employee is subject to the employer’s power to control
the means and methods by which the employee’s work is to be
performed and accomplished.

“Although the respondents denied that they exercised control over

the manner and methods by which the petitioner accomplished his
work, a careful review of the records shows that the latter performed
his work as truck driver under the respondents’ supervision and
control. Their right of control was manifested by the following
attendant circumstances:

1. The truck driven by the petitioner belonged to respondent

company;

2. There was an express instruction from the respondents that the

truck shall be used exclusively to deliver respondent company’s
goods;
3. Respondents directed the petitioner, after completion of each
delivery, to park the truck in either of two specific places only, to
wit: at its office in Metro Manila at 2320 Osmeña Street, Makati City
or at BEPZ, Mariveles, Bataan; and chanrobles virtual law library

4. Respondents determined how, where and when the petitioner

would perform his task by issuing to him gate passes and routing
slips.

a. The routing slips indicated on the column REMARKS, the

chronological order and priority of delivery such as 1st drop,
2nd drop, 3rd drop, etc. This meant that the petitioner had to
deliver the same according to the order of priority indicated
therein.

b. The routing slips, likewise, showed whether the goods were

to be delivered urgently or not by the word RUSH printed
thereon.

c. The routing slips also indicated the exact time as to when the
goods were to be delivered to the customers as, for example,
the words ‘tomorrow morning’ was written on slip no. 2776.

“These circumstances, to the Court’s mind, prove that the

respondents exercised control over the means and methods by which
the petitioner accomplished his work as truck driver of the
respondent company. On the other hand, the Court is hard put to
believe the respondents’ allegation that the petitioner was an
independent contractor engaged in providing delivery or hauling
services when he did not even own the truck used for such services.
Evidently, he did not possess substantial capitalization or investment
in the form of tools, machinery and work premises. Moreover, the
petitioner performed the delivery services exclusively for the
respondent company for a continuous and uninterrupted period of
ten years.

“The contract of service to the contrary notwithstanding, the factual

circumstances earlier discussed indubitably establish the existence of
an employer-employee relationship between the respondent
company and the petitioner. It bears stressing that the existence of
an employer-employee relationship cannot be negated by expressly
repudiating it in a contract and providing therein that the employee
is an independent contractor when, as in this case, the facts clearly
show otherwise. Indeed, the employment status of a person is
defined and prescribed by law and not by what the parties say it
should be.” (Chavez vs. NLRC, et al., G. R. No. 146530, Jan. 17,
2005).
In the 2002 case of Tan vs. Lagrama, [G. R. No. 151228, August 15,
2002], the Supreme Court distinguished employment from independent
contracting. According to the Court, compared to an employee, an
independent contractor is one who 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, 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. (Citing De los Santos v. NLRC, G.R. No. 121327, Dec. 20, 2001).
Hence, while an independent contractor enjoys independence and
freedom from the control and supervision of his principal, an employee is
subject to the employer’s power to control the means and methods by
which the employee’s work is to be performed and accomplished.

Following the control test, the High Court held in Tan vs. Lagrama [supra]
that albeit petitioner Tan claims that private respondent Lagrama was an
independent contractor and never his employee, the evidence shows that
the latter performed his work as a painter, making ad billboards and
murals for the motion pictures shown at the Empress, Supreme, and
Crown Theaters for more than 10 years, under the supervision and control
of petitioner. Lagrama worked in a designated work area inside the Crown
Theater of petitioner, for the use of which petitioner prescribed rules. The
rules included the observance of cleanliness and hygiene and a prohibition
against urinating in the work area and any place other than the toilet or
the rest rooms. Petitioner’s control over Lagrama’s work extended not
only to the use of the work area, but also to the result of Lagrama’s work,
and the manner and means by which the work was to be accomplished.

The Supreme Court further ruled:

“Moreover, it would appear that petitioner not only provided the

workplace, but supplied as well the materials used for the paintings,
because he admitted that he paid Lagrama only for the latter’s
services.

“Private respondent Lagrama claimed that he worked daily, from 8

o’clock in the morning to 5 o’clock in the afternoon. Petitioner
disputed this allegation and maintained that he paid Lagrama
P1,475.00 per week for the murals for the three theaters which the
latter usually finished in 3 to 4 days in one week. Even assuming this
to be true, the fact that Lagrama worked for at least 3 to 4 days a
week proves regularity in his employment by petitioner.

“Second. That petitioner had the right to hire and fire was admitted
by him in his position paper submitted to the NLRC, the pertinent
portions of which stated:
 ‘Complainant did not know how to use the available comfort
rooms or toilets in and about his work premises. He was
urinating right at the place where he was working when it was
so easy for him, as everybody else did and had he only wanted
to, to go to the comfort rooms. But no, the complainant had to
make a virtual urinal out of his work place! The place then stunk
to high heavens, naturally, to the consternation of respondents
and everyone who could smell the malodor.

...

‘Given such circumstances, the respondents had every right,

nay all the compelling reason, to fire him from his painting job
upon discovery and his admission of such acts. Nonetheless,
though thoroughly scolded, he was not fired. It was he who
stopped to paint for respondents. chanrobles virtual law library

“By stating that he had the right to fire Lagrama, petitioner in effect
acknowledged Lagrama to be his employee. For the right to hire and
fire is another important element of the employer-employee
relationship. Indeed, the fact that, as petitioner himself said, he
waited for Lagrama to report for work but the latter simply stopped
reporting for work reinforces the conviction that Lagrama was indeed
an employee of petitioner. For only an employee can nurture such an
expectancy, the frustration of which, unless satisfactorily explained,
can bring about some disciplinary action on the part of the employer.

“Third. Payment of wages is one of the four factors to be considered

in determining the existence of employer-employee relation. Wages
are defined as ‘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.’ That Lagrama worked for Tan on a fixed piece-work basis
is of no moment. Payment by result is a method of compensation
and does not define the essence of the relation. It is a method of
computing compensation, not a basis for determining the existence
or absence of employer-employee relationship. One may be paid on
the basis of results or time expended on the work, and may or may
not acquire an employment status, depending on whether the
elements of an employer-employee relationship are present or not.

“The Rules Implementing the Labor Code require every employer to

pay his employees by means of payroll. (Book III, Rule X, Sec. 6[a]).
The payroll should show among other things, the employee’s rate of
pay, deductions made, and the amount actually paid to the
 employee. In the case at bar, petitioner did not present the payroll
to support his claim that Lagrama was not his employee, raising
speculations whether his failure to do so proves that its presentation
would be adverse to his case. (Citing Revised Rules on Evidence,
Rule 131, Section 3(e). See (Tan vs. Lagrama, et al., G. R. No.
151228, Aug. 15, 2002; Villaruel vs. NLRC, 284 SCRA 399 [1998]).
chanrobles virtual law library

“The primary standard for determining regular employment is the

reasonable connection between the particular activity performed by
the employee in relation to the usual trade or business of the
employer. In this case, there is such a connection between the job of
Lagrama painting billboards and murals and the business of
petitioner. To let the people know what movie was to be shown in a
movie theater requires billboards. Petitioner in fact admits that the
billboards are important to his business.

“The fact that Lagrama was not reported as an employee to the SSS
is not conclusive on the question of whether he was an employee of
petitioner. (Citing Lambo vs. NLRC, 317 SCRA 420 [1999]).
Otherwise, an employer would be rewarded for his failure or even
neglect to perform his obligation. (See Santos vs. NLRC, 293 SCRA
113 [1998]).

“Neither does the fact that Lagrama painted for other persons affect
or alter his employment relationship with petitioner. That he did so
only during weekends has not been denied by petitioner. On the
other hand, Samuel Villalba, for whom Lagrama had rendered
service, admitted in a sworn statement that he was told by Lagrama
that the latter worked for petitioner.” (Tan vs. Lagrama, et al., G. R.
No. 151228, Aug. 15, 2002).

Moreover, in Escario, et al. vs. NLRC, [G. R. No. 124055, June 8, 2000],
the Supreme Court also used the so-called “four-fold test” in determining
employer-employee relationship, to establish that the legitimate
independent contractor is the true employer of petitioners. The elements
of this test are (1) the selection and engagement of employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to
control the employee’s conduct.

Case of independent contractor [Sonza vs. ABS-CBN case].

The 2004 case of Sonza vs. ABS-CBN Broadcasting Corporation, [G. R.

No. 138051, June 10, 2004] is one of first impression. Although Philippine
labor laws and jurisprudence define clearly the elements of an employer-
employee relationship, this is the first time that the Supreme Court has
resolved the nature of the relationship between a television and radio
station and one of its “talents.” There is no case law stating that a radio
and television program host is an employee of the broadcast station.

In May 1994, respondent ABS-CBN Broadcasting Corporation (“ABS-

CBN”) signed an Agreement (“Agreement”) with the Mel and Jay
Management and Development Corporation (“MJMDC”). ABS-CBN was
represented by its corporate officers while MJMDC was represented by
Sonza, as President and General Manager, and Carmela Tiangco
(“TIANGCO”), as EVP and Treasurer. Referred to in the Agreement as
“AGENT,” MJMDC agreed to provide SONZA’s services exclusively to ABS-
CBN as talent for radio and television. The Agreement listed the services
Sonza would render to ABS-CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m.,
Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m.,
Sundays.

ABS-CBN agreed to pay for Sonza’s services a monthly talent fee of

P310,000 for the first year and P317,000 for the second and third year of
the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th
days of the month.

On 30 April 1996, Sonza filed a complaint against ABS-CBN before the

Department of Labor and Employment, National Capital Region in Quezon
City. Sonza complained that ABS-CBN did not pay his salaries, separation
pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock Option Plan
(“ESOP”).

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that

no employer-employee relationship existed between the parties. Sonza
filed an Opposition to the motion on 19 July 1996.

Meanwhile, ABS-CBN continued to remit Sonza’s monthly talent fees

through his account at PCIBank, Quezon Avenue Branch, Quezon City. In
July 1996, ABS-CBN opened a new account with the same bank where
ABS-CBN deposited Sonza’s talent fees and other payments due him
under the Agreement. chanrobles virtual law library

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the
complaint for lack of jurisdiction. The NLRC, on appeal, affirmed the Labor
Arbiter’s ruling. On certiorari, the Court of Appeals affirmed the NLRC’s
finding that no employer-employee relationship existed between Sonza
and ABS-CBN.
The basic issue presented here is whether Sonza is an employee or an
independent contractor.

In affirming the said decision of the Court of Appeals and holding that
Sonza was not an employee but an independent contractor, the Supreme
Court used the four-fold test of determining the existence of an employer-
employee relationship, more particularly, the control test.

A. Selection and Engagement of Employee

Independent contractors often present themselves to possess unique

skills, expertise or talent to distinguish them from ordinary employees.
The specific selection and hiring of Sonza, because of his unique skills,
talent and celebrity status not possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of an independent contractual
relationship. If Sonza did not possess such unique skills, talent and
celebrity status, ABS-CBN would not have entered into the Agreement
with Sonza but would have hired him through its personnel department
just like any other employee.

B. Payment of Wages

All the talent fees and benefits paid to Sonza were the result of
negotiations that led to the Agreement. If Sonza were ABS-CBN’s
employee, there would be no need for the parties to stipulate on benefits
such as “SSS, Medicare, x x x and 13th month pay” which the law
automatically incorporates into every employer-employee contract.
Whatever benefits Sonza enjoyed arose from contract and not because of
an employer-employee relationship.

Sonza’s talent fees, amounting to P317,000 monthly in the second and

third year, are so huge and out of the ordinary that they indicate more an
independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay Sonza such huge talent fees
precisely because of Sonza’s unique skills, talent and celebrity status not
possessed by ordinary employees.  chanrobles virtual law library

C. Power of Dismissal

For violation of any provision of the Agreement, either party may

terminate their relationship. Sonza failed to show that ABS-CBN could
terminate his services on grounds other than breach of contract, such as
retrenchment to prevent losses as provided under labor laws. During the
life of the Agreement, ABS-CBN agreed to pay Sonza’s talent fees as long
as “AGENT and Jay Sonza shall faithfully and completely perform each
condition of this Agreement.” Even if it suffered severe business losses,
ABS-CBN could not retrench Sonza because ABS-CBN remained obligated
to pay Sonza’s talent fees during the life of the Agreement. This
circumstance indicates an independent contractual relationship between
Sonza and ABS-CBN.

D. Power of Control

Since there is no local precedent on whether a radio and television

program host is an employee or an independent contractor, reference to
foreign case law in analyzing the present case is necessary. The United
States Court of Appeals, First Circuit, recently held in Alberty-Vélez vs.
Corporación De Puerto Rico Para La Difusión Pública (“WIPR”), [361 F.3d
1, 2 March 2004] that a television program host is an independent
contractor, thus:

First, a television actress is a skilled position requiring talent and training

not available on-the-job.

Second, the actress provided the “tools and instrumentalities” necessary

for her to perform. chanrobles virtual law library

Third, WIPR could not assign the actress work in addition to filming
“Desde Mi Pueblo.”

Applying the control test, Sonza is not an employee but an independent

contractor. The control test is the most important test the courts apply in
distinguishing an employee from an independent contractor. This test is
based on the extent of control the hirer exercises over a worker. The
greater the supervision and control the hirer exercises, the more likely the
worker is deemed an employee. The converse holds true as well - the less
control the hirer exercises, the more likely the worker is considered an
independent contractor.

First, Sonza contends that ABS-CBN exercised control over the means and
methods of his work.

Sonza’s argument is misplaced. ABS-CBN engaged Sonza’s services

specifically to co-host the “Mel & Jay” programs. ABS-CBN did not assign
any other work to Sonza. To perform his work, Sonza only needed his
skills and talent. How Sonza delivered his lines, appeared on television,
and sounded on radio were outside ABS-CBN’s control. Sonza did not
have to render eight hours of work per day. The Agreement required
Sonza to attend only rehearsals and tapings of the shows, as well as pre-
and post-production staff meetings. ABS-CBN could not dictate the
contents of Sonza’s script. However, the Agreement prohibited Sonza
from criticizing in his shows ABS-CBN or its interests. The clear
implication is that Sonza had a free hand on what to say or discuss in his
shows provided he did not attack ABS-CBN or its interests. Moreover,
ABS-CBN was not involved in the actual performance that produced the
finished product of Sonza’s work. ABS-CBN did not instruct Sonza how to
perform his job. ABS-CBN merely reserved the right to modify the
program format and airtime schedule “for more effective programming.”
ABS-CBN’s sole concern was the quality of the shows and their standing in
the ratings. Clearly, ABS-CBN did not exercise control over the means and
methods of performance of Sonza’s work.

Sonza claims that ABS-CBN’s power not to broadcast his shows proves
ABS-CBN’s power over the means and methods of the performance of his
work. Although ABS-CBN did have the option not to broadcast Sonza’s
show, ABS-CBN was still obligated to pay Sonza’s talent fees. Thus, even
if ABS-CBN was completely dissatisfied with the means and methods of
Sonza’s performance of his work, or even with the quality or product of
his work, ABS-CBN could not dismiss or even discipline Sonza. All that
ABS-CBN could do is not to broadcast Sonza’s show but ABS-CBN must
still pay his talent fees in full. chanrobles virtual law library

Clearly, ABS-CBN’s right not to broadcast Sonza’s show, burdened as it

was by the obligation to continue paying in full Sonza’s talent fees, did
not amount to control over the means and methods of the performance of
Sonza’s work. ABS-CBN could not terminate or discipline Sonza even if
the means and methods of performance of his work - how he delivered
his lines and appeared on television - did not meet ABS-CBN’s approval.
This proves that ABS-CBN’s control was limited only to the result of
Sonza’s work, whether to broadcast the final product or not. In either
case, ABS-CBN must still pay Sonza’s talent fees in full until the expiry of
the Agreement.

In Vaughan, et al. vs. Warner, et al., [157 F.2d 26, 8 August 1946], the
United States Circuit Court of Appeals ruled that vaudeville performers
were independent contractors although the management reserved the
right to delete objectionable features in their shows. Since the
management did not have control over the manner of performance of the
skills of the artists, it could only control the result of the work by deleting
objectionable features. chanrobles virtual law library

Sonza further contends that ABS-CBN exercised control over his work by
supplying all equipment and crew. No doubt, ABS-CBN supplied the
equipment, crew and airtime needed to broadcast the “Mel & Jay”
programs. However, the equipment, crew and airtime are not the “tools
and instrumentalities” Sonza needed to perform his job. What Sonza
principally needed were his talent or skills and the costumes necessary for
his appearance. Even though ABS-CBN provided Sonza with the place of
work and the necessary equipment, Sonza was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-
CBN’s sole concern was for Sonza to display his talent during the airing of
the programs.
A radio broadcast specialist who works under minimal supervision is an
independent contractor. Sonza’s work as television and radio program
host required special skills and talent, which Sonza admittedly possesses.
The records do not show that ABS-CBN exercised any supervision and
control over how Sonza utilized his skills and talent in his shows.

Second, Sonza urges the Court to rule that he was ABS-CBN’s employee
because ABS-CBN subjected him to its rules and standards of
performance. Sonza claims that this indicates ABS-CBN’s control “not only
[over] his manner of work but also the quality of his work.” chanrobles virtual law
library

The Agreement stipulates that Sonza shall abide with the rules and
standards of performance “covering talents” of ABS-CBN. The Agreement
does not require Sonza to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct
imposed on Sonza under the Agreement refers to the “Television and
Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP),
which has been adopted by the COMPANY (ABS-CBN) as its Code of
Ethics.” The KBP code applies to broadcasters, not to employees of radio
and television stations. Broadcasters are not necessarily employees of
radio and television stations. Clearly, the rules and standards of
performance referred to in the Agreement are those applicable to talents
and not to employees of ABS-CBN.

In any event, not all rules imposed by the hiring party on the hired party
indicate that the latter is an employee of the former. (AFP Mutual Benefit
Association, Inc. v. NLRC, G.R. No. 102199, 28 Jan. 1997, 267 SCRA 47).
In this case, Sonza failed to show that these rules controlled his
performance. We find that these general rules are merely guidelines
towards the achievement of the mutually desired result, which are top-
rating television and radio programs that comply with standards of the
industry.

The Vaughan case also held that one could still be an independent
contractor although the hirer reserved certain supervision to insure the
attainment of the desired result. The hirer, however, must not deprive the
one hired from performing his services according to his own initiative.

Lastly, Sonza insists that the “exclusivity clause” in the Agreement is the
most extreme form of control which ABS-CBN exercised over him. chanrobles
virtual law library

This argument is futile. Being an exclusive talent does not by itself mean
that Sonza is an employee of ABS-CBN. Even an independent contractor
can validly provide his services exclusively to the hiring party. In the
broadcast industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in
the entertainment industry. This practice is not designed to control the
means and methods of work of the talent, but simply to protect the
investment of the broadcast station. The broadcast station normally
spends substantial amounts of money, time and effort “in building up its
talents as well as the programs they appear in and thus expects that said
talents remain exclusive with the station for a commensurate period of
time.” Normally, a much higher fee is paid to talents who agree to work
exclusively for a particular radio or television station. In short, the huge
talent fees partially compensates for exclusivity, as in the present case.
(Sonza vs. ABS-CBN Broadcasting Corporation, G. R. No. 138051, June
10, 2004). chanrobles virtual law library

Individuals as independent contractors.

The law does not preclude individuals from engaging as independent

contractors. Individuals with special skills, expertise or talent enjoy the
freedom to offer their services as independent contractors. The right to
life and livelihood guarantees this freedom to contract as independent
contractors. The right of labor to security of tenure cannot operate to
deprive an individual, possessed with special skills, expertise and talent,
of his right to contract as an independent contractor. An individual like an
artist or talent has a right to render his services without any one
controlling the means and methods by which he performs his art or craft.
The Supreme Court will not interpret the right of labor to security of
tenure to compel artists and talents to render their services only as
employees. If radio and television program hosts can render their services
only as employees, the station owners and managers can dictate to the
radio and television hosts what they say in their shows. This is not
conducive to freedom of the press. (Sonza vs. ABS-CBN Broadcasting
Corporation, G. R. No. 138051, June 10, 2004).

Consequently, a television program host is deemed an independent

contractor. (Alberty-Vélez vs. Corporación De Puerto Rico Para La Difusión
Pública [361 F.3d 1, 2 March 2004] United States Court of Appeals, First
Circuit).

In another case, it was ruled by the United States Circuit Court of Appeals
that vaudeville performers are independent contractors. (Vaughan, et al.
vs. Warner, et al., [157 F.2d 26, 8 Aug. 1946]). chanrobles virtual law library

In Zhengxing vs. Nathanson, [215 F.Supp.2d 114, 5 August 2002], the

plaintiff Zhengxing, a Chinese language broadcaster and translator was
deemed an independent contractor because she worked under minimal
supervision.

In the insurance industry, an insurance adjuster or a commission agent of

insurance firms is not considered an employee thereof but an independent
contractor in the light of the absence of control by the latter over the
work of the former except as to the results of such work. (AFP Mutual
Benefit Association, Inc. vs. NLRC, et al., G. R. No. 102199, Jan. 28,
1997; Insular Life Assurance Co., Ltd. vs. NLRC, et al., G. R. No. 84484,
Nov. 15, 1989).

In case of doubt, one must be classified as employee, not as independent

contractor.

In the 2000 case of SSS vs. CA, [G. R. No. 100388, December 14, 2000],
the Supreme Court reiterated its ruling in the case of Dy Keh Beng vs.
International Labor, [90 SCRA 161 (1979)], where the long-standing
ruling in Sunripe Coconut Products Co. vs. Court of Industrial Relations,
[83 Phil. 518, 523, L-2009, April 30, 1949], was cited, to wit: chanrobles virtual
law library

“When a worker possesses some attributes of an employee and

others of an independent contractor, which make him fall within an
intermediate area, he may be classified under the category of an
employee when the economic facts of the relations make it more
nearly one of employment than one of independent business
enterprise with respect to the ends sought to be accomplished.”

Employment of security guards in the security service industry.

The Supreme Court had occasion to discuss once again the issue of
employment status of security guards in the 2005 case of Manila Electric
Company vs. Benamira, [G. R. No. 145271, July 14, 2005]. In
emphasizing the fact that there was no employer-employee relationship
between petitioner Meralco and the security guards assigned to it by the
security agency employing them, it cited the case of Social Security
System vs. Court of Appeals, [No. L-28134, June 30, 1971, 39 SCRA 629]
that:

“...The guards or watchmen render their services to private

respondent by allowing themselves to be assigned by said
respondent, which furnishes them arms and ammunition, to guard
and protect the properties and interests of private respondent's
clients, thus enabling that respondent to fulfill its contractual
obligations. Who the clients will be, and under what terms and
conditions the services will be rendered, are matters determined not
by the guards or watchmen, but by private respondent. On the other
hand, the client companies have no hand in selecting who among the
guards or watchmen shall be assigned to them. It is private
respondent that issues assignment orders and instructions and
exercises control and supervision over the guards or watchmen, so
much so that if, for one reason or another, the client is dissatisfied
with the services of a particular guard, the client cannot himself
 terminate the services of such guard, but has to notify private
respondent, which either substitutes him with another or metes out
to him disciplinary measures. That in the course of a watchman's
assignment the client conceivably issues instructions to him, does
not in the least detract from the fact that private respondent is the
employer of said watchman, for in legal contemplation such
instructions carry no more weight than mere requests, the privity of
contract being between the client and private respondent, not
between the client and the guard or watchman. Corollarily, such
giving out of instructions inevitably spring from the client's right
predicated on the contract for services entered into by it with private
respondent.

“In the matter of compensation, there can be no question at all that

the guards or watchmen receive compensation from private
respondent and not from the companies or establishments whose
premises they are guarding. The fee contracted for to be paid by the
client is admittedly not equal to the salary of a guard or watchman;
such fee is arrived at independently of the salary to which the guard
or watchman is entitled under his arrangements with private
respondent.

Said ruling in SSS was reiterated in American President Lines vs. Clave,
[No. L-51641, June 29, 1982, 114 SCRA 826], thus:

“In the light of the foregoing standards, We fail to see how the
complaining watchmen of the Marine Security Agency can be
considered as employees of the petitioner. It is the agency that
recruits, hires, and assigns the work of its watchmen. Hence, a
watchman can not perform any security service for the petitioner's
vessels unless the agency first accepts him as its watchman. With
respect to his wages, the amount to be paid to a security guard is
beyond the power of the petitioner to determine. Certainly, the lump
sum amount paid by the petitioner to the agency in consideration of
the latter's service is much more than the wages of any one
watchman. In point of fact, it is the agency that quantifies and pays
the wages to which a watchman is entitled.

“Neither does the petitioner have any power to dismiss the security
guards. In fact, We fail to see any evidence in the record that it
wielded such a power. It is true that it may request the agency to
change a particular guard. But this, precisely, is proof that the power
lies in the hands of the agency.

“Since the petitioner has to deal with the agency, and not the
individual watchmen, on matters pertaining to the contracted task, it
stands to reason that the petitioner does not exercise any power
over the watchmen's conduct. Always, the agency stands between
 the petitioner and the watchmen; and it is the agency that is
answerable to the petitioner for the conduct of its guards.”

And as held in said Meralco case:

“Under the security service agreement, it was ASDAI which (a)

selected, engaged or hired and discharged the security guards; (b)
assigned them to MERALCO according to the number agreed upon;
(c) provided the uniform, firearms and ammunition, nightsticks,
flashlights, raincoats and other paraphernalia of the security guards;
(d) paid them salaries or wages; and, (e) disciplined and supervised
them or principally controlled their conduct. The agreement even
explicitly provided that “[n]othing herein contained shall be
understood to make the security guards under this Agreement,
employees of the COMPANY, it being clearly understood that such
security guards shall be considered as they are, employees of the
AGENCY alone.” Clearly, the individual respondents are the
employees of ASDAI. chanrobles virtual law library

“As to the provision in the agreement that MERALCO reserved the

right to seek replacement of any guard whose behavior, conduct or
appearance is not satisfactory, such merely confirms that the power
to discipline lies with the agency. It is a standard stipulation in
security service agreements that the client may request the
replacement of the guards to it. Service-oriented enterprises, such
as the business of providing security services, generally adhere to
the business adage that “the customer or client is always right” and,
thus, must satisfy the interests, conform to the needs, and cater to
the reasonable impositions of its clients.

“Neither is the stipulation that the agency cannot pull out any
security guard from MERALCO without its consent an indication of
control. It is simply a security clause designed to prevent the agency
from unilaterally removing its security guards from their assigned
posts at MERALCO’s premises to the latter’s detriment.

“The clause that MERALCO has the right at all times to inspect the
guards of the agency detailed in its premises is likewise not
indicative of control as it is not a unilateral right. The agreement
provides that the agency is principally mandated to conduct
inspections, without prejudice to MERALCO’s right to conduct its own
inspections.

“Needless to stress, for the power of control to be present, the

person for whom the services are rendered must reserve the right to
direct not only the end to be achieved but also the means for
reaching such end.[26] Not all rules imposed by the hiring party on
the hired party indicate that the latter is an employee of the former.
 [27] Rules which serve as general guidelines towards the
achievement of the mutually desired result are not indicative of the
power of control.[28]

“Verily, the security service agreements in the present case provided

that all specific instructions by MERALCO relating to the discharge by
the security guards of their duties shall be directed to the agency
and not directly to the individual respondents. The individual
respondents failed to show that the rules of MERALCO controlled
their performance.

xxx

“The individual respondents can not be considered as regular

employees of the MERALCO for, although security services are
necessary and desirable to the business of MERALCO, it is not
directly related to its principal business and may even be considered
unnecessary in the conduct of MERALCO’s principal business, which
is the distribution of electricity.”

87. Who are the parties to a contracting or subcontracting

arrangement?

Parties. - There are 3 parties: principal, the contractor or subcontractor,

and the workers engaged by the latter. The principal and the contractor or
subcontractor may be a natural or juridical person.

 “Principal” refers to any employer who puts out or farms out a job,
service, or work to a contractor or subcontractor, whether or not the
arrangement is covered by a written contract. chanrobles virtual law library
 “Contractor" or "subcontractor” refers to any person or entity
engaged in a legitimate contracting or subcontracting arrangement.
 "Contractual employee” includes one employed by a contractor or
subcontractor to perform or complete a job, work or service pursuant
to an arrangement between the latter and a principal called
“contracting” or “subcontracting”. chanrobles virtual law library

88. When is contracting or subcontracting legitimate?

Contracting or subcontracting shall be legitimate if the following

circumstances concur: chanrobles virtual law library

(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 directions 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 chanrobles virtual law library

(iii) The agreement between the principal and the 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.

89. What is permissible contracting or subcontracting

arrangement?

The principal may engage the services of a contractor or subcontractor for

the performance of any of the following:

(a) Works or services temporarily or occasionally needed to meet

abnormal increase in the demand of products or services, provided
that the normal production capacity or regular workforce of the
principal cannot reasonably cope with such demands; chanrobles virtual law
library

(b) Works or services temporarily or occasionally needed by the

principal for undertakings requiring expert or highly technical
personnel to improve the management or operations of an
enterprise;

(c) Services temporarily needed for the introduction or promotion of

new products, only for the duration of the introductory or
promotional period;

(d) Works or services not directly related or not integral to the main
business or operation of the principal, including casual work,
janitorial, security, landscaping, and messengerial services and work
not related to manufacturing processes in manufacturing
establishments;

(e) Services involving the public display of manufacturers’ products

which do not involve the act of selling or issuance of receipts or
invoices;

(f) Specialized works involving the use of some particular, unusual or

peculiar skills, expertise, tools or equipment the performance of
which is beyond the competence of the regular workforce or
production capacity of the principal; and

(g) Unless a reliever system is in place among the regular workforce,

substitute services for absent regular employees provided that the
period of service shall be coextensive with the period of absence and
 the same is made clear to the substitute employee at the time of
engagement. The phrase “absent regular employees” includes those
who are serving suspensions or other disciplinary measures not
amounting to termination of employment meted out by the principal
but excludes those on strike where all the formal requisites for the
legality of the strike have been prima facie complied with based on
the records filed with the National Conciliation and Mediation Board.
(Section 6, Rule VIII-A, Book III, Rules to Implement the Labor
Code, as amended by Department Order No. 10, Series of 1997).

90. What are the prohibited acts in the law on contracting and
subcontracting?

The following are hereby declared prohibited for being contrary to law or
public policy:

(a) Labor-only contracting;

(b) Contracting out of work which will either displace employees of

the principal from their jobs or reduce their regular working hours;

(c) Contracting out of work with a “cabo”. [A "cabo" refers to a

person or group of persons or to a labor group which, in the guise of
a labor organization, supplies workers to an employer, with or
without any monetary or other consideration whether in the capacity
of an agent of the employer or as an ostensible independent
contractor.]

(d) Taking undue advantage of the economic situation or lack of

bargaining strength of the contractual employee, or undermining his
security of tenure or basic rights, or circumventing the provisions of
regular employment in any of the following instances:

(i) In addition to his assigned function, requiring the contractual

employee to perform functions which are currently being
performed by the regular employee of the principal or of the
contractor or subcontractor;

(ii) Requiring him to sign as a precondition to employment or

continued employment, an antedated resignation letter; a blank
payroll; a waiver of labor standards including minimum wages
and social or welfare benefits; or a quitclaim releasing the
principal, contractor or subcontractor from any liability as to
payment of the future claims; and chanrobles virtual law library

(iii) Requiring him to sign a contract fixing the period of

employment to a term shorter than the term of the contract
between the principal and the contractor or subcontractor,
 unless the latter contract is divisible into phases for which
substantially different skills are required and this is made known
to the employee at the time of engagement.

(e) Contracting out of a job, work or service through an in-house

agency as defined herein;

(f) Contracting out of a job, work or service directly related to the

business or operation of the principal by reason of a strike or lockout
whether actual or imminent; and

(g) Contracting out of a job, work or service when not justified by

the exigencies of the business and the same results in the reduction
or splitting of the bargaining unit.

91. What is labor-only contracting?

Labor-only contracting is hereby declared prohibited. For this purpose,

labor-only contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a
job, work or service for a principal, and any of the following elements are
present:

i) the contractor or subcontractor does not have substantial capital

or investment which relates to the job, work or service to be
performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are
directly related to the main business of the principal; or chanrobles virtual
law library

ii) the contractor does not exercise the right to control over the
performance of the work of the contractual employee. (Article 106,
Labor Code; (No. 9, DOLE Primer on Contracting and Subcontracting,
Effects of Department Order No. 3, Series of 2001; Manila Water Co.,
Inc. vs. Pena, et al., G. R. No. 158255, July 8, 2004).

Effects of a labor-only contracting arrangement.

In summary, the following are the effects of a labor-only contracting

arrangement:

a. The subcontractor will be treated as the agent or intermediary of

the principal. Since the act of an agent is the act of the principal,
representations made by the subcontractor to the employees will
bind the principal.

b. The principal will become the employer as if it directly employed

the workers engaged to undertake the subcontracted job or service.
 It will be responsible to them for all their entitlements and benefits
under the labor laws.

c. The principal and the subcontractor will be solidarily treated as the

employer.

d. The employees will become employees of the principal, subject to

the classifications of employees under Article 28 of the Labor Code.
(See Manila Electric Company vs. Benamira, G. R. No. 145271, July
14, 2005).

If the labor-only contracting activity is undertaken by a legitimate labor

organization, a petition for cancellation of union registration may be filed
against it, pursuant to Article 239(e) of the Labor Code. (No. 13, DOLE
Primer on Contracting and Subcontracting, Effects of Department Order
No. 3, Series of 2001).

Substantial capital or investment, meaning.

“Substantial capital or investment” refers to capital stocks and subscribed

capitalization in the case of corporations, tools, equipment, implements,
machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job,
work or service contracted out. (Section 5, Department Order No. 18-02,
Series of 2002, [Feb. 21, 2002]; No. 8, DOLE Primer on Contracting and
Subcontracting, Effects of Department Order No. 3, Series of 2001).
chanrobles virtual law library

Right of control, meaning.

The “right to control” shall refer to the right reserved to the person for
whom the services of the contractual workers are performed, to
determine not only the end to be achieved, but also the manner and
means to be used in reaching that end. (Section 5, Department Order No.
18-02, Series of 2002, [Feb. 21, 2002]).

Substantial capital without investment in tools, equipment,

machineries, etc.; effect.

In Neri vs. NLRC, [G. R. Nos. 97008-09, July 23, 1993, 224 SCRA 7171],
the Supreme Court ruled that the labor contractor is not engaged in labor-
only contracting because it has sufficiently proved that it has substantial
capital. Having substantial capital in the amount of P1 Million fully
subscribed and paid for and is a big firm which services, among others, a
university, an international bank, a big local bank, a hospital center,
government agencies, etc., it is a highly capitalized venture and cannot
be deemed engaged in labor-only contracting. It is a qualified
independent contractor. Further, it need not prove that it made
investments in the form of tools, equipment, machineries, work premises,
among others. The law does not require both substantial capital and
investment in such tools, equipment, etc. This is clear from the use of the
conjunction “or” in the provision of fourth paragraph of Article 106 of the
Labor Code. chanrobles virtual law library

If the intention was to require the contractor to prove that he has both
capital and the requisite investment, then the conjunction “and” should
have been used. But having established that it has substantial capital, it
was no longer necessary for the labor contractor to further adduce
evidence to prove that it does not fall within the purview of “labor-only”
contracting. There is even no need for it to refute petitioners’ contention
that the activities they perform are directly related to the principal
business of respondent bank (FEBTC). (Neri vs. NLRC, G. R. Nos. 97008-
09, July 23, 1993, 224 SCRA 7171). chanrobles virtual law library

In another similar case, Filipinas Synthetic Fiber Corporation [FILSYN] vs.

NLRC, et al., [G. R. No. 113347, June 14, 1996], the Supreme Court ruled
that a contractor which is a going-concern duly registered with the
Securities and Exchange Commission with substantial capitalization of
P1.6 Million, P400,000 of which is actually subscribed, cannot be
considered as engaged in labor-only contracting being a highly capitalized
venture. Moreover, while the janitorial services performed by the
employee pursuant to the agreement between the indirect employer and
the contractor may be considered directly related to the principal business
of the indirect employer which is the manufacture of polyester fiber,
nevertheless, they are not necessary in its operation. (See also Baguio vs.
NLRC, et al., G. R. Nos. 79004-08, Oct. 4, 1991, 202 SCRA 465, 470).
chanrobles virtual law library

On the contrary, they are merely incidental thereto, as opposed to being

integral, without which production and company sales will suffer. (Ecal vs.
NLRC, et al., G. R. Nos. 92777-78, March 13, 1991, 195 SCRA 224, 223).

In the 2005 case of Wack Wack Golf & Country Club vs. NLRC, [G. R. No.
149793, April 15, 2005], the Supreme Court ruled that there is
indubitable evidence showing that Business Staffing and Management,
Inc. (BSMI), a corporation engaged in the business as Management
Service Consultant, is an independent contractor, engaged in the
management of projects, business operations, functions, jobs and other
kinds of business ventures, and has sufficient capital and resources to
undertake its principal business. It had provided management services to
various industrial and commercial business establishments. Its Articles of
Incorporation proves its sufficient capitalization. Moreover, in December
1993, Labor Secretary Bienvenido Laguesma, in the case of In re Petition
for Certification Election Among the Regular Rank-and-File Employees
Workers of Byron-Jackson (BJ) Services International Incorporated,
Federation of Free Workers (FFW)-Byron Jackson Services Employees
Chapter, recognized BSMI as an independent contractor. chanrobles virtual law
library

In the 2004 case of Manila Water Co., Inc. vs. Pena, [G. R. No. 158255,
July 8, 2004], the Supreme Court, in holding that the entity is not an
independent contractor but a labor-only contractor, ratiocinated:

“First, [Association Collectors Group, Inc.] (ACGI), [which was

contracted by petitioner Manila Water Company, Inc. to collect
charges for the Balara Branch], does not have substantial
capitalization or investment in the form of tools, equipment,
machineries, work premises, and other materials, to qualify as an
independent contractor. While it has an authorized capital stock of
P1,000,000.00, only P62,500.00 is actually paid-in, which cannot be
considered substantial capitalization. The 121 collectors [composing
ACGI] subscribed to four shares each and paid only the amount of
P625.00 in order to comply with the incorporation requirements.
Further, private respondents reported daily to the branch office of
the petitioner because ACGI has no office or work premises. In fact,
the corporate address of ACGI was the residence of its president, Mr.
Herminio D. Peña. Moreover, in dealing with the consumers, private
respondents used the receipts and identification cards issued by
petitioner. chanrobles virtual law library

“Second, the work of the private respondents was directly related to

the principal business or operation of the petitioner. Being in the
business of providing water to the consumers in the East Zone, the
collection of the charges therefor by private respondents for the
petitioner can only be categorized as clearly related to, and in the
pursuit of the latter’s business. chanrobles virtual law library

“Lastly, ACGI did not carry on an independent business or undertake

the performance of its service contract according to its own manner
and method, free from the control and supervision of its principal,
petitioner. Prior to private respondents’ alleged employment with
ACGI, they were already working for petitioner, subject to its rules
and regulations in regard to the manner and method of performing
their tasks. This form of control and supervision never changed
although they were already under the seeming employ of ACGI.
Petitioner issued memoranda regarding the billing methods and
distribution of books to the collectors; it required private
respondents to report daily and to remit their collections on the same
day to the branch office or to deposit them with Bank of the
Philippine Islands; it monitored strictly their attendance as when a
collector cannot perform his daily collection, he must notify petitioner
or the branch office in the morning of the day that he will be absent;
and although it was ACGI which ultimately disciplined private
respondents, the penalty to be imposed was dictated by petitioner as
 shown in the letters it sent to ACGI specifying the penalties to be
meted on the erring private respondents. These are indications that
ACGI was not left alone in the supervision and control of its alleged
employees. Consequently, it can be concluded that ACGI was not an
independent contractor since it did not carry a distinct business free
from the control and supervision of petitioner. chanrobles virtual law library

“Under this factual milieu, there is no doubt that ACGI was engaged
in labor-only contracting, and as such, is considered merely an agent
of the petitioner. xxx.” (Manila Water Co., Inc. vs. Pena., G. R. No.
158255, July 8, 2004). chanrobles virtual law library

In the case of Philippine Fuji Xerox Corporation, vs. NLRC, [G. R. No.
111501, March 5, 1996], the Supreme Court ruled that the manpower
agency is a labor-only contractor notwithstanding the latter’s invocation of
the ruling in the Neri case (supra) that it is a highly-capitalized business
venture, registered as an “independent employer” with the Securities and
Exchange Commission as well as the Department of Labor and
Employment; that it is a member of the Social Security System; that in
1984, it had assets exceeding P5 Million and at least 20 typewriters, office
equipment and service vehicles; and that it had employees of its own and
a pool of 25 clerks assigned to clients on a temporary basis.

In distinguishing the Philippine Fuji Xerox Corporation case [supra] from

the Neri case, the Supreme Court cited the following:

In the Neri case, the High Court considered not only the
capitalization of the contractor but also the fact that it was providing
specific special services (radio/telex operator and janitor) to the
employer; that in another case (Associated Labor Union-TUCP vs.
NLRC, et al., G. R. No. 101784, October 21, 1991), the Supreme
Court had already found that the said contractor was an independent
contractor; that the contractor retained control over the employees
and the employer was actually just concerned with the end-result;
that the contractor had the power to re-assign the employees and
their deployment was not subject to the approval of the employer;
and that the contractor was paid in lump sum for the services it
rendered.

These features of the Neri case make it distinguishable from the

Philippine Fuji Xerox Corporation case where the service being
rendered by the private respondent (contractor’s employee) was not
a specific or special skill that the contractor was in the business of
providing. Although in the Neri case, the telex machine operated by
the employee belonged to the employer, the service was deemed
permissible because it was specific and technical. This cannot be said
of the service rendered by the private respondent (contractor’s
employee) in the Philippine Fuji Xerox Corporation case.
 The argument in the Philippine Fuji Xerox Corporation case that the
contractor had typewriters and service vehicles for the conduct of its
business independently of the employer does not make it a
legitimate job contractor because typewriters and vehicles bear no
direct relationship to the job for which the contractor contracted its
service of operating copier machines and offering copying services to
the public. The fact is that the contractor did not have copying
machines of its own. What it did was simply to supply manpower to
Fuji Xerox. The phrase “substantial capital and investment in the
form of tools, equipment, machineries, work premises and other
materials which are necessary in the conduct of his business” in the
Implementing Rules, clearly contemplates tools, equipment, etc.,
which are directly related to the service it is being contracted to
render. One who does not have an independent business for
undertaking the job contracted for is just an agent of the employer.
(Philippine Fuji Xerox Corporation, et al. vs. NLRC, et al., G. R. No.
111501, March 5, 1996).

The 2003 case of San Miguel Corporation vs. Maerc Integrated Services,
Inc.., [G. R. No. 144672, July 10, 2003], where the contractor was
adjudged to have engaged in labor-only contracting, further explained the
principles of labor-only contracting. The Supreme Court said:

“Petitioner also ascribes as error the failure of the Court of Appeals

to apply the ruling in Neri vs. NLRC, [G.R. Nos. 97008-09, July 23,
1993, 224 SCRA 717]. In that case, it was held that the law did not
require one to possess both substantial capital and investment in the
form of tools, equipment, machinery, work premises, among others,
to be considered a job contractor. The second condition to establish
permissible job contracting was sufficiently met if one possessed
either attribute.

“Accordingly, petitioner alleged that the appellate court and the

NLRC erred when they declared MAERC a labor-only contractor
despite the finding that MAERC had investments amounting to
P4,608,080.00 consisting of buildings, machinery and equipment.
chanrobles virtual law library

“However, in Vinoya vs. NLRC, [G.R. No. 126586, February 2, 2000,

324 SCRA 469], we clarified that it was not enough to show
substantial capitalization or investment in the form of tools,
equipment, machinery and work premises, etc., to be considered an
independent contractor. In fact, jurisprudential holdings were to the
effect that in determining the existence of an independent contractor
relationship, several factors may be considered, such as, but not
necessarily confined to, whether the contractor was carrying on an
independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to
 assign the performance of specified pieces of work; the control and
supervision of the workers; the power of the employer with respect
to the hiring, firing and payment of the workers of the contractor;
the control of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode, manner and terms of
payment. (Citing Ponce v. NLRC, G.R. No. 124643, July 30, 1998,
293 SCRA 366).

“In Neri, the Court considered not only the fact that respondent
Building Care Corporation (BBC) had substantial capitalization but
noted that BCC carried on an independent business and performed
its contract according to its own manner and method, free from the
control and supervision of its principal in all matters except as to the
results thereof. The Court likewise mentioned that the employees of
BCC were engaged to perform specific special services for their
principal. The status of BCC had also been passed upon by the Court
in a previous case where it was found to be a qualified job contractor
because it was ‘a big firm which services among others, a university,
an international bank, a big local bank, a hospital center,
government agencies, etc.’ Furthermore, there were only two (2)
complainants in that case who were not only selected and hired by
the contractor before being assigned to work in the Cagayan de Oro
branch of FEBTC but the Court also found that the contractor
maintained effective supervision and control over them.

“In comparison, MAERC, as earlier discussed, displayed the

characteristics of a labor-only contractor. Moreover, while MAERC’s
investments in the form of buildings, tools and equipment amounted
to more than P4 Million, we cannot disregard the fact that it was the
SMC which required MAERC to undertake such investments under the
understanding that the business relationship between petitioner and
MAERC would be on a long term basis. Nor do we believe MAERC to
have an independent business. Not only was it set up to specifically
meet the pressing needs of SMC which was then having labor
problems in its segregation division, none of its workers was also
ever assigned to any other establishment, thus convincing us that it
was created solely to service the needs of SMC. Naturally, with the
severance of relationship between MAERC and SMC followed MAERC’s
cessation of operations, the loss of jobs for the whole MAERC
workforce and the resulting actions instituted by the workers. (San
Miguel Corporation vs. Maerc Integrated Services, Inc., et al., G. R.
No. 144672, July 10, 2003).

Stipulation in the contract; effect.

The existence of employer-employee relationship cannot be made subject

of an agreement or contract. The “labor only” contractor is considered
merely an agent of the employer. Any liability shall devolve upon the
“labor only” contractor and the employer, jointly and severally. (Tabas vs.
California Marketing Co., Inc., 169 SCRA 497).

As held in the 2001 case of De los Santos vs. NLRC, [G. R. No. 121327,
December 20, 2001], the parties cannot dictate, by the mere expedient of
a unilateral declaration in a contract, the character of its business, i.e.,
whether as “labor-only” contractor, or job contractor, it being crucial that
its character be measured in terms of and determined by the criteria set
by statute. chanrobles virtual law library

Thus, notwithstanding that the agreement or contract between the

principal employer and the contractor states that the latter is an
“independent contractor” and that the workers hired by it “shall not, in
any manner and under any circumstances, be considered employees of
the Company, and that the Company has no control or supervision
whatsoever over the conduct of the Contractor or any of its workers in
respect to how they accomplish their work or perform the Contractor’s
obligations under this Agreement,” the contractor may still be considered
a labor-only contractor. This was the holding of the Supreme Court in the
case of Philippine Fuji Xerox Corporation [supra]. The Court cited the
analogous case of Tabas vs. California Manufacturing Company, Inc., [169
SCRA 497 (1989)], thus:

“There is no doubt that in the case at bar, Livi performs ‘manpower

services,’ meaning to say, it contracts out labor in favor of clients.
We hold that it is one notwithstanding its vehement claims to the
contrary, and notwithstanding the provision of the contract that it is
‘an independent contractor.’ The nature of one’s business is not
determined by self-serving appellations one attaches thereto but by
the tests provided by statute and prevailing case law. The bare fact
that Livi maintains a separate line of business does not extinguish
the equal fact that it has provided California with workers to pursue
the latter’s own business. In this connection, we do not agree that
the petitioners had been made to perform activities ‘which are not
directly related to the general business of manufacturing,’
California’s purported ‘principal operation activity.’ The petitioners
had been charged with ‘merchandizing [sic] promotion or sale of the
products of [California] in the different sales outlets in Metro Manila
including task and occasional [sic] price tagging,’ an activity that is
doubtless, an integral part of the manufacturing business. It is not,
then, as if Livi had served as its [California’s] promotions or sales
arm or agents, or otherwise, rendered a piece of work it [California]
could not have itself done; Livi as a placement agency, had simply
supplied it with the manpower necessary to carry out its
[California’s] merchandising activities, using its [California’s]
premises and equipment.
 “xxx.

“The fact that the petitioners have allegedly admitted being Livi’s
‘direct employees’ in their complaints is nothing conclusive. For one
thing, the fact that the petitioners were [are], will not absolve
California since liability has been imposed by legal operation. For
another, and as we indicated, the relations of parties must be judged
from case to case and the decree of law, and not by declaration of
parties.” (Philippine Fuji Xerox Corporation, et al. vs. NLRC, et al., G.
R. No. 111501, March 5, 1996).

But in the 2000 case of Escario vs. NLRC, [G. R. No. 124055, June 8,
2000], petitioners who were likewise agency-supplied workers in the
same company (California Manufacturing Co., Inc. or “CMC”) were not
similarly fortunate as those in Tabas [supra]. Petitioners here relied on
the Tabas case in claiming that they are employees of said company. The
Supreme Court considered such reliance on Tabas as misplaced. For in
Tabas, the Supreme Court ruled that therein contractor Livi Manpower
Services was a mere placement agency and had simply supplied CMC with
the manpower necessary to carry out the company’s merchandising
activity. It was, however, further stated in said case that:

“It would have been different, we believe, had Livi been discretely a
promotions firm, and that California had hired it to perform the
latter’s merchandising activities. For then, Livi would have been truly
the employer of its employees and California, its client. x x x.”
chanrobles virtual law library

In other words, CMC can validly farm out its merchandising activities
to a legitimate independent contractor. In declaring that D. L.
Admark (petitioners’ employer) is a legitimate independent
contractor, the Supreme Court cited the following circumstances that
tend to establish it as such:

1) The SEC registration certificate of D.L. Admark states that it

is a firm engaged in promotional, advertising, marketing and
merchandising activities.

2) The service contract between CMC and D.L. Admark clearly

provides that the agreement is for the supply of sales promoting
merchandising services rather than one of manpower
placement.

3) D.L. Admark was actually engaged in several activities, such

as advertising, publication, promotions, marketing and
merchandising. It had several merchandising contracts with
companies like Purefoods, Corona Supply, Nabisco Biscuits, and
 Licron. It was likewise engaged in the publication business as
evidenced by it magazine the “Phenomenon.” chanrobles virtual law library

4) It had its own capital assets to carry out its promotion

business. It then had current assets amounting to P6 million
and is therefore a highly capitalized venture. It had an
authorized capital stock of P500,000.00. It owned several motor
vehicles and other tools, materials and equipment to service its
clients. It paid rentals of P30,020 for the office space it
occupied.

In the 2003 case of San Miguel Corporation vs. Maerc Integrated

Services, Inc., [G. R. No. 144672, July 10, 2003], it was stipulated in the
contract of services between MAERC and SMC that MAERC was an
independent contractor and that the workers hired by it “shall not, in any
manner and under any circumstances, be considered employees of the
Company, and that the Company has no control or supervision
whatsoever over the conduct of the Contractor or any of its workers in
respect to how they accomplish their work or perform the Contractor's
obligations under the Contract.” chanrobles virtual law library

The Supreme Court, however, following the “control test,” disregarded the
said stipulation in the contract. It ratiocinated, thus: chanrobles virtual law library

“In deciding the question of control, the language of the contract is

not determinative of the parties' relationship; rather, it is the totality
of the facts and surrounding circumstances of each case.

“Despite SMC’s disclaimer, there are indicia that it actively

supervised the complainants. SMC maintained a constant presence in
the workplace through its own checkers. Its asseveration that the
checkers were there only to check the end result was belied by the
testimony of Carlito R. Singson, head of the Mandaue Container
Service of SMC, that the checkers were also tasked to report on the
identity of the workers whose performance or quality of work was
not according to the rules and standards set by SMC. According to
Singson, ‘it (was) necessary to identify the names of those
concerned so that the management [referring to MAERC] could call
the attention to make these people improve the quality of work.’

“Viewed alongside the findings of the Labor Arbiter that the MAERC
organizational set-up in the bottle segregation project was such that
the segregators/cleaners were supervised by checkers and each
checker was also under a supervisor who was in turn under a field
supervisor, the responsibility of watching over the MAERC workers by
MAERC personnel became superfluous with the presence of
additional checkers from SMC.” (San Miguel Corporation vs. Maerc
Integrated Services, Inc., et al., G. R. No. 144672, July 10, 2003).
In the June 2005 decision in the case of Abella vs. PLDT, [G. R. No.
159469, June 8, 2005], the Supreme Court ruled that the security guards
supplied by People’s Security, Inc. (PSI) to PLDT are the employees of PSI
and not of PLDT. In holding that PSI is a legitimate job contractor, the
High Court declared:

“We hasten to add on this score that the Labor Arbiter as well as the
NLRC and the Court of Appeals found that PSI is a legitimate job
contractor pursuant to Section 8, Rule VII, Book II of the Omnibus
Rules Implementing the Labor Code. It is a registered corporation
duly licensed by the Philippine National Police to engage in security
business. It has substantial capital and investment in the form of
guns, ammunitions, communication equipments, vehicles, office
equipments like computer, typewriters, photocopying machines, etc.,
and above all, it is servicing clients other than PLDT like PCIBank,
Crown Triumph, and Philippine Cable, among others. Here, the
security guards which PSI had assigned to PLDT are already the
former’s employees prior to assignment and if the assigned guards
to PLDT are rejected by PLDT for reasons germane to the security
agreement, then the rejected or terminated guard may still be
assigned to other clients of PSI as in the case of Jonathan Daguno
who was posted at PLDT on 21 February 1996 but was subsequently
relieved therefrom and assigned at PCIBank Makati Square effective
10 May 1996. Therefore, the evidence as it stands is at odds with
petitioners’ assertion that PSI is an “in-house” agency of PLDT so as
to call for a piercing of veil of corporate identity as what the Court
has done in De leon, et al. vs. NLRC and Fortune Tobacco
Corporation, et al. [G.R. No. 112661, May 30, 2001].” chanrobles virtual law
library

Nature of liability of employer and labor-only contractor.

In a labor-only contract, there are three parties involved: (1) the “labor-
only” contractor; (2) the employee who is ostensibly under the employ of
the “labor-only” contractor; and (3) the principal who is deemed the real
employer. Under this scheme, the “labor-only” contractor is the agent of
the principal. The law makes the principal responsible to the employees of
the “labor-only” contractor as if the principal itself directly hired or
employed the employees. (Sonza vs. ABS-CBN Broadcasting Corporation,
G. R. No. 138051, June 10, 2004; Sandoval Shipyards, Inc., et al. vs.
Pepito, et al., G. R. No. 143428, June 25, 2001).

It has been consistently held in our jurisdiction that since the “labor-only”
contractor does not have substantial capital investment in the form of
tools, equipment, machineries, work premises and other materials, the
workers supplied by him are employees of the owner of the project to
whom said labor was supplied. (Vinoya vs. NLRC, et al., G. R. No.
126586, Feb. 2, 2000; Industrial Timber Corporation vs. NLRC, et al., 169
SCRA 341). chanrobles virtual law library

The reason is, the labor-only contractor is treated as mere agent or

intermediary of the employer. Consequently, the nature of the liability of
the employer is more direct, the labor-only contractor is treated as agent
and the former, the principal. (Manila Electric Company vs. Benamira, G.
R. No. 145271, July 14, 2005; Manila Water Co., Inc. vs. Pena, et al., G.
R. No. 158255, July 8, 2004; San Miguel Corporation v. MAERC
Integrated Services, Inc., G.R. No. 144672, 10 July 2003).

The employer is made by the statute responsible to the employees of the

labor-only contractor as if such employees had been directly employed by
the employer. Thus, where labor-only contracting exists in a given case,
the statute itself implies or establishes an employer-employee relationship
between the employer (the owner of the project) and the employees of
the labor-only contractor, this time for a comprehensive purpose:
employer for purposes of the Labor Code, to prevent any violation or
circumvention of any provision of said Code. The law, in effect, holds both
the employer and the labor-only contractor responsible to the latter’s
employees for the more effective safeguarding of the employees’ rights
under the Labor Code. (Philippine Bank of Communications vs. NLRC, et
al., G. R. No. L-66598, Dec. 19, 1986, 146 SCRA 347).

The statute creates an employer-employee relationship for a

comprehensive purpose: to prevent a circumvention of labor laws. (Manila
Water Co., Inc. vs. Pena, et al., G. R. No. 158255, July 8, 2004).

In a case, a service agency supplied 11 messengers to its client, a bank.

The messengers worked in the premises of the client and were paid their
salaries through the service agency. The client company controlled the
performance of the duties of the messenger. The Supreme Court declared
that the service agency is engaged in “labor-only” contracting.
Consequently, the client was held liable to the complainant messenger as
if the latter had been directly employed not only by the agency but also
by said client. (Philippine Bank of Communications vs. NLRC, et al. 146
SCRA 347). chanrobles virtual law library

Liability of legitimate contractor and labor-only contractor,

distinguished.

There is a wide gulf of distinction between the liability of a legitimate

independent contractor and the liability of a labor-only contractor.

In legitimate job contracting, the law creates an employer-employee

relationship for a limited purpose, i.e., to ensure that the employees are
paid their wages. The principal employer becomes jointly and severally
liable with the job contractor only for the payment of the employees'
wages whenever the contractor fails to pay the same. Other than that,
the principal employer is not responsible for any claim made by the
employees. (San Miguel Corporation vs. Maerc Integrated Services, Inc.,
et al., G. R. No. 144672, July 10, 2003).

On the other hand, in labor-only contracting, the statute creates an

employer-employee relationship for a comprehensive purpose: to prevent
a circumvention of labor laws. The contractor is considered merely an
agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been
directly employed by the principal employer. The principal employer,
therefore, becomes solidarily liable with the labor-only contractor for all
the rightful claims of the employees. (San Miguel Corporation vs. Maerc
Integrated Services, Inc., et al., G. R. No. 144672, July 10, 2003).

Duty to comply with legal requirements for valid termination in

labor-only contracting situations. chanrobles virtual law library

Having made the distinction between the liability of a job contractor and
that of a labor-only contractor, it is clear that if there is a finding of labor-
only contracting, the duty to comply with the requirements of the law for
terminating employees as well as payment of monetary claims of the
latter would necessarily devolve on the principal which is deemed the
real, direct employer, in solidum with the labor-only contractor.

In a case involving retrenchment of workers effected by the labor-only

contractor consequent to the termination of the labor-only contract, it was
ruled that the principal was not discharged from paying the separation
benefits of the workers inasmuch as the contractor was shown to be a
labor-only contractor. Resultantly, the principal should have complied with
the requirement of written notice to both the employees concerned and
the Department of Labor and Employment (DOLE) which must be given at
least one (1) month before the intended date of retrenchment. Hence, the
principal should be held liable for the separation pay of said workers,
including the fines imposed for violations of the notice requirement. (San
Miguel Corporation vs. Maerc Integrated Services, Inc., et al., G. R. No.
144672, July 10, 2003).

Illustrative cases of labor-only contracting.

a. An employee who hires dispatchers for the operator of a transportation

company, is a labor-only contractor and, therefore, a mere agent of the
petitioner-employer. (Tiu vs. NLRC, et al., G. R. No. 95845, Feb. 21,
1996).

b. A company which supplies a considerable workforce totaling 120

mechanics, janitors, gardeners, firemen and grasscutters to a garment
manufacturer, was declared a labor-only contractor for its failure to prove
that it had substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials. Moreover,
the work assigned to them are directly related to the business of the
latter. (Guarin, et al. vs. NLRC, et al., G. R. No. 86010, Oct. 3, 1989).

c. In accordance with the provisions of Article 106 of the Labor Code, the
workers supplied by three manpower agencies to a supermarket to work
as merchandisers, cashiers, baggers, check-out personnel, sales ladies,
warehousemen and so forth were declared employees of the supermarket
and the manpower agencies, labor-only contractors. Their work was
directly related, necessary and vital to the day-to-day operations of the
supermarket; their jobs involved normal and regular functions in the
ordinary business of the petitioner corporation and given the nature of
their functions and responsibilities, it is improbable that petitioners did
not exercise direct control over their work. Moreover, there is no evidence
- as in fact, petitioners do not even allege - that aside from supplying the
manpower, the labor agencies have “substantial capital or investment in
the form of tools, equipment, machineries, work premises, among
others.” Resultingly, the supermarket is deemed the direct employer of
the labor-only contractor’s employees and thus liable for all benefits to
which such workers are entitled, like wages, separation benefits and so
forth. (Shoppers Gain Supermart, et al. vs. NLRC, et al., G. R. No.
110731, July 26, 1996). 

d. A search company which supplies messengers to a bank is a labor-only

contractor considering that the messengers rendered services to the
bank, within the premises of the bank and alongside other people also
rendering services to the bank. Its argument that it is not so engaged as
labor-only contractor since it is possessed of substantial capital or
investment in the form of office equipment, tools and trained service
personnel was not accepted by the Supreme Court. Said company is not a
parcel delivery company, as its name indicates. Messengerial work - the
delivery of documents to designated persons whether within or without
the bank premises - is directly related to the day-to-day operations of the
bank. It is a recruitment and placement corporation placing bodies, as it
were, in different client-companies for longer or shorter periods of time. It
is this factor that distinguishes this case from American President Lines
vs. Clave, et al. [114 SCRA 826 (1982)] if indeed such distinguishing way
is needed. (Philippine Bank of Communications vs. NLRC, et al., G. R. No.
L-66598, Dec. 19, 1986, 146 SCRA 347). chanrobles virtual law library

e. The person who agreed with a motor company under the terms of their
Work Contract to supply only labor and supervision over his contractual
workers in doing automotive body-painting work and to hire or bring in
additional workers as may be required by the company and to handle
additional work load or to accelerate or facilitate completion of work in
process is a labor-only contractor in the light of the following
circumstances, among others: the company supplied all the tools,
equipment, machinery and materials necessary for the performance by
the former and his men of the contracted job within the premises of the
company; their compensation was paid in lump sum; they were required
to observe regular working hours and render overtime services when
needed; defects in the workmanship of their jobs while in progress, are
subject to correction by the company’s supervisors; and they are required
to observe company rules, regulations and policies such as the wearing of
identification cards and uniforms. (Broadway Motors, Inc. vs. NLRC, et al.,
G. R. No. 98382, Dec. 14, 1987, 156 SCRA 522). chanrobles virtual law library

Principal distinctions between legitimate job contracting and

labor-only contracting.

The principal distinctions between legitimate, permissible job contracting,

on the one hand, and the prohibited labor-only contracting, on the other.

a. In the former, no employer-employee relationship exists between

the employees of the job contractor and the principal employer
(indirect employer); while in the latter, an employer-employee
relationship is created by law between the principal employer and
the employees of the labor-only contractor.

b. In the former, the principal employer is considered only an

“indirect employer”, as this term is understood under Article 107 of
the Labor Code; while in the latter, the principal employer is
considered the “direct employer” of the employees in accordance
with the last paragraph of Article 106 of the Labor Code.

c. In the former, the joint and several obligation of the principal

employer and the legitimate job contractor is only for a limited
purpose, that is, to ensure that the employees are paid their wages.
Other than this obligation of paying the wages, the principal
employer is not responsible for any claim made by the employees;
while in the latter, the principal employer becomes solidarily liable
with the labor-only contractor for all the rightful claims of the
employees.

d. In the former, the legitimate job contractor provides specific

services; while in the latter, the labor-only contractor provides only
manpower.

e. In the former, the legitimate job contractor undertakes to perform

a specific job for the principal employer; while in the latter, the
labor-only contractor merely provides the personnel to work for the
principal employer. chanrobles virtual law library

92. What is “in-house agency”?

Similarly prohibited under the law is the operation of an “in-house
agency” whereby a contractor or subcontractor is engaged in the supply
of labor which:

(i) is owned, managed or controlled by the principal; and

(ii) operates solely for the principal owning, managing, or controlling

it.

A finding that a contractor is a “labor-only” contractor is equivalent to a

finding that there exists an employer-employee relationship between the
owner of the project and the employees of the “labor-only” contractor
since that relationship is defined and prescribed by law itself. chanrobles virtual
law library

93. Who is an indirect employer in a contracting or subcontracting

arrangement?

The principal is considered the indirect employer of the workers supplied

by independent contractor or subcontractor.

94. What is the nature of the liability of an indirect employer?

The nature of the liability of the principal is joint and solidary with the
contractor or subcontractor for any violation of any provision of the Labor
Code. For purposes of determining the extent of their civil liability for the
payment of wages, the indirect employer shall be considered as direct
employer. (Article 109, Labor Code).

The best illustration of these principles is the 2005 case of Manila Electric
Company vs. Benamira, [G. R. No. 145271, July 14, 2005] where it was
held, thus:

“The fact that there is no actual and direct employer-employee

relationship between MERALCO and the individual respondents does
not exonerate MERALCO from liability as to the monetary claims of
the individual respondents. When MERALCO contracted for security
services with ASDAI as the security agency that hired individual
respondents to work as guards for it, MERALCO became an indirect
employer of individual respondents pursuant to Article 107 of the
Labor Code.

xxx

“When ASDAI as contractor failed to pay the individual respondents,

MERALCO as principal becomes jointly and severally liable for the
individual respondents’ wages, under Articles 106 and 109 of the
Labor Code. chanrobles virtual law library
 xxx

“ASDAI is held liable by virtue of its status as direct employer, while

MERALCO is deemed the indirect employer of the individual
respondents for the purpose of paying their wages in the event of
failure of ASDAI to pay them. This statutory scheme gives the
workers the ample protection consonant with labor and social justice
provisions of the 1987 Constitution.

“However, as held in Mariveles Shipyard Corp. vs. Court of Appeals,

[G.R. No. 144134, November 11, 2003, 415 SCRA 573], the solidary
liability of MERALCO with that of ASDAI does not preclude the
application of Article 1217 of the Civil Code on the right of
reimbursement from his co-debtor by the one who paid, which
provides:

‘ART. 1217. Payment made by one of the solidary debtors

extinguishes the obligation. If two or more solidary debtors
offer to pay, the creditor may choose which offer to accept.

‘He who made the payment may claim from his co-debtors only
the share which corresponds to each, with the interest for the
payment already made. If the payment is made before the debt
is due, no interest for the intervening period may be demanded.

‘When one of the solidary debtors cannot, because of his

insolvency, reimburse his share to the debtor paying the
obligation, such share shall be borne by all his co-debtors, in
proportion to the debt of each.’

“ASDAI may not seek exculpation by claiming that MERALCO’s

payments to it were inadequate for the individual respondents’ lawful
compensation. As an employer, ASDAI is charged with knowledge of
labor laws and the adequacy of the compensation that it demands for
contractual services is its principal concern and not any other’s.”

95. What is meant by worker preference in case of bankruptcy?

1. The right to preference given to workers under Article 110 cannot exist
in any effective way prior to the time of its presentation in distribution
proceedings. Article 110 applies only in case of bankruptcy or judicial
liquidation of the employer.

2. Judicial proceedings in rem is required for creditors’ claims against

debtors to become operative.

3. To contend that Article 110 of the Labor Code is applicable also to

extrajudicial proceedings would be putting the worker in a better position
than the State which could only assert its own prior preference in case of
a judicial proceeding. chanrobles virtual law library

4. The right of preference as regards unpaid wages recognized by Article

110 of the Labor Code does not constitute a lien on the property of the
insolvent debtor in favor of the workers but a right to a first preference in
the discharge of the funds of the judgment debtor.

5. Article 110 of the Labor Code does not purport to create a lien in favor
of workers or employees for unpaid wages either upon all of the
properties or upon any particular property owned by their employer.
Claims for unpaid wages do not, therefore, fall at all within the category
of specially preferred claims established under Articles 2241 and 2242 of
the Civil Code, except to the extent that such claims for unpaid wages are
already covered by Article 2241, number 6: “claims for laborer’s wages,
on the goods manufactured or the work done;” or by Article 2242,
number 3: “claims of laborers and other workers engaged in the
construction, reconstruction or repair of buildings, canals and other
works, upon said buildings, canals or other works.” To the extent that
claims for unpaid wages fall outside the scope of Article 2241, number 6
and 2242, number 3, they would come within the ambit of the category of
ordinary preferred credits under Article 2244.

6. Mortgage credit. - A mortgage credit is a special preferred credit under

Article 2241 of the Civil Code while workers’ preference is an ordinary
preferred credit.

7. Preference of taxes. In one case, it was held that there is no merit in

the contention of the NLRC that taxes are also absolutely preferred claims
only with respect to movable and immovable properties on which they are
due. The claim of the government predicated on a tax lien is superior to
the claim of a private litigant predicated on a judgment. The tax lien
attaches not only from the service of the warrant of distraint of personal
property but from the time the tax became due and payable.

REHABILITATION RECEIVERSHIP:

96. What is the effect of rehabilitation receivership on monetary

claims of employees?

RUBBERWORLD (PHILS.), INC. VS. NLRC, ET AL., (G. R. NO. 128003,

JULY 26, 2000)

ALEMAR’S SIBAL AND SONS, INC. VS. NLRC, ET AL. (G. R. NO. 114761,
JANUARY 19, 2000)

(SEE ALSO RUBBERWORLD (PHILS.), INC. VS. NLRC, ET AL., (G. R. NO.
126773, APRIL 14, 1999) where the same issue is discussed and further
PREFERENCE IN CASE OF BANKRUPTCY OR LIQUIDATION UNDER
ARTICLE 110 OF THE LABOR CODE. chanrobles virtual law library

ATTORNEY’S FEES:

97. What is the amount of attorney’s fees that may be allowed by

law?

1. In cases of unlawful withholding of wages, the employer may be

assessed attorney’s fees equivalent to ten percent (10%) of the amount
of wages recovered.

2. It shall be unlawful for any person to demand or accept, in any judicial

or administrative proceedings for the recovery of wages, attorney’s fees
which exceed ten percent (10%) of the amount of wages recovered.

3. The attorney’s fees may be awarded only when the withholding of

wages is declared unlawful.

4. The basis of the 10% attorney’s fees is the amount of wages

recovered. Should there be any other monetary awards given in the
proceedings, the same may not be assessed or subjected to the 10%
attorney’s fees.

PROHIBITIONS REGARDING WAGES:

98. What is meant by the principle of non-interference in disposal

of wages?

Employers are not allowed to interfere in the disposal of wages of

employees.

99. What are allowable wage deductions?

Deductions from the wages of the employees may be made by the

employer in any of the following cases:

a. When the deductions are authorized by law, (e.g., SSS, Pag-

IBIG), including deductions for the insurance premiums advanced by
the employer in behalf of the employee as well as union dues where
the right to check-off has been recognized by the employer or
authorized in writing by the individual employee himself;

b. When the deductions are with the written authorization of the

employees for payment to a third person and the employer agrees to
do so, provided that the latter does not receive any pecuniary
benefit, directly or indirectly, from the transaction;
 c. Withholding tax mandated under the National Internal Revenue
Code;

d. Withholding of wages because of employee’s debt to the employer

which is already due;

e. Deductions made pursuant to a judgment against the worker

under circumstances where the wages may be the subject of
attachment or execution but only for debts incurred for food,
clothing, shelter and medical attendance.

f. When deductions from wages are ordered by the court;

g. Deductions made for agency fee from non-union members who

accept the benefits under the CBA negotiated by the bargaining
union. This form of deduction does not require the written
authorization of the non-union member.

100. What are deposits for loss or damage?

No employer shall require his worker to make deposits from which

deductions shall be made for the reimbursement of loss of or damage to
tools, materials, or equipment supplied by the employer, except when the
employer is engaged in such trades, occupations or business 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 and
Employment in appropriate rules and regulations.

101. Is withholding of wages and kickback allowed?

No. It shall be unlawful for any person, directly or indirectly, to withhold

any amount from the wages of a worker or induce him to give up any part
of his wages by force, stealth, intimidation, threat or by any other means
whatsoever without the worker’s consent. chanrobles virtual law library

102. May deduction be allowed to ensure employment or retention

of employment?

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 or retention in
employment.

103. What are the retaliatory measures prohibited under the law?

It shall be unlawful for an employer to refuse to pay or reduce the wages

and benefits, discharge or in any manner discriminate against any
employee who has filed any complaint or instituted any proceeding or has
testified or is about to testify in such proceedings.

ADMINISTRATION AND ENFORCEMENT OF LABOR LAWS:

104. What is the legal basis for the exercise by the Secretary of
Labor of his visitorial and enforcement powers?

The legal basis is Article 128 which involves the exercise by the Secretary
of Labor and Employment or his duly authorized representatives, of the
visitorial and enforcement powers provided therein. Article 128 applies to
inspection cases involving findings of the labor employment and
enforcement officers or industrial safety engineers regarding violations of
labor standards provisions of the Labor Code and other labor legislation.

Article 128 contemplates situations where the case for violation of labor
standards laws and other labor legislations, arose from the routine
inspection conducted by the labor employment and enforcement officer or
industrial safety engineers of the Department of Labor and Employment,
with or without a complaint initiated by an interested party. Here, it is
generally the Department of Labor and Employment which initiates the
action. chanrobles virtual law library

EMPLOYMENT OF WOMEN:

105. What is nightwork prohibition?

Regardless of age, no woman shall be employed or permitted or suffered

to work, with or without compensation:

(a) In any industrial undertaking or branch thereof between 10:00

o’clock at night and 6 o’clock in the morning of the following day; or

(b) In any commercial or non-industrial undertaking or branch

thereof, other than agricultural, between midnight and 6 o’clock in
the morning of the following day; or

(c) In any agricultural undertaking at nighttime unless she is given a

period of rest of not less than nine (9) consecutive hours.

106. What are the exceptions to nightwork prohibition?

The nightwork prohibition shall not apply in any of the following cases:

(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; chanrobles virtual law
library

(e) Where the nature of the work requires the manual skill and
dexterity of women workers and the same cannot be performed with
equal efficiency by male workers; chanrobles virtual law library

(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.

107. What are the required facilities for women?

Employers are required to:

(a) 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;

(b) To establish separate toilet rooms and lavatories for men and
women and provide at least a dressing room for women;

(c) To establish a nursery in a workplace for the benefit of the

women employees therein; and chanrobles virtual law library

(d) To determine appropriate minimum age and other standards for

retirement or termination in special occupations such as those of
flight attendants and the like.

108. What are the acts of discrimination against women expressly

prohibited under R. A. 6725 (May 12, 1989)?

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:

(a) 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

(b) Favoring a male employee over a female employee with respect

to promotion, training opportunities, study and scholarship grants
solely on account of their sexes.

There is criminal liability for the willful commission of any of the foregoing
unlawful act. (R. A. 6725, id.).

MATERNITY LEAVE BENEFITS:

109. What are maternity leave benefits?

A covered female employee who has paid at least three monthly

maternity contributions in the twelve-month period preceding the
semester of her childbirth, abortion or miscarriage and who is currently
employed shall be paid a daily maternity benefit equivalent to one
hundred percent (100%) of her present basic salary, allowances and
other benefits or the cash equivalent of such benefits for sixty (60) days
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) That the payment shall be advanced by the employer in two

equal installments within thirty (30) days from the filing of the
maternity leave application;

(c) That in case of caesarian delivery, the employee shall be paid the
daily maternity benefit for 78 days;

(d) That payment of daily maternity benefits shall be a bar to the

recovery of sickness benefits provided by this Act for the same
compensable period of sixty (60) days for the same childbirth,
abortion or miscarriage;

(e) That the maternity benefits shall be paid only for the first four
deliveries after March 13, 1973;

(f) 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; and chanrobles
virtual law library

(g) That if an employee should give birth or suffer abortion or

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 the time of the pregnancy, the
employer shall pay to the SSS damages equivalent to the benefits
which said employee would otherwise have been entitled to, and the
SSS shall in turn pay such amount to the employee concerned. (R. A.
7322, March 3, 1992).

110. Is an unmarried pregnant woman entitled to maternity leave

benefits?

Every pregnant woman in the private sector, whether married or

unmarried, is entitled to the maternity leave benefits.

111. Are maternity leave benefits included in the computation of

13th month pay?

Maternity benefits, like other benefits granted by the SSS, are granted to
employees in lieu of wages and, therefore, may not be included in
computing the employee’s 13th-month pay for the calendar year.

112. Are voluntary or self-employed members of the SSS entitled

to maternity leave benefits? chanrobles virtual law library

Voluntary or self-employed members are not entitled to the maternity

benefit because to be entitled thereto, corresponding maternity
contributions should be paid by employers. Voluntary or self-employed
members have no employers so they do not have maternity
contributions. 

PATERNITY LEAVE:

113. What is paternity leave?

“Paternity leave” refers to the benefit granted to a married male

employee allowing him not to report for work for seven (7) days (for each
delivery for the first 4 deliveries) but continues to earn the compensation
therefor, on the condition that his spouse has delivered a child or suffered
miscarriage for purposes of enabling him to effectively lend support to his
wife in her period of recovery and/or in the nursing of the newly-born
child. If paternity leave is not availed of, it is not convertible to cash.

114. What is “delivery”?

“Delivery” shall include childbirth or any miscarriage.

115. What is meant by “spouse”?

“Spouse” refers to the lawful wife. For this purpose, lawful wife refers to a
woman who is legally married to the male employee concerned.

116. What is meant by “cohabiting”?

“Cohabiting” refers to the obligation of the husband and wife to live

together.

THE SOLO PARENTS' WELFARE ACT OF 2000:

117. What is parental leave?

Republic Act No. 8972 (An Act Providing for Benefits and Privileges to Solo
Parents and Their Children, Appropriating Funds Therefor and for Other
Purposes), otherwise known as “The Solo Parents’ Welfare Act of 2000,”
was approved on November 7, 2000 providing for parental leave of seven
(7) days. It is defined as follows:

“(d) ‘Parental leave’ - shall mean leave benefits granted to a solo

parent to enable him/her to perform parental duties and
responsibilities where physical presence is required.” chanrobles virtual law
library

It bears noting that this leave privilege is an additional leave benefit

which is separate and distinct from any other leave benefits provided
under existing laws or agreements. Thus, under Section 8 thereof, it is
provided:

“Sec. 8. Parental Leave. - In addition to leave privileges under

existing laws, parental leave of not more than seven (7) working
days every year shall be granted to any solo parent employee who
has rendered service of at least one (1) year.”

118. What is meant by flexible work schedule under R. A. No.

8972?

Under Republic Act No. 8972, solo parents are allowed to work on a
flexible schedule, thus:

“Sec. 6. Flexible Work Schedule. – The employer shall provide for a

flexible working schedule for solo parents: Provided, That the same
shall not affect individual and company productivity: Provided,
further, That any employer may request exemption from the above
 requirements from the DOLE on certain meritorious grounds.”
(Section 6, Republic Act No. 8972).

The phrase “flexible work schedule” is defined in the same law as follows:

(e) “Flexible work schedule” - is the right granted to a solo parent

employee to vary his/her arrival and departure time without affecting
the core work hours as defined by the employer. (Section 3[e],
Republic Act No. 8972). chanrobles virtual law library

DISCRIMINATION AGAINST WOMEN:

119. What are the acts considered discriminatory against women

under the law?

It shall be unlawful for any employer:

(1) To deny any woman employee the benefits provided for in the
law or to discharge any woman employed by him for the purpose of
preventing her from enjoying any of the benefits provided under the
Labor Code.

(2) To discharge such woman on account of her pregnancy, or while

on leave or in confinement due to her pregnancy;

(3) To discharge or refuse the admission of such woman upon

returning to her work for fear that she may again be pregnant;

(4) To pay lesser compensation to a female employee as against a

male employee for work of equal value.  chanrobles virtual law library

(5) To favor a male employee over a female employee with respect

to promotion, training opportunities, study and scholarship grants
solely on account of their sexes.

120. What are stipulations 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 resigned or separated, or to
actually dismiss, discharge, discriminate or otherwise prejudice a woman
employee merely by reason of her marriage.

121. What is the status of women working in nightclubs, massage

clinics, and similar establishments?
Any woman who is permitted or suffered to work, with or without
compensation, in any night club, cocktail lounge, massage clinic, bar or
similar establishments under the effective control or supervision of the
employer for a substantial period of time as determined by the Secretary
of Labor and Employment, shall be considered as an employee of such
establishment for purposes of labor and social legislation.

They are considered regular employees of said establishments except

when the night club operator does not control nor direct the details and
manner of their work in the entertainment of night club patrons and,
having no fixed hours of work, they may come and go as they please.

EMPLOYMENT OF CHILDREN:

122. What are the relevant terms defined in the law?

(a) “Child” refers to any person under 18 years of age.

(b) “Child labor” refers to any work or economic activity performed by a

child that subjects him/her to any form of exploitation or is harmful to
his/her health and safety or physical, mental or psychosocial
development.

(c) “Working Child” refers to any child engaged as follows:

i. when the child is below eighteen (18) years of age, in work or

economic activity that is not child labor as defined in the immediately
preceding sub-paragraph, and chanrobles virtual law library

ii. when the child below fifteen (15) years of age, (i) in work where
he/she is directly under the responsibility of his/her parents or legal
guardian and where only members of the child’s family are
employed; or (ii)in public entertainment or information.

(d) “Hours of work” include (1) all time during which a child is required to
be at a prescribed workplace, and (2) all time during which a child is
suffered or permitted to work. Rest periods of short duration during
working hours shall be counted as hours worked. chanrobles virtual law library

(e) “Workplace” refers to the office, premises or worksite where a child is

temporarily or habitually assigned. Where there is no fixed or definite
workplace, the term shall include the place where the child actually
performs work to render service or to take an assignment, to include
households employing children.

(f) “Public entertainment or information” refers to artistic, literary, and

cultural performances for television show, radio program, cinema or film,
theater, commercial advertisement, public relations activities or
campaigns, print materials, internet, and other media.

(g) “Forced labor and slavery” refers to the extraction of work or services
from any person by means of enticement, violence, intimidation or threat,
use of force or coercion, including deprivation of freedom, abuse of
authority or moral ascendancy, debt bondage or deception.

(h) “Child pornography” refers to any representation of a child engaged in

real or simulated explicit sexual activities or any representation of the
sexual parts of a child for primarily sexual purposes.

123. What is the minimum employable age 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/her parents or legal guardian and where only members of his/her
family are employed: Provided, however, That his/her employment
neither endangers his/her life, safety, health, and morals, nor
impairs his/her normal development: Provided, further, That the
parent or legal guardian shall provide the said child with the
prescribed primary and/or secondary education; or chanrobles virtual law
library

(2) Where a child's employment or participation in public

entertainment or information through cinema, theater, radio,
television or other forms of media is essential: Provided, That the
employment contract is concluded by the child's parents or legal
guardian, with the express agreement of the child concerned, if
possible, and the approval of the Department of Labor and
Employment: Provided, further, That the following requirements in
all instances are strictly complied with:

(a) The employer shall ensure the protection, health, safety,

morals and normal development 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; and chanrobles virtual law library

(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. (Section 12, R.A. No. 7610, as
amended by R. A. No. 9231, December 19, 2003).

[NOTE: The term "child" shall apply to all persons under eighteen
(18) years of age.]

124. What is the working hours of a working child?

(1) A child below fifteen (15) years of age may be allowed to work for not
more than twenty (20) hours a week: Provided, That the work shall not
be more than four (4) hours at any given day;

(2) A child fifteen (15) years of age but below eighteen (18) shall not be
allowed to work for more than eight (8) hours a day, and in no case
beyond forty (40) hours a week; chanrobles virtual law library

(3) No child below fifteen (15) years of age shall be allowed to work
between eight o'clock in the evening and six o'clock in the morning of the
following day and no child fifteen (15) years of age but below eighteen
(18) shall be allowed to work between ten o'clock in the evening and six
o'clock in the morning of the following day. (Section 12-A, R.A. No. 7610,
as amended by R. A. No. 9231, December 19, 2003).

125. How is the working child’s income be used or administered?

The wages, salaries, earnings and other income of the working child shall
belong to him/her in ownership and shall be set aside primarily for his/her
support, education or skills acquisition and secondarily to the collective
needs of the family: Provided, That not more than twenty percent (20%)
of the child's income may be used for the collective needs of the family. 

The income of the working child and/or the property acquired through the
work of the child shall be administered by both parents. In the absence or
incapacity of either of the parents, the other parent shall administer the
same. In case both parents are absent or incapacitated, the order of
preference on parental authority as provided for under the Family Code
shall apply. (Section 12-B, R.A. No. 7610, as amended by R. A. No. 9231,
December 19, 2003).

Trust Fund to Preserve Part of the Working Child's Income. - The parent
or legal guardian of a working child below eighteen (18) years of age shall
set up a trust fund for at least thirty percent (30%) of the earnings of the
child whose wages and salaries from work and other income amount to at
least two hundred thousand pesos (P200,000.00) annually, for which
he/she shall render a semi-annual accounting of the fund to the
Department of Labor and Employment, in compliance with the provisions
of this Act. The child shall have full control over the trust fund upon
reaching the age of majority. (Section 12-C, R.A. No. 7610, as amended
by R. A. No. 9231, December 19, 2003).

126. What is meant by “worst form of child labor” under R. A. No.

9231 (December 19, 2003)?

No child shall be engaged in the worst forms of child labor. The phrase
"worst forms of child labor" shall refer to any of the following:

(1) All forms of slavery, as defined under the "Anti-trafficking in

Persons Act of 2003", or practices similar to slavery such as sale and
trafficking of children, debt bondage and serfdom and forced or
compulsory labor, including recruitment of children for use in armed
conflict; or

(2) The use, procuring, offering or exposing of a child for

prostitution, for the production of pornography or for pornographic
performances; or

(3) The use, procuring or offering of a child for illegal or illicit

activities, including the production and trafficking of dangerous drugs
and volatile substances prohibited under existing laws; or

(4) Work which, by its nature or the circumstances in which it is

carried out, is hazardous or likely to be harmful to the health, safety
or morals of children, such that it: chanrobles virtual law library

(a) Debases, degrades or demeans the intrinsic worth and

dignity of a child as a human being; or

(b) Exposes the child to physical, emotional or sexual abuse, or

is found to be highly stressful psychologically or may prejudice
morals; or

(c) Is performed underground, underwater or at dangerous

heights; or

(d) Involves the use of dangerous machinery, equipment and

tools such as power-driven or explosive power-actuated tools;
or

(e) Exposes the child to physical danger such as, but not limited
to the dangerous feats of balancing, physical strength or
contortion, or which requires the manual transport of heavy
loads; or

(f) Is performed in an unhealthy environment exposing the child

to hazardous working conditions, elements, substances, co-
 agents or processes involving ionizing, radiation, fire, flammable
substances, noxious components and the like, or to extreme
temperatures, noise levels, or vibrations; or chanrobles virtual law library

(g) Is performed under particularly difficult conditions; or

(h) Exposes the child to biological agents such as bacteria,

fungi, viruses, protozoans, nematodes and other parasites; or

(i) Involves the manufacture or handling of explosives and other

pyrotechnic products.

127. Who may file a complaint in case of unlawful acts committed

against children?

Complaints on cases of unlawful acts committed against children as

enumerated herein may be filed by the following:

(a) Offended party;

(b) Parents or guardians;

(c) Ascendant or collateral relative within the third degree of

consanguinity;

(d) Officer, social worker or representative of a licensed child-caring

institution; chanrobles virtual law library

(e) Officer or social worker of the Department of Social Welfare and

Development;

(f) Barangay chairman of the place where the violation occurred,

where the child is residing or employed; or

(g) At least three (3) concerned, responsible citizens where the

violation occurred.

128. Is the employment of children in advertisements prohibited?

No child shall be employed as a model in any advertisement directly or

indirectly promoting alcoholic beverages, intoxicating drinks, tobacco and
its byproducts, gambling or any form of violence or pornography. (Section
14, R.A. No. 7610, as amended by R. A. No. 9231, December 19, 2003).

EMPLOYMENT OF HOUSEHELPERS:

129. Who is a “househelper” or “domestic servant”?

“Househelper” or “domestic servant” 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. chanrobles virtual law library

Household services include the services of family drivers, cooks,

nursemaids or family servants, but not the services of laborers in a
commercial or industrial enterprise.

The original contract of domestic service shall not last for more than two
(2) years but it may be mutually renewed for such periods by the parties.

130. What should be paid by way of compensation to the

househelper?

The minimum wage rates of househelpers shall be the basic cash wages
which shall be paid to the househelpers in addition to lodging, food and
medical attendance. chanrobles virtual law library

131. What is the time and manner of payment of wages?

Wages shall be paid directly to the househelper to whom they are due at
least once a month. No deductions therefrom shall be made by the
employer unless authorized by the househelper himself or by existing
laws.

132. May a househelper be assigned to non-household work?

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 workers as prescribed herein.

133. Is an employer obligated to provide a househelper the

opportunity for education?

If the househelper is under the age of eighteen (18) years, the employer
shall give him or her an opportunity for at least elementary education.
The cost of education shall be part of the househelper’s compensation,
unless there is a stipulation to the contrary. chanrobles virtual law library

134. Is an employer obligated to provide board and lodging to a

househelper?

The employer shall furnish the househelper, free of charge, suitable and
sanitary living quarters as well as adequate food and medical attendance.

135. How should a househelper be treated?

A househelper should be treated in a just and humane manner and no
physical violence should be inflicted on him.

136. What is the indemnity for unjust termination of services of a

househelper?

If the period of household service is fixed, neither the employer nor the
househelper may terminate the contract before the expiration of the term,
except for a just cause. If the househelper is unjustly dismissed, he or
she shall be paid the compensation already earned plus that for fifteen
(15) days by way of indemnity. If the househelper leaves without
justifiable reason, he or she shall forfeit any unpaid salary due him or her
not exceeding fifteen (15) days.

EMPLOYMENT OF HOMEWORKERS & FIELD PERSONNEL:

137. Who is an “industrial homeworker”?

An industrial homeworker is a worker who is engaged in industrial

homework, a system of production under which work for an employer or
contractor is carried out by a homeworker at his/her home. The materials
may or may not be furnished by the employer or contractor.

138. Who is a “field personnel”?

A field personnel is a non-agricultural employee who regularly performs

his 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. chanrobles virtual law library

THE SOCIAL SECURITY SYSTEM (SSS):

139. Definition of terms under the SSS Law (R. A. No. 8282).

(a) Employer- Any person, natural or juridical, domestic or foreign, who

carries on in the Philippines any trade, business, industry, undertaking, or
activity of any kind and uses the services of another person who is under
his orders as regards the employment, except the Government and any of
its political subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government: Provided, That a
self-employed person shall be both employee and employer at the same
time.

(b) Employee - Any person who performs services for an employer in

which either or both mental or physical efforts are used and who receives
compensation for such services, where there is an employer-employee
relationship: Provided, That a self-employed person shall be both
employee and employer at the same time. chanrobles virtual law library
(c) Dependents - The dependents shall be the following:

(1) The legal spouse entitled by law to receive support from the
member;

(2) The legitimate, legitimated or legally adopted, and illegitimate

child who is unmarried, not gainfully employed, and has not reached
twenty-one (21) years of age, or if over twenty-one (21) years of
age, he is congenitally or while still a minor has been permanently
incapacitated and incapable of self-support, physically or mentally;
and

(3) The parent who is receiving regular support from the member.

(d) Compensation - All actual remuneration for employment, including the

mandated cost-of-living allowance, as well as the cash value of any
remuneration paid in any medium other than cash except that part of the
remuneration in excess of the maximum salary credit as provided under
Section Eighteen of this Act. chanrobles virtual law library

(e) Monthly salary credit - The compensation base for contributions and
benefits as indicated in the schedule in Section Eighteen of this Act.

(f) Monthly - The period from one end of the last payroll period of the
preceding month to the end of the last payroll period of the current month
if compensation is on hourly, daily or weekly basis; if on any other basis,
‘monthly’ shall mean a period of one (1) month.

(g) Contribution - The amount paid to the SSS by and on behalf of the
members in accordance with Section Eighteen of this Act.

(h) Employment - Any service performed by an employee for his

employer except:

(1) Employment purely casual and not for the purpose of occupation
or business of the employer; chanrobles virtual law library

(2) Service performed on or in connection with an alien vessel by an

employee if he is employed when such vessel is outside the
Philippines;

(3) Service performed in the employ of the Philippine Government or

instrumentality or agency thereof; chanrobles virtual law library

(4) Service performed in the employ of a foreign government or

international organization, or their wholly-owned instrumentality:
Provided, however, That this exemption notwithstanding, any foreign
government, international organization or their wholly-owned
 instrumentality employing workers in the Philippines or employing
Filipinos outside of the Philippines, may enter into an agreement with
the Philippine Government for the inclusion of such employees in the
SSS except those already covered by their respective civil service
retirement systems: Provided, further, That the terms of such
agreement shall conform with the provisions of this Act on coverage
and amount of payment of contributions and benefits: Provided,
finally, That the provisions of this Act shall be supplementary to any
such agreement; and

(5) Such other services performed by temporary and other

employees which may be excluded by regulation of the Commission.
Employees of bona fide independent contractors shall not be deemed
employees of the employer engaging the service of said contractors.

(i) Beneficiaries - The dependent spouse until he or she remarries, the

dependent legitimate, legitimated or legally adopted, and illegitimate
children, who shall be the primary beneficiaries of the member: Provided,
That the dependent illegitimate children shall be entitled to fifty percent
(50%) of the share of the legitimate, legitimated or legally adopted
children: Provided, further, That in the absence of the dependent
legitimate, legitimated children of the member, his/her dependent
illegitimate children shall be entitled to one hundred percent (100%) of
the benefits. In their absence, the dependent parents who shall be the
secondary beneficiaries of the member. In the absence of all the
foregoing, any other person designated by the member as his/her
secondary beneficiary. chanrobles virtual law library

(j) Contingency - The retirement, death, disability, injury or sickness and

maternity of the member.

(k) Average monthly salary credit - The result obtained by dividing the
sum of the last sixty (60) monthly salary credits immediately preceding
the semester of contingency by sixty (60), or the result obtained by
dividing the sum of all the monthly salary credits paid prior to the
semester of contingency by the number of monthly contributions paid in
the same period, whichever is greater: Provided, That the injury or
sickness which caused the disability shall be deemed as the permanent
disability for the purpose of computing the average monthly salary credit. 

(l) Average daily salary credit - The result obtained by dividing the sum of
the six (6) highest monthly salary credits in the twelve-month period
immediately preceding the semester of contingency by one hundred
eighty (180).

(m) Credited years of service - For a member covered prior to January

nineteen hundred and eighty five (1985) minus the calendar year of
coverage plus the number of calendar years in which six (6) or more
contributions have been paid from January nineteen hundred and eighty
five (1985) up to the calendar year containing the semester prior to the
contingency. For a member covered in or after January nineteen hundred
and eighty five (1985), the number of calendar years in which six (6) or
more contributions have been paid from the year of coverage up to the
calendar year containing the semester prior to the contingency: Provided,
That the Commission may provide for a different number of contributions
in a calendar year for it to be considered as a credited year of service.
chanrobles virtual law library

(n) Member - The worker who is covered under Section Nine and Section
Nine-A of this Act.

(o) Self-employed - Any person whose income is not derived from

employment, as defined under this Act, as well as those workers
enumerated in Section Nine-A hereof.

(p) Net earnings - Net income before income taxes plus non-cash charges
such as depreciation and depletion appearing in the regular financial
statement of the issuing or assuming institution.

140. Who are covered by the SSS?

(a) Coverage in the SSS shall be compulsory upon all employees not over
sixty (60) years of age and their employers: Provided, That in the case of
domestic helpers, their monthly income shall not be less than One
thousand pesos (P1,000.00) a month: Provided, further, That any benefit
already earned by the employees under private benefit plans existing at
the time of the approval of this Act shall not be discontinued, reduced or
otherwise impaired: Provided, further, That private plans which are
existing and in force at the time of compulsory coverage shall be
integrated with the plan of the SSS in such a way where the employer’s
contribution to his private plan is more than that required of him in this
Act, he shall pay to the SSS only the contribution required of him and he
shall continue his contribution to such private plan less his contribution to
the SSS so that the employer’s total contribution to his benefit plan and
to the SSS shall be the same as his contribution to his private benefit plan
before the compulsory coverage: Provided, further, That any changes,
adjustments, modifications, eliminations or improvements in the benefits
to be available under the remaining private plan, which may be necessary
to adopt by reason of the reduced contributions thereto as a result of the
integration, shall be subject to agreements between the employers and
employees concerned: Provided, further, That the private benefit plan
which the employer shall continue for his employees shall remain under
the employer’s management and control unless there is an existing
agreement to the contrary: Provided, finally, That nothing in this Act shall
be construed as a limitation on the right of employers and employees to
agree on and adopt benefits which are over and above those provided
under this Act.

(b) Spouses who devote full time to managing the household and family
affairs, unless they are also engaged in other vocation or employment
which is subject to mandatory coverage, may be covered by the SSS on a
voluntary basis.

(c) Filipinos recruited by foreign-based employers for employment abroad

may be covered by the SSS on a voluntary basis.

141. Are self-employed persons covered?

Coverage in the SSS shall also be compulsory upon such self-employed

persons as may be determined by the Commission under such rules and
regulations as it may prescribe, including but not limited to the following:

1. All self-employed professionals;

2. Partners and single proprietors of businesses;

3. Actors and actresses, directors, scriptwriters and news

correspondents who do not fall within the definition of the term
"employee" in Section 8 (d) of this Act; chanrobles virtual law library

4. Professional athletes, coaches, trainers and jockeys; and

5. Individual farmers and fishermen.

Unless otherwise specified in the law, all provisions of the SSS LAW
applicable to covered employees shall also be applicable to the covered
self-employed persons.

142. When does coverage take effect?

Compulsory coverage of the employer shall take effect on the first day of
his operation and that of the employee on the day of his employment:
Provided, That the compulsory coverage of the self-employed person shall
take effect upon his registration with the SSS. chanrobles virtual law library

143. What is the effect of separation from employment?

When an employee under compulsory coverage is separated from

employment, his employer’s contribution on his account and his obligation
to pay contributions arising from that employment shall cease at the end
of the month of separation, but said employee shall be credited with all
contributions paid on his behalf and entitled to benefits according to the
provisions of this Act. He may, however, continue to pay the total
contributions to maintain his right to full benefit.

144. What is the effect of interruption of business or professional

income?

If the self-employed realizes no income in any given month, he shall not

be required to pay contributions for that month. He may, however, be
allowed to continue paying contributions under the same rules and
regulations applicable to a separated employee member: Provided, That
no retroactive payment of contributions shall be allowed other than as
prescribed under Section 22-A of the SSS Law.

145. What are the benefits under the SSS Law?

(1) Monthly pension; (2) Dependents’ pension ;(3) Retirement benefits;

(4) Death benefits; (5) Permanent disability benefits; (6) Funeral benefit;
(7) Sickness benefit; (8) Maternity leave benefit.

THE GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS):

146. Definition of terms under the GSIS Law (R. A. No. 8291).

(a) Employer- The national government, its political subdivisions,

branches, agencies or instrumentalities, including government-owned or
controlled corporations, and financial institutions with original charters,
the constitutional commissions and the judiciary;

(b) Employee or Member- Any person receiving compensation while in the

service of an employer as defined herein, whether by election or
appointment, irrespective of status of appointment, including barangay
and Sanggunian officials; chanrobles virtual law library

(c) Active Member- A member who is not separated from the service;

(d) Dependents- Dependents shall be the following: (a) the legitimate

spouse dependent for support upon the member or pensioner; (b) the
legitimate, legitimated, legally adopted child, including the illegitimate
child, who is unmarried, not gainfully employed, not over the age of
majority, or is over the age of majority but incapacitated and incapable of
self-support due to a mental or physical defect acquired prior to age of
majority; and (c) the parents dependent upon the member for support;

(e) Primary beneficiaries- The legal dependent spouse until he/she

remarries and the dependent children;

(f) Secondary beneficiaries- The dependent parents and, subject to the

restrictions on dependent children, the legitimate descendants;
(g) Compensation- The basic pay or salary received by an employee,
pursuant to his election/appointment, excluding per diems, bonuses,
overtime pay, honoraria, allowances and any other emoluments received
in addition to the basic pay which are not integrated into the basic pay
under existing laws;

(h) Contribution- The amount payable to the GSIS by the member and
the employer in accordance with Section 5 of this Act;

(i) Current Daily Compensation- The actual daily compensation or the

actual monthly compensation divided by the number of working days in
the month of contingency but not to exceed twenty-two (22) days;

(j) Average Monthly Compensation (AMC)- The quotient arrived at after

dividing the aggregate compensation received by the member during his
last thirty-six (36) months of service preceding his separation/retirement/
disability/death by thirty-six (36), or by the number of months he
received such compensation if he has less than thirty-six (36) months of
service: Provided, That the average monthly compensation shall in no
case exceed the amount and rate as may be respectively set by the Board
under the rules and regulations implementing this Act as determined by
the actuary of the GSIS: Provided, further, That initially the average
monthly compensation shall not exceed Ten thousand pesos
(P10,000.00), and premium shall be nine percent (9%) and twelve
percent (12%) for employee and employer covering the AMC limit and
below and two percent (2%) and twelve percent (12%) for employee and
employer covering the compensation above the AMC limit; chanrobles virtual law
library

(k) Revalued average monthly compensation- An amount equal to one

hundred seventy percent (170%) of the first One thousand pesos
(P1,000.00) of the average monthly compensation plus one hundred
percent (100%) of the average monthly compensation in excess of One
thousand pesos (P1,000.00);

(l) Lump sum- The basic monthly pension multiplied by sixty (60);

(m) Pensioner- Any person receiving old-age permanent total disability

pension or any person who has received the lump sum excluding one
receiving survivorship pension benefits as defined in Section 20 of this
Act;

(n) Gainful Occupation- Any productive activity that provided the member
with income at least equal to the minimum compensation of government
employees;

(o) Disability- Any loss or impairment of the normal functions of the

physical and/or mental faculty of a member which reduces or eliminates
his/her capacity to continue with his/her current gainful occupation or
engage in any other gainful occupation; chanrobles virtual law library

(p) Total Disability- Complete incapacity to continue with his present

employment or engage in any gainful occupation due to the loss or
impairment of the normal functions of the physical and/or mental faculties
of the member;

(q) Permanent Total Disability- Accrues or arises when recovery from the
impairment mentioned in Section 2 (Q) is medically remote;

(r) Temporary Total Disability- Accrues or arises when the impaired

physical and/or mental faculties can be rehabilitated and/or restored to
their normal functions;

(s) Permanent Partial Disability- Accrues or arises upon the irrevocable

loss or impairment of certain portion/s of the physical faculties, despite
which the member is able to pursue a gainful occupation.

147. Compulsory membership in the GSIS.

Membership in the GSIS shall be compulsory for all employees receiving

compensation who have not reached the compulsory retirement age,
irrespective of employment status, except members of the Armed Forces
of the Philippines and the Philippine National Police, subject to the
condition that they must settle first their financial obligation with the
GSIS, and contractuals who have no employer and employee relationship
with the agencies they serve.

Except for the members of the judiciary and constitutional commissions

who shall have life insurance only, all members of the GSIS shall have life
insurance, retirement, and all other social security protections such as
disability, survivorship, separation, and unemployment benefits.

148. Effect of Separation from the Service.

A member separated from the service shall continue to be a member, and

shall be entitled to whatever benefits he has qualified to in the event of
any contingency compensable under this Act.

149. Contributions.

It shall be mandatory for the member and employer to pay the monthly
contributions specified in the GSIS Law.

150. GSIS benefits.

Monthly Pension; Separation Benefits; Unemployment or Involuntary
Separation Benefits; Retirement Benefits; Permanent Disability Benefits;
Temporary Total Disability Benefits; Survivorship Benefits; Funeral
Benefits; Compulsory Life Insurance Benefit; Optional Insurance and/or
pre-need coverage embracing life, health, hospitalization, education,
memorial plans, and such other plans as may be designed by the GSIS,
for the member and/or his dependents.

NATIONAL HEALTH INSURANCE PROGRAM (R.A. 7875, as

amended by R. A. 9241):

151. Definition of Terms.

(a) Beneficiary - Any person entitled to health care benefits under R. A.

7875.

(b) Benefit Package - Services that the Program offers to its members.

(c) Capitation - A payment mechanism where a fixed rate, whether per

person, family, household or group, is negotiated with a health care
provider who shall be responsible in delivering or arranging for the
delivery of health services required by the covered person under the
conditions of a health care provider contract. chanrobles virtual law library

(d) Contribution - The amount paid by or in behalf of a member to the

Program for coverage, based on salaries or wages in the case of formal
sector employees, and on household earnings and assets, in the case of
self-employed, or on other criteria as may be defined by the Philippine
Health Insurance Corporation (“Corporation”).

(e) Coverage - The entitlement of an individual, as a member or as a

dependent, to the benefits of the program.

(f) Dependent - The legal dependents of a member are: 1) the legitimate

spouse who is not a member; 2) the unmarried and unemployed
legitimate, legitimated, illegitimate, acknowledged children as appearing
in the birth certificate; legally adopted or step-children below twenty-one
(21) years of age; 3) children who are twenty-one (21) years old and
above but suffering from congenital disability, either physical or mental,
or any disability acquired that renders them totally dependent on the
member of our support; 4) the parents who are sixty (60) years old or
above whose monthly income is below an amount to be determined by
the Corporation in accordance with the guiding principles set forth in
Article I of this Act. chanrobles virtual law library

(g) Diagnostic Procedure - Any procedure to identify a disease or

condition through analysis and examination.
(h) Emergency - An unforeseen combination of circumstances which calls
for immediate action to preserve the life of a person or to preserve the
sight of one or both eyes; the hearing of one or both ears; or one or two
limbs at or above the ankle or wrist. chanrobles virtual law library

(i) Employee - Any person who performs services for an employer in

which either or both mental and physical efforts are used and who
receives compensation for such services, where there is an employer-
employee relationship.

(j) Employer - A natural or juridical person who employs the services of

an employee.

(k) Enrollment - The process to be determined by the Corporation in order

to enlist individuals as members or dependents covered by the Program.

(l) Fee for Service - A reasonable and equitable health care payment
system under which physicians and other health care providers receive a
payment that does not exceed their billed charge for each unit of service
provided.

(m) Global Budget - An approach to the purchase of medical services by

which health care provider negotiations concerning the costs of providing
a specific package of medical benefits is based solely on a predetermined
and fixed budget. Purchase of medical services by which health care
provider negotiations concerning the costs of providing a specific package
of medical benefits is based solely on a predetermined and fixed budget.

(n) Health Care Provider - Refers to:

(1) a health care institution, which is duly licensed and accredited

devoted primarily to the maintenance and operation of facilities for
health promotion, prevention, diagnosis, injury, disability, or
deformity, drug addiction or in need of obstetrical or other medical
and nursing care. It shall also be construed as any institution,
building, or place where there are installed beds, cribs, or bassinets
for twenty-four hour use or longer by patients in the treatment of
diseases, injuries, deformities, or abnormal physical and mental
states, maternity cases or sanitarial care; or infirmaries, nurseries,
dispensaries, rehabilitation centers and such other similar names by
which they may be designated; or

(2) a health care professional, who is any doctor of medicine, nurse,

midwife, dentist, or other health care professional or practitioner
duly licensed to practice in the Philippines and accredited by the
Corporation; or chanrobles virtual law library
 (3) a health maintenance organization, which is entity that provides,
offers, or arranges for coverage of designated health services needed
by plan members for a fixed prepaid premium; or

(4) a community-based health organization, which is an association

of indigenous members of the community organized for the purpose
of improving the health status of that community through
preventive, promotive and curative health services.

(o) Health Insurance Identification (ID) Card - The document issued by

the Corporation to members and dependents upon their enrollment to
serve as the instrument for proper identification, eligibility verification,
and utilization recording.

(p) Indigent - A person who has no visible means of income, or whose

income is insufficient for the subsistence of his family, as identified by the
Local Health Insurance Office and based on specific criteria set by the
Corporation in accordance with the guiding principles set forth in Article I
of this Act.

(q) Inpatient Education Package - A set of informational services made

available to an individual who is confined in a hospital to afford him with
knowledge about his illness and its treatment, and of the means available,
particularly lifestyle changes, to prevent the recurrence or aggravation of
such illness and to promote his health in general.

(r) Member - Any person whose premiums have been regularly paid to
the National Health Insurance Program. He may be a paying member, or
a pensioner/retiree member.

(s) Means Test - A protocol administered at the barangay level to

determine the ability of individuals or households to pay varying levels of
contributions to the Program, ranging from the indigent in the community
whose contributions should be totally subsidized by the government, to
those who can afford to subsidize part but not all the required
contributions for the Program.

152. Who are covered by the Philhealth Program?

All citizens of the Philippines shall be covered by the National Health

Insurance Program.

153. Benefit package.

The following categories of personal health services granted to the

member or his dependents as medically necessary or appropriate, shall
include:
(a) Inpatient hospital care:

1) room and board;

2) services of health care professionals;

3) diagnostic, laboratory, and other medical examination services;

4) use of surgical or medical equipment and facilities;

5) prescription drugs and biologicals; subject to the limitations stated

in Section 37 of this Act; chanrobles virtual law library

6) inpatient education packages;

(b) Outpatient care:

1) services of health care professionals;

2) diagnostic, laboratory, and other medical examination services;

3) personal preventive services; and

4) prescription drugs and biologicals, subject to the limitations

described in Section 37 of this Act;

(c) Emergency and transfer services; and

(d) Such other health care services that the Corporation shall determine
to be appropriate and cost-effective.

154. Excluded personal health services.

The benefits granted under the law shall not cover expenses for the
services enumerated hereunder except when the Corporation, after
actuarial studies, recommends their inclusion subject to the approval of
the Board:

(a) non-prescription drugs and devices;

(b) alcohol abuse or dependency treatment;

(c) cosmetic surgery;

(d) optometric services;

(e) fifth and subsequent normal obstetrical deliveries; and

 (f) cost-ineffective procedures, which shall be defined by the
Corporation.

Provided, That, such actuarial studies must be done within a period of

three (3) years, and then periodically reviewed, to determine the financial
sustainability of including the foregoing personal health services in the
benefit package.

155. Who are entitled to the benefits?

A member whose premium contributions for at least three (3) months

have been paid within six (6) months prior to the first day of his or his
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 his health insurance ID card: and Provided,
further, That he is not currently subject to legal penalties as provided for
in Section 44 of the law.

156. Who are not required to pay monthly contributions to be

entitled to the benefits?

The following need not pay the monthly contributions to be entitled to the
Program’s benefits: 

(a) Retirees and pensioners of the SSS and GSIS prior to the
effectivity of R. A. 7875; chanrobles virtual law library

(b) Members who reach the age of retirement as provided for by law
and have paid at least one hundred twenty (120) contributions; and

(c) Enrolled indigents. chanrobles virtual law library

LABOR LAWS OF THE PHILIPPINES

PART - III

LABOR RELATIONS LAW

1. What is the distinction between “labor relations” and “labor

standards”?

Labor relations - refers to that part of labor law which regulates the
relations between employers and workers.  Example: Book V of the Labor
Code which deals with labor organizations, collective bargaining,
grievance machinery, voluntary arbitration, conciliation and mediation,
unfair labor practices, strikes, picketing and lockout. chanrobles virtual law library

Labor standards  - refers to that part of labor law which prescribes the
minimum terms and conditions of employment which the employer is
required to grant to its employees.  Examples: Books One to Four of the
Labor Code as well as Book VI thereof which deal with working conditions,
wages, hours of work, holiday pay and other benefits, conditions of
employment of women, minors, househelpers and homeworkers, medical
and dental services, occupational health and safety, termination of
employment and retirement. chanrobles virtual law library
 
2. What are the quasi-judicial bodies which exercise jurisdiction
over labor cases?

A.  With Original Jurisdiction:

•    Labor Arbiters;

•    National Labor Relations Commission (NLRC);
• Secretary of Labor and Employment/his duly authorized
representatives;
•    DOLE Regional Directors/duly authorized hearing officers;
•    Grievance Machinery and Voluntary Arbitrators;
•    Bureau of Labor Relations (BLR)/Regional Office;
•    Med-Arbiters;
•    National Conciliation and Mediation Board (NCMB); and
•    Philippine Overseas Employment Administration (POEA).

B. With Appellate Jurisdiction:

•    National Labor Relations Commission (NLRC);

•    Secretary of Labor and Employment; and
•    Director of the Bureau of Labor Relations.

C. With Special Powers:

•    Secretary of Labor and Employment;

•    National Labor Relations Commission (NLRC);
•    National Conciliation and Mediation Board (NCMB);
•    President of the Philippines; and chanrobles virtual law library
•    Regional Tripartite Wages and Productivity Board (RTWPB) / National
Wages and Productivity Commission (NWPC).

D. Jurisdiction over social security benefits claims:

•    Social Security System (SSS);

•    Government Service Insurance System (GSIS); and
•    Philippine Health Insurance Corporation (PHIC).
JURISDICTION OF LABOR ARBITERS

3.  What is the nature of jurisdiction of Labor Arbiters? 

The jurisdiction is original and exclusive in nature. 

Labor Arbiters have no appellate jurisdiction.

4.  What are the cases falling under the jurisdiction of the Labor
Arbiters?

Labor Arbiters have jurisdiction over the following cases

1.   Unfair labor practice (ULP) cases;

2.   Termination disputes (or illegal dismissal cases);
3.  Cases that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment, if accompanied with
claim for reinstatement;
4.  Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
5.  Cases  arising  from  any  violation of  Article 264 of this Code,
including questions involving the legality of strikes and lockouts; and
chanrobles virtual law library
6. Except claims for Employees’ Compensation, Social Security, Medicare
and maternity benefits, all other claims arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement. chanrobles
virtual law library

5.  What are the money claims over which Labor Arbiters have
jurisdiction?

Money claims falling within the original and exclusive jurisdiction of the
Labor Arbiters may be classified as follows:

1.  any money claim, regardless of amount, accompanied with a claim for
reinstatement (which involves a termination case); or chanrobles virtual law library

2.  any money claim, regardless of whether accompanied with a claim for
reinstatement, exceeding the amount of P5,000.00 per claimant (which
does not necessarily involve termination of employment).

6.  What is the effect of receivership or liquidation of business on

the jurisdiction of Labor Arbiters?

The jurisdiction conferred upon Labor Arbiters and the NLRC would not be
lost simply because the assets of a former employer had been placed
under receivership or liquidation.

7.  What is the effect of rehabilitation receivership on monetary

claims of workers?

RUBBERWORLD (PHILS.), INC. VS. NLRC, ET AL., (G. R. No. 128003, July
26, 2000) Rehabilitation receivership of a company issued by the SEC has
the effect of suspending all proceedings in all judicial or quasi-judicial
bodies.  The NLRC may not proceed with hearing of monetary claims.  If
already decided, the monetary awards cannot be executed.  To proceed
with the labor proceedings is grave abuse of discretion.

Only when there is liquidation that the monetary claims may be asserted. 
(ALEMAR’S SIBAL AND SONS, INC. VS. NLRC, ET AL. G. R. No. 114761,
January 19, 2000) – The suspension of the proceedings is necessary to
enable the rehabilitation receiver to effectively exercise its powers free
from any judicial or extra-judicial interference that might unduly hinder
the rescue of the distressed company. Once the receivership proceedings
have ceased and the receiver/liquidator is given the imprimatur to
proceed with corporate liquidation, the SEC order becomes functus officio.
Thus, there is no legal impediment for the execution of the decision of the
Labor Arbiter for the payment of separation pay by presenting it with the
rehabilitation receiver and liquidator, subject to the rules on preference of
credits. chanrobles virtual law library

[See also RUBBERWORLD (PHILS.), INC. VS. NLRC, ET AL., (G. R.

No. 126773, April 14, 1999)].

8.    Do Labor Arbiters have jurisdiction over wage distortion

cases?

Labor Arbiters have jurisdiction over wage distortion cases only in

unorganized establishments.  In organized establishments, jurisdiction is
vested with Voluntary Arbitrators.

9.  Do Labor Arbiters have jurisdiction over money claims of

Overseas Filipino Workers (OFWs)?

Labor Arbiters have jurisdiction over all monetary claims of Overseas

Filipino Workers arising from employer-employee relationship or by virtue
of any law or contract involving Filipino workers for overseas deployment,
including claims for actual, moral, exemplary and other forms of
damages. chanrobles virtual law library

(NOTE:  The POEA continues to have jurisdiction over recruitment

or pre-employment cases which are administrative in nature,
involving or arising out of recruitment laws, rules and regulations,
including money claims arising therefrom or violation of the
conditions for issuance of license to recruit workers). 

10.  How should the monetary claims of OFWs be computed?

Skippers Pacific, Inc. vs. Mira, et al., (G. R. No. 144314, November 21,
2002) Under Section 10, Republic Act No. 8042, the claim for unpaid
salaries of overseas workers should be whichever is less between salaries
for unexpired portion of the contract or 3 months for every year of the
remaining unexpired portion of the contract (in case contract is one year
or more).

11.  Do Labor Arbiters have jurisdiction over legality of strikes

and lockouts?

Labor Arbiters have jurisdiction over the issue of legality of strikes and
lockouts, except in strikes and lockouts in industries indispensable to the
national interest, in which case, either NLRC (in certified cases) or DOLE
Secretary (in assumed cases) has jurisdiction.

12. Do Labor Arbiters have injunction power?

It must be noted that the provision in the 1990 version of the NLRC Rules
granting injunction power to the Labor Arbiters is no longer found in its
2002 version. It is opined that this deletion is correct since Article 218 of
the Labor Code grants injunctive power only to the “Commission” which
obviously refers to the NLRC’s various divisions and not to the Labor
Arbiter.

13. Do Labor Arbiters have contempt powers?

Yes. However, it must be noted that according to the 2003 case of Land
Bank of the Philippines vs. Listana, Sr., [G. R. No. 152611, August 5,
2003], quasi-judicial agencies that have the power to cite persons for
indirect contempt pursuant to Rule 71 of the Rules of Court can only do so
by initiating them in the proper Regional Trial Court.  It is not within their
jurisdiction and competence to decide the indirect contempt cases.  These
matters are still within the province of the Regional Trial Courts.

14. Is termination dispute a grievable issue over which Labor

Arbiters have no jurisdiction?

It has long been settled that a termination dispute (illegal dismissal case)
is not a grievable issue, hence, Labor Arbiters have jurisdiction
thereover.  In Atlas Farms, Inc. vs. NLRC, [G. R. No. 142244, November
18, 2002], the Supreme Court affirmed the earlier rulings to this effect.
Not only this. In the same Atlas Farms case, it was categorically ruled
that given the fact of dismissal, it can be said that the cases were
effectively removed from the jurisdiction of the Voluntary Arbitrator, thus
placing them within the jurisdiction of the Labor Arbiter. Where the
dispute is just in the interpretation, implementation or enforcement stage,
it may be referred to the grievance machinery set up in the CBA, or
brought to voluntary arbitration.  But, where there was already actual
termination, with alleged violation of the employee’s rights, it is already
cognizable by the Labor Arbiter.

15.  Do Labor Arbiters have jurisdiction over monetary claims and

illegal dismissal cases of employees of cooperatives?

a.  Members of cooperatives are not employees.

Cooperatives organized under Republic Act No. 6938, otherwise known as

“The Cooperative Code of the Philippines” are composed of members.
Issues on the termination of their membership with the cooperative do
not fall within the jurisdiction of the Labor Arbiters.

b.  Labor Arbiters have jurisdiction over illegal dismissal cases of

employees of cooperatives. chanrobles virtual law library

In the case of Perpetual Help Credit Cooperative, Inc. vs. Faburada, [G. R.
No. 121948, October 8, 2001], the Supreme Court ruled that employees
of cooperatives (as distinguished from members thereof) are covered by
the Labor Code and, therefore, Labor Arbiters have jurisdiction over their
claims.  There is no evidence in this case that private respondents are
members of petitioner cooperative and even if they are, the dispute is
about payment of wages, overtime pay, rest day and termination of
employment.  Under Art. 217 of the Labor Code, these disputes are within
the original and exclusive jurisdiction of the Labor Arbiter.

16.  What are the cases which do not fall under the jurisdiction of
the Labor Arbiters?

a. JURISDICTION OVER INTRA-CORPORATE DISPUTES. -Labor Arbiters

have no jurisdiction over termination of corporate officers and
stockholders which, under the law, is considered intra-corporate dispute.
It must be emphasized that a corporate officer’s dismissal is always a
corporate act and/or intra-corporate controversy and that nature is not
altered by the reason or wisdom which the Board of Directors may have in
taking such action.   The Regional Trial Courts (not SEC) now have
jurisdiction under R. A. 8799 (Securities Regulation Act of 2000).
Jurisdiction of RTC includes adjudication of monetary claims of the
corporate officer who was dismissed, (such as unpaid salaries, leaves,
13th month pay, bonuses, etc.), damages and attorney's fees. (Lozon vs.
NLRC, G. R. No. 107660, Jan. 02, 1995, 240 SCRA 1)
Who are corporate officers?There are specifically three (3) officers which a
corporation must have under the statute:  president, secretary, and
treasurer.  However, the law does not limit corporate officers to these
three.  Section 25 of the Corporation Code gives corporations the widest
latitude to provide for such other offices, as they may deem necessary. 
The by-laws may and usually do provide for such other officers, e.g., vice
president, cashier, auditor, and general manager. Consequently, the
Supreme Court has held that one who is included in the by-laws of a
corporation in its roster of corporate officers is an officer of said
corporation and not a mere employee.

But what about if the position is not included in the roster of officers in
the By-laws?  Does the holder of the position to be considered a corporate
officer?

In the case of Nacpil vs. Intercontinental Broadcasting Corporation, [G. R.

No. 144767, March 21, 2002], petitioner argued that he is not a corporate
officer of the IBC but an employee thereof since he had not been elected
nor appointed as Comptroller and Assistant Manager by the IBC’s Board of
Directors.  He points out that he had actually been appointed as such on
January 11, 1995 by the IBC’s General Manager.  In support of his
argument, petitioner underscores the fact that the IBC’s By-Laws does
not even include the position of comptroller in its roster of corporate
officers. He, therefore, contended that his dismissal was a controversy
falling within the jurisdiction of the labor courts. chanrobles virtual law library

The Supreme Court considered petitioner’s argument untenable. It held

that even assuming that he was in fact appointed by the General
Manager, such appointment was subsequently approved  by the Board of
Directors of the IBC.  That the position of Comptroller is not expressly
mentioned among the officers of the IBC in the by-laws is of no moment,
because the IBC’s Board of Directors is empowered under Section 25 of
the Corporation Code and under the corporation’s by-laws to appoint such
other officers as it may deem necessary.  Consequently, as petitioner’s
appointment as comptroller required the approval and formal action of the
IBC’s  Board of Directors to become valid, it is clear, therefore, that
petitioner is a corporate officer whose dismissal may be the subject of a
controversy cognizable by the SEC under Section 5(c) of P.D. 902-A (now
by the RTC under R. A. No. 8799) which includes controversies involving
both election and appointment of corporate directors, trustees, officers,
and managers. Had petitioner been an ordinary employee, such board
action would not have been required.

It must be noted that the Supreme Court has held that in most cases, the
“by-laws may and usually do provide for such other officers,” (Union
Motors vs. NLRC, 314 SCRA 531, 539 [1999]) and that where a corporate
officer is not specifically indicated in the roster of corporate officers in the
by-laws of a corporation, the Board of Directors may also be empowered
under the by-laws to create additional officers as may be necessary.
(Tabang  vs. NLRC, 266 SCRA 462 [1997]).

One who rose from the ranks is a regular employee and not a mere
corporate officer.

In Prudential Bank and Trust Company vs. Reyes, [G. R. No. 141093,
February 20, 2001], the Assistant Vice-President was appointed
Accounting Clerk by the Bank on July 14, 1963. From that position, she
rose to become supervisor. Then in 1982, she was appointed Assistant
Vice-President which she occupied until her illegal dismissal on July 19,
1991. The Bank’s contention that she merely holds an elective position
and that, in effect, she is not a regular employee is belied by the nature
of her work and her length of service with the Bank. As earlier stated, she
rose from the ranks and has been employed with the Bank since 1963
until the termination of her employment in 1991. As Assistant Vice
President of the foreign department of the Bank, she is tasked, among
others, to collect checks drawn against overseas banks payable in foreign
currency and to ensure the collection of foreign bills or checks purchased,
including the signing of transmittal letters covering the same. It has been
stated that “the primary standard of determining regular employment is
the reasonable connection between the particular activity performed by
the employee in relation to the usual trade or business of the employer.”
Additionally, “an employee is regular because of the nature of work and
the length of service, not because of the mode or even the reason for
hiring them.” As Assistant Vice-President of the Foreign Department of
the Bank she performs tasks integral to the operations of the bank and
her length of service with the bank totaling 28 years speaks volumes of
her status as a regular employee of the bank.  In fine, as a regular
employee, she is entitled to security of tenure; that is, her services may
be terminated only for a just or authorized cause. This being in truth a
case of illegal dismissal, it is no wonder then that the Bank endeavored to
the very end to establish loss of trust and confidence and serious
misconduct on the part of private respondent but to no avail. chanrobles virtual law
library

A corporate officer may also be an employee whose dismissal may vest

jurisdiction on the Labor Arbiter. chanrobles virtual law library

A corporate officer may also be, at the same time, an employee, as held
in Rural Bank of Coron [Palawan], Inc. vs. Cortes, [G.R. No.   164888,
Dec. 6, 2006]. While, indeed, respondent was the Corporate Secretary of
the Rural Bank of Coron, she was also its Financial Assistant and the
Personnel Officer of the two other petitioner corporations. The case of
Mainland Construction Co., Inc. vs. Movilla, [320 Phil, 353 (1995)],
instructs that a corporation can engage its corporate officers to perform
services under a circumstance which would make them employees.  The
Labor Arbiter has thus jurisdiction over respondent’s complaint.

b. JURISDICTION OVER GOVERNMENT CORPORATIONS WITH ORIGINAL

CHARTERS. - Labor Arbiters have jurisdiction over cases involving
employees of government-owned or controlled corporations without
original charters (organized under the Corporation Code).  They have no
jurisdiction if entity has original charter.

c. JURISDICTION OVER IMMUNED ENTITIES. - Labor Arbiters have no

jurisdiction over labor cases involving entities immuned from suit. 
Exception:  when said entities perform proprietary activities (as
distinguished from governmental functions). 

For instance, in an illegal dismissal case filed against the Asian

Development Bank (ADB), the Supreme Court ruled that it enjoys
immunity from legal process of every form and, therefore, the suit cannot
prosper.  ADB's officers, on their part, enjoy immunity in respect of all
acts performed by them in their official capacity.  The Charter and the
Headquarters Agreement granting these immunities and privileges are
treaty covenants and commitments voluntarily assumed by the Philippine
government which must be respected. (Department of Foreign Affairs vs.
NLRC, et al., G. R. No. 113191, September 18, 1996, 262 SCRA 39, 43-
44).

In 1995, the Supreme Court had occasion to assert and reiterate said rule
in an illegal dismissal case filed against a specialized agency of the United
Nations.  In dismissing the case, the Court said that being a member of
the United Nations and a party to the Convention on the Privileges and
Immunities of the Specialized Agencies of the United Nations, the
Philippine Government adheres to the doctrine of immunity granted to the
United Nations and its specialized agencies.  Both treaties have the force
and effect of law. (Lasco, et al. vs. United Nations Revolving Fund for
Natural Resources Exploration [UNRFNRE], et al., G. R. Nos. 109095-
109107, February 29, 1995; World Health Organization vs. Aquino, 48
SCRA 242 [1972]).

There is an exception to the immunity rule as exemplified by the case of

United States vs. Hon. Rodrigo, [G. R. No. 79470, Feb. 26, 1990, 182
SCRA 644, 660]. Here, it was held that when the function of the foreign
entity otherwise immune from suit, partakes of the nature of a proprietary
activity, such as the restaurant services offered at John Hay Air Station
undertaken by the United States Government as a commercial activity for
profit and not in its governmental capacity, the case for illegal dismissal
filed by a Filipino cook working therein is well within the jurisdiction of
Philippine courts. The reason is that by entering into the employment
contract with the cook in the discharge of its proprietary functions, it
impliedly divested itself of its sovereign immunity from suit. chanrobles virtual law
library

d. JURISDICTION OVER LOCAL WATER DISTRICTS. - In Hagonoy Water

District vs. NLRC, [G. R. No. 81490, August 31, 1988], the Supreme
Court ruled that local water districts are quasi-public corporations and,
therefore, the dismissal of their employees are governed by the civil
service laws, rules and regulations. (See also Tanjay Water District vs.
Gabaton, G. R. No. 63742, April 17, 1989).

However, although the Labor Arbiter has no jurisdiction, the Supreme

Court, in Zamboanga City Water District vs. Buat, [G. R. No. 104389, May
27, 1994], did not allow petitioner to belatedly raise the issue of
jurisdiction before it, considering that it never raised said issue before the
Executive Labor Arbiter, the NLRC or even before the Supreme Court in
another related case.  In fact, it was petitioner itself which filed the
complaint before the Executive Labor Arbiter and sought affirmative relief
therefrom and participated actively in the proceedings therein. Although
jurisdiction over strikes and dismissals of employees in local water
districts is lodged not with the NLRC but with the Civil Service
Commission, here, the petitioner is already estopped from assailing the
jurisdiction of the NLRC and is, therefore, bound to respect all the
proceedings therein.

e.   JURISDICTION OVER TORTS. - As earlier emphasized, Labor Arbiters

and the NLRC have no power or authority to grant reliefs from claims that
do not arise from employer-employee relations.  They have no jurisdiction
over quasi-delict or tort per Article 2176 of the Civil Code that have no
reasonable causal connection to any of the claims provided for in the
Labor Code, other labor statutes, or collective bargaining agreements.
chanrobles virtual law library

In Tolosa vs. NLRC, [G. R. No. 149578, April 10, 2003], a complaint was
lodged with the Labor Arbiter but later, the Supreme Court ruled that the
Labor Arbiter has no jurisdiction over the case because it was established
that the same was in the nature of an action based on a quasi-delict or
tort, it being evident that the issue presented therein involved the alleged
gross negligence of the co-employees (shipmates) of Captain Tolosa, the
deceased husband of the complainant, with whom Captain Tolosa had no
employer-employee relationship. 

SUMMARY OF OTHER ISSUES BEYOND JURISDICTION OF THE

LABOR ARBITERS OR NLRC.

In addition to the foregoing, other issues over which the Labor Arbiter or
NLRC has no jurisdiction may be summed up as follows:
1. Cases involving claims for Employees Compensation, Social
Security, Medicare and maternity benefits. (Article 217 [6], Labor
Code).

2.  Issue of replevin intertwined with a labor dispute. (Basaya, Jr. vs.
Militante, 156 SCRA 299). chanrobles virtual law library

3.  Cases arising from violation of training agreement. (Singapore

Airlines vs. Hon. Ernani Cruz Pano, G. R. No. L-47739, June 22,
1983; 122 SCRA 671). 

4. Cases involving claim for liquidated damages for breach of a

contractual obligation. Also the issue of liability in suretyship.
(Singapore Airlines vs. Hon. Ernani Cruz Pano, G. R. No. L-47739,
June 22, 1983; 122 SCRA 671). 

5. Cases involving issue of whether sale of property being levied on

execution was done in bad faith. (Asian Footwear vs. Soriano, 142
SCRA 49).

6. Cases of contempt involving a judge of the regular court.

(Tolentino vs. Inciong, 91 SCRA 563). chanrobles virtual law library

7. Cases involving an injunction filed by a third party with the regular

court against the sheriff enforcing a decision in a labor case.
(Philippine Association of Free Labor Unions [PAFLU] vs. Salas, 158
SCRA 53).

8. Cases involving claim of employee for cash prize offered under the
Innovation Program of a company which, although arising from
employer-employee relationship, require the application of general
civil law on contracts. (San Miguel Corporation vs. NLRC, 161 SCRA
719).

9. Cases initiated by employer against an employee for sum of

money and damages for cost of repair jobs made on an employee’s
personal cars as well as for the purchase price of parts and vehicles.
(Molave Motor Sales, Inc. vs. Laron, 129 SCRA 485).

10. Claims for commissions and certain reimbursements made by an

independent contractor. (Sara vs. Agarrado, 166 SCRA 625).

11. Cases filed by government-owned corporations performing

governmental functions. (National Housing Corporation vs. Juco, 134
SCRA 172; Metropolitan Waterworks and Sewerage System vs.
Hernandez, 143 SCRA 602; PNOC-Exploration Corporation vs. NLRC,
164 SCRA 501).
 12. Violation of labor laws which are penal in nature. Examples are
illegal recruitment cases, (Section 10, Rule X, Book II, Rules and
Regulations Governing Overseas Employment) or criminal offenses or
felonies committed in the course of strikes and lockouts.  (Article
264, Labor Code). 

13. Insolvency proceedings in the enforcement of the worker

preference ordained under Article 110 of the Labor Code.

14. Exercise of equity jurisdiction to enjoin activities for purposes of

compelling an employer to ignore a clear mandate of the law.
(Bulletin Publishing Corporation vs. Sanchez, 144 SCRA 678).

15. Administrative action against the licensee or holder of authority

cognizable by the POEA which could proceed independently from the
criminal action. (Section 12,  Rules and Regulations Implementing
the Migrant Workers and Overseas Filipinos Act of 1995).

16. Review of recruitment violation cases and other related cases

decided by the POEA. The Secretary of Labor and Employment has
exclusive jurisdiction over these cases. (Section 1, Rule IV,  Book VI,
Rules and Regulations Governing Overseas Employment). chanrobles virtual law
library

17. Cases involving issues which do not arise from, or has no

reasonable causal connection with, employer-employee relationship.
(Pepsi-Cola Distributors vs. Galang, 201 SCRA 695; Grepalife
Assurance Corporation vs. NLRC, 187 SCRA 694; Cosmopolitan
Funeral Homes vs. Maalat, 187 SCRA 773; Insular Life vs. NLRC, 179
SCRA 459). chanrobles virtual law library

17.  What is the doctrine of forum non conveniens? May this be

invoked against the exercise of jurisdiction by the Labor
Arbiters/NLRC?

In the case of The Manila Hotel Corp. vs. NLRC, (G. R. No. 120077,
October13, 2000), the Supreme Court ruled that under the international
law doctrine of forum non conveniens, the NLRC has no jurisdiction when
the main aspects of the case transpired in foreign jurisdictions and the
only link that the Philippines has with the case is that the employee is a
Filipino Citizen.  In this case, the Filipino was hired directly (without the
intervention of the POEA) by the foreign employer while he was working
in the Sultanate of Oman and was assigned to a hotel in China. The NLRC
is not a convenient forum given that all the incidents of the case – from
the time of recruitment, to employment, to dismissal - occurred outside
the Philippines.  The inconvenience is compounded by the fact that the
proper defendants – the Palace Hotel and MHICL - are not nationals of the
Philippines.  Neither are they “doing business in the Philippines.” 
Likewise, the main witnesses, Mr. Schmidt and Mr. Henk are non-
residents of the Philippines.

The said Manila Hotel case should be distinguished from Philippine

National Bank vs. Cabansag, [G. R. No. 157010, June 21, 2005]. Here,
respondent was hired by the Singapore branch of petitioner-bank while
she was a tourist in Singapore in 1998. Petitioner is a private banking
corporation organized and existing under the laws of the Philippines, with
principal offices at the PNB Financial Center, Roxas Boulevard, Manila. At
the time, too, the Branch Office had two (2) types of employees: (a)
expatriates or the regular employees, hired in Manila and assigned abroad
including Singapore; and (b) locally (direct) hired.  She applied for and
was hired as Branch Credit Officer. After her 3-month probationary
period, she was terminated. Subsequently, she filed a complaint before a
Labor Arbiter.  One of the issues presented before the Supreme Court was
whether or not the arbitration branch of the NLRC in the National Capital
Region has jurisdiction over the instant controversy.  The Supreme Court,
in answering this query in the affirmative, ruled that the Labor Arbiter has
jurisdiction because the issue here involves termination of an OFW. While
she may have been directly hired in Singapore by petitioner, however,
noteworthy is the fact that respondent likewise applied for and secured an
Overseas Employment Certificate from the POEA through the Philippine
Embassy in Singapore. The Certificate declared her a bona-fide contract
worker in Singapore. Thus, even assuming arguendo that she was
considered at the start of her employment as a “direct hire” governed by
and subject to the laws, common practices and customs prevailing in
Singapore, she subsequently became a contract worker or an OFW who
was covered by Philippine labor laws and policies upon certification by the
POEA. At the time her employment was illegally terminated, she already
possessed the POEA Employment Certificate. Moreover, petitioner admits
that it is a Philippine corporation doing business through a branch office in
Singapore. Significantly, respondent’s employment by the Singapore
branch office had to be approved by the president of the bank whose
principal offices were in Manila.  This circumstance militates against
petitioner’s contention that respondent was “locally hired”; and totally
“governed by and subject to the laws, common practices and customs” of
Singapore, not of the Philippines.  Instead, with more reason does this
fact reinforce the presumption that respondent falls under the legal
definition of migrant worker, in this case one deployed in Singapore. 
Hence, petitioner cannot escape the application of Philippine laws or the
jurisdiction of the NLRC and the Labor Arbiter. chanrobles virtual law library

Citing the ruling in PNB vs. Cabansag [supra], the High Court in Sim vs.
NLRC, [G.R. No.  157376, October 2, 2007], noted a palpable error in the
Labor Arbiter's disposition of the case, which was affirmed by the NLRC,
with regard to the issue on jurisdiction.  It held that it was wrong for the
Labor Arbiter to dismiss the case for lack of jurisdiction under its holding
that “labor relations system in the Philippines has no extra-territorial
jurisdiction”; that “it is limited to the relationship between labor and
capital within the Philippines”; and that “since complainant was hired and
assigned in a foreign land, although by a Philippine Corporation, it follows
that the law that governs their relationship is the law of the place where
the employment was executed and her place of work or assignment.”
chanrobles virtual law library

The petitioner here was Corazon Sim who was initially employed by 
Equitable PCI-Bank (respondent) in 1990 as Italian Remittance Marketing
Consultant to the Frankfurt Representative Office.  Eventually, she was
promoted to Manager position until September 1999, when she received a
letter from Remegio David -- the Senior Officer, European Head of
PCIBank, and Managing Director of PCIB- Europe -- informing her that
she was being dismissed due to loss of trust and confidence based on
alleged mismanagement and misappropriation of funds.  According to the
Supreme Court, the Labor Arbiter has jurisdiction not only on the basis of
Article 217 of the Labor Code but under Section 10 of Republic Act No.
8042, or the Migrant Workers and Overseas Filipinos Act of 1995, as well
as Section 62 of the Omnibus Rules and Regulations Implementing R.A.
No. 8042.  Under these provisions, it is clear that Labor Arbiters have
original and exclusive jurisdiction over claims arising from employer-
employee relations, including termination disputes involving all workers,
among whom are overseas Filipino workers.  (Id.). chanrobles virtual law library

The principle of forum non conveniens was also invoked by petitioners in

Pacific Consultants International Asia, Inc. vs. Schonfeld, [G.R. No.
166920, Feb. 19, 2007].  Petitioners insisted on the application of the said
principle since the respondent is a Canadian citizen and was a repatriate. 
In rejecting petitioner’s contention, the Supreme Court cited the following
reasons that do not warrant the application of the said principle:

First.  The Labor Code of the Philippines does not include forum non
conveniens as a ground for the dismissal of the complaint. (See
PHILSEC Investment Corporation vs. CA, G.R. No. 103493, June 19,
1997, 274 SCRA 102). chanrobles virtual law library

Second.  The propriety of dismissing a case based on this principle

requires a factual determination; hence, it is properly considered as
defense. (Id.). chanrobles virtual law library

Third.  In Bank of America, NT&SA, Bank of America International,

Ltd. vs. Court of Appeals, [448 Phil. 181, 196 (2003)], it was held
that:“xxx [a] Philippine Court may assume jurisdiction over the case
if it chooses to do so; provided, that the following requisites are met:
(1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and, (3)
 that the Philippine Court has or is likely to have power to enforce its
decision. Xxx.”

JURISDICTION OF THE NLRC

18.  What are the two kinds of jurisdiction of the NLRC?

The National Labor Relations Commission exercises two (2) kinds of

jurisdiction:

1.  original  jurisdiction; and

2.  exclusive appellate jurisdiction.

1.  Original jurisdiction.

a.   Injunction in ordinary labor disputes to enjoin or restrain any

actual or threatened commission of any or all prohibited or unlawful
acts or to require the performance of a particular act in any labor
dispute which, if not restrained or performed forthwith, may cause
grave or irreparable damage to any party. 

b. Injunction in strikes or lockouts under Article 264 of the Labor

Code.

c.   Certified  labor  disputes  causing  or  likely to cause a strike or

lockout in an industry indispensable to the national interest, certified
to it by the Secretary of Labor and Employment for compulsory
arbitration.

2.  Exclusive appellate jurisdiction.

a.   All cases decided by the Labor Arbiters including contempt

cases. 

b.   Cases   decided   by   the   DOLE Regional   Directors   or  his 
duly authorized Hearing Officers (under Article 129) involving
recovery of wages, simple money claims and other benefits not
exceeding P5,000 and not accompanied by claim for reinstatement. 

19.  What is the distinction between the jurisdiction of the Labor

Arbiters and the NLRC?

The NLRC has exclusive appellate jurisdiction on all cases decided by the
Labor Arbiters.  The NLRC does not have original jurisdiction on the cases
over which Labor Arbiters have original and exclusive jurisdiction (see
above enumeration).  If a claim does not fall within the exclusive original
jurisdiction of the Labor Arbiter, the NLRC cannot have appellate
jurisdiction thereover.

POWERS OF THE DOLE SECRETARY AND HIS DULY AUTHORIZED

REPRESENTATIVES

20. What is the visitorial and enforcement power of the DOLE

Secretary and his duly authorized representatives under Article
128 of the Labor Code?

1.  Power to inspect employer’s records and premises at any time of the
day or night whenever work is being undertaken therein, and the right to
copy therefrom, to question any employee and investigate any fact,
condition or matter which may be necessary to determine violations or
which may aid in the enforcement of the Labor Code and of any labor law,
wage order or rules and regulations issued pursuant thereto.

2.  Power to issue compliance orders to give effect to  the labor standards
provisions of this Code and other labor legislation based on the findings of
labor employment and enforcement officers or industrial safety engineers
made in the course of inspection. 

3. Power to issue writs of execution to the appropriate authority for the

enforcement of their orders, except in cases where the employer contests
the findings of the labor employment and enforcement officer and raises
issues supported by documentary proofs which were not considered  in
the course of inspection. chanrobles virtual law library

4.  Power to order stoppage of work or suspension of operations of any

unit or department of an establishment when non-compliance with the
law or implementing rules and regulations poses grave and imminent
danger to the health and safety of workers  in the workplace.

21.  What is the power to assume jurisdiction or certify “national

interest” labor disputes to NLRC?

When, in his opinion, there exists a labor dispute causing or likely to

cause a strike or lockout in an industry indispensable to the national
interest, the Secretary of Labor and Employment may assume jurisdiction
over the dispute and decide it or certify the same to the Commission for
compulsory arbitration. (Article 263 [g], Labor Code).

22.  What are the cases falling under the DOLE Secretary’s
appellate power? 

a. Orders issued by the duly authorized representative of the Secretary of

Labor and Employment under Article 128 (Visitorial and Enforcement
Power) may be appealed to the latter.  (Art. 128). chanrobles virtual law library
b. Denial of application for union registration or cancellation of union
registration originally rendered by the Bureau of Labor Relations (BLR)
may be appealed to the Secretary of Labor and Employment. (NOTE:  If
originally rendered by the Regional Office, appeal should be made to the
BLR).

c. Decisions of the Med-Arbiter in certification election cases are

appealable to the DOLE Secretary. (Art. 259). (NOTE:  Decisions of Med-
Arbiters in intra-union disputes are appealable to the BLR).

JURISDICTION OF THE DOLE REGIONAL DIRECTORS / DULY

AUTHORIZED HEARING OFFICERS.

23.  What are the money claims falling under the jurisdiction of
DOLE Regional Directors?

Under Article 129, the Regional Director or any of the duly authorized
hearing officers of DOLE have jurisdiction over claims for recovery of
wages, simple money claims and other benefits, provided that:

1.  the claim must arise from employer-employee relationship;

2.  the claimant does not seek reinstatement;  and

3. the aggregate money claim of each employee does not exceed

P5,000.00.

JURISDICTION OF GRIEVANCE MACHINERY IN THE CBA

24.  What are the cases falling under the jurisdiction of the
Grievance Machinery?

Any grievance arising from:

1.the interpretation or implementation of the Collective Bargaining

Agreement (CBA);  and

2.  the interpretation or enforcement of company personnel policies.

(NOTE: All grievances submitted to the grievance machinery

which are not settled within seven (7) calendar days from the
date of its submission shall automatically be referred to voluntary
arbitration prescribed in the CBA) chanrobles virtual law library

JURISDICTION OF VOLUNTARY ARBITRATORS OR PANEL OF VAs

25.  What are the cases falling under the jurisdiction of the
Voluntary Arbitrator or panel of Voluntary Arbitrators?
The Voluntary Arbitrator (or panel of Voluntary Arbitrators) has original
and exclusive jurisdiction over the following:

1. all unresolved grievances arising from the interpretation or

implementation of the collective bargaining agreement after
exhaustion of the grievance procedure; and

2. all unresolved grievances arising from the implementation or

interpretation of company personnel policies. (Article 261).

3.  all other labor disputes including unfair labor practices and
bargaining deadlocks, upon agreement of the parties. (Article 262).

26. How should cases falling under the jurisdiction of the

Voluntary Arbitrator but erroneously filed with the Labor Arbiters
or DOLE Regional Offices be processed?

They shall immediately be disposed and referred to the Grievance

Machinery or Voluntary Arbitration provided in the CBA.

27. In case of conflict, who has jurisdiction over termination

disputes, Labor Arbiter or Voluntary Arbitrator?

ATLAS FARMS, INC. VS. NLRC (G.R. NO. 142244; Nov. 18, 2002)
Jurisdiction over termination disputes belongs to Labor Arbiters and NOT
with Grievance Machinery nor Voluntary Arbitrator [cited Maneja vs.
NLRC, 290 SCRA 603, 616, (1998)]. chanrobles virtual law library

CELESTINO VIVERO VS. COURT OF APPEALS, HAMMONIA MARINE

SERVICES, ET AL., (G. R. NO. 138938, OCTOBER 24, 2000)  - Under
Article 262, the Voluntary Arbitrator may assume jurisdiction only when
agreed upon by the parties.  Policy Instructions No. 56 issued by DOLE
Secretary Confesor clarifying the jurisdiction of Labor Arbiters and
Voluntary Arbitrations does not apply.  It reiterated the ruling that
dismissal is not a grievable issue.

JURISDICTION OF THE BUREAU OF LABOR RELATIONS

(BLR)/MED-ARBITERS

28.  What are the cases falling under the jurisdiction of the BLR?

The BLR has original and exclusive jurisdiction over the following:

1.  “Inter-union disputes” or “representation disputes” which refer to

cases involving petition for certification election filed by a duly
registered labor organization which is seeking to be recognized as
the sole and exclusive bargaining agent of the rank-and-file
 employees in the appropriate bargaining unit of a company, firm or
establishment.

2.  “Intra-union disputes” or “internal union disputes” which refer to

disputes or grievances arising from any violation of or disagreement
over any provision of the constitution and by-laws of the union,
including any violation of the rights and conditions of union
membership provided for in the Labor Code. 

3.  All disputes, grievances or problems arising from or affecting

labor-management relations in all workplaces, except those arising
from the interpretation or implementation of the CBA which are
subject of grievance procedure and/or voluntary arbitration.

29.  What are the relevant administrative functions of the BLR?

The BLR has the following administrative functions:  (1) registration of

labor unions; (2)  keeping of registry of labor unions; and (3) 
maintenance and custody of CBAs. chanrobles virtual law library

JURISDICTION OF THE NATIONAL CONCILIATION AND

MEDIATION BOARD (NCMB)

30.  What is the jurisdiction of the NCMB?

Executive Order No. 251 which created the National Conciliation and
Mediation Board (NCMB) ordains that the conciliation, mediation and
voluntary arbitration functions of the Bureau of Labor Relations (BLR)
shall be absorbed by NCMB.  It is an attached agency under the
administrative supervision of the Secretary of Labor and Employment.

The NCMB has jurisdiction over conciliation, mediation and voluntary

arbitration cases.  It performs preventive mediation and conciliation
functions. It administers the voluntary arbitration program;
maintains/updates a list of voluntary arbitrators; compiles arbitration
awards and decisions; and provides counseling and preventive mediation
assistance particularly in the administration of collective agreements.

It is with the NCMB that Notices of Strike or Lockout are filed.

JURISDICTION OF POEA

31.  What are the cases falling under the jurisdiction of the POEA?

The POEA has no more jurisdiction over monetary claims of OFWs, the
same having been transferred to the Labor Arbiters by virtue of R. A.
8042.  POEA’s jurisdiction is now confined to recruitment or pre-
employment cases which are administrative in nature, involving or arising
out of recruitment laws, rules and regulations, including money claims
arising therefrom or violation of the conditions for issuance of license to
recruit workers. 

POWER OF PRESIDENT TO ASSUME JURISDICTION OVER

NATIONAL INTEREST CASES

32.  May the President assume jurisdiction over national interest

cases?

Yes. In connection with labor disputes causing or likely to cause a strike

or lockout in an industry indispensable to the national interest, the
President of the Philippines shall not be precluded from determining the
industries that, in his opinion, are indispensable to the national interest,
and from intervening at any time and assuming jurisdiction over any such
labor dispute in order to settle or terminate the same. (Article 263[g],
Labor Code).

POWER OF REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY

BOARD (RTWPB)/ NATIONAL WAGES AND PRODUCTIVITY
COMMISSION (NWPC)

33. What are the powers of the RTWPB and NWPC?

The RTWPB has the power to determine and fix minimum wage rates
applicable in the region, provinces or industries therein and to issue the
corresponding wage order, subject to the guidelines issued by the NWPC. 
chanrobles virtual law library

On the other hand, the NWPC has the power to review regional wage
levels set by the RTWPBs to determine if these are in accordance with
prescribed guidelines and national development funds.  (Articles 120-127,
Labor Code).

JURISDICTION OVER CLAIMS FOR SOCIAL SECURITY BENEFITS

34.  What agencies of government administer social security

programs?

• The Social Security System (SSS) for the private sector employees
and the Government Service Insurance System (GSIS) for the public
sector employees are the agencies which administer the income
benefits of the social insurance programs of the government. 

• The SSS and the GSIS likewise administer either the employees’
compensation program which grants income benefits, medical and
related benefits in cases of work-related illnesses, injuries and
deaths.
 • The Philippine Health Insurance Corporation has taken over the
administration of the Medicare benefits which are now also in the
hands of the SSS and the GSIS.

JURISDICTION OVER CRIMINAL AND CIVIL LIABILITIES

35.  Which has jurisdiction over criminal and civil aspects of labor
cases?

By express provision of Article 241 of the Labor Code, both criminal and
civil liabilities arising from violations of the rights and conditions of
membership in a labor organization enumerated in said Article, shall
continue to be under the jurisdiction of ordinary courts. 

This provision should be distinguished from Article 247 of the Labor Code
which vests jurisdiction upon the Labor Arbiters, over the civil aspects,
including damages, attorney’s fees and other affirmative relief, of unfair
labor practices cases.  (Article 247, Labor Code). chanrobles virtual law library

Other provisions of the Labor Code which vest jurisdiction in the regular
courts over the criminal aspect of cases are Articles 272 and 288.

APPEALS

36.  What are the modes of appeal from the decisions of the
various labor tribunals?

1. DECISION OF LABOR ARBITERS:  Appeal from the decision of the Labor

Arbiter is brought by ordinary appeal to the NLRC within ten (10) calendar
days from receipt by the party of the decision.  From the decision of the
NLRC, there is no appeal.  The only way to elevate the case to the Court
of Appeals is by way of the special civil action of certiorari under Rule 65
of the Rules of Civil Procedure. From the ruling of the Court of the
Appeals, it may be elevated to the Supreme Court by way of ordinary
appeal under Rule 45 of the Rules of Civil Procedure. (St. Martin Funeral
Home vs. NLRC, et al., G. R. No. 130866, September 16, 1998).

2. DECISION OF VOLUNTARY ARBITRATORS:  The decision of a Voluntary

Arbitrator or panel of Voluntary Arbitrators is appealable by ordinary
appeal under Rule 43 of the Rules of Civil Procedure directly to the Court
of Appeals.  From the Court of Appeals, the case may be elevated to the
Supreme Court by way of ordinary appeal under the same Rule 45.
(Luzon Development Bank vs. Association of Luzon Development Bank
Employees, et al., G. R. No. 120319, October 6, 1995).

3. DECISION OF THE BLR:  A.  Denial of application for registration of a

union. If the denial is issued by the Regional Office, it may be appealed to
the BLR. If the denial is originally made by the BLR, appeal may be had to
the Secretary of Labor and Employment.  B.  Cancellation of registration
of a union.  If the cancellation of union registration is ordered by the
Regional Office,  the same may be appealed to the BLR.  If the
cancellation is done by the BLR in a petition filed directly therewith, the
BLR’s decision is appealable to the Secretary of Labor and Employment by
ordinary appeal.  chanrobles virtual law library

The decision of the BLR rendered in its original jurisdiction may be

appealed to the Secretary of Labor and Employment whose decision
thereon may only be elevated to the Court of Appeals by way of certiorari
under Rule 65.

The decision of the BLR rendered in its appellate jurisdiction may not be
appealed to the Secretary of Labor and Employment but may be elevated
directly to the Court of  Appeals by way of certiorari under Rule 65.
(Abbott Laboratories Philippines, Inc. vs. Abbott Laboratories Employees
Union, et al., G. R. No. 131374, January 26, 2000).

4. DECISION OF THE MED-ARBITER IN CERTIFICATION ELECTION CASES

– The decision is appealable to the DOLE Secretary of Labor and
Employment.

5. DECISION OF THE DOLE REGIONAL DIRECTORS OR HIS DULY

AUTHORIZED HEARING OFFICERS UNDER ARTICLE 129 INVOLVING
RECOVERY OF WAGES, SIMPLE MONEY CLAIMS AND OTHER BENEFITS
NOT EXCEEDING P5,000 AND NOT ACCOMPANIED BY CLAIM FOR
REINSTATEMENT -  The decision is appealable to the NLRC and not to the
DOLE Secretary.

(NOTE:  Appeal from CA to SC should be under Rule 45 (Petition

for Review on Certiorari) and not Rule 65 (Special Civil Action for
Certiorari) – SEA POWER SHIPPING ENTERPRISES, INC. VS.
COURT OF APPEALS, ET AL., G. R. NO. 138270, JUNE 28, 2001)

APPEAL TO THE NLRC FROM DECISIONS OF LABOR ARBITERS

37.  What are the grounds for appeal?

There are four (4) grounds, to wit:

(a) If  there  is  prima  facie evidence of abuse of discretion on the
part of the Labor Arbiter;

(b) If the decision, order or award was secured through fraud or

coercion, including graft and corruption; chanrobles virtual law library

(c)  If made purely on questions of law; and

 (d)  If  serious  errors  in  the  findings  of facts are raised which
would cause grave or irreparable damage or injury to the appellant.

38.  What are the requisites for perfection of appeal?

Requisites for perfection of appeal.

a.   the appeal should be filed within the reglementary period;

b.   the Memorandum of Appeal should be under oath;

c.   payment of appeal fee;

d.   posting of cash or surety bond, if judgment involves monetary

award; and chanrobles virtual law library

e.   proof of service to the adverse party.

39.  What is the reglementary period to perfect the appeal?

The reglementary period  is ten (10) calendar days.

a.  Saturdays, Sundays and Legal Holidays included in reckoning 10-

day reglementary period.

b.  Exceptions to 10-calendar day period rule.

1.  Appeal filed before the Vir-Jen case (G. R. Nos. 58011-12,
July 20, 1982) at a time when the rule was 10 working days.

2.  10th day falling on a Saturday.

3.   10th day falling on a Sunday or holiday.

d.   Reliance on erroneous notice of decision.

4.  Appeal from decision of Labor Arbiter on third-party claim

(10 working days).

5.   Appeal from decision of Labor Arbiter in direct contempt

cases (5 calendar days).

6.   When allowing the appeal "in the interest of  justice."

7.   Allowing the appeal for other compelling reasons (due to

typhoon falling on the 10th day; or excusable negligence).
 c. The 10-calendar day reglementary period to appeal is not
extendible.

d. Motion for reconsideration of Labor Arbiter’s decision is not

allowed.

e. 10 calendar-day period is counted from receipt of decision by

counsel of party. chanrobles virtual law library

f. Failure to appeal or perfect appeal within 10-calendar day

reglementary period will make the Labor Arbiter's decision final and
executory.

g. Date of mailing (by registered mail) is date of filing.

h. Receipt by one of two counsels is receipt by the party.

i.  Effect of perfection of appeal - Labor Arbiter loses jurisdiction.

j.  Lack of verification of the memorandum of appeal is not fatal nor

jurisdictional.

k. Failure to pay appeal docketing fee, not fatal to the validity of

appeal.

l.  Submission of new or additional evidence on appeal may be

allowed.

m.Raising new issues or changing theory on appeal is not allowed.

40.  What is the reinstatement aspect of the Labor Arbiter's

decision?

If reinstatement is ordered by the Labor Arbiter in an illegal dismissal

case, it is immediately executory even pending appeal.  Such award does
not require a writ of execution.  In the case of Pioneer Texturizing
Corporation vs. NLRC, et al., 280 SCRA 806 [1997], it is the employer
who is duty-bound to inform employee of the reinstatement (either in the
payroll or in the position previously held or in a substantially equivalent
position if no longer available, at the option of the employer).  The
employee ordered reinstated need not secure a writ of execution from the
Labor Arbiter.  If employer refuses to reinstate, the employee may file a
motion to cite the former in contempt.  The posting of bond does not stay
reinstatement. chanrobles virtual law library

Options of the employer.

The employer is practically left with no effective contra-remedy that may
forestall or stay the execution of a Labor Arbiter’s order for immediate
reinstatement pending appeal.  All that the employer has is to avail of any
of the following options:

1.  actual reinstatement of the employee to his work under the same
terms and conditions prevailing prior to his dismissal or separation;
or

2. reinstatement of the employee in the payroll of the company,

without requiring him to report back to his work. (Article 223, Labor
Code; Zamboanga City Water District vs. Buat, 232 SCRA 587).

Employer has to notify employee of his choice of option.

Having ruled in Pioneer Texturizing [supra] that henceforth, an award or

order for reinstatement under Article 223 is self-executory, the Supreme
Court prescribes the procedure to be followed, thus:

“After receipt of the decision or resolution 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.” [Underscoring supplied]

Failure to exercise option, employer should pay salary.

Failing to exercise any of the options, the employer can be compelled,

under pain of contempt, to pay instead the salary of the employee. The
employee should not be left without any remedy in case the employer
unreasonably delays reinstatement. The unjustified refusal of the
employer to reinstate an illegally dismissed employee entitles the
employee to payment of his salaries. (Pioneer Texturizing Corporation vs.
NLRC, supra).

The entitlement of the dismissed employee to his salaries occasioned by

the unjustified refusal of the employer to reinstate him becomes effective
from the time the employer failed to reinstate him despite the issuance of
a writ of execution. (Roquero vs. Philippine Air Lines, Inc., supra).

Remedy in case of employer’s refusal to comply with writ of

execution to reinstate is contempt citation.

If despite several writs of execution, the employer still refuses to reinstate

the employee, the remedy is not the grant of additional backwages to
serve as damages but to file a motion to cite the employer for contempt.
(Christian Literature Crusade vs. NLRC, 171 SCRA 712, April 10, 1989;
See also Industrial and Transport Equipment, Inc. vs. NLRC, G. R. No.
113592, Jan. 15, 1998).

Employer must pay for the salary of employee, as if he was

reinstated.

In the 2003 case of Roquero vs. Philippine Air Lines, Inc., [G. R. No.
152329, April 22, 2003], the dismissal of the employee was held valid by
the Labor Arbiter.  On appeal to the NLRC, the Labor Arbiter’s decision
was reversed and consequently, the dismissed employee was ordered
reinstated.  The employee did not appeal from that decision of the NLRC
but filed a motion for a writ of execution of the order of reinstatement.
The Labor Arbiter granted the motion but the employer refused to execute
the said order on the ground that it has filed a Petition for Review before
the Supreme Court. The case was remanded later from the Supreme
Court to the Court of Appeals pursuant to the ruling in St. Martin Funeral
Home vs. NLRC and Bienvenido Aricayos, [G.R. No. 130866, September
16, 1998]. The Court of Appeals reversed the ruling of the NLRC but, on
appeal to the Supreme Court, the dismissal of the employee was held
valid.

What, if any, was the legal consequence of the reinstatement order issued
by the NLRC which was never complied with by the employer all
throughout the pendency of the case on appeal up to the Supreme
Court?  Did the subsequent affirmance by the Supreme Court of the
validity of the dismissal have the effect of exonerating the non-complying
employer from his obligation to pay for the salary of the employee
consequent to the reinstatement-pending-appeal order issued by the
NLRC? chanrobles virtual law library

The Supreme Court said that the employer is liable to pay for the salary
of the employee previously ordered reinstated by the NLRC although later
on, the dismissal of the employee was held not to be illegal.  chanrobles virtual law
library

In the 2006 case of Air Philippines Corp. vs. Zamora, [G.R. No. 148247,
Aug. 7, 2006], the Labor Arbiter ordered the reinstatement of respondent
Zamora who immediately filed a motion for execution of the said order of
reinstatement. Thereafter, the Labor Arbiter granted the motion and
issued a writ of execution directing petitioner APC to reinstate
complainant to his former position. On appeal, the NLRC reversed the
ruling of the Labor Arbiter and held that no dismissal, constructive or
otherwise, took place for it was Zamora himself who voluntarily
terminated his employment by not reporting for work and by joining a
competitor - Grand Air.  Zamora filed a Motion for Reconsideration but the
NLRC denied it.  However, it ordered petitioner APC to pay Zamora his
unpaid salaries and allowances in the total amount of P198,502.30 within
fifteen (15) days from receipt of the resolution. Displeased with the
modification, APC sought a partial reconsideration of the foregoing
resolution but the NLRC denied the same and justifed the award of unpaid
salaries on the ground that “(t)he grant of salaries and allowances to
complainant arose from the order of his reinstatement which is executory
even pending appeal of respondent questioning the same, pursuant to
Article 223 of the Labor Code. In the eyes of the law, complainant was as
if actually working from the date respondent received the copy of the
appealed decision of the Labor Arbiter directing the reinstatement of
complainant based on his finding that the latter was illegally dismissed
from employment.”

In affirming the above grant by the NLRC of salaries and allowances to

Zamora, the Supreme Court ratiocinated, thus:  “The premise of the
award of unpaid salary to respondent is that prior to the reversal by the
NLRC of the decision of the Labor Arbiter, the order of reinstatement
embodied therein was already the subject of an alias writ of execution
even pending appeal. Although petitioner did not comply with this writ of
execution, its intransigence made it liable nonetheless to the salaries of
respondent pending appeal. There is logic in this reasoning of the NLRC.”
(Citing Roquero vs. Philippine Airlines, Inc., supra and Aris [Phil.] Inc. vs.
NLRC, G.R. No. 90501, Aug. 5, 1991, 200 SCRA 246, 255).

Payroll-reinstated employee should refund salary if dismissal is

finally found legal on appeal; this rule does not apply if employee
was actually reinstated.

The ruling in Roquero [supra] was qualified by the Supreme Court in its
ruling in the 2007 case of Genuino vs. NLRC, [G.R. Nos. 142732-33,
December 4, 2007] insofar as illegally dismissed employees ordered to be
reinstated in the payroll are concerned.  In this case, the Supreme Court
had taken the view that “(i)f the decision of the Labor Arbiter is later
reversed on appeal upon the finding that the ground for dismissal is valid,
then the employer has the right to require the dismissed employee on
payroll reinstatement to refund the salaries he/she received while the
case was pending appeal, or it can be deducted from the accrued benefits
that the dismissed employee was entitled to receive from his/her
employer under existing laws, collective bargaining agreement provisions,
and company practices.  However, if the employee was reinstated to work
during the pendency of the appeal, then the employee is entitled to the
compensation received for actual services rendered without need of
refund. Considering that Genuino was not reinstated to work or placed on
payroll reinstatement, and her dismissal is based on a just cause, then
she is not entitled to be paid the salaries stated in item no. 3 of the fallo
of the September 3, 1994 NLRC Decision.”
While writ of execution is not required in case reinstatement is
ordered by the Labor Arbiter, it is necessary in case reinstatement
is ordered by the NLRC on appeal.

While it is now well-settled that a writ of execution is not necessary to

implement the reinstatement order issued by a Labor Arbiter upon a
finding of illegality of dismissal since it is self-executory in accordance
with Pioneer Texturizing [supra], however, if the reinstatement order is
issued by the NLRC on appeal, there is a need to secure a writ of
execution from the Labor Arbiter a quo to enforce the reinstatement of
the employee.  chanrobles virtual law library

This was the holding in the 2007 case of Mt. Carmel College vs. Resuena,
[G.R. No. 173076, Oct. 10, 2007], the Supreme Court clarified that Article
223 of the Labor Code providing that reinstatement is immediately
executory even pending appeal applies only when the Labor Arbiter
himself ordered the reinstatement.  When it is the NLRC on appeal or the
Court of Appeals which affirmed the NLRC’s ruling orders reinstatement,
what applies is not Article 223 but Article 224 of the Labor Code.  As
contemplated by Article 224 of the Labor Code, the Secretary of Labor
and Employment or any Regional Director, the Commission or any Labor
Arbiter, or med-arbiter or voluntary arbitrator may, motu proprio or on
motion of any interested party, issue a writ of execution on a judgment
within five (5) years from the date it becomes final and executory.
Consequently, under Rule III of the NLRC Manual on the Execution of
Judgment, it is provided that if the execution be for the reinstatement of
any person to a position, an office or an employment, such writ shall be
served by the sheriff upon the losing party or upon any other person
required by law to obey the same, and such party or person may be
punished for contempt if he disobeys such decision or order for
reinstatement.

Earlier, the same ruling was made in Panuncillo vs. CAP Philippines, Inc.,
[G.R. No. 161305, Feb. 9, 2007], where the Labor Arbiter directed the
reinstatement of the petitioner which was affirmed by the NLRC on
appeal. Citing Roquero vs. PAL [supra], petitioner argued that following
the third paragraph of Article 223 of the Labor Code on reinstatement
pending appeal, the order of the NLRC to reinstate her and to pay her
wages was immediately executory even while the case was on appeal
before the higher courts:  The High Court, however, ruled that unlike the
order for reinstatement of a Labor Arbiter which is self-executory, that of
the NLRC is not.  There is still a need for the issuance of a writ of
execution. The reason is that under the sixth paragraph of Article 223, the
NLRC decision becomes “final and executory after ten calendar days from
receipt of the decision by the parties.” In view, however, of Article 224 of
the Labor Code which requires the issuance of a writ of execution to
execute decisions, orders or awards of the NLRC, there is still a need for
the issuance of a writ of execution of the NLRC decision to implement its
order of reinstatement. If a Labor Arbiter does not issue a writ of
execution of the NLRC order for the reinstatement of an employee even if
there is no restraining order, he could probably be merely observing
judicial courtesy, which is advisable “if there is a strong probability that
the issues before the higher court would be rendered moot and moribund
as a result of the continuation of the proceedings in the lower court.”  In
such a case, it is as if a temporary restraining order was issued.  While
under the sixth paragraph of Article 223 of the Labor Code, the decision
of the NLRC becomes final and executory after the lapse of ten calendar
days from receipt thereof by the parties, the adverse party is not
precluded from assailing it via Petition for Certiorari under Rule 65 before
the Court of Appeals and then to the Supreme Court via a Petition for
Review under Rule 45.  If during the pendency of the review no order is
issued by the courts enjoining the execution of a decision of the Labor
Arbiter or NLRC which is favorable to an employee, the Labor Arbiter or
the NLRC must exercise extreme prudence and observe judicial courtesy
when the circumstances so warrant if one is to heed the injunction of the
Court in Philippine Geothermal, Inc v. NLRC, [G.R. No. 106370,
September 8, 1994, 236 SCRA 371, 378-379]. chanrobles virtual law library

If reinstatement order of Labor Arbiter is not executed and the

finding of illegal dismissal is later reversed, employer is not liable
to pay backwages.

In the same 2007 case of Panuncillo, the Supreme Court further ruled
that since it has affirmed the challenged decision of the Court of Appeals
finding that petitioner was validly dismissed and accordingly reversing the
NLRC Decision that petitioner was illegally dismissed and should be
reinstated, petitioner is not entitled to collect any backwages from the
time the NLRC decision became final and executory up to the time the
Court of Appeals reversed said decision. It ratiocinated, thus: “It does not
appear that a writ of execution was issued for the implementation of the
NLRC order for reinstatement.  Had one been issued, respondent would
have been obliged to reinstate petitioner and pay her salary until the said
order of the NLRC for her reinstatement was reversed by the Court of
Appeals, and following Roquero, petitioner would not have been obliged to
reimburse respondent for whatever salary she received in the interim.”
chanrobles virtual law library

But in the 2006 case of Triad Security & Allied Services, Inc. vs. Ortega,
[G.R. No. 160871, Feb. 6, 2006], the Supreme Court still ordered the
payment of backwages for the period when the employees should have
been reinstated by order of the Labor Arbiter.  In this case, the decision of
the Labor Arbiter ordering the reinstatement of the respondent-employees
and the payment of their backwages until their actual reinstatement and
in case reinstatement is no longer viable, the payment of separation pay,
became final and executory due to the failure of the petitioner-employer
to seasonably appeal the same. On the issue of whether backwages
should continue to run even after the payment of separation pay, the
Supreme Court ruled in the affirmative.  It should be pointed out that an
order of reinstatement by the labor arbiter is not the same as actual
reinstatement of a dismissed or separated employee.  Thus, until the
employer continuously fails to actually implement the reinstatement
aspect of the decision of the Labor Arbiter, their obligation to the
dismissed employees, insofar as accrued backwages and other benefits
are concerned, continues to accumulate.  It is only when the illegally
dismissed employee receives the separation pay that it could be claimed
with certainty that the employer-employee relationship has formally
ceased thereby precluding the possibility of reinstatement.  In the
meantime, the illegally dismissed employee’s entitlement to backwages,
13th month pay, and other benefits subsists. Until the payment of
separation pay is carried out, the employer should not be allowed to
remain unpunished for the delay, if not outright refusal, to immediately
execute the reinstatement aspect of the labor arbiter’s decision. chanrobles virtual
law library

Employment elsewhere does not affect reinstatement order and

obligation to pay backwages.

In the same case of Triad Security [supra], the petitioners claimed that
they could not reinstate respondents as the latter had already found jobs
elsewhere.  In not giving credence to this claim, the High Court declared
that respondents herein were minimum wage earners who were left with
no choice after they were illegally dismissed from their employment but to
seek new employment in order to earn a decent living. Surely, they could
not be faulted for their perseverance in looking for and eventually
securing new employment opportunities instead of remaining idle and
awaiting the outcome of this case.

Reinstatement in case of two successive dismissals.

In Sevilla vs. NLRC, [G. R. No. 108878, Sept. 20, 1994], a case involving
two (2) successive dismissals, it was held that the order of reinstatement
pending appeal under Article 223 issued in the first case, shall apply only
to the first case and shall not affect the second dismissal. The Labor
Arbiter was correct in denying the third motion for reinstatement filed by
the petitioner (employee) because what she should have filed was a new
complaint based on the second dismissal. The second dismissal gave rise
to a new cause of action. Inasmuch as no new complaint was filed, the
Labor Arbiter could not have ruled on the legality of the second dismissal.

Reinstatement when position already filled up.

If the former position is already filled up, the employee ordered reinstated
under Article 223 should be admitted back to work in a substantially
equivalent position. (Medina vs. Consolidated Broadcasting System
[CBS]-DZWX, 222 SCRA 707; Pedroso vs. Castro, 141 SCRA 252 [1986]).

41.  What are the rules in case of appeal involving monetary

award?

The following basic principles are worth mentioning:

a. No monetary award, no appeal bond required.

b. Labor Arbiter’s decision or order is required to state the amount

awarded. If the amount of the monetary award is not included in the
judgment, the appeal bond equivalent to the amount of the
monetary award is not required to be posted. (Orozco vs. The Fifth
Division of the Honorable Court of Appeals, [G. R. No. 155207, April
29, 2005])

c. Cash, property or surety bond is required for perfection of appeal

from monetary award. The surety bond should be issued by an
accredited surety company.

d. Bond should be posted within the 10-calendar day reglementary

period.

e.Award of moral and exemplary damages and attorney’s fees,

excluded from computation of bond. chanrobles virtual law library

f.  If bond is not genuine, appeal is not perfected.

g. Non-posting of bond will not perfect the appeal.

h. Remedy of employee in case employer failed to post bond is to file

a motion to dismiss the appeal.

42.  May a Motion to Reduce Bond be filed?

1. Motion to reduce bond may be granted only in meritorious cases such

as when the monetary claims have already prescribed. 

2.  The filing of a motion to reduce bond does not stop the running of the
period to perfect appeal. In order to effectively stop the running of the
period within which to perfect the appeal, the motion to reduce bond must
comply with the requisites that:

1. it should be filed within the reglementary period;

2.  it should be based on meritorious grounds; and

 3. a reasonable amount of bond in relation to the monetary award
should be posted together with said motion.

The failure to post the bond must be caused by a third party, not
by the appellant himself.

In Mary Abigail’s Food Services, Inc. vs. CA, G. R. No. 140294, May 9,
2005, it was held that in the cases where delayed payment of the bond
was allowed, the failure to pay was due to the excusable oversight or
error of a third party, that is, the failure of the Labor Arbiter to state in
the decision the exact amount awarded and the inclusion of the bond as a
requisite for perfecting an appeal.

But, this rule will not apply, according to Santos vs. Velarde, [G. R. No.
140753, April 30, 2003], if the petitioner’s failure to post a bond was due
to his own negligent and mistaken belief that he was exempt, especially if
the Labor Arbiter’s decision states the exact monetary awards to be paid
and there is nothing in the decision which could have given the petitioner
the impression that the bond was not necessary or that he was excused
from paying it. chanrobles virtual law library

Moreover, in the case of Quiambao vs. NLRC, [G. R. No. 91935, March 4,
1996, 254 SCRA 211], the Supreme Court pointed out that, in the cases
where belated posting of a bond was allowed, there was substantial
compliance with the rule. Thus, technical considerations had to give way
to considerations of equity and justice. The eventual posting of the bond
cannot be considered as substantial compliance warranting the relaxation
of the rules in the interest of justice. 

In the instances where the Supreme Court acknowledged substantial

compliance, the appellants, at the very least, exhibited willingness to pay
by posting a partial bond (See Teofilo Gensoli & Co. vs. NLRC, 289 SCRA
407 [1998]) or by filing a motion for reduction of bond (See Rosewood
Processing Inc. vs. NLRC, 290 SCRA 408 [1998]; also Star Angel
Handicraft vs. NLRC, 236  SCRA 580 [1994]) within the 10-day period
provided by law. If there is no such willingness exhibited by petitioner and
his failure to pay the bond was due simply to his own mistaken conclusion
that he was exempt from paying because he was not the employer of the
respondent-employees and thus was not liable to them, such is a reckless
conclusion since there was no circumstance which would have warranted
such a belief.

Furthermore, the Supreme Court has allowed tardy appeals in judicious

cases, e.g., where the presence of any justifying circumstance recognized
by law, such as fraud, accident, mistake or excusable negligence, properly
vested the judge with discretion to approve or admit an appeal filed out of
time; or where on equitable grounds, a belated appeal was allowed as the
questioned decision was served directly upon petitioner instead of her
counsel of record who at the time was already dead.  (Catubay vs. NLRC,
G. R. No. 119289, April 12, 2000; Kathy - O Enterprises vs. NLRC, 286
SCRA 729 [1998]). chanrobles virtual law library

Motion to reduce bond, when not proper.

In the case of Ong vs. Court of Appeals, [G. R. No. 152494, September
22, 2004], the petitioner filed his memorandum of appeal and paid the
corresponding appeal fees on the last day for filing the appeal.  However,
in lieu of the required cash or surety bond, he filed a motion to reduce
bond alleging that the amount of P1,427,802,04 as bond is “unjustified
and prohibitive” and prayed that the same be reduced to a “reasonable
level.” The NLRC denied the motion and consequently dismissed the
appeal for non-perfection.  Petitioner contends that he was deprived of
the chance to post bond because the NLRC took 102 days to decide his
motion.  chanrobles virtual law library

In holding that the petitioner’s argument is unavailing, the Supreme Court

declared that while Section 6, Rule VI of the NLRC New Rules of Procedure
allows the Commission to reduce the amount of the bond, the exercise of
that authority is not a matter of right on the part of the movant but lies
within the sound discretion of the NLRC upon showing of meritorious
grounds. After careful scrutiny of the motion to reduce appeal bond, the
Supreme Court agreed with the Court of Appeals that the NLRC did not
act with grave abuse of discretion when it denied petitioner’s motion for
the same failed to either elucidate why the amount of the bond was
“unjustified and prohibitive” or to indicate what would be a “reasonable
level.”

Even granting arguendo that petitioner has meritorious grounds to reduce

the appeal bond, the result would have been the same since he failed to
post cash or surety bond within the prescribed period. The fact that the
NLRC took 102 days to resolve the motion will not help petitioner’s case. 
The NLRC Rules clearly provide that “the filing of the motion to reduce
bond shall not stop the running of the period to perfect appeal.” 
Petitioner should have seasonably filed the appeal bond within the ten-
day reglementary period following the receipt of the order, resolution or
decision of the NLRC to forestall the finality of such order, resolution or
decision. 

In Calabash Garments, Inc. vs. NLRC, [G. R. No. 110827, August 8, 1996,
260 SCRA 441; 329 Phil. 226, 235 (1996)], it was held that “a substantial
monetary award, even if it runs into millions, does not necessarily give
the employer-appellant a ‘meritorious case’ and does not automatically
warrant a reduction of the appeal bond.”

Alternative remedy is to pay partial appeal bond while motion to

reduce bond is pending with the NLRC.
In the 1998 case of Rosewood Processing, Inc. vs. NLRC, [352 Phil. 1013
(1998)], the petitioner was declared to have substantially complied with
the rules by posting a partial surety bond of fifty thousand pesos issued
by Prudential Guarantee and Assurance, Inc. while its motion to reduce
appeal bond was pending before the NLRC.

In the 2004 case of Ong [supra], the Supreme Court suggested as an

alternative remedy to the full payment of the monetary award, the
payment only of a moderate and reasonable sum for the premium, as was
held in Biogenerics Marketing and Research Corporation vs. NLRC, [G. R.
No. 122725, September 8, 1999; 372 Phil. 653, 661 (1999)].

But the petitioner in Ong did not post a full or partial appeal bond within
the prescribed period, thus, no appeal was perfected from the decision of
the Labor Arbiter.  For this reason, the decision sought to be appealed to
the NLRC had become final and executory and, therefore, immutable. 
Clearly then, the NLRC has no authority to entertain the appeal, much
less to reverse the decision of the Labor Arbiter. Any amendment or
alteration made which substantially affects the final and executory
judgment is null and void for lack of jurisdiction, including the entire
proceeding held for that purpose.

While the bond requirement on appeals involving monetary awards has

been relaxed in certain cases, this can only be done where there was
substantial compliance of the Rules or where the appellants, at the very
least, exhibited willingness to pay by posting a partial bond. (See also
Teofilo Gensoli & Co. vs. NLRC, 352 Phil. 232, 239 [1998]). 

The partial payment of bond must be made during the

reglementary period.

In Filipinas [Pre-fabricated Bldg.] Systems ‘Filsystems,’ Inc. vs. NLRC, (G.

R. No. 153859, Dec. 11, 2003), it was held that the partial payment of
the bond, in order to forestall the decision of the Labor Arbiter from
becoming final and executory, should be made within the reglementary
period. The late filing of the bond divests the NLRC of its jurisdiction to
entertain the appeal since the decision of the Labor Arbiter has already
become final and executory with the lapse of the reglementary period. .

Improper granting of motion to reduce bond.

In Times Transportation Company, Inc. vs. Sotelo, [G. R. No. 163786,

February 16, 2005], the appellants’ motion to reduce bond was denied
and the NLRC ordered them to post the required amount within an
unextendible period of ten (10) days.  However, instead of complying with
the directive, appellants filed another motion for reconsideration of the
order of denial.  Several weeks later, appellants posted an additional
bond, which was still less than the required amount.  Three (3) months
after the filing of the motion for reconsideration, the NLRC reversed its
previous order and granted the motion for reduction of bond.  Said the
High Court:

“We agree with the Court of Appeals that the foregoing constitutes grave
abuse of discretion on the part of the NLRC.  By delaying the resolution of
appellants’ motion for reconsideration, it has unnecessarily prolonged the
period of appeal.  We have held that to extend the period of appeal is to
prolong the resolution of the case, a circumstance which would give the
employer the opportunity to wear out the energy and meager resources
of the workers to the point that they would be constrained to give up for
less than what they deserve in law.” (See also Globe General Services and
Security Agency vs. NLRC, 319 Phil. 531, 537 [1995]).

Effect when NLRC grants additional time to post bond after denial
of motion to reduce bond.

In Buenaobra vs. Lim King Guan, [G. R. No. 150147, January 20, 2004],
the Supreme Court did not consider as grave abuse of discretion the act
of the NLRC in granting to the appellant-employer “an unextendible period
of ten (10) days” upon receipt of the order denying the motion to exempt
from filing appeal bond, within which to post cash or surety bond.   In this
case, the cash or surety bond was actually posted four (4) months after
the filing of their memorandum on appeal. The Supreme Court reasoned
that if only to achieve substantial justice, strict observance of the
reglementary periods may be relaxed if warranted. The NLRC could not be
said to have abused its discretion in requiring the posting of bond after it
denied private respondents’ motion to be exempted therefrom.

Financial difficulties, not sufficient ground. 

An appellant cannot invoke financial difficulties as a ground in support of

a Motion to Reduce Bond. Suffice it to say that the law does not require
outright payment of the total monetary award, but only the posting of a
bond to ensure that the award will be eventually paid should the appeal
fail.  What appellant has to pay is a moderate and reasonable sum for the
premium for such bond.  (Times Transportation Company, Inc. vs. Sotelo,
supra citing Biogenerics Marketing and Research Corporation vs. NLRC,
372 Phil. 653, 661 [1999]).

Long Christmas holiday, not an excuse.

In Mary Abigail’s Food Services, Inc. vs. CA, [G. R. No. 140294, May 9,
2005], the reason given by the petitioners to justify their late posting of
the bond, i.e., that it was impossible to secure the required bond and file
it within the ten-day reglementary period because after receiving a copy
of the decision of the Labor Arbiter on December 23, 1998, a long holiday
(Christmas) season followed, was considered simply unacceptable by the
Supreme Court.  Surely, the occurrence of the holiday season did not at
all make impossible petitioners’ fulfillment of their responsibility to post
the required bond. Pursuing petitioners’ excuse, no bond would ever be
posted on time whenever the reglementary period to file the same falls on
such a season.

UNFAIR LABOR PRACTICES

43.  What is the concept of unfair labor practice?

An unfair labor practice act violates the right of workers to self-

organization, is 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,
disrupts industrial peace and hinders the promotion of healthy and stable
labor-management relations.

44.  What are the aspects of unfair labor practice?

There are two (2) aspects, namely:  (1)  Civil; and (2)  Criminal. 

Labor Arbiters shall have jurisdiction over the civil aspect of all cases
involving unfair labor practices, which may include claims for actual,
moral, exemplary and other forms of damages, attorney’s fees and other
affirmative relief.

Recovery of civil liability in the administrative proceedings shall bar

recovery under the Civil Code. No criminal prosecution may be instituted
without a final judgment finding that an unfair labor practice was
committed having been first obtained in the labor case.

45.  Name the parties which may commit unfair labor practice.

Parties who may commit ULP. 

(1)   Employer (Article 248, Labor Code); and

(2)   Labor Organization (Article 249, Labor Code).

46.  What are the elements of ULP?

Before an employer or labor organization, as the case may be, may be

said to have committed unfair labor practices acts, the following
ingredients must both concur: chanrobles virtual law library

1.  there   should   exist   an  employer-employee  relationship

between the offended party and the offender; and
 2. the act complained of must be expressly mentioned and defined in
the Labor Code as constitutive of unfair labor practice.  If not
mentioned, there is no ULP.

Absent one of the elements above will not make the act an unfair labor
practice act.

47.  What are the ULPs of the employer?

(a) To interfere with, restrain or coerce employees in the exercise of their

right to self-organization;

(b) To require as a condition of employment that a person or an employee

shall not join a labor organization or shall withdraw from one to which he
belongs (a.k.a. YELLOW DOG CONTRACT); chanrobles virtual law library

(c) To contract out services or functions being performed by union

members when such will interfere with, restrain or coerce employees in
the exercise of their rights to self-organization; [Note:  The act of an
employer in having work or certain services or functions being performed
by union members contracted out is not generally an unfair labor practice
act. It is only when the contracting out of a job, work or service being
performed by union members will interfere with, restrain or coerce
employees in the exercise of their right to self-organization that it shall be
unlawful and shall constitute unfair labor practice. (Article 248 [c], Labor
Code; Section 6 [f], Department Order No. 18-02, Series of 2002, [Feb.
21, 2002])].

(d) To initiate, dominate, assist or otherwise interfere with the formation

or administration of any labor organization, including the giving of
financial or other support to it or its organizers or supporters (a.k.a.
COMPANY UNION);

(e) To discriminate in regard to wages, hours of work and other terms

and conditions of employment in order to encourage or discourage
membership in any labor organization.  Nothing in this Code or in any
other law shall stop the parties from requiring membership in a
recognized collective bargaining agent as a condition for employment,
except those employees who are already members of another union at
the time of the signing of the collective bargaining agreement. 
Employees of an appropriate bargaining unit who are not members of the
recognized collective bargaining agent may be assessed a reasonable fee
equivalent to the dues and other fees paid by members of the recognized
collective bargaining agent, if such non-union members accept the
benefits under the collective bargaining agreement:  Provided, that the
individual authorization required under Article 242, paragraph (o) of this
Code shall not apply to the non-members of the recognized collective
bargaining agent;
(f) To dismiss, discharge or otherwise prejudice or discriminate against an
employee for having given or being about to give testimony under this
Code;

(g) To violate the duty to bargain collectively as prescribed by this Code;

(h) To pay negotiation or attorney’s fees to the union or its officers or

agents as part of the settlement of any issue in collective bargaining or
any other dispute; or chanrobles virtual law library

(i) To violate a collective bargaining agreement (but only if gross in

character).

48.  Who may be held criminally liable for ULPs of employer?

On the part of the employer, only the officers and agents of corporations,
associations or partnerships who have actually participated in, authorized
or ratified unfair labor practices shall be held criminally liable.

49.  What are the ULPs of labor organizations?

(a) To restrain or coerce employees in the exercise of their right to self-

organization.  However, a labor organization shall have the right to
prescribe its own rules with respect to the acquisition or retention of
membership; chanrobles virtual law library

(b) To cause or attempt to cause an employer to discriminate against an

employee, including discrimination against an employee with respect to
whom membership in such organization has been denied or to terminate
an employee on any ground other than the usual terms and conditions
under which membership or continuation of membership is made
available to other members;

(c) To violate the duty, or refuse to bargain collectively with the

employer, provided it is the representative of the employees;

(d) To cause or attempt to cause an employer to pay or deliver or agree

to pay or deliver any money or other things of value, in the nature of an
exaction, for services which are not performed or not to be performed,
including the demand for fee for union negotiations (a.k.a. FEATHER-
BEDDING);

(e) To ask for or accept negotiation or attorney’s fees from employers as

part of the settlement of any issue in collective bargaining or any other
dispute; or

(f) To violate a collective bargaining agreement. (but only if gross in

character).
50.  Who may be held criminally liable for ULPs of a labor
organization?

On the part of the union, only the officers, members of governing boards,
representatives or agents or members of labor associations or
organizations who have actually participated in, authorized or ratified the
unfair labor practices shall be held criminally liable. 

51.  What is totality of conduct doctrine?

The “totality of conduct doctrine” means that expressions of opinion by an

employer, though innocent in themselves, may be held to be constitutive
of unfair labor practice because of the circumstances under which they
were uttered, the history of the particular employer’s labor relations or
anti-union bias or because of their connection with an established
collateral plan of coercion or interference.  An expression which might be
permissibly uttered by one employer, might, in the mouth of a more
hostile employer, be deemed improper and consequently actionable as an
unfair labor practice.

52.  What is “yellow-dog contract”?

A “yellow dog contract” is an agreement which exacts from workers as a

condition of employment, that they shall not join or belong to a labor
organization, or attempt to organize one, during their period of
employment or that they shall withdraw therefrom, in case they are
already members of a labor organization. 

The typical yellow dog contract embodies the following stipulations:

1. a representation by the employee that he is not a member of a

labor organization;

2. a promise by the employee that he will not join a union; and

3. a promise by the employee that upon joining a labor organization,

he will quit his employment.

53.  What is “union security clause”?

A “union security clause” is a stipulation in the CBA whereby the

management recognizes that the membership of employees in the union
which negotiated said agreement should be maintained and continued as
a condition for employment or retention of employment.  The obvious
purpose is to safeguard and ensure the continued existence of the union.
chanrobles virtual law library

54.  What are the types of union security clause?

Classification. -  (1) Closed shop agreement; (2)  Maintenance of
membership agreement; (3) Union shop agreement;  (4)   Modified union
shop agreement; (5)   Exclusive bargaining agreement; (6)   Bargaining
for members only agreement; (7)  Agency shop agreement;  (8)  
Preferential hiring agreement.

55.  What are the legal principles pertinent to union security

clause arrangements?

To validly dismiss an employee based on violation of union security

clause, employer should still afford due process to the expelled unionists.

Although the Supreme Court has ruled that union security clauses
embodied in the CBA may be validly enforced and that dismissals
pursuant thereto may likewise be valid, this does not erode the
fundamental requirement of due process. The reason behind the
enforcement of union security clauses which is the sanctity and
inviolability of contracts, cannot override one’s right to due process.

In the case of Cariño vs. NLRC, [G. R. No. 91086, May 8, 1990, 185 SCRA
177], the Supreme Court pronounced that while the company, under a
maintenance of membership provision of the CBA, is bound to dismiss any
employee expelled by the union for disloyalty upon its written request,
this undertaking should not be done hastily and summarily. The company
acts in bad faith in dismissing a worker without giving him the benefit of a
hearing. The right of an employee to be informed of the charges against
him and to a reasonable opportunity to present his side in a controversy
with either the company or his own union is not wiped away by a union
security clause or a union shop clause in a CBA. An employee is entitled
to be protected not only from a company which disregards his rights but
also from his own union the leadership of which could yield to the
temptation of swift and arbitrary expulsion from membership and mere
dismissal from his job.

In Malayang Samahan ng mga Manggagawa sa M. Greenfield (MSMG-

UWP) vs. Ramos, [G. R. No. 113907, February 28, 2000], petitioner union
officers were expelled by the federation for allegedly committing acts of
disloyalty and/or inimical to the interest of the federation (ULGWP) and in
violation of the Constitution and By-laws.  Upon demand of the
federation, the company terminated the petitioners without conducting a
separate and independent investigation. Respondent company did not
inquire into the cause of the expulsion and whether or not the federation
had sufficient grounds to effect the same.  Relying merely upon the
federation’s allegations, respondent company terminated petitioners from
employment when a separate inquiry could have revealed if the federation
had acted arbitrarily and capriciously in expelling the union officers. 
Respondent company’s allegation that petitioners were accorded due
process is belied by the termination letters received by the petitioners
which state that the dismissal shall be immediately effective.

Before dismissal may be effected by the employer for breach of a union

security agreement, due process must be observed by the employer. The
employee sought to be dismissed must be given the opportunity to be
heard. The employer should not rely solely upon the request of the union.
(Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills, 90 SCRA 391;
Binalbagan-Isabela Sugar Co., Inc. [BISCOM] vs. Philippine Association of
Free Labor Unions [PAFLU], G. R. No. L-18782, Aug. 29, 1953, 8 SCRA
700; Sanyo Philippines Workers Union – PSSLU vs. Canizares, 211 SCRA
361). 

Requisites for termination based on union security clause.

In the case of Alabang Country Club, Inc. vs. NLRC, [G.R. No. 170287,
Feb. 14, 2008], the Supreme Court declared that in terminating the
employment of an employee by enforcing the union security clause, the
employer needs only to determine and prove that:

(1) the union security clause is applicable;

(2) the union is requesting for the enforcement of the union security
provision in the CBA; and chanrobles virtual law library

(3) there is sufficient evidence to support the union’s decision to

expel the employee from the union.  chanrobles virtual law library

The foregoing requisites constitute just cause for terminating an

employee based on the CBA’s union security provision.

Employer’s liability in illegal dismissal based on union security

clause.

The company is liable for the payment of backwages for having acted in
bad faith in effecting the dismissal of the employees. (Liberty Cotton Mills
Workers Union vs. Liberty Cotton Mills, 90 SCRA 391).

Thus, as held in the 2000 case of M. Greenfield [supra], notwithstanding

the fact that the dismissal was at the instance of the federation and that it
undertook to hold the company free from any liability resulting from such
a dismissal, the company may still be held liable if it was remiss in its
duty to accord the would-be dismissed employees their right to be heard
on the matter.

Effect of Union Security Clause on religious freedom.

An employee may not be compelled to join a union if it is based on
religious objection.

In 1988, the Supreme Court rendered a decision in the case of Kapatiran

sa Meat and Canning Division [Tupas Local Chapter No. 1027] vs. The
Honorable BLR Director Pura Ferrer-Calleja, [G. R. No. L-82914, June 20,
1988] where it ruled that the decision in Benjamin Victoriano vs. Elizalde
Rope Workers’ Union, [G. R. No. L-25246, September 12, 1974]
upholding the right of members of the Iglesia ni Kristo sect not to join a
labor union for being contrary to their religious beliefs, does not bar the
members of that sect from forming their own union.  The public
respondent correctly observed that the “recognition of the tenets of the
sect xxx should not infringe on the basic right of self-organization granted
by the constitution to workers, regardless of religious affiliation.” chanrobles virtual
law library

In 1992, the Supreme Court, in the case of Alexander Reyes vs.

Cresenciano B. Trajano, [G. R. No. 84433, June 2, 1992], ruled on the
issue of whether members of the Iglesia ni Kristo may be allowed to vote
in a certification election. Considering that they are not members of any
union and they refused to participate in the previous certification election,
the respondents’ argument that petitioners are disqualified to vote
because they are not constituted into a duly organized labor union but
members of the Iglesia ni Kristo which prohibits its followers, on religious
grounds, from joining or forming any labor organization, and “hence, not
one of the unions which vied for certification as sole and exclusive
bargaining representative,” is specious.  Neither law, administrative rule
nor jurisprudence requires that only employees affiliated with any labor
organization may take part in a certification election.  On the contrary,
the plainly discernible intendment of the law is to grant the right to vote
to all bona-fide employees in the bargaining unit, whether they are
members of a labor organization or not, as held in Airtime Specialists, Inc.
vs. Ferrer-Calleja, [180 SCRA 749]. 

Neither does the contention that petitioners should be denied the right to
vote because they “did not participate in previous certification elections in
the company for the reason that their religious beliefs do not allow them
to form, join or assist labor organizations,” persuade acceptance.  No law,
administrative rule or precedent prescribes forfeiture of the right to vote
by reason of neglect to exercise the right in past certification elections.
(Ibid.).

56.  What is agency fee (check-off from non-union members)?

The dues and other fees that may be assessed from non-union members
within the bargaining unit who accept and avail of the benefits flowing
from the CBA are called “agency fees.”  Payment of agency fee to the
bargaining union/agent which negotiated the CBA is but a reasonable
requirement recognized by law, to prevent non-union members from
enriching themselves at the expense of union members. (See Article 248
[e], Labor Code; Section 4, Rule XXV, Book V, Rules to Implement the
Labor Code, as amended by Department Order No. 40-03, Series of 2003,
[Feb. 17, 2003]).

It must be emphasized that non-members of the certified bargaining

agent which successfully concluded the CBA are not required to become
members of the latter. Their acceptance of the benefits flowing from the
CBA and their act of paying the agency fee does not make them members
thereof.

57.  What is a runaway shop?

A “runaway shop” is an industrial plant moved by its owners from one

location to another to escape union labor regulations or state laws.  It
may also be a relocation motivated by anti-union animus rather than for
business reasons.

58.  What is “feather-bedding”?

According to this doctrine, it shall be unfair labor practice for a labor

organization, its officers, agents or representatives to cause or attempt to
cause an employer to pay or deliver or agree to pay or deliver any money
or other things of value, in the nature of an exaction, for services which
are not performed or not to be performed, including the demand for fee
for union negotiations.

59.  What are the CBA-related ULPs under the law?

In connection with the right of workers to collective bargaining, it is unfair

labor practice of the employer:

1. to violate the duty to bargain collectively as prescribed in the

Labor Code (Article 248 [g], Labor Code);

2. to pay negotiation or attorney’s fees to the union or its officers or

agents as part of the settlement of any issue in collective bargaining
or any other dispute (Article 248 [h], Ibid.). No attorney’s fees,
negotiation fees or similar charges of any kind arising from any CBA
shall be imposed on any individual member of the contracting union.
Attorney’s fees, however, may be charged against union funds in an
amount to be agreed upon by the parties.  Any contract, agreement
or arrangement of any sort to the contrary shall be null and void.
(Article 222 [b], Labor Code; Pacific Banking Corporation vs. Clave,
128 SCRA 112; Galvadores vs. Trajano, 144 SCRA 138;
Amalgamated Laborers Association vs. CIR, 22 SCRA 1266). chanrobles
virtual law library
On the part of the union, asking for or accepting attorney’s fees or
negotiation fee from employers is a ground for cancellation of union
registration. (Article 239 [g], Labor Code).

3.  to violate a collective bargaining agreement. (Article 248 [i], Ibid.).

Violation of the CBA is ULP only if gross in character which means flagrant
and/or malicious refusal to comply with the economic provisions thereof. 
If not gross, violation of the CBA is no longer considered ULP.

The act of the employer in refusing to comply with the terms and
conditions of a CBA constitutes bargaining in bad faith and is considered
an unfair labor practice. (National Development Co., vs. NDC Employees
and Workers Union, 66 SCRA 181; Oceanic Pharmacal Employees Union
vs. Inciong, G. R. No. L-50568, Nov. 7, 1979, 94 SCRA 270).

The act of the employer in refusing to implement the negotiated wage

increase stipulated in the CBA, which increase is intended to be distinct
and separate from any other benefits or privileges that may be
forthcoming to the employees, is unfair labor practice. (Philippine Apparel
Workers Union vs. NLRC, G. R. No. L-50320, July 31, 1981; Alhambra
Industries, Inc. vs. CIR, 35 SCRA 550).

Refusal for a considerable number of years, to give salary adjustments

according to the improved salary scales in the collective bargaining
agreements, is unfair labor practice.  (Benguet Consolidated vs. BCI
Employees and Workers Union, 22 SCRA 1293).

The act of the employer to permit non-union members to participate in

the service charges, contrary to the stipulation in the CBA, is unfair labor
practice. (Alba Patio de Makati, vs. Alba Patio de Makati Employees
Association, G. R. No. L-37922, March 16, 1984).

ILLUSTRATIVE CASES INVOLVING UNFAIR LABOR PRACTICES OF

EMPLOYERS.

The following acts of the employer were generally held as unfair labor
practice acts:

1. The employer’s act of notifying through letters, absent employees

individually during a strike following unproductive efforts at collective
bargaining that the plant would be operated the next day and their
jobs were open for them should they want to return to work, has
been held to be an unfair labor practice, as an active interference
with the right of collective bargaining through dealing with the
employees individually instead of through their collective bargaining
representatives. (Insular Life Assurance Co.,  Ltd., Employees
Association-NATU,  vs. Insular Life Assurance Co., Ltd., G. R. No. L-
25291, Jan. 30, 1971,  37 SCRA 244).
2.  Offer of reinstatement and attempt to “bribe” the strikers with
“comfortable cots,” “free coffee and occasional movies,” “overtime
pay” for work performed in excess of eight hours and
“arrangements” for their families, so they would abandon the strike
and return to work, constitute strike-breaking and union-busting
which is unfair labor practice. (Ibid.).

3.  Offer of a Christmas bonus to all “loyal” employees of a company

shortly after the making of a request by the union to bargain; wage
increase given for the purpose of mollifying employees after the
employer has refused to bargain with the union, or to induce strikers
to return to work; employer’s promise of benefits in return for the
striking employees’ abandonment of their strike; and the employer’s
statement, made about six (6) weeks after the strike started, to a
group of strikers in a restaurant that if the strikers returned to work,
new benefits such as hospitalization, accident insurance, profit-
sharing and a new building to work in, will be given to them. (Ibid.).

4.  The act of the employer in indirectly forcing its employees to join
another union. (Macleod vs. Progressive Federation of Labor, 97 Phil.
205).

5.  The act of the employer in instructing an employee not to affiliate

or join a union. (Visayan Stevedores vs. CIR, 19 SCRA 426; National
Fastener Corporation vs. CIR, 1 SCRA 17).

6.  The act of the employer in interrogating its employees in

connection with their membership in the union or their union
activities, which hampers their exercise of free choice. (Scoty’s
Department Store vs. Micaller, 99 Phil. 762; Philippine Steam
Navigation Co. vs. Philippine Marine Officers Guild, 15 SCRA 174).

7.  The act of the employer in asking the union’s recruiter to

surrender the union affiliation forms and threatening him with bodily
harm. (Velez vs. PAV Watchmen’s Union, 107 Phil. 689). chanrobles virtual law
library

8. Withdrawal by the employer of holiday pay benefits stipulated

under a supplementary agreement with the union. (Oceanic
Pharmacal Employees Union vs. Inciong, G. R. No. L-50568, Nov. 7,
1979). chanrobles virtual law library

9.  The act of the employer in refusing to reinstate strikers who

voluntarily and unconditionally offered to return to work but did not
accept the new discriminatory conditions imposed against them
because of their union membership or activities. (Cromwell
Commercial Employees and Laborers Union vs. CIR, G. R. No. L-
19778, Sept. 30, 1964). chanrobles virtual law library
10.  The act of the employer in conducting espionage or surveillance
of the meetings and activities of the union. Surveillance is illegal
since it shows the opposition of the employer to the existence of the
union, and the furtive nature of his activity tends to demonstrate
spectacularly the state of his anxiety.  (51A CJS Sec. 382, p. 278).
When an employer engages in surveillance or takes steps leading his
employees to believe it is going on, a violation results because the
employees come under threat of economic coercion or retaliation for
their union activities. (Henriz Manufacturing Co. vs. NLRB, 321 F 2d
00). 

11. Refusal of the employer to reinstate an employee who was

illegally dismissed based on the union security clause, unless the
latter admits his guilt. (Litex Employees Association, vs. CIR, G. R.
No. L-39154, Sept. 9, 1982; 116 SCRA 459). chanrobles virtual law library

12.  The act of the purchasers of a business establishment in

replacing the union members who were negotiating a CBA with the
old owner at the time of the sale. (National Labor Union vs. CIR, G.
R. No. L-31276, Sept. 9, 1982). chanrobles virtual law library

13.  The announcement by the employer of benefits prior to the

conduct of a certification election, intended to induce the employees
to vote against the union. (Re Louisiana Plastics, Inc. 173 NLRB No.
218; NLRB vs. Exchange Parts Co., 375 U. S. 405).

14.  The grant of concessions and privileges during the pendency of

certification election case to members of one of the unions
participating therein. (Philippine Charity Sweepstakes Office, vs. The
Association of Sweepstakes Staff Personnel, G. R. No. L-27546, July
16, 1982).

15.  The act of the employer in suspending union officers who

attended the hearing in the petition for certification election they
filed. (CLLC E. G. Gochangco Workers Union, vs. NLRC, G. R. Nos.
67158-62, May 30, 1988).

16.  The uneven application by the employer of the company’s

marketing plan which caused undue hardship to the president and
vice president of the union. (AHS/Philippine Employees Union vs.
NLRC, G. R. No. 73721, March 30, 1987).

17. The act of the employer in ceasing its operation due to

establishment of the union. The determination to cease operations is
a prerogative of management that is usually not interfered with by
the State as no business can be required to continue operating at a
loss simply to maintain the workers in employment.  That would be
taking of property without due process of law which the employer
has a right to resist.  But where it is manifest that the closure is
motivated not by a desire to avoid further losses but to discourage
the workers from organizing themselves into a union for more
effective negotiations with the management, the State is bound to
intervene. (Carmelcraft Corporation vs. NLRC, G. R. Nos. 90634-35,
June 6, 1990; Sy Chie Junk Shop vs. Federacion Obrero de la
Industria, G. R. No. 30964, May 9, 1988).  chanrobles virtual law library

18.  Simulated sale in bad faith of business, resorted to merely to

get rid of the employees who were members of the union. (Moncada
Bijon Factory vs. CIR, 4 SCRA 756; Cruz vs. PAFLU, 42 SCRA 68;
National Labor Union vs. CIR, 116 SCRA 417). chanrobles virtual law library

19.  The act of the employer in engaging in capital reduction to

camouflage the fact that it had been making profit, in order for it to
be able to effectuate the mass lay-off of union members. (Madrigal &
Co., Inc. vs. Zamora, G. R. No. L-48237, June 30, 1987, 151 SCRA
355).

20. The retrenchment of employees who belong to a particular union,

with no satisfactory justification why said employees were singled
out. (Bataan Shipyard and Engineering Co., Inc.,  vs. NLRC, G. R.
No. 78604, May 9, 1988).

21. The act of the employer in asking the employees to disclose the
names of the members of the union. (Samahan ng Manggagawa sa
Bandolino-LMLC vs. NLRC, 275 SCRA 633 [July 17, 1997]).  chanrobles virtual
law library

22.  The act of the employer in putting on “rotation” only the alleged
members of the union. (Samahan ng Manggagawa sa Bandolino-
LMLC vs. NLRC, 275 SCRA 633 [July 17, 1997]). chanrobles virtual law library

23. The act of the employer in compelling employees to sign an

instrument indicating that the employer observed labor standards
provisions of law when he might have not, together with the act of
terminating or coercing those who refuse to cooperate with the
employer’s scheme. (Mabeza vs. NLRC G. R. No. 118506, April 18,
1997, 271 SCRA 670).

24.  An apprehension that there might be a future strike in the

school is not a ground for dismissal of teachers who have attained
permanent status. This is an unwarranted interference with the
rights of workers to self-organization and to engage in concerted
activities. While a strike may result in hardships or prejudice to the
school and the studentry, the employer is not without recourse. If
the employer feels that the action is tainted with illegality, the law
provides the employer with ample remedies to protect his interest. 
Dismissal of employees in anticipation of an exercise of a
constitutionally protected right is not one of them.  (Rizal Memorial
Colleges Faculty Union vs. NLRC, G. R. No. 59012-13, Oct. 12,
1989).

25. To justify the closure of a business and the termination of the

services of the concerned employees, the law requires the employer
to prove that it suffered substantial actual losses.  The cessation of a
company’s operations shortly after the organization of a  labor 
union,  as well as the resumption of business barely a month after,
gives credence to the employees’ claim that the closure was meant
to discourage union membership and to interfere in union activities. 
These acts constitute unfair labor practices. The reason invoked by
petitioners to justify the cessation of corporate operations was
alleged business losses which they, however, failed to substantiate
by any credible evidence. (Me-Shurn Corporation vs. Me-Shurn
Workers Union – FSM, G. R. No. 156292, Jan. 11, 2005).

26. The act of the employer in dismissing its employees because of

their union activities. (Litex Employees Association, vs. CIR, G. R.
No. L-39154, Sept. 9, 1982, 116 SCRA 459; Union of Supervisors [R.
B.] NATU vs. Secretary of Labor and Republic Bank, G. R. No. L-
39889, Nov. 12, 1981).

27. The act of the employer in dismissing the union officers and
members on the ground of losses about two years after it has
allegedly sustained losses and after the dismissed officers and
members became more militant when they demanded for the
improvement of their working conditions in the company.  (Oceanic
Air Products, Inc. vs. CIR, G. R. No. L-18704, Jan. 31, 1963). chanrobles
virtual law library

28. The act of an employer in unduly dismissing workers based on

union security clause in the CBA. (San Carlos Milling Co., vs. CIR, 1
SCRA 734; Rance vs. NLRC, G. R. No. 68147, June 30, 1988).

29. The act of the employer in effecting discriminatory dismissal

where only unionists were permanently dismissed. This holds true
even where business conditions justify a lay-off of employees. (San
Miguel Corporation vs. NLRC, G. R. No. 108001, March 15, 1996, 255
SCRA 133, 141; See also Bataan Shipyard and Engineering Co., Inc.
vs. NLRC, 161 SCRA 271 [1988]).

30. The mass lay-off or dismissal of 65 employees due to

retrenchment absent any losses or financial reverses. Retrenchment
would constitute a lame excuse and a veritable smokescreen of the
employer’s scheme to bust the union and thus unduly disturb the
employment tenure of the employees concerned, which act is
 certainly an unfair labor practice. (People’s Bank and Trust Co. vs.
People’s Bank and Trust Co. Employees Union, G. R. No. L-39603,
Jan. 13, 1976).

31. Dismissal occasioned by the refusal of employees to give up their

union membership, which dismissal was under the pretext of
retrenchment due to reduced dollar allocations. (Manila Pencil Co. vs.
CIR, 14 SCRA 953).

32. Dismissal of an employee because of his act of soliciting

signatures for the purpose of forming a union. (Judric Canning
Corporation vs. Inciong, G. R. No. L-51494, Aug. 19, 1982, 115
SCRA 887.

33. Dismissal of employees because of their refusal to resign from

their union and to join the union favorable to the employer, the
latter’s formation having been aided and abetted by the company.
(Progressive Development Corporation, vs. CIR, G. R. No. L-39546,
Nov. 24, 1977, 80 SCRA 434).

34. Dismissal of employees because of their act of engaging in valid

and legal concerted union activities. (Republic Savings Bank vs. CIR,
21 SCRA 226).

35. The act of the employer in provoking the union officers into a
fight by two recently hired employees pursuant to a strategy of the
company designed to provide an apparently lawful cause for their
dismissal, and said dismissed employees have not figured in similar
incidents before or violated company rules in their many years with
the company. (Visayan Bicycle Manufacturing Co., Inc. vs. National
Labor Union and CIR, G. R. No. L-19997, May 19, 1965, 14 SCRA 5).

36. Dismissal occasioned by the implausible and unproved allegation

of overpricing of needles the employee was ordered to buy and for
alleged tampering of receipts. (Kapisanan ng Manggagawa sa
Camara Shoes vs. Camara Shoes, G. R. No. L-50985, Jan. 30, 1982).
chanrobles virtual law library

37. Dismissal of an employee who had worked for 19 years because

he had filed money claims against the employer. (Sibal vs. Notre
Dame of Greater Manila, G. R. No. 75093, Feb. 23, 1990). chanrobles virtual
law library

ILLUSTRATIVE CASES WHERE UNION WAS DECLARED GUILTY OF

UNFAIR LABOR PRACTICE. chanrobles virtual law library

In the case of Rizal Labor Union vs. Rizal Cement Co., [G. R. No. L-19779,
July 30, 1966], both the union and management were declared guilty of
unfair labor practice when the union requested the dismissal of fifteen
(15) employees and management acceded by effecting the dismissal on
the ground that the said employees formed another union, it appearing
that the union security clause in the CBA merely provided for a limited
closed shop which did not justify the dismissal. chanrobles virtual law library

In Salunga vs. CIR, [G. R. No. L-22456, Sept. 27, 1967], where the union
member resigned from the union but, upon being advised by the company
of the consequence of his resignation which is dismissal from the
company, the said union member withdrew or revoked his resignation but
the union refused to readmit him, the Supreme Court ruled that it is well-
settled that unions are not entitled to arbitrarily exclude qualified
applicants for membership and a closed shop provision would not justify
the employer in discharging, or a union in insisting upon the discharge of,
an employee whom the union thus refuses to admit to membership,
without any reasonable ground therefor.  Needless to say, if said unions
may be compelled to admit new members who have the requisite
qualifications, with more reason may the law and the courts exercise the
coercive power when the employee involved is a long-standing union
member who, owing to provocations of union officers, was impelled to
tender his resignation, which he forthwith withdrew or revoked.  Surely,
he may, at least, invoke the rights of those who seek admission for the
first time, and cannot arbitrarily be denied readmission.  The union here
was declared to have committed unfair labor practice but the company
was spared from any liability. Nonetheless, the dismissed employee was
ordered reinstated to his former or substantially equivalent position in the
company, without prejudice to his seniority and/or rights and privileges,
and with back pay which should be borne exclusively by the union. 

In Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills, Inc., [G. R.
No. L-22987, Sept. 4, 1975], the Supreme Court adjudged both the
mother federation and the employer accountable for the dismissal of
workers who instigated the disaffiliation of the local union from the
federation. The right to disaffiliate is inherent in the contract and the act
of disaffiliation was justified by the alleged negligence of the federation in
attending to the needs of the local union.

In Manila Mandarin Employees Union vs. NLRC, [154 SCRA 369], the
union was held guilty of unfair labor practice when it expelled and
demanded and caused the dismissal of a union member based on the
union security clause in the CBA.  The Supreme Court ruled that union
security clauses are governed by law and by principles of justice, fair play
and legality. Union security clauses cannot be used  by union officials
against an employer, much less their own members, except with a high
sense of responsibility, fairness, prudence and judiciousness.  A union
member may not be expelled from her union, and consequently from her
job, for personal or impetuous reasons or for causes foreign to the closed
shop agreement and in a manner characterized by arbitrariness and
whimsicality. 

In Rance vs. NLRC, [G. R. No. 68147, June 30, 1988], it was held that the
act of some union members of seeking help from another federation
cannot constitute disloyalty as contemplated in the CBA.  At most, it was
an act of self-preservation of workers who, driven to desperation, found
shelter in the other federation who took the cudgels for them. The
dismissed union members were denied due process when they were
dismissed for disloyalty to the union based on the union security clause in
the CBA. There was no impartial tribunal or body vested with authority to
conduct disciplinary proceeding under the constitution and by-laws and
the expelled union members were not furnished notice of the charge
against them, nor timely notices of the hearing on the same. Petitioners
had no idea that they were charged with disloyalty. Those who came were
not only threatened with persecution but also made to write the answers
to questions as dictated to them by the union and the company
representatives. 

Even if the petitioners appeared in the supposed investigation

proceedings to answer the charge of disloyalty against them, it could not
have altered the fact that the proceedings violated the rule of fair play.
The Board of Directors of the union acted as prosecutor, investigator and
judge at the same time. The proceedings would have been a farce. The
absence of a full blown investigation of the expelled members of the union
by an impartial body, provided no basis for the union’s accusation of
disloyalty.  Employees are entitled to due process before they may be
expelled from the union on charge of disloyalty.  They are entitled to
reinstatement to their positions without reduction in rank, payment of
three-year backwages and payment of exemplary damages. chanrobles virtual law
library

Consequently, it was declared by the High Court that the scandalous

haste with which respondent corporation dismissed 125 employees lent
credence to the claim that there was connivance between respondent
corporation and respondent union. It is evident that private respondents
were in bad faith in dismissing petitioners.  They, the private
respondents, are guilty of unfair labor practice. chanrobles virtual law library

CASES NOT INVOLVING UNFAIR LABOR PRACTICES.

The following cases do not involve unfair labor practice:

1.  The grant of profit-sharing benefits to managers, supervisors and

all rank-and-file employees not covered by the CBA is not
discriminatory but a valid exercise of management prerogative.
Management has the prerogative to regulate, according to its
discretion and judgment, all aspects of employment. Such
management prerogative may be availed of without fear of any
liability so long as it is exercised in good faith for the advancement of
the employer’s interest and not for the purpose of defeating or
circumventing the rights of employees under special laws or valid
agreement and is not exercised in a malicious, harsh, oppressive,
vindictive or wanton manner or out of malice or spite. (Wise and Co.,
Inc. vs. Wise and Co., Inc. Employees Union, G. R. No. 87677, Oct.
13, 1989).

2.  In the absence of a showing that the illegal dismissal was dictated
by anti-union motives, it does not constitute an unfair labor practice
that would justify the staging of a strike.  The remedy is an action
for reinstatement with prayer for backwages and damages.
(AHS/Philippine Employees Union vs. NLRC, G. R. No. 73721, March
30, 1987).

3.  The transfer of employees is a prerogative of management such

as in one case where the employee who was transferred to a lower
position, retained his original rank and salary.  In the absence of any
evidence which directly reflects interference by the company with the
employee’s right to self-organization, the transfer of the employee
should be considered legal. (Rubberworld [Phils.], Inc. vs. NLRC, G.
R. No. 75704, July 19, 1989).

4. The promotion of employees to managerial positions is a

prerogative of management. A promotion which is manifestly
beneficial to an employee should not give rise to a gratuitous
speculation that such a promotion was made simply to deprive the
union of the membership of the promoted employee.  (Bulletin
Publishing Co. vs. Sanchez, G. R. No. 74425, Oct. 7, 1986).

5.  Mandatory or forced vacation leaves imposed by the employer

due to economic crisis and not in a malicious, harsh, oppressive,
vindictive nor wanton manner, where the workers were paid while on
leave but the same was charged against their respective earned
leaves, is not an unfair labor practice act. It is a valid exercise of
management prerogative.  (Philippine Graphic Arts, Inc. vs. NLRC,
166 SCRA 118).

6.  The dismissal of an employee due to loss of confidence is not

unfair labor practice. (Nevans vs. CIR, G. R. No. L-21510, June 29,
1968).

7.  The dismissal of an employee cannot be considered an unfair

labor practice act if it appears that other employees more active than
him in the union were retained. (National Union of Restaurant
Workers [PTUC] vs. CIR, G. R. No. L-20044, April 30, 1964).
8.  The act of the employer in refusing to re-admit striking workers
after the strike was declared illegal, is not an unfair labor practice
act. (GOP-OCP Workers Union vs. CIR, G. R. No. L-33015, Sept. 10,
1979).

9.  Dismissal of workers pursuant to the union security clause in the

CBA, after affording them due process, is not unfair labor practice.
(Samahan ng mga Manggagawa sa M. Greenfield (MSMG-UWP) vs.
Ramos, G. R. No. 113907, Feb. 28, 2000; Malayang Manggagawa vs.
Ang Tibay, 102 Phil. 669; Bacolod-Murcia Milling vs. Victorias-
Manapla Workers, 9 SCRA 154).

10. The failure of the employer to comply with the final order of
reinstatement cannot be considered unfair labor practice in the light
of a government directive which rendered reinstatement an
impossibility. (Arrastre Security Association vs. Ople, 127 SCRA
580). chanrobles virtual law library

11.  An error in the interpretation of a provision of the CBA, absent

any malice or bad faith, is not unfair labor practice.  Honest
differences in construction may arise in the actual application of
contractual provisions.  (Singapore Airlines Local Employees
Association vs. NLRC, 130 SCRA 472).

12. Dismissal of a supervisor who organized a labor union composed

of men under his supervision is not unfair labor practice.  (Fortich vs.
CIR, 93 SCRA 1).

13.  Failure to re-admit striking workers at the same time is not

unfair labor practice as there exist justifiable reasons not to effect
their simultaneous readmission. As a consequence of the two strikes
which were both attended by widespread violence and vandalism,
the business of the employer was completely paralyzed. There were
machines that were not in operating conditions because of long
disuse during the strikes. (Lakas ng Manggagawang Makabayan vs. 
Marcelo Enterprises, G. R. No. 38258, Nov. 12, 1982, 118 SCRA
422).chanrobles virtual law library

14.  The decision of the employer to consider the top officers of

petitioner union as unfit for reinstatement is not essentially
discriminatory and constitutive of an unlawful labor practice of
employers under Article 248 of the Labor Code. Discrimination in the
context of the Labor Code involves either encouraging membership
in any labor organization or is made on account of the employee’s
having given or being about to give testimony under the Labor Code.
There is no ULP if this is not proven by evidence. (Great Pacific Life
Employees Union vs. Great Pacific Life Assurance Corporation, G. R.
No. 126717, Feb. 11, 1999). chanrobles virtual law library
 15.  The refusal of a shipping agency to hire and employ security
guards affiliated with a security agency which does not post a bond is
not unfair labor practice. Such refusal is legitimate exercise of the
right to protect its own interests.  (Associated Watchmen and
Security Union vs. Lanting, 107 Phil. 275).

16. In a case involving the mass “protest retirement/resignation” of

pilots, the Supreme Court ruled that such is not a concerted activity
which is within the protection of the law as they did not assume the
status of strikers. No unfair labor practice is committed by their
employer when it accepted their said retirement/resignation from the
company. It cannot be said that they were dismissed. (Enriquez vs.
Zamora, G. R. No. 51382, Dec. 29, 1986).

17.  The act of the employer in filing a petition for cancellation of the
union’s registration is not per se an act of unfair labor practice. It
must be shown by substantial evidence that the filing of the petition
for cancellation of union registration by the employer was aimed to
oppress the union. (Rural Bank of Alaminos Employees Union
[RBAEU] vs. NLRC, G. R. Nos. 100342-44, Oct. 29, 1999).

60.  What are the latest cases involving the issue of ULP?

Interference in the choice of union’s bargaining panel.

In the case of Standard Chartered Bank Employees Union [NUBE] vs.

Confesor, [G. R. No. 114974, June 16, 2004], it was declared that if an
employer interferes in the selection of the union’s negotiators or coerces
the union to exclude from its panel of negotiators a representative of the
union, and if it can be inferred that the employer adopted the said act to
yield adverse effects on the free exercise to right to self-organization or
on the right to collective bargaining of the employees, ULP under Article
248(a) in connection with Article 243 of the Labor Code is committed.
However, in this case, the act of the bank’s Human Resource Manager in
suggesting the exclusion of the federation president from the negotiating
panel was not considered ULP.  It is not an anti-union conduct from which
it can be inferred that the bank consciously adopted such act to yield
adverse effects on the free exercise of the right to self-organization and
collective bargaining of the employees, especially considering that such
was undertaken previous to the commencement of the negotiation and
simultaneously with the manager’s suggestion that the bank lawyers be
excluded from its negotiating panel. The records show that after the
initiation of the collective bargaining process, with the inclusion of the
federation president in the union’s negotiating panel, the negotiations
pushed through. If at all, the suggestion should be construed as part of
the normal relations and innocent communications which are all part of
the friendly relations between the union and the bank. chanrobles virtual law library
Interference in the employees’ right to self-organization.

In General Milling Corporation vs. CA, [G. R. No. 146728, February 11,
2004], the Supreme Court considered the act of the employer in
presenting the letters between February to June 1993 by 13 union
members signifying their resignation from the union clearly indicative of
the employer’s pressure on its employees.  The records show that the
employer presented these letters to prove that the union no longer
enjoyed the support of the workers. The fact that the resignations of the
union members occurred during the pendency of the case before the
Labor Arbiter shows the employer’s desperate attempts to cast doubt on
the legitimate status of the union. The ill-timed letters of resignation from
the union members indicate that the employer had interfered with the
right of its employees to self-organization. Thus, it is guilty of unfair labor
practice for interfering with the right of its employees to self-organization.

In Hacienda Fatima vs. National Federation of Sugarcane Workers – Food

and General Trade, [G. R. No. 149440, January 28, 2003], the Supreme
Court upheld the factual findings of the NLRC and the Court of Appeals
that from the employer’s refusal to bargain to its acts of economic
inducements resulting in the promotion of those who withdrew from the
union, the use of armed guards to prevent the organizers to come in, and
the dismissal of union officials and members, one cannot but conclude
that the employer did not want a union in its hacienda - a clear
interference in the right of the workers to self-organization. Hence, the
employer is guilty of unfair labor practice. chanrobles virtual law library

In De Leon vs. NLRC and Fortune Tobacco Corporation, [G. R. No.

112661, May 30, 2001], the Supreme Court held that based on the facts,
there is sufficient ground to conclude that respondents were guilty of
interfering with the right of petitioners to self-organization which
constitutes unfair labor practice under Article 248 of the Labor Code.
Petitioner-security guards have been employed with Fortune Integrated
Services, Inc. (FISI) since the 1980’s and have since been posted at the
premises of Fortune Tobacco Corporation (FTC) - its main factory plant,
its tobacco redrying plant and warehouse.  It appears from the records
that FISI, while having its own corporate identity, was a mere
instrumentality of FTC, tasked to provide protection and security in the
company premises. The records show that the two corporations had
identical stockholders and the same business address. FISI also had no
other clients except FTC and other companies belonging to the Lucio Tan
group of companies.  Moreover, the early payslips of petitioners show that
their salaries were initially paid by FTC. To enforce their rightful benefits
under the laws on labor standards, petitioners formed a union which was
later certified as bargaining agent of all the security guards.  On February
1, 1991, the stockholders of FISI sold all their participations in the
corporation to a new set of stockholders which renamed the corporation
Magnum Integrated Services, Inc.  On October 15, 1991, FTC, without
any reason, preterminated its contract of security services with MISI and
contracted two other agencies to provide security services for its
premises.  This resulted in the displacement of petitioners. As MISI had
no other clients, it failed to give new assignments to petitioners. 
Petitioners have remained unemployed since then.  All these facts indicate
a concerted effort on the part of respondents to remove petitioners from
the company and thus abate the growth of the union and block its actions
to enforce their demands in accordance with the labor standards laws.

When termination of union president constitutes interference with

the employees’ right to self-organization.

The outright termination for alleged insubordination of the union

president, in the 2000 case of Colegio de San Juan de Letran vs.
Association of Employees and Faculty of Letran, [G. R. No. 141471,
September 18, 2000], while the CBA negotiation was on-going, was
declared as constitutive of union busting as it interfered with the
employees’ right to self-organization.  The factual backdrop of her
termination leads to no other conclusion that she was dismissed in order
to strip the union of a leader who would fight for the right of her co-
workers at the bargaining table. chanrobles virtual law library

Failure or refusal of management to give counter-proposal, effect.

In the 2004 case of General Milling Corporation vs. CA, [G. R. No.
146728, February 11, 2004], the Supreme Court declared that the
petitioner is guilty of unfair labor practice under Article 248 [g] for
refusing to send a counter-proposal to the union and to bargain anew on
the economic terms of the CBA. It ruled: 

“The law mandates that the representation provision of a CBA should

last for five years.  The relation between labor and management
should be undisturbed until the last 60 days of the fifth year. Hence,
it is indisputable that when the union requested for a renegotiation of
the economic terms of the CBA on November 29, 1991, it was still
the certified collective bargaining agent of the workers, because it
was seeking said renegotiation within five (5) years from the date of
effectivity of the CBA on December 1, 1988. The union’s proposal
was also submitted within the prescribed 3-year period from the date
of effectivity of the CBA, albeit just before the last day of said
period.  It was obvious that GMC had no valid reason to refuse to
negotiate in good faith with the union.  For refusing to send a
counter-proposal to the union and to bargain anew on the economic
terms of the CBA, the company committed an unfair labor practice
under Article 248 of the Labor Code.” chanrobles virtual law library
 “Similarly, in the earlier 2000 case of Colegio de San Juan de Letran
vs. Association of Employees and Faculty of Letran, [G. R. No.
141471, September 18, 2000], the petitioner school was declared
guilty of unfair labor practice when it failed to make a timely reply to
the proposals of the union more than a month after the same were
submitted by the union. In explaining its failure to reply, the school
merely offered the feeble excuse that its Board of Trustees had not
yet convened to discuss the matter.  Clearly, its actuation showed a
lack of sincere desire to negotiate rendering it guilty of unfair labor
practice.

“Surface bargaining” on the part of management.

“Surface bargaining” is defined as “going through the motions of

negotiating” without any legal intent to reach an agreement.
(Standard Chartered Bank Employees Union [NUBE] vs. Confesor, G.
R. No. 114974, June 16, 2004). 

The resolution of surface bargaining allegations never presents an easy

issue. The determination of whether a party has engaged in unlawful
surface bargaining is usually a difficult one because it involves, at bottom,
a question of the intent of the party in question, and usually such intent
can only be inferred from the totality of the challenged party’s conduct
both at and away from the bargaining table. (Luck Limousine, 312 NLRB
770, 789 [1993]). chanrobles virtual law library

According to Standard Chartered Bank Employees Union [NUBE] vs.

Confesor, [G. R. No. 114974, June 16, 2004], surface bargaining involves
the question of whether an employer’s conduct demonstrates an
unwillingness to bargain in good faith or is merely hard bargaining. There
can be no surface bargaining, absent any evidence that management had
done acts, both at and away from the bargaining table, which tend to
show that it did not want to reach an agreement with the union or to
settle the differences between it and the union.  Here, admittedly, the
parties were not able to agree and reached a deadlock.  However, it must
be emphasized that the duty to bargain “does not compel either party to
agree to a proposal or require the making of a concession.” Hence, the
parties’ failure to agree does not amount to ULP under Article 248 [g] for
violation of the duty to bargain. (See also National Union of Restaurant
Workers [PTUC] vs. CIR, 10 SCRA 843 [1964]). chanrobles virtual law library

“Blue-sky bargaining” on the part of union.

“Blue-sky bargaining” means making exaggerated or unreasonable

proposals. (Arthur A. Sloane and Fred Witney, Labor Relations, 7th
Edition 1991, p. 195). chanrobles virtual law library
In order to be considered as unfair labor practice, there must be proof
that the demands made by the union were exaggerated or unreasonable. 
In the same 2004 case of Standard Chartered Bank [supra], the minutes
of the meeting show that the union based its economic proposals on data
of rank-and-file employees and the prevailing economic benefits received
by bank employees from other foreign banks doing business in the
Philippines and other branches of the bank in the Asian region. Hence, it
cannot be said that the union was guilty of ULP for blue-sky bargaining.

Refusal to furnish financial information is ULP; exception.

While the refusal to furnish requested information is in itself an unfair

labor practice and also supports the inference of surface bargaining,
however, if the union failed to put its request in writing as required in
Article 242 [c] of the Labor Code, management cannot be held liable for
ULP. (Standard Chartered Bank Employees Union [NUBE] vs. Confesor,
supra).

Signing of CBA does not estop a party from raising issue of ULP.

The eventual signing of the CBA does not operate to estop the parties
from raising ULP charges against each other. Consequently, as held by
the High Court in Standard Chartered Bank [supra], the approval of the
CBA and the release of signing bonus do not necessarily mean that the
union waived its ULP claim against the management during the past
negotiations.  After all, the conclusion of the CBA was included in the
order of the Secretary of Labor and Employment, while the signing bonus
was included in the CBA itself.

61.  Who has the burden of proof in ULP cases?

In unfair labor practice cases, it is the union which has the burden of
proof to present substantial evidence to support its allegations of unfair
labor practices committed by the employer. It is not enough that the
union believed that the employer committed acts of unfair labor practice
when the circumstances clearly negate even a prima facie showing to
warrant such a belief. (Tiu vs. NLRC,  G. R. No. 123276, Aug. 18, 1997, 
277 SCRA 680, 687; See also Schering Employees Labor Union [SELU] vs.
Schering Plough Corporation, G. R. No. 142506, Feb. 17, 2005;
Samahang Manggagawa sa Sulpicio Lines, Inc. -NAFLU vs. Sulpicio Lines,
Inc., G.R. No. 140992, March 25, 2004).

LABOR ORGANIZATIONS COVERAGE OF RIGHT TO SELF-

ORGANIZATION

62.  Who may exercise the right to self-organization?

All persons employed in commercial, industrial and agricultural
enterprises and in religious, charitable, medical, or educational
institutions, whether operating for profit or not, shall have the right to
self-organization and to form, join, or assist labor organizations of their
own choosing for purposes of collective bargaining.  Ambulant,
intermittent and itinerant workers, self-employed people, rural workers
and those without any definite employers may form labor organizations
for their mutual aid and protection. chanrobles virtual law library

Any employee, whether employed for a definite period or not, shall

beginning on the first day of his/her service, be eligible for membership in
any labor organization. (Ibid.; See also Article 277 [c], Labor Code; No.
10, Basic Amendments under R. A. 6715, prepared by Members of the
Senate-House Conference Committee of Congress). chanrobles virtual law library

63.  May employees in the public service exercise their right to

self-organize?

Employees of government corporations established under the Corporation

Code (without original charters) shall have the right to organize and to
bargain collectively with their respective employers. All other employees
in the civil service shall have the right to form associations for purposes
not contrary to law.

64.  May aliens exercise the right to self-organization?

General rule:  All aliens, natural or juridical, as well as foreign

organizations are strictly prohibited from engaging directly or indirectly in
all forms of trade union activities without prejudice to normal contacts
between Philippine labor unions and recognized international labor
centers.  Exception: Alien employees with valid working permits issued by
the DOLE may exercise the right to self-organization and join or assist
labor organizations for purposes of collective bargaining, if they are
nationals of a country which grants the same or similar rights to Filipino
workers, as certified by the Department of Foreign Affairs.

65.  What are the three categories of employees?

a.  Managerial employees;

b.  Supervisory employees; and

c.  Rank-and-file employees.

66.  What are the three types of managerial employees?

The three (3) types of managerial employees are as follows:

1.Top management;

2.Middle management; and

3.First-line management.

(See United Pepsi0Cola Supervisors Union vs. Laguesma, 288

SCRA 15 and Paper Industries Corp. of the Philippines vs.
Laguesma, G. R. No. 101738, April 12, 2000)

67.  Are managerial employees allowed to unionize?  How about

supervisory employees?

As a general rule, only top and middle managers are not allowed to join
any labor organization. First-line managers (or supervisory employees)
are allowed to join a supervisory union but not the union of rank-and-file
employees or vice-versa.  In fact, the law does not allow mixed
membership of both supervisory and rank-and-file employees in one
union.  A union with such mixed membership is no union at all.  It cannot
exercise the rights of a legitimate labor organization.

68. What is the distinction between managerial employees and

supervisory employees?

The principal distinction between managerial employees and supervisory

employees is: the former have the power to decide and do managerial
acts; while the latter have the power only to recommend managerial acts
such as laying down policy, hiring or dismissal of employees and the like.
chanrobles virtual law library

69.  What is the “separation of unions” doctrine?

The “separation of unions” doctrine simply means that the affiliation of

both the rank-and-file union and supervisory union in the same company
with one and the same federation is not allowed if the rank-and-file
employees are under the direct supervision of the supervisors composing
the supervisory union.  If not, said affiliation with one and the same
federation is allowed. chanrobles virtual law library

70.  What is the “confidential employee” doctrine?

Under the “confidential employee rule”, confidential employees are not

allowed to join any union (as they are treated like managers) when they:
(1) assist or act in a confidential capacity, (2) to persons who formulate,
determine, and effectuate management policies specifically in the field of
labor relations.  Otherwise, if these two conditions do not concur, they
can join a union.  Simply put, if the confidential information to which an
employee has access has nothing to do with labor relations, such
employee cannot be considered a confidential employee under this rule.

LABOR ORGANIZATIONS

71.  What is a labor organization?

A labor organization is any union or association of employees which exists

in whole or in part for the purpose of collective bargaining or for dealing
with employers concerning terms and conditions of employment. It is
considered "legitimate" if duly registered with DOLE.

72.  What is the significance of issuance of Certificate of

Registration to a union?

In Tagaytay Highlands International Golf Club, Inc. vs. Tagaytay

Highlands Employees Union-PGTWO (G. R. No. 142000, January 22,
2003), the Supreme Court ruled that the effect of issuance of certificate
of registration to a union is that it becomes legitimate and its legal
personality can only be attacked through a petition for cancellation of
registration and not thru intervention in a certification election petition.

73.  What is a workers’ association?

A workers' association is any association of workers organized for the

mutual aid and protection of its members or for any legitimate purpose
other than collective bargaining.  Registration with DOLE makes it
legitimate. 

74.  What is the distinction between a labor organization and a

workers’ association?

A labor organization is established principally for collective bargaining

purposes; while a  workers' association is organized for the mutual aid
and protection of its members but not for collective bargaining purposes.

75.  What are the purposes of a labor organization?

(1)  Collective bargaining; and

(2) Dealing with employers regarding the terms and conditions of the
employment relationship..

76.  How is a labor organization registered?

The application for registration must be supported by at least 20% of the

members of the bargaining unit. 
77.  What is a bargaining unit?

A "bargaining unit" is the group or cluster of jobs or positions that

supports the labor organization which is applying for registration, within
the employer’s establishment. chanrobles virtual law library

CHARTERING AND AFFILIATION

78. What is a national union or federation?

“National Union” or “Federation” refers to a group of legitimate labor

unions in a private establishment organized for collective bargaining or for
dealing with employers concerning terms and conditions of employment
for their member-unions or for participating in the formulation of social
and employment policies, standards and programs, registered with the
Bureau of Labor Relations.

79. What is an affiliate?

 “Affiliate” refers to:

1. an independent union affiliated with a federation, national union;

or

2. a local chapter which was subsequently granted independent

registration but did not disaffiliate from its federation. chanrobles virtual law library

80. What is a chartered local?

“Chartered Local” refers to a labor organization in the private sector

operating at the enterprise level that acquired legal personality through
the issuance of a charter certificate by a federation or a national union. 
Under the old rule, this is known simply as “local” or “chapter.” 

81. What is an independent union?

“Independent Union” refers to a labor organization operating at the

enterprise level that acquired legal personality through independent
registration under Article 234 of the Labor Code.

82. Are local chapters required to acquire independent

registration in order to have legal personality?

In Laguna Autoparts Manufacturing Corporation vs. Office of the

Secretary, DOLE, [G. R. No. 157146, April 29, 2005], it was held that a
local or chapter need not be independently registered to acquire legal
personality.
Under Article 234-A of the Labor Code, as amended by R. A. No. 9481
[June 14, 2008], it is provided, thus:

ART. 234-A. Chartering and Creation of a Local Chapter. - A duly

registered federation or national union may directly create a local
chapter by issuing a charter certificate indicating the establishment
of the local chapter. The chapter shall acquire legal personality only
for purposes of filing a petition for certification election from the date
it was issued a charter certificate.

The chapter shall be entitled to all other rights and privileges of a

legitimate labor organization only upon the submission of the following
documents in addition to its charter certificate:

(a) The names of the chapter’s officers, their addresses, and the
principal office of the chapter; and

(b) The chapter’s constitution and by-laws: Provided, That where the
chapter’s constitution and by-laws are the same as that of the
federation or the national union, this fact shall be indicated
accordingly.

The additional supporting requirements shall be certified under oath by

the secretary or treasurer of the chapter and attested by its president.

83.  What is the proof of affiliation with a federation?

The proof of affiliation depends on the nature of the affiliation.  Thus, if:

1.  Local chapter. - Charter certificate issued by the federation or

national union. chanrobles virtual law library

2.  Independently-registered union. - contract of affiliation between

federation and the union. chanrobles virtual law library

84.  What is the effect of affiliation?

A labor union which affiliates with a federation or national union becomes

subject to the rules and regulations of the latter.  The federation is the
principal and the local union, the agent.

An independently-registered union does not lose its independent legal

personality when it affiliates with a federation or national union. 
Appending the name of the federation to the local union's name does not
mean that the federation absorbed the latter.

85.  Which one is liable for damages in case of illegal strike – the
local union or federation?
In Filipino Pipe and Foundry Corporation vs. NLRC, (G. R. No. 115180,
November 16, 1999), it was held that it is the local union and not the
federation which is liable to pay damages in case of illegal strike.

86.  What is disaffiliation?

The right to disaffiliate by the local union from its mother union or
federation, is a constitutionally-guaranteed right which may be invoked by
the former at any time.   It is not an act of disloyalty on the part of the
local union nor is it a violation of the “union security clause” in the CBA.

In the absence of specific provisions in the federation’s constitution

prohibiting disaffiliation or the declaration of autonomy of a local union, a
local may dissociate with its parent union. Thus, in one case, it was held
that there can be no disloyalty to speak of since there is no provision in
the federation’s constitution which specifically prohibits disaffiliation or
declaration of autonomy.

The local union, by disaffiliating from the old federation to join a new
federation, is merely exercising its primary right to labor organization for
the effective enhancement and protection of common interests. Absent
any enforceable provisions in the federation’s constitution expressly
forbidding disaffiliation of a local union, a local union may sever its
relationship with its parent union.

Once the fact of disaffiliation has been manifested beyond doubt, a

certification election is the most expeditious way of determining which
labor organization is to be treated as the exclusive bargaining agent.

Disaffiliation should always carry the will of the majority.  It cannot be

effected by a mere minority group of union members.  (Villar vs. Inciong,
121 SCRA 444).

The obligation to check-off federation dues is terminated with the valid

disaffiliation of the local union from the federation with which it was
previously affiliated. 

It was held in Philippine Skylanders, Inc. vs. NLRC, (G. R. No. 127374,
January 31, 2002), that the right of a local union to disaffiliate from its
mother federation is not a novel thesis unillumined by case law. In the
landmark case of Liberty Cotton Mills Workers Union Vs. Liberty Cotton
Mills, Inc. [No. L-33987, September 4, 1975, 66 SCRA 512], the Supreme
Court upheld the right of local unions to separate from their mother
federation on the ground that as separate and voluntary associations,
local unions do not owe their creation and existence to the national
federation to which they are affiliated but, instead, to the will of their
members. The sole essence of affiliation is to increase, by collective
action, the common bargaining power of local unions for the effective
enhancement and protection of their interests. Admittedly, there are
times when without succor and support local unions may find it hard,
unaided by other support groups, to secure justice for themselves.

Yet the local unions remain the basic units of association, free to serve
their own interests subject to the restraints imposed by the constitution
and by-laws of the national federation, and free also to renounce the
affiliation upon the terms laid down in the agreement which brought such
affi1iation into existence.

Such dictum has been punctiliously followed since then.

Upon an application of the afore-cited principle to the issue at hand, the

impropriety of the questioned Decisions becomes clearly apparent. There
is nothing shown in the records nor is it claimed by AFLU that the local
union was expressly forbidden to disaffiliate from the federation nor were
there any conditions imposed for a valid breakaway. As such, the
pendency of an election protest involving both the mother federation and
the local union did not constitute a bar to a valid disaffiliation. Neither was
it disputed by PAFLU that 111 signatories out of the 120 members of the
local union, or an equivalent of 92.5% of the total union membership
supported the claim of disaffiliation and had in fact disauthorized PAFLU
from instituting any complaint in their behalf. Surely, this is not a case
where one (1) or two (2) members of the local union decided to
disaffiliate from the mother federation, but it is a case where almost all
loca1 union members decided to disaffiliate. chanrobles virtual law library

It was entirely reasonable then for PSI to enter into a collective

bargaining agreement with PSEA-NCW. As PSEA had validly severed itself
from PAFLU, there would be no restrictions which could validly hinder it
from subsequently affiliating with NCW and entering into a collective
bargaining agreement in behalf of its members.

87. Disaffiliation of independently-registered union and chartered

local, distinguished.

The disaffiliation of an independently-registered union does not affect its

legitimate status as a labor organization. However, the same thing may
not be said of a union which is not independently-registered (chartered
local). 

Once a chartered local disaffiliates from the federation, it ceases to be

entitled to the rights and privileges granted to a legitimate labor
organization.  It cannot file a petition for certification election.  (Villar vs.
Inciong, 121 SCRA 444, April 20, 1983).

88. Does the act of the union in disaffiliating and entering into a
CBA with the employer constitute unfair labor practice?
In Philippine Skylanders, Inc. vs. NLRC, [G. R. No. 127374, Jan. 31,
2002], the mother federation with which the local union was formerly
affiliated instituted a complaint for unfair labor practice against the
employer (which refused to negotiate a CBA with said federation because
the local union had already effectively and validly disaffiliated from it),
and the local union and their respective officers because of the act of the
local union in disaffiliating from the mother federation and in entering into
a CBA with the employer without its participation. The Supreme Court
ruled that there was no such unfair labor practice committed.  In the first
place, the complaint for unfair labor practice was instituted against the
wishes of workers who are members of the local union whose interests it
was supposedly protecting. In the second place, the disaffiliation was held
valid and, therefore, the federation ceases to have any personality to
represent the local union in the CBA negotiation.  The complaint for unfair
labor practice lodged by the federation against the employer, the local
union and their respective officers, having been filed by a party which has
no legal personality to institute the complaint, should have been
dismissed at the first instance for failure to state a cause of action.

As far as the employer is concerned, it is entirely reasonable for it to

enter into a CBA with the local union which is now affiliated with a new
federation. As the local union had validly severed itself from the old
federation, there would be no restrictions which could validly hinder it
from subsequently affiliating with the new federation and entering into a
CBA in behalf of its members.

89. Is disaffiliation a violation of union security clause?

In Tropical Hut Employees Union - CGW, vs. Tropical Hut Food Market,
Inc., [G. R. No. L-43495-99, Jan. 20, 1990], it was pronounced that the
union security clause in the CBA cannot be used to justify the dismissal of
the employees who voted for the disaffiliation of the local union from the
federation.  More so in a case where the CBA imposes dismissal only in
case employees are expelled from the union for their act of joining
another federation or for forming another union or if they failed or refused
to maintain membership therein.  However, in a situation where it does
not involve the withdrawal of merely some employees from the union but
the whole union itself withdraws from the federation with which it was
affiliated, there can be no violation of the union security clause in the
CBA, and consequently, there exists no sufficient basis to terminate the
employment of said employees. 

90.  What is cancellation proceedings against labor organization

or workers’ association?

“Cancellation Proceedings” refer to the legal process leading to the

revocation of the legitimate status of a union or workers’ association.
(Section 1 [g], Rule I, Book V, Rules to Implement the Labor Code, as
amended by Department Order No. 40-03, Series of 2003, [Feb. 17,
2003]). chanrobles virtual law library

Subject to the requirements of notice and due process, the registration of

any legitimate independent labor union, chartered local and workers'
association may be cancelled by the Regional Director, or in the case of
federations, national or industry unions and trade union centers, by the
Bureau Director, upon the filing of an independent complaint or petition
for cancellation. (Section 1, Rule XIV, Book V, Ibid.).

The cancellation of a certificate of registration is the equivalent of snuffing

out the life of a labor organization.  For without such registration, it loses
- as a rule - its rights under the Labor Code. The union is indisputably
entitled to be heard before a judgment could be rendered canceling its
certificate of registration.  In David vs. Aguilizan, [94 SCRA 707, 713-714
(December 14, 1979)], it was held that a decision rendered without any
hearing is null and void. (Alliance of Democratic Free Labor Organization
[ADFLO] vs. Laguesma, G. R. No. 108625, March 11, 1996).

91.  What is the effect of filing or pendency of a cancellation

proceeding?

The filing or initiation of a cancellation proceeding against a labor

organization does not have the effect of depriving it of the rights accorded
to a legitimate labor organization.  For as long as there is no final order of
cancellation, the labor organization whose registration is sought to be
cancelled shall continue to enjoy said rights.  The pendency alone of
cancellation proceedings does not affect the right of a labor organization
to sue.  (Itogon-Suyoc Mines vs. Sangilo-Itogon Workers Union, 24 SCRA
873). 

Such pendency cannot also bar the conduct of a certification election.

(Samahan ng Manggagawa sa Pacific Plastic vs. Laguesma, G. R. No.
111245, Jan. 31, 1997). chanrobles virtual law library

Under Article 238-A of the Labor Code, as amended by R. A. No. 9481

[June 14, 2007];, it is provided as follows:

ART. 238-A. Effect of a Petition for Cancellation of Registration. - A

petition for cancellation of union registration shall not suspend the
proceedings for certification election nor shall it prevent the filing of
a petition for certification election.

In case of cancellation, nothing herein shall restrict the right of the union
to seek just and equitable remedies in the appropriate courts.

92.  What is the effect of cancellation during the pendency of a

case?
In case cancellation of a union registration is made during the pendency
of a case, the labor organization whose registration is cancelled may still
continue to be a party to the case without necessity for substitution. 
Whatever decision, however, may be rendered therein shall only be
binding on those members of the union who have not signified their desire
to withdraw from the case before its trial and decision on the merits.
(Itogon-Suyoc Mines, Inc. vs. Sangilo-Itogon Workers Union, 24 SCRA
873). chanrobles virtual law library

The non-renewal of registration or permit does not result in the dismissal

of a case pending with the Department of Labor and Employment. The
reason is that, at the time of the filing of the case, it has juridical
personality and the respondent court had validly acquired jurisdiction over
the case. (Philippine Land-Air-Sea Labor Union [PLASLU], Inc. vs. CIR, 93
Phil. 47).

93.  May registration of a labor organization be cancelled due to

non-compliance with reportorial requirements?

Where a registered labor organization in the private sector failed to

submit the reports required under Rule V [Reporting Requirements of
Labor Unions and Workers’ Associations], Book V of the Rules to
Implement the Labor Code, as amended, for five (5) consecutive years
despite notices for compliance sent by the Labor Relations Division or the
Bureau of Labor Relations, the latter may cause the institution of the
administrative process for cancellation of its registration, upon its own
initiative or upon complaint filed by any party-in-interest. (Section 1, Rule
XV, Book V, Rules to Implement the Labor Code, as amended by
Department Order No. 40-03, Series of 2003, [Feb. 17, 2003]).

No registration of labor organization, however, shall be cancelled

administratively by the Bureau of Labor Relations due to non-compliance
with the reportorial requirements unless:

(a) non-compliance is for a continuous period of five (5) years;

(b) the procedures laid down in the Implementing Rules were

complied with; and

(c) the labor organization concerned has not responded to any of the
notices sent by the Bureau, or its notices were returned unclaimed.
(Section 5, Rule XV, Book V, Ibid.). chanrobles virtual law library

CERTIFICATION ELECTION & REPRESENTATION ISSUES

94.  What is meant by “sole and exclusive bargaining agent”?

The term “sole and exclusive bargaining agent” refers to any legitimate
labor organization duly recognized or certified as the sole and exclusive
bargaining agent of all the employees in a bargaining unit.

95.  Exclusive bargaining representative; how determined.

Four (4) ways of determining a bargaining agent:

1. voluntary recognition in cases where there is only one legitimate

labor organization operating within the bargaining unit; or

2.  certification election; or

3.  run-off election; or

4.  consent election.

96.  Definition of terms.

Voluntary recognition of union. - Voluntary recognition of bargaining

agent is the free and voluntary act of the employer of extending and
conferring full recognition to a union as the sole and exclusive bargaining
representative of the employees in an appropriate bargaining unit, for
purposes of collective bargaining.  This is allowed when there is only one
union operating in the bargaining unit. chanrobles virtual law library

Certification election. -  refers to the process of determining through

secret ballot the sole and exclusive bargaining representative of the
employees in an appropriate bargaining unit, for purposes of collective
bargaining. chanrobles virtual law library

Run-off election. - refers to an election between the labor unions receiving

the two (2) highest number of votes when a certification election which
provides for three (3) or more choices results in no choice receiving a
majority of the valid votes cast; provided, that the total number of votes
for all contending unions is at least fifty percent (50%) of the number of
votes cast.

Consent election. - refers to the election voluntarily agreed upon by the

parties, with or without the intervention of the Department of Labor and
Employment, to determine the issue of majority representation of all the
workers in the appropriate collective bargaining unit. chanrobles virtual law library

97.  What is the distinction between consent election and

certification election?

Consent election is a separate and distinct process and has nothing to do

with the import and effort of a certification election in the sense that the
purpose of the latter is to determine the sole and exclusive bargaining
agent of all the employees in the bargaining unit. 

98.  Is direct certification allowed?

Direct certification of union is not allowed.

99.  What is a bargaining unit?

A “bargaining unit” refers to a group of employees sharing mutual

interests within a given employer unit, comprised of all or less than all of
the entire body of employees in the employer unit or any specific
occupational or geographical grouping within such employer unit.

100.  Bargaining unit, how determined.

There are no specific criteria under the law but any of the following four
(4) modes may be used: chanrobles virtual law library

1.  Substantial mutual interests principle or community or mutuality

of interests rule. chanrobles virtual law library

2.  Globe doctrine [will of the employees].

3.  Collective bargaining history. 

4.   Employment status. 

SUBSTANTIAL MUTUAL INTERESTS RULE:

Under the substantial mutual interests rule, the employees sought to be

represented by the collective bargaining agent must have substantial
mutual interests in terms of employment and working conditions as
evinced by the type of work they perform. It is characterized by similarity
of employment status, same duties and responsibilities and substantially
similar compensation and working conditions. (San Miguel Corporation
Employees Union-PTGWO vs. Confesor, G. R. No. 111262, Sept. 19, 1996,
262 SCRA 81, 98). chanrobles virtual law library

Since it is impossible for all employees in one company to perform exactly

the same work, there should be a logical basis for the formation of the
bargaining unit.  Certainly, in one company, it is highly fragmentatious for
typists and clerks to organize one bargaining unit, janitors, another unit,
accountants, another unit, messengers, another unit, and so on.  There is
commonality of interest among them - which is the progress of their
company and their desire to share equitably in the profits or fruits of their
endeavors.  On the part of the company, they are all needed and
important for its continued existence and smooth operations. (Philtranco
Service Enterprises vs. Bureau of Labor Relations, G. R. No. 85343, June
28, 1989). chanrobles virtual law library

In the case of San Miguel Corporation vs. Laguesma, [G. R. No. 100485,
September 21, 1994], the Supreme Court applied this principle in a
petition of the union which seeks to represent the sales personnel in the
various Magnolia sales offices in Northern Luzon, contrary to the position
taken by the company that each sales office consists of one bargaining
unit.  Said the Court:  “What greatly militates against this position (of the
company) is the meager number of sales personnel in each of the
Magnolia sales office in Northern Luzon.  Even the bargaining unit sought
to be represented by respondent union in the entire North Luzon sales
area consists only of approximately fifty-five (55) employees.  Surely, it
would not be for the best interests of these employees if they would
further be fractionalized.  The adage ‘there is strength in number’ is the
very rationale underlying the formation of a labor union.”

In another case involving the same company, San Miguel Corporation

Supervisors and Exempt Employees Union vs. Laguesma, [G. R. No.
110399, August 15, 1997, 277 SCRA 370, 380-381], the fact that the
three plants comprising the bargaining unit are located in three different
places, namely, in Cabuyao, Laguna, in Otis, Pandacan, Metro Manila, and
in San Fernando, Pampanga was declared immaterial.  Geographical
location can be completely disregarded if the communal or mutual
interests of the employees are not sacrificed as demonstrated in
University of the Philippines vs. Ferrer-Calleja, [211 SCRA 451 (1992)],
where all non-academic rank-and-file employees of the University of the
Philippines in Diliman, Quezon City, Padre Faura, Manila, Los Banos,
Laguna and the Visayas were allowed to participate in a certification
election. The distance among the three plants is not productive of
insurmountable difficulties in the administration of union affairs. Neither
are there regional differences that are likely to impede the operations of a
single bargaining representative.

In Alhambra Cigar and Cigarette Manufacturing Co., vs. Alhambra

Employees Association-PAFLU, [G. R. No. L-13573, Feb. 20, 1969],
employees in the administrative, sales and dispensary departments
perform work which have nothing to do with production and maintenance,
hence, it was held that they can form their own bargaining unit separate
and distinct from those involved in the production and maintenance such
as those employed in the raw leaf, cigar, cigarette, packing, engineering
and maintenance departments.

But in the case of employees of two (2) companies, a different legal

principle applies.  Although the businesses of two companies are related
and the employees of one were originally the employees of the other, the
employees of both companies cannot be treated as one bargaining unit
because they are employed by two separate and distinct entities. 
(Diatagon Labor Federation Local 110 of the ULGWP vs. Ople, G. R. Nos.
L-44493-94, Dec. 3, 1980, 101 SCRA 534; Indophil Textile Mill Workers
Union-PTGWO vs. Calica, G. R. No. 96490, Feb. 3, 1992).

In a case involving a film outfit, LVN Pictures, Inc. vs. Philippine Musicians
Guild, [1 SCRA 132 (1961)], it was pronounced following the substantial
mutual interests test, that there is substantial difference between the
work performed by musicians and that of other persons who participate in
the production of a film which suffices to show that they constitute a
proper bargaining unit. 

In Cruzvale, Inc. vs. Laguesma, [G. R. No. 107610, Nov. 25, 1994], it
was ruled that there is no commonality of interest between the employees
in the garment factory and cinema business.  Thus, their separation into
two (2) distinct bargaining units was declared proper. 

Also, in Golden Farms, Inc. vs. The Honorable Secretary of Labor, [G. R.
No. 102130, July 26, 1994], the dissimilarity of interests between
monthly-paid and daily-paid workers - where the former primarily
perform administrative or clerical work; while the latter mainly work in
the cultivation of bananas in the field – was held proper basis for the
formation of a separate and distinct bargaining unit for the monthly-paid
rank-and-file employees. chanrobles virtual law library

In St. James School of Quezon City vs. Samahang Manggagawa sa St.

James School of Quezon City, [G.R. No. 151326, Nov. 23, 2005],
respondent union sought to represent the rank-and-file employees
(consisting of the motor pool, construction and transportation employees)
of petitioner-school’s Tandang Sora campus.  Petitioner-school opposed it
by contending that the bargaining unit should not only be composed of
said employees but must include administrative, teaching and office
personnel in its five (5) campuses..  The Supreme Court disagreed with
said contention.  The motor pool, construction and transportation
employees of the Tandang Sora campus had 149 qualified voters at the
time of the certification election, hence, it was ruled that the 149 qualified
voters should be used to determine the existence of a quorum during the
election. Since a majority or 84 out of the 149 qualified voters cast their
votes, a quorum existed during the certification election.  The
computation of the quorum should be based on the rank-and-file motor
pool, construction and transportation employees of the Tandang Sora
campus and not on all the employees in St. James’ five (5) campuses.
Moreover, the administrative, teaching and office personnel are not
members of the union.  They do not belong to the bargaining unit that the
union seeks to represent. 

GLOBE DOCTRINE:
The Globe doctrine [will of the employees] is was enunciated in the United
States case of Globe Machine and Stamping Co., [3 NLRB 294 (1937)]
where it was ruled, in defining the appropriate bargaining unit, that in a
case where the company’s production workers can be considered either as
a single bargaining unit appropriate for purposes of collective bargaining
or, as three (3) separate and distinct bargaining units, the determining
factor is the desire of the workers themselves.  Consequently, a
certification election should be held separately to choose which
representative union will be chosen by the workers. (See also Mechanical
Department Labor Union sa Philippine National Railways vs. CIR, G. R. No.
L-28223, Aug. 30, 1968).

In the case of International School Alliance of Educators [ISAE] vs.

Quisumbing, [G. R. No. 128845, June 1, 2000], the Supreme Court ruled
that foreign-hired teachers do not belong to the same bargaining unit as
the local-hires because the former have not indicated their intention to be
grouped with the latter for purposes of collective bargaining.  Moreover,
the collective bargaining history of the school also shows that these
groups were always treated separately.

COLLECTIVE BARGAINING HISTORY:

The principle called collective bargaining history enunciates that the prior
collective bargaining history and affinity of the employees should be
considered in determining the appropriate bargaining unit. However, the
Supreme Court has categorically ruled that the existence of a prior
collective bargaining history is neither decisive nor conclusive in the
determination of what constitutes an appropriate bargaining unit. (San
Miguel Corporation vs. Laguesma, infra; National Association of Free
Trade Unions vs. Mainit Lumber Development Company Workers Union,
infra). chanrobles virtual law library

For instance, the Supreme Court in National Association of Free Trade

Unions vs. Mainit Lumber Development Company Workers Union, [G. R.
No. 79526, Dec. 21, 1990], declared that there is mutuality of interest
among the workers in the sawmill division and logging division as to
justify their formation of a single bargaining unit. This, despite the history
of said two divisions being treated as separate units and notwithstanding
their geographical distance.

And in another case, San Miguel Corporation vs. Laguesma, [G. R. No.
100485, Sept. 21, 1994], despite the collective bargaining history of
having a separate bargaining unit for each sales office, the Supreme
Court applied the principle of mutuality or commonality of interests in
holding that the appropriate bargaining unit is comprised of all the sales
force in the whole of North Luzon.

EMPLOYMENT STATUS DOCTRINE:

Under the doctrine of employment status, the determination of
appropriate bargaining unit based thereon is considered an acceptable
mode. (Rothenberg on Labor Relations, pp. 482-510).

For instance, casual employees and those being employed on a day-to-

day basis, according to the Supreme Court in Philippine Land-Air-Sea
Labor Union vs. CIR, [G. R. No. L-14656, Nov. 29, 1960], do not have the
mutuality or community of interest with regular and permanent
employees. Hence, their inclusion in the bargaining unit composed of the
latter employees is not justified. 

Confidential employees, by the very nature of their functions, assist and

act in a confidential capacity to, or have access to confidential matters of,
persons who exercise managerial functions in the field of labor relations.
As such, the rationale behind the ineligibility of managerial employees to
form, assist or join a labor union equally applies to them.  Hence, they
cannot be allowed to be included in the rank-and-file bargaining unit. 
(Philips Industrial Development, Inc. vs. NLRC, G. R. No. 88957, June 25,
1992; Golden Farms, Inc. vs. Ferrer-Calleja, G. R. No. 78755, July 19,
1989, 175 SCRA 471).

The rationale for this inhibition is if these managerial employees would

belong to or be affiliated with a union, the latter might not be assured of
their loyalty to the union in view of evident conflict of interest. The union
can also become company-dominated with the presence of managerial
employees in union membership. (Bulletin Publishing Co., vs. Sanchez,
144 SCRA 628).

In Belyca Corporation vs. Ferrer-Calleja, [G. R. No. 77395, Nov. 29,

1988], which involves a corporation engaged in piggery, poultry raising,
planting of agricultural crops and operation of supermarts and cinemas,
the Supreme Court ruled that it is beyond question that the employees of
the livestock and agro division of the corporation perform work entirely
different from those performed by employees in the supermarts and
cinemas.  Among others, the noted differences are:  their working
conditions, hours of work, rates of pay, including the categories of their
positions and employment status. As stated by petitioner corporation in
its position paper, due to the nature of the business in which its livestock-
agro division is engaged, very few of its employees in the division are
permanent, the overwhelming majority of which are seasonal and casual
and not regular employees.  Definitely, they have very little in common
with the employees of the supermarts and cinemas.  To lump all the
employees of petitioner in its integrated business concerns cannot result
in an efficacious bargaining unit comprised of constituents enjoying a
community or mutuality of interest.  Undeniably, the rank-and-file
employees of the livestock-agro division fully constitute a bargaining unit
that satisfies both requirements of classification according to employment
status and of the substantial similarity of work and duties which will
ultimately assure its members the exercise of their collective bargaining
rights. (See also Democratic Labor Association vs. Cebu Stevedoring, 103
Phil. 1103).

Application of foregoing 4 factors in one case.

As earlier mentioned, in the case of International School Alliance of

Educators [ISAE] vs. Quisumbing, [G. R. No. 128845, June 1, 2000], the
Supreme Court disallowed the inclusion of foreign-hired teachers in the
bargaining unit composed of locally-hired teachers.  In so holding, it used
all the four (4) factors mentioned above, thus: chanrobles virtual law library

“It does not appear that foreign-hires have indicated their intention
to be grouped together with local-hires for purposes of collective
bargaining. The collective bargaining history in the School also shows
that these groups were always treated separately. Foreign-hires
have limited tenure; local-hires enjoy security of tenure. Although
foreign-hires perform similar functions under the same working
conditions as the local-hires, foreign-hires are accorded certain
benefits not granted to local-hires. These benefits, such as housing,
transportation, shipping costs, taxes, and home leave travel
allowance, are reasonably related to their status as foreign-hires,
and justify the exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires would not assure
either group the exercise of their respective collective bargaining
rights.”

101.  What is the effect on the bargaining unit of spin-off of

business?

The employer may validly effect a spin-off of some of its divisions to

operate as distinct companies.  Such transformation of the companies is a
management prerogative and business judgment which the courts cannot
look into unless it is contrary to law, public policy or morals.

In one case involving the spin-off by a corporation of two of its divisions,

the Supreme Court declared that after the said spin-off, they became
distinct entities with separate juridical personalities. Thus, the employees
cannot belong to a single bargaining unit as held in the case of Diatagon
Labor Federation Local 110 of the ULGWP vs. Ople, [101 SCRA 534
(1980)].

Considering the spin-offs, the companies would consequently have their

respective and distinctive concerns in terms of the nature of work, wages,
hours of work, and other conditions of employment.  Interests of
employees in the different companies perforce differ. (San Miguel
Corporation Employees Union-PTGWO vs. Confesor, G. R. No. 111262,
Sept. 19, 1996, 262 SCRA 81; See also Borbon vs. Laguesma, G. R. No.
101766, March 5, 1993).

102.  May excluded employees be included in the bargaining unit

under the new CBA.

In De la Salle University vs. De la Salle University Employees Association,

[G. R. No. 109002, April 12, 2000], it was held that the express exclusion
of certain employees from the bargaining unit of rank-and-file employees
in the past CBA does not bar any re-negotiation for the future inclusion of
the said employees in the bargaining unit. During the freedom period, the
parties may not only renew the existing CBA but may also propose and
discuss modifications or amendments thereto. More so in this case where,
after a careful consideration of the pleadings filed, the alleged confidential
nature of the said employees’ functions (as computer operator and
discipline officers) were proven to be incorrect. As carefully examined by
the Solicitor General, the service record of a computer operator reveals
that his duties are basically clerical and non-confidential in nature.  As to
the discipline officers, based on the nature of their duties, they are not
confidential employees and should, therefore, be included in the
bargaining unit of rank-and-file employees.

103. May employees of one entity join the union in another entity?

In the same case of De la Salle [supra], the Supreme Court affirmed the
findings of the Voluntary Arbitrator that the employees of the College of
St. Benilde should be excluded from the bargaining unit of the rank-and-
file employees of De la Salle University, because the two educational
institutions have their own separate juridical personality and no sufficient
evidence was shown to justify the piercing of the veil of corporate fiction.

104.  What are the requisites for certification election in

organized establishments?

The following are the requisites for certification election in organized

establishments.

1. that a petition questioning the majority status of the incumbent

bargaining agent is filed before the DOLE within the 60-day freedom
period; chanrobles virtual law library

2.  that such petition is verified; and

3.  that the petition is supported by the written consent of at least

twenty-five percent (25%) of all employees in the bargaining unit.

105.  What is the requirement for certification election in

unorganized establishments?
In unorganized establishments, certification election shall be
"automatically" conducted upon the filing of a petition for certification
election by a legitimate labor organization. However, it must be
emphasized that the petitioner-union should have a valid certificate of
registration; otherwise, it has no legal personality to file the petition for
certification election.

106.  Who may file petition for certification election?

A petition for certification election may be filed by:

1.   a legitimate labor organization; or

2.  an  employer, but only when requested by a labor organization to

bargain collectively and the status of the union is in doubt. 

ROLE OF EMPLOYER IN CERTIFICATION ELECTION CASES:

R. A. No. 9481 [June 14, 2007] amended the Labor Code by introducing
the following provisions:

Article 258-A. Employer as Bystander. - In all cases, whether the

petition for certification election is filed by an employer or a
legitimate labor organization, the employer shall not be considered a
party thereto with a concomitant right to oppose a petition for
certification election. The employer’s participation in such
proceedings shall be limited to:

(1) being notified or informed of petitions of such nature; and

(2) submitting the list of employees during the pre-election

conference should the Med-Arbiter act favorably on the petition.
(As amended by Section 12, Republic Act No. 9481 which lapsed
into law on May 25, 2007 and became effective on June 14,
2007).

107.  When to file petition for certification election; general rule.

The general rule is, in the absence of a collective bargaining agreement

duly registered in accordance with Article 231 of the Labor Code, a
petition for certification election may be filed at any time.

108.  What are the exceptions to the general rule?

The exceptions when no certification election may be held are as follows:

1.  certification year-bar rule;

 2.  bargaining deadlock-bar rule; or

3.  contract-bar rule.

109.  What is certification year-bar rule?

Under the certification year-bar rule, a certification election petition may

not be filed within one (1) year: (1)  from the date of a valid certification,
consent or run-off election; or (2)  from the date of voluntary recognition.

110.  What is bargaining deadlock-bar rule?

Under the bargaining deadlock-bar rule, neither may a representation

question be entertained if:

1.  before the filing of a petition for certification election, the duly
recognized or certified union has commenced negotiations with the
employer within the one-year period from the date of a valid
certification, consent or run-off election or from the date of voluntary
recognition; or

2.  a bargaining deadlock to which an incumbent or certified

bargaining agent is a party had been submitted to conciliation or
arbitration or had become the subject of valid notice of strike or
lockout. chanrobles virtual law library

In the case of Kaisahan ng Manggagawang Pilipino [KAMPIL-KATIPUNAN]

vs. Trajano, [G. R. No. 75810, September 9, 1991, 201 SCRA 453
(1991)], the bargaining deadlock-bar rule was not applied because the
duly certified exclusive bargaining agent of all rank-and-file employees
did not, for more than four (4) years, take any action to legally compel
the employer to comply with its duty to bargain collectively, hence, no
CBA was executed; nor did it file any unfair labor practice suit against the
employer or initiate a strike against the latter. Under the circumstances, a
certification election may be validly held.

But in the case of Capitol Medical Center Alliance of Concerned

Employees-Unified Filipino Service Workers vs. Laguesma, [G. R. No.
118915, February 4, 1997, 267 SCRA 503], whose factual milieu is similar
to said case of Kaisahan, the bargaining deadlock-bar rule was applied. 
The Supreme Court ratiocinated, thus:

“This is what is strikingly different between the Kaisahan case and

the case at bench for in the latter case, there was proof that the
certified bargaining agent, respondent union, had taken an action to
legally coerce the employer to comply with its statutory duty to
bargain collectively, i.e., charging the employer with unfair labor
practice and conducting a strike in protest against the employer’s
 refusal to bargain.  It is only just and equitable that the
circumstances in this case should be considered as similar in nature
to a ‘bargaining deadlock’ when no certification election could be
held.  This is also to make sure that no floodgates will be opened for
the circumvention of the law by unscrupulous employers to prevent
any certified bargaining agent from negotiating a CBA.  Thus, Section
3, Rule V, Book V of the Implementing Rules should be interpreted
liberally so as to include a circumstance, e.g., where a CBA could not
be concluded due to the failure of one party to willingly perform its
duty to bargain collectively.”

111.  What is a contract-bar rule?

Under the contract-bar rule, the Bureau of Labor Relations shall not
entertain any petition for certification election or any other action which
may disturb the administration of duly registered existing collective
bargaining agreements affecting the parties. The reasons are:

112.  What are the exceptions to the contract-bar rule?

The exceptions to the contract-bar rule are as follows:

1. during  the  60-day  freedom  period;

2. when the CBA is not registered with the BLR or DOLE Regional
Offices;

3. when the CBA, although registered, contains provisions lower than

the standards fixed by law;

4.  when the documents supporting its registration are falsified,

fraudulent or tainted with misrepresentation; chanrobles virtual law library

5.when the collective bargaining agreement is not complete as it

does not contain any of the requisite provisions which the law
requires;

6.  when the collective bargaining agreement was entered into prior
to the 60-day freedom period; chanrobles virtual law library

7.  when there is a schism in the union resulting in an industrial

dispute wherein the collective bargaining agreement can no longer
foster industrial peace.

COLLECTIVE BARGAINING AGREEMENT (CBA)

113.  What is a Collective Bargaining Agreement (CBA)? 

Collective Bargaining Agreement (CBA) refers to the negotiated contract
between a legitimate labor organization and the employer concerning
wages, hours of work and all other terms and conditions of employment in
a bargaining unit. The CBA is deemed the law between the parties during
its lifetime.  Its provisions are construed liberally. chanrobles virtual law library

114.  What are the legal principles applicable to Collective

Bargaining Agreement (CBA)? 

• A proposal not embodied in CBA is not part thereof.

• Minutes of CBA negotiation - no effect if its contents are not

incorporated in the CBA.

• Making a promise during the CBA negotiation is not considered bad

faith.

• Adamant stance resulting in impasse, not bad faith.

• The DOLE Secretary cannot order inclusion of terms and conditions

in CBA which the law and the parties did not intend to reflect therein.

• Signing bonus, not demandable under the law.

• Allegations of bad faith, wiped out with signing of CBA.

115.  Is the collective bargaining procedure in Article 250

mandatory?

In National Union of Restaurant Workers vs. CIR, [10 SCRA 843], it was
held that failure to reply within ten (10) calendar days does not constitute
refusal to bargain. The requirement under the law that a party should
give its reply within said period is merely procedural and non-compliance
therewith is not unfair labor practice. 

Recently, however, there has been a shift in the interpretation of the

provision of Article 250. According to the pronouncement in General
Milling Corporation vs. CA, [G. R. No. 146728, February 11, 2004], the
procedure in collective bargaining prescribed by the Labor Code under
Article 250 is mandatory because of the basic interest of the State in
ensuring lasting industrial peace. It underscored the fact that the other
party upon whom the proposals was served “shall make a reply thereto
not later than ten (10) calendar days from receipt of such notice.”
Consequently, the employer’s failure to make a timely reply to the
proposals presented by the union is indicative of its bad faith and utter
lack of interest in bargaining with the union. Its excuse that it felt the
union no longer represented the workers, was mainly dilatory as it turned
out to be utterly baseless.  Consequently, the employer in this case was
held guilty of unfair labor practice under Article 248 [g] of the Labor
Code.

In Colegio de San Juan de Letran vs. Association of Employees and

Faculty of Letran, [G. R. No. 141471, September 18, 2000], petitioner-
school was declared to have acted in bad faith because of its failure to
make a timely reply to the proposals presented by the union. More than a
month after the proposals were submitted by the union, petitioner still
had not made any counter-proposals.  This inaction on the part of
petitioner prompted the union to file its second notice of strike on March
13, 1996. Petitioner could only offer a feeble explanation that the Board
of Trustees had not yet convened to discuss the matter as its excuse for
failing to file its reply. This is a clear violation of Article 250 of the Labor
Code governing the procedure in collective bargaining. The school’s
refusal to make a counter-proposal to the union’s proposed CBA is an
indication of its bad faith. Its actuation shows a lack of sincere desire to
negotiate rendering it guilty of unfair labor practice. chanrobles virtual law library

The same holding was made in Kiok Loy vs. NLRC, [141 SCRA 179, 186
(1986)] where the company’s refusal to make any counter-proposal to the
union’s proposed CBA was declared as an indication of its bad faith.
Where the employer did not even bother to submit an answer to the
bargaining proposals of the union, there is a clear evasion of the duty to
bargain collectively. (See also The Bradman Co., Inc. vs. Court of
Industrial Relations, 78 SCRA 10, 15 [1977]).

116.  What are the kinds of bargaining under the latest

implementing rules?

The Rules to Implement the Labor Code, as amended in 2003, provide for
two (2) kinds of bargaining, namely: chanrobles virtual law library

1.  Single-enterprise bargaining; and

2.  Multi-employer bargaining.

117.  What is single enterprise bargaining?

Single-enterprise bargaining involves negotiation between one certified

labor union and one employer.  Any voluntarily recognized or certified
labor union may demand negotiations with its employer for terms and
conditions of work covering employees in the bargaining unit concerned.
(Section 3, Rule XVI, Book V, Rules to Implement the Labor Code, as
amended by Department Order No. 40-03, Series of 2003, [Feb. 17,
2003]).

118.  What is multi-employer bargaining?

Multi-employer bargaining involves negotiation between and among
several certified labor unions and employers.

Any legitimate labor unions and employers may agree in writing to come
together for the purpose of collective bargaining, provided:

(a) only legitimate labor unions which are incumbent exclusive

bargaining agents may participate and negotiate in multi-employer
bargaining;

(b) only employers with counterpart legitimate labor unions which

are incumbent bargaining agents may participate and negotiate in
multi-employer bargaining; and chanrobles virtual law library

(c) only those legitimate labor unions which pertain to employer

units which consent to multi-employer bargaining may participate in
multi-employer bargaining. (Section 5, Rule XVI, Book V, Ibid.).

119.  What is meant by “duty to bargain collectively” when there

has yet been a CBA?

Article 251 contemplates a situation where there is yet no CBA or other

voluntary arrangements or modes providing for a more expeditious
manner of collective bargaining. Accordingly, the law itself mandates that
the procedures in collective bargaining laid down in the Labor Code,
specifically Article 250 thereof, among other pertinent provisions, should
be followed by the employer and the representatives of the employees in
their collective bargaining efforts.  Essentially, the duty to bargain in this
situation still requires the performance of the obligation by the employer
and the union to meet, convene and confer for collective bargaining
purposes.  The basic requisites of collective bargaining such as the
existence of employer-employee relationship, majority status of the
bargaining union and the demand to negotiate an agreement, should
likewise be fully satisfied before such negotiations may be validly held.
The advantage of negotiating a CBA for the first time lies in the fact that
both parties are not restricted or encumbered by any previous agreement
on any of the issues that may be raised in the course thereof. They are
free to take positions on anything, without having to worry about possible
past agreements affecting the current ones for discussion. chanrobles virtual law library

120.  What is meant by “duty to bargain collectively” when there

exists a CBA?

When there is a collective bargaining agreement, the duty to bargain

collectively shall mean that neither party shall terminate nor modify such
agreement during its lifetime.  However, either party can serve a written
notice to terminate or modify the agreement at least sixty (60) days prior
to its expiration date.  It shall be the duty of both parties to keep the
status quo and to continue in full force and effect the terms and
conditions of the existing agreement during the 60-day period and/or until
a new agreement is reached by the parties. chanrobles virtual law library

121.  What are the mandatory requisites of publication,

ratification and registration of the CBA?

a. Posting of CBA.

The general rule is that the CBA is required to be posted in two (2)
conspicuous places in the work premises, for a period of at least five (5)
days prior to its ratification.

In the case of multi-employer bargaining, two (2) signed copies of the

CBA should be posted for at least five (5) days in two (2) conspicuous
areas in each workplace of the employer units concerned. Said CBA shall
affect only those employees in the bargaining units who have ratified it.
(Section 7, Rule XVI, Book V, Rules to Implement the Labor Code, as
amended by Department Order No. 40-03, Series of 2003, [Feb. 17,
2003]).

b. Posting is mandatory.

This requirement on the posting of the CBA as above-described is

considered a mandatory requirement. Non-compliance therewith will
render the CBA ineffective. (Associated Trade Unions [ATU] vs. Trajano,
G. R. No. L-75321, June 20, 1988).

c.  Posting is responsibility of employer.

The posting of copies of the CBA is the responsibility of the employer

which can easily comply with the requirement through a mere mechanical
act. (Associated Labor Union [ALU] vs. Ferrer-Calleja, G. R. No. 77282,
May 5, 1989). chanrobles virtual law library

d.  Ratification by majority of the members of the bargaining unit.

The ratification of the CBA should be made not by the majority of the
members of the bargaining union but by the majority of the members of
the bargaining unit which is being represented by the bargaining union in
the negotiations. 

e.  Registration of CBA.

The CBA shall be registered with the Department of Labor and

Employment in accordance with the Rules to Implement the Labor Code,
as amended in 2003. (Section 7, Rule XVI, Book V, Rules to Implement
the Labor Code, as amended by Department Order No. 40-03, Series of
2003, [Feb. 17, 2003]).

122. What is the consequence of refusal of party to negotiate the

CBA?

The refusal of the employer to bargain with the collective bargaining

representative, by ignoring all notices for negotiations and requests for
counter-proposals so much so that the union had to resort to conciliation
proceedings, may indicate bad faith. (Kiok Loy vs. NLRC, G. R. No. 54334,
Jan. 22, 1986, 141 SCRA 179).

For refusing to send a counter-proposal to the union and to bargain anew

on the economic terms of the CBA, the company commits an unfair labor
practice act under Article 248 [g] of the Labor Code (violation of the duty
bargain collectively). As held in General Milling Corporation vs. CA, [G. R.
No. 146728, Feb. 11, 2004], the union lived up to this obligation when it
presented proposals for a new CBA to the management within three (3)
years from the effectivity of the original CBA. But the employer failed in
its duty under Article 252.  What it did was to devise a flimsy excuse, by
questioning the existence of the union and the status of its membership
to prevent any negotiation. chanrobles virtual law library

According to Colegio De San Juan De Letran vs. Association of Employees

and Faculty of Letran, [G.R. No. 141471, Sept. 18, 2000, 340 SCRA 587,
595], the management’s refusal to make a counter-proposal to the
union’s proposal for CBA negotiation is an indication of its bad faith.
Where the employer did not even bother to submit an answer to the
bargaining proposals of the union, there is a clear evasion of the duty to
bargain collectively. chanrobles virtual law library

123.  What is the effect of the refusal of party to sign the CBA?

A party to a fully-concluded CBA may be compelled to sign it, especially if

said refusal to sign is the only remaining hitch to its being implemented. 
Such refusal is considered unfair labor practice.  (Roadway Express vs.
General Teamster, 320 F 2d, 859).

124.  What is the effect if there is no meeting of the minds?

In University of the Immaculate Concepcion, Inc. vs. The Hon. Secretary

of Labor and Employment, [G. R. No. 146291, January 23, 2002], the
petitioner presented to the union a draft of the CBA allegedly embodying
all the terms and conditions agreed upon during the conciliation sessions
held by the NCMB. Petitioner contended that the union was bound to
comply with the terms contained in the draft-CBA since said draft
allegedly contains all the items already agreed upon before the NCMB.
The Supreme Court disagreed.  In affirming the finding of the Court of
Appeals that there was still no new CBA because the parties had not
reached a meeting of the minds, the Supreme Court ratiocinated, thusly:

“As in all other contracts, there must be clear indications that the
parties reached a meeting of the minds. 

“In this case, no CBA could be concluded because of what the union
perceived as illegal deductions from the 70% employees’ share in the
tuition fee increase from which the salary increases shall be
charged.  Also, the manner of computing the net incremental
proceeds was yet to be agreed upon by the parties.

“Petitioner insisted that a new collective bargaining agreement was

concluded through the conciliation proceeding before the NCMB on all
issues specified in the notice of strike. Although it is true that the
university and the union may have reached an agreement on the
issues raised during the collective bargaining negotiations, still no
agreement was concluded by them because, among other reasons,
the DOLE Secretary, who assumed jurisdiction on January 23, 1995
only  was set to resolve the distribution of the salary increase of the
covered employees.  The Court of Appeals found that ‘there are
many items in the draft-CBA that were not even mentioned in the
minutes of the July 20, 1994 conference.’

“Considering the parties failed to reach an agreement regarding

certain items of the CBA, they still have the duty to negotiate a new
collective bargaining agreement in good faith, pursuant to the
applicable provisions of the Labor Code.”

125.  Can a CBA be negotiated and concluded during suspension

of operation?

There is no legal basis to claim that a new CBA should not be entered into
or that collective bargaining should not be conducted during the effectivity
of a temporary suspension of operations which an employer can lawfully
do under Article 286 of the Labor Code.  In the absence of any other
information, the plain and natural presumption is that the employer would
resume operations after six (6) months and, therefore, it follows that a
new CBA will be needed to govern the employment relations of  the
parties, the old one having already expired.

Consequently, it was held in San Pedro Hospital of Digos, Inc. vs.

Secretary of Labor, [G. R. No. 104624, Oct. 11, 1996, 263 SCRA 98], that
while the employer cannot be forced to abandon its suspension of
operations even if said suspension be declared unjustified, illegal and
invalid, neither can the  employer evade its obligation to bargain with the
union, using the cessation of its business as reason therefor. For, as
already indicated above, the employer-employee relationship is merely
suspended (and not terminated) for the duration of the temporary
suspension.  Using the suspension as an excuse to evade the duty to
bargain is further proof of its illegality.  It shows abuse of this option and
bad faith on the part of the employer. And since it refused to bargain
without valid and sufficient cause, the DOLE Secretary, in the exercise of
his powers under Article 263 [i] of the Labor Code to decide and resolve
labor disputes, properly granted the wage increase and imposed the union
shop provision.

126.  Can a CBA be negotiated and concluded in case of closure of

business?

An employer which has already decided to close shop cannot be

compelled to enter into a new CBA.  The Supreme Court said in the same
case of San Pedro Hospital [supra] that it cannot impose upon the
employer the directive to enter into a new CBA with the union for the very
simple reason that to do so would be to compel the employer to continue
its business when it had already decided to close shop, and that would be
judicial tyranny on its part.

127.  Can a CBA proposed by the union be imposed lock, stock and
barrel on employer who refused to negotiate a CBA?

The Supreme Court, following the provision of Article 253 which imposes
on both parties to keep the status quo and to continue in full force and
effect the terms and conditions of the existing agreement during the 60-
day period [prior to its expiration date] and/or until a new agreement is
reached by the parties, has lately consistently ruled that the CBA, as
proposed by the union, may be unilaterally imposed on the employer in
the event the latter fails to discharge its duty to bargain collectively by
refusing to make any counter-proposals to the proposals of the union or 
engaging in bad faith bargaining.

Article 253 basically mandates the parties to keep the status quo while
they are still in the process of working out their respective proposals and
counter proposals. The general rule is that when a CBA already exists, its
provision shall continue to govern the relationship between the parties
until a new one is agreed upon. The rule necessarily presupposes that all
other things are equal. That is, that neither party is guilty of bad faith.
However, when one of the parties abuses this grace period by purposely
delaying the bargaining process, a departure from the general rule is
warranted. chanrobles virtual law library

Under this situation, the employer which violates the duty to bargain
collectively, loses its statutory right to negotiate or renegotiate the terms
and conditions of the draft CBA proposed by the union.  Hence, the
proposals of the union may be adopted as the CBA and, consequently,
imposed on the employer, lock, stock and barrel. chanrobles virtual law library
General Milling Corporation vs. CA.

In General Milling Corporation vs. CA, [G. R. No. 146728, Feb. 11, 2004],
the Supreme Court imposed on the employer the draft CBA proposed by
the union for two years commencing from the expiration of the original
CBA.  This was because of the employer’s refusal to counter-propose to
the union’s proposals which constitutes unfair labor practice under Article
248 [g] of the Labor Code.

Kiok Loy vs. NLRC.

In the case of Kiok Loy vs. NLRC, [No. L-54334, January 22, 1986, 141
SCRA 179, 188], the Supreme Court found that petitioner therein,
Sweden Ice Cream Plant, refused to submit any counter proposal to the
CBA proposed by its employees’ certified bargaining agent. It ruled that
the former had thereby lost its right to bargain the terms and conditions
of the CBA. Thus, the High Court did not hesitate to impose on the erring
company the CBA proposed by its employees’ union - lock, stock and
barrel.

Divine Word University of Tacloban vs. Secretary of Labor and

Employment.

Likewise, in Divine Word University of Tacloban vs. Secretary of Labor and

Employment, [213 SCRA 759, September 11, 1992], petitioner therein
refused to perform its duty to bargain collectively. Thus, the High Tribunal
upheld the unilateral imposition on the university of the CBA proposed by
the Divine Word University Employees Union.

Distinction between the aforesaid cases, disregarded.

As strictly distinguished from the facts of General Milling [supra], there

was no pre-existing CBA between the parties in Kiok Loy and Divine Word
University of Tacloban. Nonetheless, the Supreme Court deemed it proper
to apply in General Milling the rationale of the doctrine in the said two
cases. To rule otherwise, according to the Court, would be to allow
General Milling to have its cake and eat it, too.

128. What is “freedom period”?

“Freedom period” is the last sixty (60) days of the lifetime of a collective
bargaining agreement immediately prior to its expiration  It is so called
because it is the only time when the law allows the parties to serve notice
to terminate, alter or modify the existing agreement.  It is also the time
when the majority status of the bargaining union or agent may be
challenged by another union by filing appropriate petition for certification
election.  chanrobles virtual law library
129.  What is “automatic renewal clause”?

“Automatic renewal clause” means that at the expiration of the freedom

period, the employer shall continue to recognize the majority status of the
incumbent bargaining agent where no petition for certification election is
filed. 

130. What is the effect of CBA renewal or registration before or

during 60-day period?

The representation case shall not be adversely affected by a CBA

registered before or during the last sixty (60) days of a subsisting
agreement or during the pendency of the representation case. (Samahan
ng Manggagawa sa Pacific Plastic vs. Laguesma, G. R. No. 111245, Jan.
31, 1997, 267 SCRA 303, 310).

It is well-settled that the sixty-day freedom period based on the original

CBA shall not be affected by any amendment, extension or renewal of the
CBA for purposes of certification election. (ALU vs. Calleja, 179 SCRA 127
[1989]).

In the case of Warren Manufacturing Workers Union [WMWU] vs. Bureau

of Labor Relations, [159 SCRA 387 (1988)], it was held that an
agreement prematurely signed by the union and the company during the
freedom period does not affect the petition for certification election filed
by another union. (See also Oriental Tin Can Labor Union vs. Secretary of
Labor and Employment, G. R. No. 116751, Aug. 28, 1998, 294 SCRA
640).

The reason is, with a pending petition for certification, any such
agreement entered into by management with a labor organization is
fraught with the risk that such a labor union may not be chosen thereafter
as the collective bargaining representative.  Any other view would render
nugatory the clear statutory policy to favor certification election as the
means of ascertaining the true expression of the will of the workers as to
which labor organization would represent them. (Vassar Industries
Employees Union [VIEU] vs. Estrella, No. L-46562, March 31, 1978, 82
SCRA 280, 288; Today’s Knitting Free Workers Union vs. Noriel, L-45057,
Feb. 28, 1977, 75 SCRA 450).

131.  What is the term (lifetime) of a CBA?

Representation aspect (sole and exclusive status of certified union):  -

The term is 5 years which means that no petition questioning the majority
status of the incumbent bargaining agent shall be entertained by DOLE
and no certification election shall be conducted outside of the 60-day
freedom period.
All other provisions (which refer to both economic and non-economic
provisions except representation):  Shall be renegotiated not later than
three (3) years after its execution. 

132.  May CBA negotiations be suspended for 10 years?

Yes.  The Supreme Court, in the case of Rivera vs. Espiritu. (G.R.
No.135547, January 23, 2002), ratiocinated, thus:

“The assailed PAL-PALEA agreement was the result of voluntary

collective bargaining negotiations undertaken in the light of the
severe financial situation faced by the employer, with the peculiar
and unique intention of not merely promoting industrial peace at
PAL, but preventing the latter's closure. We find no conflict between
said agreement and Article 253-A of the Labor Code. Article 253-A
has a two-fold purpose. One is to promote industrial stability and
predictability . Inasmuch as the agreement sought to promote
industrial peace at PAL during its rehabilitation, said agreement
satisfies the first purpose of Article 253-A. The other is to assign
specific timetables wherein negotiations become a matter of right
and requirement. Nothing in Article 253A, prohibits the parties from
waiving or suspecting the mandatory timetables and agreeing on the
remedies to enforce the same. chanrobles virtual law library

“In the instant case, it was PALEA, as the exclusive bargaining agent
of PAL 's ground employees, that voluntarily entered into the CBA
with PAL. It was also PALEA that voluntarily opted for the 10-year
suspension of the CBA. Either case was the union's exercise of its
right to collective bargaining. The right to free collective bargaining,
after all, includes the right to suspend it. chanrobles virtual law library

“The acts of public respondents in sanctioning the 10-year

suspension of the PAL-PALEA CBA did not contravene the "protection
to labor" policy of the Constitution. The agreement afforded full
protection to labor; promoted the shared responsibility between
workers and employers; and they exercised voluntary modes in
settling disputes, including conciliation to foster industrial peace.".

133.  What is meant by “retroactivity” of CBA?

a.  Rule involving CBAs concluded by the parties through negotiation (not
concluded through arbitral award).

1. The collective bargaining agreement or other provisions of such

agreement entered into within six (6) months from the date of expiry
of the term of such other provisions as fixed in the collective
bargaining agreement shall retroact to the day immediately following
such date.
 2. If any such agreement is entered into beyond six (6) months, the
parties shall agree on the date of effectivity thereof.

b.   Rule involving CBAs concluded through arbitral awards by DOLE

Secretary, NLRC or Voluntary Arbitrator (Jurisprudence varies).

In case of arbitral awards, the retroactivity of the CBA provided under

Article 253-A of the Labor Code (enumerated above) has no application.
Thus, the Supreme Court ruled: chanrobles virtual law library

In St. Luke's Medical Center, Inc. vs. Torres, [223 SCRA 779
(1993)], the effectivity date was made retroactive to the date of the
expiration of the previous CBA.

In Pier 8 Arrastre and Stevedoring Services, Inc. vs. Roldan-

Confesor, [241 SCRA 294, 307 (1995)], the effective date of the new
CBA should be the date the Secretary of Labor and Employment has
resolved the labor dispute.

In Manila Electric Company vs. Quisumbing, [G. R. No. 127598,

January 27, 1999, 302 SCRA 173, 209], the effectivity date was
made prospective per its January 27, 1999 ruling. Later, per its
February 22, 2000 ruling in the same case which was rendered upon
motion for reconsideration, the effectivity of the CBA was made
retroactive.  But later, in its August 1, 2000 ruling which was
rendered after a Motion for Partial Reconsideration was filed by
Meralco, the Supreme Court finally changed the effectivity date
thereof.  It held that the arbitral award should retroact to the first
day after the six-month period following the expiration of the last
day of the CBA, i.e., from June 1, 1996 to May 31, 1998. chanrobles virtual law
library

LATEST RULING:  In the case of LMG Chemicals Corporation vs.

Secretary of DOLE, (G. R. No. 127422, April 17, 2001),  the Supreme
Court ruled that retroactivity of CBA in arbitral awards is subject to the
discretion of the DOLE Secretary chanrobles virtual law library

134.  What are the remedies in case of CBA deadlock?

In case of a deadlock in the negotiation or renegotiation of the collective

bargaining agreement, the parties may exercise the following rights under
the Labor Code:

1.Conciliation and mediation by the NCMB, DOLE.

2.Declaration of a strike or lockout, as the case may be.

3.   Referral of case to compulsory or voluntary arbitration.

GRIEVANCE AND VOLUNTARY ARBITRATION

135.  What is a grievance?

“Grievance” is any question by either the employer or the union regarding

the interpretation or application of the collective bargaining agreement or
company personnel policies or any claim by either party that the other
party is violating any provisions of the CBA or company personnel
policies. It is a complaint or dissatisfaction arising from the interpretation
or implementation of the CBA and those arising from interpretation or
enforcement of personnel policies.  chanrobles virtual law library

136.  What is grievance machinery?

"Grievance machinery" refers to the mechanism for the adjustment and

resolution of grievances arising from the interpretation or implementation
of a CBA and those arising from the interpretation or enforcement of
company personnel policies. It is part of the continuing process of
collective bargaining. 

137.  What is grievance procedure?

“Grievance procedure” refers to the internal rules of procedure

established by the parties in their CBA with voluntary arbitration as the
terminal step, which are intended to resolve all issues arising from the
implementation and interpretation of their CBA.  It refers to the system of
grievance settlement at the plant level as provided in the collective
bargaining agreement.  It usually consists of successive steps starting at
the level of the complainant and his immediate supervisor and ending,
when necessary, at the level of the top union and company officials.

All grievances submitted to the grievance machinery which are not settled
within seven (7) calendar days from the date of their submission shall
automatically be referred to voluntary arbitration prescribed in the CBA.

For this purpose, parties to a CBA shall name and designate in advance a
Voluntary Arbitrator or panel of Voluntary Arbitrators, or include in the
agreement a procedure for the selection of such Voluntary Arbitrator or
panel of Voluntary Arbitrators, preferably from the listing of qualified
Voluntary Arbitrators duly accredited by the NCMB.  In case the parties
fail to select a Voluntary Arbitrator or panel of Voluntary Arbitrators, the
NCMB shall designate the Voluntary Arbitrator or panel of Voluntary
Arbitrators, as may be necessary, pursuant to the selection procedure
agreed upon in the CBA, which shall act with the same force and effect as
if the Arbitrator or panel of Arbitrators has been selected by the parties as
described above.

138. What is voluntary arbitration?

“Voluntary arbitration” refers to the mode of settling labor-management
disputes by which the parties select a competent, trained and impartial
third person who shall decide on the merits of the case and whose
decision is final and executory. (Section 1 [d], Rule II, NCMB Revised
Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings
[Oct. 15, 2004]).

139.  Who is a Voluntary Arbitrator?

“Voluntary Arbitrator” refers to any person who has been accredited by

the NCMB as such, or any person named or designated in the CBA by the
parties as their Voluntary Arbitrator, or one chosen by the parties with or
without the assistance of the Board, pursuant to a selection procedure
agreed upon in the CBA or one appointed by the Board in case either of
the parties to the CBA refuses to submit to voluntary arbitration. The
term includes panel of Voluntary Arbitrators.  (Section 1 [e], Rule II,
NCMB Revised Procedural Guidelines in the Conduct of Voluntary
Arbitration Proceedings [Oct. 15, 2004]; See also Article 212 [n], Labor
Code; Section 1, Rule I, Book V, Rules to Implement the Labor Code, as
amended by Department Order No. 40-03, Series of 2003, [Feb. 17,
2003]; Section 1 [27], Rule III, NCMB Manual of Procedures for
Conciliation and Preventive Mediation Cases).

A Voluntary Arbitrator is not part of the government or of the Department

of Labor and Employment.  But he is authorized to render arbitration
services provided for under labor laws. (Ludo & Luym Corporation vs.
Saornido, G. R. No. 140960, Jan. 20, 2003).

Under the NCMB Revised Procedural Guidelines in the Conduct of

Voluntary Arbitration Proceedings [October 15, 2004], there are two kinds
of Voluntary Arbitrators, namely:

1. “Permanent Arbitrator” referring to the Voluntary Arbitrator

specifically named or designated in the CBA by the parties as their
Voluntary Arbitrator; and chanrobles virtual law library

2. “Ad-Hoc Arbitrator” referring to the Voluntary Arbitrator chosen by

the parties in accordance with the established procedures in the CBA
or the one appointed by the Board in case there is failure in the
selection or in case either of the parties to the CBA refuses to submit
to voluntary arbitration.

140. How is the decision of a Voluntary Arbitrator enforced?

Under Article 262-A of the Labor Code, upon motion of any interested
party, the Voluntary Arbitrator or panel of Voluntary Arbitrators or the
Labor Arbiter in the region where the movant resides, in case of the
absence or incapacity of the Voluntary Arbitrator or panel of Voluntary
Arbitrators, for any reason, may issue a writ of execution requiring either
the sheriff of the NLRC or regular courts or any public official whom the
parties may designate in the submission agreement to execute the final
decision, order or award. chanrobles virtual law library

STRIKES, LOCKOUTS AND PICKETING

141.  What is a strike?

A strike is any temporary stoppage of work by the concerted action of the

employees as a result of an industrial or labor dispute.  It consists not
only of concerted work stoppages but also slowdowns, mass leaves,
sitdowns, attempts to damage, destroy or sabotage plant equipment and
facilities and similar activities.

142.  What is a lockout?

A lockout is any temporary refusal of an employer to furnish work as a

result of an industrial or labor dispute.

143.  What is picketing?

“Picketing” or “peaceful picketing” is the right of workers to peacefully

march to and fro before an establishment involved in a labor dispute
generally accompanied by the carrying and display of signs, placards and
banners intended to inform the public about the dispute. 

144.  What is an industrial or labor dispute?

An industrial or labor dispute includes any controversy or matter

concerning terms and conditions of employment or the association or
representation of persons in negotiating, fixing maintaining, changing or
arranging the terms and conditions of employment, regardless of whether
the disputants stand in the proximate relation of employer and employee.

145. What are the various forms of strikes?

a.  Legal strike - one called for a valid purpose and conducted through
means allowed by law.

b.  Illegal strike - one staged for a purpose not recognized by law, or, if
for a valid purpose, conducted through means not sanctioned by law..

c.  Economic strike - one declared to demand higher wages, overtime

pay, holiday pay, vacation pay, etc. It is one which is declared for the
purpose of forcing wage or other concessions from the employer which he
is not required by law to grant.  chanrobles virtual law library
d. ULP strike - one called to protest against the employer’s acts of unfair
labor practice enumerated in Article 248 of the Labor Code as amended,
including gross violation of the collective bargaining agreement (CBA) and
union-busting.

e. Slow down strike - one staged without the workers quitting their work
but by merely slackening or by reducing their normal work output.

f. Wildcat strike - one declared and staged without the majority approval
of the recognized bargaining agent.

g. Sit down strike - one where the workers stop working but do not leave
their place of work. 

In Interphil Laboratories Employees Union-FFW vs. Interphil Laboratories,

Inc., [G. R. No. 142824, Dec. 19, 2001], overtime boycott was considered
a form of illegal strike. Discussing work slowdown, the Supreme Court, in
the same case, declared that it is an inherently illegal activity essentially
illegal even in the absence of a no-strike clause in a collective bargaining
contract, or statute or rule.  It is a “strike on the installment plan;” a
willful reduction in the rate of work by concerted action of workers for the
purpose of restricting the output of the employer, in relation to a labor
dispute; an activity by which workers, without a complete stoppage of
work, retard production or their performance of duties and functions to
compel management to grant their demands.  Such a slowdown is
generally condemned as inherently illicit and unjustifiable, because while
the employees “continue to work and remain at their positions and accept
the wages paid to them,” they, at the same time, “select what part of
their allotted tasks they care to perform of their own volition or refuse
openly or secretly, to the employer’s damage, to do  other  work.” In
other words, they “work on their own terms.”

146.  What are the procedural but mandatory requisites of a

lawful strike or lockout?

There are seven (7) mandatory requisites, namely:

First requisite:  Valid and factual ground

a. Valid grounds:  There are only two (2), namely:

(1) CBA Deadlock; and

(2) Unfair labor practice (ULP).

b. No other grounds are allowed except the two mentioned above.

The following grounds, therefore, may not be properly cited as valid
grounds for a strike or lockout in view of the pertinent provisions of
the Labor Code, authoritative labor issuances and jurisprudence:

1. Violation of collective bargaining agreements, except those

which are gross in character. Under Article 261, simple violation
of the CBA is no longer treated as unfair labor practice but as
mere grievance which should be processed through the
grievance machinery in the CBA.  It becomes an unfair labor
practice only when it is gross in nature which means that there
is flagrant and/or malicious refusal to comply with the economic
provisions of such agreement by either the employer or the
union.

2.  Inter-union or intra-union disputes. The reason is these

issues are resolved following the med-arbitration procedures
prescribed by law and not through the staging of a
strike/lockout.

Thus, a strike declared more on the ground of inter-union and

intra-union conflict which is a non-strikeable issue is patently
illegal pursuant to the provision of paragraph [b] of Article 263
of the Labor Code. (Filcon Manufacturing Corporation vs. Lakas
Manggagawa sa Filcon-Lakas Manggagawa Labor Center [LMF-
LMLC], G. R. No. 150166, July 26, 2004). chanrobles virtual law library

3.  Issues already assumed by the DOLE Secretary or certified

by him to the NLRC for compulsory arbitration. chanrobles virtual law library

Once the Secretary of Labor and Employment assumes

jurisdiction over a labor dispute affecting national interest or
certifies the same to the NLRC for compulsory arbitration, the
issues involved in said labor dispute can no longer be invoked
by the union in staging a strike or by management in
conducting a lockout. chanrobles virtual law library

4. Issues already brought before grievance machinery or

voluntary arbitration. chanrobles virtual law library

In a plethora of case, it was held that a strike is illegal because

of the failure to exhaust all the steps in the grievance
machinery/voluntary arbitration provided for in the CBA. (Union
of Filipro Employees, vs. Nestle Philippines, Inc., G. R. No.
88710-13, Dec. 19, 1990). chanrobles virtual law library

For example, in San Miguel Corporation vs. NLRC, [G. R. No.

99266, March 2, 1999], where the union, instead of asking the
CBA’s Conciliation Board composed of five representatives each
from the company and the union to decide the conflict,
petitioner declared a bargaining deadlock, and thereafter, filed a
notice of strike, the Supreme Court ruled that for failing to
exhaust all the steps in the CBA, the notice of strike should
have been dismissed by the NLRC and private respondent union
ordered to proceed with the grievance and arbitration
proceedings.  In the case of Liberal Labor Union vs. Phil. Can
Co., [91 Phil. 72], the Supreme Court declared as illegal the
strike staged by the union for not complying with the grievance
procedure provided in the CBA, ruling that:  “xxx the main
purpose of the parties in adopting a procedure in the settlement
of their disputes is to prevent a strike.  This procedure must be
followed in its entirety if it is to achieve its objective. xxx
Strikes held in violation of the terms contained in the CBA are
illegal, especially when they provide for conclusive arbitration
clauses. These agreements must be strictly adhered to and
respected if their ends have to be achieved. xxx.” In
abandoning the grievance proceedings and stubbornly refusing
to avail of the remedies under the CBA, private respondent
union violated the mandatory provisions of the CBA.

The above ruling was reiterated in the 2003 case involving the
same employer - San Miguel Corporation vs. NLRC, [G. R. No.
119293, June 10, 2003]. As in the abovecited case, petitioner
company evinced its willingness to negotiate with the union by
seeking for an order from the NLRC to compel observance of the
grievance and arbitration proceedings. Respondent union,
however, resorted to force without exhausting all available
means within its reach.  Such infringement of the aforecited
CBA provisions constitutes further justification for the issuance
of an injunction against the strike. As declared long ago:
“Strikes held in violation of the terms contained in a CBA are
illegal especially when they provide for conclusive arbitration
clauses. These agreements must be strictly adhered to and
respected if their ends have to be achieved.” (Citing Insurefco
Paper Pulp & Project Workers’ Union vs. Insular Sugar Refining
Corp., 95 Phil. 761 (1954).

5. Issues already brought before compulsory arbitration.

In view of the provisions of the second paragraph of Article 264

[a] of the Labor Code, a strike or lockout is illegal if declared
while a certain case is pending involving the same grounds for
the strike or lockout. (Bulletin Publishing Corporation vs.
Sanchez, 144 SCRA 428). 
 Thus, a strike conducted during the pendency of the compulsory
arbitration proceedings on a labor dispute certified to the NLRC
for compulsory arbitration is illegal. (Filsyn Employees Chapter
vs. Drilon, G. R. No. 82225, April 5, 1989). chanrobles virtual law library

6.  Issues involving labor standards. The law provides for

certain procedures in case of labor standards violations.

7.  Issues involving legislated wage orders.

Under Republic Act No. 6727 otherwise known as the Wage

Rationalization Act, a strike is illegal if based on alleged salary
distortion. The legislative intent that solution to the problem of
wage distortions shall be sought by voluntary negotiation or
arbitration, and not by strikes, lockouts or other concerted
activities of the employees or management, is made clear in the
rules implementing Republic Act No. 6727 issued by the
Secretary of Labor and Employment pursuant to the authority
granted by Section 13 of the said law. 

Second requisite:  Notice of strike or notice of lockout

a.  When to file notice: 

(1)  In case of ULP:  15 days from intended date of

strike/lockout

(2)  In case of CBA Deadlock:  30 days from intended date

thereof

b. Parties who may file notice:

(1)  Certified union, in case of strike; and

(2)  Employer in case of lockout. 

c.  Where to file notice: - NCMB

Third requisite - A notice must be served to the NCMB-DOLE at least

twenty-four (24) hours prior to the taking of the strike/ lockout vote
by secret balloting, informing said office of the decision to conduct a
strike vote/lockout vote, and the date, place, and time thereof.   

This is the newest requisite added by the Supreme Court per its
2005 ruling in Capitol Medical Center, Inc. vs. NLRC, [G. R. No.
147080, April 26, 2005.  This requisite is designed to: chanrobles virtual law library
 (a) inform the NCMB of the intent of the union to conduct a
strike vote;

(b) give the NCMB ample time to decide on whether or not

there is a need to supervise the conduct of the strike vote to
prevent any acts of violence and/or irregularities attendant
thereto; and

(c) should the NCMB decide on its own initiative or upon the
request of an interested party including the employer, to
supervise the strike vote, to give it ample time to prepare for
the deployment of the requisite personnel, including peace
officers if need be.

Unless and until the NCMB is notified at least 24 hours of the union’s
decision to conduct a strike vote, and the date, place, and time
thereof, the NCMB cannot determine for itself whether to supervise a
strike vote meeting or not and insure its peaceful and regular
conduct.  The failure of a union to comply with the requirement of
the giving of notice to the NCMB at least 24 hours prior to the
holding of a strike vote meeting will render the subsequent strike
staged by the union illegal. (Ibid.). chanrobles virtual law library

Fourth requisite:  Strike vote or lockout vote

a.  Majority approval of strike or lockout is required

b.  Strike vote still necessary even in case of union-busting.

Fifth requisite:  Strike vote report or lockout vote report

a.  When to submit strike or lockout vote report - at least 7

days prior to strike or lockout, as the case may be.

b. Effect of non-submission of strike vote to NCMB, DOLE -

strike or lockout is illegal

c. Effect on 7-day waiting period if filed within cooling-off

period: the 7-day waiting period shall be counted from the day
following the expiration of the cooling-off period.

d. Strike vote report in case of union-busting - still necessary, it

being mandatory unlike the cooling-off period which may be
dispensed with. chanrobles virtual law library

Sixth requisite:  Cooling-off period

a.  General rule: 

 (1) In case of CBA Deadlock - 30 days

(2) In case of ULP -  15 days

b. Exception: In the case of union-busting where the cooling-off

period need not be complied with. chanrobles virtual law library

c.  When cooling-off period starts: from the time the notice of
strike/lockout is filed with NCMB, DOLE. chanrobles virtual law library

d.  Purpose of the cooling-off period: for the parties to settle the
dispute.

Seventh requisite:  7-day waiting period or strike ban

a. Cooling-off period and waiting period, distinguished.

Waiting period is counted from the time of submission of strike vote

report to NCMB; Cooling-off period is counted from the filing of the
Notice of Strike/Lockout with NCMB. chanrobles virtual law library

b. Purpose of the 7-day waiting period:  To ensure that the strike

vote was indeed taken and that the majority of the members
approved of it.

c.  Deficiency of even one day of the 7-day strike ban (or cooling off
period) is fatal.  Hence, the strike is illegal.

147.    Summary of principles governing strikes:

1.  A strike or lockout is illegal if any of the legal requisites

(enumerated above) is not complied with.  Procedural requirements
are mandatory.

2. A strike or lockout is illegal if it is based on non-strikeable issues

(e.g., inter-union or intra-union disputes or wage distortion).

3. A strike or lockout is illegal if the issues involved are already

subject of compulsory  or voluntary arbitration or conciliation or the
steps in grievance machinery are not exhausted.

4.  A strike or lockout is illegal if unlawful means were employed or

prohibited acts or practices were committed  (e.g., Use of force,
violence, threats, coercion, etc.;  Barricades, blockades and
obstructions of ingress to [entrance] or egress from [exit] the
company premises).
 5. A strike or lockout is illegal if the notice of strike or notice of
lockout is already converted into a preventive mediation case. (See
further discussion below).

6. A strike or lockout is illegal if staged in violation of the “No-Strike,

No-Lockout” clause in the collective bargaining agreement. chanrobles virtual
law library

7. A strike or lockout is illegal if staged in violation of a temporary

restraining order or an injunction or assumption or certification
order.

8.  A strike is illegal if staged by a minority union.

9. A strike or lockout is illegal if conducted for unlawful purpose/s

(e.g.: Strike to compel dismissal of employee or to compel the
employer to recognize the union or the so-called “Union-Recognition
Strike”)

10. The local union and not the federation is liable to pay damages in
case of illegal strike.

148.  What is the effect of conversion of the notice of

strike/lockout into a preventive mediation case? chanrobles virtual law library

Under the NCMB rules, there is a remedy called “preventive mediation.” 

The NCMB has the authority to convert a notice of strike filed by the union
into a preventive mediation case if it finds that the real issues raised
therein are non-strikeable in character.  Such authority is in pursuance of
the NCMB’s duty to exert all efforts at mediation and conciliation to enable
the parties to settle the dispute amicably and in line with the state policy
of favoring voluntary modes of settling labor disputes.  Once a notice of
strike/lockout is converted into a preventive mediation case, it will be
dropped from the docket of notices of strikes/lockouts. Once dropped
therefrom, a strike/lockout can no longer be legally staged based on the
same notice.  The conversion has the effect of dismissing the notice. 

A case in point is Philippine Airlines, Inc. vs. Secretary of Labor and

Employment, [G. R. No. 88201, January 23, 1991, 193 SCRA 223] where
the strike was declared illegal for lack of a valid notice of strike, in view of
the NCMB’s conversion of the notice therein into a preventive mediation
case. The Supreme Court reasoned, thus:

“The NCMB had declared the notice of strike as ‘appropriate for

preventive mediation.’ The effect of that declaration (which PALEA
did not ask to be reconsidered or set aside) was to drop the case
from the docket of notice of strikes, as provided in Rule 41 of the
NCMB Rules, as if there was no notice of strike. During the pendency
 of preventive mediation proceedings no strike could be legally
declared... The strike which the union mounted, while preventive
mediation proceedings were ongoing, was aptly described by the
petitioner as ‘an ambush.’” (Emphasis supplied)

Clearly, therefore, applying the aforecited ruling, when the NCMB orders
the preventive mediation in a strike case, the union thereupon loses the
notice of strike it had filed. Consequently, if it still defiantly proceeded
with the strike while mediation was ongoing, the strike is illegal.

In the case of NUWHRAIN vs. NLRC, [287 SCRA 192 (1998)] where the
petitioner-union therein similarly defied a prohibition by the NCMB, the
Supreme Court said:

“Petitioners should have complied with the prohibition to strike

ordered by the NCMB when the latter dismissed the notices of strike
after finding that the alleged acts of discrimination of the hotel were
not ULP, hence not ‘strikeable.’ The refusal of the petitioners to heed
said proscription of the NCMB is reflective of bad faith.”

Such disregard of the mediation proceedings is deemed a blatant violation

of the Implementing Rules, which explicitly oblige the parties to bargain
collectively in good faith and prohibit them from impeding or disrupting
the proceedings.

In the 2003 case of San Miguel Corporation vs. NLRC, [G. R. No. 119293,
June 10, 2003], the notice of strike filed by the union was also converted
into a preventive mediation case. After such conversion, a strike can no
longer be staged based on said notice for the reason that upon such
conversion, there is no more notice of strike to speak of. When the NCMB
ordered the preventive mediation, the union had thereupon lost the notice
of strike it had filed.

149.  What is the  “NO-STRIKE, NO-LOCKOUT” clause in the CBA?

The right to strike is not absolute.  It has heretofore been held that a “no-
strike, no lockout” provision in the CBA is a valid stipulation although the
clause may be invoked by an employer only when the strike is economic
in nature or one which is conducted to force wage or other concessions
from the employer that are not mandated to be granted by the law itself.
(Samahan ng mga Manggagawa sa M. Greenfield (MSMG-UWP) vs.
Ramos, G. R. No. 113907, Feb. 28, 2000)

Jurisprudence abounds in its enunciation that such no-strike provision in

the CBA only bars strikes which are economic in nature, but not strikes
grounded on unfair labor practices. (MSMG-UWP vs. Ramos, 326 SCRA
428 (2000), citing Master Iron Labor Union vs. NLRC 219 SCRA 47
[1993]). chanrobles virtual law library
In a situation where ULP is alleged, it is not essential that the unfair labor
practice act has, in fact, been committed; it suffices that the striking
workers are shown to have acted honestly on an impression that the
company has committed such unfair labor practice and the surrounding
circumstances could warrant such a belief in good faith. (Panay Electric
Company, Inc. vs. NLRC, G. R. No. 102672, Oct. 4, 1995; People’s
Industrial and Commercial Employees and Workers Organization [FFW]
vs. People’s Industrial and Commercial Corporation, 112 SCRA 430).
chanrobles virtual law library

The Supreme Court consistently ruled in a long line of cases that a strike
is illegal if staged in violation of the “No Strike/No Lockout Clause” in the
CBA stating that a strike, which is in violation of the terms of the CBA, is
illegal, especially when such terms provide for conclusive arbitration
clause. (Filcon Manufacturing Corporation vs. Lakas Manggagawa sa
Filcon-Lakas Manggagawa Labor Center [LMF-LMLC], G. R. No. 150166,
July 26, 2004). chanrobles virtual law library

Thus, in Interphil Laboratories Employees Union-FFW vs. Interphil

Laboratories, Inc., [G. R. No. 142824, December 19, 2001], the Supreme
Court considered the conduct of “overtime boycott” and “work slowdown”
by the employees as constitutive of illegal strike and a violation of the
CBA which prohibits the union or employee, during the existence of the
CBA, to stage a strike or engage in slowdown or interruption of work.

150. What is the effect of a strike staged in violation of an

assumption or certification order?

A strike that is undertaken after the issuance by the Secretary of Labor

and Employment of an assumption or certification order becomes a
prohibited activity and thus illegal, pursuant to the second paragraph of
Article 264 of the Labor Code. The union officers and members, as a
result, are deemed to have lost their employment status for having
knowingly participated in an illegal strike. Stated differently, from the
moment a worker defies a return-to-work order, he is deemed to have
abandoned his job. The loss of employment results from the striking
employees’ own act - an act which is illegal, an act in violation of the law
and in defiance of authority.  (Philippine Airlines, Inc. vs. Brillantes, G. R.
No. 119360, Oct. 10, 1997).

Case law, likewise, provides that by staging a strike after the assumption
or certification for arbitration, the workers forfeit their right to be
readmitted to work, having abandoned their employment. (National
Federation of Labor vs. NLRC, 283 SCRA 275, 287, Dec. 15, 1997;
Marcopper Mining Corporation vs. Brillantes, 254 SCRA 595).

151.  What is the effect of a strike conducted in violation of a

temporary restraining order or injunction?
A strike is illegal if it violates a temporary restraining order (TRO) or
injunction issued for the purpose of enjoining the union and/or its
members from obstructing the company premises, and ordering the
removal therefrom of all the barricades. (Association of Independent
Unions in the Philippines vs. NLRC, G. R. No. 120505, March 25, 1999,
305 SCRA 219).

152.  Can a minority union lawfully stage a strike?

In United Restauror’s Employees & Labor Union-PAFLU vs. Torres, [26

SCRA 435, December 18, 1968], it was held that a strike conducted by a
minority union is patently illegal.  No labor dispute which will justify the
conduct of a strike may exist between the employer and a minority union.
To permit the union’s picketing activities would be to flaunt at the will of
the majority.

153.  Can a strike be staged by a union whose legitimacy is in

question?

In the 2004 case of Stamford Marketing Corp., vs. Julian, [G. R. No.
145496, February 24, 2004], the Supreme Court had occasion to rule that
a strike conducted by a union which has not been shown to be a
legitimate labor organization, is illegal.  Under Article 263 [c], only a
legitimate labor organization is entitled to file a notice of strike on behalf
of its members.  While the right to strike is specifically granted by law, it
is a remedy which can only be availed of by a legitimate labor
organization.  Absent a showing as to the legitimate status of the labor
organization, said strike would have to be considered as illegal.

154.  What are the examples of a strike conducted for unlawful

purposes?

a.  Strike for unlawful purpose is illegal.

Strike, not being an absolute right, comes into being and is safeguarded
by law only if the acts intended to render material aid or protection to a
labor union arise from a lawful ground, reason or motive.  But if the
motive which had impelled, prompted, moved or led members of a labor
union to stage a strike, even if they had acted in good faith in staging it,
be unlawful, illegitimate, unjust, unreasonable or trivial, the strike may be
declared illegal. (Filcon Manufacturing Corporation vs. Lakas Manggagawa
sa Filcon-Lakas Manggagawa Labor Center [LMF-LMLC], G. R. No.
150166, July 26, 2004; Interwood Employees Association vs. Interwood
Hardwood and Veneer Company of the Philippines, 52 O.G. 3936). chanrobles
virtual law library

b.  Strike to compel dismissal of employee.

For instance, a strike staged for the purpose of unreasonably demanding
the dismissal of a factory foreman is illegal. (Luzon Marine Department
Union vs. Roldan, G. R. No. L-2660, May 30, 1950, 86 Phil. 507).

c.  Union-recognition-strike, illegal.

A strike staged by a union to compel the employer to extend recognition

to it as the bargaining representative is illegal. A union-recognition-strike,
as its legal designation implies, is calculated to compel the employer to
recognize one’s union, and not the other contending group, as the
employees’ bargaining representative to work out a CBA despite the
striking union’s doubtful majority status to merit voluntary recognition
and lack of formal certification as the exclusive representative in the
bargaining unit. (Association of Independent Unions in the Philippines vs.
NLRC, G. R. No. 120505, March 25, 1999, 305 SCRA 219).

If the majority status of a union is in doubt, a strike cannot be declared

by reason of non-recognition by management of said union for purposes
of collective bargaining. It is only when the union’s majority status is
established through appropriate certification election, that the employer’s
refusal to the demand for collective bargaining negotiations becomes
illegal.  Hence, the union may lawfully stage a strike based on such
refusal which, under Article 248 [g] constitutes an unfair labor practice
act.

But if the strike is triggered not only by the desire for recognition by the
union but also because of the unfair labor practices committed by the
employer, the same may not be considered illegal.  In Caltex Filipino
Managers and Supervisors Association vs. CIR, [44 SCRA 351], the strike
of the Association was declared not just for the purpose of gaining
recognition but also for bargaining in bad faith on the part of the company
and by reason of the unfair labor practices committed by its officials. 
Even if the strike were really declared for the purpose of recognition, the
concerted activities of the officers and members of the Association in this
regard may not be said to be unlawful nor the purpose thereof as trivial. 
Significantly, in the voluntary return-to-work agreement entered into
between the company and the Association thereby ending the strike, the
company agreed to recognize for membership in the Association the
position titles mentioned in Annex “B” of said agreement.  This goes to
show that striking for recognition is productive of good result insofar as a
union is concerned.

d.  Trivial and puerile purpose.

If a strike is declared for a trivial, unjust or unreasonable purpose or if

carried out through unlawful means, the law will not sanction it and the
court will declare it illegal. (Luzon Marine Department Union vs. Roldan,
G. R. No. L-2660, May 30, 1950, 86 Phil. 507).
e. Premature strike.

A strike is illegal if staged without giving the employer reasonable time to

consider and act on the demands made by the union. (Almeda vs. CIR, 96
Phil. 306; Insurefco Paper vs. Insurefco, 95 Phil. 761).

f.  Strike to circumvent contracts and judicial orders.

A strike is illegal if used as a means to circumvent valid contractual

commitments (Manila Oriental Sawmills vs. NLU, 91 Phil. 28) or to
circumvent judicial orders lawfully issued.  (ALPAP vs. CIR, 76 SCRA 274).

155.  What is a good faith strike?

It is a well-established policy enunciated in several labor cases that a

strike does not automatically carry the stigma of illegality even if no
unfair labor practice were committed by the employer.  It suffices if such
belief in good faith is entertained by labor as the inducing factor for
staging a strike. (PNOC Dockyard and Engineering Corporation vs. NLRC,
G. R. No. 118223, June 26, 1998, 291 SCRA 231; Pepsi-Cola Labor Union
vs. NLRC, 114 SCRA 930, 939, June 29, 1982). chanrobles virtual law library

Indeed, the presumption of legality prevails even if the allegation of unfair

labor practice is subsequently found to be untrue provided that the union
and its members believed in good faith in the truth of such averment.
(Samahan ng mga Manggagawa sa M. Greenfield (MSMG-UWP) vs.
Ramos, G. R. No. 113907, Feb. 28, 2000; Master Iron Labor Union vs.
NLRC, 219 SCRA 47, 60, Feb. 17, 1993).

For instance, a strike based on a “non-strikeable” ground is generally an

illegal strike; corollarily, a strike grounded on ULP is illegal if no such acts
actually exist.  As an exception, however, even if no ULP acts are
committed by the employer, if the employees believe in good faith that
ULP acts exist so as to constitute a valid ground to strike, then the strike
held pursuant to such belief may be legal.  As a general proposition,
therefore, where the union believed that the employer committed ULP and
the circumstances warranted such belief in good faith, the resulting strike
may be considered legal although, subsequently, such allegations of
unfair labor practices were found to be groundless. (National Union of
Workers in Hotels, Restaurants and Allied Industries vs. NLRC, G. R. No.
125561, March 6, 1998, 287 SCRA 192; Panay Electric Co., Inc. vs. NLRC,
G. R. No. 102672, Oct. 4, 1995, 248 SCRA 688).

However, good faith cannot be invoked as a defense if the ocular

inspection by the labor authorities of the employer’s facilities yields no
semblance of such good faith. (PASVIL/Pascual Liner, Inc. Workers Union
- NAFLU vs. NLRC, G. R. No. 124823, July 28, 1999). chanrobles virtual law library
It is, therefore, an established caveat that a mere claim of good faith
would not justify the holding of a strike if the circumstances would not
warrant such belief.  It is not enough that the union believed that the
employer committed acts of ULP when the circumstances clearly negate
even a prima facie showing to sustain such belief. (National Union of
Workers in Hotels, Restaurants and Allied Industries vs. NLRC, supra; Tiu
vs. NLRC, G. R. No. 123276, Aug. 18, 1997).

In Samahang Manggagawa sa Sulpicio Lines, Inc. – NAFLU vs. Sulpicio

Lines, Inc., [G. R. No. 140992, March 25, 2004], the petitioner union
claimed that the strike was legal for it was done in good faith, having
been staged in response to what its officers and members honestly
perceived as unfair labor practice or union-busting committed by
respondent company.  The Court, however, was unconvinced because it
found the accusation of union-busting bereft of any proof. Scanning the
records very carefully failed to indicate any evidence to sustain such
charge.  Hence, the strike was declared illegal in the light of the ruling in
Tiu vs. NLRC, [G.R. No. 123276, August 18, 1997,  277 SCRA 680, 687]
that it is the union which had the burden of proof to present substantial
evidence to support its allegations (of unfair labor practices committed by
management). The facts and the evidence did not establish even at least
a rational basis why the union would wield a strike based on alleged
unfair labor practices it did not even bother to substantiate during the
conciliation proceedings.  It is not enough that the union believed that the
employer committed acts of unfair labor practice when the circumstances
clearly negate even a prima facie showing to warrant such a belief.

156.  May strikers be dismissed in cases of “good faith” strikes?

In case the strike is declared by the union upon the belief in “good faith”
that the employer has committed unfair labor practices, the strikers
cannot be said to have lost their status as employees of the company
although they did not wait for the cooling-off period to lapse before
staging the strike. (Ferrer vs. CIR, 17 SCRA 353; Cebu Portland Cement
Company vs. Cement Workers Union, 25 SCRA 504).

However, as held in Reliance Surety and Insurance Co., Inc. vs. NLRC, [G.
R. No. 86917-18, Jan. 25, 1991], if the strike conducted was violative of
the mandatory legal requirements, was attended by acts of harassment
and violence, was prompted by no actual, existing unfair labor practice
committed by the employer, and there was no semblance of good faith,
the strike is illegal.  The ruling in Bacus vs. Ople, [G. R. No. L-56856,
October 23, 1984] where the Supreme Court held that the finding of 
illegality attending a strike does not justify the wholesale dismissal of
strikers who were otherwise impressed with good faith, cannot be applied
here.  chanrobles virtual law library
Thus, as pronounced in National Federation of Labor vs. NLRC, [283 SCRA
275, 287-288, Dec. 15, 1997], even if the union acted in good faith in the
belief that the company was committing an unfair labor practice, if no
notice of strike and a strike vote were conducted, the said strike is illegal.
(See also First City Interlink Transportation Co. vs. Confesor, G. R. No.
106316, May 5, 1997).

157.  What is “improved offer balloting”?

Improved offer balloting. - In case of a strike, the Regional Branch of the

NCMB shall, at its own initiative or upon the request of any affected party,
conduct a referendum by secret balloting on the improved offer of the
employer on or before the 30th day of the strike.  When at least a
majority of the union members vote to accept the improved offer, the
striking workers shall immediately return to work and the employer shall
thereupon readmit them upon the signing of the agreement.

158.  What is “reduced offer balloting”?

Reduced offer balloting. - In case of a lockout, the Regional Branch of the

NCMB shall conduct a referendum by secret balloting on the reduced offer
of the union on or before the 30th day of the lockout.  When at least a
majority of the board of directors or trustees or the partners holding the
controlling interest in the case of partnership, vote to accept the reduced
offer, the workers shall immediately return to work and the employer
shall thereupon readmit them upon the signing of the agreement.

159.  What is the power of the DOLE Secretary to assume

jurisdiction over a labor dispute or certify it to the NLRC for
compulsory arbitration?

The DOLE Secretary may assume jurisdiction over a labor dispute, or

certify it to the NLRC for compulsory arbitration, if, in his opinion, it may
cause or likely to cause a strike or lockout in an industry indispensable to
the national interest. (NOTE:  The President may also exercise the power
to assume jurisdiction over a labor dispute).

160.  What is the effect of such assumption or certification of

labor dispute to the NLRC?

a. On intended or impending strike or lockout - automatically enjoined

even if a Motion for Reconsideration is filed. chanrobles virtual law library

b. On actual strike or lockout - strikers or locked out employees should

immediately return to work and employer should readmit them back.

c. On cases filed or may be filed - All shall be subsumed/absorbed by the

assumed or certified case except when the order specified otherwise.  The
parties to the case should inform the DOLE Secretary of pendency
thereof.

In the 2005 case of University of Immaculate Concepcion, Inc. vs. The

Honorable Secretary of Labor, [G. R. No. 151379, January 14, 2005], the
University contends that the Secretary cannot take cognizance of an issue
involving employees who are not part of the bargaining unit.  It insists
that since the individual respondents had already been excluded from the
bargaining unit by a final and executory order by the panel of Voluntary
Arbitrators, then they cannot be covered by the Secretary’s assumption
order.  Said the Supreme Court:

“This Court finds no merit in the UNIVERSITY’s contention.  In

Metrolab Industries, Inc. v. Roldan-Confessor, (254 SCRA 182, 188-
189 [1996]), this Court declared that it recognizes the exercise of
management prerogatives and it often declines to interfere with the
legitimate business decisions of the employer.  This is in keeping
with the general principle embodied in Article XIII, Section 3 of the
Constitution, (Article XIII, Section 3 of the Constitution) which is
further echoed in Article 211 of the Labor Code. However, as
expressed in PAL v. National Labor Relations Commission, (225 SCRA
301, 308 [1993]), this privilege is not absolute, but subject to
exceptions.  One of these exceptions is when the Secretary of Labor
assumes jurisdiction over labor disputes involving industries
indispensable to the national interest under Article 263(g) of the
Labor Code.  xxx.

“When the Secretary of Labor ordered the UNIVERSITY to suspend

the effect of the termination of the individual respondents, the
Secretary did not exceed her jurisdiction, nor did the Secretary 
gravely abuse the same.   It must be pointed out that one of the
substantive evils which Article 263(g) of the Labor Code seeks to
curb is the exacerbation of a labor dispute to the further detriment of
the national interest.  In her Order dated March 28, 1995, the
Secretary of Labor rightly held:

“It is well to remind both parties herein that the main reason or
rationale for the exercise of the Secretary of Labor and
Employment’s power under Article 263(g) of the Labor Code, as
amended, is the maintenance and upholding of the status quo
while the dispute is being adjudicated.  Hence, the directive to
the parties to refrain from performing acts that will exacerbate
the situation is intended to ensure that the dispute does not get
out of hand, thereby negating the direct intervention of this
office.

“The University’s act of suspending and terminating union members

and the Union’s act of filing another Notice of Strike after this Office
 has assumed jurisdiction are certainly in conflict with the status quo
ante.  By any standards[,] these acts will not in any way help in the
early resolution of the labor dispute.  It is clear that the actions of
both parties merely served to complicate and aggravate the already
strained labor-management relations. chanrobles virtual law library

“Indeed, it is clear that the act of the UNIVERSITY of dismissing the

individual respondents from their employment became the impetus
for the UNION to declare a second notice of strike.   It is not a
question anymore of whether or not the terminated employees, the
individual respondents herein, are part of the bargaining unit. Any
act committed during the pendency of the dispute that tends to give
rise to further contentious issues or increase the tensions between
the parties should be considered an act of exacerbation and should
not be allowed.” chanrobles virtual law library

161.  May picketing be enjoined? Are there exceptions?

As a general rule, injunction cannot be issued against the conduct of

picketing by the workers. Under our constitutional set up, picketing is
considered part of the freedom of speech duly guaranteed by the
constitution. (Mortera vs. CIR, 79 Phil. 345).

However, excepted from this legal proscription are the following

situations:

1. where picketing is carried out through the use of illegal means

(Mortera vs. CIR, 79 Phil. 345); or

2. where picketing involves the use of violence and other illegal acts
(PAFLU vs. Barot, 99 Phil. 1008; Caltex vs. CIR, 44 SCRA 350); or

3. where injunction becomes necessary to protect the rights of third

parties (PAFLU vs. Cloribel, 27 SCRA 465).

161.  May an injunction be issued in strike or lockout cases?

As a general rule, strikes and lockouts validly declared, enjoy the

protection of law and cannot be enjoined unless illegal acts are committed
or threatened to be committed in the course of such strikes or lockouts. 
Ordinarily, the law vests in the NLRC the authority to issue injunctions to
restrain the commission of illegal acts during the strikes and pickets.

This policy applies even if the strike appears to be illegal in nature.  The
rationale for this policy is the protection extended to the right to strike
under the constitution and the law.  It is basically treated as a weapon
that the law guarantees to employees for the advancement of their
interest and for their protection. (Caltex vs. Lucero, 4 SCRA 1196).
However, in some cases, injunctions issued to enjoin the conduct of the
strike were held to be valid.

In the 2003 case of San Miguel Corporation vs. NLRC, [G. R. No. 119293,
June 10, 2003], the Supreme Court ruled that injunction may be issued
not only against the commission of illegal act in the course of the strike
but the strike itself.  In this case, the notice of strike filed by the union
has been converted into a preventive mediation case.  Having been so
converted, a strike can no longer be staged based on said notice. Upon
such conversion, the legal effect is that there is no more notice of strike
to speak of. When the NCMB ordered the preventive mediation the union
had thereupon lost the notice of strike it had filed. However, the NCMB
which effected the conversion, has, under the law, no coercive powers of
injunction. Consequently, petitioner company sought recourse from the
NLRC. The NLRC, however, issued a TRO only for free ingress to and
egress from petitioner’s plants, but did not enjoin the unlawful strike
itself. It ignored the fatal lack of notice of strike consequent the
conversion thereof into a preventive mediation case. Article 264(a) of the
Labor Code explicitly states that a declaration of strike without first
having filed the required notice is a prohibited activity, which may be
prevented through an injunction in accordance with Article 254. Clearly,
public respondent should have granted the injunctive relief to prevent the
grave damage brought about by the unlawful strike. (See also PAL vs.
Drilon, 193 SCRA 223 [1991]). chanrobles virtual law library

In the earlier case of San Miguel Corporation vs. NLRC, [304 SCRA
1(1999)] where the same issue of NLRC’s duty to enjoin an unlawful
strike was raised, the Supreme Court ruled that the NLRC committed
grave abuse of discretion when it denied the petition for injunction to
restrain the union from declaring a strike based on non-strikeable
grounds.

In IBM vs. NLRC, [198 SCRA 586 (1991)], it was held that it is the “legal
duty and obligation” of the NLRC to enjoin a partial strike staged in
violation of the law. Failure promptly to issue an injunction by the NLRC
was likewise held therein to be an abuse of discretion. chanrobles virtual law library

In Bulletin Publishing vs. Sanchez, [G. R. No. 74425, Oct. 7, 1986],

injunction was allowed against a strike which was staged to compel the
employer to ignore the law. The reason is when trade unionism and
strikes are used in violation of the law, misuse thereof can be the subject
of judicial intervention.

162. What is meant by “return-to-work” order?

A return-to-work order is an indispensable consequence of the

assumption or certification order issued by the DOLE Secretary in national
interest cases.  It is automatic in nature which means that it may be
enforced even if it is not expressly stated in the assumption or
certification order because it is considered the logical and legal effect of
the issuance of said order. Violation thereof, even for one day, would
make the strike illegal.  This holds true even if a Motion for
Reconsideration of the assumption or certification order is filed.
(Telefunken Semiconductors Employees Union-FFW vs. CA, G. R. Nos.
143013-14, Dec. 18, 2000).

Thus, it is error for striking workers to continue with their strike alleging
absence of a return-to-work order. Article 263 [g] is clear. Once an
assumption/certification order is issued, strikes are enjoined or, if one has
already taken place, all strikers should immediately return to work. (Ibid.;
id.).

Returning to work, therefore, on the part of a worker, is “not a matter of

option or voluntariness but of obligation.” (Marcopper Mining Corporation
vs. Brillantes, G. R. No. 119381, March 11, 1996, 254 SCRA 595, 602;
Cf.  St. Scholastica’s College vs. Torres, 210 SCRA 565 [1992];
Federation of Free Workers vs. Inciong, 208 SCRA 157 [1992]).

163.  What is meant by the phrase “all striking or locked-out

employees” and “readmit all workers” within the context of a
return-to-work order?

Under Article 263 [g], once an assumption or certification order is issued,

the consequence thereof is clear, thus:

“Such assumption or certification shall have the effect of

automatically enjoining the intended or impending strike or lockout
as specified in the assumption or certification order. If one has
already taken place at the time of assumption or certification, all
striking or locked-out employees shall immediately return to work
and the employer shall immediately resume operations and readmit
all workers under the same terms and conditions prevailing before
the strike or lockout.” (Emphasis supplied)

In the 2005 case of PLDT vs. Manggagawa ng Komunikasyon sa Pilipinas,

[G. R. No. 162783, July 14, 2005], Secretary of Labor and Employment
Patricia Sto. Tomas certified the labor dispute to the NLRC for compulsory
arbitration.  In her order, she directed the return to work of all strikers
“except those who were terminated due to redundancy.” In setting aside
this “qualified” return-to-work order for being contrary to law, the Court
of Appeals observed that:

“The phrase ‘all striking or locked-out employees’ and ‘readmit all

workers’ does not distinguish or qualify and emphatically is a catch-
all embracing enumeration of who should be returned to work. 
 ‘Where the law does not distinguish, courts should not distinguish
(Recaña v. Court of Appeals, 349 SCRA 24 [2001] ).’”

The Supreme Court affirmed said ruling of the CA. As Article 263 [g] is
clear and unequivocal in stating that ALL striking or locked-out employees
shall immediately return to work and the employer shall immediately
resume operations and readmit ALL workers under the same terms and
conditions prevailing before the strike or lockout, then the unmistakable
mandate must be followed by the Secretary.  In the 2004 case of Trans-
Asia Shipping Lines, Inc.-Unlicensed Crews Employees Union-Associated
Labor Unions (Tasli-Alu) vs. Court of Appeals, [G.R. No. 145428, July 07,
2004], it was held:   chanrobles virtual law library

“. . . Assumption of jurisdiction over a labor dispute, or as in this

case the certification of the same to the NLRC for compulsory
arbitration, always co-exists with an order for workers to return to
work immediately and for employers to readmit all workers under
the same terms and conditions prevailing before the strike or
lockout.”

164. What is meant by “status quo ante” within the context of a

return-to-work order?

In the same 2005 PLDT case [supra], the Supreme Court had occasion to
describe what status quo prior to the strike means. Records show that the
strike occurred on December 23, 2002.  Article 263 [g] directs that the
employer must readmit all workers under the same terms and conditions
prevailing before the strike.  Since the strike was held on the
aforementioned date, then the condition prevailing before it, which was
the condition present on December 22, 2002, must be maintained.
Undoubtedly, on December 22, 2002, the 383 members of the private
respondent-union who were dismissed on December 31, 2002 due to
alleged redundancy were still employed by the petitioner and holding their
respective positions. This is the status quo that must be maintained.

165.  What is meant by the phrase “under the same terms and
conditions prevailing before the strike” within the context of a
return-to-work order?

Article 263 [g] constitutes a limitation or exception to the management

prerogative of hiring, firing, transfer, demotion and promotion of
employees.  And to the extent that Article 263 [g] calls for the admission
of all workers under the same terms and conditions prevailing before the
strike, the employer is restricted from exercising its generally unbounded
right to transfer or reassign its employees. (Trans-Asia Shipping Lines,
Inc. – Unlicensed Crews Employees Union – Associated Labor Unions
[TASLI-ALU] vs. CA, G. R. No. 145428, July 7, 2004).
The case of Metrolab Industries, Inc. vs. Roldan-Confesor, [254 SCRA 182
(1996)], is particularly instructive.  In this case, the Secretary of Labor,
pursuant to Article 263 [g], assumed jurisdiction over the labor dispute at
Metro Drug, Inc.  Pending resolution of said dispute, the company laid-off
ninety-four (94) of its rank-and-file employees invoking the exercise of
management prerogative.  The Secretary of Labor declared the layoff
illegal and ordered the company to reinstate the employees.  The Court
upheld said order of the Secretary of Labor as it quoted the assailed
resolution therein, viz.:

“... But it may nevertheless be appropriate to mention here that one

of the substantive evils which Article 263 (g) of the Labor Code seeks
to curb is the exacerbation of a labor dispute to the further detriment
of the national interest.  When a labor dispute has in fact occurred
and a general injunction has been issued restraining the commission
of disruptive acts, management prerogatives must always be
exercised consistently with the statutory objective. “

Likewise apropos is the case of University of Sto. Tomas vs. NLRC, [190
SCRA 758 (1990)], where the Secretary of Labor, pursuant to Article 263
[g], directed the university to “readmit all its faculty members, including
the sixteen (16) union officials, under the same terms and conditions
prevailing prior to the present dispute.”  Instead of fully complying
therewith by allowing the faculty members to teach in the classroom, the
university gave some of them “substantially equivalent academic
assignments without loss in rank, pay or privilege.” The Court ruled
therein that the grant of substantially equivalent academic assignments
could not be sustained because it could not be considered a reinstatement
under the same terms and conditions prevailing before the strike. chanrobles
virtual law library

In Trans-Asia Shipping Lines, Inc. – Unlicensed Crews Employees Union –

Associated Labor Unions [TASLI-ALU] vs. Court of Appeals, [G. R. No.
145428, July 7, 2004], it was ruled that the respondent company cannot
rightfully exercise its management’s prerogative to determine where its
employees are to be assigned or to determine their job assignments in
view of the explicit directive contained in the return-to-work orders of the
Secretary of Labor to accept the striking workers back “under the same
terms and conditions prevailing prior to the strike.” The order simply
means that the employees should be returned to their ship assignments
as before they staged their strike.   The respondent is mandated, under
the said order, to issue embarkation orders to the employees to enable
them to report to their ship assignments in compliance with the Order of
the Secretary of Labor.

166.  Is “payroll reinstatement” proper to implement a return-to-

work order?
The Supreme Court, instead of actual reinstatement, allowed payroll
reinstatement in University of Immaculate Concepcion, Inc. vs. The
Honorable Secretary of Labor, [G. R. No. 151379, January 14, 2005]. It
said:

“With respect to the Secretary’s Order allowing payroll reinstatement

instead of actual reinstatement for the individual respondents herein,
an amendment to the previous Orders issued by her office, the same
is usually not allowed.  Article 263(g) of the Labor Code
aforementioned states that all workers must immediately return to
work and all employers must readmit all of them under the same
terms and conditions prevailing before the strike or lockout.  The
phrase “under the same terms and conditions” makes it clear that
the norm is actual reinstatement.  This is consistent with the idea
that any work stoppage or slowdown in that particular industry can
be detrimental to the national interest.

“In ordering payroll reinstatement in lieu of actual reinstatement,

then Acting Secretary of Labor Jose S. Brillantes said: chanrobles virtual law library

‘Anent the Union’s Motion, we find that superseding

circumstances would not warrant the physical reinstatement of
the twelve (12) terminated employees.  Hence, they are hereby
ordered placed under payroll reinstatement until the validity of
their termination is finally resolved.’ chanrobles virtual law library

“As an exception to the rule, payroll reinstatement must rest on special

circumstances that render actual reinstatement impracticable or otherwise
not conducive to attaining the purposes of the law. (Manila Diamond Hotel
Employees Union vs. CA, G.R. No. 140518 [Dec. 16, 2004]; UST vs.
NLRC, 190 SCRA 758 [1990]). chanrobles virtual law library

“The ‘superseding circumstances’ mentioned by the Acting Secretary

of Labor no doubt refer to the final decision of the panel of
arbitrators as to the confidential nature of the positions of the twelve
private respondents, thereby rendering their actual and physical
reinstatement impracticable and more likely to exacerbate the
situation.  The payroll reinstatement in lieu of actual reinstatement
ordered in these cases, therefore, appears justified as an exception
to the rule until the validity of their termination is finally resolved. 
This Court sees no grave abuse of discretion on the part of the Acting
Secretary of Labor in ordering the same. Furthermore, the issue has
not been raised by any party in this case.”  (University of
Immaculate Concepcion, Inc. vs. The Hon. Secretary of Labor, G. R.
No. 151379, Jan. 14, 2005).

The same holding was made in the earlier case of University of Santo
Tomas [supra]. Here, the Secretary assumed jurisdiction over the labor
dispute between striking teachers and the university. He ordered the
striking teachers to return to work and the university to accept them
under the same terms and conditions.  However, in a subsequent order,
the NLRC provided payroll reinstatement for the striking teachers as an
alternative remedy to actual reinstatement. The Supreme Court affirmed
the validity of such an order and ruled that NLRC did not commit grave
abuse of discretion in providing for the alternative remedy of payroll
reinstatement. Moreover, the Supreme Court found that it was merely an
error of judgment, which is not correctible by a special civil action for
certiorari.  It observed that the NLRC was only trying its best to work out
a satisfactory ad hoc solution to a festering and serious problem.

167.  When is “payroll reinstatement” not proper?

In some cases, however, payroll reinstatement was not allowed by the

Supreme Court. For instance, in Manila Diamond Hotel Employees’ Union
vs. The Hon. Court of Appeals, [G. R. No. 140518, December 16, 2004],
the High Court disallowed the payroll reinstatement of workers who were
ordered to return to work by reason of the assumption order. It
distinguished the case from the earlier case of University of Santo Tomas
(UST) vs. NLRC, [190 SCRA 758 (1990)] (supra) in the light of one very
important fact: the teachers in the latter case could not be given back
their academic assignments since the order of the Secretary for them to
return to work was given in the middle of the first semester of the
academic year.  The NLRC was, therefore, faced with a situation where
the striking teachers were entitled to a return-to-work order, but the
university could not immediately reinstate them since it would be
impracticable and detrimental to the students to change teachers at that
point in time.

In the Manila Diamond Hotel case,  there  was  no  showing  that  the 
facts called  for  payroll  reinstatement  as  an  alternative  remedy.  The
High Tribunal declared that a strained relationship between the striking
employees and management is no reason for payroll reinstatement in lieu
of actual reinstatement.  The petitioner-union correctly pointed out that
labor disputes naturally involve strained relations between labor and
management, and  that  in  most  strikes,  the  relations  between  the 
strikers  and the non-strikers will similarly be tense. Bitter labor disputes
always leave an aftermath of strong emotions and unpleasant situations. 
Nevertheless, the government must still perform its function and apply
the law, especially if national interest is involved.

As a consequence of the above findings, the Supreme Court in Manila

Diamond Hotel declared the Secretary’s subsequent order for mere payroll
reinstatement as constitutive of grave abuse of discretion amounting to
lack or excess of jurisdiction.  Indeed, the “great breadth of discretion” by
the Secretary once he assumes jurisdiction over a labor dispute is
recognized. However, payroll reinstatement in lieu of actual reinstatement
is a departure from the rule in these cases and there must be showing of
special circumstances rendering actual reinstatement impracticable, as in
the UST case aforementioned, or otherwise not conducive to attaining the
purpose of the law in providing for assumption of jurisdiction by the
Secretary of Labor and Employment in a labor dispute that affects the
national interest.  None appears to have been established in this case. 

168.  Are the demands of the union deemed waived upon a

voluntary return to work?

The act of strikers in voluntarily returning to work does not result in the
waiver of their original demands.  Such act of returning to work only
meant that they desisted from the strike which desistance is a personal
act of the strikers and cannot be used against the union and interpreted
as a waiver by it of its original demands for which the strike was adopted
as a weapon.  (Bisaya Land Transportation Co., Inc. vs. CIR, 102 Phil.
438).

In the same breadth, a return-to-work order does not have the effect of
rendering as moot and academic, the issue of the legality of the strike. 
(Insurefco Pulp vs. Insurefco, 95 Phil. 761).  chanrobles virtual law library

However, according to Unlicensed Crews Employees Union – Associated

Labor Unions [TASLI-ALU] vs. CA, [G. R. No. 145428, July 7, 2004], an
employer may be considered to have waived its right to proceed against
the striking employees for alleged commission of illegal acts during the
strike when, during a conference before the Chairman of the NLRC, it
agreed to reinstate them and comply fully with the return-to-work order
issued by the Secretary of Labor and Employment. (Reformist Union of
R.B. Liner, Inc. vs. NLRC, 266 SCRA 713 [1997])

169.  Does the filing of a Motion for Reconsideration affect the

return-to-work order?

The filing of a motion for reconsideration does not affect the immediate
executory character of the return-to-work order issued as a consequence
of an assumption or certification order. The reason is simple: a return-to-
work order is immediately effective and executory notwithstanding the
filing of a motion for reconsideration. (Telefunken Semiconductors
Employees Union-FFW vs. Secretary of Labor and Employment, G. R. Nos.
122743 and 127215, Dec. 12, 1997, 283 SCRA 145).

To say that the effectivity of the return-to-work order must wait

affirmance in a motion for reconsideration is not only to emasculate it but
indeed to defeat its import, for by then, the deadline fixed for the return-
to-work would, in the ordinary course, have already passed and, hence,
can no longer be affirmed insofar as the time element is concerned.
(Philippine Airlines Employees Association vs. Philippine Airlines, Inc., 38
SCRA 372; University of Santo Tomas vs. NLRC, G. R. No. 89920, Oct.
18, 1990).

170. What is the effect of defiance of assumption or certification

order or return-to-work order?

Non-compliance with the assumption/certification order of the Secretary

of Labor and Employment or a return-to-work order issued pursuant
thereto by either the Secretary or the NLRC to which a labor dispute is
certified, is considered an illegal act committed in the course of the strike
or lockout.  (See Section 4, Rule IX, Rules of Procedure of the NLRC, as
amended by NLRC Resolution No. 01-02, Series of 2002; Telefunken
Semiconductors Employees Union-FFW vs. CA, G. R. Nos. 143013-14,
Dec. 18, 2000).

a.  Effect on strikers in case of strike.

The Supreme Court held in the 2004 case of San Juan de Dios Educational
Foundation Employees Union – AFW vs. San Juan de Dios Educational
Foundation, Inc. [Hospital], (G. R. No. 143341, May 28, 2004), that in
case of non-compliance by the strikers with return-to-work order issued in
connection with the assumption/certification by the Secretary of Labor
and Employment, they may be subjected to immediate disciplinary action,
including dismissal or loss of employment status and even to criminal
prosecution.

Under Article 264, paragraph [a], it is clear that from the moment a
worker defies a return-to-work order, he is deemed to have abandoned
his job. The strike becomes a prohibited activity under the same
provision.  It is already in itself knowingly participating in an illegal act.
(See also Grand Boulevard Hotel vs. Genuine Labor Organization of
Workers in Hotel Restaurant and Allied Industrial [GLOWHRAIN]; Grand
Boulevard Hotel vs. Dacanay, G.R. Nos. 153664-65, July 18, 2003).

b.  Effect on employers in case of lockout.

In case of non-compliance by the employer with the return-to-work order

issued in connection with the assumption/certification of the labor
dispute, he may be held liable to pay backwages, damages and other
positive or affirmative reliefs, even criminal prosecution against him. 
(Article 263[g], Labor Code; Section 4, Rule IX, Rules of Procedure of the
NLRC, as amended by NLRC Resolution No. 01-02, Series of 2002).

Employers who refuse to re-admit returning workers may be liable, upon

filing of proper petition for the payment of wages and other benefits, from
the date of actual refusal until the workers are re-admitted. (No. 24,
Guidelines Governing Labor Relations).
c.  Effect on the legality of strike.

The strike is illegal because of the brazen disregard of the return-to-work

order of the Secretary. (Union of Filipro Employees, vs. Nestle Philippines,
Inc., G. R. No. 88710-13, Dec. 19, 1990; Liberal Labor Union vs. Phil. Can
Co., 91 Phil. 72; PAL vs. PALEA, G. R. No. L-8197, Oct. 31, 1958). chanrobles
virtual law library

Where the return-to-work order is issued pending the determination of

the legality of the strike, it is not correct to say that it may be enforced
only if the strike is legal and may be disregarded if the strike is illegal. 
Precisely, said the Supreme Court in Asian Transmission Corporation vs.
NLRC, [G. R. No. 88728, Nov. 22, 1989], the purpose of the return-to-
work order is to maintain the status quo while the determination is being
made.  Otherwise, the workers who contend that the strike is legal can
refuse to return to their work and use a standstill in the company
operations while retaining the positions they refuse to discharge or allow
the management to fill.  Worse, they will also claim payment for work not
done, on the ground that they are still legally employed although actually
engaged in activities inimical to their employer’s interest.

d.  Contempt citation.

The Secretary of Labor and Employment may cite the defiant party in
contempt pursuant to the power vested in him under the provisions of the
Labor Code. (No. 035, Primer on Strike, Picketing and Lockout).

e.  Refusal to acknowledge receipt of assumption order.

Admittedly, in many instances, it is difficult to serve assumption or

certification orders. The aversion to receive such orders is
understandable. If a strike has not yet been staged, receipt of the order
would mean that the strike can no longer push through.  All preparations,
therefore, would all be put to naught. If a strike is on-going, receipt of
such order would mean that the strike has to end.  Any further
continuation thereof would be fatal as it may result in the loss of
employment status of the defiant strikers.

The Supreme Court is aware of this difficulty of serving said orders on

striking unions and their members who invariably view the DOLE’s
process servers with suspicion and hostility.  The refusal to receive such
orders and other processes is, as described by the Supreme Court in one
case, “an apparent attempt to frustrate the ends of justice.”  (Navale vs.
CA, 253 SCRA 705). chanrobles virtual law library

Such being the case, the Supreme Court said that it cannot allow the
union to thwart the efficacy of the assumption and return-to-work orders
issued in the national interest, through the simple expediency of refusing
to acknowledge receipt thereof.

The 2000 case of Telefunken Semiconductors Employees Union-FFW vs.

CA, [G. R. Nos. 143013-14, December 18, 2000], presents a good study
on this point.  Petitioners here claimed that the assumption and return-to-
work orders issued by the Secretary of Labor were allegedly inadequately
served upon them. The Supreme Court, however, found this contention
untenable in the light of what had already been clearly established in this
case, to wit:

“x x x, the reports of the DOLE process server, shows that the Notice
of Order of 8 September 1995 was actually served on the Union
President.  The latter, however, refused to acknowledge receipt of
the same on two separate occasions (on 8 September 1995 at 7:15
p.m. and on 11 September 1995 at 9:30 a.m.).  The Union’s counsel
of record, Atty. Allan Montano, similarly refused to acknowledge
receipt of the 8 September 1995 Order on 9 September 1995 at 1:25
p.m.

“Records also show that the Order of 16 September 1995 was served
at the strike area with copies left with the striking workers, per the
process server’s return, although a certain Virgie Cardenas also
refused to acknowledge receipt.  The Federation of Free Workers
officially received a copy as acknowledged by a certain Lourdes at
3:40 p.m. of 18 September 1995.

“The foregoing clearly negate the Union’s contention of inadequate

service of the Orders dated 8 and 16 September 1995 of Acting
Secretary Brillantes.  Furthermore, the DOLE process server’s
discharge of his function is an official act carrying the presumption of
regularity in its performance which the Union has not disproved,
much less disputed with clear and convincing evidence.

“Likewise, it would be stretching the limits of credibility if We were to

believe that the Union was unaware of the said Orders during all the
conciliation conferences conducted by the NCMB-DOLE.  Specifically,
in the conciliation meetings after the issuance of the Order of 8
September 1995 to settle the unresolved CBA issues and after the
issuance of the Order of 16 September 1995 to establish the
mechanics for a smooth implementation of this Office’s return-to-
work directive, the Union – with its officers and members in
attendance – never questioned the propriety or adequacy by which
these Orders were served upon them.”

f. The certification/assumption order may be served at any time of the

day.
To cast doubt on the regularity of the aforesaid service of the two Orders
issued by the Secretary of Labor, petitioners in Telefunken [supra] cite
Section 1, Rule IX of the NLRC Manual on Execution of Judgment  which
provides that: chanrobles virtual law library

“Section 1.  Hours and Days When Writ Shall Be Served. – Writ of
Execution shall be served at any day, except Saturdays, Sundays
and holidays, between the hours of eight in the morning and five in
the afternoon. x x x”

However, the Supreme Court observed that the above-cited rule is not
applicable to the case at bar inasmuch as Sections 1 and 4, Rule III of the
same NLRC Manual provide that such “execution shall issue only upon a
judgment or order that finally disposes of an action or proceeding.” The
assumption and return-to-work orders issued by the Secretary of Labor in
the case at bar are not the kind of orders contemplated in the
immediately cited rule of the NLRC because such orders of the Secretary
of Labor did not yet finally dispose of the labor dispute.  As pointed out by
the Secretary of Labor in his decision, petitioners cannot now feign
ignorance of his official intervention, to wit:

“The admissibility of the evidence presented by the Company,

however, has been questioned. The Union’s arguments are less than
convincing. The numerous publications of the subject DOLE Orders in
various newspapers, tabloids, radio and television cannot be
considered hearsay and subject to authentication considering that
the subject thereof were the lawful Orders of a competent
government authority. In the case of the announcements posted on
the Union’s bulletin board, pictures of which were presented by the
Company in evidence, suffice it for us to state that the bulletin board
belonged to the Union.  Since the veracity of the contents of the
announcements on the bulletin board were never denied by the
Union except to claim that these were ‘self-serving,
unverified/unverifiable and thus utterly inadmissible,’ We cannot but
admit the same for the purpose for which it was presented.”

g.  Period of defiance of return-to-work order, not material.

It is well-settled that the length of time within which the return-to-work

order was defied is not significant in determining the liability of the
defiant party to the legal consequences thereof.

The argument, therefore, should be rejected that since the defiance of the
return-to-work order did not last for five (5) months as in the case of
Sarmiento vs. Tuico, [G. R. No. 75271-73, June 27, 1988], the defiant
workers should not be dismissed.  It is clear from the law that from the
moment a worker defies a return-to-work order, he is deemed to have
abandoned his job.  It is already in itself knowingly participating in an
illegal act.  Otherwise, the worker will just simply refuse to return to his
work and cause a standstill in the company operations while retaining the
position he refused to discharge or allow management to fill.

In Federation of Free Workers vs. Inciong, [G. R. No. L-49983, April 20,
1992], the termination from work of the strikers who defied the return-to-
work order for only nine (9) days was upheld.

171. Power to assume or certify strikes or lockouts in hospitals,

clinics and medical institutions.

The DOLE Secretary may immediately assume jurisdiction over the labor
dispute within 24 hours from his knowledge thereof. In labor disputes
adversely affecting the continued operation of such hospitals, clinics or
medical institutions, it shall be the duty of the striking union or locking-
out employer to provide and maintain an effective skeletal workforce of
medical and other health personnel, whose movement and services shall
be unhampered and unrestricted, as are necessary to insure the proper
and adequate protection of the life and health of its patients, most
especially emergency cases, for the duration of the strike or lockout.

172.  May employees in the government service conduct strike?

Concerted activities and strikes in the government service are not allowed
because the terms and conditions of government employment are
governed by law.  Government employees may, however, organize
government employees' organizations and may negotiate certain terms
and conditions of employment except:  (1) those requiring appropriations;
or (2) exercise of prerogatives.

173.  What is the effect of the illegality of strike on employment

of strikers?

The rule is different for union officers, as distinguished from ordinary

members of the union.

The mere declaration of the illegality of strike would result in the

termination of employment of union officers. They are deemed to have
lost their employment status.  This adverse consequence does not apply
to ordinary union members except when they participated in the
commission of illegal acts in the course of the strike, in which case, they
shall be deemed to have also lost their employment status. 

174.  Who are the “union officers” who should be terminated as a

result of illegal strike? 

As to who the union officers are for purposes of determining liability for
the illegal strike, the Supreme Court held in CCBPI Postmix Workers
Union vs. NLRC, [G. R. No. 114521, Nov. 27, 1998] that the certifications
issued by the Chief of the Labor Organization Division of the Bureau of
Labor Relations, as to the union officers, being public records, enjoy the
presumption of regularity and deserve weight and probative value. Thus,
in the absence of clear and convincing evidence that they are flawed, they
should be taken on its face value. chanrobles virtual law library

With respect to the company’s allegation that by being signatories to the

CBA, and the Memorandum and Amendments, the concerned employees
have effectively represented themselves as union officers, the Supreme
Court ruled in the same case that that such did not sufficiently establish
the status of the employees as union officers during the illegal strike. 
Especially so when they signed said documents as mere witnesses. chanrobles
virtual law library

Neither were their active roles during the bargaining negotiations may be
considered as evidence of their being union officers.  Quite interestingly,
in situations such as negotiations and strikes, union officers could not
have the monopoly of action and reaction.  Finding themselves to be
similarly situated, the union members, stimulated by rising emotions,
joined their leaders and immersed themselves in the dealings and
negotiations. (Coca-Cola Bottlers Phils, Inc. vs. NLRC, G. R. No. 123491,
Nov. 27, 1998, 299 SCRA 410).

a.  Only the union officers during the strike are liable.

It must be emphasized that the penalty of dismissal could be imposed

only on union officers serving and acting as such during the period of
illegal strike. (Lapanday Workers Union vs. NLRC, 248 SCRA 95, 106).

As a necessary implication, if employees acted as union officers after said

strike, they may not be held liable and, therefore, could not be
terminated. (CCBPI Postmix Workers Union vs. NLRC, supra).

b.  No wholesale forfeiture of employment status.

In Telefunken Semiconductors Employees Union-FFW vs. Secretary of

Labor and Employment, [G. R. Nos. 122743 and 127215, Dec. 12, 1997,
283 SCRA 145], it was held that declaration of a wholesale forfeiture of
employment status of all those who participated in the strike is not
allowed if there was inadequate service of the certification order on the
union as of the date the strike was declared and there was no showing
that the striking members had been apprised of such order by the union. 
The mere filing of charges against an employee for alleged illegal acts
during a strike does not by itself justify his dismissal.  The charges must
be proved at an investigation duly called where the employee shall be
given an opportunity to defend himself.  This is true even if the alleged
ground constitutes a criminal offense. (See also  Batangas Laguna
Tayabas Bus Company vs. NLRC, G. R. No. 101858, Aug. 21, 1992, 212
SCRA 792, 799-801).

c. Union officers ordered dismissed despite illegal strike for only 1 day.

Invoking compassion, petitioner-union in Samahang Manggagawa sa

Sulpicio Lines, Inc. – NAFLU vs. Sulpicio Lines, Inc., [G. R. No. 140992,
March 25, 2004] pleads that its officers who participated in the one-day
strike should not be dismissed from the service, considering that
respondent’s business activities were not interrupted, much less
paralyzed. While we sympathize with their plight, said the Supreme Court,
however, we must take care that in the contest between labor and
capital, the results achieved are fair and in conformity with the law.  It is
worth reiterating that the strike is illegal for failure of petitioner to submit
the strike vote to the Department of Labor and Employment at least
seven (7) days prior thereto.  Also, petitioner failed to prove that
respondent company committed any unfair labor practice. Amid this
background, the participation of the union officers in an illegal strike
forfeits their employment status.

175.  Who are strike breakers? 

A strike breaker is any person who obstructs, impedes or interferes with

by force, violence, coercion, threats, or intimidation any peaceful
picketing by employees during any labor controversy affecting wages,
conditions of work or in the exercise of right to self-organization or
collective bargaining.  Use or employment of strike breakers is prohibited
by law.

176. What is the nature of the ingress to and egress from the
establishment subject of the strike?

The ingress to (entrance) and egress from (exit) the establishment struck
against are not part of the strike area and, thus, may not be blocked or
picketed. (No. 025, Primer on Strike, Picketing and Lockout).

Peaceful ingress and egress of workers who may want to work and those
of third parties transacting lawful business with the company under strike
is legal. (Progressive Workers Union vs. Aguas, 150 SCRA 429).

177. What is the rule on hiring of replacements?

a.  Hiring of replacements, when permanent.

As a general rule, the hiring of replacements for the strikers during a

strike is not an unfair labor practice act of an employer.  He is entitled to
do it in his effort to carry on the business.  Such hiring may even be done
on a permanent basis in the case of an economic strike.  And in the event
that the strikers decide to resume their work, the employer is not duty-
bound to dismiss said permanent replacements. (Consolidated Labor
Association of the Philippines vs. Marsman & Co., G. R. Nos. L-17038 and
L-17057, July 31, 1964).

b.  Hiring of replacements, when not permanent.

But in an unfair labor practice strike, such replacements may not be

permanently employed.  The employer is duty-bound to discharge them
when the strikers are reinstated to their former positions. (The Insular
Life Assurance Co., Employees Association vs. Insular Life Assurance Co.,
37 SCRA 244; Norton & Harrison Company and Jackbilt Concrete Blocks
Co. Labor Union vs. Norton & Harrison Co. and Jackbilt Concrete Blocks
Co., G. R. No. L-18461, Feb. 10, 1967; Feati University vs. Bautista, G. R.
No. L-21278, Dec. 27, 1966).

c.  Hiring of replacements for strikers who refuse to return to work.

Executive Order No. 111 repealed Letter of Instructions No. 1458 dated
May 1, 1985 insofar as it allows management to replace striking workers
who defy return-to-work orders. (Section 12, Executive Order No. 111,
Dec. 24, 1986).

However, it was held in Allied Banking Corporation vs. NLRC, [G. R. No.
116128, July 12, 1996, 258 SCRA 724], that in case of non-compliance
with an assumption or certification order, the Department of Labor and
Employment is authorized to impose such sanctions as may be provided
for by law which may include the hiring of replacements for workers
defying the order. chanrobles virtual law library

In case of such defiance of return-to-work order, a hearing is not required

in order for the employer to validly hire replacements for strikers who
committed the defiance. The reason is, such a sanction is merely
provisional to enable the employer to comply with its duties and functions
which are closely related to the interest of the public. (Free Telephone
Workers Union vs. PLDT, 113 SCRA 662; NLF vs. NLRC, 139 SCRA 589;
RCPI vs. PCFW, 58 SCRA 762).

PART - IV

LAW ON TERMINATION OF EMPLOYMENT

SECURITY OF TENURE

1.  What is the extent of the application of security of tenure?

Security of tenure does not exclusively apply to regular employment
only.  It also applies to probationary, seasonal, project and other forms of
employment during the effectivity thereof.

Managerial employees also enjoy security of tenure. The principle of

security of tenure applies not only to rank-and-file employees but also to
managerial employees. (PLDT vs. Tolentino, G. R. No. 143171, Sept. 21,
2004). chanrobles virtual law library

The fact that one is a managerial employee does not by itself exclude him
from the protection of the constitutional guarantee of security of tenure.
(Fujitsu Computer Products Corporation of the Philippines vs. CA, G. R.
No. 158232, April 8, 2005; Maglutac vs. NLRC, 189 SCRA 767 [1990]).
chanrobles virtual law library

MANAGEMENT RIGHTS AND PREROGATIVES.

2.  What is the extent of the rights and prerogatives of

management?

Our laws recognize and respect the exercise by management of certain

rights and prerogatives.  For this reason, courts often decline to interfere
in legitimate business decisions of employers.  In fact, labor laws
discourage interference in employers’ judgment concerning the conduct of
their business.  (Philippine Industrial Security Agency Corporation vs.
Aguinaldo, G. R. No. 149974, June 15, 2005; Mendoza vs. Rural Bank of
Lucban, G.R. No. 155421, July 7, 2004).

An employer can regulate, generally without restraint, according to its

own discretion and judgment, every aspect of its business. (Deles, Jr. vs.
NLRC, G. R. No. 121348, March 9, 2000).  chanrobles virtual law library

This privilege is inherent in the right of employers to control and manage

their enterprise effectively.  (Mendoza vs. Rural Bank of Lucban, G.R. No.
155421, 07 July 2004).
 
3.  What are the limitations on the exercise of management
prerogatives?

Needless to state, the exercise of management prerogative is not

absolute.  The exercise of management prerogative is subject to the
limitations imposed by law or by CBA, employment contract, employer
policy or practice and general principles of fair play and justice. (The
Philippine American Life and General Insurance Co. vs. Gramaje, G. R.
No. 156963, Nov. 11, 2004).

4.  What is the extent of management’s prerogative to prescribe

working methods, time, place, manner and other aspects of work?
Employers have the freedom and prerogative, according to their
discretion and best judgment, to regulate and control all aspects of
employment in their business organizations.  Such aspects of employment
include 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 workers.
(Philippine Airlines, Inc. vs. NLRC, G. R. No. 115785, Aug. 4, 2000). chanrobles
virtual law library

Thus, as held in one case, management retains the prerogative, whenever

exigencies of the service so require, to change the working hours of its
employees. (Sime Darby Pilipinas, Inc. vs. NLRC, G.R. No. 119205, 15
April 1998, 289 SCRA 86). chanrobles virtual law library

5. What is the extent of management’s prerogative to transfer or

re-assign workers?

a.  Transfer; concept and meaning.

A transfer means a movement (1) from one position to another of

equivalent rank, level or salary, without a break in the service; or (2)
from one office to another within the same business establishment.
(Sentinel Security Agency, Inc. vs. NLRC, G. R. No. 122468, Sept. 3,
1998).

b.  Transfer of employees, inherent right of management.

The Supreme Court has recognized and upheld the prerogative of

management to transfer an employee from one office to another within
the business establishment, provided there is no demotion in rank or
diminution of salary, benefits, and other privileges; and the action is not
motivated by discrimination, made in bad faith, or effected as a form of
punishment or demotion without sufficient cause. This is a privilege
inherent in the employer’s right to control and manage its enterprise
effectively. (Mendoza vs. Rural Bank of Lucban, G. R. No. 155421, July 7,
2004; Benguet Electric Cooperative vs. Fianza, G. R. No. 158606, March
9, 2004).

c.  Test to determine validity of transfer.

But like all other rights, there are limits. The managerial prerogative to
transfer personnel must be exercised without grave abuse of discretion
and putting to mind the basic elements of justice and fair play. Having the
right should not be confused with the manner that right is exercised.
Thus, it cannot be used as a subterfuge by the employer to rid himself of
an undesirable worker.  In particular, the employer must be able to show
that the transfer is not unreasonable, inconvenient or prejudicial to the
employee. Should the employer fail to overcome this burden of proof, the
employee’s transfer is tantamount to constructive dismissal. (The
Philippine American Life and General Insurance Co. vs. Gramaje, G. R.
No. 156963, Nov. 11, 2004; Globe Telecom, Inc. vs. Florendo-Flores, G.
R. No. 150092, Sept. 27, 2002).

In Dusit Hotel Nikko vs. NUWHRAIN – Dusit Hotel Nikko Chapter, [G. R.
No. 160391, August 9, 2005], it was held that the several offers made by
the employer to transfer an employee was indicative of bad faith. More so
when the contemplated transfer was from a higher position to a much
lower one. Further, the offers were made after said employee was
dismissed due to redundancy under a Special Early Retirement Program
(SERP).  The employer tried to recall the termination when it was learned
that she was going to file a complaint with the NLRC for illegal dismissal.
As a ploy to stave off the filing of said case, the offers were made to the
employee but she had not been transferred to another position at all.  Six
months from the time the employer made the offers to her, the latter
never heard from the former again. Certainly, good faith cannot be
attributed on the part of the hotel. More importantly, the offers made
could not have the effect of validating an otherwise arbitrary dismissal.
chanrobles virtual law library

d.  No vested right to position.

In OSS Security & Allied Services, Inc., vs. NLRC, [G. R. No. 112752, Feb.
9, 2000], the High Court ruled that an employee has a right to security of
tenure but this does not give her such a vested right in her position as
would deprive the employer of its prerogative to change her assignment
or transfer her where her service will be most beneficial to the employer’s
client. (See also Tan vs. NLRC, 299 SCRA 169, 180 [1998]).

In Chu vs. NLRC, [G. R. No. 106107, June 2, 1994], an employee

complained that his right was violated by the transfer effected by
management. He argued that management cannot transfer him because
his “Special Contract of Employment” which was executed after his
retirement at age 60 to extend his service, stipulated that his position is
“Head” of the Warehousing, Sugar, Shipping and Marine Department. His
transfer to the Sugar Sales Department, according to him, caused him
inconvenience and was unreasonable.  The Supreme Court overruled his
argument.  The mere specification in the employment contract of the
position to be held by the employee is not such stipulation.  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 prerogatives to
change his assignment or transfer him where he will be most useful. 
chanrobles virtual law library

e.  Refusal to transfer.

An employee who refuses to be transferred, when such transfer is valid, is
guilty of insubordination. (Westin Philippine Plaza Hotel vs. NLRC, G. R.
No. 121621, May 3, 1999).

It constitutes willful disobedience of a lawful order of an employer.

(Benguet Electric Cooperative vs. Fianza, G. R. No. 158606, March 9,
2004).

The refusal of the employees to be transferred may be held justified if

there is a showing that the transfer was directed by the employer under
questionable circumstances. For instance, in Yuco Chemical Industries,
Inc. vs. Ministry of Labor and Employment, [G. R. No. 75656, May 28,
1990], the employees were being transferred during the height of union
concerted activities in the company where they were active participants.
Further, the transfer from the province to Manila was made after classes
started, the employer knowing fully well that they were working
students.  Rendering the transfer more questionable is the fact that there
was no showing that the company cannot hire employees in Manila who
can perform the job assigned to the employees sought to be transferred,
which job did not require any special dexterity which only said employees
can perform.   chanrobles virtual law library

In Abbott Laboratories, Inc. vs. NLRC, [G. R. No. 76959, October 12,
1987], the dismissal of a medical representative who acceded in his
employment application to be assigned anywhere in the Philippines, but
later refused to be transferred from Manila to a provincial assignment,
was held valid. The reason is, when he applied and was accepted for the
job, he agreed to the policy of the company regarding assignment
anywhere in the Philippines as demanded by his employer’s business
operation.

But, in the case of Zafra vs. Hon. CA, [G. R. No. 139013, September 17,
2002], despite the petitioner-employees’ agreement in their application
for employment to be transferred or assigned to any branch, their refusal
to be transferred from Cebu to Manila which was made a condition for
their training abroad (Germany) was held valid. According to the High
Court, the fact that petitioners, in their application for employment,
agreed to be transferred or assigned to any branch should not be taken in
isolation, but rather in conjunction with the established company practice
in PLDT (the respondent employer) of disseminating a notice of transfer
to employees before sending them abroad for training.  This should be
deemed necessary and later to have ripened into a company practice or
policy that could no longer be peremptorily withdrawn, discontinued, or
eliminated by the employer.  Fairness at the workplace and settled
expectations among employees require that this practice be honored and
this policy commended. Despite their knowledge that the lone operations
and maintenance center of the 33 ALCATEL 1000 S12 Exchanges for
which they trained abroad would be “homed” in Sampaloc, Manila, PLDT
officials neglected to disclose this vital piece of information to petitioners
before they acceded to be trained abroad. On arriving home, they did not
give complaining workers any other option but placed them in an
either/or straightjacket that appeared too oppressive for those
concerned.  Needless to say, had they known about their pre-planned
reassignments, petitioners could have declined the foreign training
intended for personnel assigned to the Manila office. The lure of a foreign
trip is fleeting while a reassignment from Cebu to Manila entails major
and permanent readjustments for petitioners and their families.

While 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 involves a demotion in rank or diminution of
salaries, benefits, and other privileges. In the present case, petitioners
were unceremoniously transferred, necessitating their families’ relocation
from Cebu to Manila.  This act of management appears to be arbitrary
without the usual notice that should have been done even prior to their
training abroad.  From the employees’ viewpoint, such action affecting
their families are burdensome, economically and emotionally.  It is no
exaggeration to say that their forced transfer is not only unreasonable,
inconvenient, and prejudicial, but also in defiance of basic due process
and fair play in employment relations. chanrobles virtual law library

In Damasco vs. NLRC, [G. R. No. 115755, December 4, 2000], the refusal
of the employee to be transferred from Olongapo City to Metro Manila was
not considered serious misconduct or willful disobedience of lawful order
in connection with her work.  Even if the employer directed her to be
assigned at his store in Metro Manila, her act of refusing to be detailed in
Metro Manila could hardly be characterized as a willful or intentional
disobedience of her employer’s order. On the contrary, it was the
employer’s order that appears to be whimsical if not vindictive. 
Reassignment to Metro Manila is prejudicial to the employee, as she and
her family are residing in Olongapo City. This would entail separation from
her family and additional expenses on her part for transportation and
food. Her reassignment order was unreasonable, considering the
attendant circumstances.
 
f.  Continued refusal to report to new work assignment.

In Westin Philippine Plaza Hotel vs. NLRC, [G. R. No. 121621, May 3,
1999, 306 SCRA 631], the willfulness of the employee’s insubordination
was shown by his continued refusal to report to his new work
assignment.  Thus, upon receipt of the order of transfer, the employee
simply took an extended vacation leave.  Then, when he reported back to
work, he did not discharge his duties as linen room attendant despite
repeated reminders from the personnel office as well as his union. 
Worse, while he came to the hotel everyday, he just went to the union
office instead of working at the linen room.  More than that, when he was
asked to explain why no disciplinary action should be taken against him,
the employee merely questioned the transfer order without submitting the
required explanation. Based on the foregoing facts, the employee’s
intransigence was very evident.

g.  Refusal to transfer due to parental obligations, additional expenses

and anguish. chanrobles virtual law library

An employee could not validly refuse the lawful transfer orders on the
ground of parental obligations, additional expenses, and the anguish he
would suffer if assigned away from his family. (Allied Banking Corporation
vs. CA, G. R. No. 144412, Nov. 18, 2003).

In Phil. Telegraph and Telephone Corp. vs. Laplana, [G.R. No. 76645, July
23, 1991, 199 SCRA 485], the employee was a cashier at the Baguio City
Branch of PT&T who was directed to transfer to the company’s branch
office at Laoag City.  In refusing the transfer, the employee averred that
she had established Baguio City as her permanent residence and that
such transfer will involve additional expenses on her part, plus the fact
that an assignment to a far place will be a big sacrifice for her as she will
be kept away from her family which might adversely affect her efficiency. 
In ruling for the employer, the Supreme Court held that the transfer from
one city to another within the country is valid as long as there is no bad
faith on the part of the employer. It said: “Certainly the Court cannot
accept the proposition that when an employee opposes his employer’s
decision to transfer him to another workplace, there being no bad faith or
underhanded motives on the part of either party, it is the employee’s
wishes that should be made to prevail.”

h.  Refusal to transfer consequent to promotion.

In Dosch vs. NLRC, [208 Phil. 259; 123 SCRA 296 (1983)], the refusal of
the employee to be transferred was upheld because no law compels an
employee to accept a promotion and because the position he was
supposed to be promoted to did not even exist at that time.

i.  Refusal to transfer to overseas assignment distinguished from refusal

to transfer within the country.

In the case of Allied Banking Corporation vs. CA, [G. R. No. 144412,
November 18, 2003], the Supreme Court distinguished transfer from the
Philippines to overseas post and transfer from city to city within the
Philippines. The High Court observed that the transfer of an employee to
an overseas post, as in the Dosch case [supra], (where the refusal of the
employee was upheld as valid) cannot be likened to a transfer from one
city to another within the country, as in the 1991 case of Phil. Telegraph
and Telephone Corp. [supra] as well as the instant case.  Consequently,
the refusal to be transferred within the Philippines based on personal
grounds was considered willful disobedience of a lawful order.

j.  Transfer due to standard operating procedure of management.

Where the rotation of employees from the day shift to the night shift was
a standard operating procedure of management, an employee who had
been on a day shift for sometime may be transferred to the night shift.
(Castillo vs. CIR, 39 SCRA 81).

k.  Transfer pursuant to company policy.

Transfers can be effected pursuant to a company policy to transfer

employees from one place of work to another place of work owned by the
employer to prevent connivance among them. (Cinema, Stage and Radio
Entertainment Free Workers vs. CIR, 18 SCRA 1071 [1996]).

l.  Transfer in accordance with pre-determined and established office

policy and practice.

The employer has the right to transfer an employee to another office in

the exercise of sound business judgment and in accordance with pre-
determined and established office policy and practice.  Particularly so
when no illicit, improper or underhanded purpose can be ascribed to the
employer and the objection to the transfer was solely on the personal
inconvenience or hardship that will be caused to the employee by virtue
of the transfer. (Philippine Industrial Security Agency vs. Dapiton, G.R.
No. 127421, Dec. 8, 1999, 320 SCRA 124, 138).

m. Rotation among bank employees, legally required.

The Bangko Sentral ng Pilipinas, in its Manual of Regulations for Banks

and Other Financial Intermediaries requires the rotation of bank
personnel.  The Manual directs that the “duties of personnel handling
cash, securities and bookkeeping records should be rotated” and that
such rotation “should be irregular, unannounced and long enough to
permit disclosure of any irregularities or manipulations.”  Consequently,
the standard practice of a bank in constantly transferring its officers and
personnel with accounting responsibilities from one branch to another
among its more than a hundred branches throughout the country
primarily for internal control and to enable its employees to gain the
necessary experience for eventual promotion, is legal. (Allied Banking
Corporation vs. CA, supra).
n. Transfer to avoid conflict of interest.

Transfer of an employee to avoid conflict of interest is a valid exercise of

management prerogative and does not constitute constructive dismissal.
For example: in Duncan Association of Detailman-PTGWO vs. Glaxo
Welcome Philippines, Inc., [G. R. No. 162994, Sept. 17, 2004], the
medical representative’s transfer of assignment was held valid as the
same was necessitated by a possible conflict of interest since his wife
holds a sensitive supervisory position in a competitor firm who takes an
active participation in the market war characterized as it is by stiff
competition among pharmaceutical companies.

o. Frequent transfers of short duration, effect.

In a case where the security agency, in a span of less than three (3)
months, has assigned the security guard to at least four (4) different
establishments,  leaving him uncertain as to when and where his next
assignments would be, it was held that such frequent transfers to
different posts on short periods of time were indirect ways of dismissing
him. (Philippine Industrial Security Agency Corporation vs. Dapiton,
supra). chanrobles virtual law library

p. Transfer occasioned by abolition of position.

A transfer from one position to another occasioned by the abolition of the

position is valid. The abolition of a position deemed no longer necessary is
a management prerogative and absent any findings of malice and
arbitrariness on the part of management, will not efface such privilege if
only to protect the person holding that office. The position may not be
said to have been abolished because the employee was the occupant
thereof; rather, the position was abolished because the functions of the
position had become redundant and unnecessary. (Benguet Electric
Cooperative vs. Fianza, G. R. No. 158606, March 9, 2004).

q. Transfer may constitute constructive dismissal.

The transfer of an employee may constitute constructive dismissal when it

amounts to “an involuntary resignation resorted to when continued
employment is rendered impossible, unreasonable or unlikely; when there
is a demotion in rank and/or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes
unbearable to the employee.” (Floren Hotel vs. NLRC, G. R. No. 155264,
May 6, 2005; Mendoza vs. Rural Bank of Lucban, G.R. No. 155421, July 7,
2004). chanrobles virtual law library

In The Philippine American Life and General Insurance Co. vs. Gramaje,
[G. R. No. 156963, November 11, 2004], the Supreme Court declared the
transfer of the respondent Assistant Vice-President from the Pensions
Department to the Legal Department as not a legitimate exercise of
management prerogative on the part of petitioner-employer.  Before the
order to transfer was made, discrimination, bad faith, and disdain towards
respondent were already displayed by petitioner leading to the conclusion
by the court that she was constructively dismissed. 
         
As the High Court explained in Globe Telecom, Inc. vs. Florendo-Flores,
[G. R. No. 150092, September 27, 2002, 390 SCRA 201] and in Philippine
Industrial Security Agency Corporation vs. Aguinaldo, [G. R. No. 149974,
June 15, 2005]:

“In constructive dismissal, the employer has the burden of proving that
the transfer and demotion of an employee are for just and valid grounds
such as genuine business necessity.  The employer must be able to show
that the transfer is not unreasonable, inconvenient, or prejudicial to the
employee.  It must not involve a demotion in rank or a diminution of
salary and other benefits.  If the employer cannot overcome this burden
of proof, the employee’s demotion shall be tantamount to unlawful
constructive dismissal.”  chanrobles virtual law library

r. Damages, in addition to reinstatement, may be recovered for illegal

transfer.

An employee who was illegally transferred is entitled to damages. Under

Article 21 of the Civil Code, any person who willfully causes loss or injury
to another in a manner that is contrary to morals, good customs or public
policy shall compensate the latter for the damage.  The illegal transfer of
an employee to a functionless office is clearly an abuse on the part of the
employer of its right to control the structure of its organization. (De la
Salle University vs. De la Salle University Employees Association, 330
SCRA 363 [2000]).

In the case of Paguio vs. Philippine Long Distance Telephone Co., Inc., [G.
R. No. 154072, December 3, 2002], where there was no clear justification
for the transfer of the employee except that it was done as a result of his
disagreement with his superiors with regard to company policies, the
Supreme Court ordered the payment in his favor of moral and exemplary
damages as well as attorney’s fees. And with the finding that the transfer
was illegal, the employee was ordered reinstated to his former, or a
substantially equivalent, position without loss of seniority rights. chanrobles virtual
law library

6.  What is the extent of management’s prerogative to

reorganize?

The Supreme Court, in a number of cases, has recognized and affirmed

the prerogative of management to implement a job evaluation program or
a reorganization for as long as it is not contrary to law, morals or public
policy. (Hongkong and Shanghai Banking Corporation Employees Union
vs. NLRC, G. R. No. 125038, Nov. 6, 1997).

If the purpose of a reorganization is to be achieved, changes in the

positions and rankings of the employees should be expected. To insist on
one’s old position and ranking after a reorganization would render such
endeavor ineffectual. (Arrieta vs. NLRC, G. R. No. 126230, Sept. 18,
1997, 279 SCRA 326).

It is hard to accept the claim that an employer would go through all the
expenditure and effort incidental and necessary to a reorganization just to
dismiss a single employee whom they no longer deem desirable. (Ibid.).

7.  What is the extent of management’s prerogative to promote?

a.  Promotion, defined.

Promotion is the advancement from one position to another involving

increase in duties and responsibilities as authorized by law, and increase
in compensation and benefits. (Millares vs. Subido, 20 SCRA 954). chanrobles
virtual law library

Apparently, the indispensable element for there to be a promotion is that

there must be an “advancement from one position to another” or an
upward vertical movement of the employee’s rank or position. Any
increase in salary should only be considered incidental but never
determinative of whether or not a promotion is bestowed upon an
employee. This can be likened to the upgrading of salaries of government
employees without conferring upon them, the concomitant elevation to
the higher positions. (Philippine Telegraph & Telephone Corporation vs.
CA, G. R. No. 152057, Sept. 29, 2003).

b. Distinction between transfer and promotion.

Promotion denotes a scalar ascent of an officer or an employee to another

position, higher either in rank or salary. 

Transfer, on the other hand, involves lateral movement from one position
to another of equivalent level, rank or salary.  (Millares vs. Subido,
supra).

c.  Refusal to be promoted, legal effect.

An employee has the right to refuse promotion. There is no law which

compels an employee to accept a promotion.  Promotion is in the nature
of a gift or reward.  Any person may refuse to accept a gift or reward. 
Such refusal to be promoted is a valid exercise of such right and he
cannot be punished therefor.  (Dosch vs. NLRC, G. R. No. 51182, July 5,
1983; See also Erasmo vs. Home Insurance & Guaranty Corporation, G.R.
No. 139251, Aug. 29, 2002). chanrobles virtual law library

An employee, therefore, cannot be promoted, even if merely as a result of

a transfer, without his consent. A transfer that results in promotion or
demotion, advancement or reduction or a transfer that aims to lure the
employee away from his permanent position cannot be done without his
consent. (Philippine Telegraph & Telephone Corporation vs. CA, supra).

Hence, the exercise by the employees of their right cannot be considered

in law as insubordination, or willful disobedience of a lawful order of the
employer. Consequently, employees cannot be dismissed on that basis.
(Ibid.).

8. What is the extent of the employer’s prerogative to demote?

a.  Concept.

There is demotion where there is reduction in position, rank or salary as a

result of a transfer. (Philippine Wireless, Inc. [Pocketbell] vs. NLRC, G. R.
No. 112963, July 20, 1999). chanrobles virtual law library

There is demotion when an employee occupying a highly technical

position requiring the use of an employee’s mental faculty, is transferred
to another position where she performed mere mechanical work - virtually
a transfer from a position of dignity to a servile or menial job. (Blue Dairy
Corporation vs. NLRC, G. R. No. 129843, Sept. 14, 1999).

In addition to the comparison involving nature of work, another aspect of

comparison to determine the existence of demotion is the workplaces
themselves.  Hence, there is also demotion if there is a change in the
workplace such as in the case of transfer of an employee from the
laboratory - the most expensive work area, on a per square-meter basis
in the company’s premises - to the vegetable processing section which
involves processing of vegetables alone. Definitely, a transfer from a
workplace where only highly trusted authorized personnel are allowed to
access to a workplace that is not as critical is another reason enough for
the employee to howl a protest. (Blue Dairy Corporation vs. NLRC, supra).

The employer has the right to demote and transfer an employee who has
failed to observe proper diligence in his work and incurred habitual
tardiness and absences and indolence in his assigned work. (Petrophil
Corporation vs. NLRC, G. R. No. L-64048, Aug. 29, 1986). chanrobles virtual law library

For instance, in the consolidated cases of Leonardo vs. NLRC, [G. R. No.
125303, June 16, 2000] and Fuerte vs. Aquino, [G. R. No. 126937, June
16, 2000], the employer claims that the employee was demoted pursuant
to a company policy intended to foster competition among its employees.
Under this scheme, its employees are required to comply with a monthly
sales quota. Should a supervisor such as the employee (Fuerte) fail to
meet his quota for a certain number of consecutive months, he will be
demoted, whereupon his supervisor’s allowance will be withdrawn and be
given to the individual who takes his place. When the employee
concerned succeeds in meeting the quota again, he is re-appointed
supervisor and his allowance is restored.  The Supreme Court said that
this arrangement appears to be an allowable exercise of company rights.
An employer is entitled to impose productivity standards for its workers,
and in fact, non-compliance may be visited with a penalty even more
severe than demotion.

b.  Due process principle in termination cases applies to demotions.

While due process required by law is applied in dismissals, the same is

also applicable to demotions as the latter likewise affect the employment
of a worker whose right to continued employment, under the same terms
and conditions, is also protected by law.  Moreover, considering that
demotion is, like dismissal, also a punitive action, the employee being
demoted should, as in cases of dismissals, be given a chance to contest
the same. (Leonardo vs. NLRC, supra; Blue Dairy Corporation vs. NLRC,
supra).

Simply put, even the employer’s right to demote an employee requires

the observance of the twin-notice requirement. (Floren Hotel vs. NLRC, G.
R. No. 155264, May 6, 2005). chanrobles virtual law library

9.  What is the extent of the employer’s prerogative to discipline

and/or dismiss erring employees?

a.  Right to discipline.

The employer’s right to conduct the affairs of his business, according to

its own discretion and judgment, includes 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 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 and reasonable and the
corresponding penalties, when prescribed, commensurate to the offense
involved and to the degree of the infraction. (St. Michael’s Institute vs.
Santos, G. R. No. 145280, Dec. 4, 2001; Consolidated Food Corporation
vs. NRLC, 315 SCRA 129, 139 [1999]). chanrobles virtual law library
Instilling discipline among its employees is a basic management right and
prerogative. Management may lawfully impose reasonable penalties such
as dismissal upon an employee who transgresses the company rules and
regulations. (Deles, Jr. vs. NLRC, G. R. No. 121348, March 9, 2000).

The employer cannot be compelled to maintain in his employ the

undeserving, if not undesirable, employees. (Shoemart, Inc. vs. NLRC, G.
R. No. 74229, Aug. 11, 1989).

b.  Right to dismiss.

The right of the employer to dismiss its erring employees is a measure of

self-protection. (Reyes vs. Minister of Labor, G. R. No. 48705, Feb. 9,
1989).

The law, in protecting the rights of the laborer, authorizes neither

oppression nor self-destruction of the employer.  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, the Supreme Court has inclined more often than not
towards the worker and upheld his cause with his conflicts with the
employer.  Such favoritism, however, has not blinded the Court to rule
that justice is, in every case, for the deserving, to be dispensed in the
light of the established facts and applicable law and doctrine. (Sime Darby
Pilipinas, Inc. vs. NLRC, 119205, April 15, 1998). chanrobles virtual law library

c.  Right to discipline and/or dismiss, subject to police power.

The employer’s inherent right to discipline is, however, subject to

reasonable regulation by the State in the exercise of its police power.
(Associated Labor Unions-TUCP vs. NLRC, G. R. No. 120450, Feb. 10,
1999; PLDT vs. NLRC, 276 SCRA 1 [1997]).

In the case of Farrol vs. CA, [G. R. No. 133259, February 10, 2000],
RCPI, the employer, alleged that under its rules, petitioner’s infraction is
punishable by dismissal. However, the Supreme Court said that the
employer’s rules cannot preclude the State from inquiring whether the
strict and rigid application or interpretation thereof would be harsh to the
employee. Petitioner has no previous record in his twenty-four long years
of service - this would have been his first offense. It was thus held that
the dismissal imposed on petitioner is unduly harsh and grossly
disproportionate to the infraction which led to the termination of his
services.  A lighter penalty would have been more just, if not humane.
d.  Right to determine who to punish.

The employer has latitude to determine who among its erring officers or
employees should be punished, to what extent and what proper penalty
to impose. (Soriano vs. NLRC, G. R. No. 75510, Oct. 27, 1987).

e.  Right to prescribe company rules and regulations.

The prerogative of an employer to prescribe reasonable rules and

regulations necessary or proper for the conduct of its business and to
provide certain disciplinary measures in order to implement said rules,
and to assure that the same would be complied with has been recognized
in this jurisdiction. (Phimco Industries, Inc. vs. NLRC, G. R. No. 118041,
June 11, 1997) chanrobles virtual law library

f. Right to impose penalty; proportionality rule.

It is well recognized that company policies and regulations are, unless

shown to be grossly oppressive or contrary to law, generally binding and
valid on the parties and must be complied with until finally revised or
amended unilaterally or preferably through negotiation or by competent
authority. (Alcantara, Jr.  vs. CA, 386 SCRA 370 [2002]). 

Hence, management may lawfully impose appropriate penalties on erring

workers pursuant to company rules and regulations. (Philippine Airlines,
Inc. vs. NLRC, 337 SCRA 286 [2000]).

However, 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. (Farrol vs. CA, G. R. No. 133259, Feb. 10, 2000).

Accordingly, in determining the validity of dismissal as a form of penalty,

the charges for which an employee is being administratively cited must be
of such nature that would merit the imposition of the said supreme
penalty. Dismissal should not be imposed if it is unduly harsh and grossly
disproportionate to the charges.  This rule on proportionality - that the
penalty imposed should be commensurate to the gravity of his offense -
has been observed in a number of cases. (Felix vs. NLRC, G. R. No.
148256, Nov. 17, 2004).

The 2004 case of Philippine Long Distance Telephone Company vs.

Tolentino, [G. R. No. 143171, September 21, 2004], reiterated the ruling
in the 1998 case of Hongkong and Shanghai Bank Corporation vs. NLRC,
[260 SCRA 49 (1996)], where it was declared that the penalty imposed
must be commensurate to the depravity of the malfeasance, violation or
crime being punished.  A grave injustice is committed in the name of
justice when the penalty imposed is grossly disproportionate to the wrong
committed. Dismissal is the most severe penalty an employer can impose
on an employee. It goes without saying that care must be taken and due
regard given to an employee’s circumstances, in the application of such
punishment.

In Permex, Inc. vs. NLRC, [G. R. No. 125031, January 24, 2000], the
dismissal of the employee accused of serious misconduct of falsification or
deliberate misrepresentation, was considered too harsh a penalty in the
light of the fact that it was not supported by the evidence on record and it
was an unintentional infraction.  Moreover, it was his first offense
committed without malice and committed also by others who were not
equally penalized.  chanrobles virtual law library

In VH Manufacturing, Inc. vs. NLRC, [G. R. No. 130957, January 19,

2000], involving the dismissal of an employee for sleeping on the job, the
Supreme Court said that 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
being held liable for the 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.

In a similar case, A’ Prime Security Services, Inc. vs. NLRC, [G. R. No.
107320, Jan. 19, 2000], the Supreme Court ruled that the employee’s
violations of the company rules against sleeping on post and quarrelling
with a co-worker, cannot be considered proper grounds for dismissal as
the same were first infractions which merit only “warning” and “one-
month suspension,” respectively, under said rules.

The dismissal meted out on the teachers, under the attendant factual
antecedents in St. Michael’s Institute vs. Santos, [G. R. No. 145280,
December 4, 2001], for dereliction of duty for one school day when they
participated in a rally denouncing school authority, was also declared too
harsh a penalty considering that they are being held liable for a first time
offense and despite long years of unblemished service.  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 employment. Where a penalty less
punitive would suffice, whatever missteps may have been committed by
the employee ought not to be visited with a consequence so severe such
as dismissal from employment.

g. Right to choose which penalty to impose.

The matter of imposing the appropriate penalty depends on the

employer.  In China Banking Corporation vs. Borromeo, [G. R. No.
156515, Oct. 19, 2004], where the managerial employee questioned the
imposition of the accessory penalty of restitution on him without imposing
the principal penalty of “Written Reprimand/Suspension,” it was ruled that
the employer’s Code of Ethics expressly sanctions the imposition of
restitution/forfeiture of benefits apart from or independent of the other
penalties.  It was certainly within the employer-bank’s prerogative to
impose on the respondent-employee what it considered the appropriate
penalty under the circumstances pursuant to its company rules and
regulations.  Obviously, in view of his voluntary separation from the
employer-bank, the imposition of the penalty of reprimand or suspension
would be futile.  The employer-bank was left with no other recourse but to
impose the ancillary penalty of restitution. Like all other business
enterprises, its prerogative to discipline its employees and to impose
appropriate penalties on erring workers pursuant to company rules and
regulations must be respected. 

h.  Right to impose heavier penalty than what the company rules
prescribe.
 
The employer has the right to impose a heavier penalty than that
prescribed in the company rules and regulations if circumstances warrant
the imposition thereof.

In Stanford Microsystems, Inc. vs. NLRC, [G. R. No. 74187, Jan. 28,
1988], the fact that the offense was committed for the first time, or has
not resulted in any prejudice to the company, was held not to be a valid
excuse.  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. 
Company Rules and Regulations cannot operate to altogether negate the
employer’s prerogative and responsibility to determine and declare
whether or not facts not explicitly set out in the rules may and do
constitute such serious misconduct as to justify the dismissal of the
employee or the imposition of sanctions heavier than those specifically
and expressly prescribed.  This is dictated by logic, otherwise, the rules,
literally applied, would result in absurdity; grave offenses, e.g., rape,
would be penalized by mere suspension, this, despite the heavier penalty
provided therefor by the Labor Code, or otherwise dictated by common
sense.  chanrobles virtual law library

In Cruz vs. Coca-Cola Bottlers Phils., Inc., [G. R. No. 165586, June 15,
2005], admittedly, the company rules violated by petitioner are
punishable, for the first offense, with the penalty of suspension. 
However, the Supreme Court affirmed the validity of the dismissal
because respondent company has presented evidence showing that
petitioner has a record of other violations from as far back as 1986.  In
1991, petitioner was found to have deliberately misrepresented on two
occasions the total number of empties and was consequently suspended
for six (6) days. In 1990 and 1991, petitioner was also suspended for his
involvement in vehicular accidents which caused damage to another car
and an outlet store. On several occasions, petitioner has been
investigated for shortages in remittances of collections from customers.
These misdemeanors are aggravated by several AWOLS which petitioner
had taken in the course of his employment.

i.  Rule in case of first offense; effect when management tolerates

violation of company policy.

As a general rule, the penalty imposable on first offenders necessarily

depends on such factors as gravity of the offense, person aggrieved, or
extent of injury or damage, among others. 

In case there is a set of company rules and regulations describing certain

offenses and the corresponding penalty for violation thereof, the penalty
prescribed thereunder for first offenders should be followed. chanrobles virtual law
library

In Permex, Inc. vs. NLRC, [G. R. No. 125031, Jan. 24, 2000], where the
employee was dismissed on the charge of serious misconduct of
falsification or deliberate misrepresentation involving alleged false entry in
his daily time record which was not supported by the evidence on record
and wherein he was not afforded an opportunity to be heard, the
Supreme Court held the dismissal as too harsh a penalty for an
unintentional infraction, not to mention that it was his first offense
committed without malice, and committed also by others who were not
actually penalized.

And where a violation of company policy or breach of company rules and

regulations was found to have been tolerated by management, then the
same could not serve as a basis for termination. (Ibid.).

Moreover, as early as Tide Water Associated Oil Co. vs. Victory Employees
and Laborers’ Association, [85 Phil. 166 (1949)], it was ruled that, where
a violation of company policy or breach of company rules and regulations
was found to have been tolerated by management, then the same could
not serve as a basis for termination.
DUE PROCESS

10.  What is due process?

Contrary to the time-honored principle that the right to due process of law
is a constitutionally-guaranteed right, it being a basic constitutional tenet
that “no person shall be deprived of life, liberty or property without due
process of law, nor shall any person be denied the equal protection of the
laws” (Section 1, Article III [Bill of Rights], 1987 Constitution), however,
the 2004 case of Agabon vs. NLRC, [G. R. No. 158693 November 17,
2004], distinguished constitutional due process and statutory due
process, to wit: chanrobles virtual law library

“To be sure, the Due Process Clause in Article III, Section 1 of the
Constitution embodies a system of rights based on moral principles so
deeply imbedded in the traditions and feelings of our people as to be
deemed fundamental to a civilized society as conceived by our entire
history.  Due process is that which comports with the deepest notions of
what is fair and right and just. It is a constitutional restraint on the
legislative as well as on the executive and judicial powers of the
government provided by the Bill of Rights.

“Due process under the Labor Code, like Constitutional due process, has
two aspects: substantive, i.e., the valid and authorized causes of
employment termination under the Labor Code; and procedural, i.e., the
manner of dismissal.  Procedural due process requirements for dismissal
are found in the Implementing Rules of P.D. 442, as amended, otherwise
known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as
amended by Department Order Nos. 9 and 10. (Department Order No. 9
took effect on 21 June 1997. Department Order No. 10 took effect on 22
June 1997). Breaches of these due process requirements violate the Labor
Code.  Therefore, statutory due process should be differentiated from
failure to comply with constitutional due process.chanrobles virtual law library

“Constitutional due process protects the individual from the government

and assures him of his rights in criminal, civil or administrative
proceedings; while statutory due process found in the Labor Code and
Implementing Rules protects employees from being unjustly terminated
without just cause after notice and hearing.” chanrobles virtual law library

11.  What are “just causes” and “authorized causes”?

Just causes and authorized causes. - As mentioned in Article 279, there

are two (2) kinds of causes or grounds to terminate employment by
employer, to wit:
1.  “Just causes” which refer to those instances enumerated under Article
282 [Termination by employer] of the Labor Code.

2.  “Authorized causes” which refer to those instances enumerated under

Articles 283 [Closure of establishment and reduction of personnel] and
284 [Disease as ground for termination] of the Labor Code.

12.  What is the two-fold due process requirement?

Two-fold due process requirement.- The requirement of due process is

two-fold, thus:

(1)  Substantive aspect; and

(2)  Procedural aspect.

13.  What are the twin requirements of notice and hearing?

The twin requirements of notice and hearing constitute the essential

elements of the procedural due process and neither of these elements can
be eliminated without running afoul of the procedural mandate.

Two notices and a hearing required.

The Supreme Court, reiterating its earlier holding in King of Kings

Transport, Inc. vs. Mamac, [G.R. No. 166208, June 29, 2007], explained
the due process requirement in Genuino vs. NLRC, [G.R. Nos. 142732-33,
December 4, 2007], thus:  chanrobles virtual law library

(1)  First written notice. - The first written notice to be served on the
employees should contain the specific causes or grounds for termination
against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable
period.  “Reasonable opportunity” under the Omnibus Rules means every
kind of assistance that management must accord to the employees to
enable them to prepare adequately for their defense.  This should be
construed as a period of at least five (5) calendar days from receipt of the
notice to give the employees an opportunity to study the accusation
against them, consult a union official or lawyer, gather data and evidence,
and decide on the defenses they will raise against the complaint. 
Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration
of the facts and circumstances that will serve as basis for the charge
against the employees.  A general description of the charge will not
suffice.  Lastly, the notice should specifically mention which company
rules, if any, are violated and/or which among the grounds under Article
282 is being charged against the employees.
(2) Hearing required, - After serving the first notice, the employers should
schedule and conduct a hearing or conference wherein the employees will
be given the opportunity to: (1) explain and clarify their defenses to the
charge against them; (2) present evidence in support of their defenses;
and (3) rebut the evidence presented against them by the management. 
During the hearing or conference, the employees are given the chance to
defend themselves personally, with the assistance of a representative or
counsel of their choice. Moreover, this conference or hearing could be
used by the parties as an opportunity to come to an amicable settlement.

(3) Second written notice. - After determining that termination of

employment is justified, the employers shall serve the employees a
written notice of termination indicating that: (1) all circumstances
involving the charge against the employees have been considered; and
(2) grounds have been established to justify the severance of their
employment.” (See also PNB vs. Cabansag, G. R. No. 157010, June 21,
2005; Millares vs. PLDT, G. R. No. 154078, May 6, 2005).

14.  What are the six (6) situations in termination disputes?

The rules on termination of employment in the Labor Code and pertinent

jurisprudence are applicable to six (6) different scenarios, namely:

1.  The dismissal is for a just cause under Article 282, for an authorized
cause under Article 283, or for health reasons under Article 284, and due
process was observed – THE DISMISSAL IS LEGAL.  chanrobles virtual law library

2. The dismissal is without just or authorized cause but due process was
observed – THE DISMISSAL IS ILLEGAL.

3. The dismissal is without just or authorized cause and there was no due
process – THE DISMISSAL IS ILLEGAL.

4. The dismissal is for just or authorized cause but due process was not
observed – THE DISMISSAL IS LEGAL BUT THE EMPLOYER IS LIABLE TO
PAY  INDEMNITY IN THE FORM OF NOMINAL DAMAGES (PER AGABON
CASE).  THE AMOUNT OF NOMINAL DAMAGES VARY FROM CASE TO
CASE. 

5. The dismissal is for a cause which later on is proven to be non-existent

– THE DISMISSAL IS NOT EFFECTIVE, HENCE, THE EMPLOYEE SHOULD
BE REINSTATED. THE EMPLOYER IS NOT LIABLE TO PAY ANY
BACKWAGES OR DAMAGES.

6. The dismissal is not supported by evidence – NO DISMISSAL TO SPEAK

OF; SO EMPLOYEE SHOULD BE REINSTATED (BUT NOT AS A RELIEF). 
THE EMPLOYER IS NOT LIABLE TO PAY ANY BACKWAGES OR DAMAGES.
chanrobles virtual law library
In connection with situation No. 4 above, the Supreme Court, in the 2005
case of Jaka Food Processing Corporation vs. Pacot, [G. R. 151378, March
28, 2005], distinguished the legal effects and consequences of
termination for just cause but without due process (as in the Agabon
case) and termination for authorized cause but also without due process.

In this case, the employees were terminated due to valid retrenchment

but it was effected without Jaka complying with the requirement under
Article 283 of the Labor Code regarding the service of a written notice
upon the employees and the Department of Labor and Employment at
least one (1) month before the intended date of termination.

In awarding a “stiffer” sanction of P50,000.00 to distinguish it from the

Agabon case where the penalty was P30,000.00, the High Court declared:
chanrobles virtual law library

“The difference between Agabon and the instant case is that in the
former,  the dismissal was based on a just cause under Article 282 of the
Labor Code while in the present case, respondents were dismissed due to
retrenchment, which is one of the authorized causes under Article 283 of
the same Code.

“At this point, we note that there are divergent implications of a dismissal
for just cause under Article 282, on one hand, and a dismissal for
authorized cause under Article 283, on the other.

“A dismissal for just cause under Article 282 implies that the employee
concerned has committed, or is guilty of, some violation against the
employer, i.e. the employee has committed some serious misconduct, is
guilty of some fraud against the employer, or, as in Agabon, he has
neglected his duties.  Thus, it can be said that the employee himself
initiated the dismissal process.

“On another breath, a dismissal for an authorized cause under Article 283
does not necessarily imply delinquency or culpability on the part of the
employee.  Instead, the dismissal process is initiated by the employer’s
exercise of his management prerogative, i.e. when the employer opts to
install labor saving devices, when he decides to cease business operations
or when, as in this case, he undertakes to implement a retrenchment
program.

“The clear-cut distinction between a dismissal for just cause under Article
282 and a dismissal for authorized cause under Article 283 is further
reinforced by the fact that in the first, payment of separation pay, as a
rule, is not required, while in the second, the law requires payment of
separation pay.
“For these reasons, there ought to be a difference in treatment when the
ground for dismissal is one of the just causes under Article 282, and when
based on one of the authorized causes under Article 283.” chanrobles virtual law library

In “termination for non-existent cause,” contemplated under situation No.

5 above, the employer does not intend to dismiss the employee but the
dismissal was effected nonetheless for a specific cause which turns out to
be non-existent.  Example is when the employee is terminated due to his
detention by the military for alleged subversive act which later was not
proven and the case dismissed for lack of evidence.  (Magtoto vs. NLRC,
G. R. No. 63370, Nov. 18, 1985).

Hence, absent the reason which gave rise to his separation from
employment, there is no intention on the part of the employer to dismiss
the employee concerned.  Accordingly, reinstatement is in order. (Pepito
vs. Secretary of Labor, 96 SCRA 454).

Under situation No. 6 above, the employee was not actually dismissed but
nonetheless has filed an illegal dismissal case.  The case of Asia Fancy
Plywood Corporation vs. NLRC, [G. R. No. 113099, Jan. 20, 1999, 301
SCRA 189] is an example of a case where the employees’ conclusion that
they were dismissed was unsubstantiated as there was no evidence that
they were dismissed from employment by their employer nor were they
prevented from returning to work. Here, their employer has, in fact,
expressed its willingness to accept them back to their former positions. 
In such a case, no backwages should be awarded since the same is
proper only if an employee is unjustly or illegally dismissed.  The
employees should simply be ordered to report for work and for the
employer to accept them to their former or substantially equivalent
position without backwages.

Reinstatement without backwages was also ordered in the 2001 case of

Security and Credit Investigation, Inc. vs. NLRC, [G. R. No. 114316,
January 26, 2001], where the Supreme Court found that petitioner did
not dismiss respondent security guards, and that the latter did not
abandon their employment. (See also Indophil Acrylic Manufacturing
Corporation vs. NLRC, 226 SCRA 723 [1993]).

In the consolidated cases of Leonardo vs. NLRC, [G. R. No. 125303, June
16, 2000] and Fuerte vs. Aquino, [G. R. No. 126937, June 16, 2000], the
Supreme Court also ordered the reinstatement but without backwages of
the employee (Fuerte) who was not deemed to have abandoned his job
nor was he constructively dismissed.  As pointed out by the Court, in a
case where the employee’s failure to work was occasioned neither by his
abandonment nor by a termination, the burden of economic loss is not
rightfully shifted to the employer; each party must bear his own loss.
Separation pay, according to Capili vs. NLRC, [G. R. No. 117378, March
26, 1997, 270 SCRA 488], cannot likewise be ordered paid to the
employees who were not dismissed by the employer.  The common
denominator of those instances where payment of separation pay is
warranted is that the employee was dismissed by the employer.  In a
case where there was no dismissal at all, separation pay should not be
awarded.  The employee should instead be ordered reinstated - not as
and by way of relief proceeding from illegal dismissal but as and by way
of a declaration or affirmation that the employee may return to work
because he was not dismissed in the first place, and he should be happy
that his employer is accepting him back.

But in Cals Poultry Supply Corporation vs. Alfredo Roco, [G. R. No.
150660, July 30, 2002], the Supreme Court found that respondent
employee has not established convincingly that he was dismissed.  No
notice of termination was given to him by CALS.  There is no proof at all,
except his self-serving assertion, that he was prevented from working
after the end of his leave of absence on January 18, 1996.  In fact, CALS
notified him in a letter dated March 12, 1996 to resume his work.  Both
the Labor Arbiter and the NLRC found that Alfredo was not dismissed and
their findings of fact are entitled to great weight. His complaint for illegal
dismissal, therefore, was properly dismissed by the Labor Arbiter for lack
of merit as Alfredo was not dismissed; it was he who unilaterally severed
his relation with his employer. chanrobles virtual law library

Case where the employee filed illegal dismissal case to pre-empt lawful
dismissal.

In Jo Cinema Corporation vs. Abellana, [G. R. No. 132837, June 28,

2001,  the employee was placed under preventive suspension for 20 days
for unauthorized encashment of check.  Before the lapse of said period
and while the investigation was on-going, she filed a case for illegal
dismissal.  The Supreme Court ruled that she was not dismissed. She
could not have been dismissed on the day she was preventively
suspended because a formal investigation was still being conducted.  In
fact, she even attended said investigation where she admitted having
encashed the checks.  If she was indeed dismissed on said date, as she
claims, petitioners would not have continued with the investigation. 
Undoubtedly, the employee pre-empted the outcome of the investigation
by filing a complaint for illegal dismissal. Thus, it was she who signified
her intention not to report for work when she filed the instant case.

Having thus determined that the employee was not dismissed from the
service, the payment of separation pay and backwages are not in order. It
must be emphasized that the right of an employee to demand for
separation pay and backwages is always premised on the fact that the
employee was terminated either legally or illegally. The award of
backwages belongs to an illegally dismissed employee by direct provision
of law and it is awarded on grounds of equity for earnings which a worker
or employee has lost due to illegal dismissal. Separation pay, on the other
hand, is awarded as an alternative to illegally dismissed employees where
reinstatement is no longer possible.

Case where employee refused to be investigated.

In Leonardo vs. NLRC, [G. R. No. 125303, June 16, 2000], the petitioner-
employee protests that he was never accorded due process. According to
the Supreme Court, however, this begs the question, for he was never
terminated; he only became the subject of an investigation in which he
was apparently loath to participate. As testified to by the personnel
manager, he was given a memorandum asking him to explain the incident
in question, but he refused to receive it. In an analogous instance in the
case of Pizza Hut/Progressive Development Corporation vs. NLRC, [252
SCRA 531, 536 (1996)], it was held that an employee’s refusal to sign the
minutes of an investigation cannot negate the fact that he was accorded
due process. So should it be here.

15.  What are the reliefs available to an illegally dismissed

employee under the Labor Code and the Civil Code?

The following reliefs may be awarded:

1.Reinstatement without loss of seniority rights and other privileges;

2.Full backwages, inclusive of allowances;

3.Other benefits or their monetary equivalent;

4.Damages (moral, exemplary, if the dismissal is with malice or effected

in bad faith);

5.Attorney’s fees (10% of all monetary awards).

[NOTE:  Nos. 2 and 3 above are computed from the time the
compensation was withheld from the employee (date of
dismissal) up to the time of his actual reinstatement.  If
reinstatement is not possible, the computation is up to the time of
finality of decision]. chanrobles virtual law library

In case reinstatement is not possible, payment of separation pay in lieu

thereof may be awarded, computed at one month or one month pay per
year of service, whichever is higher.

The reliefs mentioned above are not available to a legally dismissed

employee.  Any order of reinstatement and award of backwages have,
under such situation, no factual and legal bases. (Philippine Airlines, Inc.
vs. NLRC, G. R. No. 115785, August 4, 2000).

16.  How should the due process requirement under the law be
standardized?

[NOTE:  For years, the due process requirement had been

interpreted in so many ways.  While the two-fold requirement of
substantive and procedural due process as well as the twin
requirements of notice and hearing are the well-known and well-
entrenched features thereof, there had been no clear-cut
standards, however, which were prescribed by the Department of
Labor and Employment that may be used as simple guideposts to
gauge whether due process was indeed observed in a given case
or situation]. chanrobles virtual law library

The following is an attempt at standardizing the due process requirement

under the different situations contemplated under the law.

a.  For termination based on just causes under Article 282.

Due process under Article 282 means compliance with the following
requirements of two (2) notices and a hearing:

(a) A written notice (first notice) served on the employee specifying the
ground or grounds for termination, and giving to said employee
reasonable opportunity to explain his side;

(b) A hearing or conference (or at least an opportunity to be heard)

during which the employee concerned, with the assistance of counsel if
the employee so desires, is given opportunity to respond to the charge,
present his evidence or rebut the evidence presented against him; and

(c) A written notice of termination (second notice) served on the

employee indicating that upon due consideration of all the circumstances,
grounds have been established to justify his termination. (PNB vs.
Cabansag, G. R. No. 157010, June 21, 2005; Millares vs. PLDT, G. R. No.
154078, May 6, 2005). chanrobles virtual law library

These requirements are mandatory, non-compliance with which renders

any judgment reached by management void and inexistent. (Skippers
Pacific, Inc. vs. Mira, G. R. No. 144314, Nov. 21, 2002; Concorde Hotel
vs. CA, G. R. No. 144089, Aug. 9, 2001). chanrobles virtual law library

b. For termination based on authorized causes under Article 283.

The requirements of due process is deemed complied with upon the

service of a written notice to:
(1) the employee; and

(2) the appropriate Regional Office of the Department of Labor and

Employment at least thirty (30) days before the effectivity of the
termination, specifying the ground or grounds for termination. (Article
283, Labor Code).

c. For termination based on disease under Article 284.

Article 284 does not specify the standards of due process to be followed in
case an employee is dismissed due to disease.  However, the silence of
the law should not be construed that the sick employee may be
terminated without complying with certain procedural requirements. In
Agabon vs. NLRC, [G.R. No. 158693, Nov. 17, 2004], the Supreme Court
observed that the procedural requirements under Article 283 are likewise
applicable to Article 284. chanrobles virtual law library
 
d. For termination based on completion of contract or phase thereof.

If the termination is brought about by the completion of the contract or

phase thereof, no prior notice is required. (Section 2, Rule I, Book VI,
Rules to Implement the Labor Code, as amended by Article III,
Department Order No. 10, Series of 1997). chanrobles virtual law library

e.  For termination of probationary employment based on failure to meet

the standards of employment.

If the termination of probationary employment is brought about by the

failure of an employee to meet the standards of the employer, it is
sufficient that a written notice is served the employee within a reasonable
time from the effective date of termination. (Section 2, Rule I, Book VI,
Rules to Implement the Labor Code, as amended by Article III,
Department Order No. 10, Series of 1997).

f.  Monthly report of dismissal to DOLE for policy guidance and statistical
purposes; when treated as evidence of valid dismissal.

In R. Transport Corporation vs. Ejandra, [G. R. no. 148508, May 20,

2004)], it was held that the fact that the employer who claimed that the
employee had abandoned his job, did not report such fact to the nearest
Regional Office of the Department of Labor and Employment in
accordance with Section 7, Rule XXIII, Book V of Department Order No. 9,
series of 1997 is an indicium that the employee did not commit said
offense. If the employee really abandoned his work, the employer should
have reported that fact accordingly.

17.  Is there any instance where notices alone, without the

benefit of hearing, were held to be compliant with due process
requirement?

There are certain cases decided by the Supreme Court where the
dismissal was held valid despite the fact that no hearing was conducted
after the respondent employee has explained his side in answer to the
first notice apprising him of the administrative charges. chanrobles virtual law library

In the 2005 case of Glaxo Wellcome Phils., Inc. vs. Nagkakaisang

Empleyado ng Wellcome-DFA, [G. R. No. 149349, March 11, 2005], the
Court of Appeals held that the dismissal and suspension meted upon two
employees of petitioner company were not legal because they were not
accorded the benefit of a proper charge, an opportunity to defend
themselves, and a formal investigation.  In reversing said CA ruling, the
High Tribunal ruled that the three (3) Memoranda served on the errant
employees were sufficient compliance with the due process rule. The
Memoranda specified the acts that constituted gross insubordination.  The
Memoranda served the purpose of informing them of the pending matters
beclouding their employment and of extending to them an opportunity to
clear the air. To each Memorandum, respondents were able to reply and
explain, with the aid of their counsel, why they had refused to return the
vehicles; and, in effect, why they should not be dismissed for gross
insubordination. Moreover, petitioner’s Memoranda amply gave them a
distinct, different and effective first level of remedy (which was to
surrender the vehicles) to protect their jobs.  Furthermore, they were still
able to file a Complaint with the Labor Arbiter, with better knowledge of
the cause of their dismissal, with longer time to prepare their case, and
with greater opportunity to take care of the financial needs of their family
pendente lite.  chanrobles virtual law library

In the earlier case of Nuez vs. NLRC, [239 SCRA 518, December 28,
1994], the errant employee, Federico Nuez, was the company driver.  He
was ordered by a superior officer to drive some of the employees to the
head office.  However, he refused.  Thus, he was required to explain why
he should not be administratively dealt with for disobeying the order of an
officer.  In his written reply, Nuez said that he had a previous
engagement, and that what was asked of him was not an emergency that
warranted the charge of disobedience.  Thereafter, the company vice
president issued a Memorandum to Nuez terminating the latter’s
employment for insubordination.  It must be noted that in this case, the
notice served on the employee merely asked him to explain why he
should not be administratively dealt with for his refusal to comply with a
valid order of his superior.  The notice did not state that the employee
was being dismissed, but it was still deemed sufficient compliance with
the notice required under the Implementing Rules.
 
Without a doubt, respondents in Glaxo deliberately disregarded or
disobeyed a company policy.  Their written explanations admitted their
refusal to obey petitioner’s directive to return the vehicles.  Their
justification of their refusal to obey the lawful orders of their employer did
not militate against their obvious disobedience. Consistent with San
Miguel Corporation vs. Ubaldo [supra], there was no necessity for an
actual hearing.  Under the circumstances, they were nonetheless given
adequate opportunity to answer the charge, which in fact they did.  In
arriving at the decision to dismiss them, petitioner took into consideration
the explanations they had offered.

The factual milieu in Glaxo, however, must be differentiated from

Loadstar vs. Mesano, [408 SCRA 478, August 7, 2003]. In this case, the
employee was not apprised of the particular acts for which his
employment was terminated.  He was dismissed immediately after he had
submitted his written explanation to his employer.  That the employee
was able to present, bare as it was, a written explanation did not excuse
the fact that there was a complete absence of the required notice.  His
explanations were futile, as he did not even know which particular acts or
omissions should be explained.  In the Glaxo case, respondents’
explanations were in response to specific acts and grounds that had duly
been stated with clarity. chanrobles virtual law library

Thus, a memorandum to an employee which does not state with

particularity the acts and omission for which he is being charged does not
comply with the first kind of notice preparatory to his dismissal. 

In the same vein, a memorandum advising an employee of his dismissal

but which does not “clearly” cite the reason for the dismissal does not
comply with the second kind of notice required prior to dismissal. (Bondoc
vs. NLRC, G. R. No. 103209, July 28, 1997, 276 SCRA 288).

18. When notice alone will not suffice.

In Philippine National Bank vs. Cabansag, [G. R. No. 157010, June 21,
2005], the employment contract between the parties stipulated, among
others, thus:

“6.  Termination of your employment with the Bank may be made by

either party after notice of one (1) day in writing during probation, one
month notice upon confirmation or the equivalent of one (1) day’s or
month’s salary in lieu of notice.” chanrobles virtual law library

After probationary period, the employee was terminated by a mere

notice, without citing any ground. The Supreme Court said that as a
regular employee, respondent was entitled to all rights, benefits and
privileges provided under our labor laws.  One of her fundamental rights
is that she may not be dismissed without due process of law.  The twin
requirements of notice and hearing constitute the essential elements of
procedural due process, and neither of these elements can be eliminated
without running afoul of the constitutional guarantee. In dismissing
employees, the employer must furnish them the two written notices. The
evidence in this case is crystal-clear. Respondent was not notified of the
specific act or omission for which her dismissal was being sought.  Neither
was she given any chance to be heard, as required by law. At any rate,
even if she were given the opportunity to be heard, she could not have
defended herself effectively, for she knew no cause to answer to. All that
petitioner tendered to respondent was a notice of her employment
termination effective the very same day, together with the equivalent of a
one-month pay.  It has already been held that nothing in the law gives an
employer the option to substitute the required prior notice and
opportunity to be heard with the mere payment of 30 days’ salary.

19.  Notice to explain must correctly and fully inform the

employee of the charges against him.

The notice to the employee should embody the specific charges for which
he is being asked to explain.  An employee cannot be dismissed if the
charges mentioned in the notice for which he was required to explain and
for which he was heard, were different from the ones cited for his
termination.  There is here a deprivation of procedural due process. (BPI
Credit Corporation vs. NLRC, G. R. No. 106027, July 25, 1994). chanrobles virtual
law library

In the 2005 case of Cruz vs. Coca-Cola Bottlers Phils., Inc., [G. R. No.
165586, June 15, 2005], the notices given to petitioner were declared
legally deficient. The first notice dated July 27, 1998, did not contain the
particulars of the charges nor the circumstances in which the violation
happened.  The notice was also couched in general terms that it only
mentions the specific sections and rule numbers of the Red Book that was
violated without defining what such violation was.  A cursory reading of
this notice likewise shows that it does not state that petitioner was in fact
facing a possible dismissal from the company.  Consequently, petitioner
was not sufficiently apprised of the gravity of the situation he was in. 
chanrobles virtual law library

In Philippine Pizza, Inc. vs. Bungabong, [G. R. No. 154315, May 9, 2005],
petitioners violated respondent’s right to due process, particularly the
requirement of first notice because the offense notice petitioners gave to
respondent is insufficient since it did not comply with the requirement of
the law that the first written notice must apprise the employee that his
termination is being considered due to the acts stated in the notice.  The
first notice issued in this case merely stated that respondent is being
charged of dispensing and drinking beer on December 5, 1997, around
11:30 to 11:45 p.m., and nothing more.
20. The employee must be dismissed based on the same grounds
mentioned in the first notice.

The dismissal of an employee must be based on the same grounds cited

in the first notice given to him to explain.  If an employee is dismissed
based on grounds different from those cited in said notice, he is deemed
to have been deprived of procedural due process.  For in this situation, he
could not be expected to adequately defend himself as he was not fully or
correctly informed of the charges against him which management
intended to prove.  It is less than fair for management to charge an
employee with one offense and to dismiss him for having committed
another offense with which he had not been charged and against which he
was unable to adequately defend himself. (Glaxo Wellcome Phils., Inc. vs.
Nagkakaisang Empleyado ng Wellcome-DFA, supra; BPI Credit
Corporation vs. NLRC, supra). chanrobles virtual law library

In Artemio Labor vs. NLRC, [G. R. No. 110388, Sept. 14, 1995], the
Supreme Court declared that there was no abandonment or commission
of dishonest acts by the dismissed workers when the employer merely
sent notices individually addressed to the workers on 6 September 1991,
where it sought an explanation from them on their alleged absence
without official leave or, in short, their abandonment, and warned them in
the form of a reminder that such absence is a ground for separation or
dismissal from the company.  Nothing was mentioned therein about
dishonesty or any other misconduct on the part of the petitioners.   chanrobles
virtual law library

If indeed, according to the Supreme Court, the petitioners were guilty of

both abandonment and dishonesty or misconduct, then the company
should have put them down in black and white. The letters cum notice
cannot be considered to include dishonesty or misconduct.  It would be a
gross violation of the workers’ right to due process to dismiss them for
that cause of which they were not given notice or for a charge for which
they were never given an opportunity to defend themselves. A dismissal
must not only be for a valid or substantial cause; the employer must also
observe the procedural aspect of due process in giving the employee
notice and the opportunity to be heard to defend himself. (See also
Imperial Textile Mills, Inc. vs. NLRC, 217 SCRA 237 [1993]; San Miguel
Corporation vs. NLRC, 222 SCRA 818 [1993]). chanrobles virtual law library

21. Notice should be served at employee’s last known address.

In case of termination, the notices shall be served on the employee’s last

known address. (Section 2, Rule I, Book VI, Rules to Implement the Labor
Code, as amended by Article III, Department Order No. 10, Series of
1997; Agabon vs. NLRC, G.R. No. 158693, Nov. 17, 2004).

22. Notice posted in bulletin board, not sufficient.

The mere posting of the notice to terminate the employee’s employment
on the employees’ bulletin board is not sufficient compliance with the
statutory requirement. (Shoppers Gain Supermart vs. NLRC, G. R. No.
110731, July 26, 1996, 259 SCRA 411).

23.  Notice in a newspaper, not sufficient.

In the 2005 case of Caingat vs. NLRC, [G. R. No. 154308, March 10,
2005], the respondent-employer denied it dismissed the complainant. In
the position paper, it stated that “there is no evidence that respondents
dismissed the complainant.” On record, however, it was shown that on
July 31, 1996, the following appeared in the Philippine Daily Inquirer:

“NOTICE TO THE PUBLIC

“This is to notify the public that as of June 20, 1996, MR. BERNARDINO A.
CAINGAT is no longer connected with RS Night Hawk Security and
Investigation Agency and with RS Maintenance and Services. chanrobles virtual law
library

“All transactions with Mr. Caingat after June 20, 1996 are no longer
honored by these offices.” (Underscoring supplied)

The Supreme Court ruled that neither the public notice in the Philippine
Daily Inquirer, a newspaper of general circulation, nor the demand letter
could constitute substantial compliance. What the public notice did was to
inform the public that petitioner was already separated as of June 20,
1996, the same day he was suspended. The order for petitioner to submit
a written explanation under oath was just a formality. The termination
was a fait accompli.  The pro-forma notice made even more glaring
management’s intent to separate him from the companies’ service. chanrobles
virtual law library

24. Remedy if employee refused to receive notice - service by

registered mail to last known address.

In the 2005 case of Nueva Ecija Electric Cooperative [NEECO] II vs.

NLRC, [G. R. No. 157603, June 23, 2005], it was held that the allegation
on the part of the petitioner-employer that the respondent-employee
refused to receive the memorandum that is why it was not served to him
is too self-serving a claim in the absence of any showing of the signature
or initial of the proper serving officer.  Moreover, petitioner could have
easily remedied the situation by the expediency of sending the
memorandum to private respondent by registered mail at his last known
address as usually contained in the Personal Data Sheet or any personal
file containing his last known address. chanrobles virtual law library

25.  How should answer be made in case of termination for just

cause?

The worker may answer the allegations stated against him in the first
notice within a reasonable period from receipt of such notice.  The
decision to dismiss must come only after the employee is given a
reasonable period from receipt of the first notice within which to answer
the charge and ample opportunity to be heard and defend himself with
the assistance of a representative, if he so desires.  This is in consonance
with the express provision of the law on the protection to labor and the
broader dictates of procedural due process.  Non-compliance therewith is
fatal because these requirements are conditions sine qua non before
dismissal may be validly effected. (Austria vs. Hon. NLRC, G. R. No.
124382, Aug. 16, 1999).

The law mandates that every opportunity and assistance must be

accorded to the employee by the management to enable him to prepare
adequately for his defense. (IBM Philippines, Inc. vs. NLRC, 305 SCRA
592 [1999]).

The law does not specify what constitutes reasonable period within which
an employee being cited administratively must submit his answer or
explanation. The reasonableness of the period necessarily depends on the
distinctive circumstances of each case.  chanrobles virtual law library

For instance, in the case of Asuncion vs. NLRC, [G. R. No. 129329, July
31, 2001], the Supreme Court, considered the two-day period given to
petitioner to explain and answer the charges against her as most
unreasonable, considering that she was charged with several offenses and
infractions (35 absences, 23 half-days and 108 tardiness), some of which
were allegedly committed almost a year before, not to mention the fact
that the charges leveled against her lacked particularity. Apart from
chronic absenteeism and habitual tardiness, petitioner was also made to
answer for loitering and wasting company time, getting salary of an
absent employee without acknowledging or signing for it and disobedience
and insubordination.

26.  What is hearing requirement in termination for cause?

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 or an opportunity to seek a reconsideration of the action or ruling
complained of.  A formal or trial-type hearing is not at all times and in all
instances essential, as the due process requirements are satisfied where
the parties are afforded fair and reasonable opportunity to explain their
side of the controversy at hand.  What is frowned upon is the absolute
lack of notice and hearing. (Valiao vs. Hon. CA, G. R. No. 146621, July
30, 2004; Cindy & Lynsy Garment vs. NLRC, 284 SCRA 38 [1998]). chanrobles
virtual law library
“Ample opportunity” means every kind of assistance that management
must accord to the employee to enable him to prepare adequately for his
defense including legal representation. (IBM Philippines, Inc. vs. NLRC, G.
R. No. 117221, April 13, 1999, 305 SCRA 592).

Outright termination violates due process.

The employer should give an employee who committed an act considered

lawful cause for his dismissal, the opportunity to explain or present his
side.  There should be no outright termination of his employment without
due process. Otherwise, it will be a violation of his right to security of
tenure and due process of law. (Robusta Agro Marine Products, Inc. vs.
Gorombalem, G. R. No. 80500, July 5, 1989).

Bizarre case of employee illegally dismissed twice.

Benguet Corporation vs. NLRC and Felizardo A. Guianan, [G. R. No.

124166, November 16, 1999]  presents an extreme case of illegal
dismissal. The employee who had served the company for more than two
decades was first dismissed on the basis of an anonymous letter. The
employer investigated him 22 days after the first dismissal and was again
served with a termination letter for the second time sometime later. The
Supreme Court ruled that the composition of the fact-finding committee
22 days after the employee was first terminated was obviously an
afterthought to give a semblance of compliance with the 30-day notice
requirement provided by law. It was merely a token gesture to cure the
obviously defective earlier dismissal.  Thus, his termination was tinged
with bad faith.

When dismissal was already a foregone conclusion.

In Philippine Pizza, Inc. vs. Bungabong, [G. R. No. 154315, May 9, 2005],
while there was just cause for the employee’s dismissal, the records of
the case, however, show that he was not afforded due process.  He was
able to submit his explanation denying that he stole beer from the
company dispenser, but he was not given a fair and reasonable
opportunity to confront his accusers and defend himself against the
charge of theft. The termination letter was issued by the HRD Vice
President  on December 15, 1997, one day before respondent went to the
HRD Office for the alleged investigation.  Clearly then, the decision to
terminate respondent which was made effective on December 19, 1997,
was already final, even before respondent could present his side and
refute the charges against him.  Indeed, at that point, nothing that
respondent could say or do would have changed the decision to dismiss
him. Such failure by petitioners to give respondent the benefit of a
hearing and an investigation before his termination constitutes an
infringement of respondent’s constitutional right to due process.

27.  What are the instances when hearing is not required?

In the situations mentioned below, hearing is not required to be

conducted by the employer in order for the termination to be valid.

a. Admission of guilt by employee.

b.  Termination due to authorized causes under Article 283.
c.  Termination due to disease under Article 284.
d.  Termination by the employee (resignation). chanrobles virtual law library
e.  Termination after 6 months of bona-fide suspension of operation.
f.  Termination due to expiration of fixed-period employment.
g.  Termination of casual employment. chanrobles virtual law library
h. Termination due to completion of project in project employment.
i.  Termination due to lapse of season in case of seasonal employment.
j.  Termination due to expiration of period of probationary employment.
k. Termination due to expiration of tenure made coterminous with lease.
l.  Termination due to expiration of contractual employment.
m.  Termination due to abandonment. chanrobles virtual law library
n.  Termination due to closure or stoppage of work by government
authorities.

28.  Who has the burden of proof in illegal dismissal cases?

Time and again, the rule is that in illegal dismissal cases, the onus of
proving that the employee was not dismissed or if dismissed, that the
dismissal was not illegal, rests on the employer and failure to discharge
the same would mean that the dismissal is not justified and, therefore,
illegal. (Limketkai Sons Milling, Inc. vs. Llamera, G. R. No. 152514, July
12, 2005).

29. What is the quantum of evidence required in labor cases?

All administrative determinations require only substantial proof and not

clear and convincing evidence. (Segismundo vs. NLRC, G. R. No. 112203,
Dec. 13, 1994).

30.  May the right against self-incrimination be invoked in

administrative proceedings?

The Constitution provides:

“SECTION 17.  No person shall be compelled to be a witness against

himself.” (Section 17, Article III [Bill of Rights], 1987 Constitution). chanrobles
virtual law library

May this constitutionally-guaranteed right, usually invoked in criminal

cases, be validly invoked in administrative proceedings?

The answer is in the affirmative, if the hearing partakes of the nature of a

criminal proceeding because of the nature of the penalty that may be
imposed for the offense.  (Pascual, Jr. vs. Board of Medical Examiners, G.
R. No. L-25018, May 16, 1969; Cabal vs. Kapunan, Jr., G. R. No. L-
19052, Dec. 29, 1962).

31.  May the right to counsel be asserted in administrative

proceedings?

The right to counsel under Section 12 of Article III [Bill of Rights] of the
1987 Constitution is meant to protect a suspect in a criminal case under
custodial investigation.  Custodial investigation is the stage where the
police investigation is no longer a general inquiry into an unsolved crime
but has begun to focus on a particular suspect who had been taken into
custody by the police to carry out a process of interrogation that lends
itself to elicit incriminating statements.  It is that point when questions
are initiated by law enforcement officers after a person has been taken
into custody or otherwise deprived of his freedom of action in any
significant way.  The right to counsel attaches only upon the start of such
investigation.  Therefore, the exclusionary rule under said provision of the
Bill of Rights of the 1987 Constitution applies only to admissions made in
a criminal investigation but not to those made in an administrative
investigation.  If the investigation is merely an administrative
investigation conducted by the employer and not a criminal investigation,
the admissions made during such investigation may be used as evidence
to justify dismissal. (Manuel vs. N. C. Construction Supply, G. R. No.
127553, Nov. 28, 1997, 282 SCRA 326). chanrobles virtual law library

32. May the right against unreasonable searches and seizures be

invoked in administrative proceedings?

As applied to labor cases, the Supreme Court declared that it finds no

reason to revise the doctrine laid down in People vs. Marti, [193 SCRA 57
(1991)], that the Bill of Rights does not protect citizens from
unreasonable searches and seizures perpetrated by private individuals.  It
is not true that the citizens have no recourse against such assaults.  On
the contrary, such an invasion gives rise to both criminal and civil
liabilities. (Waterous Drug Corporation vs. NLRC, G. R. No. 113271, Oct.
16, 1997, 280 SCRA 735). chanrobles virtual law library

33.  May the right to equal protection of the laws be asserted in

administrative proceedings?

In the case of Duncan Association of Detailman-PTGWO vs. Glaxo

Welcome Philippines, Inc., [G. R. No. 162994, September 17, 2004],
where the employer prohibited its employees against personal or marital
relationships with employees of competitor companies, it was held that
such prohibition is reasonable under the circumstances because
relationships of that nature might compromise the interests of the
company and the same does not violate the equal protection clause in the
Constitution.  It is a settled principle that the commands of the equal
protection clause are addressed only to the state or those acting under
color of its authority.  The only exception occurs when the state, in any of
its manifestations or actions, has been found to have become entwined or
involved in a wrongful private conduct.  Obviously, however, this
exception is not present in this case. Significantly, the company actually
enforced the policy after repeated requests to the employee to comply
with the policy.  Indeed, the application of the said policy was made in an
impartial and even-handed manner, with due regard for the lot of the
employee.  In any event, from the wordings of the contractual provision
and the policy in its employee handbook, it is clear that Glaxo does not
impose an absolute prohibition against relationships between its
employees and those of competitor companies.  Its employees are free to
cultivate relationships with and marry persons of their own choosing. 
What the company merely seeks to avoid is a conflict of interest between
the employee and the company that may arise out of such relationships.
(Ibid.). chanrobles virtual law library

34.  When may the effects of termination be suspended?

Grounds. - The Secretary may suspend the effects of termination pending

resolution of the case in the event of a prima facie finding by the
appropriate official of the Department of Labor and Employment before
whom the dispute is pending that:

1.   the termination may cause a serious labor dispute; or

2.   the termination is in implementation of a mass lay-off. (Article 277

[b])

35.  What is preventive suspension?

a.  Legal basis.

The Labor Code does not contain any provision on preventive suspension. 
The legal basis for the valid imposition thereof is found in the Rules to
Implement the Labor Code. chanrobles virtual law library

b.  Justification for imposition of preventive suspension (not a penalty);

period.

The employer may place the worker concerned under preventive

suspension for a period of 30 days if his continued employment poses a
serious and imminent threat to the life or property of the employer or of
his co-workers. During the said period, the employee is not entitled to his
wages.  But if the 30-day period is extended because the employer has
not finished its investigation of the case, the employee should be paid his
wages during the period of extension.

•Period of preventive suspension must be definite.

•Extension of period must be justified. chanrobles virtual law library
•Preventive suspension of workers in the construction industry, only 15
days.

36.  What is suspension as a penalty?

When dismissal is too harsh a penalty due to certain mitigating factors

such as, inter alia, the absence of malice or the fact that the employee is
a first offender, suspension is deemed sufficient penalty.

In the 2005 case of Coca-Cola Bottlers, Phils., Inc. vs. Kapisanan ng

Malayang Manggagawa sa Coca-Cola-FFW, [G. R. No. 148205, February
28, 2005], the respondent-employee was dismissed for dishonesty, more
specifically for violation of the company policy on fictitious sales
transactions; falsification of company records/data/documents/reports;
conspiring or conniving with, or directing others to commit fictitious
transactions; and inefficiency in the performance of duties, negligence
and blatant disregard of or deviation from established control and other
policies and procedures.  However, the petitioner-employer failed to
adduce clear and convincing evidence that the respondent had committed
said acts. Consequently, it was ruled that the extreme penalty of
dismissal was too harsh and manifestly disproportionate to the infraction
committed, which appears to have been fully explained, and, in fact, to be
not inexcusable under the circumstances.  There was no dishonesty, no
demonstration of such moral perverseness as would have justified the
claimed loss of confidence attendant to the job.  The company must bear
a share of the blame for entrusting a mere driver-helper with a highly
fiduciary task knowing that he did not possess the required skills.  At
most, the employee failed to comply with, or even violated, certain
company rules of internal control procedures, but to say that it was
deliberate is gratuitous.  chanrobles virtual law library

Perhaps, individual petitioner should first have been given a mere

warning, then a reprimand or even a suspension, but certainly not
outright dismissal from employment.  One must keep in mind that a
worker’s employment is property in the constitutional sense, and he
cannot be deprived thereof without due process and unless it was
commensurate  to his acts and degree of moral depravity.   Considering
the factual backdrop in this case, it was ruled that for his infractions, the
respondent-employee should be meted a suspension of two (2) months
instead of dismissal.
37.  What is reinstatement?

a.  Reinstatement under Articles 279 and 223 of the Labor Code,
distinguished.

Reinstatement under Article 279 presupposes that the judgment has

already become final and executory. Consequently, there is nothing left to
be done except the execution thereof. Reinstatement under Article 223 of
the Labor Code, however, may be availed of as soon as the Labor Arbiter
renders a judgment declaring that the dismissal of the employee is  illegal
and ordering said reinstatement.  It may be availed of even pending
appeal.  chanrobles virtual law library

• In case of illegal dismissal - The consequence of illegality thereof is

reinstatement without loss of seniority rights and with full backwages
(inclusive of allowances and other benefits computed from the time his
compensation was withheld up to the time of his actual reinstatement).

Reinstatement when not prayed for, effect.

The failure to allege reinstatement as one of the reliefs in the complaint

for illegal dismissal is not fatal. In the interest of justice, according to
Manipon vs. NLRC, [G. R. No. 105338, Dec. 27, 1994], although the issue
of the grant of separation pay was never contested even at the level of
the Labor Arbiter nor assigned as error at the NLRC level, the Labor
Arbiter’s ruling where he granted petitioner separation pay instead of
ordering his reinstatement should be corrected. Reinstatement should be
granted although he failed to specifically pray for the same in his
complaint. (See also General Baptist Bible College vs. NLRC, 219 SCRA
549 [1993]). chanrobles virtual law library

In Pheschem Industrial Corporation vs. Moldez, [G. R. No. 161158, May 9,

2005], respondent’s omission to pray for reinstatement in his position
paper before the Labor Arbiter was not considered as an implied waiver to
be reinstated.  It was considered a mere procedural lapse which should
not affect his substantive right to reinstatement.  It is a settled principle
that technicalities have no place in labor cases as rules of procedure are
designed primarily to give substance and meaning to the objectives of the
Labor Code to accord protection to labor.

Reinstatement when what is prayed for is separation pay.

A different rule, however, applies in a case where reinstatement was not

prayed for in the complaint but the payment of separation pay in lieu
thereof. As pronounced in Dela Cruz vs. NLRC, [G. R. No. 121288, Nov.
20, 1998, 299 SCRA 1, 13], the petitioner therein would have been
entitled to reinstatement as a consequence of his illegal dismissal from
employment.  However, by expressly asking for separation pay, he is
deemed to have opted for separation pay in lieu of reinstatement.  This is
the tenor of the holding in Reformist Union vs. NLRC, [266 SCRA 713,
728-729 (1997)] to the effect that separation pay is awarded as an
alternative to reinstatement.  chanrobles virtual law library

In the 2003 case of Solidbank Corporation vs. CA, [G. R. No. 151026,
Aug. 25, 2003], where the employee explicitly prayed for an award of
separation pay in lieu of reinstatement, the Supreme Court said that by
so doing, he forecloses reinstatement as a relief by implication.
Consequently, he is entitled to separation pay equivalent to one month
pay for every year of service, from the time of his illegal dismissal up to
the finality of this judgment, as an alternative to reinstatement.  chanrobles virtual
law library

Employee ordered reinstated may, at the end of the proceeding,

opt for separation pay instead.

The employee who files an illegal dismissal case may choose between
reinstatement and payment of separation pay in lieu of reinstatement.  He
is bound by the relief he prayed for in his complaint.  If ordered reinstated
later on after the end of the proceedings, he has no other option but to
abide thereby. 

However, the Supreme Court recognizes an exception. In the 2004 case

of Procter and Gamble Philippines vs. Bondesto, [G. R. No. 139847, March
5, 2004], after more than a year after the respondent was placed on
payroll reinstatement, the company’s Tondo Plant, where the respondent
was assigned, was shut down.  Since the respondent’s employment could
not be maintained at the Tondo Plant, so the petitioner maintains, it was
constrained to discontinue the respondent’s payroll reinstatement. 
Clearly, the respondent is entitled to reinstatement, without loss of
seniority rights to another position of similar nature in the company.  It
should be stressed that while the petitioner manifested the closure of the
Tondo Plant, it failed to indicate the absence of an unfilled position more
or less of a similar nature as the one previously occupied by the
respondent at its other plant/s. However, if the respondent no longer
desires to be reinstated, he should be awarded separation pay at the rate
of one (1) month for every year of service as an alternative, following
settled jurisprudence.  chanrobles virtual law library

Reinstatement not possible due to old age.

While reinstatement is a relief mandated in illegal dismissal cases, the

same cannot be awarded in instances where it is no longer feasible as in a
case where private respondent is already over-aged.  In such a case, the
proper remedy is to award separation pay in lieu of reinstatement.
(Benguet Corporation vs. NLRC and Felizardo A. Guianan, G. R. No.
124166, Nov. 16, 1999; Espejo vs. NLRC, G. R. No. 112678, March 29,
1996, 255 SCRA 430, 435). chanrobles virtual law library

Reinstatement when position no longer exists.

An illegally dismissed employee is entitled to be reinstated to his former

position, unless such position no longer exists at the time of his
reinstatement, in which case, he should  be given a substantially
equivalent position in the same establishment without loss of seniority
rights. (Section 4, Rule I, Book VI, Rules to Implement the Labor Code;
Pedroso vs. Castro, G. R. No. 70361, Jan. 30, 1986).

However, as held in Tanduay Distillery Labor Union vs. NLRC, [G. R. No.
73352, Dec. 06, 1994], in the event that the previous positions of
petitioners may no longer be open or available, considering that more
than ten (10) years have since elapsed from the date of their dismissal,
private respondent-employer has to pay, in lieu of reinstatement and in
addition to the three-year back salaries, separation pay equivalent to at
least one (1) month pay for every year of service.  (See also RCPI vs.
NLRC, 210 SCRA 222; Torillo vs. Leogardo, Jr., 197 SCRA 471). chanrobles virtual
law library

Reinstatement rendered moot and academic by supervening

events.

Reinstatement should no longer be ordered when it is rendered moot and

academic by reason of supervening events such as:

1. Declaration of insolvency by the court. (Electruck Asia, Inc. vs. Meris,

G. R. No. 147031, July 27, 2004). chanrobles virtual law library

2. Fire which gutted the hotel and resulted in its total destruction.
(Bagong Bayan Corporation vs. Ople, G. R. No. 73334, Dec. 8, 1986).

3. Closure of the business of the employer. (Section 4[b], Rule I, Book VI,
Rules to Implement the Labor Code; Philtread Tire & Rubber Corporation
vs. Vicente, G. R. No. 142759, Nov. 10, 2004).

4. Non-existence of the employee’s former position at the time of

reinstatement for reasons not attributable to the fault of the employer.
(Section 4[b], Rule I, Book VI, Rules to Implement the Labor Code; Pizza
Inn vs. NLRC, G. R. No. 74531, June 28, 1988).

5. Take over of the business of the employer by another company and

there is no agreement regarding assumption of liability by the acquiring
company. (Callanta vs. Carnation Philippines, G. R. No. 70615, Oct. 28,
1986). chanrobles virtual law library
38.  What is the distinction between reinstatement and
backwages?

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 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.

39.  What is the doctrine of “Strained Relations”?

In a plethora of cases, the Supreme Court has been consistent in its

holding that the existence of strained relations between the employer and
the illegally dismissed employee may effectively bar reinstatement of the
latter. (Cabatulan vs. Buat, G. R. No. 147142, Feb. 14, 2005).

a.  Strained relations must be raised before the Labor Arbiter.

Strained relations must be demonstrated as a fact. (Paguio Transport

Corporation vs. NLRC, G. R. No. 119500, Aug. 28, 1998).

In Quijano vs. Mercury Drug Corporation, [292 SCRA 109 (1998)], the
Supreme Court ruled that the existence of strained relations is a factual
issue which must be raised before the Labor Arbiter for the proper
reception of evidence. If the issue of strained relations is raised only in
the appeal from the Labor Arbiter’s decision, the same may not be
allowed. (Sagum vs. CA, G. R. No. 158759, May 26, 2005; PLDT vs.
Tolentino, G. R. No. 143171, Sept. 21, 2004).

b.  Litigation, by itself, does not give rise to strained relations that may
justify non-reinstatement. chanrobles virtual law library

As a rule, the filing of the complaint for illegal dismissal does not by itself
justify the invocation of this doctrine. (Paguio Transport Corporation vs.
NLRC, supra).

No strained relations should arise from a valid and legal act of asserting
one’s right; otherwise, an employee who asserts his right could be easily
separated from the service by merely paying his separation pay on the
pretext that his relationship with his employer had already become
strained. (Globe-Mackay Cable and Radio Corporation v. NLRC, G.R. No.
82511, March 3, 1992).

Indeed, if the strained relations engendered as a result of litigation are

sufficient to rule out reinstatement, then, reinstatement would thus
become the exception rather than the rule in cases of illegal dismissal.
(Procter and Gamble Philippines vs. Bondesto, G. R. No. 139847, March 5,
2004). chanrobles virtual law library

This doctrine should not be used so indiscriminately as to bar the

reinstatement of illegally dismissed workers, especially when they
themselves have not indicated any aversion to returning to work.  It is
only normal to expect a certain degree of antipathy and hostility to arise
from a litigation between parties, but not in every instance does such an
atmosphere of antagonism exist as to adversely affect the efficiency and
productivity of the employee concerned. (Coca-Cola Bottlers Phils., Inc.
vs. Daniel, G. R. No. 156893, June 21, 2005; Pheschem Industrial
Corporation vs. Moldez, G. R. No. 161158, May 9, 2005).

c. Nature of position, material in determining validity of “strained

relations.”

It appears from the Supreme Court rulings involving the doctrine of

“strained relations” that the common denominator which bars
reinstatement is the nature of the position of the employee.  Hence, this
doctrine should not be applied to a situation where the employee has no
say in the operation of the employer’s business.  chanrobles virtual law library

As held in the Quijano vs. Mercury Drug case [supra]:

“To protect labor’s security of tenure, we emphasize that the doctrine of

strained relations should be strictly applied so as not to deprive an
illegally dismissed employee of his right to reinstatement. Every labor
dispute almost always results in strained relations and the phrase cannot
be given an overarching interpretation, otherwise an unjustly dismissed
employee can never be reinstated.” chanrobles virtual law library

In the same breadth, this doctrine was not applied in the 2002 case of
Abalos vs. Philex Mining Corporation, [G. R. No. 140374, November 27,
2002] to deprive the workers of their right to reinstatement. Here, the
complainants are mere rank-and-file workers consisting of cooks, miners,
helpers and mechanics of the respondent company.

If the nature of the position, therefore, requires the trust and confidence
of the employer upon the employee occupying it as would make
reinstatement adversely affect the efficiency, productivity and
performance of the latter, then, strained relations will justify non-
reinstatement.  Absent this circumstance, whatever antagonism
occasioned by the litigation should not be taken as a bar to
reinstatement. (Maranaw Hotels and Resorts Corp. vs. CA, 215 SCRA 501,
507 [1992]). chanrobles virtual law library

Thus, in Acesite Corporation vs. NLRC, G. R. No. 152308 and Gonzales vs.
Acesite [Philippines] Hotel Corporation, [G. R. No. 152321, Jan. 26,
2005], where the employee was the Chief of Security of the hotel whose
duty was to “manage the operation of the security areas of the hotel to
provide and ensure the safety and security of the hotel guests, visitors,
management, staff and their properties according to company policies and
local laws,” the Supreme Court ruled that such position is one of trust and
confidence, he being in charge of the over-all security of said hotel. 
Hence, in view of the strained relations between him and management,
reinstatement is no longer possible.  In lieu thereof, the hotel is liable to
pay separation pay of one (1) month for every year of service.

d. Non-settlement of dispute after long period of time does not indicate

strained relations.

Long period of time that elapsed without any settlement of the case does
not, by itself, indicate the existence of strained relations. In Palmeria vs.
NLRC, [G. R. No. 113290-91, Aug. 3, 1995], it was held that the fact that
for six years, the complainant and his employer failed to settle their
dispute amicably does not prove that the relationship between them is
already too strained as to be beyond redemption.  chanrobles virtual law library

e. Refusal to be reinstated, indicates strained relations.

The refusal of the employees to be reinstated is indicative of strained

relations. (Sentinel Security Agency, Inc. vs. NLRC, G. R. No. 122468,
Sept. 3, 1998).

f. Criminal prosecution indicates strained relations.

Criminal prosecution confirms the existence of “strained relations” which

would render the employee’s reinstatement highly undesirable. (RDS
Trucking, vs. NLRC, G. R. No. 123941, Aug. 27, 1998). chanrobles virtual law library

As held in Cabatulan vs. Buat, [G. R. No. 147142, Feb. 14, 2005], the fact
that the employee was charged by his employer with qualified theft and
was even coerced into withdrawing the labor case filed by the former
against the latter, gives rise to no other conclusion than the categorical
fact that antagonism already caused a severe strain in the relationship
between them. chanrobles virtual law library

g. Non-reinstatement of a managerial employee; exception.

A person holding a managerial position may not be ordered reinstated if

strained relations exist.  This was the holding in Golden Donuts, Inc. et al.
vs. NLRC, [G. R. Nos. 105758-59, Feb. 21, 1994]. The position of
manager is an important consideration in determining the validity of
reinstatement.  If the employee is a laborer, clerk or other rank-and-file
employee, there would be no problem in ordering her reinstatement with
facility.  But she was a Vice President for Marketing of the company.  An
officer in such a key position can work effectively only if she enjoys the
full trust and confidence of top management. (See also Asiaworld
Publishing House, Inc. vs. Ople, G. R. No. L-56398, July 23, 1987). chanrobles
virtual law library

But if the alleged strained relations between a managerial employee and

his employer was not adequately proven, reinstatement should be
ordered. Hence, in Philippine Long Distance Telephone Company vs.
Tolentino, [G. R. No. 143171, September 21, 2004], the Supreme Court
ordered the reinstatement of the managerial employee despite allegation
of existence of strained relations inasmuch as the same were not
adequately proven by the employer which had the burden of doing so.
Strained relations must be proven as a fact. Thus, absent any competent
evidence in the records to support the employer’s assertion that a
peaceful working relationship with the employee is no longer possible, the
latter must be reinstated.  chanrobles virtual law library

h.  Reinstatement is proper if strained relations existed with former owner

but not with new owner.

In the same case of PLDT [supra], the alleged strained relations can no
longer be invoked since there has been a change in the ownership and
control of the company.  While strained relations may have existed
between the employee and the former owner of the company, the same
do not exist now between him and the new owner.  The new owner, in
fact, has absolutely nothing to do with the controversy involved in the
case. This fact makes reinstatement feasible.

i. Length of time may prevent reinstatement.

In addition to existence of strained relations, the Supreme Court, in the

case of EDI Staff Builders International, Inc. vs. Magsino, [G. R. No.
139430, June 20, 2001], considered as additional ground for ordering
payment of separation pay in lieu of reinstatement, the length of time
respondent-employee has been out of petitioners’ employ, thereby
making such award of separation pay appropriate. (See also Jardine
Davies, Inc. vs. NLRC, 311 SCRA 289 [1999]).

40.  What is separation pay?

The only instances under the Labor Code and pertinent jurisprudence
where the employer is liable to pay separation pay are the following:
chanrobles virtual law library

1.  when  ordered as substitute for reinstatement in illegal dismissal

cases;
2.   when  termination  is   due  to  closure  of  establishment  or
reduction of personnel under Article 283;

3.    when termination is due to disease under Article 284;

4.   when  resignation  pay or separation pay (or sometimes called

“financial assistance”) is required under a unilaterally promulgated
voluntary policy or practice of the employer or under an agreement such
as a Collective Bargaining Agreement; chanrobles virtual law library

5.    when employment is deemed terminated after the lapse of six (6)
months in cases involving bona-fide suspension of the operation of
business or undertaking under Article 286; 

6.    when the employer terminates without just cause, the services of a
househelper prior to the expiration of the fixed-term employment under
Article 149.  chanrobles virtual law library

41.  May separation pay be awarded despite lawful dismissal for

cause?

An employee who is dismissed for just cause is generally not entitled to

separation pay.  A reading of Article 279 in relation to Article 282 of the
Labor Code reveals that an employee who is dismissed for cause after
appropriate proceedings in compliance with due process requirements is
not entitled to an award of separation pay.  In some cases, however, the
Supreme Court awards separation pay to a legally dismissed employee on
the grounds of equity and social justice. This is not allowed, though, when
the employee has been dismissed for serious misconduct or some other
causes reflecting on his moral character or personal integrity. (Etcuban,
Jr. vs. Sulpicio Lines, Inc., G. R. No. 148410, Jan. 17, 2005). chanrobles virtual law
library

This equitable principle was emphasized again lately in the 2002 case of
San Miguel Corporation vs. Lao, [433 Phil. 890, 897, July 11, 2002] and
was further expounded the 2005 decision in Philippine Commercial
International Bank vs. Abad, [G. R. No. 158045, February 28, 2005]. As
stated in San Miguel, where the cause for the termination of employment
cannot be considered as one of mere inefficiency or incompetence but an
act that constitutes an utter disregard for the interest of the employer or
a palpable breach of trust reposed in him, the grant of separation benefits
is hardly justifiable.
 
In PLDT vs. NLRC and Abucay, [164 SCRA 671], it was declared that while
it would be compassionate to give separation pay to a salesman if he
were dismissed for his inability to fill his quota, surely, however, he does
not deserve such generosity if his offense is the misappropriation of the
receipts of his sales.
In Gustilo vs. Wyeth Phils., Inc., [G. R. No. 149629, October 4, 2004], the
Court of Appeals, despite its finding that the dismissal was legal, still
awarded the complainant separation pay of P106,890.00 allegedly by
reason of several mitigating factors mentioned in its assailed Decision. 
The Supreme Court, however, reversed said award based on the afore-
mentioned case of PLDT.  It ruled that an employee who was legally
dismissed from employment is not entitled to an award of separation pay.
Despite this holding, however, the Supreme Court was constrained not to
disturb the award of separation pay in this case because respondent
company did not interpose an appeal from said award. Hence, no
affirmative relief can be extended to it.  A party in a case who did not
appeal is not entitled to any affirmative relief.  chanrobles virtual law library

The San Miguel test.

In line with the 2002 case of San Miguel [supra], it is now a matter of
established rule that the question of whether separation pay should be
awarded depends on the cause of the dismissal and the circumstances of
each case. 

Under the San Miguel test, separation pay may “exceptionally” be

awarded as a “measure of social justice,” provided that the dismissal does
not fall under either of two circumstances: 

(1)  there was serious misconduct; or

(2)  the dismissal reflected on the employee’s moral character. 

Simply stated, notwithstanding a valid dismissal, an employee’s lack of

moral depravity could evoke compassion and thereby compel an award of
separation pay. (PCIB vs. Abad, G. R. No. 158045, Feb. 28, 2005).
 
Consequently, if the employee is dismissed due to some grounds other
than serious misconduct, say loss of trust and confidence, separation pay
may be awarded to the employee. There had been jurisprudence granting
separation pay for dismissals based on this ground. (Camua vs. NLRC,
344 Phil. 460, 466, Sept. 12, 1997). 

Moreover, if the dismissal does not fall under the first qualification
(serious misconduct), the next query shifts to whether the alleged
wrongful act was reflective of the moral character of the employee.  If the
answer is in the negative, separation pay may be awarded to him. (See
also PCIB vs. Abad, supra). chanrobles virtual law library

Incidentally, in San Miguel, the High Court reversed the decision and
resolution of the Court of Appeals insofar as it decreed the payment of
retirement benefits or separation pay to respondent but, in the light of
the plight of respondent who has spent the best years of his useful life
with petitioner, the High Court “commiserate(d) with him but it can do no
more than to appeal to an act of compassion by SMC and to ask it to see
its way clear to affording some form of financial assistance to respondent
who has served it for almost three decades with no previous blemished
record.”  While the Supreme Court did not mention any amount of such
financial assistance, it reiterated its wish in the decretal portion of the
decision when it said: “It is hoped, however, that petitioner will heed the
Court’s call for compassion.” Indeed, the sympathy of the Supreme Court
towards the workingmen is best exemplified in this case.

42.  What is the amount of separation pay in lieu of

reinstatement?

Separation pay is only proper to substitute for reinstatement (not for

backwages)]. chanrobles virtual law library

Separation pay, in lieu of reinstatement, shall include the amount

equivalent at least to one (1) month salary or to one (1) month salary for
every year of service, whichever is higher, a fraction of at least six (6)
months being considered as one (1) whole year including regular
allowances.  If not regular, not included.
 
43.  What are backwages?

Full Backwages have to be paid by an employer as part of the price or

penalty he has to pay for illegally dismissing his employee.  Other benefits
must be paid in addition to backwages.  The computation should be based
on the wage rate level at the time of the illegal dismissal and not in
accordance with the latest, current wage level of the employee’s position. 
chanrobles virtual law library

Other benefits must be paid in addition to backwages.

Following several decisions of the Supreme Court, the following benefits,

in addition to the basic salary, should be taken into account in the
computation of backwages, if applicable:

1.  fringe benefits or their monetary equivalent. (Acesite Corporation vs.

NLRC, G. R. No. 152308, Jan. 26, 2005).

2. increases in compensation and other benefits, including 13th month

pay. (Food Traders House, Inc. vs. NLRC, G. R. No. 120677, Dec. 21,
1998, 300 SCRA 360).

3. transportation and emergency allowances. (Santos vs. NLRC, G. R. No.

76721, Sept. 21, 1987; Soriano vs. NLRC, G. R. No. L-75510, Oct. 27,
1987).
4. holiday pay, vacation and sick leaves and service incentive leaves. (St.
Louise College of Tuguegarao vs. NLRC, G. R. No. 74214, Aug. 31, 1989;
On service incentive leave, see Fernandez vs. NLRC, G. R. No. 105892,
Jan. 28, 1998, 285 SCRA 149).

5. just share in the service charges. (Maranaw Hotels & Resort

Corporation vs. NLRC, G. R. No. 123880, Feb. 23, 1999).

6. gasoline, car and representation allowances. (Consolidated Rural Bank

[Cagayan Valley], Inc. vs. NLRC, G. R. No. 123810, Jan. 20, 1999, 301
SCRA 223).

7.any other allowances and benefits or their monetary equivalent. (Blue

Dairy Corporation vs. NLRC, G. R. No. 129843, Sept. 14, 1999).

The computation of said benefits should be up to the date of

reinstatement as provided under Article 279 of the Labor Code.
(Fernandez vs. NLRC, supra).

Dismissed employee’s ability to earn, irrelevant in the award of

backwages.

The award of backwages is not conditioned on the employee’s ability or

inability to, in the interim, earn any income. 

A classic case to illustrate this legal principle is the 2004 case of Tomas
Claudio Memorial College, Inc. vs. CA, [G. R. No. 152568, Feb. 16, 2004].
The petitioner-employer took the position that it cannot be lawfully
compelled to pay backwages for the period of time that the private
respondent-employee was twice incarcerated in jail on account of his
violation of the Dangerous Drugs Act, from June 10, 1996 up to July 5,
1996, and from November 21, 1996 up to February 17, 1997. The
Supreme Court, however, ruled that the illegally dismissed employee is
entitled to backwages even during the period of his incarceration noting
that the first criminal case was dismissed for lack of probable cause and
the second has yet to be finally decided, hence, the employee has, in his
favor, the presumption of innocence until his guilt is proved beyond
reasonable doubt.  chanrobles virtual law library

Salary increase during period of demotion, not covered by

backwages.

Raised as an issue in Paguio vs. Philippine Long Distance Telephone Co.,

Inc., [G. R. No. 154072, December 3, 2002], is whether petitioner is
entitled to an amount equal to 16% of his monthly salary representing his
salary increase during the period of his demotion. Petitioner based his
right to the award of P384,000.00 equivalent to 16% of his monthly
salary increase starting from January 1997 on the fact that, throughout
his employment until his illegal transfer in 1997, he had been consistently
given by the company annual salary increases on account of his above-
average or outstanding performance.  He claims that his contemporaries
now occupy higher positions as they had been promoted several times
during the course of this case.  Thus, even if he ranked higher and
performed better than they during the past years, petitioner has now
been left behind career-wise.  Petitioner averred that this would not have
taken place had he not been illegally transferred. He argued that justice
and equity requires that he be given the monetary award deleted by the
Court of Appeals from the decision of the NLRC.  Undeniably, this
particular award which petitioner is seeking is not based on any wage
order or decree but on an employee’s performance during a certain
period, as evaluated according to a specified criteria.  Petitioner  claims
that there is a high probability that he would have been granted the
increase had he not been transferred from the Garnet Exchange of
respondent PLDT.  Petitioner likens his claim to that for backwages in
illegal dismissal cases.

The Supreme Court was unconvinced.  It ruled:

“Petitioner’s claim, however, is based simply on expectancy or his

assumption that, because in the past he had been consistently rated for
his outstanding performance and his salary correspondingly increased, it
is probable that he would similarly have been given high ratings and
salary increases but for his transfer to another position in the company.

“In contrast to a grant of backwages or an award of lucrum cessans in the

civil law, this contention is based merely on speculation.  Furthermore, it
assumes that in the other position to which he had been transferred
petitioner had not been given any performance evaluation. As held by the
Court of Appeals, however, the mere fact that petitioner had been
previously granted salary increases by reason of his excellent
performance does not necessarily guarantee that he would have
performed in the same manner and, therefore, qualify for the said
increase later.  What is more, his claim is tantamount to saying that he
had a vested right to remain as Head of the Garnet Exchange and given
salary increases simply because he had performed well in such position,
and thus he should not be moved to any other position where
management would require his services.” chanrobles virtual law library

When backwages should only be for one (1) year.

In Procter and Gamble Philippines vs. Bondesto, [G. R. No. 139847, March
5, 2004], the Supreme Court, while affirming the illegality of the dismissal
of the employee, did not, however, grant full backwages. It agreed with
the findings of the NLRC and the Court of Appeals that in view of the
respondent-employee’s absences that were not wholly justified, he should
be entitled to backwages which should be limited to one (1) year.

When backwages should not only be for one (1) year.

In Viernes vs. NLRC, [G. R. No. 108405, April 4, 2003], the Supreme
Court, following the mandate of Article 279 on the payment of full
backwages to an illegally dismissed employee, considered it patently
erroneous, tantamount to grave abuse of discretion on the part of the
NLRC, in limiting to one (1) year the backwages awarded to petitioners.

Full backwages, how computed when dismissed employee has

reached 60 years of age.

If the dismissed employee has already reached sixty (60) years of age,
the backwages should only cover the time when he was illegally dismissed
up to the time when he reached 60 years. Under Article 287, 60 years is
the optional retirement age. (Espejo vs. NLRC, G. R. No. 112678, March
29, 1996, 255 SCRA 430, 435). chanrobles virtual law library

Full backwages, how computed when dismissed employee has

reached 65 years of age.

But in the 2001 case of St. Michael’s Institute vs. Santos, [G. R. No.
145280, Dec. 4, 2001], where the dismissed employee has already
reached the compulsory retirement age of 65, it was ruled that the award
of backwages should be computed up to said age. The view of the
employer that payment of backwages to the illegally dismissed teacher
should be computed only up to December 11, 1993 when she reached 60
years of age cannot be subscribed. 

Full backwages, how computed when company has already ceased

operations. chanrobles virtual law library

In Chronicle Securities Corporation vs. NLRC, [G. R. No. 157907, Nov. 25,
2004], where the employer - the Manila Chronicle - had already
permanently ceased its operations, full backwages should be computed
only up to the date of the closure.  To allow the computation of the
backwages to be based on a period beyond that would be an injustice to
the employer.

This rule holds true even if the employer is found guilty of unfair labor
practice in dismissing the employee.  As held in the case of Pizza
Inn/Consolidated Foods Corporation vs. NLRC, [G.R. No. L-74531, 28
June 1988, 162 SCRA 773], an employer found guilty of unfair labor
practice in dismissing his employee may not be ordered so to pay
backwages beyond the date of closure of business where such closure was
due to legitimate business reasons and not merely an attempt to defeat
the order of reinstatement.  chanrobles virtual law library

Full backwages, how computed when valid retrenchment

supervened.

In Mitsubishi Motors Philippines Corporation vs. Chrysler Philippines Labor

Union, [G. R. No. 148738, June 29, 2004], the illegally dismissed
employee was no longer ordered reinstated because of the occurrence of
a supervening event – that of retrenchment which covered him because
he was a newly regularized employee at the time of his termination. 
However, such non-reinstatement was not considered a sufficient ground
to deny him his backwages, his termination being illegal. In computing
the backwages, the Supreme Court considered the date of effectivity of
the retrenchment as the date when backwages should be reckoned. 
Thus:  “Considering that notices of retrenchment were mailed on February
25, 1998 and made effective one month therefrom, respondent Paras
should be paid full backwages from the date of his illegal dismissal up to
March 25, 1998. Pursuant to Article 283 of the Labor Code, he should be
paid separation pay equivalent to one (1) month salary, or to at least
one-half month pay for every year of service, whichever is higher, a
fraction of at least six months to be considered as one (1) year.” chanrobles virtual
law library

Period of suspension, deductible from backwages.

In Metro Transit Organization, Inc. vs. NLRC, [G. R. No. 119724, May 31,
1999], the employee’s dismissal on the ground of abandonment was
declared illegal but he was found guilty of absence without official leave
(AWOL) for which he was ordered suspended for three (3) months.  In
reckoning the backwages, the Supreme Court directed the payment
thereof from the time of his illegal dismissal on March 29, 1990 up to the
time of his actual reinstatement, less backwages for three (3) months
corresponding to the  period of his suspension for the period March 29,
1990 to June 26, 1990, inclusive, and including allowances and other
benefits or their monetary equivalent.  No deductions therefrom were
allowed for the earnings derived elsewhere by the employee during the
period of his illegal dismissal.  chanrobles virtual law library

In Acesite Corporation vs. NLRC, [G. R. No. 152308, Jan. 26, 2005], the
computation of  backwages was made subject to deduction for the three
(3) days when the employee was under suspension.

Backwages should include period of preventive suspension.

In the 2002 case of Buhain vs. The Hon. CA, [G. R. No. 143709, July 2,
2002], the Supreme Court ruled that the Court of Appeals committed a
reversible error in merely fixing the backwages from the time he was
placed under preventive suspension up to the time he was illegally
dismissed. This period covers only a total of eight days, from May 13,
1996 to May 21, 1996.  Such formula runs counter to the letter and spirit
of the Labor Code. In conformity with Article 279, petitioner should be
given full backwages and all the benefits accruing to him from the first
day of his preventive suspension, May 13, 1996, up to the date of the
finality of this judgment, in light of the Voluntary Arbitrator’s conclusion
that reinstatement is no longer possible.  chanrobles virtual law library

Employer’s offer to reinstate does not forestall payment of full

backwages.

In Condo Suite Club Travel, Inc. vs. NLRC, [G. R. No. 125671, January
28, 2000], backwages were limited by the NLRC from the date of the
employee’s dismissal up to the time when the employer allegedly offered
to reinstate him. It explained that the failure of the employee to work,
after the supposed offer was made, can no longer be attributed to the
fault of the employer.  In reversing the NLRC, the Supreme Court ruled
that this does not suffice to provide complete relief to the painful socio-
economic dislocation of the employee and his family. As previously stated,
an employee who is unjustly dismissed is entitled to his full backwages
computed from the time his compensation was withheld from him up to
the time of his reinstatement.  Mere offer to reinstate a dismissed
employee, given the circumstances in this case, is not enough.  If the
petitioner (employer) were sincere in its intention to reinstate the private
respondent (dismissed employee), petitioner should have at the very least
reinstated him in its payroll right away. The petitioner should thus be held
liable for the entire amount of backwages due the private respondent
from the day he was illegally dismissed up to the date of his
reinstatement.  Only then could observance of labor laws be promoted
and social justice upheld.

Full backwages, in case of refusal of employer to reinstate.

The unjustified refusal of the employer to reinstate an illegally dismissed

employee entitles him to payment of his salaries effective from the time
the employer failed to reinstate him despite the issuance of a writ of
execution. (Medina vs. Consolidated Broadcasting System, G. R. Nos.
99054-56, May 28, 1993, 222 SCRA 707). chanrobles virtual law library

Therefore, the payment of backwages by petitioner to respondent

employee for the period he was not reinstated despite the alias writ of
execution up to the time he opted for separation pay in lieu of
reinstatement is equitable and justified under the law. (Philippine Rabbit
Bus Lines, Inc. vs. NLRC, G. R. No. 122078, April 21, 1999, 306 SCRA
155).

44.  What are the distinctions between separation pay and

backwages?

Separation pay and backwages are two (2) different things. Payment of
separation pay is not inconsistent with payment of backwages.

The two may be distinguished as follows:

1. Separation pay is paid when reinstatement is not possible; while

backwages is paid for the compensation which otherwise the employee
should have earned had he not been illegally dismissed.

2. The former is computed normally on the basis of the employee’s length

of service; while the latter is normally computed until the employee is
reinstated, or when reinstatement is no longer possible, until the finality
of the decision.

3. The former is paid as a wherewithal during the period that an employee

is looking for another employment; while the latter is paid for the loss of
earnings during the period between illegal dismissal and reinstatement.

4. The former is oriented towards the immediate future; while the latter is
restoration of the past income lost.

5. Separation pay cannot be paid in lieu of backwages.

45.  What are damages and attorney’s fees?

No proof of pecuniary loss is necessary in order that moral, nominal or

exemplary damages may be adjudicated.  The assessment of such
damages is left to the discretion of the court, according to the
circumstances of each case.  Normally, if dismissal is attended with bad
faith, whimsicality and oppression, the said damages are awarded,
including attorney's fees.

Award of attorney's fees when employee is forced  to sue. - It is settled

that in actions for recovery of wages or where an employee was forced to
litigate and has incurred expenses to protect his rights and interests, even
if not so claimed, an award of attorney's fees equivalent to ten percent
(10%) of the total award is legally and morally justifiable.

46.  Is legal interest allowed?

In a 1998 case, the dismissed employee was awarded a separation pay of

1/2 month salary for every year of service inclusive of allowances, if any,
with twelve percent (12%) interest per annum from the date of
promulgation of the decision until fully paid. (Magos vs. NLRC, et al., G.
R. No. 123421, December 28, 1998).
 
In another 1998 case, backwages were made subject to interest of 6%
per annum for the period from the date the employee was illegally
dismissed from service until the decision becomes final and executory,
after which time, the interest rate shall be 12% per annum until the
amounts due are actually paid or satisfied; and separation pay at the rate
of one (1) month's pay for every year of service computed from the date
he was first employed until the finality of the decision, with interest at
12% per annum from the date of promulgation of the decision until
actually paid. (Dela Cruz vs. NLRC, et al., G. R. No. 121288, November
20, 1998, 299 SCRA 1, 15).  

In a 1997 case, the Supreme Court has imposed interest at the legal rate
on the full backwages awarded to an illegally dismissed employee
computed from the time she was temporarily laid off until she is fully paid
her separation pay. (De la Cruz vs. NLRC, et al., G. R. No. 119536,
February 17, 1997).

47.  TERMINATION OF EMPLOYMENT OF OVERSEAS FILIPINO

WORKERS (OFWs); MONETARY AWARDS.

a. OFWs are not entitled to the reliefs under Article 279.

The proper basis for the monetary awards of the overseas Filipino workers
(OFWs) is Section 10 of R. A. No. 8042 and not Article 279 of the Labor
Code. Consequently, the remedies provided for under Article 279 such as
reinstatement, or separation pay in lieu of reinstatement or full
backwages, are not available to OFWs.  This is so because the OFWs are
contractual employees whose rights and obligations are governed
primarily by the Rules and Regulations of the POEA and, more
importantly, by R. A. No. 8042. (Gu-Miro vs. Adorable, G. R. No. 160952,
Aug. 20, 2004).

As early as the 1995 case of Coyoca vs. NLRC, [G.R. No. 113658, March
31, 1995, 243 SCRA 190 (1995)], the Supreme Court had already
declared that a seafarer, not being a regular employee, is not entitled to
separation or termination pay. (See Ravago vs. Esso Eastern Marine, Ltd.,
G. R. No. 158324, March 14, 2005). chanrobles virtual law library

b. Monetary awards to illegally dismissed OFWs, how reckoned.

Section 10 of Republic Act No. 8042 (Migrant Workers and Overseas

Filipinos Act of 1995) provides:

“In case of termination of overseas employment without just, valid or

authorized cause as defined by law or contract, the worker shall be
entitled to the full reimbursement of his placement fee with interest at
twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year
of the unexpired term, whichever is less.” (Underscoring supplied)

In Skippers Pacific, Inc. vs. Mira, [392 SCRA 371 (2002)], it was held that
an overseas Filipino worker who is illegally terminated shall be entitled to
his salary equivalent to the unexpired portion of his employment contract
if such contract is less than one year.  However, if his contract is for a
period of at least one year, he is entitled to receive his salaries equivalent
to the unexpired portion of his contract, or three months’ salary for every
year of the unexpired term, whichever is lower. (Phil. Employ Services
and Resources, Inc. vs. Paramio, G. R. No. 144786, April 15, 2004). chanrobles
virtual law library

In the earlier case of Marsaman Manning Agency, Inc. vs. NLRC, [313
SCRA 88 (1999)], the Supreme Court explained when an OFW is entitled
to the three (3) months salary mentioned in the aforequoted Section 10
of R. A. No. 8042.  It was ruled therein that a plain reading of said
provision clearly reveals that the choice of which amount to award an
illegally dismissed overseas contract worker, i.e., whether his salaries for
the unexpired portion of his employment contract or three (3) months
salary for every year of the unexpired term, whichever is less, comes into
play only when the employment contract concerned has a term of at least
one (1) year or more.  This is evident from the words “for every year of
the unexpired term” which follows the words “salaries xxx for three
months.”  To follow petitioners’ thinking that private respondent is
entitled to three (3) months salary only simply because it is the lesser
amount is to completely disregard and overlook some words used in the
statute while giving effect to some.  This is contrary to the well-
established rule in legal hermeneutics that interpreting a statute, care
should be taken that every part or word thereof be given effect since the
lawmaking body is presumed to know the meaning of the words employed
in the statute and to have used them advisedly. Ut res magis valeat quam
pereat. (See also Phil. Employ Services and Resources, Inc. vs. Paramio,
G. R. No. 144786, April 15, 2004).

OFW who worked for only 21 days of her 1-year contract.

Noteworthy is the holding of the Supreme Court in Olarte vs. Nayona, [G.
R. No. 148407, November 12, 2003], which involves a one-year contract
and yet, it was ruled therein that the 3-month salary principle should be
applied thereto, the OFW having worked for only 21 days of the 1-year
period.  To reiterate, said the High Court, a plain reading of the provision
of Section 10 of Republic Act No. 8042 [supra] clearly reveals that the
choice of which amount to award an illegally dismissed overseas contract
worker comes into play only when the employment contract has a term of
at least one (1) year or more.  Consequently, an illegally dismissed
overseas Filipino worker whose actual employment was only for twenty-
one (21) days of her 1-year contract, is entitled only to an amount
corresponding to her three (3) months salary, which is obviously less than
her salaries for the unexpired portion of her one-year employment
contract.

OFW who worked for only a month of his contract for 1 year, 10
months and 28 days. chanrobles virtual law library

As held in Athenna International Manpower Services, Inc. vs. Villanos, [G.

R. No. 151303, April 15, 2005], for the computation of the lump-sum
salary due an illegally dismissed overseas employee, there are two
clauses as points of reckoning: first is the cumulative salary for the
unexpired portion of his employment; and the other is the grant of three
months salary for every year of the unexpired term, whichever is lesser.

The OFW in Athenna was contracted to render work in Taiwan for one
year, ten months and twenty-eight days.  He was, however, terminated
after only a month of service.  Consequently, since respondent was
dismissed after only one month of service, the unexpired portion of his
contract is admittedly one year, nine months and twenty-eight days.  But
the applicable clause is not the first but the second: three months salary
for every year of the unexpired term, as the lesser amount, hence it is
what is due the respondent.

Note that the fraction of nine months and twenty-eight days is considered
as one whole year following the Labor Code.  Thus, respondent’s lump-
sum salary should be computed as follows:

3 months x 2 (years)=    6 months worth of salary

6 months x (NT$) 15,840 =    NT$95,040, subject to proper conversion
                                    to Philippine currency by Labor Arbiter Cresencio
Iniego.

OFW’s monetary awards include reimbursement of placement fee.

In Phil. Employ Services and Resources, Inc. vs. Paramio, [G. R. No.
144786, April 15, 2004], the Supreme Court, in addition to the monetary
award, had granted full reimbursement of the placement fee with 12%
interest per annum.

Under Section 15 of R. A. No. 8042, the repatriation of the worker and the
transport of his personal belongings are the primary responsibilities of the
agency which recruited or deployed the overseas contract worker. All the
costs attendant thereto should be borne by the agency concerned and/or
its principal. (Ibid.).

Likewise, in Athenna [supra], the same award of full reimbursement of

the OFW’s placement fee with interest at twelve percent (12%) per
annum was ordered by the Supreme Court, with the qualification,
however, that while respondent was assessed P94,000 in placement fee,
he paid only P30,000 on the agreement that the balance of P64,000
would be paid on a monthly salary deduction upon his deployment. 
Hence, respondent cannot be granted reimbursement of the entire
assessed amount of P94,000.  He is only entitled to the reimbursement of
the amount of placement fee he actually paid, which is the P30,000 he
gave as downpayment plus interest at twelve percent (12%) per annum.
chanrobles virtual law library

Reimbursement of repatriation expenses such as return airfare.

The case of Sevillana vs. I.T. [International] Corp., [G. R. No. 99047,
April 16, 2001], allowed the refund for the repatriation plane ticket of the
OFW. This was by reason of the illegality of his dismissal.

Award of backwages and separation pay to OFWs, upheld.

In the case of ATCI Overseas Corporation vs. CA, [G. R. No. 143949,
August 9, 2001], where the two (2) private respondent-OFWs were
declared as regular employees, the Supreme Court awarded them
backwages and separation pay in lieu of reinstatement. The High Court
ruled: chanrobles virtual law library

“In order to give substance to the constitutional right of labor to security

of tenure, Article 279 provides that the illegally dismissed employee shall
be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement. chanrobles virtual law library

“The award of backwages is intended to restore to the employee the

earnings which he lost due to his illegal dismissal. The POEA held that the
backwages to be awarded to private respondents should be computed
from the time they were illegally dismissed until the expiration of their
contract of employment, or from 17 October 1991 to 19 August 1993. 
We concur for this is the amount which private respondents would have
received had they not been unlawfully dismissed.

“As to the second remedy granted by Article 279, nowhere in the records
does it appear that private respondents desire to be reinstated to their
former employment. But more significantly, any order of reinstatement
issued by this Court will be difficult for private respondents to enforce
against the Ministry of Public Health of Kuwait.  Therefore, in lieu of
reinstatement, private respondents are entitled to separation pay. The
illegally dismissed employee is granted separation pay in order to provide
him with ‘the wherewithal during the period that he is looking for another
employment.’ Prevailing jurisprudence dictates that the employee be
given one month pay for every year of service, as an alternative to
reinstatement. Considering that private respondents herein have only
worked for two months, they are entitled to a separation pay equivalent
to one-sixth of their monthly salary.” 

Entitlement to moral and exemplary damages and attorney’s fees.

In the same 2005 case of Athenna [supra], the High Tribunal ruled that
because of the breach of contract and bad faith alleged against the
employer and the petitioner recruitment agency, the award of P50,000 in
moral damages and P50,000 as exemplary damages, in addition to
attorney’s fees of ten percent (10%) of the aggregate monetary awards,
must be sustained.

Likewise, in the case of ATCI Overseas [supra], the award of attorney’s

fees equivalent to ten percent (10%) of the total award was held legally
and morally justified as the OFWs were compelled to litigate and thus
incur expenses to protect their rights and interests. chanrobles virtual law library

Monetary awards  in foreign currency; how paid.

In case the salary of an illegally dismissed employee is in foreign currency

(say, US Dollars) as in the case of OFWs, the monetary award equivalent
to the salary for the unexpired portion should be paid at its prevailing
peso equivalent at the time of payment in accordance with Republic Act
No. 8183 which provides in its Section 1 that “[a]ll monetary obligations
shall be settled in the Philippine currency which is legal tender in the
Philippines.  However, the parties may agree that the obligation or
transaction shall be settled in any other currency at the time of payment.”
(Republic Act No. 8183 entitled “An Act Repealing Republic Act Numbered
Five Hundred Twenty-Nine Entitled ‘An Act to Assure the Uniform Value of
Philippine Coin and Currency’”; Asia World Recruitment, Inc. vs. NLRC, G.
R. No. 113363, Aug. 24, 1999).

Joint and solidary obligation of local agency and foreign principal.

Private employment or recruitment agencies are jointly and severally

liable with its principal, the foreign-based employer, for all claims filed by
recruited workers which may arise in connection with the recruitment
agreements or employment contracts. (Sevillana vs. I.T. [International]
Corp., supra; Empire Insurance Company vs. NLRC, 294 SCRA 263).

48.  PERSONAL LIABILITY OF STOCKHOLDERS OR CORPORATE

OFFICERS FOR CLAIMS OF EMPLOYEES.

a.  Concept and legal basis.

As a general rule, only the employer-corporation, partnership, association
or any other entity, and not its officers, which may be held liable for
illegal dismissal of employees or for other wrongful acts. (Brent Hospital,
Inc. vs. NLRC, G. R. No. 117593, July 10, 1998). chanrobles virtual law library

Hence, responsibility for the payment of separation pay in lieu of

reinstatement, backwages, moral and exemplary damages, attorney’s
fees and other monetary awards in an illegal dismissal case devolves
upon the employer-corporation. (Seaborne Carriers Corporation vs. NLRC,
G. R. No. 88795, Oct. 04, 1994).

To justify solidary liability, there must be an allegation or showing that

the officers of the corporation deliberately or maliciously designed to
evade the financial obligation of the corporation to its employees or a
showing that the officers indiscriminately stopped its business to
perpetrate an illegal act as a vehicle for the evasion of existing
obligations, in circumvention of statutes, and to confuse legitimate issues.
(Reahs vs. NLRC, G. R. No. 117473, April 15, 1997).

Thus, it was held in Malayang Samahan ng mga Manggagawa sa M.

Greenfield [MSMG-UWP] vs. Ramos, [G. R. No. 113907, April 20, 2001]:

“Petitioners’ claim that the jobs intended for the respondent company’s
regular employees were diverted to its satellite companies where the
respondent company officers are holding key positions is not
substantiated and was raised for the first time in this motion for
reconsideration.  Even assuming that the respondent company officials
are also officers and incorporators of the satellite companies, such
circumstance does not in itself amount to fraud.  The documents attached
to petitioners’ motion for reconsideration show that these satellite
companies were established prior to the filing of petitioners’ complaint
against private respondents with the Department of Labor and
Employment on September 6, 1989 and that these corporations have
different sets of incorporators aside from the respondent officers and are
holding their principal offices at different locations.  Substantial identity of
incorporators between respondent company and these satellite companies
does not necessarily imply fraud. (Citing Del Rosario vs. NLRC, 187 SCRA
777). In such a case, respondent company’s corporate personality
remains inviolable.” chanrobles virtual law library

In Acesite Corporation vs. NLRC, [G. R. No. 152308, Jan. 26, 2005], the
NLRC declared the corporate officers of a hotel solidarily liable in order “to
deter other foreign employer[s] from repeating the inhuman treatment of
their Filipino employees who should be treated with equal respect
especially in their own land and prevent further violation of their human
rights as employees.” The Supreme Court disagreed and reversed the said
finding of the NLRC considering that the “records of the case do not show
any inhuman treatment of the (illegally dismissed employee) and the
allegation of bad faith or malice was not proven.  That the superiors just
happened to be foreigners is of no moment.
 
b.  When officers are solidarily liable.   chanrobles virtual law library

In  A. C. Ransom Labor Union-CCLU vs. NLRC, [L-69494, June 10, 1986,
142 SCRA 269], it was ruled that a corporation is the employer only in its
technical sense.  Being an artificial person, there must be a natural
person who should be acting for its interest.  The term “employer,”
according to Article 212 [e] of the Labor Code, “includes any person
acting in the interest of an employer, directly or indirectly.” If not so
included, the employees will have no recourse if corporate employers will
evade the payment of their lawful claims. chanrobles virtual law library

In NYK International Knitwear Corporation Philippines vs. NLRC, [G. R.

No. 146267, February 17, 2003], the Supreme Court, conformably with
its ruling in A. C. Ransom [supra], held the manager as falling within the
meaning of an “employer” as contemplated under Article 212 [e] of the
Labor Code, who may be held jointly and severally liable for the
obligations of the corporation to its dismissed employees. Pursuant to
prevailing jurisprudence, the manager  cannot be exonerated from her
joint and several liability in the payment of monetary award to the
illegally dismissed employee in her capacity as manager and responsible
officer of the company.

c. Rule when company ceased operations.

When the company ceased to operate, the officers, particularly the

president, may be held liable for the payment of the employee’s claims.
(Gudez vs. NLRC, G. R. No. 183023, March 22, 1990). chanrobles virtual law library

d. The corporate officer must be identified as such to hold him liable.

The rule is clear. A person cannot be held jointly and severally liable for
the obligations of the company arising from illegal dismissal if the
dismissed employee failed to establish that such person is a stockholder
or an officer thereof. (Concorde Hotel vs. CA, G. R. No. 144089, Aug. 9,
2001).

e.  Absence of clear identification of officer directly responsible, the

President or highest officer should be held liable. chanrobles virtual law library

In the absence of a clear identification of the officer directly responsible

for failure to pay backwages or other monetary claims, it was held in
Equitable Banking Corporation vs. NLRC, [G. R. No. 102467, June 13,
1997, 273 SCRA 352], that the President of the corporation should be
considered as the “officer” who should be held liable.  chanrobles virtual law library

The reason is simple: as held in Kay Products, Inc. vs. CA, [G. R. No.
162472, July 28, 2005], citing Naguiat vs. NLRC, [G. R. No. 116123,
March 13, 1997, 269 SCRA 564], the president of the company who
actively manages the business, falls within the meaning of an “employer”
as contemplated by the Labor Code, who may be held jointly and
severally liable for the obligations of the corporation to its dismissed
employees.  chanrobles virtual law library

The rule, of course, is different if it was the President who was dismissed
and who filed the claim for unpaid wages.  In this situation, Equitable
[supra] pronounced that it is the Vice-President of the company who
should be held liable being the highest and most ranking official of the
corporation next to the complaining President.  chanrobles virtual law library

f. Corporate officers cannot be held liable absent any finding in the

decision to that effect.

Tan vs. Timbal, Jr., [G. R. No. 141926, July 14, 2004], says that if the
Labor Arbiter neither made any finding in his decision that the corporate
officer acted with malice or bad faith in ordering the suspension or
dismissal of the employee nor did he hold the said corporate officer liable,
either jointly or severally with the corporation, for the monetary award in
favor of the employee, the corporate officer cannot be held liable for the
said monetary awards.  More so in a case where the decision of the Labor
Arbiter, for failure of the parties to appeal therefrom, had already become
final and executory.  chanrobles virtual law library
 
Coca-Cola Bottlers Phils., Inc. vs. Daniel, [G. R. No. 156893, June 21,
2005], declares that the mere fact that the president and chief executive
officer, assistant vice-president and general manager, and plant security
officer were impleaded in the case does not make them solidarily liable -
absent any showing - as in this case - that the dismissal was attended
with malice or bad faith. It appears that the only reason they were
impleaded was the fact that they were officers and/or agents of petitioner
company.  chanrobles virtual law library

g. Decision must state in its fallo that the obligation is solidary.

There is a solidary liability only when the obligation expressly so states,

when the law so provides or when the nature of the obligation so
requires. (Inciong, Jr. vs. CA, 257 SCRA 578 [1996]). chanrobles virtual law library

When it is not provided in a judgment that the defendants are liable to

pay jointly and severally a certain sum of money, none of them may be
compelled to satisfy in full said judgment.  chanrobles virtual law library

In the dispositive portion of the Labor Arbiter’s decision in the 2000 case
of Industrial Management International Development Corp. vs. NLRC, [G.
R. No. 101723, May 11, 2000], the word “solidary” does not appear. The
fallo expressly states the parties liable without mentioning therein that
their liability is solidary. In this case, their liability should merely be joint.
Moreover, even granting that the Labor Arbiter has committed a mistake
in failing to indicate in the dispositive portion that the liability of
respondents therein is solidary, the correction - which is substantial - can
no longer be allowed because the judgment has already become final and
executory. Once a decision or order becomes final and executory, it is
removed from the power or jurisdiction of the court which rendered it to
further alter or amend it. chanrobles virtual law library

REGULAR EMPLOYMENT

49.  What are the kinds of employment?

1.  “Regular employment” where, notwithstanding any written or oral

agreement between the employer and the employee to the contrary:

a.  the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer. chanrobles virtual law library

b.  the employee 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 and his employment shall continue while such activity exists.

c.   the employee is allowed to work after a probationary period.

2.  “Project employment” 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 employee.

3.  “Seasonal employment” where the work or service to be performed by

the employee is seasonal in nature and the employment is for the
duration of the season.

4.  “Casual employment” which is not in the nature of a regular, project or

seasonal employment as these kinds of employment are defined under
Article 280 of  the Labor Code. There is casual employment where an
employee is engaged to perform a job, work or service which is merely
incidental to the business of the employer, and such job, work or service
is for a definite period made known to the employee at the time of
engagement; provided, that any employee who has rendered at least one
year of service, whether such service is continuous or not, 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.
chanrobles virtual law library

5.  “Probationary employment” where the employee is on trial by an

employer during which the employer determines the qualification of the
employee for regular employment.

6.  “Fixed-period employment” contracts are not limited to those by

nature, seasonal or for specific projects with pre-determined dates of
completion provided under the Labor Code.  They also include contracts to
which the parties by free choice, have assigned a specific date of
termination. 

7.  "Part-time employment” is a single, regular or voluntary form of

employment with hours of work substantially shorter than those
considered as normal in the establishment. chanrobles virtual law library

50.  When does a casual employee become a regular employee?

a.  Casual employee becomes regular after one year of service by

operation of law.

The status of regular employment attaches to the casual worker on the

day immediately after the end of the first year of service. (Kay Products,
Inc. vs. CA, G. R. No. 162472, July 28, 2005).  chanrobles virtual law library

b.   Repeated rehiring, effect.

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. (Tan vs. Lagrama,
G. R. No. 151228, Aug. 15, 2002).

51.  What is the concept of regular and casual employment?

Once it is established that the employees are regular under the first
paragraph of Article 280 (regularity of employment by nature of work),
there is no more need to dwell further on the question of whether or not
they had rendered one (1) year of service (regularity of employment by
period of service) under the second paragraph thereof which applies only
to casual employees.

52. When may a project employee become regular employee?

A project employee, according to Maraguinot, Jr. vs. NLRC, [284 SCRA
539, 556 (1998)], may acquire the status of a regular employee when the
following factors concur:

(1)  There is a continuous (as opposed to intermittent) rehiring of project

employees even after cessation of a project for the same tasks or nature
of tasks; and

(2)  The tasks performed by the alleged “project employee” are vital,
necessary and indispensable to the usual business or trade of the
employer. (See also Imbuido vs. NLRC, G. R. No. 114734, March 31,
2000).
In Chua vs. Court of Appeals, [G. R. No. 125837, October 6, 2004], the
petitioner-employer insisted that the employees were project employees. 
The facts, however, show that as masons, carpenters and fine graders in
petitioner’s various construction projects, they performed work which was
usually necessary and desirable to petitioner’s business which involves
construction of roads and bridges.  As held in Violeta vs. NLRC, [345 Phil.
762 (1997)], to be exempted from the presumption of regularity of
employment, the agreement between a project employee and his
employer must strictly conform to the requirements and conditions under
Article 280 of the Labor Code.  It is not enough that an employee is hired
for a specific project or phase of work.  There must also be a
determination of, or a clear agreement on, the completion or termination
of the project at the time the employee was engaged if the objectives of
Article 280 are to be achieved.

Regular employment is inconsistent with project employment.

Regular employees cannot certainly be at the same time project

employees.  Article 280 states that regular employees are those whose
work is necessary or desirable to the usual business of the employer. The
two exceptions mentioned therein following the general description of
regular employees refer to either project or seasonal employees.
(Magcalas vs. NLRC, G. R. No. 100333, March 13, 1997, 269 SCRA 453,
468). chanrobles virtual law library

Project employment is akin to seasonal employment.

The term “project employee” has also been equated to seasonal employee
where the work or service to be performed is seasonal in nature and the
employment is for the duration of the season. (Mercado vs. NLRC, G. R.
No. 79869, Sept. 5, 1991, 201 SCRA 332).

Like regular seasonal employees, the employment of project employees is

not severed but merely suspended after the completion of the project.
The employees are, strictly speaking, not separated from service but
merely on leave of absence without pay until they are reemployed in
another project. (Maraguinot, Jr. vs. NLRC, G. R. No. 120969, Jan. 22,
1998).

Moreover, in the construction industry, the employees of a particular

project are not separated from work at the same time.  Some phases of
the project are completed ahead of others.  For this reason, the
completion of a phase of the project is considered the completion of the
project for an employee employed in such phase.  Meanwhile, those
employed in a particular phase of a construction project are also not
separated at the same time.  Normally, less and less employees are
required as the phase draws closer to completion.

Upon completion of the project or a phase thereof, the project employee

may be re-hired for another undertaking provided, however, that such
rehiring conforms with the provisions of law and Department Order No.
19, Series of 1993.  In such a case, the last day of service with the
employer in the preceding project should be indicated in the employment
agreement. (Section 2.3.[a] and [b], Department Order No. 19, Series of
1993).
 
Length of service, not determinant of regularity of employment.

The simple fact that the employment as project employees has gone
beyond one (1) year does not detract from, or legally dissolve, their
status as project employees.  The second paragraph of Article 280 of the
Labor Code providing that an employee who has served for at least one
(1) year shall be considered a regular employee, relates to casual
employees, not to project employees. (Raycor Aircontrol Systems, Inc. vs.
NLRC, G. R. No. 114290, Sept. 9, 1996).

In D.M. Consunji, Inc. vs. NLRC, [348 SCRA 441, 447, December 18,
2000], citing Rada vs. NLRC, [205 SCRA 69, January 9, 1992], the
Supreme Court ruled that “the length of service of a project employee is
not the controlling test of employment tenure but whether or not ‘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 employee.’”

In Cioco vs. C. E. Construction Corporation, [G. R. No. 156748, Sept. 8,

2004], it was emphasized that the fact that the workers have been
employed with the company for several years on various projects, the
longest being nine (9) years, did not automatically make them regular
employees considering that the definition of regular employment in Article
280 of the Labor Code, makes specific exception with respect to project
employment. The re-hiring of petitioners on a project-to-project basis did
not confer upon them regular employment status. The practice was
dictated by the practical consideration that experienced construction
workers are more preferred. It did not change their status as project
employees. (See also Millares vs. NLRC, 385 SCRA 306 [2002]).

The same holding was made in Filipinas Pre-Fabricated Building Systems

[Filsystems], Inc. vs. Puente, [G. R. No. 153832, March 18, 2005] where
the employee involved was employed with the company for ten (10) years
in various projects.  The Supreme Court said that such length of time did
not ipso facto make him a regular employee or change his status as a
project employee.

When length of service of project employee indicates regularity of

employment.

Where the employment of project employees, however, is extended long

after the supposed project had been finished, the employees are removed
from the scope of project employees and they shall be considered regular
employees.  Repeated extensions of the employment contracts long after
the completion of the project for which they were allegedly hired will
make them regular employees. (Phesco, Inc. vs. NLRC, G. R. Nos.
104444-49, Dec. 27, 1994).

For 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 the employer as when the employees had already
gone through the status of project employees and their employments
became non-coterminous with specific projects when they started to be
continuously re-hired due to the demands of the employer’s business and
were re-engaged for many more projects without interruption. (Tomas
Lao Construction, vs. NLRC, G. R. No. 116781, Sept. 5, 1997).

Thus, in Integrated Contractor and Plumbing Works, Inc. vs. NLRC, [G. R.
No. 152427, August 9, 2005], private respondent had been a project
employee several times over.  Consequently, his employment was held to
have ceased to be coterminous with specific projects when he was
repeatedly re-hired due to the demands of petitioner’s business.  Where
from the circumstances it is apparent that periods have been imposed to
preclude the acquisition of tenurial security by the employee, they should
be struck down as contrary to public policy, morals, good customs or
public order.  chanrobles virtual law library

Termination of employment of project and regular employees, 

distinguished.

The services of project employees are coterminous with the project and
may be terminated upon the end or completion of the project for which
they were hired. 
Regular employees, in contrast, are legally entitled to remain in the
service of their employer until that service is terminated by one or
another of the recognized modes of termination of service under the
Labor Code. (Magcalas vs. NLRC, supra; ALU-TUCP vs. NLRC, 234 SCRA
678).

Notice of termination, not required; report to DOLE necessary.

No prior notice of termination is required if the termination is brought

about by completion of the contract or phase thereof for which the worker
has been engaged.  This is because completion of the work or project
automatically terminates the employment. (Cioco vs. C. E. Construction
Corporation, G. R. No. 156748, Sept. 8, 2004).

Being project employees whose nature of employment they were fully

informed about at the time of their engagement, their employment legally
ends upon completion of said project. The termination of their
employment could not be regarded as illegal dismissal. (Association of
Trade Unions [ATU] vs. Abella, G. R. No. 100518, Jan. 24, 2000).

Policy Instructions No. 20 required the employer-company to report to the

nearest Public Employment Office the fact of termination of project
employees as a result of the completion of the project or any phase
thereof, in which one is employed.  Department Order No. 19, [April 1,
1993] which superseded said Policy Instructions, did not eradicate the
notice requirement but, instead, enshrined it as one of the “indicators”
that a worker is a project employee. (Salinas vs. NLRC, G. R. No. 114671,
Nov. 24, 1999).

Accordingly, instead of the notice of termination to the affected project

employees upon completion of the project, the law merely requires that
the employer should render a report to the DOLE on the termination of
the employment. (Cioco vs. C. E. Construction Corporation, G. R. No.
156748, Sept. 8, 2004).
 
Legal consequences of termination of project employment.

The legal effects of termination of project employees is best exemplified

by the 2005 case of Filipinas Pre-Fabricated Building Systems
[Filsystems], Inc. vs. Puente, [G. R. No. 153832, March 18, 2005]. Here,
petitioners claim that respondent-employee’s services were terminated
due to the completion of the project.  There is no allegation or proof,
however, that the World Finance Plaza project - or the phase of work
therein to which respondent had been assigned  - was already completed
by October 1, 1999, the date when he was dismissed.  The inescapable
presumption is that his services were terminated for no valid cause prior
to the expiration of the period of his employment; hence, the termination
was illegal.  Reinstatement with full back wages, inclusive of allowances
and other benefits or their monetary equivalents - computed from the
date of his dismissal until his reinstatement - is thus in order. 
 
However, if indeed the World Finance Plaza project has already been
completed during the pendency of this suit, then respondent - being a
project employee - can no longer be reinstated.  Instead, he shall be
entitled to the payment of his salary and other benefits corresponding to
the unexpired portion of his employment, specifically from the time of the
termination of his employment on October 1, 1999, until the date of the
completion of the World Finance Plaza project.

53.  May OFWs acquire regularity of employment?

No, they can never become regular employees because their employment
contract is for a fixed term.  (Millares, et al. vs. NLRC, G. R. No. 110524,
July 29, 2002).

That overseas Filipino workers cannot acquire regularity of employment

was reiterated in the 2004 case of Gu-Miro vs. Adorable, [G. R. No.
160952, August 20, 2004] and in the 2005 case of Ravago vs. Esso
Eastern Marine, Ltd., [G. R. No. 158324, March 14, 2005].

And as held in Pentagon International Shipping, Inc. vs. Adelantar, [G. R.

No. 157373, July 27, 2004], even if the contract provides for an unlimited
period, the same is not valid as it contravenes the explicit provision of the
said POEA Rules and Regulations on fixed period employment.  chanrobles virtual
law library

OFWs do not become regular employees by reason of nature of

work.

Clearly, an OFW cannot be considered a regular employee

notwithstanding the fact that the work he performs is necessary and
desirable in the business of the company, as clearly expounded in the
above-mentioned cases.  The exigencies of their work necessitates that
they be employed on a contractual basis. (Gu-Miro vs. Adorable, supra).

In the same Gu-Miro case [supra], it was stated that even with the
continued re-hiring by the company of the OFW to serve as Radio Officer
on board the employer’s different vessels, this should be interpreted not
as a basis for regularization but rather as a series of contract renewals
sanctioned under the doctrine set down by the second Millares case
[supra] rendered on July 29, 2002. [Note: in the first decision in the same
case (March 14, 2000), the Supreme Court ruled that OFWs can become
regular employees]. If at all, petitioner was preferred because of practical
considerations – namely, his experience and qualifications.  However, this
does not alter the status of his employment from being contractual.  chanrobles
virtual law library

The contracts of OFWs cease upon expiration thereof.

Not being considered regular or permanent employees under Article 280,

OFWs’ employment automatically cease upon the expiration of their
contracts. (Ravago vs. Esso Eastern Marine, Ltd., supra; Millares vs.
NLRC, supra).

Hiring of seaman for overseas employment but assigning him to local

vessel, effect.  chanrobles virtual law library

In OSM Shipping Philippines, Inc. vs. NLRC, [G. R. No. 138193, March 5,
2003], the petitioner does not deny hiring private respondent Guerrero as
master mariner. However, it argues that since he was not deployed
overseas, his employment contract became ineffective, because its object
was allegedly absent. Petitioner contends that using the vessel in
coastwise trade and subsequently chartering it to another principal had
the effect of novating the employment contract. The Supreme Court was
not persuaded by this argument. Contrary to petitioner’s contention, the
contract had an object, which was the rendition of service by private
respondent on board the vessel. The non-deployment of the ship overseas
did not affect the validity of the perfected employment contract. After all,
the decision to use the vessel for coastwise shipping was made by
petitioner only and did not bear the written conformity of private
respondent. A contract cannot be novated by the will of only one party.
The claim of petitioner that it processed the contract of private
respondent with the POEA only after he had started working is also
without merit. Petitioner cannot use its own misfeasance to defeat his
claim.

54.  What is regular seasonal employment? Is it valid?

Yes. The validity of regular seasonal employment has been affirmed by

the Supreme Court in a plethora of cases.  chanrobles virtual law library

Seasonal workers who are called to work from time to time and are
temporarily laid off during off-season are not separated from the service
in said period, but are merely considered on leave until re-employed.
(Hacienda Fatima vs. National Federation of Sugarcane Workers-Food and
General Trade (G. R. No. 149440, January 28, 2003)

The 2003 case of Hacienda Fatima vs. National Federation of Sugarcane

Workers - Food and General Trade, [G. R. No. 149440, January 28,
2003], reiterated this rule. For respondent-workers to be excluded from
those classified as regular employees, it is not enough that they perform
work or services that are seasonal in nature.  They must have also been
employed only for the duration of one season.  If the evidence proves the
existence of the first, but not of the second, condition, then, the workers
have become regular employees.  The fact that the employees repeatedly
worked as sugarcane workers for petitioner-employer for several years is
not denied by the petitioners.  Evidently, petitioners employed
respondents for more than one season.  Therefore, the general rule of
regular employment is applicable.  This is so because although the
employer had shown that the employees performed work that was
seasonal in nature, the former failed to prove that the latter worked only
for the duration of one particular season.  In fact, the employer does not
deny that the workers have served for several years already.  Hence, they
are regular - not seasonal - employees. (See also Hacienda
Bino/Hortencia Starke, Inc./Hortencia L. Starke vs. Cuenca, G. R. No.
150478,  April 15, 2005; Benares vs. Pancho, [G. R. No. 151827, April
29, 2005). chanrobles virtual law library

Failure to re-hire regular seasonal employee for next season

amounts to illegal dismissal.

The refusal of the employer to furnish work to regular seasonal workers

would amount to illegal dismissal. Where there is no showing of clear,
valid and legal cause for the termination of employment, the law
considers the matter a case of illegal dismissal and the burden is on the
employer to prove that the termination was for a valid and authorized
cause. (Hacienda Fatima vs. National Federation of Sugarcane Workers –
Food and General Trade, supra). chanrobles virtual law library

55. What are the criteria for fixed conracts of employment?

In the case of Philippine National Oil Company-Energy Development

Corporation vs. NLRC, [G. R. No. 97747, March 31, 1993], the Supreme
Court set down two (2) criteria under which fixed contracts of
employment cannot be said to be in circumvention of security of tenure,
to wit:

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 employee dealt with
each other on more or less equal terms with no moral dominance
whatever being exercised by the former on the latter. (Philips
Semiconductors [Phils.], Inc. vs. Fadriquela, G. R. No. 141717, April 14,
2004). chanrobles virtual law library

If the foregoing criteria are not present, the contract should be struck
down for being illegal.
In Philips Semiconductors [Phils.], Inc. vs. Fadriquela, [G. R. No. 141717,
April 14, 2004], the Supreme Court rejected petitioner’s submission that
it resorted to hiring employees for fixed terms to augment or supplement
its regular employment “for the duration of peak loads” during short-term
surges to respond to cyclical demands; hence, it may hire and retire
workers on fixed terms, ad infinitum, depending upon the needs of its
customers, domestic and international.  Under the petitioner’s
submission, any worker hired by it for fixed terms of months or years can
never attain regular employment status.

Fixed-term employment; effect if duties are usually necessary or

desirable in the employer’s usual business.

It should be noted that 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. (Pangilinan vs.
General Milling Corporation, G. R. No. 149329, July 12, 2004). chanrobles virtual law
library

In the 2004 case of Pangilinan vs. General Milling Corporation, [G. R. No.
149329, July 12, 2004], the petitioners were hired as “emergency
workers” and assigned as chicken dressers, packers and helpers at the
Cainta Processing Plant of General Milling Corporation (GMC).  The
respondent GMC is a domestic corporation engaged in the production and
sale of livestock and poultry, and is a distributor of dressed chicken. While
the petitioners’ employment as chicken dressers is necessary and
desirable in the usual business of the respondent, they were employed on
a mere temporary basis, since their employment was limited to a fixed
period. As such, they cannot be said to be regular employees, but are
merely “contractual employees.”  Consequently, there was no illegal
dismissal when the petitioners’ services were terminated by reason of the
expiration of their contracts.  chanrobles virtual law library

In the 2000 case of Medenilla vs. Philippine Veterans Bank, [G. R. No.
127673, March 13, 2000], the petitioners were employees of the
Philippine Veterans Bank (PVB). On June 15, 1985, their services were
terminated as a result of the liquidation of PVB pursuant to the order of
the Monetary Board of the Central Bank embodied in MB Resolution No.
612 dated June 7, 1985. On the same day of their termination, petitioners
were re-hired through PVB’s Bank Liquidator. However, all of them were
required to sign employment contracts which provided that  “[t]he
employment shall be on a strictly temporary basis and only for the
duration of the particular undertaking for which you are hired and only for
the particular days during which actual work is available as determined by
the Liquidator or his representatives since the work requirements of the
liquidation process merely demand intermittent and temporary rendition
of services.” The Supreme Court interpreted this stipulation as a valid
form of fixed-term employment. Furthermore, it is evident from the
records that the subsequent re-hiring of petitioners which was to continue
during the period of liquidation and the process of liquidation ended prior
to the enactment of RA 7169 entitled, “An Act to Rehabilitate Philippine
Veterans Bank”, which was promulgated on January 2, 1992.

In the case of Philippine Village Hotel vs. NLRC, [G. R. No. 105033,
February 28, 1994], the Supreme Court ruled that the fact that the
private respondents therein were required to render services necessary or
desirable in the operation of the petitioner’s business for the duration of
the one month dry-run operation period, did not in any way impair the
validity of  the contractual nature of private respondents’ contracts of
employment which specifically stipulated that their employment was only
for one month.   chanrobles virtual law library

In the case of Pantranco North Express, Inc. vs. NLRC, [G. R. No. 106654,
December 16, 1994], a bus driver was, long time ago, dismissed by the
bus company for cause.  Fifteen (15) years later, he reappeared and out
of generosity, was re-hired on a fixed-term contractual basis of one (1)
month.  Fifteen days into his one-month employment, he figured in a
vehicular mishap.  After investigation, he was dismissed and his contract
was no longer renewed.  Later, he filed against the company a complaint
for illegal dismissal, claiming that he was constructively dismissed
because of the refusal of the latter to renew his contract.

The Supreme Court ruled against the complainant, holding that his
termination was justified and that the one-month fixed-term contract was
valid following the consistent rulings in the cases of Brent School, PNOC
and Philippine Village Hotel [supra].

Notice to terminate not necessary in fixed-term employment.

In a fixed-period employment, lack of notice of termination is of no

consequence because when the contract specifies the period of its
duration, it terminates on the expiration of such period.  A contract for
employment for a definite period terminates by its own term at the end of
such period. (Pangilinan vs. General Milling Corporation, supra; Blancaflor
vs. NLRC, 218 SCRA 366  [1993]). chanrobles virtual law library

Employees allowed to work beyond fixed term become regular

employees.

In the 2004 case of Viernes vs. NLRC, [G. R. No. 108405, April 4, 2003],
the petitioner-employees were initially employed on a fixed-term basis as
their employment contracts were only for October 8 to 31, 1990. After
October 31, 1990, however, they were allowed to continue working in the
same capacity as meter readers without the benefit of a new contract or
agreement or without the term of their employment being fixed anew. 
The Supreme Court ruled that after October 31, 1990, the employment of
the employees should no longer be treated as being on a fixed-term
basis. The complexion of the employment relationship of the employees
and private respondent-employer is thereby totally changed. Petitioner-
employees have attained the status of regular employees.  Hence, since
petitioners are already regular employees at the time of their illegal
dismissal from employment, they are entitled to be reinstated to their
former position as regular employees, not merely as probationary
employees (since they never were engaged on probationary basis).
Reinstatement means restoration to a state or condition from which one
had been removed or separated. 

Work rendered for more than one year, effect.

In Megascope General Services vs. NLRC, [G. R. No. 109224, June 19,
1997, 274 SCRA 147, 156], the private respondent-workers were hired as
gardeners, helpers and maintenance workers. In hiring laborers,
petitioner whose business is contracting out general services, would give
them work from 5 to 10 days as the need arose and there were periodical
gaps in the hiring of employees.  In resolving the issue of whether they
had become regular employees, the Supreme Court pronounced that even
if there was a contrary agreement between the parties, if the worker has
worked for more than a year and there is a reasonable connection
between the particular activity performed by the employee in relation to
the usual business or trade of the employer, not only an employment
relationship is deemed to exist between them but the workers, although
hired initially as contractual employees, had been converted into regular
employees by the sheer length of service they had rendered for the
employer by virtue of the proviso in the second paragraph of Article 280.

Successive renewal of fixed-period contracts, effect.

In the 2004 case of Philips Semiconductors [Phils.], Inc. vs. Fadriquela,

[G. R. No. 141717, April 14, 2004], it was ruled that an employee who
has been engaged to perform work which is necessary or desirable in the
business or trade of the company and whose original contract of
employment had been extended or renewed for four (4) times ranging
from two to three months over a period of one year and twenty-eight
days to the same position, with the same chores and who remained in the
employ of the company without any interruption, is definitely a regular
employee.  Such re-employment was but a catch-all excuse to prevent
her regularization.  The continuing need for her services is sufficient
evidence of the necessity and indispensability of her services to the
company’s business.  By operation of law, then, she had attained the
regular status of her employment and is thus entitled to security of tenure
as provided for in Article 279 of the Labor Code. chanrobles virtual law library

Hiring of employees on a 5-month period basis.

In Pure Foods Corporation vs. NLRC, [G. R. No. 122653, Dec. 12, 1997,
283 SCRA 133], the scheme of the employer in hiring workers on a
uniformly fixed contract basis of 5 months and replacing them upon the
expiration of their contracts with other workers with the same
employment status was found to have been designed to prevent the
“casual” employees from attaining the status of a regular employee.  It
was a clear circumvention of the employee’s right to security of tenure
and to other benefits like minimum wage, cost-of-living allowance, sick
leave, holiday pay, and 13th month pay.

Employment on a “day-to-day basis for a temporary period.”

A contract which states that the employment of the worker “shall be on a

day-to-day basis for a temporary period” and that the same may be
terminated at any time without liability to the employer other than for
salary actually earned up to and including the date of last service, is a
contract which has the purpose of circumventing the employee’s security
of tenure.  The court rigorously disapproves such contracts which
demonstrate a clear attempt to exploit the employee and deprive him of
the protection sanctioned by the Labor Code.  Owing to the worker’s
length of service with the company and considering that the nature of his
work is usually necessary or desirable in the usual trade or business of
the company, he became a regular employee, by operation of law, one
year after he was employed. (Baguio Country Club Corporation vs. NLRC
G. R. No. 71664, Feb. 28, 1992; De Leon vs. NLRC, G. R. No. 70705, Aug.
21, 1989).

In the 2003 case of Magsalin & Coca-Cola Bottlers Phils., Inc. vs. National
Organization of Working Men (N.O.W.M.), [G. R. No. 148492, May 9,
2003], Coca-Cola Bottlers Phils., Inc., engaged the services of respondent
workers as “sales route helpers” for a limited period of five months.  After
five months, respondent workers were employed by petitioner company
on a day-to-day basis.  According to petitioner company, respondent
workers were hired to substitute for regular sales route helpers whenever
the latter would be unavailable or when there would be an unexpected
shortage of manpower in any of its work places or an unusually high
volume of work.  The practice was for the workers to wait every morning
outside the gates of the sales office of petitioner company.  If thus hired,
the workers would then be paid their wages at the end of the day.
Ultimately, respondent workers asked petitioner company to extend to
them regular appointments.  Petitioner company refused.  In declaring
that the workers have become regular employees, the Supreme Court
reasoned that the repeated rehiring of respondent workers and the
continuing need for their services clearly attest to the necessity or
desirability of their services in the regular conduct of the business or
trade of petitioner company. More so here where the Court of Appeals has
found each of respondents to have worked for at least one year with
petitioner company.  The pernicious practice of having employees,
workers and laborers, engaged for a fixed period of few months, short of
the normal six-month probationary period of employment, and,
thereafter, to be hired on a day-to-day basis, mocks the law.  Any
obvious circumvention of the law cannot be countenanced.  The fact that
respondent workers have agreed to be employed on such basis and to
forego the protection given to them on their security of tenure,
demonstrate nothing more than the serious problem of impoverishment of
so many of our people and the resulting unevenness between labor and
capital.  chanrobles virtual law library

Employment on “as the need arises” basis.

In the same 2004 case of Philips Semiconductors [supra], the employer’s

general and catch-all submission that its policy for a specific and limited
period on an “as the need arises” basis is not prohibited by law or
abhorred by the Constitution; and that there is nothing essentially
contradictory between a definite period of employment and the nature of
the employee’s duties, was rejected and struck down by the Supreme
Court for being contrary to law.

Illegal dismissal of fixed-term employee, liability is only for salary

for unexpired portion.

As held in the case of Medenilla vs. Philippine Veterans Bank, [G. R. No.
127673, March 13, 2000], 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.

56.  May part-time workers attain regularity of employment?

Yes.

Probationary employment of part-time employees.

Using the legal principles enunciated in Article 281 of the Labor Code on
probationary employment vis-à-vis Article 13 of the Civil Code on the
proper reckoning of periods, a part-time employee shall become regular
in status after working for such number of hours or days which equates to
or completes a six-month probationary period in the same establishment
doing the same job under the employment contract.

Once a part-time employee becomes a regular employee, he is entitled to

security of tenure under the law and he can only be separated for a just
or authorized cause and after due process.  

Indicators of regular employment of part-time employees.

One may know if a part-time worker is a regular employee if any of the

following conditions exist:

a.the terms of his employment show that he is engaged as regular or

permanent employee;

b.the terms of his employment indicate that he is employed for an

indefinite period; chanrobles virtual law library

c.he has been engaged for a probationary period and has continued in his
employment even after the expiration of the probationary period; or

d.the employee performs activities which are usually necessary or

desirable in the usual business or trade of the employer.

On the other hand, where the employment contract is fixed or for a

definite period only as contemplated by law, part-time employees are
likewise entitled to tenurial rights during the entire period of their fixed
employment.  In other words, they cannot be separated from work
without just or authorized cause.

In the 2003 case of Philippine Airlines, Inc. vs. Pascua, [G. R. No.
143258, August 15, 2003], involving the regularization of part-time
workers to full-time workers, the Supreme Court ruled that although the
respondent-employees were initially hired as part-time employees for one
year, thereafter the over-all circumstances with respect to duties assigned
to them, number of hours they were permitted to work including
overtime, and the extension of employment beyond two years can only
lead to one conclusion: that they should be declared full-time employees. 

PROBATIONARY EMPLOYMENT

57.  Who is a probationary employee?

A probationary employee is one who, for a given period of time, is on

observation, evaluation and trial by an employer during which the
employer determines whether or not he is qualified for permanent
employment. During the probationary period, the employer is given the
opportunity to observe the skill, competence, attitude and fitness of the
employee while the latter seeks to prove to the employer that he has the
qualifications to meet the reasonable standards for permanent
employment. (De la Cruz, Jr. vs. NLRC, G. R. No. 145417, Dec. 11,
2003).

The word “probationary” is appropriately used to underscore the objective

or purpose of the period, and not its length which is immaterial.
(International Catholic Migration Commission vs. NLRC, G. R. No. 72222,
Jan. 30, 1989).

The length of time is immaterial in determining the correlative rights of

both the employer and the employee in dealing with each other during
said period.  (Escorpizo vs. University of Baguio, 306 SCRA 497, 507
[1999]).

58.  What is the period of probationary employment?

General rule. - Probationary period should not exceed six (6) months from
the date the employee started working. One becomes a regular employee
upon completion of his six-month period of probation.

Exceptions. - The six (6) months period provided in the law admits of
certain exceptions such as:

1. when the employer and the employee mutually agree on a shorter or

longer period; chanrobles virtual law library

2. when the nature of work to be performed by the employee requires a

longer period;

3.  when a longer period is required and established by company policy. 

In Buiser vs. Leogardo, (G. R. No. L-63316, July 13, 1984), the Supreme
Court considered the probationary period of employment of eighteen (18)
months as valid since it was shown that the company needs at least 18
months to determine the character and selling capabilities of the
employees as sales representatives.

59.  May probationary employment be extended?

Extension of probationary period. - Probationary period of employment

may be extended provided there is mutual consent thereto by the
employer and the employee. 

Employer’s act of rehiring a probationary employee, effect.

The act of the employer in repetitively rehiring a probationary employee

negates the former’s claim that the latter failed to qualify as a regular
employee.  As held in Octaviano, vs. NLRC, [G. R. No. 88636, Oct. 3,
1991], these successive hirings and firings are a ploy to avoid the
obligations imposed by law on employers for the protection and benefit of
probationary employees who, more often than not, are kept in the
bondage, so to speak, of unending probationary employment without any
complaint due to the serious unemployment problem besetting the
country.

If no stipulation on probationary period, employment is deemed

regular.

In the case of ATCI Overseas Corporation vs. CA, [G. R. No. 143949,
August 9, 2001], it was ruled that in the absence of any evidence that
there is a provision in the employment contract providing for a
probationary period, or that the employees were apprised of the fact that
they were to be placed on probationary status and the requirements that
they should comply with in order to qualify as regular employees, no
other conclusion can be drawn but that they were regular employees at
the time they were dismissed.

Probationary employment cannot be ad infinitum.

In the 2005 case of Voyeur Visage Studio, Inc. vs. CA, [G. R. No. 144939,
March 18, 2005], the Supreme Court had occasion to reiterate its earlier
ruling in Bernardo vs. NLRC, [310 SCRA 186 (1999)] that “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.” (Emphasis supplied)

60.  How should the six-month probationary period be computed?

The computation of the 6-month probationary period should be reckoned

from the date of appointment up to the same calendar date of the 6th
month following. (Cals Poultry Supply Corp. vs. Roco  G.R. No.150660.
July 30, 2002).

However, in the 2004 case of Mitsubishi Motors Philippines Corporation

vs. Chrysler Philippines Labor Union, [G. R. No. 148738, June 29, 2004],
the Supreme Court, in reckoning the probationary period, applied to the
letter, Article 13 of the Civil Code which basically states: chanrobles virtual law library
 “Article 13. When the law speaks of years, months, days or nights, it
shall be understood that years are of three hundred sixty-five days each;
months, of thirty days; days, of twenty-four hours;  and nights from
sunset to sunrise.

“If months are designated by their name, they shall be computed by the
number of days which they respectively have. chanrobles virtual law library

“In computing a period, the first day shall be excluded, and the last day
included.”

In this case, the respondent employee (Paras) was employed as a

management trainee on a probationary basis.  During the orientation
conducted on May 15, 1996, he was apprised of the standards upon which
his regularization would be based.  He reported for work on May 27,
1996.  As per the company’s policy, the probationary period was from
three (3) months to a maximum of six (6) months.  Applying said Article
13 of the Civil Code, the probationary period of six (6) months consists of
one hundred eighty (180) days.  This is in conformity with paragraph one,
Article 13 of the Civil Code, which provides that the months which are not
designated by their names shall be understood as consisting of thirty (30)
days each. The number of months in the probationary period, six (6),
should then be multiplied by the number of days within a month, thirty
(30); hence, the period of one hundred eighty (180) days.  chanrobles virtual law library

As clearly provided for in the last paragraph of Article 13, in computing a

period, the first day shall be excluded and the last day included.  Thus,
the one hundred eighty (180) days commenced on May 27, 1996, and
ended on November 23, 1996.  Consequently, when the termination letter
dated November 25, 1996 was served on respondent Paras at 3:00 a.m.
of November 26, 1996, he was, by then, already a regular employee of
the petitioner under Article 281 of the Labor Code.  chanrobles virtual law library

But in the earlier case of Cebu Royal vs. Deputy Minister of Labor, [153
SCRA 38 (1987)], the 6-month probationary period was reckoned from
the date of appointment up to the same calendar date of the 6th month
following. 

The 2002 case of Cals Poultry Supply Corporation vs. Roco, [G. R. No.
150660, July 30, 2002], followed the said reckoning/computation
enunciated in the Cebu Royal case [supra].

In this case, the probationary employee was hired on May 16, 1995 and
her services were terminated on November 15, 1995.  The Court of
Appeals set aside the NLRC ruling on the ground that at the time the
probationary employee’s services were terminated, she had attained the
status of a regular employee as the termination on November 15, 1995
was effected four (4) days after the 6-month probationary period had
expired, hence, she is entitled to security of tenure in accordance with
Article 281 of the Labor Code.

Petitioner Cals argues that the Court of Appeals’ computation of the 6-

month probationary period is erroneous as the termination of the
probationary employee’s services on November 15, 1995 was exactly on
the last day of the 6-month period.

Citing Cebu Royal [supra], the Supreme Court agreed with petitioner Cals’
contention as upheld by both the Labor Arbiter and the NLRC that the
probationary employee’s services were terminated within and not beyond
the 6-month probationary period.

61.  Standards should be made known to employee at start of

engagement.

The rudiments of due process demand that an employee should be

apprised beforehand of the conditions of his employment and the basis for
his advancement. (Servidad vs. NLRC, G. R. No. 128682, March 18, 1999;
Orient Express Philippines, vs. NLRC, G. R. No. 113713, June 11, 1997).

If standards are not made known to the employee at start of

employment, he is deemed a regular employee from day one.

According to the Rules to Implement the Labor Code, in all cases of

probationary employment, the employer should make known to the
employee the standards under which he will qualify as a regular employee
at the time of his engagement. Where no standards are made known to
the employee at that time, he should be deemed a regular employee.
(Section 6 [d], Rule I, Book VI, Rules to Implement the Labor Code, as
amended by Article V, Department Order No. 10, Series of 1997).

This rule was applied in the 2005 case of Clarion Printing House, Inc. vs.
NLRC, [G. R. No. 148372, June 27, 2005], where it was held that since at
the time the employee was hired on probationary basis she was not
informed of the standards that would qualify her as a regular employee,
she was deemed to have been hired from day one as a regular employee.
(See also Cielo vs. NLRC, 193 SCRA 410, 418  [1991]).

However, in the case of Aberdeen Court, Inc. vs. Agustin, Jr., [G. R. No.
149371, April 13, 2005], the Supreme Court cautioned that the above
rule should not be used to exculpate a probationary employee who acts in
a manner contrary to basic knowledge and common sense, in regard to
which there is no need to spell out a policy or standard to be met.  In this
case, the electrical engineer undergoing probationary employment was
dismissed because he failed in the performance of his task as such. 
Quoting with approval the findings of the NLRC, the Supreme Court ruled:

“It bears stressing that even if technically the reading of air exhaust
balancing is not within the realm of expertise of the complainant, still it
ought not to be missed that prudence and due diligence imposed upon
him not to readily accept the report handed to him by the workers of
Centigrade Industries.  Required of the complainant was that he himself
proceed to the work area, inquire from the workers as to any difficulties
encountered, problems fixed and otherwise observe for himself the
progress and/or condition/quality of the work performed. chanrobles virtual law library

“As it is, We find it hard to believe that complainant would just have been
made to sign the report to signify his presence.  By saying so,
complainant is inadvertently degrading himself from an electrical engineer
to a mere watchdog.  It is in this regard that We concur with the
respondents that by his omission, lack of concern and grasp of basic
knowledge and common sense, complainant has shown himself to be
undeserving of continued employment from probationary employee to
regular employee.”

62. What is the effect of allowing an employee to work beyond the

probationary period?

An employee who is allowed to work after a probationary period is

considered a regular employee. (Article 281, Labor Code; Philippine
National Bank vs. Cabansag, G. R. No. 157010, June 21, 2005). chanrobles virtual
law library

An employee who is allowed to work after a probationary period shall be

considered a regular employee. Thus, in one case, an employee was
considered already on permanent status when he was dismissed four (4)
days after he ceased to be a probationer. (Cals Poultry Supply Corp. vs.
Roco  G.R. No.150660. July 30, 2002).

63.  What are the grounds to terminate probationary

employment?

Under Article 281, a probationary employee may be terminated on two

(2) grounds, to wit:

(a)  for a just cause; or

(b)when employee fails to qualify as a regular employee in accordance

with reasonable standards made known by the employer to the employee
at the start of the employment. (Aberdeen Court, Inc. vs. Agustin, Jr., G.
R. No. 149371, April 13, 2005).
Assignment to a job different from that applied for.

In the 3005 case of Athenna International Manpower Services, Inc. vs.

Villanos, [G. R. No. 151303, April 15, 2005], the OFW was terminated
while, as alleged by petitioner, still undergoing probationary employment
for a period of forty (40) days.  In declaring the termination as illegal, the
Supreme Court ruled that even assuming respondent was a mere
probationary employee as claimed by petitioner, respondent could only be
terminated for a pertinent and just cause, such as when he fails to qualify
as a regular employee in accordance with reasonable standards of
employment made known to him by his employer at the time of his
engagement. Here, it appears that the petitioner failed to prove that, at
the time of respondent’s engagement, the employer’s reasonable
standards for the job were made known to respondent.  Moreover, in this
case, respondent was assigned to a job different from the one he applied
and was hired for.

Termination due to poor performance; effect of high performance

rating after temporary reinstatement.

A probationary employee was dismissed in Lucero vs. CA, [G. R. No.

152032, July 3, 2003], for unsatisfactory performance prior to the
expiration of his probationary employment.  He was ordered reinstated by
the NLRC while the case was pending appeal.  During the period of his
reinstatement, he was given a high rating of “very satisfactory” in his
work performance.  The Supreme Court, however, did not give any weight
to said high rating.  It ruled: “It would be difficult to sustain the stand
taken by petitioner that the Court of Appeals erred in ignoring his
subsequent high performance rating.  The high rating of “very
satisfactory” obtained by petitioner after his reinstatement, in compliance
with the order of the NLRC, was not controlling, the point in question
being his performance during the probationary period of the
employment.”

Peremptory termination of probationary employment.

In the 2003 case of Cebu Marine Beach Resort vs. NLRC, [G. R. No.
143252, October 23, 2003], the respondents-probationary employees,
while undergoing special training in Japanese customs, traditions,
discipline as well as hotel and resort services of the newly opened resort,
were suddenly scolded by the Japanese conducting the training and
hurled brooms, floor maps, iron trays, fire hoses and other things at
them.  In protest, respondents staged a walk-out and gathered in front of
the resort.  Immediately, the Japanese reacted by shouting at them to go
home and never to report back to work.  Heeding his directive,
respondents left the premises.  Eventually, they filed a complaint for
illegal dismissal and other monetary claims against petitioners.  chanrobles virtual
law library

The Supreme Court, in holding that the dismissal of the probationary

employees were illegal, ruled that the respondents could not have failed
to qualify for their positions since 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 said 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 obviously were made known to him. To reiterate, in
the case at bar, 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.

Agabon doctrine applies if dismissal of probationary employee is

without due process.

In the 2005 case of Aberdeen Court, Inc. vs. Agustin, Jr., G. R. No.
149371, April 13, 2005], it was held that if a probationary employee was
dismissed for just cause but without affording him the required notice, the
doctrinal ruling in the leading case of Agabon vs. NLRC,  [G.R. No.
158693, November 17, 2004], shall apply.  Consequently, the employer is
liable for nominal damages in the amount of P30,000.

TERMINATION OF EMPLOYMENT BY THE EMPLOYER

JUST CAUSES FOR TERMINATION OF EMPLOYMENT

64.  What are the just causes for termination of employment

under Article 282 of the Labor Code?

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
authorized representatives; and

(e)  Other causes analogous to the foregoing.

65.  What is serious misconduct?

Requisites.- For misconduct or improper behavior to be a just cause for

dismissal:
 
(a) it must be serious; 

(b) it must relate to the performance of the employee’s duties; and

(c) it must show that the employee has become unfit to continue working
for the employer.

In the 2005 case of Fujitsu Computer Products Corporation of the

Philippines vs. CA, [G. R. No. 158232, April 8, 2005], the respondent’s act
of sending an e-mail message as an expression of sympathy for the plight
of a superior can hardly be characterized as serious misconduct as to
merit the penalty of dismissal.  There is no showing that the sending of
such e-mail message had any bearing or relation on respondent’s
competence and proficiency in his job.  To reiterate, in order to consider it
a serious misconduct that would justify dismissal under the law, the act
must have been done in relation to the performance of his duties as would
show him to be unfit to continue working for his employer.  chanrobles virtual law
library

Series of irregularities, when put together, may constitute serious

misconduct.

An employee’s fitness for continued employment cannot be

compartmentalized or taken in isolation from one act to another.  A series
of irregularities, when considered together or in their entirety, may
constitute serious misconduct, a valid ground to terminate employment.
(Piedad vs. Lanao del Norte Electric Cooperative, Inc., G. R. No. 73735,
Aug. 31, 1987, 153 SCRA 500). chanrobles virtual law library

In a 2004 case where the employee was shown to have committed

various violations of the company’s rules and regulations, the Supreme
Court ruled that his dismissal from the service is in order. Indeed, a series
of irregularities when put together may constitute serious misconduct.
(Gustilo vs. Wyeth Phils., Inc., G. R. No. 149629, Oct. 4, 2004).

Throwing a stapler and uttering invectives against a plant

manager.
Applying the foregoing standards, the Supreme Court ruled in a 2000
case that the act of the employee in throwing a stapler and uttering
abusive language upon the person of the plant manager may be
considered from a layman’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.  Also, the memorandum informing
her that she was being preventively suspended pending investigation of
her case was addressed to her as a nurse. Hence, she cannot be held in
violation therefor. (Philippine Aeolus Automotive United Corporation vs.
NLRC, G. R. No. 124617, April 28, 2000).

Use of shabu, valid ground to terminate employment.

There is no question that the possession and use by an employee of

methampethamine hydrochloride or shabu is a just cause to terminate
employment as it constitutes serious misconduct under Article 282 of the
Labor Code.

In the 2003 case of Roquero vs. Philippine Air Lines, Inc., [G. R. No.
152329, April 22, 2003], the Supreme Court affirmed the validity of the
dismissal of petitioner who was caught red-handed possessing and using
methampethamine hydrochloride or shabu in a raid conducted inside the
company premises by PAL security officers and NARCOM personnel.  Said
the Supreme Court:  “It is of public knowledge that drugs can damage the
mental faculties of the user. Roquero was tasked with the repair and
maintenance of PAL’s airplanes.  He cannot discharge that duty if he is a
drug user.  His failure to do his job can mean great loss of lives and
properties.  Hence, even if he was instigated to take drugs he has no right
to be reinstated to his position.  He took the drugs fully knowing that he
was on duty and more so that it is prohibited by company rules. 
Instigation is only a defense against criminal liability.  It cannot be used
as a shield against dismissal from employment especially when the
position involves the safety of human lives.”

Immorality.

As a general rule, immorality is not a just ground to terminate

employment.  The exception is when such immoral conduct is prejudicial
or detrimental to the interest of the employer. 

The standard to be used to determine whether the immoral conduct

adversely affects the interest of the employer is whether the immoral act
is of such nature which may be considered calculated to undermine or
injure such interest or which would make the worker incapable of
performing his work.

For instance, in a case involving a teacher, immorality was defined as a

course of conduct which offends the morals of the community and is a
bad example to the youth whose ideals a teacher is supposed to foster
and to elevate, the same including sexual misconduct.  Thus, the gravity
and seriousness of the charges against the teacher stem from his being a
married man and at the same time a teacher.  Therefore, 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. (Santos, Jr. vs. NLRC, G. R. No. 115795, March 6,
1998, 287 SCRA 117).

In another case, the dismissal of the supervisor who maintained a

concubine and practically drove his family away because of his illicit
relationship was held legal. As supervisor, he failed to set a good example
to the several personnel under him. (Sanchez vs. Ang Tibay, 54 O. G.
4515). chanrobles virtual law library

Immoral act committed beyond office hours.

The act of sexually harassing a co-employee within the company premises

(ladies’ dormitory) even after office hours is a work-related matter
considering that the peace of the company is thereby affected. The Code
of Employee Discipline is very clear that immoral conduct “within the
company premises regardless of whether or not [it is] committed during
working time” is punishable. (Navarro III vs. Damasco, G. R. No. 101875,
July 14, 1995).

Sexual intercourse inside company premises constitutes serious

misconduct.

A security coordinator committed serious breaches of company rules

when he caused the introduction of intoxicating liquor into the premises
which he drank with another guard on duty, and allowed two female
security guards to come inside the Security Office and had sexual
intercourse with one of them on top of the desk of the Security Head,
while the other guard pretended to be asleep during all the time that the
lustful act was commenced until consummated. (Stanford Microsystems,
Inc. vs. NLRC, G. R. No. L-74187, Jan. 28, 1988).

The act of a lady teacher in falling in love with a student, not

immoral.
The act of a 30-year old lady teacher, of falling in love with her student
whose age is 16, is not an immoral act which would justify the
termination of her employment. The school 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 of 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
immorality. The deviation of the circumstances of their marriage from the
usual societal pattern cannot be considered as a defiance of contemporary
social mores.  (Chua-Qua vs. Clave, G. R. No. L-49549, Aug. 30, 1990).
chanrobles virtual law library

Fighting as ground for termination.

Fighting within work premises may be deemed a valid ground for the
dismissal of an employee.  Such act adversely affects the employer’s
interests for it distracts employees, disrupts operations and creates a
hostile work atmosphere. (Solvic Industrial Corp. vs. NLRC, G. R. No.
125548, Sept. 25, 1998).

Not every fight, however, within company premises in which an employee

is involved would warrant his dismissal.  This is especially true when the
employee concerned did not instigate the fight and was in fact the victim
who was constrained to defend himself. (Garcia vs. NLRC, G. R. No.
116568, Sept. 3, 1999).

The fact that an employee filed a criminal case against the other
employee involved in a fight while the latter did not, does not necessarily
mean that the former was the aggrieved party. (Flores vs. NLRC, G. R.
No. 109362, May 15, 1996, 256 SCRA 735). chanrobles virtual law library

In one case where the fisticuffs between an employee and a security

guard occurred in a store within the company auxiliary compound, about
15 meters from the gate, the Supreme Court ruled that the penalty of
dismissal was not commensurate with the misconduct, considering the
length of service and the surrounding circumstances of the incident.
(North Camarines Lumber Co., Inc. vs. Barreda, G. R. No. 75436, Aug.
21, 1987).

And in another case where the fight occurred outside the work premises
and did not lead to any disruption of work or any hostile environment in
the work premises, the dismissal of the employee who figured in the fight
was considered too harsh a penalty. (Solvic Industrial Corp. vs. NLRC, G.
R. No. 125548, Sept. 25, 1998; 296 SCRA 432, 441).

Utterance of obscene, insulting or offensive words constitutes

serious misconduct.
The act of an employee in hurling obscene, insulting or offensive language
against his superior is not only destructive of the morale of his co-
employees and a violation of the company rules and regulations, but also
constitutes gross misconduct which is one of the grounds provided for by
law to terminate the services of an employee. This attitude towards a
supervisor amounted to insubordination and conduct unbecoming of an
employee which should merit the penalty of dismissal.  (Autobus Workers’
Union vs. NLRC, G. R. No. 117453, June 26, 1998, 291 SCRA 219, 228).

In Reynolds Philippine Corporation vs. Eslava, [137 SCRA 259 (1985)],

the dismissed employee circulated several letters to the members of the
company’s board of directors calling the executive vice-president and
general manager a “big fool,” “anti-Filipino,” and accusing him of
“mismanagement, inefficiency, lack of planning and foresight, petty
favoritism, dictatorial policies, one-man rule, contemptuous attitude to
labor, anti-Filipino utterances and activities.” As a result of this, said
employee’s dismissal was held legal in view of these utterances.

In Asian Design and Manufacturing Corporation vs. Deputy Minister of

Labor, [142 SCRA 79 (1986)], the dismissed employee made false and
malicious statements against the foreman (his superior) by telling his co-
employees:  “If you don’t give a goat to the foreman, you will be
terminated.  If you want to remain in this company, you have to give a
goat.” Further, the dismissed employee therein likewise posted a notice in
the comfort room of the company premises which read:  “Notice to all
Sander – Those who want to remain in this company, you must give
anything to your foreman.  Failure to do so will be terminated – Alice 80.”
The Supreme Court declared the dismissal of said employee based on
these malicious statements valid and legal.

In De la Cruz vs. NLRC, [G. R. No. 82703, September 15, 1989, 177
SCRA 626], the act of an employee in hurling invectives at a company
physician such as “sayang ang pagka-professional mo” and “putang ina
mo,” was held to constitute insubordination and conduct unbecoming an
employee which should warrant his dismissal. 

In Bondoc vs. NLRC, [G. R. No. 103209, July 28, 1997, 276 SCRA 288],
utterances on different occasions towards a co-employee of the following:
-”Di bale bilang na naman ang araw mo.” – “Sige lang, patawa tawa ka
pa, eh bilang na bilang na ang araw mo.” – “Matakot ka sa Diyos, bilang
na ang araw mo; Mag-ingat ka sa paglabas mo sa Silahis Hotel. - Unggoy
xxx ulol” were held unquestionably as partaking the form of grave threat
or coercion which justified the dismissal of the offender.

In Autobus Workers’ Union vs. NLRC, [G. R. No. 117453, June 26, 1998,
291 SCRA 219, 228], the act of the employee in calling his supervisor
“gago ka” and taunting the latter by saying “bakit anong gusto mo, ‘tang
ina mo” was held sufficient ground to dismiss the former.

But in Samson vs. NLRC, [G. R. No. 121035, April 12, 2000], the
following utterances: “Si EDT (referring to Epitacio D. Titong, General
Manager and President of the company), bullshit yan,” “sabihin mo kay
EDT yan,” and “sabihin mo kay EDT, bullshit yan” while making the “dirty
finger” gesture, were not held to be sufficient to merit the dismissal of the
employee.  The Supreme Court justified said finding by distinguishing this
case from the De la Cruz, Autobus, Asian Design and Reynolds cases
[supra], in that the said offensive utterances were not made in the
presence of the employee’s superior; that the company’s rules and
regulations merely provide for “verbal reminder” for first offenders; and
that the penalty of dismissal was unduly harsh considering his 11 years of
service to the company.

Gambling within company premises, a serious misconduct.

In one case, an employee was validly terminated when he was caught

gambling within the company premises, it being a prohibited act carrying
the penalty of termination under the Company Rules. (Dimalanta vs.
Secretary of Labor, G. R. No. 83854, May 24, 1989). chanrobles virtual law library

Intoxication as ground for termination.

As a general rule, intoxication of an employee which interferes with his

work, constitutes serious misconduct.  It is well-settled by jurisprudence
that serious misconduct in the form of drunkenness and disorderly or
violent behavior is a just cause for the dismissal of an employee. (Sanyo
Travel Corporation vs. NLRC, G. R. No. 121449, Oct. 2, 1997; Club
Filipino, Inc. vs. Sebastian, G. R. No. 85490, July 23, 1992, 211 SCRA
717).

However, the nature of the employee’s work, the dignity of his position
and the surrounding circumstances of the intoxication, must be taken into
account.

For instance, the act of a managerial employee of reporting for work

under the influence of liquor and sleeping while on duty reflect his
unworthiness of the trust and confidence reposed on him. (Del Val vs.
NLRC, G. R. No. 121806, Sept. 25, 1998, 296 SCRA 283).

The act of a pilot with the rank of captain, of forcing two co-pilots with the
rank of First Officers, to drink one evening at the coffee shop of a hotel in
Cebu City, six bottles of beer each, within thirty minutes, failing which, he
ordered them to stand erect and were hit on the stomach, was held as
constitutive of serious misconduct.  The incident occurred with his full
knowledge that his co-pilots have flight duties as early as 7:10 a.m. the
next day and as late as 12:00 p.m.  (Philippine Airlines, Inc. vs. NLRC, G.
R. No. L-62961, Sept. 2, 1983).

In another case involving two (2) security guards who, while off-duty,
joined a drinking spree at a birthday party of a co-guard in a sari-sari
store near the FTI security office, the lesser penalty of 30-day
suspension, not dismissal, was the penalty held to be appropriate under
the circumstances. The reason cited was the fact that the company rules
and regulations merely provided for suspension for first offenders. 
(Quiňones vs. NLRC, G. R. No. 105763, July 14, 1995).

Pressure exerted by a teacher upon a colleague to change a failing

grade of a student.

The pressure and influence exerted by a teacher on his colleague to

change a failing grade of a student to a passing one, as well as his
misrepresentation that the student is his nephew, constitute serious
misconduct, which is a valid ground for dismissing an employee. (Padilla
vs. NLRC, G. R. No. 114764, June 13, 1997, 273 SCRA 457).

Sleeping while on duty as a ground for termination.

In Luzon Stevedoring Corporation vs. CIR, [G. R. No. L-18683, Dec. 31,
1965], and A’ Prime Security Services, Inc. vs. NLRC, [220 SCRA 142
(1993)], the act of an employee of sleeping in his post, coupled with
gross insubordination, dereliction of duty and challenging superiors to a
fight, was held as serious misconduct.

However, in the 2000 case of VH Manufacturing, Inc. vs. NLRC, [G. R. No.
130957, Jan. 19, 2000], it was pronounced that to cite that sleeping on
the job is always a valid ground for dismissal is misplaced not only
because the same was not substantiated by any convincing evidence
other than the bare allegation of the employer but most significantly,
because the authorities cited, Luzon Stevedoring [supra] and A’ Prime
[supra], are not applicable in this case since the function involved in said
cases was “to protect the company from pilferage or loss.” Accordingly,
the doctrine laid down in those cases is not applicable to the case at bar.

In the 2004 case of Electruck Asia, Inc. vs. Meris, [G. R. No. 147031, July
27, 2004], where more than fifty employees were alleged to have slept at
the same time, the Supreme Court found it “highly unlikely and contrary
to human experience that all fifty-five employees including respondents
were at the same time sleeping.” If indeed the Night Manager chanced
upon respondent-employees sleeping on the job, why he did not at least
rouse some or all of them to put them on notice that they were caught in
flagrante defies understanding.
Eating while at work.

Dismissal is too harsh a penalty for the offense of eating while at work,
under the attendant circumstances of the case. (Tanduay Distillery Labor
Union vs. NLRC, G. R. No. 73352, Dec. 06, 1995).

Urinating in the workplace.

In a 2002 case, it was held that urinating in a workplace other than the
one designated for the purpose by the employer constitutes violation of
reasonable regulations intended to promote a healthy environment under
Art. 282 [1] of the Labor Code for purposes of terminating employment,
but the same must be shown by evidence. An employee cannot be
terminated based on this ground if there is no evidence that he did
urinate in a place other than a rest room in the premises of his work. (Tan
vs. Lagrama, G. R. No. 151228, Aug. 15, 2002).

66.  Sexual Harassment.

Republic Act No. 7877, approved on February 14, 1995, otherwise known
as the “Anti-Sexual Harassment Act of 1995” declares sexual harassment
unlawful in the employment, education or training environment. chanrobles virtual
law library

R. A. No. 7877 punishes sexual harassment if the same is:

1.  work-related; or

2.  education-related; or

3.  training-related. (Section 3, Ibid.).

Who may be liable for sexual harassment.

Work, education or training-related sexual harassment is committed by

any 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 another, regardless of whether the
demand, request or requirement for submission is accepted by the object
of said act.  (Section 3, Ibid.). chanrobles virtual law library

Any person who directs or induces another to commit any act of sexual
harassment as defined in the law, or who cooperates in the commission
thereof by another without which it would not have been committed, shall
also be held liable under the law. (Section 3, Ibid.).
In a sexual harassment case involving a manager, the Supreme Court
said: 

“As a managerial employee, petitioner is bound by a more exacting work

ethics.  He failed to live up to this higher standard of responsibility when
he succumbed to his moral perversity.  And when such moral perversity is
perpetrated 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 over-sexed superiors.”
(Villarama vs. NLRC and Golden Donuts, Inc., supra). chanrobles virtual law library

In another case, the act of the manager in “touching a female

subordinate’s hand and shoulder, caressing her nape and telling other
people that the subordinate was the one who hugged and kissed or that
she responded to the sexual advances” was considered act of sexual
harassment for which he was penalized by the company with a 30-day
suspension which the Supreme Court affirmed. (Libres vs. NLRC, supra).

Jacutin vs. People.

An illustrative criminal case involving sexual harassment is the 2002 case

of Dr. Rico S. Jacutin vs. People of the Philippines, [G. R. No. 140604,
March 6, 2002] where the Supreme Court affirmed the Sandiganbayan’s
decision finding Dr. Rico Jacutin y Salcedo guilty of the crime of Sexual
Harassment defined and punished under Republic Act No. 7877,
particularly Sections 3 and 7 thereof, and penalizing him with
imprisonment of six (6) months and to pay a fine of Twenty Thousand
(P20,000.00) Pesos, with subsidiary imprisonment in case of insolvency.
Additionally, he was ordered to indemnify the offended party, Juliet Yee,
in the amount of P30,000.00 and P20,000.00 by way of, respectively,
moral damages and exemplary damages.

Prescription of action.

Any action arising from sexual harassment shall prescribe in three (3)
years. (Section 7, Republic Act No. 7877).

Delay in filing the case for sexual harassment.

According to Libres vs. NLRC, [G. R. No. 123737, May 28, 1999], a delay
of one (1) year in instituting the complaint for sexual harassment is not
an indicium of afterthought.  The delay could be expected since the
respondent was the subordinate’s immediate superior.  Fear of retaliation
and backlash, not to forget the social humiliation and embarrassment that
victims of this human frailty usually suffer, are all realities that the
subordinate had to contend with.  Moreover, the delay did not detract
from the truth derived from the facts.  In fact, the narration of the
respondent even corroborated the subordinate’s assertion in several
material points.  He only raised issue on the complaint’s protracted filing.

Likewise, in the 2002 case of Philippine Aeolus Automotive United

Corporation vs. NLRC, [G. R. No. 124617, April 28, 2000], it was held that
the delay of more than four (4) years to expose the manager’s sexual
harassment is of no moment. 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. chanrobles virtual law library

Private respondent admittedly allowed four (4) years to pass before finally
coming out with her employer’s sexual impositions.  Not many women,
especially in this country, are made of the stuff that can endure the agony
and trauma of a public, even corporate, scandal.  If petitioner corporation
had not issued the third memorandum that terminated the services of
private respondent, we could only speculate how much longer she would
keep her silence.  Moreover, few persons are privileged indeed to transfer
from one employer to another.  The dearth of quality employment has
become a daily “monster” roaming the streets that one may not be
expected to give up one’s employment easily but to hang on to it, so to
speak, by all tolerable means. (Ibid.).

67.  What legal ground/s may be cited for acts of dishonesty?

An act of dishonesty may constitute either of the following grounds:

serious misconduct, fraud, willful breach of trust and confidence. chanrobles virtual
law library

68.  What are the requisites to validly invoke willful disobedience

of lawful orders as a just ground to terminate employment?

In order that the willful disobedience by the employee of the orders,

regulations or instructions of the employer may constitute a just cause for
terminating his employment, said orders, regulations, or instructions must
be:

1.  lawful and  reasonable;

2.  sufficiently known to the employee; and

3.  in  connection  with  the duties which the employee has been engaged
to discharge.
Requisites of lawful dismissal on the ground of willful disobedience. - For
the ground of “willful disobedience” to be considered a just cause for
termination of employment, the following requisites must concur, namely:
chanrobles virtual law library

1. the employee’s assailed conduct must have been willful or intentional,

the willfulness being characterized by a ‘wrongful and perverse attitude;’
and

2.  the order violated must have been reasonable and lawful and made
known to the employee and must pertain to the duties which he had been
engaged to discharge.

Rule where violation of the rules was tolerated by employer.

Where a violation of company policy or breach of company rules and

regulations was found to have been tolerated by management, the same
could not serve as a basis for termination. 

As held in the 2004 case of Coca-Cola Bottlers Philippines, Inc. vs. Vital,
[G. R. No. 154384, Sept. 13, 2004], if an employee was merely following
the instructions of his supervisor, his act should be deemed in good faith.
Clearly, his dismissal from the service on the ground of willful
disobedience or violation of company rules and regulations is not justified.

Rule against marriage, when not valid.

Article 136 of the Labor Code considers as an unlawful act of the

employer to stipulate, as a condition of employment or continuation of
employment, that a woman employee shall not get married, or that upon
getting married, a woman employee shall be deemed resigned or
separated.  It is likewise an unlawful act of the employer, to actually
dismiss, discharge, discriminate or otherwise prejudice a woman
employee merely by reason of her marriage. (See also Section 13 [e],
Rule XII, Book III, Rules to Implement the Labor Code; Gualberto vs.
Marinduque Mining Industrial Corporation, C. A.-G. R. No. 52753-R, June
28, 1978).

A company policy of not accepting or considering as disqualified from

work any woman worker who contracts marriage runs afoul of the test of,
and the right against, discrimination afforded all women workers by our
labor laws and by no less than the Constitution. (PT&T vs. NLRC, G. R.
No. 118978, May 23, 1997).

The provision in a contract between an airline company and a flight

attendant which states that “flight attendant-applicants must be single
and that they shall be automatically separated from employment in the
event they subsequently get married” is a null and void provision, hence,
cannot be enforced for being contrary to Article 136 of the Labor Code
and the protection-to-labor clause in the Constitution. (Zialcita vs.
Philippine Airlines, Inc., Case No. RO4-3-398-76, Feb. 20, 1977, decided
by the Office of the President).

Rule against marriage, when valid.

In the 2004 case of Duncan Association of Detailman-PTGWO vs. Glaxo

Welcome Philippines, Inc., [G. R. No. 162994, September 17, 2004], the
contract of employment expressly prohibited an employee from having a
relationship with an employee of a competitor company.  It provides:

“10. You agree to disclose to management any existing or future

relationship you may have, either by consanguinity or affinity with co-
employees or employees of competing drug companies. Should it pose a
possible conflict of interest in management discretion, you agree to resign
voluntarily from the Company as a matter of Company policy.”

The Supreme Court ruled that this stipulation is a valid exercise of

management prerogative. The prohibition against personal or marital
relationships with employees of competitor-companies upon its employees
is reasonable under the circumstances because relationships of that
nature might compromise the interests of the company.  In laying down
the assailed company policy, the employer only aims to protect its
interests against the possibility that a competitor company will gain
access to its secrets and procedures.

69.  What constitutes the ground of gross and habitual neglect of

duties?

• Element of habituality may be disregarded where loss is substantial.

• Element of habituality may be disregarded if totality of evidence justifies

dismissal.

• Element of actual loss or damage, not an essential requisite.

• Habitual tardiness or habitual absenteeism may be a ground for

termination.

Test to determine negligence. 

According to the Supreme Court in the 2003 case of Reyes vs. Maxim’s
Tea House, [G. R. No. 140853, February 27, 2003], the test to determine
the existence of negligence is as follows: Did the employee, in doing the
alleged negligent act, use that reasonable care and caution which an
ordinarily prudent person would use in the same situation? chanrobles
virtual law library

In this case involving a vehicular collision leading to the dismissal of the

petitioner-employee on the ground of gross negligence, the Supreme
Court found that the petitioner tried to turn left to avoid a collision. To put
it otherwise, petitioner did not insist on his right of way, notwithstanding
the green light in his lane. Still, the collision took place as the ten-wheeler
careened on the wrong lane. Clearly, petitioner exerted reasonable effort
under the circumstances to avoid injury not only to himself but also to his
passengers and the van he was driving. To hold that petitioner was
grossly negligent under the circumstances goes against the factual
circumstances shown. It appears that he was more a victim of a vehicular
accident rather than its cause. There being no clear showing that
petitioner was culpable for gross negligence, petitioner’s dismissal is
illegal. chanrobles virtual law library

70.  What are the requisites to validly invoke abandonment of

work?

Requisites. -  Abandonment of work is a valid ground to terminate an

employment.  To constitute abandonment, two (2) elements must concur,
namely:  chanrobles virtual law library

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.  This

is the more determinative factor being manifested by some overt acts.

Requirement of notice before declaring abandonment. - The notice

required consists of two (2) parts to be separately served on the
employee in his last known address, to wit:  chanrobles virtual law library

1. notice to apprise the employee of the particular acts or omissions for

which his dismissal is sought; and

2.   subsequent notice to inform him of the employer’s decision to dismiss

him.

This notice requirement is not a mere technicality but a requirement of

due process to which every employee is entitled to insure that the
employer’s prerogative to dismiss or lay-off is not abused or exercised in
an arbitrary manner.

Notices in abandonment cases, where sent.

In case of abandonment of work, the notices should be served at the

worker’s last known address. (Icawat vs. NLRC, G. R. No. 133573, June
20, 2000).

In the 2004 case of Agabon vs. NLRC, [G.R. No. 158693, Nov. 17, 2004],
while the validity of the dismissal based on abandonment was upheld,
however, the employer was deemed to have violated due process when it
did not follow the notice requirements and instead argued that sending
notices to the last known addresses would have been useless because
they did not reside there anymore.  Unfortunately for the employer, this is
not a valid excuse because the law mandates the twin notice
requirements be sent to the employee’s last known address. Thus, it
should be held liable for non-compliance with the procedural requirements
of due process. 

Immediate filing of complaint negates abandonment.

In a 2004 case, it was ruled that the immediate filing of complaint for
illegal dismissal by the employees praying for their reinstatement,
negates the finding of abandonment. They cannot, by any reasoning, be
said to have abandoned their work, for as the Supreme Court had
consistently ruled, the filing by an employee of a complaint for illegal
dismissal is proof enough of his desire to return to work, thus negating
the employer’s charge of abandonment. (Unicorn Safety Glass, Inc. vs.
Basarte, G. R. No. 154689, Nov. 25, 2004).

An employee who had truly forsaken his job would not have bothered to
file a complaint for illegal dismissal. (Hodieng Concrete Products vs. Dante
Emilia, G. R. No. 149180, Feb. 14, 2005).

For instance, the filing of such complaint the very next day after the
employee was removed (Anflo Management & Investment Corp. vs.
Bolanio, G. R. No. 141608, Oct. 4, 2002) or two (2) days after receiving
the termination letter (EgyptAir, vs. NLRC, G. R. No. 63185, Feb. 27,
1989) or six (6) days (Masagana Concrete Products vs. NLRC, G. R. No.
106916, Sept. 3, 1999) or four (4) days from the time the employees
were prevented from entering their workplace, is an indication that they
have not abandoned their work. (Artemio Labor vs. NLRC, G. R. No.
110388, Sept. 14, 1995).

The Supreme Court did not likewise consider the lapse of nine (9) months
(Kingsize Manufacturing Corp. vs. NLRC, G. R. Nos. 110452-54, Nov. 24,
1994) or six (6) months before filing the complaints for illegal dismissal
as an indication of abandonment. Under the law, the employee has four
(4) years within which to institute his action for illegal dismissal. (Pare vs.
NLRC, G. R. No. 128957, Nov. 16, 1999).

When filing of complaint does not negate abandonment;

consequence of failure to pray for reinstatement.

The rule that abandonment of work is inconsistent with the filing of a

complaint for illegal dismissal is not applicable to a case where the
complainant does not pray for reinstatement and just asks for separation
pay instead.  It goes without saying that the prayer for separation pay,
being the alternative remedy to reinstatement, contradicts private
respondent-employee’s stance. That he was illegally dismissed is belied
by his own pleadings as well as contemporaneous conduct. (Jo vs. NLRC,
G. R. No. 121605, Feb. 2, 2000).

But in Sentinel Security Agency, Inc. vs. NLRC, [G. R. No. 122468, Sept.
3, 1998], the fact that complainants did not pray for reinstatement was
considered by the Supreme Court as not sufficient proof of abandonment. 
A strong indication of the intention of the complainants to resume work is
their allegation that on several dates, they reported to the Security
Agency for reassignment, but were not given any.  In fact, the contention
of complainants was that the Agency constructively dismissed them.
Abandonment has recently been ruled to be incompatible with
constructive dismissal.

When refusal to return to work does not constitute abandonment. 

         
In the 2004 case of The Philippine American Life and General Insurance
Co. vs. Gramaje, [G. R. No. 156963, Nov. 11, 2004], the Assistant Vice-
President was directed to report to her new assignment and submit to a
medical examination.  She did not comply leading to her being declared
as having abandoned her work.  However, the Supreme Court ruled that
the there could not have been an abandonment since at the time she was
being asked to report to her new assignment, she had already filed a case
for illegal dismissal against her employer.  For the employer to anticipate
the employee to report for work after the latter already filed a case for
illegal dismissal before the NLRC, would be absurd.  The two requisites for
abandonment are not present here.  There was no abandonment as the
latter is not compatible with constructive dismissal.
 
Offer of reinstatement during proceedings before Labor Arbiter,
effect.

The respondent-employee in the 2002 case of  Hantex Trading Co., Inc.
vs. CA, [G. R. No. 148241, September 27, 2002], accused of abandoning
his work, filed a complaint and prayed therein, among others, for
reinstatement.  However, during the initial hearing before the Labor
Arbiter, the petitioners made an offer to reinstate him to his former
position, but he  “defiantly” refused the offer despite the fact that in his
complaint, he was asking for reinstatement.  Again, the petitioners
extended the offer in its position paper filed with the Labor Arbiter but
was likewise rejected by the respondent. The petitioners consequently
asserted that these circumstances are clear indications of respondent’s
lack of further interest to work and effectively negate his claim of illegal
dismissal. chanrobles virtual law library

The Supreme Court, however, ruled otherwise. It considered the refusal

to be reinstated as more of a symptom of strained relations between the
parties, rather than an indicium of abandonment of work as obstinately
insisted by petitioners.  While the respondent desires to have his job
back, it must have later dawned on him that the filing of the complaint for
illegal dismissal and the bitter incidents that followed have sundered the
erstwhile harmonious relationship between the parties. He must have
surely realized that even if reinstated, he will find it uncomfortable to
continue working under the hostile eyes of the petitioners who had been
forced to reinstate him.  He had every reason to fear that if he accepted
petitioners’ offer, their watchful eyes would thereafter be focused on him,
to detect every small shortcoming of his as a ground for vindictive
disciplinary action.  In such instance, reinstatement would no longer be
beneficial to him. chanrobles virtual law library

Neither does the fact that petitioners made offers to reinstate respondent
legally disproves illegal dismissal.  As observed by the Court of Appeals,
to which the Supreme Court was in full agreement, the offer may very
well be “a tacit admission of petitioners that they erred in dismissing him
verbally and without observance of both substantive and procedural due
process.” Curiously, petitioners’ offer of reinstatement was made only
after more than one (1) month from the date of the filing of the illegal
dismissal case.  Their belated gesture of goodwill is highly suspect.  If
petitioners were indeed sincere in inviting respondent back to work in the
company, they could have made the offer much sooner.  In any case,
their intentions in making the offer are immaterial, for the offer to re-
employ respondent could not have the effect of validating an otherwise
arbitrary dismissal.

In Ranara vs. NLRC, [212 SCRA 631], where the employer offered to re-
employ the illegally dismissed employee, the Supreme Court stated:

“The fact that his employer later made an offer to re-employ him did not
cure the vice of his early arbitrary dismissal. The wrong had been
committed and the wrong done. Notably, it was only after the complaint
had been filed that it occurred to Chang, in a 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
respondents incurred liability under the Labor Code from the moment
Ranara was illegally dismissed and the liability did not abate as a result of
Chang’s repentance.”

In the 2001 case of Suan vs. NLRC, [G. R. No. 141441, June 19, 2001], a
letter was sent to the petitioner almost one (1) month after the filing of
the complaint for illegal dismissal which required him to explain his
absence without leave (AWOL).  He found refuge in the above case of
Ranara.  The Supreme Court, however, did not find any analogy between
the two cases as the factual backdrop of Ranara [supra] is not the same
as Suan. In contrast, petitioner Jose Suan in the latter case who suffered
a stroke, was not dismissed but was only asked to go on extended leave
from July 10 to August 10, 1997 because when petitioner reported for
work on July 10, 1997, after more than six months of sick leave,
respondent Oripaypay noticed that petitioner’s left arm down to his left
limb was paralyzed, thus Oripaypay could readily see that petitioner was
not yet ready and physically well to perform his usual assignment as
master fisherman.  However, after petitioner’s extended leave expired, he
did not return to work which prompted private respondent Oripaypay to
send him a letter dated August 16, 1997 requiring him to explain why no
disciplinary action should be taken against him for his absence without
official leave.  The said letter clearly shows that respondent Oripaypay
was waiting for the return of petitioner unlike in Ranara, wherein
petitioner Ranara, a driver, upon reporting for work, was surprised to find
some other person who replaced him in handling the vehicle previously
assigned to him, thus confirming his dismissal without proper notice.

Subcontracting for another company indicates abandonment.

In Agabon vs. NLRC, [G.R. No. 158693, November 17, 2004], the
Supreme Court held that the act of the petitioners who were frequently
absent to engage in subcontracting work for another company clearly
shows the intention to sever the employer-employee relationship with
their employer. Hence, they are guilty of abandonment.

71.  What constitutes the ground of fraud?

Commission of fraud by an employee against the employer will

necessarily result in the latter's loss of trust and confidence in the
former.  Proof of loss is not required under this ground.

Commission of fraud or deceit leading to loss of trust and

confidence. 

In the 2003 case of De la Cruz, Jr. vs. NLRC, G. R. No. 145417,

[December 11, 2003], the petitioner was holding a managerial position in
which he was tasked to perform key functions in accordance with an
exacting work ethic.  His position required the full trust and confidence of
his employer.  While petitioner could exercise some discretion, this
obviously did not cover acts for his own personal benefit.  As found by the
court a quo, he committed a transgression that betrayed the trust and
confidence of his employer - reimbursing his family’s personal travel
expenses out of company funds. Petitioner failed to present any
persuasive evidence or argument to prove otherwise. His act amounted to
fraud or deceit which led to the loss of trust and confidence of his
employer.

Lack of damage or losses not necessary in fraud cases.

The fact that the employer did not suffer losses from the dishonesty of
the dismissed employee because of its timely discovery does not excuse
the latter from any culpability. (Villanueva vs. NLRC, G. R. No. 129413,
July 27, 1998).

In Diamond Motors Corporation vs. CA, [G. R. No. 151981, Dec. 1, 2003]
and in the earlier case of Philippine Airlines, Inc. vs. NLRC, [G. R. No.
126805, March 16, 2000] involving the commission of fraud against the
company, it was ruled that the fact that the employer failed to show it
suffered losses in revenue as a consequence of the employee’s act is
immaterial.  It must be stressed that actual defraudation is not necessary
in order that an employee may be held liable under the company rule
against fraud.  That the dismissed employee attempted to deprive the
employer of its lawful revenue is already tantamount to fraud against the
company which warrants dismissal from the service.

Restitution does not have absolutory effect.

In Gonzales vs. NLRC and Pepsi-Cola Products, Phils., Inc., [G. R. No.
131653, March 26, 2001], it was held that the fact that the employer
ultimately suffered no monetary damage as the employee subsequently
settled his account is of no moment.  This was not the reason for the
termination of his employment in the company but the anomalous scheme
he engineered to cover up his past due account which constitutes a clear
betrayal of trust and confidence.

The Supreme Court has reiterated this rule in Santos vs. San Miguel
Corporation, [G. R. No. 149416, March 14, 2003]. Hence, even if the
shortages have been fully restituted, the fact that the employee has
misappropriated company funds is a valid ground to terminate the
services of an employee of the company for loss of trust and confidence.
(See also San Miguel Corporation vs. Deputy Minister of Labor and
Employment, 145 SCRA 196, 203-204 [1986]).

Lack of misappropriation or shortage, immaterial.

Where there was a series of unauthorized encashments of personal
checks, the Supreme Court in Central Pangasinan Electric Cooperative,
Inc. vs. Macaraeg, [G. R. No. 145800, January 22, 2003], ruled that it is
not material that the teller and cashier did not “misappropriate any
amount of money, nor incur any shortage relative to the funds in their
possession.” The basic premise for dismissal on the ground of loss of
confidence is that the employees concerned hold positions of trust.  The
betrayal of this trust is the essence of the offence for which an employee
is penalized.  The respondents here held positions of utmost trust and
confidence.  As teller and cashier, they are expected to possess a high
degree of fidelity.  They are entrusted with a considerable amount of
cash.  Respondent de Vera accepted payments from petitioner’s
consumers while respondent Macaraeg received remittances for deposit at
petitioner’s bank.  They did not live up to their duties and obligations.

72.  What are the requisites for  the ground of willful breach of
trust?

In the 2004 case of Charles Joseph U. Ramos vs. The Honorable Court of
Appeals and Union Bank of the Philippines, [G.R. No. 145405, June 29,
2004], the Supreme Court held that, in order to validly dismiss an
employee on the ground of loss of trust and confidence under Article 282,
the following guidelines must be followed:

1. The loss of confidence must not be simulated;

2. It should not be used as a subterfuge for causes which are illegal,

improper or unjustified;

3. It may not be arbitrarily asserted in the face of overwhelming evidence

to the contrary;

4. It must be genuine, not a mere afterthought, to justify earlier action

taken in bad faith; and

5. The employee involved holds a position of trust and confidence.

(Tolentino vs. PLDT, G. R. No. 160404, June 8, 2005).

Breach must be work-related.

In order to constitute a just cause for dismissal, the act complained of

should be “work-related” and must show that the employee concerned is
unfit to continue to work for the employer. (Sulpicio Lines, Inc. vs. Gulde,
G. R. No. 149930, Feb. 22, 2002).

For instance, in the 2005 case of Philippine National Construction

Corporation vs. Matias, [G. R. No. 156283, May 6, 2005], undeniably, the
position of project controller - the position of respondent at the time of his
dismissal - required trust and confidence, for it related to the handling of
business expenditures or finances.  However, his act allegedly constituting
breach of trust and confidence (referring to the unlawful scheme by PNCC
of using its employees as ‘dummies’ for the acquisition of vast tract of
land in Bukidnon and thereafter compelling them to assign all rights over
same properties in favor of PNCC – a scheme by PNCC which is a flagrant
violation of the Constitution as regards the maximum area of real
property which a corporation can acquire under the CARP Law) was not in
any way related to his official functions and responsibilities as controller. 
In fact, the questioned act pertained to an unlawful scheme deliberately
engaged in by petitioner in order to evade a constitutional and legal
mandate.

Breach must be willful and without justifiable excuse.

Loss of trust and confidence must be based on a willful breach and

founded on clearly established facts. (Asia Pacific Chartering [Phils.], Inc.
vs. Farolan, G. R. No. 151370, Dec. 4, 2002).

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. (Atlas
Consolidated Mining & Development Corporation vs. NLRC, G. R. No.
122033, May 21, 1998).
 
Employee’s position must be reposed with trust and confidence.

As firmly entrenched in our jurisprudence, loss of trust and confidence as

a just cause for termination of employment is premised on the fact that
an employee concerned holds a position where greater trust is placed by
management and from whom greater fidelity to duty is correspondingly
expected.  This includes managerial personnel entrusted with confidence
on delicate matters, such as the custody, handling, or care and protection
of the employer’s  property. (Caingat vs. NLRC, G. R. No. 154308, March
10, 2005).

This situation also holds in the case of supervisory personnel occupying

positions of responsibility. (Cruz vs. Coca-Cola Bottlers Phils., Inc., G. R.
No. 165586, June 15, 2005).

The betrayal of this trust is the essence of the offense for which an
employee is penalized. (Santos vs. San Miguel Corporation, G. R. No.
149416, March 14, 2003).
There must be “some basis” for the loss of trust and confidence.

While it is true that loss of trust and confidence is one of the just causes
for termination, such loss of trust and confidence must, however, have
some basis. Proof beyond reasonable doubt is not required.  It is sufficient
that there must only be some basis for such loss of confidence or that
there is reasonable ground to believe if not to entertain the moral
conviction that the concerned employee is responsible for the misconduct
and that the nature of his participation therein rendered him absolutely
unworthy of trust and confidence demanded by his position. (Central
Pangasinan Electric Cooperative, Inc. vs. Macaraeg, G. R. No. 145800,
Jan. 22, 2003).

In Limketkai Sons Milling, Inc. vs. Llamera, [G. R. No. 152514, July 12,
2005], petitioners simply allege that respondent’s failure to report to the
quality control head the batch that did not meet the minimum standard
showed connivance to sabotage petitioners’ business.  The Supreme Court
ruled that not only is petitioners’ logic flawed, it is an instance of arguing
non sequitur.  Said allegation alone, without proven facts to back it up,
could not and did not suffice as a basis for a finding of willful breach of
trust. Petitioners failed to prove the existence of a valid cause for the
dismissal of respondent.  Therefore, the dismissal must be deemed
contrary to the provisions of the Labor Code, hence illegal. chanrobles virtual law library

Prolonged practice, not an excuse for wrongful act.

In Santos vs. San Miguel Corporation, [G. R. No. 149416, March 14,
2003], it was held that prolonged practice of encashing personal checks
among payroll personnel does not excuse or justify petitioner’s misdeeds.
Petitioner’s willful and deliberate acts were in gross violation of
respondent company’s policy against encashment of personal checks of its
personnel.  She, as Finance Director, cannot feign ignorance of such
policy as she is duty-bound to keep abreast of company policies related to
financial matters within the corporation.

Grant of promotions and bonuses negates loss of trust and

confidence.

In Norkis Distributors, Inc. vs. NLRC, [G. R. No. 112230, July 17, 1995],
where the employer alleged inefficiency and loss of trust and confidence
as grounds for termination of employment, the High Tribunal said that
these are negated by the fact that the evidence shows that the employee
received several promotions since his employment in 1986 and was given
bonuses for his collection efforts and a compensation adjustment for his
excellent performance. chanrobles virtual law library
Long years of service, absence of derogatory record and small
amount involved, when deemed inconsequential.

In Etcuban, Jr. vs. Sulpicio Lines, Inc., [G. R. No. 148410, January 17,
2005], 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. Citing jurisprudence, he
appeals for compassion and requests that he be merely suspended, or at
the very least, given separation pay for his length of service. The
Supreme Court, however, found 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. (Citing Gonzales vs. NLRC, 355 SCRA
195 [2001]).

“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-à-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. (Citing Flores vs. NLRC, 219 SCRA 350
[1993]). chanrobles virtual law library

“xxx

“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. Unlike other
just causes for dismissal, trust in an employee, once lost, is difficult, if not
impossible, to regain. (Citing Salvador vs. Philippine Mining Service
Corporation, 395 SCRA 729 [2003]). 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.” (San Miguel Corporation
vs. NLRC, 115 SCRA 329 [1982]).

In another case, Central Pangasinan Electric Cooperative, Inc. vs.

Macaraeg, [G. R. No. 145800, January 22, 2003], the teller and cashier
(who were charged and dismissed for unauthorized encashments of
checks) have been employed with the petitioner-electric cooperative for
22 and 19 years of continuous service, respectively, and this is the first
time that either of them has been administratively charged.  Nonetheless,
their dismissal was held justified considering the breach of trust they have
committed. Well to emphasize, the longer an employee stays in the
service of the company, the greater is his responsibility for knowledge
and compliance with the norms of conduct and the code of discipline in
the company. Considering that they have mishandled the funds of the
cooperative and the danger they have posed to its members, their
reinstatement is neither sound in reason nor just in principle.  It is
irreconcilable with trust and confidence that has been irretrievably lost.

In Salvador vs. Philippine Mining Service Corporation, [G. R. No. 148766,

January 22, 2003], petitioner argues that assuming there was evidence to
support the charges against him, his dismissal from service is
unwarranted, harsh and grossly disproportionate to his act, considering
his long years of service with the company.  The Supreme Court,
however, disagreed, thusly:

“To be sure, length of service is taken into consideration in imposing the

penalty to be meted an erring employee.  However, the case at bar
involves dishonesty and pilferage by petitioner which resulted in
respondent’s loss of confidence in him.  Unlike other just causes for
dismissal, trust in an employee, once lost is difficult, if not impossible, to
regain.  Moreover, petitioner was not an ordinary rank-and-file
employee.  He occupied a high position of responsibility. As foreman and
shift boss, he had over-all control of the care, supervision and operations
of respondent’s entire plant.  It cannot be over-emphasized that there is
no substitute for honesty for sensitive positions which call for utmost
trust.  Fairness dictates that respondent should not be allowed to continue
with the employment of petitioner who has breached the confidence
reposed on him. (Citing Galsim vs. Philippine National Bank, 29 SCRA 293
[1969]). As a general rule, employers are allowed wider latitude of
discretion in terminating the employment of managerial employees as
they perform functions which require the employer’s full trust and
confidence. (Citing Gonzales vs. NLRC, 355 SCRA 195 [2001]).
“In the case at bar, respondent has every right to dismiss petitioner, a
managerial employee, for breach of trust and loss of confidence as a
measure of self-preservation against acts patently inimical to its
interests.  Indeed, in cases of this nature, the fact that petitioner has
been employed with the respondent for a long time, if to be considered at
all, should be taken against him, (Citing Flores vs. NLRC, 219 SCRA 350
[1993]). as his act of pilferage reflects a regrettable lack of loyalty which
he should have strengthened, instead of betrayed.”

In Cruz vs. Coca-Cola Bottlers Phils., Inc., [G. R. No. 165586, June 15,
2005], involving the spiriting out of thirty (30) cases of canned soft drinks
loaded on petitioner’s truck without the required documentation, the
Supreme Court took his long years of service as militating against his
claim of good faith.  Petitioner’s length of service (as driver/helper), which
spans almost fifteen (15) years, works against his favor in this case.  The
reason is, it has long been held that the longer an employee stays in the
service of the company, the greater is his responsibility for knowledge
and compliance with the norms of conduct and the code of discipline in
the company.

Rules on termination of managerial employee, different from rank-

and-file.

The rules on termination of managerial employees are different from

those applicable to rank-and-file employees. Obviously, a managerial
employee is tasked to perform key and sensitive functions, and thus he is
bound by more exacting work ethics. (Gonzales vs. NLRC and Pepsi-Cola
Products, Phils., Inc., G. R. No. 131653, March 26, 2001).

This distinction has been underscored by the Supreme Court in recent

decisions involving the application of the doctrine of loss of trust and
confidence. 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, the 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.  (Etcuban, Jr. vs. Sulpicio Lines, Inc., G. R. No.
148410, Jan. 17, 2005).
It is thus important that in termination based on this ground, it must be
shown that the employee is a managerial employee since the term “trust
and confidence” is restricted to said class of employees.  As a managerial
employee, any transgression on her part gives the employer a wider
latitude of discretion in terminating her services. (Deles, Jr. vs. NLRC, G.
R. No. 121348, March 9, 2000).

If what is involved in a case is a rank-and-file employee, the doctrine of

loss of trust and confidence may not be appropriately applied.  For
instance, the task of a janitor, said the Supreme Court, does not fall
squarely under this category. (De los Santos vs. NLRC, G. R. No. 121327,
Dec. 20, 2001).

When rank-and-file employees may be dismissed based on loss of

trust and confidence.

While generally, the doctrine of loss of trust and confidence may only be
invoked against managerial employees, there are instances when the
doctrine may also be successfully invoked against rank-and-file
employees who, by reason of the nature of their positions, are reposed
with trust and confidence.

For example, as held in Coca-Cola Bottlers Philippines, Inc. vs. NLRC,

[172 SCRA 751 (1989)], route salesmen are rank-and-file employees but
they are highly individualistic personnel who roam around selling
products, deal with customers and are entrusted with large assets and
funds and property of the employer.  There is a high degree of trust and
confidence reposed on them, and when such confidence is breached, the
employer may take proper disciplinary action on them.

In holding that the dismissal of the food attendant was valid, the
Supreme Court, in Philippine Pizza, Inc. vs. Bungabong, [G. R. No.
154315, May 9, 2005], ruled that where the employee has access to the
employer’s property in the form of merchandise and articles for sale, the
relationship of the employer and the employee necessarily involves trust
and confidence. Hence, when respondent drank stolen beer from the
dispenser of Pizza Hut-Ermita on Decem¬ber 6, 1997, he gave cause for
his termination and his termination was within the ambit of Article 282 of
the Labor Code.

Examples of cases where rank-and-file employees may not be

dismissed based on loss of trust and confidence.

But in another case involving the same company, Coca-Cola Bottlers,

Phils., Inc. vs. Kapisanan ng Malayang Manggagawa sa Coca-Cola-FFW,
[G. R. No. 148205, Feb. 28, 2005], it was pronounced that the temporary
assignment as route salesman for a period of three (3) days of an
employee who was employed as driver-helper does not automatically
make him an employee on whom his employer reposed trust and
confidence, for breach of which he shall be meted the penalty of
dismissal. The assumption by said employee, for only three days, of some
of the duties of a route salesman on orders of his employer, did not
automatically make him an employee holding a position of trust and
confidence. Despite his additional duties, said employee remained a
driver-helper of the petitioner. Thus, he cannot be dismissed based on
loss of trust and confidence.

In Vallacar Transit, Inc. vs. NLRC, [G. R. No. 109809, July 17, 1995], it
was held that a non-managerial position such as a bus driver does not
hold a position of trust and confidence. That he figured in several
accidents prejudicial to petitioner cannot serve as basis for the loss of
trust and confidence.

73.  What constitutes the ground of commission of crime or

offense?

The commission of a crime or offense by the employee may justify the

termination of his employment, if such crime or offense is committed
against any of the following persons: chanrobles virtual law library

1.  his employer;

2.  any immediate member of his employer’s family; or

3.  his employer’s duly authorized representative. 

74.  What are other analogous causes under Article 282 of the
Labor Code?

Instances considered analogous causes.

1.  The ground of inefficiency.

2.  Violation of safety rules. 
3.  Ban on one’s employees imposed by another company. 
4.  Violation of the company code of conduct or company rules and
regulations. 

AUTHORIZED CAUSES FOR TERMINATION OF EMPLOYMENT.

75.  What are the authorized causes for termination of

employment?

Grounds.- The grounds cited in Articles 283 and 284 are technically called
the authorized causes for termination of employment.  They are: chanrobles
virtual law library
1. installation of labor-saving devices;
2. redundancy;
3. retrenchment;
4. closure or cessation of business; and
5. disease. 

76.  What are the requisites for the ground of installation of

labor-saving devices?

In order to validly invoke this ground, the following requisites must

concur:

1. the introduction of the machinery, equipment or other devices must be

done in good faith;

2.  the purpose for such introduction must be valid such as  to save on
cost, enhance efficiency and other justifiable economic reasons; chanrobles virtual
law library

3.  there  is  no  other  option  available  to  the  employer  than   the
introduction of the machinery, equipment or device and the consequent
termination of employment of those affected thereby;

4. the 30-day notice requirement under Article 283 should be complied

with;

5. there should be reasonable and fair standards or criteria in selecting

who to terminate such as nature of work, status of the employee
(whether casual, temporary or regular), experience, efficiency rating and
seniority, among other considerations; and

6. separation pay under the law or company policy or Collective

Bargaining Agreement or similar contract, when appropriate, must be
paid  to the affected employees. chanrobles virtual law library

Modernization program through introduction of machines.

In the 2004 case of Abapo vs. CA, [G. R. No. 142405, Sept. 30, 2004],
the company (San Miguel Corporation) conducted a viability study of its
business operations and adopted a modernization program. It then
brought into its Mandaue plant high-speed machines to be used in the
manufacture of its beer.  The Supreme Court held that the installation of
labor-saving devices at its Mandaue plant was a proper ground for
terminating employment.

Installation of machines for more economy and efficiency.

In Philippine Sheet Metal Workers Union vs. CIR, [83 Phil. 433], the
termination of employment of the affected employees due to the
introduction of machinery in the manufacture of its products for purposes
of effecting more economy and efficiency, was declared valid. 

Proof of losses, not required.

As earlier mentioned, in installation of labor-saving devices, there is no

need for the employer to show proof of losses or imminent losses.

77.  What are the requisites for the ground of redundancy?

For redundancy to be a valid ground to terminate employment, the

following requisites must be present:

1. written notice served on both the affected employees and the

Department of Labor and Employment at least one (1) month prior to the
intended date of termination;

2.  payment of separation pay equivalent to at least one (1) month pay or
to at least one (1) 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 [such as less preferred
status [e. g., temporary employee]; (b) efficiency; and (c) seniority].

Elimination of undesirables, abusers and worst performers

through redundancy, not an indication of bad faith.

In Dole Philippines, Inc. vs. NLRC, [G. R. No. 120009, Sept. 13, 2001],
the private respondent-employees point to references in petitioner’s
studies of the redundancy program to the elimination of “undesirables,”
“abusers” and “worst performers” as another indicia of petitioner’s bad
faith.  The Supreme Court, however, ruled that it is not too keen on
attaching such a sinister significance to these allusions.  It may be argued
that the elimination of the so-called “undesirables” was merely incidental
to the redundancy program or that past transgressions could have been
part of the criteria in determining who among the redundant employees is
to be dismissed.

Characterization of service as redundant by employer, not subject

to review; exception.

As a general rule, the characterization of the services of the employee

who was terminated for redundancy is an exercise of business judgment
of the employer.  The wisdom or soundness of such characterization or
decision is not subject to discretionary review by the Labor Arbiter or the
NLRC and the Court of Appeals. The only exception is when there is a
showing that the same was done in violation of law or attended with
arbitrary and malicious action.

It is not enough, therefore, 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.

In the 2001 case of Santos vs. CA, Pepsi-Cola Products Phils., Inc., [G. R.
No. 141947, July 5, 2001], respondent Pepsi, based on the fact that its
Metro Manila Sales Operations were not meeting its sales targets, and on
the fact that new positions were subsequently created, wanted to
restructure its organization in order to include more complex positions
that would either absorb or render completely unnecessary the positions
it had previously declared redundant.  The soundness of this business
judgment of Pepsi has been assailed by petitioners, arguing that it is
more logical to implement new procedures in physical distribution, sales
quotas, and other policies aimed at improving the performance of the
division rather than to reduce the number of employees and create new
positions. The Supreme Court, however, said that this argument cannot
be accepted.  While it is true that management may not, under the guise
of invoking its prerogative, ease out employees and defeat their
constitutional right to security of tenure, the same must be respected if
clearly undertaken in good faith and if no arbitrary or malicious action is
shown.

Similarly, in Wiltshire File Co., Inc. vs. NLRC, [G.R. No. 82249, February
7, 1991, 193 SCRA 665], petitioner company effected some changes in its
organization by abolishing the position of Sales Manager and simply
adding the duties previously discharged by it to the duties of the General
Manager to whom the Sales Manager used to report. In that case, it was
held that the characterization of private respondent’s services as no
longer necessary or sustainable and, therefore, properly terminable, was
an exercise of business judgment on the part of petitioner company.
 
But the above rule was not applied in the 2001 case of University of the
Immaculate Concepcion, vs. U.I.C. Teaching and Non-Teaching Personnel
and Employees Union, [G. R. No. 144702, July 31, 2001]. Petitioners do
not claim that the position of school electrician has become useless or
redundant such that it had to be abolished.  That there is need for an
electrician is shown by the fact that his work is being performed by the
student-scholar.  There is no showing that there were two (2) positions
for school electricians, and that in order to achieve a reduction in
personnel, one position for electrician was abolished resulting in one
position for school electrician and the consequent termination of the
employment of the person occupying the position.  Rather, the facts show
that there was only one position for electrician which was occupied by
respondent.  When the time came that the student-trainee became
capable of performing his functions, the latter’s employment was
terminated and the student-trainee took the vacated position.  Clearly
there was here no abolition of position to achieve a reduction in the
number of electricians employed by the UIC. In other words, the student-
trainee merely replaced respondent as school electrician because
petitioners found it to their advantage to let the work be done by the
student for free.

Burden of proof in redundancy rests on the employer.

It is the burden of the employer to prove the factual and legal basis for
the dismissal of its employees on the ground of redundancy.

Evidence of losses, not required.

Just like installation of labor-saving devices, the ground of redundancy

does not require the exhibition of proof of losses or imminent losses.
(Dole Philippines, Inc. vs. NLRC, supra).

Redundancy and retrenchment, distinguished.

Redundancy and retrenchment are not synonymous but distinct and

separate grounds under Article 283.

“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. “Redundancy Program,”
while denominated as such, is more precisely termed “retrenchment” if it
was primarily intended to prevent serious business losses. (Atlantic Gulf
and Pacific Company of Manila, Inc. [AG & P], vs. NLRC, G. R. No.
127516, May 28, 1999).

Abolition of position or department.

The abolition of departments or positions in the company is one of the

recognized management prerogatives. In the absence of proof that the
act of the employer was ill-motivated, it is presumed that it acted in good
faith. (San Miguel Corporation vs. NLRC, G. R. No. 99266, March 2,
1999).

In valid abolition of positions, the Supreme Court cannot erase that

initiative simply to protect the person holding the position. (Cosico, Jr. vs.
NLRC, G. R. No. 118432, May 23, 1997). chanrobles virtual law library

Reorganization through redundancy, valid.

Reorganization as a cost-saving device effected through redundancy is

acknowledged as valid by jurisprudence. An employer is not precluded
from adopting a new policy conducive to a more economical and effective
management. (International Harvester Macleod, Inc. vs. IAC, 149 SCRA
641 [1987]).

Contracting out of abolished position to independent contractors

held valid.

In Serrano vs. NLRC, [G. R. No. 117040, January 27, 2000], the act of
the employer of phasing-out its security section and the hiring of an
independent security agency to perform its task constitutes a legitimate
business decision. Consequently, absent proof that management acted in
a malicious or arbitrary manner, the Supreme Court will not interfere with
the exercise of judgment by an employer.

In Asian Alcohol Corporation vs. NLRC, [G. R. No. 131108, March 25,
1999], the Supreme Court upheld the termination of employment of water
pump tenders and their replacement by independent contractors. It ruled
that an employer’s good faith in implementing a redundancy program is
not necessarily put in doubt by the availment of the services of an
independent contractor to replace the services of the terminated
employees to promote economy and efficiency.

In De Ocampo vs. NLRC, [213 SCRA 652 (1992)], the Supreme Court
upheld the termination of employment of three mechanics in a
transportation company and their replacement by a company rendering
maintenance and repair services.

Indeed, the management of a company cannot be denied the faculty of

promoting efficiency and attaining economy by a study of what units are
essential for its operation. To it belongs the ultimate determination of
whether services should be performed by its personnel or contracted to
outside agencies.  While there should be mutual consultation, eventually
deference is to be made to what management decides. (Serrano vs.
NLRC, supra).

Hiring of casuals after redundancy, held valid.

Private respondent-employees in Dole Philippines, Inc. vs. NLRC, [G. R.

No. 120009, September 13, 2001] submit that the subsequent hiring of
casual employees to replace the dismissed regular employees on the
ground of redundancy is an indication of bad faith.  Petitioner company
does not deny that they hired casual employees after the implementation
of the redundancy program.  Petitioner explains, however, that it has
always hired casuals to augment the company’s manpower requirements
in accordance with the demands of the industry.  Petitioner further asserts
that the number of casuals remained relatively constant after the
implementation of the redundancy program, as shown by the graph
appended as Annex “J” of its supplement to the motion for
reconsideration before the NLRC.  The Court finds the foregoing
explanation sufficient to negate the allegations of bad faith by its former
employees. chanrobles virtual law library

Duplication of work.

Where two or more persons are performing the same work which may be
effectively accomplished by only one, the employer may terminate the
excess personnel and retain only one.

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 that private respondent held prior
to the termination of his services, does not show that his position had not
become redundant.  Indeed, in any well-organized business enterprise, it
would be surprising to find duplication of work and two (2) or more
people doing the work of one person. (Wiltshire File Co., Inc. vs. NLRC,
supra).

 “Last In, First Out” [LIFO] rule.

In the case of Maya Farms Employees Organization vs. NLRC, [G. R. No.
106256, December 28, 1994], involving termination due to redundancy,
one of the issues raised was the validity of application of the “Last In,
First Out [LIFO]” rule embodied in the CBA which states:

“Section 2.  LIFO RULE. - In all cases of lay-off or retrenchment resulting

in termination of employment in the line of work, the Last-In-First-Out
(LIFO) Rule must always be strictly observed.” (Section 2, Article III,
CBA).

In holding that the employer did not violate said rule, the Supreme Court
declared:

“It is not disputed that the LIFO rule applies to termination of

employment in the line of work.  Verily, what is contemplated in the LIFO
rule is that when there are two or more employees occupying the same
position in the company affected by the retrenchment program, the last
one employed will necessarily be the first to go.
“Moreover, the reason why there was no violation of the LIFO rule was
amply explained by public respondent in this wise:

‘xxx. The LIFO rule under the CBA is explicit. It is ordained that in cases
of retrenchment resulting in termination of employment in line of work,
the employee who was employed on the latest date must be the first one
to go. The provision speaks of termination in the line of work. This
contemplates a situation where employees occupying the same position in
the company are to be affected by the retrenchment program. Since there
ought to be a reduction in the number of personnel in such positions, the
length of service of each employee is the determining factor, such that
the employee who has a longer period of employment will be retained.’”

LIFO rule, exception.

In the same case of Maya Farms [supra], the petitioners contended that
the LIFO rule was violated by management in the case of two (2)
employees, the  Asst. Superintendent for packing and Asst.
Superintendent for meat processing, respectively. The union pointed out
that the employee who was retained by management was employed on a
much later date than the other employee, and both were Assistant
Superintendents.

The Supreme Court affirmed the ruling of the NLRC which declared that
despite the LIFO rule, the nature of work and experience were correctly
taken into account by management, thus:

“We cannot sustain the union’s argument.  It is indeed true that Roberta
Cabrera was employed earlier (January 28, 1961) and [sic] Lydia
Bandong (July 9, 1966).  However, it is maintained that in the meat
processing department, there were 3 Asst. Superintendents assigned as
head of the 3 sections thereat. The reason advanced by the company in
retaining Bandong was that as Asst. Superintendent for meat processing,
she could ‘already take care of the operations of the other sections.’ The
nature of work of each assistant superintendent as well as experience
were taken into account by management. Such criteria was not shown to
be whimsical nor capricious.” (Maya Farms Employees Organization vs.
NLRC, G. R. No. 106256, Dec. 28, 1994).

LIFO or FILO rule, no basis in law.

No law mandates the so-called rule of “Last in, First out” [LIFO] or “First
in, Last out” [FILO]. 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. (Asian Alcohol Corporation vs. NLRC,
supra). chanrobles virtual law library
LIFO rule, not controlling, as employer has prerogative to choose
who to terminate.

In the 2000 case of De la Salle University vs. De la Salle University

Employees Association, [G. R. No. 109002, April 12, 2000], the union
proposed the use of the "last-in-first-out" method in case of lay-off,
termination due to retrenchment and transfer of employees.  The union
relied on social justice and equity to support its proposition, and
submitted that the University’s prerogative to select and/or choose the
employees it will hire is limited, either by law or agreement, especially
where the exercise of this prerogative might result in the loss of
employment.  The union further insists that its proposal is “…in keeping
with the avowed State policy ‘(q) To ensure the participation of workers in
decision and policy-making processes affecting their rights, duties and
welfare’ (Art. 211, Labor Code, as amended).”

On the other hand, the University asserted its management prerogative

and countered that “[w]hile it is recognized that this right of employees
and workers to ‘participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law’ has been
enshrined in the Constitution (Article III, [should be Article XIII], Section
3, par. 2), said participation, however, does not automatically entitle the
union to dictate as to how an employer should choose the employees to
be affected by a retrenchment program. The employer still retains the
prerogative to determine the reasonable basis for selecting such
employees.”

The Supreme Court ruled as follows:

“We agree with the voluntary arbitrator that as an exercise of

management prerogative, the University has the right to adopt valid and
equitable grounds as basis for terminating or transferring employees. As
we ruled in the case of Autobus Workers' Union (AWU) and Ricardo
Escanlar vs. National Labor Relations Commission, [291 SCRA 219
(1998)], ‘[a] valid exercise of management prerogative is one which,
among others, covers: work assignment, working methods, time,
supervision of workers, transfer of employees, work supervision, and the
discipline, dismissal and recall of workers. Except as provided for, or
limited by special laws, an employer is free to regulate, according to his
own discretion and judgment, all aspects of employment.’” (emphasis
supplied)

Hobson’s choice.

Hobson’s choice means no choice at all; a choice between accepting what

is offered or having nothing at all.  It refers to the practice of Tobias
Hobson, an English stable-owner in the 17th century, of offering only the
horse nearest the stable door.

This principle was applied in the 2004 case of Asufrin, Jr. vs. San Miguel
Corporation, [G. R. No. 156658, March 10, 2004], where the employees,
even if given the option to retire, be retrenched or dismissed, were made
to understand that they had no choice but to leave the company.  More
bluntly stated, they were forced to swallow the bitter pill of dismissal but
afforded a chance to sweeten their separation from employment. They
either had to voluntarily retire, be retrenched with benefits or be
dismissed without receiving any benefit at all. All that the employees were
offered was a choice on the means or method of terminating their
services but never as to the status of their employment. In short, they
were never asked if they wanted to work for petitioner-company.  chanrobles
virtual law library

78.  What are the requisites for the ground of retrenchment?

Under Article 283, the following are the requisites for a valid
retrenchment which must be proved by clear and convincing evidence:

(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 serves a written notice both to the employees and
to the Department of Labor and Employment at least one (1) month prior
to the intended date of retrenchment;

(3) that the employer pays the retrenched employees separation pay
equivalent to one (1) month pay or at least one-half (1/2) month's 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 and not to defeat or
circumvent the employees' right to security of tenure; and

(5) that the employer uses 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.

Standards to be observed in retrenchment.

The general standards in terms of which the act of an employer in

retrenching or reducing the number of its employees must be appraised
are as follows:
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 bona-fide 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 retrenched or
otherwise laid off. 

Thirdly, retrenchment, because of its consequential nature, must 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.

Lastly, but certainly not the least important, the alleged losses, if already
realized, and the expected imminent losses sought to be forestalled, must
be proved by sufficient and convincing evidence.  The reason for requiring
this quantum of proof is apparent;  any less exacting standard of proof
would render too easy the abuse of this ground for termination of services
of employees. (F. F. Marine Corporation vs. The Honorable Second
Division NLRC, G. R. No. 152039, April 8, 2005; See also Clarion Printing
House, Inc. vs. NLRC, G. R. No. 148372, June 27, 2005). chanrobles virtual law library

Failure to follow fair criteria in selection, effect.

While an employer may be justified in ordering retrenchment because it

actually suffered financial distress, however, its manner of implementing
the scheme of selecting the employees to be retrenched may render the
retrenchment invalid. 

In the case of Philippine Tuberculosis Society, Inc. vs. NLRC, [G. R. No.
115414, Aug. 25, 1998], the Supreme Court invalidated the retrenchment
program for its improper implementation despite proof of financial losses.
Petitioner claims that the retrenchment was based on a number of
criteria, to wit:  (1) whether the positions of the employees are to be
retained or abolished; (2) the qualifications required by the positions to
be retained, modified, or created; and (3)  the attitude, discipline,
efficiency, flexibility, and trainability of the employees.  Petitioner has not
shown, however, that certain employees were selected for retrenchment
because they did not meet these criteria.  It has not explained why said
employees had to be laid off without considering their many years of
service. The fact that these employees had accumulated seniority credits
indicates that they had been retained in the employ of the employer
because of loyal and efficient service.  The burden of proving the contrary
is on petitioner.

In the 2005 case of Ariola vs. Philex Mining Corporation, [G. R. No.
147756, August 9, 2005], while respondent Philex had complied with
some of the requisites for retrenchment, what it failed to do was to
implement its retrenchment program in a just and proper manner.  Its
failure to use a reasonable and fair standard in the computation of the
supervisors’ demerits points is not merely a procedural but a substantive
defect which invalidates petitioners’ dismissal. Here, one of the criteria for
retrenchment in the supervisors’ MOA was held inconsistent with Article
XVIII of the CBA. The system in the supervisors’ MOA for computing
demerits points,  based on the formula provided in the rank-and-file’s
MOA, evaluates the employee’s disciplinary record over a three-year
period, regardless of the penalty involved. This contravenes Article XVIII
of the CBA which provides that offenses punishable by “reprimands and
warnings of separation” will be stricken-off the record every February 1st
of each year.   Since the supervisors’ union did not ratify the MOA, the
MOA cannot prevail over the CBA.  The inconsistency between the
supervisors’ MOA and the CBA is a substantive defect because what the
CBA removes from petitioners’ record the supervisors’ MOA treats as a
factor in evaluating petitioners’ demerits points. Under Article XVIII of the
CBA, petitioners and their co-supervisors will not get demerits points for
sanctions of reprimands and warnings of separation. This is not true
under the supervisors’ MOA.  In short, if the CBA governs instead of the
MOA, petitioners may not fall under those to be retrenched.   Thus, the
use of the MOA instead of the CBA becomes a substantive defect.  chanrobles
virtual law library

Cost reduction measures prior to retrenchment, necessary.

Retrenchment is only a measure of last resort when other less drastic

means have been tried and found to be wanting, inadequate or
insufficient.  Cost reduction measures should first be taken prior to
retrenchment. (Polymart Paper Industries, Inc. vs. NLRC, G. R. No.
118973, Aug. 12, 1998). chanrobles virtual law library

In a 2005 case, it was held that the employer is required to take 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 number 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. (F. F. Marine Corporation vs.
The Honorable Second Division NLRC, G. R. No. 152039, April 8, 2005).
chanrobles virtual law library

In the 2004 case of Emco Plywood Corporation vs. Abelgas, [G. R. No.
148532, April 14, 2004], where the only less drastic measure that the
company undertook was the rotation work scheme: the three-day-work
per employee per week schedule, the Supreme Court noted that it did not
try other measures, such as cost reduction, lesser investment on raw
materials, adjustment of the work routine to avoid the scheduled power
failure, reduction of the bonuses and salaries of both management and
rank-and-file, improvement of manufacturing efficiency, trimming of
marketing and advertising costs, and so on.  The fact that the company
did not resort to other such measures seriously belies its claim that
retrenchment was done in good faith to avoid losses.  chanrobles virtual law library

Meaning of the phrase “retrenchment to prevent losses.”

Article 283 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.  The
Supreme Court, however, has 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 to attack as undue
taking of property for the benefit of another. (Asian Alcohol Corporation
vs. NLRC, G. R. No. 131108, March 25, 1999, 305 SCRA 416). chanrobles virtual law
library

Best evidence of losses - audited financial statements.

The Supreme Court has consistently ruled that financial statements

audited by independent external auditors constitute the normal method of
proof of the profit and loss performance of a company.  (F. F. Marine
Corporation vs. The Hon. Second Division NLRC, supra).

Unless duly audited by independent auditors, the financial statements can

be assailed as self-serving documents. (Danzas Intercontinental, Inc. vs.
Daguman, G. R. No. 154368, April 15, 2005). chanrobles virtual law library

Best evidence of losses in a government-controlled corporation -

financial statements audited by COA. chanrobles virtual law library

In the 2001 case of NDC-Guthrie Plantations, Inc., vs. NLRC, [G. R. No.
110740, August 9, 2001], involving the retrenchment of workers in
government-controlled corporations, the financial statements submitted
as evidence to prove losses were duly audited by the Commission on
Audit (COA).  And yet, the Labor Arbiter and the NLRC rejected them. 
The Supreme Court ruled that in the context of the submitted financial
statements prepared by  COA itemizing and explaining the losses suffered
by petitioner companies, the Court is unable to understand the rationale
behind the NLRC’s challenged judgment.  These financial documents duly
audited by COA constitute the normal and reliable method of proof of the
profit and loss performance of a government-controlled corporation. 
chanrobles virtual law library

Rehabilitation receivership presupposes existence of losses.

In the 2005 case of Clarion Printing House, Inc. vs. NLRC, [G. R. No.
148372, June 27, 2005], it was held that the appointment of a receiver or
management committee by the SEC (now RTC under the Securities
Regulation Code, R. A. No. 8799) presupposes a finding that, inter alia, a
company possesses sufficient property to cover all its debts but “foresees
the impossibility of meeting them when they respectively fall due” and
“there is imminent danger of dissipation, loss, wastage or destruction of
assets of other properties or paralyzation of business operations.”
 
That the SEC appointed an interim receiver for the EYCO Group of
Companies on its petition in light of “factors beyond the control and
anticipation of the management” rendering it unable to meet its obligation
as they fall due, and thus resulting to “complications and problems  . . . to
arise that would impair and affect [its] operations . . .” shows that
Clarion, together with the other member-companies of the EYCO Group of
Companies, was suffering business reverses justifying, among other
things, the retrenchment of its employees. 
 
Evidence of losses in a retrenchment case may be presented for
the first time on appeal with the NLRC.

In the 2003 case of Tanjuan vs. Philippine Postal Savings Bank, Inc., [G.
R. No. 155278, September 16, 2003], it was declared that pursuant to
the policy that technical rules of procedure are not strictly applied in labor
cases, employers may, on cogent grounds, be allowed to present, even on
appeal, evidence of business losses to justify the retrenchment of
workers. However, delay in the submission of evidence should be clearly
explained and should adequately prove the employer’s allegation of the
cause for termination. However, delay in the submission of evidence
should be clearly explained and should adequately prove the employer’s
allegation of the cause for termination. (See also Clarion Printing House,
Inc. vs. NLRC, G. R. No. 148372, June 27, 2005). chanrobles virtual law library

Audited financial statements belatedly filed in the CA, effect.

In the 2005 case of F. F. Marine Corporation vs. The Honorable Second

Division NLRC, [G. R. No. 152039, April 8, 2005], petitioners seek to
justify the retrenchment on the ground of serious business losses brought
about by the Asian economic crisis.  To prove their claim, petitioners
adduced before the Labor Arbiter the 1994 and 1995 Financial
Statements. Said Financial Statements, however, were prepared only by
petitioners’ accountant and approved by the manager. They were not
audited by an independent external auditor. The financial statements
show that in 1994 and 1995, petitioner corporation earned an income of
only P77,609.79 and P155,339.96, respectively. In contrast, the 1996 and
1997 Financial Statements showed losses of P18,005,918.08, and
P21,316,072.89, respectively.
 
It was only before the Court of Appeals that the financial statements for
the years 1996 and 1997 as audited by an independent external auditor
were introduced. They were not presented before the Labor Arbiter and
the NLRC although they were executed on 30 March 1998, several months
prior to the filing of the complaint for illegal dismissal on 12 January
1999. The Supreme Court ruled:

“Petitioners’ failure to adduce financial statements duly audited by

independent external auditor casts doubt on their claim of losses for
financial statements are easy prey to manipulation and concoction. This
Court has ruled that financial statements audited by independent external
auditors constitute the normal method of proof of the profit and loss
performance of a company. Even this, however, is not a hard and fast
rule as the norm does not compel this Court to accept the contents of the
said documents blindly and without thinking. A careful examination of
financial statements may be resorted to especially if on their face relevant
facts appear to have been ignored that will warrant a contrary
conclusion.”

Evidence of losses may be allowed to be presented for the first

time on appeal with NLRC but not with CA.

In Cañete vs. NLRC, [320 Phil. 313 (1995)] as in Tanjuan vs. Philippine
Postal Savings Bank, Inc., [G. R. No. 155278, September 16, 2003
(supra)], the Supreme Court allowed the presentation of documentary
evidence for the first time on appeal with the NLRC.  But in F. F. Marine
[supra], the Supreme Court did not allow the presentation of evidence of
losses for the first time before the Court of Appeals.  Distinguishing the
Cañete from the F. F. Marine cases, the Supreme Court ruled in the latter
case: chanrobles virtual law library

“Petitioners cite Cañete vs. NLRC, [320 Phil. 313 (1995)] where the Court
upheld the NLRC’s consideration of documents submitted to it by the
respondent therein for the first time on appeal.  The holding is clearly not
apropos since the documents were presented to the NLRC, unlike in this
case where the new financial statements were submitted for the first time
before the Court of Appeals.  That was why this Court in Cañete
ratiocinated that the petitioner therein had the opportunity to rebut the
truth of the additional documents. The same cannot be said of the private
respondent in this case.”

Retrenchment effected long after business losses.

In Taggat Industries, Inc. vs. NLRC, [G. R. No. 120971, March 10, 1999],
while sufficient evidence of the company’s business losses was submitted
by the petitioner company, per its financial statements for the period
1986 to December 31, 1987, the same is belied by the fact that the
private respondent-employees remained employed by petitioner company
until October 15, 1991, more than four (4) years since the company
declared losses in 1987.  Indeed, if there was any truth that the company
was reeling from business reverses, it should have retrenched the private
respondent-employees as soon as the business losses became evident. 
chanrobles virtual law library

Re-hiring of retrenched employees, effect.

In Atlantic Gulf and Pacific Company of Manila, Inc. [AG & P], vs. NLRC,
[G. R. No. 127516, May 28, 1999], it was contended that the “redundancy
program” was actually a union-busting scheme of management, aimed at
removing union officers who had declared a strike. This contention,
however, cannot stand in the fact of evidence of substantial losses
suffered by the company. Moreover, while it is true that the company re-
hired 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.  chanrobles virtual law library

79.  What are the requisites for the ground of closure or cessation
of business operations?

The requisites for the valid invocation of this statutory ground are as
follows:

1.  the decision to close or cease operations should be made in good

faith;

2.  the purpose should not be to circumvent the provisions of Title I of

Book Six of the Labor Code;

[NOTE:  If the ground is serious business losses or financial

reverses, there  should be clear proof thereof since no separation
pay to the employees is required to be paid under the law, if such
is the cause invoked.  If not due to serious business losses, this
requisite becomes relevant.]
3. there is no other option available to the employer except to close or
cease operations;

4.  the notice requirement under Article 283 should be complied with,
whether or not the closure or cessation of operations is due to serious
business losses or financial reverses; and

5. separation pay under the law (when not due to serious business losses)
or company policy or Collective Bargaining Agreement or similar contract,
when appropriate, must be paid  to the affected employees.

Employer may close its business whether it is suffering from business

losses or not; court cannot order employer to continue its business.

A careful examination of Article 283 indicates that closure or cessation of

business operation as a valid and authorized ground of terminating
employment is not limited to those resulting from business losses or
reverses.  Said provision, in fact, provides for the payment of separation
pay to employees terminated because of closure of business not due to
losses, thus implying that termination of employees other than closure of
business due to losses may be valid. (J.A.T. General Services vs. NLRC,
G. R. No. 148340, Jan. 26, 2004).

In Industrial Timber Corporation vs. NLRC, [339 Phil. 395, 405 (1997)],
the Supreme Court held more emphatically that: chanrobles virtual law library

“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
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.”

Principle of closure under Article 283 applies in cases of both

complete and partial cessation of business operation.

Although Article 283 uses the phrase “closure or cessation of operation of

an establishment or undertaking,” the Supreme Court ruled in Coca-Cola
Bottlers [Phils.], Inc. vs. NLRC, [G. R. No. 125887, March 11, 1998], that
said statutory provision applies to closure or cessation of an
establishment or undertaking, whether it be a complete or partial
cessation or closure of business operation.

In Dangan vs. NLRC, [127 SCRA 706], the Supreme 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, said the Supreme Court, 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.  chanrobles virtual law library

Closure of outlets, branches, departments or sections.

In the 2004 case of Cama vs. Joni’s Food Services, Inc., [G. R. No.
153021, March 10, 2004], the Supreme Court ruled as valid the closure of
outlets or branches, not necessarily the entire business operations. 
Moreover, it held that since the closure was due to serious losses duly
proven by clear evidence, the employees affected were not entitled to
separation pay.  chanrobles virtual law library

It is worth noting in this regard that the employer’s prerogative to close

or abolish a department or section of his establishment for economic
reasons such as to minimize expenses and reduce capitalization is as
much recognized as management’s prerogative to close the entire
establishment and cease operations due to adverse economic conditions.
(Danzas Intercontinental, Inc. vs. Daguman, G. R. No. 154368, April 15,
2005).

Relocation of business amounts to cessation of operations.

In a 2000 case, Cheniver Deco Print Technics Corporation vs. NLRC, [G.
R. No. 122876, February 17, 2000], petitioner contends that the transfer
of its business from its site in Makati to Sto. Tomas, Batangas is neither a
closure nor retrenchment, hence, separation pay should not be awarded
to the private respondents. The Supreme Court considered this contention
without merit.  It ruled that 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, thus: chanrobles virtual law library

“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.” (Citing Coca-Cola Bottlers [Phils.] Inc. vs.
NLRC, 194 SCRA 592, 599 [1991]). chanrobles virtual law library

Burden of proof in case closure is due to losses.

It is well settled that the burden of proving that the closure is bona-fide
falls upon the employer. (J.A.T. General Services vs. NLRC, G. R. No.
148340, Jan. 26, 2004).

Audited financial statements necessary in closure due to losses.

The condition of business losses is normally shown by financial documents

duly audited by independent auditors. According to the 2005 case of
Danzas Intercontinental, Inc. vs. Daguman, [G. R. No. 154368, April 15,
2005], the same evidence is generally required when the termination of
employees is by reason of closure of the establishment or a division
thereof for economic reasons, although the more overriding consideration
is, of course, good faith. The employer must prove that the cessation of
or withdrawal from business operations was bona-fide in character and
not impelled by a motive to defeat or circumvent the tenurial rights of
employees.  Parenthetically, if the business losses that justify the closure
of the establishment are duly proved, the right of affected employees to
separation pay is lost for obvious reasons. Otherwise, the employer
closing his business is obligated to pay his employees their separation
pay.  chanrobles virtual law library

Evidence of losses in a closure case should not be presented for

the first time on appeal with the Court of Appeals or Supreme
Court.

In the 2005 case of Me-Shurn Corporation vs. Me-Shurn Workers Union -

FSM, [G. R. No. 156292, January 11, 2005] and Danzas Intercontinental
[supra], the High Tribunal held that as the employer-petitioners have the
burden of proving the existence of an authorized cause, they should have
presented the company’s audited financial statements before the Labor
Arbiter or, under justifiable circumstances, even on appeal with the NLRC,
who are in the position to evaluate evidence.  That they failed to do so
and only presented these documents to the Court of Appeals on certiorari
is lamentable considering that the admission of evidence is outside the
sphere of the appellate court’s certiorari jurisdiction. Matters regarding
the financial condition of a company - those that justify the closing of its
business and show the losses in its operations - are questions of fact that
must be proven below. 

Closure due to CARP.

Article 283 does not contemplate a situation where the closure of the
business establishment is forced upon the employer and ultimately for the
benefit of the employees as in the case of closure of the employer’s
business because a large portion of its estate was acquired by the
Department of Agrarian Reform pursuant to the Comprehensive Agrarian
Reform Program under Republic Act No. 6657. The Supreme Court thus
said in National Federation of Labor vs. NLRC, [G. R. No. 127718, March
2, 2000]: “(S)ince the closure was due to the act of the government to
benefit the petitioners as members of the Patalon Estate Agrarian Reform
Association by making them agrarian lot beneficiaries of said estate, the
petitioners are not entitled to separation pay. The termination of their
employment was not caused by the private respondents. The blame, if
any, for the termination of petitioners’ employment can even be laid upon
the petitioner-employees themselves inasmuch as they formed
themselves into a cooperative, PEARA, ultimately to take over, as
agrarian lot beneficiaries, private respondents’ landed estate pursuant to
R. A. 6657. The resulting closure of the business establishment, Patalon
Coconut Estate, when it was placed under CARP, occurred through no
fault of the private respondents.”  chanrobles virtual law library

In 2005, the Supreme Court had occasion to re-affirm the ruling in the
above 2000 case of National Federation of Labor [supra], in the case of
Manaban vs.  Sarphil Corporation, [G. R. No. 150915, April 11, 2005].
Quoting the Court of Appeals’ decision affirming the ruling of the NLRC,
the Supreme Court said:

“Anent the legality of the Labor Arbiter’s award of separation pay in favor
of petitioners, respondent NLRC correctly ruled that the termination of
employer-employee relationship as a result of the implementation of the
Comprehensive Agrarian Reform Law does not make out a case for illegal
dismissal or termination due to authorized cause under Article 283 of the
Labor Code as to warrant the payment of separation pay.  The closure of
business operations contemplated under Article 283 refers to a voluntary
act or decision on the part of the employer, not one forced upon it, as in
this case, by an act of the Law or State to benefit petitioners by making
them agrarian lot beneficiaries.  Thus, We quote with approval the
following disquisitions of public respondent which We have found to be
substantiated by the evidence, viz:

‘x x x The resulting severance of employment relation between the parties

does not make out a case of illegal dismissal nor of termination due to
cessation of business operation or undertaking under Article 283 of the
Labor Code warranting payment of separation pay, primarily because
dismissal presupposes a unilateral act  by the employer in terminating the
employment of its workers.  The resulting severance of  employment
relationship between the parties came about INVOLUNTARILY.  If the
landowners ceased their operation, it was not because they wanted to.
Rather, it was something forced upon them by an act of law or the State. 
It would be the height of injustice and inequity if the workers who
benefited from the takeover of the lands and becoming new owners in the
process would still be allowed to exact payment from their former
employer-landowner in the form of separation pay benefit.  Such would
be tantamount to dealing a  DOUBLE WHAMMY against the landowner who
was forced to relinquish or part with the ownership of his land by an act
of the State.’ (Emphasis supplied)

“The ruling in the parallel case of National Federation of Labor vs. NLRC,
is apropos.  There, the Supreme Court categorically held that former
employees who became beneficiaries of the Comprehensive Agrarian
Reform Program are not entitled to separation  pay because the closure of
the business of their employer is compelled by law and not by the
decision of its management. xxx.” chanrobles virtual law library

Retrenchment and closure of business, distinguished.

The 2004 case of J.A.T. General Services vs. NLRC, [G. R. No. 148340,
January 26, 2004] discusses in clear terms the distinction between
retrenchment and closure of business.  In this case, while the Court of
Appeals defined the issue to be the validity of dismissal due to alleged
closure of business, it cited jurisprudence relating to retrenchment to
support its resolution and conclusion. While the two are often used
interchangeably and are interrelated, they are actually two separate and
independent authorized causes for termination of employment.
Termination of an employment may be predicated on one without need of
resorting to the other. chanrobles virtual law library

Closure of business, on one hand, is the reversal of fortune of the

employer whereby there is a complete cessation of business operations
and/or an actual locking-up of the doors of establishment, usually due to
financial losses.  Closure of business as an authorized cause for
termination of employment aims to prevent further financial drain upon
an employer who cannot pay anymore his employees since business has
already stopped. On the other hand, retrenchment is reduction of
personnel usually due to poor financial returns so as to cut down on costs
of operations in terms of salaries and wages to prevent bankruptcy of the
company. It is sometimes also referred to as down-sizing. Retrenchment
is an authorized cause for termination of employment which the law
accords an employer who is not making good in its operations in order to
cut back on expenses for salaries and wages by laying off some
employees.  The purpose of retrenchment is to save a financially ailing
business establishment from eventually collapsing. chanrobles virtual law library

The foregoing distinction was reiterated in the 2005 case of Alabang

Country Club, Inc. vs. NLRC, [G. R. No. 157611, August 9, 2005].  In this
case, the ground cited by petitioner in terminating its employees working
in its Food and Beverage Department (F & B Department) was
retrenchment.  The Supreme Court, however, found closure as the most
appropriate ground.  The reason is that when petitioner decided to cease
operating its F & B Department and open the same to a concessionaire, it
did not reduce the number of personnel assigned thereat.  It terminated
the employment of all personnel assigned at the department.

80. Notices required under Article 283, mandatory.

Article 283 requires that separate 30-day prior notices should be sent to
the affected employees and to the Department of Labor and
Employment.  This requirement is mandatory. (Fuentes vs. NLRC, 266
SCRA 24, 32, Jan. 2, 1997; Pulp and Paper, Inc. vs. NLRC, G. R. No.
116593, Sept. 24, 1997).

While an employer may have a valid ground for implementing a

retrenchment program, it is not excused from complying with the required
written notice served both to the employee concerned and the DOLE at
least one month prior to the intended date of retrenchment.  (PT & T vs.
NLRC, G. R. No. 147002, April 15, 2005).

Rationale for the notice requirement.

The notice requirement is a substitute for the prior-clearance requirement

in case of termination of employment.  (Explanatory Note, Cabinet Bill No.
45 which was later enacted into law as Batas Pambansa Bilang 130).

1.  Notice to DOLE; rationale.

The notice to the Department of Labor and Employment (DOLE) is

necessary to enable it to ascertain the verity and truth of the cause of
termination. (Emco Plywood Corporation vs. Abelgas, G. R. No. 148532,
April 14, 2004).
 
2.  Notice to the employee; rationale.

The notice to the employee is required to enable him to contest the

factual bases of the management decision or good faith of the termination
before the DOLE.  In addition, this notice requirement gives employees
some time to prepare for the eventual loss of their jobs and their
corresponding income. (PT & T vs. NLRC, G. R. No. 147002, April 15,
2005

Absence of notice does not render the dismissal ineffectual,

defective or illegal.

In Agabon, vs. NLRC, [G. R. No. 158693 November 17, 2004], the
Supreme Court ruled that dismissal for authorized cause but without
complying with the notice requirement does not make the dismissal illegal
or ineffectual.  The dismissal remains valid and legal but the employer is
made to pay an indemnity in the form of nominal damages for non-
compliance with the procedural requirements of due process.
 
Failure to observe 30-day prior notice rule, effect per Agabon
case. 

In the 2005 case of Cajucom VII vs. TPI Philippine Cement Corporation,
[G. R. No. 149090, February 11, 2005], it was ruled that a notice served
on the employee to be retrenched and to the DOLE three (3) days short of
the 30 days required by law is procedurally defective.  However, while
this infirmity cannot be cured, it should not invalidate the dismissal.
Consequently, the employer should be held liable in the amount of
P20,000.00 as nominal damages for non-compliance with the procedural
requirements of due process.   

In another 2005 case, Philippine Telegraph & Telephone Corporation vs.

NLRC, [G. R. No. 147002, April 15, 2005], the Supreme Court held that
while the employer’s failure to comply with the one-month notice
requirement prior to retrenchment does not render the termination illegal,
it, however, renders the same defective, entitling the dismissed employee
to payment of indemnity in the form of nominal damages.  Based on
prevailing jurisprudence, the amount of indemnity is pegged at
P30,000.00. 

Notice should be served to employees themselves.

A notice sent to the foremen, the section heads, the supervisors and the
department heads instructing them to retrench some of the workers
based on certain guidelines is not the required notice contemplated by
law. The written notice should be served on the employees themselves,
not on their supervisors. (Emco Plywood Corporation vs. Abelgas, supra).
chanrobles virtual law library

Notice to DOLE should state correct number of workers to be

terminated.

The notice required to be sent to the DOLE should state clearly the correct
number of workers to be terminated based on the grounds cited in Article
283.  Such notice is defective if it stated that the company would
terminate the services of 104 of its workers but had actually dismissed
250. (Ibid.).

Notice to DOLE need not be complied with in case of voluntary

personnel reduction program.

Well-settled is the rule that notice to the Department of Labor and

Employment need not be complied with if the termination of employment
under Article 283 was made voluntarily by the employees pursuant to a
valid personnel reduction program.
In International Hardware, Inc. vs. NLRC, [176 SCRA 256 (1989)], it was
ruled that if an employee consented to the retrenchment or voluntarily
applied for retrenchment with the employer due to the installation of
labor-saving devices, redundancy, closure or cessation of operation or to
prevent financial losses to the business of the employer, the required
previous notice to the Department of Labor and Employment is not
necessary as the employee thereby acknowledged the existence of a valid
cause for termination of his employment.  chanrobles virtual law library

In a subsequent 2001 case, the lack of notice to the DOLE, according to

the Supreme Court in Dole Philippines, Inc., vs. NLRC, [G. R. No. 120009,
September 13, 2001], does not render the voluntary redundancy program
void.  Petitioner accurately invoked the case of International Hardware
[supra]. Here, most of the private respondents even filled up application
forms to be considered for the redundancy program and thus
acknowledged the existence that their services were redundant. chanrobles virtual
law library

In another 2001 case, Santos vs. CA, Pepsi-Cola Products Phils., Inc., [G.
R. No. 141947, July 5, 2001], the same ruling in International Hardware
[supra] that the mandated one (1) month notice prior to termination
given to the worker and the DOLE is rendered unnecessary by the consent
of the worker himself, was cited. Petitioners assail the voluntariness of
their consent by stating that had they known of PEPSI’s bad faith, they
would not have agreed to their termination, nor would they have signed
the corresponding releases and quitclaims.  Having established private
respondent’s good faith in undertaking the assailed redundancy program,
there is no need to rule on this contention.

Advance payment of one month salary, not a substitute for written

notice requirement.

The law requires that the notice to the employee who will be terminated
for authorized causes and notice to the Department of Labor and
Employment (DOLE) must be served at least one (1) month before the
intended date of effectivity thereof. 

May the employer validly pay in advance, upon the service of notice to
the employee and to the DOLE, the salary of the employee equivalent to
said one (1) month period but without requiring him to report for work
within said period? 

This question may be answered in the affirmative considering that the law
does not preclude such procedure and the same is more beneficial to the
employee who will then have enough, unimpeded time to look for a new
job during the one (1) month period he is no longer required to work by
his employer.  However, it must be stressed that the service of separate
notices to the employees affected and to the Department of Labor and
Employment at least thirty (30) days from the effectivity of the
termination for authorized cause should still be duly complied with.

In other words, the advance payment of the salary for one month does
not dispense with the requirement of the 1-month prior notice. Such
advance payment cannot be treated as a replacement or substitute for
the notices required under the law. The employer paying the advance
salaries should still comply with said notice requirement one month prior
to the intended effectivity of the termination.

The case in point is the 2000 en banc case of Serrano vs. NLRC, [G. R.
No. 117040, May 4, 2000], where the Supreme Court, in its Resolution on
the Motion for Reconsideration, had the occasion to reiterate the rule that
nothing in Article 283 of the Labor Code gives the employer the option to
substitute the required prior written notice with payment of thirty (30)
days salary.  It is not for the employer to make substitutions for a right
that a worker is legally entitled to.

Indeed, continues the High Court, 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, 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.

One-month notice requirement, applies to both permanent and

temporary-lay off.

It must be stressed that compliance with the one-month notice rule is

mandatory regardless of whether the retrenchment is temporary or
permanent.  This is so because Article 283 itself does not speak of
temporary or permanent retrenchment; hence, there is no need to qualify
the term.  Ubi lex non distinguit nec nos distinguere debemus (when the
law does not distinguish, we must not distinguish). chanrobles virtual law library

This is the conclusion of the Supreme Court in the 2005 case of Philippine
Telegraph & Telephone Corporation vs. NLRC, [G. R. No. 147002, April
15, 2005], which involves the  temporary retrenchment of some
employees dubbed as Temporary Staff Reduction Program (TSRP) lasting
for not more than five and a half (5½) months, to commence from
September 1, 1998 to February 15, 1999.

The petitioners insist that the one-month notice requirement does not
apply in this situation, as the retrenchment involved was merely
temporary and not permanent.  They aver that this has been recognized
by the Supreme Court, and they quote Sebuguero vs. NLRC, [G.R. No.
115394, September 27, 1995, 248 SCRA 532], in this manner:

“Article 283 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.”  chanrobles virtual law library

The petitioners’ adherence to the above pronouncement of the Court is

misplaced.  The particular issue involved in the said decision was the
duration of the period of temporary lay-off, and not the compliance with
the one-month notice requirement. 

Nowhere can it be found in Sebuguero that the one-month notice may be

dispensed with.  On the contrary, the Supreme Court, speaking through
Chief Justice Hilario G. Davide, Jr., emphasized the mandatory nature of
the said notice.

Further, in the case at bar, the memorandum of Del Rosario, the vice-
president of the COG, to respondents Bayao and Castillo informing the
latter that they were included in the TSRP to be implemented effective
September 1, 1998 was dated August 21, 1998.  The said memorandum
was received by Castillo on August 24, 1998 and Bayao on August 26,
1998.  The respondents had barely two weeks’ notice of the intended
retrenchment program.  Clearly then, the one-month notice rule was not
complied with.  At the same time, the petitioners never showed that any
notice of the retrenchment was sent to the DOLE.

81. Hearing is not required in termination for authorized causes

under Article 283 (and Article 284).

Hearing in termination of employment for authorized causes need not be

conducted by the employer. The rationale behind this rule is that where
the ground for the dismissal or termination of services does not relate to
a blameworthy act or omission on the part of the employee, there is no
need for an investigation or hearing to be conducted by the employer who
does not, to begin with, allege any malfeasance or nonfeasance 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 the
company to hold a hearing at which private respondent would have had a
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. 

82. Separation pay under Article 283.

Amount of separation pay depends on the ground cited.

For purposes of reckoning the appropriate separation pay to be paid to

terminated employees under Article 283, the grounds of installation of
labor-saving devices and redundancy are grouped together; while the
other two grounds of retrenchment and closure or cessation of operations
not due to serious business losses or financial reverses are also
separately grouped as one. 

Separation pay in cases of installation of labor-saving devices or

redundancy.

An employee is entitled to termination pay equivalent to at least his one

(1) month pay or at least one (1) month pay for every year of service,
whichever is higher, a fraction of at least six (6) months being considered
as one (1) whole year, in case his termination is due to the installation of
labor-saving devices or redundancy. (See also Section 9 [a], Rule I, Book
VI, Rules to Implement the Labor Code).

Separation pay in cases of retrenchment or closure not due to

serious business losses or disease.

The employee is entitled to separation pay equivalent to one (1) month

pay or at least one-half (½) month pay for every year of service,
whichever is higher, a fraction of at least six (6) months being considered
as one (1) whole year where the termination of employment is due to
either:

a. retrenchment to prevent losses; or

b. closure or cessation of operations of establishment or undertaking not

due to serious business losses or financial reverses; or  chanrobles virtual law library

c. disease under Article 284. (See also Section 9 [b], Rule I, Book VI,
Rules to Implement the Labor Code). chanrobles virtual law library

“One month” pay, the minimum amount of separation pay under

Article 283.

(1) “One month pay” is the minimum amount an employee terminated

under Article 283 should receive, irrespective of the period of service he
has rendered for the employer since the law itself does not impose any
such minimum period of service as requisite for entitlement thereto. 
By way of illustration, in Clarion Printing House, Inc. vs. NLRC, [G. R. No.
148372, June 27, 2005], the respondent-employee who had rendered
service from April 21, 1997 to October 22, 1997 was held to be entitled to
a separation pay equivalent to one (1) month salary.

(2) The employee should receive either “one month pay for every year of
service” or “one-half (½) month pay for every year of service” depending
on the ground invoked for the termination. Thus, the former will be
applied if the ground is installation of labor-saving device or redundancy;
while the latter will be paid if the ground is retrenchment or closure or
cessation of business operations not due to serious business losses or
financial reverses;

(3)  In case the employee has served for one (1) year, he shall be entitled
to at least one month pay, irrespective of the ground invoked for the
termination under Article 283.

(4)  In case the employee has served for at least two (2) years:

a.if the ground invoked is installation of labor-saving device or

redundancy, he shall be entitled to a separation pay equivalent to two (2)
months pay (1 month pay x 2 years); or chanrobles virtual law library

b. if the ground invoked is retrenchment or closure or cessation of

business operations not due to serious business losses or financial
reverses, he shall be entitled to a separation pay equivalent to one (1)
month pay (½ month pay x 2 years).

It must be noted that the phrase “a fraction of at least six (6) months
shall be considered one (1) whole year” found in Article 283 refers only to
the computation or reckoning of the separation pay of affected employees
who have served for more than one (1) year. It does not pertain to
employees whose service is less than one (1) year as the law, as earlier
posited, grants the minimum amount of separation pay of one (1) month
pay, irrespective of the length of service of the affected employee.
Indeed, it is absurd to hold that affected employees who have served for
less than six (6) months are not entitled to the minimum separation pay
of one (1) month prescribed thereunder. When the law does not
distinguish, no distinction should be made.

By way of illustration, if an employee has served for 1 year and 5 months,

his period of service shall only be considered one (1) year.  If he has
served for 1 year and 6 months, his period of service shall be deemed at
least two (2) years for purposes of computing his separation pay.

Closure or cessation of operations; requisite for entitlement to

separation pay.
In the leading case of North Davao Mining Corporation vs. NLRC, [G. R.
No. 112546, March 13, 1996], the Supreme Court en banc categorically
declared that when the closure or cessation of operations is due to serious
business losses or financial reverses, the employer is not liable to pay any
separation pay.  Payment of separation pay under Article 283 is justified
only if the “closure or cessation of operations” is not due to serious
business losses or financial reverses.  Indeed, one cannot squeeze blood
out of a dry stone.  Nor water out of parched land. 

This ruling was reiterated in the 2004 case of Cama vs. Joni’s Food
Services, Inc., [G. R. No. 153021, March 10, 2004], where it was
pronounced that since the closure was due to serious losses duly proven
by clear evidence, the employees affected were not entitled to separation
pay. In this case, the Supreme Court, to determine the veracity of the
claim of the company that it has suffered extreme losses, scrutinized the
balance sheets and income statements by using such basic accounting
tools as the working capital ratio, debt-equity ratio, gross profit ratio and
net profit (loss) ratio.  Accordingly, it concluded that indeed, the company
was suffering from serious losses and, therefore, the employer is not
obligated to pay separation benefits.

Separation pay not subject to deduction for attorney’s fees or

negotiation fees.

In a 2004 case, it was held that the separation pay mandated to be paid
under Article 283 cannot be reduced by any deductions for attorney’s fees
that may have accrued as a result of the renegotiations for a new CBA.
The Labor Code prohibits such arrangement under Article 222 of the
Labor Code. The obligation to pay attorney’s fees belongs to the union
and cannot be shunted to the individual workers as their direct
responsibility. The law has made clear that any agreement to the contrary
shall be null and void ab initio. (Emco Plywood Corporation vs. Abelgas,
G. R. No. 148532, April 14, 2004).

Quitclaim, not a bar to question validity of termination under

Article 283.

Receipt of separation pay and execution of quitclaims by employees

terminated under Article 283 do not bar them from instituting an action
for illegal dismissal. (Bogo-Medellin Sugarcane Planters Association, Inc.
vs. NLRC, G. R. No. 97846, Sept. 25, 1998).

In the 2004 case of Emco Plywood Corporation vs. Abelgas, [G. R. No.
148532, April 14, 2004], and in the earlier cases of Trendline Employees
Association-Southern Philippines Federation of Labor (TEA-SPFL) vs.
NLRC, [338 Phil. 681, May 5, 1997] and Philippine Carpet Employees’
Association vs. Philippine Carpet Manufacturing Corporation, [340 SCRA
383, 394, September 14, 2000], where the retrenchments were found to
be illegal as the employers had failed to prove that they were actually
suffering from poor financial conditions, the quitclaims were deemed
illegal as the employees’ consent had been vitiated by mistake or fraud.

The same holding was made by the Supreme Court in the 2005 case of F.
F. Marine Corporation vs. The Honorable Second Division NLRC, [G. R. No.
152039, April 8, 2005]. Considering that the ground for retrenchment
availed of by petitioners was not sufficiently and convincingly established,
the retrenchment was declared illegal and of no effect. The quitclaims
executed by retrenched employees in favor of petitioners were, therefore,
not voluntarily entered into by them.  Their consent was similarly vitiated
by mistake or fraud. The law looks with disfavor upon quitclaims and
releases by employees pressured into signing by unscrupulous employers
minded to evade legal responsibilities.  As a rule, deeds of release or
quitclaim cannot bar employees from demanding benefits to which they
are legally entitled or from contesting the legality of their dismissal. The
acceptance of those benefits would not amount to estoppel. The amounts
already received by the retrenched employees as consideration for signing
the quitclaims should, however, be deducted from their respective
monetary awards.

83.  What are the legal principles that may be invoked in cases of
sale, transfer or spin-off of business?

• Change of ownership of business, not an authorized cause to terminate

employment.

• Liability of buyer or transferee of business in good faith - Not obligated

to absorb employees except when this is specifically stipulated. chanrobles virtual
law library

• Sale or transfer of business in bad faith - Liable to the employees.

• Generous termination pay package indicates good faith.

• Appointment of same directors and employees, not indicative of bad

faith.

• New owner is not assignee of CBA in sale in good faith.

• Transfer of business due to death - obligations of deceased not

enforceable against the transferee. Thus, claims for unpaid benefits
should be filed in the intestate proceedings involving the estate of the
deceased in accordance with Section 5, Rule 86 of the Rules of Court.
(Martinez vs. NLRC, et al., G. R. No. 117495, May 29, 1997, 272 SCRA
793).
84.  What is the legal consequence of merger?

In merger, the employees of the merged companies or entities are

deemed absorbed by the new company.  The obligation of the new
company involves not only to absorb the workers of the dissolved
companies but also to include the length of service earned by the
absorbed employees with their former employers as well.

85.  What are the requisites for the ground of disease?

The following requisites must be complied with before termination of

employment due to disease may be justified:

1.  the employee is suffering from a disease;

2.  his continued employment is either:

a.  prohibited by law; or

b.  prejudicial to his health; or

c.  prejudicial to the health of his co-employees;

3.  there is a certification by a competent public health authority that the

disease is of such nature or at such stage that it cannot be cured within a
period of six (6) months even with proper medical treatment;

4.  notice of termination based on this ground should be served to the

employee; and

6.separation pay shall be paid to him in the amount 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.

•Burden of proof rests on the employer.

•Company physician is not a “competent public health authority.”

•Medical certificate issued by company doctor is not sufficient.

Medical certificate issued by company doctor, not acceptable.

A medical certificate issued by a company’s own physician is not an

acceptable certificate for purposes of terminating an employment based
on Article 284, it having been issued not by a “competent public health
authority,” the person referred to in the law. (Cebu Royal Plant [San
Miguel Corporation] vs. Hon. Deputy Minister of Labor, G. R. No. 58639,
Aug. 12, 1987, 153 SCRA 38 [1987]).

“Competent public health authority” refers to a government doctor whose

medical specialization pertains to the disease being suffered by the
employee. For instance, an employee who is sick of tuberculosis should
consult a government-employed pulmonologist who is competent to make
an opinion thereon.  If the employee has cardiac symptoms, the
competent physician in this case would be a cardiologist. chanrobles virtual law library

Medical certificate, an indispensable requisite.

In the absence of the required certification by a competent public health

authority, the Supreme Court has consistently ruled against the validity of
the employee’s dismissal. (Cruz vs. NLRC, G. R. No. 116384, Feb. 7,
2000).

In the 2003 case of Sy vs. CA, [G. R. No. 142293, February 27, 2003],
the High Court reiterated its earlier ruling in Triple Eight Integrated
Services, Inc. vs. NLRC, [299 SCRA 608, 614 1998], that the requirement
for a medical certificate under Article 284 cannot be dispensed with;
otherwise, it would sanction the unilateral and arbitrary determination by
the employer of the gravity or extent of the employee’s illness and thus
defeat the public policy in the protection of labor. chanrobles virtual law library

In the 2001 case of Cathay Pacific Airways, Ltd. vs. NLRC, [G. R. No.
141702-03, August 2, 2001], the dismissal of the employee based on a
finding that she was suffering from asthma was declared illegal because
of the absence of a certification by a competent public health authority
that the disease is of such nature or at such a stage that it cannot be
cured within a period of six (6) months even with proper medical
treatment, a requirement under Section 8, Rule I, Book VI, of the Rules to
Implement the Labor Code. Here, the employee was dismissed based only
on the recommendation of its company doctors who concluded that she
was afflicted with asthma.  It did not likewise show proof that the
employee’s asthma could not be cured in six (6) months even with proper
medical treatment.  On the contrary, when she returned to the company
clinic five (5) days after her initial examination, the company doctor
diagnosed her condition to have vastly improved.

In General Textile, Inc. vs. NLRC, [G. R. No. 102969, April 4, 1995], the
termination of the employee due to PTB sickness was declared not
justified in the absence of medical certificate issued by a competent public
health authority that the disease is of such nature or at such a stage that
it cannot be cured within a period of six (6) months even with proper
medical treatment. chanrobles virtual law library
Medical certificate as evidence of illness.

Medical certificates presented by an employee to prove (a) his illness, the

nature and the duration of the procedures performed by the dentist on
him; and (b) the period during which he was incapacitated to work are
admissible in evidence and have probative weight even if not notarized. 
It is sufficient that the physician and the dentist who examined the
employee, aside from their respective letterheads, had written their
respective license numbers below their names and signatures, hence,
they bear all the earmarks of regularity in their issuance and are entitled
to full probative weight.  Common sense dictates that an ordinary worker
does not need to have these medical certificates to be notarized for
proper presentation to his company to prove his ailment. It has been said
that verification of documents is not necessary in order that the said
documents could be considered as substantial evidence. (Union Motor
Corporation vs. NLRC, G. R. No. 159738, Dec. 9, 2004)

Medical certificate issued by Labor Attache and Ministry of Public

Health of Kuwait, not sufficient.

In the 2001 case of ATCI Overseas Corporation vs. CA, [G. R. No.
143949, August 9, 2001], involving two (2) overseas Filipino workers who
were recruited by the Ministry of Public Health of Kuwait to work as dental
hygienists in that country for a period of 2 years but who were terminated
after working for only two months based on alleged tuberculosis and heart
disease, the Supreme Court, in declaring the termination as illegal, ruled
that  there is nothing in the records to show that petitioner complied with
Sec. 8, Rule I, Book VI of the Rules to Implement the Labor Code before
private respondent-doctors were dismissed. In the proceedings before the
POEA, petitioner did not present any certification whatsoever.  It was only
when the case was appealed to the NLRC that petitioner belatedly
introduced in evidence a letter from the Ministry stating that private
respondents were found to be positive for tuberculosis and heart disease. 
In addition, petitioner presented a certification issued by the Philippine
labor attache attesting to the fact that private respondents were
subjected to a medical examination after their arrival in Kuwait and were
found to be unfit for employment due to lung defects. The letter from the
Ministry and the certification by the Philippine labor attache fall short of
the demands of the Omnibus Rules.  First of all, there is no finding that
the disease allegedly afflicting private respondents is of such nature or at
such a stage that it cannot be cured within a period of six (6) months with
proper medical treatment.  Secondly, even assuming that the letter from
the Ministry complied with the Omnibus Rules, petitioner has not proven
that the same was presented to private respondents prior to their
termination.  Rather, the letter appears to have been an afterthought, a
belated, yet grossly unsuccessful attempt at compliance with Philippine
laws, produced by petitioner after an adverse judgment was rendered
against it by the POEA.  Clearly, Sec. 8, Rule I, Book VI, of the Omnibus
Rules was not complied with, thus making private respondents’ dismissal
illegal.

The certificate should be procured by the employer.

It devolves upon the employer the obligation to obtain a certificate from a

competent public authority that the employee’s disease is at such stage or
of such nature that it cannot be cured within six (6) months even with
prior medical treatment. It is the employer, and not the employee, who
has the burden of proof to justify that the termination was supported by
said certificate.  Clearly, it is only where there is such prior certification
that the employee could be validly terminated from his job. (Tan vs.
NLRC, G. R. No. 116807, April 14, 1997, 271 SCRA 216; See also Phil.
Employ Services and Resources, Inc. vs. Paramio, G. R. No. 144786, April
15, 2004; Sy vs. CA, supra).  chanrobles virtual law library

Existence of certificate, burden of proof is on the employer.

The burden of proving the existence of such a medical certificate required

under the law is upon the employer, not the employee. (ATCI Overseas
Corporation vs. CA, G. R. No. 143949, Aug. 9, 2001; Tan vs. NLRC, 271
SCRA 216 [1997]; Cebu Royal Plant vs. Deputy Minister of Labor, supra).

Employee dismissed without the medical certificate is entitled to

moral and exemplary damages.

In the same 2001 case of Cathay Pacific Airways [supra], because the
employer summarily dismissed the employee from the service based only
on the recommendation of its medical officers, in effect, failing to observe
the provision of the Labor Code which requires a certification by a
competent public health authority, it was held that the award of moral
and exemplary damages to the employee should be affirmed. Notably, the
decision to dismiss the employee was reached after a single examination
only. The employer’s medical officers recommended the employee’s
dismissal even after having diagnosed her condition to have vastly
improved.  It did not make even a token offer for the employee to take a
leave of absence as what it provided in its Contract of Service.  The
employer is presumed to know the law and the stipulation in its Contract
of Service with the employee.

Notice to employee and the DOLE regarding termination due to

disease, necessary.

Although Article 284 does not require the service of notice to the
employee, however, it is necessary under the following circumstances, if
only to document the procedure taken by the employer prior to
terminating the employment:

1. Notice to the sick employee to submit himself for medical examination

by a competent public health authority to determine not only his fitness
for work but, more importantly, for the purpose of having his sickness
certified that it is of such nature or at such a stage that it can be cured
within a period of six (6) months with proper medical treatment; and

2. Notice of termination in case the certification of the competent public

health authority is to the effect that the sickness is of such nature or at
such a stage that it cannot be cured within a period of six (6) months
even with proper medical treatment. 

The second notice above should be given not only to the employee but
also to the Department of Labor and Employment, in accordance with the
ruling in the case of Agabon vs. NLRC, [G.R. No. 158693, November 17,
2004], where the Supreme Court opined that if the dismissal is based on
authorized causes under Articles 283 and 284, the employer must give
the employee and the Department of Labor and Employment written
notices thirty (30) days prior to the effectivity of his separation.

No hearing require in case of termination due to disease.

Being an authorized cause, as distinguished from just cause, hearing is

not necessary to be conducted by the employer prior to the termination of
employment of the sick employee.

Separation pay in case of lawful dismissal based on disease.

The separation pay of an employee terminated on the ground of disease is

equivalent to at least one (1) month salary or to one-half (½) 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. (Article 284,
Labor Code; Baby Bus, Inc. vs. Minister of Labor, G. R. No. 54223, Feb.
26, 1988).

TERMINATION OF EMPLOYMENT BY EMPLOYEE. (RESIGNATION)

86.  What are the requisites for termination of employment by

employee without just cause?

In case of termination without just cause, the following requisites must be

complied with by the employee:

1.  written (not verbal or oral) notice of the termination (commonly

known as resignation letter); and
2.  service of such notice to the  employer at least one (1) month in
advance. 

Acceptance of resignation, necessary.

Acceptance of the resignation tendered by an employee is necessary to

make the resignation effective. (Shie Jie Corp. vs. National Federation of
Labor, G. R. No. 153148, July 15, 2005).

However, the acceptance of a resignation does not require the conformity

of the resigning employee.  Such conformity only indicates that the
employee was forced to resign for which reason her “conformity” was
obtained to make it appear as voluntary or legal.  (Rase vs. NLRC, G. R.
No. 110637, Oct. 07, 1994).

Once resignation is accepted, the employee no longer has any right to the
job. It goes without saying, therefore, that resignation terminates the
employer-employee relationship. (Philippine National Construction
Corporation vs. NLRC, G. R. No. 120961, Oct. 2, 1997, 280 SCRA 116).
 
Withdrawal of resignation; effect of acceptance thereof.

A resignation tendered by an employee, irrespective of whether it was

made revocable or irrevocable, may still be withdrawn anytime before its
acceptance by the employer. Once accepted, however, withdrawal thereof
can no longer be made by the resigning employee, except with the
consent or agreement of the employer. (Custodio vs. Ministry of Labor
and Employment, G. R. No. 643174, July 19, 1990). chanrobles virtual law library

The acceptance of the withdrawal of resignation is the employer’s sole

prerogative. The employee who resigned cannot unilaterally withdraw his
resignation. Once accepted, the employee 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 services would be continued.  If the employer accepts
said withdrawal, the employee retains the job.  If the employer does not,
the employee cannot claim illegal dismissal for the employer has the right
to determine who his employees will be.  To say that the employee who
has resigned is illegally dismissed is to encroach upon the right of the
employers to hire persons who will be of service to them. (Intertrod
Maritime, Inc. vs. NLRC, G. R. No. 81087, June 19, 1991, 198 SCRA 318).

Assumption of new job by employee prior to employer’s

acceptance of resignation,  effect.

The assumption of a new job by an employee prior to receiving his

employer’s acceptance of his resignation is clearly inconsistent with any
desire to remain in employment.  His resignation is, therefore, deemed
effective. (Philippines Today, Inc. vs. NLRC, G. R. No. 112965, Jan. 30,
1997, 267 SCRA 202). chanrobles virtual law library

Employment elsewhere during the pendency of case, effect.

In the 2005 case of Great Southern Maritime Services Corporation vs.

Acuña, (G. R. No. 140189, Feb. 28, 2005), the employer’s submission
that respondent-employees voluntarily resigned because of their desire to
seek employment elsewhere, as accentuated by the concurrent fact that
two of the respondents already have jobs in Singapore, was held as an
unreasonable inference.  The fact that these two have already found
employment elsewhere should not be weighed against their favor. It
should be expected that they would seek other means of income to tide
them over during the time that the legality of their termination is under
litigation.  They should not be faulted for seeking employment elsewhere
for their economic survival. chanrobles virtual law library

Re-employment after acceptance of resignation.

A resigned employee who desires to take his job back has to reapply
therefor, and he shall have the status of a stranger who cannot
unilaterally demand an appointment.  He cannot arrogate unto himself the
same position which he earlier decided to leave.  To allow him to do so
would be to deprive the employer of his basic right to choose whom to
employ.  It has been held that an employer is free to regulate, according
to his own discretion and judgment, all aspects of employment including
hiring.  The law, in protecting the rights of the laborer, impels neither the
oppression nor self-destruction of the employer. (Philippines Today, Inc.
vs. NLRC, supra). chanrobles virtual law library

Resignation and execution of quitclaim, effect.

Once an employee resigns and executes a quitclaim in favor of the

employer, he is thereby estopped from filing any further money claims
against the employer arising from his employment.  Such money claims
may be given due course only when the voluntariness of the execution of
the quitclaim or release is put in issue, or when it is established that there
is an unwritten agreement between the employer and employee which
would entitle the employee to other remuneration or benefits upon his or
her resignation. (Philippine National Construction Corporation vs. NLRC,
G. R. No. 120961, Oct. 2, 1997). chanrobles virtual law library
 
87.  What are the just causes for termination of employment by
employee with just cause?
An employee may put 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.   inhumane 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.

88.  What are the requisites for serious insult as a ground to

terminate employment by employee?

In order to be considered a just cause to warrant the valid termination of

employment by the employee without notice, the following requisites
must concur:

1.  the insult must be serious in character;

2.  it must be committed by the employer or his representative; and

3.  it must injure the honor and person of the employee.

89.  What are the requisites for serious inhumane and unbearable
treatment as a ground to terminate employment by employee?

This ground may be invoked if the following requisites concur:

1.  the treatment is inhumane and unbearable in nature; and

2.  it is perpetrated by the employer or his representative.

90.  What are the requisites for commission of crime as a ground

to terminate employment by employee?

The requisites for this ground are as follows:

1. a crime or offense is committed;

2. it was committed by the employer or his representative; and

3. it was perpetrated against the person of the employee or any of the

immediate members of his family. chanrobles virtual law library
91. What are other analogous causes that may be invoked as a
ground to terminate employment by employee?

Other analogous causes that may be cited are: constructive dismissal or

forced resignation.

92.  What are the distinctions between constructive dismissal and

forced resignation?

Both forced resignation and constructive dismissal consist in the act of 
quitting because continued employment is rendered impossible,
unreasonable or unlikely as in the case of an offer involving a demotion in
rank and a diminution in pay.However, in forced resignation, as
distinguished from constructive dismissal, the employee is made to do or
perform an involuntary act - submission or tender of resignation - meant
to validate the action of management in inveigling, luring or influencing or
practically forcing the employee to effectuate the termination of
employment, instead of doing the termination himself.

93.  Some principles on resignation.

Resignation letter written and prepared by employer; effect.

According to the 2000 case of A’ Prime Security Services, Inc. vs. NLRC,
[G. R. No. 107320, January 19, 2000], no weight should be given to the
employee’s resignation letter which appears to have been written and
submitted at the instance of the petitioner-employer.  Its form is of the
company’s and its wordings are more of a waiver and quitclaim. More so
when the supposed resignation was not acknowledged before a notary
public.

In the 2005 case of Mobile Protective & Detective Agency vs. Ompad, [G.
R. No. 159195, May 9, 2005], the High Court agreed with the NLRC and
the CA that the two resignation letters at issue are dubious, to say the
least.  A bare reading of their content would reveal that they are in the
nature of a quitclaim, waiver or release.  They were written in a language
obviously not of respondent's and “lopsidedly worded” to free the
employer from liabilities. The CA’s ruling was upheld thus:  “[w]hen the
first resignation letter was a pro forma one, entirely drafted by the
petitioner Agency for the private respondent to merely affix his signature,
and the second one entirely copied by the private respondent with his
own hand from the first resignation letter, voluntariness is not attendant.”

Resignation letters similarly worded and of same tenor, effect.

In the 2005 case of Great Southern Maritime Services Corporation vs.
Acuña, [G. R. No. 140189, Feb. 28, 2005], it was held that resignation
letters which were all prepared by the employer and were substantially
similarly worded and of the same tenor would reveal the true nature of
these documents - they are waivers or quitclaims which are not sufficient
to show valid separation from work or bar the employees from assailing
their termination.  They also constitute evidence of forced resignation or
that they were summarily dismissed without just cause.

Voluntariness of resignation may be inferred from the language thereof.

In the 2005 case of Willi Hahn Enterprises, vs. Maghuyop, [G. R. No.
160348, December 17, 2004], the employee’s resignation letter reads:
 
“July 22, 1998

“Dear Mr. and Mrs. Hahn

“I am respectfully submitting my resignation from Willi Hahn Enterprises

effective today, July 22, 1998.  I hope that in some way, I was of some
help to you and your family.

“Thank you for your assistance during the past.

 “Very truly yours,

“LILIA MAGHUYOP”
 
In holding that the afore-quoted letter was voluntarily tendered by the
employee, the Supreme Court declared:

“The letter is simple, candid and direct to the point.  We find no merit in
respondent’s claim that being a mere clerk, she did not realize the
consequences of her resignation.  Although she started as nanny to the
son of petitioner Willi Hahn, she has risen to being the manager and
officer-in-charge of the Willi Hahn Enterprises in SM Cebu branch.

“In Callanta vs. National Labor Relations Commission, [G.R. No. 105083,
20 August 1993, 225 SCRA 526], a national-promoter salesman of
Distilleria Limtuaco Co., Inc., assigned in Iligan City, Lanao del Sur and
Lanao Del Norte, resigned after he was found to have a shortage of
P49,005.49 in a ‘spot audit’ conducted by the company.  He later filed an
illegal dismissal case claiming that his consent to the resignation was
vitiated as he signed the company’s ready made resignation letter
because the latter threatened to file a estafa case against him.  In
rejecting his contention, the Court ruled that a salesman-promoter could
not have been confused, coerced or intimidated into signing the
resignation letter.  Instead of defending himself against the adverse audit
report, he voluntarily signed the resignation letter though there is no
urgency in signing the same.  The Court concluded that he affixed his
signature in the said letter of his own free will with full knowledge of the
consequences thereof.” chanrobles virtual law library

Act of employer in giving the employee the choice between

resignation or investigation, not illegal.

In a case where the employer asked the employee to submit her

resignation letter or, if not, to submit her written explanation to the
complaints against her, and consequently, the employee immediately filed
a complaint for illegal dismissal thereby preempting an investigation by
the employer on the matter, the Supreme Court ruled that the employer
did not violate any law when it gave the employee the option to resign
because there is nothing illegal with the practice of allowing an employee
to resign instead of being separated for just cause, so as not to smear her
employment record. (Belaunzaran vs. NLRC, G. R. No. 120038, Dec. 23,
1996).

Failure of employer to criminally prosecute employee who

resigned, effect.

In Willi Hahn Enterprises, vs. Maghuyop, [G. R. No. 160348, Dec. 17,
2004)], it was held that the failure of the employer to pursue the
termination proceedings against an employee who resigned and to make
her pay for the shortage incurred did not cast doubt on the voluntary
nature of her resignation.  A decision to give a graceful exit to an
employee rather than to file an action for redress is perfectly within the
discretion of an employer.  It is not uncommon that an employee is
permitted to resign to save face after the exposure of her malfeasance. 
Under the circumstances, the failure of petitioner to file action against the
employee should be considered as an act of compassion for one who used
to be a trusted employee and a close member of the household.
 
Employee who alleges that she was coerced into resigning should
prove such claim.

In the same case of Willi Hahn [supra], the resigning employee’s

unsubstantiated and self-serving claim that she was coerced into signing
the resignation letter was not given any credence.  It is a basic rule in
evidence that the burden of proof is on the part of the party who makes
the allegations. She failed to discharge this burden.  Moreover, the Court
of Appeals’ finding that respondent had no motive to resign because the
charges of dishonesty were not fully substantiated has no basis.  Had the
separation of respondent been for dismissal due to loss of trust and
confidence, substantial evidence of the shortages and non-remittances
would have been indispensable.  Such, is not the case here considering
her voluntary resignation. 
 
Filing of complaint negates resignation; exception.
 
The general rule is that the filing of a complaint for illegal dismissal is
inconsistent with resignation. (Cheniver Deco Print Technics Corporation
vs. NLRC, G. R. No. 122876, Feb. 17, 2000).

Citing Molave Tours Corporation vs. NLRC, [G.R. No. 112909, November
24, 1995, 250 SCRA 325, 330], the Supreme Court in Shie Jie Corp. vs.
National Federation of Labor, [G. R. No. 153148, July 15, 2005], held:

“By vigorously pursuing the litigation of his action against petitioner,

private respondent clearly manifested that he has no intention of
relinquishing his employment, which act is wholly incompatible to
petitioner’s assertion that he voluntarily resigned.” 

In Great Southern Maritime Services Corporation vs. Acuña, [G. R. No.

140189, Feb. 28, 2005], it was ruled that the execution of the alleged
“resignation letters cum release and quitclaim” to support the employer’s
claim that respondents voluntarily resigned is unavailing as the filing of
the complaint for illegal dismissal is inconsistent with resignation.

It would have been illogical for the employee to resign and then file a
complaint for illegal dismissal. (Emco Plywood Corporation vs. Abelgas, G.
R. No. 148532, April 14, 2004).

Hence, the finding that the employee's resignation is involuntary is further

strengthened by the fact that he filed an illegal dismissal case the day
after the alleged tender of resignation. (Mobile Protective & Detective
Agency vs. Ompad, G. R. No. 159195, May 9, 2005). chanrobles virtual law library

However, this rule does not apply to a case where the filing of an illegal
dismissal case by the employee who resigned was evidently a mere
afterthought.  It was filed not because she wanted to return to work but
to claim separation pay and backwages. (Willi Hahn Enterprises, vs.
Maghuyop, supra).

Expression of gratitude to employer, effect.

A resignation letter which contains words of gratitude and appreciation to

the employer can hardly come from employees who are forced to resign.
(St. Michael Academy vs. NLRC, G. R. No. 119512, July 13, 1998, 292
SCRA 478).

TEMPORARY SUSPENSION OF OPERATION FOR SIX MONTHS

UNDER ARTICLE 286
94.  What are the situations contemplated under Article 286 of
the Labor Code when employment not deemed terminated?

Based on the provisions of Article 286, the following situations are

contemplated therein:

1. bona-fide suspension by the employer of the operation of his business

or undertaking for a period not exceeding six (6) months;

2. fulfillment by the employee of a military duty; or

3.  fulfillment by the employee of a civic duty.

95.  What is bona-fide suspension of operations for a period not

exceeding six months?

• No law on temporary retrenchment or lay-off, Article 286 applies only

by analogy.

• Extent of suspension of operation - may involve only a section or

department of the company - not necessarily the entire operations.

• Burden to prove bona-fide suspension of operation is on the employer.

Suspension of operation prior to closure, held as evidence of good

faith.

In the 2004 case of J.A.T. General Services vs. NLRC, [G. R. No. 148340,
Jan. 26, 2004], it was ruled that the closure of business operation was
deemed not tainted with bad faith because the decision to permanently
close business operations was arrived at, among others, after a
suspension of operation for several months precipitated by a slowdown in
sales without any prospects of improving.

Compensation of employees during the six-month suspension.

Employees are not entitled to their wages and benefits during the 6-
month period. The reason is, within the said period, the employer-
employee relationship is deemed suspended. The employment
relationship being suspended, both the employer and the employees
cease to be bound, at least temporarily, by the basic terms and conditions
of their employment contract - the employer regarding his obligation to
provide salary to his workers; and on the part of the workers, to provide
their services to the former. chanrobles virtual law library

Employer may suspend his business operation for less than six
months but not more.

Article 286 of the Labor Code and the Rules to Implement the Labor Code
are clear in stating that the period of suspension of operation of the
employer’s business or undertaking shall not exceed six (6) months.
Therefore, the employer may validly suspend his business operation for a
period of less than six (6) months. chanrobles virtual law library

Suspension of work exceeding 6 months, effect.

In the 2005 case of Mayon Hotel & Restaurant vs. Adana, [G. R. No.
157634, May 16, 2005], the High Court declared that Article 286 is clear -
there is termination of employment when an otherwise bona fide
suspension of work exceeds six (6) months. Moreover, even assuming
arguendo that the cessation of employment on April 1997 was merely
temporary when hotel operations were suspended due to the termination
of the lease of the old premises, it became dismissal by operation of law
when petitioners failed to reinstate respondents after the lapse of six (6)
months, pursuant to Article 286. And even assuming that the closure was
due to a reason beyond the control of the employer, it still has to accord
its employees some relief in the form of severance pay. (See also
Cheniver Deco Print Technics Corporation v. NLRC, G.R. No. 122876, Feb.
17, 2000, 325 SCRA 758).

Effect of employment of the employee in other establishments

during 6-month period.

In the 2005 case of JPL Marketing Promotions vs. CA, [G. R. No. 151966,
July 8, 2005], it was established that private respondent-employees
sought employment from other establishments even before the expiration
of the six (6)-month period provided by law.  They admitted that all three
of them applied for and were employed by another establishment after
they received the notice from JPL.  Consequently, it was held that
petitioner JPL cannot be said to have terminated their employment for it
was they themselves who severed their relations with JPL.  Thus, they are
not entitled to separation pay, even on the ground of compassionate
justice.  Clearly, the principle in the law which grants separation pay
applies only when the employee is dismissed by the employer, which is
not the case in this instance.  In seeking and obtaining employment
elsewhere, private respondents effectively terminated their employment
with JPL.

96.  Temporary “off-detail” or “floating status” of security guards.

Temporary “off-detail” or “floating status,” as applied to security guards,

refer to the period of time they are made to wait until they are
transferred or assigned to a new post or client.  It does not constitute
constructive dismissal as their assignments primarily depend on the
contracts entered into by the security agency with third parties. This
ruling is based on Article 286 of the Labor Code. (Philippine Industrial
Security Agency Corporation vs. Dapiton, G. R. No. 127421, Dec. 8,
1999; Superstar Security Agency, Inc. vs. NLRC, 184 SCRA 74 [1990]).

In a 2005 case, the Supreme Court said that when a security guard is
placed on “off detail” or “floating status,” in security agency parlance, it
means “waiting to be posted.”  Consequently, a relief and transfer order
in itself does not sever employment relationship between a security guard
and her agency.  And the mere fact that the transfer would be
inconvenient for her does not by itself make her transfer illegal. (Mobile
Protective & Detective Agency vs. Ompad, G. R. No. 159195, May 9,
2005).  chanrobles virtual law library

“Off-detailing” is not equivalent to dismissal, so long as such status does

not continue beyond a reasonable time. (Agro Commercial Security
Services Agency, Inc. vs. NLRC, 175 SCRA 790, 797, July 31, 1989).

“Floating status,” therefore, is lawful.  However, such “floating status”

should last only for a reasonable time.  When the “floating status” or
“reserve status” lasts for more than six (6) months, the employee may be
considered to have been constructively dismissed from his employment.
(United Special Watchman Agency vs. CA, G. R. No. 152476, July 8,
2003; Pulp and Paper, Inc. vs. NLRC, G. R. No. 116593, Sept. 24, 1997,
279 SCRA 408).

Applicability of “floating status” rule to employees other than

security guards.

Although the application of this principle on temporary “off detail” or

“floating status” is thus far confined to security guards, it is opined that it
may also be made applicable to employees of contractors/subcontractors
under a valid independent contracting/ subcontracting arrangement under
Article 106 of the Labor Code. The same form of dislocation and
displacement also affects their employees everytime contracts of service
are terminated by their clients (principals).  In the meantime that the
dislocated employees are waiting for their next assignment, they may be
placed on “off detail” or “floating status” following the same concept
applicable to security guards.

For instance, in the earlier cited case of JPL Marketing Promotions vs. CA,
[G. R. No. 151966, July 8, 2005], this principle was applied to
merchandisers hired by petitioner which is engaged in the business of
recruitment and placement of workers.  After they were notified of the
cancellation of the contract of petitioner with a client where they were
assigned and pending their re-assignment to other clients, the
merchandisers are deemed to have been placed under “floating status”
for a period of not exceeding six (6) months under Article 286. Such
notice, according to the Court, should not be treated as a notice of
termination, but a mere note informing them of the termination of the
client’s contract and their re-assignment to other clients.  The thirty (30)-
day notice rule under Article 283 does not, therefore, apply thereto.

Legal consequence if off-detailed security guards are not re-

assigned after six months.

Security guards may be temporarily sidelined by their security agency as

their assignments primarily depend on the contracts entered into by the
latter with third parties. However, the sidelining should continue only for
six (6) months.  If after said period, the security guards placed on “off-
detail” or “floating  status” are not recalled and given any assignment,
they are deemed constructively dismissed.  Consequently, they are
entitled to the corresponding benefits for their separation and this would
apply to the two (2) types of work suspension heretofore noted, that is,
either of the entire business or of a specific component thereof. (Mobile
Protective & Detective Agency vs. Ompad, G. R. No. 159195, May 9,
2005). chanrobles virtual law library

Off-detail status for 29 days, not constructive dismissal.

In the 2002 case of Soliman Security Services, Inc. vs. CA, [G. R. No.
143215; July 11, 2002], the issue of whether or not private respondent
should be deemed constructively dismissed by petitioner for having been
placed on “floating status,” i.e., with no reassignment, for a period of 29
days was answered in the negative. This question posed is not new. In
the case of Superstar Security Agency, Inc., vs. NLRC, [184 SCRA 74],
the Supreme Court, addressing a similar issue, has said:

“xxx The charge of illegal dismissal was prematurely filed. The records
show that a month after Hermosa was placed on a temporary ‘off-detail,’
she readily filed a complaint against the petitioners on the presumption
that her services were already terminated. Temporary ‘off-detail’ is not
equivalent to dismissal. In security parlance, it means waiting to be
posted. It is a recognized fact that security guards employed in a security
agency may be temporarily sidelined as their assignments primarily
depend on the contracts entered into by the agency with third parties
(Agro Commercial Security Agencies, Inc. vs. NLRC, G.R. Nos. 82823-24,
31 July 1989). However, it must be emphasized that such temporary
inactivity should continue only for six months. Otherwise, the security
agency concerned could be liable for constructive dismissal.”  (See also
Valdez vs. NLRC, 286 SCRA 87).

RETIREMENT
97.  What is the coverage of the Retirement Pay Law?

The Retirement Pay Law applies to all employees in the private sector,
regardless of their position, designation or status and irrespective of the
method by which their wages are paid, except those specifically
exempted.  It also includes and covers part-time employees, employees
of service and other job contractors and domestic helpers or persons in
the personal service of another. chanrobles virtual law library

98.  Who are the employees not covered by the Retirement Pay
Law?

The Retirement Pay Law does not apply to the following employees:

1. Employees of the National Government and its political subdivisions,

including government-owned and/or controlled corporations, if they are
covered by the Civil Service Law and its regulations.

2.  Employees of retail, service and agricultural establishments or

operations regularly employing not more than ten (10) employees.  As
used in this sub-section:

• “Retail establishment” is one principally engaged in the sale of goods to

end-users for personal or household use.  It shall lose its retail character
qualified for exemption if it is engaged in both retail and wholesale of
goods.

• “Service establishment” is one principally engaged in the sale of service

to individuals for their own or household use and is generally recognized
as such.

• “Agricultural establishment/operation” refers to an employer which is

engaged in agriculture.  This term refers to all farming activities in all
branches and includes, among others, the cultivation and tillage of soil,
production, cultivation, growing and harvesting of any agricultural or
horticultural commodities, dairying, raising of livestock or poultry, the
culture of fish and other aquatic products in farms or ponds, and any
activities performed by a farmer or on a farm as an incident to, or in
conjunction with, such farming operations, but does not include the
manufacture and/or processing of sugar, coconut, abaca, tobacco,
pineapple, aquatic or other farm products.

99.  May an employee retire under the CBA or employment

contract?

Any employee may retire or be retired by his employer upon reaching the
retirement age established in the CBA or other applicable employment
contract and he shall be entitled to the benefits thereunder.  If the
amount is less than those provided under the law, the employer shall pay
the difference.

100.  What is the distinction between optional and compulsory

retirement?

Article 287 of the Labor Code, as amended by Republic Act No. 7641,
provides for two (2) types of retirement:  (a)  optional; and (b) 
compulsory. 

1.  Optional retirement. - In the absence of a retirement plan or other

applicable agreement providing for retirement benefits of employees in an
establishment, an employee may retire upon reaching the age of sixty
(60) years or more if he has served for at least five (5) years in said
establishment.  chanrobles virtual law library

2.  Compulsory retirement. - Where there is no such retirement plan or

other applicable agreement providing for retirement benefits of employees
in an establishment, an employee shall be retired upon reaching the age
of sixty-five (65) years.

101.  Is the option granted to the employer to retire an employee

valid?

Yes. The decision of the Supreme Court in the case of PAL vs. ALPAP.
(G.R. No.143686, January 15, 2002), is instructive:

“Finally, on the issue of whether petitioner should consult the pilot

concerned before exercising its option to retire pilots, we rule that this
added requirement, in effect, amended the terms of Article VII, Section 2
of the 1976 PAL-ALPAP Retirement Plan. The option of an employer to
retire its employees is recognized as valid.
 
“Surely, the requirement to consult the pilots prior to their retirement
defeats the exercise by management of its option to retire the said
employees. It gives the pilot concerned an undue prerogative to assail the
decision of management. Due process only requires that notice be given
to the pilot of petitioner's decision to retire him. Hence, the Secretary of
Labor overstepped the boundaries of reason and fairness when he
imposed on petitioner the additional requirement of consulting each pilot
prior to retiring him.

“Furthermore, when the Secretary of Labor and Employment imposed the

added requirement that petitioner should consult its pilots prior to
retirement, he resolved a question which was outside of the issues raised,
thereby depriving petitioner an opportunity to be heard on this point.
102.  May an employee retire at an earlier or older age?

The law recognizes as valid any retirement plan, agreement or

management policy regarding retirement at an earlier or older age.

103.  What are included in the minimum 5-year service

requirement?

The minimum 5-year service requirement includes the following.

1.  Authorized absences, vacations, regular holidays, included.

2.  Only actual service included.

104.  What are included  in the retirement benefits under the

Retirement Pay Law?  chanrobles virtual law library

Retirement benefits.

1. One-half (1/2) month salary.

In the absence of an applicable employment contract, an employee who

retires shall be entitled to retirement pay equivalent to at least one-half
(1/2) month salary for every year of service, a fraction of at least six (6)
months being considered as one (1) whole year.

2.  One-half (1/2) month salary, components. - For the purpose of

determining the minimum retirement pay due an employee, the term
“one-half month salary” shall include all the following:

(a) fifteen (15) days salary of the employee based on his latest salary
rate.  chanrobles virtual law library

(b) the cash equivalent of five (5) days of service incentive leave;

(c) one-twelfth (1/12) of the 13th month pay due the employee; and

(d) all other benefits that the employer and employee may agree upon
that should be included in the computation of the employee’s retirement
pay.

3.  One-half monthly salary of employees who are paid by results. - For
covered workers who are paid by results and do not have a fixed monthly
rate, the basis for determination of the salary for fifteen (15) days shall
be their average daily salary (ADS).

105.  Does the Retirement Pay Law have any retroactive effect?
Yes.  R. A. 7641 (Retirement Pay Law) is applicable to services rendered
prior to January 7, 1993.  Consequently, in reckoning the length of
service, the period of employment with the same employer before the
effectivity date of the law (Republic Act No. 7641) shall be included.

106.  May Pag-IBIG be considered as substitute retirement plan?

As provided in R. A. No. 7742, a private employer shall have the option to

treat the coverage of the Pag-IBIG Fund as a substitute retirement benefit
for the employee concerned within the purview of the Labor Code as
amended; provided such option does not in any way contravene an
existing collective bargaining agreement or other employment
agreement. 

Thus, the Pag-IBIG Fund can be considered as a substitute retirement

plan of the company for its employees provided that such scheme offers
benefits which are more than or at least equal to the benefits under
Republic Act No. 7641.  If said scheme provides for less than what the
employee is entitled to under Republic Act No. 7641, the employer is
liable to pay the difference.

107.  What is the latest amendment to the Retirement Pay Law

(Article 287 of the Labor Code)?  chanrobles virtual law library

The latest amendment to Article 287 of the Labor Code was introduced by
Republic Act No. 8558 [An Act Amending Article 287 of Presidential
Decree No. 442, as Amended, Otherwise Known as the Labor Code of the
Philippines by Reducing the Retirement Age of Underground Mine Workers
from Sixty (60) to Fifty (50)] which was approved on February 26, 1998. 

108.  Who is an underground mine employee?

An underground mine employee is a person employed to extract mineral

deposits underground or to work in excavations or workings such as
shafts, winzes, tunnels, drifts, crosscuts, raises, working places whether
abandoned or in use beneath the earth's surface for the purpose of
searching for and extracting mineral deposits.

109.  What is the distinction between retirement and dismissal?

Retirement is the result of a bilateral act of the parties, a voluntary

agreement between the employer and the employee whereby the latter,
after reaching a certain age, agrees or consents to sever his employment
with the former. 

Dismissal, on the other hand, refers to the unilateral act of the employer
in terminating the services of an employee with or without cause.
(Gamogamo vs. PNOC Shipping and Transport Corp., G. R. No. 141707,
May 7, 2002).

Dismissal for cause, effect on entitlement to retirement benefits.

Management discretion may not be exercised arbitrarily or capriciously

especially with regards to the implementation of the retirement plan. As
held in Razon, Jr. vs. NLRC, [G. R. No. 80502, May 7, 1990, 185 SCRA
44], upon acceptance of employment, a contractual relationship is
established giving the employee an enforceable vested interest in the
retirement fund. Hence, the dismissed employee is entitled to the
retirement benefits provided thereunder. chanrobles virtual law library

However, in the 2002 case of San Miguel Corporation vs. Lao, [G. R. No.
143136-37, July 11, 2002], an employee who was dismissed for cause
was held not entitled to the retirement benefits under the company’s
retirement plan which concededly prohibits the award of retirement
benefits to an employee dismissed for a just cause, a proscription that
binds the parties to it.

Distinguishing Razon from San Miguel, the Supreme Court ruled that in
Razon, the employer’s refusal to give the employee his retirement
benefits is based on the provision of the retirement plan giving
management wide discretion to grant or not to grant retirement benefits,
a prerogative that obviously cannot be exercised arbitrarily or
whimsically. But in San Miguel, the retirement plan expressly prohibits the
grant of retirement benefits in case of dismissal for cause. Hence, the
employee is bound by such prohibition.

110.  What is the distinction between retirement pay and

separation pay?

1. Retirement pay differs from separation pay in that the former is paid
by reason of retirement; while the latter is required in the cases
enumerated in Articles 283 and 284 of the Labor Code.

2. The purpose for the grant of retirement pay is to help the employee
enjoy the remaining years of his life thereby lessening the burden of
worrying for his financial support.  It is also a form of reward for the
employee’s loyalty and service to the employer.  Separation pay, on the
other hand, is designed as a wherewithal during the period that an
employee is looking for another employment after his termination.

As a general rule, retiring employees are entitled only to retirement

benefits.  But there are instances when separation pay and retirement
pay must both be paid to the employee.  The reason is, the separation
pay is mandated by law; while retirement pay is required by contract.

Cases where both separation pay and retirement pay must be

paid.

In the case of University of the East vs. Hon. Minister of Labor, [G. R. No.
74007, July 31, 1987], the school claimed that teachers who were
terminated because of phased-out units cannot be considered retired and,
therefore, entitled to retirement benefits and, at the same time,
retrenched, which would entitle them to separation pay. This would be
tantamount to enriching them at the expense of the school. The Supreme
Court, however, ruled that separation pay arising from a forced
termination of employment and retirement benefits given as a contractual
right to the teachers for many years of faithful service, are not necessarily
antagonistic to each other.  Moreover, the retirement scheme has become
part of the school’s policy and, therefore, it should be enforced separately
from the provision of the Labor Code.  Consequently, the teachers were
ordered paid for both retirement pay and separation pay.

In another case, Aquino vs. NLRC, [G. R. No. 87653, February 11, 1992;
See also BLTB vs. CA, 71 SCRA 470 (1976)], the Supreme Court ordered
the payment of both the separation pay for retrenchment embodied in the
CBA as well as the retirement pay provided under a separate Retirement
Plan to the retrenched employees.  The argument of the company that it
has more than complied with the mandate of the law on retrenchment by
paying separation pay double that required by the Labor Code (at the rate
of one month pay instead of the one-half month pay per year of service)
was not favorably taken into account by the Supreme Court because the
employees were not pleading for generosity but demanding their rights
embodied in the CBA which was the result of negotiations between the
company and the employees.

On the issue of mutual exclusivity of the CBA-mandated separation pay in

case of retrenchment, on the one hand, and the retirement benefits
provided in the Retirement Plan, on the other, the Supreme Court in this
case of Aquino opined that:

“The Court feels that if the private respondent (company) really intended
to make the separation pay and the retirement benefits mutually
exclusive, it should have sought inclusion of the corresponding provision
in the Retirement Plan and the Collective Bargaining Agreement so as to
remove all possible ambiguity regarding this matter.

“We may presume that the counsel of the respondent company was
aware of the prevailing doctrine embodied in the cases earlier cited. 
Knowing this, he should have made it a point to categorically provide in
the Retirement Plan and the CBA that an employee who had received
separation pay would no longer be entitled to retirement benefits. Or to
put it more plainly, collection of retirement benefits was prohibited if the
employee had already received separation pay.” (See also Batangas
Laguna Tayabas Bus Co. vs. Court of Appeals, G.R. No L-38482, June 18,
1976, 71 SCRA 470).

In Bongar vs. NLRC, [G. R. No. 107234, August 24, 1998], the Supreme
Court ordered the payment not only of separation pay and backwages to
an illegally dismissed teacher but additionally, of the retirement benefits
“pursuant to any collective bargaining agreement in the workplace or, in
the absence thereof, as provided in Section 14 [Retirement Benefits],
Book VI of the Implementing Rules of the Labor Code.”  chanrobles virtual law library

Case where separation pay was charged to retirement pay.

In Ford Philippines Salaried Employees Association vs. NLRC, [G. R. No.

75347, Dec. 11, 1987], a case decided before the advent of Republic Act
No. 7641, the Supreme Court ruled that if it is provided in the Retirement
Plan of the company that the retirement, death and disability benefits
paid in the plan are considered integrated with and in lieu of termination
benefits under the Labor Code, then the retirement fund may be validly
used to pay such termination or separation pay because of closure of
business.

Cases where employees are entitled only to one form of benefit.

In Cipriano vs. San Miguel Corporation, [G. R. No. L-24774, August 21,
1968], it was ruled that in case the Retirement Plan of the company
provides that the employee shall be entitled to either the retirement
benefit provided therein or to the separation pay provided by law,
whichever is higher, the employee cannot be entitled to both benefits.
Article X of said Retirement Plan reads:

‘Regular employees who are separated from the service of the company
for any reason other than misconduct or voluntary resignation shall be
entitled to either 100% of the benefits provided in Section 2, Article VIII
hereof, regardless of their length of service in the company or to the
severance pay provided by law, which ever is the greater amount.’

In the 2004 case of Cruz vs. Philippine Global Communications, Inc., [G.
R. No. 141868, May 28, 2004], the Supreme Court reiterated the said
rule in Cipriano [supra] under the following provision in the Retirement
Plan which states: 

“b)Adjustment of Benefits Payments.- x x x, in the event the Company is

required under the law or by lawful order of competent authority to pay to
the Member benefits or emoluments similar or analogous to those already
provided in the Plan, the Member concerned shall not be entitled to both
what the law or the lawful order of competent authority requires the
Company to give and the benefits provided by the Plan, but shall only be
entitled to whichever is the greatest among them, x x x.” (Section 6 (b),
Article XI of the Retirement Plan).

The employees in this case who were terminated due to closure of the
company’s branches, are entitled only to either the separation pay
provided under Article 283 of the Labor Code, as amended, or retirement
benefits prescribed by the Retirement Plan, whichever is higher.
Consequently, they were paid separation benefits computed under the
Retirement Plan, the same being higher than what Article 283 provides.

In the 2005 case of Salomon vs. Association of International Shipping

Lines, Inc., [G. R. No. 156317, April 26, 2005], petitioners who were duly
paid separation pay when they were retrenched, claimed that they are, in
addition, entitled to retirement benefits under the CBA citing the Aquino
case [supra] as basis. Said CBA provides, thus:

“Section 1.    In case of termination due to redundancy, retrenchment,

dissolution of a department/ conference/section and/or the whole
ASSOCIATION, sickness or physical disability, a regular employee shall be
entitled to a separation pay equivalent to his one (1) month basic pay for
every year of service.   A fraction of at least six (6) months shall be
considered as one (1) whole year and less than six (6) months shall be
prorated accordingly.

x x x                          x x x                           x x x

“Section 3.  Optional Retirement – An employee shall have the option to

retire regardless of age provided he/she has rendered at least 15 years of
continuous service to the ASSOCIATION.   An employee shall be entitled
to the following benefits.

a. 15 to less than 20 years of service – 50% of the monthly basic salary

for every year of service. chanrobles virtual law library

b. 20 years of service – 100% of the monthly basic salary for every year
of service.”

According to the Supreme Court, it is obvious that petitioners, as

prescribed by the parties’ CBA quoted above, are entitled only to either
the separation pay, if they are terminated for cause, or optional
retirement benefits, if they rendered at least fifteen (15) years of
continuous services. Here, petitioners were separated from the service for
cause.  Accordingly, pursuant to the CBA, what each actually received is a
separation pay.  Hence, considering their Releases and Quitclaims, they
are no longer entitled to retirement benefits.

The provisions of the retirement plan are controlling.

As held in Cipriano [supra] and Aquino [supra], the employees’ right to
payment of retirement benefits and/or separation pay is governed by the
Retirement Plan of the parties. The provisions of the Retirement Plan are
controlling in determining such entitlement. (Cruz vs. Philippine Global
Communications, Inc., supra).

In other words, if the Retirement Plan mandates that the employees who
are separated under any of the authorized causes under Article 283 of the
Labor Code are entitled to both the separation pay provided therein as
well as the retirement benefits under the Retirement Plan, then, they shall
be so paid.  Otherwise, if the Retirement Plan says that the employees
shall be entitled to either the separation pay under the said provision of
the law or the retirement benefits under the Retirement Plan, whichever is
higher, then, they should not be allowed to claim both.

Clearly, under the above cases, the right of the concerned employees to
receive both retirement benefits and separation pay depends upon the
provisions in the Retirement Plan. (Ibid.).

Forced retirement.

If the intention to retire is not clearly established or if the retirement is

involuntary, it is to be treated as a discharge. (De Leon vs. NLRC, 100
SCRA 691 [1980]). chanrobles virtual law library

In San Miguel Corporation vs. NLRC, [G. R. No. 107693, July 23, 1998],
the employees were given the option to retire, be retrenched or dismissed
but they were made to understand that they had no choice but to leave
the company.  It was in reality a Hobson’s choice which means that they
have no choice at all.  All that the private respondents were offered was a
choice on the means or method of terminating their services but never as
to the status of their employment.  In short, they were never asked if
they still wanted to work for petitioner.  The mere absence of actual
physical force to compel private respondents to ink an application for
retirement did not make their retirement voluntary.  Confronted with the
danger of being jobless, unable to provide their families even with the
basic needs or necessities of life, the private respondents had no choice
but to sign the documents proffered to them.  But neither their receipt of
separation pay nor their negotiating for more monetary benefits estopped
private respondents from questioning and challenging the legality of  the
nature or cause of their separation from the service.

In Villena vs. NLRC, [G. R. No. 90664, Feb. 7, 1991], an employee whose
age was 57 when he was illegally singled out for retirement, after serving
the bus company since he was 25 years old, was declared to be entitled
to his full backwages, allowances and other benefits for a period of three
(3) years after his illegal dismissal from the service until he reached the
compulsory retirement age, plus his retirement benefits equivalent to his
gross monthly pay, allowances and other benefits for every year of
service up to age sixty (60) which is the normal retirement age for him. 

Case of non-entitlement to retirement pay due to termination for

cause. 

In the 2004 case of Piñero vs. NLRC, [G. R. NO. 149610, August 20,
2004], the petitioner employee who turned 60 years old and retired on
March 1, 1996 after 29 years of service was declared not entitled to the
payment of retirement benefits because he lost his employment status
effective as of the date of the decision of the Labor Arbiter on October 28,
2004 which declared as legal the termination of his employment as a
consequence of an illegal strike.  At that time, his employer refused to
pay his retirement benefits pending the final resolution of the case. 
Instead, the Supreme Court, on ground of equity for his long years of
service without any derogatory record, awarded him financial assistance
equivalent to one-half (½) month’s pay for every year of service
computed from his date of employment up to October 28, 1994 when he
was declared to have lost his employment status. chanrobles virtual law library

111.  Is the retirement pay under the SSS similar to or may be a

substitute for the retirement pay under the Labor Code?

The employee’s retirement pay under Article 287 of the Labor Code or
under a unilaterally promulgated retirement policy or plan of the employer
or under a Collective Bargaining Agreement, is separate and distinct from
the retirement benefits granted under Republic Act No. 8282, otherwise
known as the Social Security Act of 1997.

112.  Other latest cases on retirement.

Concept of retirement under Article 287.

The opening paragraph of Article 287 clearly enunciates the intent and
application of the law.  It conveys in clear and unmistakable terms that
once an employee retires, it is not Article 287 that is controlling but the
retirement plan under the CBA or other applicable employment contract.
Article 287 becomes relevant only in the matter of ensuring that the
retirement benefits are not less than those provided therein. 

This explains why, in the third paragraph of Article 287, it is further

underscored that the retirement package provided therein is made
applicable only “in the absence of a retirement plan or agreement
providing for retirement benefits of employees in the establishment.”
In case of retirement under the CBA or other applicable employment
contract, the employee is entitled to receive such retirement benefits as
he may have earned under existing laws, the CBA and other agreements;
provided that such retirement benefits under the CBA or other
agreements should not, in any way, be less than those provided under the
law.  In the event that such benefits are less, the employer is obligated to
pay the difference between the amount due the employee under the law
and that provided under the CBA or other applicable employment
contract. (Sections 3.1 and 3.2, Rule II, Ibid.).

This is best illustrated in the 2001 case of Manuel L. Quezon University

vs. NLRC, [G. R. No. 141673, October 17, 2001]. the issue raised is
whether respondent-teachers are entitled to the retirement benefits
provided for under Republic Act No. 7641, even if the petitioner has an
existing valid retirement plan.  The Supreme Court ruled that they are so
entitled. Republic Act No. 7641 intends to give the minimum retirement
benefits to employees not entitled thereto under collective bargaining and
other agreements. Its coverage applies to establishments with existing
collective bargaining or other agreements or voluntary retirement plans
whose benefits are less than those prescribed under the proviso in
question. Consequently, petitioner University was ordered to pay the
teachers their retirement differential pay (i.e., the difference between the
retirement pay under R. A. No. 7641 and the MLQU Retirement Plan) plus
legal interest of six percent (6%) per annum from the date of filing of
their complaints on March 27, 1997 up to actual payment.

If after applying Article 287, however, it is clear that the retirement plan
under the CBA or other agreements, company policy or practice provides
for retirement benefits which are equal or superior to that which is
provided in said law, then, such retirement plan and not Article 287,
should prevail and thus govern the computation of the benefits to be
awarded. (Labor Advisory on Retirement Pay Law dated Oct. 24, 1996,
issued by Secretary Leonardo A. Quisumbing).

The best case to exemplify this point is the 2002 case of Philippine
Airlines, Inc. vs. Airline Pilots Association of the Philippines, [G. R. No.
143686, January 15, 2002], where the Supreme Court had occasion to
comment on the following pertinent provision of the 1967 PAL-ALPAP
Retirement Plan: chanrobles virtual law library

“SECTION 1.  Normal Retirement.  (a) Any member who completed

twenty (20) years of service as a pilot for PAL or has flown 20,000 hours
for PAL shall be eligible for normal retirement.  The normal retirement
date is the date on which he completes twenty (20) years of service, or
on which he logs his 20,000 hours as a pilot for PAL.  The member who
retires on his normal retirement shall be entitled to either (a) a lump sum
payment of P100,000.00 or  (b) to such termination pay benefits to which
he may be entitled to under existing laws, whichever is the greater
amount.”

A pilot who retires after twenty years of service or after flying 20,000
hours would still be in the prime of his life and at the peak of his career,
compared to one who retires at the age of 60 years old.  Based on this
peculiar circumstance that PAL pilots are in, the parties provided for a
special scheme of retirement different from that contemplated in the
Labor Code. Conversely, the provisions of Article 287 of the Labor Code
could not have contemplated the situation of PAL’s pilots.  Rather, it was
intended for those who have no more plans of employment after
retirement, and are thus in need of financial assistance and reward for the
years that they have rendered service. chanrobles virtual law library

In any event, petitioner contends that its pilots who retire below the
retirement age of 60 years not only receive the benefits under the 1967
PAL-ALPAP Retirement Plan but also an equity of the retirement fund
under the PAL Pilots’ Retirement Benefit Plan, entered into between
petitioner and respondent on May 30, 1972.

The PAL Pilots’ Retirement Benefit Plan is a retirement fund raised from
contributions exclusively from petitioner of amounts equivalent to 20% of
each pilot’s gross monthly pay.  Upon retirement, each pilot stands to
receive the full amount of the contribution.  In sum, therefore, the pilot
gets an amount equivalent to 240% of his gross monthly income for every
year of service he rendered to petitioner.  This is in addition to the
amount of not less than P100,000.00 that he shall receive under the 1967
Retirement Plan. In short, the retirement benefits that a pilot would get
under the provisions of Article 287 of the Labor Code are less than those
that he would get under the applicable retirement plans of petitioner.
(Ibid.).

Indeed, Article 287 makes clear the intention and spirit of the law to give
employers and employees a free hand to determine and agree upon the
terms and conditions of retirement.  The law presumes that employees
know what they want and what is good for them absent any showing that
fraud or intimidation was employed to secure their consent thereto.
(Pantranco North Express, Inc. vs. NLRC, G. R. No. 95940, July 24, 1996,
259 SCRA 161).

Who should exercise the option to retire?

Compulsory retirement takes place at age 65, while optional retirement is

primarily determined by the CBA or other employment contract or
employer’s retirement plan.  In the absence of any provision on optional
retirement in a CBA, other employment contract, or employer’s retirement
plan, an employee may optionally retire upon reaching the age of 60
years or more, but not beyond 65 years, provided he has served at least
five (5) years in the establishment concerned.  That prerogative is
exclusively lodged in the employee.  chanrobles virtual law library

Thus, in Capili vs. NLRC, [G. R. No. 120802, June 17, 1997, 273 SCRA
576], it was held that the act of accepting the retirement benefits is
deemed an exercise of the option to retire under the third paragraph of
Article 287, as amended by Republic Act No. 7641. Thereunder, he could
choose to retire upon reaching the age of 60 years, provided it is before
reaching 65 years which is the compulsory age of retirement. (Capili vs.
NLRC, G. R. No. 120802, June 17, 1997, 273 SCRA 576).

May employers exercise the option to retire?

The answer to this query is, of course, in the affirmative. If there is a

provision on retirement in a CBA or any other agreement or if the
employer has a retirement plan, the option may be exercised by the
employer in accordance therewith.  Article 287 is clear:  “(a)ny employee
may be retired upon reaching the retirement age established in the
collective bargaining agreement or other applicable employment
contract.”

In Philippine Airlines, Inc. vs. Airline Pilots Association of the Philippines,

[G. R. No. 143686, January 15, 2002], an issue was raised on whether
petitioner should consult the pilot concerned before exercising its option
to retire pilots.  The Supreme Court ruled in the negative.  It held that
this constitutes an added requirement which, in effect, amended the
terms of Article VII, Section 2 of the 1976 PAL-ALPAP Retirement Plan
which states:

“SECTION 2. Late Retirement. Any member who remains in the service of

the Company after his normal retirement date may retire either at his
option or at the option of the Company and when so retired he shall be
entitled either (a) to a lump sum payment of P5,000.00 for each
completed year of service rendered as a pilot, or (b) to such termination
pay benefits to which he may be entitled under existing laws, whichever is
the greater amount.” chanrobles virtual law library

Surely, the requirement to consult the pilots prior to their retirement

defeats the exercise by management of its option to retire the said
employees.  It gives the pilot concerned an undue prerogative to assail
the decision of management.  Due process only requires that notice be
given to the pilot of petitioner’s decision to retire him.

In the 2000 case of Progressive Development Corporation vs. NLRC, [G.

R. No. 138826, October 30, 2000], the optional retirement provision of
the Employees’ Non-Contributory Retirement Plan states:
“Section 3. Optional Retirement. - Any participant with twenty (20) years
of service, regardless of age, may be retired at his option or at the option
of the Company and shall be entitled to the following benefits x x x.”

In upholding the validity of the decision of management to retire

employees in accordance with the afore-quoted provision, the Supreme
Court ruled that the said retirement plan is valid for it forms part of the
employment contract of petitioner company. The following
pronouncement made by no less than the DOLE was given substantial
weight, to wit:

“Considering therefore the fact that your client’s retirement plan now
forms part of the employment contract since it is made known to the
employees and accepted by them, and such plan has an express provision
that the company has the choice to retire an employee regardless of age,
with twenty (20) years of service, said policy is within the bounds
contemplated by the Labor Code. Moreover, the manner of computation of
retirement benefits depends on the stipulation provided in the company
retirement plan.” (Opinion of Director Augusto G. Sanchez of the Bureau
of Working Conditions, Department of Labor and Employment, Oct. 8,
1990, confirming the validity of The Plan, particularly its provision on
optional retirement). chanrobles virtual law library

Moreover, the undisputed fact that a number of employees of petitioner

company had availed of The Plan since its effectivity only confirms that
The Plan has already been part of the employment contract of petitioner
company for a long time. (Ibid.).

In Pantranco North Express, Inc. vs. NLRC, [G. R. No. 95940, July 24,
1996, 259 SCRA 161], it was ruled that an employee who was
compulsorily retired after rendering 25 years of service in accordance with
the provision of the CBA cannot claim that he was illegally dismissed. 
Providing in a CBA for compulsory retirement of employees after 25 years
of service is legal and enforceable so long as the parties agree to be
governed by such CBA.

In the earlier case of Bulletin Publishing Corp. vs. Sanchez, [144 SCRA
628 (1986)], the Supreme Court held:

“The aforestated sections explicitly declare, in no uncertain terms, that

retirement of an employee may be done upon initiative and option of the
management. And where there are cases of voluntary retirement, the
same is effective only upon the approval of management.  The fact that
there are some supervisory employees who have not yet been retired
after 25 years with the company or have reached the age of sixty merely
confirms that it is the singular prerogative of management, at its option,
to retire supervisors or rank-and-file members when it deems fit. There
should be no unfair labor practice committed by management if the
retirement of private respondents were made in accord with the agreed
option. That there were numerous instances wherein management
exercised its option to retire employees pursuant to the aforementioned
provisions, appears to be a fact which private respondents have not
controverted.  It seems only now when the question of the legality of a
supervisors union has arisen that private respondents attempt to inject
the dubious theory that the private respondents are entitled to form a
union or go on strike because there is allegedly no retirement policy
provided for their benefit. As above noted, this assertion does not appear
to have any factual basis.”

Interruption in the service, effect.

The decision of the Supreme Court in the 2003 case of Sta. Catalina
College vs. NLRC, [G. R. No. 144483, November 19, 2003] is instructive
on the issue of interruption in the service.  In this case, the teacher was
hired by the Sta. Catalina College in June 1955 as an elementary school
teacher. In 1970, she applied for and was granted a one-year leave of
absence without pay on account of the illness of her mother.  After the
expiration in 1971 of her leave of absence, she had not been heard from
by petitioner school.  In the meantime, she was employed as a teacher in
another school - the San Pedro Parochial School during school year 1980-
1981 and later, at the Liceo de San Pedro, Biñan, Laguna during school
year 1981-1982.  In 1982, she applied anew at petitioner school which
hired her.  In 1997, the teacher reached compulsory retirement age.  The
threshold issue is whether the teacher’s services for petitioner school
during the period from 1955 to 1970 should be factored in the
computation of her retirement benefits. chanrobles virtual law library

The Supreme Court ruled that she cannot be credited for her services in
1955-1970 in the determination of her retirement benefits.  For, after her
one year leave of absence expired in 1971 without her requesting for
extension thereof as in fact she had not been heard from until she
resurfaced in 1982 when she reapplied with petitioner school, she
abandoned her teaching position as in fact she was employed elsewhere
in the interim and effectively relinquished the retirement benefits
accumulated during the said period. As the teacher was considered a new
employee when she rejoined petitioner school upon re-applying in 1982,
her retirement benefits should thus be computed only on the basis of her
years of service from 1982 to 1997.

Service in another firm, excluded in the computation of retirement

benefits.

In the 2002 case of Gamogamo vs. PNOC Shipping and Transport Corp.,
[G. R. No. 141707, May 7, 2002], it was held that since the retirement
pay solely comes from respondent company’s funds, it is but natural that
respondent should disregard petitioner-employee’s length of service in
another company for the computation of his retirement benefits.

Petitioner in Gamogamo was first employed with the Department of

Health (DOH) and remained employed as dentist at the DOH for fourteen
(14) years until he resigned on  November 2, 1977. On November 9,
1977, petitioner was hired as company dentist by Luzon Stevedoring
Corporation (LUSTEVECO), a private domestic corporation. Subsequently,
respondent PNOC Shipping and Transport Corporation (hereafter
respondent) acquired and took over the shipping business of LUSTEVECO,
and on August 1, 1979, petitioner was among those who opted to be
absorbed by the respondent. Thus, he continued to work as company
dentist. Ordinarily, his creditable service should be reckoned from such
date. However, since respondent took over the shipping business of
LUSTEVECO and agreed to assume without interruption all the service
credits of petitioner with LUSTEVECO, petitioner’s creditable service must
start from November 9, 1977 when he started working with LUSTEVECO
until his day of retirement on April 1, 1995.  Thus, petitioner’s creditable
service is 17.3333 years.

Petitioner’s contention cannot be upheld that his fourteen (14) years of

service with the DOH should be considered because his last two
employers were government-owned and controlled corporations, and fall
under the Civil Service Law.   chanrobles virtual law library

It is not at all disputed that while respondent and LUSTEVECO are

government-owned and controlled corporations, they have no original
charters; hence they are not under the Civil Service Law.  In any case,
petitioner’s fourteen years of service with the DOH may not remain
uncompensated because it may be recognized by the GSIS pursuant to
Section 12 of Presidential Decree No, 1146, as amended, otherwise
known as the Government Service Insurance Act of 1977, as may be
determined by the GSIS. 

“One-half (½) month salary” means 22.5 days.

To dispel any further confusion on the meaning of “one-half [½] month

salary” in the law, the Supreme Court, in the case of Capitol Wireless, Inc.
vs. Confesor, [G. R. No. 117174, November 13, 1996, 264 SCRA 68, 77],
simplified its computation by declaring that it means the total of “22.5
days” arrived at after adding 15 days plus 2.5 days representing one-
twelfth [1/12] of the 13th month pay plus 5 days of service incentive
leave.  

Should 1/12 of 13th month pay and 5 days of service incentive

leave be included if the employees are not entitled thereto?
 A question may be posed.  Supposing the retiring employee, by reason of
the nature of his work, was not entitled to 13th month pay or to the
service incentive leave pay pursuant to the exceptions mentioned in the
13th-Month Pay Law and the Labor Code, should he be paid upon
retirement, in addition to the salary equivalent to fifteen (15) days, the
additional 2.5 days representing one-twelfth [1/12] of the 13th month
pay as well as the five (5) days representing the service incentive leave
for a total of 22.5 days?

This question was answered in the negative in the 2004 case of R & E
Transport, Inc. vs. Latag, [G. R. No. 155214, February 13, 2004].  The
Supreme Court ruled that employees who are not entitled to 13th month
pay and service incentive leave pay while still working should not be paid
the entire “22.5 days” but only the fifteen (15) days salary.  In other
words, the additional 2.5 days representing one-twelfth [1/12] of the 13th
month pay and the five (5) days of service incentive leave should not be
included as part of the retirement benefits.

The employee in the said case was a taxi driver who was being paid on
the “boundary” system basis.  It was undisputed that he was entitled to
retirement benefits after working for 14 years with R & E Transport, Inc. 
On the question of how much he should receive as and by way of
retirement benefits, the Supreme Court pronounced:

“The rules implementing the New Retirement Law similarly provide the
above-mentioned formula for computing the one-half month salary.
(Section 5, Rule II of the Rules Implementing RA 7641 or the New
Retirement Law). Since Pedro was paid according to the “boundary”
system, he is not entitled to the 13th month in accordance with Section 3
of the Rules and Regulations Implementing P. D. No. 851 [which exempts
from its coverage employers of those who are paid on purely boundary
basis], and the service incentive leave pay pursuant to Section 1 of Rule
V, Book III of the Rules to Implement the Labor Code [which expressly
excepts field personnel and other employees whose performance is
unsupervised by the employer, including those who are engaged on task
or contract basis, purely commission basis, or those who are paid a fixed
amount for performing work irrespective of the time consumed in the
performance]. Hence, his retirement pay should be computed on the sole
basis of his salary. chanrobles virtual law library

“It is accepted that taxi drivers do not receive fixed wages, but retain only
those sums in excess of the “boundary” or fee they pay to the owners or
operators of their vehicles. Thus, the basis for computing their benefits
should be the average daily income.  In this case, the CA found that
Pedro was earning an average of five hundred pesos (P500) per day. We
thus compute his retirement pay as follows: P500 x 15 days x 14 years of
service equals P105,000. Compared with this amount, the P38,850 he
received, which represented just over one third of what was legally due
him, was unconscionable.” (Underscoring supplied)
 
Liberal interpretation of retirement laws; exception.

It is axiomatic that retirement laws are liberally construed and

administered in favor of the persons intended to be benefited. All doubts
as to the intent of the law should be resolved in favor of the retiree to
achieve its humanitarian purposes. The intention is to provide for the
retiree’s sustenance and hopefully even comfort, when he no longer has
the stamina to continue earning his livelihood.

While it is axiomatic that retirement laws are liberally construed in favor

of the persons intended to be benefited, however, such interpretation
cannot be made in the event there is clear lack of consensual and
statutory basis of the grant of retirement benefits to the claimant-
employee.

For instance, in the 2004 case of Lopez vs. National Steel Corporation, [G.
R. No. 149674, February 16, 2004], the Labor Arbiter, the NLRC and the
Court of Appeals were one in saying that there is no provision in the
parties’ CBA authorizing the payment to petitioner-employee of
retirement benefits in addition to her retrenchment pay; and that there is
no indication that she was forced or “duped” by respondent-employer to
sign the Release and Quitclaim.  The Court of Appeals also ruled that
petitioner, not having reached the retirement age, is not entitled to
retirement benefits under Article 287 of the Labor Code.  In justifying her
claim for retirement benefits, petitioner contends that respondent’s
September 20, 1994 termination letter declares in unequivocal terms that
“(Y)ou will receive a separation package in accordance with the program
and existing policies, including benefits you may be entitled to, if any,
under the Company’s Retirement Plan.” According to her, the quoted
statement expressly guarantees the grant of retirement benefits. Suffice
it to reiterate that the respondent’s retirement plan precludes employees
whose services were terminated for cause, from availing retirement
benefits.

PRESCRIPTIVE PERIOD

113.  What is the prescriptive period for offenses penalized under

the Labor Code?

General rule. - The prescriptive period of all criminal offenses penalized

under the Labor Code and the Rules to Implement the Labor Code is three
(3) years from the time of commission thereof. chanrobles virtual law library

Exception. - Criminal cases arising from ULP which prescribe within one
(1) year from the time the acts complained of were committed;
otherwise, they shall be forever barred. The running of the 1 year period,
however, is interrupted during the pendency of the labor case.

114.  What is the prescriptive period for money claims?

Prescriptive period is three (3) years from accrual of cause of action.

Meaning of “accrued” cause of action.

To properly construe Article 291, it is essential to ascertain the time when

the third element of a cause of action transpired.  Stated differently, in
the computation of the three-year prescriptive period, a determination
must be made as to the period when the act constituting a violation of the
workers’ right to the benefits being claimed was committed.  For if the
cause of action accrued more than three (3) years before the filing of the
money claim, said cause of action has already prescribed in accordance
with Article 291. (Auto Bus Transport System, Inc. vs. Bautista, supra;
Serrano vs. CA, G. R. No. 139420, Aug. 15, 2001; De Guzman vs. CA and
Nasipit Lumber Co., G.R. No.132257, Oct. 12, 1998, 297 SCRA 743).
chanrobles virtual law library

It is well-settled that an action accrues until the party obligated to do or

perform an act, refuses, expressly or impliedly, to comply with the duty. 
A case in point is Baliwag Transit, Inc. vs. Ople, [G. R. No. 57642, March
16, 1989].  A bus of petitioner Baliwag Transit driven by the respondent
driver figured in an accident with a train of the Philippine National
Railways (PNR) on August 10, 1974.  This resulted to the death of
eighteen (18) passengers and caused serious injury to fifty-six (56) other
passengers. The bus itself also sustained extensive damage. The bus
company instituted a complaint against the PNR. The latter was held liable
for its negligence in the decision rendered on April 6, 1977.  The
respondent driver was absolved of any contributory negligence.  However,
the driver was also prosecuted for multiple homicide and multiple serious
physical injuries, but the case was provisionally dismissed in March 1980
for failure of the prosecution witness to appear at the scheduled hearing. 
Soon after the PNR decision was rendered, the driver renewed his license
and sought reinstatement with Baliwag Transit.  He was advised to wait
until his criminal case was terminated.  He repeatedly requested for
reinstatement thereafter, but to no avail, even after termination of the
criminal case against him. Finally, on May 2, 1980, he demanded
reinstatement in a letter signed by his counsel.  On May 10, 1980,
petitioner Baliwag Transit replied that he could not be reinstated as his
driver’s license had already been revoked and his driving was “extremely
dangerous to the riding public.”  This prompted respondent driver to file
on July 29, 1980 a formal complaint with the Ministry of Labor and
Employment for illegal dismissal against Baliwag Transit praying for
reinstatement with backwages and emergency cost-of-living allowance.
The complaint was dismissed by the Regional Director on the ground of
prescription under Article 291 of the Labor Code.  This was reversed by
then Labor and Employment Minister Ople.  On appeal to the Supreme
Court, it was ruled that the action had not prescribed, viz.:

“. . . (T)he antecedent question that has to be settled is the date when

the cause of action accrued and from which the period shall commence to
run.  The parties disagree on this date.  The contention of the petitioner is
that it should be August 10, 1974, when the collision occurred. The
private respondent insists it is May 10, 1980, when his demand for
reinstatement was rejected by the petitioner. chanrobles virtual law library

“It is settled jurisprudence that a cause of action has three elements, to

wit, (1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the
named defendant to respect or not to violate such right; and (3) an act or
omission on the part of such defendant violative of the right of the
plaintiff or constituting a breach of the obligation of the defendant to the
plaintiff.

“The problem in the case at bar is with the third element as the first two
are deemed established. chanrobles virtual law library

“We hold that the private respondent’s right of action could not have
accrued from the mere fact of the occurrence of the mishap on August 10,
1974, as he was not considered automatically dismissed on that date.  At
best, he was deemed suspended from his work, and not even by positive
act of the petitioner but as a result of the suspension of his driver’s
license because of the accident. There was no apparent disagreement
then between (respondent driver) Hughes and his employer.  As the
private respondent was the petitioner’s principal witness in its complaint
for damages against the Philippine National Railways, we may assume
that Baliwag Transit and Hughes were on the best of terms when the case
was being tried.  Hence, there existed no justification at that time for the
private respondent to demand reinstatement and no opportunity warrant
(sic) either for the petitioner to reject that demand.

“We agree with private respondent that May 10, 1980, is the date when
his cause of action accrued, for it was then that the petitioner denied his
demand for reinstatement and so committed that act or omission
‘constituting a breach of the obligation of the defendant to the plaintiff.’
The earlier requests by him having been warded off with indefinite
promises, and the private respondent not yet having decided to assert his
right, his cause of action could not be said to have then already accrued. 
The issues had not yet been joined, so to speak.  This happened only
when the private respondent finally demanded reinstatement on May 2,
1980, and his demand was categorically rejected by the petitioner on May
10, 1980.” (Baliwag Transit, Inc. vs. Ople, G. R. No. 57642, March 16,
1989).

Finding analogy with the case of Baliwag Transit [supra], the Supreme
Court, in Serrano vs. CA, [G. R. No. 139420, August 15, 2001], ruled that
the cause of action of petitioner has not yet prescribed.  From 1974 to
1991, respondent Maersk-Filipinas Crewing, Inc., the local agent of
respondent foreign corporation A.P. Moller, deployed petitioner Serrano as
a seaman to Liberian, British and Danish ships. As petitioner was on board
a ship most of the time, respondent Maersk offered to send portions of
petitioner’s salary to his family in the Philippines.  The amounts would be
sent by money order. Petitioner agreed and from 1977 to 1978, he
instructed respondent Maersk to send money orders to his family.
Respondent Maersk deducted the amounts of these money orders totaling
HK$4,600.00 and £1,050.00 Sterling Pounds from petitioner’s salary.
Respondent Maersk deducted various amounts from his salary for Danish
Social Security System (SSS), welfare contributions, ship club, and SSS
Medicare.

It appears that petitioner’s family failed to receive the money orders

petitioner sent through respondent Maersk. Upon learning this in 1978,
petitioner demanded that respondent Maersk pay him the amounts the
latter deducted from his salary.  Respondent Maersk assured him that
they would look into the matter, then assigned him again to board one of
their vessels.

Whenever he returned to the Philippines, petitioner would go to the office

of respondent Maersk to follow up his money claims but he would be told
to return after several weeks as respondent Maersk needed time to verify
its records and to bring up the matter with its principal employer,
respondent A.P.  Moller.  Meantime, respondent Maersk would hire him
again to board another one of their vessels for about a year.

Finally, in October 1993, petitioner wrote to respondent Maersk

demanding immediate payment to him of the total amount of the money
orders deducted from his salary from 1977 to 1978. On November 11,
1993, respondent A.P. Moller replied to petitioner that they keep
accounting documents only for a certain number of years, thus data on
his money claims from 1977 to 1978 were no longer available.  Likewise,
it was claimed that it had no outstanding money orders. A.P. Moller
declined petitioner’s demand for payment.

In ruling that the cause of action has not yet prescribed, the Supreme
Court declared:

“The facts in the case at bar are similar to the Baliwag case. Petitioner
repeatedly demanded payment from respondent Maersk but similar to the
actuations of Baliwag Transit in the above cited case, respondent Maersk
warded off these demands by saying that it would look into the matter
until years passed by.  In October 1993, Serrano finally demanded in
writing payment of the unsent money orders.  Then and only then was
the claim categorically denied by respondent A.P. Moller in its letter dated
November 22, 1993. Following the Baliwag Transit ruling, petitioner’s
cause of action accrued only upon respondent A.P. Moller’s definite denial
of his claim in November 1993.  Having filed his action five (5) months
thereafter or in April 1994, it was held that it was filed within the three-
year (3) prescriptive period provided in Article 291 of the Labor Code.”

In Philippine National Construction Corporation [PNCC] vs. NLRC, [G. R.

No. 100353, October 22, 1999], the complainant was not dismissed but
merely asked to go on vacation in May, 1985.  It was only on August 16,
1989 that he was informed of the termination of his services.  Hence,
when he brought his complaint in 1989, his cause of action was not yet
barred by prescription. It was within the three-year prescriptive period
under Article 291 of the Labor Code.

In the 2003 case of Ludo & Luym Corporation vs. Saornido, [G. R. No.
140960, January 20, 2003] petitioner contended that the money claim in
this case is barred by prescription.  The Supreme Court disagreed and
ruled that this contention is without merit. Such determination is a
question of fact which must be ascertained based on the evidence, both
oral and documentary, presented by the parties before the Voluntary
Arbitrator. In this case, the Voluntary Arbitrator found that prescription
has not as yet set in to bar the respondents’ claims for the monetary
benefits awarded to them.  As elucidated by the Voluntary Arbitrator:

“The respondents had raised prescription as defense.  The controlling law,

as ruled by the High Court, is:

‘The cause of action accrues until the party obligated refuses xxx to
comply with his duty.  Being warded off by promises, the workers not
having decided to assert [their] right[s], [their] causes of action had not
accrued…’ (Citation omitted)

“Since the parties had continued their negotiations even after the matter
was raised before the Grievance Procedure and the voluntary arbitration,
the respondents had not refused to comply with their duty.  They just
wanted the complainants to present some proofs.  The complainant’s
cause of action had not therefore accrued yet. Besides, in the earlier
voluntary arbitration case aforementioned involving exactly the same
issue and employees similarly situated as the complainants’, the same
defense was raised and dismissed by Honorable Thelma Jordan, Voluntary
Arbitrator. chanrobles virtual law library
“In fact, the respondents’ promised to correct their length of service and
grant them the back CBA benefits if the complainants can prove they are
entitled rendered the former in estoppel, barring them from raising the
defense of laches or prescription.  To hold otherwise amounts to
rewarding the respondents for their duplicitous representation and abet
them in a dishonest scheme against their workers.” (Ludo & Luym
Corporation vs. Saornido, G. R. No. 140960, Jan. 20, 2003).

However, in the 2004 case of Kar Asia, Inc. vs. Corona, [G. R. No.
154985, August 24, 2004], it was pronounced that there was
unreasonable length of time in pursuing respondents’ claim for the
December 1993 COLA when they filed their complaint for underpayment
of wage only on September 24, 1997.  Thus, the action for the payment
of the December 1993 COLA has already prescribed. chanrobles virtual law library

Time to reckon prescription; date of filing of complaint.

As a general rule, the date of filing of the complaint should be the

determining factor in reckoning the prescriptive period. 

However, in case the complaint is amended, the date of filing should be

reckoned on the date said amended pleading is filed.  Thus, in the case of
Philippine Industrial Security Agency Corporation vs. Dapiton, [G. R. No.
127421, December 8, 1999], it was held that respondent-employee filed
his money claims only on June 15, 1994 when he filed his Amended
Complaint and Position Paper.  As a consequence thereof, his money
claims from November 2, 1990 to June 14, 1992, are already barred by
prescription pursuant to Article 291 of the Labor Code. Apparently, the
Labor Arbiter mistakenly relied on the date of filing of the original
complaint of respondent.  It is true that said complaint was filed on April
22, 1994, however, at that time, respondent merely accused petitioner of
illegal dismissal and has not yet charged petitioner with underpayment of
wages or non-payment of overtime pay, 13th month pay, etc.

Prescription of claims for allowances and other benefits.

In cases of nonpayment of allowances and other monetary benefits, if it is

established that the benefits being claimed have been withheld from the
employee for a period longer than three (3) years, the amount pertaining
to the period beyond the three-year prescriptive period is barred by
prescription.  The amount that can only be demanded by the aggrieved
employee shall be limited to the amount of the benefits withheld within
three (3) years before the filing of the complaint.

Thus, in the case of E. Ganzon, Inc. vs. NLRC, [G. R. No. 123769,
December 22, 1999], involving claims for regular holiday pay and service
incentive leave, the Supreme Court observed that the Labor Arbiter
should not have awarded the money claims that were beyond three (3)
years.  There are ten (10) regular holidays under Executive Order No. 203
and five (5) days of service incentive leave in a year.  At most, private
respondents (employees) can only claim thirty (30)-day holiday pay and
fifteen (15)-day service incentive leave pay with respect to their amended
complaint of 25 January 1991. Any other claim is now barred by
prescription.

Different prescriptive rule for service incentive leave.

The Supreme Court clarified in the 2005 case of Auto Bus Transport
System, Inc. vs. Bautista, [G. R. No. 156367, May 16, 2005], the correct
reckoning of the prescriptive period for service incentive leave,
considering that “the service incentive leave is a curious animal in relation
to other benefits granted by the law to every employee” because “in the
case of service incentive leave, the employee may choose to either use
his leave credits or commute it to its monetary equivalent if not
exhausted at the end of the year.  Furthermore, if the employee entitled
to service incentive leave does not use or commute the same, he is
entitled upon his resignation or separation from work to the commutation
of his accrued service incentive leave.”

Applying Article 291 of the Labor Code as well as the three (3) elements
of a cause of action [supra], the Supreme Court ruled:
 
“Correspondingly, it can be conscientiously deduced that the cause of
action of an entitled employee to claim his service incentive leave pay
accrues from the moment the employer refuses to remunerate its
monetary equivalent if the employee did not make use of said leave
credits but instead chose to avail of its commutation.  Accordingly, if the
employee wishes to accumulate his leave credits and opts for its
commutation upon his resignation or separation from employment, his
cause of action to claim the whole amount of his accumulated service
incentive leave shall arise when the employer fails to pay such amount at
the time of his resignation or separation from employment. chanrobles virtual law library

“Applying Article 291 of the Labor Code in light of this peculiarity of the
service incentive leave, we can conclude that the three (3)-year
prescriptive period commences, not at the end of the year when the
employee becomes entitled to the commutation of his service incentive
leave, but from the time when the employer refuses to pay its monetary
equivalent after demand of commutation or upon termination of the
employee’s services, as the case may be.

“The above construal of Art. 291, vis-à-vis the rules on service incentive
leave, is in keeping with the rudimentary principle 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. 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.

“In the case at bar, respondent had not made use of his service incentive
leave nor demanded for its commutation until his employment was
terminated by petitioner.  Neither did petitioner compensate his
accumulated service incentive leave pay at the time of his dismissal. It
was only upon his filing of a complaint for illegal dismissal, one month
from the time of his dismissal, that respondent demanded from his former
employer commutation of his accumulated leave credits. His cause of
action to claim the payment of his accumulated service incentive leave
thus accrued from the time when his employer dismissed him and failed
to pay his accumulated leave credits.   chanrobles virtual law library

“Therefore, the prescriptive period with respect to his claim for service
incentive leave pay only commenced from the time the employer failed to
compensate his accumulated service incentive leave pay at the time of his
dismissal. Since respondent had filed his money claim after only one
month from the time of his dismissal, necessarily, his money claim was
filed within the prescriptive period provided for by Article 291 of the Labor
Code.”

115.  What is the prescriptive period for illegal dismissal?

An action for illegal dismissal prescribes in 4 years from accrual of cause

of action.

116.  What is the prescriptive period for actions involving the

funds of the union?

Any action involving the funds of a labor organization shall prescribe after
three (3) years from the date of submission of the annual financial report
to the Department of Labor and Employment or from the date the same
should have been submitted as required by law, whichever comes earlier.

117.  What is the prescriptive period for illegal recruitment?

Generally, an illegal recruitment case prescribes in 5 years. The exception

is in case of illegal recruitment involving economic sabotage which
prescribes in 20 years.

118.  What is the prescriptive period for SSS violations?

In cases involving refusal or neglect by the employer in the remittance of

contributions to the SSS, prescriptive period is twenty (20) years from the
time the delinquency is known or the assessment is made by the SSS, or
from the time the benefit accrues, as the case may be.

In Chua vs. CA, [G. R. No. 125837, Oct. 6, 2004], where only eight (8)
years had passed from the time delinquency was discovered or the proper
assessment was made, the Supreme Court ruled that the claim has not
yet prescribed because Republic Act No. 1161, as amended,  (now
Republic Act No. 8282, otherwise known as the Social Security Act of
1997), prescribes a period of twenty (20) years, from the time the
delinquency is known or assessment is made by the SSS, within which to
file a claim for non-remittance against employers. (Section 22(b), R.A.
1161).

119.  What is the prescriptive period for employees’ compensation

claims?

Three (3) years from accrual of cause of action.