LABOR LAW REVIEW

20%? Why only make it easier for chartered locals?

You privilege chartered locals. You want unions that

Lecture/recitation notes
Atty. Marlon Manuel

are attached to parent federations, which already

Notes by Glenn T. Tuazon

RIGHT TO SELF-ORGANIZATION

Who can join a union?

o Anyone, whether for profit or not, and regardless of nature
(commercial, industrial, charitable, educational, etc.)
Exceptions:

managerial

supervisory only by themselves

What is a union?
o See definition
How do you form a union?
o Identify the bargaining unit
o Register the union

20% of members of bargaining unit

Constitution and by-laws

If you do not have 20% of the membership of the bargaining unit,
o

you cannot organize. T or F?

o False. You can still have a union, although not a legitimate
o

local.
What is the significance of removing the 20% requirement
for chartered locals?

Consistent with policy that makes it easier to selforganize.

have systems and support in place.

What is a federation?
o An umbrella organization a group of local unions forming the
national level (there are industry unions, ex. Banking unions;

while there are national federation from different industries)

An independent union is not part of a federation. T or F?
o False. An independent union can join a federation, after

independently organizing itself.

A chartered local is not an affiliate. T or F?
o True, because it has to be created by the federation.

See

below for the types of affiliates.

Can a chartered local register as an independent union while
within the federation?
o Yes. It becomes an affiliate.
o There are two types of affiliates:

1. Independent first, then joined federation.

2. Part of federation, then became independent but

labor organization.
You can still receive a charter from a federal union you do not
need to meet the 20% requirement to become a chartered

But why is an independent union still required to have the

did not leave the union.

What can a federation do versus other types?
o ONLY a federation can create another labor organization.
o An independent union cannot create another union.

chartered local cannot, as well.

o N.B. A Trade union is not a legitimate labor organization.
Whats the difference between procedure for acquisition of legal
personality of an independent union and a chartered local?
o Independent union:

Obtain a certificate of registration

o Chartered local:

Issuance of charter certificate has limited legal

personality (to apply for certification election)

Do

you

need

submission,

or

does

personality vest upon issuance of the certificate?

Just upon the moment of issuance of charter

certificate. No need for submission or filing.

Why is the personality limited?

Personality is only to apply for certification

election.
What documents must be submitted?

1. Chapters officers, addresses, principal

union; while for a chartered local, you just need to submit.

o

you

are

not

encountering

an

entirely

new

organization; the chartered local is merely the creature of an

existing union.
How do you illustrate limited legal personality of a chartered
local?
o

obtain limited legal personality first.

In the amendment introduced by RA 9481, R&F and supervisors
can be part of the same union. T or F?
o False. Only same federation, not same union.
o RA 9481 removed the prohibition against the joining together of
supervisory and R&F unions in a federation.
Atlas.

chartered

local

becomes

o
o

professional

relationship between supervisors and R&F, etc.).

So when Atlas was killed, the De La Salle

the

is prohibited by the Labor Code.

What is the effect of this comingling?

Those not supposed to be part of the union are

deemed to be not included or part of the union.
BUT it is not a ground for cancellation of the
registration of the union.

The Labor Code only

provides three grounds for cancellation of a unions

registration comingling is not one of these.

N.B. Art 245 speaks of eligibility of employees to
become union members. Even before RA 9481, the
SC clarified that because the LC speaks of eligibility
of employees and not legitimacy of unions. So it

Meaning, you can either

should not adversely impact the union, just the

acquire full legal personality first before filing for certification

election (by submitting the documents: a) list of officers, b)

(direct

qualifications set in law before.

But no comingling within union or chartered local, because this

election have limited legal personality. T or F?

o False.
Limited legal personality is an option that can be
exercised by a chartered local.

qualifications

qualifications also died.

Did RA 9481 allow comingling between R&F and supervisors?
o Yes.
Allow within the same federation, without

after

submission of documents):

Ex. Cannot conduct a strike

All chartered locals, upon filing for petition for certification

This is not in Art. 245, but merely a jurisprudential

providing

They do not possess all the rights of legitimate labor

(which

It overturned

prohibition. So they can now mix in the same federation.

N.B. De La Salle qualified the Atlas doctrine by

organizations

office of the chapter

2. Constitution, by-laws
Upon submission, what happens?

You obtain all rights and privileges of a

legitimate labor organization.

Whats the reason behind the difference in requirements?
o Note that you need to wait for the certificate for independent
(IMPT!)
Because

constitution and by-laws); or you can do it the normal way and

legal

employees.
What are these three grounds?

1. Misrepresentation, false statement, or

is the federation issuing a charter certificate. (Consistent with

fraud in adoption/ratification of constitution or

by-laws or amendments to such; minutes of

the federations personality is indeed cancelled?

o It also erases the legal personality of all the chartered locals.
o OLD EXCEPTION (does not apply anymore this is missing in

ratification, or list of members taking part in

policy of RA 9481 on encouraging membership in federations)

What if a petition for cancellation is filed against the federation and

the ratification
2. Misrepresentation, false statement, or

the new DO): if there is an existing CBA and the chartered local

fraud in election of officers, minutes of

election, and list of voters

3. Voluntary cancellation
o 2/3 of general membership
o In a meeting duly called for that
o

purpose
Submitted by labor organizations

board, attested by president of org

Can an opposition be filed by another union or party, alleging any

is the administrator of the CBA, the chartered local will not exist
only until after the CBA expires.
BARGAINING AGENT AND CERTIFICATION ELECTION
<Copy from Jaja>

of the grounds for cancellation against another union during the

filing for certification election?
o No.
You cannot attack the validity of an organization

collaterally in a procedure for certification election. You have to

o

Pre-election proceedings
o Includes matters such as exclusion and inclusion of voters

Ex. when there is no employer-employee relationship;

directly attack it.

Is this an absolute rule?

No. Wait for this in the part on certification elections.

when he is not a member of the bargaining unit

How do you do undergo inclusion/exclusion?

Report to Med-Arbiter, who will note it in the minutes.

Undergo with normal conduct of elections. But actual

exclusion/inclusion only happens after the elections.

But what if they agree? Can there be removal

during pre-election?

Yes.
Normally, whats the status of the challenged

Extra questions

What is a trade union?

o It is the third level. It is a group of federations. This is why is

names?

They can vote. But the Med-Arbiter decides

it not a legitimate labor organization. Its just a grouping of

different federations.
If a chartered local disaffiliates, does it lose its legal personality?
o Yes. Because its existence is dependent on the federation.

after certification election.

But how can you exclude them?
o You segregate their votes,

in

separate envelopes, because their

The legal personality is tacked on the point of creation, which

votes are otherwise anonymous.

Election proceedings

If there are 500 voters, how many must vote for there to be
valid elections?

At least 251.
What if there is a failure of election?

This happens when there is 50% or less valid votes

be a union, even if there is no majority?

At least 50% of ALL votes, including spoiled ballots,

from the voters in the bargaining unit.

You DONT have to file another petition. You can just
request through a motion to repeat the conduct of a

certification election.
What are you voting on?

Either you vote for a union (Union A or Union B), or

vote for no union.

If there is just one union, its yes or no in favor of

Union X.
How do you determine the winner?

Get the majority of those who actually voted with valid

votes.

What do you mean valid votes?

Those which are not spoiled ballots.

For instance, of the 500 voters, 400 voted. 390 are valid votes.
o Union A 150
o Union B 200
o No Union 40
o Spoiled 10
o Is there a winning Union?

Yes. Union B got majority of 390 votes (at least 196

votes).
For instance, of the 500 voters, 400 voted. 390 are valid votes.
o Union A 150
o Union B 150
o No Union 90
o Spoiled 10
o Is there a winning Union?

No. There will be a run-off election.

What is your basis for determining whether there should

voted for unions,

For instance, of the 500 voters, 400 voted. 390 are valid votes.
o Union A 90
o Union B 100
o No Union 200
o Spoiled 10
o Is there a winner?

Yes. No Union won.

For instance, of the 500 voters, 400 voted. 390 are valid votes.
o Union A 100
o Union B 100
o No Union 190
o Spoiled 10
o Is there a winner?

No, no choice got the magic number of 196.

o Will there be a run-off?

Yes, because the two unions got 50% of ALL the

votes (200 out of 400). (You count the spoiled ballots
in the total, but you dont care about what their
o
o

contents are [Gs question])

What happens?

No union choice will be removed.

N.B. In this situation, even if no union got most of the votes,

ONLY unions can participate in run off elections.

For instance, of the 500 voters, 400 voted. 390 are valid votes.
o Union A 150
o Union B 95
o No Union 195
o Spoiled 10
o Is there a winner?

No. Nobody got a majority.

o Is there a run-off election?


o
o

No, because the two unions did not get at least 50%

of ALL the votes (200 out of 400).

Is there a valid election?

Yes.
What is the effect of this particular certification election?

The one-year bar applies. The certification election

way?

won the CE, through a one-year protection to give it a chance

o

to negotiate with the employer as regards a CBA.

After 1 year, the ideal situation is that there is CBA.

This

extends the 1 year period to a 5-year period.

There is a short window period (60 day freedom

elections.
In this case, does it apply?

Yes, because there is no winner and any of those

bars a subsequent CE
There is no incumbent EBR. So there was a certification election
(or consent election).
o From the CE, you have 1 year bar. This protects the union that

another SEPARATE envelope and put the name.

Do you open the segregated envelopes immediately after

period expires
3. Deadlock bar
4. Negotiation bar

Once negotiations are started within the 1st year, even

if there is no CBA at the end of the 1-year period, it

elections?

Only if it will materially affect the result of the

o

there is no need to do so.

Aside from the one-year bar from certification election, is there any

o
o

put his/her name. You put Challenged persons Y in

o

So you dont unduly expose their votes to scrutiny if

other bar for certification election?

o 1. Certification election bar <this>

- one year bar

o 2. Contract bar

Wait for the 60-day freedom period before the 5 year

has ended. It is as if no union won.

NOTE: Different base figures based on example:
o 500 (for total amount of voters need 251 for valid elections)
o 390 (for majority need 196 which is 50%+1)
o 400 (whether there will be a run-off elections just 50%, not
50%+1)
For instance, of the 500 voters, 400 voted. 390 are valid votes.
o Union A 150
o Union B 95
o No Union 195
o CHALLENGED (not spoiled) 10
o what happens here?

You put Challenged persons X in one envelope and

What is the reason why challenged ballots are treated this

period before the expiration of the 5 year term of the

o

challenged votes could lead to a winner.

Also, if none of the 10 votes is for no union it can

CBA)
N.B. (very important) If you dont have a CBA and you are
nearing the end of the first year, in the past, you need a

also help the two unions reach 200 votes to enable

deadlock to bar subsequent CE. NOW, there is no more need

run-off elections.
N.B. When they are qualified as valid votes, 196 will

negotiations and you have sustained negotiations beyond the

not be the majority number, because the base number

will increase.

for a CBA or a deadlock, because as long as you have started

first year, you are still protected.

What are the two kinds of consent elections?

If Union A and B decide to have elections without participation

of DOLE, it has no effect of a valid CE. It only determines the

o

majority.
But if Union A and B agree to have elections, but involve the

What is the term of the CBA?

o It can be fixed by the parties. It can be 20 years, whatever, but
o

Med-Arbiter and the DOLE, then it has effect of valid CE.

COLLECTIVE BARGAINING

What is collective bargaining?

o Agreement between employer and employee as to terms of
employment (benefits, conditions of work), and dispute

subject to the five-year period.

What happens after five years?

There is a freedom period (60-days before the end of

the five years) to possibly hold another CE.
What happens before the end of the third year?

N.B. Use the term underlined to be precise.

You can renegotiate the economic provisions of the

settlement (ex. grievance machinery).

How do you start collective bargaining?
o Submission of the EBR to the employer of notice to collectively

CBA.
How do you do the renegotiation?

The terms of the CBA will be reexamined.

Who will start it?

o The union. You will not expect the

bargain, along with proposal

o Then the employer will submit a counterproposal
What next?
o They will negotiate (do not proceed to the NCMB immediately,

modification.

proposal becomes the new CBA if

provision.
If you have exhausted all efforts, you will reach a point where

there can be no agreement or movement in the positions of the

parties as to particular provisions.
What if the employer refuses to respond to the EBRs proposal?
o There is Unfair Labor Practice violation of the duty to bargain
o
o

collectively.
It can be submitted to the Labor Arbiter.
The penalty for management for refusing to bargain the

proposal becomes the new CBA

What if you refuse to go to the labor arbiter?
o You can use it as a ground to file a notice of strike.
o You cannot do both. These two remedies are mutually
exclusive.

same

refusing to bargain will apply the

several times, over a period, until you have discussed each

The

principle/penalty for management

contrary to what the provision of law suggests!). You can meet

employer to start it.

The union submits a proposal for

management refuses to respond.

What if the union does not submit a

proposal?
o Then the existing CBA will persist.
Can the parties renegotiate on the first year? The second

year?

Yes, but only if the parties both agree.

But on the third year, the law mandates bargaining.

This is valid:
o There is a CBA that covers five years, giving wage increases
for the first, second, and third years, leaving the fourth and fifth
o

years open.
Or it can provide for wage increases in years four and five, but
subject to renegotiation.

A CBA expires after five years. You commence negotiations for a

new CBA.

(Alternatively, renegotiations, if the CBA is not yet

expiring, but after 3 years.) What is the relevance of the six month

period?
o Agreement between the parties on the new CBA will retroact to

the beginning of the first date after expiration, if they agree

within 6 months from expiration.

Here, the law mandates retroactivity.

If they agree after six months post expiration of the CBA, the
parties will determine when the CBA is deemed to have

commenced.

There can still be retroactivity, but optional.

Does the six month period apply to mid-term renegotiation period?
o No. The six month period only applies to a new CBA. The
provision only speaks of expiration so it must involve a new

STRIKES

you cannot strike without having registered with DOLE.

o True.
Because the charter certificate only gives your

after the end of the six month period. BUT there is no basis for

this. This seems like an invention of the SC.

In case you have a situation when there is a new CBA entered into

after the six month period and there is no retroactivity. So there is

a gap (ex. 10 months). What happens?
o There is a hold-over principle where the first CBA will be
o

new CBA retroacts to replace the effects of the first

CBA. (Ex. Back pay of wage differentials)

need to wait for approval)

When can you strike?
o There are only two. No other:
o 1. ULP
o 2. Deadlock in collective bargaining
What is ULP?
o Acts of the employer or the labor organization that violate the
o

deemed to exist in the meantime.

What if there is a four month interim instead?

In the interim, the first CBA will hold-over for the

meantime.
But since there is an agreement within six months, the

personality to file for certification.

T/F If you are a chartered local, and you submitted all
requirements, can you strike?
o Yes. Upon submission, you have all the rights of an LLO. (No

CBA.
If there is no agreement on retroactivity, what must the Secretary
of Labor do after he assumes jurisdiction?
o There is an SC case that says the CBA must retroact to the first

How are strikes related to CBA?

o One of the grounds for strike is a bargaining deadlock
T/F You cannot strike before negotiation.
o False, you can strike on ULP.
T/F You cannot strike before certification election.
o False. If there is no EBR, an LLO can strike on ULP and LLO.
T/F You cannot strike before you register in the DOLE.
o True. Because an LLO has to be registered with DOLE.
T/F If you are not an independent union, hence a chartered union,

right to organize.
Youre not being paid OT pay. Is this ULP?

No, not in itself. It must be done in order to

discourage membership in a labor organization.

TEST: It must be related to the exercise of an

employees right to self-organize.

Can the employer only commit ULP when there is a union?
o No. [GT: I think, grounds B and F in 247]
Can ULP be committed only by the employer?
o No. The labor organization can commit it too (248).
Can there be a strike when there is no union?

o No. There has to be a union.

What if the temporary work stoppage becomes permanent?
What is the definition of strike?
o Temporary stoppage of work by concerted action arising from a
o

labor dispute between employer and employee.

Requisites?

1. Temporary stoppage of work

2. Concert action

3. From labor dispute between employer

and

employee
o What does concerted action mean?

Group of employees. At least two.

o 10 employees can there be a valid strike?

As long as initiated by the labor union.

o If not initiated by a labor union, is it still a strike?

Yes, but its not a valid strike.

Is a violation of a CBA an ULP?
o If it amounts to ULP (Economic provision + malice).
o All other violations are just grievances its still an actionable

wrong, but not ULP. You go to the grievance machinery.

o If you strike on the basis of a grievance, what happens?

It is not a valid strike.

N.B. The distinction between gross and simple violations only applies

to violations of the CBA. Do not get confused.

T/F If there is no dispute with the employer, there can be no
strike.
o
o

illegal strike.
If its not an egg, do not call it a rotten egg. Its not an

egg. The SC is guilty of doing this a lot.

Although jurisprudence calls it a strike. Be careful.

But in the Bar exam, follow this classification.

The SC has upheld certain actions by employees, ex. wearing
armbands, having placards as valid expressions. But after the Dusit
case, it seems unclear if these will already be considered as work
stoppage or mass action. (NUWHRAIN Dusit Hotel Nikko Chapter v. CA,

November 11, 2008)

There was a case where the employees did not apply for a permit to
strike, but just applied for a mayors permit to hold a rally, on the theory
that it is not a strike, but a mass action.
o But the SC held that it is a strike because there is work
stoppage; because they applied for work leaves, and there is a

dispute existing.
Is a prayer rally a strike?
o No, as long as it does not disrupt the work of those in duty. A
hot tip is to include as well non-members of the union. And it is
no question, valid, if done after work hours. If done during

work hours, do not disrupt.

T/F If there is no actual ground for a strike, there is no legal
strike.
o

False. You can have a good faith strike, when the union in
good faith believed there is a ground to strike, even if it is found

mere sympathy strike.

Its a mass action that could lead to possible

dismissal.
Is it proper to call it an illegal strike?

No. Because its not a strike in the first place, so you

dont even go into the inquiry whether its a legal or

True.
Is a welga ng bayan a strike?

No. There is no employer-employee dispute. It is a

not to have actually existed.

There must be actions done by the employer that would justify

the belief that there was ULP committed.

What do you do?
o 1. File notice to strike stating that you intend to hold a strike on
the stated ground to the Regional Office of the DOLE

*TAKE NOTE of the cooling off period below

What if you dont have an intended date?

Its not required in the IRR.

So in this case, how do you peg 15 and 30

days?
o [no answer]
2. Inform the NCMB (DOLE) at least 24 hours before the strike
vote

vote, and allow any party to contest the

This is the second notice. The purpose is to inform

the NCMB and give it a chance to supervise the strike

vote, and give it ample time to deploy personnel

When do you file this?

Anytime after notice to strike.

Should the union wait for a DOLE representative?

No, because it is not mandatory.

3. Hold strike vote

It has to be done after filing notice of strike. There is

no specific period.
Majority vote of whom?

Union members only

This is different from the eligible voters in a

certification election

Third notice: notice of result of strike vote

4. 7 day strike ban

Count this 7-day ban from the time you submitted the

strike-vote results
Can it be counted within the cooling off period?

It can be wholly within, partly within, or

results.
Can they wait several weeks after to conduct the

actual strike?

Yes.
What is the cooling off period?
o At least 30 days before intended date of strike for CBA
deadlock
At least 15 days for ULP

Exception: No cooling-off period for union-busting,

such as dismissal of union officers who are duly-

Allow DOLE to confirm the results of the

elected officers (take note of the duty elected part)

Does termination of an appointed officer fall

within this exception?

No.
What is the reason for 30 and 15 days?

To give the parties chance to cool-off, in order to

reconcile.
What if the strike ban is over but the cooling off period is not?
o You cannot strike yet. Wait for the cooling off period to end.
What if the cooling off period is done, but the strike ban is not?
o Same. Wait for the strike ban to end.
How many notices all-in-all do you need for a valid strike?
o Three notice of strike, notice of conduct of strike vote, notice
of strike vote results
[Class question] What if the employer commits ULP against the
minority union but the EBR doesnt strike on behalf of the minority

entirely outside the cooling off period.

Just use the submission of the results of the

union. Can the minority strike?

o Sir. MM Yes they should be able to, based on ULP.

strike-vote as the starting point.

What is the purpose of this?

Especially when the EBR is in cahoots with the employer.

o Jurisprudence No, they cannot.
Can there be an illegal strike vote?

No such thing; there is no requirement that should be complied

with.
But what if there is absence of notice of strike vote?

There is defect in notice, but the strike vote itself is not

by government. Patagalan at patigasan. The parties have to

illegal.
After complying with all the four steps, what else do you have to
comply with?
o Cannot perform acts that would render a strike illegal.
o Ex. violence
What are the prohibited acts of employer?
o Employing strike breakers
o Etc.
Should the employer wait for a case to be filed in order to fire an

for a determination that the strike is illegal?

o No. The act is illegal, independent of whether the strike is

holding in a case.
Recent case: statements or charges made by strikers against

respectively.
What are the implications/effects of assumption order?
o Immediately return to work.
o Secretary of Labor issues a Return to Work Order in addition to
o

convert an otherwise valid strike into an illegal strike.

o Ex. Libelous, statements against products or services
o Although general rule is that a strike is a conflict situation, so

assumption

order.

It

is

necessarily

implied.

Otherwise, its a free vacation for the laborers! Steel

of the strikers?
o It is a factual question. It is case-to-case basis.
o A single or isolated act of violence does not convert. Only if

the assumption order.

Can you have an assumption order with a return to work
order? What if there is no return to work order?

The return to work order is automatic with the

the language used is expected to be strong.

So when does a strike change from valid to illegal due to the acts

the violence is pervasive.

What is assumption of jurisdiction?
o The Secretary will decide the conflict him or herself.

refers the matter to the NLRC. The NLRC will decide the case.
Both are interventions of government that convert the issue into
a case to be decided upon by the Secretary or NLRC

management or company were considered illegal activities that would

in.
Is it still an assumption even if a petition is filed?

Yes.
What happens in an assumption order?

Enjoin pending strike or ongoing strike. Workers have

to return to work or cannot pursue the strike.

How different is assumption from certification order?
o Assumption: Secretary will decide the case. Certification:
o

illegal or not. So the employer just has to follow the regular

decide the conflict themselves.

Distinguish from court jurisdiction over a case.
o In assumption, the parties do not initiate it; the Secretary steps
o

employee who committed an illegal act? Should the employer wait

procedure of terminating an employee, independent of any

Without the assumption order, the dispute will not be decided

Corp. v. SMP
Go back to status quo ante. The employer must accept the

employees under the same terms and conditions as before.

To whom do you serve the assumption order?
o To the union, and to the employer.
o Serve to the president usually, as agent.

What is the effect of declaration of illegality of a strike? What if the

union officers did not participate in the strike and were reporting
for work, but then the rest of the union were striking?
o Union members will not be terminated, unless they performed
o
o

illegal acts during the strike.

Union officers can be terminated. Even if they did not actually
physically participate in the strike.
When can you terminate all strikers?

When there is a Return to Work Order and they

refused to comply with it.

And this RWO only happens when there is an

Assumption or Certification.
So mass termination cannot happen in ordinary

How do you determine whether there is an EER?

o Four-fold test

1. Selection and hiring

2. Payment of wages

3. Power to dismiss the employee

4. Control over how the employee performs his

o

only be issued in an Assumption or Certification

o

individual actions, even if the strike per se is legal.

When is there an award of backwages?
o There is no reward of backwages, even if the strikers win.
Can employers hire replacement workers?
o Yes, employers can.
In sum, what are the four grounds to make a strike valid
o 1. Ground
o 2. Procedure
o 3. Conduct
o 4. Compliance with return to work

Employer-employee relationship

Why is it important to determine EER?

o It determines the legal relationship between the parties, and
their rights and obligations.

says the end product or goal

What about employees working outside the facilities, are

Ex. taxi cab drivers.

Distinguish giving details on the work, supervision on the manner
of doing the work:
o Instructions, no matter how detailed, may not actually indicate

be terminated not because of the strike per se, but because of

not just the end product

There is no control under the EER if the employer just

they still under control of the employer?

They still can be under the control of the employer.

strikes there has to be defiance of RWO, which can

Order.
Of course, if everyone committed illegal activities, everyone will

functions
How do you determine when there is control?

Determine how the employee performs the functions,

control. If the details pertain to the product itself, then you are
not controlling the work. (Ex. you say that you want a barong
that has gold buttons, long sleeves, made of a certain tela,
o
o

etc.)
If the details pertain to the work itself, there is control.
N.B. So reporting about collections, or progress of the chair
being construction these reports are really just about the
end product, and do not indicate control. So even reports do

not always indicate control.

Should the power be exercised?
o No, need not be. Just as long as its available.
o How can you prove it if its not exercised?

If there is a written agreement, you can point to

certain provisions.

What if there is no written contract or any proof of the

What are the rights of the parties in a legitimate contracting

arrangement?
o The principal is the indirect employer.
o Contractor is the direct employer.
o Employee is, well, the employee.
In an illegitimate contracting relationship?
o Principal is the direct employer
o Contractor is the agent of the principal
o Employee is still the employee
How different are the responsibilities of the principal is the two

instructions given?

Usually you can prove it by the fact that he is within

the company premises.

That his presence is

permitted by the school, and he is given an ID, are

strong indicators. Working in a place controlled by the

employer is a good indicator.

In the above examples, there are only two parties. But if there are
multiple parties involved and there are multiple suspected
employers, how do you determine who the employer is?
o Control is the strongest factor. For instance, A hires, B fires, C

relationships?
o Legitimate principal is solidarily responsible if the employer-

pays, and D controls. D is the employer.

Contracting arrangement

Whats a contracting arrangement?

o There are three parties: the principal, the contractor, and the
o

liability is not as important, because they are targeting the

employee
There are two contracts between the principal and contractor,

and the contractor and the employee

What is the relationship between the principal and the worker?
o The principal is the indirect employer.
o Principle why this is so: the work is always for the principal. It
redounds to his benefit.

N.B. This does not refer to all situations where there is

a

complicated

process/production

line,

where

contractor cannot pay the wages due

o Illegitimate principal is principally liable for the wages
When is there solidary liability?
o In EITHER contractual arrangement.
o But in the illegitimate contractual arrangement, the solidary
principal usually. But it is wrong to say that the contractor is
not solidarily liable. It is solidarily liable; otherwise it will be in a
better position than the legitimate contractor. But for all intents

and purposes they just go to the principal anyway.

What is the difference though?
o In legitimate labor contracting, the principal is only liable if the
contractor fails to pay wages.

NOTE: Under Art. 106, the principal is ONLY liable for

failure to pay wages by the contractor for work

ultimately, what is produced by employer goes to the

principal.

For

instance,

some

performed, but the principal is NOT their employer for

outsourcing

any other purpose.

transactions are not contracting arrangements. Just

take note of this.

The principal has no liability to the employee is you have a
legitimate contracting arrangement. T/F?
o False. The principal is solidarily liable for failure to pay wages.

Nothing else.

Not even back-

wages stemming from illegal termination.

Note: Under Art. 109, solidary liability is established
between principal and contractor. In 109, there is no

difference
o

between

legitimate

and

illegitimate

contractors, as to solidary liability.

In illegitimate labor contracting, the principal is employer even
beyond this single circumstance.

It is, for all intents and

purposes, just like any other employer. It is liable not just for
o

payment but for responsibilities of the employer.

If the illegitimate contractor already paid the wages, is the
principal still liable?

Not anymore, because the principal/employers agent

has paid.
What if there a violation of the Labor Code?
o For legitimate contracting arrangement, the principal is
generally not liable, unless it has participated or connived in
the violation. Remember, the principal is just liable under one
circumstance: payment of wages for work performed. Nothing
o

else.
Take note of Rosewood case, which laid down that there must
be finding of fault in the principal to hold it liable for violation of

Labor Code.
What is a legitimate contracting arrangement?
o 1. The contractor has sufficient capital
o 2. Employees do not perform work directly related to the
business of the principal
o 3. Contractor has control
When does it become a labor-only contracting arrangement? Does
it have to violate all three grounds or just one?
o Do not be confused by the structure of the definition in Dept.
Order 18-02. You go back to Art. 100. One disqualification
o
o

out of three is the more reasonable interpretation.

For legitimate contractor you have to meet ALL requirements.
For illegitimate you miss just one, you are illegitimate.

N.B. In the old rules, there was a definition of an independent

contractor.
contractor.

We only have the definition of a labor-only