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EMPLOYER-EMPLOYEE RELATIONSHIP

100 Notes on Labor Law / 2007 / Marlon J. Manuel

1.
It is possible for a “dual juridical relationship” to exist – that of employer-employee and vendor-vendee,
or that of employer-employee and corporation-stockholder. Control of the employee’s conduct is the most
crucial and determinative indicator of the presence or absence of an employer-employee relationship. The
existence of a different kind of juridical relationship between the parties does not necessarily extinguish the
employer-employee relationship. In the same way, the existence of an employer-employee relationship cannot
be negated by expressly repudiating it in a contract.
2.
The submission of reports and recommendations regarding work progress on a regular basis does not
amount to control over the means and methods of work. Not all rules are equivalent to control, that gives rise
to an employer-employee relationship. There is a difference between rules and guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in attaining
it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means.
The first create no employer-employee relationship.
3.
Exclusivity of service does not necessarily mean that the purported employer exercised control over the
means and methods of the purported employee’s work. This feature is not meant to change the nature of the
relationship between the parties, nor does it necessarily imbue such relationship with the quality of control
envisioned by law as giving rise to an employer-employee relationship.
4.
A person may be paid on the basis of results or time expended on the work, and may or may not acquire
an employment status. Payment by results is merely a method of computing compensation and not a basis for
determining the existence of employer-employee relationship. Hence, payment by commission or on per-trip
basis will not negate the existence of an employer-employee relationship.
5.
A party may render services for another, no matter how necessary for the latter’s business, even without
being hired as an employee. The fact that the worker performs work that is usually necessary and desirable to
the business of the employer is not determinative of the existence of an employer-employee relationship.
Article 280 of the Labor Code is not the yardstick for determining the existence of an employer-employee
relationship. The provision merely distinguishes between the two (2) kinds of employees (regular and nonregular), in an employment relationship that is not in dispute.
6.
The mere presence of the contractor’s supervisor in the work premises does not necessarily mean that
the contractor had control over the work of the employees. The test to determine the existence of independent
contractorship is whether one claming to be an independent contractor has contracted to do the work on its own
account, under its own responsibility, according to its own methods and without being subject to the control of
the principal, except only as to the results.
7.
It is not enough to show substantial capitalization or investment in the form of tools and equipment, to
be considered as an independent contractor. In determining the existence of an independent contractor
relationship, several factors might be considered such as: whether the contractor is 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 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.
8.
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. In labor-only contracting, the law 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 contractor as if such
employees had been directly employed by the principal.
9.
For employees in a contracting arrangement, the actual source of the payment of their wage does not
matter as long as they are paid. As creditors, the employees may collect from anyone of the solidary debtors.
Solidary liability does not mean that two solidary debtors are liable for only half of the payment. The
employees’ immediate recourse, however, is with their direct employer.
10.
The Constitution declares that the State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare. The State shall afford full protection to labor, local and

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organized and unorganized. 2 . and promote full employment and equality of employment opportunities for all. Manuel overseas.100 Notes on Labor Law / 2007 / Marlon J.

Project employment contemplates an activity which is not commonly or habitually performed or such type of work which is not done on a daily basis but only for a specific duration of time or until completion. The length of time during which the employee was continuously rehired is not controlling. and (c) the fixed-term employment is not used by the employer to circumvent the employee’s right to security of tenure. an employee whose mode of compensation is on a “per-piece basis” can still be a regular employee. The essence of probationary employment lies in the purpose or objective sought to be attained. and identifiable as such. 3 . 8. What determines whether a certain employment is regular or not is not the will and word of the employer but the nature of the activities performed by the employee. duress.100 Notes on Labor Law / 2007 / Marlon J. A person becomes a regular employee by operation of law. Hence. 7. and the work to be undertaken is usually necessary or desirable in the usual business or trade of the employer. the status of regular employment attaches to a casual employee on the day immediately after the end of his first year of service. The test is whether the former is usually necessary or desirable in the usual trade or business of the employer. Whether one’s employment is regular is not determined by the number of hours one works. or improper pressure brought to bear upon the employee and absent any other circumstances vitiating his/her consent. 5. Length of service of a project employee is not the controlling test of employment classification. 9. The word “probationary” implies the purpose of the term. If there is no specification of the duration and scope. they will be considered regular employees for their respective tasks. Regular employment status is likewise not determined by the manner of compensation.. 3. necessary and indispensable to the usual trade or business of the employer. (b) it satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former on the latter. If seasonal workers perform the same tasks for the employer every season for several years. the services of an employee are necessary and desirable in the employer’s usual business only for the period of time it takes to complete the project. it is not enough that they perform work that is seasonal in nature. from the other undertakings of the employer. For fixed-term employment to be valid: (a) the fixed period of employment must be knowingly and voluntarily agreed upon by the parties without any force. The probationary employee is not entitled to the completion of the probationary period and can be terminated prior to that completion for a just cause or for failure to qualify as a regular employee in accordance with reasonable standards made known to the employee at the time of engagement. but which is distinct and separate. 2. and (b) the tasks performed by the employees are vital. primarily for the employer to determine whether or not the employee is qualified for permanent employment. In project employment. in which case. the employment is coterminous with the project. Hence. 4. part-time work does not necessarily negate regular employment. 6.e. Whether one is employed as a project employee or not would depend on whether s/he was hired to carry out a specific project or undertaking. For seasonal employees to be excluded from those classified as regular employees. the duration and scope of which were specified at the time his/her services were engaged. Thus. Seasonal workers who are called to work from time to time and are temporarily laid off during off-season are not separated from service. but merely considered on leave until re-employed. but not its length. Manuel CLASSES OF EMPLOYEES 1. then it is regular employment. but serves as a badge of regular employment. The primary standard of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. Utilizing a series of employment contracts of short duration can be considered circumvention. The law does not provide the qualification that the employee must first be issued a regular appointment or must first be formally declared as such before s/he can acquire a regular status. i. They must have been employed only for the duration of one season. A project employee may acquire the status of a regular employee when the following concur: (a) there is a continuous rehiring of project employees even after the cessation of a project for the same tasks or nature of tasks. A project could also refer to a particular job or undertaking that is within the regular or usual business of the employer.

100 Notes on Labor Law / 2007 / Marlon J. Semesters served as part-time lecturer cannot be credited in computing the number of years the teacher has served to qualify for regular status. 4 . Manuel 10. A part-time teacher cannot acquire permanent status despite the length of service. Only when a teacher has served as a full-time employee can such teacher acquire permanent or regular status.

100 Notes on Labor Law / 2007 / Marlon J. The granting of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee’s basic salaries or wages. A policy requiring employees to remain single and providing that they will be separated from the service once they marry was declared void.. and other 5 . Accordingly. 4. it cannot be said that the new schedule prejudices the right to self-organization. This is subject to the condition that it must not be motivated by discrimination or bad faith. and requiring one of the spouses to resign from the company. the employees cannot be considered to be field personnel. Earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th month pay. salary is partly fixed amount and partly incentive bonus). constitutes voluntary employer practice which cannot be unilaterally withdrawn by the employer. However. 10. Transfer of employees is within the inherent right of employers to manage their business. Fixing of the work schedule of employees is the employer’s prerogative. The criterion in making a distinction between a supplement and a facility does not so much lie in the kind but the purpose. 8. inconvenient. Absent discrimination.g. A policy prohibiting employees from marrying co-employees. The cause of action of an entitled employee to claim the service incentive leave pay (SIL) 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. despite the clarity of the law on this. it being violative of the Labor Code’s policy with regard to discrimination against marriage. It does not cover voluntary and unilateral increases by the employer in fixing hiring rates. as in a situation where the change effected by management with regard to working time is made to apply to all employees whether or not they are members of the union. In the “salary-ceiling” method. the cause of action to claim the whole amount of the SIL shall arise when the employer fails to pay such amount at the time of the resignation or separation from employment. Food or snacks or other convenience provided by the employers are deemed as supplements if they are granted for the convenience of the employer. 9. workers already receiving more than the existing minimum wage (up to a certain amount stated in the Wage Order – the “ceiling”) are also to be given a wage increase. benefits. The “salary-ceiling” method mandates a wage adjustment that will be applied to employees receiving a certain denominated salary ceiling. Manuel LABOR STANDARDS 1. Management’s practice of including non-basic benefits in the computation of the 13th month pay for two years. The “floor wage” method involves the fixing of a determinate amount to be added to the prevailing statutory minimum wage rates. if the employee wishes to accumulate the leave credits and opts for its commutation upon his/her resignation or separation. The Labor Code’s mandate for the correction of a wage distortion contemplates a wage distortion due to a prescribed law or wage order. a policy prohibiting employees from marrying employees of a competitor company was upheld. 7. “Field personnel” are non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. 3. Furthermore. was likewise held invalid. 5. and involves a demotion in rank or diminution of salaries. or prejudicial to the employee. As an exception. 2. a bonus is demandable only when there is clear proof that it is made part of the wage or salary or compensation (e. The definition is not merely concerned with the location where the employee regularly performs his duties but also with the fact that the employee’s performance is unsupervised by the employer. The 3 year prescriptive period commences from the time when the employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the employee’s services. especially so if it is incapable of doing so. 6. the transfer may amount to constructive dismissal when the transfer is unreasonable. If required to be at specific places at specific times. The mere factual existence of a wage distortion does not ipso facto result to an obligation to rectify it absent a law or other source of obligation which requires rectification.

100 Notes on Labor Law / 2007 / Marlon J. insensibility. An act of clear discrimination. or disdain by an employer may become so unbearable on the part of the employee that it will force the employee to quit work. Manuel privileges. 6 .

regardless of the duration of the said marriage. 10. Under the “country-team approach. It does not mean absolute helplessness. however.100 Notes on Labor Law / 2007 / Marlon J. 5. contract stipulations to the contrary notwithstanding. The law does not require that the illness should be incurable. In illegal recruitment. 7 . The term “primary beneficiaries as of the date of his retirement” should include a dependent spouse who was married to the member after the retirement of the latter. without the knowledge and consent of the recruitment agency. 9. unless their employment falls under the specific exceptions provided by the law. or accustomed to perform. There can be recruitment even if only one prospective worker is involved.. 6. 4. 3. even when the hiring was done through the branch office while the employee was on a tourist status in the foreign country. The mandatory coverage of SSS is premised on the existence of an employer-employee relationship. When after the termination of the original employment contract.” all officers. on a per country basis. Obtaining a work permit in a foreign country does not necessarily mean a waiver of one’s national laws on labor. Recruitment is deemed committed in large scale. 7. Manuel RECRUITMENT & SSS 1. whether it is regular or project. bears no relation to the achievement of the policy objective of the law. The fact that the employee was able to work again after a few years will not negate total disability. it is not the injury which is compensated. Classifying dependent spouses and determining their entitlement to survivor’s pension based on whether the marriage was contracted before or after the retirement of the other spouse. By express provision of law. employees are subject of the compulsory coverage under the SSS law. Whether employed locally or overseas. act as one country-team with a mission under the leadership of the ambassador. 8. The obligation of the recruitment agency and the foreign principal to the employee does not end upon the expiration of their contract (manning agreement between agency and principal) but continues up to the termination of the employment contract. It is of no consequence that the employee was cured after a couple of years. or any kind of work which a person of his/her mentality and attainment could do. the foreign principal directly negotiated with the migrant worker and entered into a new and separate employment contract. That permit does not automatically mean that the non-citizen is thereby bound by local laws only.e. such liability does not necessarily end upon the termination of employment but upon the repatriation of the employee to the Philippines. if committed against three (3) or more persons individually or as a group. representatives and personnel of the Philippine government posted abroad regardless of their mother agencies shall. but rather it is the incapacity to work resulting in the impairment of one’s earning capacity. the recruiter gives the impression that s/he has the power to send workers abroad. and spouses who devote full time to managing the household and family affairs. by the laws of the country of work. i. In fact. The solidary nature of the relationship between the local recruitment agency and the foreign principal makes them solidarily liable for any violation of the recruitment agreement or the employment contract. In disability compensation. Voluntary coverage of the SSS includes Filipinos recruited in the Philippines by foreign-based employers for employment abroad. Total disability means the disablement of an employee to earn wages in the same kind of work or similar nature that s/he was trained for. the agency cannot be held liable for the worker’s claims arising from the contract extension. casual employees are not subject to compulsory coverage of SSS. Regardless of the nature of employment. all Filipino workers enjoy the protective mantle of Philippine labor and social legislation. The number of persons dealt with is not an essential ingredient of the act of recruitment and placement. 2. The term “migrant worker” includes a Filipino who is hired by a Philippine corporation to work for its branch abroad.

Manuel RIGHT TO SELF-ORGANIZATION 1. It is only necessary that there is a reasonable inference that anti-union conduct of the employer does have an adverse effect on self-organization and collective bargaining. 6. false statement or fraud. 9. False statements made by union officers before and during a certification election – that the union is independent and not affiliated with a national federation – interfere with the free choice of the employees. and can be a valid ground for a protest. The test of whether an employer has interfered with and coerced employees in the exercise of their rights to self-organization is whether the employer has engaged in conduct which it may reasonably be said tends to interfere with the free exercise of the employees’ rights. and the list of members who took part in the ratification. Under the “totality of conduct doctrine. in connection with the adoption or ratification of the constitution and by-laws. “Policy-determining” refers to policy-determination in matters that may be the subject of negotiation between management and labor. and (b) the national federation is actively involved in union activities in the company. or in connection with the election of officers. For this extension of the prohibition in Article 245 to apply. 4.100 Notes on Labor Law / 2007 / Marlon J. unless such inclusion is due to misrepresentation. The inclusion in a union of disqualified employees cannot be used as a ground for a petition for cancellation of union registration. It may be questioned only in an independent petition for cancellation. The test of supervisory or managerial status depends on whether a person possesses authority to act in the interest of his/her employer and whether such authority is not merely routinary or clerical in nature but requires the use of independent judgment. (2) an opportunity for reply has been lacking. Two criteria must concur for an employee to be considered a confidential employee: (a) the confidential relationship must exist between the employee and his superior officer.access must not only be incidental but must be necessary in the performance of the employee’s duties. its legal personality cannot be subject to collateral attack. two conditions must concur: (a) the rank-and-file employees are directly under the authority of the supervisory employees. 2. 8 . and (b) the officer must handle responsibilities relating to labor relations. Report of violations of rights and conditions of union membership does not always require the support of 30% of the union membership. the minutes of ratification. Even the membership of a rank-and-file union and a supervisory union of the same company in two separate federations with a common set of officers was held to be prohibited co-mingling. The prohibition extends to a supervisors’ union joining a national federation the members of which include unions of rank-and-file employees of the same employer unit. 5. The prohibition in Art. and (3) the misrepresentation has had an impact on the free choice of the employees in the election. Neither will such petition for cancellation preclude or suspend collective bargaining. where (1) a material fact has been misrepresented. A report of a violation of rights and conditions of membership in a labor organization may be made by any member or members especially concerned. A certification election may be set aside for misstatements made during the campaign. The alleged misrepresentation of a union by making it appear that its membership was composed purely of rank-and-file employees is not the misrepresentation that amounts to a ground for cancellation of registration. 3. The pendency of a petition for cancellation is not a ground for the employer to refuse to bargain with the certified bargaining agent.” the culpability of the employer should be evaluated against the background of and in conjunction with all collateral circumstances. 7. 245 is not confined to a case of individual employees (rank-and-file and supervisors) co-mingling in the same union. The pendency of a petition for cancellation of a union’s registration will not suspend an ongoing certification election case. and the list of voters. A key element that must be considered is the employee’s necessary access to confidential labor relations information . minutes of the election. however. It is not necessary that there be direct evidence that any employee was in fact coerced. The prohibition to join labor organizations extends to confidential employees or those who by reason of their positions or nature of work are required to assist or act in a fiduciary manner to managerial employees. 8. After a certificate of registration is issued to a union.

recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments. 9 .100 Notes on Labor Law / 2007 / Marlon J. Manuel 10. The State shall regulate the relations between workers and employers. Workers shall participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.

the union’s proposal shall be considered as the CBA between the parties. The employer has no legal standing in a certification election as it cannot oppose the petition or appeal the Med-Arbiter/Secretary’s orders related thereto. i. Collective bargaining is a mutual responsibility of the employer and the union and is characterized as a legal obligation. 10 . 6. The law has fixed the term of CBAs to a period of five years. The employer’s refusal to make a counter-proposal to the union’s proposed CBA is an indication of bad faith and constitutes an unfair labor practice. The express exclusion of certain groups of employees from the bargaining unit in a previous CBA does not bar any renegotiation for the future inclusion of said employees in the unit.e. 3. 10. and if it can be inferred that the employer adopted the said act to yield adverse effects on the free exercise of the right to self-organization and to collective bargaining. Interlocutory orders of the Med-Arbiter are not appealable. The terms and conditions of a CBA constitute the law between the parties. The choice of a collective bargaining agent is the sole concern of the employees. 4. also in good faith. and the parties are required to negotiate one. 8. the CBA that has expired shall continue in full force and effect until a new CBA is reached by the parties. In case of expiration of a CBA. If an election is conducted upon agreement by the parties but without the participation of the Regional Office. such election will not serve as a bar to future petitions for certification election. All other orders of the Med-Arbiter granting or denying a petition for certification election shall be subject to appeal. A unilateral policy of the employer that is contrary to the CBA cannot prevail over the provisions of the CBA. 9. and the parties are mandated to renegotiate its provisions not later than 3 years from the start of its effectivity. a petition for certification election is barred when the duly certified bargaining agent has commenced negotiations in good faith with the employer within one year from the certification election and has sustained such negotiations (even beyond one year). 2. The employees sought to be represented by the collective bargaining agent must have substantial mutual interests in terms of employment and working conditions. The Med-Arbiter’s order granting the conduct of a certification election in an unorganized establishment shall not be subject to appeal. in the same manner as a certification election. and also. Where a petition for certification election has been filed and upon the Med-Arbiter’s intercession.. 5. The only exception to this rule is where the employer has to file the petition for certification election because it was requested to bargain collectively. As a result of the employer’s refusal to bargain. the parties agree to hold a consent election.100 Notes on Labor Law / 2007 / Marlon J. in so far as the representation aspect is concerned. Under D. even if no petition for certification election was filed. This principle applies to a situation where there is no existing CBA. Any issue arising therefrom may be raised by means of protest on the conduct and results of the certification election. A certified bargaining agent has the right to be furnished by the employer with the annual audited financial statements. 7. to a situation where there is an existing CBA. including the balance sheet and the profit and loss statement. the “hold-over principle” applies. Substantial evidence of the coercion is necessary. within thirty (30) calendar days from the date of receipt of the request. Manuel COLLECTIVE BARGAINING 1. the results thereof shall constitute a bar to future petitions for certification election. the employer commits an unfair labor practice. There is no fixed period for the other provisions of the CBA but the parties are mandated to renegotiate the non-representation provisions not later than 3 years from the start of the CBA. The same principle applies to a consent election conducted with the intercession of the Regional Office. The law requires a written request from the union as a precondition for this right. The intention of the law is to limit the grounds for appeal that may stay the holding of a certification election.O. 40-03. 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.

100 Notes on Labor Law / 2007 / Marlon J. Manuel 11 .

Where a penalty less punitive would suffice. An “overtime boycott” or the concerted refusal of the union members to render overtime work. then the strike is an illegal strike because the union. 2. A strike is a temporary stoppage of work by the concerted action of the employees. has already lost the notice of strike. the strike must likewise comply with the procedural requirements (notice of strike. and the actual reinstatement of the returning strikers. and (b) the Secretary of Labor’s (and the President’s) powers to issue assumption or certification orders. The Secretary may merely suspend rather than dismiss the employees involved. then the strike held pursuant to that belief may be legal as a “good faith strike. after years of regularly having the said arrangement. In one case. As a general rule. Exceptions to these are the following: (a) the NLRC’s power to enjoin or restrain actual and threatened commission of any or all prohibited or unlawful acts. at that time. Payroll reinstatement is not contemplated by the law. 7. When the NCMB issues a notice converting the dispute into a preventive mediation case. As an exception. Mere finding of the illegality of a strike should not be automatically followed by wholesale dismissal of the strikers from employment. actual strike vote. the Labor Code prohibits the issuance of injunctions or restraining orders in any case growing out of labor disputes. may cause grave or irreparable damage to any party or render ineffectual any decision in favor of such party. 8.100 Notes on Labor Law / 2007 / Marlon J. the Court even allowed the assumption order to cover striking employees whose membership in the bargaining unit was in question. notice of results of vote. cooling-off period. even if no ULP is committed by the employer.” A mere claim of good faith. after such conversion. the said conversion has the effect of dismissing the notice of strike that has been filed. the “picket” amounted to a strike. 12 . 5. an employee should not be sanctioned with a consequence so severe. circumstances must have warranted such belief. In addition to such good faith. The order to reinstate the returning strikers must cover all strikers and must not be limited to a group of strikers. In some cases. When an assumption order (or certification order) is issued. The procedural requirements are mandatory and the failure of a union to comply with the requirements will render the strike illegal. if the other departments that were still operating were adversely affected by the picket in such a way that there was work stoppage. The Secretary has the prerogative to temper the consequence of the defiance of an assumption order. A “picket” may be considered a strike if it causes a work stoppage (such as when the picketers block the delivery of supplies or prevents other employees from reporting for work). a strike must have as ground either ULP or bargaining deadlock. A union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during the strike may be declared to have lost their employment status. as a result of a labor dispute. An ordinary striking employee cannot be terminated for mere participation in an illegal strike. if the employees believe in good faith that ULP acts exist so as to constitute a valid ground to strike. If the union still proceeds with the strike. if not restrained or performed forthwith. it should mandate the return to work of the strikers. Manuel STRIKES 1. This strict policy applies even to the 24-hour notice to the NCMB of the conduct of the strike vote. 7-day strike ban). was also considered a strike. 3. The mere posting of an assumption order in conspicuous places in the picket area does not satisfy the rigid requirement for proper service. The union affected could not be adjudged to have defied such order since it was not properly apprised thereof. Labor laws frown upon dismissal. not just the illegal acts attendant to the strike. will not be enough. To be valid. or to require the performance of a particular act which. however. the Court has said that the coercive measure of injunction may also be used to restrain an actual or threatened unlawful strike. notice of the conduct of strike vote. In addition to the existence of a valid ground. Reinstatement must be to the same position of the strikers before the strike and this order acts as a limitation on the managerial prerogative to transfer and reassign employees. Even if the employer had shut down the operation of one department prior to the picket. 4. 9. 6.

either party to the dispute. Manuel 10. therefore. its interests are totally foreign to the context thereof.100 Notes on Labor Law / 2007 / Marlon J. without any connection whatsoever to. An “innocent bystander” who seeks an injunction from the regular court against a labor strike must show that it is entirely different from. 13 . and.

Failure to formally inform the employer of the employee’s pregnancy cannot be considered grave misconduct. To justify retrenchment. A first time infraction will not justify termination. there must be fair and reasonable criteria in the selection of employees who will be affected by the retrenchment program. or the entire absence of care. loss of trust requires proof of involvement in the events in question. unjustified. willful in character. mere existence of reasonable basis for believing that the employee has breached the trust of the employer would suffice. There is a difference in the treatment of managerial employees from that of rank-and-file employees. the willfulness being characterized by a wrongful and perverse attitude. knowingly and purposely. For rank-and-file employees. As an exception. (b) the reasonable imminence of the losses and the urgency of the retrenchment. unjustified refusal of the employee to resume his/her employment. The allegation of breach of trust must rest on substantial ground and cannot be dependent on the employer’s arbitrariness. The breach of trust must be related to the performance of the employee’s function and must be willful. the negligence must not only be gross. and (b) overt act from which it may be inferred that the employee has no more intent to resume his/her work. There must be adequate proof of the redundancy. 6. as opposed to an act done carelessly or inadvertently. lawful.100 Notes on Labor Law / 2007 / Marlon J. Mere allegation of redundancy will not suffice. Abandonment means the deliberate. 14 . 9. which must be substantial. 8. As a general rule. Retrenchment is a management prerogative resorted to by employers to avoid or minimize business losses. a forbidden act. without justifiable excuse. Gross negligence implies a want or absence of or failure to exercise slight care or diligence. e. and (c) seniority. 2. Possible criteria include: (a) less preferred status. Willful disobedience. to justify termination. and implies wrongful intent and not mere error in judgment. and he/she has no other choice but to disassociate himself/herself from employment. 4. To constitute a valid ground for dismissal. If the employer violates its own criteria. For retrenchment to be valid. then the redundancy cannot be considered valid. 7. this principle does not apply when the employee does not ask for reinstatement in his/her complaint for illegal dismissal. Loss of trust and confidence applies only when the employee concerned holds a position of trust and confidence. It is a thoughtless disregard of consequences without exerting any effort to avoid them. not a mere afterthought to justify earlier termination or a subterfuge for causes which are improper. It should be genuine and not simulated. The immediate filing of an illegal dismissal complaint generally negates the employer’s claim of abandonment. Like in retrenchment. Gross misconduct is improper or wrong conduct. A breach is willful if it is done intentionally. Resignation is defined as the voluntary act of an employee who finds himself/herself in a situation where he/she believes that personal reasons cannot be sacrificed in favor of the exigency of the service. it should also be habitual in character. (b) efficiency. For abandonment to be a valid ground for termination. Poor performance does not necessarily amount to gross and habitual negligence. 3. and (c) other measures taken by the employer prior or parallel to the retrenchment. temporary employee. The misconduct must be work-related. Manuel TERMINATION DISPUTES (Causes) 1. and (b) the order violated must have been reasonable. insofar as the application of loss of trust and confidence is concerned. the employer must also prove that it applied fair and reasonable criteria in the implementation of the redundancy program. As regards managerial employees. illegal. two elements must concur: (a) the employee’s intention to abandon. The misconduct must be of such a grave and aggravated character and not merely trivial and unimportant. 5. made known to the employee and must pertain to the duties of the employee. requires the concurrence of two factors: (a) the employee’s conduct must have been willful or intentional. Redundancy is a situation where the personnel complement of the employer is in excess of the needs of its operations. the transgression of some established and definite rule of action. a dereliction of duty. the employer must prove by sufficient and convincing evidence: (a) the losses expected. It is the breach of this trust that results in the employer’s loss of confidence. voluntary resignation is inconsistent with the filing of a complaint for illegal dismissal.g.

For termination on the ground of disease to be valid. 15 . Manuel 10. two requisites must concur: (a) the disease cannot be cured within 6 months and the continued employment of the concerned employee is prohibited by law or prejudicial to his/her health or to the health of the co-employees. and (b) a certification to that effect must be issued by a competent public health authority.100 Notes on Labor Law / 2007 / Marlon J.

No preventive suspension shall last longer than 30 days. The first notice must apprise the employee that his/her termination is being considered due to the acts stated in the notice. however. 7. 9. preventive suspension is not proper. Retrenchment. An extension of the suspension beyond 30 days shall be with pay. 3.. the award of backwages is not conditioned on the employee’s ability or inability to. 2.e. the base figure to be used is pegged at the wage rate at the time of the employee’s dismissal. for non-compliance with the procedural requirements of due process. there is no need to qualify the term.. It is a form of relief that restores the income that was lost by reason of the unlawful dismissal.e. compared to dismissals due to just causes. Any violation of this requirement amounts to constructive dismissal. Furthermore. Substantial evidence is required to show that the relationship was indeed strained as a necessary consequence of the judicial controversy. a union-security clause). i. earn any income. must still comply with the 30-day prior notice requirement. Such prospective salary increases cannot be included in the computation of the backwages. 6. will not invalidate the dismissal. Payment of separation pay in lieu of reinstatement is allowed due to: (a) reasons not attributable to the fault of the employer. we must not distinguish. It is not private compensation or damages but is awarded in furtherance of the public objective of the law. The payment of backwages is generally granted on the ground of equity. the procedural infirmity in the termination. observance of substantial due process is indispensable in establishing the presence of the cause or causes for dismissal as provided for in the CBA. No backwages will be awarded. Salary increases. even if temporary (based on the employer’s own program). 5. Preventive suspension is justified where the employee’s continued employment poses a serious and imminent threat to the life or property of the employer or the employee’s co-workers.. the primary remedy for an illegally dismissed employee. Hence. 4. Income earned by the employee during the pendency of the case will not be deducted from the backwages that the employee should receive. Reinstatement will not be ordered. Without this kind of threat. not between the dismissed employee and his/her co-employees. unless mandated by law or wage order. inclusive of regular allowances that the employee had been receiving. failure of the employer to comply with the procedural requirements of termination. or (c) strained relationship exists between the parties. As applied to the dismissals grounded on violations of the CBA. The employer should be held liable. The principle of strained relations should not be used so indiscriminately as to bar the reinstatement of illegally dismissed workers. In computing full backwages. due to imprisonment) will not negate the award of full backwages. closure of the company. e. but pursuant to the provisions of a CBA (eg. The employee’s inability to earn during the period (e.100 Notes on Labor Law / 2007 / Marlon J. are a mere expectancy. The notice must clearly indicate the possibility of termination. Termination for a just cause requires two notices to the employee: (a) the show-cause letter requiring the employee to explain.. adherence to substantive due process is a requisite for a valid determination that just or authorized causes existed to justify dismissal. i. It is not redress of a private right but rather in the nature of a command to the employer to make public reparation for dismissing an employee either due to the former’s unlawful act or bad faith. Manuel TERMINATION DISPUTES (Procedure and Effects) 1. 16 . the strained relationship must be between the dismissed employee and the employer. in the interim. It must be alleged and proved during trial.g. it is still necessary to observe substantive due process in order to validate the dismissal.g. and (b) the final notice informing the employee of the termination. (b) the position has already been abolished and reinstatement to an equivalent position is also not feasible. The employee will only be awarded nominal damages. It is only when reinstatement is not possible that payment of separation pay is awarded to the employee. As applied to the Labor Code.. 8. The law does not speak of temporary or permanent retrenchment. If the dismissal is for just or authorized cause (proved during the trial). When the law does not distinguish. Reinstatement is intended by law as the general rule. The amount of nominal damages should be higher in dismissals due to authorized causes. hence. Even if the dismissal of an employee is conditioned not on the grounds for termination under the Labor Code.

17 . Separation pay as “financial assistance” may be granted to a legally dismissed employee on the grounds of equity and social justice. however. when the dismissal is for serious misconduct or some other cause reflecting on the moral character of the employee. Manuel 10. This is not allowed.100 Notes on Labor Law / 2007 / Marlon J.

the Secretary of Labor or his/her duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of the Code and other labor legislation based on findings of the labor employment and enforcement officers or industrial safety engineers made in the course of inspection. The holding of an adversarial trial is discretionary on the Labor Arbiter and the parties cannot demand it as a matter of right. The Voluntary Arbitrator will have original and exclusive jurisdiction over money claims arising from the interpretation or implementation of the CBA. The perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but jurisdictional. In these cases. The right to appeal is a statutory right and one who seeks to avail of the right must comply with the statute or rules. Manuel DISPUTE SETTLEMENT 1. 2. is not a simple labor problem but a matter that comes within the area of corporate affairs and management. Not all quitclaims are per se invalid or against public policy. or an intra-corporate controversy. The civil implications thereof do not necessarily defeat its nature as a fundamental labor offense. The requirements for perfecting an appeal within the reglementary period must be strictly followed as they are considered indispensable interdictions against needless delays. 6. In administrative proceedings. The original and exclusive jurisdiction of the Labor Arbiter for money claims is limited only to those arising from statutes or contracts other than a CBA. and the nature is not altered by the reason or wisdom with which the Board of Directors may have in taking such action. implementation or enforcement stage. it becomes a termination dispute that is already cognizable by the Labor Arbiter. The exercise of this visitorial and enforcement powers can be exercised regardless of the amount of monetary claims of the employee/s concerned. The P5. A corporate officer’s dismissal is always a corporate act. The authority of the Secretary of Labor to assume jurisdiction over a labor dispute necessarily includes and extends to all questions and controversies arising therefrom. If there is a clear agreement between the parties that a termination dispute will be submitted to voluntary arbitration. The posting of a cash or surety bond is mandatory for an appeal by the employer of the Labor Arbiter’s decision. Legitimate waivers that represent a voluntary and reasonable settlement of a worker’ claim should be respected as the law between the parties. 8. except: (a) where there is clear proof that the waiver was wangled from an unsuspecting or gullible persons. An “office” is created by the charter of the corporation and the officer is elected by the directors or stockholders. 9. then the voluntary arbitrator shall have jurisdiction since Article 262 states that “all other disputes” can be referred by agreement to voluntary arbitration. Such quitclaims are regarded as ineffective to bar the workers from claiming their full measure of their legal rights. 5. Of course. including cases over which the labor arbiter has exclusive jurisdiction (like dismissal of employees and illegality of the strike). technical rules of procedure and evidence are not strictly applied. The requirements of due process are deemed to have been satisfied when parties are given the opportunity to submit position papers. It was intended to discourage the employer from using an appeal to delay or evade its obligation. Thus. The damages suffered only form part of the civil component of the injury arising from ULP. Under Article 128 of the Labor Code. a question involving the remuneration of a person who is not a mere employee but a stockholder and officer. 18 .000 jurisdictional limitation applicable to employee complaints for simple money claims under Article 129 does not apply. and to assure the workers that they will receive the money judgment upon the dismissal of the appeal. administrative due process cannot be fully equated with due process in its strict judicial sense. 4. But where there is already an actual termination. it may be referred to the grievance machinery set up in the CBA or by voluntary arbitration.100 Notes on Labor Law / 2007 / Marlon J. Where the dispute is just in the interpretation. The civil aspect of ULP including claims for damages can be within the jurisdiction of the Labor Arbiter. It is a corporate controversy in contemplation of the Corporation Code. or (b) where the terms of settlement are unconscionable on their faces. this assumes that the dispute should be submitted first to the grievance machinery before it can be brought to voluntary arbitration. 7. 3. the law will step in to annul the questionable transactions.

which is made in the exercise of its original jurisdiction. Manuel 10. The BLR’s decision.100 Notes on Labor Law / 2007 / Marlon J. 19 . shall be final and executory. may be appealed to the Secretary of Labor. The decision of the Bureau of Labor Relations. which is made in the exercise of its appellate jurisdiction over decisions of the Regional Director.