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Part I : Introductory Materials

Labor Standards

SECTION 1 – LABOR LAW IN GENERAL social, economic, and political inequalities, and
remove cultural inequities by equitably diffusing
wealth and political power for the common good.
1.01 LABOR LAW DEFINED To this end, the State shall regulate the
acquisition, ownership, use, and disposition of
The law governing the rights and duties of the property and its increments.
employer and employees
(1) with respect to the terms and conditions of 1.04 LAW AND WORKER
employment and
(2) with respect to labor disputes arising from Cebu Royal Plant v. Deputy Minister of Labor
collective bargaining respecting such terms (87)
and conditions The SC reaffirmed its concern for the lowly
worker who, often at the mercy of his employer
1.02 LAW CLASSIFICATION must look up to the law for his protection. Fittingly,
the law regards him with tenderness and even favor
1. Labor Standards and always with faith and hope in his capacity to
Provide minimum terms and conditions of help in shaping the nation’s future.
employment, below which it cannot be allowed
to fall. 1.05 CASE DECISION
Terms and conditions society deem necessary to
maintain health, safety, and decent living of Anino v. NLRC (98)
workers The Court finds occasion to remind courts and
Books 1, 2, 3, 5 & 6 quasi-judicial bodies that “[a] decision should
Must be observed in the entirety faithfully comply with Section 14, Article VIII of the
Constitution which provides that no decision shall be
Maternity Children’s Hospital v. Sec. of rendered by any court [or quasi-judicial body]
Labor (89) without expressing therein clearly and distinctly the
Labor standards are the minimum facts of the case and the law on which it is based.
requirements prescribed by existing laws, rules xxx It is a requirement of due process and fair play
and regulations relating to wages, hours of that the parties to a litigation be informed of how it
work, cost-of-living allowance, and other was decided, with an explanation of the factual and
monetary and welfare benefits, including legal reasons that led to the conclusions of the court
occupational safety, and health standards. [or quasi-judicial body]. A decision that does not
clearly and distinctly state the facts and the law on
2. Labor Relations which it is based leaves the parties in the dark as to
Regulates the institutional relationship between how it was reached and is especially prejudicial to
the workers organized into a union and the the losing party, who is unable to pinpoint the
employers possible errors of the court [or quasi-judicial body]
Book V – Right to Self – Organization and Right for review by a higher tribunal.”
to bargain collectively In the present case, the NLRC was definitely
wanting in the observance of the aforesaid
3. Welfare Laws constitutional requirement. Its assailed five-page
Designed to take care of the contingencies decision consisted of about three pages of quotation
which may affect the workers, e.g. where there from the labor arbiter’s decision, including the
is loss of income for reasons beyond control, dispositive portion, and barely a page (two short
i.e. sickness, death, accident, etc. paragraphs of two sentences each) of its own
 Social Security Act of 1997, RA 8282 discussion of its reasons for reversing the arbiter’s
 Government Service Insurance System of findings.
1997, RA 8291
 Employment Compensation and State 1.06 MANAGEMENT FUNCTION
Insurance Fund
 National Health Insurance Act of 1995, RA RECOGNITION
7875
Deles v. NLRC (2000)
1.03 BASIS OF ENACTMENT However, petitioner loses sight of the fact that
the right of an employer to regulate all aspects of
1987 Constitution employment is well settled. This right, aptly called
Art II Sec 5 management prerogative, gives employers the
The maintenance of peace and order, the protection freedom to regulate, according to their discretion
of life, liberty, and property, and the promotion of and best judgment, all aspects of employment,
the general welfare are essential for the enjoyment including work assignment, working methods,
by all the people of the blessings of democracy. processes to be followed, working regulations,
transfer of employees, work supervision, lay-off of
Art II Sec 18 workers and the discipline, dismissal and recall of
The State affirms labor as a primary social economic workers. In general, management has the
force. It shall protect the rights of workers and prerogative to discipline its employees and to impose
promote their welfare. appropriate penalties on erring workers, pursuant to
company rules and regulations.
Art XIII Sec 1
The Congress shall give highest priority to the LIMITATIONS
enactment of measures that protect and enhance
the right of all the people to human dignity, reduce

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Labor Standards
Great Pacific Employees Union v. Great Pacific
Life Assurance (99) Asian Alcohol Corp. v. NLRC (99)
It bears emphasis that the employer is free to It is true that this Court has generally held that
regulate all aspects of employment according to his quitclaims and releases are contrary to public policy
own discretion and judgment. This prerogative and therefore, void. Nonetheless, voluntary
flowed from the established rule that labor laws do agreements that represent a reasonable settlement
not authorize substitution of judgment of the are binding on the parties and should not later be
employer in the conduct of his business. Recall f disowned. It is only where there is clear proof that
workers clearly falls within the ambit of management the waiver was wangled from an unsuspecting or
prerogative. The employer can exercise this gullible person, or the terms of the settlement are
prerogative without fear of liability so long as it is unconscionable, that the law will step in to bail out
done in good faith for the advancement of his the employee. While it is our duty to prevent the
interest and not for the purpose of defeating or exploitation of employees, it also behooves us to
circumventing the rights of the employees under protect the sanctity of contracts that do not
special laws or valid agreements. It is valid as it is contravene our laws.
not performed in a malicious, harsh, oppressive,
vindictive or wanton manner or out of malice or More Maritime Agencies, Inc. v. NLRC (99)
spite. In American Home Assurance Co. v. NLRC, this
Court held:
Pantranco North Express, Inc. v. NLRC (99) “The law does not consider as valid any
The State affords the constitutional blanket of agreement to receive less compensation that
rendering protection to labor, but it must also what a worker is entitled to recover nor prevent
him from demanding benefits to which he is
protect the right of employers to exercise what are
entitled. Quitclaims executed by the employees
clearly management prerogatives, so long as the are thus commonly frowned upon as contrary to
exercise is without abuse of discretion. public policy and ineffective to bar claims for the
full measure of the worker’s legal rights,
Bontia v. NLRC (96) considering the economic disadvantage of the
The rule is well settled that labor laws employee and the inevitable pressure upon him
discourage interference with an employer's by financial necessity.”
judgment in the conduct of his business. Even as the Thus, it is never enough to assert that the parties
law is solicitous of the welfare of employees, it must have voluntarily entered into such a quitclaim.
also protect the right of an employer to exercise
what are clearly management prerogatives As long Golden Donuts, Inc. v. NLRC (2000)
as the company' s exercise of the same is in good A compromise, once approved by final orders of
faith in order to advance its interests and not for the the court has the force of res judicata between the
purpose of defeating or circumventing the rights of parties and should not be disturbed except for vices
the employees under the law or valid agreements, of consent or forgery." A compromise is basically a
such exercise will be upheld. contract perfected by mere consent. "Consent is
However, management prerogatives are not manifested by the meeting of the offer and the
absolute but are subject to legal limits, collective acceptance upon the thing and the cause which are
bargaining agreements, or general principles of fair to constitute the contract." A compromise
play and justice. And, while it is the special privilege agreement is not valid when a party in the case has
of management to dismiss or lay off an employee, not signed the same or when someone signs for and
the exercise of that prerogative must be made in behalf of such party without authority to do so.
without abuse of discretion, for what is at stake is
not only the employee' s position but also his means 1.08 SOURCES OF LAW
of livelihood. Courts may, therefore, look into the
employer' s exercise of a management prerogative if LABOR CODE AND RELATED SPECIAL LEGISLATION
the same is clearly shown to be tainted with grave
abuse of discretion, 15 ever mindful that, under the Article 1305 Civil Code
foregoing principles and the policy of the State, A contract is a meeting of the minds between two
doubts should be resolved in favor of the persons whereby one binds himself, with respect to
disadvantaged employee. the other, to give something or to render some
service.
1.07 COMPROMISE AND WAIVER
Article 1306 Civil Code
Article 227 The contracting parties may establish such
Any compromise settlement, including those stipulations, clauses, terms and conditions as they
involving labor standards law, voluntarily agreed may deem convenient, provided they are not
upon by the parties with the assistance of the contrary to law, morals, good customs, public order,
Bureau or the regional office of the Department of or public policy.
Labor, shall be FINAL and BINDING upon the
parties. The National Labor relations Commission or CONTRACT
any court shall not assume jurisdiction over
issues involved therein except in case of non- Collective Bargaining Agreement
compliance thereof or if there is prima facie
evidence that the settlement was obtained Plastic Town Center Corp. v. NLRC (89)
through FRAUD, MISREPRESENTATION, OR The subject for interpretation in this petition for
COERCION. review is not the Labor Code or its implementing
rules and regulations but the provisions of the
Rules collective bargaining agreement entered into by
management and the labor union. As a contract,

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it constitutes the law between the parties (Fegurin v. opportunities which should be regulated, if not
National Labor Relations Commission) and in controlled, by the State or placed, as it were, in
interpreting contracts, the rules on contract must custodia societatis.
govern.
Contracts which are not ambiguous are to be 2.02 NATURE OF PROVISION
interpreted according to their literal meaning and
should not be interpreted beyond their obvious Phil. Airlines, Inc. v. Santos (93)
intendment (Herrera v. Petrophil Corp.). It is a fact that the sympathy of the Court is on
the side of the laboring classes, not only because the
Constitution imposes such sympathy, but because of
the one-sided relation between labor and capital.
The purpose is to place the workingman on an equal
plane with management — with all its power and
PAST PRACTICES influence — in negotiating for the advancement of
his interests and the defense of his rights. Under the
Davao Fruits Corporation v. Associated Labor policy of social justice, the law bends over backward
Union (93) to accommodate the interests of the working class
From 1975 to 1981, petitioner had freely, on the humane justification that those with less
voluntarily and continuously included in the privileges in life should have more privileges in law.
computation of its employees' thirteenth month pay,
the payments for sick, vacation and maternity Phil. Geothermal, Inc. v. NLRC (94)
leaves, premiums for work done on rest days and The law in protecting the rights of the
special holidays, and pay for regular holidays. The employees authorizes neither oppression nor self-
considerable length of time the questioned items had destruction of the employer. There may be cases
been included by petitioner indicates a unilateral and where the circumstances warrant favoring labor over
voluntary act on its part, sufficient in itself to negate the interests of management but never should the
any claim of mistake. scale be so tilted if the result is an injustice to the
A company practice favorable to the employees employer. Justitia nemini neganda est (Justice is to
had indeed been established and the payments be denied to none).
made pursuant thereto, ripened into benefits
enjoyed by them. And any benefit and supplement 2.03 1987 CONSTITUTION
being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the LABOR SECTOR - CHARACTERIZED
employer, by virtue of Section 10 of the Rules and
Regulations Implementing P.D. No. 851, and Article Article II Section 18
100 of the Labor Code of the Philippines, which The State affirms labor as a primary social
prohibit the diminution or elimination by the economic force. It shall protect the rights of
employer of the employees' existing benefits workers and promote their welfare.
(Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).
PROTECTION OF LABOR – GUARANTEES

Article XIII, Sec. 3


SECTION 2 - LABOR AND THE The State shall afford full protection to labor,
local and overseas, organized and unorganized, and
CONSTITUTION
promote full employment and equality of
employment opportunities for all.
2.01 HISTORICAL BACKGROUND/RATIONALE It shall guarantee the rights of all workers to
self-organization, collective bargaining and
Antamoc Goldfields Mining Co. v. CIR (40) negotiations, and peaceful concerted activities,
It should be observed at the outset that our including the right to strike in accordance with law.
Constitution was adopted in the midst of surging They shall be entitled to security of tenure, humane
unrest and dissatisfaction resulting from economic conditions of work, and a living wage. They shall
and social distress which was threatening the also participate in policy and decision-making
stability of governments the world over. Alive to the processes affecting their rights and benefits as may
social and economic forces at work, the framers of be provided by law.
our Constitution boldly met the problems and The State shall promote the principle of shared
difficulties which faced them and endeavored to responsibility between workers and employers and
crystallize, with more or less fidelity, the political, the preferential use of voluntary modes in settling
social and economic propositions of their age, and disputes, including conciliation, and shall enforce
this they did, with the consciousness that the their mutual compliance therewith to foster
political and philosophical aphorism of their industrial peace.
generation will, in the language of a great jurist, 'be
doubted by the next and perhaps entirely discarded 7 Cardinal Rights of Workers
by the third.' Embodying the spirit of the present
epoch, general provisions were inserted in the
Constitution which are intended to bring about the
needed social and economic equilibrium between
component elements of society through the
application of what may be termed as the justitia
communis advocated by Grotius and Leibnits many
years ago to be secured through the
counterbalancing of economic and social forces and

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S right to self-organization preservation of corporate profits. Then, by and
C collective bargaining and negotiations pursuant to the same power, the State may
P peaceful concerted activities including authorize an immediate implementation, pending
T the right to strike in accordance with appeal, of a decision reinstating a dismissed or
H law separated employee since that saving act is
L security of tenure designed to stop, although temporarily since the
P humane conditions of work appeal may be decided in favor of the appellant, a
living wage continuing threat or danger to the survival or even
participate in policy and decision-making the life of the dismissed or separated employee and
processes affecting their rights and his family.
benefits as may be provided by law.
SOCIAL JUSTICE
Aris (Phil.) Inc. v. NLRC (91)
These provisions are the quintessence of the Article II, Section 10
aspirations of the workingman for recognition of his The State shall promote social justice in all phases of
role in the social and economic life of the nation, for national development.
the protection of his rights, and the promotion of his
welfare. Thus, in the Article on Social Justice and Article XIII Section 1
Human Rights of the Constitution, which principally The Congress shall give highest priority to the
directs Congress to give highest priority to the enactment of measures that protect and enhance
enactment of measures that protect and enhance the right of all the people to human dignity, reduce
the right of all people to human dignity, reduce social, economic, and political inequalities, and
social, economic, and political inequalities, and remove cultural inequities by equitably diffusing
remove cultural inequities by equitably diffusing wealth and political power for the common good.
wealth and political power for the common good, the
State is mandated to afford full protection to labor, Article XIII, Section 2
local and overseas, organized and unorganized, and The promotion of social justice shall include the
promote full employment and equality of commitment to create economic opportunities based
employment opportunities for all; to guarantee the on freedom of initiative and self-reliance.
rights of all workers to self-organization, collective DEFINITION
bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance Calalang v. Williams (40)
with law, security of tenure, human conditions of Social justice is "neither communism, nor
work, and a living wage, to participate in policy and despotism, nor atomism, nor anarchy," but the
decision-making processes affecting their rights and humanization of laws and the equalization of social
benefits as may be provided by law; and to promote and economic forces by the State so that justice in
the principle of shared responsibility between its rational and objectively secular conception may
workers and employers and the preferential use of at least be approximated.
voluntary modes in settling disputes. Incidentally, a
study of the Constitutions of various nations readily LIMITS OF USE
reveals that it is only our Constitution which devotes
a separate article on Social Justice and Human Guido v. Rural Progress Adm. (49)
Rights. Thus, by no less than its fundamental law, Hand in hand with the announced principle,
the Philippines has laid down the strong foundations herein invoked, that "the promotion of social justice
of a truly just and humane society. This Article to insure the well-being and economic security of all
addresses itself to specified areas of concern—labor, the people should be the concern of the state," is a
agrarian and natural resources reform, urban land declaration, with which the former should be
reform and housing, health, working women, and reconciled, that "the Philippines is a Republican
people's organizations—and reaches out to the state" created to secure to the Filipino people "the
underprivileged sector of society, for which reason blessings of independence under a regime of justice,
the President of the Constitutional Commission of liberty and democracy." Democracy, as a way of life
1986, former Associate Justice of this Court Cecilia enshrined in the Constitution, embraces as its
Muñoz-Palma, aptly describes this Article as the necessary components freedom of conscience,
"heart of the new Charter." freedom of expression, and freedom in the pursuit of
These duties and responsibilities of the State happiness. Along with these freedoms are included
are imposed not so much to express sympathy for economic freedom and freedom of enterprise within
the workingman as to forcefully and meaningfully reasonable bounds and under proper control. In
underscore labor as a primary social and economic paving the way for the breaking up of existing large
force, which the Constitution also expressly affirms estates, trusts in perpetuity, feudalism, and their
with equal intensity. Labor is an indispensable concomitant evils, the Constitution did not propose
partner for the nation's progress and stability. to destroy or undermine property rights, or to
XXX The validity of the questioned law is not advocate equal distribution of wealth, or to authorize
only supported and sustained by the foregoing the taking of what is in excess of one's personal
considerations. As contended by the Solicitor needs and the giving of it to another. Evincing much
General, it is a valid exercise of the police power of concern for the protection of property, the
the State. Certainly, if the right of an employer to Constitution distinctly recognizes the preferred
freely discharge his employees is subject to position which real estate has occupied in law for
regulation by the State, basically in the exercise of ages. Property is bound up with every aspect of
its permanent police power on the theory that the social life in a democracy as democracy is
preservation of the lives of the citizens is a basic conceived in the Constitution. The Constitution
duty of the State, that is more vital than the realizes the indispensable role which property,

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owned in reasonable quantities and used fundamental law also guarantees the right of the
legitimately, plays in the stimulation to economic employer to reasonable returns from his investment.
effort and the formation and growth of a solid social Corollarily, the law allows an employer to downsize
middle class that is said to be the bulwark of his business to meet clear and continuing economic
democracy and the backbone of every progressive threats. Thus, this Court has upheld reductions in
and happy country. the work force to forestall business losses or stop
the hemorrhaging of capital.
Phil. Long Distance Telephone Co. v. NLRC (88) The right of management to dismiss workers
The policy of social justice is not intended to during periods of business recession and to install
countenance wrongdoing simply because it is labor saving devices to prevent losses is governed
committed by the underprivileged. At best it may by Art. 283 of the Labor Code, as amended.
mitigate the penalty but it certainly will not condone
the offense. Social justice cannot be permitted to be Balbalec v. NLRC (95)
refuge of scoundrels any more than can equity be an The law recognizes the right of every business
impediment to the punishment of the guilty. Those entity to reduce its workforce if the same is made
who invoke social justice may do so only if their necessary by compelling economic factors which
hands are clean and their motives blameless and not would endanger its existence or stability. In spite of
simply because they happen to be poor. This great overwhelming support granted by the social justice
policy of our Constitution is not meant for the provisions of our Constitution in favor of labor, the
protection of those who have proved they are not fundamental law itself guarantees, even during the
worthy of it, like the workers who have tainted the process of tilting the scales of social justice towards
cause of labor with the blemishes of their own workers and employees, "the right of enterprises to
character. reasonable returns of investment and to expansion
and growth." To hold otherwise would not only be
Garcia v. NLRC (94) oppressive and inhuman, but also counterproductive
The constitutional policy of providing full and ultimately subversive of the nation's thrust
protection to labor is not intended to oppress or towards a resurgence in our economy which would
destroy management. The employer cannot be ultimately benefit the majority of our people. Where
compelled to retain employees it no longer needs, to appropriate and where conditions are in accord with
be paid for work unreasonably refused and not law and jurisprudence, the Court has authorized
actually performed. NASECO bent over backward valid reductions in the workforce to forestall
and exerted every effort to help the petitioners look business losses, the hemorrhaging of capital, or
for other work, postponed the effective date of their even to recognize an obvious reduction in the
separation, and offered them a generous termination volume of business which has rendered certain
pay package. The unflagging commitment of this employees redundant.
Court to the cause of labor will not prevent us from
sustaining the employer when it is in the right, as in 2.04 CONSTITUTIONAL RIGHTS AND LABOR
this case. LAW

Phil. Geothermal Inc. v. NLRC (94) LABOR AS PROPERTY


While it is true that compassion and human
consideration should guide the disposition of cases Phil. Movie Workers Assn. v. Premiere
involving termination of employment since it affects Productions, Inc. (53)
one's source or means of livelihood, it should not be The right to labor is a constitutional as well as a
overlooked that the benefits accorded to labor do statutory right. Every man has a natural right to the
not include compelling an employer to retain the fruits of his own industry. A man who has been
services of an employee who has been shown to be employed to undertake certain labor and has put
a gross liability to the employer. The law in into it his time and effort is entitled to be protected.
protecting the rights of the employees authorizes The right of a person to his labor is deemed to be
neither oppression nor self-destruction of the property within the meaning of constitutional
employer. It should be made clear that when the law guarantees. That is his means of livelihood. He
tilts the scale of justice in favor of labor, it is but a cannot be deprived of his labor or work without due
recognition of the inherent economic inequality process of law (11 Am. Jur., 333, pp. 1151-1153; 11
between labor and management. The intent is to Am. Jur., section 344, pp. 1168- 1171).
balance the scale of justice; to put the two parties
on relatively equal positions. There may be cases Sibal v. Notre Dame of Greater Manila (90)
where the circumstances warrant favoring labor over Thus, in the case of Callanta v. Carnation
the interests of management but never should the Philippines, Inc. (145 SCRA 268), this Court held
scale be so tilted if the result is an injustice to the that one's employment, profession, trade or calling
employer. Justitia nemini neganda est (Justice is to is a "property right", and the wrongful interference
be denied to none). therewith is an actionable wrong. The right is
considered to be property within the protection of a
EMPLOYER PROTECTION constitutional guaranty of due process of law.

Asian Alcohol Corp. v. NLRC (99) DUE PROCESS REQUIREMENT


Out of its concern for those with less privilege in
life, this Court has inclined towards the worker and Century Textile Mills, Inc. v. NLRC (89)
upheld his cause in his conflicts with the employer. The twin requirements of notice and hearing
This favored treatment is directed by the social constitute essential elements of due process in
justice policy of the Constitution. But while titling cases of employee dismissal: the requirement of
the scales of justice in favor of workers, the notice is intended to inform the employee

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Labor Standards
concerned of the employer's intent to dismiss and Victoriano vs. Elizalde Rope Workers Union
the reason for the proposed dismissal; upon the (74)
other hand, the requirement of hearing affords the It should not be overlooked, however, that the
employee an opportunity to answer his employer's prohibition to impair the obligation of contracts is
charges against him and accordingly to defend not absolute and unqualified. In spite of the
himself therefrom before dismissal is effected. constitutional prohibition, the State continues to
Neither of these two requirements can be dispensed possess authority to safeguard the vital interests of
with without running afoul of the due process its people. Legislation appropriate to safeguarding
requirement of the 1987 Constitution. said interests may modify or abrogate contracts
already in effect. For not only are existing laws read
Maneja v. NLRC (98) into contracts in order to fix the obligations as
The requisites of a valid dismissal are (1) the between the parties, but the reservation of essential
dismissal must be for any of the causes expressed in attributes of sovereign power is also read into
Article 282 of the Labor Code, and (2) the employee contracts as a postulate of the legal order. xxx This
must be given an opportunity to be heard and to has special application to contracts regulating
defend himself. The substantive and procedural relations between capital and labor which are not
laws must be strictly complied with before a worker merely contractual, and said labor contracts, for
can be dismissed from his employment because being impressed with public interest, must yield to
what is at stake is not only the employee’s position the common good.
but his livelihood.
XXX Well-settled is the dictum that the twin Phil. National Construction Corp. v. NLRC (93)
requirements of notice and hearing constitute the The mandate of the law for a liberal
essential elements of due process in the dismissal of interpretation of labor contracts in favor of the
employees. It is a cardinal rule in our jurisdiction working man was applied in the case of Ditan vs.
that the employer must furnish the employees with POEA Administrator 8 where We made the following
two written notices before the termination of pronouncement:
employment can be effected: (a) the first apprises "A strict interpretation of the cold facts before us
the employee of employer’s decision to dismiss him. might support the position taken by the
respondents. However, we are dealing here not
The requirement of a hearing, on the other hand, is
with an ordinary transaction but with a labor
complied with as long as there was an opportunity to contract which deserves special treatment and a
be heard, and not necessarily that an actual hearing liberal interpretation in favor of the worker . . .
was conducted. the Constitution mandates the protection of labor
XXX It bears stressing that a worker’s and the sympathetic concern of the State for the
employment is property in the constitutional sense. working class conformably to the social justice
He cannot be deprived of his work without due policy . . .
xxx xxx xxx
process of law. Substantive due process mandates
Under the policy of social justice, the law bends
that an employee can only be dismissed based on over backward to accommodate the interests of
just or authorized causes. Procedural due process the working class on the humane justification
requires further that he can only be dismissed after that those with less privileges in life should have
he has been given an opportunity to be heard. The more privileges in law . . ."
import of due process necessitates the compliance of
these two aspects.

LIABILITY OF CONTRACT AND STATE INTERFERENCE

Leyte Land Transportation Co. v. Leyte Farmers MANAGEMENT AND THE CONSTITUTION
and Workers Union (48)
In answer to the contention of the petitioner National Sugar Refineries Corp. v. NLRC (93)
that the doctrine laid down in the appealed decision While the Constitution is committed to the policy
in effect "has deprived the company of its rights to of social justice and the protection of the working
enter into contract of employment as it and the class, it should not be supposed that every labor
employee may agree," it is sufficient to quote the dispute will be automatically decided in favor of
following pronouncements of the United States labor. Management also has its own rights which, as
Supreme Court: "The fact that both parties are of such, are entitled to respect and enforcement in the
full age and competent to contract does not interest of simple fair play. Out of its concern for
necessarily deprive the State of the power to those with less privileges in life, this Court has
interfere where the parties do not stand upon an inclined more often than not toward the worker and
equality, or where the public health demands that upheld his cause in his conflicts with the employer.
one party to the contract shall be protected against Such favoritism, however, has not blinded us to the
himself. The State still retains an interest in his rule that justice is in every case for the deserving, to
welfare, however reckless he may be. The whole is be dispensed in the light of the established facts and
no greater than the sum of all the parts, and where the applicable law and doctrine.
the individual health, safety and welfare are
sacrificed or neglected, the State must suffer." Manila Electric Company v. Quisumbing (99)
(West Coast Hotel Company vs. Parrish, quoting Additionally, we recognize that contracting out
Holden vs. Hardy. The former, by the way, expressly is not unlimited; rather, it is a prerogative that
overrules the case of Adkins vs. Children's Hospital) management enjoys subject to well-defined legal
limitations. As we have previously held, the
company can determine in its best business
judgment whether it should contract out
performance of some of its work for as long as

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the employer is motivated by good faith, and the
contracting out must not have been resorted to PARTICIPATION IN DECISION MAKING PROCESS
circumvent the law or must not have been the result
of malicious or arbitrary action. The Labor Code and Philippine Airlines, Inc. v. NLRC (93)
its implementing rules also contain specific rules Indeed, industrial peace cannot be achieved if
governing contracting out. the employees are denied their just participation in
Given these realities, we recognize that a the discussion of matters affecting their rights. Thus,
balance already exists in the parties’ relationship even before Article 211 of the Labor Code (P.D. 442)
with respect to contracting out; MERALCO has its was amended by Republic Act No. 6715, it was
legally defined and protected management already declared a policy of the State: "(d) To
prerogatives while workers are guaranteed their own promote the enlightenment of workers concerning
protection through specific labor provisions and the their rights and obligations . . .as employees." This
recognition of limits to the exercise of management was, of course, amplified by Republic Act No. 6715
prerogatives. when it decreed the "participation of workers in
decision and policy making processes affecting their
WELFARE STATE rights, duties and welfare." PAL's position that it
cannot be saddled with the "obligation" of sharing
Alalayan v. National Power Corporation (68) management prerogatives as during the formulation
The welfare state concept is not alien to the of the Code, Republic Act No. 6715 had not yet been
philosophy of our Constitution. It is implicit in quite a enacted, cannot thus be sustained. While such
few of its provisions. There is the clause on the "obligation" was not yet founded in law when the
promotion of social justice to ensure the well-being Code was formulated, the attainment of a
and economic security of all the people, as well as harmonious labor-management relationship and the
the pledge of protection to labor with specific then already existing state policy of enlightening
authority to regulate the relations between workers concerning their rights as employees
landowners and tenants and between labor and demand no less than the observance of transparency
capital. in managerial moves affecting employees' rights.

LAISSEZ-FAIRE Manila Electric Co. v. Quisumbing (99)


We do not find merit in MERALCO’s contention
Agricultural Credit & Cooperative Financing that the above-quoted ruling of the Secretary is an
Admin. v. Confederation of Unions (69) intrusion into the management prerogatives of
The influence exerted by American MERALCO. It is worthwhile to note that all the Union
constitutional doctrines unavoidable when the demands and what the Secretary’s order granted is
Philippines was still under American rule that the Union be allowed to participate in policy
notwithstanding, an influence that has not altogether formulation and decision-making process on matters
vanished even after independence, the laissez faire affecting the Union members’ rights, duties and
principle never found full acceptance in this welfare as required in Article 211 (A) (g) of the
jurisdiction, even during the period of its flowering in Labor Code. And this can only be done when the
the United States. Union is allowed to have representatives in the
Safety Committee, Uniform Committee and other
Employees Confederation of the Philippines v. committees of a similar nature. Certainly, such
NWPC (91) participation by the Union in the said committees is
Apparently, ECOP is of the mistaken impression not in the nature of a co-management control of the
that Republic Act No. 6727 is meant to "get the business of MERALCO. What is granted by the
Government out of the industry" and leave labor and Secretary is participation and representation. Thus,
management alone in deciding wages. The Court there is no impairment of management prerogatives.
does not think that the law intended to deregulate
the relation between labor and capital for several
reasons: (1) The Constitution calls upon the State to
protect the rights of workers and promote their
welfare; (2) the Constitution also makes it a duty of SECTION 3 - LABOR AND THE CIVIL CODE
the State "to intervene when the common goal so
demands" in regulating property and property
relations; (3) the Charter urges Congress to give 3.01 ROLE OF LAW
priority to the enactment of measures, among other
things, to diffuse the wealth of the nation and to The New Civil Code Art. 1700
regulate the use of property; (4) the Charter The relations between capital and labor are not
recognizes the "just share of labor in the fruits of merely contractual. They are so impressed with
production;" (5) under the Labor Code, the State public interest that labor contracts must yield to the
shall regulate the relations between labor and common good. Therefore, such contracts are subject
management; (6) under Republic Act No. 6727 to the special laws on labor unions, collective
itself, the State is interested in seeing that workers bargaining, strikes and lockouts, closed shop,
receive fair and equitable wages; and (7) the wages, working conditions, hours of labor and
Constitution is primarily a document of social justice, similar subjects.
and although it has recognized the importance of the
private sector, it has not embraced fully the concept LABOR CONTRACTS
of laissez faire or otherwise, relied on pure market
forces to govern the economy; We can not give to PAL Employees Savings and Loan Assn., Inc.
the Act a meaning or intent that will conflict with v. NLRC (96)
these basic principles. In connection with the foregoing, we should
add that even if there had been a meeting of the

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minds in the instant case, the employment contract FAIR TREATMENT
could not have effectively shielded petitioner from
the just and valid claims of private respondent. General Bank and Trust Co., v. Court of Appeals
Generally speaking, contracts are respected as the (85)
law between the contracting parties, and they may Basically, the right of an employer to dismiss an
establish such stipulations, clauses, terms and employee differs from and should not be confused
conditions as they may see fit; and for as long as with the manner in which such right is exercised. It
such agreements are not contrary to law, morals, must not be oppressive and abusive since it affects
good customs, public policy or public order, they one's person and property. (Remerco Garments
shall have the force of law between them. However, Manufacturing v. MOLE)
“… while it is the inherent an inalienable right of
every man to have the utmost liberty of contracting, MUTUAL OBLIGATION
and agreements voluntarily and fairly made will be
held valid and enforced in the courts, the general Firestone Tire and Rubber Co. v. Lariosa (87)
right to contract is subject to the limitation that the The employer's obligation to give him workers
agreement must not be in violation of the just compensation and treatment carries with it the
Constitution, the statute or some rule of law.” And corollary right to expect from the workers adequate
under the Civil Code, contracts of labor are explicitly work, diligence and good conduct.
subject to the police power of the State because
they are not ordinary contracts but are impressed LAW COMPLIANCE
with public interest. Inasmuch as in this particular
instance the contract in question would have been Sarmiento v. Tuico (88)
deemed in violation of pertinent labor laws, the It is also important to emphasize that the
provisions of said laws would prevail over the terms return-to-work order not so much confers a right as
of the contract, and private respondent would still be it imposes a duty; and while as a right it may be
entitled to overtime pay. waived, it must be discharged as a duty even
against the worker's will.
Philippine Telephone and Telegraph Co. v.
NLRC (97) EMPLOYEES OBEDIENCE AND COMPLIANCE TO
Petitioner’s policy is not only in derogation of EMPLOYERS ORDERS
the provisions of Article 136 of the Labor Code on
the right of a woman to be free from any kind of PCIB v. Jacinto (91)
stipulation against marriage in connection with her Any employee who is entrusted with
employment, but it likewise assaults good morals responsibility by his employer should perform the
and public policy, tending as it does to deprive a task assigned to him with care and dedication. The
woman of the freedom to choose her status, a lack of a written or formal designation should not be
privilege that by all accounts inheres in the an excuse to disclaim any responsibility for any
individual as an intangible and inalienable right. damage suffered by the employer due to his
Hence, while it is true that the parties to a contract negligence. The measure of the responsibility of an
may establish any agreements, terms, and employee is that if he performed his assigned task
conditions that they may deem convenient, the efficiently and according to the usual standards, then
same should not be contrary to law, orals, good he may not be held personally liable for any damage
customs, public order, or public policy. Carried to its arising therefrom. Failing in this, the employee must
logical consequences, it may even be said that suffer the consequences of his negligence if not lack
petitioner’s policy against legitimate marital bonds of due care in the performance of his duties.
would encourage illicit or common-law relations and
subvert the sacrament of marriage. 3.02 EMPLOYER-EMPLOYEE STANDARD OF
Parenthetically, the Civil Code provisions on the CONDUCT
contract of labor state that the relations between the
parties, that is, of capital and labor, are not merely GTE Directories Corp. v. Sanchez (91)
contractual, impressed as they are with so much To sanction disregard or disobedience by
public interest that the same should yield to the employees of a rule or order laid down by
common good. It goes on to intone that neither management, on the pleaded theory that the rule or
capital nor labor should visit acts of oppression order is unreasonable, illegal, or otherwise irregular
against the other, nor impair the interest or for one reason or another, would be disastrous to
convenience of the public. In the final reckoning, the discipline and order that it is in the interest of
the danger of just such a policy against marriage both the employer and his employees to preserve
followed by petitioner PT&T is that it strikes at the and maintain in the working establishment and
very essence, ideals and purpose of marriage as an without which no meaningful operation and progress
inviolable social institution and, ultimately, of the is possible.
family as the foundation of the nation. That it must
be effectively interdicted here in all its indirect, San Miguel Corp. v. Ubaldo (93)
disguised or dissembled forms as discriminatory Quoting the words of this Court in a recent
conduct derogatory of the laws of the lands is not case:
only in order but imperatively required. "To sanction disregard or disobedience by
employees of a rule or order laid down by
management, on the pleaded theory that the
Art. 1701
rule or order is unreasonable, illegal, or
Neither capital nor labor shall act oppressively otherwise irregular for one reason or another,
against the other, or impair the interest or would be disastrous to the discipline and order that
convenience of the public. it is in the interest of both employer and his
employees to preserve and maintain in the working
establishment and without which no meaningful

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operation and progress is possible. Deliberate International Covenant on Civil and Political
disregard or disobedience of rules, defiance of Rights – Part II, Art. 8
management authority cannot be countenanced.
This is not to say that the employees have no
remedy against rules or orders they regard as
Conventions and Recommendations if the
unjust or illegal. They may object thereto, ask to International Labor Organization (ILO)
negotiate thereon, bring proceedings for redress
against the employer before the Ministry of INTERNATIONAL CONVENTIONS
Labor. But until and unless the rules or orders
are declared to be illegal or improper by International School Alliance of Educators v.
competent authority, the employees ignore or
Quisumbing (2000)
disobey them at their peril."
That public policy abhors inequality and
With a view of maintaining the viability of a
discrimination is beyond contention. Our Constitution
business enterprise, the employees are expected to
and laws reflect the policy against these evils. The
recognize the rules or orders which have not been
Constitution in the Article on Social Justice and
declared to be illegal or improper by competent
Human Rights exhorts Congress to "give highest
authority. In the case at bar, the private
priority to the enactment of measures that protect
respondents committed acts contrary to the rules
and enhance the right of all people to human
and regulations set out by the company, which
dignity, reduce social, economic, and political
eventually caused serious damage to the
inequalities." The very broad Article 19 of the Civil
establishment.
Code requires every person, "in the exercise of his
It is a recognized principle that company policies
rights and in the performance of his duties, [to] act
and regulations are, unless shown to be grossly
with justice, give everyone his due, and observe
oppressive or contrary to law, generally binding and
honesty and good faith."
valid on the parties and must be complied with until
International law, which springs from general
finally revised or amended unilaterally or preferably
principles of law, likewise proscribes discrimination.
through negotiation or by competent authority.
General principles of law include principles of equity,
XXX Deliberate disregard or disobedience of
i.e., the general principles of fairness and justice,
rules by the employees cannot be countenanced.
based on the test of what is reasonable. The
Whatever maybe the justification behind the
Universal Declaration of Human Rights, the
violations is immaterial at this point, because the
International Covenant on Economic, Social, and
fact still remains that an infraction of the company
Cultural Rights, the International Convention on the
rules has been committed.
Elimination of All Forms of Racial Discrimination, the
Convention against Discrimination in Education, the
EMPLOYER OBLIGATION
Convention (No. 111) Concerning Discrimination in
Respect of Employment and Occupation - all embody
Lagniton v. NLRC (93)
the general principle against discrimination, the very
The days are gone when the employee was at
antithesis of fairness and justice. The Philippines,
the mercy of his employer and could be dismissed
through its Constitution, has incorporated this
for the flimsiest reasons or for no reason at all. The
principle as part of its national laws.
tyrannical employer is an anachronism in this
In the workplace, where the relations between
enlightened era. The employee today, once
capital and labor are often skewed in favor of
defenseless and often oppressed, has found new
capital, inequality and discrimination by the
strength in the protection of the law and the proud
employer are all the more reprehensible.
realization that he performs a symbiotic role with the
The Constitution specifically provides that labor
employer in their common enterprise. As such, he
is entitled to "humane conditions of work." These
must be treated not as a disdained subordinate but
conditions are not restricted to the physical
with the respect and fairness, if not affection and
workplace - the factory, the office or the field - but
gratitude, that is due to an equal partner.
include as well the manner by which employers treat
their employees.
Maneja v. NLRC (98)
The Constitution also directs the State to
An employer can terminate the services of an
promote "equality of employment opportunities for
employee only for valid and just causes which must
all." Similarly, the Labor Code provides that the
be supported by clear and convincing evidence. The
State shall "ensure equal work opportunities
employer has the burden of proving that the
regardless of sex, race or creed." It would be an
dismissal was indeed for a valid and just cause.
affront to both the spirit and letter of these
Failure to do so results in a finding that the
provisions if the State, in spite of its primordial
dismissal was unjustified.
obligation to promote and ensure equal employment
opportunities, closes its eyes to unequal and
discriminatory terms and conditions of employment.
Discrimination, particularly in terms of wages, is
SECTION 4 - LABOR AND INTERNATIONAL frowned upon by the Labor Code. Article 135, for
COVENANTS example, prohibits and penalizes the payment of
lesser compensation to a female employee as
Universal Declaration of Human Rights – Arts. against a male employee for work of equal value.
3, 7, 17, 22, 23,24, 25 Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order
International Covenant on Economic, Social to encourage or discourage membership in any labor
and Cultural Rights – Part III, Arts. 6, 7, 9, organization.
11 Notably, the International Covenant on
Economic, Social, and Cultural Rights, supra, in
Article 7 thereof, provides:

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The States Parties to the present Covenant controlled corporations, shall be governed by the
recognize the right of everyone to the enjoyment of Civil Service Law, rules and regulations. Their
just and favourable conditions of work, which salaries shall be standardized by the National
ensure, in particular: Assembly as provided for in the new constitution.
a.....Remuneration which provides all However, there shall be no reduction of existing
workers, as a minimum, with: wages, benefits and other terms and conditions of
i.....Fair wages and equal remuneration for employment being enjoyed by them at the time of
work of equal value without distinction of the adoption of this Code.
any kind, in particular women being
guaranteed conditions of work not inferior Art IX, B, Sec 2(1), 1987 Constitution:
to those enjoyed by men, with equal pay The civil service embraces all branches, subdivisions,
for equal work; instrumentalities, and agencies of the Government,
The foregoing provisions impregnably including government-owned or controlled
institutionalize in this jurisdiction the long honored corporations with original charters.
legal truism of "equal pay for equal work." Persons
who work with substantially equal qualifications, TEST – GOVERNMENT OWNED AND CONTROLLED
skill, effort and responsibility, under similar CORPORATIONS
conditions, should be paid similar salaries. This rule
applies to the School, its "international character" PNOC Energy Development Corp. v. NLRC (91)
notwithstanding. Thus, under the present state of the law, the
test in determining whether a government-owned or
controlled corporation is subject to the Civil Service
Law are the manner of its creation, such that
SECTION 5 - THE LABOR CODE OF THE government corporations created by special charter
are subject to its provisions while those incorporated
PHILIPPINES
under the General Corporation Law are not within its
coverage.
5.01 DECREE TITLE
Cabrera v. NLRC (91)
A DECREE INSTITUTING A LABOR CODE, THEREBY Our finding is that the respondent NLRC erred in
REVISING AND CONSOLIDATING LABOR AND dismissing the petitioners' complaint for lack of
SOCIAL LAWS TO AFFORD PROTECTION TO jurisdiction because the rule now is that only
LABOR, PROMOTE EMPLOYMENT AND HUMAN government-owned or controlled corporations with
RESOURCES DEVELOPMENT AND ENSURE original charters come under the Civil Service. The
INDUSTRIAL PEACE BASED ON SOCIAL NASECO having been organized under the
JUSTICE. Corporation Law and not by virtue of a special
legislative charter, its relations with its personnel are
Art. 1 governed by the Labor Code and come under the
Name of Decree - This Decree shall be known as the jurisdiction of the National Labor Relations
"Labor Code of the Philippines," 10/02/1999 Commission.

5.02 EFFECTIVITY APPLICATION OF THE LABOR CODE


 Not of universal application
Art. 2  Labor Code, PD 442 as amended
Date of effectivity - This Code shall take effect six Applicability – Art. 6
months after its promulgation.  All workers – agricultural and non-agricultural
 GOCC – organized under general laws in
5.03 POLICY DECLARATION corporation – Corporation Code
 Wages (97b) – government, all branches,
Art. 3 subdivision & instrumentalities, GOCC, profit or
Declaration of Basic Policy – The State shall afford non – profit organizations
protection to labor, promote full employment,  ECSIF – all private and government employees
ensure equal work, opportunities regardless of sex, (167 f)
race or creed, and regulate the relations between Offspring of GOCC – test: HOW ORGANIZED
workers and employers. The State shall assure the  Labor code – NOT APPLICABLE
rights of workers to self-organization, collective » Government employees – what’s
bargaining, security of tenure, and just and humane applicable? Civil Service and EO 180
conditions of work. » GOCC with original charter – Art. 9 – B,
Sec. 2(1) of the Constitution
5.04 APPLICABILITY » International Agencies and specialized
agencies or UN – treaty or international
Art. 6 conventions
Applicability - All rights and benefits granted to ▪ grant of immunity from suit ex. IRRI,
workers under this Code shall, except as may ICMC
otherwise be provided herein, apply alike to all ▪ by specific treaty – grant of immunity
workers, whether agricultural or non-agricultural. ▪ if injustice is created due to exemption
from suit, REMEDY: withdraw the grant
of immunity from suit.
Art. 276
Government employees - The terms and conditions
of employment of all government employees, International Agencies
including employees of government-owned and

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void by this Court in Philippine Apparel Workers
Ebro III v. NLRC (96) Union vs. National Labor Relations Commission,
The grant of immunity is by virtue of the ruling that: ". . ., it must be pointed out that the
Convention on the Privileges and Immunities of Secretary of Labor has exceeded his authority when
Specialized Agencies of the U.N. adopted by the he included paragraph (k) in Section 1 of the Rules
Senate on May 17, 1949. This has become part of Implementing P.D. 1123. "By virtue of such rule-
the law of the land under the Constitution on making authority, the Secretary of Labor issued on
generally accepted principles of international law. May 1, 1977 a set of rules which exempts not only
distressed employers but also 'those who have
SCHOOL TEACHERS granted in addition to the allowance under P.D. 525,
at least P60.00 monthly wage increase on or after
National Mines and Allied Workers’ Union v January 1, 1977, provided that those who paid less
NLRC (98) than this amount shall pay the difference.' "Clearly,
On the issue of whether the individual the inclusion of paragraph k contravenes the
petitioners were permanent employees, it is the statutory authority granted to the Secretary of
Manual of Regulations for Private Schools, and not Labor, and the same is therefore void, as ruled by
the Labor Code, which is applicable. this Court in a long line of cases, . . ."

RELIGIOUS CORPORATIONS Pagpalain Haulers, Inc. v. Trajano (99)


Neither can Pagpalain contend that Department
Austria v. NLRC (99) Order No. 9 is an invalid exercise of rule-making
An ecclesiastical affair is “one that concerns power by the Secretary of Labor. For an
doctrine, creed or form of worship of the church, or administrative order to be valid, it must 1) be issued
the adoption and enforcement within a religious on the authority of law and 2) it must not be
association of needful laws and regulations for the contrary to the law and the Constitution.
government of the membership, and the power of Department Order No. 9 has been issued on
excluding from such associations those deemed authority of law. Under the law, the Secretary is
unworthy of membership. Based on this definition, authorized to promulgate rules and regulations to
an ecclesiastical affair involves the relationship implement the Labor Code. Specifically, Article 5 of
between the church and its members and relate to the Labor Code provides that “[t]he Department of
matters of faith, religious doctrines, worship and Labor and other government agencies charged with
governance of the congregation. the administration and enforcement of this Code or
XXX Under the Labor Code, the provision which any of its parts shall promulgate the necessary
governs the dismissal of employees, is implementing rules and regulations.” Consonant
comprehensive enough to include religious with this article, the Secretary of Labor and
corporations, such as the SDA, in its coverage. Employment promulgated the Omnibus Rules
Article 278 of the Labor Code on post-employment Implementing the Labor Code. By virtue of this self-
states that “the provisions of this Title shall apply to same authority, the Secretary amended the above-
all establishments or undertakings, whether for mentioned omnibus rules by issuing Department
profit or not.” Obviously, the cited article does not Order No. 9, Series of 1997.
make any exception in favor of a religious Moreover, Pagpalain has failed to show that
corporation. This is made more evident by the fact Department Order No. 9 is contrary to the law or the
that the Rules Implementing the Labor Code, Constitution. At the risk of being repetitious, the
particularly, Section 1, Rule 1, Book VI on the Labor Code does not require a local or chapter to
Termination of Employment and Retirement, submit books of account in order for it to be
categorically includes religious institutions in the registered as a legitimate labor organization. There
coverage of the law, to wit: is, thus, no inconsistency between the Labor Code
SECTION 1. Coverage. – This Rule shall apply to and Department order No. 9. Neither has Pagpalain
all establishments and undertakings, whether shown that said order contravenes any provision of
operated to profit or not, including educational,
the Constitution.
medical, charitable and religious institutions and
organizations, in cases of regular employment
with the exception of Government and its political 5.06 LAW INTERPRETATION
subdivisions including government-owned or
controlled corporations. Art. 4, Labor Code
With this clear mandate, the SDA cannot hide Construction in favor of labor - All doubts in the
behind the mantle of protection of the doctrine of implementation and interpretation of the provisions
separation of church and state to avoid its of this Code, including its implementing rules and
responsibilities as an employer under the Labor regulations, shall be resolved in favor of labor.
Code.
Art. 170, Civil Code
5.05 RULE MAKING POWER In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety
LIMITATION – RULE MAKING POWER and decent living for the laborer.

Kapisanan ng mga Manggagawang Pinagyakap LIBERAL CONSTRUCTION


v. NLRC (87)
The labor arbiter in rendering the questioned Salinas v. NLRC (99)
decision relied primarily on Section 1 (k) of the It is basic and irrefragable rule that in carrying
Labor Department's rules and regulations out and interpreting the provisions of the Labor
implementing Presidential Decree No. 1123. This Code and its implementing regulations, the
exemption paragraph (k) was, however, declared workingman’s welfare should be the primordial

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and paramount consideration. The interpretation solicitude can not justify disregard of relevant facts
herein made gives meaning and substance to the or eschewal of rationality in the construction of the
liberal and compassionate spirit of the law text of applicable rules in order to arrive at a
enunciated in Article 4 of the Labor Code that “all disposition in favor of an employee who is perceived
doubts in the implementation and interpretation of as otherwise deserving of sympathy and
the provisions of the Labor Code including its commiseration.
implementing rules and regulations shall be resolved
in favor of labor.”

IN FAVOR OF LABOR – RATIONALE EQUITY AND MORAL CONSIDERATION

Abella v. NLRC (87) Manning International Corp. v. NLRC (91)


In any event, it is well-settled that in the There is another reason to strike down the
implementation and interpretation of the provisions NLRC's "new judgment" of April 15, 1988, and that
of the Labor Code and its implementing regulations, is, that in disregard of the relevant provisions of the
the workingman's welfare should be the primordial law, it is made to rest on "considerations of equity
and paramount consideration. It is the kind of and social justice." This is impermissible. As this
interpretation which gives meaning and substance to Court held in the analogous situation of an employee
the liberal and compassionate spirit of the law as whom the NLRC found had been dismissed by her
provided for in Article 4 of the New Labor Code employer for cause (dishonesty) but whom it
which states that `all doubts in the implementation nonetheless awarded separation pay on equitable
and interpretation of the provisions of this Code and compassionate grounds:
including its implementing rules and regulations shall "The rule embodied in the Labor Code is that a
be resolved in favor of labor." The policy is to extend person dismissed for cause as defined therein is not
the applicability of the decree to a greater number of entitled to separation pay. The cases above cited
employees who can avail of the benefits under the constitute the exception, based upon considerations
law, which is in consonance with the avowed policy of equity. Equity has been defined as justice outside
of the State to give maximum aid and protection to law, being ethical rather than jural and belonging to
labor. the sphere of morals than of law. It is grounded on
the precepts of conscience and not on any sanction
DOUBT of positive law. Hence, it cannot prevail against the
expressed provision of the labor laws allowing
Clemente v. GSIS (87) dismissal of employees for cause and without any
This Court has held in appropriate cases that the provision for separation pay."
conservative posture of the respondents is not
consistent with the liberal interpretation of the Labor FAIRNESS
Code and the social justice guarantee embodied in
the Constitution in favor of the workers. It clashes Reliance Surety and Insurance Co. Inc v NLRC
with the injunction in the Labor Code (Article 4, New (91)
Labor Code) that, as a rule, doubts should be As a general rule, the sympathy of the Court is
resolved in favor of the claimant-employee. on the side of the laboring classes, not only because
the Constitution imposes sympathy but because of
NO DOUBT the one-sided relation between labor and capital.
The Court must take care, however, that in the
Bonifacio v. GSIS (86) contest between labor and capital, the results
While we do not dispute petitioner's contention achieved are fair and in conformity with the rules.
that under the law, in case of doubt in the
implementation and interpretation of the provisions BALANCING CONFLICTING CLAIMS
of the Labor Code, including its implementing rules
and regulations, the doubt shall be resolved in favor Phil. Airlines, Inc. v. NLRC (1992)
of the laborer, we find that the same has no That there should be care and solicitude in the
application in this case since the pertinent provisions protection and vindication of the rights of
of the Labor Code leave no room for doubt either in workingmen cannot be gainsaid; but that care and
their interpretation or application. solicitude can not justify disregard of relevant facts
or eschewal of rationality in the construction of the
SWEEPING INTERPRETATION text of applicable rules in order to arrive at a
disposition in favor of an employee who is perceived
Bravo v. ECC (86) as otherwise deserving of sympathy and
We are aware of the mandate that social commiseration.
legislation should be applied in consonance with the
principles of social justice and protection to labor.
However, we cannot adopt a sweeping interpretation
of the law in favor of labor lest we engage in judicial SECTION 6 - WORK RELATIONSHIP
legislation.

FACTUAL CONSIDERATIONS AND RATIONALITY 6.01 WORK RELATIONSHIP

Philippine Airlines Inc v NLRC (91) DEFINITIONS


That there should be care and solicitude in the
protection and vindication of the rights of Art. 97 Definition
workingmen cannot be gainsaid; but that care and (a) "Person" means an individual, partnership,
association, corporation, business trust, legal

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representative or any organized group of To determine the existence of an employer-
person. employee relation, this Court has consistently
(b) "Employer" includes any person acting directly applied the “four-fold” test which has the following
or indirectly in the interest of an employer in elements: (1) the power to hire, (2) the payment of
relation to an employee and shall include the wages, (3) the power to dismiss, and (4) the power
Government and all its branches, subdivisions to control – the last being the most important
and instrumentalities, all government-owned or element.
controlled corporations and institutions, as well
as non-profit private institutions or Lim v. NLRC (99)
organizations. The existence of an employer-employee
"Employee" includes any individual employed relationship is principally determined by the
by an employer. following indicia: (1) selection and engagement of
Art. 167 Definition of Terms the employee; (2) payment of wages; (3) power of
(f) "Employer" means any person, natural or dismissal; and (4) employer’s power to control the
juridical, employing the services of the employee with respect to the result to be done and
employee. to the means and methods by which the work is to
(g) "Employee" means any person compulsorily be accomplished.
covered by the GSIS under Commonwealth Act
numbered one hundred eighty-six, as amended, CONTROL TEST
including members of the Armed Forces of the
Philippines, and any person employed as casual, Religious of the Virgin Mary v. NLRC (99)
emergency, temporary, substitute or The argument has no merit. AS this Court has
contractual; or any person compulsorily covered consistently ruled, the power of control is the most
by the SSS under Republic Act numbered eleven decisive factor in determining the existence of an
hundred sixty-one, as amended. employer – employee relationship. In Encyclopedia
Britannica (Phils.), Inc. v. NLRC, we held:
Art. 212 Definitions In determining the existence of an employer-
(e) "Employer" includes any person acting in the employee relationship the following elements
must be present: (1) selection and engagement
interest of an employer, directly or indirectly.
of the employee; (2) payment of wages; (3)
The term shall not include any labor power of dismissal; and (4) the power to control
organization or any of its officers or agents the employees’ conduct. Of the above, control of
except when acting as employer. employee’s conduct is commonly regarded as the
(f) "Employee" includes any person in the employ most crucial and determinative indicator of the
of an employer. The term shall not be limited to presence or absence of an employer-employee
the employees of a particular employer, unless relationship. Under the control test, an
employer-employee relationship exists where the
this Code so explicitly states. It shall include any
person for whom the services are performed
individual whose work has ceased as a result of reserves the right to control not only the end to
or in connection with any current labor dispute be achieved, but also the manner and means to
or because of any unfair labor practice if he has be used in reaching that end.
not obtained any other substantially equivalent In this case, CDSPB reserved the right to control
and regular employment. and supervise the operations of the Girls’
Department. Although CDSPB “actually exercised
EMPLOYEE minimal supervision over petitioner, [it]could
exercise substantial supervision and control as it did
United Pepsi-Cola Supervisory Union (UPSU) v. when [it] preterminated the Agreement.” There
Laguesma (98) was, therefore, no basis in finding that petitioner
As can be seen from this description, a had a “greater degree of autonomy ad independence
distinction exists between those who have the in running the affairs” of the school. The presence
authority to devise, implement and control strategic of the school director, whose vast powers have
and operational policies (top and middle managers) already been noted, negates any suggestions or
and those whose task is simply to ensure that such semblance of autonomy.
policies are carried out by the rank-and-file Nor is there any merit in the claim that “actual
employees of an organization (first-level and effective control” was exercised by petitioner
managers/supervisors). What distinguishes them since the designation of the parish priest as director
from the rank-and-file employees is that they act in was “a mere formality, as he did perform functions
the interest of the employer in supervising such which are purely ministerial and figurative in
rank-and-file employees. nature.” Time and again we have held that “the
"Managerial employees" may therefore be said ‘control test’ only requires the existence of the right
to fall into two distinct categories: the "managers" to control the manner of doing the work not
per se, who compose the former group described necessarily the actual exercise of the power by him,
above, and the "supervisors" who form the latter which he can delegate.” Indeed, although the
group. Whether they belong to the first or the letters of appointment were signed by the
second category, managers, vis-a-vis employers, principal/representative of petitioner, they bore the
are, likewise, employees. name/letterhead of CDSPB and clearly indicated
therein that the employees were hired as
EMPLOYER-EMPLOYEE RELATIONSHIP teachers/personnel by CDSPB, and not by RVM.
Moreover, CDSPB itself admits that its name – not
FACTORS petitioner’s – appears in the employees’ payroll
ledger cards.
Chavez vs. NLRC (2005); Caurdanetaan Piece
Workers Union v. Laguesma (98) PROOF

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The principle requiring the piercing of the
Domasig v NLRC (96) corporate veil mandates the courts to see through
It has long been established that in the protective shroud that distinguishes one
administrative and quasi-judicial proceedings, corporation from seemingly separate one. xxx
substantial evidence is sufficient as a basis for In the present case, the corporations have basically
judgment on the existence of employer-employee the same incorporators and directors and are headed
relationship. No particular form of evidence is by the same official. Both use only on office and one
required to prove the existence of such. payroll and are under one management. In their
individual affidavits, respondents allege that they
ECONOMIC TEST worked under the supervision and control of
petitioner Bondoc—the common managing director
Sevilla v. CA(88) of both the petitioner-company and the leisure
We have considered, in addition to the standard corporation. Some of the laborers of the plantation
of right-of-control, the existing economic conditions also work in the golf course. Thus, the attempt to
prevailing between the parties, like the inclusion of make the two corporations appear as two separate
the employee in the payrolls, in determining the entities, insofar as the workers are concerned,
existence of an employer-employee relationship. should be viewed as a devious but obvious mens o
defeat the ends of the law. Such a ploy should not
AGREEMENT be permitted to cloud the truth and perpetrate
injustice.
Tabas v. California Manufacturing Co. (90)
The existence of an employer-employees 6.02 INDEPENDENT CONTRACTOR AND LABOR
relation is a question of law and being such, it CONTRACTOR ONLY
cannot be made the subject of agreement.
REFERENCE
Insular Life Assurance Co. Ltd. v. NLRC (98)
It is axiomatic that the existence of an Art. 106, Labor Code
employer-employee relationship cannot be negated Contractor or sub-contractor - Whenever an
by expressly repudiating it in the management employer enters into a contract with another person
contract and providing therein that the "employee" is for the performance of the former's work, the
an independent contractor when the terms of the employees of the contractor and of the latter's sub-
agreement clearly show otherwise. For, the contractor, if any, shall be paid in accordance with
employment status of a person is defined and the provisions of this Code.
prescribed by law and not by what the parties say it
should be. In determining the status of the In the event that the contractor or sub-contractor
management contract, the "four-fold test" on fails to pay the wages of his employees in
employment earlier mentioned has to be applied. accordance with this Code, the employer shall be
jointly and severally liable with his contractor or sub-
EFFECT OF RELATIONSHIP contractor to such employees to the extent of the
work performed under the contract, in the same
Philippine Fuji Xerox Corp. v NLRC (96) manner and extent that he is liable to employees
It is wrong to say that if a task is not directly directly employed by him.
related to the employer's business, or it falls under
what may be considered "housekeeping activities," The Secretary of Labor and Employment may, by
the one performing the task is a job contractor. The appropriate regulations, restrict or prohibit the
determination of the existence of an employer- contracting out of labor to protect the rights of
employee relationship is defined by law according to workers established under this Code. In so
the facts of each case, regardless of the nature of prohibiting or restricting, he may make appropriate
the activities involved. distinctions between labor-only contracting as well
as differentiations within these types of contracting,
NATURE/CHARACTER and determine who among the parties involved shall
be considered the employer for purposes of this
Dunlop Slazenger (Phils.), Inc. v. Secretary, Code, to prevent any violation or circumvention of
DOLE (98) any provision of this Code.
Determining the status of supervisory and rank-
and-file employees is not a hard row to hoe in labor There is "labor-only" contracting where the person
law. The test of supervisory status as we have supplying workers to an employer does not have
repeatedly ruled is whether an employee possesses substantial capital or investment in the form of tools,
authority to act in the interest of his employer, equipment, machineries, work premises, among
which authority should not be merely routinary or others, and the workers recruited and placed by
clerical in nature but requires the use of independent such person are performing activities which are
judgment. Corollarily, what determines the nature directly related to the principal business of such
of employment is not the employee’s title, but his employer. In such cases, the person or intermediary
job description. shall be considered merely as an agent of the
employer who shall be responsible to the workers in
PIERCING THE CORPORATE VEIL the same manner and extent as if the latter were
directly employed by him.
Pamplona Plantation Co., Inc v. Tinghil (2005)
The legal fiction of separate corporate entities Art. 107, Labor Code
cannot be invoked to further an end subversive of Indirect employer - The provisions of the
justice. immediately preceding Article shall likewise apply

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to any person, partnership, association or iii) The agreement between the principal and
corporation which, not being an employer, contracts contractor or subcontractor assures the
with an independent contractor for the performance contractual employees entitlement to all
of any work, task, job or project. labor and occupational safety and health
standards, free exercise of the right to self-
Art. 109, Labor Code organization, security of tenure, and social
Solidary liability - The provisions of existing laws to and welfare benefits.
the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his Escario v. NLRC (2000)
contractor or subcontractor for any violation of any In contrast, there is permissible job contracting
provision of this Code. For purposes of determining when a principal agrees to put out or farm out with a
the extent of their civil liability under this Chapter, contractor or a subcontractor the performance or
they shall be considered as direct employers. completion of a specific job, work or service within a
definite or predetermined period, regardless of
INDEPENDENT CONTRACTOR whether such job or work or service is to be
performed or completed within or outside the
National Power Corp. v. Court of Appeals (98) premises of the principal. In this arrangement, the
Job (independent) contracting is present if the following conditions must concur:
following conditions are met: (a) the contractor (a)....The contractor carries on a distinct and
carries on an independent business and undertakes independent business and undertakes the
contract work on his account under his own
the contract work on his own account under his own
responsibility according to his own manner and
responsibility according to his own manner and method, free from the control and direction of his
method, free from the control and direction of his employer or principal in all matters connected
employer or principal in all matters connected with with the performance of his work except as to
the performance of the work except to the result the results thereof; and
thereof; and (b) the contractor has substantial (b)....The contractor has substantial capital or
capital or investments in the form of tools, investment in the form of tools, equipment,
machineries (sic), work premises, and other
equipment, machineries, work premises and other
materials which are necessary in the conduct of
materials which are necessary in the conduct of his his business. [RULES TO IMPLEMENT THE LABOR
business. Absent these requisites, what exists is a CODE, Book III, Rule VIII, Sec. 8.]
“labor only” contract under which the person acting In the recent case of Alexander Vinoya vs. NLRC
as contractor is considered merely as an agent or et al., this Court ruled that in order to be considered
intermediary of the principal who is responsible to an independent contractor it is not enough to show
the workers in the same manner and to the same substantial capitalization or investment in the form
extent as if they had been directly employed by him. of tools, equipment, machinery and work premises.
In addition, the following factors need be
MANAGEMENT FUNCTION considered: (a) whether the contractor is carrying on
an independent business; (b) the nature and extent
Manila Electric Co. v. Quisumbing (99) of the work; (c) the skill required; (d) the term and
Additionally, We recognize that contracting out duration of the relationship; (e) the right to assign
is not unlimited; rather, it is a prerogative that the performance of specified pieces of work; (f) the
management enjoys subject to well-defined legal control and supervision of the workers; (g) the
limitations. As we have previously held, the power of the employer with respect to the hiring,
company can determine in its best business firing and payment of workers of the contractor; (h)
judgment whether it should contract out the the control of the premises; (i) the duty to supply
performance of some of its work for as long as the premises, tools, appliances, materials, and labor;
employer is motivated by good faith, and the and (j) the mode, manner and terms of payment.
contracting out must not have been resorted to
circumvent the law or must not have been the result Desirable – Unnecessary
of malicious or arbitrary action. The Labor Code and
its implementing rules also contain specific rules Coca-Cola Bottlers Phil., Inc. v. NLRC (99)
governing contracting out (Department or Labor We perceive at the outset the disposition of the
Order No. 10, May 30, 1997, Sections 1-25). NLRC that janitorial services are necessary and
desirable to the trade or business of petitioner Coca-
REQUIREMENTS – INDEPENDENT CONTRACTOR Cola. But this is inconsistent with our
pronouncement in Kimberly Independent Labor
Lim v. NLRC (99) Union v. Drilon where the Court took judicial notice
Under DOLE Department Order No. 10 (1997), of the practice adopted in several government and
contracting shall be legitimate if the following private institutions and industries of hiring janitorial
circumstances concur: services on an “independent contractor basis.” In
i) The contractor or subcontractor carries on a this respect, although janitorial services may be
distinct and independent business and considered directly related to the principal business
undertakes to perform the job, work or of an employer, as with every business, we deemed
service on its own account and under its them unnecessary in the conduct of the employer’s
own responsibility, according to its own principal business.
manner and method, and free from the
control and direction of the principal in all Judicial Notice
matters connected with the performance of
the work except as to the results thereof; Coca-Cola Bottlers Phil., Inc. v. NLRC (99)
ii) The contractor or subcontractor has We perceive at the outset the disposition of
substantial capital or investment; and the NLRC that janitorial services are necessary

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and desirable to the trade or business of petitioner (b) The employees recruited, supplied or placed
Coca-Cola. But this is inconsistent with our by such contractor or subcontractor are
performing activities which are directly related to
pronouncement in Kimberly Independent Labor
the main business of the principal.
Union v. Drilon where the Court took judicial notice
of the practice adopted in several government and
Requisites
private institutions and industries of hiring janitorial
services on an “independent contractor basis.” In
Ponce v. NLRC (98)
this respect, although janitorial services may be
Sec. 9(a), Rule VIII, Book III, of the Omnibus
considered directly related to the principal business
Rules Implementing Article 106 of the Labor Code,
of an employer, as with every business, we deemed
provides, in turn, that a person who supplies
them unnecessary in the conduct of the employer’s
workers to another shall be deemed to be merely
principal business.
engaged in "labor-only contracting," a disallowed
This judicial notice, of course, rests on the
act, (a) when he does not have substantial capital or
assumption that the independent contractor is a
investment in the form of tools, equipment,
legitimate job contractor so that there can be no
machineries, work premises and other materials,
doubt as to the existence of an employer-employee
and (b) when the workers recruited and placed by
relationship between the contractor and the worker.
him perform activities that relate directly to the
In this situation, the only pertinent question that
principal business or operations of the employer in
may arise will no longer deal with whether there
which the workers are habitually employed. Such
exists an employment bond but whether the
supplier of labor is considered merely as an agent or
employee may be considered regular or casual as to
intermediary of the employer who can
deserve the application of Art. 280 of the Labor
correspondingly be held responsible to the workers
Code.
in the same manner and extent as if the latter are
directly employed by him.
Employer – Employee
Effect of Finding
Phil. Airlines, Inc. v. NLRC (98)
From the foregoing disquisition, it is evident
Phil. Airlines, Inc. v. NLRC (98)
that petitioner was engaged in permissible job
Based on these findings, we sustain the
contracting and that the individual private
conclusion of public respondent that G.C. Services
respondents, for the entire duration of their employ,
Enterprises is merely a "labor-only" contractor who
were employees not of petitioner but of STELLAR. In
acted as mere supplier of manpower for petitioner at
legitimate job contracting, no employer-employee
its maintenance department. As we held in Industrial
relation exists between the principal and the job
Timber Corporation, et. al. vs. NLRC et. al.:
contractor's employees. The principal is responsible Hence a finding that a contractor is a "labor-
to the job contractor's employees only for the proper only" contractor is equivalent to a finding that
payment of wages. But in labor-only contracting, an there exists as employer-employee relationship
employer-employee relation is created by law between the owner of the project and the
between the principal and the labor-only contractor's employees of the "labor-only" contractor since
employees, such that the former is responsible to that relationship is defined and prescribed by law
itself.
such employees, as if he or she had directly
employed them. Besides, the Court has already Accordingly, private respondents, are
taken judicial notice of the general practice adopted considered employees of the petitioner. Further,
in several government and private institutions of private respondents, having performed activities
securing janitorial services on an independent which are directly related to petitioner's business,
contractor basis. are deemed regular employees of petitioner
pursuant to Article 280 of the Labor Code. And as
LABOR ONLY CONTRACTOR regular employees, they must be accorded security
of tenure in their employment. Verily, their services
Prohibition can be terminated only based on "just" and
"authorized" causes under Articles 282, 283 and 284
Maraguinot v. NLRC (98) of the Labor Code.
As labor-only contracting is prohibited, the law
considers the person or entity engaged in the same Liability of indirect Employer
a mere agent or intermediary of the direct employer.
But even by the preceding standards, the associate Lanzadares v. Amethyst Security (2003)
producers of VIVA cannot be considered labor-only The only time the indirect employer may be
contractors as they did not supply, recruit nor hire made solidarily liable with the contractor is when the
the workers. contractor fails to pay his employees their wages
and other benefits claimed.
Vinoya v. NLRC (2000)
Labor-only contracting, a prohibited act, is an
arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to
perform a job, work or service for a principal. In
labor-only contracting, the following elements are
present:
(a) The contractor or subcontractor does not
have substantial capital or investment to actually
perform the job, work or service under its own
account and responsibility;

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INDEPENDENT CONTRACTING: » A probationary employee who is allowed to
Under DOLE Department Order No. 10 work after the probationary period (Art.
(1997), contracting shall be legitimate if the 281)
following circumstances concur: » All learners who has been allowed or
suffered to work during the first 2 months
1. The contractor or subcontractor carries on shall be deemed regular employees if
a distinct and independent business and training is terminated by the ER before the
undertakes to perform the job, work or end of the stipulated period through no
service on its own account and under its fault of the learner. [Art. 75 (d)]
own responsibility, according to its own  Casual
manner and method, and free from the » If not covered by the preceding paragraph
control and direction of the principal in all (280 LC)
matters connected with the performance of  Project
the work except as to the results thereof; » Employment has been fixed for a specific
project or undertaking the completion or
2. The contractor or subcontractor has termination of which has been determined
substantial capital or investment; and at the time of engagement of the EE (280
LC)
3. The agreement between the principal and  Seasonal
contractor or subcontractor assures the » The work or services to be performed is
contractual employees entitlement to all seasonal in nature and the employment is
labor and occupational safety and health for the duration of the season. (280 LC)
standards, free exercise of the right to self-  Probationary
organization, security of tenure, and social » Employment shall not exceed 6 months
and welfare benefits. from the date the EE started working unless
covered by apprenticeship agreement
LABOR – ONLY CONTRACTING: stipulating a longer period (281 LC)

1. the person supplying workers to an RECOGNITION AND TYPES


employer does not have substantial
capital or investment Philippine Federation of Credit Cooperatives,
Inc v. NLRC (98)
2. in the form of tools, equipment, This provision of law comprehends three kinds
machineries, work premises, among of employees: (a) regular employees or those whose
others, work is necessary or desirable to the usual business
of the employer; (b) project employees or those
3. the workers recruited and placed by such whose employment has been fixed for a specific
person are performing activities which project or undertaking the completion or termination
are directly related to the principal of which has been determined at the time of the
business of such employer. engagement of the employee or where the work or
services to be performed is seasonal in nature and
the employment is for the duration of the season;
and (c) casual employees or those who are neither
regular nor project employees. With regard to
contractual employees, the Court in the leading case
of Brent School, Inc. v. Zamora, laid down the
guidelines before a contract of employment may be
held as valid, to wit: "stipulations in employment
SECTION 7 - EMPLOYEE CLASSIFICATION contracts providing for term employment or fixed
period employment are valid when the period were
agreed upon knowingly and voluntarily by the
7.01 COVERAGE parties without force, duress or improper pressure
being brought to bear upon the employee and
The provisions of this Title shall apply to all absent any other circumstances vitiating his consent,
establishments or undertakings whether for profit or or where it satisfactorily appears that the employer
not. (278 LC) and employee dealt with each other on more or less
equal terms with no moral dominance whatever
7.02 EMPLOYEE CLASSIFICATION being exercised by the former over the latter."
 Regular EMPLOYER DETERMINATION
» EE has been engaged to perform activities
which are usually necessary and desirable De Leon v. NLRC (89)
in the usual business or trade of the ER It is of no moment that petitioner was told when
(Art. 280) he was hired that his employment would only be
» A casual employee who has rendered at casual, that he was paid through cash vouchers, and
least 1 year of service, whether continuous that he did not comply with regular employment
or broken, with respect to the activity in procedure. Precisely, the law overrides such
which he is employed and his employment conditions which are prejudicial to the interest of the
shall continue while such activity exists worker whose weak bargaining position needs
(Art. 280) the support of the State. What determines
whether a certain employment is regular or

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casual is not the will and word of the employer, to XXX Thus, the nature of one’s employment does
which the desperate worker often accedes, much not depend on the will or word of the employer. Nor
less the procedure of hiring the employee or the on the procedure of hiring and the manner of
manner of paying his salary. It is the nature of the designating the employee, but on the nature of the
activities performed in relation to the particular activities to be performed by the employee,
business or trade considering all circumstances, and considering the employer’s nature of business and
in some cases the length of time of its performance the duration and scope of the work to be done.
and its continued existence.
7.03 REGULAR EMPLOYEES
Violeta v. NLRC (97); Romares v. NLRC (98)
Art. 280 was emplaced in our statute books to TYPE
prevent the circumvention of the employees’ right to
be secure in his tenure by indiscriminately and Romares v. NLRC (98)
completely ruling out all written and oral agreements In determining the status of petitioner as a
inconsistent with the concept of regular employment regular employee, reference is made to Article 280
defined therein. Where an employee has been of the Labor Code, as amended. Thus, the two kinds
engaged to perform activities which are usually of regular employees are (1) those who are engaged
necessary or desirable in the usual business of the to perform activities which are necessary or
employer, such employee is deemed a regular desirable in the usual business or trade of the
employee and is entitled to security of tenure employer; and (2) those casual employees who have
notwithstanding the contrary provisions of his rendered at least one year of service, whether
contract of employment. continuous or broken, with respect to the activity in
which they are employed.
Phil Federation of Credit Cooperatives, Inc. v.
NLRC (98) NATURE OF WORK
Regardless of the designation that an employer
may have conferred upon a worker’s employment Phil. Fruit and Vegetable Industries, Inc. v.
status, it is, however, uncontroverted that the latter, NLRC (99)
having completed the probationary period and An employment shall be deemed regular where
allowed to work thereafter, became regular the employee: a) has been engaged to perform
employee who may be dismissed only for just or activities which are usually necessary or desirable in
authorized causes of the Labor Code. Therefore, the the usual business or trade of the employer; or b)
dismissal, premised on the alleged expiration of the has rendered at least one year of service, whether
contract, is illegal an entitles the worker to the such service is continuous or broken, with respect to
reliefs prayed for. the activity in which he is employed.
XXX It should be noted that complainants'
AGREEMENT employment has not been fixed for a specific project
or undertaking the completion or termination of
Tabas v. California Manufacturing Co., Inc. v. which has been determined at the time of their
NLRC (89) appointment or hiring. Neither is their employment
The existence of an employer-employees seasonal in nature. While it may be true that some
relation is a question of law and being such, it phases of petitioner company's processing
cannot be made the subject of agreement. Hence, operations is dependent on the supply of fruits for a
the fact that the manpower supply agreement particular season, the other equally important
between Livi and California had specifically aspects of its business, such as manufacturing and
designated the former as the petitioners' employer marketing are not seasonal. The fact is that large-
and had absolved the latter from any liability as an scale food processing companies such as petitioner
employer, will not erase either party's obligations as company continue to operate and do business
an employer, if an employer-employee relation throughout the year even if the availability of fruits
otherwise exists between the workers and either and vegetables is seasonal.
firm. At any rate, since the agreement was between
Livi and California, they alone are bound by it, and De Leon v. NLRC (89); E. Ganzon, Inc. v. NLRC
the petitioners cannot be made to suffer from its (99); Hacienda Fatima v. National Federation
adverse consequences. of Sugarcane Workers (2003)
The primary standard, therefore, of determining
a regular employment is the reasonable connection
San Miguel Corporation v. NLRC (98) between the particular activity performed by the
Article 280 reinforces the Constitutional employee in relation to the usual business or trade
mandate to protect the interest of labor as it sets of the employer. The test is whether the former is
the legal framework for ascertaining one’s nature of usually necessary or desirable in the usual business
employment, and distinguishing different kinds of or trade of the employer. The connection can be
employees. Its language manifests the intent to determined by considering the nature of the work
safeguard the tenurial interest of worker who may performed and its relation to the scheme of the
be denied the enjoyment of rights and benefits due particular business or trade in its entirety. Also, if
to an employee, regardless of the nature of his the employee has been performing the job for at
employment, by virtue of lopsided agreements with least one year, even if the performance is not
the economically powerful employer who can continuous or merely intermittent, the law deems
maneuver to keep an employee on a casual or the repeated and continuing need for its
contractual status for as long as it is convenient to performance as sufficient evidence of the
the employer. necessity if not indispensability of that activity to
the business. Hence the employment is also

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considered regular, but only with respect to such of Hi-Line, they should be deemed regular
activity and while such activity exists. employees of the latter 13 and as such are entitled
to all the benefits and rights appurtenant to regular
Magante v. NLRC (90) employment.
The determining factor of the status of
complainant-petitioner or any worker is the nature of Mercado v. NLRC (91)
the work performed by the latter and the place The first paragraph answers the question of who
where he performed his assignment. are regular employees. It states that, regardless of
any written or oral agreement to the contrary, an
Tacloban Sagkahan Rice etc. v. NLRC (90) employee is deemed regular where he is engaged in
Furthermore, the services performed or to be necessary or desirable activities in the usual
performed by private respondents are not seasonal business or trade of the employer, except for project
in nature. While it may be true that the harvest of employees.
palay is seasonal, the milling operations which is the
main business of petitioners are not seasonal. The Datu and Co., Inc. v. NLRC (96)
fact is that big rice mills such as the one owned by In De Leon vs. NLRC this Court ruled that when
petitioners continue to operate and do business the activities performed by the employee are usually
throughout the year even if there are only two or necessary or desirable in the usual business or trade
three harvest seasons within the year. It is a of the employer, the employment is deemed regular
common practice among farmers and rice dealers to notwithstanding contrary agreement. The
store their palay and to have the same milled as the determination of whether employment is casual or
need arises. Thus, the milling operations have no regular does not depend on the will or word of the
let-up. employer, and the procedure of hiring and manner
Private respondents have justifiably argued of paying, but on the nature of the activities
thus: performed by an employee, and to some extent, the
"The contention of petitioner in saying that length of performance, and its continued existence.
respondents/appellees belong to petitioner's pool
of casual workers who work only when there is
International Pharmaceutical, Inc. v. NLRC
work to be done at the mills particularly during
the milling season is indeed untenable for
(98)
petitioner had been engaged in the rice and corn In Brent School, Inc. v. Zamora, although the
mill business way back in 1949 whose work done under a contract is necessary and usually
capitalization involves millions of pesos. The desirable in relation to the usual business of the
work done by the palay mill for the capitalization employer, a contract for a fixed period may be made
of petitioner is so much that it keeps its so long as it is entered into freely, voluntarily, and
employees working the whole year round by
knowingly by the parties.
buying the palay during harvest season for
milling. Rice and corn milling business is not
TEST: Whether work was “necessary & desirable
seasonal in nature, contemplated in the Labor to the main business of ER”
Code. It is the planting and harvesting of rice In the contract, there was no mention of any
that is seasonal. . . ." project or consultancy. The work she performed was
manifestly necessary and desirable to the usual
Kimberly etc. v. Drilon (90) business of petitioner, considering that she is
While the actual regularization of these engaged in the manufacture and production of
employees entails the mechanical act of issuing medicinal preparations.
regular appointment papers and compliance with STANDARD: reasonable connection between the
such other operating procedures as may be adopted particular activity performed by the ER in relation to
by the employer, it is more in keeping with the the usual business or trade of the ER.
intent and spirit of the law to rule that the status of - connection can be determined by considering the
regular employment attaches to the casual worker nature of the work performed and its relation to the
on the day immediately after the end of his first year scheme of the particular business or trade in its
of service. To rule otherwise, and to instead make entirety
their regularization dependent on the happening of
some contingency or the fulfillment of certain Labor Congress of the Phil. v. NLRC (98)
requirements, is to impose a burden on the That petitioner employees are "pakyao" or piece
employee which is not sanctioned by law. workers does not imply that they are not regular
That the first stated position is the situation employees entitled to reinstatement. Private
contemplated and sanctioned by law is further respondent Empire Food Products, Inc. is a food and
enhanced by the absence of a statutory limitation fruit processing company. In Tabas v. California
before regular status can be acquired by a casual Manufacturing Co., Inc., this Honorable Court held
employee. The law is explicit. As long as the that the work of merchandisers of processed food,
employee has rendered at least one year of service, who coordinate with grocery stores and other outlets
he becomes a regular employee with respect to the for the sale of the processed food is necessary in the
activity in which he is employed. The law does not day-to-day operation[s] of the company. With more
provide the qualification that the employee must reason, the work of processed food repackers is
first be issued a regular appointment or must first be necessary in the day-to-day operation[s] of
formally declared as such before he can acquire a respondent Empire Food Products.
regular status. Obviously, where the law does not
distinguish, no distinction should be drawn. Highway Copra Trades v. NLRC (98)
Article 280 of the Labor Code describes a
Ecal v. NLRC (91) regular employee as one who is either (1)
Since petitioners perform tasks which are engaged to perform activities which are
usually necessary or desirable in the main business necessary or desirable in the usual business or

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trade of the employer; and (2) those casual are removed from the scope of project employees
employees who have rendered at least one year of and considered regular employees.
service, whether continuous or broken, with respect
to the activity in which he is employed. Lao Construction v. NLRC (98)
The Labor Code draws a fine line between The principal test in determining whether
regular and casual employees to protect the particular employees are “project employees”
interests of labor. We ruled in Baguio Country Club distinguished from “regular employees” is whether
Corporation vs. NLRC that "its language evidently the “project employees” are assigned to carry out
manifests the intent to safeguard the tenurial “specific project or undertaking,” the duration (and
interest of the worker who may be denied the rights scope) of which are specified at the time the
and benefits due a regular employee by virtue of employees are engaged for the project. “Project” in
lopsided agreements with the economically powerful the realm of business and industry refers to a
employer who can maneuver to keep an employee particular job or undertaking that is within the
on a casual status for as long as convenient." Thus, regular or usual business of employer, but which is
notwithstanding any agreements to the contrary, an distinct and separate and identifiable as such from
employment is deemed regular when the activities the undertakings of the company. Such job or
performed by the employee are usually necessary or undertaking begins and ends at determined or
desirable in the usual business or trade of the determinable times.
employer. The primary standard, therefore, of While it may be allowed that in the instant case
determining a regular employment is the reasonable the workers were initially hired for specific projects
connection between the particular activity performed or undertakings of the company and hence can be
by the employee in relation to the usual business or classified as project employees, the repeated re-
trade of the employer, i.e. if the work is usually hiring and the continuing need for their services over
necessary or desirable in the usual business or trade a long span of time have undeniable made them
of the employer. The connection can be determined regular employees. Thus, we held that where the
by considering the nature of the work performed and employment of project employees is extended long
its relation to the scheme of the particular business after the supposed project has been finished, the
or trade in its entirety. employees are removed from the scope of project
employees and are considered regular employees.
San Miguel Corp. v. NLRC (98) While length of time may not be a controlling
A regular employee is distinguished from a test for project employment, it can be a strong
project employee by the fact that the latter is factor in determining whether the employee was
employed to carry out a specific project or hired for a specific undertaking or in fact tasked to
undertaking, the duration or scope of which was perform functions which are vital, necessary and
specified at the time the employees were engaged. A indispensable to the usual business or trade of
"project" has reference to a particular job or employer.
undertaking that may or may not be within the
regular or usual business of the employer. In either Bernardo v. NLRC (99)
case, the project must be distinct, separate and As held by the Court, "Articles 280 and 281 of
identifiable from the main business of the employer, the Labor Code put an end to the pernicious practice
and its duration must be determined or of making permanent casuals of our lowly employees
determinable. by the simple expedient of extending to them
probationary appointments, ad infinitum." The
Millares v. NLRC (2000) contract signed by petitioners is akin to a
The primary standard to determine a regular probationary employment, during which the bank
employment is the reasonable connection between determined the employees' fitness for the job. When
the particular activity performed by the employee in the bank renewed the contract after the lapse of the
relation to the usual business or trade of the six-month probationary period, the employees
employer. The test is whether the former is usually thereby became regular employees. No employer is
necessary or desirable in the usual business or trade allowed to determine indefinitely the fitness of its
of the employer. employees.
The connection can be determined by
considering the nature of the work performed and its CONTRACT TO CONTRACT (REPEATED RENEWAL OF
relation to the scheme of the particular business or CONTRACT)
trade in its entirety. Also, if the employee has been
performing the job for at least one year, even if the Beta Electric Corp. v. NLRC (90)
performance is not continuous or merely The petitioner cannot rightfully say that since
intermittent, the law deems the repeated and the private respondent's employment hinged from
continuing need for its performance as sufficient contract to contract, it was ergo, "temporary",
evidence of the necessity if not indispensability of depending on the term of each agreement. Under
that activity to the business. Hence, the employment the Labor Code, an employment may only be said to
is also considered regular, but only with respect to be "temporary" "where [it] has been fixed for a
such activity and while such activity exists. specific undertaking the completion of or termination
of which has been determined at the time of the
HIRING PERIOD EXTENDED engagement of the employee or where the work or
services to be performed is seasonal in nature and
Audio Electric Co., Inc. v. NLRC (99) the employment is for the duration of the season."
We have held that where the employment of Quite to the contrary, the private respondent's work,
project employees is extended long after the that of "typist-clerk" is far from being "specific"
supposed project has been finished, the employees or "seasonal", but rather, one, according to the
Code, "where the employee has been engaged to

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perform activities which are usually necessary or also begins and ends at determined or determinable
desirable in the usual business." And under the times.
Code, where one performs such activities, he is a
regular employee, "[t]he provisions of written Lao Construction v. NLRC (97)
agreement to the contrary notwithstanding . . . The principal test in determining whether
It is true that in Biboso v. Victorias Milling particular employees are “project employees”
Company, Inc., we recognized the validity of distinguished from regular employees is whether the
contractual stipulations as to the duration of ”project employees” are assigned to carry out
employment, we can not apply it here because “specific project or undertaking,” the duration (and
clearly, the contract-to-contract arrangement given scope) of which are specified at the time the
to the private respondent was but an artifice to employees are engaged for the project. “Project” in
prevent her from acquiring security of tenure and to the realm of business and industry refers to a
frustrate constitutional decrees. particular job or undertaking that is within the
regular or usual business of ER, but which is distinct
LENGTH OF TIME and separate and identifiable as such from the
undertakings of the company. Such job or
Maraguinot v. NLRC (98) undertaking begins and ends at determined or
However, the length of time during which the determinable times.
employee was continuously re-hired is not
controlling, but merely serves as a badge of regular ALU – TUCP v. NLRC (94)
employment. In the realm of business and industry, we note
that "project" could refer to one or the other of at
7.04 PROJECT EMPLOYEES least 2 distinguishable types of activities. Firstly, a
project could refer to a particular job or undertaking
PROJECT EMPLOYEES – whose employment has been that is within the regular or usual business of the ER
fixed for a specific project or undertaking the company, but which is distinct and separate, and
completion or termination of which has been identifiable as such, from the other undertakings of
determined at the time of engagement of the the company. Such job or undertaking begins and
employee [Art. 280 (1)] ends at determined or determinable times.
The term "project" could also refer to, secondly,
DEFINED a particular job or undertaking that is not within the
regular business of the corporation. Such a job or
Magcalas v. NLRC (97) undertaking must also be identifiably separate and
Regular employees cannot at the same time be distinct from the ordinary or regular business
project employees. Art. 280 of the Labor Code operations of the employer. The job or undertaking
states that regular employees are those whose work also begins and ends at determined or determinable
is necessary or desirable to the usual business of the times.
employer. The two exceptions following the general Whichever type of project employment is found
description of regular employees refer to either in a particular case, a common basic requisite is that
project or seasonal employees. It has been ruled in the designation of named employees as "project
the case of ALU-TUCP v. NLRC that: “In the realm of employees" and their assignment to a specific
business and industry, we note that “project” could project, are effected and implemented in good faith,
refer to one or the other of at least two and not merely as a means of evading otherwise
distinguishable types of activities. First, a project applicable requirements of labor laws.
could refer to particular job or undertaking that is
within the regular or usual business of the employer Kiamco v. NLRC (99)
company, but which is distinct and separate, and In Violeta v. NLRC we held —
identifiable as such, from the other undertakings of
the company. Such job or undertaking begins and The principal test for determining whether
ends at determined or determinable times. The particular employees are properly characterized as
"project employees," as distinguished from
typical example of this type of project is a particular
"regular employees," is whether or not the "project
construction jib or project of a construction employees" were assigned to carry out a "specific
company. A construction company ordinarily carries project or undertaking," the duration (and scope)
out 2 or more discrete (should distinct) identifiable of which were specified at the time the employees
construction projects: e.g. a 25-story hotel in were engaged for that project. As defined, project
Makati; a residential condominium building I Baguio employees are those workers hired (1) for a
City; and a domestic air terminal in Iloilo City. specific project or undertaking, and (2) the
completion or termination of such project or
Employees who are ired for the carrying out of 12 of
undertaking has been determined at the time of
these separate projects, the scope and duration of engagement of the employee.
which has been determined and made known to the Under Policy Instruction No. 20 of the Secretary
employees at the time of employment, are properly of Labor, project employees are those employed in
treated as “project employees” and their service connection with a particular project. Non-project or
may be lawfully terminated at completion of the regular employees are those employed without
project.” reference to any particular project.
The term "project" could also refer to, secondly,
a particular job or undertaking that is not within the PROJECT EMPLOYEES
regular business of the corporation. Such a job or
undertaking must also be identifiably separate and Phil. Jai-Alai and Amusement Corp. v. Clave
distinct from the ordinary or regular business (83)
operations of the employer. The job or undertaking Private respondents were hired for a specific
project — to renovate the main building, where

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major repairs such as painting the main building, throughout his period of employment allegedly
repair of the roof, cleaning of clogged water pipes considered to have been done on a project to project
and drains, and other necessary repairs were basis.
required. It was made known, and so understood at Although petitioner had only rendered almost
the start of the hiring, that their services would last two years of service, nevertheless this should not
until the completion of the renovation. They detract from his status of being a regular employee
rendered service from February 2 to December 11, because as correctly stated by the labor arbiter, the
1976, almost 11 months, but less than a year. In its determining factor of the status of complainant-
Report to the Department of Labor, petitioner gave petitioner or any worker is the nature of the work
the reason for termination as "due to termination of performed by the latter and the place where he
project." It was only private respondents, out of the performed his assignment.
32 hired for the renovation, who questioned their
termination, the 30 other workers having acquiesced Tucor Industries, Inc. v. NLRC (91)
to their termination. Private respondents merely The term "specific project or undertaking" under
alleged in their letter-complaint that "kami'y inalis sa Article 280 of the Labor Code contemplates an
trabaho ng walang dahilan." There could be no other activity which was commonly or habitually
reason, however, than that the termination of performed or such type of work which is not done on
private respondents was because their services were a daily basis but only for a specific duration of time
no longer needed and they had nothing more to do or until the completion of the project. The services
since the project for which they were hired had been employed are thus necessary or desirable in the
completed. The fact was not that private employer's usual business only for the period of time
respondents were hired as maintenance helpers, it takes to complete the project. Without the
because petitioner corporation had a regular performance of such services on a regular basis, the
maintenance force. Private respondents, as well as employer's main business is not expected to grind to
the other 30 workers, were needed as additional a halt.
hands for the renovation work and not for ordinary In the case at bar, private respondents were
upkeep and maintenance. The erection of the fire assigned to do carpentry work, packing and driving,
escape and other small jobs after the renovation activities which are usually necessary and desirable
cannot be deemed maintenance but more of casual in petitioners' usual business and which thus had to
work. be done on a regular basis.
The casual or limited character of private
respondents' employment, therefore, is evident. Rada v. NLRC (92)
They were engaged for a specific project or A non-project employee is different in that the
undertaking and fall within the exception provided employee is hired for more than one project. A non-
for in Article 231 of the Labor Code, supra. Not being project employee, vis-a-vis a project employee, is
regular employees, it cannot be justifiably said that best exemplified in the case of Fegurin, et al. vs.
petitioner had dismissed them without just cause. National Labor Relations Commission, et al. wherein
They are not entitled to reinstatement with full four of the petitioners had been working with the
backwages. company for nine years, one for eight years, another
for six years, the shortest term being three years. In
Sandoval Shipyards, Inc. v. NLRC (85) holding that petitioners are regular employees, this
We hold that private respondents were project Court therein explained:
employees whose work was coterminous with the "Considering the nature of the work of
project for which they were hired. Project petitioners, that of carpenter, laborer or mason,
their respective jobs would actually be
employees, as distinguished from regular or non-
continuous and on-going. When a project to
project employees, are mentioned in Art. 281 LC as which they are individually assigned is
those "where the employment has been fixed for a completed, they would be assigned to the next
specific project or undertaking the completion or project or a phase thereof. In other words, they
termination of which has been determined at the belonged to a work pool' from which the
time of the engagement of the EE." company would draw workers for assignment to
other projects at its discretion. They are,
therefore, actually 'non-project employees.'"
Magante v. NLRC (91)
As aptly observed by the Solicitor-General, From the foregoing, it is clear that petitioner is a
petitioner has established that since the very project employee considering that he does not
inception of his employment in 1980, he was never belong to a "work pool" from which the company
deployed from project to project of private would draw workers for assignment to other projects
respondent but had been regularly assigned to at its discretion. It is likewise apparent from the
perform carpentry work under the supervision of a facts obtaining herein that petitioner was utilized
certain Bernardo Padaon who, since 1964 until his only for one particular project, the MNEE Stage 2
resignation on January 2, 1982 worked for private Project of respondent company. Hence, the
respondent as the supervisor of its Carpentry termination of herein petitioner is valid by reason of
Department. This goes to show two things: that the completion of the project and the expiration of
petitioner was assigned to perform tasks which are his employment contract.
usually necessary or desirable in the usual business
or trade of private respondent; and that said Mamansag v. NLRC (93)
assignments did not end on a project to project Private respondent company is a market
basis, although the contrary was made to appear by research group that conducts public surveys about
private respondent through the signing of separate commercial consumer goods, products,
employment contracts allegedly for different projects merchandises and/or services of its clients. Said
because it is indeed obvious that petitioner market researches and surveys are dependent
continued to perform the same kind of work upon the contracts it can secure from its clients
consisting of corporations, organizations,

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government and individuals. Because of the very those "casual" employees who have rendered at
nature of its business, private respondent company least one year of service regardless of the fact that
had to resort to engaging the services of contractual such service may be continuous or broken. It is not
workers, such as petitioners, to conduct interviews applicable to "project" employees, who are
on specific project basis for a definite short period of specifically excepted therefrom.
time. Generally, said contractual employment is not
continuous but intermittent, sporadic with long Uy v. NLRC (96)
intervals of idle periods in between projects due to PROJECT EE’s - workers hired : for a specific
lack of work or job contracts. To require a market project or undertaking; completion/termination of
research and survey firm to indefinitely maintain in project has been determined at time of engagement
its payroll petitioners, despite the absence of of EE
contracted projects, would be counterproductive and
lead to the bankruptcy of said firm. Phil. Airlines, Inc. v. NLRC (98)
Private respondent company, in entering into The position of STELLAR that individual private
specific and limited contracts with petitioners, was respondents were its project employees is totally
only exercising its management prerogative to unfounded. A regular employee is distinguished
conduct its business in the most efficient manner from a project employee by the fact that the latter is
thereby avoiding unnecessary expenses and employed to carry out a specific project or
maximizing profitability without, however, defeating undertaking, the duration or scope of which was
or circumventing the rights of its employees. specified at the time the employees were engaged.
An examination of the petitioners' contract of A “project” has reference to a particular job or
employment showed that they were hired by private undertaking that may or may not be within the
respondent company for a specific project and the regular or usual business of the employer. In either
completion or termination of said project was case, the project must be distinct, separate and
determined at the start of their employment. identifiable from the main business of the employer
Petitioners cannot be hired for an indefinite period of and its duration must be determined or
time and carried on the company's payroll even determinable.
without projects to work, with without respondent
company incurring financial losses. Villa v. NLRC (98)
As field interviewers of private respondent A project employment terminates as soon as the
company, the latter depends for its business on the project is completed. Thus an employer is allowed
contract it is able to obtain from its clients. by law to reduce the work force into a number suited
Necessarily, the duration of the employment of its for the remaining work to be done upon the
employees is not permanent but co-terminus with completion or proximate accomplishment of the
the projects to which they are assigned and from project. However, the law requires that, upon
whose payrolls they are paid. The fact that completion of the project, the employer must
petitioners worked for several projects of private present proof of termination of the services of the
respondent company is no basis to consider them as project employees at the nearest public employment
regular employees. By the very nature of their office. This is specially provided for as regards
employer's business, they will always remain project construction workers obviously to obviate
employees regardless of the number of projects in indiscriminate termination of employment in
which they have worked. derogation of the worker’s right to security of
tenure. After the termination of the project, an
Fernandez v. NLRC (94) employer may wind up its operations only to
Inasmuch as the documentary evidence clearly complete the project. In such a case, the remaining
showed gaps of a month or months between the employees do not necessarily lose their status as
hiring of petitioner in the numerous projects wherein project employees. However, if the employees’
he was assigned, the ineluctable conclusion is that services are extended long after the supposed
petitioner has not continuously worked with private project had been completed, the employees are
respondent but only intermittently as he was hired removed from the scope of project employees and
solely for specific projects. As such, he is governed they shall be considered regular employees.
by Policy Instruction No. 20, the pertinent portions
of which read as follows: Phil. Fruits and Vegetables Industries, Inc. v.
"Generally, there are two types of employees in NLRC (99)
the construction industry, namely 1) Project It should be noted that complainants'
Employees and 2) Non-project Employees.
employment has not been fixed for a specific project
"Project employees are those employed in
or undertaking the completion or termination of
connection with a particular construction project. which has been determined at the time of their
Non-project employees are those employed by a appointment or hiring. Neither is their employment
construction company without reference to a seasonal in nature. While it may be true that some
particular project. phases of petitioner company's processing
operations is dependent on the supply of fruits for a
"Project employees are not entitled to
particular season, the other equally important
termination pay if they are terminated as a result
of the completion of the project or any phase
aspects of its business, such as manufacturing and
thereof in which they are employed, regardless marketing are not seasonal. The fact is that large-
of the number of projects in which they have scale food processing companies such as petitioner
been employed by a particular construction company continue to operate and do business
company." throughout the year even if the availability of fruits
XXX The proviso in the second paragraph of and vegetables is seasonal.
Article 280 of the Labor Code has recently been
explained in Mercado v. NLRC, where it was held Imbuido v. NLRC (2000)
that said proviso deems as regular employees only

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We agree with the findings of the NLRC that Coming now to the last question, we stress the
petitioner is a project employee. The principal test rule in Cartagenas v. Romago Electric Co., that
for determining whether an employee is a project contract workers are not considered regular
employee or a regular employee is whether the employees, their services being needed only when
project employee was assigned to carry out a there are projects to be undertaken. The rationale of
specific project or undertaking, the duration and this rule is that if a project has already been
scope of which were specified at the time the completed, it would be unjust to require the
employee was engaged for that project. A project employer to maintain them in the payroll while they
employee is one whose employment has been fixed are doing absolutely nothing except waiting until
for a specific project or undertaking, the completion another project is begun, if at all. In effect, these
or termination of which has been determined at the stand-by workers would be enjoying the status of
time of the engagement of the employee or where privileged retainers, collecting payment for work not
the work or service to be performed is seasonal in done, to be disbursed by the employer from profits
nature and the employment is for the duration of the not earned. This is not fair by any standard and can
season. In the instant case, petitioner was engaged only lead to a coddling of labor at the expense of
to perform activities which were usually necessary or management.
desirable in the usual business or trade of the
employer, as admittedly, petitioner worked as a data EMPLOYER OBLIGATION
encoder for private respondent, a corporation
engaged in the business of data encoding and A. M. Oreta and Co., Inc. v. NLRC (89)
keypunching, and her employment was fixed for a The law is clear to the effect that in all cases
specific project or undertaking the completion or involving employees engaged on probationary' basis,
termination of which had been determined at the the employer shall make known to the employee at
time of her engagement, as may be observed from the time he is hired, the standards by which he will
the series of employment contracts between qualify as a regular employee. Nowhere in the
petitioner and private respondent, all of which employment contract executed between petitioner
contained a designation of the specific job contract company and respondent Grulla is there a stipulation
and a specific period of employment. that the latter shall undergo a probationary period
for three months before he can quality as a regular
RATIONALE employee. There is also no evidence on record
showing that the respondent Grulla had been
Maraguinot v. NLRC (98) apprised of his probationary status and the
The Court’s ruling is meant to give life to the requirements which he should comply in order to be
institutional policy of strengthening the labor sector, a regular employee. In the absence of these
but, we stress, not at the expense of management. requisites, there is justification in concluding that
Lest it be misunderstood, this ruling does not mean respondent Grulla was a regular employee at the
that simply because an employee is a project or time he was dismissed by petitioner. As such, he is
work pool employee has been: (1) continuously, as entitled to security of tenure during his period of
opposed to intermittently, re-hired by the same employment and his services cannot be terminated
employer, for the same tasks or nature of tasks; and except for just and authorized causes enumerated
(2) these tasks are vital, necessary and under the Labor Code and under the employment
indispensable to the usual business or trade of the contract.
employer, then the employee must be deemed a
regular employee, pursuant to Art. 280 of the Labor IMPLICATION
Code and jurisprudence. To rule otherwise would
allow circumvention of labor laws in industries not ALU-TUCP v. NLRC (94)
falling within the ambit of Policy Instruction No. 20/ In other words, the employment of each 'project
Department Order No. 19, hence allowing the worker' is dependent and co-terminous with the
prevention of acquisition of tenurial security by completion or termination of the specific activity or
project or work pool employees who have already undertaking [for which] he was hired which has been
gained the status of regular employees by the pre-determined at the time of engagement. Since,
employer’s conduct. there is no showing that they (13 complainants)
were engaged to perform work-related activities to
Phil. Airlines, Inc. v. NLRC (98) the business of respondent which is steel-making,
The position of STELLAR that individual private there is no logical and legal sense of applying to
respondents were its project employees is totally them the proviso under the second paragraph of
unfounded. A regular employee is distinguished Article 280 of the Labor Code, as amended.
from a project employee by the fact that the latter is xxx In the case of Mercado, Sr. vs. National
employed to carry out a specific project or Labor Relations Commission, this Court ruled that
undertaking, the duration or scope of which was the proviso in the second paragraph of Article 280
specified at the time the employees were engaged. relates only to casual employees and is not
A “project” has reference to a particular job or applicable to those who fall within the definition of
undertaking that may or may not be within the said Article's first paragraph, i.e., project employees.
regular or usual business of the employer. In either The familiar grammatical rule is that a proviso is to
case, the project must be distinct, separate and be construed with reference to the immediately
identifiable from the main business of the employer preceding part of the provision to which it is
and its duration must be determined or attached, and not to other sections thereof, unless
determinable. the clear legislative intent is to restrict or qualify not
only the phrase immediately preceding the
De Ocampo v. NLRC (90) proviso but also earlier provisions of the statute
or even the statute itself as a whole.

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LENGTH OF SERVICE
SECURITY OF TENURE
Palomares v. NLRC (97)
Southern Cotabato v. NLRC (87) Length of service is not the controlling
It is not disputed that private respondents were determinant of the employment tenure of a project
project employees. As such, they were entitled to employee. It is based on whether or not the
security of tenure guaranteed by the Constitution employment has been fixed for a specific project or
and the Labor Code for the duration of the project undertaking, the completion of which has been
they were hired for, or the phases thereof to which determined at the time of the engagement of the
they were assigned or in connection with which they employee. Furthermore, the 2nd paragraph of Art.
rendered services. The length of their employment 280, providing that an employee who has rendered
id determined by the completion of the task for service for at least 1 year, shall be considered a
which they were hired. regular employee, pertains to casual employees and
not to project employees such as petitioners.
SPECIFIED PERIOD
Villa v. NLRC (98)
Purefoods Corp. V. NLRC (87) Thus, the fact that petitioners worked for NSC
In the leading case of Brent School v. Zamora, under different project employment contracts for
which was reaffirmed in numerous subsequent several years cannot be made basis to consider
cases, the Court has upheld the legality of fixed- them a regular employees, for they remain project
term employment. It ruled that the decisive employees regardless of the number of projects in
determinant in term employment should not be the which they have worked.
activities that the employee is called upon to
perform but the day certain agreed upon by the 7.05 CASUAL EMPLOYEES
parties for the commencement and termination of
their employment relationship. But, this Court went
on to say that where from the circumstances it is Art. 281, 2nd paragraph
apparent that the periods have been imposed to An employment shall be deemed casual if it is not
preclude acquisition of tenurial security by the covered by the preceding paragraph: Provided,
employee, they should be struck down or that, any employee who has rendered at least one
disregarded as contrary to public policy and morals. year of service, whether such service is continuous
or broken, shall be considered a regular employee
WORKPOOL EMPLOYEES with respect to the activity in which he is employed
and his employment shall continue while such
Maraguinot v. NLRC (98) activity exists.
A project EE or a member of a work pool may
acquire the status of a regular employee when the NATURE OF WORK
following concur:
1. There is a continuous rehiring of project AM Oreta & Co., Inc v. NLRC (89)
employees even after cessation of a What determines regularity or casualness is not
project; and the employment contract, written or otherwise, but
2. The tasks performed by the alleged the nature of the job. If the job is usually necessary
“project employee” are vital, necessary, or desirable to the main business of the employer,
and indispensable to the usual business or then employment is regular.
trade of the employer.
However, the length of time during which the EE
ONE YEAR SERVICE
was continuously rehired is not controlling, but
merely serves as a badge of regular employment.
Tabas v. California Manufacturing Co. Inc. (89)
A work pool may exist although the workers in
The fact that the petitioners have been hired on
the pool do not receive salaries and are free to seek
a "temporary or seasonal" basis merely is no
other employment during temporary breaks in the
argument either. As we held in Philippine Bank of
business, provided, that the worker shall be
Communications v. NLRC, a temporary or casual
available when called to report for a project.
employee, under Article 218 of the Labor Code,
Although primarily applicable to regular seasonal
becomes regular after service of one year, unless he
workers, this set-up can likewise be applied to
has been contracted for a specific project. And we
project workers insofar as the effect of temporary
cannot say that merchandising is a specific project
cessation of work is concerned. This is beneficial to
for the obvious reason that it is an activity related to
both the employer and employee for it prevents the
the day-to-day operations of California.
unjust situation of “coddling labor at the expense of
The records show that the petitioners had been
capital” and at the same time enables the workers to
given an initial six-month contract, renewed for
attain the status of regular employees.
another six months. Accordingly, under Article 281
of the Code, they had become regular employees —
Aguilar Corp. v. NLRC (97)
of California — and had acquired a secure tenure.
Members of a work pool from which a
Hence, they cannot be separated without due
construction company draws its project employees,
process of law.
if considered employees of the construction company
while in the work pool, are non-project employees,
Phil. Geothermal, Inc. v. NLRC (90)
or employees for an indefinite period. If they are
Assuming therefore, that an employee could
employed in a particular project, the completion of
properly be regarded as a casual (as
the project or any phase thereof will not mean
distinguished from a regular employee) he
severance of the employer-employee relationship.
becomes entitled to be regarded as a regular
employee of the employer as soon as he has

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completed one year of service. Under the Brent School v. Zamora (90)
circumstances, employers may not terminate the Accordingly, and since the entire purpose behind
service of a regular employee except for a just cause the development of legislation culminating in the
or when authorized under the Labor Code. It is not present Article 280 of the Labor Code clearly
difficult to see that to uphold the contractual appears to have been, as already observed, to
arrangement between the employer and the prevent circumvention of the employee's right to be
employee would in effect be to permit employers to secure in his tenure, the clause in said article
avoid the necessity of hiring regular or permanent indiscriminately and completely ruling out all written
employees indefinitely on a temporary or casual or oral agreements conflicting with the concept of
status, thus to deny them security of tenure in their regular employment as defined therein should be
jobs. Article 106 of the Labor Code is precisely construed to refer to the substantive evil that the
designed to prevent such result. 17 Code itself has singled out: agreements entered into
precisely to circumvent security of tenure. It should
Mercado v. NLRC (91) have no application to instances where a fixed period
The second paragraph of Art. 280 demarcates of employment was agreed upon knowingly and
as "casual" employees, all other employees who do voluntarily by the parties, without any force, duress
not fall under the definition of the preceding or improper pressure being brought to bear upon the
paragraph. The proviso, in said second paragraph, employee and absent any other circumstances
deems as regular employees those "casual" vitiating his consent, or where it satisfactorily
employees who have rendered at least one year of appears that the employer and employee dealt with
service regardless of the fact that such service may each other on more or less equal terms with no
be continuous or broken. moral dominance whatever being exercised by the
former over the latter. Unless thus limited in its
International Pharmaceutical, Inc. v. NLRC purview, the law would be made to apply to
(98) purposes other than those explicitly stated by its
Quintia became a regular employee of petitioner framers; it thus becomes pointless and arbitrary,
after two years after her contract expired and her unjust in its effects and apt to lead to absurd and
services were continued for more than two years in unintended consequences.
the usual trade or business of the employer.
Cielo v. NLRC (91)
Cebu Engineering and Development Co., v. In Brent School, Inc. vs. Zamora, the Court
NLRC (98) affirmed the general principle that "where from the
Private respondent belonged to a work pool circumstances it is apparent that periods have been
from which CEDCO drew its employees and assigned imposed to preclude acquisition of tenurial security
them to different projects. He was not only hired for by the employee, they should be struck down or
a specific project. He was a regular employee disregarded as contrary to public policy, morals,
assigned to different projects. He was in fact a etc."
mainstay of the company. Contrary to petitioner's
claim, his services were not terminated on 30 International Pharmaecuticals, Inc. v. NLRC
November 1992. He continued working after that. (98)
Hence, according to the law, on 1 December 1992, On the other hand the written contract in this
after a year of continuous work, he became a case provided that it was subject to renewal by
regular employee regardless of any contract to the mutual consent of the parties at least thirty days
contrary. It is in keeping with the intent and spirit of before its expiration on March 18, 1984. There is no
the law to rule that the status of regular evidence to show that the parties mutually agreed to
employment attaches to the casual worker on the renew their contract. On the other hand, to sustain
day immediately after the end of the first year of petitioner's contention that there was an implied
service. extension after the expiration of the original contract
would make it possible for employers like petitioner
Highway Copra Traders v. NLRC (98) to circumvent Art. 280 of the Labor Code and thus
The Labor Code draws a fine line between prevent an employee from becoming regular through
regular and casual employees to protect the the simple expedient of making him sign a contract
interests of labor. We ruled in Baguio Country Club for a term and then extend to him a contract term,
Corporation vs. NLRC that "its language evidently after term, after term.
manifests the intent to safeguard the tenurial
interest of the worker who may be denied the rights St. Theresa’s School v. NLRC (98)
and benefits due a regular employee by virtue of Article 280 of the Labor Code does not proscribe
lopsided agreements with the economically powerful or prohibit an employment contract with a fixed
employer who can maneuver to keep an employee period provided the same is entered into by the
on a casual status for as long as convenient." Thus, parties, without any force, duress or improper
notwithstanding any agreements to the contrary, an pressure being brought to bear upon the employee
employment is deemed regular when the activities and absent any other circumstance vitiating consent.
performed by the employee are usually necessary or It does not necessarily follow that where the duties
desirable in the usual business or trade of the of the employee consist of activities usually
employer. necessary or desirable in the usual business of the
employer, the parties are forbidden from agreeing
7.06 CONTRACT FIXED PERIOD on a period of time for the performance of such
activities. There is thus nothing essentially
TESTS VALIDITY contradictory between a definite period of
employment and the nature of the employee's
duties.

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It goes without saying that contracts or with reasonable standards made known by the
employment govern the relationship of the parties. employer to the employee at the time of his
In this case, private respondent's contract provided engagement. An employee who is allowed to work
for a fixed term of nine (9) months, from June 1, after a probationary period shall be considered a
1991 to March 31, 1992. Such stipulation, not being regular employee.
contrary to law, morals, good customs, public order
and public policy, is valid, binding and must be Art. 61, 2nd Sentence, Book VI, Rule 1, Sec. 6,
respected. Omnibus Rules
There is a probationary employment where the
Servidad v. NLRC (99) employee upon his engagement, is made to undergo
The language of the contract in dispute is truly a a trial period during which the employer determines
double-bladed scheme to block the acquisition of the his fitness to qualify for regular employment, based
employee of tenurial security. Thereunder, private on reasonable standards made known to him at the
respondent has two options. It can terminate the time of engagement.
employee by reason of expiration of contract, or it
may use "failure to meet work standards" as the DEFINITION
ground for the employee's dismissal. In either case,
the tenor of the contract jeopardizes the right of the International Catholic Migration Commission v.
worker to security of tenure guaranteed by the NLRC (89); De la Cruz, Jr. v. NLRC (2003)
Constitution. A probationary employee, as understood under
In the case of Brent School, Inc. vs. Zamora, et Article 282 (now Article 281) of the Labor Code, is
al., the Court upheld the principle that where from one who is on trial by an employer during which the
the circumstances it is apparent that periods have employer determines whether or not he is qualified
been imposed to preclude acquisition of tenurial for permanent employment.
security by the employee, they should be
disregarded for being contrary to public policy. PURPOSE

SEASONAL EMPLOYEES Grand Motors Corp. v. MOLE (84)


We find merit in the contention of the petitioner
Phil. Tobacco etc. v. NLRC (98) that "private respondent had not been hired as
The Court has previously ruled in Manila Hotel manager of any firm before his employment with
Company v. CIR that seasonal workers who are petitioner. The highest previous position he attained
called to work from time to time and are temporarily was that of Finance Officer. His position with
laid off during-off season are not separated from petitioner's Iloilo Branch was his first as Manager.
service in said period, but are merely considered on Moreover, Warner, Barnes & Co., private
leave until re-employed. respondent's previous employer, and petitioner are
engaged in different kinds of business. Managing
San Miguel Corp. v. NLRC (98) petitioner's Iloilo Branch was an entirely new
Thus, under Article 280 of the Labor Code, an experience for private respondent. It was, therefore,
employment is deemed regular when the activities necessary for private respondent to undergo a
performed by the employee are usually necessary or period of probation to test his qualifications, skill and
desirable in the usual business or trade of the experience." Indeed, the employer has the right or is
employer even if the parties enter into an agreement at liberty to choose as to who will be hired and who
tating otherwise. But considered not regular under will be declined. It is within the exercise of this right
said Article (1) the so-called "project employment" to select his employees that the employer may set
the termination of which is more or less or fix a probationary period within which the latter
determinable at the time of employment, such as may test and observe the conduct of the former
those connected, which by its nature is only for one before hiring him permanently. "The right of a
season of the year and the employment is limited for laborer to sell his labor to such persons as he may
the duration of that season, such as the Christmas choose is, in its essence, the same as the right of an
holiday season. Nevertheless, an exception to this employer to purchase labor from any person whom
exception is made: any employee who has rendered it chooses. The employer and the employee have
at least one (1) year of service, whether continuous thus an equality of right guaranteed by the
or intermitent, with respect to the activity he Constitution. 'If the employer can compel the
performed and while such activity actually exists, employee to work against the latter's will, this is
must be deemed regular. servitude. If the employee can compel the employer
to give him work against the employer's will, this is
oppression.'"

SECTION 8 – Probationary Employees International Catholic Migration Commission v.


NLRC (89)
8.01 PROBATIONARY EMPLOYEES A probationary appointment is made to afford
the employer an opportunity to observe the fitness
Art. 281 of a probationer while at work, and to ascertain
Probationary employments hall not exceed six whether he will become a proper and efficient
months from the date the employee started working, employee. The word "probationary", as used to
unless it is covered by an apprenticeship agreement describe the period of employment, implies the
stipulating a longer period. The services of an purpose of the term or period, but not its length.
employee who has been engaged on a probationary Being in the nature of a "trial period" the
basis may be terminated for a just cause or when he essence of a probationary period of employment
fails to qualify as a regular employee in accordance fundamentally lies in the purpose or objective

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sought to be attained by both the employer and the Grand Motors Corp. v. MOLE (84)
employee during said period. The length of time is The employer has the right or is at liberty to
immaterial in determining the correlative rights of choose as to who will be hired and who will be
both in dealing with each other during said period. declined. It is within the exercise of this right to
While the employer, as stated earlier, observes the select his employees that the employer may set or
fitness, propriety and efficiency of a probationer to fix a probationary period within which the latter may
ascertain whether he is qualified for permanent test and observe the conduct of the former before
employment, the probationer, on the other, seeks to hiring him permanently.
prove to the employer, that he has the qualifications
to meet the reasonable standards for permanent Orient Express Placement Philippines v. NLRC
employment. (97)
Under Art. 281 of the Labor Code, the services
Phil. Federation of Credit Cooperatives, Inc. v. of an employee hired on a probationary basis may
NLRC (98) be terminated when he fails to qualify as a regular
Art. 281 of the Labor Code, as amended, allows employee in accordance with reasonable standards
the employer to secure the services of an employee made known by the employer to the employee at the
on a probationary basis which allows him to time of his engagement. However, the Court cannot
terminate the latter for just cause or upon failure to sustain his dismissal on this ground because
qualify in accordance with reasonable standards set petitioner failed to specify the reasonable standards
forth by the employer at the time of his by which private respondent’s alleged poor
engagement. As defined in the case of International performance was evaluated, much less to prove that
Catholic Migration v. NLRC, "a probationary such standards were made known to him at the time
employee is one who is on trial by an employer of his recruitment in Manila.
during which the employer determines whether or Due process dictates that an employee be
not he is qualified for permanent employment. A apprised beforehand of the condition of his
probationary employment is made to afford the employment and of the terms of advancement
employer an opportunity to observe the fitness of a therein. Precisely, implicit in Art. 281 of the Code is
probationer while at work, and to ascertain whether the requirement that reasonable standards be
he will become a proper and efficient employee." previously made known by the employer to the
probationary employee at the time of his
Escorpizo v. University of Baguio (99) engagement as correctly suggested by the POEA.
A probationary employee is one who, for a given
period of time, is being observed and evaluated to DURATION/EXCEPTION
determine whether or not he is qualified for
permanent employment. A probationary Busier v. Leogardo (84)
appointment affords the employer an opportunity to Generally, the probationary period of
observe the skill, competence and attitude of a employment is limited to six (6) months. The
probationer. The word "probationary", as used to exception to this general rule is when the parties to
describe the period of employment, implies the an employment contract may agree otherwise, such
purpose of the term or period. While the employer as when the same is established by company policy
observes the fitness, propriety and efficiency of a or when the same is required by the nature of work
probationer to ascertain whether he is qualified for to be performed by the employee. In the latter case,
permanent employment, the probationer at the there is recognition of the exercise of managerial
same time, seeks to prove to the employer that be prerogatives in requiring a longer period of
has the qualifications to meet the reasonable probationary employment, such as in the present
standards for permanent employment. case where the probationary period was set for
eighteen (18) months, i.e. from May, 1980 to
Cebu Marine Beach Resort v. NLRC (2003) October, 1981 inclusive, especially where the
That the workers failed to qualify for their employee must learn a particular kind of work such
positions, suffice it to state that at the time they as selling, or when the job requires certain
were dismissed, they were still in a “trial period” or qualifications, skills, experience or training.
probationary period. Being in the nature of a trial Policy Instruction No. 11 of the Minister of Labor
period, the essence of a probationary period of and Employment has clarified any and all doubts on
employment fundamentally lies in the purpose or the period of probationary employment. It states as
objective sought to be attained by both the follows:
employer and the employee during the period. "Probationary Employment has been the
While the employer observes the fitness, propriety subject of misunderstanding in some quarter.
Some people believe six (6) months is the
and efficiency of a probationer to ascertain whether
probationary period in all cases. On the other
he is qualified for permanent employment, the hand, employees who have already served the
probationer, on the other hand seeks to prove to the probationary period are sometimes required to
employer that he has the qualifications to meet the serve again on probation.
reasonable standards for permanent employment Under the Labor Code, six (6) months is the
which were obviously made known to him. general probationary period, but the
To reiterate, in this case, far from allowing the probationary period is actually the period needed
to determine fitness for the job. This period, for
respondents to prove that they possessed the
lack of a better measurement is deemed to be
qualifications to meet the reasonable standards for the period needed to learn the job.
their permanent employment, petitioners The purpose of this policy is to protect the
peremptorily dismissed them from the service. worker at the same time enable the employer to
make a meaningful employee selection. This
EMPLOYER RIGHT SET PERIOD/OBLIGATION purpose should be kept in mind in enforcing this
provision of the Code. This issuance shall take
effect immediately."

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A probationary employee is one who, for a given
International Catholic Migration Commission v. period of time, is being observed and evaluated to
NLRC (89) determine whether or not he is qualified for
It is well settled that the employer has the right permanent employment. A probationary
or is at liberty to choose who will be hired and who appointment affords the employer an opportunity to
will be denied employment. In that sense, it is within observe the skill, competence and attitude of a
the exercise of the right to select his employees that probationer. The word "probationary", as used to
the employer may set or fix a probationary period describe the period of employment, implies the
within which the latter may test and observe the purpose of the term or period. While the employer
conduct of the former before hiring him observes the fitness, propriety and efficiency of a
permanently. probationer to ascertain whether he is qualified for
XXX There is nothing under Article 281 of the permanent employment, the probationer at the
Labor Code that would preclude the employer from same time, seeks to prove to the employer that be
extending a regular or a permanent appointment to has the qualifications to meet the reasonable
an employee once the employer finds that the standards for permanent employment.
employee is qualified for regular employment even
before the expiration of the probationary period. A’ Prime Security Services, Inc. v. NLRC (2000)
Conversely, if the purpose sought by the employer is There is no basis for subjecting an employee to
neither attained nor attainable within the said a new probationary or temporary employment where
period, Article 281 of the Labor Code does not he had already become a regular employee when he
likewise preclude the employer from terminating the was absorbed by a sister company.
probationary employment on justifiable causes as in
the instant case. De la Cruz, Jr. v. NLRC (2003)
A probationary employee enjoys only a
Holiday Inn Manila v. NLRC (93) temporary employment status. This means that he
Probation is the period during which the is terminable at any time, permanent employment
employer may determine if the employee is qualified not having been attained in the meantime. The
for possible inclusion in the regular force. In the case employer could well decided he no longer needed
at bar, the period was for three weeks, during the probationary employee’s services or his
Honasan's on-the-job training. When her services performance fell short of expectations, etc. As long
were continued after this training, the petitioners in as the termination was made before the termination
effect recognized that she had passed probation and of the six-month probationary period, the employer
was qualified to be a regular employee. was well within his rights to sever the employer-
Honasan was certainly under observation during employee relationship. A contrary interpretation
her three-week on-the-job training. If her services would defect the clear meaning of the term
proved unsatisfactory then, she could have been “probationary”.
dropped as early as during that period. But she was
not. On the contrary, her services were continued, EXTENSION CONTRACT
presumably because they were acceptable, although
she was formally placed this time on probation. Mariwasa Manufacturing Inc v. Leogardo (89)
Even if it be supposed that the probation did not For aught that appears of record, the extension
end with the three-week period of on-the-job of Dequila's probation was ex gratia, an act of
training, there is still no reason why that period liberality on the part of his employer affording him a
should not be included in the stipulated six-month second chance to make good after having initially
period of probation. Honasan was accepted for on- failed to prove his worth as an employee. Such an
the-job training on April 15, 1991. Assuming that act cannot now unjustly be turned against said
her probation could be extended beyond that date, it employer's account to compel it to keep on its
nevertheless could continue only up to October 15, payroll one who could not perform according to its
1991, after the end of six months from the earlier work standards. The law, surely, was never meant to
date. Under this more lenient approach, she had produce such an inequitable result.
become a regular employee of Holiday Inn and By voluntarily agreeing to an extension of the
acquired full security of tenure as of October 15, probationary period, Dequila in effect waived any
1991. benefit attaching to the completion of said period if
he still failed to make the grade during the period of
Bernardo v. NLRC (99) extension. The Court finds nothing in the law which
As held by the Court, "Articles 280 and 281 of by any fair interpretation prohibits such a waiver.
the Labor Code put an end to the pernicious practice And no public policy protecting the employee and
of making permanent casuals of our lowly employees the security of his tenure is served by proscribing
by the simple expedient of extending to them voluntary agreements which, by reasonably
probationary appointments, ad infinitum." The extending the period of probation, actually improve
contract signed by petitioners is akin to a and further a probationary employee's prospects of
probationary employment, during which the bank demonstrating his fitness for regular employment.
determined the employees' fitness for the job. When
the bank renewed the contract after the lapse of the Phil. Federation, etc. v. NLRC (98)
six-month probationary period, the employees It is an elementary rule in the law on labor
thereby became regular employees. No employer is relations that a probationary employee who is
allowed to determine indefinitely the fitness of its engaged to work beyond the probationary period of
employees. 6 months, as provided under Art. 281 Labor Code,
as amended, or for any length of time set forth
Escorpizo v. University of Baguio (99) by the employer, shall be considered as a regular
employee.

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work-site and to terminate at the end of one (1)
ABSORBED EMPLOYEES year. No other condition was laid out except that he
was to be on probation for three (3) months.
Cebu Stevedoring Co. Inc v. Regional Director As aforesaid, no standard whatsoever by which
(88) such probationary period could be hurdled was
We agree with the Regional Director that private specified and made known to him. Due process
respondents could not be considered probationary dictates that an employee be apprised beforehand of
employees because they were already well-trained in the condition of his employment and of the terms of
their respective functions. This conclusion is further advancement therein. Precisely, implicit in Art. 281
bolstered by the factual findings of the Labor of the Code is the requirement that reasonable
Minister that said order of the Director was standards be previously made known by the
supported by substantial evidence. As stressed by employer to the probationary employee at the time
the Solicitor General, while private respondents were of his engagement, as correctly suggested by the
still with the CCAS they were already clerks. POEA. Obviously, such an essential requirement was
Respondent Gelig had been a clerk for CCAS for not met by petitioner, even assuming that Flores'
more than ten (10) years, while respondent Quijano alleged unsatisfactory performance was true.
had slightly less than ten (10) years of service. They Besides, unsatisfactory performance is not one of
were, therefore, not novices in their jobs but the just causes for dismissal under the Labor Code.
experienced workers.
RULE PRIVATE SCHOOL TEACHERS
TERMINATION AND SALARY
Escorpizo v. University of Baguio (99)
International Catholic Migration Commission v. Under the University Memorandum Circular No.
NLRC (89) 1, series of 1988, the following conditions must
If the purpose sought by the employer is neither concur in order that a probationary teacher may be
attained nor attainable within the said period, Article extended a regular appointment; (1) the faculty
281 of the Labor Code does not preclude the member must satisfactorily complete the
employer from terminating the probationary probationary period of four semesters or two years,
employment on justifiable causes. within which his performance shall be observed and
We find unmeritorious, therefore, public evaluated for the purpose of determining his
respondent's argument that the security of tenure of competency and fitness to be extended permanent
probationary employees within the period of their status; and (2) the faculty member must pass the
probation, as in the case of herein private PBET or an equivalent civil service examination.
respondent, justified the award of salary for the
unexpired portion of her probationary employment. St. Michael Academy v. NLRC (98)
The termination of private respondent predicated on Clearly, probationary teachers are not entitled
a just cause negates the application in this case of to the leaves specified in Section 2 of the School
the pronouncement in the case of Biboso v. Victorias Manual. The probationary period for private school
Milling Co., Inc., on the right of security of tenure of teachers is three years as provided in the Manual of
probationary employees. Regulations for Private Schools.

Orient Express Placement Philippines v. NLRC


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

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EMPLOYEE CLASSIFICATION – LAW the exception
STRUCTURE
PROBATIONARY EMPLOYMENT
REGULAR EMPLOYMENT  Period – duration – not exceed 6 months
 Test – written agreement to contrary from the date the employee started
notwithstanding and regardless of oral working, unless covered by an
agreement of parties provided by law apprenticeship agreement stipulating a
 Employee engaged to perform activities longer period
which are usually necessary or desirable to  Termination of Employment
the usual business or trade of employer 1. Just causes
 Other Regular Employees 2. Fail to qualify as regular employee in
1. Casual Employment after 1 year of accordance with reasonable standards
service whether continuous or broken made known by the employer to the
(conditions – Art. 280) employee at the time of engagement
2. Probationary Employee – allowed to  Effect of Work beyond 6 months – deemed
work even after the completion of the Regular employee by automatic application
probationary period (Art. 281) of the law (even if there is no appointment
3. Learner – allowed or suffered to work [Kimberly Clark v. Drilon]
during the first 2 months of learner  Purpose:
period, if training is terminated by the 1. Observance Period
employer before the end of the - For the employer to know
stipulated period. whether employee is qualified
 Not synonymous to permanent employment - For the employee to
(no such thing as permanent employment demonstrate to the employer his skills
since he can be terminated for cause) 2. Restrictive
 EXCEPT:  Parties may agree for a longer period if
1. PROJECT EMPLOYMENT company policy requires or the nature of
 Employment fixed on a specific work requires
project or undertaking,  Direct rationale connection: unduly long –
completion or termination of unfair to the worker
which is DETERMINED AT THE  Nothing prohibits the employer to
TIME OF ENGAGEMENT OF abbreviate or shorten the period
EMPLOYEE  If agreed to extend for the benefit of worker
 Must have been forewarned of – Ex gratia
the name of the project and  No obligation to pay the unfinished portion
the duration of the project
 Whether or not the project has
a direct relation to the
business of the employer, not
important, BUT:
a. Employee MUST be
informed of the
name and duration
of the project
b. Project and the
Principal business of
employer are two
separate things
c. No attempt to deny
Security of Tenure
to worker
2. SEASONAL EMPLOYMENT
 Work or services to be
performed seasonal in nature,
employment is for the duration
of the season
 No continuing need for worker

CASUAL EMPLOYMENT
 When not regular, project, or seasonal
 Requirement and Effect = Regular
Employees
1. One (1) year service whether
continuous or broken
2. With respect to activity employed
3. Employment shall continue while such
activity exists (Regular in a limited
sense)
** Project, Seasonal and Casual Employees –
may be doing a function that is by definition
regular but are not regular because they fall in

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SECTION 9 – EMPLOYMENT POLICY

9.01 PRE-EMPLOYMENT POLICY


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

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Private recruitment - Except as provided in Chapter public employment offices and the OEDB for
II of this Title, no person or entity, other than the overseas employment, shall engage in the
public employment offices and the OEDB for recruitment and placement of workers.
overseas employment, shall engage in the
recruitment and placement of workers. Art. 18
Ban on direct hiring - No employer may hire a
Filipino worker for overseas employment except
Art. 18 through the Boards and entities authorized by the
Ban on direct hiring - No employer may hire a Department of Labor and Employment. Direct hiring
Filipino worker for overseas employment except by members of the diplomatic service, officials and
through the Boards and entities authorized by the employees of international organizations and such
Department of Labor and Employment. Direct hiring other employers as may be allowed by the
by members of the diplomatic service, officials and Department and Labor and Employment is exempt
employees of international organizations and such from this provision.
other employers as may be allowed by the
Department and Labor and Employment is exempt Art. 26
from this provision. Travel agencies prohibited to recruit – Travel
agencies and sales agencies of airline companies are
Art. 25 prohibited from engaging in the business of
Private sector participation in the recruitment and recruitment and placement of workers for overseas
placement of workers - …the private employment employment whether for profit or not.
sector shall participate in the recruitment and
placement of workers, locally and overseas, under LICENSING – CITIZENSHIP, CAPITALIZATION,
such guidelines, rules and regulations, as may be DURATION, TRANSFERABILITY AND FEES
issued by the Secretary of Labor and Employment.
Art. 25.
Art. 12 (f) Private Sector Participation in the Recruitment and
To strengthen the network of public employment Placement of Workers - Pursuant to national
offices and rationalize the participation of the private development objectives and in order to harness and
sector in the recruitment and placement of workers, maximize the use of private sector resources and
locally and overseas, to serve national development initiative in the development and implementation of
objectives. a comprehensive employment program, the private
employment sector shall participate in the
ALLOWED ENTITIES recruitment and placement of workers, locally and
overseas, under such guidelines, rules and
1. Private regulations, as may be issued by the Secretary of
Labor and Employment.
Art. 13 (c)
"Private employment agency": any person or entity Art. 26
engaged in the recruitment and placement of Travel agencies prohibited to recruit – Travel
workers for a fee which is charged, directly or agencies and sales agencies of airline companies are
indirectly, from the workers or employers or both. prohibited from engaging in the business of
recruitment and placement of workers for overseas
Art. 13 (e) employment whether for profit or not.
"Private recruitment entity": any person or
association engaged in the recruitment and Art. 27.
placement of workers, locally or overseas, without Citizenship Requirement - Only Filipino Citizens or
charging, directly or indirectly, any fee from the corporations, partnership or entities at least 75 % of
workers or employers. the authorized and voting capital stock of which is
owned and controlled by Filipino citizens shall be
2. Public permitted to participate in the recruitment and
placement of workers, locally or overseas.
Art. 12 (f)
To strengthen the network of public employment Art. 28.
offices and rationalize the participation of the private Capitalization – All applicants for authority to hire or
sector in the recruitment and placement of workers, renewal of license to recruit are required to have
locally and overseas, to serve national development such substantial capitalization as determined by the
objectives. Secretary of Labor.

Art. 14 (g) Art. 29.


Employment promotion – The Secretary of Labor Non-transferability of license or authority – No
shall have the power and authority … “To organize license or authority shall be used directly or
and establish new employment offices in addition to indirectly by any person other than the one in whose
existing employment offices under the Department favor it was issued or at any place other than that
of Labor as the need arises.” stated in the license or authority, nor may such
license or authority be transferred, conveyed, or
10.4 PROHIBITED ENTITY assigned to any other person or entity. Any transfer
of business address, appointment or designation of
Art. 16 nay agent or representative including the
Private recruitment - Except as provided in Chapter establishment of additional offices anywhere shall
II of this Title, no person or entity, other than the

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b subject to the prior approval of the Department of 34 of this Code, to be undertaken by non-
Labor. licensees or non-holders of authority shall be
deemed illegal and punishable under Article
Art. 30. 39 of this Code. The Secretary of Labor and
Registration Fees – The Secretary of Labor shall Employment or any law enforcement officer
promulgate a schedule of fees for the registration of may initiate complaints under this Article.
all applicants for license or authority. (b) Illegal recruitment when committed by a
syndicate or in large scale shall be
considered an offense involving economic
sabotage and shall be penalized in
accordance with Article 39 hereof.
Illegal recruitment is deemed committed
by a SYNDICATE if carried out by a group of
three (3) or more persons conspiring and/or
10.05 TECHNIQUES OF REGULATION confederating with one another in carrying
out any unlawful or illegal transaction,
BONDS enterprise or scheme defined under the first
paragraph hereof. Illegal recruitment is
Art. 31. deemed committed in large scale if
Bonds – All applicants for license or authority shall committed against three (3) or more persons
post such cash and surety bonds as determined by individually or as a group.
the Secretary of Labor to guarantee compliance with (c) The Secretary of Labor or his duly authorized
prescribed recruitment procedures, rules an representative shall have the power to
regulations, and terms and conditions of recommend the arrest and detention of such
employment as may be appropriate. non-licensee or non-holder of authority if
after investigation it is determined that his
WORKERS FEES activities constitute a danger to national
security and public order or will lead to
Art. 32. further exploitation of job-seekers. The
Fees to be paid by workers – Any person applying Secretary shall order the search of the office
with a private fee-charging employment agency for or premises and seizure of documents,
employment assistance shall not be charged any fee paraphernalia, properties and other
until he has obtained employment through its efforts implements used in illegal recruitment
or has actually commenced employment. Such fee activities and the closure of companies,
shall be always covered with the appropriate receipt establishments and entities found to be
clearly showing the amount paid. The Secretary of engaged in the recruitment of workers for
Labor shall promulgate a schedule of allowable fees. overseas employment, without having been
licensed or authorized to do so.
REPORTS SUBMISSION
Salazar v. Achacoso
Art. 33 We reiterate that the Secretary of Labor, not
Reports on employment status - Whenever the being a judge, may no longer issue search or arrest
public interest so requires, the Secretary of Labor warrants. Hence, the authorities must go through
and Employment may direct all persons or entities the judicial process. To that extent, we declare
within the coverage of this Title to submit a report Article 38, paragraph (c), of the Labor Code,
on the status of employment, including job unconstitutional and of no force and effect.
vacancies; details of job requisitions, separation
from jobs, wages, other terms and conditions, and Art. 34
other employment data. Prohibited practices - It shall be unlawful for any
individual, entity, licensee or holder of authority:
SUSPENSION AND/OR CANCELLATION OF LICENSE OR (CFGI-IEOF-SBW)
AUTHORITY a. To CHARGE or accept directly or indirectly any
amount greater than that specified in the
Art. 35. schedule of allowable fees prescribed by the
Suspension and/or cancellation of License or Secretary of Labor and Employment, or to
Authority – The Secretary of Labor shall have the make a worker pay any amount greater than
power to suspend or cancel any license or authority that actually received by him as a loan or
to recruit employees for overseas employment for advance;
violation of rules and regulations issued by the b. To FURNISH or publish any false notice or
Department of Labor, the Overseas Employment information or document in relation to
Development Board, and the National Seamen recruitment or employment;
Board, or for violation of the provisions of this and c. To GIVE any false notice, testimony,
other applicable laws, General Orders and Letters of information or document or commit any act or
Instructions. misrepresentation for the purpose of securing
a license or authority under this Code;
10.06 ILLEGAL RECRUITMENT d. To INDUCE or attempt to induce a worker
already employed to quit his employment in
Art. 38 order to offer him another unless the transfer
Illegal Recruitment – is designed to liberate a worker from
(a) Any recruitment activities, including the oppressive terms and conditions of
prohibited practices enumerated under Article employment;

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e. To INFLUENCE or attempt to influence any that actually received by him as a loan or
person or entity not to employ any worker who advance;
has not applied for employment through his b. To FURNISH or publish any false notice or
agency; information or document in relation to
f. To ENGAGE in the recruitment or placement of recruitment or employment;
workers in jobs harmful to public health or c. To GIVE any false notice, testimony,
morality or to the dignity of the Republic of the information or document or commit any act of
Philippines; misrepresentation for the purpose of securing
g. To OBSTRUCT or attempt to obstruct a license or authority under the Labor Code;
inspection by the Secretary of Labor and d. To INDUCE or attempt to induce a worker
Employment or by his duly authorized already employed to quit his employment in
representatives; order to offer him another unless the transfer
h. To FAIL to file reports on the status of is designed to liberate a worker from
employment, placement vacancies, remittance oppressive terms and conditions of
of foreign exchange earnings, separation from employment;
jobs, departures and such other matters or e. To INFLUENCE or attempt to influence any
information as may be required by the person or entity not to employ any worker who
Secretary of Labor and Employment; has not applied for employment through his
i. To SUBSTITUTE or alter employment contracts agency;
approved and verified by the Department of f. To ENGAGE in the recruitment or placement of
Labor and Employment from the time of actual workers in jobs harmful to public health or
signing thereof by the parties up to and morality or to the dignity of the Republic of the
including the period of expiration of the same Philippines;
without the approval of the Department of g. To OBSTRUCT or attempt to obstruct
Labor and Employment. inspection by the Secretary of Labor and
j. To BECOME officer or member of the Board of Employment or by his duly authorized
any corporation engaged in travel agency or to representative;
be engaged directly or indirectly in the h. To FAIL to submit reports on the status of
management of a travel agency; and employment, placement vacancies, remittance
k. To WITHHOLD or deny travel documents from of foreign exchange earnings, separation from
applicant workers before departure for jobs, departures and such other matters or
monetary or financial considerations other information as may be required by the
than those authorized under this Code and its Secretary of Labor and Employment;
implementing rules and regulations. i. To SUBSTITUTE or alter to the prejudice of the
worker, employment contracts approved and
RA 8042 MIGRANT WORKERS AND OVERSEAS verified by the Department of Labor and
FILIPINOS ACT OF 1995 Employment from the time of actual signing
thereof by the parties up to and including the
Sec. 6 period of the expiration of the same without
For purposes of this Act, ILLEGAL RECRUITMENT the approval of the Department of Labor and
shall mean any act of: Employment;
canvassing, j. For an OFFICER or agent of a recruitment or
enlisting, placement agency to become an officer or
contracting, member of the Board of any corporation
transporting, engaged in travel agency or to be engaged
utilizing, directly or indirectly in the management of a
hiring, or travel agency;
procuring workers k. To WITHHOLD or deny travel documents from
and includes: applicant workers before departure for
referring, monetary or financial considerations other
contract services, than those authorized under the Labor Code
promising or advertising for employment and its implementing rules and regulations;
abroad, l. FAILURE to actually deploy without valid
whether for profit or not, when undertaken by a reason as determined by the Department of
non-licensee or non-holder of authority Labor and Employment; and
contemplated under Article 13(f) of Presidential m. FAILURE to reimburse expenses incurred by
Decree No. 442, as amended, otherwise known as the worker in connection with his
the Labor Code of the Philippines: documentation and processing for purposes of
deployment, in cases where the deployment
Provided, That any such non-licensee or non- does not actually take place without the
holder who, in any manner, offers or promises for a worker's fault. Illegal recruitment when
fee employment abroad to two or more persons shall committed by a syndicate or in large scale
be deemed so engaged. shall be considered an offense involving
It shall likewise include the following acts, economic sabotage.
whether committed by any person, whether a non- Illegal recruitment is deemed committed by a
licensee, non-holder, licensee or holder of authority: SYNDICATE if carried out by a group of three (3) or
a. To CHARGE or accept directly or indirectly any more persons conspiring or confederating with one
amount greater than that specified in the another. It is deemed committed in large scale if
schedule of allowable fees prescribed by the committed against three (3) or more persons
Secretary of Labor and Employment, or to individually or as a group.
make a worker pay any amount greater than

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The persons CRIMINALLY LIABLE for the above ELEMENTS OF CRIME
offenses are the principals, accomplices and
accessories. In case of juridical persons, the officers People v. Guevarra (99)
having control, management or direction of their Under the Labor Code, recruitment and
business shall be liable. placement refer to "any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring or
10.07 ENFORCEMENT AND SANCTIONS procuring workers, and includes referrals, contract
services, promising or advertising for employment,
Art. 36 locally or abroad, whether for profit or not: Provided,
Regulatory power - The Secretary shall have the [t]hat any person or entity which, in any manner,
power to restrict and regulate the recruitment and offers or promises for a fee employment to two or
placement activities of all agencies is authorized to more persons shall be deemed engaged in
issue orders and promulgate rules and regulations to recruitment and placement.
carry out the objectives and implement the Recruitment for overseas employment is not in
provisions of this Title. itself necessarily immoral or unlawful. It is the lack
of the necessary license or permit, or the
Art. 37 engagement of prohibited activities enumerated in
Visitorial power - The Secretary or his duly the Labor Code that render such recruitment
authorized representatives may at any time inspect activities unlawful or criminal. Illegal recruitment is
the premises, books of accounts and records of any qualified into large scale recruitment when three or
person or entity covered by this Title, require it to more persons are victimized. If such recruitment is
submit reports regularly on prescribed forms, and carried out by a group of three (3) or more persons
act on violations of any provision of this Title. conspiring and/or confederating with one another in
carrying out any unlawful or illegal transaction,
enterprise or scheme, it becomes one committed by
a syndicate. Illegal recruitment committed by a
syndicate or in large scale amounts to an offense
Art. 39 involving economic sabotage, punishable by life
Penalties – imprisonment and a fine of one hundred thousand
a. The penalty of life imprisonment and a fine of pesos (P100,000.00).
One Hundred thousand Pesos (P100,000) shall People v. Ordoño (2000)
be imposed if illegal recruitment constitutes Illegal recruitment is committed when two
economic sabotage as defined herein: elements concur, namely: (1) the offender has no
b. Any license or holder of authority found valid license or authority required by law to enable
violating or causing another to violate any one to lawfully engage in recruitment and placement
provision of this Title or its implementing rules of workers; and (2) he undertakes either any activity
and regulations shall, upon conviction thereof, within the meaning of “recruitment and placement”
suffer the penalty of imprisonment of not less defined under Art. 13 (b), or any of the prohibited
than two years nor more than five years or a practices enumerated under Art. 34 of the Labor
fine of not less than P10,000 nor more than Code.
P50,000 or both such imprisonment and fine,
at the discretion of the court; LARGE SCALE
c. Any person who is neither a license nor a
holder of authority under this Title found People v. Reyes (95)
violating any provision thereof or its There are, it is said, 14 other cases
implementing rules and regulations shall, upon filed/pending in the courts against the accused for
conviction thereof, suffer the penalty of illegal recruitment. These cases cannot be taken into
imprisonment of not less than four years nor account for the purpose of Art. 38(b). When the
more than eight years or a fine of not less Labor Code speaks of illegal recruitment "committed
than P20,000 nor more than P100,000 or both against three (3) or more persons individually or as
such imprisonment and fine, at the discretion a group," it must be understood as referring to the
of the court; number of complainants in each case who are
d. If the offender is a corporation, partnership, complainants therein, otherwise, prosecutions for
association or entity, the penalty shall be single crimes of illegal recruitment can be cumulated
imposed upon the officer or officers of the to make out a case of large scale illegal recruitment.
corporation, partnership, association or entity In other words, a conviction for large scale illegal
responsible for violation; and if such officer is recruitment must be based on a finding in each case
an alien, he shall, in addition to the penalties of illegal recruitment of three or more persons
herein prescribed, be deported without further whether individually or as a group.
proceedings; Moreover, even if Blanza and Garcia had been
e. In every case, conviction shall cause and carry illegally recruited so as to make the number of
the automatic revocation of the license or persons illegally recruited four and make the crime
authority and all the permits and privileges that of illegal recruitment of a large scale, since this
granted to such person or entity under this was not alleged in the information and this is the
Title, and the forfeiture of the cash and surety more serious offense which includes that which was
bonds in favor of the Overseas Employment charged, the appellant can only be found guilty of
Development Board or the National Seamen the less serious offense charged, pursuant to Rule
Board, as the case may be, both of which are 120, §4.
authorized to use the same exclusively to
promote their objectives. People v. Sanchez (98)

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Art. 13(b) of the Labor Code defines recruitment
and placement as "any act of canvassing, enlisting, SECTION 11 - ALIEN EMPLOYMENT
contracting, transporting, utilizing, hiring or
procuring workers, and includes referrals, contract
services, promising or advertising for employment, 11.01 COVERAGE
locally or abroad, whether for profit or not: Provided,
That any person or entity which, in any manner, NON-RESIDENT ALIEN
offers or promises for a fee employment to two or
more persons shall be deemed engaged in Almodiel v NLRC (93)
recruitment and placement." The essential elements Art. 40 of the Labor Code which requires
then of the crime of illegal recruitment in large scale employment permit refers to non-resident aliens.
are that: (1) the accused engages in acts of The employment permit is required for entry into the
recruitment and placement of workers defined under country for employment purposes and is issued after
Article 13(b) or in any prohibited activities under determination of the non-availability of a person in
Article 34 of the Labor Code; (2) the accused has the Philippines who is competent, able and willing at
not complied with the guidelines issued by the the time of application to perform the services for
Secretary of Labor and Employment, particularly which the alien is desired. A resident alien does not
with respect to the securing of a license an authority fall within the ambit of the provision.
to recruit and deploy workers, either locally or
overseas, and (3) the accused commits the unlawful Art. 40
acts against three or more persons, individually or Employment permit of non-resident aliens - Any
as a group. alien seeking admission to the Philippines for
employment purposes and any domestic or foreign
People v. Meris (2000) employer who desires to engage an alien for
Illegal recruitment is conducted in a large scale employment in the Philippines shall obtain an
if perpetrated against three (3) or more persons employment permit from the Department of Labor.
individually or as a group. This crime requires proof The employment permit may be issued to a
that the accused: (1) engaged in the recruitment non-resident alien or to the applicant employer after
and placement of workers defined under Article 13 a determination of the non-availability of a person in
or in any of the prohibited activities under Article 34 the Philippines who is competent, able and willing at
of the Labor Code; (2) does not have a license or the time of application to perform the services for
authority to lawfully engage in the recruitment or which the alien is desired.
and placement of workers; and (3) committed the For an enterprise registered in preferred areas
infraction against three or more, persons, of investment, may be issued upon recommendation
individually or as a group. of the government agency charged with the
supervision of said registered enterprise.
REFERRALS

People v. Meris (2000) Art. 41


In People v. Agustin, the Court ruled: Prohibition against transfer of employment –
Hence, the inevitable query is whether or not a. After the issuance of an employment permit,
appellant Agustin merely introduced the alien shall not transfer to another job or
complainants to the Goce couple or her actions change his employer without prior approval of
went beyond that. The testimonial evidence Secretary of Labor and Employment.
hereon show that she indeed further committed b. Any non-resident alien who shall take up
acts constitutive of illegal recruitment. All four
employment in violation of the provision of this
prosecution witnesses testified that it was
Agustin whom they initially approached Title and its implementing rules and
regarding their plans of working overseas. It was regulations shall be punished in accordance
from her that they learned about the fees they with the provisions of Articles 289 and 290 of
had to pay, as well as the papers that they had the Labor Code.
to submit. It was after they had talked to her In addition, the alien worker shall be subject to
that they met the accused spouses who owned deportation after service of his sentence.
the placement agency.
As such, the Court concluded that appellant that Art. 42
appellant was an employee of the Goce spouses, as Submission of list - Any employer employing non-
she was actually making referrals to the agency. She resident foreign nationals on the effective date of
was therefore, engaged in recruitment activities. this Code shall submit a list of such nationals to the
The same factual circumstance obtains in this Secretary of Labor and Employment within 30 days
case. Although accused-appellant was not an after such date indicating their names, citizenship,
employee of the alleged illegal recruiter Julie Micua, foreign and local addresses, nature of employment
the evidence show that she was the one who and status of stay in the country. The Secretary of
approached complainants and prodded them to seek Labor and Employment shall then determine if they
employment abroad. It was through her that they are entitled to an employment permit.
met Julia Micua. This is clearly an act of referral.
Worse, accused-appellant declared that she was 11.02 TECHNIQUE OF REGULATION –
capable of placing them in jobs overseas. Suffice it EMPLOYMENT PERMIT
to say that complainants' recruitment would not
have been consummated were it not for the direct Art XII Sec 12
participation of accused-appellant in the recruitment The State shall promote the preferential use of
process. Filipino labor, domestic materials and locally
produced goods, and adopt measures that help
them competitive.

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“Apprenticeship” training within employment with
AUTHORITY EMPLOYMENT PERMIT – ISSUANCE compulsory related theoretical instructions involving
a contract between an apprentice and an employer
General Milling Corp. v. Torres (91) during an established period assured by an
The Labor Code itself specifically empowers apprenticeable occupation.
respondent Secretary to make a determination as to
the availability of the services of a "person in the APPRENTICEABLE OCCUPATION
Philippines who is competent, able and willing at the
time of application to perform the services for which Sec. 4 (m) (RA7796)
an alien is desired." In short, the Department of “Apprenticeable Occupation: is an occupation
Labor is the agency vested with jurisdiction to officially endorsed by a tripartite body and approved
determine the question of availability of local for apprenticeship by the Authority
workers. The constitutional validity of legal
provisions granting such jurisdiction and authority QUALIFICATION
and requiring proof of non-availability of local
nationals able to carry out the duties of the position Sec. 12 (RA 7610, as amended by RA 7658)
involved, cannot be seriously questioned. Employment of Children – Children below fifteen
(15) years of age shall not be employed except:
1. When a child works directly under the sole
responsibility of his parents or legal guardian
SECTION 12 - EMPLOYMENT OF and where only members of the employer’s
family are employed: Provided, however, That
APPRENTICE, LEARNERS AND
his employment neither endangers his life,
HANDICAPPED WORKERS safety, health and morals, nor impairs his
normal development: Provided, further, That
12.01 POLICY OBJECTIVES the parent or legal guardian shall provide the
said minor child with the prescribed primary
Sec. 2, RA 7796 and/or secondary education; or
Declaration of Policy – It is hereby declared the 2. When a child’s employment or participation in
policy of the State to provide relevant, accessible, public and entertainment or information
high quality and efficient technical education and through cinema, theater, radio or television is
skills development in support of the development of essential: Provided, the employment contract
high quality Filipino middle-level manpower is concluded by the child’s parents or guardian,
responsive to and in accordance with Philippine with the express agreement of the child
development goals and priorities. concerned, if possible, and the approval of the
The state shall encourage active participation of Department of Labor and Employment: and
various concerned sectors, particularly private Provided, That the following requirements in
enterprises, being direct participants in an all instances are strictly complied with:
immediate beneficiaries of a trained and skilled a. The employer shall ensure the protection,
workforce, in providing technical education and skills health, safety and morals of the child
development opportunities. b. The employer shall institute measures to
Sec. 3, RA 7796 prevent the child’s exploitation or
Statement of Goals and Objectives – It is the goal discrimination taking into account the
and objective of this Act to: system and level of remuneration, and the
a. Promote and strengthen the quality of technical duration and arrangement of working time
education and skills development programs to c. The employer shall formulate and
attain international competitiveness implement, subject to the approval and
b. Focus technical education and skills supervision of competent authorities, a
development or meeting the changing continuing program for training and skills
demands for quality middle-level manpower acquisition of the child.
c. Encourage critical and creative thinking by In the above exceptional cases where any
disseminating the scientific and technical such child may be employed, the employer shall
knowledge base of middle-level manpower first secure, before engaging such child, a work
development programs permit from the Department of Labor and
d. Recognize and encourage the complementary
Employment which shall ensure observance of
roles of public and private institutions in
the above requirements.
technical education and skills development and
training systems;
ALLOWED EMPLOYMENT
e. Inculcate desirable values through the
development of moral character with emphasis
Program Approval
on work ethic, self-discipline, self reliance, and
nationalism.
Nitto Enterprises v. NLRC (95)
Contents of apprenticeship agreement. —
A. APPRENTICE Apprenticeship agreements, including the main rates
of apprentices, shall conform to the rules issued by
12.02 APPRENTICE the Minister of Labor and Employment. The period of
apprenticeship shall not exceed six months.
DEFINED Apprenticeship agreements providing for wage rates
below the legal minimum wage, which in no case
Sec. 4 (j) (RA 7796) shall start below 75% per cent of the applicable
minimum wage, may be entered into only in

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Labor Standards
accordance with apprenticeship program duly Exhaustion of administrative remedies
approved by the Minister of Labor and Employment. before instituting any action for the enforcement of
The Ministry shall develop standard model programs any apprenticeship agreement, or damages for
of apprenticeship. breach of any such agreement

TERMS AND CONDITIONS OF EMPLOYMENT B. Learners

Art. 61 12.03 LEARNERS


Contents of apprenticeship agreement. —
Apprenticeship agreements, including the main rates DEFINED
of apprentices, shall conform to the rules issued by
the Minister of Labor and Employment. The period of Sec. 4 (n), RA 7796
apprenticeship shall not exceed six months. “Learners” refer to persons hired as trainees in semi-
Apprenticeship agreements providing for wage rates skilled and other industrial occupation which are
below the legal minimum wage, which in no case non-apprenticeable. Learnership programs must be
shall start below 75% per cent of the applicable approved by the Authority.
minimum wage, may be entered into only in
accordance with apprenticeship program duly ALLOWED EMPLOYMENT
approved by the Minister of Labor and Employment.
The Ministry shall develop standard model programs Art. 74
of apprenticeship. When Learners may be hired – Learners may be
employed
Art. 72 when no experienced workers are available
Apprentices without compensation the employment of learners is necessary to
The Secretary of Labor may authorize the hiring of prevent curtailment of employment opportunities,
apprentices without compensation whose training on and
the job is required by the school or training program the employment does not create unfair
curriculum or as a requisite for graduation or board competition in terms of labor costs or impair or
examination. lower working standards.

COSTS TERMS AND CONDITIONS OF EMPLOYMENT

Art. 71 Art. 75
Deductibility of training costs - An additional Learnership agreement – Any employer desiring to
deduction from taxable income of one-half of the employer learners shall enter into a learnership
value of labor training expenses incurred for agreement with them, which agreement shall
developing the productivity and efficiency of include:
apprentices shall be granted to the person or
enterprise organizing an apprenticeship program a. The NAMES and addresses of the learners;
provided such program is duly recognized by the b. The DURATION of the learnership period, which
Department of Labor and Employment; provided shall not exceed three months;
further that such deduction shall not exceed 10 c. The WAGES or salary rates of the learners
percent of direct labor wage; and provided finally which shall begin at not less than 75 percent
that the person or enterprise who wish to avail of of the applicable minimum wage; and
this incentive should pay his apprentices the d. A COMMITMENT to employ the learners, if they
minimum wages. so desire, as regular employees upon
completion of the learnership. All learners who
have been allowed or suffered to work during
ENFORCEMENT the first two months shall be deemed regular
employees if training is terminated by the
Art. 65 employer before the end of the stipulated
Investigation of violation of apprenticeship period through no fault of the learner.
agreement The learnership agreement shall be subject to
Upon complaint of any interested person or upon its inspection by the Secretary or his duly authorized
own initiative, representatives.
the appropriate agency of the Department of Labor
and Employment or its authorized representative Art. 76
shall investigate any violation of any apprenticeship Learners in piecework – Learners employed in piece
agreement or incentive rate jobs during the training period shall
be paid in full for the work done.
Art. 66
Appeal to the Secretary of Labor and Employment
C. Handicapped Workers
The decision of the authorized agency of the
Department
by any aggrieved person 12.04 HANDICAPPED WORKER
to the Secretary of Labor and Employment
within five days from receipt of the decision. Law : RA 7277 “Magna Carta for Disabled
The decision of the Secretary shall be final and Persons”
executory.
POLICY
Art. 67

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Declaration of Policy – The grant of the rights and » a record of such an impairment; or
privileges for disabled persons shall be guided by the » being regarded as having such an
following principles: (2) impairment [4(c)]
a. Disabled persons are part of Philippine society,  Handicap - refers to a disadvantage for a given
thus the State shall give full support to the individual, resulting from an impairment or a
improvement of the total well-being of disability, that limits or prevents the function or
disabled persons and their integration into the activity, that is considered normal given the
mainstream of society. Toward this end, the age and sex of the individual [4(d)]
State shall adopt policies ensuring the
rehabilitation, self-development and self- RIGHTS AND PRIVILEGES OF DISABLED PERSONS
reliance of disabled persons. It shall develop
their skills and potentials to enable them to Equal Opportunity for Employment (5)
compete favorably for available opportunities.
b. Disabled persons have the same rights as No disable person shall be denied access to
other people to take their proper place in opportunities for suitable employment. A qualified
society. They should be able to live freely and disabled employee shall be subject to the same
as independently as possible. This must be terms and conditions of employment and the same
the concern of everyone – the family, compensation, privileges, benefits, fringe benefits,
community and all government and non- incentives or allowances as a qualified able-bodied
government organizations. Disabled persons’ person
rights must never be perceived as welfare
services by the Government. Five percent (5%) of all casual, emergency and
c. The rehabilitation of the disabled persons shall contractual positions in the Departments of Social
be the concern of the Government in order to Welfare and Development; health, Education,
foster their capacity to attain a more Culture and Sports; and other government agencies,
meaningful, productive and satisfying life. To offices or corporations engaged in social
reach out to greater number of disabled development shall be reserved for disabled persons.
persons, the rehabilitation services and
benefits shall be expected beyond the Sheltered Employment (6)
traditional urban-based centers to community
based programs, that will ensure full If suitable employment for disabled persons
participation of different sectors as supported cannot be found through open employment as
by national and local government agencies. provided in the immediately preceding Section, the
d. The State also recognizes the role of the State shall endeavor to provide it by means of
private sector in promoting the welfare of sheltered employment. In the placement of disabled
disabled persons and shall encourage persons in sheltered employment, it shall accord due
partnership in programs that address their regard to the individual qualities, vocational goals
needs and concerns. and inclinations to ensure a good working
e. To facilitate integration of disabled persons atmosphere and efficient production.
into the mainstream of society, the State shall
advocate for and encourage respect for Apprenticeship (7)
disabled persons. The State shall exert all
efforts to remove all social, cultural, economic, Subject to the provisions of the Labor Code as
environmental and attitudinal barriers that are amended, disabled persons shall be eligible as
prejudicial to disabled persons. apprentices or learners: Provided, that their
handicap s not as much as to effectively impede the
COVERAGE performance of job operations in the particular
occupation for which they are hired; provided,
shall cover all disabled persons and, to the extent further, That after the lapse of the period of
herein provided, departments, officers and agencies apprenticeship, if found satisfactory in the job
of the National Government or non-government performance, they shall be eligible for employment.
organizations involved in the attainment of the
objectives of this Act. (3) Incentives for Employers (8)

DEFINED a. To encourage the active participation of the


private sector in promoting the welfare of
 Disabled Persons - those suffering from disabled persons and to ensure gainful
restriction or different abilities, as a result of a employment for qualified disabled persons,
mental, physical or sensory impairment, to adequate incentives shall be provided to
perform an activity in the manner or within the private entities which employ disabled
range considered normal for a human being persons.
[4(a)]
 Impairment - any loss, dimunition or aberration b. Private entities that employ disabled persons
of psychological, physiological, or anatomical who meet the required skills or qualifications,
structure or function [4(b)] either ad regular employee, apprentice or
 Disability - shall mean learner, shall be entitled to an additional
» a physical or mental impairment that deduction, from their gross income, equivalent
substantially limits one or more to 25% of the total amount paid as salaries
psychological, physiological or anatomical and wages to disabled persons: Provided,
function of an individual or activities of such however, That such entities present proof
individual; as certified by the Department of Labor and

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Employment and the Department f Health as unemployment by forcing employers, in cases where
to his disability, skills, and qualifications. more than 8-hour operation is necessary, to utilize
different shifts of laborers or employees working
c. Private entities that improve or modify their only for eight hours each.
physical facilities in order to provide
reasonable accommodation for disabled 13.02 COVERAGE
persons shall also be entitled to an additional
deduction from their net taxable income, Art. 82
equivalent to 50% of the direct costs of the Coverage
improvements or modifications. This Section,  COVERED: employees in all establishments and
however, does not apply to improvements or undertakings, whether for profit or not
modifications or facilities required under Batas  NOT COVERED:
Pambansa Bilang 344. » government employees
» managerial employees
REGULAR WORKERS » field personnel
» members of the family of the employer who
Bernardo v. NLRC (99) are dependent on him for support
In this light, the Magna Carta for Disabled » domestic helpers
Persons mandates that a qualified disabled employee » persons in the personal service of another
should be given the same terms and conditions of and
employment as a qualified able-bodied person. » workers who are paid by results as
Section 5 of the Magna Carta provides: determined by the Secretary of Labor and
Employment in appropriate regulations.
Sec. 5. Equal Opportunity for Employment. — No  MANAGERIAL EMPLOYEES: those whose
disabled person shall be denied access to primary duty consists of the management of
opportunities for suitable employment. A qualified
the establishment in which they are employed
disabled employee shall be subject to the same
terms and conditions of employment and the same
or of a department or subdivision thereof, and
compensation, privileges, benefits, fringe benefits, to other officers or members of the managerial
incentives or allowances as a qualified able bodied staff.
person.  FIELD PERSONNEL: non-agricultural employees
The fact that the employees were qualified who regularly perform their duties away from
disabled persons necessarily removes the the principal place of business or branch office
employment contracts from the ambit of Article 80. of the employer and whose actual hours of
Since the Magna Carta accords them the rights of work in the field cannot be determined with
qualified able-bodied persons, they are thus covered reasonable certainty.
by Article 280 of the Labor Code.
XXX The noble objectives of Magna Carta for RATIONALE EXEMPTION – MANAGERIAL EMPLOYEES
Disabled Persons are not based merely on charity or
accommodation, but on justice and the equal Natl Waterworks & Sewerage Authority v.
treatment of qualified persons, disabled or not. In NASA Consolidated Unions (65)
the present case, the handicap of petitioners (deaf- The philosophy behind the exemption of
mutes) is not a hindrance to their work. The managerial employees from the 8-Hour Labor Law is
eloquent proof of this statement is the repeated that such workers are not usually employed for
renewal of their employment contracts. Why then every hour of work but their compensation is
should they be dismissed, simply because they are determined considering their special training,
physically impaired? The Court believes, that, after experience or knowledge which requires the exercise
showing their fitness for the work assigned to them, of discretion and independent judgment, or perform
they should be treated and granted the same rights work related to management policies or general
like any other regular employees. business operations along specialized or technical
lines. For these workers it is not feasible to provide a
fixed hourly rate of pay or maximum hours of labor.

Salazar v. NLRC (96)


Hence, although petitioner cannot strictly be
classified as a managerial employee under Art. 82 of
the Labor Code, and sec. 2(b), Rule I, Book III of
the Omnibus Rules Implementing the Labor Code,
nonetheless he is still not entitled to payment of the
aforestated benefits because he falls squarely under
another exempt category — "officers or members of
SECTION 13 CONDITIONS a managerial staff" as defined under sec. 2(c) of the
abovementioned implementing rules.
OF EMPLOYMENT – HOURS OF WORK
A case in point is National Sugar Refineries
Corporation v. NLRC. On the issue of "whether
13.01 HOURS REGULATON supervisory employees, as defined in Article 212
(m), Book V of the Labor Code, should be considered
RATIONALE AND ENFORCEMENT as officers or members of the managerial staff under
Article 82, Book III of the same Code and hence not
Manila Terminal Co. Inc v CIR (52) entitled to overtime, rest day and holiday pay,"
The Eight-Hour Labor Law was designed not this Court ruled:
only to safeguard the health and welfare of the A cursory perusal of the Job Value
laborer or employee, but in a way to minimize Contribution Statements of the union members will

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readily show that these supervisory employees are private respondent and other fishermen in its
under the direct supervision of their respective employ should be classified as field personnel who
department superintendents and that generally
have no statutory right to service incentive leave
they assist the latter in planning, organizing,
staffing, directing, controlling, communicating and
pay.
in making decisions in attaining the company's set In contrast, in the case at bar, during the entire
goals and objectives. These supervisory course of their fishing voyage, fishermen employed
employees are likewise responsible for the by the petitioner have no choice but to remain on
effective and efficient operation of their respective board its vessel. Although they perform non-
departments. . . . agricultural work away from the petitioner’s business
From the foregoing, it is apparent that the offices, the fact remains that throughout the
members of respondent union discharge duties and duration of their work they are under the effective
responsibilities which ineluctably qualify them as control and supervision of the petitioner through the
officers or members of the managerial staff, as vessel’s patron or master as the NLRC correctly held.
defined in Section 2, Rule I, Book III of the
aforestated Rules to Implement the Labor Code, RATIONALE EXEMPTION – PIECE WORKER
viz.:
(1) their primary duty consists of the
Red V Coconut Products Ltd. v. CIR (66)
performance of work directly related to
management policies of their employer; (2) they
Furthermore, although the Eight-Hour Labor
customarily and regularly exercise discretion and Law provides that it does not cover those workers
independent judgment; (3) they regularly and who prefer to be paid on piece-work basis (Sec. 2,
directly assist the managerial employee whose CA 444), nothing in said law precludes an agreement
primary duty consists of the management of a for the payment of overtime precludes an agreement
department of the establishment in which they for the payment of overtime compensation to piece-
are employed; (4) they execute, under general
workers. And in agreeing to the provision for
supervision, work along specialized or technical
lines requiring special training, experience, or
payment of shift differential to the petitioners-
knowledge; (5) they execute, under general workers aforementioned, in the bargaining
supervision, special assignments and tasks; and agreement, as well as in actually paying to them
(6) they do not devote more than 20% of their said differentials, though not in full, the company in
hours worked in a work-week to activities which effect freely adhered to an application and
are not directly and clearly related to the implementation of the Eight-Hour Labor Law, or its
performance of their work hereinbefore
objectives, to said workers.
described.
Under the facts obtaining in this case, we are
13.03 NORMAL HOURS OF WORK
constrained to agree with petitioner that the union
members should be considered as officers or
Art. 83 Normal hours of work –
members of the managerial staff and are, therefore,
The normal hours of work of any employee shall
exempt from the coverage of Article 82. Perforce,
not exceed eight hours a day.
they are not entitled to overtime, rest day and
Health personnel in cities or municipalities with
holiday pay.
a population of at least one million or in hospitals or
clinics with a bed capacity of at least one hundred
TEST – FIELD PERSONNEL
shall hold regular office hours for eight hours a day,
for five days a week, or a total of forty hours a
Union of Filipro Employees v. Vivar (92)
week, exclusive of time for meals, except where the
XXX Contrary to the contention of the petitioner,
exigencies of the service require that such personnel
the Court finds that the aforementioned rule did not
work for six days, forty-eight hours, in which case
add another element to the Labor Code definition of
they shall be entitled to an additional compensation
field personnel. The clause "whose time and
of at least 30 percent of their regular wage for work
performance is unsupervised by the employer" did
on the sixth day.
not amplify but merely interpreted and expounded
the clause "whose actual hours of work in the field
HEALTH PERSONNEL: resident physicians, nurses,
cannot be determined with reasonable certainty."
nutritionists, dieticians, pharmacists, social workers,
The former clause is still within the scope and
laboratory technicians, paramedical technicians,
purview of Article 82 which defines field personnel.
psychologists, midwives, attendants and all other
Hence, in deciding whether or not an employee's
hospital or clinic personnel.
actual working hours in the field can be determined
with reasonable certainty, query must be made as to
DISTINCTION BETWEEN THE TWO CLASSES
whether or not such employee's time and
COMMERCIAL/INDU HEALTH
performance is constantly supervised by the
STRIAL
employer.
Normal 8 hrs/day 8
Work Day hrs/day
Salazar v. NLRC (96)
Normal 6 days 5 days
“Actual hours work in the field…” is to be read in
Work Week
conjunction with Rule IV, Book III of the
Implementing Rules. Therefore field personnel are
employees whose time and performance is
unsupervised by the employer.
13.04 HOURS WORKED
Mercidar Fishing Corp. v NLRC (98)
Petitioner argues essentially that since the work
Art. 84
of private respondent is performed away from its
Hours worked - shall include
principal of business, it has no way of verifying his
actual hours of work on the vessel. It contends that

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a. All time during which an employee is required counted as working time only where the work is
to be on duty or to be at a prescribed broken or is not continuous.
workplace, and
b. All time during which an employee is suffered Luzon Stevedoring Co. v. Luzon Marine
or permitted to work. Department Union (57)
Rest periods of short duration during working A laborer need not leave the premises of the
hours shall be counted as hours worked. factory, shop or boat in order that his period of rest
shall not be counted, it being enough that he "cease
ENTRY TIME CARDS to work", may rest completely and leave or may
leave at his will the spot where he actually stays
Prangan v. NLRC (98) while working, to go somewhere else, whether
In the instant petition, the NLRC, in declaring within or outside the premises of said factory, shop
that petitioner only worked for four hours, relied or boat. If these requisites are complied with, the
solely on the supposed daily time records of the period of such rest shall not be counted.
petitioner submitted by the private respondent. We,
however, are of the opinion that these documents CONTINUOUS WORK
cannot be considered substantial evidence as to
conclude that petitioner only worked for four hours. State Marine Corporation v. Cebu Seamen’s
Private respondent hardly bothered to Association (63)
controvert petitioner's assertion, much less bolster The provision of section 1 of Commonwealth Act
its own contention. As petitioner's employer, private No. 444, which states that "when the work is not
respondent has unlimited access to all relevant continuous, the time during which the laborer is not
documents and records on the hours of work of the working and can leave his working place and can
petitioner. Yet, even as it insists that petitioner only rest completely shall not be counted", finds no
worked for four hours and not twelve, no application in the present case, where the laborer's
employment contract, payroll, notice of assignment work is continuous, and during the time that he is
or posting, cash voucher or any other convincing not working he can not leave and completely rest
evidence which may attest to the actual hours of owing to the place and nature of his work.
work of the petitioner was even presented. Instead,
what the private respondent offered as evidence was WAITING TIME
only petitioner's daily time record, which the latter
categorically denied ever accomplishing, much less Arica v. NLRC (89)
signing. Furthermore, the thirty (30)-minute assembly is
In said alleged daily time record, it showed that a deeply-rooted, routinary practice of the
petitioner started work at 10:00 p.m. and would employees, and the proceedings attendant thereto
invariably leave his post at exactly 2:00 a.m. are not infected with complexities as to deprive the
Obviously, such unvarying recording of a daily time workers the time to attend to other personal
record is improbable and contrary to human pursuits.
experience. It is impossible for an employee to
arrive at the workplace and leave at exactly the TRAVEL TIME
same time, day in day out. The very uniformity and
regularity of the entries are "badges of Rada v NLRC (92)
untruthfulness and as such indices of dubiety. The fact that he picks up employees of Philnor
at certain specified points along EDSA in going to the
Nicario v. NLRC (98) project site and drops them off at the same points
This Court, in previously evaluating the on his way back from the field office going home to
evidentiary value of daily time records, especially Marikina, Metro Manila is not merely incidental to
those which show uniform entries with regard to the petitioner's job as a driver. On the contrary, said
hours of work rendered by an employee, has ruled transportation arrangement had been adopted, not
that "such unvarying recording of a daily time record so much for the convenience of the employees, but
is improbable and contrary to human experience. It primarily for the benefit of the employer, herein
is impossible for an employee to arrive at the private respondent. Since the assigned task of
workplace and leave at exactly the same time, day fetching and delivering employees is indispensable
in day out. The uniformity and regularity of the and consequently mandatory, then the time required
entries are 'badges of untruthfulness and as such of and used by petitioner in going from his residence
indices of dubiety.' The observations made by the to the field office and back, that is, from 5:30 A.M.
Solicitor General regarding the unreliability of the to 7:00 A.M. and from 4:00 P.M. to around 6:00
daily time records would therefore seem more P.M., which the labor arbiter rounded off as
convincing. On the other hand, respondent company averaging three hours each working day, should be
failed to present substantial evidence, other than the paid as overtime work.
disputed DTRs, to prove that petitioner indeed
worked for only eight hours a day. 13.05 MEAL PERIOD

IDLE TIME Art. 85


Meal periods - Subject to such regulations as the
National Development Co. v. CIR (62) Secretary may prescribe, it shall be the duty of
It will be noted that, under the law, the idle every employer to give his employees not less than
time that an employee may spend for resting and sixty minutes time-off for their regular meals.
during which he may leave the spot or place of work
though not the premises 2 of his employer, is not

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Computation of additional compensation – For
MEAL TIME – FREE TIME purposes of computing overtime and other additional
remuneration as required by this Chapter, the
Pan-American Airways v Pan-American "regular wage" of an employee shall include the cash
Employees Association (61) wage only, without deduction on account of facilities
Where during the so-called meal period, the provided by the employer.
laborers are required to stand by for emergency
work, or where said meals hour is not one of RATIONALE – OVERTIME PAY
complete rest, such period is considered overtime.
Philippine National Bank v. PNB Employees
Phil. Airlines, Inc. v. NLRC (99) Association (82)
Thus, the eight-hour work period does not Why is a laborer or employee who works beyond
include the meal break. Nowhere in the law may it the regular hours of work entitled to extra
be inferred that employees must take their meals compensation called in this enlightened time,
within the company premises. Employees are not overtime pay? Verily, there can be no other reason
prohibited from going out of the premises as long as than that he is made to work longer than what is
they return to their posts on time. Private commensurate with his agreed compensation for the
respondent's act, therefore, of going home to take statutorily fixed or voluntarily agreed hours of labor
his dinner does not constitute abandonment. he is supposed to do. It is thus the additional work,
labor or service employed and the adverse effects of
13.06 OVERTIME WORK AND OFFSETTING his longer stay in his place of work that justify and is
PROHIBITION the real reason for the extra compensation that is
called overtime pay.
Art. 87 Overtime work is actually the lengthening of
Overtime work – Work may be performed beyond hours devoted to the interests of the employer and
eight hours a day provided that the employee is paid the requirements of his enterprise.
for the overtime work an additional compensation
equivalent to his regular wage plus at least twenty- Caltex Regular Employees v. Caltex Phil. Inc.
five percent thereof. Work performed beyond eight (95)
hours on a holiday or rest day shall be paid an Overtime work consists of hours worked on a
additional compensation equivalent to the rate for given day in excess of the applicable work period,
the first eight hours on a holiday or rest day plus at which here is eight (8) hours. It is not enough that
least 30 percent thereof. the hours worked fall on disagreeable or
inconvenient hours. In order that work may be
Art. 88 considered as overtime work, the hours worked
Undertime not offset by overtime - Undertime work must be in excess of and in addition to the eight (8)
on any particular day shall not be offset by overtime hours worked during the prescribed daily work
work on any other day. Permission given to the period, or the forty (40) hours worked during the
employee to go on leave on some other day of the regular work week Monday through Friday.
week shall not exempt the employer from paying the
additional compensation required in this Chapter. NO FORMULA BASIC CONTRACT

Art. 89 Manila Terminal Co. Inc v. CIR (52)


Emergency overtime work - Any employee may be A contract of employment, which provides for a
required by the employer to perform overtime work weekly wage for a specified number of hours,
in any of the following cases: sufficient to cover both the statutory minimum wage
a. When the country is at WAR or when any other and overtime compensation, if computed on the
national or local emergency has been declared basis of the statutory minimum, and which makes no
by Congress or the Chief Executive; provision for a fixed hourly rate or that the weekly
b. When it is necessary to prevent LOSS of life or wage includes overtime compensation, does not
property or in case of imminent danger to meet the requirements of the Act.
public safety due to an actual or impending
emergency in the locality caused by serious BUILT-IN COMPENSATION
accidents, fire, flood, typhoon, earthquake,
epidemic or other disaster or calamity; Engineering Equipment Inc v. MOLE (85)
c. When there is URGENT work to be performed Written contracts with a "built-in" overtime pay
on machines, installation or equipment, in in the ten-hour working day and that their basic
order to avoid serious loss or damage to the monthly pay was adjusted to reflect the higher
employer or some other cause of similar amount covering the guaranteed two-hour extra
nature; time whether worked or unworked are valid.
d. When the work is necessary to prevent loss or
damage to PERISHABLE goods; COMPUTATION
e. Where the completion or continuation of the
work started before the 8th hour is necessary Agga v. NLRC (98)
to prevent SERIOUS obstruction or prejudice The cited provisions of PD 442 simply declare
to the business or operations of the employer. that night shift differential and additional
Any employee required to render overtime work remuneration for overtime, rest day, Sunday and
under this Article shall be paid the ADDITIONAL holiday work shall be computed on the basis of the
compensation required in this Chapter. employee's regular wage. In like fashion, the
1991 POEA Rules merely require employers to
Art. 90 guarantee payment of wages and overtime pay.

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Thus, petitioners' stance is bereft of any legal work is such that least 30 percent of his
support. he has no regular regular wage for work
workdays and no performed on Sundays and
PROOF regular rest days holidays.
can be scheduled
Lagatic v. NLRC (98) c. any special Additional compensation of at
Entitlement to overtime pay must first be holiday least 30 percent of the
established by proof that said overtime work was regular wage
actually performed, before an employee may avail of Where such holiday work falls
said benefit. on the employee's
scheduled rest day, he
13.07 NIGHT WORK shall be entitled to an
additional compensation
Art. 86 of at least 50 percent of
Night shift differential - not less than ten percent of his regular wage.
his regular wage for each hour of work performed d. Where the The employer shall pay such
between ten o'clock in the evening and six o'clock in collective higher rate
the morning. bargaining
agreement or
RATIONALE PROHIBITION other applicable
employment
Shell Oil Co. Ltd v. National Labor Union (48) contract stipulates
"Nightwork cannot be regarded as desirable, the payment of a
either from the point of view of the employer or of higher premium
the wage earner. It is uneconomical unless overhead pay than that
costs are unusually heavy. Frequently the scale of prescribed under
wages is higher as an inducement to employees to this Article
accept employment on the night shift, and the rate
of production is generally lower." Manila Electric Company v. Public Utilities
"The case against nightwork, then, may be said Employees Association (47)
to rest upon several grounds. In the first place, Perfecto, J. dissenting - Furthermore, it is a fact
there are the remotely injurious effects of that Sundays and legal holidays are set aside by law
permanent nightwork manifested in the later years as days of rest. The life, existence, and happiness of
of the worker's life. Of more immediate importance a person do not depend only on the satisfaction of
to the average worker is the disarrangement of his his physical needs. There are moral, intellectual and
social life, including the recreational activities of his spiritual needs as imperative as the physical ones…
leisure hours and the ordinary associations of normal The deprivation of that opportunity to satisfy mental,
family relations. From an economic point of view, moral, and spiritual needs should not be ignored,
nightwork is to be discouraged because of its and should be properly compensated.
adverse effect upon efficiency and output. A moral
argument against nightwork in the case of women is 14.02 COVERAGE
that the night shift forces the workers to go to and
from the factory in darkness. Recent experiences of Art. 82
industrial nations have added much to the evidence Coverage - SUPRA
against the continuation of nightwork, except in
extraordinary circumstances and unavoidable Art. 91
emergencies. The immediate prohibition of Right to weekly rest day
nightwork for all laborers is hardly practicable; its a. It shall be the duty of every employer, whether
discontinuance in the case of women employees is operating for profit or not, to provide a rest
unquestionably desirable. 'The night was made for period of not less than twenty-four consecutive
rest and sleep and not for work' is a common saying hours after every six consecutive normal work
among wage-earning people, and many of them days.
dream of an industrial order in which there will be no
night shift." 14.03 SCHEDULING OF REST DAY

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

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a. In case of actual or impending EMERGENCIES Unless otherwise modified by law, order or
caused by serious accidents, fire, flood, proclamation, the following regular holidays and
typhoon, earthquake, epidemic or other special days shall be observed in this country:
disaster or calamity to prevent loss of life and
property or imminent danger to public safety; A. Regular Holidays
b. In case of URGENT work to be performed on New Year's Day - January 1
the machinery, equipment or installation to Maundy Thursday - Movable date
avoid serious loss which the employer would Good Friday - Movable date
otherwise suffer; Araw ng Kagitingan (Bataan and Corregidor
c. In the event of ABNORMAL pressure of work Day) - April 9
due to special circumstances, where the Labor Day - May 1
employer cannot ordinarily be expected to Independence Day - June 12
resort to other measures; National Heroes Day - Last Sunday of August
d. To prevent loss or damage to PERISHABLE Bonifacio Day - November 30
goods; Christmas Day - December 25
e. Where the nature of the work requires Rizal Day - December 30
CONTINUOUS operations and the stoppage of B. Nationwide Special Days
work may result in irreparable injury or loss to All Saints Day - November 1
the employer; and Last Day of the Year - December 31
f. Under other circumstances ANALOGOUS or Sec. 2.
similar to the foregoing as determined by the Henceforth, the terms "legal or regular holiday"
Secretary of Labor and Employment. and "special holiday", as used in laws, orders, rules
and regulations or other issuances shall now be
COMPUTATION referred to as "regular holiday" and "special day",
respectively.
Agga v. NLRC (98)
The cited provisions of PD 442 simply declare 15.03 HOLIDAY PAY
that night shift differential and additional
remuneration for overtime, rest day, Sunday and Art 94(b)
holiday work shall be computed on the basis of the The employer may require an employee to work on
employee's regular wage. In like fashion, the 1991 any holiday but such employee shall be paid a
POEA Rules merely require employers to guarantee compensation equivalent to twice his regular rate;
payment of wages and overtime pay. Thus,
petitioners' stance is bereft of any legal support. FACULTY PRIVATE SCHOOL

Art. 93 Jose Rizal College v. NLRC (87)


Compensation for rest day, Sunday or holiday work It is readily apparent that the declared purpose
of the holiday pay which is the prevention of
diminution of the monthly income of the employees
on account of work interruptions is defeated when a
SECTION 15 - CONDITION regular class day is cancelled on account of a special
public holiday and class hours are held on another
OF EMPLOYMENT – HOLIDAYS
working day to make up for time lost in the school
calendar. Otherwise stated, the faculty member,
15.01 COVERAGE although forced to take a rest, does not earn what
he should earn on that day. Be it noted that when a
Art. 94 special public holiday is declared, the faculty
Right to holiday pay - (a) Every worker shall be paid member paid by the hour is deprived of expected
his regular daily wage during regular holidays, income, and it does not matter that the school
except in retail and service establishment regularly calendar is extended in view of the days or hours
employing less than ten workers; lost, for their income that could be earned from
other sources is lost during the extended days.
COVERAGE – EMPLOYEES Similarly, when classes are called off or shortened
on account of typhoons, floods, rallies, and the like,
Mantrade/FMC Division Employees and these faculty members must likewise be paid,
Workers Union v. Bacungan (86) whether or not extensions are ordered.
The Secretary of Labor cannot exempt Mantrade
from paying holiday pay just because its employees DIVISOR AS FACTOR
are uniformly paid by the month irrespective of the
number of working days therein. The Labor Code Union of Filipro Employees v. Viva (91)
only exempts retail and service establishments It must be stressed that the daily rate,
regularly employing less than 10 workers. assuming there are no intervening salary increases,
is a constant figure for the purpose of computing
15.02 HOLIDAYS overtime and night differential pay and commutation
of sick and vacation leave credits. Necessarily, the
EXECUTIVE ORDER NO. 203 daily rate should also be the same basis for
PROVIDING A LIST OF REGULAR HOLIDAYS AND computing the 10 unpaid holidays.
SPECIAL DAYS TO BE OBSERVED THROUGHOUT THE
PHILIPPINES AND FOR OTHER PURPOSES Transasia Phils. Emplower Assn. v. NLRC
(99)
Sec. 1.

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Trans-Asia's inclusion of holiday pay in holidays falling on Sundays in a given year, or,
petitioners' monthly salary is clearly established by contrary to the legal provisions bearing on the point,
its consistent use of the divisor of "286" days in the otherwise to reckon a year at more than 365 days.
computation of its employees' benefits and As earlier mentioned, what the law requires of
deductions. The use by Trans-Asia of the "286" days employers opting to pay by the month is to assure
divisor was never disputed by petitioners. A simple that "the monthly minimum wage shall not be less
application of mathematics would reveal that the ten than the statutory minimum wage multiplied by 365
(10) legal holidays in a year are already accounted days divided by twelve," and to pay that salary "for
for with the use of the said divisor. As explained by all days in the month whether worked or not," and
Trans-Asia, if one is to deduct the unworked 52 "irrespective of the number of working days
Sundays and 26 Saturdays (derived by dividing 52 therein."
Saturdays in half since petitioners are required to
work half-day on Saturdays) from the 365 calendar PROOF OF PAYMENT
days in a year, the resulting divisor would be 286
days (should actually be 287 days). Since the ten Building Care Corp v. NLRC (98)
(10) legal holidays were never included in Indeed if petitioner wanted to prove its payment
subtracting the unworked and unpaid days in a of holiday pays and salary differentials, it could have
calendar year, the only logical conclusion would be easily presented proofs of such monetary benefits.
that the payment for holiday pay is already But it did not. It had failed to comply with the
incorporated into the said divisor. Thus, when mandate of the law. As public respondent ruled, the
viewed against this very convincing piece of burden of proof in this regard belongs to the
evidence, the arguments put forward by petitioners employer, not to the employee.
to support their claim of non-payment of holiday
pay, i.e., the pre-condition stated in the Employees'
Manual for entitlement to holiday pay, the absence
of a stipulation in the employees' appointment SECTION 16 - CONDITION
papers for the inclusion of holiday pay in their
OF EMPLOYMENT – SERVICE INCENTIVE
monthly salary, the stipulation in the CBA
recognizing the entitlement of the petitioners to LEAVE
holiday pay with a concomitant provision for the
granting of an "allegedly" very generous holiday pay A. Service Incentive Leave
rate, would appear to be merely inferences and
suppositions which, in the apropos words of the 16.01 COVERAGE
labor arbiter, "paled in the face of the prevailing
company practices and circumstances abovestated." Art 95.
The Court notes that there is a need to adjust Right to Service Incentive Leave –
the divisor used by Trans-Asia to 287 days, instead a. Every employee who has rendered at least one
of only 286 days, in order to properly account for the year of service shall be entitled to a yearly
entirety of regular holidays and special days in a service incentive leave of five days with pay
year as prescribed by Executive Order No. 203 in b. This provision shall not apply to those who are
relation to Section 6 of the Rules Implementing already enjoying the benefit herein provided,
Republic Act 6727. those enjoying vacation leave with pay at least
five days and those employed in
COMPUTATION establishments regularly employing less than
ten employees or in establishments exempted
Agga v. NLRC (98) from granting this benefit by the Secretary of
The cited provisions of PD 442 simply declare Labor after considering the viability or financial
that night shift differential and additional condition of such establishment.
remuneration for overtime, rest day, Sunday and
holiday work shall be computed on the basis of the Makati Haberdashery Inc. v. NLRC (89)
employee's regular wage. In like fashion, the 1991 On the other hand, while private respondents
POEA Rules merely require employers to guarantee are entitled to Minimum Wage, COLA and 13th
payment of wages and overtime pay. Thus, Month Pay, they are not entitled to service incentive
petitioners' stance is bereft of any legal support. leave pay because as piece-rate workers being paid
at a fixed amount for performing work irrespective of
SUNDAY time consumed in the performance thereof, they fall
under one of the exceptions stated in Section 1(d),
Wellington Investment Inc v. Trajano (95) Rule V, Implementing Regulations, Book III, Labor
In fixing the salary, Wellington used what it calls Code. For the same reason private respondents
the "314 factor;" that is to say, it simply deducted cannot also claim holiday pay (Section 1(e), Rule IV,
51 Sundays from the 365 days normally comprising Implementing Regulations, Book III, Labor Code).
a year and used the difference, 314, as basis for
determining the monthly salary. The monthly salary 16.02 ENTITLEMENT AND ARBITRATION
thus fixed actually covers payment for 314 days of
the year, including regular and special holidays, as Art 95.
well as days when no work is done by reason of Right to Service Incentive Leave –
fortuitous cause, as above specified, or causes not a. Every employee who has rendered at least one
attributable to the employees. year of service shall be entitled to a yearly
There is no provision of law requiring any service incentive leave of five days with
employer to make such adjustments in the monthly pay
salary rate set by him to take account of legal

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c. The grant of benefit in excess of that provided satisfactory proof of such payment and legality
herein shall not be made a subject of thereof;
arbitration or any court or administrative f. That if an employee should give birth or suffer
action. miscarriage without the required contributions
having been remitted for her by her employer
16.03 COMPUTATION AND LIABILITY to the SSS, or without the latter having been
previously notified by the employer of time of
Sentinel Security Agency, Inc. v. NLRC (98) the pregnancy, the employer shall pay to the
Under Arts. 107 and 109, the indirect employer SSS damages equivalent to the benefits which
is jointly and severally liable with the contractor for said employee member would otherwise have
the workers’ wages, in the same manner and extent been entitled to.
that it is liable to its direct employees. This liability
of the Client covers the payment of the service D. Vacation and Sick Leave
incentive leave pay of the complainants during the
time they were posted at the Cebu Branch of the POLICY
Client. As service had been rendered, the liability
accrued, even if the complainants were eventually St. Michael Academy v. NLRC
transferred or reassigned. The service incentive The payment of vacation and sick leave is
leave is expressly granted by these pertinent governed by the policy of the employer or the
provisions of the Labor Code agreement between the employer and employee.

B. Paternity Leave

Reference: RA 8187 Paternity Leave Act of 1995 and


Implementing Rules
SECTION 17 - WAGES
Coverage: Sec. 2 Notwithstanding any law, rules,
and regulations to the contrary, every MARRIED
male employee in the private and public sectors A. Wages – In General
shall be entitled to a paternity leave of SEVEN (7)
days with full pay for the first four (4) deliveries of 17.01 COVERAGE
the LEGITIMATE spouse with whom he is
cohabiting. The male employee applying for Art. 97
paternity leave shall notify his employer of the Definitions - As used in this Title:
pregnancy of his legitimate spouse and the expected (b) "Employer" includes
date of such delivery. any person
For purposes of this Act, delivery shall include acting directly or indirectly in the interest of
childbirth or any miscarriage. an employer in relation to an employee
and shall include
C. Maternity Leave the Government and all its branches,
subdivisions and instrumentalities
Reference: Sec. 14 – A RA 8282 all Government-owned and controlled
A female employee who has paid at least three corporations and institutions, as well as
(3) monthly contributions in the twelve-month non-profit private institutions or
period immediately preceding the semester of her organizations.
childbirth, or miscarriage shall be paid a daily (c) "Employee" includes any individual employed
maternity benefit equivalent to one hundred percent by an employer.
(100%) of her average salary credit for sixty (60) (e) "Employ" means to suffer or permit to work.
days or seventy-eight days in case of caesarean
delivery subject to the following conditions: Application of Title – Art. 98:
a. That the employee shall have notified her This Title shall not apply to:
employer of her pregnancy and the probable farm tenancy or leasehold
date of her childbirth which notice shall be domestic service
transmitted to the SSS in accordance with the persons working in their respective homes in
rules and regulations it may provide. needlework or in any cottage industry duly
b. The full payment shall be advanced by the registered in accordance with law.
employer within thirty (30) days from the filing
of the maternity leave application. GOVERNMENT AGENCY
c. That payment of daily maternity benefits shall
be a bar to the recovery of sickness benefits Phil. Fisheries Development Authority v. NLRC
provided by this Act for the same period for (92)
which daily maternity benefits have been Notwithstanding that the petitioner is a
received. government agency, its liabilities, which are joint
d. That the maternity benefits provided under and solidary with that of the contractor, are provided
this section shall be paid only for the first four in Articles 106, 107 and 109 of the Labor Code. This
(4) deliveries or miscarriages. places the petitioner's liabilities under the scope of
e. That the SSS shall immediately reimburse the the NLRC. Moreover, Book Three, Title II on Wages
employer of one hundred percent (100%) of specifically provides that the term "employer"
the amount of maternity benefits advanced to includes any person acting directly or indirectly in
the employee by the employer upon receipt of the interest of an employer in relation to an

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employee and shall include the Government and all designated, capable of being expressed in terms of
its branches, subdivisions and instrumentalities, all money, whether fixed or ascertained on a time, task,
government-owned or controlled corporation and piece, or commission basis, or other method of
institutions as well as non-profit private institutions, calculating the same, which is payable by an
or organizations (Art. 97 [b], Labor Code; Eagle employer to an employee under a written or
Security Agency, Inc. v. NLRC; Rabago v. NLRC) unwritten contract of employment for work done or
to be done, or for services rendered or to be
17.02 WAGE rendered and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board,
Art. 97(f) lodging, or other facilities customarily furnished by
“Wage” paid to any employee shall mean the the employer to the employee.
remuneration or earnings, however designated, Stated differently, when an employer
capable of being expressed in terms of money, customarily furnishes his employee board, lodging or
whether fixed on a time, task, piece, commission other facilities, the fair and reasonable value thereof,
basis, or other method of calculating the same, as determined by the Secretary of Labor and
which is payable by an employer to an employee Employment, is included in "wage." In order to
under a written or unwritten contract of employment ascertain whether the subject allowances form part
for work done or to be done or for services rendered of petitioner's "wages," we divide the discussion on
or to be rendered and includes the fair and the following — "customarily furnished;" "board,
reasonable value, as determined by the Secretary of lodging or other facilities;" and, "fair reasonable
Labor, of board, lodging or other facilities value as determined by the Secretary of Labor."
customarily furnished by the employer to the "Customary" is founded on long-established and
employee. constant practice connoting regularity. The receipt of
an allowance on a monthly basis does not ipso facto
"Fair and reasonable value" shall not include any characterize it as regular and forming part of salary
profit to the employer or to any person affiliated because the nature of the grant is a factor worth
with the employer. considering. We agree with the observation of the
Office of the Solicitor General that the subject
allowances were temporarily, not regularly, received
FAIR DAY PAY by petitioners because —
In the case of the housing allowance, once a
Aklan Electronic Cooperative, Inc. v. NLRC vacancy occurs in the company-provided housing
accommodations, the employee concerned
(2000)
transfers to the company premises and his
The age-old rule governing the relation between housing allowance is discontinued . . . .
labor and capital, or management and employee of a On the other hand, the transportation allowance
"fair day’s wage for a fair day’s labor" remains as is in the form of advances for actual transportation
the basic factor in determining employees’ wages. If expenses subject to liquidation . . . given only to
there is no work performed by the employee there employees who have personal cars.
can be no wage or pay unless, of course, the laborer The Bislig allowance is given to Division
was able, willing and ready to work but was illegally Managers and corporate officers assigned in Bislig,
locked out, suspended or dismissed, or otherwise Surigao del Norte. Once the officer is transferred
illegally prevented from working, a situation which outside Bislig, the allowance stops.
we find is not present in the instant case. It would Although it is quite easy to comprehend "board"
neither be fair nor just to allow private respondents and "lodging," it is not so with "facilities." Thus Sec.
to recover something they have not earned and 5, Rule VII, Book III, of the Rules Implementing the
could not have earned because they did not render Labor Code gives meaning to the term as including
services at the Kalibo office during the stated period. articles or services for the benefit of the employee or
his family but excluding tools of the trade or articles
FACILITIES AND SUPPLEMENTS or service primarily for the benefit of the employer
or necessary to the conduct of the employer's
Atok Big Wedge Mining Co. Inc. v. Atok Big business. The Staff/Manager's allowance may fall
Wedge Mutual Benefit Assoc. (53) under "lodging" but the transportation and Bislig
A person's needs increase as his means allowances are not embraced in "facilities" on the
increase. This is true not only as to food but as to main consideration that they are granted as well as
everything else - education, clothing, entertainment, the Staff/Manager's allowance for respondent
etc. The law guarantees the laborer a fair and just PICOP's benefit and convenience, i.e., to insure that
wage. The minimum must be fair and just. The petitioners render quality performance. In
"minimum wage" can by no means imply only the determining whether a privilege is a facility, the
actual minimum. Some margin or leeway must be criterion is not so much its kind but its purpose. That
provided, over and above the minimum, to take care the assailed allowances were for the benefit and
of contingencies, such as increase of prices of convenience of respondent company was supported
commodities and increase in wants, and to provide by the circumstance that they were not subjected to
means for a desirable improvement in his mode of withholding tax.
living.
States Marine Corporation v. Cebu Seamen’s
Millares v. NLRC (99) Association, Inc. (63)
In Songco the Court explained that both words 'Supplements', constitute extra remuneration/
(as well as salary) generally refer to one and the special benefits given to or received by the EEs over
same meaning, i.e., a reward or recompense for and above their ordinary earnings or wages,
services performed. Specifically, "wage" is defined in 'Facilities' are items of expense necessary for the
letter (f) as the remuneration or earnings, however laborer's and his family's existence and

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subsistence, so that by express provision of law the basic minimum pay mandated by law should said
they form part of the wage and when furnished by commissions be less than their basic minimum for
the employer are deductible therefrom, since if they eight hours work. It can, thus, be inferred that were
are not furnished, the laborer would spend and pay said commissions equal to or even exceed the
for them just the same." minimum wage, the employer need not pay, in
addition, the basic minimum pay prescribed by law.
CASH WAGE/COMMISSIONS It follows then that commissions are included in
determining compliance with minimum wage
Songco v. NLRC (90) requirements.
The words "wages" and "salary" are in essence
synonymous, both words generally refer to one and GRATUITY AND WAGES
the same meaning, that is, a reward or recompense
for services performed. Likewise, "pay" is the Plastic Town Center Corp. v. NLRC (89)
synonym of "wages" and "salary" From the foregoing, gratuity pay is therefore,
not intended to pay a worker for actual services
Iran v. NLRC (98) rendered. It is a money benefit given to the workers
While commissions are incentives to inspire whose purpose is "to reward employees or laborers,
employees to put more industry on the jobs who have rendered satisfactory and efficient service
assigned to them, still these commissions are direct to the company." (Sec. 2, CBA) While it may be
remuneration for services rendered. Commissions enforced once it forms part of a contractual
have been defined as the recompense, compensation undertaking, the grant of such benefit is not
or reward of an agent, salesman, executor, trustee, mandatory so as to be considered a part of labor
receiver, factor, broker or bailee, when the same is standard law unlike the salary, cost of living
calculated as a percentage on the amount of his allowances, holiday pay, leave benefits, etc., which
transactions or on the profit to the principal. The are covered by the Labor Code. Nowhere has it ever
nature of the work of a salesman and the reason for been stated that gratuity pay should be based on the
such type of remuneration for services rendered actual number of days worked over the period of
demonstrate clearly that commissions are part of a years forming its basis.
salesman's wage or salary.
B. Payment of Wages
WAGES AND SALARY
17.03 FORM
Gaa v. Court of Appeals (85)
Article 1708 used the word "wages" and not Art. 102.
"salary" in relation to "laborer" when it declared Forms of payment - No employer shall pay the
what are to be exempted from attachment and wages of an employee by means of: promissory
execution. The term "wages" as distinguished from notes vouchers
"salary", applies to the compensation for manual coupons
labor, skilled or unskilled, paid at stated times, and tokens
measured by the day, week, month, or season, while tickets
"salary" denotes a higher degree of employment, or chits
a superior grade of services, and implies a position or any object other than legal tender
of office: by contrast, the term "wages" indicates even when expressly requested by the employee.
considerable pay for a lower and less responsible
character of employment, while "salary" is Payment of wages by check or money order shall be
suggestive of a larger and more important service allowed when:
(35 Am. Jur. 496). such manner is customary on the date of
effectivity of this Code; or
Arms Taxi v. NLRC (93) is necessary because of special circumstances
While a salary is a fixed compensation for as specified in appropriate regulations to be
regular work or for continuous service rendered over issued by the SOLE; or
a period of time (Moreno's Philippine Law Dictionary, as stipulated in a collective bargaining
3rd Ed., p. 852 citing Lee Tee vs. Ching Chiong, agreement.
17518-R, January 13, 1959), a commission is a
percentage or allowance made to a factor or agent CASH WAGE
for transacting business for another (Supra, p. 171
citing People vs. Sua Bok, 1 O.G. 689) Congson v. NLRC (59)
Undoubtedly, petitioner's practice of paying the
Iran v. NLRC (98) private respondents the minimum wage by means of
There is no law mandating that commissions be legal tender combined with tuna liver and intestines
paid only after the minimum wage has been paid to runs counter to the abovecited provision of the Labor
the employee. Verily, the establishment of a Code. The fact that said method of paying the
minimum wage only sets a floor below which an minimum wage was not only agreed upon by both
employee’s remuneration cannot fall, not that parties in the employment agreement but even
commissions are excluded from wages in expressly requested by private respondents, does
determining compliance with the minimum wage not shield petitioner. Article 102 of the Labor Code is
law. This conclusion is bolstered by Philippine clear. Wages shall be paid only by means of legal
Agricultural Commercial and industrial Workers tender. The only instance when an employer is
Union v. NLRC, where this Court acknowledged that permitted to pay wages in forms other than legal
drivers and conductors who are compensated purely tender, that is, by checks or money order, is
on a commission basis are automatically entitled to

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when the circumstances prescribed in the second 3. The System shall allow workers to receive
paragraph of Article 102 are present. their wages within the period or frequency
and in the amount prescribed under the
17.04 TIME OF PAYMENT Labor Code, as amended.
4. There is a bank or ATM facility within a
Art. 103 radius of one kilometer to the place of work
Time of payment - Wage shall be paid at least once 5. Upon request of the concerned employee/s,
every 2 weeks or twice a month at intervals not the employer shall issue a record of
exceeding 16 days. If on account of force majeure or payment of wages, benefits and deductions
circumstances beyond the employer's control, for particular period.
payment of wages on or within the time herein 6. There shall be no additional expenses and
provided cannot be made, the employer shall pay no dimunition of benefits and privileges as
the wages immediately after such force majeure or a result of the ATM system of payment
circumstances have ceased. No employer shall make 7. The employer shall assume responsibility in
payment with less frequency that once a month. case the wage protection provisions of law
The payment of wages of employees engaged to and regulations are not complied with
perform a task which cannot be completed in 2 under the arrangement.
weeks shall be subject to the following conditions in
the absence of a collective bargaining agreement or 17.06 DIRECT PAYMENT
arbitration award:
1. That payments are made at intervals not Art. 105
exceeding 16 days, in proportion to the Direct payment of wages - Wages shall be paid
amount of work completed; and directly to the workers to whom they are due
2. That final settlement is made upon completion except:
of the work. a. In cases of force majeure rendering such
payments impossible or under other special
17.05 PLACE OF PAYMENT circumstances to be determined by the
Secretary of Labor in appropriate regulations,
Art. 104 in which case the worker may be paid through
Place of payment - Payment of wages shall be made another person under written authority given
at or near the place of undertaking, except as by the worker for the purpose; or
otherwise provided by such regulations as the
Secretary of Labor may prescribe under conditions to b. Where the worker has died, the employer may
ensure greater protection of wages. pay the wages of the deceased worker to the
heirs of the latter without the necessity of
Sec. 7, RA 6727 (Wage Rationalization Act) intestate proceedings.

Upon written permission of the majority of the Procedure: Claimants, if all of age, shall execute an
employees or workers concerned, all private affidavit attesting to their
establishments, companies, businesses and other relationship to the deceased and the fact
entities with 25 or more employees and located that they are his heirs, to the exclusion of all
within 1 kilometer radius to a commercial, other persons.
savings or rural bank shall pay the wages and If any of the heirs is a minor: the affidavit
other benefits of their employees through any of shall be executed on his
the said banks and within the period of payment behalf by his natural guardian or next of
of wages fixed by PD 422, as amended, kin.
otherwise known as the Labor Code of the The affidavit shall be presented to the
Philippines. employer who shall make payment through the
Secretary of Labor or his representative. The
representative of the Secretary of Labor shall act as
referee in dividing the amount paid among the heirs.
The payment of wages under this Article shall
Labor Advisory on Payment of Salaries thru absolve the employer of any further liability with
Automated Teller Machine (ATM) respect to the amount paid.

“Based on Article 104, as well as the provisions of 17.07 CONTRACTOR - SUBCONTRACTOR


Sec. 4, Rule VIII, Book III of the Code’s
Implementing Rules and considering present-day Art. 106.
circumstances, practices and technology, Contractor or sub-contractor
employers may adopt a system of payment other Whenever an employer enters into a contract with
than in the workplace, such as through another person for the performance of the formers
automated teller machine (ATM) of banks, work, the employees of the contractor and of the
provided that the following conditions are met: latter’s subcontractor, if any, shall be paid in
1. The ATM system of payment is with the accordance with the provisions of this Code.
written consent of the employees In the event that the contractor or sub-
concerned. contractor fails to pay wages of employees in
2. The employees are given reasonable time accordance with this Code, the employer shall be
to withdraw their wages from the bank JOINTLY AND SEVERALLY liable with his contractor
facility which time, if done during working or sub-contractor to such employees to the
hours, shall be considered compensable extent of the work performed under the contract,
hours worked.

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in the same manner and extent that he is liable to Wage deduction - No employer, in his own behalf or
employees directly employed by him. in behalf of any person, shall make any deduction
The Secretary of Labor may, by appropriate from the wages of his employees, except:
regulations, restrict or prohibit the contracting out of 1. In cases where the worker is insured with his
labor to protect the rights of workers established consent by the employer, and the deduction is
under this Code. In so prohibiting or restricting, he to recompense the employer for the amount
may make appropriate distinctions between labor- paid by him as premium on the insurance;
only contracting and job contracting as well as 2. For union dues, in cases where the right of the
differentiations within these types of contracting, worker or his union to check off has been
and determine who among the parties involved shall recognized by the employer or authorized in
be considered the employer for purposes of this writing by the individual worker concerned;
Code, to prevent any violation or circumvention of and
any provision of this Code. 3. In cases where the employer is authorized by
There is "labor-only" contracting where the law or regulations issued by the Secretary of
person supplying workers to an employer does not Labor.
have substantial capital or investment in the form of
tools, equipment, machineries, work premises, Art. 117
among others, and the workers recruited and placed Deduction to ensure employment (Art. 117) - It shall
by such person are performing activities which are be unlawful to make any deduction from the wages
directly related to the principal business of such of any employee for the benefit of the employer or
employer. In such cases, the person or intermediary his representative or intermediary as consideration
shall be considered merely as an agent of the of a promise of employment/ retention in
employer who shall be responsible to the workers in employment.
the same manner an extent as if the latter were
directly employed by him. WAGE DEDUCTION

Art. 107 Radio Communication of the Phil., Inc. v. Sec.


Indirect employer - The provisions of the of Labor (89)
immediately preceding article shall likewise apply to Article 222 Labor Code requires an individual
any person, partnership, association or corporation written authorization as a prerequisite to wage
which, not being an employer, contracts with an deductions seeks to protect the employee against
independent contractor for the performance of any unwarranted practices that would diminish his
work, task, job or project. compensation without his knowledge and consent.
However, for all intents and purposes, the
Art. 108 deductions required of the petitioner and employees
Posting of bond - An employer or indirect employer do not run counter to the express mandate of the
may require the contractor or sub-contractor to law since the same are not unwarranted or without
furnish a bond equal to the cost of labor under their knowledge and consent. Also, the deductions
contract, on condition that the bond will answer for for the union service fee in question are authorized
the wages due the employees should the by law and do not require individual check-off
contractor/sub-contractor, as the case may be, fail authorizations.
to pay the same.
Apodaca v. NLRC (89)
Art. 109. Lastly, assuming further that there was a call
Solidary liability – The provisions of existing laws to for payment of the unpaid subscription, the NLRC
the contrary notwithstanding, every employer or cannot validly set it off against the wages and other
indirect employer shall be held responsible with his benefits due petitioner. Article 113 of the Labor Code
contractor/subcontractor for any violation of any allows such a deduction from the wages of the
provision of this Code. For purposes of determining employees by the employer, only in three instances,
the extent of their civil liability under this Chapter, to wit:
they shall be considered as direct employers. "ART. 113. Wage Deduction. — No employer,
in his own behalf or in behalf of any person, shall
make any deduction from the wages of his
C. Prohibition regarding Wages employees, except:
(a) In cases where the worker is insured with his
17.08 NON-INTERFERENCE – DISPOSAL WAGES consent by the employer, and the deduction is to
recompense the employer for the amount paid by
Art. 112 him as premium on the insurance;
(b) For union dues, in cases where the right of
Non-interference in disposal of wages - No employer
the worker or his union to check-off has been
shall limit or otherwise interfere with the freedom of recognized by the employer or authorized in
any employee to dispose of his wages. He shall not writing by the individual worker concerned; and
in any manner force, compel or oblige his employees (c) In cases where the employer is authorized by
to purchase merchandise, commodities or other law or regulations issued by the Secretary of
property from the employer or from any other Labor."
person or otherwise make use of any store or
services of such employer or any other person. Jardin v. NLRC (2000)
With regard to the amount deducted daily by
17.09 WAGE DEDUCTION private respondent from petitioners for washing of
the taxi units, we view the same as not illegal in the
Art. 113 context of the law. We note that after a tour of
duty, it is incumbent upon the driver to restore
the unit he has driven to the same clean

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condition when he took it out. Car washing after a
tour of duty is indeed a practice in the taxi industry Art. 116
and is in fact dictated by fair play. Hence, the drivers Withholding of wages and kickbacks prohibited - It
are not entitled to reimbursement of washing shall be unlawful for any person, directly or
charges. indirectly, to withhold any amount from the wages of
a worker or induce him to give up any part of his
CHECK – OFF wages by force, stealth, intimidation, threat or
dismissal or by any other means whatsoever without
ART. 113 the worker's consent.
Wage Deduction. — No employer, in his own behalf
or in behalf of any person, shall make any deduction GARNISHMENT/ATTACHMENT
from the wages of his employees, except:
b. For union dues, in cases where the right of the Pacific Customs Brokerage, Inc. v. Inter-Island
worker or his union to check-off has been Dockmen and Labor Union (51)
recognized by the employer or authorized in Art 1708 NCC: "laborers' wages shall not be
writing by the individual worker concerned; subject to execution or attachment, except for debts
and incurred for food, shelter, clothing and medical
attendance". Writ of garnishment issued by CFI,
Manila Trading and Supply Co. v. Manila while purporting to include all moneys and
Trading Labor Association (53) properties of the employing company, cannot affect
An employer may be compelled to "check-off" what the co. has in its possession to pay the wages
union dues from the wages of his employee when it of its laborers pursuant to its contract w/ them or
has been authorized to do so by the employee. This their labor union w/o contravening the letter and
is upon the theory that it is necessary to promote spirit of article 1708.
the welfare and integrity of the union to which he
belongs. It is a forward step to promote social Gaa v. Court of Appeals (85)
justice as envisaged by our Constitution. Article 1708 used the word "wages" and not
"salary" in relation to "laborer" when it declared
17.10 DEPOSIT what are to be exempted from attachment and
execution. The term "wages" as distinguished from
Art. 114 "salary", applies to the compensation for manual
Deposits for loss or damage - No employer shall labor, skilled or unskilled, paid at stated times, and
require his worker to make deposits from which measured by the day, week, month, or season, while
deduction shall be made, for the reimbursement of "salary" denotes a higher degree of employment, or
loss of or damage to tools, materials or equipment a superior grade of services, and implies a position
supplied by the employer of office: by contrast, the term "wages" indicates
Exception: considerable pay for a lower and less responsible
 when the employer is engaged in such trades, character of employment, while "salary" is
occupations or businesses where the practice of suggestive of a larger and more important service
making deductions or requiring deposits is a (35 Am. Jur. 496).
recognized one; or XXX We do not think that the legislature
 is necessary or desirable as determined by the intended the exemption in Article 1708 of the New
Secretary of Labor in appropriate rules and Civil Code to operate in favor of any but those who
regulations are laboring men or women in the sense that their
work is manual. Persons belonging to this class
Art. 115 usually look to the reward of a day's labor for
Limitations - No deduction from the deposits of an immediate or present support, and such persons are
employee for the actual amount of the loss or more in need of the exemption than any others.
damage shall be made unless the employee has
been heard thereon, and his responsibility has been RECORD KEEPING
clearly shown.
South Motorist Enterprises v. Tosoc (90)
Dentech Manufacturing Corp. v. NLRC (89) It failed to present employment records giving
Article 114 of the Labor Code prohibits an as an excuse that they were sent to the main office
employer from requiring his employees to file a cash in Manila, in violation of Section 11 of Rule X, Book
bond or to make deposits, subject to certain II of the Omnibus Rules Implementing the Labor
exceptions. Code providing that:
"All employment records of the employees of an
Five J Taxi v. NLRC (94) employer shall be kept and maintained in or about
the premises of the workplace. The premises of a
The article providing the rule on deposits for
workplace shall be understood to mean the main
loss or damage to tools, materials or equipment or branch office or establishment, if any,
supplied by the employer does not apply to or depending upon where the employees are
permit deposits to defray any deficiency which the regularly assigned. The keeping of the employee's
taxi driver may incur in the remittance of his records in another place is prohibited."
"boundary." And when worker stops working for
employer, the alleged purpose for the unauthorized
deposits no longer exists. In other case, any balance D. Other Forms of Remuneration
due to private respondents after proper accounting
must be returned to them with legal interest. 17.12 SERVICE CHARGES

17.11 WITHHOLDING OF WAGES Art. 96

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Service Charges -All service charges collected by s from entering into any agreement
hotels, restaurants and similar establishments shall with terms more favorable to the
be distributed at the rate of 85% for all covered employees than those provided
employees and 15% management. The share of the herein, or be used to diminish any
employees shall be EQUALLY DISTRIBUTED among benefit granted to the employees
them. In case the service charge is abolished, the under existing laws, agreement
share of covered employees shall be considered and voluntary employer practice.
integrated in their wages.
17.13 THIRTEENTH MONTH PAY
Maranaw Hotels, etc. v. NLRC (99)
As regards the share of Damalerio in the service COVERAGE
charges collected during the period of his preventive
suspension, the same form part of his earnings, and Revised Guidelines on the implementation of
his dismissal having been adjudged to be illegal, he the 13th Month pay
is entitled not only to full backwages but also to
other benefits, including a just share in the service Removal of the Salary Ceiling (Aug 13, 86, Pres.
charges, to be computed from the start of his Aquino's Memo Order No. 28)
preventive suspension until his reinstatement.
ALL EMPLOYERS are hereby required to pay all their
Book III Rule VI Omnibus Rules
Coverage only establishments collecting rank and file employees a 13th month pay not later
service charges such as hotels, than December 24 of every year, provided that they
restaurants, lodging houses, night have worked for at least one (1) month during a
clubs, cocktail lounge, massage calendar year.
clinics, bars, casinos and
gambling houses and similar Who are Rank and File Employees?
enterprises, including those A managerial employee is one who is vested
entities operating primarily as with powers or prerogatives to lay down and execute
private subsidiaries of the management policies and/or to hire, transfer,
Government. suspend, lay-off, recall, discharge, assign, or
Employees shall apply to all employees of discipline employees, or to effectively recommend
covered covered employers REGARDLESS such managerial actions. ALL EMPLOYEES NOT
OF THEIR POSITIONS, FALLING WITHIN THIS DEFINITION ARE
DESIGNATIONS OR EMPLOYMENT CONSIDERED RANK-AND-FILE EMPLOYEES.
STATUS, and IRRESPECTIVE OF
THE METHOD BY WHICH THEIR Exempted EMPLOYERS
WAGES ARE PAID 1. The Government and any of its political
Exception MANAGERIAL EMPLOYEES subdivisions, including government-owned and
(defined as one who is vested controlled corporations, except those
with powers or prerogatives to lay corporations operating essentially as private
down and execute management subsidiaries of the Government;
policies and/or to hire, transfer, 2. Employers already paying their employees a
suspend, lay-off, recall, discharge, 13th month pay or more in a calendar year or
assign, or discipline employees or its equivalent at the time of this issuance;
to effectively recommend such “ITS EQUIVALENT” : includes Christmas
managerial actions.) bonus, mid-year bonus, cash bonuses and
Distributio 85% - employees to be other payments amounting to not less than
n distributed EQUALLY 1/12 of the basic salary but shall NOT
15% - management (for the INCLUDE cash and stock dividends, cost of
disposition by management to living allowances and all other allowances
answer for losses and breakages regularly enjoyed by the employee as well a
and distribution to managerial non-monetary benefits.
employees at the discretion of the 3. Employers of household helpers and persons in
management in the latter case) the personal service of another relation to such
Frequency shall be distributed and paid to workers and;
of the employees not less than once 4. Employers of those who are paid on purely
Distributio every two weeks or twice a month commission, boundary or task basis and those
n at intervals not exceeding 16 days who are paid a fixed amount for performing
Permanen In case the service charge is specific work, except where the workers are
cy of abolished, the share of covered paid on piece-rate basis in which case the
service employees shall be considered employer shall grant the required 13th month
charges integrated in their wages. The pay to such workers.
basis of the amount to be
integrated shall be the average Workers paid on a piece – rate basis: those
monthly share of each employee who are paid a standard amount for every piece
for the past 12 months or unit of work produced that is more or less
immediately preceding the regularly replicated, without regard to the time
abolition or withdrawals of such spent in producing the same.
charges
Relation to Nothing in this rule shall prevent AMOUNT AND PAYMENT DATE
agreement the employer and his employees

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Minimum Amount An employee who has resigned or whose
The minimum 13th month pay required by law services were terminated at any time before the
shall not be less than 1/12 of the total basic salary time for payment of the 13th month pay is entitled
earned by an employee within a calendar year for to this monetary benefit in proportion to the length
the year 1987, the computation of the 13th month of time he worked during the year, reckoned from
pay shall include the cost of living allowances (COLA) the time he started working during the calendar year
integrated into the basic salary of a covered up to the time of his resignation or termination from
employee pursuant to EO 178. service.

Basic salary = for the purpose of computing the MANNER OF WAGE PAYMENT
13th month pay shall include all remuneration’s or Jackson Building v. NLRC (95)
earning paid by this employer for services rendered Presidential Degree No. 851, as amended by
but does not include allowances and monetary Memorandum Order No. 28, provides that
benefits which are not considered or integrated as employees are entitled to the thirteenth-month pay
part of the regular or basic salary, such as the cash benefit regardless of their designation and
equivalent of unused vacation and sick leave credits, irrespective of the method by which their wages are
overtime, premium, night differential and holiday paid.
pay and cost-of-living allowances. However, these
salary-related benefits should be included as part of HOUSEHELPERS
the basic salary in the computation of the 13th
month pay if by individual or collective agreement, Ultra Villa Food House v. Geniston (99)
company practice or policy, the same are treated as Moreover, the specific provisions mandating
part of the basic salary of the employees. these benefits are found in Book III, Title I of the
Labor Code, and Article 82, which defines the scope
Time of payment of the application of these provisions, expressly
The required 13th Month Pay shall be paid not excludes domestic helpers from its coverage. The
later than December 24 of each year. An employer, limitations set out in the said article are echoed in
however, may give to his employees one-half (1/2) Book III of the Omnibus Rules Implementing the
Labor Code. Clearly then, petitioner is not obliged by
of the required 13th Month Pay before the opening
law to grant private respondent any of these
of the regular school year and the other half on or
benefits.
before the 24th of December every year. The Employing the same line of analysis, it would
frequency of payment of this monetary benefit may seem that private respondent is not entitled to 13th
be the subject of agreement between the employer month pay. The Revised Guidelines on the
and the recognized collective bargaining agent of the Implementation of the 13th Month Pay Law also
employees. excludes employers of household helpers from the
coverage of Presidential Decree No. 851.
13TH MONTH PAY FOR CERTAIN TYPE OF EMPLOYEES Nevertheless, we deem it just to award private
respondent 13th month pay in view of petitioner's
Paid by Results practice of according private respondent such
benefit. Indeed, petitioner admitted that she gave
Employees who are paid on piece work basis are private respondent 13th month pay every
December.
by law entitled to the 13th Month Pay
Employees who are paid a fixed or guaranteed
GOVERNMENT EMPLOYEES
wage plus commission are also entitled to the
mandated 13th month pay based on their total Alliance of Government Workers v. NLRC (95)
earnings during the calendar year, i.e. on both their An analysis of the "whereases" of PD No. 851
fixed or guaranteed wage and commission. shows that the President had in mind only workers in
private employment when he issued the decree.
Those with Multiple Employers There was no intention to cover persons working in
the government service.
Government employees working part time in a
private enterprise, including private educational TERMINATED EMPLOYEES
institutions, as well as employees working in two or
more private firms, whether on full or part time Archilles Manufacturing Corp. v. NLRC (95)
bases, are entitled to the required 13th Month Pay On the issue of the propriety of the award of a
from all their private employers regardless of their 13th month pay, paragraph 6 of the Revised
total earnings from each or all their employers. Guidelines on the Implementation of the 13th Month
Pay Law (P. D. 851) provides that "(a)n employee
Private School Teachers who has resigned or whose services were terminated
at any time before the payment of the 13th month
Private school teachers, including faculty pay is entitled to this monetary benefit in proportion
members of universities and colleges, are entitled to to the length of time he worked during the year,
the required 13th month pay, regardless of the reckoned from the time he started working during
number of months they teach or are paid within a the calendar year up to the time of his resignation or
year, if they have rendered service for at least one termination from the service . . .. The payment of
(1) month within a year. the 13th month pay may be demanded by the
Resigned or Separated Employee employee upon the cessation of employer-
employee relationship. This is consistent with the

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principle of equity that as the employer can require In the case of San Miguel Corp. vs. Inciong, this
the employee to clear himself of all liabilities and Court delineated the coverage of the term "basic
property accountability, so can the employee salary" as used in P.D. 851. We said at some length:
demand the payment of all benefits due him upon Under Presidential Decree 851 and its
the termination of the relationship." Furthermore, implementing rules, the basic salary of an employee
Sec. 4 of the original Implementing Rules of P. D. is used as the basis in the determination of his 13th
851 mandates employers to pay their employees to month pay. Any compensations or remunerations
pay their employees a 13th month pay not later than which are deemed not part of the basic pay is
the 24th of December every year. In effect, this excluded as basis in the computation of the
statutory benefit is automatically vested in the mandatory bonus.
employee who has at least worked for one month Under the Rules and Regulations implementing
during the calendar year. As correctly stated by the Presidential Decree 851, the following
Solicitor General, such benefit may not be lost or compensations are deemed not part of the basic
forfeited even in the event of the employee's salary:
subsequent dismissal for cause without violating his a) cost-of-living allowances granted pursuant to
property rights. Presidential Decree 525 and Letter of
Instructions No. 174;
RATIONALE b) Profit-sharing payments;
c) All allowances and monetary benefits which
Whereas Clauses and Limitations - PD NO. 851 are not considered or integrated as part of the
 It is necessary to further protect the level of regular basic salary of the employee at the
real wages from the ravage of world-wide time of the promulgation of the Decree on
inflation; December 16, 1975.
 There has been no increase in the legal Under a later set of Supplementary Rules and
minimum wage rates since 1970; Regulations Implementing PD 851 issued by then
 The Christmas season is an opportune time for Labor Secretary Blas Ople, overtime pay, earnings
society to show its concern for the plight of the and other remunerations are excluded as part of the
working masses so they may properly celebrate basic salary and in the computation of the 13th
Christmas and New Year. month pay.
The exclusion of the cost-of-living allowances
MANAGEMENT FUNCTION under PD 525 and Letter of Instructions No. 174,
and profit-sharing payments indicate the intention to
Businessday Information Systems and strip basic salary of other payments which are
Services, Inc. v. NLRC (93) properly considered as "fringe" benefits. Likewise,
Clearly, there was impermissible discrimination the catch-all exclusionary phrase "all allowances and
against the private respondents in the payment of monetary benefits which are not considered or
their separation benefits. The law requires an integrated as part of the basic salary" shows also the
employer to extend equal treatment to its intention to strip basic salary of any and all additions
employees. It may not, in the guise of exercising which may be in the form of allowances or "fringe"
management prerogatives, grant greater benefits to benefits.
some and less to others. Management prerogatives Moreover, the Supplementary Rules and
are not absolute prerogatives but are subject to Regulations Implementing Presidential Decree 851 is
legal limits, collective bargaining agreements, or even more emphatic in declaring that earnings and
general principles of fair play and justice (UST vs. other remunerations which are not part of the basic
NLRC). Article 283 of the Labor Code, as amended, salary shall not be included in the computation of
protects workers whose employment is terminated the 13th-month pay.
because of closure of the establishment or reduction While doubt may have been created by the prior
of personnel (Abella vs. NLRC). Rules and Regulations Implementing Presidential
With regard to the private respondents' claim Decree 851 which defines basic salary to include all
for the mid-year bonus, it is settled doctrine that the remunerations or earnings paid by an employer to
grant of a bonus is a prerogative, not an obligation, an employee, this cloud is dissipated in the later and
of the employer (Traders Royal Bank vs. NLRC). The more controlling Supplementary Rules and
matter of giving a bonus over and above the Regulations which categorically exclude from the
worker's lawful salaries and allowances is entirely definitions of basic salary earnings and other
dependent on the financial capability of the employer remunerations paid by an employer to an employee.
to give it. The fact that the company's business was A cursory perusal of the two sets of Rules indicates
no longer profitable (it was in fact moribund) plus that what has hitherto been the subject of a broad
the fact that the private respondents did not work up inclusion is now a subject of broad exclusion. The
to the middle of the year (they were discharged in Supplementary Rules and Regulations cure the
May 1988) were valid reasons for not granting them seeming tendency of the former rules to include all
a mid-year bonus. Requiring the company to pay a remunerations and earnings within the definition of
mid-year bonus to them also would in effect penalize basic salary.
the company for its generosity to those workers who The all embracing phrase "earnings and other
remained with the company till the end" of its days. remunerations" which are deemed not part of the
(Traders Royal Bank vs. NLRC) The award must basic salary includes within its meaning payments
therefore be deleted. for sick, vacation, or maternity leaves, premium for
works performed on rest days and special holidays,
BASIC WAGE/COMMISSIONS pays for regular holidays and night differentials. As
such they are deemed not part of the basic salary
Boie Takeda v. Dela Serna (93) and shall not be considered in the computation of
the 13th-month pay. If they were not excluded, it

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is hard to find any "earnings and other its medical representatives could not have been
remunerations" expressly excluded in the "sales commissions" in the same sense that
computation of the 13th month pay. Then the Philippine Duplicators paid its salesmen Sales
exclusionary provision would prove to be idle and commissions. Medical representatives are not
with no purpose. salesmen; they do not effect any sale of any article
Quite obvious from the foregoing is that the at all. In common commercial practice, in the
term "basic salary" is to be understood in its Philippines and elsewhere, of which we take judicial
common, generally-accepted meaning, i.e., as a rate notice, medical representatives are employees
of pay for a standard work period exclusive of such engaged in the promotion of pharmaceutical
additional payments as bonuses and overtime. This products or medical devices manufactured by their
is how the term was also understood in the case of employer.
Pless v. Franks, which held that in statutes providing
that pension should not less than 50 percent of Iran v. NLRC (98)
"basic salary" at the time of retirement, the quoted This definition explicitly includes commissions as
words meant the salary that an employee (e.g., a part of wages. While commissions are, indeed,
policeman) was receiving at the time he retired incentives or forms of encouragement to inspire
without taking into consideration any extra employees to put a little more industry on the jobs
compensation to which he might be entitled for extra particularly assigned to them, still these
work. commissions are direct remunerations for services
In remunerative schemes consisting of a fixed rendered. In fact, commissions have been defined as
or guaranteed wage plus commission, the fixed or the recompense, compensation or reward of an
guaranteed wage is patently the "basic salary" for agent, salesman, executor, trustee, receiver, factor,
this is what the employee receives for a standard broker or bailee, when the same is calculated as a
work period. Commissions are given for extra efforts percentage on the amount of his transactions or on
exerted in consummating sales or other related the profit to the principal. The nature of the work of
transactions. They are, as such, additional pay, a salesman and the reason for such type of
which this Court has made clear do not form part of remuneration for services rendered demonstrate
the "basic salary." clearly that commissions are part of a salesman's
wage or salary.
Philippine Duplicators Inc v. NLRC (95)
The sales commissions received for every SUBSTITUTE PAYMENT
duplicating machine sold constituted part of the
basic compensation or remuneration of the salesmen Framanlis Farms, Inc. v. MOLE (89)
of Philippine Duplicators for doing their job. The Under Section 3 of PD No. 851, such benefits in
portion of the salary structure representing the form of food or free electricity, assuming they
commissions simply comprised an automatic were given, were not a proper substitute for the
increment to the monetary value initially assigned to 13th month pay required by law. Neither may year-
each unit of work rendered by a salesman. end rewards for loyalty and service be considered in
The sales commissions were an integral part of lieu of 13th month pay. Section 10 of the Rules and
the basic salary structure of Philippine Duplicators' Regulations Implementing Presidential Decree No.
employees salesmen. These commissions are not 851 provides that: "Nothing herein shall be
overtime payments, nor profit-sharing payments nor construed to authorize any employer to eliminate or
any other fringe benefit. Thus, the salesmen's diminish in any way supplements or other employee
commissions, comprising a pre-determined percent benefits or favorable practice being enjoyed by the
of the selling price of the goods sold by each employee at the time of promulgation of this
salesman, were properly included in the term "basic issuance."
salary" for purposes of computing their 13th month
pay. 14TH MONTH PAY
In Boie-Takeda the so-called commissions "paid
to or received by medical representatives of Boie- Kamaya Port Hotel v. NLRC (89)
Takeda Chemicals or by the rank and file employees There is no law that mandates the payment of
of Philippine Fuji Xerox Co.," were excluded from the the 14th month pay. This is emphasized in the grant
term "basic salary" because these were paid to the of exemption under Presidential Decree 851 (13th
medical representatives and rank-and-file employees Month Pay Law) which states: "Employers already
as "productivity bonuses." The Second Division paying their employees a 13th month pay or its
characterized these payments as additional equivalent are not covered by this Decree."
monetary benefits not properly included in the term Necessarily then, only the 13th month pay is
"basic salary" in computing their 13th month pay. mandated. Having enjoyed the additional income in
We note that productivity bonuses are generally tied the form of the 13th month pay, private
to the productivity, or capacity for revenue respondents' insistence on the 14th month pay for
production, of a corporation; such bonuses closely 1982 is already an unwarranted expansion of the
resemble profit-sharing payments and have no clear liberality of the law.
director necessary relation to the amount of work
actually done by each individual employee. More 17.14 BONUS
generally, a bonus is an amount granted and paid ex
gratia to the employee; its payment constitutes an MANAGEMENT FUNCTION
act of enlightened generosity and self-interest on the
part of the employer, rather than as a demandable Businessday Information Systems and
or enforceable obligation. Services, Inc. v. NLRC (93)
It is also important to note that the purported Clearly, there was impermissible
"commissions" paid by the Boie-Takeda Company to discrimination against the private respondents in

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the payment of their separation benefits. The law the duration of the contract of employment, but the
requires an employer to extend equal treatment to employee enters upon or continues in service under
its employees. It may not, in the guise of exercising an offer of a bonus if he remains therein for a
management prerogatives, grant greater benefits to certain time, his service, in case he remains for the
some and less to others. Management prerogatives required time, constitutes an acceptance of the offer
are not absolute prerogatives but are subject to of the employer to pay the bonus and, after that
legal limits, collective bargaining agreements, or acceptance, the offer cannot be withdrawn, but can
general principles of fair play and justice (UST vs. be enforced by the employee.
NLRC). Article 283 of the Labor Code, as amended,
protects workers whose employment is terminated Phil. National Construction Corp. v. NLRC (99)
because of closure of the establishment or reduction A bonus is a gift from the employer and the
of personnel (Abella vs. NLRC). grant thereof is a management prerogative.
With regard to the private respondents' claim Petitioner may not be compelled to award a bonus to
for the mid-year bonus, it is settled doctrine that the private respondents whom it found guilty of serious
grant of a bonus is a prerogative, not an obligation, misconduct.
of the employer (Traders Royal Bank vs. NLRC). The We held in Traders Royal Bank v. NLRC:
matter of giving a bonus over and above the “A bonus is a gratuity or an act of liberality of the
worker's lawful salaries and allowances is entirely giver which the recipient has no right to demand
as a matter of right. It is something given in
dependent on the financial capability of the employer
addition to what is ordinarily received by or strictly
to give it. The fact that the company's business was due the recipient. The granting of a bonus is
no longer profitable (it was in fact moribund) plus basically a management prerogative which cannot
the fact that the private respondents did not work up be forced upon the employer who may not be
to the middle of the year (they were discharged in obliged to assume the onerous burden of granting
May 1988) were valid reasons for not granting them bonuses or other benefits aside from the
a mid-year bonus. Requiring the company to pay a employee’s basic salaries or wages.”
mid-year bonus to them also would in effect penalize We further held in Metro Transit Organization,
the company for its generosity to those workers who Inc. v. NLRC, that a bonus becomes a demandable
remained with the company till the end" of its days. or enforceable obligation only when it is made part
(Traders Royal Bank vs. NLRC) The award must of the wage or salary or compensation of the
therefore be deleted. employee, thus:
“The general rule is that a bonus is a gratuity or
an act of liberality which the recipient has no right
NATURE – BONUS to demand as a matter of right. A bonus,
however, is a demandable or enforceable
Luzon Stevedoring Corporation v. CIR (65) obligation when it is made part of the wage or
A bonus is an amount granted and paid to an salary or compensation of the employee. Whether
employee for his industry and loyalty which or not a bonus forms part of wages depends upon
contributed to the success of the employer's the circumstances and conditions for its payment.
If it is additional compensation which the
business and made possible the realization of profits.
employer promised and agreed to give without
It is not a demandable and enforceable obligation. It any conditions imposed for its payment, such as
is so when it is made a part of the wage or salary or success of business or greater production or
compensation. In such a case the latter would be a output, then it is part of the wage. But if it is paid
fixed amount and the former would be a contingent only if profits are realized or if a certain level of
one dependent upon the realization of profits. If productivity is achieved, it cannot be considered
there be none, there would be no bonus. part of the wage. Where it is not payable to all
but only to some employees and only when their
labor becomes more efficient or more productive,
Marcos v. NLRC (95) it is only an inducement for efficiency, a prize
A bonus is not a gift or gratuity, but is paid for therefore not a part of the wage.”
some services or consideration and is in addition to The presumption is that it is not a demandable
what would ordinarily be given. The term "bonus" as obligation from the employer and the latter may not
used in employment contracts, also conveys an idea be compelled to grant the same to undeserving
of something which is gratuitous, or which may be employees.
claimed to be gratuitous, over and above the
prescribed wage which the employer agrees to pay. WHEN DEMANDABLE
While there is a conflict of opinion as to the
validity of an agreement to pay additional sums for Luzon Stevedoring Corp. v. CIR (65)
the performance of that which the promisee is As a rule a bonus is an amount granted and paid
already under obligation to perform, so as to give to an employee for his industry and loyalty which
the latter the right to enforce such promise after contributed to the success of the employer's
performance, the authorities hold that if one enters business and made possible the realization of profits.
into a contract of employment under an agreement It is an act of generosity for which the employee
that he shall be paid a certain salary by the week or ought to be thankful and grateful. It is also granted
some other stated period and, in addition, a bonus, by an enlightened employer to spur the employee to
in case he serves for a specified length of time, greater efforts for the success of the business and
there is no reason for refusing to enforce the realization of bigger profits. From the legal point of
promise to pay the bonus, if the employee has view, a bonus is not a demandable and enforceable
served during the stipulated time, on the ground obligation. It is so when it is made a part of the
that it was a promise of a mere gratuity. wage or salary or compensation. In such a case the
This is true if the contract contemplates a latter would be a fixed amount and the former would
continuance of the employment for a definite term, be a contingent one dependent upon the
and the promise of the bonus is made at the time realization of profits. If there be none, there
the contract is entered into. If no time is fixed for would be no bonus.

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government-owned and controlled corporations
Liberation Steamship Co. Inc. v. CIR (68) performing proprietary functions
While normally discretionary, the grant of a  It shall cover all employees and workers
gratuity or bonus by reason of its long and regular including casual, regular, supervisory and
concession may become regarded as part of regular managerial employees.
compensation. (Phil. Education Co., Inc., vs. CIR).
For this reason, where there is a resale of the DEFINITION (4)
vessels to another party during the pendency of the Business Enterprise: industrial, agricultural, or agro-
motion for reconsideration, the court may order the industrial establishments engaged in the
reopening of the case insofar as the demands for production manufacturing, processing,
gratuity are concerned, in order to determine repacking, or assembly of goods, including
whether aforecited conditions operated in the instant service-oriented enterprises, duly certified as
case. such by appropriate government agencies.

Philippine Duplicators Inc. v. NLRC (95) Labor-management Committee: a negotiating body


Productivity bonuses are generally tied to the in a business enterprise composed of the
productivity or profit generation of the employer representatives of labor and management
corporation. Productivity bonuses are not directly created to establish a productivity incentives
dependent on the extent an individual employee program, and to settle disputes arising
exerts himself. A productivity bonus is something therefrom in accordance with Section 9 hereof.
extra for which no specific additional services are
rendered by any particular employee and hence not Productivity Incentives Program: a formal agreement
legally demandable, absent a contractual established by the labor-management
undertaking to pay it. Sales commissions, on the committee containing a process that will
other hand, such as those paid in Duplicators, are promote gainful employment, improve working
intimately related to or directly proportional to the conditions and result in increased productivity,
extent or energy of an employee's endeavors. including cost savings, whereby the employees
Commissioners are paid upon the specific results are granted salary bonuses proportionate to
achieved by a salesman-employee. It is a increases in current productivity over the
percentage of the sales closed by a salesman and average for the preceding three (3) consecutive
operates as an integral part of such salesman's basic years. The agreement shall be ratified by at
pay. least a majority of the employees who have
rendered at least six (6) months of continuous
Manila Electric Co. v. Quisumbing (99) service.
As a rule, a bonus is not a demandable and
enforceable obligation; it may nevertheless be LABOR MANAGEMENT COMMITTEE (5)
granted on equitable considerations as when the a. A business enterprise or its employees,
giving of such bonus has been the company's long through their authorized representatives, may
and regular practice. To be considered a "regular initiate the formation of a labor-management
practice," the giving of the bonus should have been committee that shall be composed of an equal
done over a long period of time, and must be shown number of representatives from the
to have been consistent and deliberate. Thus we management and from the rank-and-file
have ruled in National Sugar Refineries Corporation employees: Provided, That both management
vs. NLRC: and labor shall have equal voting rights:
The test or rationale of this rule on long practice Provided, further, That at the request of any
requires an indubitable showing that the employer party to the negotiation, the National Wages
agreed to continue giving the benefits knowing
and Productivity Commission of the
fully well that said employees are not covered by
the law requiring payment thereof.
Department of Labor and Employment shall
provide the necessary studies, technical
17.15 PRODUCTIVITY INCENTIVES ACT OF information and assistance, and expert advice
1990 (RA 6971) to enable the parties to conclude productivity
agreements.
POLICY (2) b. In business enterprises with duly recognized or
 To encourage higher levels of productivity, certified labor organizations, the
maintain industrial peace and harmony and representatives of labor shall be those
promote the principle of shared responsibility in designated by the collective bargaining
the relations between workers and employers, agent(s) of the bargaining unit(s).
recognizing the right of labor to its just share in c. In business enterprises without duly
the fruits of production and the right of recognized or certified labor organizations, the
business enterprises to reasonable returns of representatives of labor shall be elected by at
investments and to expansion and growth, and least a majority of all rank-and-file employees
accordingly to provide corresponding incentives who have rendered at least six (6) months of
to both labor and capital for undertaking continuous service.
voluntary programs to ensure greater sharing
by the workers in the fruits of their labor PRODUCTIVITY INCENTIVES PROGRAM (6)
a. The productivity incentives program shall
COVERAGE (3) contain provisions for the manner of sharing
 Applies to all business enterprises with or and the factors in determining productivity
without existing and duly recognized or bonuses: Provided, That the productivity
certified labor organizations, including bonuses granted to labor under this
program shall not be less than half of the

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percentage increase in the productivity of the Commission and to the Bureau of Internal Revenue
business enterprise. for their information and record.
b. Productivity agreements reached by the
parties as provided in this Act supplement DISPUTES AND GRIEVANCES (9)
existing collective bargaining agreements. Whenever disputes, grievances, or other
c. If, during the existence of the productivity matters arise from the interpretation or
incentives program or agreement, the implementation of the productivity incentives
employees will join or form a union, such program, the labor-management committee shall
program or agreement may, in addition to the meet to resolve the dispute, and may seek
terms and conditions agreed upon by labor assistance of the National Conciliation and Mediation
and management, be integrated in the Board of the Department of Labor and Employment
collective bargaining agreement that may be for such purpose. Any dispute which remains
entered into between them. unresolved within 20 days from the time of its
submission to the labor-management committee
BENEFITS AND TAX INCENTIVES (7) shall be submitted for voluntary arbitration in line
a. Subject to the provisions of Section 6 hereof, a with the pertinent provisions of the Labor Code, as
business enterprise which adopts a amended.
productivity incentives program, duly and The productivity incentives program shall
mutually agreed upon by the parties to the include the name(s) of the voluntary arbitrator or
labor-management committee, shall be panel of voluntary arbitrators previously chosen and
granted a special deduction from gross income agreed upon by the labor-management committee.
equivalent to 50% of the total productivity
bonuses given to employees under the NON-DIMUNITION OF BENEFITS (12)
program over and above the total allowable Nothing in this Act shall be construed to
ordinary and necessary business deductions diminish or reduce any benefits and other privileges
for said bonuses under the National Internal enjoyed by the workers under existing laws,
Revenue Code, as amended. decrees, executive orders, company policy or
b. Grants for manpower training and special practice, or any agreement or contract between the
duties given to rank-and-file employees employer and employees.
pursuant to a program prepared by the labor-
management committee for the development
of skills identified as necessary by the
appropriate government agencies shall also E. Wage Recovery, Liabilities, and Worker
entitle the business enterprise to a special
Preference
deduction from gross income equivalent to
50% of the total grants over and above the
allowable ordinary and necessary business 17.16 LIABILITY OF EMPLOYER AND OTHER
deductions for said grants under the National PARTIES
Internal Revenue Code, as amended.
c. Any strike or lockout arising from any violation Employer, Independent Contractor and Sub-
of the productivity incentives program shall Contractor and Labor-Only Contracting
suspend the effectivity thereof pending
settlement of such strike or lockout: Provided, Art. 106.
That the business enterprise shall not be Contractor or sub-contractor
deemed to have forfeited any tax incentives Whenever an employer enters into a contract with
accrued prior to the date of occurrence of such another person for the performance of the formers
strike or lockout, and the workers shall not be work, the employees of the contractor and of the
required to reimburse the productivity bonuses latters subcontractor, if any, shall be paid in
already granted to them under the productivity accordance with the provisions of this Code.
incentives program. Likewise, bonuses which
have already accrued before the strike or In the event that the contractor or sub-contractor
lockout shall be paid the workers within six (6) fails to pay wages of employees in accordance with
months from their accrual. this Code, the employer shall be JOINTLY AND
d. Bonuses provided for under the productivity SEVERALLY liable with his contractor or sub-
incentives program shall be given to the contractor to such employees to the extent of the
employees not later than every six (6) months work performed under the contract, in the same
from the start of such program over and above manner and extent that he is liable to employees
existing bonuses granted by the business directly employed by him.
enterprise and by law: Provided, That the said The Secretary of Labor may, by appropriate
bonuses shall not be deemed as salary regulations, restrict or prohibit the contracting out of
increases due the employees and workers. labor to protect the rights of workers established
e. The special deductions from gross income under this Code. In so prohibiting or restricting, he
provided for herein shall be allowed starting may make appropriate distinctions between labor-
the next taxable year after the effectivity of only contracting and job contracting as well as
this Act. differentiations within these types of contracting,
and determine who among the parties involved shall
NOTIFICATION (8) be considered the employer for purposes of this
A business enterprise which adopts a Code, to prevent any violation or circumvention of
productivity incentives program shall submit copies any provision of this Code.
of the same to the National Wages and Productivity There is "labor-only" contracting where
the person supplying workers to an employer
does not have substantial capital or investment in

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the form of tools, equipment, machineries, work employees in the event that the contractor fails to
premises, among others, and the workers recruited pay such wages.
and placed by such person are performing activities It will be seen from the above provisions that
which are directly related to the principal business of the principal (petitioner) and the contractor
such employer. In such cases, the person or (respondent) are jointly and severally liable to the
intermediary shall be considered merely as an agent employees for their wages. This Court held in Eagle
of the employer who shall be responsible to the Security, Inc. vs. NLRC and Spartan Security and
workers in the same manner an extent as if the Detective Agency, Inc. vs. NLRC that the joint and
latter were directly employed by him. several liability of the contractor and the principal is
mandated by the Labor Code to assure compliance
Art. 107 with the provisions therein including the minimum
Indirect employer - The provisions of the wage. The contractor is made liable by virtue of his
immediately preceding article shall likewise apply to status as direct employer. The principal, on the other
any person, partnership, association or corporation hand, is made the indirect employer of the
which, not being an employer, contracts with an contractor’s employees to secure payment of their
independent contractor for the performance of any wages should the contractor be unable to pay them.
work, task, job or project. Even in the absence of an employer-employee
relationship, the law itself establishes one between
Art. 108 the principal and the employees of the agency for a
Posting of bond - An employer or indirect employer limited purpose i.e. in order to ensure that the
may require the contractor or sub-contractor to employees are paid the wages due them. In the
furnish a bond equal to the cost of labor under above-mentioned cases, the solidary liability of the
contract, on condition that the bond will answer for principal and contractor was held to apply to the
the wages due the employees should the aforementioned Wage Order Nos. 5 and 6.
contractor/sub-contractor, as the case may be, fail
to pay the same. BASIS

Art. 109. Lim v. NLRC (99)


Solidary liability – The provisions of existing laws to The scourge of exploitation of labor, as shown
the contrary notwithstanding, every employer or by numerous petitions before us, remains pervasive.
indirect employer shall be held responsible with his It is imperative for all government agencies
contractor/subcontractor for any violation of any concerned to exert all-out efforts to prevent any
provision of this Code. For purposes of determining further violation or circumvention of the provisions
the extent of their civil liability under this Chapter, of the Labor Code through deceptive devices and
they shall be considered as direct employers. malpractices. Unscrupulous employers could not be
LIABILITIES allowed to hide behind labor-only contracting in
order to escape the just claims of their workers and
Philippine Airlines v. NLRC (98) other employees.
In legitimate job contracting, no employer-
employee relation exists between the principal and 17.17 WORKER PREFERENCE - BANKRUPTCY
the job contractor's employees. The principal is
responsible to the job contractor's employees only Art. 110 Labor Code
for the proper payment of wages. But in labor-only In the event of bankruptcy or liquidation of an
contracting, an employer-employee relation is employer's business, his workers shall enjoy first
created by law between the principal and the labor- preference as regards their wages and other
only contractor's employees, such that the former is monetary claims, any provision of law to the
responsible to such employees, as if he or she had contrary notwithstanding.
directly employed them. Besides, the Court has Such unpaid wages and monetary claims shall
already taken judicial notice of the general practice be paid in full before the claims of the Government
adopted in several government and private and other creditors may be paid. (As amended by R.
institutions of securing janitorial services on an A. 6715)
independent contractor basis.
Art. 1707, Civil Code
Sentinel Security Agency, Inc. v. NLRC (98) The laborer's wages shall be a lien on the goods
Under these provisions, the indirect employer, manufactured or the work done.
who is the Client in the case at bar, is jointly and
severally liable with the contractor for the workers' Art. 2241, Civil Code
wages, in the same manner and extent that it is With reference to specific movable property of
liable to its direct employees. This liability of the the debtor, the following claims or liens shall be
Client covers the payment of the service incentive preferred:
leave pay of the complainants during the time they 6. Claims for laborers' wages, on the goods
were posted at the Cebu branch of the Client. As manufactured or the work done;
service had been rendered, the liability accrued,
even if the complainants were eventually transferred Art. 2242, Civil Code
or reassigned. With reference to specific immovable property
and real rights of the debtor, the following claims,
Lapanday Agricultural Development mortgages and liens shall be preferred, and shall
Corporation v. Court of Appeals (2000) constitute an encumbrance on the immovable or real
Articles 106 and 107 of the Labor Code provides right:
the rule governing the payment of wages of 3. Claims of laborers, masons, mechanics and
other workmen, as well as of architects,

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engineers and contractors, engaged in the bankruptcy or liquidation. Thus, very substantial
construction, reconstruction or repair of effect may be given to the provisions of Article 110
buildings, canals or other works, upon said without grievously distorting the framework
buildings, canals or other works; established in the Civil Code by holding, as we so
hold, that Article 110 of the Labor Code has modified
Art. 2244, Civil Code Article 2244 of the Civil Code in two respects: (a)
With reference to other property, real and firstly, by removing the one year limitation found in
personal, of the debtor, the following claims or Article 2244, number 2; and (b) secondly, by
credits shall be preferred in the order named: moving up claims for unpaid wages of laborers or
4. Compensation due the laborers or their workers of the Insolvent from second priority to first
dependents under laws providing for indemnity priority in the order of preference established by
for damages in cases of labor accident, or Article 2244.
illness resulting from the nature of the
employment; Phil. Export etc. v. Court of Appeals (95)
A final observation On 21 March 1989, Article
(Pls. See complete texts of Arts. 2241, 2242, & 110 of the Labor Code was amended by Republic Act
2244) No. 6715 so as to read:
"Article 110. Worker preference in case of
CIVIL CODE – LABOR CODE bankruptcy -In the event of bankruptcy or
liquidation of an employer's business, his workers
shall enjoy first preference as regards their wages
Republic v. Peralta (87) and other monetary claims, any provisions of law
We believe and so hold that Article 110 of the to the contrary notwithstanding. Such unpaid
Labor Code did not sweep away the overriding wages and monetary claims shall be paid in full
preference accorded under the scheme of the Civil before claims of the Government and other
Code to tax claims of the government or any creditors may be paid."
subdivision thereof which constitute a lien upon Since then, the Court has had a number of
properties of the Insolvent. It is frequently said that occasions to rule on the effects of the amendment.
taxes are the very lifeblood of government. The In Development Bank of the Philippines vs. National
effective collection of taxes is a task of highest Labor Relations Commission, the Court has said:
importance for the sovereign. It is critical indeed for "The amendment expands worker preference to
cover not only unpaid wages but also other
its own survival. It follows that language of a much
monetary claims to which even claims of the
higher degree of specificity than that exhibited in Government must be deemed subordinate.
Article 110 of the Labor Code is necessary to set xxx
aside the intent and purpose of the legislator that "Notably, the terms 'declaration' of bankruptcy
shines through the precisely crafted provisions of the or 'judicial' liquidation have been eliminated.
Civil Code. It cannot be assumed simpliciter that the Does this mean then that liquidation proceedings
legislative authority, by using in Article 110 the have been done away with?
words "first preference" and "any provision of law to
"We opine in the negative, upon the following
the contrary notwithstanding" intended to disrupt considerations:
the elaborate and symmetrical structure set up in
the Civil Code. Neither can it be assumed casually "1. Because of its impact on the entire system of
that Article 110 intended to subsume the sovereign credit, Article 110 of the Labor Code cannot be
itself within the term "other creditors" in stating that viewed in isolation but must be read in relation
"unpaid wages shall be paid in full before other to the Civil Code scheme on classification and
preference of credits.
creditors may establish any claim to a share in the
assets of employer." Insistent considerations of "2. In the same way that the Civil Code
public policy prevent us from giving to "other provisions on classification of credits and the
creditors" a linguistically unlimited scope that would Insolvency Law have been brought into
embrace the universe of creditors save only unpaid harmony, so also must the kindred provisions of
employees. the Labor Law be made to harmonize with those
We, however, do not believe that Article 110 laws.
has had no impact at all upon the provisions of the
"3. In the event of insolvency, a principal
Civil Code. Bearing in mind the overriding objective should be to effect an equitable
precedence given to taxes, duties and fees by the distribution of the insolvent's property among his
Civil Code and the fact that the Labor Code does not creditors. To accomplish this there must first be
impress any lien on the property of an employer, the some proceeding where notice to all of the
use of the phrase "first preference" in Article 110 insolvent's creditors may be given and where the
indicates that what Article 110 intended to modify is claims of preferred creditors may be bindingly
adjudicated (De Barretto vs. Villanueva).
the order of preference found in Article 2244, which
order relates, as we have seen, to property of the "4. A distinction should be made between a
Insolvent that is not burdened with the liens or preference of credit and a lien. A preference
encumbrances created or recognized by Articles applies only to claims which do not attach to
2241 and 2242. We have noted that Article 2244, specific properties. A lien creates a charge on a
number 2, establishes second priority for claims for particular property. The right of first preference
wages for services rendered by employees or as regards unpaid wages recognized by Article
110 does not constitute a lien on the property of
laborers of the Insolvent "for one year preceding the
the insolvent debtor in favor of workers. It is but
commencement of the proceedings in insolvency." a preference of credit in their favor, a preference
Article 110 of the Labor Code establishes "first in application. It is a method adopted to
preference" for services rendered "during the period determine and specify the order in which credits
prior to the bankruptcy or liquidation," a period not should be paid in the final distribution of the
limited to the year immediately prior to the proceeds of the insolvent's assets. It is a right to

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a first preference in the discharge of the funds of Article 217 of the Labor Code should be
the judgment debtor. construed not in isolation but in harmony with PD
902-A, according to the basic rule in statutory
"6. Even if Article 110 and its Implementing
Rule, as amended, should be interpreted to
construction that implied repeals are not favored.
mean 'absolute preference,' the same should be Indeed, it is axiomatic that each and every statute
given only prospective effect in line with the must be construed in a way that would avoid conflict
cardinal rule that laws shall have no retroactive with existing laws. True, the NLRC has the power to
effect, unless the contrary is provided (Article 4, hear and decide labor disputes, but such authority is
Civil Code). Thereby, any infringement on the deemed suspended when PD 902-A is put into effect
constitutional guarantee on non-impairment of
by the Securities and Exchange Commission.
the obligation of contracts (Section 10, Article
III, 1987 Constitution) is also avoided. In point
The preferential right of workers and employees
of fact, DBP's mortgage credit antedated by under Article 110 of the Labor code may be invoked
several years the amendatory law, RA No. 6715. only upon the institution of insolvency or judicial
To give Article 110 retroactive effect would be to liquidation proceeding. Indeed, it is well-settled that
wipe out the mortgage in DBP's favor and "a declaration of bankruptcy or a judicial liquidation
expose it to a risk which it sought to protect must be present before preferences over various
itself against by requiring a collateral in the form
money claims may be enforced." But debtors resort
of real property.
to preference of credit — giving preferred creditors
"In fine, the right to preference given to workers the rights to have their claims paid ahead of those of
under Article 110 of the Labor Code cannot exist other claimants — only when their assets are
in any effective way prior to the time of its insufficient to pay their debts fully. The purpose of
presentation in distribution proceedings. It will rehabilitation proceedings is precisely to enable the
find application when, in proceedings such as company to gain a new lease on life and thereby
insolvency such unpaid wages shall be paid in
allow creditors to be paid their claims from its
full before the claims of the Government and
other creditors' may be paid. But, for an orderly
earnings. In insolvency proceedings, on the other
settlement of a debtor's assets, all creditors hand, the company stops operating, and the claims
must be convened, their claims ascertained and of creditors are satisfied from the assets of the
inventoried, and thereafter the preferences insolvent corporation. The present case involves the
determined in the course of judicial proceedings rehabilitation, not the liquidation, of petitioner-
which have for their object the subjection of the corporation. Hence, the preference of credit granted
property of the debtor to the payment of his
to workers or employees under Article 110 of the
debts or other lawful obligations. Thereby, an
orderly determination of preference of creditors'
Labor Code is not applicable.
claims is assured (Philippine Savings Bank vs.
Lantin); the adjudication made will be binding on 17.18 WAGE RECOVERY AND ATTORNEY’S FEES
all parties-in-interest, since those proceedings
are proceedings in rem; and the legal scheme of Art. 128.
classification, concurrence and preference of Visitorial and enforcement powers
credits in the Civil Code, the Insolvency Law,
and the Labor Code is preserved in harmony."
Art. 129.
Recovery of wages, simple money claims and other
RECEIVERSHIP
benefits – In connection with Art. 217.
Jurisdiction of Labor Arbiters and the Commission
Rubberworld (Phils.), Inc. v. NLRC (99)
The law is clear: upon the creation of a
Art. 111.
management committee or the appointment of a
Attorney's fees
rehabilitation receiver, all claims for actions "shall be
a. In cases of unlawful withholding of wages, the
suspended accordingly." No exception in favor of
culpable party may be assessed attorney's
labor claims is mentioned in the law. Since the law
fees equivalent to 10 % of the amount of
makes no distinction or exemptions, neither should
wages recovered.
this Court. Ubi lex non distinguit nec nos distinguere
b. It shall be unlawful for any person to demand
debemos. Allowing labor cases to proceed clearly
or accept, in any judicial or administrative
defeats the purpose of the automatic stays and
proceedings for the recovery of the wages,
severally encumbers the management committee's
attorney’s fees, which exceed 10% of the
and resources. The said committee would need to
amount of wages recovered.
defend against these suits, to the detriment of its
primary and urgent duty to work towards
rehabilitating the corporation and making it viable
again. The rule otherwise would open the floodgates
to other similarly situated claimants and forestall if SECTION 18 MINIMUM WAGES
not defeat the rescue efforts. Besides, even if the
NLRC awards the claims of private respondents, as it 18.01 WAGES AND THE CONSTITUTION
did, its ruling could not be enforced as long as the
petitioner is under the management committee. Art XIII Sec 3, 1987 Constitution
In Chua v. National Labor Relations The State shall afford full protection to labor,
Commission, we ruled that labor claims cannot local and overseas, organized and unorganized, and
proceed independently of a bankruptcy liquidation promote full employment and equality of
proceeding, since these claims "would spawn employment opportunities for all.
needless controversy, delays, and confusion." With It shall guarantee the rights of all workers to
more reason, allowing labor claims to continue in self-organization, collective bargaining and
spite of a SEC suspension order in a rehabilitation negotiations, and peaceful concerted activities,
case would merely lead to such results. including the right to strike in accordance with
law. They shall be entitled to security of tenure,

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humane conditions of work, and a living wage. They b. To formulate policies and guidelines on wages,
shall also participate in policy and decision-making incomes and productivity improvement at the
processes affecting their rights and benefits as may enterprise, industry and national levels;
be provided by law. c. To prescribe rules and guidelines for the
The State shall promote the principle of shared determination of appropriate minimum wage
responsibility between workers and employers and and productivity measures at the regional,
the preferential use of voluntary modes in settling provincial or industry levels;
disputes, including conciliation, and shall enforce d. To review regional wage levels set by the
their mutual compliance therewith to foster Regional Tripartite Wages and Productivity
industrial peace. Boards to determine if these are in accordance
with prescribed guidelines and national
BENEFICIARIES development plans;
e. To undertake studies, researches and surveys
People v. Gatchalian (59) necessary for the attainment of its functions
"The establishment of the maximum wage and objectives, and to collect and compile data
benefits directly the low-paid employees, who now and periodically disseminate information on
receive inadequate wages on which to support wages and productivity and other related
themselves and their families. It benefits all wage information, including, but not limited to,
earners indirectly by setting a floor below which their employment, cost-of-living, labor costs,
remuneration cannot fail. It raises the standards of investments and returns;
competition among employers, since it would protect f. To review plans and programs of the Regional
the fair-minded employer who voluntarily pays a Tripartite Wages and Productivity Boards to
wage that supports the wage earner from the determine whether these are consistent with
competition of the employer, who operates at lower national development plans;
cost by reasons of paying his workers a wage below g. To exercise technical and administrative
subsistence. If, in fact, the employer cannot pay a supervision over the Regional Tripartite Wages
subsistence wage. then he should not continue his and Productivity Boards;
operation unless he improves his methods and h. To call, from time to time, a national tripartite
equipment so as to make the payment of the conference of representatives of government,
minimum wage feasible for him; otherwise the workers, and employers for the consideration
employer is wasting the toil of the worker and the of measures to promote wage rationalization
material resources used in the employment. Second and productivity; and
methods of operation, progressive and fair-minded i. To exercise such powers and functions as may
management, and an adequate minimum wage go be necessary to implement this Act.
hand in hand." (Explanatory Note to H.B. No. 1476)
Composition of the Commission:
EFFECT INABILITY PAY  Secretary of Labor and Employment as ex-
officio chairman
Phil. Apparel Workers Union v. NLRC (81)  Director-General of the NEDA as ex-officio vice-
The stability of the economy does not depend chairman
on the employer alone, but on government economic  2 members each from workers and employer
policies concerning productivity in all areas and not sectors who shall be appointed by the President
only in the clothing or textile industries. There is not upon recommendation of the Secretary of
even an intimation that the company is losing. It is Labor
the living wage of the workers which is the basis of a » to be made on the basis of the list of
stable economy. If the company cannot pay a living nominees submitted by the workers &
wage, it has no business operating at the expense of employers sectors, respectively, and
the lives of its workers from the very start. » who shall serve for a term of 5 years.

Note: members of the Commission representing


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

The Executive Director of the Commission


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

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under Article 122 (b) of the Labor Code, such orders
REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY are subject to the guidelines prescribed by the
BOARD NWPC. One of these guidelines is the "Rules on
Minimum Wage Fixing," which was issued on June 4,
Created thru Art. 122 1990. Rule IV, Section 2 thereof, allows the RTWPB
to issue wage orders exempting enterprises from the
 referred to as Regional Boards in all regions, coverage of the prescribed minimum wages.
including autonomous regions as may be However, the NWPC has the power not only to
established by law. prescribe guidelines to govern wage orders, but also
» The Commission shall determine to issue exemptions therefrom, as the said rule
offices/headquarters of the respective provides that "[w]henever a wage order provides for
Regional Boards. exemption, applications thereto shall be filed with
the appropriate Board which shall process the same,
Powers and Functions in their respective territorial subject to guidelines issued by the Commission." In
jurisdiction (Art. 122) short, the NWPC lays down the guidelines which the
a. To develop plans, programs and projects RTWPB implements.
relative to wages, incomes and productivity
improvement for their respective regions; 18.03 AREA MINIMUM WAGES AND CRITERIA
 to be implemented thru the respective
regional offices of the DOLE within their STANDARDS/CRITERIA FOR MINIMUM WAGE FIXING
territorial jurisdiction (ART. 124):
 Regional Boards shall have technical  The regional minimum wage to be established
supervision over the regional office of the by the Regional Board shall be as nearly
DOLE with respect to the implementation of adequate as is economically feasible to
said plans, programs and projects. maintain the minimum standards of living
b. To determine and fix minimum wage rates necessary for the health, efficiency and
applicable in their respective regions, general well-being of the employees within
provinces or industries therein and to issue the the framework of the national economic and
corresponding wage orders, subject to social development program.
guidelines issued by the Commission;  Factors in determining regional minimum
c. To undertake studies, researches, and surveys wages:
necessary for the attainment of their functions, a. The demand for living wages;
objectives and programs and to collect and b. Wage adjustment vis-a-vis the consumer
compile data on wages, incomes, productivity price index;
and other related information and periodically c. The cost of living and changes or
disseminate the same; increases therein;
d. To coordinate with the other Regional Boards d. The needs of workers and their families;
as may be necessary to attain the policy and e. The need to induce industries to invest in
intention of this Code; the countryside;
e. To receive, process and act on applications for f. Improvements in standards of living;
exemption from prescribed wage rates as may g. The prevailing wage levels;
be provided by law or any Wage Order; and h. Fair return of the capital invested and
f. To exercise such other powers and functions capacity to pay of employers;
as may be necessary to carry out their i. Effects in employment generation and
mandate under this Code. family income; and
j. The equitable distribution of income and
Composition of each Regional Board : wealth along the imperatives of economic
and social development.
 Regional Director of DOLE as chairman  The wages prescribed in accordance with the
 Regional Directors of NEDA & DTI as vice- provisions of this Title shall be the standard
chairman prevailing minimum wages in every region.
 2 members each from workers and employers These wages shall include wages varying with
sectors who shall be appointed by the President industries, provinces or localities if in the
upon recommendation of the SOLE to be made judgment of the Regional Board conditions
on the basis of the list of nominees submitted make such local differentiation proper and
by the workers and employers sectors, necessary to effectuate the purpose of this
respectively, and who shall serve for a term of Title.
5 years.  Any person, company, corporation ,
Each Regional Board to be headed by its partnership or any other entity engaged in
chairman shall be assisted by a Secretariat. (As business shall file and register annually with
amended by RA 6727) the appropriate Regional Board, Commission
and the National Statistics Office an itemized
listing of their labor component specifying the
FUNCTIONS names of their workers and employees below
the managerial level, including learners,
Nasipit Lumber Co. v. NLRC(98) apprentices and disabled/handicapped workers
The Labor Code, as amended by RA 6727 grants who were hired under the terms prescribed in
the NWPC, not the RTWPB, the power to "prescribe the employment contracts, and their
the rules and guidelines" for the determination of corresponding salaries and wages.
minimum wage and productivity measures. While
the RTWPB has the power to issue wage orders  WAGE DISTORTION

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» Where the application of any prescribed  Any such wage order shall take effect after 15
wage increase by virtue of a law or wage days from its complete publication in at least 1
order issued by any regional board results newspaper of general circulation in the region.
in distortions of wage structure within an  In the performance of its wage-determination
establishment, the employer and the union functions, the Regional Board shall conduct
shall negotiate to correct the distortions. public hearings/consultations, giving notices to
» Any dispute arising from wage distortions employees’ & employers' groups, provincial,
shall be resolved through the grievance city and municipal officials and other interested
procedure under their collective bargaining parties.
agreement and, if it remains unresolved,  Any party aggrieved by the Wage Order issued
through voluntary arbitration. by the Regional Board may appeal to the
▪ Unless otherwise agreed by the parties Commission within 10 days from the
in writing, such dispute shall be decided publication of such order. It shall be mandatory
by the voluntary arbitrator or panel of for the Commission to decide such appeal
voluntary arbitrators within 10 calendar within 60 days from the filing thereof.
days from the time said dispute was  The filing of appeal does not stay the order
referred to voluntary arbitration. unless the person appealing shall file with the
» In cases where there are no collective Commission, an undertaking with a surety or
bargaining agreements or recognized labor sureties for the payment to the employees
unions, the employers and workers shall affected by the order of the corresponding
endeavor to correct such distortions. increase, in the event such order is affirmed.
▪ Any dispute arising therefrom shall be (As amended by RA 6727)
settled through the National Conciliation
and Mediation Board and, if it remains
unresolved after 10 calendar days of
conciliation, shall be referred to the
appropriate branch of the National Labor
Relations Commission (NLRC).
▪ It shall be mandatory for the NLRC to
conduct continuous hearings and decide
the dispute within 20 calendar days
from the time said dispute is submitted
for compulsory arbitration
» The pendency of a dispute arising from a
wage distortion shall not delay the
applicability of any increase in prescribed
wage rates pursuant to provisions of law or
wage order.
» Wage distortion - a situation where an
increase in prescribed wage rates results in
the elimination or severe contraction of
intentional quantitative differences in wage
or salary rates between and among
employee groups in an establishment as to
effectively obliterate the distinctions
embodied in such wage structure based on
skills, length of service, or other logical
bases of differentiation.

 All workers paid by result, including those who


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

 All recognized learnership and apprenticeship


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

18.04 WAGE ORDER

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

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MINIMUM WAGE FIXING categorical terms for an increase in statutory
minimum wage of workers in the region. Hence, the
Agencies: subsequent passage of RO2-02-A providing instead
1. NWPC for an across the board increase in wages did not
a. Prescribe rules, guidelines for the clarify the earlier Order but amended the same. In
determination of appropriate minimum truth, it changed the essence of the original Order.
wage and what factors should be In passing RO2-02-A without going through the
considered process of public consultation and hearings, the
b. Review Regular wage levels set by RTWPB Regional Board deprived petitioner and other
if they are in accordance to prescribed employers of due process as they were not given the
guidelines opportunity to ventilate their positions regarding the
c. REMEMBER, NWPC does not set the proposed wage increase. In wage-fixing, factors
minimum wage. such as fair return of capital invested, the need to
2. RTWPB induce industries to invest in the countryside and the
a. Determine and fix the minimum wage capacity of employers to pay are, among others,
rates applicable to the region, provinces, taken into consideration. Hence, our legislators
industries provide for the creation of Regional Tripartite Boards
b. Issue the corresponding wage order composed of representatives from the government,
subject to guidelines issued by the NWPC the workers and the employers to determine the
appropriate wage rates per region to ensure that all
NOTES: sides are heard. For the same reason, Article 123 of
 Composition TRIPARTITE: Employer, the Labor Code also provides that in the
employee and government performance of their wage-determining functions,
 Functions are delineated the Regional Board shall conduct public hearings and
consultations, giving notices to interested parties.
Procedure: Moreover, it mandates that the Wage Order shall
take effect only after publication in a newspaper of
RTWPB general circulation in the region. It is a fundamental
 When conditions warrant, investigate and rule, borne out of a sense of fairness, that the public
study pertinent facts, based criteria (Art. is first notified of a law or wage order-before it can
124) be held liable for violation thereof. In the case at
 Conduct public hearings/consultations, bar, it is indisputable that there was no public
notice to employer and employees groups, consultation or hearing conducted prior to the
provinces, city, municipal officials and passage of RO2-02-A. Neither was it published in a
other interested parties newspaper of general circulation as attested in the
 Decide to ISSUE or NOT TO ISSUE a wage February 3, 1995 minutes of the meeting of the
order Regional Wage Board that the non-publication was
 If it decides to ISSUE a wage order, the by consensus of all the board members. Hence,
wage order takes effect after 15 days from RO2-02-A must be struck down for violation of
complete publication in at least 1 Article 123 of the Labor Code.
newspaper of general circulation in the
region PIECE WORKER
 Appeal wage order to NWPC within 10
calendar days; mandatory for the NWPC to Pulp and Paper, Inc. v. NLRC (97)
decide within 60 calendar days from filing In the absence of wage rates based on time and
 Filing of an appeal DOES NOT STAY order motion studies determined by the labor secretary or
unless appellant filed an undertaking with submitted by the employer to the labor secretary for
surety, sureties, guarantees payment of his approval, wage rates of piece-rate workers must
employees if the wage order is affirmed be based on the applicable daily minimum wage
determined by the Regional Tripartite Wages and
Productivity Commission. To ensure the payment of
METHODS OF FIXING fair and reasonable wage rates, Article 101 of the
Labor Code provides that “ the Secretary of Labor
Employers Confederation of the Philippines v. shall regulate the payment of wages by results,
NWPC (91) including pakyao, piecework, and other noontime
It is the Court's thinking, reached after the work.” The same statutory provision also states that
Court's own study of the Act, that the Act is meant the wage rates should be based, preferably, on time
to rationalize wages, that is, by having permanent and motion studies, or those arrived at in
boards to decide wages rather than leaving wage consultation with representatives of workers' and
determination to Congress year after year and law employers' organizations. In the absence of such
after law. The Court is not of course saying that the prescribed wage rates for piece-rate workers, the
Act is an effort of Congress to pass the buck, or ordinary minimum wage rates prescribed by
worse, to abdicate its duty, but simply, to leave the Regional Tripartite Wages and Productivity Board
question of wages to the expertise of experts. should apply.

VALIDITY Lambo v. NLRC (99)


There is no dispute that petitioners were
Cagayan Sugar Milling Co. v. Secretary of Labor employees of private respondents although they
(98) were paid not on the case of time spent on the
There was no ambiguity in the provision of job but according to the quantity and the quality
Wage Order RO2-02 as it provided in clear and of work produced by them. There are two

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categories of employees paid by results: 91) those strikes, lockouts, or other concerted activities of the
whose time and performance are supervised by the employees or management.
employer. (Here there is an element of control and
supervision over the manner as to how the work is National Federation of Labor v. NLRC (94)
to be performed. A piece-rate worker belongs to A statutory definition of "wage distortion" is now
this category especially if he performs his work in found in Article 124 of the Labor Code as amended
the company premises.); and (2) those whose time by Republic Act No. 6727.
and performance are unsupervised. (Here, the xxx As used herein, a wage distortion shall
employer’s control is over the result of the work. mean a situation where an increase in prescribed
Workers on pakyao and takay basis belong to this wage rates results in the elimination or severe
group.) Both classes of workers are paid per unit contraction of intentional quantitative differences in
accomplished. Piece-rate payment is generally wage or salary rates between and among employee
practices in garment factories where work is done in groups in an establishment as to effectively
the company premises, while payment on pakyao obliterate the distinctions embodied in such wage
and takay basis is commonly observed in the structure based on skills, length of service, or other
agricultural industry, such as in sugar plantations logical bases of differentiation."
where the work is performed in bulk or in volumes From the above quoted material, it will be seen
difficult to quantify. that the concept of wage distortion assumes an
XXX The term “wage” is broadly defined in Art. existing grouping or classification of employees
97 of the Labor Code as remuneration or earnings, which establishes distinctions among such
capable of being expressed in terms of money employees on some relevant or legitimate basis.
whether fixed or ascertained on a time, task, piece This classification is reflected in a differing wage rate
or commission basis. for each of the existing classes of employees. The
wage distortion anticipated in Wage Orders Nos. 3,
WAGE DISTORTION 4, 5 and 6 was a "distortion" (or "compression")
which ensued from the impact of those Wage Orders
Wage Distortion upon the different wage rates of the several classes
1. Cause: implementation of a wage order of employees. Thus distortion ensued where the
increase prescribe minimum wage rate result of implementation of one or another of the
2. Result: several Wage Orders was the total elimination or the
 Elimination OR severe contraction of severe reduction of the differential or gap existing
intentional quantitative wages/salary rates between the wage rates of the differing classes of
between or among employees employees. 10
 Effectively obliterates distinctions on wage It is important to note that the remedy
structure which was based on skills, length contemplated in the Wage Orders, and now in Article
of service or other logical differences. 124 of the Labor Code, for a wage distortion
3. Procedure for Settlement consisted of negotiations between employer and
a. Organized Establishment employees for the rectification of the distortion by
1. CBA Grievance Procedure re-adjusting the wage rates of the differing classes
2. Voluntary Arbitration of employees. As a practical matter, this ordinarily
b. Unorganized Establishment meant a wage increase for one or more of the
1. Employer and employee, with aid of affected classes of employees so that some gap or
National Conciliation Mediation Board differential would be re-established. There was no
(NCMB) settles conciliation mediation legal requirement that the historical gap which
2. NLRC – Compulsory Arbitration existed before the implementation of the Wage
Orders be restored in precisely the same form or
NOTES: amount.
 Both the employer and employee cannot
use economic weapons (Employer cannot Prubankers Assn. v. Prudential Bank and Co.
declare a lock-out; Employee cannot (99)
declare a strike) because the law has The statutory definition of wage distortion is
provided for a procedure for settling found in Article 124 of the Labor Code, as amended
 Cases say that: by Republic Act No. 6727,
1. Parties are encouraged to settle the Elaborating on this statutory definition, this
dispute voluntarily Court ruled: "Wage distortion presupposes a
2. Neither party can use economic classification of positions and ranking of these
weapons positions at various levels. One visualizes a
3. Original decree of differential need not hierarchy of positions with corresponding ranks
be restored basically in terms of wages and other emoluments.
4. NLRC has no authority to impose Where a significant change occurs at the lowest level
directly or indirectly under guise of of positions in terms of basic wage without a
rectifying a wage distortion upon the corresponding change in the other level in the
employer a new scheme of hierarchy of positions, negating as a result thereof
classification the distinction between one level of position from
the next higher level, and resulting in a parity
Associated Labor Union v. NLRC (94) between the lowest level and the next higher level or
The law recognizes the validity of negotiated rank, between new entrants and old hires, there
wage increases to correct wage distortions. The exists a wage distortion. . . . . The concept of a
legislative intent is to encourage the parties to seek wage distortion assumes an existing grouping or
solution to the problem of wage distortions through classification of employees which establishes
voluntary negotiation or arbitration, rather than distinctions among such employees on some

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relevant or legitimate basis. This classification is
reflected in a differing wage rate for each of the
existing classes of employees"
Wage distortion involves four elements: SECTION 19 - WOMEN WORKERS
1. An existing hierarchy of positions with
corresponding salary rates
2. A significant change in the salary rate of a 19.01 WOMEN AND THE CONSTITUTION
lower pay class without a concomitant
increase in the salary rate of a higher one Art II Sec 14, 1987 Constitution
3. The elimination of the distinction between The State recognizes the role of women in nation-
the two levels building, and shall ensure the fundamental equality
4. The existence of the distortion in the same before the law of women and men.
region of the country
Contrary to petitioner's postulation, a disparity
in wages between employees holding similar
positions but in different regions does not constitute WOMEN WORKERS
wage distortion as contemplated by law. As
previously enunciated, it is the hierarchy of positions Philippine Telegraph and Telephone Co. v.
and the disparity of their corresponding wages and NLRC (97)
other emoluments that are sought to be preserved The Constitution, cognizant of the disparity in
by the concept of wage distortion. Put differently, a rights between men and women in almost all phases
wage distortion arises when a wage order engenders of social and political life, provides a gamut of
wage parity between employees in different rungs of protective provisions. To cite a few of the primordial
the organizational ladder of the same establishment. ones, Section 14, Article II on the Declaration of
It bears emphasis that wage distortion involves a Principles and State Policies, expressly recognizes
parity in the salary rates of different pay classes the role of women in nation-building and commands
which, as a result, eliminates the distinction between the State to ensure, at all times, the fundamental
the different ranks in the same region. equality before the law of women and men. Corollary
thereto, Section 3 of Article XIII (the progenitor
18.05 EFFECT OF BENEFITS whereof dates back to both the 1935 and 1973
Constitution) pointedly requires the State to afford
Art. 100 full protection to labor and to promote full
Prohibition against elimination or diminution of employment and equality of employment
benefits opportunities for all, including an assurance of
Nothing in this Book shall be construed to entitlement to tenurial security of all workers.
eliminate or in any way diminish supplements or Similarly, Section 14 of Article XIII mandates that
other employee benefits being enjoyed at the time the State shall protect working women through
of the promulgation of this Code. provisions for opportunities that would enable them
to reach their full potential.
Davao Fruits Corporation v. Associated Labor
Unions (93) 19.02 COVERAGE
A company practice favorable to the employees
had indeed been established and the payments Book III, Rule XIII, Sec. 1, Omnibus Rules
made pursuant thereto, ripened into benefits This Rule shall apply to all employers, whether
enjoyed by them. And any benefit and supplement operating for profit or not, including educational,
being enjoyed by the employees cannot be reduced, religious and charitable institutions,
diminished, discontinued or eliminated by the
employer, by virtue of Section 10 of the Rules and EXCEPT:
Regulations Implementing P.D. No. 851, and Article  Government
100 of the Labor Code of the Philippines, which  Government-owned or controlled corporations
prohibit the diminution or elimination by the and
employer of the employees' existing benefits  Employers of household helpers and persons in
(Tiangco v. Leogardo, Jr. ). their personal service insofar as such workers
are concerned.
Prubankers Assn. v. Prudential Bank and Co.
(99) 18.03 PROHIBITED ACTS
Petitioner also insists that the Bank has adopted
a uniform wage policy, which has attained the status NIGHT WORK AND EXCEPTION
of an established management practice; thus, it is
estopped from implementing a wage order for a Art. 130.
specific region only. We are not persuaded. Said Night work prohibition. - No woman, regardless of
nationwide uniform wage policy of the Bank had age, shall be employed or permitted or suffered to
been adopted prior to the enactment of RA 6727. work, with or without compensation:
After the passage of said law, the Bank was a. In any industrial undertaking or branch thereof
mandated to regionalize its wage structure. Although between 10pm & 6am of the following day
the Bank implemented Wage Order Nos. NCR-01 and b. In any commercial or non-industrial
NCR-02 nationwide instead of regionally even after undertaking or branch thereof, other than
the effectivity of RA 6727, the Bank at the time was agricultural, between 12mn & 6am of the
still uncertain about how to follow the new law. In following day.
any event, that single instance cannot be c. In any agricultural undertaking at night
constitutive of "management practice." time unless she is given a period of rest of
not less than 9 consecutive hours.

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resigned or separated or to actually dismiss,
Art. 131. discharge, discriminate or otherwise prejudice a
Exceptions woman employee merely by reason of her marriage.
a. In cases of actual or impending emergencies
caused by serious accident, fire, flood, GENERAL
typhoon, earthquake, epidemic or other
disasters or calamity, to prevent loss of life or Art. 137.
property or in cases of force majeure or Prohibited acts. - (a) It shall be unlawful for any
imminent danger to public safety; employer:
b. In case of urgent work to be performed on 1. To deny any woman employee the benefits
machineries, equipment or installation, to provided for in this Chapter or to discharge
avoid serious loss which the employer would any woman employed by him for the purpose
otherwise suffer; of preventing her from enjoying any of the
c. Where the work is necessary to prevent benefits provided under this Code;
serious loss of perishable goods; 2. To discharge such woman on account of her
d. Where the woman employee holds a pregnancy, while on leave or in confinement
responsible position of managerial or technical due to her pregnancy; or
nature, or where the woman employee has 3. To discharge or refuse the admission of such
been engaged to provide health and welfare woman upon returning to her work for fear
services; that she may again be pregnant.
e. Where the nature of the work requires the
manual skill and dexterity of woman worker 19.04 FACILITIES
and the same cannot be performed with equal
efficiency by male worker; Art. 132.
f. Where the women employees are immediate Facilities for women. - The Secretary of Labor and
members of the family operating the Employment shall establish standards that will
establishment or undertaking; and ensure the safety and health of women employees.
g. Under other analogous cases exempted by the In appropriate cases, he shall by regulations require
Secretary of Labor and Employment in any employer to:
appropriate regulations. 1. Provide seats proper for women and permit
them to use such seats when they are free
DISCRIMINATION from work and during working hours, provided
they can perform their duties in this position
Art. 135. without detriment to efficiency;
Discrimination prohibited – It shall be unlawful for 2. Establish separate toilet rooms and lavatories
any employer to discriminate against any woman for men and women and provide at least a
employee with respect to terms and conditions of dressing room for women;
employment solely on account of her sex. 3. Establish a nursery in a workplace for the
benefit of the woman employees therein; and
The following are acts of discrimination: 4. Determine appropriate minimum age and
1. Payment of a lesser compensation, including other standards for retirement or termination
wage, salary or other form of remuneration in special occupations such as those of flight
and fringe benefits, to a female employee as attendants and the like.
against a male employee, for work of equal
value; and Art. 134.
2. Favoring a male employee over a female Family planning services; incentives for family
employee with respect to promotion, training planning. –
opportunities, study and scholarship grant a. Establishments which are required by law to
solely on account of their sexes. maintain a clinic or infirmary shall provide free
Criminal liability for the willful commission of family planning services to their employees
any unlawful acts as provided in this article or any which shall include, but not limited to, the
violation of the rules and regulations issued pursuant application or use of contraceptive pills and
to Sec. 2 hereof shall be penalized as provided in intra-uterine devices.
Articles 288 and 289 of this Code: Provided, That b. In coordination with other agencies of the
the institution of any criminal action under this government engaged in the promotion of
provision shall not bar the aggrieved employee from family planning, the Department of Labor and
filing an entirely separate and distinct action for Employment shall develop and prescribe
money claims, which may include claims for incentive bonus schemes to encourage family
damages and other affirmative reliefs. The action planning among female workers in any
hereby authorized shall proceed independently of establishment or enterprise.
each other.
19.05 SPECIAL CLASSIFICATION, SPECIAL
MARRIAGE WOMEN WORKERS

Art. 136. Art. 138.


Stipulation against marriage- It shall be unlawful for Classification of certain women workers. - Any
an employer to require as a condition of woman who is permitted or suffered to work with or
employment or continuation of employment without compensation in any night club, cocktail
that a woman employee shall not get married, or to lounge, massage clinic, bar or similar
stipulate expressly or tacitly that upon getting establishment, under the effective control or
married a woman employee shall be deemed supervision of the employer for a substantial

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period of time as determined by the Secretary of applicants for employment, students or those
Labor and Employment, shall be considered as an undergoing training, instruction or education.
employee of such establishments for purposes of Towards this end, all forms of sexual harassment in
labor and social legislation. the employment, education or training environment
are hereby declared unlawful.
19.06 MATERNITY LEAVE
Work, Education or Training-related Sexual
Sec. 14 – A RA 8282 Harassment Defined
A female employee who has paid at least three (3)  Work, education or training-related sexual
monthly contributions in the twelve-month period harassment is committed
immediately preceding the semester of her » by an employer, employee, manager,
childbirth, or miscarriage shall be paid a daily supervisor, agent of the employer, teacher,
maternity benefit equivalent to one hundred percent instructor, professor, coach, trainor or any
(100%) of her average salary credit for sixty (60) other person who, HAVING AUTHORITY,
days or seventy-eight days in case of caesarean INFLUENCE OR MORAL ASCENDANCY OVER
delivery subject to the following conditions: ANOTHER
d. That the employee shall have notified her » IN A WORK OR TRAINING OR EDUCATION
employer of her pregnancy and the probable ENVIRONMENT,
date of her childbirth which notice shall be » demands requests or otherwise requires
transmitted to the SSS in accordance with the any sexual favor from other,
rules and regulations it may provide. » regardless of whether the demand, request
e. The full payment shall be advanced by the for requirement for submission is accepted
employer within thirty (30) days from the filing by the object of said act.
of the maternity leave application.  In a work-related or employment environment,
f. That payment of daily maternity benefits shall sexual harassment is committed when:
be a bar to the recovery of sickness benefits a. The sexual favor is made as a condition in
provided by this Act for the same period for the hiring or in the employment, re-
which daily maternity benefits have been employment or continued employment of
received. said individual or in granting said individual
g. That the maternity benefits provided under favorable compensation, terms, conditions,
this section shall be paid only for the first four promotions, or privileges, or the refusal to
(4) deliveries or miscarriages. grant the sexual favor results in limiting,
h. That the SSS shall immediately reimburse the segregating or classifying the employee
employer of one hundred percent (100%) of which in any way would discrimnate,
the amount of maternity benefits advanced to deprive or diminish employment
the employee by the employer upon receipt of opportunities or otherwise adversely affect
satisfactory proof of such payment and legality said employee;
thereof; b. The above acts would impair the
i. That if an employee should give birth or suffer employee’s rights or privileges under
miscarriage without the required contributions existing labor laws; or
having been remitted for her by her employer c. The above acts would result in an
to the SSS, or without the latter having been intimidating, hostile, or offensive
previously notified by the employer of time of environment for the employee.
the pregnancy, the employer shall pay to the  In an education or training environment, sexual
SSS damages equivalent to the benefits which harassment is committed:
said employee member would otherwise have a. Against one who is under the care, custody
been entitled to. or supervision of the offender
b. Against one whose education, training,
Paternity Leave Act of 1996 (RA 8187) apprenticeship or tutorship is entrusted to
the offender;
Sec. 2: c. When the sexual favor is made a condition
Notwithstanding any law, rules and regulations to the giving of a passing grade, or the
to the contrary, every MARRIED male employee in granting of honors and scholarships, or the
the private and public sectors shall be entitled to a payment of a stipend, allowance or other
paternity leave of seven (7) days with full pay benefits, privileges, or considerations; or
FOR THE FIRST FOUR (4) DELIVERIES OF THE d. When the sexual advances result in an
LEGITIMATE SPOUSE WITH WHOM HE IS intimidating, hostile or offensive
COHABITING. The male employee applying for environment for the result, trainee or
paternity leave shall notify his employer of the apprentice.
pregnancy of his legitimate spouse and the expected  Any person who directs or induces another to
date of such delivery. commit any act of sexual harassment as herein
For the purposes of this Act, delivery shall defined, or who cooperates in the commission
include childbirth or any miscarriage. thereof by another without which it would not
have been committed, shall also be held liable
19.07 SEXUAL HARASSMENT under this Act.

POLICY DUTY OF THE EMPLOYER OR HEAD OF OFFICE IN A


The State shall value the dignity of every WORK-RELATED, EDUCATION OR TRAINING
individual, enhance the development of its human ENVIRONMENT
resources, guarantee full respect for human rights,
and uphold the dignity of workers, employees,

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 It shall be the duty of the employer or the head independent action for damages and other
of the work-related, educational or training affirmative relief.
environment or institution,
1. to prevent or deter the commission of acts PENALTIES
of sexual harassment and
2. to provide the procedures for the Any person who violates the provisions of this
resolution, settlement or prosecution of acts Act shall, upon conviction, be penalized by
of sexual harassment. imprisonment of not less than 1 month nor more
 Towards this end, the employer or head of than 6 months, or a fine or not less than P10,0000
office shall: nor more than P20,000.00, or both such fine and
a. Promulgate appropriate rules and regulations imprisonment at the discretion of the court.
in consultation with and jointly approved by Any action arising from the violations of the
the employees or students or trainees, provisions of this Act shall prescribe in 3 years.
through their duly designated representatives
prescribing the procedure for the Libres v. NLRC (99)
investigation of sexual harassment cases and Republic Act No. 7877 was not yet in effect at
the administrative sanctions therefore. the time of the occurrence of the act complained of.
▪ The said rules and regulations issued It was still being deliberated upon in Congress when
pursuant to this subsections (a) shall petitioner’s case was decided by the Labor Arbiter.
include, among others, guidelines on As a rule, laws shall have no retroactive effect unless
proper decorum in the workplace and otherwise provided, or except in a criminal case
educational or training institutions when their application will favor the accused.
b. Create a committee on decorum and Hence, the Labor Arbiter have to rely on the MEC
investigation of cases on sexual report and the common connotation of sexual
harassment. The Committee shall conduct harassment as it is generally understood by the
meetings, as the case may be, with officers public.
and employees, teachers, instructors, The disparity in the periods of filing the
professors, coaches, trainors and students complaints in the two cases did not in any way
or trainees to increase understanding and reduce this case into insignificance. On the
prevent incidents of sexual harassment. It contrary, it even invited the attention of the Court to
shall also conduct the investigation of focus on sexual harassment as a just and valid cause
alleged cases constituting sexual for termination. xxx “As a managerial employee,
harassment. petitioner is bound by more exacting work ethics.
▪ In the case of work-related He failed to live up to his higher standard of
environment, the committee shall be responsibility when he succumbed to his moral
composed of at least 1 representative perversity. And when such moral perversity is
each from the management, the union, perpetuated against his subordinate, he provides a
if any, the employees from the justifiable ground for his dismissal for lack of trust
supervisory rank, and from the rank and and confidence. It is the right, nay the duty of every
file employees. employer to protect its employees from oversexed
superiors.”
▪ In the case of the educational or
training institution, the committee shall Phil. Aelous Automotive United Corp. v. NLRC
be composed of at least 1 (2000)
representative from the administration, The gravamen of the offense in sexual
the trainors, teachers, instructors, harassment is not the violation of the employee's
professors or coaches and students or sexuality but the abuse of power by the employer.
trainees, as the case may be. Any employee, male or female, may rightfully cry
"foul" provided the claim is well substantiated.
▪ The employer or head of office, Strictly speaking, there is no time period within
educational or training institution shall which he or she is expected to complain through the
disseminate or post a copy of this Act proper channels. The time to do so may vary
for the information of all concerned. depending upon the needs, circumstances, and more
importantly, the emotional threshold of the
LIABILITY OF THE EMPLOYER, HEAD OF OFFICE, employee.
EDUCATIONAL OR TRAINING INSTITUTION

The employer or head of office, educational or


training institution shall be SOLIDARILY LIABLE for SECTION 20 - MINORS
damages arising from the acts of sexual harassment
committed in the employment, education or training
environment if the employer or head of office, 20.01 MINORS AND THE CONSTITUTION
educational or training institution is informed of such
acts by the offended party and no immediate action Art II Sec 13, 1987 Constitution
is taken thereon. The State recognizes the vital role of the youth
in nation-building and shall promote and protect
INDEPENDENT ACTION FOR DAMAGES their physical, moral, spiritual, intellectual, and
social well-being. It shall inculcate in the youth
Nothing in this Act shall preclude the victim of patriotism and nationalism, and encourage their
work, education or training-related sexual involvement in public and civic affairs.
harassment from instituting a separate and
20.02 LAW

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b. Working under conditions hazardous to life,
RA 7610 “Special Protection of Children Against Child safety and morals which unduly interfere with
Abuse, Exploitation and Discrimination Act” their normal development
c. Living in or fending for themselves in the
POLICY streets of urban or rural areas without the care
 It is hereby declared to be the policy of the of parents or a guardian or any adult
State to provide special protection to children supervision needed for their welfare.
from all forms of abuse, neglect, cruelty, d. Being a member of an indigenous cultural
exploitation and discrimination, and other community and/or living under conditions of
conditions prejudicial to their development; extreme poverty or in an area which is
provide sanctions for their commission and underdeveloped and/or lacks or has
carry out a program for prevention and inadequate access to basic services needed for
deterrence of and crisis intervention in a good quality of life;
situations of child abuse, exploitation and e. Being a victim of a man-made or natural
discrimination. The State shall intervene on disaster or calamity; or
behalf of the child with the parent, guardian, f. Circumstances analogous to those abovestated
teacher or person having care or custody of the which endanger the life, safety or normal
child fails or is unable to protect the child development of children.
against abuse, exploitation and discrimination
or when such acts against the child are “Comprehensive program against child abuse,
committed b the said parent, guardian, teacher exploitation and discrimination” refers to the
or person having care and custody of the same. coordinated program of services and facilities to
 It shall be the policy of the State to protect and protect children against:
rehabilitate children gravely threatened or a. Child prostitution and other sexual abuse;
endangered by circumstances which affect or b. Child trafficking;
will affect their survival and normal c. Obscene publications and indecent shows;
development and over which they have no d. Other acts of abuse; and
control. e. Circumstances which threaten or endanger the
 The best interests of children shall be the survival and normal development of children.
paramount consideration of all actions
concerning them, whether undertaken by WORKING CHILDREN
public or private social welfare institutions,
courts of law, administrative authorities, and Sec. 12 (RA 7610, as amended by RA 7658)
legislative bodies, consistent with the principle Employment of Children – Children below fifteen
of First Call for Children as enunciated I the (15) years of age shall not be employed except:
United Nations Convention on the Rights of the 3. When a child works directly under the sole
Child. Every effort shall be exerted to promote responsibility of his parents or legal guardian
the welfare of children and enhance their and where only members of the employer’s
opportunities for a useful and happy life. family are employed: Provided, however, That
his employment neither endangers his life,
DEFINITION OF TERMS safety, health and morals, nor impairs his
normal development: Provided, further, That
Children - persons below 18 years of age or those the parent or legal guardian shall provide the
over but are unable to fully take care of themselves said minor child with the prescribed primary
or protect themselves from abuse, neglect, cruelty, and/or secondary education; or
exploitation or discrimination because of a physical 4. When a child’s employment or participation in
or mental disability or condition public and entertainment or information
through cinema, theater, radio or television is
Child Abuse – maltreatment, whether habitual or essential: Provided, the employment contract
not, of the child which includes any of the following: is concluded by the child’s parents or guardian,
1. Psychological and physical abuse, neglect, with the express agreement of the child
cruelty, sexual abuse and emotional concerned, if possible, and the approval of the
maltreatment; Department of Labor and Employment: and
2. Any act by deeds or words which debases, Provided, That the following requirements in
degrades or demeans the intrinsic worth and all instances are strictly complied with:
dignity of a child as a human being; a. The employer shall ensure the protection,
3. Unreasonable deprivation of his basic needs health, safety and morals of the child
for survival, such as food and shelter; or b. The employer shall institute measures to
4. Failure to immediately give medical treatment prevent the child’s exploitation or
to an injured child resulting in serious discrimination taking into account the
impairment of his growth and development or system and level of remuneration, and the
in his permanent incapacity or death. duration and arrangement of working time
c. The employer shall formulate and
“Circumstances which gravely threaten or implement, subject to the approval and
endanger the survival and normal development supervision of competent authorities, a
of children”, include, but are not limited to, the continuing program for training and skills
following: acquisition of the child.
a. Being in a community where there is armed
conflict or being affected by armed conflict- In the above exceptional cases where any
related activities; such child may be employed, the employer shall
first secure, before engaging such child, a work

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permit from the Department of Labor and 21.02 HOUSEHELPERS
Employment which shall ensure observance of the
above requirements. Art. 141
 all persons rendering services in households for
NON-FORMAL EDUCATION FOR WORKING CHILDREN compensation.
(SEC. 13) "Domestic or household services" shall mean service
in the employer's home, which is usually necessary
The Department of Education, Culture and or desirable for the maintenance and enjoyment
Sports shall promulgate a course design under its thereof and includes ministering to the personal
non-formal education program aimed at promoting comfort and convenience of the members of the
the intellectual, moral and vocational efficiency of employer's household, including services of family
working children who have not undergone or finished drivers.
elementary or secondary education. Such course
design shall integrate the learning process deemed 21.03 NON-HOUSEHOLD WORK ASSIGNMENT
most effective under given circumstances.
Art. 145.
PROHIBITION ON THE EMPLOYMENT OF CHILDREN IN No househelper shall be assigned to work in a
CERTAIN ADVERTISEMENTS (SEC. 14) commercial, industrial or agricultural enterprise at a
wage or salary rate lower than that provided for
No person shall employ child models in all agricultural or non-agricultural worker as prescribed
commercial advertisements promoting alcoholic herein
beverages, intoxicating drinks, tobacco and its
byproducts, and violence. Barcenas v. NLRC(90)
Moreover, the work that petitioner performed in
DUTY OF EMPLOYER (SEC. 15) the temple could not be categorized as mere
domestic work. Thus, We find that petitioner, being
Every employer shall comply with the duties proficient in the Chinese language, attended to the
provided for in Articles 108 and 109 of PD 603. visitors, mostly Chinese, who came to pray or seek
advice before Buddha for personal or business
Article 108, PD 603 problems; arranged meetings between these visitors
Duty of Employer to Submit Report and Su and supervised the preparation of the food
for the temple visitors; acted as tourist guide of
Article 109, PD 603 foreign visitors; acted as liaison with some
Register of Children government offices; and made the payment for the
temple's Meralco, MWSS and PLDT bills. Indeed,
PENALTIES (SEC. 16) these tasks may not be deemed activities of a
household helper. They were essential and important
Any person who shall violate any provision of to the operation and religious functions of the
this Article shall suffer the penalty of a fine of not temple.
less than P1,000.00 but not more than P10,000.00
or imprisonment of not less than 3 months but not Apex Mining Co. v. NLRC
more than 3 years, or both at the discretion of the The term `househelper' as used herein is
court, Provided, that in case of repeated violations of synonymous to the term `domestic servant' and
the provisions of this Article, the offender’s license to shall refer to any person, whether male or female,
operate shall be revoked. who renders services in and about the employer's
home and which services are usually necessary or
20.03 DISCRIMINATION desirable for the maintenance and enjoyment
thereof, and ministers exclusively to the personal
Art. 140 comfort and enjoyment of the employer's family.
Prohibition against child discrimination. - No
employer shall discriminate against any person in 21.04 CONDITIONS OF EMPLOYMENT
respect to terms and conditions of employment on
account of his age. Art. 142.
Contract of domestic service. - original contract shall
not last for more than two years but it may be
renewed for such periods as may be agreed upon by
SECTION 21 – HOUSEHELPERS the parties.

Art. 143
21.01 COVERAGE Minimum Wage
Art. 141 Art. 144
 all persons rendering services in households for Minimum Cash Wage – The minimum wage rates
compensation. prescribed under this Chapter shall be the basic cash
"Domestic or household services" shall mean service wages which shall be paid to the househelpers in
in the employer's home, which is usually necessary addition to lodging, food and medical attendance.
or desirable for the maintenance and enjoyment
thereof and includes ministering to the personal Art. 145.
comfort and convenience of the members of the Assignment to non-household work. - No
employer's household, including services of family househelper shall be assigned to work in a
drivers. commercial, industrial or agricultural enterprise

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at a wage or salary rate lower than that provided for Chapter III, Title III, Book III, however, is silent
agricultural or non-agricultural worker as prescribed on the grant of overtime pay, holiday pay, premium
herein pay and service incentive leave to those engaged in
the domestic or household service.
Art. 146. Moreover, the specific provisions mandating
Opportunity for education. - If below 18 the these benefits are found in Book III, Title I of the
employer shall give him or her an opportunity for at Labor Code, and Article 82, which defines the scope
least elementary education. The cost of such of the application of these provisions, expressly
education shall be part of the househelper's excludes domestic helpers from its coverage:
compensation, unless there is a stipulation to the
contrary.

Art. 147. SECTION 22 – HOMEWORKERS


Treatment of househelpers. - just and humane
manner. In no case shall physical violence be used
upon the househelper. 22.01 COVERAGE AND REGULATION

Art. 148. Art. 153.


Board, lodging and medical attendance. - ER furnish Regulations of industrial homework. - The
free of charge suitable and sanitary living quarters employment of industrial homeworkers and field
as well as adequate food and medical attendance. personnel shall be regulated by the Government
through appropriate regulations issued by the
Art. 149. Secretary of Labor and Employment to ensure the
Indemnity for unjust termination of services. - If the general welfare and protection of homeworkers and
period of household if period of service fixed = no field personnel and the industries employing them.
termination by either party except for just
unjust dismissal = compensation already earned Art. 154.
plus that of 15 days by way of indemnity. Regulations of Secretary of Labor and Employment. -
leaves w/o justifiable reason = any unpaid salary The regulations or orders to be issued pursuant to
due him or her not exceeding 15 days. this Chapter shall be designed to assure the average
employee of an undertaking the minimum terms and
Art. 150. conditions of employment applicable to the industrial
Service of termination notice. - If the duration of the homeworkers or field personnel involved.
household service is not determined either by
stipulation or by the nature of the service, the Department Order No. 005 – 92
employer or the househelper may give notice to put
an end to the relationship five days before the Coverage: This Rule shall apply to any person who
intended termination of the service. performs industrial homework for an employer,
contractor or sub-contractor. (1)
Art. 151.
Employment certification. - Upon the severance of Industrial Homework: A system of production under
the household service relation, the employer shall which work for an employer or contractor is carried
give the househelper a written statement of the out by a homework at his/her home. Materials may
nature and duration of the service and his or her or may not be furnished by the employer or
efficiency and conduct as househelper. contractor. (2a)

Art. 152.
Employment records. - The employer may keep such
records as he may deem necessary to reflect the
actual terms and conditions of employment of his 22. 02 EMPLOYER
househelper which the latter shall authenticate by
signature or thumbmark upon request of the Art. 155.
employer. Distribution of homework. - For purposes of this
Chapter, the "employer" of homeworkers includes
SEE ALSO ARTICLES 1689 – 1699 OF THE CIVIL any person, natural or artificial, who for his account
CODE or benefit or on behalf of any person residing outside
the country, directly or indirectly, or through any
Ultra Villa Food Haus v. Geniston (99) employee, agent, contractor, sub-contractor or any
Accordingly, the terms and conditions of private other person:
respondent's employment are governed by Chapter 1. Delivers, or causes to be delivered, any goods,
III, Title III, Book III of the Labor Code as well as by articles or materials to be processed or
the pertinent provisions of the Civil Code. Thus, fabricated in or about a home and thereafter
Article 141 of the Labor Code provides: to be returned or to be disposed of or
Art. 141. Coverage. — This Chapter shall apply to distributed in accordance with his directions;
all persons rendering services in households for or
compensation. 2. Sells any goods, articles or materials for the
Domestic or household service" shall mean purpose of having the same processed or
services in the employers home which is usually fabricated in or about a home and then rebuys
necessary or desirable for the maintenance and
them after such processing or fabrication,
enjoyment thereof and includes ministering to the
personal comfort and convenience of the members either himself or through some other
of the employers household, including services of person.
family drivers.

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Security of tenure is a right of paramount value.
Precisely, it is given specific recognition and
guarantee by the Constitution no less. The State
SECTION 23 - TERMINATION OF shall afford protection to labor and "shall assure the
EMPLOYMENT rights of workers to .. security of tenure", so runs
the Constitutional mandate. (Art. II, Sec. 9.) It
A. General Concepts stands to reason that a right so highly ranked as
security of tenure should not lightly be denied on so
nebulous a basis as mere speculation.
23.01 SECURITY OF TENURE OR TENURIAL
SECURITY
Manila Electric Co., v. NLRC (91)
Such an offense is obviously of so serious a
Art. 279
character as to merit the penalty of dismissal from
Security of Tenure
employment. The Labor Code pronounces "fraud or
In cases of regular employment, the employer shall
willful breach by the employee of the trust reposed
not terminate the services of an employee except for
in him by his employer or duly authorized
a just cause or when authorized by this Title. An
representative," or "serious misconduct" on the part
employee who is unjustly dismissed from work shall
of the employee to be lawful ground to terminate
be entitled to reinstatement without loss of seniority
employment. And this Court has held that the
rights and other privileges and to his full backwages,
"dismissal of a dishonest employee is as much in the
inclusive of allowances, and to his other benefits or
interests of labor as it is of management. The labor
their monetary equivalent computed from the time
force in any company is protected and the workers'
his compensation was withheld from him up to the
security of tenure strengthened when pilferage of
time of his actual reinstatement.
equipment, goods and products which endangers the
viability of an employer and, therefore, the workers'
Art. XIII, Sec. 3, 1987 Constitution
continued employment is minimized or eliminated
The State shall afford full protection to labor, local
and consequently labor-management relations based
and overseas, organized and unorganized, and
on mutual trust and confidence are promoted."
promote full employment and equality of
employment opportunities for all.
Alhambra Industries, Inc. v. NLRC (94)
It shall guarantee the rights of all workers to
TODAY employment is no longer just an
self-organization, collective bargaining and
ordinary human activity. For most families the main
negotiations, and peaceful concerted activities,
source of their livelihood, employment has now
including the right to strike in accordance with law.
leveled off with property rights which no one may be
They shall be entitled to security of tenure, humane
deprived of without due process of law.
conditions of work, and a living wage. They shall
Termination of employment is not anymore a
also participate in policy and decision-making
mere cessation or severance of contractual
processes affecting their rights and benefits as may
relationship but an economic phenomenon affecting
be provided by law.
members of the family. This explains why under the
The State shall promote the principle of shared
broad principles of social justice the dismissal of
responsibility between workers and employers and
employees is adequately protected by the laws of
the preferential use of voluntary modes in settling
the state.
disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster
Quijano v. Mercury Drug Corp. (98)
industrial peace.
Well-entrenched is the rule that an illegally
dismissed employee is entitled to reinstatement as a
POLICY STATEMENT
matter of right. Over the years, however, the case
law developed that where reinstatement is not
City Trust Banking Corp. v. NLRC (96)
feasible, expedient or practical, as where
Backwages are for earnings which a worker has
reinstatement would only exacerbate the tension
lost due to his illegal dismissal. After she was
and strained relations between the parties, or where
reinstated, she was entitled to receive the
the relationship between the employer and
differential between the salary of internal auditor
employee has been unduly strained by reason of
and manager of the Auditing Department for the
their irreconcilable differences, particularly where
position was not a substantial equivalent to that of
the illegally dismissed employee held a managerial
internal auditor.
or key position in the company, it would be more
This petition is the fourth filed with this Court.
prudent to order payment of separation pay instead
It has no doubt, prolonged the granting of complete
of reinstatement. Some unscrupulous employers,
relief to private respondent. Litigation must come to
however, have taken advantage of the overgrowth of
an end. In labor cases, the cause of an illegally
this doctrine of "strained relations" by using it as a
dismissed employee must always be a concern of
cover to get rid of its employees and thus defeat
everyone if we ae to give effect to the constitutional
their right to job security.
policy of protecting labor and the duty of this Court
To protect labor's security of tenure, we
to see to it that justice is served not only fairly but
emphasize that the doctrine of "strained relations"
also swiftly.
should be strictly applied so as not to deprive an
illegally dismissed employee of his right to
NATURE OF SECURITY OF TENURE
reinstatement. Every labor dispute almost always
results in "strained relations", and the phrase cannot
TERMINAL SECURITY RIGHT
be given an overarching interpretation,
otherwise, an unjustly dismissed employee can
City Service Corp. Workers Union v. City
never be reinstated.
Service Corp. (85)

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The provisions of this Title shall apply to ALL
Condo Suite Club Travel, Inc. v. NLRC (2000) establishments or undertakings, whether for profit or
The fundamental guarantee of security of tenure not.
dictates that no worker shall be dismissed except for
just and authorized cause provided by law, and after CONTRACT EMPLOYEE
de process.
Labajo v. Alejandro (88)
Lanzadares v. Amethyst Security (2003) As probationary and contractual employees,
Security of tenure, although provided in the private respondents enjoyed security of tenure, but
Constitution does not give an employee an absolute only to a limited extent — i. e., they remained
vested right in a position as would deprive the secure in their employment during the period of time
company of its prerogative to change their their respective contracts of employment remained
assignment or transfer them where they will be most in effect. That temporary security of tenure,
useful. When a transfer is not unreasonable, nor however, ended the moment their employment
inconvenient, nor prejudicial to an employee; and it contracts expired on 31 March 1985 and petitioners
does not involve a demotion in rank or diminution of declined to renew the same for the next succeeding
his pay, benefits, and other privileges, the employee school year. Consequently, as petitioners were not
may not complain that it amounts to constructive under obligation to renew those contracts of
dismissal employment, the separation of private respondents
in this case cannot be said to have been without
IMPORTANCE OF EMPLOYMENT justifiable cause, much less illegal.

EMPLOYMENT PROBATIONARY EMPLOYEE

Gonzales v. NLRC (99) Skillworld Management and Marketing Corp. v.


Employment is not merely a contractual NLRC (90)
relationship; it has assumed the nature of property While it may be true that Manuel was a
right. It may spell the difference whether or not a probationary employee at the time of his dismissal
family will have food on their table, roof over their he may not be dismissed without cause. This is
heads and education for their children. It is for this settled in the cases of Manila Hotel Corporation v.
reason that the State has taken up measures to NLRC and in the case of Alga Moher International
protect employees from unjustified dismissals. It is Placement Services v. Hon. D. Atienza, where We
also because of this that the right to security of held:
tenure is not only a statutory right but, more so, a "There is no dispute that as a probationary
constitutional right. employee, private respondent had but a limited
tenure. Although on probationary basis, however,
Cruz still enjoys the constitutional protection on
STATE REGULATION – RATIONALE security of tenure. During his tenure of
employment therefore, or before his contract
Llosa-Tan v. Silahis International Hotel (90) expires, respondent Cruz cannot be removed
It is well settled that dismissal based on loss of except for cause as provided for by law."
trust and confidence arising from alleged misconduct
of employee, is not to be used as a shield to dismiss Lopez v. Javier (1996)
an employee arbitrarily (Callanta v. Carnation While probationary employees do not enjoy
Philippines, Inc.). Although the power to dismiss is a permanent status, they are, nonetheless, accorded
normal prerogative of the employer, the same is not the constitutional protection of security of tenure.
without limitations (Rance v. NLRC). The right of the Article XIII, Section 3 of the Constitution which
employer must not be exercised arbitrarily and provides that the State “shall guarantee the rights of
without just cause. Otherwise, the constitutional all workers to….security of tenure…” does not
guarantee of security of tenure of the workers would distinguish as to the kind of worker who is entitled to
be rendered nugatory. While dismissing or laying off be protected in this right.
of an employee is a management's prerogative, it Furthermore, in Manila Hotel Corp. v. NLRC, et.
must nevertheless be done without abuse of al. various limitations on the power of an employer
discretion (Atlas Consolidated Mining Corp. v. NLRC). to terminate a probationary employment contract
Furthermore, the right of employer to freely select or were laid down, thus: First, it must be exercised in
discharge his employees is regulated by the State, accordance with the specific requirements of the
because the preservation of the lives of the citizens contract. If a particular time is prescribed, the
is a basic duty of the State, more vital than the termination must be done within such time. Should
preservation of the corporate profit (Euro-Linea, the contract require a written notice, then such form
Phils., Inc. v. NLRC). In addition, security of tenure should be used. Secondly, the dissatisfaction of he
is a right of paramount value guaranteed by the employer must be real and in good faith, not feigned
Constitution and should not be denied on mere so as to circumvent the contract or the law; and
speculation (Tolentino v. NLRC). Protection to labor thirdly, there must be no unlawful discrimination in
and social justice provisions of the Constitution and the dismissal.
the labor laws and rules and regulations are
interpreted in favor of the exercise of labor rights MANAGERIAL EMPLOYEE
(Euro-Linea, Phils., Inc. v. NLRC)
Inter Orient Maritime Enterprises, Inc. v. NLRC
COVERAGE (94)
It is well settled in this jurisdiction that
Art. 278 confidential and managerial employees cannot be
Coverage arbitrarily dismissed at any time, and without

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cause as reasonably established in an appropriate being held liable for first time, after nine (9) long
investigation. Such employees, too, are entitled to years of unblemished service, for an alleged offense
security of tenure, fair standards of employment and which caused no prejudice to the employer, aside
the protection of labor laws. from absence of substantiation of the alleged
offense.
MANAGEMENT RIGHTS AND SECURITY OF TENURE
St. Michael’s Institute v. Santos (2001)
San Miguel Brewery, etc. v. Ople (89) The employer’s right to conduct the affairs of his
Public respondent was correct in holding that business according to its own discretion and
the CDS is a valid exercise of management judgment, is well-recognized. An employer has a
prerogatives: "Except as limited by special laws, an free reign and enjoys wide latitude of discretion to
employer is free to regulate, according to his own regulate all aspects of employment, including the
discretion and judgment, all aspects of employment, prerogative to instill discipline in its employees and
including hiring, work assignments, working to impose penalties, including dismissal, upon erring
methods, time, place and manner of work, tools to employees. This is a management prerogative,
be used, processes to be followed, supervision of where the free will of the management to conduct its
workers, working regulations, transfer of employees, own affairs to achieve its purpose takes form. The
work supervision, lay-off of workers and the only criterion to guide the exercise of its
discipline, dismissal and recall of work. . . . (NLU vs. management prerogative is that the policies, rules
Insular La Yebana Co.; Republic Savings Bank vs. and regulations on work-related activities of the
CIR)" (Perfecto V. Hernandez, Labor Relations Law, employees must always be fair anf reasonable and
1985 Ed., p. 44.) Every business enterprise the corresponding penalties, when prescribed,
endeavors to increase its profits. In the process, it commensurate to the offense involved and o the
may adopt or devise means designed towards that degree of the infraction.
goal. So long as a company's management
prerogatives are exercised in good faith for the Etcuban, Jr. v. Sulpicio Lines, Inc. (2005)
advancement of the employer's interest and not for Finally, the petitioner theorizes that even
the purpose of defeating or circumventing the rights assuming that there was evidence to support the
of the employees under special laws or under valid charges against him, his dismissal from the service
agreements, this Court will uphold them (LVN is unwarranted, harsh and is not commensurate to
Pictures Workers vs. LVN; Phil. American his misdeeds, considering the following: first, his 16
Embroideries vs. Embroidery and Garment Workers; long years of service with the company; second, no
Phil. Refining Co. vs. Garcia). San Miguel loss or damages was suffered by the company since
Corporation's offer to compensate the members of the tickets were unissued; third, he had no previous
its sales force who will be adversely affected by the derogatory record; and, lastly, the amount involved
implementation of the CDS, by paying them a so- is miniscule.[48] Citing jurisprudence,[49] he
called "back adjustment commission" to make up for appeals for compassion and requests that he be
the commissions they might lose as a result of the merely suspended, or at the very least, given
CDS, proves the company's good faith and lack of separation pay for his length of service.[50]
intention to bust their union. We find no merit in the petitioner’s contention.
We are not unmindful of the foregoing doctrine,
GUIDELINES ON IMPOSITION OF PENALTIES but after a careful scrutiny of the cited cases, the
Court is convinced that the petitioner’s reliance
Farrol v. Court of Appeals (2000) thereon is misplaced. It must be stressed that in all
Assuming further that there was breach of trust of the cases cited, the employees involved were all
and confidence, it appears that this is the first rank-and-file or ordinary workers. As pointed out
infraction committed by petitioner. Although the earlier, the rules on termination of employment,
employer has the prerogative to discipline or dismiss penalties for infractions, insofar as fiduciary
its employee, such prerogative cannot be exercised employees are concerned, are not necessarily the
wantonly, but must be controlled by substantive due same as those applicable to the termination of
process and tempered by the fundamental policy of employment of ordinary employees. Employers,
protection to labor enshrined in the Constitution. generally, are allowed a wider latitude of discretion
Infractions committed by an employee should merit in terminating the employment of managerial
only the corresponding sanction demanded by the personnel or those of similar rank performing
circumstances. The penalty must be commensurate functions which by their nature require the
with the act, conduct or omission imputed to the employer’s trust and confidence, than in the case of
employee and imposed in connection with the ordinary rank-and-file employees.
employer’s disciplinary authority. The fact that the petitioner has worked with the
respondent for more than 16 years, if it is to be
VH Manufacturing, Inc. v. NLRC (2000) considered at all, should be taken against him. The
While an employer enjoys a wide latitude of infraction that he committed, vis-a-vis his long years
discretion in the promulgation of policies, rules and of service with the company, reflects a regrettable
regulations on work-related activities of the lack of loyalty. Loyalty that he should have
employees, those directives, however, must always strengthened instead of betrayed. If an employee’s
be fair and reasonable, and the corresponding length of service is to be regarded as a justification
penalties, when prescribed, must be commensurate for moderating the penalty of dismissal, it will
to the offense involved and to the degree of the actually become a prize for disloyalty, perverting the
infraction. In the case at bar, the dismissal meted meaning of social justice and undermining the
out on private respondent for allegedly sleeping on efforts of labor to cleanse its ranks of all
the job, under the attendant circumstances, appears undesirables.[52]
to be too harsh a penalty, considering that he was

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The argument that the petitioner was not guilty unfaithful employee who is holding a position of trust
of anything because the tickets were never issued or and confidence in a company poses a greater danger
that he had received nothing from the passengers to its security than a mere clerk or machine operator
that he could short-change the company would not like petitioner.
mitigate his liability, nor efface the respondent’s loss There is another reason why violations by non-
of trust and confidence in him. Whether or not the confidential employees of company rules and
respondent was financially prejudiced is immaterial. regulations such as that involved in this case are
Also, what matters is not the amount involved, be it considered minor. Such employees are generally
paltry or gargantuan; rather the fraudulent scheme mere wage earners whose dismissal from
in which the petitioner was involved, which employment can have severe financial consequences
constitutes a clear betrayal of trust and confidence. on their families especially at a time like the present
In fact, there are indications that this fraudulent act when unemployment is quite high. Consequently,
had been done before, and probably would have whatever missteps may have been committed by
continued had it not been discovered. them ought not to be visited with a consequence so
Moreover, the records show that the petitioner severe as dismissal.
is not as blameless as he claimed to be. In 1979 and
1980, he was suspended by the respondent for Philippine Long Distance Telephone Co., Inc. v.
several company infractions, which the petitioner did NLRC (99)
not deny. It must also be stressed that when an Likewise, it must be noted that willful defiance
employee accepts a promotion to a managerial of company rules must be characterized by perverse
position or to an office requiring full trust and attitude that would be considered as inimical to the
confidence, he gives up some of the rigid guaranties interest of his employer. Even when an employee is
available to an ordinary worker. Infractions which, if found to have transgressed the employer's rules, in
committed by others, would be overlooked or the actual imposition of penalties upon the erring
condoned or penalties mitigated may be visited with employee, due consideration must still be given to
more serious disciplinary action. his length of service and the number of violations
It cannot be over emphasized that there is no committed during his employ.
substitute for honesty for sensitive positions which Dismissal is the ultimate penalty that can be
call for utmost trust. Fairness dictates that the meted to an employee. Where a penalty less
respondent should not be allowed to continue with punitive would suffice, whatever missteps may have
the employment of the petitioner who has breached been committed by the worker ought not to be
the confidence reposed on him.[55] Unlike other just visited with a consequence so severe such as
causes for dismissal, trust in an employee, once lost, dismissal from employment. For the Constitution
is difficult, if not impossible, to regain.[56] There guarantees the right of workers to "security of
can be no doubt that the petitioner’s continuance in tenure." The misery and pain attendant to the loss of
the extremely sensitive fiduciary position of Chief jobs then could be avoided if there be acceptance of
Purser would be patently inimical to the respondent’s the view that under certain circumstances of the
interests. It would be oppressive and unjust to order case the workers should not be deprived of their
the respondent to take him back, for the law, in means of livelihood.
protecting the rights of the employee, authorizes
neither oppression nor self-destruction of the Dimabayao v. NLRC (99)
employer. In light of our ruling in Gold City Integrated Port
Services we cannot sustain the NLRC for upholding
FACTORS private respondents' dismissal of petitioner.
Petitioner's act of leaving his work place to relieve
Associate Labor Union v. NLRC (99) himself can hardly be characterized as
There is no question that the employer has the abandonment, much less a willful or intentional
inherent right to discipline, including that of disobedience of company rules since he was merely
dismissing its employees for just causes. This right answering the call of nature over which he had no
is, however, subject to reasonable regulation by the control. Restraining one's bowel movement can
State in the exercise of its police power. The finding result in great discomfort and affect adversely the
of the NLRC that an employee violated the company efficiency, and even the health, of the worker.
rules and regulations is subject to scrutiny by the Petitioner's disobedience to his employer's orders
Court to determine if the dismissal is justified and, if can easily be categorized as trivial and unimportant,
so, whether the penalty imposed is commensurate and as such, does not merit a penalty as harsh as
to the gravity of his offense. dismissal.
In this case, we agree with the Labor Arbiter Likewise, there was no gross and habitual
that dismissal would be proportionate to the gravity neglect of his duties by petitioner since he merely
of the offense committed by petitioner considering relieved himself which, as already adverted to, could
the value of the articles he pilfered and the fact that not have constituted abandonment of work. Neither
he had no previous derogatory record during his two could it have disrupted the operations of the
(2) years of employment in the company. The Labor company as to cause it irreparable damage.
Arbiter is certainly mistaken in regarding the articles Witnesses testified during the hearing before the
taken to be mere scraps and hence without value to Arbitration Branch of the NLRC that petitioner was
the company. They were of some value but not absent from his work station only for a few minutes
enough to warrant dismissal. and that on 20 October 1992 he even took the
Moreover, it should also be taken into account initiative of asking his co-worker to take over his
that petitioner is not a managerial or confidential post before proceeding to the latrine. The violation
employee in whom greater trust is placed by of petitioner, if at all it was, could not be that
management and from whom greater fidelity to duty serious as to warrant his dismissal from the
is correspondingly expected. It is easy to see why an service.

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show the employee concerned to be unfit to continue
working for the employer.
Now it must be noted that recent decisions of
this Court has distinguished the treatment of
managerial employees from that of rank-and-file
DISMISSAL AS PENALTY personnel, insofar as the application of the doctrine
of loss of trust and confidence is concerned. Thus,
Golden Thread Knitting Industries, Inc. v. NLRC with respect to rank-and-file personnel, loss of trust
(99) and confidence as ground for valid dismissal requires
Dismissal is the ultimate penalty that can be proof of involvement in the alleged events in
meted to an employee. It must therefore be based question, and that mere uncorroborated assertions
on a clear and not on an ambiguous or ambivalent and accusations by the employer will not be
ground. From our assessment of the records, we find sufficient. But, as regards a managerial employee,
that petitioners exercised their authority to dismiss mere existence of a basis for believing that such
without due regard to the pertinent exacting employee has breached the trust of his employer
provisions of the Labor Code. The right to terminate would suffice for his dismissal. Hence, in the case of
should be utilized with extreme caution because its managerial employees, proof beyond reasonable
immediate effect is to put an end to an employee's doubt is not required, it being sufficient that there is
present means of livelihood while its distant effect, some basis for such loss of confidence, such as when
upon a subsequent finding of illegal dismissal, is just the employer has reasonable ground to believe that
as pernicious to the employer who will most likely be the employee concerned is responsible for the
required to reinstate the subject employee and grant purported misconduct, and the nature of his
him full back wages and other benefits. participation therein renders him unworthy of the
trust and confidence demanded by his position.
RULES – MANAGERIAL AND RANK AND FILE EMPLOYEES
B. Termination of Employment by Employee
Libres v. NLRC (99)
The disparity in the periods of filing the 23.02 CAUSES
complaints in the two cases did not in any way
reduce this case into insignificance. On the JUST CAUSES
contrary, it even invited the attention of the Court to
focus on sexual harassment as a just and valid cause Art. 285.
for termination. Whereas petitioner Libres was only Termination by employee
meted a 30-day suspension by t he NLRC, Villarama (b) An employee may an end to the relationship
in the other case was penalized with termination. As WITHOUT serving any notice on the employer
Mister Justice Puno elucidated, “As a managerial for any of the following just causes:
employee, petitioner is bound by more exacting 1. Serious insult by the employer or his
work ethics. He failed to live up to his higher representative on the honor and person of
standard of responsibility when he succumbed to his the employee;
moral perversity. And when such moral perversity is 2. Inhuman and unbearable treatment
perpetuated against his subordinate, he provides a accorded the employee by the employer or
justifiable ground for his dismissal for lack of trust his representative
and confidence. It is the right, nay the duty of every 3. Commission of a crime or offense by the
employer to protect its employees from oversexed employer or his representative against the
superiors.” person of the employee or any of the
Caoile v. NLRC (98) immediate members of his family; and
Law and jurisprudence have long recognized the 4. Other causes analogous to any of the
right of employers to dismiss employees by reason foregoing.
of loss of trust and confidence. As provided for in the
Labor Code, "Art. 282. An employer may terminate WITHOUT JUST CAUSE
an employment for any of the following causes: . . .
(c) Fraud or willful breach of the trust reposed in REQUISITES
him by his employer or his duly authorized
representative. . . ." In the case of supervisors or Art. 285 (a)
personnel occupying positions of responsibility, this
Court has repeatedly held that loss of trust and An employee may terminate without just cause the
confidence justifies termination. Obviously, as a just employee-employer relationship by serving a written
cause provided by law, this ground for terminating notice n the employer at least one (1) month in
employment, springs from the voluntary or willful advance. The employer upon whom no such notice
act of the employee, or "by reason of some was served may hold the employee liable for
blameworthy act or omission on the part of the damages.
employee".
Loss of confidence as a just cause for RESIGNATION
termination of employment is premised from the fact
that an employee concerned holds a position of trust DEFINITION
and confidence. This situation holds where a person
is entrusted with confidence on delicate matters, Habana v. NLRC (98)
such as the custody, handling, or care and Voluntary resignation is defined as the voluntary
protection of the employer's property. But, in order act of an employee who "finds himself in a
to constitute a just cause for dismissal, the act situation where he believes that personal reasons
complained of must be "work-related" such as would cannot be sacrificed in favor of the exigency of

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the service and he has no other choice but to Indeed, it would have been illogical for private
disassociate himself from his employment. respondents herein to resign and then file a
complaint for illegal dismissal. Resignation is
REQUISITES inconsistent with the filing of the said complaint.
[Valdez vs. NLRC, 286 SCRA 87, 94 (1998).]
Azcor Manufacturing, Inc. v. NLRC (99)
To constitute a resignation, it must be Admiral Realty Co., Inc. v. NLRC (99)
unconditional and with the intent to operate as such. Respondent claims that she was constructively
There must be an intention to relinquish a portion of dismissed from her office as its location was
the term of office accompanied by an act of transferred from under the steps of the stairs to the
relinquishment. In the instant case, the fact that kitchen. Such transfer caused her mental torture
Capulso signified his desire to resume his work when which forced her to resign. However, it was not
he went back to petitioner AZCOR after recuperating shown that her transfer was prompted by ill will of
from his illness, and actively pursued his case for management. Indeed, the manager of the hotel
illegal dismissal before the labor courts when he was swore that the transfer affected not only the Cost
refused admission by his employer, negated any Control office but also other offices.
intention on his part to relinquish his job at AZCOR. The transfer involved only a change in location
of the office. It does not involve a change in
Metro Transit Organization, Inc. v. NLRC (98) petitioner's position. Even a transfer in position is
There is no valid resignation where it was made valid when based on sound judgment, unattended by
without proper discernment, such as when an demotion in rank or diminution of pay or bad faith.
employee’s writing and handing in of his resignation With respect to the memorandum requiring the
letter to his employer was only triggered by that private respondent to explain why disciplinary action
singular moment when he was left with no should not be taken against her for violations of
alternative but to accede, having been literally hotel rules, we find that the memorandum was not
forced into it by being presented with the more unreasonable nor an act of harassment that left
unpleasant fate of being terminated. petitioner with no choice but to resign.
There is no showing that petitioner was coerced
Reyes v. CA (2003) into resigning from the company. On the contrary,
While it is true that petitioner tendered his respondent resigned without any element of coercion
resignation letter to respondents requesting that he attending her option. She voluntarily resigned from
be given the same benefits granted by the company employment and signed the quitclaim and waiver
to resigned/retrenched employees, there is no after receiving all the benefits for her separation. To
showing that respondents accepted his resignation. allow respondent to repudiate the same will be to
Acceptance of a resignation tendered by an countenance unjust enrichment on her part. "The
employee is necessary to make the resignation Court will not permit such a situation."
effective.[24] No such acceptance, however, was
shown in the instant case. What appears in the Phil. Wireless Inc.v. NLRC (98)
record is a letter terminating the services of The Court has held that constructive dismissal is
petitioner due to retrenchment effective January 20, “an involuntary resignation resorted to when
1998. Verily, said letter should be interpreted as a continued employment is rendered impossible,
non-acceptance of petitioner’s resignation effective unreasonable, or unlikely; when there is a demotion
December 31, 1997. As correctly pointed out by the in rank and/or a dimunition in pay; or when a clear
Labor Arbiter, if respondents considered petitioner discrimination, insensibility or disdain by an
resigned as of December 31, 1997, then there would employer becomes unbearable to the employee.” In
be no need to retrench him. this particular case, respondent voluntarily resigned
from his employment. He was not pressured into
Willi Hahn Enterprises v. Maghuyop (2004) resigning.
The rule that the filing of a complaint for illegal Voluntary resignation is defined as the act of an
dismissal is inconsistent with resignation is not employee who finds himself in a situation where he
applicable to the instant case. The filing of an illegal believes that personal reasons cannot be sacrificed
dismissal case by respondent was evidently a mere in favor of the exigency of the service and he has no
afterthought. It was filed not because she wanted to other choice but to disassociate himself from his
return to wok but to claim separation pay and back employment.
wages.
Pascua v. NLRC (98)
VOLUNTARY RESIGNATION Basic is the doctrine that resignation must be
voluntary and made with the intention of
Cheniver Deco Print Technics Corporation v. relinquishing the office, accompanied with an act of
NLRC (2000) relinquishment.
Petitioner’s contention that private respondents
resigned from their jobs, does not appear Azcor Manufacturing Inc. v. NLRC (99)
convincing. As public respondent observed, the To constitute a resignation, it must be
subsequent transfer of petitioner to another place unconditional and with the intent to operate as such.
hardly accessible to its workers resulted in the There must be an intention to relinquish a portion of
latter’s untimely separation from the service not to the term of office accompanied by an act of
their own liking, hence, not construable as relinquishment. In the instant case, the fact that
resignation. Resignation must be voluntary and Capulso signified his desire to resume his work when
made with the intention of relinquishing the office, he went back to petitioner AZCOR after
accompanied with an act of relinquishment.8 recuperating from his illness, and actively
[Pascua vs. NLRC, 287 SCRA 554, 567 (1998).] pursued his case for illegal dismissal before the

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labor courts when he was refused admission by his a certificate of candidacy for any elective or local
employer, negated any intention on his part to office as resigned from the company. Although §11
relinquish his job at AZCOR. (b) of R.A. No. 6646 does not require mass media
Moreover, a closer look at the subject commentators and announcers such as private
resignation letters readily reveals the following: (a) respondent to resign from their radio or TV stations
the resignation letter allegedly tendered by Capulso but only to go on leave for the duration of the
to Filipinas Paso was identically worded with that campaign period, we think that the company may
supposedly addressed by him to AZCOR; (b) both nevertheless validly require them to resign as a
were pre-drafted with blank spaces filled up with the matter of policy. In this case, the policy is justified
purported dates of effectivity of his resignation; and, on the following grounds:
(c) it was written in English, a language which  Working for the government and the company
Capulso was not conversant with considering his low at the same time is clearly disadvantageous
level of education. No other plausible explanation and prejudicial to the rights and interest not
can be drawn from these circumstances than that only of the company but the public as well. In
the subject letters of resignation were prepared by a the event an employee wins in an election, he
person or persons other than Capulso. And the fact cannot fully serve, as he is expected to do, the
that he categorically disowned the signatures therein interest of his employer. The employee has to
and denied having executed them clearly indicates serve two (2) employers, obviously detrimental
that the resignation letters were drafted, without his to the interest of both the government and the
consent and participation. private employer.
Even assuming for the sake of argument that  In the event the employee loses in the election,
the signatures were, genuine, we still cannot give the impartiality and cold neutrality of an
credence to those letters in the absence of any employee as broadcast personality is suspect,
showing that Capulso was aware that what he was thus readily eroding and adversely affecting the
signing then were in fact resignation letters or that confidence and trust of the listening public to
he fully understood the contents thereof. Having employer's station.
introduced those resignation letters in evidence, it XXX As important a rule as one which considers
was incumbent upon petitioners to prove clearly and an employee who runs for public office resigned
convincingly their genuineness and due execution, must be written and published so as to lend
especially considering the serious doubts an their certainty to its existence and definiteness to its
authenticity. Petitioners miserably failed in this scope. Otherwise, the impression may be fostered
respect. that the enforcement of the policy is discretionary on
the part of the heads of the various offices and units
Intertrod Maritime Inc. v. NLRC (91) of the company. Moreover, such an unwritten rule is
Resignation is the voluntary act of an employee susceptible of misinterpretation and is not likely to
who "finds himself in a situation where he believes be taken seriously by those to whom it is addressed.
that personal reasons cannot be sacrificed in favor of
the exigency of the service, then he has no other CONSTRUCTIVE DISMISSAL
choice but to disassociate himself from his
employment." The employer has no control over Valdez v. NLRC (98)
resignations and so, the notification requirement was Under Article 286 of the Labor Code, the bona
devised in order to ensure that no disruption of work fide suspension of the operation of a business or
would be involved by reason of the resignation. This undertaking for a period not exceeding six months
practice has been recognized because "every shall not terminate employment. Consequently,
business enterprise endeavors to increase its profits when the bona fide suspension of the operation of a
by adopting a device or means designed towards business or undertaking exceeds six months, then
that goal." the employment of the employee shall be deemed
Resignations, once accepted and being the sole terminated. By the same token and applying said
act of the employee, may not be withdrawn without rule by analogy, if the employee was forced to
the consent of the employer. remain without work or assignment for a period
Once an employee resigns and his resignation is exceeding six months, then he is in effect
accepted, he no longer has any right to the job. If constructively dismissed.
the employee later changes his mind, he must ask XXX It would have been illogical for herein
for approval of the withdrawal of his resignation petitioner to resign and then file a complaint for
from his employer, as if he were re-applying for the illegal dismissal. Resignation is inconsistent with the
job. It will then be up to the employer to determine filing of the said complaint.
whether or not his service would be continued. If the Resignation is defined as the voluntary act of an
employer accepts said withdrawal, the employee employee who finds himself in a situation where he
retains his job. If the employer does not, as in this believes that personal reasons cannot be sacrificed
case, the employee cannot claim illegal dismissal for in favor of the exigency of the service, and, that he
the employer has the right to determine who his has no other choice but to disassociate himself from
employees will be. To say that an employee who has his employment. Resignation is a formal
resigned is illegally dismissed, is to encroach upon pronouncement of relinquishment of an office. It
the right of employers to hire persons who will be of must be made with the intention of relinquishing the
service to them. office accompanied by an act of relinquishment.

VALIDITY OF POLICY 23.03 NO TERMINATION – PERFORMANCE OF


MILITARY OR CIVIC DUTY
Manila Broadcasting Co. v. NLRC (98)
What is involved in this case is an unwritten Art. 286
company policy considering any employee who files When Employment NOT Deemed Terminated

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a. The bona fide suspension of the operation of a class, is meet and proper. That in controversies
business or undertaking for a period not between a laborer and his master, doubts
reasonably arising from the evidence, or in the
exceeding six months, or
interpretation of agreements and writings should
b. The fulfillment by the employee of a military or be resolved in the former's favor, is not an
civic duty shall not terminate employment. unreasonable or unfair rule. But that disregard of
In all such cases, the employer shall reinstate the employer's own rights and interests can be
the employee, to his former position without loss of justified by that concern and solicitude is unjust
seniority rights if he indicates his desire to resume and unacceptable." (Stanford Microsystems, Inc.
his work not later than 1 month from the resumption v. NLRC).
of operations of his employer or from his relief from The law is protecting the rights of the laborer
the military or civic duty. authorizes neither oppression nor self-destruction of
the employer. More importantly, while the
Constitution is committed to the policy of social
justice and the protection of the working class, it
should not be supposed that every labor dispute will
automatically be decided in favor of labor.
Finally, it has been established that the right to
dismiss or otherwise impose disciplinary sanctions
upon an employee for just and valid cause, pertains
in the first place to the employer, as well as the
authority to determine the existence of said cause in
accordance with the norms of due process.

Ocean East Agency Corp. v. NLRC (1998)


C. Termination of Employment by Employer
Respondent’s defiance of a lawful order posed
serious and considerable prejudice to the business of
PRELIMINARY MATTERS
the employer. This Court finds that petitioner’s
order was made within the sphere of its
23.04 BASIS OF RIGHT AND REQUIREMENTS
management prerogative. “The exercise of an
employer to regulate all aspects of employment
BASIS
must be in keeping with good faith and not to be
used as a pretext for defeating the rights of
Manila Trading and Supply Co., Inc. v. Zulueta
employees under the laws and applicable contracts.”
(40)
A perusal of the records shows a clear, valid and
The whole controversy is centered around the
legal cause for the termination of respondent’s
right of the Court of Industrial Relations to order the
employment.
readmission of a laborer who, it is admitted, had
been found derelict in the performance of his duties
REQUIREMENTS
towards his employer. We concede that the right of
an employer to freely select or discharge his
Art. 282.
employees, is subject to regulation by the State
Termination by employer. – An employer may
basically in the exercise of its paramount police
terminate an employment for any of the following
power. (Commonwealth Acts Nos. 103 and 213.) But
causes:
much as we should expand beyond economic
a. Serious misconduct or willful disobedience by
orthodoxy, we hold that an employer cannot legally
the employee of the lawful orders of his
be compelled to continue with the employment of a
employer or representative in connection with
person who admittedly was guilty of misfeasance or
his work;
malfeasance towards his employer, and whose
b. Gross and habitual neglect by the employee of
continuance in the service of the latter is patently
his duties:
inimical to his interests. The law, in protecting the
c. Fraud or willful breach by the employee of the
rights of the laborer, authorizes neither oppression
trust reposed in him by his employer or duly
nor self-destruction of the employer. There may, of
authorized representative;
course, be cases where the suspension or dismissal
d. Commission of a crime or offense by the
of an employee is whimsical or unjustified or
employee against the person of his employer
otherwise illegal in which case he will be protected.
or any immediate member of his family or his
Each case will be scrutinized carefully and the proper
duly authorize representative; and
authorities will go to the core of the controversy and
e. Other causes analogous to the foregoing.
not close their eyes to the real situation. This is not
however the case here.
ARTICLE 283.
Closure of establishment and reduction of personnel.
Makati Haberdashery, Inc. v. NLRC (89)
The employer may also terminate the
Under the circumstances, it is evident that there
employment of any employee due to the:
is no illegal dismissal of said employees. Thus, We
a. Installation of labor saving devices,
have ruled that:
b. Redundancy,
"No employer may rationally be expected to
continue in employment a person whose lack of c. Retrenchment to prevent losses or
morals, respect and loyalty to his employer, d. Closing or cessation of operation of the
regard for his employer's rules, and appreciation establishment or undertaking unless the
of the dignity and responsibility of his office, has closing is for the purpose of circumventing the
so plainly and completely been bared. provisions of this Title,
by serving a written notice on the workers and
"That there should be concern, sympathy, and
the Ministry of Labor and Employment at least
solicitude for the rights and welfare of the working
one (1) month before the intended date thereof.

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In case of termination due to the installation of facets of valid termination of employment; (a) the
labor saving devices or redundancy, the worker legality of the act of dismissal, i.e., the dismissal
affected thereby shall be entitled to a separation pay must be under any of the just causes provided under
equivalent to at least his one (1) month pay or to at Art. 282 of the Labor Code; and (b) the legality of
least one (1) month pay for every year of service, the manner of dismissal, which means that there
whichever is higher. must be observance of the requirements of due
In case of retrenchment to prevent losses and in process, otherwise known as the two-notice rule.
cases of closures or cessation of operations of Thus, "the employer is required to furnish the
establishment or undertaking not due to serious employee with a written notice containing a
business losses or financial reverses, the separation statement of the cause for termination and to afford
pay shall be equivalent to one (1) month pay or at said employee ample opportunity to be heard and to
least one-half (1/2) month pay for every year of defend himself with the assistance of his
service, whichever is higher representative, if he so desires. The employer is also
A fraction of at least six (6) months shall be required to notify the worker in writing of the
considered one (1) whole year. decision to dismiss him, stating clearly the reasons
therefore."
Art. 284.
Disease as a ground for termination. – An employer Salaw v. NLRC (91)
may terminate the services of an employee who has Under the Labor Code, as amended, the
been found to be suffering from any disease and requirements for the lawful dismissal of an employee
whose continued employment is prohibited by law or by his employer are two-fold: the substantive and
is prejudicial to his health as well as to the health of the procedural. Not only must the dismissal be for a
his co-employees: Provided, That he is paid valid or authorized cause as provided by law
separation pay equivalent to at least one (1) month (Articles 279, 281, 282-284, New Labor Code), but
salary or to one-half (1/2) month salary for every the rudimentary requirements of due process -
year of service, whichever is greater, a fraction of at notice and hearing - must also be observed before
least six (6) months being considered as one (1) an employee may be dismissed. One does not
whole year. suffice; without their concurrence, the termination
would, in the eyes of the law, be illegal.
Art. 277 (b) The inviolability of notice and hearing for a valid
Subject to the constitutional right of workers to dismissal of an employee can not be over-
security of tenure and their right to be protected emphasized. Those twin requirements constitute
against dismissal except for just and authorized essential elements of due process in cases of
cause and without prejudice to the requirement of employee dismissal. The requirement of notice is
notice under Art. 283 of this Code the employer shall intended to inform the employee concerned of the
furnish the worker whose employment is sought to employer's intent to dismiss him and the reason for
be terminated a written notice containing a the proposed dismissal; on the other hand, the
statement of the causes for termination and shall requirement of hearing affords the employee the
afford the latter ample opportunity to be heard and opportunity to answer his employer's charges
to be defend himself with the assistance of his against him and accordingly to defend himself
representative if he so desires in accordance with therefrom before dismissal is effected. Neither one
company rules and regulations promulgated of these two requirements can be dispensed with
pursuant to guidelines set by the Department of without running afoul of the due process
Labor and Employment. Any decision taken by the requirement of the Constitution.
employer shall be without prejudice to the right of
the worker to contest the validity or legality of his Arboleda v. NLRC (99)
dismissal by filing a complaint with the regional The main issue being the legality of petitioner's
branch of the National Labor Relations Commission. dismissal, it may be worth to look into the requisites
The burden of proving that the termination was for a for the validity of a dismissal, namely, (a) the
valid or authorized cause shall rest on the employer. employee must be afforded due process, i.e., he
The Secretary of the Department of Labor and must be given an opportunity to be heard and
Employment may suspend the effects of the defend himself, and (b) the dismissal must be for a
termination pending resolution of the dispute in the valid cause as provided in Art. 282 of the Labor
event of a prima facie finding by the appropriate Code.
official of the Department of Labor and Employment The essence of due process in administrative
before whom such dispute is pending that the proceedings is an opportunity to explain one's side
termination may cause a serious labor dispute or is or an opportunity to seek reconsideration of the
in implementation of a mass lay-off. action or ruling complained of. Before an employee
can be validly dismissed, the Labor code requires the
SUBSTANTIVE AND PROCEDURAL DUE PROCESS employer to furnish the employee with two (2)
written notices: (a) a written notice containing a
Orlando Farms Growers v. NLRC (98) statement of the cause for termination to afford the
It is settled that in termination disputes, the employee ample opportunity to be heard and defend
employer bears the burden of proving that the himself with the assistance of his representative, if
dismissal is for just cause, failing which it would he so desires; and, (b) if the employer decides to
mean that the dismissal is not justified and the terminate the services of the employee, the
employer is entitled to reinstatement. The dismissal employer must notify him in writing of the decision
of employees must be made within the parameters to dismiss him, stating clearly the reasons therefor.
of the law and pursuant to the basic tenets of equity,
justice and fair play. In Brahm Industries, Inc. v.
NLRC, the Court explained that there are two (2)

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FRAMEWORK ANALYSIS withheld up to actual reinstatement.
PROPER FORUM? APPEAL PROCEDURE
 Labor Arbiter = 217 (a) (2)
 Voluntary Arbitrator = 260 – 261 SUPREME COURT
 Regular Courts

COMPLAINT
ILLEGAL DISMISSAL COURT OF APPEALS

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

COMPLIANCE – SUBSTANTIVE DUE PROCESS 


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

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compassion accorded by the law to workers who are employment. While the Constitution does condone
bound to join the ranks of the unemployed. wrongdoing by the employee, it nevertheless urges a
moderation of the sanctions that may be applied to
Golden Thread Knitting Industrial Inc. v. NLRC him in light of the many disadvantages that weigh
(99) heavily on him like an albatross on his neck. Where
We find that petitioners were unable to a penalty less punitive would suffice, whatever
substantiate the charge of serious misconduct missteps may have been committed by the worker
against Macaspac and Albasin. The incident report of ought not be visited with a consequence so severe
the two (2) security guards was on its face such as dismissal from employment. For the
categorical on the culpability of subject respondents, foregoing reasons, we believe that the minor
yet it is perplexing that the report was not utilized as infraction committed by petitioner does not merit the
supporting evidence in the criminal proceedings. ultimate penalty of dismissal.
As previously stated, the incident report was
addressed to the Manager of the company. Philippine Aeolus Automotive United Corp. v.
Considering that it was the Manager who instructed NLRC (2000)
petitioner Bico to lodge the criminal complaint, and if The Supreme Court, in a litany of decisions on
the report was submitted after the incident, then serious misconduct warranting dismissal of an
there was no reason for it not to form part of the employee, has ruled that for misconduct or improper
evidence in the criminal proceedings. As it is, we can behavior to be a just cause for dismissal (a) it must
gather from the narration of petitioner Bico that the be serious; (b) must relate to the performance of
person who revealed to him the identities of the the employee’s duties; and, (c) must show that the
culprits was not one of the security guards but Mejia employee has become unfit to continue working for
who supplied the supporting affidavit. These the employer. The act of private respondent in
circumstances inevitably lead us to the conclusion throwing a stapler and uttering abusive language
that the incident report was merely concocted by upon the person of the plant manager may be
petitioners in view of the filing of the labor cases considered, from a lay man's perspective, as a
against them. serious misconduct. However, in order to consider it
Often, misdeeds are committed either in the a serious misconduct that would justify dismissal
presence of an ally, if nobody is around to blow the under the law, it must have been done in relation to
whistle, or when darkness has adequately shrouded the performance of her duties as would show her to
the surroundings. Moreover, it has not been shown be unfit to continue working for her employer. The
that Macaspac and Albasin were such feckless acts complained of, under the circumstances they
individuals who would resort to destruction of were done, did not in any way pertain to her duties
company properties in total disregard of its dire as a nurse. Her employment identification card
consequences. On the contrary, they were union discloses the nature of her employment as a nurse
members fighting for their rights as employees. and no other.
Even the reason advanced by Mejia for their
misconduct banks on speculation. Further still, it Naguit, Jr. vs. NLRC (2003)
does not appear that the criminal case filed by Petitioner’s attempt at exoneration deserves
petitioner Bico primarily on the strength of the scant consideration. As custodian of the petty cash
affidavit of Mejia ever prospered at the prosecutor's fund, he had the duty to ascertain that the
level. circumstances which brought about any claim
therefrom were in order. He cannot now shirk from
Austria v. NLRC (99) the responsibility by indirectly pinning the blame on
Misconduct has been defined as improper or the approving officer and asserting that the
wrong conduct. It is the transgression of some transgression was the result of mere advertence.
established and definite rule of action, a forbidden Petitioner thus committed dishonesty and breached
act, a dereliction of duty, willful in character, and Meralco’s trust, which dishonesty calls for reprimand
implies wrongful intent and not mere error in to dismissal under MERALCO’s rules.
judgment. For misconduct to be considered serious it
must be of such grave and aggravated character and WILLFUL DISOBEDIENCE
not merely trivial or unimportant. Based on this
standard, we believe that the act of petitioner in DEFINITION AND REQUISITES
banging the attaché case on the table, throwing the
telephone and scattering the books in the office of Cebu Filveneer Corp. v. NLRC (98)
Pastor Buhat, although improper, cannot be The omission of the private respondent can
considered as grave enough to be considered as hardly be described as "willful" to justify her
serious misconduct. After all, as correctly observed dismissal. For one, the omission did not last for long.
by the Labor Arbiter, though petitioner committed For another, the subsequent actions of the private
damage to property, he did not physically assault respondent upon learning of the encashment of the
Pastor Buhat or any other pastor present during the unauthorized check by Mr. Kun negate any
incident of 16 October 1991. In fact, the alleged implication that she willfully or intentionally
offense committed upon the person of the defaulted in reporting to prejudice petitioners.
employer's representatives was never really Indeed, she reported the matter to petitioner
established or proven by private respondents. Cordaro and wrote to the PNB MEPZ Branch to
Hence, there is no basis for the allegation that retrieve the encashed check. A breach is willful if it is
petitioner's act constituted serious misconduct or done intentionally, knowingly and purposely.
that the same was an offense against the person of Petitioners merely proved the omission of the private
the employer's duly authorized representative. As respondent but there is no evidence whatsoever
such, the cited actuation of petitioner does not that it was done intentionally.
justify the ultimate penalty of dismissal from

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Westin Phil. Plaza Hotel v. NLRC (99) as a just cause for dismissal of an employee,
Under Article 282 (a) of the Labor Code, as envisages the concurrence of at least two (2)
amended, an employer may terminate an requisites: the employees assailed conduct must be
employment for serious misconduct or willful willful or intentional, the willfulness being
disobedience by the employee of the lawful orders of characterized by a wrongful and perverse attitude;
his employer or representative in connection with his and the order violated must have been reasonable,
work. But disobedience to be a just cause for lawful, made known to the employee and must
dismissal envisages the concurrence of at least two pertain to the duties which he had been engaged to
(2) requisites: (a) the employee's assailed conduct discharge.
must have been willful or intentional, the willfulness
being characterized by a wrongful and perverse Rosario v. Victory Rice mill (2003)
attitude; and, (b) the order violated must have been In this case, the order to petitioner was simple,
reasonable, lawful, made known to the employee i.e., to deliver the merchandise to the Felix
and must pertain to the duties which he has been Hardware. It was clearly reasonable, lawful, made
engaged to discharge. known to petitioner and pertained to his duty as
driver of respondent. Petitioner did not even proffer
Dimabayao v. NLRC (99) a justifiable explanation for his disobedience thereto.
In light of our ruling in Gold City Integrated Port Every employee is charged with the implicit duty of
Services we cannot sustain the NLRC for upholding caring for the employer’s property. Petitioner’s
private respondents' dismissal of petitioner. conduct showed that he could not even be trusted
Petitioner's act of leaving his work place to relieve with this task. Further, his hostile attitude towards
himself can hardly be characterized as his co-workers which eventually led him to inflict
abandonment, much less a willful or intentional physical injuries on one of them cannot be
disobedience of company rules since he was merely countenanced. As correctly put by the NLRC,
answering the call of nature over which he had no petitioner’s “continuance in the service of
control. Restraining one's bowel movement can respondent company is partly inimical not only to its
result in great discomfort and affect adversely the interests but also to the interest of its other
efficiency, and even the health, of the worker. employees.
Petitioner's disobedience to his employer's orders PNOC-EDC v. Abella (2005)
can easily be categorized as trivial and unimportant, Insubordination or willful disobedience by an
and as such, does not merit a penalty as harsh as employee, to constitute a just cause for terminating
dismissal. his employment, the orders, regulations, or
instructions of the employer or representative must
Tierra International Production Corp. v. NLRC be:
(96) 1. reasonable and lawful;
According to the report of the company' s Site 2. sufficiently known to the employee; and
Administration Officer, private respondents were 3. in connection with the duties which the
given three "options:" (1) to go back to work; (2) to employee has been engaged to discharge.
apologize to their supervisor; and (3) to be There is no doubt in this case that the assailed
repatriated. What private respondents were given transfer orders fulfill the second and third elements
were not really "options." They were given the above-stated. Private respondent Abella was well
choice of apologizing for their refusal to work and informed of the orders of transfer and said orders
then resume working as ordered, or, else, resign and were well in connection with the security functions of
be sent back home. Under the circumstances they the private respondent. It is only the issue of
really had no choice but to resign. It was not pride reasonableness and lawfulness of said orders that
or arrogance which made them refuse to work as have to be elucidated on.
ordered, but the assertion of their right not to be The reasonableness and lawfulness of an order,
made to work outside of what they had been hired regulation, or instruction depend on the
to do. For asserting their right, private respondents circumstances availing in each case. Reasonableness
should not be punished. We, therefore, hold that pertains to the kind or character of directives and
private respondents' dismissal was illegal and that commands and to the manner in which they are
for this reason they are entitled to be paid their made.
salaries corresponding to the unexpired portion of The petitioners aver that the orders were well
their employment contract, in addition to their within their managerial prerogative to make and that
unpaid salaries prior to their dismissal, as found by there was never any agreement that private
both the POEA and the NLRC. respondent Abella had to be posted in a fixed place.
The appellate court, on the other hand, stated
Legahi v. NLRC (99) that its finding that the private respondent was not
For willful disobedience to be considered as just guilty of insubordination and abandonment was
cause for dismissal, the employee's conduct must be based on the fact that the dismissal of private
willful or intentional, the willfulness being respondent Abella was effected with bad faith, as it
characterized by a wrongful and perverse attitude was intended to punish him for refusal to heed his
and the order violated must have been reasonable, employer’s unreasonable orders.
lawful, made known to the employee and must The records of the present case fail to show any
pertain to the duties which he has been engaged to hint of truth to the declaration of the appellate court.
discharge. A thorough review of the records of the case
shows that there is a valid reason behind the
Vitarich Corp. v. NLRC (99); Rosario v. Victory transfer of the private respondent to MIGP in
Rice mill (2003) Kidapawan, North Cotabato. As stated in the
In AHS/Philippines, Inc. v. CA, we explained - … telegraphic message received by the private
willful disobedience of the employer’s lawful orders, respondent,

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excuse the latter as she was very much aware that
Acesite Coproration v. NLRC (2005) her acts would be greatly prejudicial to NASUREFCO.
Willful disobedience entails the concurrence of
at least two (2) requisites: the employee’s assailed Judy Philippines Inc. v. NLRC (98)
conduct has been willful or intentional, the Petitioner anchors its right to terminate the
willfulness being characterized by a “wrongful and employment of Virginia Antiola on the ground of
perverse attitude;” and the order violated must have "gross neglect of duties," under Article 282 (b) of
been reasonable, lawful, made known to the the Labor Code. Gross negligence implies a want or
employee and must pertain to the duties which he absence of or failure to exercise slight care or
had been engaged to discharge. diligence, or the entire absence of care. It evinces a
In Gonzales’ case, his assailed conduct has not thoughtless disregard of consequences without
been shown to have been characterized by a exerting any effort to avoid them.
perverse attitude, hence, the first requisite is We affirm the finding of the NLRC that "Article
wanting. His receipt of the telegram disapproving 282 (b) of the Labor Code requires that . . . such
his application for emergency leave starting April 30, neglect must not only be gross, it should be 'Gross
1998 has not been shown. And it cannot be said and habitual neglect' in character." As aptly
that he disobeyed the May 5, 1998 telegram since pronounced by the NLRC, "the penalty of dismissal is
he received it only on May 7, 1998. On the quite severe here" noting that the labor arbiter
contrary, that he immediately hired back to Manila himself admits that she committed the infraction for
upon receipt thereof negates a perverse attitude. the first time.
As to Gonzales’ alleged concealment of his
candidacy (for provincial board member) as a PLDT v. NLRC (99)
ground for Acesite’s loss of trust and confidence in Likewise, it must be noted that willful defiance
him, the same is not impressed with merit. It of company rules must be characterized by perverse
should be noted that Acesite’s ground for attitude that would be considered as inimical to the
terminating the services of Gonzales as stated in the interest of his employer. Even when an employee is
Notice of Termination is his alleged acts of found to have transgressed the employer's rules, in
insubordination/disobedience. The concealment of the actual imposition of penalties upon the erring
candidacy angle harped upon by Acesite can only employee, due consideration must still be given to
thus be considered as mere afterthought to further his length of service and the number of violations
justify his illegal dismissal. committed during his employ.
With regards to Gonzales’ perceived feigning of
illness, the same is purely speculatory.
If there is anything that Gonzales can be faulted
for, it is his being too presumptuous that his
application for leave would be approved. GROSS NEGLIGENCE DEFINED

B. GROSS AND HABITUAL NEGLECT OF DUTIES Tres Reyes v. Maxim’s Tea House (2003)
Under the Labor Code, gross negligence is a
Requisites valid ground for an employer to terminate an
employee. Gross negligence is negligence
National Sugar refineries Corp. v. NLRC (98) characterized by want of even slight care, acting or
Neglect of duty, to be a ground for dismissal, omitting to act in a situation where there is a duty to
must be both gross and habitual.[4] In the instant ac, not inadvertently but willfully and intentionally
case, Pabiona’s neglect of duty was gross. As her with a conscious indifference to consequences
position related to money matters, she was expected insofar as other persons may be affected. In this
and required to be extra vigilant in the case, however, there is no substantial basis to
performance of her job as it involved the support a finding that petitioner committed gross
financial interest of the company. She was also negligence.
habitually remiss in her duties. She issued a Refined
Sugar Delivery Order to Shantung Commercial National Bookstore, Inc. v. CA (2002)
without first examining the corresponding Raw Sugar Gross negligence has been defined as the want
Quedan and Delivery Order. Consequently, or absence of or failure to exercise slight care or
Shantung Commercial was able to withdraw a larger diligence, or the entire absence of care. It evinces a
quantity of refined sugar than what was allowable to thoughtless disregard of consequences without
it. In another instance, Pabiona again issued a exerting any effort to avoid them.[19] A perusal of
Refined Sugar Delivery Order to Shantung the records of the case does not in any way show
Commercial without the corresponding Raw Sugar that private respondents were even remotely
Quedan. Thus, NASUREFCO was not able to collect negligent of their duties so as to cause the loss of
raw sugar from Shantung Commercial equivalent to petitioner National Bookstore’s funds. Private
the refined sugar it had withdrawn. Thirdly, Pabiona respondents were able to illustrate with candor and
made it appear that in 1989 Dacongcogon Producers sincerity the procedure they took prior to the loss
endorsed more than 200,000 piculs of raw sugar to which was witnessed by an employee of petitioner
NASUREFCO thereby allowing it to qualify in the National Bookstore. They were in fact subjected to a
Volume Incentive Program under which NASUREFCO thorough body search by petitioner National
would pay P1.00 per picul of raw sugar to every Bookstore’s lady guard before leaving their place of
planter that endorsed 200,000 piculs or more of raw work on the date in issue, a claim not controverted
sugar to NASUREFCO. The fact that NASUREFCO by petitioners. Moreover, it was not even shown that
did not suffer losses from the anomalies committed they had access to the vault where the money
by Pabiona because of timely discovery does not was kept.

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Significantly, in order to constitute a just cause the satisfaction of the labor arbiter, public
for the employee’s dismissal, the neglect of duties respondent NLRC, and finally, this Court.
must not only be gross but also habitual. Thus, the
single or isolated act of negligence does not Paguio Transport Corp. v. NLRC (98)
constitute a just cause for the dismissal of the Private respondent's admission that he was
employee.[20] Verily, assuming arguendo that involved in the November 4, 1993 accident did not
private respondents were negligent, although we give petitioner a just cause to dismiss him. Mere
find otherwise, it could only be a single or an involvement in an accident, absent any showing of
isolated act that cannot be categorized as habitual, fault or recklessness on the part of an employee, is
hence, not a just cause for their dismissal. not a valid ground for dismissal.

Philippine Aeolus Automotive United Corp. v. C. FRAUD – WILLFUL BREACH OF TRUST


NLRC (2000)
Gross negligence implies a want or absence of Loss of Confidence – Requisites
or failure to exercise slight care or diligence, or the
entire absence of care. It evinces a thoughtless Jardine Davies, Inc. v. NLRC (99)
disregard of consequences without exerting any It is settled that loss of confidence as a just
effort to avoid them. The negligence, to warrant cause for terminating employment must be premised
removal from service, should not merely be gross on the fact that an employee concerned holds a
but also habitual. Likewise, the ground "willful position of trust and confidence. This situation
breach by the employee of the trust reposed in him obtains where a person is entrusted with confidence
by his employer" must be founded on facts on delicate matters, such as care and protection,
established by the employer who must clearly and handling or custody of the employer's property, as in
convincingly prove by substantial evidence the facts this case. But, in order to constitute a just cause for
and incidents upon which loss of confidence in the dismissal, the act complained of must be "work-
employee may fairly be made to rest. All these related" such as would show the employee
requirements prescribed by law and jurisprudence concerned to be unfit to continue working for the
are wanting in the case at bar. employer. Likewise, it must be noted that proof
beyond reasonable doubt is not required to dismiss
Cebu Filveneer Corp. v. NLRC (98) an employee on the ground of loss of confidence. It
Gross negligence implies a want or absence of is sufficient that there is some basis for such loss of
or failure to exercise slight care or diligence or the confidence, such as when the employer has
entire absence of care. It evinces a thoughtless reasonable ground to believe that the employee
disregard of consequences without exerting any concerned is responsible for the purported
effort to avoid them. misconduct, and the nature of his participation
therein renders him unworthy of the trust and
Citibank N. A. v. Gatchalian (95) confidence demanded of his position.
Gross negligence implies a want or absence of
or failure to exercise slight care or diligence, or the
entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any
effort to avoid them.
POSITION OF TRUST AND CONFIDENCE
Simple Negligence
Panday v. NLRC (92)
RDS Trucking v. NLRC (98) The case of Lepanto Consolidated Mining Co. v.
Our findings and conclusion in this labor case Court of Appeals, 1 SCRA 125 [1961], provides us
are not affected by the outcome of that criminal with a definition of a 'position of trust and
case. A mere reading of the MeTC decision clearly confidence'. It one where a person is 'entrusted with
reveals that private respondent was in fact acquitted confidence on delicate matters, or with the custody,
of the charge of malicious mischief. The trial court handling, or care and protection of the employer's
categorically found that there was "no direct property . . ..'
evidence to show that the accused deliberately
caused damage" to the truck of petitioners. Although Farrol v. Court of Appeals (2000)
private respondent was held liable for simple A perusal of RCPI’s dismissal notice reveals that
imprudence resulting in damage to property from it merely stated a conclusion to the effect that the
the mere fact that he was not able to satisfactorily withholding was deliberately done to hide alleged
explain the cause of damage to the truck, such is malversation or misappropriation without, however,
not sufficient to validate his illegal dismissal. Under stating the facts and circumstances in support
the Labor Code simple negligence is not a ground for thereof. It further mentioned that the position of
the dismissal of an employee. Article 282 (b) cashier requires utmost trust and confidence but
explicitly provides that negligence must not only be failed to allege the breach of trust on the part of
gross but must be both "gross and habitual" in petitioner and how the alleged breach was
character to justify depriving an employee of his committed. On the assumption that there was
means of livelihood. In this case, the alleged indeed a breach, there is no evidence that petitioner
negligence of private respondent cannot be was a managerial employee of respondent RCPI. It
considered "gross and habitual." As already should be noted that the term "trust and confidence"
discussed the infractions imputed against private is restricted to managerial employees. It may not
respondent, who has not been accorded any even be presumed that when there is a shortage,
semblance of due process prior to his termination, there is also a corresponding breach of trust.
have not been substantially proven by petitioners to Cash shortages in a cashier’s work may happen,

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and when there is no proof that the same was termination of employment by an employer.[26] This
deliberately done for a fraudulent or wrongful ground should be duly established.[27] Substantial
purpose, it cannot constitute breach of trust so as to evidence is sufficient as long as such loss of
render the dismissal from work invalid. confidence is well-founded or if the employer has
reasonable ground to believe that the employee
Sulpicio Lines, Inc. v. Gulde (2002) concerned is responsible for the misconduct and her
The basic requisite for dismissal on the ground act rendered her unworthy of the trust and
of loss of trust and confidence is that the employee confidence demanded of her position.[28] It must be
concerned must be one holding a position of trust shown, though, that the employee concerned holds a
and confidence. However, loss of confidence must position of trust.[29] The betrayal of this trust is the
not be indiscriminately used as a shield by the essence of the offense for which an employee is
employer against a claim that the dismissal of an penalized.[30]
employee was arbitrary. Loss of confidence as a just Petitioner argues that her position as Finance
cause for termination of employment is premised on Director of respondent's Beer Division is not one of
the fact that the employee concerned holds a trust but one that is merely functional and advisory
position of responsibility or trust and confidence. He in nature. She possesses no administrative control
must be invested with confidence on delicate over the plants and region finance officers, including
matters, such as custody handling or care and cashiers. She reports to two superiors.
protection of the property and assets of the Petitioner's argument is misplaced. As Finance
employer. And, in order to constitute a just cause for Director, she is in charge of the custody, handling,
dismissal, the act complained of must be work- care and protection of respondent's funds. The
related and shows that the employee concerned is encashment of her personal checks and her private
unfit to continue to work for the employer. use of such funds, albeit for short periods of time,
Further, well-settled is the rule that "for loss of are contrary to the fiduciary nature of her duties.
trust and confidence to be a valid ground for Moreover, petitioner has functional control over
dismissal of an employee, it must be substantial and all the plant and region finance officers, including
founded on clearly established facts sufficient to cashiers, within the Luzon Operations Area. In fact,
warrant the employee’s separation from she is the highest ranking managerial employee for
employment." the finance section of the Luzon Beer Division
In this case, contrary to the allegations of Operations. Obviously, her position is a factor in
petitioner, there is no sufficient evidence to show abetting the encashment of her personal checks.
that respondent conspired with the thieves in Indeed, we find substantial ground for
stealing four (4) pieces of basketball from respondent's loss of confidence in petitioner. She
petitioner’s truck. As found by the CA: does not deny encashing her personal checks at
[I]t ca be gleaned that the evidence respondent's sales offices and diverting for her own
presented in the case did not clearly prove that private use the latter's resources. The audit
petitioner willfully breach his duty. It was not
investigation accounted for all the checks she
proven the indeed he connived with the thieves.
The same was even commented upon by the
encashed, some of which were dishonored for
NLRC when it said that the allegations that insufficiency of funds. The Investigating Panel
petitioner (respondent herein) knew the thieves concluded that petitioner not only encashed her
were not even found in the police report. (p. 29. personal checks at respondent's sales offices, but
Rollo) Additionally, the reason given by the truck also used company funds to temporarily satisfy her
helper as to his inaction in preventing the insufficient accounts. This Court has held that
thieves from taking the basketballs is not
misappropriation of company funds, although the
incredible. His reaction given the situation is not
beyond human reaction to similar circumstances.
shortages had been fully restituted, is a valid ground
It is a natural reaction to think about one’s to terminate the services of an employee of the
safety first before the safety of another’s company for loss of trust and confidence.
property.
Likewise, contrary to petitioner’s claim, GUIDELINES
respondent did not stop the truck to allow the
looters to disembark. Rather, respondent made
Greenhills Products, Inc. v. NLRC (98)
a brief stop at the house of a co-employee in
Calao Street near the Agusan Institute of
The guidelines for the doctrine of loss of
Technology to deliver his medicines.In fact, as confidence to apply are: (1) loss of confidence
testified by Manapat, respondent’s companion, should not be simulated; (2) it should not be used as
respondent was not aware that the two pilferers a subterfuge for causes which are improper, illegal,
boarded the truck and he learned about the theft or unjustified; (3) it may not be arbitrarily asserted
only when Manapat told him about it. in the face of overwhelming evidence to the
In fine, petitioner failed to present sufficient contrary; and (4) it must be genuine, not a mere
evidence to show that respondent committed acts afterthought to justify an earlier action taken in bad
that would warrant his dismissal for loss of trust and faith. 8 Petitioner contended that respondent's
confidence. It is significant to note that respondent dismissal was for a valid cause arguing that the
had been in petitioner’s employ for thirteen (13) latter stole company properties and, thereafter,
years and it has not been shown that during this disposed of them for a consideration in favor of
period he had been guilty of any infraction against Roberto Caramelo.
petitioner. It is difficult to believe that he would
deliberately jeopardize his job for something as Vitarich v. NLRC (99)
worthless as basketballs. Being a mere afterthought to justify its earlier
action of terminating Recodo, the allegations of
Santos v. San Miguel Corporation (2003) policy violations do not constitute just causes of
Article 282(c) of the same Code provides that dismissal on account of the lack of confidence
"willful breach by the employee of the trust reposed contemplated in Midas Touch Food Corporation v.
in him by his employer" is a cause for the

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NLRC under which the guidelines for the application disrespect and defiance of authority and assumes
of the doctrine of loss of confidence are: (a) loss of the proportion of serious misconduct or
confidence which should not be simulated; (b) it insubordination, any of which constitutes just cause
should not be used as a subterfuge for causes which for dismissal from employment.
are improper, illegal or unjustified; (c) it should not
be arbitrarily asserted in the face of overwhelming CONVICTION – MORAL TURPITUDE
evidence to the contrary; and (d) it must be
genuine, not a mere afterthought to justify earlier International Rice Research Institute v. NLRC
action taken in bad faith. (93)
Article 282 of the Labor Code enumerates the
ATTITUDE just causes wherein an employer may terminate an
employment. Verily, conviction of a crime involving
San Antonio v. NLRC (95) moral turpitude is not one of these justifiable
The Court is not prepared to conclude that causes. Neither may said ground be justified under
petitioner has been guilty of willful disobedience in Article 282 (c) nor under 282 (d) by analogy. Fraud
failing to comply posthaste with the transfer order. or willful breach by the employees of the trust
In Gold City Integrated Port Services, Inc. v. NLRC, reposed in him by his employer or duly authorized
the Court, on the subject "willful disobedience," has representative under Article 282 (c) refers to any
explained: fault or culpability on the part of the employee in the
"Willful disobedience of the employer's lawful discharge of his duty rendering him absolutely
orders', as a just cause for the dismissal of an unworthy of the trust and confidence demanded by
employee, envisages the concurrence of at least
his position. It cannot be gainsaid that the breach of
two (2) requisites: the employee's assailed
conduct must have been willful or intentional,
trust must be related to the performance of the
the wilfulness being characterized by a 'wrongful employee's function. On the other hand, the
and perverse attitude'; and the order violated commission of a crime by the employee under Article
must have been reasonable, lawful, made known 282 (d) refers to an offense against the person of his
to the employee and must pertain to the duties employer or any immediate member of his family or
which he had been engaged to discharged." his duly authorized representative. Analogous causes
must have an element similar to those found in the
Willful Breach specific just cause enumerated under Article 282.
Clearly lacking in the ground invoked by petitioner is
Atlas Consolidated Mining and Development its relation to his work or to his employer.
Corp. v. NLRC (98); Felix v. NLRC (2004) In the case at bar, the commission of the crime
Settled is the rule that under Article 283 (c) of of homicide was outside the perimeter of the IRRI
the Labor Code, the breach of trust must be willful. complex, having been committed in a restaurant
A breach is willful if it is done intentionally, after office hours and against a non-IRRI employee.
knowingly and purposely, without justifiable excuse, Thus, the conviction of Micosa for homicide was not
as distinguished from an act done carelessly, work-related, his misdeed having no relation to his
thoughtlessly, heedlessly or inadvertently. It must position as laborer and was not directed or
rest on substantial grounds and not on the committed against IRRI or its authorized agent.
employer's arbitrariness, whims, caprices or XXX As to what crime involves moral turpitude,
suspicion; otherwise, the employee would eternally is for the Supreme Court to determine. Thus, the
remain at the mercy of the employer. It should be precipitate conclusion of IRRI that conviction of the
genuine and not simulated; nor should it appear as a crime of homicide involves moral turpitude is
mere afterthought to justify earlier action taken in unwarranted considering that the said crime which
bad faith or a subterfuge for causes which are resulted from an act of incomplete self-defense from
improper, illegal or unjustified. It has never been an unlawful aggression by the victim has not been
intended to afford an occasion for abuse because of so classified as involving moral turpitude.
its subjective nature.
There must therefore be an actual breach of Oania v. NLRC (95)
duty committed by the employee which must be Violation of a company rule prohibiting the
established by substantial evidence. infliction of harm or physical injury against any
D. COMMISSION OF CRIME; 282 (D) person under the particular circumstances provided
for in the same rule may be deemed analogous to
E. ANALOGOUS CASES; 282 (E) "serious misconduct" stated in Art. 282 (a) above.
To repeat, however, there is no substantial evidence
QUARRELSOME – BOSSY definitely pointing to petitioners as the perpetrators
of the mauling of Malong. What is an established fact
Cathedral School of Technology v. NLRC (92) is that, after investigation, private respondent
The reason for which private respondent's dismissed them and, thereafter, a criminal complaint
services were terminated, namely, her unreasonable was filed against petitioners. Likewise, it is of record
behavior and unpleasant department in dealing with that Malong desisted from suing the perpetrators
the people she closely works with in the course of before the regular courts.
her employment, is analogous to the other "just
causes" enumerated under the Labor Code, as Lim v. NLRC (96)
amended. Gross inefficiency falls within the purview of
Petitioners' averments on private respondent's :other causes analogous to the foregoing,” and
disagreeable character — "quarrelsome, bossy, constitutes just cause to terminate an employee
unreasonable and very difficult to deal with" — are under Art. 282, labor Code. One is analogous to
supported by the various testimonies of several co- another if it is susceptible of comparison with the
employees and students of the school. The conduct latter either in general or in some specific detail,
she exhibited on that occasion smacks of sheer

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or has a close relationship with the latter. Gross alleges, coincides with the date of the original
inefficiency is closely related to gross neglect for complaint strongly indicates that such employment
both involve specific acts of omission on the part of was only meant to help respondent and his family
the employee resulting in damage to the employer survive during the pendency of his case. It has been
or to his business. said that abandonment of position cannot be lightly
inferred, much less legally presumed from certain
F. OTHERS – JUST CAUSES CLAIMED BY EMPLOYER equivocal acts such as an interim employment.

1. ABANDONMENT SPECIFIC ACTS

DEFINED Premiere Development Bank v. NLRC (98)


We agree with both the NLRC and the Solicitor
Escobin v. NLRC (98) General that respondent did not abandon her job. To
This contention is untenable. Abandonment, as constitute abandonment, two elements must concur:
a just and valid cause for dismissal, requires a (1) the failure to report for work or absence without
deliberate, unjustified refusal of an employee to valid or justifiable reason, and (2) a clear intention
resume his work, coupled with a clear absence of to sever the employer-employee relationship, with
any intention of returning to his work. No evidence the second element as the more determinative
was presented to establish that petitioners factor and being manifested by some overt acts.
relinquished their jobs. Abandoning one's job means the deliberate,
unjustified refusal of the employee to resume his
REQUISITES employment and the burden of proof is on the
employer to show a clear and deliberate intent on
Metro Transit Corp., Inc. v. NLRC (99) the part of the employee to discontinue
Indeed, for abandonment of work to be a just employment. The law, however, does not enumerate
and valid ground for dismissal, there must be a what specific overt acts can be considered as strong
deliberate and unjustified refusal on the part of an evidence of the intention to sever the employee-
employee to resume his employment. The burden of employer relationship. An employee who merely
proof is on the employer to show an unequivocal took steps to protest her indefinite suspension and
intent on the part of the employee to discontinue to subsequently file an action for damages, cannot
employment. To warrant a finding of abandonment, be said to have abandoned her work nor is it
there must be evidence not only of the failure of an indicative of an intention to sever the employer-
employee to report for work or his absence without employee relationship. Her failure to report for work
valid or justifiable reason, but also of his intention to was due to her indefinite suspension. Petitioner's
sever the employer-employee relationship. The allegation of abandonment is further belied by the
second element is the more determinative factor, fact that private respondent filed a complaint for
being manifested by overt acts. illegal dismissal. Abandonment of work is
inconsistent with the filing of said complaint.
Leonardo v. NLRC (2000) and Fuerte v. Aquino
(2000) NO ABANDONMENT
Neither can we say that FUERTE’s actions are
indicative of abandonment. To constitute such a Phil. Airlines, Inc. v. NLRC (99)
ground for dismissal, there must be (1) failure to Thus, the eight-hour work period does not
report for work or absence without valid or include the meal break. Nowhere in the law may it
justifiable reason; and (2) a clear intention, as be inferred that employees must take their meals
manifested by some overt acts, to sever the within the company premises. Employees are not
employer-employee relationship. We have prohibited from going out of the premises as long as
accordingly held that the filing of a complaint for they return to their posts on time. Private
illegal dismissal, as in this case, is inconsistent with respondent's act, therefore, of going home to take
a charge of abandonment. his dinner does not constitute abandonment.

INFERENCE – PRESCRIPTION CMP Federal Security Agency, Inc v. NLRC (99)


Contrariwise, when Caranto was relieved from
Hacienda Dapdap v. NLRC (98) his post on 6 May 1994 he immediately pursued his
No such grave abuse of discretion was claim against CMP by amending his complaint six (6)
committed by the NLRC as it correctly applied the days after to include illegal dismissal among his
consistent ruling in labor cases that a charge of charges. This can hardly be expected from one who
abandonment is totally inconsistent with the has voluntarily "abandoned" his job, as claimed by
immediate filing of a complaint for illegal dismissal. CMP. The immediate filing of a complaint for illegal
It is indeed inconceivable that an employee like dismissal against the employer is a clear indication
herein respondent who has been working at Hda. that the employee has not given up on his work.
Dapdap I since 1977 and cultivating a substantial
portion of a 6-hectare lot therein for himself would Mendoza v. NLRC (99)
just abandon his work in 1992 for no apparent We cannot concur with the NLRC. The
reason. As quoted by the Court in Judric Canning unflinching rule in illegal dismissal cases is that the
Corporation v. Inciong, "To get a job is difficult; to employer bears the burden of proof. To establish a
run from it is foolhardy." Nor could intent to case of abandonment, the employer must prove the
abandon be presumed from private respondent's employee's deliberate and unjustified refusal to
subsequent employment with another employer as resume employment without any intention of
petitioner alleges. The fact that the start of such returning. Specifically, the employer has to show
employment, i.e., after 1 March 1992 as petitioner the concurrence of the following: (1) the

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employee's intention to abandon employment and
(2) overt acts from which such intention may be Manila Electric Co. v. NLRC (96)
inferred — as when the employee shows no desire to Habitual absenteeism should not and cannot be
resume works. The private respondent failed to tolerated by petitioner herein which is a public utility
establish any of these. company engaged in the business of distributing and
The employer herein argues that the lack of a selling electric energy within its franchise areas and
notice of termination is proof that petitioner that the maintenance of Meralco’s distribution
abandoned her job. We disagree. Mere absence from facilities (electric lines) by responding to customer’s
work, especially where the employee has been complaints is of paramount importance to the
verbally told not to report, cannot by itself constitute consuming public.
abandonment. To repeat, the employer has the An employee’s habitual absenteeism without
burden of proving overt acts on the employee's part leave, which violated company rules and regulations
which demonstrate a desire or an intention to is sufficient cause to justify termination from service.
abandon her work. It failed to discharge this burden.
Furthermore, the filing of a complaint for illegal 5. TERM EMPLOYMENT
dismissal within a reasonable period negates
abandonment. In the present case, the Complaint Brent School v. Zamora (90)
was filed about two weeks after petitioner has been Such interpretation puts the seal on Bibiso upon
dismissed or had been deemed resigned. the effect of the expiry of an agreed period of
employment as still good rule — a rule reaffirmed in
2. LOANS the recent case of Escudero vs. Office of the
President where, in the fairly analogous case of a
BORROWING MONEY teacher being served by her school a notice of
termination following the expiration of the last of
Pearl S. Buck Foundation, Inc. v. NRLC (90) three successive fixed-term employment contracts,
Borrowing money is neither dishonest, nor the Court held:
immoral, nor illegal, much less criminal. (Medical "Reyes' (the teacher's) argument is not
Doctors, Inc. [Makati Medical Center] v. NLRC) persuasive. It loses sight of the fact that her
However, said act becomes a serious misconduct employment was probationary, contractual in
that may justly be asserted as a ground for dismissal nature, and one with a definitive period. At the
when reprehensible behavior such as the use of a expiration of the period stipulated in the contract,
trust relationship as a leverage for borrowing money her appointment was deemed terminated and the
is involved. A recipient of largesse may be so letter informing her of the non-renewal of her
grateful that out of a sense of "utang na loob" she contract is not a condition sine qua non before Reyes
may lend money to an employee or relative of a may be deemed to have ceased in the employ of
benefactor believing that the loan would be paid petitioner UST. The notice is a mere reminder that
anyway. In this case, the fact that Aliarte has Reyes' contract of employment was due to expire
retracted her complaint is of no moment. She loaned and that the contract would no longer be renewed. It
money to the respondent, not once but twice and is not a letter of termination. The interpretation that
there can be no other assumption where the money the notice is only a reminder is consistent with the
came from except from the trust funds intended for court's finding in Labajo, supra. . . ."
the ward.
Romares v. NLRC (98)
3. COURTESY RESIGNATION The Brent ruling also laid down the criteria
under which "term employment" cannot be said to
Batongbacal v. Associated Bank (88) be in circumvention of the law on security of tenure:
While it may be said that the private 1. The fixed period of employment was
respondent's call for courtesy resignations was knowingly and voluntarily agreed upon by the
prompted by its determination to survive, we cannot parties without any force, duress, or improper
lend legality to the manner by which it pursued its pressure being brought to bear upon the employee
goal. By directing its employees to submit letters of and absent any other circumstances vitiating his
courtesy resignation, the bank in effect forced upon consent; or
its employees an act which they themselves should 2. It satisfactorily appears that the employer
voluntarily do. It should be emphasized that and the employee dealt with each other on more or
resignation per se means voluntary relinquishment less equal terms with no moral dominance exercised
of a position or office. Adding the word "courtesy" by the former or the latter.
did not change the essence of resignation. That None of these requisites were complied with.
courtesy resignations were utilized in government
reorganization did not give private respondent the Medenilla v. Phil. Veterans Bank (2000)
right to use it as well in its own reorganization and Since findings by the Labor Arbiter are binding
rehabilitation plan. There is no guarantee that all on this Court if supported by substantial evidence,
employers will not use it to rid themselves arbitrarily the Court rules that there was illegal dismissal
of employees they do not like, in the guise of absent just cause, which is one of the facets of a
"streamlining" its organization. On the other hand, dismissal. Such illegal dismissal warrants
employees would be unduly exposed to outright reinstatement and payment of backwages. However,
termination of employment which is anathema to the since petitioners’ reinstatement is now considered
constitutional mandate of security of tenure. impractical because the new Philippine Veterans
Bank has been rehabilitated by virtue of RA 7169,
4. WORK ATTITUDE the Court limits the relief to be granted to the
petitioners to the unpaid wages during the
ABSENCES remaining period of their employment contract.

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As held by this Court, if the contract is for a behavior amounts to immorality, justifying his
fixed term and the employee is dismissed without termination from employment.
just cause, he is entitled to the payment of his
salaries corresponding to the unexpired portion of 8. PROFESSIONAL TRAINING
the employment contract. In the case under
scrutiny, the unpaid wages should be reckoned on RESIDENCY TRAINING
February 18, 1991 to January 1, 1992. January 1,
1992 is considered the date of expiration of the Felix v. Buenaseda (95)
period of liquidation since January 2, 1992 was the A residency or resident physician position in a
effectivity of RA 7169, entitled "An Act to medical specialty is never a permanent one.
Rehabilitate the Philippine Veterans Bank". Residency connotes training and temporary status.
It is the step taken by a physician right after post-
6. PAST INFRACTIONS graduate internship (and after hurdling the Medical
Licensure Examinations) prior to his recognition as a
PAST OFFENSES specialist or sub-specialist in a given field.
This upward movement from residency to
La Carlota Planters Assn. v. NLRC (98) specialist rank, institutionalized in the residency
The correct rule has always been that such training process, guarantees minimum standards
previous offenses may be so used as valid and skills and ensures that the physician claiming to
justification for dismissal from work only if the be a specialist will not be set loose on the
infractions are related to the subsequent offense community without the basic knowledge and skills of
upon which basis the termination of employment is his specialty. Because acceptance and promotion
decreed. The previous infraction, in other words, requirements are stringent, competitive, and based
may be used if it has a bearing to the proximate on merit, acceptance to a first year residency
offense warranting dismissal. program is no guaranty that the physician will
complete the program. Attrition rates are high.
Ramoran v. Jardine CMG Life Insurance Co., Some programs are pyramidal. Promotion to the
Inc. (2000) next post-graduate year is based on merit and
Finally, there is no basis to mitigate petitioner’s performance determined by periodic evaluations and
liability inasmuch as this is not the first time that examinations of knowledge, skills and bedside
petitioner was charged with falsification by manner. Under this system, residents, specially
respondent Jardine. She had in fact earlier served a those in university teaching hospitals 18 enjoy their
five (5)-day suspension from November 8-13, 1993 right to security of tenure only to the extent that
for admittedly tampering with the entries in Official they periodically make the grade, making the
Receipt No. 1013 issued by Limited Vision Center on situation quite unique as far as physicians
July 7, 1993, in support of her application for the undergoing post-graduate residencies and
optical loan she had obtained from respondent fellowships are concerned.
Jardine. Under its company rules, respondent
Jardine was, strictly speaking, entitled to dismiss 9. LOVE AND MORALS
petitioner on that ground. However, due to
petitioner’s voluntary admission of the offense and IMMORALITY
for humanitarian reasons, she was only given a five
(5)-day suspension. In a memorandum, respondent Santos v. NLRC (98)
Jardine warned the petitioner that "any future Accordingly, teachers must abide by a standard
violation of the same nature, irrespective of the time of personal conduct which not only proscribes the
frame [sic] that it is repeated or committed, would commission of immoral acts, but also prohibits
result in the imposition of the maximum penalty of behavior creating a suspicion of immorality because
dismissal." As aptly remarked by the appellate court of the harmful impression it might have on the
"the seeds of mistrust had been sown, awaiting only students. Likewise, they must observe a high
the proper occasion for it to grow and fester." standard of integrity and honesty.
Petitioner, thus, had only herself to blame when she From the foregoing, it seems obvious that when
was finally dismissed, for cause, by respondent a teacher engages in extra-marital relationship,
Jardine for the reason that she falsified her subject especially when the parties are both married, such
overtime authorization slips dated December 6 and behavior amounts to immorality, justifying his
14, 1993 in violation of the Company Rules and termination from employment.
Regulations.
LOVE
7. ANIMOSITY
Chua-Qua v. Clave (90)
Santos v. NLRC (98) With the finding that there is no substantial
Accordingly, teachers must abide by a standard evidence of the imputed immoral acts, it follows that
of personal conduct which not only proscribes the the alleged violation of the Code of Ethics governing
commission of immoral acts, but also prohibits school teachers would have no basis. Private
behavior creating a suspicion of immorality because respondent utterly failed to show that petitioner took
of the harmful impression it might have on the advantage of her position to court her student. If the
students. Likewise, they must observe a high two eventually fell in love, despite the disparity in
standard of integrity and honesty. their ages and academic levels, this only lends
From the foregoing, it seems obvious that when substance to the truism that the heart has reasons
a teacher engages in extra-marital relationship, of its own which reason does not know. But,
especially when the parties are both married, such definitely, yielding to this gentle and universal
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immorality. The deviation of the circumstances of evidence, particularly, for lack of proof that the
their marriage from the usual societal pattern cannot USECO was damaged by the acts attributed to
be considered as a defiance of contemporary social petitioner.
mores. These are patent errors. Petitioner was not
It would seem quite obvious that the avowed denied due process. Similarly, it is a well
policy of the school in rearing and educating children established ruled that the dismissal of the criminal
is being unnecessarily bannered to justify the case against an employee shall not necessarily be a
dismissal of petitioner. This policy, however, is not bar to his dismissal from employment on the ground
at odds with and should not be capitalized on to of loss of trust and confidence. The NLRC corrected
defeat the security of tenure granted by the these patent errors when it granted private
Constitution to labor. In termination cases, the respondent’s second motion for reconsideration.
burden of proving just and valid cause for dismissing
an employee rests on the employer and his failure to CONVICTION
do so would result in a finding that the dismissal is
unjustified. Sampaguita Garments Corp. v. NLRC (94)
The private respondent's conviction of the crime
10. VIOLATION OF COMPANY RULES of theft of property belonging to the petitioner has
affirmed the existence of a valid ground for her
Aparente Sr. v. NLRC (2000) dismissal and thus removed the justification for the
The petitioner’s dismissal is justified by administrative decision ordering her reinstatement
Company rules and regulations. It is true that his with back wages. Nevertheless, the petitioner is still
violation of company rules is his first offense. subject to sanction for its failure to accord the
Nonetheless, the damage caused to private private respondent the right to an administrative
respondent amounted to more than P5,000.00, thus, investigation in conformity with the procedural
the penalty of discharge is properly imposable as requirements of due process.
provided by Section 12 of Rule 005-85 of CCBPI’s
Code of Disciplinary Rules and Regulations. DISMISSAL – CRIMINAL CASE
It is recognized that company policies and
regulations, unless shown to be grossly oppressive Lacorte v. Inciong (88)
or contrary to law, are generally valid and binding on The purpose of the proceedings before the fiscal
the parties and must be complied with until finally is to determine if there is sufficient evidence to
revised or amended, unilaterally or preferably warrant the prosecution and conviction of the
through negotiation, by competent authority. The accused. In assessing the evidence before him, the
Court has upheld a company’s management fiscal considers the basic rule that to successfully
prerogatives so long as they are exercised in good convict the accused the evidence must be beyond
faith for the advancement of the employer’s interest reasonable doubt and not merely substantial. On the
and not for the purpose of defeating or other hand, to support findings and conclusion of
circumventing the rights of the employees under administrative bodies only substantial evidence is
special laws or under valid agreements. required. It does not follow that once the fiscal
Article 282 (a) of the Labor Code of the dismisses the complaint for qualified theft,
Philippines sanctions termination by the employer of respondent officials should also have decided in
the employee’s services for serious misconduct or favor of petitioner. For one, the evidence presented
willful disobedience by the employee of the lawful before the two bodies may not be necessarily
orders of his employer or representative in identical. Secondly, the appreciation of the facts and
connection with his work. In the instant case, evidence presented is an exercise of discretion on
petitioner Aparente was terminated from service the part of administrative officials over which one
after having been found guilty of driving without a cannot impose his conclusion on the other. As we
valid driver’s license, which is a clear violation of the have already ruled, "the conviction of an employee
company’s rules and regulations. in a criminal case is not indispensable to warrant his
In order that an employer may dismiss an dismissal, and the fact that a criminal complaint
employee on the ground of willful disobedience, against the employee has been dropped by the fiscal
there must be concurrence of at least two requisites: is not binding and conclusive upon a labor tribunal.
The employee’s assailed conduct must have been
willful or intentional, the willfulness being Starlite etc. v. NLRC (89)
characterized by a wrongful and perverse attitude; There is no dispute that loss of confidence,
and the order violated must have been reasonable, when adequately proven, constitutes a valid ground
lawful, made known to the employee and must for dismissing an employee [Manila Midtown
pertain to the duties which he had been engaged to Commercial Corporation v. Nuwhrain] and proof
discharge. We have found these requisites to be beyond reasonable doubt is not required to
present in the case at bar. terminate him on this charge [Gatmaitan v. MRR]. It
is sufficient that there is some basis for such loss of
11. CRIMINAL CASE confidence [Galsim v. PNB; Central Textile Mills v.
NLRC] and that the employer has reasonable ground
EFFECT OF ACQUITTAL to believe or entertain the moral conviction that the
employee concerned is responsible for the
Ramos v. NLRC (98) misconduct and that the nature of his participation
The NLRC initially reversed the ruling of the therein would render him absolutely unworthy of the
labor arbiter on the grounds that: (1) petitioner was trust and confidence demanded of his position
denied procedural due process and (2) the criminal [Nevans v. CIR]. The doctrine goes on further to
case for estafa filed against her has been dismissed include the basic rule that the conviction of an
by the Manila Prosecutor’s office for insufficiency of employee in a criminal case is not indispensable

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to warrant his dismissal by his employer and that of its employee's qualifications, aptitudes and
the fact that a criminal complaint against the competence, to move him around in the various
employee has been dropped by the city fiscal is not areas of its business operations in order to ascertain
binding and conclusive upon a labor tribunal [Sea where the employee will function with utmost
Land Service Inc. v. NLRC]. efficiency and maximum productivity or benefit to
the company. An employee's right to security of
GUILT OR INNOCENCE tenure does not give him such a vested right in his
position as would deprive the company of its
Chua-Qua v. Clave (90) prerogative to change his assignment or transfer
While the criminal complaint where petitioner him where he will be most useful.
was included as one of the accused was dismissed
for insufficiency of evidence, the Court considers Castillo v. NLRC (99)
that the dismissal of the criminal complaint did not Petitioner claims that she was constructively
preclude a finding by the competent administrative dismissed. We agree with the respondent
authorities, that petitioner had indeed committed Commission's finding rejecting the same. Well-
acts inimical to the interest of his employer. settled is the rule that it is the prerogative of the
In Pepsi Cola Bottling Company of the employer to transfer and reassign employees for
Philippines v. Guanzon, we held that: "Private valid reasons and according to the requirement of its
respondent's guilt or innocence in the criminal case business. An owner of a business enterprise is given
is not determinative of the existence of a just or considerable leeway in managing his business. Our
authorized cause for his dismissal". This doctrine law recognizes certain rights collectively called
follows from the principle that the quantum and management prerogative as inherent in the
weight of evidence necessary to sustain conviction in management of business enterprises. One of the
criminal cases are quite different from the quantum prerogatives of management is the right to transfer
of evidence necessary for affirmance of a decision of employees in their work station. This Court has
the Labor Arbiter and of the NLRC. consistently recognized and upheld the prerogative
of management to transfer an employee from one
Quiambao v. NLRC (96) office to another within the business establishment,
This case is to be distinguished from those cases provided that there is no demotion in rank or a
in which it was held that the acquittal of the diminution of his salary, benefits and other
employee in the criminal case was not a bar to his privileges.
dismissal on the ground of loss of confidence. The The Court, as a rule, will not interfere with an
rulings in those cases were based on findings that employer's prerogative to regulate all aspects of
the evidence in the criminal case was not sufficient employment which includes among others, work
to satisfy the requirement of proof beyond assignment, working methods, and place and
reasonable doubt but otherwise adequate to support manner of work. The rule well-settled that labor laws
a finding that there was substantial evidence that discourage interference with an employer's
the employee was guilty. In contrast, in the case at judgment in the conduct of his business.
bar, there is entire want of evidence to justify the Of course, the managerial prerogative to
dismissal of the petitioner. The NLRC merely relied transfer personnel must be exercised without grave
on the fact that the Ministry of Justice found abuse of discretion, putting to mind the basic
petitioner probably guilty of estafa. In fact, the NLRC elements of justice and fair play. It cannot be used
found that the charges against him had not been as a subterfuge by the employer to rid himself of an
substantiated. undesirable worker.

12. ABOLITION OF POSITION OSS Security and Allied Services, Inc. v. NLRC
(2000)
San Miguel Corp. v. NLRC (99) Thus, the transfer of an employee ordinarily lies
Abolition of departments or positions in the within the ambit of management prerogatives.
company is one of the recognized management However, a transfer amounts to constructive
prerogatives. Noteworthy is the fact that the private dismissal when the transfer is unreasonable,
respondent does not question the validity of the inconvenient, or prejudicial to the employee, and it
business move of petitioner. In the absence of proof involves a demotion in rank or diminution of salaries,
that the act of petitioner was ill-motivated, it is benefits and other privileges. In the case at bench,
presumed that petitioner San Miguel Corporation nowhere in the record does it show that that the
acted in good faith. transfer of private respondent was anything but
done in good faith, without grave abuse of
TRANSFERS – DISCHARGE AND SUSPENSION discretion, and in the best interest of the business
enterprise.
Westin Phil. Plaza Hotel v. NLRC (99)
On the issue of legality and reasonableness of 13. CONSTRUCTIVE DISCHARGE
the order of transfer, it must be emphasized that
this Court has recognized and upheld the prerogative DEFINED
of management to transfer an employee from one
office to another within the business establishment, Philippine –Japan Active Carbon Corp. v. NLRC
provided that there is no demotion in rank or a (89)
diminution of his salary, benefits and other A constructive discharge is defined as: "A
privileges. This is a privilege inherent in the quitting because continued employment is rendered
employer's right to control and manage its impossible, unreasonable or unlikely; as, an offer
enterprise effectively. Besides, it is the employer's involving a demotion in rank and a diminution in
prerogative, based on its assessment and perception pay." (Moreno's Philippine Law Dictionary, 2nd

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Ed., p. 129, citing the case of Alia vs. Salani Una unreasonable or unlikely, as an offer involving a
Transportation Co. ) demotion in rank and; a diminution in pay. In the
XXX It is the employer's prerogative, based on instant case, private respondents were not demoted
its assessment and perception of its employees' in rank nor their pay diminished considerably. They
qualifications, aptitudes, and competence, to move were simply told without prior warning or notice that
them around in the various areas of its business there was no more work for them. After receiving
operations in order to ascertain where they will the notice of hearing of the petition for certification
function with maximum benefit to the company. An election on 27 October 1992, petitioners
employee's right to security of tenure does not give immediately told private respondents that they were
him such a vested right in his position as would no longer employed. Evidently it was the filing of the
deprive the company of its prerogative to change his petition for certification election and organization of
assignment or transfer him where he will be most a union within the company which led petitioners to
useful. When his transfer is not unreasonable, nor dismiss private respondents and not petitioners'
inconvenient, nor prejudicial to him, and it does not allegations of absence or abandonment by private
involve a demotion in rank or a diminution of his respondents. The formation of a labor union has
salaries, benefits, and other privileges, the employee never been a ground for valid termination, and
may not complain that it amounts to a constructive where there is an absence of clear, valid and legal
dismissal. cause, the law considers the termination illegal.

Hagonoy Rural Bank, Inc. v. NLRC (98) PREVENTIVE SUSPENSION - REMOVAL


The next issue that needs be addressed is
whether the first nine private respondents were Globe-Mackay Cable and Radio Corp. v. NLRC
illegally dismissed. We agree with the Labor Arbiter (92)
and the NLRC in holding the affirmative view. While Under such circumstances, preventive
it may be true that the private respondents had suspension was the proper remedial recourse
chosen to go on leave for one month effective 16 available to the company pending Salazar's
October 1992, the choice was not of their complete investigation. By itself, preventive suspension does
free will because the other alternative given by the not signify that the company has adjudged the
petitioner was suspension. The threat of suspension employee guilty of the charges she was asked to
thus became the proximate cause of the "leave." It answer and explain. Such disciplinary measure is
was a coerced option imposed by the petitioner. That resorted to for the protection of the company's
the petitioner had in fact in mind private property pending investigation of any alleged
respondents' suspension was finally made evident by malfeasance or misfeasance committed by the
its refusal to take them back after the expiration of employee.
the leave. The petitioner extended their leave for
another month with a promise to pay them salaries. Phil. Airlines v. NLRC (98)
After the expiration of the "extended" leave, the Preventive suspension is a disciplinary measure
petitioner still refused to accept them back. for the protection of the company's property pending
Ineluctably, the private respondents were investigation of any alleged malfeasance or
constructively dismissed from 16 October 1992. misfeasance committed by the employee. The
employer may place the worker concerned under
Phil. Wireless, Inc. v. NLRC (99) preventive suspension if his continued employment
The Court has held that constructive dismissal is poses a serious and imminent threat to the life or
“an involuntary resignation resorted to when property of the employer or of his co-workers.
continued employment is rendered impossible,
unreasonable, or unlikely; when there is a demotion RATIONALE
in rank and/or a dimunition in pay; or when a clear
discrimination, insensibility or disdain by an Kwikway Engineering Works v. NLRC (91)
employer becomes unbearable to the employee.” In Further, the preventive suspension of
this particular case, respondent voluntarily resigned respondent Vargas for an indefinite period amounted
from his employment. He was not pressured into to a dismissal and is violative of Section 4, Rule XIV
resigning. of the Implementing Rules of the Labor Code which
Voluntary resignation is defined as the act of an limits the preventive suspension to thirty (30) days.
employee who finds himself in a situation where he The said rule also provides that "the employer shall
believes that personal reasons cannot be sacrificed thereafter reinstate the worker in his former or in a
in favor of the exigency of the service and he has no substantially equivalent position or the employer
other choice but to disassociate himself from his may extend the period of suspension provided that
employment. during the period of extension, he pays the wages
Respondent considered his transfer/promotion and other benefits due to the worker." (Pacific
as a demotion due to the fact that he had no support Cement Company Inc. v. NLRC).
staff to assist him in his work and whom he could
supervise. There is no demotion where there is no OTHER CAUSES – BUSINESS RELATED CAUSES
reduction in position, rank or salary as a result of
such transfer. 23.06 OTHER CAUSES- BUSINESS RELATED
CAUSES
CONSTRUCTIVE DISCHARGE AND ILLEGAL DISMISSAL
Art. 283
Mark Roche International v. NLRC (99) Closure of establishment and reduction of personnel.
Constructive dismissal or a constructive
discharge has been defined as a quitting because The employer may also terminate the
continued employment is rendered impossible, employment of any employee due to the:

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e. Installation of labor saving devices, measure is made necessary or compelled by
f. Redundancy, economic factors that would otherwise endanger its
g. Retrenchment to prevent losses or stability or existence. In exercising its right to
h. Closing or cessation of operation of retrench employees, the firm may choose to close
the establishment or undertaking all, or a part of, its business to avoid further losses
unless the closing is for the or mitigate expenses. In Caffco International Limited
purpose of circumventing the vs. Office of the Minister-Ministry of Labor and
provisions of this Title, Employment, the Court has aptly observed that —
by serving a written notice on the workers and the Business enterprises today are faced with the
Ministry of Labor and Employment at least one (1) pressures of economic recession, stiff competition,
month before the intended date thereof. and labor unrest. Thus, businessmen are always
In case of termination due to the installation of pressured to adopt certain changes and programs in
labor saving devices or redundancy, the worker order to enhance their profits and protect their
affected thereby shall be entitled to a separation pay investments. Such changes may take various forms.
equivalent to at least his one (1) month pay or to at Management may even choose to close a branch, a
least one (1) month pay for every year of service, department, a plant, or a shop (Phil. Engineering
whichever is higher. Corp. vs. CIR).
In case of retrenchment to prevent losses and in
cases of closures or cessation of operations of
establishment or undertaking not due to serious
business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of A. INSTALLATION OF LABOR SAVING DEVICES
service, whichever is higher
A fraction of at least six (6) months shall be B. REDUNDANCY
considered one (1) whole year.
BUSINESS JUDGMENT
CAUSES PROCEDURAL SEPARATION
REQUIREMENT PAY Wiltshire File Co., Inc. v. NLRC (91)
Installation 1 month advance at least 1 The characterization of private respondent's
of Labor notice to DOLE month pay or 1 services as no longer necessary or sustainable, and
Saving and Employee month pay for therefore properly terminable, was an exercise of
Devices (twin every year of business judgment on the part of petitioner
requirements) service company. The wisdom or soundness of such
whichever is characterization or decision was not subject to
higher discretionary review on the part of the Labor Arbiter
Redundancy SAME at least 1 nor of the NLRC so long, of course, as violation of
month pay or 1 law or merely arbitrary and malicious action is not
month pay for shown. It should also be noted that the position held
every year of by private respondent, Sales Manager, was clearly
service managerial in character. In D.M. Consunji, Inc. v.
whichever is National Labor Relations Commission, the Court
higher held:
Retrenchme SAME 1 month pay or "An employer has a much wider discretion in
nt to ½ month pay terminating the employment relationship of
Prevent for every year managerial personnel as compared to rank and file
Losses of service employees. However, such prerogative of
whichever is management to dismiss or lay off an employee must
higher be made without abuse of discretion, for what is at
Closing, SAME 1 month pay or stake is not only the private respondent's position
Cessation of ½ month pay but also his means of livelihood . ."
Operation for every year The determination of the continuing necessity of
(unless of service a particular officer or position in a business
purpose is whichever is corporation is management's prerogative, and the
to higher courts will not interfere with the exercise of such so
circumvent long as no abuse of discretion or merely arbitrary or
Security of malicious action on the part of management is
Tenure shown.
guarantee)
not due to Almodiel v. NLRC (93)
serious A survey of existing case law will disclose that in
business Wiltshire File Co., Inc. v. NLRC, the position of Sales
losses or Manager was abolished on the ground of redundancy
financial as the duties previously discharged by the Sales
reverses. Manager simply added to the duties of the General
Manager to whom the Sales Manager to whom the
RECOGNITION OF RIGHT – BUSINESS RELATED CAUSES Sales Manager used to report. In adjudging said
termination as legal, this Court said that
Edge Apparel, Inc. v. NLRC (98) redundancy, for purposes of our Labor Code,
The law acknowledges the right of every exists where the services of an employee are in
business entity to reduce its work force if such excess of what is reasonably demanded by the

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actual requirements of the enterprise. The is suffering from business losses merely provides
characterization of an employee's services as no stronger justification for the termination.
longer necessary or sustainable, and therefore,
properly terminable, was an exercise of business LAW REQUIRED POSITION
judgment on the part of the employer. The wisdom
or soundness of such characterization or decision Escareal v. NLRC (92)
was not subject to discretionary review on the part Private respondent PRC had no valid and
of the Labor Arbiter nor of the NLRC so long, of acceptable basis to declare the position of Pollution
course, as violation of law or merely arbitrary and Control and Safety Manager redundant as the same
malicious action is not shown. may not be considered as superfluous; by the
XXX Indeed, an employer has no legal obligation express mandate of the provisions earlier cited, said
to keep more employees than are necessary for the positions are required by law. Thus, it cannot be
operation of its business. gainsaid that the services of the petitioner are in
excess of what is reasonably required by the
Asian Alcohol Corp. v. NLRC (99) enterprise. Otherwise, PRC would not have allowed
The right of management to dismiss workers ten (10) long years to pass before opening its eyes
during periods of business recession and to install to that fact; neither would it have increased the
labor saving devices to prevent losses is governed petitioner's salary to P23,100.00 a month effective 1
by Art. 283 of the labor Code, as amended. April 1988. The latter by itself is an unequivocal
Under the foregoing provision, retrenchment admission of the specific and special need for the
and redundancy are just causes for the employer to position and an open recognition of the valuable
terminate the services of workers to preserve the services rendered by the petitioner. Such admission
viability of the business. In exercising its right, and recognition are inconsistent with the proposition
however, management must faithfully comply with that petitioner's positions are redundant. If based on
the substantive and procedural requirements laid the ground of redundancy, a substitution of the
down law and jurisprudence. petitioner by Miguelito S. Navarro would be invalid
Not one of the private respondents refuted the as the creation of said position is mandated by the
foregoing facts. They only contend that the new law; the same cannot therefore be declared
management should have followed the policy of "first redundant. If the change was effected to consolidate
in, last out" in choosing which positions to declare as the functions of the pollution control and safety
redundant or whom to retrench to prevent further officer with the duties of the Industrial Engineering
business losses. No law mandates such a policy. And Manager, as private respondent postulates, such
the reason is simple enough. A host of relevant substitution was done in bad faith for as had already
factors come into play in determining cost efficient been pointed out, Miguelito S. Navarro was hardly
measures and in choosing the employees who will be qualified for the position.
retained or separated to save the company from
closing shop. In determining these issues, REDUNDANCY/RETRENCHMENT
management has to enjoy a pre-eminent role. The
characterization of positions as redundant is an AG & P United Rank and File Assn. v. NLRC (96)
exercise of business judgment on the part of the At this point, it is necessary to distinguish
employers. It will be upheld as long as it passes the "redundancy" from" retrenchment." Both are
test of arbitrariness. mentioned in Art. 283 of the Labor Code as just
causes for the closing of establishments or reduction
FINANCIAL LOSS of personnel. "Redundancy" exists when the services
of an employee are in excess of what is required by
Escareal v. NLRC (92) an enterprise. "Retrenchment," on the other hand, is
In Wiltshire File Co., Inc. vs. NLRC, this Court one of the economic grounds for dismissing
held that redundancy, for purposes of the Labor employees and is resorted to primarily to avoid or
Code, exists where the services of an employee are minimize business losses. Private respondent's
in excess of what is reasonably demanded by the "redundancy program," while denominated as such,
actual requirements of the enterprise; a position is is more precisely termed "retrenchment" because it
redundant when it is superfluous, and superfluity of is primarily intended to prevent serious business
a position or positions may be the outcome of a losses.
number of factors, such as the overhiring of
workers, a decreased volume of business or the Caffco International Ltd. v. Office MOLE (92)
dropping of a particular product line or service When an employer decides to reduce the
activity previously manufactured or undertaken by number of its personnel in order to prevent further
the enterprise. Redundancy in an employer's losses, he is exercising his right to retrench
personnel force, however, does not necessarily or employees to prevent losses in his business
even ordinarily refer to duplication of work. That no operations. On the other hand, where for purposes
other person was holding the same position which of economy, a company decides to reorganize its
the dismissed employee held prior to the termination departments by imposing on employees of one
of his services does not show that his position had department the duties performed by the employees
not become redundant. of the other department, thus rendering unnecessary
While concededly, Article 283 of the Labor Code the job of the latter, the services of the employees
does not require that the employer should be whose functions are now being performed by the
suffering financial losses before he can terminate the others, may be validly terminated on the ground of
services of the employee on the ground of redundancy.
redundancy, it does not mean either that a company
which is doing well can effect such a dismissal Sebuguero v. NLRC (95)
whimsically or capriciously. The fact that a company

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Redundancy exists where the services of an in excess of what is reasonably demanded by the
employee are in excess of what is reasonably actual requirements of the enterprise; a position is
demanded by the actual requirements of the redundant when it is superfluous, and superfluity of
enterprise. A position is redundant where it is a position or positions may be the outcome of a
superfluous, and superfluity of a position or positions number of factors, such as the overhiring of
may be the outcome of a number of factors, such as workers, a decreased volume of business or the
overhiring of workers, decreased volume of dropping of a particular product line or service
business, or dropping of a particular product line or activity previously manufactured or undertaken by
service activity previously manufactured or the enterprise. Redundancy in an employer's
undertaken by the enterprise. personnel force, however, does not necessarily or
Retrenchment, on the other hand, is used even ordinarily refer to duplication of work. That no
interchangeably with the term "lay-off." It is the other person was holding the same position which
termination of employment initiated by the employer the dismissed employee held prior to the termination
through no fault of the employees and without of his services does not show that his position had
prejudice to the latter, resorted to by management not become redundant.
during periods of business recession, industrial
depression, or seasonal fluctuations, or during lulls Edge Apparel, Inc. v. NLRC (98)
occasioned by lack of orders, shortage of materials, Redundancy exists where the services of an
conversion of the plant for a new production employee are in excess of what would reasonably be
program or the introduction of new methods or more demanded by the actual requirements of the
efficient machinery, or of automation. Simply put, it enterprise. A position is redundant when it is
is an act of the employer of dismissing employees superfluous, and superfluity of a position or positions
because of losses in the operation of a business, lack could be the result of a number of factors, such as
of work, and considerable reduction on the volume the overhiring of workers, a decrease in the volume
of his business, a right consistently recognized and of business or the dropping of a particular line or
affirmed by this Court. service previously manufactured or undertaken by
the enterprise. An employer has no legal obligation
to keep on the payroll employees more than the
number needed for the operation of the business.

WHEN REDUNDANCY

Wiltshire File Co., Inc. v. NLRC (91)


We believe that redundancy, for purposes of our CRITERIA – SELECTION OF EMPLOYEE
Labor Code, exists where the services of an
employee are in excess of what is reasonably Tierra International Construction Corp. v. NLTC
demanded by the actual requirements of the (92)
enterprise. Succinctly put, a position is redundant We agree with the petitioner that the law does
where it is superfluous, and superfluity of a position not make any distinction between a technical and a
or positions may be the outcome of a number of non-technical position for purposes of determining
factors, such as overhiring of workers, decreased the validity of termination due to redundancy.
volume of business, or dropping of a particular Neither does the law nor the stipulations of the
product line or service activity previously employment contract here involved require that
manufactured or undertaken by the enterprise. 4 junior employees should first be terminated. In
The employer has no legal obligation to keep in its redundancy, what is looked into is the position itself,
payroll more employees than are necessary for the the nature of the services performed by the
operation of its business. employee and the necessity of such position. As held
in Wiltshire File Co., Inc. vs. NLRC:
Tierra International Construction Corp. v. NLRC "The determination of the continuing necessity
(92) of a particular officer or position in a business
Termination of an employee's services because corporation is management's prerogative, and the
of a reduction of work force due to a decrease in the courts will not interfere with the exercise of such so
scope or volume of work of the employer is long as no abuse of discretion or merely arbitrary or
synonymous to, or a shade of termination because malicious action on the part of management is
of redundancy under Article 283 (formerly 284) of shown."
the Labor Code. Redundancy exists where the
services of an employee are in excess of what is Almodiel v. NLRC (93)
reasonably demanded by the actual requirements of In the case at bar, since petitioner does not
the enterprise. A position is redundant where it is allege that Ang Tan Chai does not qualify for the
superfluous, and superfluity of a position or positions position, the Court cannot substitute its discretion
may be the outcome of a number of factors, such as and judgment for that which is clearly and
overhiring of workers, decreased volume of exclusively management prerogative. To do so would
business, or dropping of a particular product line or take away from the employer what rightly belongs to
service activity previously manufactured or him as aptly explained in National Federation of
undertaken by the enterprise. Labor Unions v. NLRC:
"It is a well-settled rule that labor laws do not
Escareal v. NLRC (92) authorize interference with the employer's judgment
In Wiltshire File Co., Inc. vs. NLRC, this Court in the conduct of his business. The determination
held that redundancy, for purposes of the Labor of the qualification and fitness of workers for
Code, exists where the services of an employee are hiring and firing, promotion or reassignment are

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exclusive prerogatives of management. The Labor separation pay equivalent to at least one month pay
Code and its implementing Rules do not vest in the or at least one month pay for every year of service,
Labor Arbiters nor in the different Divisions of the whichever is higher; (3) good faith in abolishing the
NLRC (nor in the courts) managerial authority. The redundant positions; and (4) fair and reasonable
employer is free to determine, using his own criteria in ascertaining what positions are to be
discretion and business judgment, all elements of declared redundant and accordingly abolished.
employment, "from hiring to firing" except in cases
of unlawful discrimination or those which may be HEARING
provided by law. There is none in the instant case."
Wiltshire File Co., Inc. v. NLRC (91)
Panlilio v. NLRC (97) Where, as in the instant case, the ground for
We have held that it is important for a company dismissal or termination of services does not relate
to have fair and reasonable criteria in implementing to a blameworthy act or omission on the part of the
its redundancy program, such as but not limited to, employee, there appears to us no need for an
(a) preferred status, (b) efficiency and (c) seniority. investigation and hearing to be conducted by the
Unfortunately for FPS, such appraisal was not done employer who does not, to begin with, allege any
in the instant case. malfeasance or non-feasance on the part of the
employee. In such case, there are no allegations
PROOF which the employee should refute and defend
himself from. Thus, to require petitioner Wiltshire to
Golden Thread Knitting Industries, Inc. v. NLRC hold a hearing, at which private respondent would
(99) have had the right to be present, on the business
The characterization of an employee's services and financial circumstances compelling retrenchment
as no longer necessary or sustainable, and therefore and resulting in redundancy, would be to impose
properly terminable, is an exercise of business upon the employer an unnecessary and inutile
judgment on the part of the employer. The wisdom hearing as a condition for legality of termination.
or soundness of such characterization or decision is
not subject to discretionary review on the part of the VENUE OF COMPLAINT
Labor Arbiter nor the NLRC provided, of course, that
violation of law or arbitrary or malicious action is not Wiltshire File Co., Inc. v. NLRC (91)
shown. In the instant case, we question petitioners' This is not to say that the employee may not
exercise of management prerogative because it was contest the reality or good faith character of the
not shown that Rivera and Macaspac's positions retrenchment or redundancy asserted as grounds for
were indeed unnecessary, much less was petitioners' termination of services. The appropriate forum for
claim supported by any evidence. It is not enough such controversion would, however, be the
for a company to merely declare that it has become Department of Labor and Employment and not an
overmanned. It must produce adequate proof that investigation or hearing to be held by the employer
such is the actual situation in order to justify the itself It is precisely for this reason that an employer
dismissal of the affected employees for redundancy. seeking to terminate services of an employee or
employees because of "closure of establishment and
EMPLOYMENT OF INDEPENDENT CONTRACTOR – EFFECT reduction of personnel", is legally required to give a
written notice not only to the employee but also to
Asian Alcohol Corp. v. NLRC (99) the Department of Labor and Employment at least
In any event, we have held that an employer's one month before effectivity date of the termination.
good faith in implementing a redundancy program is In the instant case, private respondent did
not necessarily destroyed by availment of the controvert before the appropriate labor authorities
services of an independent contractor to replace the the grounds for termination of services set out in
services of the terminated employees. We have petitioner's letter to him dated 17 June 1985.
previously ruled that the reduction of the number of
workers in a company made necessary by the C. RETRENCHMENT TO PREVENT LOSSES
introduction of an independent contractor is justified
when the latter is undertaken in order to effectuate DISTINCTION REDUNDANCY AND RETRENCHMENT
more economic and efficient methods of production.
In the case at bar, private respondents failed to AG & P United Rank and File Assn. v. NLRC (96)
proffer any proof that the management acted in a At this point, it is necessary to distinguish
malicious or arbitrary manner in engaging the "redundancy" from" retrenchment." Both are
services of an independent contractor to operate the mentioned in Art. 283 of the Labor Code as just
Laura wells. Absent such proof, the Court has no causes for the closing of establishments or reduction
basis to interfere with the bona fide decision of of personnel. "Redundancy" exists when the services
management to effect more economic and efficient of an employee are in excess of what is required by
methods of production. an enterprise. "Retrenchment," on the other hand, is
one of the economic grounds for dismissing
PROCEDURE – REQUIREMENT employees and is resorted to primarily to avoid or
minimize business losses. Private respondent's
Asian Alcohol Corp. v. NLRC (99) "redundancy program," while denominated as such,
For the implementation of a redundancy is more precisely termed "retrenchment" because it
program to be valid, the employer must comply with is primarily intended to prevent serious business
the following requisites: (1) written notice served on losses.
both the employees and the Department of Labor
and Employment at least one month prior to the TEMPORARY RETRENCHMENT
intended date of retrenchment; (2) payment of

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Sebuguero v. NLRC (95) reason for requiring this quantum of proof is readily
Article 283 of the Labor Code, however, speaks apparent: any less exacting standard of proof would
of a permanent retrenchment as opposed to a render too easy the abuse of this ground for
temporary lay-off as is the case here. There is no termination of services of employees.
specific provision of law which treats of a temporary
retrenchment or lay-off and provides for the Guerrero v. NLRC (96)
requisites in effecting it or a period or duration The requisites for valid retrenchment under the
therefor. These employees cannot forever be foregoing provision are:
temporarily laid-off. To remedy this situation or fill
the hiatus, Article 286 may be applied but only by 1. necessity of the retrenchment to prevent
analogy to set a specific period that employees may losses and proof of such losses;
remain temporarily laid-off or in floating status. Six 2. written notice to the employees and to the
months is the period set by law that the operation of Department of Labor and Employment at
a business or undertaking may be suspended least one month prior to the intended date
thereby suspending the employment of the of retrenchment; and
employees concerned. The temporary lay-off 3. payment of separation pay equivalent to
wherein the employees likewise cease to work one month pay or at least 1/2 month pay
should also not last longer than six months. After six for every year of service, whichever is
months, the employees should either be recalled to higher.
work or permanently retrenched following the
requirements of the law, and that failing to comply Asian Alcohol Corp. v. NLRC (99)
with this would be tantamount to dismissing the The requirements for valid retrenchment which
employees and the employer would thus be liable for must be proved by clear and convincing evidence
such dismissal. are: (1) that the retrenchment is reasonably
necessary and likely to prevent business losses,
REQUIREMENTS – STANDARDS which, if already incurred, are not merely de
minimis, but substantial, serious, actual and real, or
Lopez Sugar Corporation v. Federation of Free if only expected, are reasonably imminent as
Workers (90) perceived objectively and in good faith by the
We consider it may be useful to sketch the employer; (2) that the employer served written
general standards in terms of which the acts of notice both to the employees and to the Department
petitioner employer must be appraised. Firstly, the of Labor and Employment at least one month prior
losses expected should be substantial and not to the intend date of retrenchment; (3) that the
merely de minimis in extent. If the loss purportedly employer pays the retrenched employees separation
sought to be forestalled by retrenchment is clearly pay equivalent to one month pay or at least 1/2
shown to be insubstantial and inconsequential in month pay for every year of service, whichever is
character, the bonafide nature of the retrenchment higher; (4) that the employer exercises its
would appear to be seriously in question. Secondly, prerogative to retrench employees in good faith for
the substantial loss apprehended must be the advancement of its interest of its interest and
reasonably imminent, as such imminence can be not to defeat or circumvent the employees' right to
perceived objectively and in good faith by the security of tenure; and (5) that the employer used
employer. There should, in other words, be a certain fair and reasonable criteria in ascertaining who
degree of urgency for the retrenchment, which is would be dismissed and who would be retained
after all a drastic recourse with serious among the employees, such as status (i.e., whether
consequences for the livelihood of the employees they are temporary, casual, regular or managerial
retired or otherwise laid-off. Because of the employees), efficiency, seniority, physical fitness,
consequential nature of retrenchment, it must, age, and financial hardship for certain workers.
thirdly, be reasonably necessary and likely to
effectively prevent the expected losses. The Complex Electronics Employees Assn. v. NLRC
employer should have taken other measures prior or (99)
parallel to retrenchment to forestall losses, i.e., cut In the instant case, notwithstanding the
other costs than labor costs. An employer who, for financial losses suffered by Complex, such was,
instance, lays off substantial numbers of workers however, not the main reason for its closure.
while continuing to dispense fat executive bonuses Complex admitted in its petition that the main
and perquisites or so-called "golden parachutes", reason for the cessation of the operations was the
can scarcely claim to be retrenching in good faith to pull-out of the materials, equipment and machinery
avoid losses. To impart operational meaning to the from the premises of the corporation as dictated by
constitutional policy of providing "full protection" to its customers. It was actually still capable of
labor, the employer's prerogative to bring down continuing the business but opted to close down to
labor costs by retrenching must be exercised prevent further losses. Under the facts and
essentially as a measure of last resort, after less circumstances of the case, we find no grave abuse of
drastic means — e.g., reduction of both discretion on the part of the public respondent in
management and rank-and-file bonuses and awarding the employees one (1) month pay for
salaries, going on reduced time, improving every year of service as termination pay.
manufacturing efficiencies, trimming of marketing
and advertising costs, etc. — have been tried and NATURE OF LOSS
found wanting.
Lastly, but certainly not the least important, Lopez Sugar Corporation v. Federation of Free
alleged losses if already realized, and the expected Workers (90)
imminent losses sought to be forestalled, must be We consider it may be useful to sketch the
proved by sufficient and convincing evidence. The general standards in terms of which the acts of

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petitioner employer must be appraised. Firstly, the The general standards or elements needed for
losses expected should be substantial and not the retrenchment to be valid — i.e., that the losses
merely de minimis in extent. If the loss purportedly expected are substantial and not merely de minimis
sought to be forestalled by retrenchment is clearly in extent; that the expected losses are reasonably
shown to be insubstantial and inconsequential in imminent such as can be perceived objectively and
character, the bonafide nature of the retrenchment in good faith by the employer; that the
would appear to be seriously in question. Secondly, retrenchment is reasonably necessary and likely to
the substantial loss apprehended must be effectively prevent the expected losses; and that the
reasonably imminent, as such imminence can be imminent losses sought to be forestalled are
perceived objectively and in good faith by the substantiated — were adequately shown in the
employer. There should, in other words, be a certain present case.
degree of urgency for the retrenchment, which is
after all a drastic recourse with serious Bogo-Medellin Sugar Can Planters Assn., Inc. v.
consequences for the livelihood of the employees NLRC (98)
retired or otherwise laid-off. In a number of cases, the Court has laid down
the following requisites of a valid retrenchment: (1)
Revidad v. NLRC (95) the losses incurred are substantial and not
At the other end of the spectrum, it seems deminimis: (2) the losses are actual or reasonably
equally clear that not every asserted possibility of imminent; (3) the retrenchment is reasonably
loss is sufficient legal warrant for the reduction of necessary and is likely to be effective in preventing
personnel. In the nature of things, the possibility of the expected imminent losses sought to be
incurring the losses is constantly present, in greater forestalled, are proven by sufficient and convincing
or lesser degree, in the carrying on of business evidence. In the present case, petitioners miserably
operations, since some, indeed many, of the factors failed to prove (1) substantial losses and (2) the
which impact upon the profitability outside the reasonable necessity of the retrenchment.
control of the employer.
SLIDING INCOME
Balbalec v. NLRC (95)
The above-quoted article not only contemplates San Miguel Jeepney Service v. NLRC (96)
the termination of employment of workers or As petitioners themselves admitted, what they
employees to minimize established business losses suffered were "sliding incomes", in other words,
but also to prevent impending losses, for the law's decreasing gross revenues. What the law speaks of
phraseology explicitly uses the phrase "retrenchment is serious business losses or financial reverses.
to prevent losses." However, retrenchment strikes at Clearly, sliding incomes are not necessarily losses,
the very core of an individual's employment and the much less serious business losses within the
burden clearly falls upon the employer to prove meaning of the law. In this connection, we are
economic or business losses with appropriate reminded of our previous ruling that "the requisites
supporting evidence. After all, not every asserted of a valid retrenchment are: (a) the losses expected
potential loss is sufficient legal warrant for a should be substantial and not merely de minimis in
reduction of personnel and the evidence adduced in extent; (b) the substantial losses apprehended must
support of a claim of actual or potential business be reasonably imminent; (c) the retrenchment must
losses should satisfy certain established standards, be reasonably necessary and likely to effectively
to wit: prevent the expected losses; and (d) the alleged
4. The losses expected and sought to be losses, if already incurred, and the expected
avoided must be substantial and not imminent losses sought to be forestalled, must be
merely de minimis; proved by sufficient and convincing evidence." We
5. The apprehended substantial losses must have also held that adverse business conditions
be reasonably imminent, as such justify the exercise of management prerogative to
imminence can be perceived objectively retrench in order to avoid the not-so-remote
and in good faith by the employer; possibility of closure of the entire business. At the
6. The retrenchment should reasonably be other end of the spectrum, it seems equally clear
necessary and likely to prevent that not every asserted possibility of loss is sufficient
effectively the expected losses; legal warrant for reduction of personnel. In the
7. The losses, both the past and nature of things, the possibility of incurring losses is
forthcoming, must be proven by constantly present, in greater or lesser degree, in
sufficient and convincing evidence. the carrying on of business operations, since some,
indeed many, of the factors which impact upon the
Edge Apparel, Inc. v. NLRC (98) profitability or viability of such operations may be
In order to be justified, the termination of substantially outside the control of the employer.
employment by reason of retrenchment must be due
to business losses or reverses which are serious, PROOF OF LOSS
actual and real. Not every loss incurred or expected
to be incurred by the employer will justify Lopez Sugar Corporation v. Federation of Free
retrenchment, since, in the nature of things, the Workers (90)
possibility of incurring losses is constantly present, The principal difficulty with petitioner's case as
in greater or lesser degree, in carrying on the above presented was that no proof of actual
business operations. Retrenchment is normally declining gross and net revenues was submitted. No
resorted to by management during periods of audited financial statements showing the financial
business reverses and economic difficulties condition of petitioner corporation during the
occasioned by such events as recession, industrial above mentioned crop years were submitted.
depression, or seasonal fluctuations. Since financial statements audited by

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independent external auditors constitute the normal These, however, fall far short of the stringent
method of proof of the profit and loss performance requirement of the law that the employer prove
of a company, it is not easy to understand why sufficiently and convincingly its allegation of
petitioner should have failed to submit such financial substantial losses. The failure of petitioner to show
statements. its income or loss for the immediately preceding
years or to prove that it expected no abatement of
Revidad v. NLRC (95) such losses in the coming years bespeaks the
The voluntary arbitrator's conclusions were weakness of its cause. The financial statement for
premised upon and substantiated by the audited 1992, by itself, does not sufficiently prove
financial statements and the auditor's reports of AG petitioner's allegation that it "already suffered actual
& P for the years 1987 to 1991. These, financial serious losses," because it does not show whether its
statements audited by independent external auditors losses increased or decreased. Although petitioner
constitute the normal and reliable method of proof of posted a loss for 1992, it is also possible that such
the profit and loss performance of a company. loss was considerably less than those previously
Contrary to petitioner's asseverations, proof of incurred, thereby indicating the company's
actual financial losses incurred by the company is improving condition.
not a condition sine qua non for retrenchment.
Retrenchment is one of the economic grounds to Bogo-Medellin Sugar Can Planters Assn., Inc. v.
dismiss employees, which is resorted to by an NLRC (98)
employer primarily to avoid or minimize business A comparative statement of revenue and
losses. expenses for two years, by itself, is not conclusive
proof of serious business losses. The Court has
Catatista v. NLRC (95) previously ruled that financial statements audited by
We see no grave abuse of discretion on the part independent external auditors constitute the normal
of NLRC when it found that "company haciendas method of proof of the profit and loss performance
including Hacienda Binanlutan incurred huge losses of a company. While Petitioner Corporation avers
from years 1982 to 1983." Private respondent that it was not required to file audited financial
showed that Hacienda Binanlutan itself suffered a statements under. Section 232 of the Tax Code, it
net loss of P22,624.88. It is significant to note that failed to establish its exemption through any
petitioners failed to dispute these submissions of evidence showing that its quarterly gross revenues
private respondent which more than satisfy the first did not exceed P25,000. Thus, its claim that it did
and fourth requirements for a valid retrenchment. not need to have its financial statements certified by
The losses incurred are clearly substantial and a certified public accountant is without basis in fact
sufficiently proven by means of an income statement and in law and does not excuse it from complying
of Hacienda Binanlutan and the financial statement with the usual requirement. Besides, the
of the company haciendas. Said losses are not only requirement of the Tax Code is one thing, and the
imminent but had, in fact, already been incurred by requirement of the Labor Code is quite another.
private respondent since 1982. This was even more Moreover, the financial statement of Petitioner
alarming in 1984 considering the worldwide Corporation for two crop years is insufficient proof of
economic situation, as well as the low sugar prices serious business losses that would justify the
during that year, events which were obviously retrenchment of private respondents.
beyond the control of private respondent.
BURDEN OF PROOF
Central Azucarera de la Carlota v. NLRC (95)
We give little consideration to the certification Revidad v. NLRC (95)
issued by the Sugar Regulatory Administration On the bases of these consideration, it follows
illustrating the decline in petitioner's sugar that the employer bears the burden to prove his
production. A similar allegation was made by Lopez allegation of economic or business reverses with
Sugar Corporation against the Federation of Free clear and satisfactory evidence, it being in the
Workers and we answered in this wise: nature of an affirmative defense.
The principal difficulty with petitioner's case as
above presented was that no proof of actual Balbalec v. NLRC (95)
declining gross and net revenues were submitted. However, retrenchment strikes at the very core
No audited financial statements showing the of an individual's employment and the burden clearly
financial condition of petitioner corporation during falls upon the employer to prove economic or
the above mentioned crop years were submitted. business losses with appropriate supporting
Since financial statements audited by independent evidence. After all, not every asserted potential loss
external auditors constitute the normal method of is sufficient legal warrant for a reduction of
proof of the profit and loss performance of a personnel and the evidence adduced in support of a
company, it is not easy to understand why petitioner claim of actual or potential business losses should
should have failed to submit such financial satisfy certain established standards.
statements.
Petitioner, in the case at bench, even admitted WHEN EFFECTED
that it did not present evidence to prove its business
losses. Its rationale that "because of the timely Lopez Sugar Corporation v. Federation of Free
retrenchments to prevent losses, these losses were Workers (90)
avoided and therefore cannot be proven to have In its ordinary connotation, the phrase "to
been incurred" is simply absurd. prevent losses" means that retrenchment or
termination of the services of some employees is
Somerville Stainless Steel Corp. v. NLRC (98) authorized to be undertaken by the employer
sometime before the losses anticipated are

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actually sustained or realized. It is not, in other Catatista v. NLRC (95)
words, the intention of the lawmaker to compel the Article 283 of the Labor Code provides, inter
employer to stay his hand and keep all his alia, that the employer may terminate the
employees until sometime after losses shall have in employment of his employees to prevent losses. For
fact materialized; if such an intent were expressly an employer to validly terminate the service of his
written into the law, that law may well be vulnerable employees under this ground, he has to comply with
to constitutional attack as taking property from one two requirements, namely: (a) serving a written
man to give to another. This is simple enough. notice on the workers and the Department of Labor
and Employment at least one month before the
Revidad v. NLRC (95) taking effect of the closure, and (b) payment of
In its ordinary connotation, the phrase "to separation pay equivalent to one month pay or at
prevent losses" means that retrenchment or least one-half (l/2) month pay for every year of
termination of the services of some employees is service, whichever is higher, with a fraction of at
authorized to be undertaken by the employer least six months to be considered one whole year.
sometime before the anticipated losses are actually
sustained or realized. It is not, in other words, the Sebuguero v. NLRC (95)
intention of the lawmaker to compel the employer to Under the aforequoted Article 283 of the Labor
stay his hand and keep all his employees until after Code, there are three basic requisites for a valid
losses shall have in fact materialized. If such an retrenchment:
intent were expressly written into the law, that law 1. the retrenchment is necessary to prevent
may well be vulnerable to constitutional attack as losses and such losses are proven;
unduly taking property from one man to be given to 2. written notice to the employees and to the
another. Department of Labor and Employment at
least one month prior to the intended date
Asian Alcohol Corp. v. NLRC (99) of retrenchment; and
It should be observed that Article 283 of the 3. payment of separation pay equivalent to
Labor Code uses the phrase "retrenchment to one month pay or at least 1/2 month pay
prevent losses". In its ordinary connotation, this for every year of service, whichever is
phrase means that retrenchment must be higher.
undertaken by the employer before losses are The requirement of notice to both the employees
actually sustained. We have, however, interpreted concerned and the Department of Labor and
the law to mean that the employer need not keep all Employment (DOLE) is and must be written and
his employees until after his losses shall have given at least one month before the intended date of
materialized. Otherwise, the law could be vulnerable retrenchment. In this case, it is undisputed that the
of attack as undue taking of property for the benefit petitioners were given notice of the temporary lay-
of another. off. There is, however, no evidence that any written
notice to permanently retrench them was given at
PROCEDURE (FOR BOTH RETRENCHMENT AND least one month prior to the date of the intended
REDUNDANCY) retrenchment. The NLRC found that GTI conveyed to
the petitioners the impossibility of recalling them
Revidad v. NLRC (95) due to the continued unavailability of work. But what
The circular is more than sufficient notice to AG the law requires is a written notice to the employees
& P employees, as well as herein petitioners, of the concerned and that requirement is mandatory. The
then impending decision of the company to carry out notice must also be given at least one month in
its retrenchment program for the reasons therein advance of the intended date of retrenchment to
stated. enable the employees to look for other means of
Anent the mandatory written notice to be filed employment an therefore to ease the impact of the
with the labor department one month before the loss of their jobs and the corresponding income.
date of retrenchment, we are of the considered That they were already on temporary lay-off at the
opinion that the proceedings had before the time notice should have been given to them is not
voluntary arbitrator, where both parties were given an excuse to forego the one-month written notice
the opportunity to be heard and present evidence in because by this time, their lay-off is to become
their favor, constitute substantial compliance with permanent and they were definitely losing their
the requirement of the law. The purpose of this employment.
notice is to enable the proper authorities to ascertain
whether the closure of the business is being done in NON-STOCK NON-PROFIT ORGANIZATION
good faith and is not just a pretext for evading
compliance with the just obligations of the employer Phil. Tuberculosis Society, Inc. v. NLRC (98)
to the affected employees. In fact, the voluntary Although petitioner is a non-stock and non-
arbitration proceedings more than satisfied the profit organization, retrenchment as a measure
intendment of the law considering that the parties adopted to stave off threats to its existence is
were accorded the benefit of a hearing, in addition to available to it. Article 278 of the Labor Code states
the right to present their respective position papers that the fiscal measures recognized therein which an
and documentary evidence. employer may validly adopt apply to "all
For that matter, hearing and investigation by establishments or undertakings, whether for profit or
the employer, where the reason for termination is not."
retrenchment due to financial reverses and not to an
act attributable to the employee, is not even RURAL BANK
required because it is considered a surplusage under
existing jurisprudence. Balbalec v. NLRC (95)

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It should be noted, moreover, that unlike huge their length of service. It would, indeed, be
commercial banks with large capitalization, the bank stretching the intent and spirit of the law, if we were
involved in the case at bench is a small rural bank to unjustly interfere in management's prerogative to
barely afloat and surviving on a measly capitalization close or cease its business operations just because
of P500,000.00. Were we to deny private said business operation or undertaking is not
respondent's urgent request to streamline its work suffering from any loss. This Court, in the case of
force to enable it to maintain stability and modest Maya Farms Employees Organization, et al. v. NLRC,
profitability, we would be sending a small financial et al., held that:
institution teetering on the verge of financial ruin "The rule is well-settled that labor laws
tumbling down on the road to bankruptcy. discourage interference with an employer's
It need not be overemphasized that the State judgment in the conduct of his business. Even as the
recognizes the pivotal role of small rural banks, such law is solicitous of the welfare of employees, it must
as the respondent bank, in the development of the also protect the right of an employer to exercise
countryside through its loan portfolios and other what are clearly management prerogatives. As long
services to the rural folk. While courts must be as the company's exercise of the same is in good
constantly vigilant in validating claims of business faith to advance its interest and not for the purpose
losses to prevent unscrupulous employers from of defeating or circumventing the rights of
feigning such losses in order to dismiss their employees under the laws or valid agreements, such
personnel, we are satisfied that respondent bank exercise will be upheld."
undertook the drastic act of cutting down its In Dangan v. NLRC, this Court had occasion to
workforce in order to prevent imminent substantial reiterate management's prerogative to close or
loss to its business. abolish a department or section of the employer's
establishment for economic reasons. We reasoned
APPOINTMENT OF REPLACEMENTS – EFFECT out that since the greater right to close the entire
establishment and cease operations due to adverse
Bogo-Medellin Sugar Cane Planters Assn., Inc economic conditions is granted an employer, the
v. NLRC (98) closure of a part thereof to minimize expenses and
Petitioner Corporation also failed to rebut the reduce capitalization should similarly be recognized.
allegation that new employees were hired to replace Likewise, this Court held in the case of Special
the private respondents after the latter had been Events & Central Shipping Office Workers Union v.
retrenched. The executive labor arbiter found that San Miguel Corp. that the determination of the
Gavino Negapatan replaced Private Respondent usefulness of a section, being a company
Montilla, while Reynaldo Parilla and Godofredo prerogative, the closure may not be questioned,
Florita replaced the other private respondents who specially in this case where it is impelled by
had worked as sugar checkers or samplers. The economic reasons due to the continuous losses
employment of these replacements clearly belies sustained in its operation, coupled with the lack of
petitioners' contention that the retrenchment was demand for the service of such section.
necessary to prevent or offset the expected losses
effectively. REQUIREMENTS

APPOINTMENT OF REPLACEMENTS – RE-HIRING EFFECT Caffco International Ltd. v. Office MOLE (92)
Under Article 283 of the Labor Code, three (3)
Atlantic Gulf and Pacific Co. of Manila v. NLRC requirements are necessary for a valid cessation of
(99) business operations, namely: (a) service of a written
“Petitioners contend that the ‘redundancy notice to the employees and to the MOLE at least
program’ was actually a union-busting scheme of one (1) month before the bona fide in character; and
management, aimed at removing union officers who (c) payment to the employees of termination pay
had declared a strike. This contention cannot stand amounting to at least one-half (1/2) month pay for
in the face of evidence of substantial losses suffered every year of service, or one (1) month pay,
by the company. Moreover, while it is true that the whichever is higher (Mobil Employees Association et
company rehired or re-employed some of the al vs. NLRC et al.)
dismissed workers, it has been shown that such
action was made only as company projects became EXTENT OF CLOSURE
available and that it was done in pursuance of the
company’s policy of giving preference to its former PARTIAL CLOSURE
workers in the rehiring of project employees. The
rehiring or re-employment does not negate the Catatista v. NLRC (95)
imminence of losses, which prompted private The termination of employment of the
respondents to retrench.” employees of Hacienda Binanlutan brought about by
the closure is to be considered as retrenchment as
D. CLOSING OF BUSINESS Hacienda Binanlutan is only one of the six haciendas
of private respondent. 6 Clearly, private
RIGHT respondent's purpose in converting said hacienda
into an ipil-ipil plantation and terminating the service
Catatista v. NLRC (95) of petitioners is to cut down on losses which it had
In any case, Article 283 of the Labor Code is adequately shown to have suffered through an
clear that an employer may close or cease his income statement for the fiscal year which ended
business operations or undertaking even if he is not August 31, 1984.
suffering from serious business losses or financial
reverses, as long as he pays his employees their
termination pay in the amount corresponding to

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Phil. Tobacco Flue Curing, etc. v. NLRC (98) to resist. But where it is shown that the closure is
It must be noted that the present case involves motivated not by a desire to prevent further losses,
the closure of merely a unit or division, not the but to discourage the workers from organizing
whole business of an otherwise viable enterprise. themselves into a union for more effective
Although Article 283 uses the phrase "closure or negotiation with management, the State is bound to
cessation of operation of an establishment or intervene.
undertaking," this Court previously ruled in Coca- The burden of proving that such a temporary
Cola Bottlers (Phil.), Inc. v. NLRC that said statutory suspension is bona fide falls upon the employer. In
provision applies in cases of both complete and this instance, petitioner had to establish the fact of
partial cessation of the business operation: its precarious financial health, that its cessation of
. . . Ordinarily, the closing of a warehouse operation was really necessitated by its financial
facility and the termination of the services of condition, and that said condition would probably be
employees there assigned is a matter that is left to alleviated or improved, or its losses abated, by
the determination of the employer in the good faith undertaking such suspension of operation. Petitioner
exercise of its management prerogatives. The could have at least party met the foregoing
applicable law in such a case is Article 283 of the requirements by submitting its financial statements
Labor Code which permits "closure or cessation of or records as proof of its financial crisis, since the
operation of an establishment or undertaking not purported financial hemorrhage would definitely
due to serious business losses or financial reverses," have been reflected therein. Thus, petitioner's
which, in our reading, includes both the complete unexplained and continued failure to submit its
cessation of operations and the cessation of only financial statements could not but raise grave doubts
part of a company's business. as to the truth of the claimed financial crisis and the
real purpose of the suspension of operations. It is
Cheniver Deco Print Technics Corporation v. not enough to merely raise this issue nor to discuss
NLRC(2000) it only in passing. The precarious financial condition
Broadly speaking, there appears no complete must be established by evidence, e.g., balance
dissolution of petitioner’s business undertaking but sheets and income statements, and the figures
the relocation of petitioner’s plant to Batangas, in therein must be interpreted and discussed at length.
our view, amounts to cessation of petitioner’s It is a hornbook rule that employers who
business operations in Makati. It must be stressed contemplate terminating the services of their
that the phrase "closure or cessation of operation of workers must base their decisions on more than just
an establishment or undertaking not due to serious flimsy excuses, considering that the dismissal of an
business losses or reverses" under Article 283 of the employee from work involves not only the loss of his
Labor Code includes both the complete cessation of position but, what is more important, his means of
all business operations and the cessation of only part livelihood. The same principle applies in temporary
of a company’s business. In Philippine Tobacco Flue- suspension of operations, as in this case, considering
Curing & Redrying Corp. vs. NLRC, a company that it involves laying off employees for a period of
transferred its tobacco processing plant in six months.
Balintawak, Quezon City to Candon, Ilocos Sur. The
company therein did not actually close its entire EFFECT ON EMPLOYER-EMPLOYEE RELATIONSHIP
business but merely relocated its tobacco processing
and redrying operations to another place. Yet, this San Pedro Hospital of Digos v. Sec. of Labor
Court considered the transfer as closure not due to (96)
serious business losses for which the workers are It is a hornbook rule that employers who
entitled to separation pay. contemplate terminating the services of their
There is no doubt that petitioner has legitimate workers must base their decisions on more than just
reason to relocate its plant because of the expiration flimsy excuses, considering that the dismissal of an
of the lease contract on the premises it occupied. employee from work involves not only the loss of his
That is its prerogative. But even though the transfer position but, what is more important, his means of
was due to a reason beyond its control, petitioner livelihood. The same principle applies in temporary
has to accord its employees some relief in the form suspension of operations, as in this case, considering
of severance pay. that it involves laying off employees for a period of
six months.
TEMPORARY CESSATION OF OPERATION
Valdez v. NLRC (98)
BASIS Under Article 286 of the Labor Code, the bona
fide suspension of the operation of a business or
San Pedro Hospital of Digos v. Sec. of Labor undertaking for a period not exceeding six months
(96) shall not terminate employment. Consequently,
Temporary suspension of operations is when the bona fide suspension of the operation of a
recognized as a valid exercise of management business or undertaking exceeds six months, then
prerogative provided it is not carried out in order to the employment of the employee shall be deemed
circumvent the provisions of the Labor Code or to terminated. By the same token and applying said
defeat the rights of the employees under the Code. rule by analogy, if the employee was forced to
The determination to case or suspend operations is a remain without work or assignment for a period
prerogative of management that the State usually exceeding six months, then he is in effect
does not interfere with, as no business can be constructively dismissed.
required to continue operating at a loss simply to
maintain the workers in employment. Such an act E. SPECIAL CASE OF BUSINESS TRANSFERS
would be tantamount to a taking of property without
due process of law, which the employer has a right NATURE OF LABOR CONTRACT

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provision, the third paragraph of the same section
Sundowner Development Corp. v. Drilon (89) explicitly states that, "any confession or admission
The rule is that unless expressly assumed, labor obtained in violation of this or the preceding section
contracts such as employment contracts and shall be inadmissible in evidence against him."
collective bargaining agreements are not enforceable
against a transferee of an enterprise, labor contracts
being in personam, thus binding only between the
parties. A labor contract merely creates an action in
personam and does not create any real right which
should be respected by third parties. This conclusion
draws its force from the right of an employer to NOTICE
select his employees and to decide when to engage
them as protected under our Constitution, and the Complex Electronics Employees Assn. v. NLRC
same can only be restricted by law through the (99)
exercise of the police power. The purpose of the notice requirement is to
As a general rule, there is no law requiring a enable the proper authorities to determine after
bona fide purchaser of assets of an on-going concern gearing whether such closure is being done in good
to absorb in its employ the employees of the latter. faith, i.e., for bona fide business reasons, or
However, although the purchase of the assets or whether, to the contrary, the closure is being
enterprise is not legally bound to absorb in its resorted to as a means of evading compliance with
employ the employees of the seller of such assets or the just obligations of the employer to the
enterprise, the parties are liable to the employees if employees affected.
the transaction between the parties is colored or
clothed with bad faith. Serrano v. NLRC (2000)
Nothing in the law gives private respondent the
F. PROCEDURAL DUE PROCESS – NATURE AND option to substitute the required prior written notice
REQUIREMENTS with payment of thirty (30) days salary. It is not for
private respondent to make substitutions for a right
A. REQUIREMENTS that a worker is legally entitled to. For instance, as
held in Farmanlis Farms, Inc. v. Minister of Labor,
IN GENERAL under the law, benefits in the form of food or free
electricity, assuming they were given, were not a
ESSENCE OF DUE PROCESS proper substitute for the 13th month pay required
by law.
Arboleda v. NLRC (99) Indeed, a job is more than the salary that it
The essence of due process in administrative carries. Payment of thirty (30) days salary cannot
proceedings is an opportunity to explain one's side compensate for the psychological effect or the
or an opportunity to seek reconsideration of the stigma of immediately finding one’s self laid off from
action or ruling complained of. Before an employee work. It cannot be a fully effective substitute for the
can be validly dismissed, the Labor code requires the thirty (30) days written notice required by law
employer to furnish the employee with two (2) especially when, as in this case, the fact is that no
written notices: (a) a written notice containing a notice was given to the Department of Labor and
statement of the cause for termination to afford the Employment (DOLE).
employee ample opportunity to be heard and defend Besides, as we held in our decision in this case,
himself with the assistance of his representative, if the purpose of such previous notice is to give the
he so desires; and, (b) if the employer decides to employee some time to prepare for the eventual loss
terminate the services of the employee, the of his job as well as the DOLE the opportunity to
employer must notify him in writing of the decision ascertain the verity of the alleged authorized cause
to dismiss him, stating clearly the reasons therefor. of termination. Such purpose would not be served by
the simple expedient of paying thirty (30) days
RIGHT TO COUNSEL salary in lieu of notice of an employee’s impending
dismissal, as by then the loss of employment would
Salaw v. NLRC (91) have been a fait accompli.
It is true that administrative and quasi-judicial
bodies are not bound by the technical rules of TWO NOTICE RULE
procedure in the adjudication of cases. However, the
right to counsel, a very basic requirement of Maneja v. NLRC (98)
substantive due process, has to be observed. Well-settled is the dictum that the twin
Indeed, the rights to counsel and to due process of requirements of notice and hearing constitute the
law are two of the fundamental rights guaranteed by essential elements of due process in the dismissal of
the 1987 Constitution to any person under employees. It is a cardinal rule in our jurisdiction
investigation, be the proceeding administrative, civil, that the employer must furnish the employee with
or criminal. Thus, Section 12(1), Article III thereof two written notice before the termination of
specifically provides: "Any person under employment can be effected: (a) the first apprises
investigation for the commission of an offense shall the employee of the particular acts or omissions for
have the right to . . . have competent and which his dismissal is sought; and, (b) the second
independent counsel preferably of his own choice. If informs the employee of the employer's decision to
the person cannot afford the service of counsel, he dismiss him. The requirement of a hearing, on the
must be provided with one. These rights cannot be other hand, is complied with as long as there was
waived except in writing and in the presence of an opportunity to be heard, and not necessarily
counsel." To underscore the inviolability of this that an actual hearing was conducted.

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representation." Here, private respondent has been
Farrol v. Court of Appeals (2000) summarily dismissed, following his suspension,
As set forth in the foregoing procedures, the without being accorded an opportunity to confront
employer must comply with the twin requirements of the "witness" (Rene Baylon) against him and to
two notices and hearing. The first notice is that thereafter adduce evidence in his defense.
which apprises the employee of the particular acts or
omissions for which his dismissal is sought, and after HEARING
affording the employee an opportunity to be heard,
a subsequent notice informing the latter of the Consolidated Rural Bank, Inc. v. NLRC (99)
employer’s decision to dismiss him from work. Petitioner's avowal of denial of procedural due
process must fail, and so with its prayer for a
remand. The fact that counsel for petitioner was not
present during the clarificatory hearing on 19 July
HEARING – NOT REQUIRED 1994, hence, unable to rebut the testimony given by
private respondent could hardly be attributed to
Magos v. NLRC (98) anybody else's fault but its own. Records show that
Both the NLC and the Labor Arbiter found that notice was given to the parties with warning that
no formal hearing was conducted regarding failure to attend would be construed as a waiver of
petitioner's dismissal. Although a hearing is essential the opportunity to be heard. However while counsel
to due process, in Bernardo v. NLRC we did hold that for private respondent filed his Manifestation
no formal hearing was necessary when the petitioner begging off from the hearing on ground of a prior
had already admitted his responsibility for the act he engagement, counsel for petitioner on the other
was accused of. hand simply chose not to appear on the assumption
Even though petitioner in this case never that the hearing would be postponed on account of
admitted the accusations of dishonesty against him, opposing counsel's absence thus negligently and
he impliedly acknowledged his insubordination as completely overlooking the assurance in the very
shown in his petition. same Manifestation that private respondent would
nevertheless appear on her own. Hence, the fact
Caurdenetaan Piece Workers Union v. that the Labor Arbiter proceeded with the hearing as
Laguesma (98) scheduled could not be branded as an arbitrary act
Due process is not violated where a person is depriving petitioner of its right to present evidence.
given the opportunity to be heard, but chooses not Petitioner lost this additional opportunity entirely
to give his side of the case. through its own fault and negligence.
Similarly, the decision of the Labor Arbiter not
National Semi-Conductor (HK) Distribution Ltd. to schedule the case for another hearing could not
v. NLRC be considered as a grave abuse of discretion. First of
The essence of due process is simply an all, it is well-settled that the holding of a hearing is
opportunity to be heard, or as applied to discretionary with the Labor Arbiter and is something
administrative proceedings, an opportunity to which the parties cannot demand as a matter of
explain one's side. In the instant case, petitioner right. It is entirely within the bounds of the Labor
furnished private respondent notice as to the Arbiter's authority to decide a case based on mere
particular acts which constituted the ground for his position papers and supporting documents without a
dismissal. By requiring him to submit a written formal trial or hearing as is sanctioned by the New
explanation within 48 hours from receipt of the Rules Procedure of the National Labor Relations
notice, the company gave him the opportunity to be Commission. Thus we have consistently held that
heard in his defense. Private respondent availed of the requirements of due process are satisfied when
this chance by submitting a written explanation. the parties are given the opportunity to submit
Furthermore, investigations on the incident were position papers wherein they are supposed to attach
actually conducted on 9 January 1993 and 11 all the documents that would prove their claim in
January 1993. Thus, it is clear the minimum case it be decided that no hearing should be
requirements of due process have been fulfilled by conducted or was necessary. Secondly, we note that
petitioner. petitioner and private respondent themselves agreed
That the investigations conducted by petitioner during the hearing of 3 March 1994 to forego with a
may not be considered formal or recorded hearings formal trial and opted instead to file only their
or investigations is immaterial. A formal or trial type respective replies to each other's position paper.
hearing is not all times and in all instances essential Given these circumstances, petitioner certainly
to due process, the requirements of which are cannot now be heard to have been deprived of due
satisfied where the parties are afforded fair and process.
reasonable opportunity to explain their side of the
controversy. It is deemed sufficient for the employer Libres v. NLRC (99)
to follow the natural sequence of notice, hearing and Due process as a constitutional precept does not
judgment. always and in all situations require a trial type
proceeding. Due process is satisfied when a person
AMPLE OPPORTUNITY is notified of the charge against him and given an
opportunity to explain or defend himself. The
La Carlota Planters Assn., Inc. v. NLRC (98) essence of due process is simply to be heard, or as
In Balayan Colleges vs. NLRC, the Court has applied to administrative proceedings, an
observed that ample opportunity in due process opportunity to explain one’s side, or an opportunity
means that "kind of assistance that management to seek a reconsideration of the action or ruling
must accord the employee to enable him to prepare complained of.
adequately for his defense including legal

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LACK OF VERIFICATION employment for any of the authorized causes
mentioned in Arts. 283-284. The order to pay full
St. Michael Academy v. NLRC (98) backwages is a consequence of the employer's
While the procedure adopted by the private action in dismissing an employee without notice
respondents failed to comply strictly with Rule III which makes said dismissal ineffectual. The
(Pleadings) and Rule V (Proceedings Before Labor employee is considered not to have been terminated
Arbiters) of the New Rules of Procedure of the NLRC, from his employment until it is finally determined
we are constrained to heed the underlying policy of that his dismissal/termination of employment was
the Labor Code relaxing the application of technical for cause and, therefore, he should be paid his
rules of procedure in labor cases to help secure and salaries in the interim. This eliminates guesswork in
not defeat justice. To be sure, petitioners cannot determining the degree of prejudice suffered by an
maintain that they were denied due process. The employee dismissed with cause but without notice
essence of due process in administrative proceedings since the penalty is measured by the salary he failed
is simply an opportunity to explain one's side or an to earn on account of his dismissal/termination of
opportunity to seek a reconsideration of action or employment.
ruling complained of. In labor cases, submission of
position papers and memoranda fulfills the
requirements of due process.
Petitioners' stance with respect to the lack of
verification of private respondents' position paper
deserves scant consideration. The defect is a formal,
rather than a substantial one and which further loses
significance in light of the exhaustive proceedings B. OTHER PROCEDURAL MATTERS
undertaken by public respondent to resolve the
parties' dispute on the merits. BURDEN AND DEGREE OF PROOF

FAILURE TO FURNISH BURDEN

Pepsi-Cola Products Phils., Inc. v. NLRC (98) Gothong Lines Inc. v. NLRC (99)
At all events, a plea of denial of procedural due The constitutional guarantee of protection to
process, where the defect consists in the failure to labor and security of tenure requires that an
furnish an opponent with a copy of a party's position employer terminate the services of an employee only
paper, cannot be entertained when he who makes for valid and just causes which must be supported
the plea is effectively given the opportunity to be by substantial evidence. The burden of proving that
heard in a Memorandum of Appeal. Even if a party the termination of an employee is for a valid or
has not been heard at the stage of mediation and authorized cause rests on the employer. In any
fact-finding, he still can take that opportunity to event, the employer must comply with due process
present his side when the Memorandum of Appeal is requirements before any termination is done.
given due course, as it has so been given in this
instance, by the NLRC. Thus, the fundamental rule of Maranaw Hotel and Resort Corp. v. NLRC (99)
due process that mandates notice and an Albeit petitioner may have reasons to doubt the
opportunity to be heard has here been amply met. honesty and trustworthiness of Damalerio, as a
result of what happened, absent sufficient proof of
FAILURE OF DUE PROCESS guilt, he (Damalerio), who is a rank-and-file
employee, cannot be legally dismissed.
EFFECT OF FAILURE – SUBSTANTIVE – PROCEDURAL Unsubstantiated suspicions and baseless conclusions
by employers are not legal justification for
Alhambra Industries, Inc. v. NLRC (94) dismissing employees. The burden of proving the
A termination without just cause entitles a existence of a valid and authorized cause of
worker to reinstatement regardless of whether he termination is on the employer. Any doubt should be
was accorded due process. On the other hand, resolved in favor of the employee, in keeping with
termination of a worker for cause, even without the principle of social justice enshrined in the
procedural due process, does not warrant Constitution.
reinstatement, but the employer incurs liability for
damages. DEGREE

Serrano v. NLRC (2000) Manila Electric Co., Inc. v. NLRC (91)


It is contended that private respondent's non- And this Court has ruled that the ground for an
observance of the notice requirement should not be employer's dismissal of an employee need be
visited with a severe consequence in accordance established only by substantial evidence, it not being
with Art. III, §19(1) of the Constitution. The required that the former's evidence "be of such
contention is without merit. In the first place, Art. degree as is required in criminal cases, i.e., proof
III, §19(1) of the Constitution, prohibiting the beyond reasonable doubt." 16 It is absolutely of no
imposition of excessive fines, applies only to criminal consequence that the misconduct with which an
prosecutions. In the second place, the decision in employee may be charged also constitutes a criminal
this case, providing for the payment of full offense: theft, embezzlement, assault on another
backwages for failure of an employer to give notice, employee or company officer, arson, malicious
seeks to vindicate the employee's right to notice mischief, etc. The proceedings being administrative,
before he is dismissed or laid off, while recognizing the quantum of proof is governed by the
the right of the employer to dismiss for any of the substantial evidence rule and not, as the
just causes enumerated in Art. 282 or to terminate

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respondent Commission seems to imagine, by the illegal dismissal, when Roque filed his complaint for
rule governing judgments in criminal actions. damages with the Regional Trial Court.

Phil. Savings Bank v. NLRC (96) OFFER TO REINSTATE


In affirming the Labor Arbiter, the NLRC found
the evidence supporting the Labor Arbiter's factual Ranara v. NLRC (92)
findings to be substantial and for this reason The fact that his employer later made an offer
apparently found it unnecessary to make a separate to re-employ him did not cure the vice of his earlier
discussion. Factual findings of administrative arbitrary dismissal. The wrong had been committed
agencies are generally accorded respect and even and the harm done. Notably, it was only after the
finality in this Court if they are supported by complaint had been filed that it occurred to Chang,
substantial evidence. in belated gesture of good will, to invite Ranara back
Loss of trust and confidence is a cause for to work in his store. Chang's sincerity is suspect. We
dismissing an employee who is entrusted with doubt if his offer would have been made if Ranara
fiducial matters, or with the custody, handling or had not complained against him. At any rate, sincere
care and protection of the employer's property. or not, the offer of reinstatement could not correct
There is no dispute about this. But the employer the earlier illegal dismissal of the petitioner. The
must clearly and convincingly establish the facts and private Civil Case s incurred liability under the Labor
incidents upon which its loss of confidence in the Code from the Ranara was illegally dismissed, and
employee may be fairly made to rest otherwise, the the liability did not abate as a result of Chang's
dismissal will be rendered illegal. repentance.

Reno Foods, Inc. v. NLRC (95)


Findings of facts of quasi-judicial agencies like
the NLRC which have acquired expertise in the
specific matters entrusted to their jurisdiction are
accorded by this Court not only with respect but
even finality if they are supported by substantial
evidence. Substantial evidence, which is the
quantum of evidence required to establish a fact in
cases before administrative and quasi-judicial G. SANCTIONS AND REMEDIES
bodies, is that amount of relevant evidence which a
reasonable mind might accept as adequate to justify 23.08 GENERAL RULE
a conclusion.
TWIN REMEDIES
PRESCRIPTION PERIOD
Valdez v. NLRC (98)
Azcor Manufacturing Inc. v. NLRC (99) Under Article 279 of the Labor Code, as
In addition, an action for reinstatement by amended, an employee who is unjustly dismissed
reason of illegal dismissal is one based on an injury from work shall be entitled to reinstatement without
which may be brought within four (4) years from the loss of seniority rights and other privileges and to his
time of dismissal pursuant to Art. 1146 of the Civil full back wages, inclusive of allowances, and to other
Code. Hence, Capulso's case which was filed after a benefits or their monetary equivalent computed from
measly delay of four (4) months should not be the time his compensation was withheld from him up
treated with skepticism or cynicism. By law and to the time of his actual reinstatement.
settled jurisprudence, he has four (4) years to file Thus, it being clearly established that herein
his complaint for illegal dismissal. A delay of merely petitioner was constructively dismissed, the decision
four (4) months in instituting an illegal dismissal of the Labor Arbiter awarding him back wages and
case is more than sufficient compliance with the separation pay in lieu of reinstatement, plus the
prescriptive period. It may betray an unlettered refund of his cash bond and tire deposit, is definitely
man's lack of awareness of his rights as a lowly in order.
worker but, certainly, he must not be penalized for
his tarrying. Phil. Airlines, Inc. v. NLRC (98)
In the case at bar, the alleged injury which
Coca-cola Bottlers Phils., Inc. v. Roque (99) private respondents stand to suffer by reason of
Davide, C. J., dissenting their alleged illegal dismissal can be adequately
Pursuant to Article 291 of the Labor Code, as compensated and therefore, there exists no
amended, the complaint should have been filed "irreparable injury," as defined above which would
within three (3) years for the accrual of Roque’s necessitate the issuance of the injunction sought for.
cause of action (his dismissal in 1982) otherwise, his Article 279 of the Labor Code provides that an
claim shall be forever bared. employee who is unjustly dismissed from
Besides even assuming for the sake of employment shall be entitled to reinstatement,
argument that the regular courts have jurisdiction without loss of seniority rights and other privileges,
over his claim for damages because of his illegal and to the payment of full backwages, inclusive of
dismissal, such claims necessarily arose upon an allowances, and to other benefits or their monetary
injury to his (as plaintiff) rights. Under Article 1146 equivalent computed from the time his
of the Civil Code, an action arising from injury to compensation was withheld from him up to the time
plaintiff’s rights prescribe in four (4) years from the of his actual reinstatement.
accrual of the cause of action. It was only in 1 June
1989, or after the lapse of seven (7) years after his Judy Philippines, Inc. v. NLRC (98)

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Under the law, an employee is entitled to exercise her right by asking the management for
reinstatement and to his full backwages when he is copies of the letters.
unjustly dismissed. Note, however, that
reinstatement and backwages are separate and Torillo v. Leogardo (91)
distinct reliefs given to an illegally dismissed Article 280 (now Article 279) of the Labor Code
employee. provides that "an employee who is unjustly
Reinstatement means restoration to a state or dismissed from work shall be entitled to
condition from which one had been removed or reinstatement without loss of seniority rights and
separated. One who is reinstated assumes the other privileges and to his full backwages . . ."
position he had occupied prior to the dismissal and Backwages in general are granted on grounds of
is, as an ordinary rule, entitled only to the last salary equity for earnings which a worker or employee has
in that position. lost due to his illegal dismissal. Reinstatement, on
Backwages, on the other hand, is a form of the other hand, means restoration to a state of
relief that restores the income that was lost by condition from which one had been removed or
reason of unlawful dismissal. separated.
Backwages and reinstatement are two reliefs
Bongan v. NLRC (98) given to an illegally dismissed employee. They are
In view thereof, "an employee who is unjustly separate and distinct from each other. However, in
dismissed from work shall be entitled to the event that reinstatement is no longer possible,
reinstatement without loss of seniority rights and to separation pay is awarded to the employee. Thus,
his backwages computed from the time his the award of separation pay is in lieu of
compensation was withheld from him up to the time reinstatement and not of backwages. In other
of his reinstatement." This apparently unqualified words, an illegally dismissed employee is entitled to
rule, however, admits of an exception. Thus, an (1) either reinstatement, if viable, or separation pay
illegally dismissed employee is entitled to: (1) either if reinstatement is no longer viable and (2)
reinstatement if viable or separation pay if backwages.
reinstatement is no longer viable, and (2) The distinction between separation pay and
backwages. Jurisprudence abound to the effect that backwages has been exhaustively discussed by this
the grant of separation pay can substitute if Court in Santos vs. NLRC, et. al., wherein we held:
reinstatement is not feasible, such as in the case of “The normal consequences of a finding that an
a strained employer-employee relationship or when employee has been illegally dismissed are, firstly,
the work or position formerly held by the dismissed that the employee becomes entitled to reinstatement
employee no longer exists. To these specified to his former position without loss of seniority rights
circumstances, we add another. In the instant case, and, secondly, the payment of backwages
while in the course of the prosecution of his claim, corresponding to the period from his illegal dismissal
petitioner was already in the twilight years of his up to actual reinstatement. The statutory intent on
employment. In Reyes v. Philippine Duplicators Inc., this matter is clearly discernible. Reinstatement
the Court held that a company should exercise restored the employee who was unjustly dismissed
caution and care in dealing with its employees to to the position from which he was removed, that is,
prevent suspicion that its dismissal of an employee to his status quo ante dismissal, while the grant of
is only a scheme to evade its responsibility of backwages allows the same employee to recover
granting retirement benefits. Thus, for having been from the employer that which he had lost by way of
illegally dismissed, petitioner shall be entitled, not wages as a result of his dismissal. These twin
only to separation pay and full backwages, but remedies-reinstatement and payment of backwages
additionally, to his retirement benefits pursuant to — make the dismissed employee whole who can
any collective bargaining agreement in the then look forward to continued employment. Thus do
workplace or, in the absence thereof, as provided in these two remedies give meaning and substance to
Section 14, Book VI of the Implementing Rules of the constitutional right of labor to security of tenure.
the Labor Code. The two forms of relief are distinct and separate, one
from the other. Though the grant of reinstatement
Mendoza v. NLRC (99) commonly carries with it an award of backwages,
The notices served on her sufficiently apprised the inappropriateness or non-availability of one does
her of the existence and the nature of the not carry with it the inappropriateness or non-
accusations against her. The company president's availability of the other."
letter of June 2, 1995 informed her that there was a
complaint from Amado Roa and the other division NATURE OF REMEDIES
heads of the Sales Department for her "alleged
deliberate withholding or delaying of the release and Filflex Industrial and Manufacturing Corp. v.
payment of the commissions . . ., unless and until NLRC (98)
given a certain amount in consideration [of] the An order for reinstatement must be specifically
expeditious release of the said commissions." declared and cannot be presumed; like back wages,
Celeridad's letter of June 24, 1995 reiterated the it is a separate and distinct relief given to an illegally
same gripe. That she did not receive a copy of these dismissed employee. There being no specific order
Complaints does not show that they were mere for reinstatement and the order being for
fabrications of the private respondent. Procedural complainant's separation, there can be no basis for
due process only requires employers to furnish their the award of salaries/back wages during the
errant employees written notices stating the pendency of appeal.
particular acts or omissions constituting the grounds
for their dismissal, and to hear their side of the De Guzman v. NLRC (99)
story. Obviously, the employer complied with these. The general rule is that where there is a
It was, therefore, incumbent upon petitioner to finding of illegal dismissal, an employee is

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entitled to reinstatement and to receive back wages compensation was withheld from him up to the
from the date of his dismissal up to the time of his time of his reinstatement."
reinstatement. is aimed to restore the situation as nearly as
The normal consequences of a finding that an possible to status quo ante the unfair labor practice.
employee has been illegally dismissed are, firstly, This requires that those deprived of a recognized
that the employee becomes entitled to reinstatement and protected interest by violations of the law should
to his former position without loss of seniority rights be made whole so as to prevent the violator from
and, secondly, the payment of back wages profiting from his misdeeds (N.L.R.B. v. Coats and
corresponding to the period from his illegal dismissal Clark, Inc.; N.L.R.B. v. J.H. Rutter-Rex
up to actual reinstatement. The rationale therefor is Manufacturing Co.). Yet the reinstatement remedy
clearly obvious. Reinstatement restores the must always be adapted to economic-business
employee who was unjustly dismissed to the position conditions (N.L.R.B. v. R.C. Can Co.; N.L.R.B. v.
from which he was removed, i.e., to his status quo American Aggregate Co.).
ante dismissal, while the grant of back wages allows
the same employee to recover from the employer RATIONALE
that which he had lost by way of wages as a result
of his dismissal. These twin remedies of Escobin v. NLRC (98)
reinstatement and payment of back wages make The normal consequences of illegal dismissal are
whole the dismissed employee, who can then look reinstatement and payment of back wages. These
forward to continued employment. These two remedies give life to the workers' constitutional right
remedies give meaning and substance to the to security of tenure.
constitutional right of labor to security of tenure. Separation pay is generally not awarded except
However, the two remedies are distinct and in instances where reinstatement is no longer
separate. Though the grant of reinstatement feasible or appropriate, as in this case. As a
commonly carries with it an award of back wages, substitute for immediate and continued
the inappropriateness or non-availability of one does reemployment, separation pay is meant to provide
not carry with it the inappropriateness or non- the employee the "wherewithal during the period
availability of the other. Reinstatement is a that he is looking for another employment."
restoration to a state from which one has been
removed or separated. On the other hand, the EMPLOYEE RIGHT
payment of backwages is a form of relief that
restores the income that was lost by reason of the Quijano v. Mercury Drug Corp. (98)
unlawful dismissal. The award of one is not a We disagree. Well-entrenched is the rule that an
condition precedent to an award of another. Back illegally dismissed employee is entitled to
wages may be ordered without ordering reinstatement as a matter of right. Over the years,
reinstatement; conversely, reinstatement may be however, the case law developed that where
payment ordered without of back wages. reinstatement is not feasible, expedient or practical,
as where reinstatement would only exacerbate the
tension and strained relations between the parties,
or where the relationship between the employer and
RATIONALE FOR REMEDIES employee has been unduly strained by reason of
their irreconcilable differences, particularly where
Globe Mackay v. NLRC (92) the illegally dismissed employee held a managerial
To go back to the instant case, there being no or key position in the company, it would be more
evidence to show an authorized, much less a legal, prudent to order payment of separation pay instead
cause for the dismissal of private respondent, she of reinstatement. Some unscrupulous employers,
had every right, not only to be entitled to however, have taken advantage of the overgrowth of
reinstatement, but as well, to full backwages. this doctrine of "strained relations" by using it as a
The intendment of the law in prescribing the cover to get rid of its employees and thus defeat
twin remedies of reinstatement and payment of their right to job security.
backwages is, in the former, to restore the dismissed
employee to her status before she lost her job, for EFFECT OF FAILURE TO ASK RELIEF
the dictionary meaning of the word "reinstate" is "to
restore to a state, condition, position, etc. from General Baptist Bible College v. NLRC (93)
which one had been removed" and in the latter, to Having been illegally dismissed from his position
give her back the income lost during the period of as Academic Dean, Basa is entitled to reinstatement
unemployment. Both remedies, looking to the past, to his former position without loss of seniority rights
would perforce make her "whole." and to payment of backwages from the time of his
illegal dismissal up to his actual reinstatement. In
23.09 REINSTATEMENT resolving whether or not the relief of reinstatement
may be granted to Basa notwithstanding his failure
DEFINED to pray for the same in his complaint, We rule in the
affirmative. We are for the granting of the relief he is
Union of Supervisors, etc. v. Secretary of Labor entitled to under the law, although he failed to
(84) specifically pray for the same in his complaint.
The Labor Code provision on reinstatement, to We hereby note that Basa's failure to specifically
wit: pray for the relief of reinstatement in a complaint
"Art. 280. An employee who is unjustly which he personally prepared and signed using a
dismissed from work shall be entitled to standard form prepared by the NLRC Regional
reinstatement without loss of seniority rights and Arbitration, Branch No. XI, Davao City, is a
to his backwages computed from the time his procedural lapse which cannot put to naught a
right which he is entitled under a substantive

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law. Technicalities have no room in labor cases, reinstatement without loss of seniority rights and
where the Rules of Court are applicable only in order to his backwages computed from the time his
compensation was withheld from him up to the
to effectuate the objectives of the Labor Code and
time of his reinstatement."
not to defeat them. The pertinent provisions of the
is aimed to restore the situation as nearly as
Revised Rules of Court of the Philippines and
possible to status quo ante the unfair labor practice.
prevailing jurisprudence may be applied by analogy
This requires that those deprived of a recognized
or in a suppletory character to effect an expeditious
and protected interest by violations of the law should
resolution of labor controversies in a practical and
be made whole so as to prevent the violator from
convenient manner. We are inclined to overlook a
profiting from his misdeeds (N.L.R.B. v. Coats and
procedural defect if only to promote substantial
Clark, Inc.; N.L.R.B. v. J.H. Rutter-Rex
justice.
Manufacturing Co.). Yet the reinstatement remedy
must always be adapted to economic-business
RULES ON REINSTATEMENT
conditions (N.L.R.B. v. R.C. Can Co.; N.L.R.B. v.
American Aggregate Co.].
NOT AN EMPLOYER OPTION
Espejo v. NLRC (96)
Iriga Telephone Co., Inc. v. NLRC (98)
The law recognizes as valid any retirement plan,
In sum, the labor arbiter ruled that, while
agreement or management policy regarding
Praxides was at fault for desisting from working for
retirement at an earlier or older age. In the case of
ITELCO, the former could not be totally blamed for
petitioner, CISP did not have any retirement plan for
doing so because of the maltreatment he suffered at
its employees. In such situation, Sec. 13, Book IV,
the hands of Atty. Ortega. He tried to restore the
of the Omnibus Rules Implementing the Labor Code
status quo by decreeing Praxides' reinstatement
provides that in the absence of a retirement plan,
without loss of seniority rights but without back
agreement or policy an employee may be retired
wages. The filing by Praxides of a criminal complaint
upon reaching the age of sixty (60) years.
against ITELCO's president and general manager
Construing this provision, we held that an employee
has, however, strained the relations between them,
may retire, or may be retired by his employer, upon
moving the NLRC to award separation pay in lieu of
reaching sixty (60). Thus, an employee held to be
reinstatement, in conformity with applicable
illegally dismissed cannot be reinstated if he had
jurisprudence on the matter. Certainly, this act does
already reached the age of sixty (60) years at the
not constitute abuse of discretion, much less grave
time of his second complaint (pressing for
abuse, on the part of the NLRC. Finally, as to the
reinstatement) before the Labor Arbiter's Office.
amount of the monetary award, this Court has ruled
that where reinstatement is no longer an option, a
STATUS OF EMPLOYMENT
separation pay equivalent to one month's salary for
every year of service is awarded as an alternative.
Kiamco v. NLRC (99)
The argument of private respondents that
DUE PROCESS
reinstatement and payment of back wages could not
be made since Kiamco was not a regular employee is
Alhambra Industries, Inc. v. NLRC (94)
apparently misplaced. As quoted above, the normal
The error is consequential. A termination
consequences of an illegal dismissal are the
without just cause entitles a worker to reinstatement
reinstatement of the aggrieved employee and the
regardless of whether he was accorded due process.
grant of back wages. These rights of an employee do
On the other hand, termination of a worker for
not depend on the status of his employment prior to
cause, even without procedural due process, does
his dismissal but rather to the legality and validity of
not warrant reinstatement, but the employer incurs
his termination. The fact that an employee is not a
liability for damages.
regular employee does not mean that he can be
Since the Labor Arbiter found a valid ground for
dismissed any time, even illegally, by his employer.
dismissal, taking into consideration the controverting
evidence of the parties, which finding was not set
STRAINED RELATIONS
aside by NLRC, the latter was in grave error when it
directed reinstatement. Where, on the basis of the
RATIONALE
evidence of the opposing parties the validity of the
dismissal is determinable at the level of the Labor
Pearl S. Buck Foundation, Inc. v. NLRC (90)
Arbiter, the latter should resolve that issue. And if
There is likewise no basis for the NLRC ruling
the Labor Arbiter finds just cause in the termination,
that Mrs. Querimit should be reinstated with
reinstatement would no longer serve any purpose.
backwages. A close scrutiny of the record reveals
After all, a finding by the Labor Arbiter as to the
that after filing her complaint for illegal dismissal,
validity of the ground for dismissal is much more
Mrs. Querimit executed an affidavit which states:
impartial and trustworthy than a determination by "That since I am not interested to be reinstated
the employer who assumes the role of accuser and to my employment by reason of the prejudicial
judge at the same time. and strained relations now existing between
myself and the management of Pearl S. Buck
EXCEPTIONS Foundation, Inc., I am claiming separation pay
for being illegally dismissed from employment to
be computed from the date I was employed up
BUSINESS CONDITIONS
to the date I was illegally dismissed; . . ."
Said statement should have cautioned both the
Union of Supervisors, etc. v. Sec. of Labor (84)
labor arbiter and the NLRC. The parties to a case
The Labor Code provision on reinstatement, to
should not be forced into a situation where a
wit:
"Art. 280. An employee who is unjustly
peaceful relationship is not feasible. As the
dismissed from work shall be entitled to petitioner appears to have lost its trust in private

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respondent, who in turn is not seeking It is readily noticeable in the case at bar that
reinstatement, it would be an act of oppression to the differences of Caparas with Philamlife are neither
compel them to return to the status quo ante. personal nor physical nor are they of so serious a
nature as to preclude his reinstatement. The
Commercial Motors Corp. v. NLRC (90) unsigned probationary appointment to a lower
It would seem, however, that the circumstances position that was offered him was an irritant that
of this case render inappropriate Umlas' any employee similarly prejudiced had reason to
reinstatement to his former position, as an item of question. It bears emphasis that not only was
relief. A more equitable disposition is that which this Caparas reacting merely as an individual employee
Court has more than once made in other cases of to the conditions laid down by Philamlife; he was
the same nature: the award, in lieu of expressing the official position and opposition of the
reinstatement, of separation pay at the rate of one EMAPALICO of which he was the President. In this
month's salary for every year of service, "so that . . . capacity, he had a right and a duty as well to protest
(the employee) can be spared the agony of having the acts of Philamlife insofar as they affected not
to work anew with . . . (the employer) under an only him but also his co-workers.
atmosphere of antipathy and antagonism, and the . .
. (latter) does not have to endure the continued NO STRAINED RELATIONS
service of . . . (the former) in whom it has lost
confidence." Sibal v. Notre Dame of Greater manila (90)
Strained relations in order that it may justify the
INDICATORS award of separation pay in lieu of reinstatement with
backwages, should be such, that they are so
Sentinel Security Agency, Inc. v. NLRC compelling & so serious in character, that the
The only logical conclusion from the foregoing continued employment of an employee is so
discussion is that the Agency illegally dismissed the obnoxious to the person/business of the employer &
complainants. Hence, as a necessary consequence, that the continuation of such employment has
the complainants are entitled to reinstatement and become inconsistent with peace & tranquility which
back wages. However, reinstatement is no longer is an ideal atmosphere in every workplace.
feasible in this case. The Agency cannot reassign
them to the Client, as the former has recruited new LIMITATIONS
security guards; the complainants, on the other
hand, refuse to accept other assignment. Verily, Jardine Davies, Inc. v. NLRC (99)
complainants do not pray for reinstatement; in fact In addition to back wages, illegally dismissed
they refused to be reinstated. Such refusal is employees are entitled to either reinstatement, if
indicative of strained relations. Thus, separation pay feasible, or separation pay if reinstatement is no
is awarded in lieu of reinstatement. longer viable. In our view, the circumstances
obtaining in this case would not warrant the
ILLUSTRATIONS reinstatement of the private respondent.
Antagonism and imputation of criminal act caused a
Employees Association of the Philippine severe strain in the relationship between petitioner
American Life Assurance Co. v. NLRC (91) and private respondent, not to mention the
While there is no denying that relations have considerable length of time private respondent has
been strained between Caparas and Philamlife, their been out of petitioner’s employ. Thus, a more
differences are not of such a nature or degree as to equitable disposition would be an award of
preclude the petitioner's reinstatement. The fact that separation pay equivalent to one (1) month’s pay for
Caparas was the President of the Employees every year of service with petitioner, a fraction of at
Association of the Philippine American Life Insurance least 6 months being considered as 1 whole year.
Company (EMAPALICO) at the time he was
dismissed could be another reason why he should be
reinstated rather than simply given separation pay
and back wages.
In the several cases cited by the parties, it was
clear that the retention of the employee was not
advisable because of the irreconcilable enmity
between the employee and management.
IMPLEMENTATION – OPTIONS AND RATIONALE
In Century Textile Mills v. NLRC, the
reinstatement of the employee was not allowed
RATIONALE
because he had tried to poison some of his co-
workers and would have continued, if retained, to Jardine Davies, Inc. v. NLRC (93)
pose a threat to their lives. In Flores v. Nuestro
The order of immediate reinstatement pending
there was a previous altercation between the parties
appeal, in cases of illegal dismissal is an ancillary
that led to the filing of a complaint for slight physical
relief under RA 6715 granted to a dismissed
injuries by the employee against the employer, and
employee to cushion him & his family against the
we felt that any possible confrontation between
impact of economic dislocation or abrupt loss of
them should be avoided. While a similar physical
earnings. If the employee chooses not to report for
hostility was not demonstrated in Divine Word High
work pending the resolution of the case on appeal,
School v. NLRC, the teacher's separation was
he foregoes such a temporary relief and is not paid
nevertheless sustained by this Court because we felt
of his salary.
that her retention in the high school faculty would
prejudice the educational and moral objectives of
IMMEDIATELY EXECUTORY OPTIONS
the Catholic school.

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Pioneer Texturizing Corp. v. NLRC (97) ordering the employee's reinstatement, the
We note that prior to the enactment of R.A. No. employer has the right to choose whether to re-
6715, Article 223 of the Labor Code contains no admit the employee to work under the same terms
provision dealing with the reinstatement of an and conditions prevailing prior to his dismissal or to
illegally dismissed employee. The amendment reinstate the employee in the payroll. In either
introduced by R.A. No. 6715 is an innovation and a instance, the employer has to inform the employee
far departure from the old law indicating thereby the of his choice. The notification is based on practical
legislature's unequivocal intent to insert a new rule considerations for without notice, the employee has
that will govern the reinstatement aspect of a no way of knowing if he has to report for work or
decision or resolution in any given labor dispute. In not.
fact, the law as now worded employs the phrase
"shall immediately be executory" without International Container Services, Inc. v. NLRC
qualification emphasizing the need for prompt (98)
compliance. As a rule, "shall" in a statute commonly The provision of Art. 223 is clear that an award
denotes an imperative obligation and is inconsistent for reinstatement shall be immediately executory
with the idea of discretion and that the presumption even pending appeal and the posting of a bond by
is that the word "shall", when used in a statute, is the employer shall not stay the execution for
mandatory. An appeal or posting of bond, by plain reinstatement.
mandate of the law, could not even forestall nor stay
the executory nature of an order of reinstatement. 23.10 BACKWAGES
The law, moreover, is unambiguous and clear. Thus,
it must be applied according to its plain and obvious DEFINITION
meaning, according to its express terms.
And in conformity with the executory nature of St. Theresa’s School of Novaliches Foundation
the reinstatement order, Rule V, Section 16 (3) of v. NLRC (98)
the New Rules of Procedure of the NLRC strictly The term "backwages" has been defined as that
requires the Labor Arbiter to direct the employer to for earnings lost by a worker due to his illegal
immediately reinstate the dismissed employee. dismissal. Backwages are generally granted on
A closer examination, however, shows that the grounds of equity. Payment thereof is a form of
necessity for a writ of execution under Article 224 relief that restores the income lost by reason of such
applies only to final and executory decisions which unlawful dismissal. It is not private compensation or
are not within the coverage of Article 223. damages, but is awarded in furtherance and
Article 224 states that the need for a writ of effectuation of the public objectives of the labor
execution applies only within five (5) years from the Code. Nor is it a redress of a private right but,
date a decision, an order or award becomes final and rather, in the nature of a command to the employer
executory. It can not relate to an award or order of to make public reparation for dismissing an
reinstatement still to be appealed or pending appeal employee, either due to the former's unlawful act or
which Article 223 contemplates. The provision of bad faith.
Article 223 is clear that an award for reinstatement
shall be immediately executory even pending appeal General Baptist Bible College v. NLRC (93)
and the posting of a bond by the employer shall not The NLRC, however, erroneously referred to
stay the execution for reinstatement. The legislative unpaid salaries as “back wages” when it excluded
intent is quite obvious, i.e., to make an award of allowances therefrom. In order to obviate any
reinstatement immediately enforceable, even further controversy on this matter, We would like to
pending appeal. To require the application for and clarify the difference between the two terms. When
issuance of a writ of execution as prerequisites for the term “back wages” was used in the NLRC
the execution of a reinstatement award would decision, what was actually meant was unpaid
certainly betray and run counter to the very object salaries, which pertain to compensation due the
and intent of Article 223, i.e., the immediate employee for services actually rendered before
execution of a reinstatement order. The reason is termination. Back wages, on the other hand, refer to
simple. An application for a writ of execution and its his supposed earnings had he not been illegally
issuance could be delayed for numerous reasons. A dismissed. Unpaid salaries refer to those earned
mere continuance or postponement of a scheduled prior to dismissal whereas back wages refer to those
hearing, for instance, or an inaction on the part of earnings lost after illegal dismissal. Thus,
the Labor Arbiter or the NLRC could easily delay the reinstatement would always bring with it payment of
issuance of the writ thereby setting at naught the backwages but not necessarily payment of unpaid
strict mandate and noble purpose envisioned by salaries. Payment of unpaid salaries is only ordered
Article 223. In other words, if the requirements of if there are still salaries collectible from his employer
Article 224 were to govern, as we so declared in by reason of service already rendered.
Maranaw, then the executory nature of a We also want to clarify that when there is an
reinstatement order or award contemplated by award of back wages this actually refers to back
Article 223 will be unduly circumscribed and wages without qualifications and deductions, thus,
rendered ineffectual. we held that:
Furthermore, the rule is that all doubts in the “The term ‘back wages without qualification and
interpretation and implementation of labor laws deduction’ means that the workers are to be
paid their back wages fixed as of the time of the
should be resolved in favor of labor. In ruling that an
dismissal or strike without deduction for their
order or award for reinstatement does not require a earnings elsewhere during their layoff and
writ of execution the Court is simply adhering and without qualification of their wages as thus
giving meaning to this rule. Henceforth, we rule that fixed; i.e., received by their co-workers who are
an award or order for reinstatement is self- not dismissed or did not go on strike. Awards
executory. After receipt of the decision or resolution including salary differentials are not allowed. The
salary base properly used should, however, include

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not only the basic salary but also the emergency income that was lost because of his unjust dismissal.
cost of living allowances and also transportation On the other hand, payment of separation pay is
allowances if the workers are entitled thereto.”
intended to provide the employee money during the
period in which he will be looking for another
RATIONALE employment.
XXX It is true that private respondent did not
Associated Labor Unions – TUCP v. NLRC (99) appeal the award of Labor Arbiter awarding
As already stated, dismissal as a measure to separation pay sans back wages. While as a
protect the interests of respondent company is general rule a party who has not appealed is not
unwarranted under the facts of this case. entitled to affirmative relief other than the ones
Suspension would have sufficed. Without deciding granted in the decision of the court below, law and
for how long the suspension should be in cases such jurisprudence authorize a tribunal to consider errors,
as this, considering that petitioner has been although unassigned, if they involve (1) errors
prevented from working in respondent company affecting the lower court’s jurisdiction over the
since September 13, 1993, we hold that, for all subject matter, (2) plain errors not specified, and
purposes, he has served a reasonable period of (3) clerical errors. In this case, the failure of the
suspension commensurate to the gravity of his Labor Arbiter and the public respondent NLRC to
offense. Consequently, the Labor Arbiter’s order of award back wages to the private respondent, who is
reinstatement of petitioner without back wages may legally entitled thereto having been illegally
be considered appropriate. dismissed, amounts to a “plain error” which we may
rectify in this petition, although private respondent
Quebec v. NLRC (99) did not bring any appeal regarding the matter, in the
Considering that the dismissal of private interest of substantial justice. The Supreme Court is
respondents was illegal, the payment of back wages clothed with ample authority to review matters, even
is in order; and since their termination was after 21 if they are not assigned as errors on appeal, if it
March 1989, or after RA No. 6715 took effect, they finds that their consideration is necessary in arriving
are also entitled to full back wages, inclusive of at a just decision of the case. Rules of procedure
allowances and other benefits allowed by law, are mere tools designed to facilitate the attainment
computed from the time their compensation was of justice. Their strict and rigid application, which
withheld up to the finality of this judgment. would result in technicalities that tend to frustrate
In lieu of reinstatement, however, separation rather than promote substantial justice, must always
pay is to be awarded herein due to the fact that the be avoided. Thus, substantive rights like the award
reinstatement of respondents to their previous of back wages resulting from illegal dismissal must
confidential jobs is no longer possible since the not be prejudiced by a rigid and technical application
Canhagimet Express was already sold by petitioner. of the rules.
Separation pay is the amount that an employee
receives at the time of his severance from the PERIOD – COMPUTATION
service and is designed to provide him with the
wherewithal during the period that he is looking for Itogon Suyoc, etc. v. Sangilo (68)
another employment. The grant of separation pay Since the dismissal of respondents in 1958,
does not preclude an award for back wages for the more than ten years had elapsed, it would not seem
latter represents the amount of earnings lost by out of place to restate the guidelines to be observed
reason of the unjustified dismissal. in the ascertainment of the total back wages payable
under the judgment below. These are:
EFFECT FAILURE TO CLAIM First. To be deducted from the back wages
accruing to each of the laborers to be reinstated is
De la Cruz v. NLRC (98) the total amount of earnings obtained by him from
It is evident that the award of back wages other employment(s) from the date of dismissal to
resulting from the illegal dismissal of an employee is the date of reinstatement. Should the laborer decide
a substantive right. Thus, the failure to claim back that it is preferable not to return to work, the
wages in a complaint for illegal dismissal has been deduction should be made up to the time judgment
held to be a mere procedural lapse which cannot becomes final. And these, for the reason that
defeat a right granted under substantive law. employees should not be permitted to enrich
themselves at the expense of their employer.
EFFECT FAILURE TO ORDER Besides, there is the “law’s abhorrence for double
compensation.”
Aurora Land, etc. v. NLRC (97) Second. Likewise, in mitigation of the damages
The Court, however, is bewildered why only an that the dismissed respondents are entitled to,
award for separation pay in lieu of reinstatement account should be taken of whether in the exercise
was made by both the Labor Arbiter and the NLRC. of due diligence respondents might have obtained
No back wages were awarded. It must be income from suitable remunerative employment.
remembered that back wages and reinstatement are We are prompted to give out this last reminder
two reliefs that should be given to an illegally because it is really unjust that a discharged
dismissed employee. They are separate and distinct employee should, with folded arms, remain inactive
from each other. In the event that reinstatement is in the expectation that a windfall would come to
no longer possible, as in this case, separation pay is him. A contrary view would breed idleness; it is
awarded to the employee. The award of separation conducive to lack of initiative on the part of a
pay is in lieu of reinstatement and not of back laborer.
wages. In other words, an illegally dismissed
employee is entitled to (1) either reinstatement, if Mercury Drug Co., Inc. v. CIR (74)
viable, and (2) back wages. Payment of back wages
is specifically designed to restore an employee’s

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While this case was submitted for decision on Republic Act No. 6715 which took effect on march
March 29, 1965, the delay in its resolution is not due 21, 1989. It should be noted that private
to the parties. However, it should be noted that respondents were dismissed illegally on March 31,
private respondent Dayao filed his ULP charge with 1989, or after the effectivity of said amendatory law.
reinstatement and back wages about two years and However, in ascertaining the total amount of back
fifteen days after his separation on April 10, 1961. wages payable to them, we go back to the rule prior
As aforestated, the shortest prescriptive period for to the Mercury Drug rule that the total amount
the filing of all other actions for which the statute of derived from employment elsewhere by the
limitations does not fix a period, is four years. The employee from the date of dismissal up to the date
period of delay in instituting this ULP charge with of reinstatement, if any, should be deducted
claim for reinstatement and back wages, although therefrom. We restate the underlying reason that
within the prescriptive period, should be deducted employees should not be permitted to enrich
from the liability of the employer to him for back themselves at the expense of their employer. In
wages. In order that the employee however should addition, the law abhors double compensation. To
be relieved from proving his income during the this extent, our ruling in Alex Ferrer, et al. v. NLRC,
period he was out of the service and the employer promulgated on July 5, 1993, is hereby modified.
from submitting counter-proofs, which may delay
the execution of the decision, the employer in the Lopez v. NLRC (96)
case at bar should be directed to pay private With respect to the total amount of back wages
respondent Dayao back wages equivalent to one payable to petitioner, the case of Pines City
year, eleven months, and fifteen days without Educational Center, et al. v. NLRC which was cited in
further disqualifications. the recent case of Zenaida Gaco v. NLRC, enunciated
Teehankee (dissent) - an award of back wages the prevailing jurisprudence on the matter:
equivalent to 3 years should serve as the base figure in ascertaining the total amount of back wages
without deductions, subject to deductions where payable to them, we go back to the rule prior to
the Mercury Drug rule that the total amount
there are mitigating circumstances in favor of the
derived from employment elsewhere by the
ER, but subject to an increase by way