Part I : Introductory Materials Labor Standards

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

3.

1.03 BASIS OF ENACTMENT 1987 Constitution Art II Sec 5 The maintenance of peace and order, the protection of life, liberty, and property, and the promotion of the general welfare are essential for the enjoyment by all the people of the blessings of democracy. Art II Sec 18 The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare. Art XIII Sec 1 The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce

UP LAW BAROPS 2007 ONE UP
1 of 132

Part I : Introductory Materials Labor Standards
Great Pacific Employees Union v. Great Pacific Life Assurance (99) It bears emphasis that the employer is free to regulate all aspects of employment according to his own discretion and judgment. This prerogative flowed from the established rule that labor laws do not authorize substitution of judgment of the employer in the conduct of his business. Recall f workers clearly falls within the ambit of management prerogative. The employer can exercise this prerogative without fear of liability so long as it is done in good faith for the advancement of his interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or valid agreements. It is valid as it is not performed in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite. Pantranco North Express, Inc. v. NLRC (99) The State affords the constitutional blanket of rendering protection to labor, but it must also protect the right of employers to exercise what are clearly management prerogatives, so long as the exercise is without abuse of discretion. Bontia v. NLRC (96) The rule is well settled that labor laws discourage interference with an employer's judgment in the conduct of his business. Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives As long as the company' s exercise of the same is in good faith in order to advance its interests and not for the purpose of defeating or circumventing the rights of the employees under the law or valid agreements, such exercise will be upheld. However, management prerogatives are not absolute but are subject to legal limits, collective bargaining agreements, or general principles of fair play and justice. And, while it is the special privilege of management to dismiss or lay off an employee, the exercise of that prerogative must be made without abuse of discretion, for what is at stake is not only the employee' s position but also his means of livelihood. Courts may, therefore, look into the employer' s exercise of a management prerogative if the same is clearly shown to be tainted with grave abuse of discretion, 15 ever mindful that, under the foregoing principles and the policy of the State, doubts should be resolved in favor of the disadvantaged employee. 1.07 COMPROMISE AND WAIVER Article 227 Any compromise settlement, including those involving labor standards law, voluntarily agreed upon by the parties with the assistance of the Bureau or the regional office of the Department of Labor, shall be FINAL and BINDING upon the parties. The National Labor relations Commission or any court shall not assume jurisdiction over issues involved therein except in case of noncompliance thereof or if there is prima facie evidence that the settlement was obtained through FRAUD, MISREPRESENTATION, OR COERCION. Rules Asian Alcohol Corp. v. NLRC (99) It is true that this Court has generally held that quitclaims and releases are contrary to public policy and therefore, void. Nonetheless, voluntary agreements that represent a reasonable settlement are binding on the parties and should not later be disowned. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of the settlement are unconscionable, that the law will step in to bail out the employee. While it is our duty to prevent the exploitation of employees, it also behooves us to protect the sanctity of contracts that do not contravene our laws. More Maritime Agencies, Inc. v. NLRC (99) In American Home Assurance Co. v. NLRC, this Court held:
“The law does not consider as valid any agreement to receive less compensation that what a worker is entitled to recover nor prevent him from demanding benefits to which he is entitled. Quitclaims executed by the employees are thus commonly frowned upon as contrary to public policy and ineffective to bar claims for the full measure of the worker’s legal rights, considering the economic disadvantage of the employee and the inevitable pressure upon him by financial necessity.”

Thus, it is never enough to assert that the parties have voluntarily entered into such a quitclaim. Golden Donuts, Inc. v. NLRC (2000) A compromise, once approved by final orders of the court has the force of res judicata between the parties and should not be disturbed except for vices of consent or forgery." A compromise is basically a contract perfected by mere consent. "Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract." A compromise agreement is not valid when a party in the case has not signed the same or when someone signs for and in behalf of such party without authority to do so. 1.08 SOURCES OF LAW LABOR CODE AND RELATED SPECIAL LEGISLATION Article 1305 Civil Code A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Article 1306 Civil Code The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. CONTRACT Collective Bargaining Agreement Plastic Town Center Corp. v. NLRC (89) The subject for interpretation in this petition for review is not the Labor Code or its implementing rules and regulations but the provisions of the collective bargaining agreement entered into by management and the labor union. As a contract,

UP LAW BAROPS 2007 ONE UP
2 of 132

Part I : Introductory Materials Labor Standards
it constitutes the law between the parties (Fegurin v. National Labor Relations Commission) and in interpreting contracts, the rules on contract must govern. Contracts which are not ambiguous are to be interpreted according to their literal meaning and should not be interpreted beyond their obvious intendment (Herrera v. Petrophil Corp.). opportunities which should be regulated, if not controlled, by the State or placed, as it were, in custodia societatis. 2.02 NATURE OF PROVISION Phil. Airlines, Inc. v. Santos (93) It is a fact that the sympathy of the Court is on the side of the laboring classes, not only because the Constitution imposes such sympathy, but because of the one-sided relation between labor and capital. The purpose is to place the workingman on an equal plane with management — with all its power and influence — in negotiating for the advancement of his interests and the defense of his rights. Under the policy of social justice, the law bends over backward to accommodate the interests of the working class on the humane justification that those with less privileges in life should have more privileges in law. Phil. Geothermal, Inc. v. NLRC (94) The law in protecting the rights of the employees authorizes neither oppression nor selfdestruction of the employer. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to none). 2.03 1987 CONSTITUTION LABOR SECTOR - CHARACTERIZED Article II Section 18 The State affirms labor as a primary social It shall protect the rights of economic force. workers and promote their welfare. PROTECTION OF LABOR – GUARANTEES Article XIII, Sec. 3 The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace. 7 Cardinal Rights of Workers

PAST PRACTICES Davao Fruits Corporation v. Associated Labor Union (93) From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its employees' thirteenth month pay, the payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays. The considerable length of time the questioned items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake. A company practice favorable to the employees had indeed been established and the payments made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Section 10 of the Rules and Regulations Implementing P.D. No. 851, and Article 100 of the Labor Code of the Philippines, which prohibit the diminution or elimination by the employer of the employees' existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).

SECTION 2 - LABOR AND THE CONSTITUTION
2.01 HISTORICAL BACKGROUND/RATIONALE Antamoc Goldfields Mining Co. v. CIR (40) It should be observed at the outset that our Constitution was adopted in the midst of surging unrest and dissatisfaction resulting from economic and social distress which was threatening the stability of governments the world over. Alive to the social and economic forces at work, the framers of our Constitution boldly met the problems and difficulties which faced them and endeavored to crystallize, with more or less fidelity, the political, social and economic propositions of their age, and this they did, with the consciousness that the political and philosophical aphorism of their generation will, in the language of a great jurist, 'be doubted by the next and perhaps entirely discarded by the third.' Embodying the spirit of the present epoch, general provisions were inserted in the Constitution which are intended to bring about the needed social and economic equilibrium between component elements of society through the application of what may be termed as the justitia communis advocated by Grotius and Leibnits many years ago to be secured through the counterbalancing of economic and social forces and

UP LAW BAROPS 2007 ONE UP
3 of 132

Part I : Introductory Materials Labor Standards
S C P T H L P right to self-organization collective bargaining and negotiations peaceful concerted activities including the right to strike in accordance with law security of tenure humane conditions of work living wage participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. preservation of corporate profits. Then, by and pursuant to the same power, the State may authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated employee and his family. SOCIAL JUSTICE Article II, Section 10 The State shall promote social justice in all phases of national development. Article XIII Section 1 The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce social, economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good. Article XIII, Section 2 The promotion of social justice shall include the commitment to create economic opportunities based on freedom of initiative and self-reliance. DEFINITION Calalang v. Williams (40) Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. LIMITS OF USE Guido v. Rural Progress Adm. (49) Hand in hand with the announced principle, herein invoked, that "the promotion of social justice to insure the well-being and economic security of all the people should be the concern of the state," is a declaration, with which the former should be reconciled, that "the Philippines is a Republican state" created to secure to the Filipino people "the blessings of independence under a regime of justice, liberty and democracy." Democracy, as a way of life enshrined in the Constitution, embraces as its necessary components freedom of conscience, freedom of expression, and freedom in the pursuit of happiness. Along with these freedoms are included economic freedom and freedom of enterprise within reasonable bounds and under proper control. In paving the way for the breaking up of existing large estates, trusts in perpetuity, feudalism, and their concomitant evils, the Constitution did not propose to destroy or undermine property rights, or to advocate equal distribution of wealth, or to authorize the taking of what is in excess of one's personal needs and the giving of it to another. Evincing much concern for the protection of property, the Constitution distinctly recognizes the preferred position which real estate has occupied in law for ages. Property is bound up with every aspect of social life in a democracy as democracy is conceived in the Constitution. The Constitution realizes the indispensable role which property,

Aris (Phil.) Inc. v. NLRC (91) These provisions are the quintessence of the aspirations of the workingman for recognition of his role in the social and economic life of the nation, for the protection of his rights, and the promotion of his welfare. Thus, in the Article on Social Justice and Human Rights of the Constitution, which principally directs Congress to give highest priority to the enactment of measures that protect and enhance the right of all people to human dignity, reduce social, economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good, the State is mandated to afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all; to guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law, security of tenure, human conditions of work, and a living wage, to participate in policy and decision-making processes affecting their rights and benefits as may be provided by law; and to promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes. Incidentally, a study of the Constitutions of various nations readily reveals that it is only our Constitution which devotes a separate article on Social Justice and Human Rights. Thus, by no less than its fundamental law, the Philippines has laid down the strong foundations of a truly just and humane society. This Article addresses itself to specified areas of concern—labor, agrarian and natural resources reform, urban land reform and housing, health, working women, and people's organizations—and reaches out to the underprivileged sector of society, for which reason the President of the Constitutional Commission of 1986, former Associate Justice of this Court Cecilia Muñoz-Palma, aptly describes this Article as the "heart of the new Charter." These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for the nation's progress and stability. XXX The validity of the questioned law is not only supported and sustained by the foregoing considerations. As contended by the Solicitor General, it is a valid exercise of the police power of the State. Certainly, if the right of an employer to freely discharge his employees is subject to regulation by the State, basically in the exercise of its permanent police power on the theory that the preservation of the lives of the citizens is a basic duty of the State, that is more vital than the

UP LAW BAROPS 2007 ONE UP
4 of 132

Part I : Introductory Materials Labor Standards
owned in reasonable quantities and used legitimately, plays in the stimulation to economic effort and the formation and growth of a solid social middle class that is said to be the bulwark of democracy and the backbone of every progressive and happy country. Phil. Long Distance Telephone Co. v. NLRC (88) The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character. Garcia v. NLRC (94) The constitutional policy of providing full protection to labor is not intended to oppress or destroy management. The employer cannot be compelled to retain employees it no longer needs, to be paid for work unreasonably refused and not actually performed. NASECO bent over backward and exerted every effort to help the petitioners look for other work, postponed the effective date of their separation, and offered them a generous termination pay package. The unflagging commitment of this Court to the cause of labor will not prevent us from sustaining the employer when it is in the right, as in this case. Phil. Geothermal Inc. v. NLRC (94) While it is true that compassion and human consideration should guide the disposition of cases involving termination of employment since it affects one's source or means of livelihood, it should not be overlooked that the benefits accorded to labor do not include compelling an employer to retain the services of an employee who has been shown to be a gross liability to the employer. The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but a recognition of the inherent economic inequality between labor and management. The intent is to balance the scale of justice; to put the two parties on relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to none). EMPLOYER PROTECTION Out of its concern for those with less privilege in life, this Court has inclined towards the worker and upheld his cause in his conflicts with the employer. This favored treatment is directed by the social justice policy of the Constitution. But while titling the scales of justice in favor of workers, the fundamental law also guarantees the right of the employer to reasonable returns from his investment. Corollarily, the law allows an employer to downsize his business to meet clear and continuing economic threats. Thus, this Court has upheld reductions in the work force to forestall business losses or stop the hemorrhaging of capital. The right of management to dismiss workers during periods of business recession and to install labor saving devices to prevent losses is governed by Art. 283 of the Labor Code, as amended. Balbalec v. NLRC (95) The law recognizes the right of every business entity to reduce its workforce if the same is made necessary by compelling economic factors which would endanger its existence or stability. In spite of overwhelming support granted by the social justice provisions of our Constitution in favor of labor, the fundamental law itself guarantees, even during the process of tilting the scales of social justice towards workers and employees, "the right of enterprises to reasonable returns of investment and to expansion and growth." To hold otherwise would not only be oppressive and inhuman, but also counterproductive and ultimately subversive of the nation's thrust towards a resurgence in our economy which would ultimately benefit the majority of our people. Where appropriate and where conditions are in accord with law and jurisprudence, the Court has authorized valid reductions in the workforce to forestall business losses, the hemorrhaging of capital, or even to recognize an obvious reduction in the volume of business which has rendered certain employees redundant. 2.04 CONSTITUTIONAL RIGHTS AND LABOR LAW LABOR AS PROPERTY Phil. Movie Workers Assn. v. Premiere Productions, Inc. (53) The right to labor is a constitutional as well as a statutory right. Every man has a natural right to the fruits of his own industry. A man who has been employed to undertake certain labor and has put into it his time and effort is entitled to be protected. The right of a person to his labor is deemed to be property within the meaning of constitutional guarantees. That is his means of livelihood. He cannot be deprived of his labor or work without due process of law (11 Am. Jur., 333, pp. 1151-1153; 11 Am. Jur., section 344, pp. 1168- 1171). Sibal v. Notre Dame of Greater Manila (90) Thus, in the case of Callanta v. Carnation Philippines, Inc. (145 SCRA 268), this Court held that one's employment, profession, trade or calling is a "property right", and the wrongful interference therewith is an actionable wrong. The right is considered to be property within the protection of a constitutional guaranty of due process of law. DUE PROCESS REQUIREMENT Century Textile Mills, Inc. v. NLRC (89) The twin requirements of notice and hearing constitute essential elements of due process in cases of employee dismissal: the requirement of notice is intended to inform the employee

Asian Alcohol Corp. v. NLRC (99)

UP LAW BAROPS 2007 ONE UP
5 of 132

Part I : Introductory Materials Labor Standards
concerned of the employer's intent to dismiss and the reason for the proposed dismissal; upon the other hand, the requirement of hearing affords the employee an opportunity to answer his employer's charges against him and accordingly to defend himself therefrom before dismissal is effected. Neither of these two requirements can be dispensed with without running afoul of the due process requirement of the 1987 Constitution. Maneja v. NLRC (98) The requisites of a valid dismissal are (1) the dismissal must be for any of the causes expressed in Article 282 of the Labor Code, and (2) the employee must be given an opportunity to be heard and to defend himself. The substantive and procedural laws must be strictly complied with before a worker can be dismissed from his employment because what is at stake is not only the employee’s position but his livelihood. XXX Well-settled is the dictum that the twin requirements of notice and hearing constitute the essential elements of due process in the dismissal of employees. It is a cardinal rule in our jurisdiction that the employer must furnish the employees with two written notices before the termination of employment can be effected: (a) the first apprises the employee of employer’s decision to dismiss him. The requirement of a hearing, on the other hand, is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted. XXX It bears stressing that a worker’s employment is property in the constitutional sense. He cannot be deprived of his work without due process of law. Substantive due process mandates that an employee can only be dismissed based on just or authorized causes. Procedural due process requires further that he can only be dismissed after he has been given an opportunity to be heard. The import of due process necessitates the compliance of these two aspects. LIABILITY OF CONTRACT AND STATE INTERFERENCE Leyte Land Transportation Co. v. Leyte Farmers and Workers Union (48) In answer to the contention of the petitioner that the doctrine laid down in the appealed decision in effect "has deprived the company of its rights to enter into contract of employment as it and the employee may agree," it is sufficient to quote the following pronouncements of the United States Supreme Court: "The fact that both parties are of full age and competent to contract does not necessarily deprive the State of the power to interfere where the parties do not stand upon an equality, or where the public health demands that one party to the contract shall be protected against himself. The State still retains an interest in his welfare, however reckless he may be. The whole is no greater than the sum of all the parts, and where the individual health, safety and welfare are sacrificed or neglected, the State must suffer." (West Coast Hotel Company vs. Parrish, quoting Holden vs. Hardy. The former, by the way, expressly overrules the case of Adkins vs. Children's Hospital) MANAGEMENT AND THE CONSTITUTION National Sugar Refineries Corp. v. NLRC (93) While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with less privileges in life, this Court has inclined more often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded us to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine. Manila Electric Company v. Quisumbing (99) Additionally, we recognize that contracting out is not unlimited; rather, it is a prerogative that management enjoys subject to well-defined legal limitations. As we have previously held, the company can determine in its best business judgment whether it should contract out performance of some of its work for as long as Victoriano vs. Elizalde Rope Workers Union (74) It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute and unqualified. In spite of the constitutional prohibition, the State continues to possess authority to safeguard the vital interests of its people. Legislation appropriate to safeguarding said interests may modify or abrogate contracts already in effect. For not only are existing laws read into contracts in order to fix the obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. xxx This has special application to contracts regulating relations between capital and labor which are not merely contractual, and said labor contracts, for being impressed with public interest, must yield to the common good. Phil. National Construction Corp. v. NLRC (93) The mandate of the law for a liberal interpretation of labor contracts in favor of the working man was applied in the case of Ditan vs. POEA Administrator 8 where We made the following pronouncement:
"A strict interpretation of the cold facts before us might support the position taken by the respondents. However, we are dealing here not with an ordinary transaction but with a labor contract which deserves special treatment and a liberal interpretation in favor of the worker . . . the Constitution mandates the protection of labor and the sympathetic concern of the State for the working class conformably to the social justice policy . . . xxx xxx xxx Under the policy of social justice, the law bends over backward to accommodate the interests of the working class on the humane justification that those with less privileges in life should have more privileges in law . . ."

UP LAW BAROPS 2007 ONE UP
6 of 132

Part I : Introductory Materials Labor Standards
the employer is motivated by good faith, and the contracting out must not have been resorted to circumvent the law or must not have been the result of malicious or arbitrary action. The Labor Code and its implementing rules also contain specific rules governing contracting out. Given these realities, we recognize that a balance already exists in the parties’ relationship with respect to contracting out; MERALCO has its legally defined and protected management prerogatives while workers are guaranteed their own protection through specific labor provisions and the recognition of limits to the exercise of management prerogatives. WELFARE STATE Alalayan v. National Power Corporation (68) The welfare state concept is not alien to the philosophy of our Constitution. It is implicit in quite a few of its provisions. There is the clause on the promotion of social justice to ensure the well-being and economic security of all the people, as well as the pledge of protection to labor with specific authority to regulate the relations between landowners and tenants and between labor and capital. LAISSEZ-FAIRE Agricultural Credit & Cooperative Financing Admin. v. Confederation of Unions (69) The influence exerted by American constitutional doctrines unavoidable when the Philippines was still under American rule notwithstanding, an influence that has not altogether vanished even after independence, the laissez faire principle never found full acceptance in this jurisdiction, even during the period of its flowering in the United States. Employees Confederation of the Philippines v. NWPC (91) Apparently, ECOP is of the mistaken impression that Republic Act No. 6727 is meant to "get the Government out of the industry" and leave labor and management alone in deciding wages. The Court does not think that the law intended to deregulate the relation between labor and capital for several reasons: (1) The Constitution calls upon the State to protect the rights of workers and promote their welfare; (2) the Constitution also makes it a duty of the State "to intervene when the common goal so demands" in regulating property and property relations; (3) the Charter urges Congress to give priority to the enactment of measures, among other things, to diffuse the wealth of the nation and to regulate the use of property; (4) the Charter recognizes the "just share of labor in the fruits of production;" (5) under the Labor Code, the State shall regulate the relations between labor and management; (6) under Republic Act No. 6727 itself, the State is interested in seeing that workers receive fair and equitable wages; and (7) the Constitution is primarily a document of social justice, and although it has recognized the importance of the private sector, it has not embraced fully the concept of laissez faire or otherwise, relied on pure market forces to govern the economy; We can not give to the Act a meaning or intent that will conflict with these basic principles. PARTICIPATION IN DECISION MAKING PROCESS Philippine Airlines, Inc. v. NLRC (93) Indeed, industrial peace cannot be achieved if the employees are denied their just participation in the discussion of matters affecting their rights. Thus, even before Article 211 of the Labor Code (P.D. 442) was amended by Republic Act No. 6715, it was already declared a policy of the State: "(d) To promote the enlightenment of workers concerning their rights and obligations . . .as employees." This was, of course, amplified by Republic Act No. 6715 when it decreed the "participation of workers in decision and policy making processes affecting their rights, duties and welfare." PAL's position that it cannot be saddled with the "obligation" of sharing management prerogatives as during the formulation of the Code, Republic Act No. 6715 had not yet been enacted, cannot thus be sustained. While such "obligation" was not yet founded in law when the Code was formulated, the attainment of a harmonious labor-management relationship and the then already existing state policy of enlightening workers concerning their rights as employees demand no less than the observance of transparency in managerial moves affecting employees' rights. Manila Electric Co. v. Quisumbing (99) We do not find merit in MERALCO’s contention that the above-quoted ruling of the Secretary is an intrusion into the management prerogatives of MERALCO. It is worthwhile to note that all the Union demands and what the Secretary’s order granted is that the Union be allowed to participate in policy formulation and decision-making process on matters affecting the Union members’ rights, duties and welfare as required in Article 211 (A) (g) of the Labor Code. And this can only be done when the Union is allowed to have representatives in the Safety Committee, Uniform Committee and other committees of a similar nature. Certainly, such participation by the Union in the said committees is not in the nature of a co-management control of the business of MERALCO. What is granted by the Secretary is participation and representation. Thus, there is no impairment of management prerogatives.

SECTION 3 - LABOR AND THE CIVIL CODE
3.01 ROLE OF LAW The New Civil Code Art. 1700 The relations between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects. LABOR CONTRACTS PAL Employees Savings and Loan Assn., Inc. v. NLRC (96) In connection with the foregoing, we should add that even if there had been a meeting of the

UP LAW BAROPS 2007 ONE UP
7 of 132

Part I : Introductory Materials Labor Standards
minds in the instant case, the employment contract could not have effectively shielded petitioner from the just and valid claims of private respondent. Generally speaking, contracts are respected as the law between the contracting parties, and they may establish such stipulations, clauses, terms and conditions as they may see fit; and for as long as such agreements are not contrary to law, morals, good customs, public policy or public order, they shall have the force of law between them. However, “… while it is the inherent an inalienable right of every man to have the utmost liberty of contracting, and agreements voluntarily and fairly made will be held valid and enforced in the courts, the general right to contract is subject to the limitation that the agreement must not be in violation of the Constitution, the statute or some rule of law.” And under the Civil Code, contracts of labor are explicitly subject to the police power of the State because they are not ordinary contracts but are impressed with public interest. Inasmuch as in this particular instance the contract in question would have been deemed in violation of pertinent labor laws, the provisions of said laws would prevail over the terms of the contract, and private respondent would still be entitled to overtime pay. Philippine Telephone and Telegraph Co. v. NLRC (97) Petitioner’s policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be free from any kind of stipulation against marriage in connection with her employment, but it likewise assaults good morals and public policy, tending as it does to deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable right. Hence, while it is true that the parties to a contract may establish any agreements, terms, and conditions that they may deem convenient, the same should not be contrary to law, orals, good customs, public order, or public policy. Carried to its logical consequences, it may even be said that petitioner’s policy against legitimate marital bonds would encourage illicit or common-law relations and subvert the sacrament of marriage. Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the parties, that is, of capital and labor, are not merely contractual, impressed as they are with so much public interest that the same should yield to the common good. It goes on to intone that neither capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience of the public. In the final reckoning, the danger of just such a policy against marriage followed by petitioner PT&T is that it strikes at the very essence, ideals and purpose of marriage as an inviolable social institution and, ultimately, of the family as the foundation of the nation. That it must be effectively interdicted here in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the lands is not only in order but imperatively required. Art. 1701 Neither capital nor labor shall act oppressively against the other, or impair the interest or convenience of the public. FAIR TREATMENT General Bank and Trust Co., v. Court of Appeals (85) Basically, the right of an employer to dismiss an employee differs from and should not be confused with the manner in which such right is exercised. It must not be oppressive and abusive since it affects one's person and property. (Remerco Garments Manufacturing v. MOLE) MUTUAL OBLIGATION Firestone Tire and Rubber Co. v. Lariosa (87) The employer's obligation to give him workers just compensation and treatment carries with it the corollary right to expect from the workers adequate work, diligence and good conduct. LAW COMPLIANCE Sarmiento v. Tuico (88) It is also important to emphasize that the return-to-work order not so much confers a right as it imposes a duty; and while as a right it may be waived, it must be discharged as a duty even against the worker's will. EMPLOYEES OBEDIENCE EMPLOYERS ORDERS
AND

COMPLIANCE

TO

PCIB v. Jacinto (91) Any employee who is entrusted with responsibility by his employer should perform the task assigned to him with care and dedication. The lack of a written or formal designation should not be an excuse to disclaim any responsibility for any damage suffered by the employer due to his negligence. The measure of the responsibility of an employee is that if he performed his assigned task efficiently and according to the usual standards, then he may not be held personally liable for any damage arising therefrom. Failing in this, the employee must suffer the consequences of his negligence if not lack of due care in the performance of his duties. 3.02 EMPLOYER-EMPLOYEE CONDUCT STANDARD OF

GTE Directories Corp. v. Sanchez (91) To sanction disregard or disobedience by employees of a rule or order laid down by management, on the pleaded theory that the rule or order is unreasonable, illegal, or otherwise irregular for one reason or another, would be disastrous to the discipline and order that it is in the interest of both the employer and his employees to preserve and maintain in the working establishment and without which no meaningful operation and progress is possible. San Miguel Corp. v. Ubaldo (93) Quoting the words of this Court in a recent case:
"To sanction disregard or disobedience by employees of a rule or order laid down by management, on the pleaded theory that the rule or order is unreasonable, illegal, or otherwise irregular for one reason or another, would be disastrous to the discipline and order that it is in the interest of both employer and his employees to preserve and maintain in the working establishment and without which no meaningful

UP LAW BAROPS 2007 ONE UP
8 of 132

Part I : Introductory Materials Labor Standards
operation and progress is possible. Deliberate disregard or disobedience of rules, defiance of management authority cannot be countenanced. This is not to say that the employees have no remedy against rules or orders they regard as unjust or illegal. They may object thereto, ask to negotiate thereon, bring proceedings for redress against the employer before the Ministry of Labor. But until and unless the rules or orders are declared to be illegal or improper by competent authority, the employees ignore or disobey them at their peril."

International Covenant on Civil and Political Rights – Part II, Art. 8 Conventions and Recommendations if the International Labor Organization (ILO) INTERNATIONAL CONVENTIONS International School Alliance of Educators v. Quisumbing (2000) That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy against these evils. The Constitution in the Article on Social Justice and Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect and enhance the right of all people to human dignity, reduce social, economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe honesty and good faith." International law, which springs from general principles of law, likewise proscribes discrimination. General principles of law include principles of equity, i.e., the general principles of fairness and justice, based on the test of what is reasonable. The Universal Declaration of Human Rights, the International Covenant on Economic, Social, and Cultural Rights, the International Convention on the Elimination of All Forms of Racial Discrimination, the Convention against Discrimination in Education, the Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation - all embody the general principle against discrimination, the very antithesis of fairness and justice. The Philippines, through its Constitution, has incorporated this principle as part of its national laws. In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and discrimination by the employer are all the more reprehensible. The Constitution specifically provides that labor is entitled to "humane conditions of work." These conditions are not restricted to the physical workplace - the factory, the office or the field - but include as well the manner by which employers treat their employees. The Constitution also directs the State to promote "equality of employment opportunities for all." Similarly, the Labor Code provides that the State shall "ensure equal work opportunities regardless of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State, in spite of its primordial 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 frowned upon by the Labor Code. Article 135, for example, prohibits and penalizes the payment of lesser compensation to a female employee as against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an employer to discriminate in regard to wages in order to encourage or discourage membership in any labor organization. Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof, provides:

With a view of maintaining the viability of a business enterprise, the employees are expected to recognize the rules or orders which have not been declared to be illegal or improper by competent authority. In the case at bar, the private respondents committed acts contrary to the rules and regulations set out by the company, which eventually caused serious damage to the establishment. It is a recognized principle that company policies and regulations are, unless shown to be grossly oppressive or contrary to law, generally binding and valid on the parties and must be complied with until finally revised or amended unilaterally or preferably through negotiation or by competent authority. XXX Deliberate disregard or disobedience of rules by the employees cannot be countenanced. Whatever maybe the justification behind the violations is immaterial at this point, because the fact still remains that an infraction of the company rules has been committed. EMPLOYER OBLIGATION Lagniton v. NLRC (93) The days are gone when the employee was at the mercy of his employer and could be dismissed for the flimsiest reasons or for no reason at all. The tyrannical employer is an anachronism in this enlightened era. The employee today, once defenseless and often oppressed, has found new strength in the protection of the law and the proud realization that he performs a symbiotic role with the employer in their common enterprise. As such, he must be treated not as a disdained subordinate but with the respect and fairness, if not affection and gratitude, that is due to an equal partner. Maneja v. NLRC (98) An employer can terminate the services of an employee only for valid and just causes which must be supported by clear and convincing evidence. The employer has the burden of proving that the dismissal was indeed for a valid and just cause. Failure to do so results in a finding that the dismissal was unjustified.

SECTION 4 - LABOR AND INTERNATIONAL COVENANTS
Universal Declaration of Human Rights – Arts. 3, 7, 17, 22, 23,24, 25 International Covenant on Economic, Social and Cultural Rights – Part III, Arts. 6, 7, 9, 11

UP LAW BAROPS 2007 ONE UP
9 of 132

Part I : Introductory Materials Labor Standards
The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and favourable conditions of work, which ensure, in particular: a.....Remuneration which provides all workers, as a minimum, with: i.....Fair wages and equal remuneration for work of equal value without distinction of any kind, in particular women being guaranteed conditions of work not inferior to those enjoyed by men, with equal pay for equal work; The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort and responsibility, under similar conditions, should be paid similar salaries. This rule applies to the School, its "international character" notwithstanding. controlled corporations, shall be governed by the Civil Service Law, rules and regulations. Their salaries shall be standardized by the National Assembly as provided for in the new constitution. However, there shall be no reduction of existing wages, benefits and other terms and conditions of employment being enjoyed by them at the time of the adoption of this Code. Art IX, B, Sec 2(1), 1987 Constitution: The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters. TEST – GOVERNMENT CORPORATIONS OWNED
AND

CONTROLLED

SECTION 5 - THE LABOR CODE OF THE PHILIPPINES
5.01 DECREE TITLE A DECREE INSTITUTING A LABOR CODE, THEREBY REVISING AND CONSOLIDATING LABOR AND SOCIAL LAWS TO AFFORD PROTECTION TO LABOR, PROMOTE EMPLOYMENT AND HUMAN RESOURCES DEVELOPMENT AND ENSURE INDUSTRIAL PEACE BASED ON SOCIAL JUSTICE. Art. 1 Name of Decree - This Decree shall be known as the "Labor Code of the Philippines," 10/02/1999 5.02 EFFECTIVITY Art. 2 Date of effectivity - This Code shall take effect six months after its promulgation. 5.03 POLICY DECLARATION Art. 3 Declaration of Basic Policy – The State shall afford protection to labor, promote full employment, ensure equal work, opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work. 5.04 APPLICABILITY Art. 6 Applicability - All rights and benefits granted to workers under this Code shall, except as may otherwise be provided herein, apply alike to all workers, whether agricultural or non-agricultural. Art. 276 Government employees - The terms and conditions of employment of all government employees, including employees of government-owned and

PNOC Energy Development Corp. v. NLRC (91) Thus, under the present state of the law, the test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law are the manner of its creation, such that government corporations created by special charter are subject to its provisions while those incorporated under the General Corporation Law are not within its coverage. Cabrera v. NLRC (91) Our finding is that the respondent NLRC erred in dismissing the petitioners' complaint for lack of jurisdiction because the rule now is that only government-owned or controlled corporations with original charters come under the Civil Service. The NASECO having been organized under the Corporation Law and not by virtue of a special legislative charter, its relations with its personnel are governed by the Labor Code and come under the jurisdiction of the National Labor Relations Commission. APPLICATION OF THE LABOR CODE  Not of universal application  Labor Code, PD 442 as amended Applicability – Art. 6  All workers – agricultural and non-agricultural  GOCC – organized under general laws in corporation – Corporation Code  Wages (97b) – government, all branches, subdivision & instrumentalities, GOCC, profit or non – profit organizations  ECSIF – all private and government employees (167 f) Offspring of GOCC – test: HOW ORGANIZED  Labor code – NOT APPLICABLE » Government employees – what’s applicable? Civil Service and EO 180 » GOCC with original charter – Art. 9 – B, Sec. 2(1) of the Constitution » International Agencies and specialized agencies or UN – treaty or international conventions ▪ grant of immunity from suit ex. IRRI, ICMC ▪ by specific treaty – grant of immunity ▪ if injustice is created due to exemption from suit, REMEDY: withdraw the grant of immunity from suit. International Agencies

UP LAW BAROPS 2007 ONE UP
10 of 132

Part I : Introductory Materials Labor Standards
Ebro III v. NLRC (96) The grant of immunity is by virtue of the Convention on the Privileges and Immunities of Specialized Agencies of the U.N. adopted by the Senate on May 17, 1949. This has become part of the law of the land under the Constitution on generally accepted principles of international law. SCHOOL TEACHERS National Mines and Allied Workers’ Union v NLRC (98) On the issue of whether the individual petitioners were permanent employees, it is the Manual of Regulations for Private Schools, and not the Labor Code, which is applicable. RELIGIOUS CORPORATIONS Austria v. NLRC (99) An ecclesiastical affair is “one that concerns doctrine, creed or form of worship of the church, or the adoption and enforcement within a religious association of needful laws and regulations for the government of the membership, and the power of excluding from such associations those deemed unworthy of membership. Based on this definition, an ecclesiastical affair involves the relationship between the church and its members and relate to matters of faith, religious doctrines, worship and governance of the congregation. XXX Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough to include religious corporations, such as the SDA, in its coverage. Article 278 of the Labor Code on post-employment states that “the provisions of this Title shall apply to all establishments or undertakings, whether for profit or not.” Obviously, the cited article does not make any exception in favor of a religious corporation. This is made more evident by the fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of Employment and Retirement, categorically includes religious institutions in the coverage of the law, to wit:
SECTION 1. Coverage. – This Rule shall apply to all establishments and undertakings, whether operated to profit or not, including educational, medical, charitable and religious institutions and organizations, in cases of regular employment with the exception of Government and its political subdivisions including government-owned or controlled corporations.

void by this Court in Philippine Apparel Workers Union vs. National Labor Relations Commission, ruling that: ". . ., it must be pointed out that the Secretary of Labor has exceeded his authority when he included paragraph (k) in Section 1 of the Rules Implementing P.D. 1123. "By virtue of such rulemaking authority, the Secretary of Labor issued on May 1, 1977 a set of rules which exempts not only distressed employers but also 'those who have granted in addition to the allowance under P.D. 525, at least P60.00 monthly wage increase on or after January 1, 1977, provided that those who paid less than this amount shall pay the difference.' "Clearly, the inclusion of paragraph k contravenes the statutory authority granted to the Secretary of Labor, and the same is therefore void, as ruled by this Court in a long line of cases, . . ." Pagpalain Haulers, Inc. v. Trajano (99) Neither can Pagpalain contend that Department Order No. 9 is an invalid exercise of rule-making power by the Secretary of Labor. For an administrative order to be valid, it must 1) be issued on the authority of law and 2) it must not be contrary to the law and the Constitution. Department Order No. 9 has been issued on authority of law. Under the law, the Secretary is authorized to promulgate rules and regulations to implement the Labor Code. Specifically, Article 5 of the Labor Code provides that “[t]he Department of Labor and other government agencies charged with the administration and enforcement of this Code or any of its parts shall promulgate the necessary implementing rules and regulations.” Consonant with this article, the Secretary of Labor and Employment promulgated the Omnibus Rules Implementing the Labor Code. By virtue of this selfsame authority, the Secretary amended the abovementioned omnibus rules by issuing Department Order No. 9, Series of 1997. Moreover, Pagpalain has failed to show that Department Order No. 9 is contrary to the law or the Constitution. At the risk of being repetitious, the Labor Code does not require a local or chapter to submit books of account in order for it to be registered as a legitimate labor organization. There is, thus, no inconsistency between the Labor Code and Department order No. 9. Neither has Pagpalain shown that said order contravenes any provision of the Constitution. 5.06 LAW INTERPRETATION Art. 4, Labor Code Construction in favor of labor - All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor. Art. 170, Civil Code In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer. LIBERAL CONSTRUCTION Salinas v. NLRC (99) It is basic and irrefragable rule that in carrying out and interpreting the provisions of the Labor Code and its implementing regulations, the workingman’s welfare should be the primordial

With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of separation of church and state to avoid its responsibilities as an employer under the Labor Code. 5.05 RULE MAKING POWER LIMITATION – RULE MAKING POWER Kapisanan ng mga Manggagawang Pinagyakap v. NLRC (87) The labor arbiter in rendering the questioned decision relied primarily on Section 1 (k) of the Labor Department's rules and regulations implementing Presidential Decree No. 1123. This exemption paragraph (k) was, however, declared

UP LAW BAROPS 2007 ONE UP
11 of 132

Part I : Introductory Materials Labor Standards
and paramount consideration. The interpretation herein made gives meaning and substance to the liberal and compassionate spirit of the law enunciated in Article 4 of the Labor Code that “all doubts in the implementation and interpretation of the provisions of the Labor Code including its implementing rules and regulations shall be resolved in favor of labor.” IN FAVOR OF LABOR – RATIONALE Abella v. NLRC (87) In any event, it is well-settled that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman's welfare should be the primordial and paramount consideration. It is the kind of interpretation which gives meaning and substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the New Labor Code which states that `all doubts in the implementation and interpretation of the provisions of this Code including its implementing rules and regulations shall be resolved in favor of labor." The policy is to extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor. DOUBT Clemente v. GSIS (87) This Court has held in appropriate cases that the conservative posture of the respondents is not consistent with the liberal interpretation of the Labor Code and the social justice guarantee embodied in the Constitution in favor of the workers. It clashes with the injunction in the Labor Code (Article 4, New Labor Code) that, as a rule, doubts should be resolved in favor of the claimant-employee. NO DOUBT Bonifacio v. GSIS (86) While we do not dispute petitioner's contention that under the law, in case of doubt in the implementation and interpretation of the provisions of the Labor Code, including its implementing rules and regulations, the doubt shall be resolved in favor of the laborer, we find that the same has no application in this case since the pertinent provisions of the Labor Code leave no room for doubt either in their interpretation or application. SWEEPING INTERPRETATION Bravo v. ECC (86) We are aware of the mandate that social legislation should be applied in consonance with the principles of social justice and protection to labor. However, we cannot adopt a sweeping interpretation of the law in favor of labor lest we engage in judicial legislation. FACTUAL CONSIDERATIONS AND RATIONALITY Philippine Airlines Inc v NLRC (91) That there should be care and solicitude in the protection and vindication of the rights of workingmen cannot be gainsaid; but that care and solicitude can not justify disregard of relevant facts or eschewal of rationality in the construction of the text of applicable rules in order to arrive at a disposition in favor of an employee who is perceived as otherwise deserving of sympathy and commiseration.

EQUITY AND MORAL CONSIDERATION Manning International Corp. v. NLRC (91) There is another reason to strike down the NLRC's "new judgment" of April 15, 1988, and that is, that in disregard of the relevant provisions of the law, it is made to rest on "considerations of equity and social justice." This is impermissible. As this Court held in the analogous situation of an employee whom the NLRC found had been dismissed by her employer for cause (dishonesty) but whom it nonetheless awarded separation pay on equitable and compassionate grounds: "The rule embodied in the Labor Code is that a person dismissed for cause as defined therein is not entitled to separation pay. The cases above cited constitute the exception, based upon considerations of equity. Equity has been defined as justice outside law, being ethical rather than jural and belonging to the sphere of morals than of law. It is grounded on the precepts of conscience and not on any sanction of positive law. Hence, it cannot prevail against the expressed provision of the labor laws allowing dismissal of employees for cause and without any provision for separation pay." FAIRNESS Reliance Surety and Insurance Co. Inc v NLRC (91) As a general rule, the sympathy of the Court is on the side of the laboring classes, not only because the Constitution imposes sympathy but because of the one-sided relation between labor and capital. The Court must take care, however, that in the contest between labor and capital, the results achieved are fair and in conformity with the rules. BALANCING CONFLICTING CLAIMS Phil. Airlines, Inc. v. NLRC (1992) That there should be care and solicitude in the protection and vindication of the rights of workingmen cannot be gainsaid; but that care and solicitude can not justify disregard of relevant facts or eschewal of rationality in the construction of the text of applicable rules in order to arrive at a disposition in favor of an employee who is perceived as otherwise deserving of sympathy and commiseration.

SECTION 6 - WORK RELATIONSHIP
6.01 WORK RELATIONSHIP DEFINITIONS Art. 97 Definition (a) "Person" means an individual, partnership, association, corporation, business trust, legal

UP LAW BAROPS 2007 ONE UP
12 of 132

Part I : Introductory Materials Labor Standards
representative or any organized group of person. (b) "Employer" includes any person acting directly or indirectly in the interest of an employer in relation to an employee and shall include the Government and all its branches, subdivisions and instrumentalities, all government-owned or controlled corporations and institutions, as well as non-profit private institutions or organizations. "Employee" includes any individual employed by an employer. Art. 167 Definition of Terms (f) "Employer" means any person, natural or juridical, employing the services of the employee. (g) "Employee" means any person compulsorily covered by the GSIS under Commonwealth Act numbered one hundred eighty-six, as amended, including members of the Armed Forces of the Philippines, and any person employed as casual, emergency, temporary, substitute or contractual; or any person compulsorily covered by the SSS under Republic Act numbered eleven hundred sixty-one, as amended. Art. 212 Definitions (e) "Employer" includes any person acting in the interest of an employer, directly or indirectly. The term shall not include any labor organization or any of its officers or agents except when acting as employer. (f) "Employee" includes any person in the employ of an employer. The term shall not be limited to the employees of a particular employer, unless this Code so explicitly states. It shall include any individual whose work has ceased as a result of or in connection with any current labor dispute or because of any unfair labor practice if he has not obtained any other substantially equivalent and regular employment. EMPLOYEE United Pepsi-Cola Supervisory Union (UPSU) v. Laguesma (98) As can be seen from this description, a distinction exists between those who have the authority to devise, implement and control strategic and operational policies (top and middle managers) and those whose task is simply to ensure that such policies are carried out by the rank-and-file employees of an organization (first-level managers/supervisors). What distinguishes them from the rank-and-file employees is that they act in the interest of the employer in supervising such rank-and-file employees. "Managerial employees" may therefore be said to fall into two distinct categories: the "managers" per se, who compose the former group described above, and the "supervisors" who form the latter group. Whether they belong to the first or the second category, managers, vis-a-vis employers, are, likewise, employees. EMPLOYER-EMPLOYEE RELATIONSHIP FACTORS Chavez vs. NLRC (2005); Caurdanetaan Piece Workers Union v. Laguesma (98) To determine the existence of an employeremployee relation, this Court has consistently applied the “four-fold” test which has the following elements: (1) the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the power to control – the last being the most important element. Lim v. NLRC (99) The existence of an employer-employee relationship is principally determined by the following indicia: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) employer’s power to control the employee with respect to the result to be done and to the means and methods by which the work is to be accomplished. CONTROL TEST Religious of the Virgin Mary v. NLRC (99) The argument has no merit. AS this Court has consistently ruled, the power of control is the most decisive factor in determining the existence of an employer – employee relationship. In Encyclopedia Britannica (Phils.), Inc. v. NLRC, we held:
In determining the existence of an employeremployee relationship the following elements must be present: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) the power to control the employees’ conduct. Of the above, control of employee’s conduct is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching that end.

In this case, CDSPB reserved the right to control and supervise the operations of the Girls’ Department. Although CDSPB “actually exercised minimal supervision over petitioner, [it]could exercise substantial supervision and control as it did when [it] preterminated the Agreement.” There was, therefore, no basis in finding that petitioner had a “greater degree of autonomy ad independence in running the affairs” of the school. The presence of the school director, whose vast powers have already been noted, negates any suggestions or semblance of autonomy. Nor is there any merit in the claim that “actual and effective control” was exercised by petitioner since the designation of the parish priest as director was “a mere formality, as he did perform functions which are purely ministerial and figurative in nature.” Time and again we have held that “the ‘control test’ only requires the existence of the right to control the manner of doing the work not necessarily the actual exercise of the power by him, which he can delegate.” Indeed, although the letters of appointment were signed by the principal/representative of petitioner, they bore the name/letterhead of CDSPB and clearly indicated therein that the employees were hired as teachers/personnel by CDSPB, and not by RVM. Moreover, CDSPB itself admits that its name – not petitioner’s – appears in the employees’ payroll ledger cards. PROOF

UP LAW BAROPS 2007 ONE UP
13 of 132

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

UP LAW BAROPS 2007 ONE UP
14 of 132

Part I : Introductory Materials Labor Standards
to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project. Art. 109, Labor Code Solidary liability - The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers. INDEPENDENT CONTRACTOR National Power Corp. v. Court of Appeals (98) Job (independent) contracting is present if the following conditions are met: (a) the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except to the result thereof; and (b) the contractor has substantial capital or investments in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his business. Absent these requisites, what exists is a “labor only” contract under which the person acting as contractor is considered merely as an agent or intermediary of the principal who is responsible to the workers in the same manner and to the same extent as if they had been directly employed by him. MANAGEMENT FUNCTION Manila Electric Co. v. Quisumbing (99) Additionally, We recognize that contracting out is not unlimited; rather, it is a prerogative that management enjoys subject to well-defined legal limitations. As we have previously held, the company can determine in its best business judgment whether it should contract out the performance of some of its work for as long as the employer is motivated by good faith, and the contracting out must not have been resorted to circumvent the law or must not have been the result of malicious or arbitrary action. The Labor Code and its implementing rules also contain specific rules governing contracting out (Department or Labor Order No. 10, May 30, 1997, Sections 1-25). REQUIREMENTS – INDEPENDENT CONTRACTOR Lim v. NLRC (99) Under DOLE Department Order No. 10 (1997), contracting shall be legitimate if the following circumstances concur: i) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility, according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof; ii) The contractor or subcontractor has substantial capital or investment; and iii) The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to selforganization, security of tenure, and social and welfare benefits. Escario v. NLRC (2000) In contrast, there is permissible job contracting when a principal agrees to put out or farm out with a contractor or a subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job or work or service is to be performed or completed within or outside the premises of the principal. In this arrangement, the following conditions must concur:
(a)....The contractor carries on a distinct and independent business and undertakes the contract work on his account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of his work except as to the results thereof; and (b)....The contractor has substantial capital or investment in the form of tools, equipment, machineries (sic), work premises, and other materials which are necessary in the conduct of his business. [RULES TO IMPLEMENT THE LABOR CODE, Book III, Rule VIII, Sec. 8.]

In the recent case of Alexander Vinoya vs. NLRC et al., this Court ruled that in order to be considered an independent contractor it is not enough to show substantial capitalization or investment in the form of tools, equipment, machinery and work premises. In addition, the following factors need be considered: (a) whether the contractor is carrying on an independent business; (b) the nature and extent of the work; (c) the skill required; (d) the term and duration of the relationship; (e) the right to assign the performance of specified pieces of work; (f) the control and supervision of the workers; (g) the power of the employer with respect to the hiring, firing and payment of workers of the contractor; (h) the control of the premises; (i) the duty to supply premises, tools, appliances, materials, and labor; and (j) the mode, manner and terms of payment. Desirable – Unnecessary Coca-Cola Bottlers Phil., Inc. v. NLRC (99) We perceive at the outset the disposition of the NLRC that janitorial services are necessary and desirable to the trade or business of petitioner CocaCola. But this is inconsistent with our pronouncement in Kimberly Independent Labor Union v. Drilon where the Court took judicial notice of the practice adopted in several government and private institutions and industries of hiring janitorial services on an “independent contractor basis.” In this respect, although janitorial services may be considered directly related to the principal business of an employer, as with every business, we deemed them unnecessary in the conduct of the employer’s principal business. Judicial Notice Coca-Cola Bottlers Phil., Inc. v. NLRC (99) We perceive at the outset the disposition of the NLRC that janitorial services are necessary

UP LAW BAROPS 2007 ONE UP
15 of 132

Part I : Introductory Materials Labor Standards
and desirable to the trade or business of petitioner Coca-Cola. But this is inconsistent with our pronouncement in Kimberly Independent Labor Union v. Drilon where the Court took judicial notice of the practice adopted in several government and private institutions and industries of hiring janitorial services on an “independent contractor basis.” In this respect, although janitorial services may be considered directly related to the principal business of an employer, as with every business, we deemed them unnecessary in the conduct of the employer’s principal business. This judicial notice, of course, rests on the assumption that the independent contractor is a legitimate job contractor so that there can be no doubt as to the existence of an employer-employee relationship between the contractor and the worker. In this situation, the only pertinent question that may arise will no longer deal with whether there exists an employment bond but whether the employee may be considered regular or casual as to deserve the application of Art. 280 of the Labor Code. Employer – Employee Phil. Airlines, Inc. v. NLRC (98) From the foregoing disquisition, it is evident that petitioner was engaged in permissible job contracting and that the individual private respondents, for the entire duration of their employ, were employees not of petitioner but of STELLAR. In legitimate job contracting, no employer-employee relation exists between the principal and the job contractor's employees. The principal is responsible to the job contractor's employees only for the proper payment of wages. But in labor-only contracting, an employer-employee relation is created by law between the principal and the labor-only contractor's employees, such that the former is responsible to such employees, as if he or she had directly employed them. Besides, the Court has already taken judicial notice of the general practice adopted in several government and private institutions of securing janitorial services on an independent contractor basis. LABOR ONLY CONTRACTOR Prohibition Maraguinot v. NLRC (98) As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent or intermediary of the direct employer. But even by the preceding standards, the associate producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit nor hire the workers. 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; (b) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal.

Requisites Ponce v. NLRC (98) Sec. 9(a), Rule VIII, Book III, of the Omnibus Rules Implementing Article 106 of the Labor Code, provides, in turn, that a person who supplies workers to another shall be deemed to be merely engaged in "labor-only contracting," a disallowed act, (a) when he does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials, and (b) when the workers recruited and placed by him perform activities that relate directly to the principal business or operations of the employer in which the workers are habitually employed. Such supplier of labor is considered merely as an agent or intermediary of the employer who can correspondingly be held responsible to the workers in the same manner and extent as if the latter are directly employed by him. Effect of Finding Phil. Airlines, Inc. v. NLRC (98) Based on these findings, we sustain the conclusion of public respondent that G.C. Services Enterprises is merely a "labor-only" contractor who acted as mere supplier of manpower for petitioner at its maintenance department. As we held in Industrial Timber Corporation, et. al. vs. NLRC et. al.:
Hence a finding that a contractor is a "laboronly" contractor is equivalent to a finding that there exists as employer-employee relationship between the owner of the project and the employees of the "labor-only" contractor since that relationship is defined and prescribed by law itself.

Accordingly, private respondents, are considered employees of the petitioner. Further, private respondents, having performed activities which are directly related to petitioner's business, are deemed regular employees of petitioner pursuant to Article 280 of the Labor Code. And as regular employees, they must be accorded security of tenure in their employment. Verily, their services can be terminated only based on "just" and "authorized" causes under Articles 282, 283 and 284 of the Labor Code. Liability of indirect Employer Lanzadares v. Amethyst Security (2003) The only time the indirect employer may be made solidarily liable with the contractor is when the contractor fails to pay his employees their wages and other benefits claimed.

UP LAW BAROPS 2007 ONE UP
16 of 132

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

 

2. 3.

The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to selforganization, security of tenure, and social and welfare benefits.

LABOR – ONLY CONTRACTING: 1. the person supplying workers to an employer does not have substantial capital or investment in the form of machineries, work others, tools, equipment, premises, among

RECOGNITION AND TYPES Philippine Federation of Credit Cooperatives, Inc v. NLRC (98) This provision of law comprehends three kinds of employees: (a) regular employees or those whose work is necessary or desirable to the usual business of the employer; (b) project employees or those whose employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season; and (c) casual employees or those who are neither regular nor project employees. With regard to contractual employees, the Court in the leading case of Brent School, Inc. v. Zamora, laid down the guidelines before a contract of employment may be held as valid, to wit: "stipulations in employment contracts providing for term employment or fixed period employment are valid when the period were agreed upon knowingly and voluntarily by the parties without force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter." EMPLOYER DETERMINATION De Leon v. NLRC (89) It is of no moment that petitioner was told when he was hired that his employment would only be casual, that he was paid through cash vouchers, and that he did not comply with regular employment procedure. Precisely, the law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining position needs the support of the State. What determines whether a certain employment is regular or

2.

3.

the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer.

SECTION 7 - EMPLOYEE CLASSIFICATION
7.01 COVERAGE The provisions of this Title shall apply to all establishments or undertakings whether for profit or not. (278 LC) 7.02 EMPLOYEE CLASSIFICATION  Regular » EE has been engaged to perform activities which are usually necessary and desirable in the usual business or trade of the ER (Art. 280) » A casual employee who has rendered at least 1 year of service, whether continuous or broken, with respect to the activity in which he is employed and his employment shall continue while such activity exists (Art. 280)

UP LAW BAROPS 2007 ONE UP
17 of 132

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

UP LAW BAROPS 2007 ONE UP
18 of 132

Part I : Introductory Materials Labor Standards
considered regular, but only with respect to such activity and while such activity exists. Magante v. NLRC (90) The determining factor of the status of complainant-petitioner or any worker is the nature of the work performed by the latter and the place where he performed his assignment. Tacloban Sagkahan Rice etc. v. NLRC (90) Furthermore, the services performed or to be performed by private respondents are not seasonal in nature. While it may be true that the harvest of palay is seasonal, the milling operations which is the main business of petitioners are not seasonal. The fact is that big rice mills such as the one owned by petitioners continue to operate and do business throughout the year even if there are only two or three harvest seasons within the year. It is a common practice among farmers and rice dealers to store their palay and to have the same milled as the need arises. Thus, the milling operations have no let-up. Private respondents have justifiably argued thus:
"The contention of petitioner in saying that respondents/appellees belong to petitioner's pool of casual workers who work only when there is work to be done at the mills particularly during the milling season is indeed untenable for petitioner had been engaged in the rice and corn mill business way back in 1949 whose capitalization involves millions of pesos. The work done by the palay mill for the capitalization of petitioner is so much that it keeps its employees working the whole year round by buying the palay during harvest season for milling. Rice and corn milling business is not seasonal in nature, contemplated in the Labor Code. It is the planting and harvesting of rice that is seasonal. . . ."

of Hi-Line, they should be deemed regular employees of the latter 13 and as such are entitled to all the benefits and rights appurtenant to regular employment. Mercado v. NLRC (91) The first paragraph answers the question of who are regular employees. It states that, regardless of any written or oral agreement to the contrary, an employee is deemed regular where he is engaged in necessary or desirable activities in the usual business or trade of the employer, except for project employees. Datu and Co., Inc. v. NLRC (96) In De Leon vs. NLRC this Court ruled that when the activities performed by the employee are usually necessary or desirable in the usual business or trade of the employer, the employment is deemed regular notwithstanding contrary agreement. The determination of whether employment is casual or regular does not depend on the will or word of the employer, and the procedure of hiring and manner of paying, but on the nature of the activities performed by an employee, and to some extent, the length of performance, and its continued existence. International Pharmaceutical, Inc. v. NLRC (98) In Brent School, Inc. v. Zamora, although the work done under a contract is necessary and usually desirable in relation to the usual business of the employer, a contract for a fixed period may be made so long as it is entered into freely, voluntarily, and knowingly by the parties. TEST: Whether work was “necessary & desirable to the main business of ER” In the contract, there was no mention of any project or consultancy. The work she performed was manifestly necessary and desirable to the usual business of petitioner, considering that she is engaged in the manufacture and production of medicinal preparations. STANDARD: reasonable connection between the particular activity performed by the ER in relation to the usual business or trade of the ER. - connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety Labor Congress of the Phil. v. NLRC (98) That petitioner employees are "pakyao" or piece workers does not imply that they are not regular employees entitled to reinstatement. Private respondent Empire Food Products, Inc. is a food and fruit processing company. In Tabas v. California Manufacturing Co., Inc., this Honorable Court held that the work of merchandisers of processed food, who coordinate with grocery stores and other outlets for the sale of the processed food is necessary in the day-to-day operation[s] of the company. With more reason, the work of processed food repackers is necessary in the day-to-day operation[s] of respondent Empire Food Products. Highway Copra Trades v. NLRC (98) Article 280 of the Labor Code describes a regular employee as one who is either (1) engaged to perform activities which are necessary or desirable in the usual business or

Kimberly etc. v. Drilon (90) While the actual regularization of these employees entails the mechanical act of issuing regular appointment papers and compliance with such other operating procedures as may be adopted by the employer, it is more in keeping with the intent and spirit of the law to rule that the status of regular employment attaches to the casual worker on the day immediately after the end of his first year of service. To rule otherwise, and to instead make their regularization dependent on the happening of some contingency or the fulfillment of certain requirements, is to impose a burden on the employee which is not sanctioned by law. That the first stated position is the situation contemplated and sanctioned by law is further enhanced by the absence of a statutory limitation before regular status can be acquired by a casual employee. The law is explicit. As long as the employee has rendered at least one year of service, he becomes a regular employee with respect to the activity in which he is employed. The law does not provide the qualification that the employee must first be issued a regular appointment or must first be formally declared as such before he can acquire a regular status. Obviously, where the law does not distinguish, no distinction should be drawn. Ecal v. NLRC (91) Since petitioners perform tasks which are usually necessary or desirable in the main business

UP LAW BAROPS 2007 ONE UP
19 of 132

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

UP LAW BAROPS 2007 ONE UP
20 of 132

Part I : Introductory Materials Labor Standards
perform activities which are usually necessary or desirable in the usual business." And under the Code, where one performs such activities, he is a regular employee, "[t]he provisions of written agreement to the contrary notwithstanding . . . It is true that in Biboso v. Victorias Milling Company, Inc., we recognized the validity of contractual stipulations as to the duration of employment, we can not apply it here because clearly, the contract-to-contract arrangement given to the private respondent was but an artifice to prevent her from acquiring security of tenure and to frustrate constitutional decrees. LENGTH OF TIME Maraguinot v. NLRC (98) However, the length of time during which the employee was continuously re-hired is not controlling, but merely serves as a badge of regular employment. 7.04 PROJECT EMPLOYEES PROJECT EMPLOYEES – whose employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of engagement of the employee [Art. 280 (1)] DEFINED Magcalas v. NLRC (97) Regular employees cannot at the same time be project employees. Art. 280 of the Labor Code states that regular employees are those whose work is necessary or desirable to the usual business of the employer. The two exceptions following the general description of regular employees refer to either project or seasonal employees. It has been ruled in the case of ALU-TUCP v. NLRC that: “In the realm of business and industry, we note that “project” could refer to one or the other of at least two distinguishable types of activities. First, a project could refer to particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. The typical example of this type of project is a particular construction jib or project of a construction company. A construction company ordinarily carries out 2 or more discrete (should distinct) identifiable construction projects: e.g. a 25-story hotel in Makati; a residential condominium building I Baguio City; and a domestic air terminal in Iloilo City. Employees who are ired for the carrying out of 12 of these separate projects, the scope and duration of which has been determined and made known to the employees at the time of employment, are properly treated as “project employees” and their service may be lawfully terminated at completion of the project.” The term "project" could also refer to, secondly, a particular job or undertaking that is not within the regular business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times. Lao Construction v. NLRC (97) The principal test in determining whether particular employees are “project employees” distinguished from regular employees is whether the ”project employees” are assigned to carry out “specific project or undertaking,” the duration (and scope) of which are specified at the time the employees are engaged for the project. “Project” in the realm of business and industry refers to a particular job or undertaking that is within the regular or usual business of ER, but which is distinct and separate and identifiable as such from the undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. ALU – TUCP v. NLRC (94) In the realm of business and industry, we note that "project" could refer to one or the other of at least 2 distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking that is within the regular or usual business of the ER company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. The term "project" could also refer to, secondly, a particular job or undertaking that is not within the regular business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times. Whichever type of project employment is found in a particular case, a common basic requisite is that the designation of named employees as "project employees" and their assignment to a specific project, are effected and implemented in good faith, and not merely as a means of evading otherwise applicable requirements of labor laws. Kiamco v. NLRC (99) In Violeta v. NLRC we held —
The principal test for determining whether particular employees are properly characterized as "project employees," as distinguished from "regular employees," is whether or not the "project employees" were assigned to carry out a "specific project or undertaking," the duration (and scope) of which were specified at the time the employees were engaged for that project. As defined, project employees are those workers hired (1) for a specific project or undertaking, and (2) the completion or termination of such project or undertaking has been determined at the time of engagement of the employee.

Under Policy Instruction No. 20 of the Secretary of Labor, project employees are those employed in connection with a particular project. Non-project or regular employees are those employed without reference to any particular project. PROJECT EMPLOYEES Phil. Jai-Alai and Amusement Corp. v. Clave (83) Private respondents were hired for a specific project — to renovate the main building, where

UP LAW BAROPS 2007 ONE UP
21 of 132

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

From the foregoing, it is clear that petitioner is a project employee considering that he does not belong to a "work pool" from which the company would draw workers for assignment to other projects at its discretion. It is likewise apparent from the facts obtaining herein that petitioner was utilized only for one particular project, the MNEE Stage 2 Project of respondent company. Hence, the termination of herein petitioner is valid by reason of the completion of the project and the expiration of his employment contract. Mamansag v. NLRC (93) Private respondent company is a market research group that conducts public surveys about commercial consumer goods, products, merchandises and/or services of its clients. Said market researches and surveys are dependent upon the contracts it can secure from its clients consisting of corporations, organizations,

UP LAW BAROPS 2007 ONE UP
22 of 132

Part I : Introductory Materials Labor Standards
government and individuals. Because of the very nature of its business, private respondent company had to resort to engaging the services of contractual workers, such as petitioners, to conduct interviews on specific project basis for a definite short period of time. Generally, said contractual employment is not continuous but intermittent, sporadic with long intervals of idle periods in between projects due to lack of work or job contracts. To require a market research and survey firm to indefinitely maintain in its payroll petitioners, despite the absence of contracted projects, would be counterproductive and lead to the bankruptcy of said firm. Private respondent company, in entering into specific and limited contracts with petitioners, was only exercising its management prerogative to conduct its business in the most efficient manner thereby avoiding unnecessary expenses and maximizing profitability without, however, defeating or circumventing the rights of its employees. An examination of the petitioners' contract of employment showed that they were hired by private respondent company for a specific project and the completion or termination of said project was determined at the start of their employment. Petitioners cannot be hired for an indefinite period of time and carried on the company's payroll even without projects to work, with without respondent company incurring financial losses. As field interviewers of private respondent company, the latter depends for its business on the contract it is able to obtain from its clients. Necessarily, the duration of the employment of its employees is not permanent but co-terminus with the projects to which they are assigned and from whose payrolls they are paid. The fact that petitioners worked for several projects of private respondent company is no basis to consider them as regular employees. By the very nature of their employer's business, they will always remain project employees regardless of the number of projects in which they have worked. Fernandez v. NLRC (94) Inasmuch as the documentary evidence clearly showed gaps of a month or months between the hiring of petitioner in the numerous projects wherein he was assigned, the ineluctable conclusion is that petitioner has not continuously worked with private respondent but only intermittently as he was hired solely for specific projects. As such, he is governed by Policy Instruction No. 20, the pertinent portions of which read as follows:
"Generally, there are two types of employees in the construction industry, namely 1) Project Employees and 2) Non-project Employees. "Project employees are those employed in connection with a particular construction project. Non-project employees are those employed by a construction company without reference to a particular project. "Project employees are not entitled to termination pay if they are terminated as a result of the completion of the project or any phase thereof in which they are employed, regardless of the number of projects in which they have been employed by a particular construction company."

those "casual" employees who have rendered at least one year of service regardless of the fact that such service may be continuous or broken. It is not applicable to "project" employees, who are specifically excepted therefrom. Uy v. NLRC (96) PROJECT EE’s - workers hired : for a specific project or undertaking; completion/termination of project has been determined at time of engagement of EE Phil. Airlines, Inc. v. NLRC (98) The position of STELLAR that individual private respondents were its project employees is totally unfounded. A regular employee is distinguished from a project employee by the fact that the latter is employed to carry out a specific project or undertaking, the duration or scope of which was specified at the time the employees were engaged. A “project” has reference to a particular job or undertaking that may or may not be within the regular or usual business of the employer. In either case, the project must be distinct, separate and identifiable from the main business of the employer and its duration must be determined or determinable. Villa v. NLRC (98) A project employment terminates as soon as the project is completed. Thus an employer is allowed by law to reduce the work force into a number suited for the remaining work to be done upon the completion or proximate accomplishment of the project. However, the law requires that, upon completion of the project, the employer must present proof of termination of the services of the project employees at the nearest public employment office. This is specially provided for as regards construction workers obviously to obviate indiscriminate termination of employment in derogation of the worker’s right to security of tenure. After the termination of the project, an employer may wind up its operations only to complete the project. In such a case, the remaining employees do not necessarily lose their status as project employees. However, if the employees’ services are extended long after the supposed project had been completed, the employees are removed from the scope of project employees and they shall be considered regular employees. Phil. Fruits and Vegetables Industries, Inc. v. NLRC (99) It should be noted that complainants' employment has not been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of their appointment or hiring. Neither is their employment seasonal in nature. While it may be true that some phases of petitioner company's processing operations is dependent on the supply of fruits for a particular season, the other equally important aspects of its business, such as manufacturing and marketing are not seasonal. The fact is that largescale food processing companies such as petitioner company continue to operate and do business throughout the year even if the availability of fruits and vegetables is seasonal. Imbuido v. NLRC (2000)

XXX The proviso in the second paragraph of Article 280 of the Labor Code has recently been explained in Mercado v. NLRC, where it was held that said proviso deems as regular employees only

UP LAW BAROPS 2007 ONE UP
23 of 132

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

UP LAW BAROPS 2007 ONE UP
24 of 132

Part I : Introductory Materials Labor Standards
SECURITY OF TENURE Southern Cotabato v. NLRC (87) It is not disputed that private respondents were project employees. As such, they were entitled to security of tenure guaranteed by the Constitution and the Labor Code for the duration of the project they were hired for, or the phases thereof to which they were assigned or in connection with which they rendered services. The length of their employment id determined by the completion of the task for which they were hired. SPECIFIED PERIOD Purefoods Corp. V. NLRC (87) In the leading case of Brent School v. Zamora, which was reaffirmed in numerous subsequent cases, the Court has upheld the legality of fixedterm employment. It ruled that the decisive determinant in term employment should not be the activities that the employee is called upon to perform but the day certain agreed upon by the parties for the commencement and termination of their employment relationship. But, this Court went on to say that where from the circumstances it is apparent that the periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy and morals. WORKPOOL EMPLOYEES Maraguinot v. NLRC (98) A project EE or a member of a work pool may acquire the status of a regular employee when the following concur:
1. 2. There is a continuous rehiring of project employees even after cessation of a project; and The tasks performed by the alleged “project employee” are vital, necessary, and indispensable to the usual business or trade of the employer.

LENGTH OF SERVICE Palomares v. NLRC (97) Length of service is not the controlling determinant of the employment tenure of a project employee. It is based on whether or not the employment has been fixed for a specific project or undertaking, the completion of which has been determined at the time of the engagement of the employee. Furthermore, the 2nd paragraph of Art. 280, providing that an employee who has rendered service for at least 1 year, shall be considered a regular employee, pertains to casual employees and not to project employees such as petitioners.

Villa v. NLRC (98) Thus, the fact that petitioners worked for NSC under different project employment contracts for several years cannot be made basis to consider them a regular employees, for they remain project employees regardless of the number of projects in which they have worked. 7.05 CASUAL EMPLOYEES Art. 281, 2nd paragraph An employment shall be deemed casual if it is not covered by the preceding paragraph: Provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists. NATURE OF WORK AM Oreta & Co., Inc v. NLRC (89) What determines regularity or casualness is not the employment contract, written or otherwise, but the nature of the job. If the job is usually necessary or desirable to the main business of the employer, then employment is regular. ONE YEAR SERVICE Tabas v. California Manufacturing Co. Inc. (89) The fact that the petitioners have been hired on a "temporary or seasonal" basis merely is no argument either. As we held in Philippine Bank of Communications v. NLRC, a temporary or casual employee, under Article 218 of the Labor Code, becomes regular after service of one year, unless he has been contracted for a specific project. And we cannot say that merchandising is a specific project for the obvious reason that it is an activity related to the day-to-day operations of California. The records show that the petitioners had been given an initial six-month contract, renewed for another six months. Accordingly, under Article 281 of the Code, they had become regular employees — of California — and had acquired a secure tenure. Hence, they cannot be separated without due process of law. Phil. Geothermal, Inc. v. NLRC (90) Assuming therefore, that an employee could properly be regarded as a casual (as distinguished from a regular employee) he becomes entitled to be regarded as a regular employee of the employer as soon as he has

However, the length of time during which the EE was continuously rehired is not controlling, but merely serves as a badge of regular employment. A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment during temporary breaks in the business, provided, that the worker shall be available when called to report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the employer and employee for it prevents the unjust situation of “coddling labor at the expense of capital” and at the same time enables the workers to attain the status of regular employees. Aguilar Corp. v. NLRC (97) Members of a work pool from which a construction company draws its project employees, if considered employees of the construction company while in the work pool, are non-project employees, or employees for an indefinite period. If they are employed in a particular project, the completion of the project or any phase thereof will not mean severance of the employer-employee relationship.

UP LAW BAROPS 2007 ONE UP
25 of 132

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

UP LAW BAROPS 2007 ONE UP
26 of 132

Part I : Introductory Materials Labor Standards
It goes without saying that contracts or employment govern the relationship of the parties. In this case, private respondent's contract provided for a fixed term of nine (9) months, from June 1, 1991 to March 31, 1992. Such stipulation, not being contrary to law, morals, good customs, public order and public policy, is valid, binding and must be respected. Servidad v. NLRC (99) The language of the contract in dispute is truly a double-bladed scheme to block the acquisition of the employee of tenurial security. Thereunder, private respondent has two options. It can terminate the employee by reason of expiration of contract, or it may use "failure to meet work standards" as the ground for the employee's dismissal. In either case, the tenor of the contract jeopardizes the right of the worker to security of tenure guaranteed by the Constitution. In the case of Brent School, Inc. vs. Zamora, et al., the Court upheld the principle that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be disregarded for being contrary to public policy. SEASONAL EMPLOYEES Phil. Tobacco etc. v. NLRC (98) The Court has previously ruled in Manila Hotel Company v. CIR that seasonal workers who are called to work from time to time and are temporarily laid off during-off season are not separated from service in said period, but are merely considered on leave until re-employed. San Miguel Corp. v. NLRC (98) Thus, under Article 280 of the Labor Code, an employment is deemed regular when the activities performed by the employee are usually necessary or desirable in the usual business or trade of the employer even if the parties enter into an agreement tating otherwise. But considered not regular under said Article (1) the so-called "project employment" the termination of which is more or less determinable at the time of employment, such as those connected, which by its nature is only for one season of the year and the employment is limited for the duration of that season, such as the Christmas holiday season. Nevertheless, an exception to this exception is made: any employee who has rendered at least one (1) year of service, whether continuous or intermitent, with respect to the activity he performed and while such activity actually exists, must be deemed regular. with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. Art. 61, 2nd Sentence, Book VI, Rule 1, Sec. 6, Omnibus Rules There is a probationary employment where the employee upon his engagement, is made to undergo a trial period during which the employer determines his fitness to qualify for regular employment, based on reasonable standards made known to him at the time of engagement. DEFINITION International Catholic Migration Commission v. NLRC (89); De la Cruz, Jr. v. NLRC (2003) A probationary employee, as understood under Article 282 (now Article 281) of the Labor Code, is one who is on trial by an employer during which the employer determines whether or not he is qualified for permanent employment. PURPOSE Grand Motors Corp. v. MOLE (84) We find merit in the contention of the petitioner that "private respondent had not been hired as manager of any firm before his employment with petitioner. The highest previous position he attained was that of Finance Officer. His position with petitioner's Iloilo Branch was his first as Manager. Moreover, Warner, Barnes & Co., private respondent's previous employer, and petitioner are engaged in different kinds of business. Managing petitioner's Iloilo Branch was an entirely new experience for private respondent. It was, therefore, necessary for private respondent to undergo a period of probation to test his qualifications, skill and experience." Indeed, the employer has the right or is at liberty to choose as to who will be hired and who will be declined. It is within the exercise of this right to select his employees that the employer may set or fix a probationary period within which the latter may test and observe the conduct of the former before hiring him permanently. "The right of a laborer to sell his labor to such persons as he may choose is, in its essence, the same as the right of an employer to purchase labor from any person whom it chooses. The employer and the employee have thus an equality of right guaranteed by the Constitution. 'If the employer can compel the employee to work against the latter's will, this is servitude. If the employee can compel the employer to give him work against the employer's will, this is oppression.'" International Catholic Migration Commission v. NLRC (89) A probationary appointment is made to afford the employer an opportunity to observe the fitness of a probationer while at work, and to ascertain whether he will become a proper and efficient employee. The word "probationary", as used to describe the period of employment, implies the purpose of the term or period, but not its length. Being in the nature of a "trial period" the essence of a probationary period of employment fundamentally lies in the purpose or objective

SECTION 8 – Probationary Employees
8.01 PROBATIONARY EMPLOYEES Art. 281 Probationary employments hall not exceed six months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance

UP LAW BAROPS 2007 ONE UP
27 of 132

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

UP LAW BAROPS 2007 ONE UP
28 of 132

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

UP LAW BAROPS 2007 ONE UP
29 of 132

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

UP LAW BAROPS 2007 ONE UP
30 of 132

Part I : Introductory Materials Labor Standards
EMPLOYEE STRUCTURE CLASSIFICATION – LAW the exception PROBATIONARY EMPLOYMENT  Period – duration – not exceed 6 months from the date the employee started working, unless covered by an apprenticeship agreement stipulating a longer period  Termination of Employment 1. Just causes 2. Fail to qualify as regular employee in accordance with reasonable standards made known by the employer to the employee at the time of engagement  Effect of Work beyond 6 months – deemed Regular employee by automatic application of the law (even if there is no appointment [Kimberly Clark v. Drilon]  Purpose: 1. Observance Period For the employer to know whether employee is qualified For the employee to demonstrate to the employer his skills 2. Restrictive  Parties may agree for a longer period if company policy requires or the nature of work requires  Direct rationale connection: unduly long – unfair to the worker  Nothing prohibits the employer to abbreviate or shorten the period  If agreed to extend for the benefit of worker – Ex gratia  No obligation to pay the unfinished portion

REGULAR EMPLOYMENT  Test – written agreement to contrary notwithstanding and regardless of oral agreement of parties provided by law  Employee engaged to perform activities which are usually necessary or desirable to the usual business or trade of employer  Other Regular Employees 1. Casual Employment after 1 year of service whether continuous or broken (conditions – Art. 280) 2. Probationary Employee – allowed to work even after the completion of the probationary period (Art. 281) 3. Learner – allowed or suffered to work during the first 2 months of learner period, if training is terminated by the employer before the end of the stipulated period.  Not synonymous to permanent employment (no such thing as permanent employment since he can be terminated for cause)  EXCEPT: 1. PROJECT EMPLOYMENT  Employment fixed on a specific project or undertaking, completion or termination of which is DETERMINED AT THE TIME OF ENGAGEMENT OF EMPLOYEE  Must have been forewarned of the name of the project and 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

UP LAW BAROPS 2007 ONE UP
31 of 132

Part II : Labor Standards Law Labor Standards
SECTION 9 – EMPLOYMENT POLICY
9.01 PRE-EMPLOYMENT POLICY Art. 12 Employment Policies of the State: To PROMOTE and maintain a state of full employment through improved manpower training, allocation and utilization; To PROTECT every citizen desiring to work locally or overseas by securing for him the best possible terms and conditions of employment; To FACILITATE a free choice of available employment by persons seeking work in conformity with the national interest; To FACILITATE and regulate the movement of workers in conformity with the national interest; To REGULATE the employment of aliens, including the establishment of a registration and/or work permit system; To STRENGTHEN the network of public employment offices and rationalize the participation of the private sector in the recruitment and placement of workers, locally and overseas, to serve national development objectives; To INSURE careful selection of Filipino workers for overseas employment in order to protect the good name of the Philippines abroad. STRUCTURE OF THE LAW: 1. Main Part – Basic Rule ACTS: canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, includes: referrals, contract services,  Acts accompanied by a promise or advertising for employment – locally or abroad  Consideration – whether for profit or not 2. Proviso actor – person or entity act – offers, promises employment 3. Consideration – for a fee no. of workers – 2 or more effect – deemed engaged in recruitment or placement NO. WORKERS 0 2 OF CONSIDE RATION none fee

SECTION 10 – RECRUITMENT AND PLACEMENT OF WORKERS
10.01 RECRUITMENT WORKERS DEFINITIONS Art. 13(b) "Recruitment and placement" refers to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not: Provided, That any person or entity which, in any manner, offers or promises for a free employment to two or more persons shall be deemed engaged in recruitment and placement. Art. 13(a) "Workers": any member of the labor force, whether employed or unemployed. DEFINITION - RELATIONSHIP People v. Panis (88) The number of persons dealt with is not an essential ingredient of the act of recruitment and placement of workers. Any of the acts mentioned in the basic rule in Article 13(b) will constitute recruitment and placement even if only one prospective worker is involved. The proviso merely lays down a rule of evidence that where a fee is collected in consideration of a promise or offer of employment to two or more prospective workers, the individual or entity dealing with them shall be deemed to be engaged in the act of recruitment and placement. The words "shall be deemed" create that presumption. AND PLACEMENT OF

BASIC RULE PROVISO

10.02 EMPLOYMENT AGENCY - ENTITY Art. 13(c) "Private employment agency": any person or entity engaged in the recruitment and placement of workers for a fee which is charged, directly or indirectly, from the workers or employers or both. Art. 13 (d) “License”: a document issued by the Department of Labor authorizing a person or entity to operate a private employment agency Art. 13(e) "Private recruitment entity": any person or association engaged in the recruitment and placement of workers, locally or overseas, without charging, directly or indirectly, any fee from the workers or employers. Art. 13 (f) “Authority”: a document issued by the Department of Labor authorizing a person or association to engage in recruitment and placement activities as a private recruitment entity. 10.03 ALLOWED ENTITIES GENERAL RULE Art. 16

UP LAW BAROPS 2007 ONE UP
32 of 132

Part II : Labor Standards Law Labor Standards
Private recruitment - Except as provided in Chapter II of this Title, no person or entity, other than the public employment offices and the OEDB for overseas employment, shall engage in the recruitment and placement of workers. Art. 18 Ban on direct hiring - No employer may hire a Filipino worker for overseas employment except through the Boards and entities authorized by the Department of Labor and Employment. Direct hiring by members of the diplomatic service, officials and employees of international organizations and such other employers as may be allowed by the Department and Labor and Employment is exempt from this provision. Art. 25 Private sector participation in the recruitment and placement of workers - …the private employment sector shall participate in the recruitment and placement of workers, locally and overseas, under such guidelines, rules and regulations, as may be issued by the Secretary of Labor and Employment. Art. 12 (f) To strengthen the network of public employment offices and rationalize the participation of the private sector in the recruitment and placement of workers, locally and overseas, to serve national development objectives. ALLOWED ENTITIES 1. Private Art. 13 (c) "Private employment agency": any person or entity engaged in the recruitment and placement of workers for a fee which is charged, directly or indirectly, from the workers or employers or both. Art. 13 (e) "Private recruitment entity": any person or association engaged in the recruitment and placement of workers, locally or overseas, without charging, directly or indirectly, any fee from the workers or employers. 2. Public Art. 12 (f) To strengthen the network of public employment offices and rationalize the participation of the private sector in the recruitment and placement of workers, locally and overseas, to serve national development objectives. Art. 14 (g) Employment promotion – The Secretary of Labor shall have the power and authority … “To organize and establish new employment offices in addition to existing employment offices under the Department of Labor as the need arises.” 10.4 PROHIBITED ENTITY Art. 16 Private recruitment - Except as provided in Chapter II of this Title, no person or entity, other than the public employment offices and the OEDB for overseas employment, shall engage in the recruitment and placement of workers. Art. 18 Ban on direct hiring - No employer may hire a Filipino worker for overseas employment except through the Boards and entities authorized by the Department of Labor and Employment. Direct hiring by members of the diplomatic service, officials and employees of international organizations and such other employers as may be allowed by the Department and Labor and Employment is exempt from this provision. Art. 26 Travel agencies prohibited to recruit – Travel agencies and sales agencies of airline companies are prohibited from engaging in the business of recruitment and placement of workers for overseas employment whether for profit or not. LICENSING – CITIZENSHIP, CAPITALIZATION, DURATION, TRANSFERABILITY AND FEES Art. 25. Private Sector Participation in the Recruitment and Pursuant to national Placement of Workers development objectives and in order to harness and maximize the use of private sector resources and initiative in the development and implementation of a comprehensive employment program, the private employment sector shall participate in the recruitment and placement of workers, locally and overseas, under such guidelines, rules and regulations, as may be issued by the Secretary of Labor and Employment. Art. 26 Travel agencies prohibited to recruit – Travel agencies and sales agencies of airline companies are prohibited from engaging in the business of recruitment and placement of workers for overseas employment whether for profit or not. Art. 27. Citizenship Requirement - Only Filipino Citizens or corporations, partnership or entities at least 75 % of the authorized and voting capital stock of which is owned and controlled by Filipino citizens shall be permitted to participate in the recruitment and placement of workers, locally or overseas. Art. 28. Capitalization – All applicants for authority to hire or renewal of license to recruit are required to have such substantial capitalization as determined by the Secretary of Labor. Art. 29. Non-transferability of license or authority – No license or authority shall be used directly or indirectly by any person other than the one in whose favor it was issued or at any place other than that stated in the license or authority, nor may such license or authority be transferred, conveyed, or assigned to any other person or entity. Any transfer of business address, appointment or designation of nay agent or representative including the establishment of additional offices anywhere shall

UP LAW BAROPS 2007 ONE UP
33 of 132

Part II : Labor Standards Law Labor Standards
b subject to the prior approval of the Department of Labor. Art. 30. Registration Fees – The Secretary of Labor shall promulgate a schedule of fees for the registration of all applicants for license or authority. 34 of this Code, to be undertaken by nonlicensees or non-holders of authority shall be deemed illegal and punishable under Article 39 of this Code. The Secretary of Labor and Employment or any law enforcement officer may initiate complaints under this Article. (b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving economic sabotage and shall be penalized in accordance with Article 39 hereof. Illegal recruitment is deemed committed by a SYNDICATE if carried out by a group of three (3) or more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise or scheme defined under the first paragraph hereof. Illegal recruitment is deemed committed in large scale if committed against three (3) or more persons individually or as a group. (c) The Secretary of Labor or his duly authorized representative shall have the power to recommend the arrest and detention of such non-licensee or non-holder of authority if after investigation it is determined that his activities constitute a danger to national security and public order or will lead to further exploitation of job-seekers. The Secretary shall order the search of the office or premises and seizure of documents, paraphernalia, properties and other implements used in illegal recruitment activities and the closure of companies, establishments and entities found to be engaged in the recruitment of workers for overseas employment, without having been licensed or authorized to do so. Salazar v. Achacoso We reiterate that the Secretary of Labor, not being a judge, may no longer issue search or arrest warrants. Hence, the authorities must go through the judicial process. To that extent, we declare Article 38, paragraph (c), of the Labor Code, unconstitutional and of no force and effect. Art. 34 Prohibited practices - It shall be unlawful for any individual, entity, licensee or holder of authority: (CFGI-IEOF-SBW) a. To CHARGE or accept directly or indirectly any amount greater than that specified in the schedule of allowable fees prescribed by the Secretary of Labor and Employment, or to make a worker pay any amount greater than that actually received by him as a loan or advance; b. To FURNISH or publish any false notice or information or document in relation to recruitment or employment; c. To GIVE any false notice, testimony, information or document or commit any act or misrepresentation for the purpose of securing a license or authority under this Code; d. To INDUCE or attempt to induce a worker already employed to quit his employment in order to offer him another unless the transfer is designed to liberate a worker from oppressive terms and conditions of employment;

10.05 TECHNIQUES OF REGULATION BONDS Art. 31. Bonds – All applicants for license or authority shall post such cash and surety bonds as determined by the Secretary of Labor to guarantee compliance with prescribed recruitment procedures, rules an regulations, and terms and conditions of employment as may be appropriate. WORKERS FEES Art. 32. Fees to be paid by workers – Any person applying with a private fee-charging employment agency for employment assistance shall not be charged any fee until he has obtained employment through its efforts or has actually commenced employment. Such fee shall be always covered with the appropriate receipt clearly showing the amount paid. The Secretary of Labor shall promulgate a schedule of allowable fees. REPORTS SUBMISSION Art. 33 Reports on employment status - Whenever the public interest so requires, the Secretary of Labor and Employment may direct all persons or entities within the coverage of this Title to submit a report on the status of employment, including job vacancies; details of job requisitions, separation from jobs, wages, other terms and conditions, and other employment data. SUSPENSION AND/OR CANCELLATION OF LICENSE OR AUTHORITY Art. 35. Suspension and/or cancellation of License or Authority – The Secretary of Labor shall have the power to suspend or cancel any license or authority to recruit employees for overseas employment for violation of rules and regulations issued by the Department of Labor, the Overseas Employment Development Board, and the National Seamen Board, or for violation of the provisions of this and other applicable laws, General Orders and Letters of Instructions. 10.06 ILLEGAL RECRUITMENT Art. 38 Illegal Recruitment – (a) Any recruitment activities, including the prohibited practices enumerated under Article

UP LAW BAROPS 2007 ONE UP
34 of 132

Part II : Labor Standards Law Labor Standards
e. To INFLUENCE or attempt to influence any person or entity not to employ any worker who has not applied for employment through his agency; f. To ENGAGE in the recruitment or placement of workers in jobs harmful to public health or morality or to the dignity of the Republic of the Philippines; g. To OBSTRUCT or attempt to obstruct inspection by the Secretary of Labor and Employment or by his duly authorized representatives; h. To FAIL to file reports on the status of employment, placement vacancies, remittance of foreign exchange earnings, separation from jobs, departures and such other matters or information as may be required by the Secretary of Labor and Employment; i. To SUBSTITUTE or alter employment contracts approved and verified by the Department of Labor and Employment from the time of actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the Department of Labor and Employment. j. To BECOME officer or member of the Board of any corporation engaged in travel agency or to be engaged directly or indirectly in the management of a travel agency; and k. To WITHHOLD or deny travel documents from applicant workers before departure for monetary or financial considerations other than those authorized under this Code and its implementing rules and regulations. RA 8042 MIGRANT WORKERS FILIPINOS ACT OF 1995
AND

OVERSEAS

Sec. 6 For purposes of this Act, ILLEGAL RECRUITMENT shall mean any act of: canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers and includes: referring, contract services, promising or advertising for employment abroad, whether for profit or not, when undertaken by a non-licensee or non-holder of authority contemplated under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines: Provided, That any such non-licensee or nonholder who, in any manner, offers or promises for a fee employment abroad to two or more persons shall be deemed so engaged. It shall likewise include the following acts, whether committed by any person, whether a nonlicensee, non-holder, licensee or holder of authority: a. To CHARGE or accept directly or indirectly any amount greater than that specified in the schedule of allowable fees prescribed by the Secretary of Labor and Employment, or to make a worker pay any amount greater than

that actually received by him as a loan or advance; b. To FURNISH or publish any false notice or information or document in relation to recruitment or employment; c. To GIVE any false notice, testimony, information or document or commit any act of misrepresentation for the purpose of securing a license or authority under the Labor Code; d. To INDUCE or attempt to induce a worker already employed to quit his employment in order to offer him another unless the transfer is designed to liberate a worker from oppressive terms and conditions of employment; e. To INFLUENCE or attempt to influence any person or entity not to employ any worker who has not applied for employment through his agency; f. To ENGAGE in the recruitment or placement of workers in jobs harmful to public health or morality or to the dignity of the Republic of the Philippines; g. To OBSTRUCT or attempt to obstruct inspection by the Secretary of Labor and Employment or by his duly authorized representative; h. To FAIL to submit reports on the status of employment, placement vacancies, remittance of foreign exchange earnings, separation from jobs, departures and such other matters or information as may be required by the Secretary of Labor and Employment; i. To SUBSTITUTE or alter to the prejudice of the worker, employment contracts approved and verified by the Department of Labor and Employment from the time of actual signing thereof by the parties up to and including the period of the expiration of the same without the approval of the Department of Labor and Employment; j. For an OFFICER or agent of a recruitment or placement agency to become an officer or member of the Board of any corporation engaged in travel agency or to be engaged directly or indirectly in the management of a travel agency; k. To WITHHOLD or deny travel documents from applicant workers before departure for monetary or financial considerations other than those authorized under the Labor Code and its implementing rules and regulations; l. FAILURE to actually deploy without valid reason as determined by the Department of Labor and Employment; and m. FAILURE to reimburse expenses incurred by the worker in connection with his documentation and processing for purposes of deployment, in cases where the deployment does not actually take place without the worker's fault. Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving economic sabotage. Illegal recruitment is deemed committed by a SYNDICATE if carried out by a group of three (3) or more persons conspiring or confederating with one another. It is deemed committed in large scale if committed against three (3) or more persons individually or as a group.

UP LAW BAROPS 2007 ONE UP
35 of 132

Part II : Labor Standards Law Labor Standards
The persons CRIMINALLY LIABLE for the above offenses are the principals, accomplices and accessories. In case of juridical persons, the officers having control, management or direction of their business shall be liable. 10.07 ENFORCEMENT AND SANCTIONS Art. 36 Regulatory power - The Secretary shall have the power to restrict and regulate the recruitment and placement activities of all agencies is authorized to issue orders and promulgate rules and regulations to carry out the objectives and implement the provisions of this Title. Art. 37 Visitorial power - The Secretary or his duly authorized representatives may at any time inspect the premises, books of accounts and records of any person or entity covered by this Title, require it to submit reports regularly on prescribed forms, and act on violations of any provision of this Title. ELEMENTS OF CRIME People v. Guevarra (99) Under the Labor Code, recruitment and placement refer to "any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not: Provided, [t]hat any person or entity which, in any manner, offers or promises for a fee employment to two or more persons shall be deemed engaged in recruitment and placement. Recruitment for overseas employment is not in itself necessarily immoral or unlawful. It is the lack of the necessary license or permit, or the engagement of prohibited activities enumerated in the Labor Code that render such recruitment activities unlawful or criminal. Illegal recruitment is qualified into large scale recruitment when three or more persons are victimized. If such recruitment is carried out by a group of three (3) or more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise or scheme, it becomes one committed by a syndicate. Illegal recruitment committed by a syndicate or in large scale amounts to an offense involving economic sabotage, punishable by life imprisonment and a fine of one hundred thousand pesos (P100,000.00). People v. Ordoño (2000) Illegal recruitment is committed when two elements concur, namely: (1) the offender has no valid license or authority required by law to enable one to lawfully engage in recruitment and placement of workers; and (2) he undertakes either any activity within the meaning of “recruitment and placement” defined under Art. 13 (b), or any of the prohibited practices enumerated under Art. 34 of the Labor Code. LARGE SCALE People v. Reyes (95) There are, it is said, 14 other cases filed/pending in the courts against the accused for illegal recruitment. These cases cannot be taken into account for the purpose of Art. 38(b). When the Labor Code speaks of illegal recruitment "committed against three (3) or more persons individually or as a group," it must be understood as referring to the number of complainants in each case who are complainants therein, otherwise, prosecutions for single crimes of illegal recruitment can be cumulated to make out a case of large scale illegal recruitment. In other words, a conviction for large scale illegal recruitment must be based on a finding in each case of illegal recruitment of three or more persons whether individually or as a group. Moreover, even if Blanza and Garcia had been illegally recruited so as to make the number of persons illegally recruited four and make the crime that of illegal recruitment of a large scale, since this was not alleged in the information and this is the more serious offense which includes that which was charged, the appellant can only be found guilty of the less serious offense charged, pursuant to Rule 120, §4. People v. Sanchez (98)

Art. 39 Penalties – a. The penalty of life imprisonment and a fine of One Hundred thousand Pesos (P100,000) shall be imposed if illegal recruitment constitutes economic sabotage as defined herein: b. Any license or holder of authority found violating or causing another to violate any provision of this Title or its implementing rules and regulations shall, upon conviction thereof, suffer the penalty of imprisonment of not less than two years nor more than five years or a fine of not less than P10,000 nor more than P50,000 or both such imprisonment and fine, at the discretion of the court; c. Any person who is neither a license nor a holder of authority under this Title found violating any provision thereof or its implementing rules and regulations shall, upon conviction thereof, suffer the penalty of imprisonment of not less than four years nor more than eight years or a fine of not less than P20,000 nor more than P100,000 or both such imprisonment and fine, at the discretion of the court; d. If the offender is a corporation, partnership, association or entity, the penalty shall be imposed upon the officer or officers of the corporation, partnership, association or entity responsible for violation; and if such officer is an alien, he shall, in addition to the penalties herein prescribed, be deported without further proceedings; e. In every case, conviction shall cause and carry the automatic revocation of the license or authority and all the permits and privileges granted to such person or entity under this Title, and the forfeiture of the cash and surety bonds in favor of the Overseas Employment Development Board or the National Seamen Board, as the case may be, both of which are authorized to use the same exclusively to promote their objectives.

UP LAW BAROPS 2007 ONE UP
36 of 132

Part II : Labor Standards Law Labor Standards
Art. 13(b) of the Labor Code defines recruitment and placement as "any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not: Provided, That any person or entity which, in any manner, offers or promises for a fee employment to two or more persons shall be deemed engaged in recruitment and placement." The essential elements then of the crime of illegal recruitment in large scale are that: (1) the accused engages in acts of recruitment and placement of workers defined under Article 13(b) or in any prohibited activities under Article 34 of the Labor Code; (2) the accused has not complied with the guidelines issued by the Secretary of Labor and Employment, particularly with respect to the securing of a license an authority to recruit and deploy workers, either locally or overseas, and (3) the accused commits the unlawful acts against three or more persons, individually or as a group. People v. Meris (2000) Illegal recruitment is conducted in a large scale if perpetrated against three (3) or more persons individually or as a group. This crime requires proof that the accused: (1) engaged in the recruitment and placement of workers defined under Article 13 or in any of the prohibited activities under Article 34 of the Labor Code; (2) does not have a license or authority to lawfully engage in the recruitment or and placement of workers; and (3) committed the infraction against three or more, persons, individually or as a group. REFERRALS People v. Meris (2000) In People v. Agustin, the Court ruled: Art. 41 Prohibition against transfer of employment – a. After the issuance of an employment permit, the alien shall not transfer to another job or change his employer without prior approval of Secretary of Labor and Employment. b. Any non-resident alien who shall take up employment in violation of the provision of this Title and its implementing rules and regulations shall be punished in accordance with the provisions of Articles 289 and 290 of the Labor Code. In addition, the alien worker shall be subject to deportation after service of his sentence. Art. 42 Submission of list - Any employer employing nonresident foreign nationals on the effective date of this Code shall submit a list of such nationals to the Secretary of Labor and Employment within 30 days after such date indicating their names, citizenship, foreign and local addresses, nature of employment and status of stay in the country. The Secretary of Labor and Employment shall then determine if they are entitled to an employment permit. 11.02 TECHNIQUE OF EMPLOYMENT PERMIT REGULATION –

SECTION 11 - ALIEN EMPLOYMENT
11.01 COVERAGE NON-RESIDENT ALIEN Almodiel v NLRC (93) Art. 40 of the Labor Code which requires employment permit refers to non-resident aliens. The employment permit is required for entry into the country for employment purposes and is issued after determination of the non-availability of a person in the Philippines who is competent, able and willing at the time of application to perform the services for which the alien is desired. A resident alien does not fall within the ambit of the provision. Art. 40 Employment permit of non-resident aliens Any alien seeking admission to the Philippines for employment purposes and any domestic or foreign employer who desires to engage an alien for employment in the Philippines shall obtain an employment permit from the Department of Labor. The employment permit may be issued to a non-resident alien or to the applicant employer after a determination of the non-availability of a person in the Philippines who is competent, able and willing at the time of application to perform the services for which the alien is desired. For an enterprise registered in preferred areas of investment, may be issued upon recommendation of the government agency charged with the supervision of said registered enterprise.

Hence, the inevitable query is whether or not appellant Agustin merely introduced complainants to the Goce couple or her actions went beyond that. The testimonial evidence hereon show that she indeed further committed acts constitutive of illegal recruitment. All four prosecution witnesses testified that it was Agustin whom they initially approached regarding their plans of working overseas. It was from her that they learned about the fees they had to pay, as well as the papers that they had to submit. It was after they had talked to her that they met the accused spouses who owned the placement agency.

As such, the Court concluded that appellant that appellant was an employee of the Goce spouses, as she was actually making referrals to the agency. She was therefore, engaged in recruitment activities. The same factual circumstance obtains in this case. Although accused-appellant was not an employee of the alleged illegal recruiter Julie Micua, the evidence show that she was the one who approached complainants and prodded them to seek employment abroad. It was through her that they met Julia Micua. This is clearly an act of referral. Worse, accused-appellant declared that she was capable of placing them in jobs overseas. Suffice it to say that complainants' recruitment would not have been consummated were it not for the direct participation of accused-appellant in the recruitment process.

Art XII Sec 12 The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help them competitive.

UP LAW BAROPS 2007 ONE UP
37 of 132

Part II : Labor Standards Law Labor Standards
AUTHORITY EMPLOYMENT PERMIT – ISSUANCE General Milling Corp. v. Torres (91) The Labor Code itself specifically empowers respondent Secretary to make a determination as to the availability of the services of a "person in the Philippines who is competent, able and willing at the time of application to perform the services for which an alien is desired." In short, the Department of Labor is the agency vested with jurisdiction to determine the question of availability of local workers. The constitutional validity of legal provisions granting such jurisdiction and authority and requiring proof of non-availability of local nationals able to carry out the duties of the position involved, cannot be seriously questioned. “Apprenticeship” training within employment with compulsory related theoretical instructions involving a contract between an apprentice and an employer during an established period assured by an apprenticeable occupation. APPRENTICEABLE OCCUPATION Sec. 4 (m) (RA7796) “Apprenticeable Occupation: is an occupation officially endorsed by a tripartite body and approved for apprenticeship by the Authority QUALIFICATION Sec. 12 (RA 7610, as amended by RA 7658) Employment of Children – Children below fifteen (15) years of age shall not be employed except: 1. When a child works directly under the sole responsibility of his parents or legal guardian and where only members of the employer’s family are employed: Provided, however, That his employment neither endangers his life, safety, health and morals, nor impairs his normal development: Provided, further, That the parent or legal guardian shall provide the said minor child with the prescribed primary and/or secondary education; or 2. When a child’s employment or participation in public and entertainment or information through cinema, theater, radio or television is essential: Provided, the employment contract is concluded by the child’s parents or guardian, with the express agreement of the child concerned, if possible, and the approval of the Department of Labor and Employment: and Provided, That the following requirements in all instances are strictly complied with: a. The employer shall ensure the protection, health, safety and morals of the child b. The employer shall institute measures to prevent the child’s exploitation or discrimination taking into account the system and level of remuneration, and the duration and arrangement of working time c. The employer shall formulate and implement, subject to the approval and supervision of competent authorities, a continuing program for training and skills acquisition of the child.

SECTION 12 - EMPLOYMENT OF APPRENTICE, LEARNERS AND HANDICAPPED WORKERS
12.01 POLICY OBJECTIVES Sec. 2, RA 7796 Declaration of Policy – It is hereby declared the policy of the State to provide relevant, accessible, high quality and efficient technical education and skills development in support of the development of high quality Filipino middle-level manpower responsive to and in accordance with Philippine development goals and priorities. The state shall encourage active participation of various concerned sectors, particularly private enterprises, being direct participants in an immediate beneficiaries of a trained and skilled workforce, in providing technical education and skills development opportunities. Sec. 3, RA 7796 Statement of Goals and Objectives – It is the goal and objective of this Act to: a. Promote and strengthen the quality of technical education and skills development programs to attain international competitiveness b. Focus technical education and skills development or meeting the changing demands for quality middle-level manpower c. Encourage critical and creative thinking by disseminating the scientific and technical knowledge base of middle-level manpower development programs d. Recognize and encourage the complementary roles of public and private institutions in technical education and skills development and training systems; e. Inculcate desirable values through the development of moral character with emphasis on work ethic, self-discipline, self reliance, and nationalism. A. APPRENTICE 12.02 APPRENTICE DEFINED Sec. 4 (j) (RA 7796)

In the above exceptional cases where any such child may be employed, the employer shall first secure, before engaging such child, a work permit from the Department of Labor and Employment which shall ensure observance of the above requirements.

ALLOWED EMPLOYMENT Program Approval Nitto Enterprises v. NLRC (95) Contents of apprenticeship agreement. — Apprenticeship agreements, including the main rates of apprentices, shall conform to the rules issued by the Minister of Labor and Employment. The period of apprenticeship shall not exceed six months. Apprenticeship agreements providing for wage rates below the legal minimum wage, which in no case shall start below 75% per cent of the applicable minimum wage, may be entered into only in

UP LAW BAROPS 2007 ONE UP
38 of 132

Part II : Labor Standards Law Labor Standards
accordance with apprenticeship program duly approved by the Minister of Labor and Employment. The Ministry shall develop standard model programs of apprenticeship. TERMS AND CONDITIONS OF EMPLOYMENT Art. 61 Contents of apprenticeship agreement. — Apprenticeship agreements, including the main rates of apprentices, shall conform to the rules issued by the Minister of Labor and Employment. The period of apprenticeship shall not exceed six months. Apprenticeship agreements providing for wage rates below the legal minimum wage, which in no case shall start below 75% per cent of the applicable minimum wage, may be entered into only in accordance with apprenticeship program duly approved by the Minister of Labor and Employment. The Ministry shall develop standard model programs of apprenticeship. Art. 72 Apprentices without compensation The Secretary of Labor may authorize the hiring of apprentices without compensation whose training on the job is required by the school or training program curriculum or as a requisite for graduation or board examination. COSTS Art. 71 Deductibility of training costs - An additional deduction from taxable income of one-half of the value of labor training expenses incurred for developing the productivity and efficiency of apprentices shall be granted to the person or enterprise organizing an apprenticeship program provided such program is duly recognized by the Department of Labor and Employment; provided further that such deduction shall not exceed 10 percent of direct labor wage; and provided finally that the person or enterprise who wish to avail of this incentive should pay his apprentices the minimum wages. ENFORCEMENT Art. 65 Investigation of violation of apprenticeship agreement Upon complaint of any interested person or upon its own initiative, the appropriate agency of the Department of Labor and Employment or its authorized representative shall investigate any violation of any apprenticeship agreement Art. 66 Appeal to the Secretary of Labor and Employment The decision of the authorized agency of the Department by any aggrieved person to the Secretary of Labor and Employment within five days from receipt of the decision. The decision of the Secretary shall be final and executory. Art. 67 12.03 LEARNERS DEFINED Sec. 4 (n), RA 7796 “Learners” refer to persons hired as trainees in semiskilled and other industrial occupation which are non-apprenticeable. Learnership programs must be approved by the Authority. ALLOWED EMPLOYMENT Art. 74 When Learners may be hired – Learners may be employed when no experienced workers are available the employment of learners is necessary to prevent curtailment of employment opportunities, and the employment does not create unfair competition in terms of labor costs or impair or lower working standards. TERMS AND CONDITIONS OF EMPLOYMENT Art. 75 Learnership agreement – Any employer desiring to employer learners shall enter into a learnership agreement with them, which agreement shall include: a. The NAMES and addresses of the learners; b. The DURATION of the learnership period, which shall not exceed three months; c. The WAGES or salary rates of the learners which shall begin at not less than 75 percent of the applicable minimum wage; and d. A COMMITMENT to employ the learners, if they so desire, as regular employees upon completion of the learnership. All learners who have been allowed or suffered to work during the first two months shall be deemed regular employees if training is terminated by the employer before the end of the stipulated period through no fault of the learner. The learnership agreement shall be subject to inspection by the Secretary or his duly authorized representatives. Art. 76 Learners in piecework – Learners employed in piece or incentive rate jobs during the training period shall be paid in full for the work done. C. Handicapped Workers 12.04 HANDICAPPED WORKER Law : RA 7277 “Magna Persons” POLICY Carta for Disabled Exhaustion of administrative remedies before instituting any action for the enforcement of any apprenticeship agreement, or damages for breach of any such agreement B. Learners

UP LAW BAROPS 2007 ONE UP
39 of 132

Part II : Labor Standards Law Labor Standards
Declaration of Policy – The grant of the rights and privileges for disabled persons shall be guided by the following principles: (2) a. Disabled persons are part of Philippine society, thus the State shall give full support to the improvement of the total well-being of disabled persons and their integration into the mainstream of society. Toward this end, the State shall adopt policies ensuring the rehabilitation, self-development and selfreliance of disabled persons. It shall develop their skills and potentials to enable them to compete favorably for available opportunities. b. Disabled persons have the same rights as other people to take their proper place in society. They should be able to live freely and as independently as possible. This must be the concern of everyone – the family, community and all government and nongovernment organizations. Disabled persons’ rights must never be perceived as welfare services by the Government. c. The rehabilitation of the disabled persons shall be the concern of the Government in order to foster their capacity to attain a more meaningful, productive and satisfying life. To reach out to greater number of disabled persons, the rehabilitation services and benefits shall be expected beyond the traditional urban-based centers to community based programs, that will ensure full participation of different sectors as supported by national and local government agencies. d. The State also recognizes the role of the private sector in promoting the welfare of disabled persons and shall encourage partnership in programs that address their needs and concerns. e. To facilitate integration of disabled persons into the mainstream of society, the State shall advocate for and encourage respect for disabled persons. The State shall exert all efforts to remove all social, cultural, economic, environmental and attitudinal barriers that are prejudicial to disabled persons. COVERAGE shall cover all disabled persons and, to the extent herein provided, departments, officers and agencies of the National Government or non-government organizations involved in the attainment of the objectives of this Act. (3) DEFINED  Disabled Persons - those suffering from restriction or different abilities, as a result of a mental, physical or sensory impairment, to perform an activity in the manner or within the range considered normal for a human being [4(a)] Impairment - any loss, dimunition or aberration of psychological, physiological, or anatomical structure or function [4(b)] Disability - shall mean » a physical or mental impairment that substantially limits one or more psychological, physiological or anatomical function of an individual or activities of such individual; a record of such an impairment; or being regarded as having such an impairment [4(c)] Handicap - refers to a disadvantage for a given individual, resulting from an impairment or a disability, that limits or prevents the function or activity, that is considered normal given the age and sex of the individual [4(d)] » »

RIGHTS AND PRIVILEGES OF DISABLED PERSONS Equal Opportunity for Employment (5) No disable person shall be denied access to opportunities for suitable employment. A qualified disabled employee shall be subject to the same terms and conditions of employment and the same compensation, privileges, benefits, fringe benefits, incentives or allowances as a qualified able-bodied person Five percent (5%) of all casual, emergency and contractual positions in the Departments of Social Welfare and Development; health, Education, Culture and Sports; and other government agencies, offices or corporations engaged in social development shall be reserved for disabled persons. Sheltered Employment (6) If suitable employment for disabled persons cannot be found through open employment as provided in the immediately preceding Section, the State shall endeavor to provide it by means of sheltered employment. In the placement of disabled persons in sheltered employment, it shall accord due regard to the individual qualities, vocational goals and inclinations to ensure a good working atmosphere and efficient production. Apprenticeship (7) Subject to the provisions of the Labor Code as amended, disabled persons shall be eligible as apprentices or learners: Provided, that their handicap s not as much as to effectively impede the performance of job operations in the particular occupation for which they are hired; provided, further, That after the lapse of the period of apprenticeship, if found satisfactory in the job performance, they shall be eligible for employment. Incentives for Employers (8) a. To encourage the active participation of the private sector in promoting the welfare of disabled persons and to ensure gainful employment for qualified disabled persons, adequate incentives shall be provided to private entities which employ disabled persons. b. Private entities that employ disabled persons who meet the required skills or qualifications, either ad regular employee, apprentice or learner, shall be entitled to an additional deduction, from their gross income, equivalent to 25% of the total amount paid as salaries and wages to disabled persons: Provided, however, That such entities present proof as certified by the Department of Labor and

 

UP LAW BAROPS 2007 ONE UP
40 of 132

Part II : Labor Standards Law Labor Standards
Employment and the Department f Health as to his disability, skills, and qualifications. c. Private entities that improve or modify their physical facilities in order to provide reasonable accommodation for disabled persons shall also be entitled to an additional deduction from their net taxable income, equivalent to 50% of the direct costs of the improvements or modifications. This Section, however, does not apply to improvements or modifications or facilities required under Batas Pambansa Bilang 344. REGULAR WORKERS Bernardo v. NLRC (99) In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled employee should be given the same terms and conditions of employment as a qualified able-bodied person. Section 5 of the Magna Carta provides:
Sec. 5. Equal Opportunity for Employment. — No disabled person shall be denied access to opportunities for suitable employment. A qualified disabled employee shall be subject to the same terms and conditions of employment and the same compensation, privileges, benefits, fringe benefits, incentives or allowances as a qualified able bodied person.

unemployment by forcing employers, in cases where more than 8-hour operation is necessary, to utilize different shifts of laborers or employees working only for eight hours each. 13.02 COVERAGE Art. 82 Coverage  COVERED: employees in all establishments and undertakings, whether for profit or not  NOT COVERED: » government employees » managerial employees » field personnel » members of the family of the employer who are dependent on him for support » domestic helpers » persons in the personal service of another and » workers who are paid by results as determined by the Secretary of Labor and Employment in appropriate regulations.  MANAGERIAL EMPLOYEES: those whose primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof, and to other officers or members of the managerial staff.  FIELD PERSONNEL: non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. RATIONALE EXEMPTION – MANAGERIAL EMPLOYEES Natl Waterworks & Sewerage Authority v. NASA Consolidated Unions (65) The philosophy behind the exemption of managerial employees from the 8-Hour Labor Law is that such workers are not usually employed for every hour of work but their compensation is determined considering their special training, experience or knowledge which requires the exercise of discretion and independent judgment, or perform work related to management policies or general business operations along specialized or technical lines. For these workers it is not feasible to provide a fixed hourly rate of pay or maximum hours of labor. Salazar v. NLRC (96) Hence, although petitioner cannot strictly be classified as a managerial employee under Art. 82 of the Labor Code, and sec. 2(b), Rule I, Book III of the Omnibus Rules Implementing the Labor Code, nonetheless he is still not entitled to payment of the aforestated benefits because he falls squarely under another exempt category — "officers or members of a managerial staff" as defined under sec. 2(c) of the abovementioned implementing rules. A case in point is National Sugar Refineries Corporation v. NLRC. On the issue of "whether supervisory employees, as defined in Article 212 (m), Book V of the Labor Code, should be considered as officers or members of the managerial staff under Article 82, Book III of the same Code and hence not entitled to overtime, rest day and holiday pay," this Court ruled:
A cursory perusal of the Job Value Contribution Statements of the union members will

The fact that the employees were qualified disabled persons necessarily removes the employment contracts from the ambit of Article 80. Since the Magna Carta accords them the rights of qualified able-bodied persons, they are thus covered by Article 280 of the Labor Code. XXX The noble objectives of Magna Carta for Disabled Persons are not based merely on charity or accommodation, but on justice and the equal treatment of qualified persons, disabled or not. In the present case, the handicap of petitioners (deafmutes) is not a hindrance to their work. The eloquent proof of this statement is the repeated renewal of their employment contracts. Why then should they be dismissed, simply because they are physically impaired? The Court believes, that, after showing their fitness for the work assigned to them, they should be treated and granted the same rights like any other regular employees.

SECTION 13 CONDITIONS OF EMPLOYMENT – HOURS OF WORK
13.01 HOURS REGULATON RATIONALE AND ENFORCEMENT Manila Terminal Co. Inc v CIR (52) The Eight-Hour Labor Law was designed not only to safeguard the health and welfare of the laborer or employee, but in a way to minimize

UP LAW BAROPS 2007 ONE UP
41 of 132

Part II : Labor Standards Law Labor Standards
readily show that these supervisory employees are under the direct supervision of their respective department superintendents and that generally they assist the latter in planning, organizing, staffing, directing, controlling, communicating and in making decisions in attaining the company's set goals and objectives. These supervisory employees are likewise responsible for the effective and efficient operation of their respective departments. . . .

From the foregoing, it is apparent that the members of respondent union discharge duties and responsibilities which ineluctably qualify them as officers or members of the managerial staff, as defined in Section 2, Rule I, Book III of the aforestated Rules to Implement the Labor Code, viz.:
(1) their primary duty consists of the performance of work directly related to management policies of their employer; (2) they customarily and regularly exercise discretion and independent judgment; (3) they regularly and directly assist the managerial employee whose primary duty consists of the management of a department of the establishment in which they are employed; (4) they execute, under general supervision, work along specialized or technical lines requiring special training, experience, or knowledge; (5) they execute, under general supervision, special assignments and tasks; and (6) they do not devote more than 20% of their hours worked in a work-week to activities which are not directly and clearly related to the performance of their work hereinbefore described.

private respondent and other fishermen in its employ should be classified as field personnel who have no statutory right to service incentive leave pay. In contrast, in the case at bar, during the entire course of their fishing voyage, fishermen employed by the petitioner have no choice but to remain on board its vessel. Although they perform nonagricultural work away from the petitioner’s business offices, the fact remains that throughout the duration of their work they are under the effective control and supervision of the petitioner through the vessel’s patron or master as the NLRC correctly held. RATIONALE EXEMPTION – PIECE WORKER Red V Coconut Products Ltd. v. CIR (66) Furthermore, although the Eight-Hour Labor Law provides that it does not cover those workers who prefer to be paid on piece-work basis (Sec. 2, CA 444), nothing in said law precludes an agreement for the payment of overtime precludes an agreement for the payment of overtime compensation to pieceworkers. And in agreeing to the provision for payment of shift differential to the petitionersworkers aforementioned, in the bargaining agreement, as well as in actually paying to them said differentials, though not in full, the company in effect freely adhered to an application and implementation of the Eight-Hour Labor Law, or its objectives, to said workers. 13.03 NORMAL HOURS OF WORK Art. 83 Normal hours of work – The normal hours of work of any employee shall not exceed eight hours a day. Health personnel in cities or municipalities with a population of at least one million or in hospitals or clinics with a bed capacity of at least one hundred shall hold regular office hours for eight hours a day, for five days a week, or a total of forty hours a week, exclusive of time for meals, except where the exigencies of the service require that such personnel work for six days, forty-eight hours, in which case they shall be entitled to an additional compensation of at least 30 percent of their regular wage for work on the sixth day. HEALTH PERSONNEL: resident physicians, nurses, nutritionists, dieticians, pharmacists, social workers, laboratory technicians, paramedical technicians, psychologists, midwives, attendants and all other hospital or clinic personnel. DISTINCTION BETWEEN THE TWO CLASSES COMMERCIAL/INDU HEALTH STRIAL 8 hrs/day 8 Normal hrs/day Work Day Normal 6 days 5 days Work Week

Under the facts obtaining in this case, we are constrained to agree with petitioner that the union members should be considered as officers or members of the managerial staff and are, therefore, exempt from the coverage of Article 82. Perforce, they are not entitled to overtime, rest day and holiday pay. TEST – FIELD PERSONNEL Union of Filipro Employees v. Vivar (92) XXX Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another element to the Labor Code definition of field personnel. The clause "whose time and performance is unsupervised by the employer" did not amplify but merely interpreted and expounded the clause "whose actual hours of work in the field cannot be determined with reasonable certainty." The former clause is still within the scope and purview of Article 82 which defines field personnel. Hence, in deciding whether or not an employee's actual working hours in the field can be determined with reasonable certainty, query must be made as to whether or not such employee's time and performance is constantly supervised by the employer. Salazar v. NLRC (96) “Actual hours work in the field…” is to be read in conjunction with Rule IV, Book III of the Implementing Rules. Therefore field personnel are employees whose time and performance is unsupervised by the employer. Mercidar Fishing Corp. v NLRC (98) Petitioner argues essentially that since the work of private respondent is performed away from its principal of business, it has no way of verifying his actual hours of work on the vessel. It contends that

13.04 HOURS WORKED Art. 84 Hours worked - shall include

UP LAW BAROPS 2007 ONE UP
42 of 132

Part II : Labor Standards Law Labor Standards
a. All time during which an employee is required to be on duty or to be at a prescribed workplace, and b. All time during which an employee is suffered or permitted to work. Rest periods of short duration during working hours shall be counted as hours worked. ENTRY TIME CARDS Prangan v. NLRC (98) In the instant petition, the NLRC, in declaring that petitioner only worked for four hours, relied solely on the supposed daily time records of the petitioner submitted by the private respondent. We, however, are of the opinion that these documents cannot be considered substantial evidence as to conclude that petitioner only worked for four hours. Private respondent hardly bothered to controvert petitioner's assertion, much less bolster its own contention. As petitioner's employer, private respondent has unlimited access to all relevant documents and records on the hours of work of the petitioner. Yet, even as it insists that petitioner only worked for four hours and not twelve, no employment contract, payroll, notice of assignment or posting, cash voucher or any other convincing evidence which may attest to the actual hours of work of the petitioner was even presented. Instead, what the private respondent offered as evidence was only petitioner's daily time record, which the latter categorically denied ever accomplishing, much less signing. In said alleged daily time record, it showed that petitioner started work at 10:00 p.m. and would invariably leave his post at exactly 2:00 a.m. Obviously, such unvarying recording of a daily time record is improbable and contrary to human experience. It is impossible for an employee to arrive at the workplace and leave at exactly the same time, day in day out. The very uniformity and regularity of the entries are "badges of untruthfulness and as such indices of dubiety. Nicario v. NLRC (98) This Court, in previously evaluating the evidentiary value of daily time records, especially those which show uniform entries with regard to the hours of work rendered by an employee, has ruled that "such unvarying recording of a daily time record is improbable and contrary to human experience. It is impossible for an employee to arrive at the workplace and leave at exactly the same time, day in day out. The uniformity and regularity of the entries are 'badges of untruthfulness and as such indices of dubiety.' The observations made by the Solicitor General regarding the unreliability of the daily time records would therefore seem more convincing. On the other hand, respondent company failed to present substantial evidence, other than the disputed DTRs, to prove that petitioner indeed worked for only eight hours a day. IDLE TIME National Development Co. v. CIR (62) It will be noted that, under the law, the idle time that an employee may spend for resting and during which he may leave the spot or place of work though not the premises 2 of his employer, is not counted as working time only where the work is broken or is not continuous. Luzon Stevedoring Co. v. Luzon Marine Department Union (57) A laborer need not leave the premises of the factory, shop or boat in order that his period of rest shall not be counted, it being enough that he "cease to work", may rest completely and leave or may leave at his will the spot where he actually stays while working, to go somewhere else, whether within or outside the premises of said factory, shop or boat. If these requisites are complied with, the period of such rest shall not be counted. CONTINUOUS WORK State Marine Corporation v. Cebu Seamen’s Association (63) The provision of section 1 of Commonwealth Act No. 444, which states that "when the work is not continuous, the time during which the laborer is not working and can leave his working place and can rest completely shall not be counted", finds no application in the present case, where the laborer's work is continuous, and during the time that he is not working he can not leave and completely rest owing to the place and nature of his work. WAITING TIME Arica v. NLRC (89) Furthermore, the thirty (30)-minute assembly is a deeply-rooted, routinary practice of the employees, and the proceedings attendant thereto are not infected with complexities as to deprive the workers the time to attend to other personal pursuits. TRAVEL TIME Rada v NLRC (92) The fact that he picks up employees of Philnor at certain specified points along EDSA in going to the project site and drops them off at the same points on his way back from the field office going home to Marikina, Metro Manila is not merely incidental to petitioner's job as a driver. On the contrary, said transportation arrangement had been adopted, not so much for the convenience of the employees, but primarily for the benefit of the employer, herein private respondent. Since the assigned task of fetching and delivering employees is indispensable and consequently mandatory, then the time required of and used by petitioner in going from his residence to the field office and back, that is, from 5:30 A.M. to 7:00 A.M. and from 4:00 P.M. to around 6:00 P.M., which the labor arbiter rounded off as averaging three hours each working day, should be paid as overtime work. 13.05 MEAL PERIOD Art. 85 Meal periods - Subject to such regulations as the Secretary may prescribe, it shall be the duty of every employer to give his employees not less than sixty minutes time-off for their regular meals.

UP LAW BAROPS 2007 ONE UP
43 of 132

Part II : Labor Standards Law Labor Standards
MEAL TIME – FREE TIME Pan-American Airways v Pan-American Employees Association (61) Where during the so-called meal period, the laborers are required to stand by for emergency work, or where said meals hour is not one of complete rest, such period is considered overtime. Phil. Airlines, Inc. v. NLRC (99) Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it be inferred that employees must take their meals within the company premises. Employees are not prohibited from going out of the premises as long as they return to their posts on time. Private respondent's act, therefore, of going home to take his dinner does not constitute abandonment. 13.06 OVERTIME PROHIBITION WORK AND OFFSETTING Computation of additional compensation – For purposes of computing overtime and other additional remuneration as required by this Chapter, the "regular wage" of an employee shall include the cash wage only, without deduction on account of facilities provided by the employer. RATIONALE – OVERTIME PAY Philippine National Bank v. PNB Employees Association (82) Why is a laborer or employee who works beyond the regular hours of work entitled to extra compensation called in this enlightened time, overtime pay? Verily, there can be no other reason than that he is made to work longer than what is commensurate with his agreed compensation for the statutorily fixed or voluntarily agreed hours of labor he is supposed to do. It is thus the additional work, labor or service employed and the adverse effects of his longer stay in his place of work that justify and is the real reason for the extra compensation that is called overtime pay. Overtime work is actually the lengthening of hours devoted to the interests of the employer and the requirements of his enterprise. Caltex Regular Employees v. Caltex Phil. Inc. (95) Overtime work consists of hours worked on a given day in excess of the applicable work period, which here is eight (8) hours. It is not enough that the hours worked fall on disagreeable or inconvenient hours. In order that work may be considered as overtime work, the hours worked must be in excess of and in addition to the eight (8) hours worked during the prescribed daily work period, or the forty (40) hours worked during the regular work week Monday through Friday. NO FORMULA BASIC CONTRACT Manila Terminal Co. Inc v. CIR (52) A contract of employment, which provides for a weekly wage for a specified number of hours, sufficient to cover both the statutory minimum wage and overtime compensation, if computed on the basis of the statutory minimum, and which makes no provision for a fixed hourly rate or that the weekly wage includes overtime compensation, does not meet the requirements of the Act. BUILT-IN COMPENSATION Engineering Equipment Inc v. MOLE (85) Written contracts with a "built-in" overtime pay in the ten-hour working day and that their basic monthly pay was adjusted to reflect the higher amount covering the guaranteed two-hour extra time whether worked or unworked are valid. COMPUTATION Agga v. NLRC (98) The cited provisions of PD 442 simply declare that night shift differential and additional remuneration for overtime, rest day, Sunday and holiday work shall be computed on the basis of the employee's regular wage. In like fashion, the 1991 POEA Rules merely require employers to guarantee payment of wages and overtime pay.

Art. 87 Overtime work – Work may be performed beyond eight hours a day provided that the employee is paid for the overtime work an additional compensation equivalent to his regular wage plus at least twentyfive percent thereof. Work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation equivalent to the rate for the first eight hours on a holiday or rest day plus at least 30 percent thereof. Art. 88 Undertime not offset by overtime - Undertime work on any particular day shall not be offset by overtime work on any other day. Permission given to the employee to go on leave on some other day of the week shall not exempt the employer from paying the additional compensation required in this Chapter. Art. 89 Emergency overtime work - Any employee may be required by the employer to perform overtime work in any of the following cases: a. When the country is at WAR or when any other national or local emergency has been declared by Congress or the Chief Executive; b. When it is necessary to prevent LOSS of life or property or in case of imminent danger to public safety due to an actual or impending emergency in the locality caused by serious accidents, fire, flood, typhoon, earthquake, epidemic or other disaster or calamity; c. When there is URGENT work to be performed on machines, installation or equipment, in order to avoid serious loss or damage to the employer or some other cause of similar nature; d. When the work is necessary to prevent loss or damage to PERISHABLE goods; e. Where the completion or continuation of the work started before the 8th hour is necessary to prevent SERIOUS obstruction or prejudice to the business or operations of the employer. Any employee required to render overtime work under this Article shall be paid the ADDITIONAL compensation required in this Chapter. Art. 90

UP LAW BAROPS 2007 ONE UP
44 of 132

Part II : Labor Standards Law Labor Standards
Thus, petitioners' stance is bereft of any legal support. PROOF Lagatic v. NLRC (98) Entitlement to overtime pay must first be established by proof that said overtime work was actually performed, before an employee may avail of said benefit. 13.07 NIGHT WORK Art. 86 Night shift differential - not less than ten percent of his regular wage for each hour of work performed between ten o'clock in the evening and six o'clock in the morning. RATIONALE PROHIBITION Shell Oil Co. Ltd v. National Labor Union (48) "Nightwork cannot be regarded as desirable, either from the point of view of the employer or of the wage earner. It is uneconomical unless overhead costs are unusually heavy. Frequently the scale of wages is higher as an inducement to employees to accept employment on the night shift, and the rate of production is generally lower." "The case against nightwork, then, may be said to rest upon several grounds. In the first place, there are the remotely injurious effects of permanent nightwork manifested in the later years of the worker's life. Of more immediate importance to the average worker is the disarrangement of his social life, including the recreational activities of his leisure hours and the ordinary associations of normal family relations. From an economic point of view, nightwork is to be discouraged because of its adverse effect upon efficiency and output. A moral argument against nightwork in the case of women is that the night shift forces the workers to go to and from the factory in darkness. Recent experiences of industrial nations have added much to the evidence against the continuation of nightwork, except in extraordinary circumstances and unavoidable emergencies. The immediate prohibition of nightwork for all laborers is hardly practicable; its discontinuance in the case of women employees is unquestionably desirable. 'The night was made for rest and sleep and not for work' is a common saying among wage-earning people, and many of them dream of an industrial order in which there will be no night shift." work is such that he has no regular workdays and no regular rest days can be scheduled c. any special holiday least 30 percent of his regular wage for work performed on Sundays and holidays. Additional compensation of at least 30 percent of the regular wage Where such holiday work falls on the employee's scheduled rest day, he shall be entitled to an additional compensation of at least 50 percent of his regular wage. The employer shall pay such higher rate

d. Where the collective bargaining agreement or other applicable employment contract stipulates the payment of a higher premium pay than that prescribed under this Article

Manila Electric Company v. Public Utilities Employees Association (47) Perfecto, J. dissenting - Furthermore, it is a fact that Sundays and legal holidays are set aside by law as days of rest. The life, existence, and happiness of a person do not depend only on the satisfaction of his physical needs. There are moral, intellectual and spiritual needs as imperative as the physical ones… The deprivation of that opportunity to satisfy mental, moral, and spiritual needs should not be ignored, and should be properly compensated. 14.02 COVERAGE Art. 82 Coverage - SUPRA Art. 91 Right to weekly rest day a. It shall be the duty of every employer, whether operating for profit or not, to provide a rest period of not less than twenty-four consecutive hours after every six consecutive normal work days. 14.03 SCHEDULING OF REST DAY Art. 91 (b) The employer shall determine and schedule the weekly rest day of his employees subject to collective bargaining agreement and to such rules and regulations as the Secretary of Labor may provide. However, the employer shall respect the preference of employees as to their weekly rest day when such preference is based on religious grounds. 14.04 COMPULSORY COMPENSATION WORK AND

SECTION 14 CONDITION OF EMPLOYMENT – WEEKLY REST PERIOD
14.01 RATIONALE a. scheduled rest day Additional compensation of at least 10 percent of regular wage. An employee shall be entitled to such additional compensation for work performed on Sunday only when it is his established rest day. Additional compensation of at

b. nature of the

Art. 92 When employer may require work on a rest day – The employer may require his employees to work on any day:

UP LAW BAROPS 2007 ONE UP
45 of 132

Part II : Labor Standards Law Labor Standards
a. In case of actual or impending EMERGENCIES caused by serious accidents, fire, flood, typhoon, earthquake, epidemic or other disaster or calamity to prevent loss of life and property or imminent danger to public safety; b. In case of URGENT work to be performed on the machinery, equipment or installation to avoid serious loss which the employer would otherwise suffer; c. In the event of ABNORMAL pressure of work due to special circumstances, where the employer cannot ordinarily be expected to resort to other measures; d. To prevent loss or damage to PERISHABLE goods; e. Where the nature of the work requires CONTINUOUS operations and the stoppage of work may result in irreparable injury or loss to the employer; and f. Under other circumstances ANALOGOUS or similar to the foregoing as determined by the Secretary of Labor and Employment. COMPUTATION Agga v. NLRC (98) The cited provisions of PD 442 simply declare that night shift differential and additional remuneration for overtime, rest day, Sunday and holiday work shall be computed on the basis of the employee's regular wage. In like fashion, the 1991 POEA Rules merely require employers to guarantee payment of wages and overtime pay. Thus, petitioners' stance is bereft of any legal support. Art. 93 Compensation for rest day, Sunday or holiday work Unless otherwise modified by law, order or proclamation, the following regular holidays and special days shall be observed in this country: A. Regular Holidays New Year's Day - January 1 Maundy Thursday - Movable date Good Friday - Movable date Araw ng Kagitingan (Bataan and Corregidor Day) - April 9 Labor Day - May 1 Independence Day - June 12 National Heroes Day - Last Sunday of August Bonifacio Day - November 30 Christmas Day - December 25 Rizal Day - December 30 B. Nationwide Special Days All Saints Day - November 1 Last Day of the Year - December 31 Sec. 2. Henceforth, the terms "legal or regular holiday" and "special holiday", as used in laws, orders, rules and regulations or other issuances shall now be referred to as "regular holiday" and "special day", respectively. 15.03 HOLIDAY PAY Art 94(b) The employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent to twice his regular rate; FACULTY PRIVATE SCHOOL Jose Rizal College v. NLRC (87) It is readily apparent that the declared purpose of the holiday pay which is the prevention of diminution of the monthly income of the employees on account of work interruptions is defeated when a regular class day is cancelled on account of a special public holiday and class hours are held on another working day to make up for time lost in the school calendar. Otherwise stated, the faculty member, although forced to take a rest, does not earn what he should earn on that day. Be it noted that when a special public holiday is declared, the faculty member paid by the hour is deprived of expected income, and it does not matter that the school calendar is extended in view of the days or hours lost, for their income that could be earned from other sources is lost during the extended days. Similarly, when classes are called off or shortened on account of typhoons, floods, rallies, and the like, these faculty members must likewise be paid, whether or not extensions are ordered. DIVISOR AS FACTOR Union of Filipro Employees v. Viva (91) It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for the purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays. Transasia Phils. Emplower Assn. v. NLRC (99)

SECTION 15 - CONDITION OF EMPLOYMENT – HOLIDAYS
15.01 COVERAGE Art. 94 Right to holiday pay - (a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishment regularly employing less than ten workers; COVERAGE – EMPLOYEES Mantrade/FMC Division Employees and Workers Union v. Bacungan (86) The Secretary of Labor cannot exempt Mantrade from paying holiday pay just because its employees are uniformly paid by the month irrespective of the number of working days therein. The Labor Code only exempts retail and service establishments regularly employing less than 10 workers. 15.02 HOLIDAYS EXECUTIVE ORDER NO. 203 PROVIDING A LIST OF REGULAR HOLIDAYS AND SPECIAL DAYS TO BE OBSERVED THROUGHOUT THE PHILIPPINES AND FOR OTHER PURPOSES Sec. 1.

UP LAW BAROPS 2007 ONE UP
46 of 132

Part II : Labor Standards Law Labor Standards
Trans-Asia's inclusion of holiday pay in petitioners' monthly salary is clearly established by its consistent use of the divisor of "286" days in the computation of its employees' benefits and deductions. The use by Trans-Asia of the "286" days divisor was never disputed by petitioners. A simple application of mathematics would reveal that the ten (10) legal holidays in a year are already accounted for with the use of the said divisor. As explained by Trans-Asia, if one is to deduct the unworked 52 Sundays and 26 Saturdays (derived by dividing 52 Saturdays in half since petitioners are required to work half-day on Saturdays) from the 365 calendar days in a year, the resulting divisor would be 286 days (should actually be 287 days). Since the ten (10) legal holidays were never included in subtracting the unworked and unpaid days in a calendar year, the only logical conclusion would be that the payment for holiday pay is already incorporated into the said divisor. Thus, when viewed against this very convincing piece of evidence, the arguments put forward by petitioners to support their claim of non-payment of holiday pay, i.e., the pre-condition stated in the Employees' Manual for entitlement to holiday pay, the absence of a stipulation in the employees' appointment papers for the inclusion of holiday pay in their monthly salary, the stipulation in the CBA recognizing the entitlement of the petitioners to holiday pay with a concomitant provision for the granting of an "allegedly" very generous holiday pay rate, would appear to be merely inferences and suppositions which, in the apropos words of the labor arbiter, "paled in the face of the prevailing company practices and circumstances abovestated." The Court notes that there is a need to adjust the divisor used by Trans-Asia to 287 days, instead of only 286 days, in order to properly account for the entirety of regular holidays and special days in a year as prescribed by Executive Order No. 203 in relation to Section 6 of the Rules Implementing Republic Act 6727. COMPUTATION Agga v. NLRC (98) The cited provisions of PD 442 simply declare that night shift differential and additional remuneration for overtime, rest day, Sunday and holiday work shall be computed on the basis of the employee's regular wage. In like fashion, the 1991 POEA Rules merely require employers to guarantee payment of wages and overtime pay. Thus, petitioners' stance is bereft of any legal support. SUNDAY Wellington Investment Inc v. Trajano (95) In fixing the salary, Wellington used what it calls the "314 factor;" that is to say, it simply deducted 51 Sundays from the 365 days normally comprising a year and used the difference, 314, as basis for determining the monthly salary. The monthly salary thus fixed actually covers payment for 314 days of the year, including regular and special holidays, as well as days when no work is done by reason of fortuitous cause, as above specified, or causes not attributable to the employees. There is no provision of law requiring any employer to make such adjustments in the monthly salary rate set by him to take account of legal holidays falling on Sundays in a given year, or, contrary to the legal provisions bearing on the point, otherwise to reckon a year at more than 365 days. As earlier mentioned, what the law requires of employers opting to pay by the month is to assure that "the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days divided by twelve," and to pay that salary "for all days in the month whether worked or not," and "irrespective of the number of working days therein." PROOF OF PAYMENT Building Care Corp v. NLRC (98) Indeed if petitioner wanted to prove its payment of holiday pays and salary differentials, it could have easily presented proofs of such monetary benefits. But it did not. It had failed to comply with the mandate of the law. As public respondent ruled, the burden of proof in this regard belongs to the employer, not to the employee.

SECTION 16 - CONDITION OF EMPLOYMENT – SERVICE INCENTIVE LEAVE
A. Service Incentive Leave 16.01 COVERAGE Art 95. Right to Service Incentive Leave – a. Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay b. This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying vacation leave with pay at least five days and those employed in establishments regularly employing less than ten employees or in establishments exempted from granting this benefit by the Secretary of Labor after considering the viability or financial condition of such establishment. Makati Haberdashery Inc. v. NLRC (89) On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month Pay, they are not entitled to service incentive leave pay because as piece-rate workers being paid at a fixed amount for performing work irrespective of time consumed in the performance thereof, they fall under one of the exceptions stated in Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code. For the same reason private respondents cannot also claim holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor Code). 16.02 ENTITLEMENT AND ARBITRATION Art 95. Right to Service Incentive Leave – a. Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay

UP LAW BAROPS 2007 ONE UP
47 of 132

Part II : Labor Standards Law Labor Standards
c. The grant of benefit in excess of that provided herein shall not be made a subject of arbitration or any court or administrative action. 16.03 COMPUTATION AND LIABILITY satisfactory proof of such payment and legality thereof; f. That if an employee should give birth or suffer miscarriage without the required contributions having been remitted for her by her employer to the SSS, or without the latter having been previously notified by the employer of time of the pregnancy, the employer shall pay to the SSS damages equivalent to the benefits which said employee member would otherwise have been entitled to. D. Vacation and Sick Leave POLICY St. Michael Academy v. NLRC The payment of vacation and sick leave is governed by the policy of the employer or the agreement between the employer and employee.

Sentinel Security Agency, Inc. v. NLRC (98) Under Arts. 107 and 109, the indirect employer is jointly and severally liable with the contractor for the workers’ wages, in the same manner and extent that it is liable to its direct employees. This liability of the Client covers the payment of the service incentive leave pay of the complainants during the time they were posted at the Cebu Branch of the Client. As service had been rendered, the liability accrued, even if the complainants were eventually transferred or reassigned. The service incentive leave is expressly granted by these pertinent provisions of the Labor Code

B. Paternity Leave Reference: RA 8187 Paternity Leave Act of 1995 and Implementing Rules Coverage: Sec. 2 Notwithstanding any law, rules, and regulations to the contrary, every MARRIED male employee in the private and public sectors shall be entitled to a paternity leave of SEVEN (7) days with full pay for the first four (4) deliveries of the LEGITIMATE spouse with whom he is The male employee applying for cohabiting. paternity leave shall notify his employer of the pregnancy of his legitimate spouse and the expected date of such delivery. For purposes of this Act, delivery shall include childbirth or any miscarriage. C. Maternity Leave Reference: Sec. 14 – A RA 8282 A female employee who has paid at least three (3) monthly contributions in the twelve-month period immediately preceding the semester of her childbirth, or miscarriage shall be paid a daily maternity benefit equivalent to one hundred percent (100%) of her average salary credit for sixty (60) days or seventy-eight days in case of caesarean delivery subject to the following conditions: a. That the employee shall have notified her employer of her pregnancy and the probable date of her childbirth which notice shall be transmitted to the SSS in accordance with the rules and regulations it may provide. b. The full payment shall be advanced by the employer within thirty (30) days from the filing of the maternity leave application. c. That payment of daily maternity benefits shall be a bar to the recovery of sickness benefits provided by this Act for the same period for which daily maternity benefits have been received. d. That the maternity benefits provided under this section shall be paid only for the first four (4) deliveries or miscarriages. e. That the SSS shall immediately reimburse the employer of one hundred percent (100%) of the amount of maternity benefits advanced to the employee by the employer upon receipt of

SECTION 17 - WAGES
A. Wages – In General 17.01 COVERAGE Art. 97 Definitions - As used in this Title: (b) "Employer" includes any person acting directly or indirectly in the interest of an employer in relation to an employee and shall include the Government and all its branches, subdivisions and instrumentalities all Government-owned and controlled corporations and institutions, as well as non-profit private institutions or organizations. (c) "Employee" includes any individual employed by an employer. (e) "Employ" means to suffer or permit to work. Application of Title – Art. 98: This Title shall not apply to: farm tenancy or leasehold domestic service persons working in their respective homes in needlework or in any cottage industry duly registered in accordance with law. GOVERNMENT AGENCY Phil. Fisheries Development Authority v. NLRC (92) Notwithstanding that the petitioner is a government agency, its liabilities, which are joint and solidary with that of the contractor, are provided in Articles 106, 107 and 109 of the Labor Code. This places the petitioner's liabilities under the scope of the NLRC. Moreover, Book Three, Title II on Wages specifically provides that the term "employer" includes any person acting directly or indirectly in the interest of an employer in relation to an

UP LAW BAROPS 2007 ONE UP
48 of 132

Part II : Labor Standards Law Labor Standards
employee and shall include the Government and all its branches, subdivisions and instrumentalities, all government-owned or controlled corporation and institutions as well as non-profit private institutions, or organizations (Art. 97 [b], Labor Code; Eagle Security Agency, Inc. v. NLRC; Rabago v. NLRC) 17.02 WAGE Art. 97(f) “Wage” paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed on a time, task, piece, commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging or other facilities customarily furnished by the employer to the employee. "Fair and reasonable value" shall not include any profit to the employer or to any person affiliated with the employer. FAIR DAY PAY Aklan Electronic Cooperative, Inc. v. NLRC (2000) The age-old rule governing the relation between labor and capital, or management and employee of a "fair day’s wage for a fair day’s labor" remains as the basic factor in determining employees’ wages. If there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, suspended or dismissed, or otherwise illegally prevented from working, a situation which we find is not present in the instant case. It would neither be fair nor just to allow private respondents to recover something they have not earned and could not have earned because they did not render services at the Kalibo office during the stated period. FACILITIES AND SUPPLEMENTS Atok Big Wedge Mining Co. Inc. v. Atok Big Wedge Mutual Benefit Assoc. (53) A person's needs increase as his means increase. This is true not only as to food but as to everything else - education, clothing, entertainment, etc. The law guarantees the laborer a fair and just wage. The minimum must be fair and just. The "minimum wage" can by no means imply only the actual minimum. Some margin or leeway must be provided, over and above the minimum, to take care of contingencies, such as increase of prices of commodities and increase in wants, and to provide means for a desirable improvement in his mode of living. Millares v. NLRC (99) In Songco the Court explained that both words (as well as salary) generally refer to one and the same meaning, i.e., a reward or recompense for services performed. Specifically, "wage" is defined in letter (f) as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. Stated differently, when an employer customarily furnishes his employee board, lodging or other facilities, the fair and reasonable value thereof, as determined by the Secretary of Labor and Employment, is included in "wage." In order to ascertain whether the subject allowances form part of petitioner's "wages," we divide the discussion on the following — "customarily furnished;" "board, lodging or other facilities;" and, "fair reasonable value as determined by the Secretary of Labor." "Customary" is founded on long-established and constant practice connoting regularity. The receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and forming part of salary because the nature of the grant is a factor worth considering. We agree with the observation of the Office of the Solicitor General that the subject allowances were temporarily, not regularly, received by petitioners because —
In the case of the housing allowance, once a vacancy occurs in the company-provided housing accommodations, the employee concerned transfers to the company premises and his housing allowance is discontinued . . . .

On the other hand, the transportation allowance is in the form of advances for actual transportation expenses subject to liquidation . . . given only to employees who have personal cars. The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao del Norte. Once the officer is transferred outside Bislig, the allowance stops. Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term as including articles or services for the benefit of the employee or his family but excluding tools of the trade or articles or service primarily for the benefit of the employer or necessary to the conduct of the employer's business. The Staff/Manager's allowance may fall under "lodging" but the transportation and Bislig allowances are not embraced in "facilities" on the main consideration that they are granted as well as the Staff/Manager's allowance for respondent PICOP's benefit and convenience, i.e., to insure that petitioners render quality performance. In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose. That the assailed allowances were for the benefit and convenience of respondent company was supported by the circumstance that they were not subjected to withholding tax. States Marine Corporation v. Cebu Seamen’s Association, Inc. (63) 'Supplements', constitute extra remuneration/ special benefits given to or received by the EEs over and above their ordinary earnings or wages, 'Facilities' are items of expense necessary for the laborer's and his family's existence and

UP LAW BAROPS 2007 ONE UP
49 of 132

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

UP LAW BAROPS 2007 ONE UP
50 of 132

Part II : Labor Standards Law Labor Standards
when the circumstances prescribed in the second paragraph of Article 102 are present. 17.04 TIME OF PAYMENT Art. 103 Time of payment - Wage shall be paid at least once every 2 weeks or twice a month at intervals not exceeding 16 days. If on account of force majeure or circumstances beyond the employer's control, payment of wages on or within the time herein provided cannot be made, the employer shall pay the wages immediately after such force majeure or circumstances have ceased. No employer shall make payment with less frequency that once a month. The payment of wages of employees engaged to perform a task which cannot be completed in 2 weeks shall be subject to the following conditions in the absence of a collective bargaining agreement or arbitration award: 1. That payments are made at intervals not exceeding 16 days, in proportion to the amount of work completed; and 2. That final settlement is made upon completion of the work. 17.05 PLACE OF PAYMENT Art. 104 Place of payment - Payment of wages shall be made at or near the place of undertaking, except as otherwise provided by such regulations as the Secretary of Labor may prescribe under conditions to ensure greater protection of wages. Sec. 7, RA 6727 (Wage Rationalization Act) Upon written permission of the majority of the employees or workers concerned, all private establishments, companies, businesses and other entities with 25 or more employees and located within 1 kilometer radius to a commercial, savings or rural bank shall pay the wages and other benefits of their employees through any of the said banks and within the period of payment of wages fixed by PD 422, as amended, otherwise known as the Labor Code of the Philippines. 3. The System shall allow workers to receive their wages within the period or frequency and in the amount prescribed under the Labor Code, as amended. 4. There is a bank or ATM facility within a radius of one kilometer to the place of work 5. Upon request of the concerned employee/s, the employer shall issue a record of payment of wages, benefits and deductions for particular period. 6. There shall be no additional expenses and no dimunition of benefits and privileges as a result of the ATM system of payment 7. The employer shall assume responsibility in case the wage protection provisions of law and regulations are not complied with under the arrangement. 17.06 DIRECT PAYMENT Art. 105 Direct payment of wages - Wages shall be paid directly to the workers to whom they are due except: a. In cases of force majeure rendering such payments impossible or under other special circumstances to be determined by the Secretary of Labor in appropriate regulations, in which case the worker may be paid through another person under written authority given by the worker for the purpose; or b. Where the worker has died, the employer may pay the wages of the deceased worker to the heirs of the latter without the necessity of intestate proceedings. Procedure: Claimants, if all of age, shall execute an affidavit attesting to their relationship to the deceased and the fact that they are his heirs, to the exclusion of all other persons. If any of the heirs is a minor: the affidavit shall be executed on his behalf by his natural guardian or next of kin. The affidavit shall be presented to the employer who shall make payment through the Secretary of Labor or his representative. The representative of the Secretary of Labor shall act as referee in dividing the amount paid among the heirs. The payment of wages under this Article shall absolve the employer of any further liability with respect to the amount paid. 17.07 CONTRACTOR - SUBCONTRACTOR Art. 106. Contractor or sub-contractor Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay wages of employees in accordance with this Code, the employer shall be JOINTLY AND SEVERALLY liable with his contractor or sub-contractor to such employees to the extent of the work performed under the contract,

Labor Advisory on Payment of Salaries thru Automated Teller Machine (ATM) “Based on Article 104, as well as the provisions of Sec. 4, Rule VIII, Book III of the Code’s Implementing Rules and considering present-day circumstances, practices and technology, employers may adopt a system of payment other than in the workplace, such as through automated teller machine (ATM) of banks, provided that the following conditions are met: 1. The ATM system of payment is with the written consent of the employees concerned. 2. The employees are given reasonable time to withdraw their wages from the bank facility which time, if done during working hours, shall be considered compensable hours worked.

UP LAW BAROPS 2007 ONE UP
51 of 132

Part II : Labor Standards Law Labor Standards
in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between laboronly contracting and job contracting as well as differentiations within these types of contracting, and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner an extent as if the latter were directly employed by him. Art. 107 Indirect employer - The provisions of the immediately preceding article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project. Art. 108 Posting of bond - An employer or indirect employer may require the contractor or sub-contractor to furnish a bond equal to the cost of labor under contract, on condition that the bond will answer for the wages due the employees should the contractor/sub-contractor, as the case may be, fail to pay the same. Art. 109. Solidary liability – The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor/subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers. C. Prohibition regarding Wages 17.08 NON-INTERFERENCE – DISPOSAL WAGES Art. 112 Non-interference in disposal of wages - No employer shall limit or otherwise interfere with the freedom of any employee to dispose of his wages. He shall not in any manner force, compel or oblige his employees to purchase merchandise, commodities or other property from the employer or from any other person or otherwise make use of any store or services of such employer or any other person. 17.09 WAGE DEDUCTION Art. 113 Wage deduction - No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his employees, except: 1. In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on the insurance; 2. For union dues, in cases where the right of the worker or his union to check off has been recognized by the employer or authorized in writing by the individual worker concerned; and 3. In cases where the employer is authorized by law or regulations issued by the Secretary of Labor. Art. 117 Deduction to ensure employment (Art. 117) - It shall be unlawful to make any deduction from the wages of any employee for the benefit of the employer or his representative or intermediary as consideration of a promise of employment/ retention in employment. WAGE DEDUCTION Radio Communication of the Phil., Inc. v. Sec. of Labor (89) Article 222 Labor Code requires an individual written authorization as a prerequisite to wage deductions seeks to protect the employee against unwarranted practices that would diminish his compensation without his knowledge and consent. However, for all intents and purposes, the deductions required of the petitioner and employees do not run counter to the express mandate of the law since the same are not unwarranted or without their knowledge and consent. Also, the deductions for the union service fee in question are authorized by law and do not require individual check-off authorizations. Apodaca v. NLRC (89) Lastly, assuming further that there was a call for payment of the unpaid subscription, the NLRC cannot validly set it off against the wages and other benefits due petitioner. Article 113 of the Labor Code allows such a deduction from the wages of the employees by the employer, only in three instances, to wit:
"ART. 113. Wage Deduction. — No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his employees, except: (a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on the insurance; (b) For union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer or authorized in writing by the individual worker concerned; and (c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor."

Jardin v. NLRC (2000) With regard to the amount deducted daily by private respondent from petitioners for washing of the taxi units, we view the same as not illegal in the context of the law. We note that after a tour of duty, it is incumbent upon the driver to restore the unit he has driven to the same clean

UP LAW BAROPS 2007 ONE UP
52 of 132

Part II : Labor Standards Law Labor Standards
condition when he took it out. Car washing after a tour of duty is indeed a practice in the taxi industry and is in fact dictated by fair play. Hence, the drivers are not entitled to reimbursement of washing charges. CHECK – OFF ART. 113 Wage Deduction. — No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his employees, except: b. For union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer or authorized in writing by the individual worker concerned; and Manila Trading and Supply Co. v. Manila Trading Labor Association (53) An employer may be compelled to "check-off" union dues from the wages of his employee when it has been authorized to do so by the employee. This is upon the theory that it is necessary to promote the welfare and integrity of the union to which he belongs. It is a forward step to promote social justice as envisaged by our Constitution. 17.10 DEPOSIT Art. 114 Deposits for loss or damage - No employer shall require his worker to make deposits from which deduction shall be made, for the reimbursement of loss of or damage to tools, materials or equipment supplied by the employer Exception:  when the employer is engaged in such trades, occupations or businesses where the practice of making deductions or requiring deposits is a recognized one; or  is necessary or desirable as determined by the Secretary of Labor in appropriate rules and regulations Art. 115 Limitations - No deduction from the deposits of an employee for the actual amount of the loss or damage shall be made unless the employee has been heard thereon, and his responsibility has been clearly shown. Dentech Manufacturing Corp. v. NLRC (89) Article 114 of the Labor Code prohibits an employer from requiring his employees to file a cash bond or to make deposits, subject to certain exceptions. Five J Taxi v. NLRC (94) The article providing the rule on deposits for loss or damage to tools, materials or equipment supplied by the employer does not apply to or permit deposits to defray any deficiency which the taxi driver may incur in the remittance of his "boundary." And when worker stops working for employer, the alleged purpose for the unauthorized deposits no longer exists. In other case, any balance due to private respondents after proper accounting must be returned to them with legal interest. 17.11 WITHHOLDING OF WAGES Art. 116 Withholding of wages and kickbacks prohibited - It shall be unlawful for any person, directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or dismissal or by any other means whatsoever without the worker's consent. GARNISHMENT/ATTACHMENT Pacific Customs Brokerage, Inc. v. Inter-Island Dockmen and Labor Union (51) Art 1708 NCC: "laborers' wages shall not be subject to execution or attachment, except for debts incurred for food, shelter, clothing and medical attendance". Writ of garnishment issued by CFI, while purporting to include all moneys and properties of the employing company, cannot affect what the co. has in its possession to pay the wages of its laborers pursuant to its contract w/ them or their labor union w/o contravening the letter and spirit of article 1708. Gaa v. Court of Appeals (85) Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what are to be exempted from attachment and execution. The term "wages" as distinguished from "salary", applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day, week, month, or season, while "salary" denotes a higher degree of employment, or a superior grade of services, and implies a position of office: by contrast, the term "wages" indicates considerable pay for a lower and less responsible character of employment, while "salary" is suggestive of a larger and more important service (35 Am. Jur. 496). XXX We do not think that the legislature intended the exemption in Article 1708 of the New Civil Code to operate in favor of any but those who are laboring men or women in the sense that their work is manual. Persons belonging to this class usually look to the reward of a day's labor for immediate or present support, and such persons are more in need of the exemption than any others. RECORD KEEPING South Motorist Enterprises v. Tosoc (90) It failed to present employment records giving as an excuse that they were sent to the main office in Manila, in violation of Section 11 of Rule X, Book II of the Omnibus Rules Implementing the Labor Code providing that:
"All employment records of the employees of an employer shall be kept and maintained in or about the premises of the workplace. The premises of a workplace shall be understood to mean the main or branch office or establishment, if any, depending upon where the employees are regularly assigned. The keeping of the employee's records in another place is prohibited."

D. Other Forms of Remuneration 17.12 SERVICE CHARGES Art. 96

UP LAW BAROPS 2007 ONE UP
53 of 132

Part II : Labor Standards Law Labor Standards
Service Charges -All service charges collected by hotels, restaurants and similar establishments shall be distributed at the rate of 85% for all covered employees and 15% management. The share of the employees shall be EQUALLY DISTRIBUTED among them. In case the service charge is abolished, the share of covered employees shall be considered integrated in their wages. Maranaw Hotels, etc. v. NLRC (99) As regards the share of Damalerio in the service charges collected during the period of his preventive suspension, the same form part of his earnings, and his dismissal having been adjudged to be illegal, he is entitled not only to full backwages but also to other benefits, including a just share in the service charges, to be computed from the start of his preventive suspension until his reinstatement. Book III Rule VI Omnibus Rules only establishments collecting Coverage service charges such as hotels, restaurants, lodging houses, night clubs, cocktail lounge, massage clinics, bars, casinos and gambling houses and similar enterprises, including those entities operating primarily as private subsidiaries of the Government. Employees shall apply to all employees of covered covered employers REGARDLESS OF THEIR POSITIONS, DESIGNATIONS OR EMPLOYMENT STATUS, and IRRESPECTIVE OF THE METHOD BY WHICH THEIR WAGES ARE PAID Exception MANAGERIAL EMPLOYEES (defined as one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign, or discipline employees or to effectively recommend such managerial actions.) Distributio 85% employees to be n distributed EQUALLY 15% - management (for the disposition by management to answer for losses and breakages and distribution to managerial employees at the discretion of the management in the latter case) Frequency shall be distributed and paid to of the employees not less than once Distributio every two weeks or twice a month n at intervals not exceeding 16 days Permanen In case the service charge is cy of abolished, the share of covered service employees shall be considered charges integrated in their wages. The basis of the amount to be integrated shall be the average monthly share of each employee for the past 12 months immediately preceding the abolition or withdrawals of such charges Relation to Nothing in this rule shall prevent agreement the employer and his employees s from entering into any agreement with terms more favorable to the employees than those provided herein, or be used to diminish any benefit granted to the employees under existing laws, agreement and voluntary employer practice.

17.13 THIRTEENTH MONTH PAY COVERAGE Revised Guidelines on the implementation of the 13th Month pay Removal of the Salary Ceiling (Aug 13, 86, Pres. Aquino's Memo Order No. 28) ALL EMPLOYERS are hereby required to pay all their rank and file employees a 13th month pay not later than December 24 of every year, provided that they have worked for at least one (1) month during a calendar year. Who are Rank and File Employees? A managerial employee is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign, or discipline employees, or to effectively recommend such managerial actions. ALL EMPLOYEES NOT FALLING WITHIN THIS DEFINITION ARE CONSIDERED RANK-AND-FILE EMPLOYEES. Exempted EMPLOYERS 1. The Government and any of its political subdivisions, including government-owned and controlled corporations, except those corporations operating essentially as private subsidiaries of the Government; 2. Employers already paying their employees a 13th month pay or more in a calendar year or

its equivalent at the time of this issuance; “ITS EQUIVALENT” : includes Christmas bonus, mid-year bonus, cash bonuses and other payments amounting to not less than 1/12 of the basic salary but shall NOT INCLUDE cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employee as well a non-monetary benefits. 3. Employers of household helpers and persons in the personal service of another relation to such workers and; 4. Employers of those who are paid on purely commission, boundary or task basis and those who are paid a fixed amount for performing specific work, except where the workers are paid on piece-rate basis in which case the employer shall grant the required 13th month pay to such workers.

Workers paid on a piece – rate basis: those who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated, without regard to the time spent in producing the same. AMOUNT AND PAYMENT DATE

UP LAW BAROPS 2007 ONE UP
54 of 132

Part II : Labor Standards Law Labor Standards
The minimum 13th month pay required by law shall not be less than 1/12 of the total basic salary earned by an employee within a calendar year for the year 1987, the computation of the 13th month Minimum Amount An employee who has resigned or whose services were terminated at any time before the time for payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from service. MANNER OF WAGE PAYMENT Jackson Building v. NLRC (95) Presidential Degree No. 851, as amended by Memorandum Order No. 28, provides that employees are entitled to the thirteenth-month pay benefit regardless of their designation and irrespective of the method by which their wages are paid. HOUSEHELPERS Ultra Villa Food House v. Geniston (99) Moreover, the specific provisions mandating these benefits are found in Book III, Title I of the Labor Code, and Article 82, which defines the scope of the application of these provisions, expressly excludes domestic helpers from its coverage. The limitations set out in the said article are echoed in Book III of the Omnibus Rules Implementing the Labor Code. Clearly then, petitioner is not obliged by law to grant private respondent any of these benefits. Employing the same line of analysis, it would seem that private respondent is not entitled to 13th month pay. The Revised Guidelines on the Implementation of the 13th Month Pay Law also excludes employers of household helpers from the coverage of Presidential Decree No. 851. Nevertheless, we deem it just to award private respondent 13th month pay in view of petitioner's practice of according private respondent such benefit. Indeed, petitioner admitted that she gave private respondent 13th month pay every December. GOVERNMENT EMPLOYEES Alliance of Government Workers v. NLRC (95) An analysis of the "whereases" of PD No. 851 shows that the President had in mind only workers in private employment when he issued the decree. There was no intention to cover persons working in the government service. TERMINATED EMPLOYEES Archilles Manufacturing Corp. v. NLRC (95) On the issue of the propriety of the award of a 13th month pay, paragraph 6 of the Revised Guidelines on the Implementation of the 13th Month Pay Law (P. D. 851) provides that "(a)n employee who has resigned or whose services were terminated at any time before the payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from the service . . .. The payment of the 13th month pay may be demanded by the employee upon the cessation of employeremployee relationship. This is consistent with the

pay shall include the cost of living allowances (COLA) integrated into the basic salary of a covered employee pursuant to EO 178.

Basic salary = for the purpose of computing the 13th month pay shall include all remuneration’s or earning paid by this employer for services rendered but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay and cost-of-living allowances. However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th

month pay if by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees. The required 13th Month Pay shall be paid not later than December 24 of each year. An employer, however, may give to his employees one-half (1/2) of the required 13th Month Pay before the opening Time of payment

of the regular school year and the other half on or before the 24th of December every year. The frequency of payment of this monetary benefit may be the subject of agreement between the employer and the recognized collective bargaining agent of the employees. 13TH MONTH PAY FOR CERTAIN TYPE OF EMPLOYEES Paid by Results by law entitled to the 13th Month Pay Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay based on their total Employees who are paid on piece work basis are

earnings during the calendar year, i.e. on both their fixed or guaranteed wage and commission. Those with Multiple Employers Government employees working part time in a private enterprise, including private educational institutions, as well as employees working in two or more private firms, whether on full or part time bases, are entitled to the required 13th Month Pay from all their private employers regardless of their total earnings from each or all their employers. Private School Teachers Private school teachers, including faculty members of universities and colleges, are entitled to the required 13th month pay, regardless of the number of months they teach or are paid within a year, if they have rendered service for at least one (1) month within a year. Resigned or Separated Employee

UP LAW BAROPS 2007 ONE UP
55 of 132

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

UP LAW BAROPS 2007 ONE UP
56 of 132

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

UP LAW BAROPS 2007 ONE UP
57 of 132

Part II : Labor Standards Law Labor Standards
the payment of their separation benefits. The law requires an employer to extend equal treatment to its employees. It may not, in the guise of exercising management prerogatives, grant greater benefits to some and less to others. Management prerogatives are not absolute prerogatives but are subject to legal limits, collective bargaining agreements, or general principles of fair play and justice (UST vs. NLRC). Article 283 of the Labor Code, as amended, protects workers whose employment is terminated because of closure of the establishment or reduction of personnel (Abella vs. NLRC). With regard to the private respondents' claim for the mid-year bonus, it is settled doctrine that the grant of a bonus is a prerogative, not an obligation, of the employer (Traders Royal Bank vs. NLRC). The matter of giving a bonus over and above the worker's lawful salaries and allowances is entirely dependent on the financial capability of the employer to give it. The fact that the company's business was no longer profitable (it was in fact moribund) plus the fact that the private respondents did not work up to the middle of the year (they were discharged in May 1988) were valid reasons for not granting them a mid-year bonus. Requiring the company to pay a mid-year bonus to them also would in effect penalize the company for its generosity to those workers who remained with the company till the end" of its days. (Traders Royal Bank vs. NLRC) The award must therefore be deleted. NATURE – BONUS Luzon Stevedoring Corporation v. CIR (65) A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is not a demandable and enforceable obligation. It is so when it is made a part of the wage or salary or compensation. In such a case the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profits. If there be none, there would be no bonus. Marcos v. NLRC (95) A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition to what would ordinarily be given. The term "bonus" as used in employment contracts, also conveys an idea of something which is gratuitous, or which may be claimed to be gratuitous, over and above the prescribed wage which the employer agrees to pay. While there is a conflict of opinion as to the validity of an agreement to pay additional sums for the performance of that which the promisee is already under obligation to perform, so as to give the latter the right to enforce such promise after performance, the authorities hold that if one enters into a contract of employment under an agreement that he shall be paid a certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified length of time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served during the stipulated time, on the ground that it was a promise of a mere gratuity. This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonus is made at the time the contract is entered into. If no time is fixed for the duration of the contract of employment, but the employee enters upon or continues in service under an offer of a bonus if he remains therein for a certain time, his service, in case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after that acceptance, the offer cannot be withdrawn, but can be enforced by the employee. Phil. National Construction Corp. v. NLRC (99) A bonus is a gift from the employer and the grant thereof is a management prerogative. Petitioner may not be compelled to award a bonus to private respondents whom it found guilty of serious misconduct. We held in Traders Royal Bank v. NLRC:
“A bonus is a gratuity or an act of liberality of the giver which the recipient has no right to demand as a matter of right. It is something given in addition to what is ordinarily received by or strictly due the recipient. The granting of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee’s basic salaries or wages.”

We further held in Metro Transit Organization, Inc. v. NLRC, that a bonus becomes a demandable or enforceable obligation only when it is made part of the wage or salary or compensation of the employee, thus:
“The general rule is that a bonus is a gratuity or an act of liberality which the recipient has no right to demand as a matter of right. A bonus, however, is a demandable or enforceable obligation when it is made part of the wage or salary or compensation of the employee. Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its payment. If it is additional compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or if a certain level of productivity is achieved, it cannot be considered part of the wage. Where it is not payable to all but only to some employees and only when their labor becomes more efficient or more productive, it is only an inducement for efficiency, a prize therefore not a part of the wage.”

The presumption is that it is not a demandable obligation from the employer and the latter may not be compelled to grant the same to undeserving employees. WHEN DEMANDABLE Luzon Stevedoring Corp. v. CIR (65) As a rule a bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. From the legal point of view, a bonus is not a demandable and enforceable obligation. It is so when it is made a part of the wage or salary or compensation. In such a case the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profits. If there be none, there would be no bonus.

UP LAW BAROPS 2007 ONE UP
58 of 132

Part II : Labor Standards Law Labor Standards
Liberation Steamship Co. Inc. v. CIR (68) While normally discretionary, the grant of a gratuity or bonus by reason of its long and regular concession may become regarded as part of regular compensation. (Phil. Education Co., Inc., vs. CIR). For this reason, where there is a resale of the vessels to another party during the pendency of the motion for reconsideration, the court may order the reopening of the case insofar as the demands for gratuity are concerned, in order to determine whether aforecited conditions operated in the instant case. Philippine Duplicators Inc. v. NLRC (95) Productivity bonuses are generally tied to the productivity or profit generation of the employer corporation. Productivity bonuses are not directly dependent on the extent an individual employee exerts himself. A productivity bonus is something extra for which no specific additional services are rendered by any particular employee and hence not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent or energy of an employee's endeavors. Commissioners are paid upon the specific results achieved by a salesman-employee. It is a percentage of the sales closed by a salesman and operates as an integral part of such salesman's basic pay. Manila Electric Co. v. Quisumbing (99) As a rule, a bonus is not a demandable and enforceable obligation; it may nevertheless be granted on equitable considerations as when the giving of such bonus has been the company's long and regular practice. To be considered a "regular practice," the giving of the bonus should have been done over a long period of time, and must be shown to have been consistent and deliberate. Thus we have ruled in National Sugar Refineries Corporation vs. NLRC:
The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment thereof.

government-owned and controlled corporations performing proprietary functions It shall cover all employees and workers including casual, regular, supervisory and managerial employees.

DEFINITION (4) Business Enterprise: industrial, agricultural, or agroindustrial establishments engaged in the production manufacturing, processing, repacking, or assembly of goods, including service-oriented enterprises, duly certified as such by appropriate government agencies. Labor-management Committee: a negotiating body in a business enterprise composed of the representatives of labor and management created to establish a productivity incentives program, and to settle disputes arising therefrom in accordance with Section 9 hereof. Productivity Incentives Program: a formal agreement established by the labor-management committee containing a process that will promote gainful employment, improve working conditions and result in increased productivity, including cost savings, whereby the employees are granted salary bonuses proportionate to increases in current productivity over the average for the preceding three (3) consecutive years. The agreement shall be ratified by at least a majority of the employees who have rendered at least six (6) months of continuous service. LABOR MANAGEMENT COMMITTEE (5) a. A business enterprise or its employees, through their authorized representatives, may initiate the formation of a labor-management committee that shall be composed of an equal number of representatives from the management and from the rank-and-file employees: Provided, That both management and labor shall have equal voting rights: Provided, further, That at the request of any party to the negotiation, the National Wages and Productivity Commission of the Department of Labor and Employment shall provide the necessary studies, technical information and assistance, and expert advice to enable the parties to conclude productivity agreements. b. In business enterprises with duly recognized or certified labor organizations, the representatives of labor shall be those designated by the collective bargaining agent(s) of the bargaining unit(s). c. In business enterprises without duly recognized or certified labor organizations, the representatives of labor shall be elected by at least a majority of all rank-and-file employees who have rendered at least six (6) months of continuous service. PRODUCTIVITY INCENTIVES PROGRAM (6) a. The productivity incentives program shall contain provisions for the manner of sharing and the factors in determining productivity bonuses: Provided, That the productivity bonuses granted to labor under this program shall not be less than half of the

17.15 PRODUCTIVITY 1990 (RA 6971)

INCENTIVES

ACT

OF

POLICY (2)  To encourage higher levels of productivity, maintain industrial peace and harmony and promote the principle of shared responsibility in the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of business enterprises to reasonable returns of investments and to expansion and growth, and accordingly to provide corresponding incentives to both labor and capital for undertaking voluntary programs to ensure greater sharing by the workers in the fruits of their labor COVERAGE (3)  Applies to all business enterprises with or without existing and duly recognized or certified labor organizations, including

UP LAW BAROPS 2007 ONE UP
59 of 132

Part II : Labor Standards Law Labor Standards
percentage increase in the productivity of the business enterprise. b. Productivity agreements reached by the parties as provided in this Act supplement existing collective bargaining agreements. c. If, during the existence of the productivity incentives program or agreement, the employees will join or form a union, such program or agreement may, in addition to the terms and conditions agreed upon by labor and management, be integrated in the collective bargaining agreement that may be entered into between them. BENEFITS AND TAX INCENTIVES (7) a. Subject to the provisions of Section 6 hereof, a business enterprise which adopts a productivity incentives program, duly and mutually agreed upon by the parties to the labor-management committee, shall be granted a special deduction from gross income equivalent to 50% of the total productivity bonuses given to employees under the program over and above the total allowable ordinary and necessary business deductions for said bonuses under the National Internal Revenue Code, as amended. b. Grants for manpower training and special duties given to rank-and-file employees pursuant to a program prepared by the labormanagement committee for the development of skills identified as necessary by the appropriate government agencies shall also entitle the business enterprise to a special deduction from gross income equivalent to 50% of the total grants over and above the allowable ordinary and necessary business deductions for said grants under the National Internal Revenue Code, as amended. c. Any strike or lockout arising from any violation of the productivity incentives program shall suspend the effectivity thereof pending settlement of such strike or lockout: Provided, That the business enterprise shall not be deemed to have forfeited any tax incentives accrued prior to the date of occurrence of such strike or lockout, and the workers shall not be required to reimburse the productivity bonuses already granted to them under the productivity incentives program. Likewise, bonuses which have already accrued before the strike or lockout shall be paid the workers within six (6) months from their accrual. d. Bonuses provided for under the productivity incentives program shall be given to the employees not later than every six (6) months from the start of such program over and above existing bonuses granted by the business enterprise and by law: Provided, That the said bonuses shall not be deemed as salary increases due the employees and workers. e. The special deductions from gross income provided for herein shall be allowed starting the next taxable year after the effectivity of this Act. NOTIFICATION (8) A business enterprise which adopts a productivity incentives program shall submit copies of the same to the National Wages and Productivity Commission and to the Bureau of Internal Revenue for their information and record. DISPUTES AND GRIEVANCES (9) Whenever disputes, grievances, or other matters arise from the interpretation or implementation of the productivity incentives program, the labor-management committee shall meet to resolve the dispute, and may seek assistance of the National Conciliation and Mediation Board of the Department of Labor and Employment for such purpose. Any dispute which remains unresolved within 20 days from the time of its submission to the labor-management committee shall be submitted for voluntary arbitration in line with the pertinent provisions of the Labor Code, as amended. The productivity incentives program shall include the name(s) of the voluntary arbitrator or panel of voluntary arbitrators previously chosen and agreed upon by the labor-management committee. NON-DIMUNITION OF BENEFITS (12) Nothing in this Act shall be construed to diminish or reduce any benefits and other privileges enjoyed by the workers under existing laws, decrees, executive orders, company policy or practice, or any agreement or contract between the employer and employees.

E. Wage Recovery, Liabilities, and Worker Preference 17.16 LIABILITY OF EMPLOYER AND OTHER PARTIES Employer, Independent Contractor Contractor and Labor-Only Contracting and Sub-

Art. 106. Contractor or sub-contractor Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or sub-contractor fails to pay wages of employees in accordance with this Code, the employer shall be JOINTLY AND SEVERALLY liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between laboronly contracting and job contracting as well as differentiations within these types of contracting, and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in

UP LAW BAROPS 2007 ONE UP
60 of 132

Part II : Labor Standards Law Labor Standards
the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner an extent as if the latter were directly employed by him. Art. 107 Indirect employer - The provisions of the immediately preceding article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project. Art. 108 Posting of bond - An employer or indirect employer may require the contractor or sub-contractor to furnish a bond equal to the cost of labor under contract, on condition that the bond will answer for the wages due the employees should the contractor/sub-contractor, as the case may be, fail to pay the same. Art. 109. Solidary liability – The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor/subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers. LIABILITIES Philippine Airlines v. NLRC (98) In legitimate job contracting, no employeremployee relation exists between the principal and the job contractor's employees. The principal is responsible to the job contractor's employees only for the proper payment of wages. But in labor-only contracting, an employer-employee relation is created by law between the principal and the laboronly contractor's employees, such that the former is responsible to such employees, as if he or she had directly employed them. Besides, the Court has already taken judicial notice of the general practice adopted in several government and private institutions of securing janitorial services on an independent contractor basis. Sentinel Security Agency, Inc. v. NLRC (98) Under these provisions, the indirect employer, who is the Client in the case at bar, is jointly and severally liable with the contractor for the workers' wages, in the same manner and extent that it is liable to its direct employees. This liability of the Client covers the payment of the service incentive leave pay of the complainants during the time they were posted at the Cebu branch of the Client. As service had been rendered, the liability accrued, even if the complainants were eventually transferred or reassigned. Lapanday Agricultural Development Corporation v. Court of Appeals (2000) Articles 106 and 107 of the Labor Code provides the rule governing the payment of wages of employees in the event that the contractor fails to pay such wages. It will be seen from the above provisions that the principal (petitioner) and the contractor (respondent) are jointly and severally liable to the employees for their wages. This Court held in Eagle Security, Inc. vs. NLRC and Spartan Security and Detective Agency, Inc. vs. NLRC that the joint and several liability of the contractor and the principal is mandated by the Labor Code to assure compliance with the provisions therein including the minimum wage. The contractor is made liable by virtue of his status as direct employer. The principal, on the other hand, is made the indirect employer of the contractor’s employees to secure payment of their wages should the contractor be unable to pay them. Even in the absence of an employer-employee relationship, the law itself establishes one between the principal and the employees of the agency for a limited purpose i.e. in order to ensure that the employees are paid the wages due them. In the above-mentioned cases, the solidary liability of the principal and contractor was held to apply to the aforementioned Wage Order Nos. 5 and 6. BASIS Lim v. NLRC (99) The scourge of exploitation of labor, as shown by numerous petitions before us, remains pervasive. It is imperative for all government agencies concerned to exert all-out efforts to prevent any further violation or circumvention of the provisions of the Labor Code through deceptive devices and malpractices. Unscrupulous employers could not be allowed to hide behind labor-only contracting in order to escape the just claims of their workers and other employees. 17.17 WORKER PREFERENCE - BANKRUPTCY Art. 110 Labor Code In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards their wages and other monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before the claims of the Government and other creditors may be paid. (As amended by R. A. 6715) Art. 1707, Civil Code The laborer's wages shall be a lien on the goods manufactured or the work done. Art. 2241, Civil Code With reference to specific movable property of the debtor, the following claims or liens shall be preferred: 6. Claims for laborers' wages, on the goods manufactured or the work done; Art. 2242, Civil Code With reference to specific immovable property and real rights of the debtor, the following claims, mortgages and liens shall be preferred, and shall constitute an encumbrance on the immovable or real right: 3. Claims of laborers, masons, mechanics and other workmen, as well as of architects,

UP LAW BAROPS 2007 ONE UP
61 of 132

Part II : Labor Standards Law Labor Standards
engineers and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works; Art. 2244, Civil Code With reference to other property, real and personal, of the debtor, the following claims or credits shall be preferred in the order named: 4. Compensation due the laborers or their dependents under laws providing for indemnity for damages in cases of labor accident, or illness resulting from the nature of the employment; (Pls. See complete texts of Arts. 2241, 2242, & 2244) CIVIL CODE – LABOR CODE Republic v. Peralta (87) We believe and so hold that Article 110 of the Labor Code did not sweep away the overriding preference accorded under the scheme of the Civil Code to tax claims of the government or any subdivision thereof which constitute a lien upon properties of the Insolvent. It is frequently said that taxes are the very lifeblood of government. The effective collection of taxes is a task of highest importance for the sovereign. It is critical indeed for its own survival. It follows that language of a much higher degree of specificity than that exhibited in Article 110 of the Labor Code is necessary to set aside the intent and purpose of the legislator that shines through the precisely crafted provisions of the Civil Code. It cannot be assumed simpliciter that the legislative authority, by using in Article 110 the words "first preference" and "any provision of law to the contrary notwithstanding" intended to disrupt the elaborate and symmetrical structure set up in the Civil Code. Neither can it be assumed casually that Article 110 intended to subsume the sovereign itself within the term "other creditors" in stating that "unpaid wages shall be paid in full before other creditors may establish any claim to a share in the assets of employer." Insistent considerations of public policy prevent us from giving to "other creditors" a linguistically unlimited scope that would embrace the universe of creditors save only unpaid employees. We, however, do not believe that Article 110 has had no impact at all upon the provisions of the Civil Code. Bearing in mind the overriding precedence given to taxes, duties and fees by the Civil Code and the fact that the Labor Code does not impress any lien on the property of an employer, the use of the phrase "first preference" in Article 110 indicates that what Article 110 intended to modify is the order of preference found in Article 2244, which order relates, as we have seen, to property of the Insolvent that is not burdened with the liens or encumbrances created or recognized by Articles 2241 and 2242. We have noted that Article 2244, number 2, establishes second priority for claims for wages for services rendered by employees or laborers of the Insolvent "for one year preceding the commencement of the proceedings in insolvency." Article 110 of the Labor Code establishes "first preference" for services rendered "during the period prior to the bankruptcy or liquidation," a period not limited to the year immediately prior to the bankruptcy or liquidation. Thus, very substantial effect may be given to the provisions of Article 110 without grievously distorting the framework established in the Civil Code by holding, as we so hold, that Article 110 of the Labor Code has modified Article 2244 of the Civil Code in two respects: (a) firstly, by removing the one year limitation found in Article 2244, number 2; and (b) secondly, by moving up claims for unpaid wages of laborers or workers of the Insolvent from second priority to first priority in the order of preference established by Article 2244. Phil. Export etc. v. Court of Appeals (95) A final observation On 21 March 1989, Article 110 of the Labor Code was amended by Republic Act No. 6715 so as to read:
"Article 110. Worker preference in case of bankruptcy -In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the Government and other creditors may be paid."

Since then, the Court has had a number of occasions to rule on the effects of the amendment. In Development Bank of the Philippines vs. National Labor Relations Commission, the Court has said:
"The amendment expands worker preference to cover not only unpaid wages but also other monetary claims to which even claims of the Government must be deemed subordinate. xxx "Notably, the terms 'declaration' of bankruptcy or 'judicial' liquidation have been eliminated. Does this mean then that liquidation proceedings have been done away with? "We opine in the negative, upon the following considerations: "1. Because of its impact on the entire system of credit, Article 110 of the Labor Code cannot be viewed in isolation but must be read in relation to the Civil Code scheme on classification and preference of credits. "2. In the same way that the Civil Code provisions on classification of credits and the Insolvency Law have been brought into harmony, so also must the kindred provisions of the Labor Law be made to harmonize with those laws. "3. In the event of insolvency, a principal objective should be to effect an equitable distribution of the insolvent's property among his creditors. To accomplish this there must first be some proceeding where notice to all of the insolvent's creditors may be given and where the claims of preferred creditors may be bindingly adjudicated (De Barretto vs. Villanueva). "4. A distinction should be made between a preference of credit and a lien. A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to

UP LAW BAROPS 2007 ONE UP
62 of 132

Part II : Labor Standards Law Labor Standards
a first preference in the discharge of the funds of the judgment debtor. "6. Even if Article 110 and its Implementing Rule, as amended, should be interpreted to mean 'absolute preference,' the same should be given only prospective effect in line with the cardinal rule that laws shall have no retroactive effect, unless the contrary is provided (Article 4, Civil Code). Thereby, any infringement on the constitutional guarantee on non-impairment of the obligation of contracts (Section 10, Article III, 1987 Constitution) is also avoided. In point of fact, DBP's mortgage credit antedated by several years the amendatory law, RA No. 6715. To give Article 110 retroactive effect would be to wipe out the mortgage in DBP's favor and expose it to a risk which it sought to protect itself against by requiring a collateral in the form of real property. "In fine, the right to preference given to workers under Article 110 of the Labor Code cannot exist in any effective way prior to the time of its presentation in distribution proceedings. It will find application when, in proceedings such as insolvency such unpaid wages shall be paid in full before the claims of the Government and other creditors' may be paid. But, for an orderly settlement of a debtor's assets, all creditors must be convened, their claims ascertained and inventoried, and thereafter the preferences determined in the course of judicial proceedings which have for their object the subjection of the property of the debtor to the payment of his debts or other lawful obligations. Thereby, an orderly determination of preference of creditors' claims is assured (Philippine Savings Bank vs. Lantin); the adjudication made will be binding on all parties-in-interest, since those proceedings are proceedings in rem; and the legal scheme of classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code is preserved in harmony."

Article 217 of the Labor Code should be construed not in isolation but in harmony with PD 902-A, according to the basic rule in statutory construction that implied repeals are not favored. Indeed, it is axiomatic that each and every statute must be construed in a way that would avoid conflict with existing laws. True, the NLRC has the power to hear and decide labor disputes, but such authority is deemed suspended when PD 902-A is put into effect by the Securities and Exchange Commission. The preferential right of workers and employees under Article 110 of the Labor code may be invoked only upon the institution of insolvency or judicial liquidation proceeding. Indeed, it is well-settled that "a declaration of bankruptcy or a judicial liquidation must be present before preferences over various money claims may be enforced." But debtors resort to preference of credit — giving preferred creditors the rights to have their claims paid ahead of those of other claimants — only when their assets are insufficient to pay their debts fully. The purpose of rehabilitation proceedings is precisely to enable the company to gain a new lease on life and thereby allow creditors to be paid their claims from its earnings. In insolvency proceedings, on the other hand, the company stops operating, and the claims of creditors are satisfied from the assets of the insolvent corporation. The present case involves the rehabilitation, not the liquidation, of petitionercorporation. Hence, the preference of credit granted to workers or employees under Article 110 of the Labor Code is not applicable. 17.18 WAGE RECOVERY AND ATTORNEY’S FEES Art. 128. Visitorial and enforcement powers Art. 129. Recovery of wages, simple money claims and other benefits – In connection with Art. 217. Jurisdiction of Labor Arbiters and the Commission Art. 111. Attorney's fees a. In cases of unlawful withholding of wages, the culpable party may be assessed attorney's fees equivalent to 10 % of the amount of wages recovered. b. It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of the wages, attorney’s fees, which exceed 10% of the amount of wages recovered.

RECEIVERSHIP Rubberworld (Phils.), Inc. v. NLRC (99) The law is clear: upon the creation of a management committee or the appointment of a rehabilitation receiver, all claims for actions "shall be suspended accordingly." No exception in favor of labor claims is mentioned in the law. Since the law makes no distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos distinguere debemos. Allowing labor cases to proceed clearly defeats the purpose of the automatic stays and severally encumbers the management committee's and resources. The said committee would need to defend against these suits, to the detriment of its primary and urgent duty to work towards rehabilitating the corporation and making it viable again. The rule otherwise would open the floodgates to other similarly situated claimants and forestall if not defeat the rescue efforts. Besides, even if the NLRC awards the claims of private respondents, as it did, its ruling could not be enforced as long as the petitioner is under the management committee. Chua v. National Labor Relations In Commission, we ruled that labor claims cannot proceed independently of a bankruptcy liquidation proceeding, since these claims "would spawn needless controversy, delays, and confusion." With more reason, allowing labor claims to continue in spite of a SEC suspension order in a rehabilitation case would merely lead to such results.

SECTION 18 MINIMUM WAGES
18.01 WAGES AND THE CONSTITUTION Art XIII Sec 3, 1987 Constitution The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,

UP LAW BAROPS 2007 ONE UP
63 of 132

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

18.02 AGENCIES MACHINERY

FOR

WAGE

FIXING

NATIONAL WAGES AND PRODUCTIVITY COMMISSION Created thru Art. 120  attached to the DOLE for policy and program coordination. Powers and Functions of the Commission (Art. 121) a. To act as the national consultative and advisory body to the President of the Philippines and Congress on matters relating to wages, incomes and productivity;

The Executive Director of the Commission Secretariat shall also be a member of the Commission. The Commission shall be assisted by a Secretariat composed of 1. Executive Director(as head) same rank/salary/benefits as a Dept Asst. Secretary 2. Deputy Directors, appointed by the Pres. upon recom. of the SOLE - same rank, salary, benefits and other emoluments as that of a Bureau Director. Prohibition against Injunction (Art. 126) No preliminary or permanent injunction or temporary restraining order may be issued by any COURT, TRIBUNAL OR OTHER ENTITY against any proceedings before the Commission or the Regional Boards.

UP LAW BAROPS 2007 ONE UP
64 of 132

Part II : Labor Standards Law Labor Standards
REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY BOARD Created thru Art. 122  referred to as Regional Boards in all regions, including autonomous regions as may be established by law. » The Commission shall determine offices/headquarters of the respective Regional Boards. under Article 122 (b) of the Labor Code, such orders are subject to the guidelines prescribed by the NWPC. One of these guidelines is the "Rules on Minimum Wage Fixing," which was issued on June 4, 1990. Rule IV, Section 2 thereof, allows the RTWPB to issue wage orders exempting enterprises from the coverage of the prescribed minimum wages. However, the NWPC has the power not only to prescribe guidelines to govern wage orders, but also to issue exemptions therefrom, as the said rule provides that "[w]henever a wage order provides for exemption, applications thereto shall be filed with the appropriate Board which shall process the same, subject to guidelines issued by the Commission." In short, the NWPC lays down the guidelines which the RTWPB implements. 18.03 AREA MINIMUM WAGES AND CRITERIA STANDARDS/CRITERIA FOR MINIMUM WAGE FIXING (ART. 124):  The regional minimum wage to be established by the Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum standards of living necessary for the health, efficiency and general well-being of the employees within the framework of the national economic and social development program.  Factors in determining regional minimum wages: a. The demand for living wages; b. Wage adjustment vis-a-vis the consumer price index; c. The cost of living and changes or increases therein; d. The needs of workers and their families; e. The need to induce industries to invest in the countryside; f. Improvements in standards of living; g. The prevailing wage levels; h. Fair return of the capital invested and capacity to pay of employers; i. Effects in employment generation and family income; and j. The equitable distribution of income and wealth along the imperatives of economic and social development.  The wages prescribed in accordance with the provisions of this Title shall be the standard prevailing minimum wages in every region. These wages shall include wages varying with industries, provinces or localities if in the judgment of the Regional Board conditions make such local differentiation proper and necessary to effectuate the purpose of this Title.  Any person, company, corporation , partnership or any other entity engaged in business shall file and register annually with the appropriate Regional Board, Commission and the National Statistics Office an itemized listing of their labor component specifying the names of their workers and employees below the managerial level, including learners, apprentices and disabled/handicapped workers who were hired under the terms prescribed in the employment contracts, and their corresponding salaries and wages.  WAGE DISTORTION

Powers and Functions in their respective territorial jurisdiction (Art. 122) a. To develop plans, programs and projects relative to wages, incomes and productivity improvement for their respective regions;  to be implemented thru the respective regional offices of the DOLE within their territorial jurisdiction  Regional Boards shall have technical supervision over the regional office of the DOLE with respect to the implementation of said plans, programs and projects. b. To determine and fix minimum wage rates applicable in their respective regions, provinces or industries therein and to issue the corresponding wage orders, subject to guidelines issued by the Commission; c. To undertake studies, researches, and surveys necessary for the attainment of their functions, objectives and programs and to collect and compile data on wages, incomes, productivity and other related information and periodically disseminate the same; d. To coordinate with the other Regional Boards as may be necessary to attain the policy and intention of this Code; e. To receive, process and act on applications for exemption from prescribed wage rates as may be provided by law or any Wage Order; and f. To exercise such other powers and functions as may be necessary to carry out their mandate under this Code. Composition of each Regional Board : Regional Director of DOLE as chairman Regional Directors of NEDA & DTI as vicechairman  2 members each from workers and employers sectors who shall be appointed by the President upon recommendation of the SOLE to be made on the basis of the list of nominees submitted by the workers and employers sectors, respectively, and who shall serve for a term of 5 years. Each Regional Board to be headed by its chairman shall be assisted by a Secretariat. (As amended by RA 6727) FUNCTIONS Nasipit Lumber Co. v. NLRC(98) The Labor Code, as amended by RA 6727 grants the NWPC, not the RTWPB, the power to "prescribe the rules and guidelines" for the determination of minimum wage and productivity measures. While the RTWPB has the power to issue wage orders  

UP LAW BAROPS 2007 ONE UP
65 of 132

Part II : Labor Standards Law Labor Standards
» Where the application of any prescribed wage increase by virtue of a law or wage order issued by any regional board results in distortions of wage structure within an establishment, the employer and the union shall negotiate to correct the distortions. Any dispute arising from wage distortions shall be resolved through the grievance procedure under their collective bargaining agreement and, if it remains unresolved, through voluntary arbitration. ▪ Unless otherwise agreed by the parties in writing, such dispute shall be decided by the voluntary arbitrator or panel of voluntary arbitrators within 10 calendar days from the time said dispute was referred to voluntary arbitration. In cases where there are no collective bargaining agreements or recognized labor unions, the employers and workers shall endeavor to correct such distortions. ▪ Any dispute arising therefrom shall be 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.   Any such wage order shall take effect after 15 days from its complete publication in at least 1 newspaper of general circulation in the region. In the performance of its wage-determination functions, the Regional Board shall conduct public hearings/consultations, giving notices to employees’ & employers' groups, provincial, city and municipal officials and other interested parties. Any party aggrieved by the Wage Order issued by the Regional Board may appeal to the Commission within 10 days from the publication of such order. It shall be mandatory for the Commission to decide such appeal within 60 days from the filing thereof. The filing of appeal does not stay the order unless the person appealing shall file with the Commission, an undertaking with a surety or sureties for the payment to the employees affected by the order of the corresponding increase, in the event such order is affirmed. (As amended by RA 6727)

»

»

»

»

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.

UP LAW BAROPS 2007 ONE UP
66 of 132

Part II : Labor Standards Law Labor Standards
MINIMUM WAGE FIXING Agencies: 1. NWPC a. Prescribe rules, guidelines for the determination of appropriate minimum wage and what factors should be considered b. Review Regular wage levels set by RTWPB if they are in accordance to prescribed guidelines c. REMEMBER, NWPC does not set the minimum wage. 2. RTWPB a. Determine and fix the minimum wage rates applicable to the region, provinces, industries b. Issue the corresponding wage order subject to guidelines issued by the NWPC NOTES:  Composition TRIPARTITE: employee and government  Functions are delineated Procedure: RTWPB  When conditions warrant, investigate and study pertinent facts, based criteria (Art. 124)  Conduct public hearings/consultations, notice to employer and employees groups, provinces, city, municipal officials and other interested parties  Decide to ISSUE or NOT TO ISSUE a wage order  If it decides to ISSUE a wage order, the wage order takes effect after 15 days from complete publication in at least 1 newspaper of general circulation in the region  Appeal wage order to NWPC within 10 calendar days; mandatory for the NWPC to decide within 60 calendar days from filing  Filing of an appeal DOES NOT STAY order unless appellant filed an undertaking with surety, sureties, guarantees payment of employees if the wage order is affirmed METHODS OF FIXING Employers Confederation of the Philippines v. NWPC (91) It is the Court's thinking, reached after the Court's own study of the Act, that the Act is meant to rationalize wages, that is, by having permanent boards to decide wages rather than leaving wage determination to Congress year after year and law after law. The Court is not of course saying that the Act is an effort of Congress to pass the buck, or worse, to abdicate its duty, but simply, to leave the question of wages to the expertise of experts. VALIDITY Cagayan Sugar Milling Co. v. Secretary of Labor (98) There was no ambiguity in the provision of Wage Order RO2-02 as it provided in clear and Employer, categorical terms for an increase in statutory minimum wage of workers in the region. Hence, the subsequent passage of RO2-02-A providing instead for an across the board increase in wages did not clarify the earlier Order but amended the same. In truth, it changed the essence of the original Order. In passing RO2-02-A without going through the process of public consultation and hearings, the Regional Board deprived petitioner and other employers of due process as they were not given the opportunity to ventilate their positions regarding the proposed wage increase. In wage-fixing, factors such as fair return of capital invested, the need to induce industries to invest in the countryside and the capacity of employers to pay are, among others, taken into consideration. Hence, our legislators provide for the creation of Regional Tripartite Boards composed of representatives from the government, the workers and the employers to determine the appropriate wage rates per region to ensure that all sides are heard. For the same reason, Article 123 of the Labor Code also provides that in the performance of their wage-determining functions, the Regional Board shall conduct public hearings and consultations, giving notices to interested parties. Moreover, it mandates that the Wage Order shall take effect only after publication in a newspaper of general circulation in the region. It is a fundamental rule, borne out of a sense of fairness, that the public is first notified of a law or wage order-before it can be held liable for violation thereof. In the case at bar, it is indisputable that there was no public consultation or hearing conducted prior to the passage of RO2-02-A. Neither was it published in a newspaper of general circulation as attested in the February 3, 1995 minutes of the meeting of the Regional Wage Board that the non-publication was by consensus of all the board members. Hence, RO2-02-A must be struck down for violation of Article 123 of the Labor Code. PIECE WORKER Pulp and Paper, Inc. v. NLRC (97) In the absence of wage rates based on time and motion studies determined by the labor secretary or submitted by the employer to the labor secretary for his approval, wage rates of piece-rate workers must be based on the applicable daily minimum wage determined by the Regional Tripartite Wages and Productivity Commission. To ensure the payment of fair and reasonable wage rates, Article 101 of the Labor Code provides that “ the Secretary of Labor shall regulate the payment of wages by results, including pakyao, piecework, and other noontime work.” The same statutory provision also states that the wage rates should be based, preferably, on time and motion studies, or those arrived at in consultation with representatives of workers' and employers' organizations. In the absence of such prescribed wage rates for piece-rate workers, the ordinary minimum wage rates prescribed by Regional Tripartite Wages and Productivity Board should apply. Lambo v. NLRC (99) There is no dispute that petitioners were employees of private respondents although they were paid not on the case of time spent on the job but according to the quantity and the quality of work produced by them. There are two

UP LAW BAROPS 2007 ONE UP
67 of 132

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

UP LAW BAROPS 2007 ONE UP
68 of 132

Part II : Labor Standards Law Labor Standards
relevant or legitimate basis. This classification is reflected in a differing wage rate for each of the existing classes of employees" Wage distortion involves four elements: 1. An existing hierarchy of positions with corresponding salary rates 2. A significant change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a higher one 3. The elimination of the distinction between the two levels 4. The existence of the distortion in the same region of the country Contrary to petitioner's postulation, a disparity in wages between employees holding similar positions but in different regions does not constitute wage distortion as contemplated by law. As previously enunciated, it is the hierarchy of positions and the disparity of their corresponding wages and other emoluments that are sought to be preserved by the concept of wage distortion. Put differently, a wage distortion arises when a wage order engenders wage parity between employees in different rungs of the organizational ladder of the same establishment. It bears emphasis that wage distortion involves a parity in the salary rates of different pay classes which, as a result, eliminates the distinction between the different ranks in the same region. 18.05 EFFECT OF BENEFITS Art. 100 Prohibition against elimination or diminution of benefits Nothing in this Book shall be construed to eliminate or in any way diminish supplements or other employee benefits being enjoyed at the time of the promulgation of this Code. Davao Fruits Corporation v. Associated Labor Unions (93) A company practice favorable to the employees had indeed been established and the payments made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Section 10 of the Rules and Regulations Implementing P.D. No. 851, and Article 100 of the Labor Code of the Philippines, which prohibit the diminution or elimination by the employer of the employees' existing benefits (Tiangco v. Leogardo, Jr. ). Prubankers Assn. v. Prudential Bank and Co. (99) Petitioner also insists that the Bank has adopted a uniform wage policy, which has attained the status of an established management practice; thus, it is estopped from implementing a wage order for a specific region only. We are not persuaded. Said nationwide uniform wage policy of the Bank had been adopted prior to the enactment of RA 6727. After the passage of said law, the Bank was mandated to regionalize its wage structure. Although the Bank implemented Wage Order Nos. NCR-01 and NCR-02 nationwide instead of regionally even after the effectivity of RA 6727, the Bank at the time was still uncertain about how to follow the new law. In any event, that single instance cannot be constitutive of "management practice."

SECTION 19 - WOMEN WORKERS
19.01 WOMEN AND THE CONSTITUTION Art II Sec 14, 1987 Constitution The State recognizes the role of women in nationbuilding, and shall ensure the fundamental equality before the law of women and men.

WOMEN WORKERS Philippine Telegraph and Telephone Co. v. NLRC (97) The Constitution, cognizant of the disparity in rights between men and women in almost all phases of social and political life, provides a gamut of protective provisions. To cite a few of the primordial ones, Section 14, Article II on the Declaration of Principles and State Policies, expressly recognizes the role of women in nation-building and commands the State to ensure, at all times, the fundamental equality before the law of women and men. Corollary thereto, Section 3 of Article XIII (the progenitor whereof dates back to both the 1935 and 1973 Constitution) pointedly requires the State to afford full protection to labor and to promote full employment and equality of employment opportunities for all, including an assurance of entitlement to tenurial security of all workers. Similarly, Section 14 of Article XIII mandates that the State shall protect working women through provisions for opportunities that would enable them to reach their full potential. 19.02 COVERAGE Book III, Rule XIII, Sec. 1, Omnibus Rules This Rule shall apply to all employers, whether operating for profit or not, including educational, religious and charitable institutions, EXCEPT:  Government  Government-owned or controlled corporations and  Employers of household helpers and persons in their personal service insofar as such workers are concerned. 18.03 PROHIBITED ACTS NIGHT WORK AND EXCEPTION Art. 130. Night work prohibition. - No woman, regardless of age, shall be employed or permitted or suffered to work, with or without compensation: a. In any industrial undertaking or branch thereof between 10pm & 6am of the following day b. In any commercial or non-industrial undertaking or branch thereof, other than agricultural, between 12mn & 6am of the following day. c. In any agricultural undertaking at night time unless she is given a period of rest of not less than 9 consecutive hours.

UP LAW BAROPS 2007 ONE UP
69 of 132

Part II : Labor Standards Law Labor Standards
Art. 131. Exceptions a. In cases of actual or impending emergencies caused by serious accident, fire, flood, typhoon, earthquake, epidemic or other disasters or calamity, to prevent loss of life or property or in cases of force majeure or imminent danger to public safety; b. In case of urgent work to be performed on machineries, equipment or installation, to avoid serious loss which the employer would otherwise suffer; c. Where the work is necessary to prevent serious loss of perishable goods; d. Where the woman employee holds a responsible position of managerial or technical nature, or where the woman employee has been engaged to provide health and welfare services; e. Where the nature of the work requires the manual skill and dexterity of woman worker and the same cannot be performed with equal efficiency by male worker; f. Where the women employees are immediate members of the family operating the establishment or undertaking; and g. Under other analogous cases exempted by the Secretary of Labor and Employment in appropriate regulations. DISCRIMINATION Art. 135. Discrimination prohibited – It shall be unlawful for any employer to discriminate against any woman employee with respect to terms and conditions of employment solely on account of her sex. The following are acts of discrimination: 1. Payment of a lesser compensation, including wage, salary or other form of remuneration and fringe benefits, to a female employee as against a male employee, for work of equal value; and 2. Favoring a male employee over a female employee with respect to promotion, training opportunities, study and scholarship grant solely on account of their sexes. Criminal liability for the willful commission of any unlawful acts as provided in this article or any violation of the rules and regulations issued pursuant to Sec. 2 hereof shall be penalized as provided in Articles 288 and 289 of this Code: Provided, That the institution of any criminal action under this provision shall not bar the aggrieved employee from filing an entirely separate and distinct action for money claims, which may include claims for damages and other affirmative reliefs. The action hereby authorized shall proceed independently of each other. MARRIAGE Art. 136. Stipulation against marriage- It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman employee shall not get married, or to stipulate expressly or tacitly that upon getting married a woman employee shall be deemed resigned or separated or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of her marriage. GENERAL Art. 137. Prohibited acts. - (a) It shall be unlawful for any employer: 1. To deny any woman employee the benefits provided for in this Chapter or to discharge any woman employed by him for the purpose of preventing her from enjoying any of the benefits provided under this Code; 2. To discharge such woman on account of her pregnancy, while on leave or in confinement due to her pregnancy; or 3. To discharge or refuse the admission of such woman upon returning to her work for fear that she may again be pregnant. 19.04 FACILITIES

Art. 132. Facilities for women. - The Secretary of Labor and Employment shall establish standards that will ensure the safety and health of women employees. In appropriate cases, he shall by regulations require any employer to: 1. Provide seats proper for women and permit them to use such seats when they are free from work and during working hours, provided they can perform their duties in this position without detriment to efficiency; 2. Establish separate toilet rooms and lavatories for men and women and provide at least a dressing room for women; 3. Establish a nursery in a workplace for the benefit of the woman employees therein; and 4. Determine appropriate minimum age and other standards for retirement or termination in special occupations such as those of flight attendants and the like. Art. 134. Family planning services; incentives for family planning. – a. Establishments which are required by law to maintain a clinic or infirmary shall provide free family planning services to their employees which shall include, but not limited to, the application or use of contraceptive pills and intra-uterine devices. b. In coordination with other agencies of the government engaged in the promotion of family planning, the Department of Labor and Employment shall develop and prescribe incentive bonus schemes to encourage family planning among female workers in any establishment or enterprise. 19.05 SPECIAL CLASSIFICATION, WOMEN WORKERS SPECIAL

Art. 138. Classification of certain women workers. - Any woman who is permitted or suffered to work with or without compensation in any night club, cocktail lounge, massage clinic, bar or similar establishment, under the effective control or supervision of the employer for a substantial

UP LAW BAROPS 2007 ONE UP
70 of 132

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

UP LAW BAROPS 2007 ONE UP
71 of 132

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

LIABILITY OF THE EMPLOYER, HEAD OF OFFICE, EDUCATIONAL OR TRAINING INSTITUTION The employer or head of office, educational or training institution shall be SOLIDARILY LIABLE for damages arising from the acts of sexual harassment committed in the employment, education or training environment if the employer or head of office, educational or training institution is informed of such acts by the offended party and no immediate action is taken thereon. INDEPENDENT ACTION FOR DAMAGES Nothing in this Act shall preclude the victim of work, education or training-related sexual harassment from instituting a separate and

SECTION 20 - MINORS
20.01 MINORS AND THE CONSTITUTION Art II Sec 13, 1987 Constitution The State recognizes the vital role of the youth in nation-building and shall promote and protect their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate in the youth patriotism and nationalism, and encourage their involvement in public and civic affairs. 20.02 LAW

UP LAW BAROPS 2007 ONE UP
72 of 132

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

UP LAW BAROPS 2007 ONE UP
73 of 132

Part II : Labor Standards Law Labor Standards
permit from the Department of Labor and Employment which shall ensure observance of the above requirements. NON-FORMAL EDUCATION FOR WORKING CHILDREN (SEC. 13) The Department of Education, Culture and Sports shall promulgate a course design under its non-formal education program aimed at promoting the intellectual, moral and vocational efficiency of working children who have not undergone or finished elementary or secondary education. Such course design shall integrate the learning process deemed most effective under given circumstances. PROHIBITION ON THE EMPLOYMENT OF CHILDREN IN CERTAIN ADVERTISEMENTS (SEC. 14) No person shall employ child models in all commercial advertisements promoting alcoholic beverages, intoxicating drinks, tobacco and its byproducts, and violence. DUTY OF EMPLOYER (SEC. 15) Every employer shall comply with the duties provided for in Articles 108 and 109 of PD 603. Article 108, PD 603 Duty of Employer to Submit Report Article 109, PD 603 Register of Children PENALTIES (SEC. 16) Any person who shall violate any provision of this Article shall suffer the penalty of a fine of not less than P1,000.00 but not more than P10,000.00 or imprisonment of not less than 3 months but not more than 3 years, or both at the discretion of the court, Provided, that in case of repeated violations of the provisions of this Article, the offender’s license to operate shall be revoked. 20.03 DISCRIMINATION Art. 140 Prohibition against child discrimination. - No employer shall discriminate against any person in respect to terms and conditions of employment on account of his age. 21.02 HOUSEHELPERS Art. 141  all persons rendering services in households for compensation. "Domestic or household services" shall mean service in the employer's home, which is usually necessary or desirable for the maintenance and enjoyment thereof and includes ministering to the personal comfort and convenience of the members of the employer's household, including services of family drivers. 21.03 NON-HOUSEHOLD WORK ASSIGNMENT Art. 145. No househelper shall be assigned to work in a commercial, industrial or agricultural enterprise at a wage or salary rate lower than that provided for agricultural or non-agricultural worker as prescribed herein Barcenas v. NLRC(90) Moreover, the work that petitioner performed in the temple could not be categorized as mere domestic work. Thus, We find that petitioner, being proficient in the Chinese language, attended to the visitors, mostly Chinese, who came to pray or seek advice before Buddha for personal or business problems; arranged meetings between these visitors and Su and supervised the preparation of the food for the temple visitors; acted as tourist guide of foreign visitors; acted as liaison with some government offices; and made the payment for the temple's Meralco, MWSS and PLDT bills. Indeed, these tasks may not be deemed activities of a household helper. They were essential and important to the operation and religious functions of the temple. Apex Mining Co. v. NLRC The term `househelper' as used herein is synonymous to the term `domestic servant' and shall refer to any person, whether male or female, who renders services in and about the employer's home and which services are usually necessary or desirable for the maintenance and enjoyment thereof, and ministers exclusively to the personal comfort and enjoyment of the employer's family. 21.04 CONDITIONS OF EMPLOYMENT Art. 142. Contract of domestic service. - original contract shall not last for more than two years but it may be renewed for such periods as may be agreed upon by the parties. Art. 143 Minimum Wage Art. 144 Minimum Cash Wage – The minimum wage rates prescribed under this Chapter shall be the basic cash wages which shall be paid to the househelpers in addition to lodging, food and medical attendance. Art. 145. Assignment to non-household work. - No househelper shall be assigned to work in a commercial, industrial or agricultural enterprise

SECTION 21 – HOUSEHELPERS
21.01 COVERAGE Art. 141  all persons rendering services in households for compensation. "Domestic or household services" shall mean service in the employer's home, which is usually necessary or desirable for the maintenance and enjoyment thereof and includes ministering to the personal comfort and convenience of the members of the employer's household, including services of family drivers.

UP LAW BAROPS 2007 ONE UP
74 of 132

Part II : Labor Standards Law Labor Standards
at a wage or salary rate lower than that provided for agricultural or non-agricultural worker as prescribed herein Art. 146. Opportunity for education. - If below 18 the employer shall give him or her an opportunity for at least elementary education. The cost of such education shall be part of the househelper's compensation, unless there is a stipulation to the contrary. Art. 147. Treatment of househelpers. - just and humane manner. In no case shall physical violence be used upon the househelper. Art. 148. Board, lodging and medical attendance. - ER furnish free of charge suitable and sanitary living quarters as well as adequate food and medical attendance. Art. 149. Indemnity for unjust termination of services. - If the period of household if period of service fixed = no termination by either party except for just unjust dismissal = compensation already earned plus that of 15 days by way of indemnity. leaves w/o justifiable reason = any unpaid salary due him or her not exceeding 15 days. Art. 150. Service of termination notice. - If the duration of household service is not determined either stipulation or by the nature of the service, employer or the househelper may give notice to an end to the relationship five days before intended termination of the service. the by the put the Chapter III, Title III, Book III, however, is silent on the grant of overtime pay, holiday pay, premium pay and service incentive leave to those engaged in the domestic or household service. Moreover, the specific provisions mandating these benefits are found in Book III, Title I of the Labor Code, and Article 82, which defines the scope of the application of these provisions, expressly excludes domestic helpers from its coverage:

SECTION 22 – HOMEWORKERS
22.01 COVERAGE AND REGULATION Art. 153. Regulations of industrial homework. - The employment of industrial homeworkers and field personnel shall be regulated by the Government through appropriate regulations issued by the Secretary of Labor and Employment to ensure the general welfare and protection of homeworkers and field personnel and the industries employing them. Art. 154. Regulations of Secretary of Labor and Employment. The regulations or orders to be issued pursuant to this Chapter shall be designed to assure the average employee of an undertaking the minimum terms and conditions of employment applicable to the industrial homeworkers or field personnel involved. Department Order No. 005 – 92 Coverage: This Rule shall apply to any person who performs industrial homework for an employer, contractor or sub-contractor. (1) Industrial Homework: A system of production under which work for an employer or contractor is carried out by a homework at his/her home. Materials may or may not be furnished by the employer or contractor. (2a)

Art. 151. Employment certification. - Upon the severance of the household service relation, the employer shall give the househelper a written statement of the nature and duration of the service and his or her efficiency and conduct as househelper. Art. 152. Employment records. - The employer may keep such records as he may deem necessary to reflect the actual terms and conditions of employment of his househelper which the latter shall authenticate by signature or thumbmark upon request of the employer. SEE ALSO ARTICLES 1689 – 1699 OF THE CIVIL CODE Ultra Villa Food Haus v. Geniston (99) Accordingly, the terms and conditions of private respondent's employment are governed by Chapter III, Title III, Book III of the Labor Code as well as by the pertinent provisions of the Civil Code. Thus, Article 141 of the Labor Code provides:
Art. 141. Coverage. — This Chapter shall apply to all persons rendering services in households for compensation. Domestic or household service" shall mean services in the employers home which is usually necessary or desirable for the maintenance and enjoyment thereof and includes ministering to the personal comfort and convenience of the members of the employers household, including services of family drivers.

22. 02 EMPLOYER Art. 155. Distribution of homework. - For purposes of this Chapter, the "employer" of homeworkers includes any person, natural or artificial, who for his account or benefit or on behalf of any person residing outside the country, directly or indirectly, or through any employee, agent, contractor, sub-contractor or any other person: 1. Delivers, or causes to be delivered, any goods, articles or materials to be processed or fabricated in or about a home and thereafter to be returned or to be disposed of or distributed in accordance with his directions; or 2. Sells any goods, articles or materials for the purpose of having the same processed or fabricated in or about a home and then rebuys them after such processing or fabrication, either himself or through some other person.

UP LAW BAROPS 2007 ONE UP
75 of 132

Part II : Labor Standards Law Labor Standards
Security of tenure is a right of paramount value. Precisely, it is given specific recognition and guarantee by the Constitution no less. The State shall afford protection to labor and "shall assure the rights of workers to .. security of tenure", so runs the Constitutional mandate. (Art. II, Sec. 9.) It 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. Manila Electric Co., v. NLRC (91) Such an offense is obviously of so serious a character as to merit the penalty of dismissal from employment. The Labor Code pronounces "fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative," or "serious misconduct" on the part of the employee to be lawful ground to terminate employment. And this Court has held that the "dismissal of a dishonest employee is as much in the interests of labor as it is of management. The labor force in any company is protected and the workers' security of tenure strengthened when pilferage of equipment, goods and products which endangers the viability of an employer and, therefore, the workers' continued employment is minimized or eliminated and consequently labor-management relations based on mutual trust and confidence are promoted." Alhambra Industries, Inc. v. NLRC (94) TODAY employment is no longer just an ordinary human activity. For most families the main source of their livelihood, employment has now leveled off with property rights which no one may be deprived of without due process of law. Termination of employment is not anymore a mere cessation or severance of contractual relationship but an economic phenomenon affecting members of the family. This explains why under the broad principles of social justice the dismissal of employees is adequately protected by the laws of the state. Quijano v. Mercury Drug Corp. (98) Well-entrenched is the rule that an illegally dismissed employee is entitled to reinstatement as a matter of right. Over the years, however, the case law developed that where reinstatement is not feasible, expedient or practical, as where reinstatement would only exacerbate the tension and strained relations between the parties, or where the relationship between the employer and employee has been unduly strained by reason of their irreconcilable differences, particularly where the illegally dismissed employee held a managerial or key position in the company, it would be more prudent to order payment of separation pay instead of reinstatement. Some unscrupulous employers, however, have taken advantage of the overgrowth of this doctrine of "strained relations" by using it as a cover to get rid of its employees and thus defeat their right to job security. To protect labor's security of tenure, we emphasize that the doctrine of "strained relations" should be strictly applied so as not to deprive an illegally dismissed employee of his right to reinstatement. Every labor dispute almost always results in "strained relations", and the phrase cannot be given an overarching interpretation, otherwise, an unjustly dismissed employee can never be reinstated.

SECTION 23 - TERMINATION OF EMPLOYMENT
A. General Concepts 23.01 SECURITY OF TENURE OR TENURIAL SECURITY Art. 279 Security of Tenure In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. Art. XIII, Sec. 3, 1987 Constitution The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace. POLICY STATEMENT City Trust Banking Corp. v. NLRC (96) Backwages are for earnings which a worker has lost due to his illegal dismissal. After she was reinstated, she was entitled to receive the differential between the salary of internal auditor and manager of the Auditing Department for the position was not a substantial equivalent to that of internal auditor. This petition is the fourth filed with this Court. It has no doubt, prolonged the granting of complete relief to private respondent. Litigation must come to an end. In labor cases, the cause of an illegally dismissed employee must always be a concern of everyone if we ae to give effect to the constitutional policy of protecting labor and the duty of this Court to see to it that justice is served not only fairly but also swiftly. NATURE OF SECURITY OF TENURE TERMINAL SECURITY RIGHT City Service Corp. Workers Union v. City Service Corp. (85)

UP LAW BAROPS 2007 ONE UP
76 of 132

Part II : Labor Standards Law Labor Standards
Condo Suite Club Travel, Inc. v. NLRC (2000) The fundamental guarantee of security of tenure dictates that no worker shall be dismissed except for just and authorized cause provided by law, and after de process. Lanzadares v. Amethyst Security (2003) Security of tenure, although provided in the Constitution does not give an employee an absolute vested right in a position as would deprive the company of its prerogative to change their assignment or transfer them where they will be most useful. When a transfer is not unreasonable, nor inconvenient, nor prejudicial to an employee; and it does not involve a demotion in rank or diminution of his pay, benefits, and other privileges, the employee may not complain that it amounts to constructive dismissal IMPORTANCE OF EMPLOYMENT EMPLOYMENT Gonzales v. NLRC (99) Employment is not merely a contractual relationship; it has assumed the nature of property right. It may spell the difference whether or not a family will have food on their table, roof over their heads and education for their children. It is for this reason that the State has taken up measures to protect employees from unjustified dismissals. It is also because of this that the right to security of tenure is not only a statutory right but, more so, a constitutional right. STATE REGULATION – RATIONALE Llosa-Tan v. Silahis International Hotel (90) It is well settled that dismissal based on loss of trust and confidence arising from alleged misconduct of employee, is not to be used as a shield to dismiss an employee arbitrarily (Callanta v. Carnation Philippines, Inc.). Although the power to dismiss is a normal prerogative of the employer, the same is not without limitations (Rance v. NLRC). The right of the employer must not be exercised arbitrarily and without just cause. Otherwise, the constitutional guarantee of security of tenure of the workers would be rendered nugatory. While dismissing or laying off of an employee is a management's prerogative, it must nevertheless be done without abuse of discretion (Atlas Consolidated Mining Corp. v. NLRC). Furthermore, the right of employer to freely select or discharge his employees is regulated by the State, because the preservation of the lives of the citizens is a basic duty of the State, more vital than the preservation of the corporate profit (Euro-Linea, Phils., Inc. v. NLRC). In addition, security of tenure is a right of paramount value guaranteed by the Constitution and should not be denied on mere speculation (Tolentino v. NLRC). Protection to labor and social justice provisions of the Constitution and the labor laws and rules and regulations are interpreted in favor of the exercise of labor rights (Euro-Linea, Phils., Inc. v. NLRC) COVERAGE Art. 278 Coverage The provisions of this Title shall apply to ALL establishments or undertakings, whether for profit or not. CONTRACT EMPLOYEE Labajo v. Alejandro (88) As probationary and contractual employees, private respondents enjoyed security of tenure, but only to a limited extent — i. e., they remained secure in their employment during the period of time their respective contracts of employment remained in effect. That temporary security of tenure, however, ended the moment their employment contracts expired on 31 March 1985 and petitioners declined to renew the same for the next succeeding school year. Consequently, as petitioners were not under obligation to renew those contracts of employment, the separation of private respondents in this case cannot be said to have been without justifiable cause, much less illegal. PROBATIONARY EMPLOYEE Skillworld Management and Marketing Corp. v. NLRC (90) While it may be true that Manuel was a probationary employee at the time of his dismissal he may not be dismissed without cause. This is settled in the cases of Manila Hotel Corporation v. NLRC and in the case of Alga Moher International Placement Services v. Hon. D. Atienza, where We held:
"There is no dispute that as a probationary employee, private respondent had but a limited tenure. Although on probationary basis, however, Cruz still enjoys the constitutional protection on security of tenure. During his tenure of employment therefore, or before his contract expires, respondent Cruz cannot be removed except for cause as provided for by law."

Lopez v. Javier (1996) While probationary employees do not enjoy permanent status, they are, nonetheless, accorded the constitutional protection of security of tenure. Article XIII, Section 3 of the Constitution which provides that the State “shall guarantee the rights of all workers to….security of tenure…” does not distinguish as to the kind of worker who is entitled to be protected in this right. Furthermore, in Manila Hotel Corp. v. NLRC, et. al. various limitations on the power of an employer to terminate a probationary employment contract were laid down, thus: First, it must be exercised in accordance with the specific requirements of the contract. If a particular time is prescribed, the termination must be done within such time. Should the contract require a written notice, then such form should be used. Secondly, the dissatisfaction of he employer must be real and in good faith, not feigned so as to circumvent the contract or the law; and thirdly, there must be no unlawful discrimination in the dismissal. MANAGERIAL EMPLOYEE Inter Orient Maritime Enterprises, Inc. v. NLRC (94) It is well settled in this jurisdiction that confidential and managerial employees cannot be arbitrarily dismissed at any time, and without

UP LAW BAROPS 2007 ONE UP
77 of 132

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

UP LAW BAROPS 2007 ONE UP
78 of 132

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

UP LAW BAROPS 2007 ONE UP
79 of 132

Part II : Labor Standards Law Labor Standards
show the employee concerned to be unfit to continue working for the employer. Now it must be noted that recent decisions of this Court has distinguished the treatment of managerial employees from that of rank-and-file personnel, insofar as the application of the doctrine of loss of trust and confidence is concerned. Thus, with respect to rank-and-file personnel, loss of trust and confidence as ground for valid dismissal requires proof of involvement in the alleged events in question, and that mere uncorroborated assertions and accusations by the employer will not be sufficient. But, as regards a managerial employee, mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal. Hence, in the case of managerial employees, proof beyond reasonable doubt is not required, it being sufficient that there is some basis for such loss of confidence, such as when the employer has reasonable ground to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust and confidence demanded by his position. B. Termination of Employment by Employee 23.02 CAUSES JUST CAUSES Art. 285. Termination by employee (b) An employee may an end to the relationship WITHOUT serving any notice on the employer for any of the following just causes: 1. Serious insult by the employer or his representative on the honor and person of the employee; 2. Inhuman and unbearable treatment accorded the employee by the employer or his representative 3. Commission of a crime or offense by the employer or his representative against the person of the employee or any of the immediate members of his family; and 4. Other causes analogous to any of the foregoing. WITHOUT JUST CAUSE REQUISITES Art. 285 (a) An employee may terminate without just cause the employee-employer relationship by serving a written notice n the employer at least one (1) month in advance. The employer upon whom no such notice was served may hold the employee liable for damages. RESIGNATION DEFINITION Habana v. NLRC (98) Voluntary resignation is defined as the voluntary act of an employee who "finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of

DISMISSAL AS PENALTY Golden Thread Knitting Industries, Inc. v. NLRC (99) Dismissal is the ultimate penalty that can be meted to an employee. It must therefore be based on a clear and not on an ambiguous or ambivalent ground. From our assessment of the records, we find that petitioners exercised their authority to dismiss without due regard to the pertinent exacting provisions of the Labor Code. The right to terminate should be utilized with extreme caution because its immediate effect is to put an end to an employee's present means of livelihood while its distant effect, upon a subsequent finding of illegal dismissal, is just as pernicious to the employer who will most likely be required to reinstate the subject employee and grant him full back wages and other benefits. RULES – MANAGERIAL AND RANK AND FILE EMPLOYEES Libres v. NLRC (99) The disparity in the periods of filing the complaints in the two cases did not in any way reduce this case into insignificance. On the contrary, it even invited the attention of the Court to focus on sexual harassment as a just and valid cause for termination. Whereas petitioner Libres was only meted a 30-day suspension by t he NLRC, Villarama in the other case was penalized with termination. As Mister Justice Puno elucidated, “As a managerial employee, petitioner is bound by more exacting work ethics. He failed to live up to his higher standard of responsibility when he succumbed to his moral perversity. And when such moral perversity is perpetuated against his subordinate, he provides a justifiable ground for his dismissal for lack of trust and confidence. It is the right, nay the duty of every employer to protect its employees from oversexed superiors.” Caoile v. NLRC (98) Law and jurisprudence have long recognized the right of employers to dismiss employees by reason of loss of trust and confidence. As provided for in the Labor Code, "Art. 282. An employer may terminate an employment for any of the following causes: . . . (c) Fraud or willful breach of the trust reposed in him by his employer or his duly authorized representative. . . ." In the case of supervisors or personnel occupying positions of responsibility, this Court has repeatedly held that loss of trust and confidence justifies termination. Obviously, as a just cause provided by law, this ground for terminating employment, springs from the voluntary or willful act of the employee, or "by reason of some blameworthy act or omission on the part of the employee". Loss of confidence as a just cause for termination of employment is premised from the fact that an employee concerned holds a position of trust and confidence. This situation holds where a person is entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employer's property. But, in order to constitute a just cause for dismissal, the act complained of must be "work-related" such as would

UP LAW BAROPS 2007 ONE UP
80 of 132

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

UP LAW BAROPS 2007 ONE UP
81 of 132

Part II : Labor Standards Law Labor Standards
labor courts when he was refused admission by his employer, negated any intention on his part to relinquish his job at AZCOR. Moreover, a closer look at the subject resignation letters readily reveals the following: (a) the resignation letter allegedly tendered by Capulso to Filipinas Paso was identically worded with that supposedly addressed by him to AZCOR; (b) both were pre-drafted with blank spaces filled up with the purported dates of effectivity of his resignation; and, (c) it was written in English, a language which Capulso was not conversant with considering his low level of education. No other plausible explanation can be drawn from these circumstances than that the subject letters of resignation were prepared by a person or persons other than Capulso. And the fact that he categorically disowned the signatures therein and denied having executed them clearly indicates that the resignation letters were drafted, without his consent and participation. Even assuming for the sake of argument that the signatures were, genuine, we still cannot give credence to those letters in the absence of any showing that Capulso was aware that what he was signing then were in fact resignation letters or that he fully understood the contents thereof. Having introduced those resignation letters in evidence, it was incumbent upon petitioners to prove clearly and convincingly their genuineness and due execution, especially considering the serious doubts an their authenticity. Petitioners miserably failed in this respect. Intertrod Maritime Inc. v. NLRC (91) Resignation is the voluntary act of an employee who "finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service, then he has no other choice but to disassociate himself from his employment." The employer has no control over resignations and so, the notification requirement was devised in order to ensure that no disruption of work would be involved by reason of the resignation. This practice has been recognized because "every business enterprise endeavors to increase its profits by adopting a device or means designed towards that goal." Resignations, once accepted and being the sole act of the employee, may not be withdrawn without the consent of the employer. Once an employee resigns and his resignation is accepted, he no longer has any right to the job. If the employee later changes his mind, he must ask for approval of the withdrawal of his resignation from his employer, as if he were re-applying for the job. It will then be up to the employer to determine whether or not his service would be continued. If the employer accepts said withdrawal, the employee retains his job. If the employer does not, as in this case, the employee cannot claim illegal dismissal for the employer has the right to determine who his employees will be. To say that an employee who has resigned is illegally dismissed, is to encroach upon the right of employers to hire persons who will be of service to them. VALIDITY OF POLICY Manila Broadcasting Co. v. NLRC (98) What is involved in this case is an unwritten company policy considering any employee who files a certificate of candidacy for any elective or local office as resigned from the company. Although §11 (b) of R.A. No. 6646 does not require mass media commentators and announcers such as private respondent to resign from their radio or TV stations but only to go on leave for the duration of the campaign period, we think that the company may nevertheless validly require them to resign as a matter of policy. In this case, the policy is justified on the following grounds:  Working for the government and the company at the same time is clearly disadvantageous and prejudicial to the rights and interest not only of the company but the public as well. In the event an employee wins in an election, he cannot fully serve, as he is expected to do, the interest of his employer. The employee has to serve two (2) employers, obviously detrimental to the interest of both the government and the private employer.  In the event the employee loses in the election, the impartiality and cold neutrality of an employee as broadcast personality is suspect, thus readily eroding and adversely affecting the confidence and trust of the listening public to employer's station. XXX As important a rule as one which considers an employee who runs for public office resigned must be written and published so as to lend certainty to its existence and definiteness to its scope. Otherwise, the impression may be fostered that the enforcement of the policy is discretionary on the part of the heads of the various offices and units of the company. Moreover, such an unwritten rule is susceptible of misinterpretation and is not likely to be taken seriously by those to whom it is addressed. CONSTRUCTIVE DISMISSAL Valdez v. NLRC (98) Under Article 286 of the Labor Code, the bona fide suspension of the operation of a business or undertaking for a period not exceeding six months shall not terminate employment. Consequently, when the bona fide suspension of the operation of a business or undertaking exceeds six months, then the employment of the employee shall be deemed terminated. By the same token and applying said rule by analogy, if the employee was forced to remain without work or assignment for a period exceeding six months, then he is in effect constructively dismissed. XXX It would have been illogical for herein petitioner to resign and then file a complaint for illegal dismissal. Resignation is inconsistent with the filing of the said complaint. Resignation is defined as the voluntary act of an employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service, and, that he has no other choice but to disassociate himself from his employment. Resignation is a formal pronouncement of relinquishment of an office. It must be made with the intention of relinquishing the office accompanied by an act of relinquishment. 23.03 NO TERMINATION – PERFORMANCE OF MILITARY OR CIVIC DUTY Art. 286 When Employment NOT Deemed Terminated

UP LAW BAROPS 2007 ONE UP
82 of 132

Part II : Labor Standards Law Labor Standards
a. The bona fide suspension of the operation of a business or undertaking for a period not exceeding six months, or b. The fulfillment by the employee of a military or civic duty shall not terminate employment. In all such cases, the employer shall reinstate the employee, to his former position without loss of seniority rights if he indicates his desire to resume his work not later than 1 month from the resumption of operations of his employer or from his relief from the military or civic duty.
class, is meet and proper. That in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of agreements and writings should be resolved in the former's favor, is not an unreasonable or unfair rule. But that disregard of the employer's own rights and interests can be justified by that concern and solicitude is unjust and unacceptable." (Stanford Microsystems, Inc. v. NLRC).

The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer. More importantly, while the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will automatically be decided in favor of labor. Finally, it has been established that the right to dismiss or otherwise impose disciplinary sanctions upon an employee for just and valid cause, pertains in the first place to the employer, as well as the authority to determine the existence of said cause in accordance with the norms of due process. Ocean East Agency Corp. v. NLRC (1998) Respondent’s defiance of a lawful order posed serious and considerable prejudice to the business of the employer. This Court finds that petitioner’s order was made within the sphere of its management prerogative. “The exercise of an employer to regulate all aspects of employment must be in keeping with good faith and not to be used as a pretext for defeating the rights of employees under the laws and applicable contracts.” A perusal of the records shows a clear, valid and legal cause for the termination of respondent’s employment. REQUIREMENTS Art. 282. Termination by employer. – An employer may terminate an employment for any of the following causes: a. Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; b. Gross and habitual neglect by the employee of his duties: c. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; d. Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorize representative; and e. Other causes analogous to the foregoing. ARTICLE 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the: a. Installation of labor saving devices, b. Redundancy, c. Retrenchment to prevent losses or d. Closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof.

C. Termination of Employment by Employer PRELIMINARY MATTERS 23.04 BASIS OF RIGHT AND REQUIREMENTS BASIS Manila Trading and Supply Co., Inc. v. Zulueta (40) The whole controversy is centered around the right of the Court of Industrial Relations to order the readmission of a laborer who, it is admitted, had been found derelict in the performance of his duties towards his employer. We concede that the right of an employer to freely select or discharge his employees, is subject to regulation by the State basically in the exercise of its paramount police power. (Commonwealth Acts Nos. 103 and 213.) But much as we should expand beyond economic orthodoxy, we hold that an employer cannot legally be compelled to continue with the employment of a person who admittedly was guilty of misfeasance or malfeasance towards his employer, and whose continuance in the service of the latter is patently inimical to his interests. The law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer. There may, of course, be cases where the suspension or dismissal of an employee is whimsical or unjustified or otherwise illegal in which case he will be protected. Each case will be scrutinized carefully and the proper authorities will go to the core of the controversy and not close their eyes to the real situation. This is not however the case here. Makati Haberdashery, Inc. v. NLRC (89) Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus, We have ruled that:
"No employer may rationally be expected to continue in employment a person whose lack of morals, respect and loyalty to his employer, regard for his employer's rules, and appreciation of the dignity and responsibility of his office, has so plainly and completely been bared. "That there should be concern, sympathy, and solicitude for the rights and welfare of the working

UP LAW BAROPS 2007 ONE UP
83 of 132

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

UP LAW BAROPS 2007 ONE UP
84 of 132

Part II : Labor Standards Law Labor Standards
FRAMEWORK ANALYSIS PROPER FORUM?  Labor Arbiter = 217 (a) (2)  Voluntary Arbitrator = 260 – 261  Regular Courts COMPLAINT ILLEGAL DISMISSAL PRESCRIPTION  Art. 1141, NCC = injury rights plaintiff – 4yrs from date of dismissal COMPLIANCE – SUBSTANTIVE DUE PROCESS  Just Cause = Art. 279  Just Causes = 282 » Serious misconduct, willful disobedience of lawful order » Gross and habitual neglect of duties » Fraud, willful breach of trust reposed by employer » Commission of creime, offense against person orf employer or immediate member of family or authorized representative » Other analogous cases  Authorized Causes = 279  Authorized Causes = 283 » Installation of labor saving device » Redundancy » Retrenchment to prevent losses » Closing, cessation of business, not purpose circumvention of law  Disease = 284 PROPER FORUM CAUSE OF ACTION NOT PRESCRIBED COMPLIANCE PROCEDURAL DUE PROCESS  Just causes » OLD RULE = on just cause and authorized cause ▪ Art. 277 (b) = notice and hearing and notice » NEW RULE = Serrano v. NLRC, GR No. 117040, May 4, 2000  Other Causes = 283 » Notice served Employee and DOLE Secretary  Disease = 284 » Nature of disease and treatment If termination is VALID = END OF CASE If Termination is INVALID Remedies/Sanctions:  279 = Reinstatement without loss of seniority rights and other privileges » 223 = ▪ Reinstatement immediately executory even pending appeal ▪ Employer option physical or payroll reinstatement ▪ Same terms and conditions of employment prior to dismissal ▪ Bond cannot stay execution order 279 = Full Backwages, inclusive of allowances, other benefits, or other monetary equivalent from date compensation was withheld up to actual reinstatement. APPEAL PROCEDURE SUPREME COURT  COURT OF APPEALS  NLRC  LABOR ARBITER / VOLUNTYARY ARBITRATOR GROUNDS FOR TERMINATION – SUBSTANTIVE DUE PROCESS 23.05 JUST CAUSES Article 282 of the Labor Code, as amended, the following are deemed just causes to terminate an employee: a. Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; b. Gross and habitual neglect by the employee of his duties: c. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; d. Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorize representative; and e. Other causes analogous to the foregoing. A. SERIOUS MISCONDUCT Definition and Acts Samson v. NLRC (2000) Misconduct is improper or wrong conduct. It is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. The misconduct to be serious must be of such grave and aggravated character and not merely trivial and unimportant. Such misconduct, however serious, must, nevertheless, be in connection with the employee’s work to constitute just cause for his separation. PNCC v. NLRC (99) In the case at bar, private respondents were caught in the act of accepting bribe in the form of cash and a dog from a motorist who was suspected of illegally transporting dogs. As tollway guards, private respondents had the duty to maintain peace and order at the North Luzon Expressway and to ensure that all tollway rules and regulations are followed. But private respondents did the contrary by yielding to bribery. They were the first to violate the rules they were tasked to enforce. Undoubtedly, private respondents’ act constituted serious misconduct which warranted their dismissal from the service. It is for this reason that we find private respondents undeserving of the

UP LAW BAROPS 2007 ONE UP
85 of 132

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

UP LAW BAROPS 2007 ONE UP
86 of 132

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

UP LAW BAROPS 2007 ONE UP
87 of 132

Part II : Labor Standards Law Labor Standards
Acesite Coproration v. NLRC (2005) Willful disobedience entails the concurrence of at least two (2) requisites: the employee’s assailed conduct has been willful or intentional, the willfulness being characterized by a “wrongful and perverse attitude;” and the order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he had been engaged to discharge. In Gonzales’ case, his assailed conduct has not been shown to have been characterized by a perverse attitude, hence, the first requisite is wanting. His receipt of the telegram disapproving his application for emergency leave starting April 30, 1998 has not been shown. And it cannot be said that he disobeyed the May 5, 1998 telegram since he received it only on May 7, 1998. On the contrary, that he immediately hired back to Manila upon receipt thereof negates a perverse attitude. As to Gonzales’ alleged concealment of his candidacy (for provincial board member) as a ground for Acesite’s loss of trust and confidence in him, the same is not impressed with merit. It should be noted that Acesite’s ground for terminating the services of Gonzales as stated in the Notice of Termination is his alleged acts of insubordination/disobedience. The concealment of candidacy angle harped upon by Acesite can only thus be considered as mere afterthought to further justify his illegal dismissal. With regards to Gonzales’ perceived feigning of illness, the same is purely speculatory. If there is anything that Gonzales can be faulted for, it is his being too presumptuous that his application for leave would be approved. B. GROSS AND HABITUAL NEGLECT OF DUTIES Requisites National Sugar refineries Corp. v. NLRC (98) Neglect of duty, to be a ground for dismissal, must be both gross and habitual.[4] In the instant case, Pabiona’s neglect of duty was gross. As her position related to money matters, she was expected and required to be extra vigilant in the performance of her job as it involved the financial interest of the company. She was also habitually remiss in her duties. She issued a Refined Sugar Delivery Order to Shantung Commercial without first examining the corresponding Raw Sugar Quedan and Delivery Order. Consequently, Shantung Commercial was able to withdraw a larger quantity of refined sugar than what was allowable to it. In another instance, Pabiona again issued a Refined Sugar Delivery Order to Shantung Commercial without the corresponding Raw Sugar Quedan. Thus, NASUREFCO was not able to collect raw sugar from Shantung Commercial equivalent to the refined sugar it had withdrawn. Thirdly, Pabiona made it appear that in 1989 Dacongcogon Producers endorsed more than 200,000 piculs of raw sugar to NASUREFCO thereby allowing it to qualify in the Volume Incentive Program under which NASUREFCO would pay P1.00 per picul of raw sugar to every planter that endorsed 200,000 piculs or more of raw sugar to NASUREFCO. The fact that NASUREFCO did not suffer losses from the anomalies committed by Pabiona because of timely discovery does not excuse the latter as she was very much aware that her acts would be greatly prejudicial to NASUREFCO. Judy Philippines Inc. v. NLRC (98) Petitioner anchors its right to terminate the employment of Virginia Antiola on the ground of "gross neglect of duties," under Article 282 (b) of the Labor Code. Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. We affirm the finding of the NLRC that "Article 282 (b) of the Labor Code requires that . . . such neglect must not only be gross, it should be 'Gross and habitual neglect' in character." As aptly pronounced by the NLRC, "the penalty of dismissal is quite severe here" noting that the labor arbiter himself admits that she committed the infraction for the first time. PLDT v. NLRC (99) Likewise, it must be noted that willful defiance of company rules must be characterized by perverse attitude that would be considered as inimical to the interest of his employer. Even when an employee is found to have transgressed the employer's rules, in the actual imposition of penalties upon the erring employee, due consideration must still be given to his length of service and the number of violations committed during his employ.

GROSS NEGLIGENCE DEFINED Tres Reyes v. Maxim’s Tea House (2003) Under the Labor Code, gross negligence is a valid ground for an employer to terminate an employee. Gross negligence is negligence characterized by want of even slight care, acting or omitting to act in a situation where there is a duty to ac, not inadvertently but willfully and intentionally with a conscious indifference to consequences insofar as other persons may be affected. In this case, however, there is no substantial basis to support a finding that petitioner committed gross negligence. National Bookstore, Inc. v. CA (2002) Gross negligence has been defined as the want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them.[19] A perusal of the records of the case does not in any way show that private respondents were even remotely negligent of their duties so as to cause the loss of petitioner National Bookstore’s funds. Private respondents were able to illustrate with candor and sincerity the procedure they took prior to the loss which was witnessed by an employee of petitioner National Bookstore. They were in fact subjected to a thorough body search by petitioner National Bookstore’s lady guard before leaving their place of work on the date in issue, a claim not controverted by petitioners. Moreover, it was not even shown that they had access to the vault where the money was kept.

UP LAW BAROPS 2007 ONE UP
88 of 132

Part II : Labor Standards Law Labor Standards
Significantly, in order to constitute a just cause for the employee’s dismissal, the neglect of duties must not only be gross but also habitual. Thus, the single or isolated act of negligence does not constitute a just cause for the dismissal of the employee.[20] Verily, assuming arguendo that private respondents were negligent, although we find otherwise, it could only be a single or an isolated act that cannot be categorized as habitual, hence, not a just cause for their dismissal. Philippine Aeolus Automotive United Corp. v. NLRC (2000) Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. The negligence, to warrant removal from service, should not merely be gross but also habitual. Likewise, the ground "willful breach by the employee of the trust reposed in him by his employer" must be founded on facts established by the employer who must clearly and convincingly prove by substantial evidence the facts and incidents upon which loss of confidence in the employee may fairly be made to rest. All these requirements prescribed by law and jurisprudence are wanting in the case at bar. Cebu Filveneer Corp. v. NLRC (98) Gross negligence implies a want or absence of or failure to exercise slight care or diligence or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. Citibank N. A. v. Gatchalian (95) Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. Simple Negligence RDS Trucking v. NLRC (98) Our findings and conclusion in this labor case are not affected by the outcome of that criminal case. A mere reading of the MeTC decision clearly reveals that private respondent was in fact acquitted of the charge of malicious mischief. The trial court categorically found that there was "no direct evidence to show that the accused deliberately caused damage" to the truck of petitioners. Although private respondent was held liable for simple imprudence resulting in damage to property from the mere fact that he was not able to satisfactorily explain the cause of damage to the truck, such is not sufficient to validate his illegal dismissal. Under the Labor Code simple negligence is not a ground for the dismissal of an employee. Article 282 (b) explicitly provides that negligence must not only be gross but must be both "gross and habitual" in character to justify depriving an employee of his means of livelihood. In this case, the alleged negligence of private respondent cannot be considered "gross and habitual." As already discussed the infractions imputed against private respondent, who has not been accorded any semblance of due process prior to his termination, have not been substantially proven by petitioners to the satisfaction of the labor arbiter, respondent NLRC, and finally, this Court. public

Paguio Transport Corp. v. NLRC (98) Private respondent's admission that he was involved in the November 4, 1993 accident did not give petitioner a just cause to dismiss him. Mere involvement in an accident, absent any showing of fault or recklessness on the part of an employee, is not a valid ground for dismissal. C. FRAUD – WILLFUL BREACH OF TRUST Loss of Confidence – Requisites Jardine Davies, Inc. v. NLRC (99) It is settled that loss of confidence as a just cause for terminating employment must be premised on the fact that an employee concerned holds a position of trust and confidence. This situation obtains where a person is entrusted with confidence on delicate matters, such as care and protection, handling or custody of the employer's property, as in this case. But, in order to constitute a just cause for dismissal, the act complained of must be "workrelated" such as would show the employee concerned to be unfit to continue working for the employer. Likewise, it must be noted that proof beyond reasonable doubt is not required to dismiss an employee on the ground of loss of confidence. It is sufficient that there is some basis for such loss of confidence, such as when the employer has reasonable ground to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust and confidence demanded of his position.

POSITION OF TRUST AND CONFIDENCE Panday v. NLRC (92) The case of Lepanto Consolidated Mining Co. v. Court of Appeals, 1 SCRA 125 [1961], provides us with a definition of a 'position of trust and confidence'. It one where a person is 'entrusted with confidence on delicate matters, or with the custody, handling, or care and protection of the employer's property . . ..' Farrol v. Court of Appeals (2000) A perusal of RCPI’s dismissal notice reveals that it merely stated a conclusion to the effect that the withholding was deliberately done to hide alleged malversation or misappropriation without, however, stating the facts and circumstances in support thereof. It further mentioned that the position of cashier requires utmost trust and confidence but failed to allege the breach of trust on the part of petitioner and how the alleged breach was committed. On the assumption that there was indeed a breach, there is no evidence that petitioner was a managerial employee of respondent RCPI. It should be noted that the term "trust and confidence" is restricted to managerial employees. It may not even be presumed that when there is a shortage, there is also a corresponding breach of trust. Cash shortages in a cashier’s work may happen,

UP LAW BAROPS 2007 ONE UP
89 of 132

Part II : Labor Standards Law Labor Standards
and when there is no proof that the same was deliberately done for a fraudulent or wrongful purpose, it cannot constitute breach of trust so as to render the dismissal from work invalid. Sulpicio Lines, Inc. v. Gulde (2002) The basic requisite for dismissal on the ground of loss of trust and confidence is that the employee concerned must be one holding a position of trust and confidence. However, loss of confidence must not be indiscriminately used as a shield by the employer against a claim that the dismissal of an employee was arbitrary. Loss of confidence as a just cause for termination of employment is premised on the fact that the employee concerned holds a position of responsibility or trust and confidence. He must be invested with confidence on delicate matters, such as custody handling or care and protection of the property and assets of the employer. And, in order to constitute a just cause for dismissal, the act complained of must be workrelated and shows that the employee concerned is unfit to continue to work for the employer. Further, well-settled is the rule that "for loss of trust and confidence to be a valid ground for dismissal of an employee, it must be substantial and founded on clearly established facts sufficient to warrant the employee’s separation from employment." In this case, contrary to the allegations of petitioner, there is no sufficient evidence to show that respondent conspired with the thieves in stealing four (4) pieces of basketball from petitioner’s truck. As found by the CA:
[I]t ca be gleaned that the evidence presented in the case did not clearly prove that petitioner willfully breach his duty. It was not proven the indeed he connived with the thieves. The same was even commented upon by the NLRC when it said that the allegations that petitioner (respondent herein) knew the thieves were not even found in the police report. (p. 29. Rollo) Additionally, the reason given by the truck helper as to his inaction in preventing the thieves from taking the basketballs is not incredible. His reaction given the situation is not beyond human reaction to similar circumstances. It is a natural reaction to think about one’s safety first before the safety of another’s property. Likewise, contrary to petitioner’s claim, respondent did not stop the truck to allow the looters to disembark. Rather, respondent made a brief stop at the house of a co-employee in Calao Street near the Agusan Institute of Technology to deliver his medicines.In fact, as testified by Manapat, respondent’s companion, respondent was not aware that the two pilferers boarded the truck and he learned about the theft only when Manapat told him about it.

termination of employment by an employer.[26] This ground should be duly established.[27] Substantial evidence is sufficient as long as such loss of confidence is well-founded or if the employer has reasonable ground to believe that the employee concerned is responsible for the misconduct and her act rendered her unworthy of the trust and confidence demanded of her position.[28] It must be shown, though, that the employee concerned holds a position of trust.[29] The betrayal of this trust is the essence of the offense for which an employee is penalized.[30] Petitioner argues that her position as Finance Director of respondent's Beer Division is not one of trust but one that is merely functional and advisory in nature. She possesses no administrative control over the plants and region finance officers, including cashiers. She reports to two superiors. Petitioner's argument is misplaced. As Finance Director, she is in charge of the custody, handling, care and protection of respondent's funds. The encashment of her personal checks and her private use of such funds, albeit for short periods of time, are contrary to the fiduciary nature of her duties. Moreover, petitioner has functional control over all the plant and region finance officers, including cashiers, within the Luzon Operations Area. In fact, she is the highest ranking managerial employee for the finance section of the Luzon Beer Division Operations. Obviously, her position is a factor in abetting the encashment of her personal checks. Indeed, we find substantial ground for respondent's loss of confidence in petitioner. She does not deny encashing her personal checks at respondent's sales offices and diverting for her own private use the latter's resources. The audit investigation accounted for all the checks she encashed, some of which were dishonored for insufficiency of funds. The Investigating Panel concluded that petitioner not only encashed her personal checks at respondent's sales offices, but also used company funds to temporarily satisfy her insufficient accounts. This Court has held that misappropriation of company funds, although the shortages had been fully restituted, is a valid ground to terminate the services of an employee of the company for loss of trust and confidence. GUIDELINES Greenhills Products, Inc. v. NLRC (98) The guidelines for the doctrine of loss of confidence to apply are: (1) loss of confidence should not be simulated; (2) it should not be used as a subterfuge for causes which are improper, illegal, or unjustified; (3) it may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and (4) it must be genuine, not a mere afterthought to justify an earlier action taken in bad faith. 8 Petitioner contended that respondent's dismissal was for a valid cause arguing that the latter stole company properties and, thereafter, disposed of them for a consideration in favor of Roberto Caramelo. Vitarich v. NLRC (99) Being a mere afterthought to justify its earlier action of terminating Recodo, the allegations of policy violations do not constitute just causes of dismissal on account of the lack of confidence contemplated in Midas Touch Food Corporation v.

In fine, petitioner failed to present sufficient evidence to show that respondent committed acts that would warrant his dismissal for loss of trust and confidence. It is significant to note that respondent had been in petitioner’s employ for thirteen (13) years and it has not been shown that during this period he had been guilty of any infraction against petitioner. It is difficult to believe that he would deliberately jeopardize his job for something as worthless as basketballs. Santos v. San Miguel Corporation (2003) Article 282(c) of the same Code provides that "willful breach by the employee of the trust reposed in him by his employer" is a cause for the

UP LAW BAROPS 2007 ONE UP
90 of 132

Part II : Labor Standards Law Labor Standards
NLRC under which the guidelines for the application of the doctrine of loss of confidence are: (a) loss of confidence which should not be simulated; (b) it should not be used as a subterfuge for causes which are improper, illegal or unjustified; (c) it should not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and (d) it must be genuine, not a mere afterthought to justify earlier action taken in bad faith. ATTITUDE San Antonio v. NLRC (95) The Court is not prepared to conclude that petitioner has been guilty of willful disobedience in failing to comply posthaste with the transfer order. In Gold City Integrated Port Services, Inc. v. NLRC, the Court, on the subject "willful disobedience," has explained:
"Willful disobedience of the employer's lawful orders', as a just cause for the dismissal of an employee, envisages the concurrence of at least two (2) requisites: the employee's assailed conduct must have been willful or intentional, the wilfulness being characterized by a 'wrongful and perverse attitude'; and the order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he had been engaged to discharged."

disrespect and defiance of authority and assumes the proportion of serious misconduct or insubordination, any of which constitutes just cause for dismissal from employment. CONVICTION – MORAL TURPITUDE International Rice Research Institute v. NLRC (93) Article 282 of the Labor Code enumerates the just causes wherein an employer may terminate an employment. Verily, conviction of a crime involving moral turpitude is not one of these justifiable causes. Neither may said ground be justified under Article 282 (c) nor under 282 (d) by analogy. Fraud or willful breach by the employees of the trust reposed in him by his employer or duly authorized representative under Article 282 (c) refers to any fault or culpability on the part of the employee in the discharge of his duty rendering him absolutely unworthy of the trust and confidence demanded by his position. It cannot be gainsaid that the breach of trust must be related to the performance of the employee's function. On the other hand, the commission of a crime by the employee under Article 282 (d) refers to an offense against the person of his employer or any immediate member of his family or his duly authorized representative. Analogous causes must have an element similar to those found in the specific just cause enumerated under Article 282. Clearly lacking in the ground invoked by petitioner is its relation to his work or to his employer. In the case at bar, the commission of the crime of homicide was outside the perimeter of the IRRI complex, having been committed in a restaurant after office hours and against a non-IRRI employee. Thus, the conviction of Micosa for homicide was not work-related, his misdeed having no relation to his position as laborer and was not directed or committed against IRRI or its authorized agent. XXX As to what crime involves moral turpitude, is for the Supreme Court to determine. Thus, the precipitate conclusion of IRRI that conviction of the crime of homicide involves moral turpitude is unwarranted considering that the said crime which resulted from an act of incomplete self-defense from an unlawful aggression by the victim has not been so classified as involving moral turpitude. Oania v. NLRC (95) Violation of a company rule prohibiting the infliction of harm or physical injury against any person under the particular circumstances provided for in the same rule may be deemed analogous to "serious misconduct" stated in Art. 282 (a) above. To repeat, however, there is no substantial evidence definitely pointing to petitioners as the perpetrators of the mauling of Malong. What is an established fact is that, after investigation, private respondent dismissed them and, thereafter, a criminal complaint was filed against petitioners. Likewise, it is of record that Malong desisted from suing the perpetrators before the regular courts. Lim v. NLRC (96) Gross inefficiency falls within the purview of :other causes analogous to the foregoing,” and constitutes just cause to terminate an employee under Art. 282, labor Code. One is analogous to another if it is susceptible of comparison with the latter either in general or in some specific detail,

Willful Breach Atlas Consolidated Mining and Development Corp. v. NLRC (98); Felix v. NLRC (2004) Settled is the rule that under Article 283 (c) of the Labor Code, the breach of trust must be willful. A breach is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It must rest on substantial grounds and not on the employer's arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally remain at the mercy of the employer. It should be genuine and not simulated; nor should it appear as a mere afterthought to justify earlier action taken in bad faith or a subterfuge for causes which are improper, illegal or unjustified. It has never been intended to afford an occasion for abuse because of its subjective nature. There must therefore be an actual breach of duty committed by the employee which must be established by substantial evidence. D. COMMISSION OF CRIME; 282 (D) E. ANALOGOUS CASES; 282 (E) QUARRELSOME – BOSSY Cathedral School of Technology v. NLRC (92) The reason for which private respondent's services were terminated, namely, her unreasonable behavior and unpleasant department in dealing with the people she closely works with in the course of her employment, is analogous to the other "just causes" enumerated under the Labor Code, as amended. Petitioners' averments on private respondent's disagreeable character — "quarrelsome, bossy, unreasonable and very difficult to deal with" — are supported by the various testimonies of several coemployees and students of the school. The conduct she exhibited on that occasion smacks of sheer

UP LAW BAROPS 2007 ONE UP
91 of 132

Part II : Labor Standards Law Labor Standards
or has a close relationship with the latter. Gross inefficiency is closely related to gross neglect for both involve specific acts of omission on the part of the employee resulting in damage to the employer or to his business. F. OTHERS – JUST CAUSES CLAIMED BY EMPLOYER 1. ABANDONMENT DEFINED Escobin v. NLRC (98) This contention is untenable. Abandonment, as a just and valid cause for dismissal, requires a deliberate, unjustified refusal of an employee to resume his work, coupled with a clear absence of any intention of returning to his work. No evidence was presented to establish that petitioners relinquished their jobs. REQUISITES Metro Transit Corp., Inc. v. NLRC (99) Indeed, for abandonment of work to be a just and valid ground for dismissal, there must be a deliberate and unjustified refusal on the part of an employee to resume his employment. The burden of proof is on the employer to show an unequivocal intent on the part of the employee to discontinue employment. To warrant a finding of abandonment, there must be evidence not only of the failure of an employee to report for work or his absence without valid or justifiable reason, but also of his intention to sever the employer-employee relationship. The second element is the more determinative factor, being manifested by overt acts. Leonardo v. NLRC (2000) and Fuerte v. Aquino (2000) Neither can we say that FUERTE’s actions are indicative of abandonment. To constitute such a ground for dismissal, there must be (1) failure to report for work or absence without valid or justifiable reason; and (2) a clear intention, as manifested by some overt acts, to sever the employer-employee relationship. We have accordingly held that the filing of a complaint for illegal dismissal, as in this case, is inconsistent with a charge of abandonment. INFERENCE – PRESCRIPTION Hacienda Dapdap v. NLRC (98) No such grave abuse of discretion was committed by the NLRC as it correctly applied the consistent ruling in labor cases that a charge of abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal. It is indeed inconceivable that an employee like herein respondent who has been working at Hda. Dapdap I since 1977 and cultivating a substantial portion of a 6-hectare lot therein for himself would just abandon his work in 1992 for no apparent reason. As quoted by the Court in Judric Canning Corporation v. Inciong, "To get a job is difficult; to run from it is foolhardy." Nor could intent to abandon be presumed from private respondent's subsequent employment with another employer as petitioner alleges. The fact that the start of such employment, i.e., after 1 March 1992 as petitioner alleges, coincides with the date of the original complaint strongly indicates that such employment was only meant to help respondent and his family survive during the pendency of his case. It has been said that abandonment of position cannot be lightly inferred, much less legally presumed from certain equivocal acts such as an interim employment. SPECIFIC ACTS Premiere Development Bank v. NLRC (98) We agree with both the NLRC and the Solicitor General that respondent did not abandon her job. To constitute abandonment, two elements must concur: (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, with the second element as the more determinative factor and being manifested by some overt acts. Abandoning one's job means the deliberate, unjustified refusal of the employee to resume his employment and the burden of proof is on the employer to show a clear and deliberate intent on the part of the employee to discontinue employment. The law, however, does not enumerate what specific overt acts can be considered as strong evidence of the intention to sever the employeeemployer relationship. An employee who merely took steps to protest her indefinite suspension and to subsequently file an action for damages, cannot be said to have abandoned her work nor is it indicative of an intention to sever the employeremployee relationship. Her failure to report for work was due to her indefinite suspension. Petitioner's allegation of abandonment is further belied by the fact that private respondent filed a complaint for illegal dismissal. Abandonment of work is inconsistent with the filing of said complaint. NO ABANDONMENT Phil. Airlines, Inc. v. NLRC (99) Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it be inferred that employees must take their meals within the company premises. Employees are not prohibited from going out of the premises as long as they return to their posts on time. Private respondent's act, therefore, of going home to take his dinner does not constitute abandonment. CMP Federal Security Agency, Inc v. NLRC (99) Contrariwise, when Caranto was relieved from his post on 6 May 1994 he immediately pursued his claim against CMP by amending his complaint six (6) days after to include illegal dismissal among his charges. This can hardly be expected from one who has voluntarily "abandoned" his job, as claimed by CMP. The immediate filing of a complaint for illegal dismissal against the employer is a clear indication that the employee has not given up on his work. Mendoza v. NLRC (99) We cannot concur with the NLRC. The unflinching rule in illegal dismissal cases is that the employer bears the burden of proof. To establish a case of abandonment, the employer must prove the employee's deliberate and unjustified refusal to resume employment without any intention of returning. Specifically, the employer has to show the concurrence of the following: (1) the

UP LAW BAROPS 2007 ONE UP
92 of 132

Part II : Labor Standards Law Labor Standards
employee's intention to abandon employment and (2) overt acts from which such intention may be inferred — as when the employee shows no desire to resume works. The private respondent failed to establish any of these. The employer herein argues that the lack of a notice of termination is proof that petitioner abandoned her job. We disagree. Mere absence from work, especially where the employee has been verbally told not to report, cannot by itself constitute abandonment. To repeat, the employer has the burden of proving overt acts on the employee's part which demonstrate a desire or an intention to abandon her work. It failed to discharge this burden. Furthermore, the filing of a complaint for illegal dismissal within a reasonable period negates abandonment. In the present case, the Complaint was filed about two weeks after petitioner has been dismissed or had been deemed resigned. 2. LOANS Manila Electric Co. v. NLRC (96) Habitual absenteeism should not and cannot be tolerated by petitioner herein which is a public utility company engaged in the business of distributing and selling electric energy within its franchise areas and that the maintenance of Meralco’s distribution facilities (electric lines) by responding to customer’s complaints is of paramount importance to the consuming public. An employee’s habitual absenteeism without leave, which violated company rules and regulations is sufficient cause to justify termination from service. 5. TERM EMPLOYMENT

BORROWING MONEY Pearl S. Buck Foundation, Inc. v. NRLC (90) Borrowing money is neither dishonest, nor immoral, nor illegal, much less criminal. (Medical Doctors, Inc. [Makati Medical Center] v. NLRC) However, said act becomes a serious misconduct that may justly be asserted as a ground for dismissal when reprehensible behavior such as the use of a trust relationship as a leverage for borrowing money is involved. A recipient of largesse may be so grateful that out of a sense of "utang na loob" she may lend money to an employee or relative of a benefactor believing that the loan would be paid anyway. In this case, the fact that Aliarte has retracted her complaint is of no moment. She loaned money to the respondent, not once but twice and there can be no other assumption where the money came from except from the trust funds intended for the ward. 3. COURTESY RESIGNATION

Brent School v. Zamora (90) Such interpretation puts the seal on Bibiso upon the effect of the expiry of an agreed period of employment as still good rule — a rule reaffirmed in the recent case of Escudero vs. Office of the President where, in the fairly analogous case of a teacher being served by her school a notice of termination following the expiration of the last of three successive fixed-term employment contracts, the Court held: "Reyes' (the teacher's) argument is not persuasive. It loses sight of the fact that her employment was probationary, contractual in nature, and one with a definitive period. At the expiration of the period stipulated in the contract, her appointment was deemed terminated and the letter informing her of the non-renewal of her contract is not a condition sine qua non before Reyes may be deemed to have ceased in the employ of petitioner UST. The notice is a mere reminder that Reyes' contract of employment was due to expire and that the contract would no longer be renewed. It is not a letter of termination. The interpretation that the notice is only a reminder is consistent with the court's finding in Labajo, supra. . . ." Romares v. NLRC (98) The Brent ruling also laid down the criteria under which "term employment" cannot be said to be in circumvention of the law on security of tenure: 1. The fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or 2. It satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former or the latter. None of these requisites were complied with. Medenilla v. Phil. Veterans Bank (2000) Since findings by the Labor Arbiter are binding on this Court if supported by substantial evidence, the Court rules that there was illegal dismissal absent just cause, which is one of the facets of a dismissal. Such illegal dismissal warrants reinstatement and payment of backwages. However, since petitioners’ reinstatement is now considered impractical because the new Philippine Veterans Bank has been rehabilitated by virtue of RA 7169, the Court limits the relief to be granted to the petitioners to the unpaid wages during the remaining period of their employment contract.

Batongbacal v. Associated Bank (88) While it may be said that the private respondent's call for courtesy resignations was prompted by its determination to survive, we cannot lend legality to the manner by which it pursued its goal. By directing its employees to submit letters of courtesy resignation, the bank in effect forced upon its employees an act which they themselves should voluntarily do. It should be emphasized that resignation per se means voluntary relinquishment of a position or office. Adding the word "courtesy" did not change the essence of resignation. That courtesy resignations were utilized in government reorganization did not give private respondent the right to use it as well in its own reorganization and rehabilitation plan. There is no guarantee that all employers will not use it to rid themselves arbitrarily of employees they do not like, in the guise of "streamlining" its organization. On the other hand, employees would be unduly exposed to outright termination of employment which is anathema to the constitutional mandate of security of tenure. 4. WORK ATTITUDE

ABSENCES

UP LAW BAROPS 2007 ONE UP
93 of 132

Part II : Labor Standards Law Labor Standards
As held by this Court, if the contract is for a fixed term and the employee is dismissed without just cause, he is entitled to the payment of his salaries corresponding to the unexpired portion of the employment contract. In the case under scrutiny, the unpaid wages should be reckoned on February 18, 1991 to January 1, 1992. January 1, 1992 is considered the date of expiration of the period of liquidation since January 2, 1992 was the effectivity of RA 7169, entitled "An Act to Rehabilitate the Philippine Veterans Bank". 6. PAST INFRACTIONS behavior amounts to immorality, termination from employment. 8. PROFESSIONAL TRAINING justifying his

RESIDENCY TRAINING Felix v. Buenaseda (95) A residency or resident physician position in a medical specialty is never a permanent one. Residency connotes training and temporary status. It is the step taken by a physician right after postgraduate internship (and after hurdling the Medical Licensure Examinations) prior to his recognition as a specialist or sub-specialist in a given field. This upward movement from residency to specialist rank, institutionalized in the residency training process, guarantees minimum standards and skills and ensures that the physician claiming to be a specialist will not be set loose on the community without the basic knowledge and skills of his specialty. Because acceptance and promotion requirements are stringent, competitive, and based on merit, acceptance to a first year residency program is no guaranty that the physician will complete the program. Attrition rates are high. Some programs are pyramidal. Promotion to the next post-graduate year is based on merit and performance determined by periodic evaluations and examinations of knowledge, skills and bedside manner. Under this system, residents, specially those in university teaching hospitals 18 enjoy their right to security of tenure only to the extent that they periodically make the grade, making the situation quite unique as far as physicians undergoing post-graduate residencies and fellowships are concerned. 9. LOVE AND MORALS

PAST OFFENSES La Carlota Planters Assn. v. NLRC (98) The correct rule has always been that such previous offenses may be so used as valid justification for dismissal from work only if the infractions are related to the subsequent offense upon which basis the termination of employment is decreed. The previous infraction, in other words, may be used if it has a bearing to the proximate offense warranting dismissal. Ramoran v. Jardine CMG Life Insurance Co., Inc. (2000) Finally, there is no basis to mitigate petitioner’s liability inasmuch as this is not the first time that petitioner was charged with falsification by respondent Jardine. She had in fact earlier served a five (5)-day suspension from November 8-13, 1993 for admittedly tampering with the entries in Official Receipt No. 1013 issued by Limited Vision Center on July 7, 1993, in support of her application for the optical loan she had obtained from respondent Jardine. Under its company rules, respondent Jardine was, strictly speaking, entitled to dismiss petitioner on that ground. However, due to petitioner’s voluntary admission of the offense and for humanitarian reasons, she was only given a five (5)-day suspension. In a memorandum, respondent Jardine warned the petitioner that "any future violation of the same nature, irrespective of the time frame [sic] that it is repeated or committed, would result in the imposition of the maximum penalty of dismissal." As aptly remarked by the appellate court "the seeds of mistrust had been sown, awaiting only the proper occasion for it to grow and fester." Petitioner, thus, had only herself to blame when she was finally dismissed, for cause, by respondent Jardine for the reason that she falsified her subject overtime authorization slips dated December 6 and 14, 1993 in violation of the Company Rules and Regulations. 7. ANIMOSITY

IMMORALITY Santos v. NLRC (98) Accordingly, teachers must abide by a standard of personal conduct which not only proscribes the commission of immoral acts, but also prohibits behavior creating a suspicion of immorality because of the harmful impression it might have on the students. Likewise, they must observe a high standard of integrity and honesty. From the foregoing, it seems obvious that when a teacher engages in extra-marital relationship, especially when the parties are both married, such behavior amounts to immorality, justifying his termination from employment. LOVE Chua-Qua v. Clave (90) With the finding that there is no substantial evidence of the imputed immoral acts, it follows that the alleged violation of the Code of Ethics governing school teachers would have no basis. Private respondent utterly failed to show that petitioner took advantage of her position to court her student. If the two eventually fell in love, despite the disparity in their ages and academic levels, this only lends substance to the truism that the heart has reasons of its own which reason does not know. But, definitely, yielding to this gentle and universal emotion is not to be so casually equated with

Santos v. NLRC (98) Accordingly, teachers must abide by a standard of personal conduct which not only proscribes the commission of immoral acts, but also prohibits behavior creating a suspicion of immorality because of the harmful impression it might have on the students. Likewise, they must observe a high standard of integrity and honesty. From the foregoing, it seems obvious that when a teacher engages in extra-marital relationship, especially when the parties are both married, such

UP LAW BAROPS 2007 ONE UP
94 of 132

Part II : Labor Standards Law Labor Standards
immorality. The deviation of the circumstances of their marriage from the usual societal pattern cannot be considered as a defiance of contemporary social mores. It would seem quite obvious that the avowed policy of the school in rearing and educating children is being unnecessarily bannered to justify the dismissal of petitioner. This policy, however, is not at odds with and should not be capitalized on to defeat the security of tenure granted by the Constitution to labor. In termination cases, the burden of proving just and valid cause for dismissing an employee rests on the employer and his failure to do so would result in a finding that the dismissal is unjustified. 10. VIOLATION OF COMPANY RULES Aparente Sr. v. NLRC (2000) The petitioner’s dismissal is justified by Company rules and regulations. It is true that his violation of company rules is his first offense. Nonetheless, the damage caused to private respondent amounted to more than P5,000.00, thus, the penalty of discharge is properly imposable as provided by Section 12 of Rule 005-85 of CCBPI’s Code of Disciplinary Rules and Regulations. It is recognized that company policies and regulations, unless shown to be grossly oppressive or contrary to law, are generally valid and binding on the parties and must be complied with until finally revised or amended, unilaterally or preferably through negotiation, by competent authority. The Court has upheld a company’s management prerogatives so long as they are exercised in good faith for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements. Article 282 (a) of the Labor Code of the Philippines sanctions termination by the employer of the employee’s services for serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work. In the instant case, petitioner Aparente was terminated from service after having been found guilty of driving without a valid driver’s license, which is a clear violation of the company’s rules and regulations. In order that an employer may dismiss an employee on the ground of willful disobedience, there must be concurrence of at least two requisites: The employee’s assailed conduct must have been willful or intentional, the willfulness being characterized by a wrongful and perverse attitude; and the order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he had been engaged to discharge. We have found these requisites to be present in the case at bar. 11. CRIMINAL CASE EFFECT OF ACQUITTAL Ramos v. NLRC (98) The NLRC initially reversed the ruling of the labor arbiter on the grounds that: (1) petitioner was denied procedural due process and (2) the criminal case for estafa filed against her has been dismissed by the Manila Prosecutor’s office for insufficiency of evidence, particularly, for lack of proof that the USECO was damaged by the acts attributed to petitioner. These are patent errors. Petitioner was not denied due process. Similarly, it is a well established ruled that the dismissal of the criminal case against an employee shall not necessarily be a bar to his dismissal from employment on the ground of loss of trust and confidence. The NLRC corrected these patent errors when it granted private respondent’s second motion for reconsideration. CONVICTION Sampaguita Garments Corp. v. NLRC (94) The private respondent's conviction of the crime of theft of property belonging to the petitioner has affirmed the existence of a valid ground for her dismissal and thus removed the justification for the administrative decision ordering her reinstatement with back wages. Nevertheless, the petitioner is still subject to sanction for its failure to accord the private respondent the right to an administrative investigation in conformity with the procedural requirements of due process. DISMISSAL – CRIMINAL CASE Lacorte v. Inciong (88) The purpose of the proceedings before the fiscal is to determine if there is sufficient evidence to warrant the prosecution and conviction of the accused. In assessing the evidence before him, the fiscal considers the basic rule that to successfully convict the accused the evidence must be beyond reasonable doubt and not merely substantial. On the other hand, to support findings and conclusion of administrative bodies only substantial evidence is required. It does not follow that once the fiscal dismisses the complaint for qualified theft, respondent officials should also have decided in favor of petitioner. For one, the evidence presented before the two bodies may not be necessarily identical. Secondly, the appreciation of the facts and evidence presented is an exercise of discretion on the part of administrative officials over which one cannot impose his conclusion on the other. As we have already ruled, "the conviction of an employee in a criminal case is not indispensable to warrant his dismissal, and the fact that a criminal complaint against the employee has been dropped by the fiscal is not binding and conclusive upon a labor tribunal. Starlite etc. v. NLRC (89) There is no dispute that loss of confidence, when adequately proven, constitutes a valid ground for dismissing an employee [Manila Midtown Commercial Corporation v. Nuwhrain] and proof beyond reasonable doubt is not required to terminate him on this charge [Gatmaitan v. MRR]. It is sufficient that there is some basis for such loss of confidence [Galsim v. PNB; Central Textile Mills v. NLRC] and that the employer has reasonable ground to believe or entertain the moral conviction that the employee concerned is responsible for the misconduct and that the nature of his participation therein would render him absolutely unworthy of the trust and confidence demanded of his position [Nevans v. CIR]. The doctrine goes on further to include the basic rule that the conviction of an employee in a criminal case is not indispensable

UP LAW BAROPS 2007 ONE UP
95 of 132

Part II : Labor Standards Law Labor Standards
to warrant his dismissal by his employer and that the fact that a criminal complaint against the employee has been dropped by the city fiscal is not binding and conclusive upon a labor tribunal [Sea Land Service Inc. v. NLRC]. GUILT OR INNOCENCE Chua-Qua v. Clave (90) While the criminal complaint where petitioner was included as one of the accused was dismissed for insufficiency of evidence, the Court considers that the dismissal of the criminal complaint did not preclude a finding by the competent administrative authorities, that petitioner had indeed committed acts inimical to the interest of his employer. In Pepsi Cola Bottling Company of the Philippines v. Guanzon, we held that: "Private respondent's guilt or innocence in the criminal case is not determinative of the existence of a just or authorized cause for his dismissal". This doctrine follows from the principle that the quantum and weight of evidence necessary to sustain conviction in criminal cases are quite different from the quantum of evidence necessary for affirmance of a decision of the Labor Arbiter and of the NLRC. Quiambao v. NLRC (96) This case is to be distinguished from those cases in which it was held that the acquittal of the employee in the criminal case was not a bar to his dismissal on the ground of loss of confidence. The rulings in those cases were based on findings that the evidence in the criminal case was not sufficient to satisfy the requirement of proof beyond reasonable doubt but otherwise adequate to support a finding that there was substantial evidence that the employee was guilty. In contrast, in the case at bar, there is entire want of evidence to justify the dismissal of the petitioner. The NLRC merely relied on the fact that the Ministry of Justice found petitioner probably guilty of estafa. In fact, the NLRC found that the charges against him had not been substantiated. 12. ABOLITION OF POSITION San Miguel Corp. v. NLRC (99) Abolition of departments or positions in the company is one of the recognized management prerogatives. Noteworthy is the fact that the private respondent does not question the validity of the business move of petitioner. In the absence of proof that the act of petitioner was ill-motivated, it is presumed that petitioner San Miguel Corporation acted in good faith. TRANSFERS – DISCHARGE AND SUSPENSION Westin Phil. Plaza Hotel v. NLRC (99) On the issue of legality and reasonableness of the order of transfer, it must be emphasized that this Court has recognized and upheld the prerogative of management to transfer an employee from one office to another within the business establishment, provided that there is no demotion in rank or a diminution of his salary, benefits and other privileges. This is a privilege inherent in the employer's right to control and manage its enterprise effectively. Besides, it is the employer's prerogative, based on its assessment and perception of its employee's qualifications, aptitudes and competence, to move him around in the various areas of its business operations in order to ascertain where the employee will function with utmost efficiency and maximum productivity or benefit to the company. An employee's right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. Castillo v. NLRC (99) Petitioner claims that she was constructively dismissed. We agree with the respondent Commission's finding rejecting the same. Wellsettled is the rule that it is the prerogative of the employer to transfer and reassign employees for valid reasons and according to the requirement of its business. An owner of a business enterprise is given considerable leeway in managing his business. Our law recognizes certain rights collectively called management prerogative as inherent in the management of business enterprises. One of the prerogatives of management is the right to transfer employees in their work station. This Court has consistently recognized and upheld the prerogative of management to transfer an employee from one office to another within the business establishment, provided that there is no demotion in rank or a diminution of his salary, benefits and other privileges. The Court, as a rule, will not interfere with an employer's prerogative to regulate all aspects of employment which includes among others, work assignment, working methods, and place and manner of work. The rule well-settled that labor laws discourage interference with an employer's judgment in the conduct of his business. Of course, the managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, putting to mind the basic elements of justice and fair play. It cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. OSS Security and Allied Services, Inc. v. NLRC (2000) Thus, the transfer of an employee ordinarily lies within the ambit of management prerogatives. However, a transfer amounts to constructive dismissal when the transfer is unreasonable, inconvenient, or prejudicial to the employee, and it involves a demotion in rank or diminution of salaries, benefits and other privileges. In the case at bench, nowhere in the record does it show that that the transfer of private respondent was anything but done in good faith, without grave abuse of discretion, and in the best interest of the business enterprise. 13. CONSTRUCTIVE DISCHARGE DEFINED Philippine –Japan Active Carbon Corp. v. NLRC (89) A constructive discharge is defined as: "A quitting because continued employment is rendered impossible, unreasonable or unlikely; as, an offer involving a demotion in rank and a diminution in pay." (Moreno's Philippine Law Dictionary, 2nd

UP LAW BAROPS 2007 ONE UP
96 of 132

Part II : Labor Standards Law Labor Standards
Ed., p. 129, citing the case of Alia vs. Salani Una Transportation Co. ) XXX It is the employer's prerogative, based on its assessment and perception of its employees' qualifications, aptitudes, and competence, to move them around in the various areas of its business operations in order to ascertain where they will function with maximum benefit to the company. An employee's right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive dismissal. Hagonoy Rural Bank, Inc. v. NLRC (98) The next issue that needs be addressed is whether the first nine private respondents were illegally dismissed. We agree with the Labor Arbiter and the NLRC in holding the affirmative view. While it may be true that the private respondents had chosen to go on leave for one month effective 16 October 1992, the choice was not of their complete free will because the other alternative given by the petitioner was suspension. The threat of suspension thus became the proximate cause of the "leave." It was a coerced option imposed by the petitioner. That the petitioner had in fact in mind private respondents' suspension was finally made evident by its refusal to take them back after the expiration of the leave. The petitioner extended their leave for another month with a promise to pay them salaries. After the expiration of the "extended" leave, the petitioner still refused to accept them back. Ineluctably, the private respondents were constructively dismissed from 16 October 1992. Phil. Wireless, Inc. v. NLRC (99) The Court has held that constructive dismissal is “an involuntary resignation resorted to when continued employment is rendered impossible, unreasonable, or unlikely; when there is a demotion in rank and/or a dimunition in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.” In this particular case, respondent voluntarily resigned from his employment. He was not pressured into resigning. Voluntary resignation is defined as the act of an employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service and he has no other choice but to disassociate himself from his employment. Respondent considered his transfer/promotion as a demotion due to the fact that he had no support staff to assist him in his work and whom he could supervise. There is no demotion where there is no reduction in position, rank or salary as a result of such transfer. CONSTRUCTIVE DISCHARGE AND ILLEGAL DISMISSAL Mark Roche International v. NLRC (99) Constructive dismissal or a constructive discharge has been defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and; a diminution in pay. In the instant case, private respondents were not demoted in rank nor their pay diminished considerably. They were simply told without prior warning or notice that there was no more work for them. After receiving the notice of hearing of the petition for certification election on 27 October 1992, petitioners immediately told private respondents that they were no longer employed. Evidently it was the filing of the petition for certification election and organization of a union within the company which led petitioners to dismiss private respondents and not petitioners' allegations of absence or abandonment by private respondents. The formation of a labor union has never been a ground for valid termination, and where there is an absence of clear, valid and legal cause, the law considers the termination illegal. PREVENTIVE SUSPENSION - REMOVAL Globe-Mackay Cable and Radio Corp. v. NLRC (92) Under such circumstances, preventive suspension was the proper remedial recourse available to the company pending Salazar's investigation. By itself, preventive suspension does not signify that the company has adjudged the employee guilty of the charges she was asked to answer and explain. Such disciplinary measure is resorted to for the protection of the company's property pending investigation of any alleged malfeasance or misfeasance committed by the employee. Phil. Airlines v. NLRC (98) Preventive suspension is a disciplinary measure for the protection of the company's property pending investigation of any alleged malfeasance or misfeasance committed by the employee. The employer may place the worker concerned under preventive suspension if his continued employment poses a serious and imminent threat to the life or property of the employer or of his co-workers. RATIONALE Kwikway Engineering Works v. NLRC (91) Further, the preventive suspension of respondent Vargas for an indefinite period amounted to a dismissal and is violative of Section 4, Rule XIV of the Implementing Rules of the Labor Code which limits the preventive suspension to thirty (30) days. The said rule also provides that "the employer shall thereafter reinstate the worker in his former or in a substantially equivalent position or the employer may extend the period of suspension provided that during the period of extension, he pays the wages and other benefits due to the worker." (Pacific Cement Company Inc. v. NLRC). OTHER CAUSES – BUSINESS RELATED CAUSES 23.06 OTHER CAUSES CAUSES- BUSINESS RELATED

Art. 283 Closure of establishment and reduction of personnel. The employer may also terminate employment of any employee due to the: the

UP LAW BAROPS 2007 ONE UP
97 of 132

Part II : Labor Standards Law Labor Standards
Installation of labor saving devices, Redundancy, Retrenchment to prevent losses or Closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher A fraction of at least six (6) months shall be considered one (1) whole year. CAUSES Installation of Labor Saving Devices PROCEDURAL REQUIREMENT 1 month advance notice to DOLE and Employee (twin requirements) SAME SEPARATION PAY at least 1 month pay or 1 month pay for every year of service whichever is higher at least 1 month pay or 1 month pay for every year of service whichever is higher 1 month pay or ½ month pay for every year of service whichever is higher 1 month pay or ½ month pay for every year of service whichever is higher e. f. g. h. measure is made necessary or compelled by economic factors that would otherwise endanger its stability or existence. In exercising its right to retrench employees, the firm may choose to close all, or a part of, its business to avoid further losses or mitigate expenses. In Caffco International Limited vs. Office of the Minister-Ministry of Labor and Employment, the Court has aptly observed that — Business enterprises today are faced with the pressures of economic recession, stiff competition, and labor unrest. Thus, businessmen are always pressured to adopt certain changes and programs in order to enhance their profits and protect their investments. Such changes may take various forms. Management may even choose to close a branch, a department, a plant, or a shop (Phil. Engineering Corp. vs. CIR).

A. B.

INSTALLATION OF LABOR SAVING DEVICES REDUNDANCY

BUSINESS JUDGMENT Wiltshire File Co., Inc. v. NLRC (91) The characterization of private respondent's services as no longer necessary or sustainable, and therefore properly terminable, was an exercise of business judgment on the part of petitioner company. The wisdom or soundness of such characterization or decision was not subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely arbitrary and malicious action is not shown. It should also be noted that the position held by private respondent, Sales Manager, was clearly managerial in character. In D.M. Consunji, Inc. v. National Labor Relations Commission, the Court held: "An employer has a much wider discretion in terminating the employment relationship of managerial personnel as compared to rank and file employees. However, such prerogative of management to dismiss or lay off an employee must be made without abuse of discretion, for what is at stake is not only the private respondent's position but also his means of livelihood . ." The determination of the continuing necessity of a particular officer or position in a business corporation is management's prerogative, and the courts will not interfere with the exercise of such so long as no abuse of discretion or merely arbitrary or malicious action on the part of management is shown. Almodiel v. NLRC (93) A survey of existing case law will disclose that in Wiltshire File Co., Inc. v. NLRC, the position of Sales Manager was abolished on the ground of redundancy as the duties previously discharged by the Sales Manager simply added to the duties of the General Manager to whom the Sales Manager to whom the Sales Manager used to report. In adjudging said termination as legal, this Court said that redundancy, for purposes of our Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the

Redundancy

Retrenchme nt to Prevent Losses Closing, Cessation of Operation (unless purpose is to circumvent Security of Tenure guarantee) not due to serious business losses or financial reverses.

SAME

SAME

RECOGNITION OF RIGHT – BUSINESS RELATED CAUSES Edge Apparel, Inc. v. NLRC (98) The law acknowledges the right of every business entity to reduce its work force if such

UP LAW BAROPS 2007 ONE UP
98 of 132

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

UP LAW BAROPS 2007 ONE UP
99 of 132

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

WHEN REDUNDANCY Wiltshire File Co., Inc. v. NLRC (91) We believe that redundancy, for purposes of our Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. 4 The employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business. Tierra International Construction Corp. v. NLRC (92) Termination of an employee's services because of a reduction of work force due to a decrease in the scope or volume of work of the employer is synonymous to, or a shade of termination because of redundancy under Article 283 (formerly 284) of the Labor Code. Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. A position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. Escareal v. NLRC (92) In Wiltshire File Co., Inc. vs. NLRC, this Court held that redundancy, for purposes of the Labor Code, exists where the services of an employee are CRITERIA – SELECTION OF EMPLOYEE Tierra International Construction Corp. v. NLTC (92) We agree with the petitioner that the law does not make any distinction between a technical and a non-technical position for purposes of determining the validity of termination due to redundancy. Neither does the law nor the stipulations of the employment contract here involved require that junior employees should first be terminated. In redundancy, what is looked into is the position itself, the nature of the services performed by the employee and the necessity of such position. As held in Wiltshire File Co., Inc. vs. NLRC: "The determination of the continuing necessity of a particular officer or position in a business corporation is management's prerogative, and the courts will not interfere with the exercise of such so long as no abuse of discretion or merely arbitrary or malicious action on the part of management is shown." Almodiel v. NLRC (93) In the case at bar, since petitioner does not allege that Ang Tan Chai does not qualify for the position, the Court cannot substitute its discretion and judgment for that which is clearly and exclusively management prerogative. To do so would take away from the employer what rightly belongs to him as aptly explained in National Federation of Labor Unions v. NLRC: "It is a well-settled rule that labor laws do not authorize interference with the employer's judgment in the conduct of his business. The determination of the qualification and fitness of workers for hiring and firing, promotion or reassignment are

UP LAW BAROPS 2007 ONE UP
100 of 132

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

RETRENCHMENT TO PREVENT LOSSES

DISTINCTION REDUNDANCY AND RETRENCHMENT AG & P United Rank and File Assn. v. NLRC (96) At this point, it is necessary to distinguish "redundancy" from" retrenchment." Both are mentioned in Art. 283 of the Labor Code as just causes for the closing of establishments or reduction of personnel. "Redundancy" exists when the services of an employee are in excess of what is required by an enterprise. "Retrenchment," on the other hand, is one of the economic grounds for dismissing employees and is resorted to primarily to avoid or minimize business losses. Private respondent's "redundancy program," while denominated as such, is more precisely termed "retrenchment" because it is primarily intended to prevent serious business losses. TEMPORARY RETRENCHMENT

UP LAW BAROPS 2007 ONE UP
101 of 132

Part II : Labor Standards Law Labor Standards
Sebuguero v. NLRC (95) Article 283 of the Labor Code, however, speaks of a permanent retrenchment as opposed to a temporary lay-off as is the case here. There is no specific provision of law which treats of a temporary retrenchment or lay-off and provides for the requisites in effecting it or a period or duration therefor. These employees cannot forever be temporarily laid-off. To remedy this situation or fill the hiatus, Article 286 may be applied but only by analogy to set a specific period that employees may remain temporarily laid-off or in floating status. Six months is the period set by law that the operation of a business or undertaking may be suspended thereby suspending the employment of the employees concerned. The temporary lay-off wherein the employees likewise cease to work should also not last longer than six months. After six months, the employees should either be recalled to work or permanently retrenched following the requirements of the law, and that failing to comply with this would be tantamount to dismissing the employees and the employer would thus be liable for such dismissal. REQUIREMENTS – STANDARDS Lopez Sugar Corporation v. Federation of Free Workers (90) We consider it may be useful to sketch the general standards in terms of which the acts of petitioner employer must be appraised. Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in character, the bonafide nature of the retrenchment would appear to be seriously in question. Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for the retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the employees retired or otherwise laid-off. Because of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs than labor costs. An employer who, for instance, lays off substantial numbers of workers while continuing to dispense fat executive bonuses and perquisites or so-called "golden parachutes", can scarcely claim to be retrenching in good faith to avoid losses. To impart operational meaning to the constitutional policy of providing "full protection" to labor, the employer's prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means — e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing and advertising costs, etc. — have been tried and found wanting. Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring this quantum of proof is readily apparent: any less exacting standard of proof would render too easy the abuse of this ground for termination of services of employees. Guerrero v. NLRC (96) The requisites for valid retrenchment under the foregoing provision are: 1. 2. necessity of the retrenchment to prevent losses and proof of such losses; written notice to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment; and payment of separation pay equivalent to one month pay or at least 1/2 month pay for every year of service, whichever is higher.

3.

Asian Alcohol Corp. v. NLRC (99) The requirements for valid retrenchment which must be proved by clear and convincing evidence are: (1) that the retrenchment is reasonably necessary and likely to prevent business losses, which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer; (2) that the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intend date of retrenchment; (3) that the employer pays the retrenched employees separation pay equivalent to one month pay or at least 1/2 month pay for every year of service, whichever is higher; (4) that the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest of its interest and not to defeat or circumvent the employees' right to security of tenure; and (5) that the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status (i.e., whether they are temporary, casual, regular or managerial employees), efficiency, seniority, physical fitness, age, and financial hardship for certain workers. Complex Electronics Employees Assn. v. NLRC (99) In the instant case, notwithstanding the financial losses suffered by Complex, such was, however, not the main reason for its closure. Complex admitted in its petition that the main reason for the cessation of the operations was the pull-out of the materials, equipment and machinery from the premises of the corporation as dictated by its customers. It was actually still capable of continuing the business but opted to close down to prevent further losses. Under the facts and circumstances of the case, we find no grave abuse of discretion on the part of the public respondent in awarding the employees one (1) month pay for every year of service as termination pay. NATURE OF LOSS Lopez Sugar Corporation v. Federation of Free Workers (90) We consider it may be useful to sketch the general standards in terms of which the acts of

UP LAW BAROPS 2007 ONE UP
102 of 132

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

UP LAW BAROPS 2007 ONE UP
103 of 132

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

UP LAW BAROPS 2007 ONE UP
104 of 132

Part II : Labor Standards Law Labor Standards
actually sustained or realized. It is not, in other words, the intention of the lawmaker to compel the employer to stay his hand and keep all his employees until sometime after losses shall have in fact materialized; if such an intent were expressly written into the law, that law may well be vulnerable to constitutional attack as taking property from one man to give to another. This is simple enough. Revidad v. NLRC (95) In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or termination of the services of some employees is authorized to be undertaken by the employer sometime before the anticipated losses are actually sustained or realized. It is not, in other words, the intention of the lawmaker to compel the employer to stay his hand and keep all his employees until after losses shall have in fact materialized. If such an intent were expressly written into the law, that law may well be vulnerable to constitutional attack as unduly taking property from one man to be given to another. Asian Alcohol Corp. v. NLRC (99) It should be observed that Article 283 of the Labor Code uses the phrase "retrenchment to prevent losses". In its ordinary connotation, this phrase means that retrenchment must be undertaken by the employer before losses are actually sustained. We have, however, interpreted the law to mean that the employer need not keep all his employees until after his losses shall have materialized. Otherwise, the law could be vulnerable of attack as undue taking of property for the benefit of another. PROCEDURE (FOR REDUNDANCY)
BOTH RETRENCHMENT AND

Catatista v. NLRC (95) Article 283 of the Labor Code provides, inter alia, that the employer may terminate the employment of his employees to prevent losses. For an employer to validly terminate the service of his employees under this ground, he has to comply with two requirements, namely: (a) serving a written notice on the workers and the Department of Labor and Employment at least one month before the taking effect of the closure, and (b) payment of separation pay equivalent to one month pay or at least one-half (l/2) month pay for every year of service, whichever is higher, with a fraction of at least six months to be considered one whole year. Sebuguero v. NLRC (95) Under the aforequoted Article 283 of the Labor Code, there are three basic requisites for a valid retrenchment: 1. the retrenchment is necessary to prevent losses and such losses are proven; 2. written notice to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment; and 3. payment of separation pay equivalent to one month pay or at least 1/2 month pay for every year of service, whichever is higher. The requirement of notice to both the employees concerned and the Department of Labor and Employment (DOLE) is and must be written and given at least one month before the intended date of retrenchment. In this case, it is undisputed that the petitioners were given notice of the temporary layoff. There is, however, no evidence that any written notice to permanently retrench them was given at least one month prior to the date of the intended retrenchment. The NLRC found that GTI conveyed to the petitioners the impossibility of recalling them due to the continued unavailability of work. But what the law requires is a written notice to the employees concerned and that requirement is mandatory. The notice must also be given at least one month in advance of the intended date of retrenchment to enable the employees to look for other means of employment an therefore to ease the impact of the loss of their jobs and the corresponding income. That they were already on temporary lay-off at the time notice should have been given to them is not an excuse to forego the one-month written notice because by this time, their lay-off is to become permanent and they were definitely losing their employment. NON-STOCK NON-PROFIT ORGANIZATION Phil. Tuberculosis Society, Inc. v. NLRC (98) Although petitioner is a non-stock and nonprofit organization, retrenchment as a measure adopted to stave off threats to its existence is available to it. Article 278 of the Labor Code states that the fiscal measures recognized therein which an employer may validly adopt apply to "all establishments or undertakings, whether for profit or not." RURAL BANK Balbalec v. NLRC (95)

Revidad v. NLRC (95) The circular is more than sufficient notice to AG & P employees, as well as herein petitioners, of the then impending decision of the company to carry out its retrenchment program for the reasons therein stated. Anent the mandatory written notice to be filed with the labor department one month before the date of retrenchment, we are of the considered opinion that the proceedings had before the voluntary arbitrator, where both parties were given the opportunity to be heard and present evidence in their favor, constitute substantial compliance with the requirement of the law. The purpose of this notice is to enable the proper authorities to ascertain whether the closure of the business is being done in good faith and is not just a pretext for evading compliance with the just obligations of the employer to the affected employees. In fact, the voluntary arbitration proceedings more than satisfied the intendment of the law considering that the parties were accorded the benefit of a hearing, in addition to the right to present their respective position papers and documentary evidence. For that matter, hearing and investigation by the employer, where the reason for termination is retrenchment due to financial reverses and not to an act attributable to the employee, is not even required because it is considered a surplusage under existing jurisprudence.

UP LAW BAROPS 2007 ONE UP
105 of 132

Part II : Labor Standards Law Labor Standards
It should be noted, moreover, that unlike huge commercial banks with large capitalization, the bank involved in the case at bench is a small rural bank barely afloat and surviving on a measly capitalization of P500,000.00. Were we to deny private respondent's urgent request to streamline its work force to enable it to maintain stability and modest profitability, we would be sending a small financial institution teetering on the verge of financial ruin tumbling down on the road to bankruptcy. It need not be overemphasized that the State recognizes the pivotal role of small rural banks, such as the respondent bank, in the development of the countryside through its loan portfolios and other services to the rural folk. While courts must be constantly vigilant in validating claims of business losses to prevent unscrupulous employers from feigning such losses in order to dismiss their personnel, we are satisfied that respondent bank undertook the drastic act of cutting down its workforce in order to prevent imminent substantial loss to its business. APPOINTMENT OF REPLACEMENTS – EFFECT Bogo-Medellin Sugar Cane Planters Assn., Inc v. NLRC (98) Petitioner Corporation also failed to rebut the allegation that new employees were hired to replace the private respondents after the latter had been retrenched. The executive labor arbiter found that Gavino Negapatan replaced Private Respondent Montilla, while Reynaldo Parilla and Godofredo Florita replaced the other private respondents who had worked as sugar checkers or samplers. The employment of these replacements clearly belies petitioners' contention that the retrenchment was necessary to prevent or offset the expected losses effectively. APPOINTMENT OF REPLACEMENTS – RE-HIRING EFFECT Atlantic Gulf and Pacific Co. of Manila v. NLRC (99) “Petitioners contend that the ‘redundancy program’ was actually a union-busting scheme of management, aimed at removing union officers who had declared a strike. This contention cannot stand in the face of evidence of substantial losses suffered by the company. Moreover, while it is true that the company rehired or re-employed some of the dismissed workers, it has been shown that such action was made only as company projects became available and that it was done in pursuance of the company’s policy of giving preference to its former workers in the rehiring of project employees. The rehiring or re-employment does not negate the imminence of losses, which prompted private respondents to retrench.”
D.

their length of service. It would, indeed, be stretching the intent and spirit of the law, if we were to unjustly interfere in management's prerogative to close or cease its business operations just because said business operation or undertaking is not suffering from any loss. This Court, in the case of Maya Farms Employees Organization, et al. v. NLRC, et al., held that: "The rule is well-settled that labor laws discourage interference with an employer's judgment in the conduct of his business. Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. As long as the company's exercise of the same is in good faith to advance its interest and not for the purpose of defeating or circumventing the rights of employees under the laws or valid agreements, such exercise will be upheld." In Dangan v. NLRC, this Court had occasion to reiterate management's prerogative to close or abolish a department or section of the employer's establishment for economic reasons. We reasoned out that since the greater right to close the entire establishment and cease operations due to adverse economic conditions is granted an employer, the closure of a part thereof to minimize expenses and reduce capitalization should similarly be recognized. Likewise, this Court held in the case of Special Events & Central Shipping Office Workers Union v. San Miguel Corp. that the determination of the usefulness of a section, being a company prerogative, the closure may not be questioned, specially in this case where it is impelled by economic reasons due to the continuous losses sustained in its operation, coupled with the lack of demand for the service of such section. REQUIREMENTS Caffco International Ltd. v. Office MOLE (92) Under Article 283 of the Labor Code, three (3) requirements are necessary for a valid cessation of business operations, namely: (a) service of a written notice to the employees and to the MOLE at least one (1) month before the bona fide in character; and (c) payment to the employees of termination pay amounting to at least one-half (1/2) month pay for every year of service, or one (1) month pay, whichever is higher (Mobil Employees Association et al vs. NLRC et al.) EXTENT OF CLOSURE PARTIAL CLOSURE Catatista v. NLRC (95) The termination of employment of the employees of Hacienda Binanlutan brought about by the closure is to be considered as retrenchment as Hacienda Binanlutan is only one of the six haciendas of private respondent. 6 Clearly, private respondent's purpose in converting said hacienda into an ipil-ipil plantation and terminating the service of petitioners is to cut down on losses which it had adequately shown to have suffered through an income statement for the fiscal year which ended August 31, 1984.

CLOSING OF BUSINESS

RIGHT Catatista v. NLRC (95) In any case, Article 283 of the Labor Code is clear that an employer may close or cease his business operations or undertaking even if he is not suffering from serious business losses or financial reverses, as long as he pays his employees their termination pay in the amount corresponding to

UP LAW BAROPS 2007 ONE UP
106 of 132

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

NATURE OF LABOR CONTRACT

UP LAW BAROPS 2007 ONE UP
107 of 132

Part II : Labor Standards Law Labor Standards
Sundowner Development Corp. v. Drilon (89) The rule is that unless expressly assumed, labor contracts such as employment contracts and collective bargaining agreements are not enforceable against a transferee of an enterprise, labor contracts being in personam, thus binding only between the parties. A labor contract merely creates an action in personam and does not create any real right which should be respected by third parties. This conclusion draws its force from the right of an employer to select his employees and to decide when to engage them as protected under our Constitution, and the same can only be restricted by law through the exercise of the police power. As a general rule, there is no law requiring a bona fide purchaser of assets of an on-going concern to absorb in its employ the employees of the latter. However, although the purchase of the assets or enterprise is not legally bound to absorb in its employ the employees of the seller of such assets or enterprise, the parties are liable to the employees if the transaction between the parties is colored or clothed with bad faith. F. PROCEDURAL REQUIREMENTS
A.

provision, the third paragraph of the same section explicitly states that, "any confession or admission obtained in violation of this or the preceding section shall be inadmissible in evidence against him."

NOTICE Complex Electronics Employees Assn. v. NLRC (99) The purpose of the notice requirement is to enable the proper authorities to determine after gearing whether such closure is being done in good faith, i.e., for bona fide business reasons, or whether, to the contrary, the closure is being resorted to as a means of evading compliance with the just obligations of the employer to the employees affected. Serrano v. NLRC (2000) Nothing in the law gives private respondent the option to substitute the required prior written notice with payment of thirty (30) days salary. It is not for private respondent to make substitutions for a right that a worker is legally entitled to. For instance, as held in Farmanlis Farms, Inc. v. Minister of Labor, under the law, benefits in the form of food or free electricity, assuming they were given, were not a proper substitute for the 13th month pay required by law. Indeed, a job is more than the salary that it carries. Payment of thirty (30) days salary cannot compensate for the psychological effect or the stigma of immediately finding one’s self laid off from work. It cannot be a fully effective substitute for the thirty (30) days written notice required by law especially when, as in this case, the fact is that no notice was given to the Department of Labor and Employment (DOLE). Besides, as we held in our decision in this case, the purpose of such previous notice is to give the employee some time to prepare for the eventual loss of his job as well as the DOLE the opportunity to ascertain the verity of the alleged authorized cause of termination. Such purpose would not be served by the simple expedient of paying thirty (30) days salary in lieu of notice of an employee’s impending dismissal, as by then the loss of employment would have been a fait accompli. TWO NOTICE RULE Maneja v. NLRC (98) Well-settled is the dictum that the twin requirements of notice and hearing constitute the essential elements of due process in the dismissal of employees. It is a cardinal rule in our jurisdiction that the employer must furnish the employee with two written notice before the termination of employment can be effected: (a) the first apprises the employee of the particular acts or omissions for which his dismissal is sought; and, (b) the second informs the employee of the employer's decision to dismiss him. The requirement of a hearing, on the other hand, is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted.

DUE

PROCESS

NATURE

AND

REQUIREMENTS

IN GENERAL ESSENCE OF DUE PROCESS Arboleda v. NLRC (99) The essence of due process in administrative proceedings is an opportunity to explain one's side or an opportunity to seek reconsideration of the action or ruling complained of. Before an employee can be validly dismissed, the Labor code requires the employer to furnish the employee with two (2) written notices: (a) a written notice containing a statement of the cause for termination to afford the employee ample opportunity to be heard and defend himself with the assistance of his representative, if he so desires; and, (b) if the employer decides to terminate the services of the employee, the employer must notify him in writing of the decision to dismiss him, stating clearly the reasons therefor. RIGHT TO COUNSEL Salaw v. NLRC (91) It is true that administrative and quasi-judicial bodies are not bound by the technical rules of procedure in the adjudication of cases. However, the right to counsel, a very basic requirement of substantive due process, has to be observed. Indeed, the rights to counsel and to due process of law are two of the fundamental rights guaranteed by the 1987 Constitution to any person under investigation, be the proceeding administrative, civil, or criminal. Thus, Section 12(1), Article III thereof specifically provides: "Any person under investigation for the commission of an offense shall have the right to . . . have competent and independent counsel preferably of his own choice. If the person cannot afford the service of counsel, he must be provided with one. These rights cannot be waived except in writing and in the presence of counsel." To underscore the inviolability of this

UP LAW BAROPS 2007 ONE UP
108 of 132

Part II : Labor Standards Law Labor Standards
Farrol v. Court of Appeals (2000) As set forth in the foregoing procedures, the employer must comply with the twin requirements of two notices and hearing. The first notice is that which apprises the employee of the particular acts or omissions for which his dismissal is sought, and after affording the employee an opportunity to be heard, a subsequent notice informing the latter of the employer’s decision to dismiss him from work. representation." Here, private respondent has been summarily dismissed, following his suspension, without being accorded an opportunity to confront the "witness" (Rene Baylon) against him and to thereafter adduce evidence in his defense. HEARING Consolidated Rural Bank, Inc. v. NLRC (99) Petitioner's avowal of denial of procedural due process must fail, and so with its prayer for a remand. The fact that counsel for petitioner was not present during the clarificatory hearing on 19 July 1994, hence, unable to rebut the testimony given by private respondent could hardly be attributed to anybody else's fault but its own. Records show that notice was given to the parties with warning that failure to attend would be construed as a waiver of the opportunity to be heard. However while counsel for private respondent filed his Manifestation begging off from the hearing on ground of a prior engagement, counsel for petitioner on the other hand simply chose not to appear on the assumption that the hearing would be postponed on account of opposing counsel's absence thus negligently and completely overlooking the assurance in the very same Manifestation that private respondent would nevertheless appear on her own. Hence, the fact that the Labor Arbiter proceeded with the hearing as scheduled could not be branded as an arbitrary act depriving petitioner of its right to present evidence. Petitioner lost this additional opportunity entirely through its own fault and negligence. Similarly, the decision of the Labor Arbiter not to schedule the case for another hearing could not be considered as a grave abuse of discretion. First of all, it is well-settled that the holding of a hearing is discretionary with the Labor Arbiter and is something which the parties cannot demand as a matter of right. It is entirely within the bounds of the Labor Arbiter's authority to decide a case based on mere position papers and supporting documents without a formal trial or hearing as is sanctioned by the New Rules Procedure of the National Labor Relations Commission. Thus we have consistently held that the requirements of due process are satisfied when the parties are given the opportunity to submit position papers wherein they are supposed to attach all the documents that would prove their claim in case it be decided that no hearing should be conducted or was necessary. Secondly, we note that petitioner and private respondent themselves agreed during the hearing of 3 March 1994 to forego with a formal trial and opted instead to file only their respective replies to each other's position paper. Given these circumstances, petitioner certainly cannot now be heard to have been deprived of due process. Libres v. NLRC (99) Due process as a constitutional precept does not always and in all situations require a trial type proceeding. Due process is satisfied when a person is notified of the charge against him and given an opportunity to explain or defend himself. The essence of due process is simply to be heard, or as applied to administrative proceedings, an opportunity to explain one’s side, or an opportunity to seek a reconsideration of the action or ruling complained of.

HEARING – NOT REQUIRED Magos v. NLRC (98) Both the NLC and the Labor Arbiter found that no formal hearing was conducted regarding petitioner's dismissal. Although a hearing is essential to due process, in Bernardo v. NLRC we did hold that no formal hearing was necessary when the petitioner had already admitted his responsibility for the act he was accused of. Even though petitioner in this case never admitted the accusations of dishonesty against him, he impliedly acknowledged his insubordination as shown in his petition. Caurdenetaan Piece Workers Union v. Laguesma (98) Due process is not violated where a person is given the opportunity to be heard, but chooses not to give his side of the case. National Semi-Conductor (HK) Distribution Ltd. v. NLRC The essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain one's side. In the instant case, petitioner furnished private respondent notice as to the particular acts which constituted the ground for his dismissal. By requiring him to submit a written explanation within 48 hours from receipt of the notice, the company gave him the opportunity to be heard in his defense. Private respondent availed of this chance by submitting a written explanation. Furthermore, investigations on the incident were actually conducted on 9 January 1993 and 11 January 1993. Thus, it is clear the minimum requirements of due process have been fulfilled by petitioner. That the investigations conducted by petitioner may not be considered formal or recorded hearings or investigations is immaterial. A formal or trial type hearing is not all times and in all instances essential to due process, the requirements of which are satisfied where the parties are afforded fair and reasonable opportunity to explain their side of the controversy. It is deemed sufficient for the employer to follow the natural sequence of notice, hearing and judgment. AMPLE OPPORTUNITY La Carlota Planters Assn., Inc. v. NLRC (98) In Balayan Colleges vs. NLRC, the Court has observed that ample opportunity in due process means that "kind of assistance that management must accord the employee to enable him to prepare adequately for his defense including legal

UP LAW BAROPS 2007 ONE UP
109 of 132

Part II : Labor Standards Law Labor Standards
LACK OF VERIFICATION St. Michael Academy v. NLRC (98) While the procedure adopted by the private respondents failed to comply strictly with Rule III (Pleadings) and Rule V (Proceedings Before Labor Arbiters) of the New Rules of Procedure of the NLRC, we are constrained to heed the underlying policy of the Labor Code relaxing the application of technical rules of procedure in labor cases to help secure and not defeat justice. To be sure, petitioners cannot maintain that they were denied due process. The essence of due process in administrative proceedings is simply an opportunity to explain one's side or an opportunity to seek a reconsideration of action or ruling complained of. In labor cases, submission of position papers and memoranda fulfills the requirements of due process. Petitioners' stance with respect to the lack of verification of private respondents' position paper deserves scant consideration. The defect is a formal, rather than a substantial one and which further loses significance in light of the exhaustive proceedings undertaken by public respondent to resolve the parties' dispute on the merits. FAILURE TO FURNISH Pepsi-Cola Products Phils., Inc. v. NLRC (98) At all events, a plea of denial of procedural due process, where the defect consists in the failure to furnish an opponent with a copy of a party's position paper, cannot be entertained when he who makes the plea is effectively given the opportunity to be heard in a Memorandum of Appeal. Even if a party has not been heard at the stage of mediation and fact-finding, he still can take that opportunity to present his side when the Memorandum of Appeal is given due course, as it has so been given in this instance, by the NLRC. Thus, the fundamental rule of due process that mandates notice and an opportunity to be heard has here been amply met. FAILURE OF DUE PROCESS EFFECT OF FAILURE – SUBSTANTIVE – PROCEDURAL Alhambra Industries, Inc. v. NLRC (94) A termination without just cause entitles a worker to reinstatement regardless of whether he was accorded due process. On the other hand, termination of a worker for cause, even without procedural due process, does not warrant reinstatement, but the employer incurs liability for damages. Serrano v. NLRC (2000) It is contended that private respondent's nonobservance of the notice requirement should not be visited with a severe consequence in accordance with Art. III, §19(1) of the Constitution. The contention is without merit. In the first place, Art. III, §19(1) of the Constitution, prohibiting the imposition of excessive fines, applies only to criminal prosecutions. In the second place, the decision in this case, providing for the payment of full backwages for failure of an employer to give notice, seeks to vindicate the employee's right to notice before he is dismissed or laid off, while recognizing the right of the employer to dismiss for any of the just causes enumerated in Art. 282 or to terminate employment for any of the authorized causes mentioned in Arts. 283-284. The order to pay full backwages is a consequence of the employer's action in dismissing an employee without notice which makes said dismissal ineffectual. The employee is considered not to have been terminated from his employment until it is finally determined that his dismissal/termination of employment was for cause and, therefore, he should be paid his salaries in the interim. This eliminates guesswork in determining the degree of prejudice suffered by an employee dismissed with cause but without notice since the penalty is measured by the salary he failed to earn on account of his dismissal/termination of employment.

B.

OTHER PROCEDURAL MATTERS

BURDEN AND DEGREE OF PROOF BURDEN Gothong Lines Inc. v. NLRC (99) The constitutional guarantee of protection to labor and security of tenure requires that an employer terminate the services of an employee only for valid and just causes which must be supported by substantial evidence. The burden of proving that the termination of an employee is for a valid or authorized cause rests on the employer. In any event, the employer must comply with due process requirements before any termination is done. Maranaw Hotel and Resort Corp. v. NLRC (99) Albeit petitioner may have reasons to doubt the honesty and trustworthiness of Damalerio, as a result of what happened, absent sufficient proof of guilt, he (Damalerio), who is a rank-and-file employee, cannot be legally dismissed. Unsubstantiated suspicions and baseless conclusions by employers are not legal justification for dismissing employees. The burden of proving the existence of a valid and authorized cause of termination is on the employer. Any doubt should be resolved in favor of the employee, in keeping with the principle of social justice enshrined in the Constitution. DEGREE Manila Electric Co., Inc. v. NLRC (91) And this Court has ruled that the ground for an employer's dismissal of an employee need be established only by substantial evidence, it not being required that the former's evidence "be of such degree as is required in criminal cases, i.e., proof beyond reasonable doubt." 16 It is absolutely of no consequence that the misconduct with which an employee may be charged also constitutes a criminal offense: theft, embezzlement, assault on another employee or company officer, arson, malicious mischief, etc. The proceedings being administrative, the quantum of proof is governed by the substantial evidence rule and not, as the

UP LAW BAROPS 2007 ONE UP
110 of 132

Part II : Labor Standards Law Labor Standards
respondent Commission seems to imagine, by the rule governing judgments in criminal actions. Phil. Savings Bank v. NLRC (96) In affirming the Labor Arbiter, the NLRC found the evidence supporting the Labor Arbiter's factual findings to be substantial and for this reason apparently found it unnecessary to make a separate discussion. Factual findings of administrative agencies are generally accorded respect and even finality in this Court if they are supported by substantial evidence. Loss of trust and confidence is a cause for dismissing an employee who is entrusted with fiducial matters, or with the custody, handling or care and protection of the employer's property. There is no dispute about this. But the employer must clearly and convincingly establish the facts and incidents upon which its loss of confidence in the employee may be fairly made to rest otherwise, the dismissal will be rendered illegal. Reno Foods, Inc. v. NLRC (95) Findings of facts of quasi-judicial agencies like the NLRC which have acquired expertise in the specific matters entrusted to their jurisdiction are accorded by this Court not only with respect but even finality if they are supported by substantial evidence. Substantial evidence, which is the quantum of evidence required to establish a fact in cases before administrative and quasi-judicial bodies, is that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. PRESCRIPTION PERIOD Azcor Manufacturing Inc. v. NLRC (99) In addition, an action for reinstatement by reason of illegal dismissal is one based on an injury which may be brought within four (4) years from the time of dismissal pursuant to Art. 1146 of the Civil Code. Hence, Capulso's case which was filed after a measly delay of four (4) months should not be treated with skepticism or cynicism. By law and settled jurisprudence, he has four (4) years to file his complaint for illegal dismissal. A delay of merely four (4) months in instituting an illegal dismissal case is more than sufficient compliance with the prescriptive period. It may betray an unlettered man's lack of awareness of his rights as a lowly worker but, certainly, he must not be penalized for his tarrying. Coca-cola Bottlers Phils., Inc. v. Roque (99) Davide, C. J., dissenting Pursuant to Article 291 of the Labor Code, as amended, the complaint should have been filed within three (3) years for the accrual of Roque’s cause of action (his dismissal in 1982) otherwise, his claim shall be forever bared. Besides even assuming for the sake of argument that the regular courts have jurisdiction over his claim for damages because of his illegal dismissal, such claims necessarily arose upon an injury to his (as plaintiff) rights. Under Article 1146 of the Civil Code, an action arising from injury to plaintiff’s rights prescribe in four (4) years from the accrual of the cause of action. It was only in 1 June 1989, or after the lapse of seven (7) years after his illegal dismissal, when Roque filed his complaint for damages with the Regional Trial Court. OFFER TO REINSTATE Ranara v. NLRC (92) The fact that his employer later made an offer to re-employ him did not cure the vice of his earlier arbitrary dismissal. The wrong had been committed and the harm done. Notably, it was only after the complaint had been filed that it occurred to Chang, in belated gesture of good will, to invite Ranara back to work in his store. Chang's sincerity is suspect. We doubt if his offer would have been made if Ranara had not complained against him. At any rate, sincere or not, the offer of reinstatement could not correct the earlier illegal dismissal of the petitioner. The private Civil Case s incurred liability under the Labor Code from the Ranara was illegally dismissed, and the liability did not abate as a result of Chang's repentance.

G.

SANCTIONS AND REMEDIES

23.08 GENERAL RULE TWIN REMEDIES Valdez v. NLRC (98) Under Article 279 of the Labor Code, as amended, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full back wages, inclusive of allowances, and to other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. Thus, it being clearly established that herein petitioner was constructively dismissed, the decision of the Labor Arbiter awarding him back wages and separation pay in lieu of reinstatement, plus the refund of his cash bond and tire deposit, is definitely in order. Phil. Airlines, Inc. v. NLRC (98) In the case at bar, the alleged injury which private respondents stand to suffer by reason of their alleged illegal dismissal can be adequately compensated and therefore, there exists no "irreparable injury," as defined above which would necessitate the issuance of the injunction sought for. Article 279 of the Labor Code provides that an employee who is unjustly dismissed from employment shall be entitled to reinstatement, without loss of seniority rights and other privileges, and to the payment of full backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. Judy Philippines, Inc. v. NLRC (98)

UP LAW BAROPS 2007 ONE UP
111 of 132

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

UP LAW BAROPS 2007 ONE UP
112 of 132

Part II : Labor Standards Law Labor Standards
entitled to reinstatement and to receive back wages from the date of his dismissal up to the time of his reinstatement. The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the employee becomes entitled to reinstatement to his former position without loss of seniority rights and, secondly, the payment of back wages corresponding to the period from his illegal dismissal up to actual reinstatement. The rationale therefor is clearly obvious. Reinstatement restores the employee who was unjustly dismissed to the position from which he was removed, i.e., to his status quo ante dismissal, while the grant of back wages allows the same employee to recover from the employer that which he had lost by way of wages as a result of his dismissal. These twin remedies of reinstatement and payment of back wages make whole the dismissed employee, who can then look forward to continued employment. These two remedies give meaning and substance to the constitutional right of labor to security of tenure. However, the two remedies are distinct and separate. Though the grant of reinstatement commonly carries with it an award of back wages, the inappropriateness or non-availability of one does not carry with it the inappropriateness or nonavailability of the other. Reinstatement is a restoration to a state from which one has been removed or separated. On the other hand, the payment of backwages is a form of relief that restores the income that was lost by reason of the unlawful dismissal. The award of one is not a condition precedent to an award of another. Back wages may be ordered without ordering reinstatement; conversely, reinstatement may be payment ordered without of back wages.
compensation was withheld from him up to the time of his reinstatement."

is aimed to restore the situation as nearly as possible to status quo ante the unfair labor practice. This requires that those deprived of a recognized and protected interest by violations of the law should be made whole so as to prevent the violator from profiting from his misdeeds (N.L.R.B. v. Coats and Clark, Inc.; N.L.R.B. v. J.H. Rutter-Rex Manufacturing Co.). Yet the reinstatement remedy must always be adapted to economic-business conditions (N.L.R.B. v. R.C. Can Co.; N.L.R.B. v. American Aggregate Co.). RATIONALE Escobin v. NLRC (98) The normal consequences of illegal dismissal are reinstatement and payment of back wages. These remedies give life to the workers' constitutional right to security of tenure. Separation pay is generally not awarded except in instances where reinstatement is no longer feasible or appropriate, as in this case. As a substitute for immediate and continued reemployment, separation pay is meant to provide the employee the "wherewithal during the period that he is looking for another employment." EMPLOYEE RIGHT Quijano v. Mercury Drug Corp. (98) We disagree. Well-entrenched is the rule that an illegally dismissed employee is entitled to reinstatement as a matter of right. Over the years, however, the case law developed that where reinstatement is not feasible, expedient or practical, as where reinstatement would only exacerbate the tension and strained relations between the parties, or where the relationship between the employer and employee has been unduly strained by reason of their irreconcilable differences, particularly where the illegally dismissed employee held a managerial or key position in the company, it would be more prudent to order payment of separation pay instead of reinstatement. Some unscrupulous employers, however, have taken advantage of the overgrowth of this doctrine of "strained relations" by using it as a cover to get rid of its employees and thus defeat their right to job security. EFFECT OF FAILURE TO ASK RELIEF General Baptist Bible College v. NLRC (93) Having been illegally dismissed from his position as Academic Dean, Basa is entitled to reinstatement to his former position without loss of seniority rights and to payment of backwages from the time of his illegal dismissal up to his actual reinstatement. In resolving whether or not the relief of reinstatement may be granted to Basa notwithstanding his failure to pray for the same in his complaint, We rule in the affirmative. We are for the granting of the relief he is entitled to under the law, although he failed to specifically pray for the same in his complaint. We hereby note that Basa's failure to specifically pray for the relief of reinstatement in a complaint which he personally prepared and signed using a standard form prepared by the NLRC Regional Arbitration, Branch No. XI, Davao City, is a procedural lapse which cannot put to naught a right which he is entitled under a substantive

RATIONALE FOR REMEDIES Globe Mackay v. NLRC (92) To go back to the instant case, there being no evidence to show an authorized, much less a legal, cause for the dismissal of private respondent, she had every right, not only to be entitled to reinstatement, but as well, to full backwages. The intendment of the law in prescribing the twin remedies of reinstatement and payment of backwages is, in the former, to restore the dismissed employee to her status before she lost her job, for the dictionary meaning of the word "reinstate" is "to restore to a state, condition, position, etc. from which one had been removed" and in the latter, to give her back the income lost during the period of unemployment. Both remedies, looking to the past, would perforce make her "whole." 23.09 REINSTATEMENT DEFINED Union of Supervisors, etc. v. Secretary of Labor (84) The Labor Code provision on reinstatement, to wit:
"Art. 280. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his

UP LAW BAROPS 2007 ONE UP
113 of 132

Part II : Labor Standards Law Labor Standards
law. Technicalities have no room in labor cases, where the Rules of Court are applicable only in order to effectuate the objectives of the Labor Code and not to defeat them. The pertinent provisions of the Revised Rules of Court of the Philippines and prevailing jurisprudence may be applied by analogy or in a suppletory character to effect an expeditious resolution of labor controversies in a practical and convenient manner. We are inclined to overlook a procedural defect if only to promote substantial justice. RULES ON REINSTATEMENT NOT AN EMPLOYER OPTION Iriga Telephone Co., Inc. v. NLRC (98) In sum, the labor arbiter ruled that, while Praxides was at fault for desisting from working for ITELCO, the former could not be totally blamed for doing so because of the maltreatment he suffered at the hands of Atty. Ortega. He tried to restore the status quo by decreeing Praxides' reinstatement without loss of seniority rights but without back wages. The filing by Praxides of a criminal complaint against ITELCO's president and general manager has, however, strained the relations between them, moving the NLRC to award separation pay in lieu of reinstatement, in conformity with applicable jurisprudence on the matter. Certainly, this act does not constitute abuse of discretion, much less grave abuse, on the part of the NLRC. Finally, as to the amount of the monetary award, this Court has ruled that where reinstatement is no longer an option, a separation pay equivalent to one month's salary for every year of service is awarded as an alternative. DUE PROCESS Alhambra Industries, Inc. v. NLRC (94) The error is consequential. A termination without just cause entitles a worker to reinstatement regardless of whether he was accorded due process. On the other hand, termination of a worker for cause, even without procedural due process, does not warrant reinstatement, but the employer incurs liability for damages. Since the Labor Arbiter found a valid ground for dismissal, taking into consideration the controverting evidence of the parties, which finding was not set aside by NLRC, the latter was in grave error when it directed reinstatement. Where, on the basis of the evidence of the opposing parties the validity of the dismissal is determinable at the level of the Labor Arbiter, the latter should resolve that issue. And if the Labor Arbiter finds just cause in the termination, reinstatement would no longer serve any purpose. After all, a finding by the Labor Arbiter as to the validity of the ground for dismissal is much more impartial and trustworthy than a determination by the employer who assumes the role of accuser and judge at the same time. EXCEPTIONS BUSINESS CONDITIONS Union of Supervisors, etc. v. Sec. of Labor (84) The Labor Code provision on reinstatement, to wit:
"Art. 280. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his compensation was withheld from him up to the time of his reinstatement."

is aimed to restore the situation as nearly as possible to status quo ante the unfair labor practice. This requires that those deprived of a recognized and protected interest by violations of the law should be made whole so as to prevent the violator from profiting from his misdeeds (N.L.R.B. v. Coats and Clark, Inc.; N.L.R.B. v. J.H. Rutter-Rex Manufacturing Co.). Yet the reinstatement remedy must always be adapted to economic-business conditions (N.L.R.B. v. R.C. Can Co.; N.L.R.B. v. American Aggregate Co.]. Espejo v. NLRC (96) The law recognizes as valid any retirement plan, agreement or management policy regarding retirement at an earlier or older age. In the case of petitioner, CISP did not have any retirement plan for its employees. In such situation, Sec. 13, Book IV, of the Omnibus Rules Implementing the Labor Code provides that in the absence of a retirement plan, agreement or policy an employee may be retired upon reaching the age of sixty (60) years. Construing this provision, we held that an employee may retire, or may be retired by his employer, upon reaching sixty (60). Thus, an employee held to be illegally dismissed cannot be reinstated if he had already reached the age of sixty (60) years at the time of his second complaint (pressing for reinstatement) before the Labor Arbiter's Office. STATUS OF EMPLOYMENT Kiamco v. NLRC (99) The argument of private respondents that reinstatement and payment of back wages could not be made since Kiamco was not a regular employee is apparently misplaced. As quoted above, the normal consequences of an illegal dismissal are the reinstatement of the aggrieved employee and the grant of back wages. These rights of an employee do not depend on the status of his employment prior to his dismissal but rather to the legality and validity of his termination. The fact that an employee is not a regular employee does not mean that he can be dismissed any time, even illegally, by his employer. STRAINED RELATIONS RATIONALE Pearl S. Buck Foundation, Inc. v. NLRC (90) There is likewise no basis for the NLRC ruling that Mrs. Querimit should be reinstated with backwages. A close scrutiny of the record reveals that after filing her complaint for illegal dismissal, Mrs. Querimit executed an affidavit which states:
"That since I am not interested to be reinstated to my employment by reason of the prejudicial and strained relations now existing between myself and the management of Pearl S. Buck Foundation, Inc., I am claiming separation pay for being illegally dismissed from employment to be computed from the date I was employed up to the date I was illegally dismissed; . . ."

Said statement should have cautioned both the labor arbiter and the NLRC. The parties to a case should not be forced into a situation where a peaceful relationship is not feasible. As the petitioner appears to have lost its trust in private

UP LAW BAROPS 2007 ONE UP
114 of 132

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

IMPLEMENTATION – OPTIONS AND RATIONALE RATIONALE Jardine Davies, Inc. v. NLRC (93) The order of immediate reinstatement pending appeal, in cases of illegal dismissal is an ancillary relief under RA 6715 granted to a dismissed employee to cushion him & his family against the impact of economic dislocation or abrupt loss of earnings. If the employee chooses not to report for work pending the resolution of the case on appeal, he foregoes such a temporary relief and is not paid of his salary. IMMEDIATELY EXECUTORY OPTIONS

UP LAW BAROPS 2007 ONE UP
115 of 132

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

UP LAW BAROPS 2007 ONE UP
116 of 132

Part II : Labor Standards Law Labor Standards
not only the basic salary but also the emergency cost of living allowances and also transportation allowances if the workers are entitled thereto.”

RATIONALE Associated Labor Unions – TUCP v. NLRC (99) As already stated, dismissal as a measure to protect the interests of respondent company is unwarranted under the facts of this case. Suspension would have sufficed. Without deciding for how long the suspension should be in cases such as this, considering that petitioner has been prevented from working in respondent company since September 13, 1993, we hold that, for all purposes, he has served a reasonable period of suspension commensurate to the gravity of his offense. Consequently, the Labor Arbiter’s order of reinstatement of petitioner without back wages may be considered appropriate. Quebec v. NLRC (99) Considering that the dismissal of private respondents was illegal, the payment of back wages is in order; and since their termination was after 21 March 1989, or after RA No. 6715 took effect, they are also entitled to full back wages, inclusive of allowances and other benefits allowed by law, computed from the time their compensation was withheld up to the finality of this judgment. In lieu of reinstatement, however, separation pay is to be awarded herein due to the fact that the reinstatement of respondents to their previous confidential jobs is no longer possible since the Canhagimet Express was already sold by petitioner. Separation pay is the amount that an employee receives at the time of his severance from the service and is designed to provide him with the wherewithal during the period that he is looking for another employment. The grant of separation pay does not preclude an award for back wages for the latter represents the amount of earnings lost by reason of the unjustified dismissal. EFFECT FAILURE TO CLAIM De la Cruz v. NLRC (98) It is evident that the award of back wages resulting from the illegal dismissal of an employee is a substantive right. Thus, the failure to claim back wages in a complaint for illegal dismissal has been held to be a mere procedural lapse which cannot defeat a right granted under substantive law. EFFECT FAILURE TO ORDER Aurora Land, etc. v. NLRC (97) The Court, however, is bewildered why only an award for separation pay in lieu of reinstatement was made by both the Labor Arbiter and the NLRC. No back wages were awarded. It must be remembered that back wages and reinstatement are two reliefs that should be given to an illegally dismissed employee. They are separate and distinct from each other. In the event that reinstatement is no longer possible, as in this case, separation pay is awarded to the employee. The award of separation pay is in lieu of reinstatement and not of back wages. In other words, an illegally dismissed employee is entitled to (1) either reinstatement, if viable, and (2) back wages. Payment of back wages is specifically designed to restore an employee’s

income that was lost because of his unjust dismissal. On the other hand, payment of separation pay is intended to provide the employee money during the period in which he will be looking for another employment. XXX It is true that private respondent did not appeal the award of Labor Arbiter awarding separation pay sans back wages. While as a general rule a party who has not appealed is not entitled to affirmative relief other than the ones granted in the decision of the court below, law and jurisprudence authorize a tribunal to consider errors, although unassigned, if they involve (1) errors affecting the lower court’s jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical errors. In this case, the failure of the Labor Arbiter and the public respondent NLRC to award back wages to the private respondent, who is legally entitled thereto having been illegally dismissed, amounts to a “plain error” which we may rectify in this petition, although private respondent did not bring any appeal regarding the matter, in the interest of substantial justice. The Supreme Court is clothed with ample authority to review matters, even if they are not assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. Rules of procedure are mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be avoided. Thus, substantive rights like the award of back wages resulting from illegal dismissal must not be prejudiced by a rigid and technical application of the rules. PERIOD – COMPUTATION Itogon Suyoc, etc. v. Sangilo (68) Since the dismissal of respondents in 1958, more than ten years had elapsed, it would not seem out of place to restate the guidelines to be observed in the ascertainment of the total back wages payable under the judgment below. These are: First. To be deducted from the back wages accruing to each of the laborers to be reinstated is the total amount of earnings obtained by him from other employment(s) from the date of dismissal to the date of reinstatement. Should the laborer decide that it is preferable not to return to work, the deduction should be made up to the time judgment becomes final. And these, for the reason that employees should not be permitted to enrich themselves at the expense of their employer. Besides, there is the “law’s abhorrence for double compensation.” Second. Likewise, in mitigation of the damages that the dismissed respondents are entitled to, account should be taken of whether in the exercise of due diligence respondents might have obtained income from suitable remunerative employment. We are prompted to give out this last reminder because it is really unjust that a discharged employee should, with folded arms, remain inactive in the expectation that a windfall would come to him. A contrary view would breed idleness; it is conducive to lack of initiative on the part of a laborer. Mercury Drug Co., Inc. v. CIR (74)

UP LAW BAROPS 2007 ONE UP
117 of 132

Part II : Labor Standards Law Labor Standards
While this case was submitted for decision on March 29, 1965, the delay in its resolution is not due to the parties. However, it should be noted that private respondent Dayao filed his ULP charge with reinstatement and back wages about two years and fifteen days after his separation on April 10, 1961. As aforestated, the shortest prescriptive period for the filing of all other actions for which the statute of limitations does not fix a period, is four years. The period of delay in instituting this ULP charge with claim for reinstatement and back wages, although within the prescriptive period, should be deducted from the liability of the employer to him for back wages. In order that the employee however should be relieved from proving his income during the period he was out of the service and the employer from submitting counter-proofs, which may delay the execution of the decision, the employer in the case at bar should be directed to pay private respondent Dayao back wages equivalent to one year, eleven months, and fifteen days without further disqualifications. Teehankee (dissent) - an award of back wages equivalent to 3 years should serve as the base figure without deductions, subject to deductions where there are mitigating circumstances in favor of the ER, but subject to an increase by way of exemplary damages where there are aggravating circumstances on the ER’s part. FEATI University v. Bautista (74) As to the amount of back wages, the Court applies the precedent recently stated in Mercury Drug Co. v. CIR of fixing the amount of back wages to a just and reasonable level without qualification or deduction so as to avoid protracted delay in the execution of the award for back wages due to extended hearings and unavoidable delays and difficulties encountered in determining the earnings of the laid-off employees ordered to be reinstated with back wages during the pendency of the case for purposes of deducting the same from the gross back wages awarded. As has been noted, this formula of awarding reasonable net back wages without deduction or qualification relieves the employees from proving or disproving their earnings during their lay-off and the employers from submitting counterproofs, and obviates the twin evils of idleness on the part of the employee who would “with folded arms, remain inactive in the expectation that a windfall would come to him” and attrition and protracted delay in satisfying such award on the part of unscrupulous employers who have seized upon the further proceedings to determine the actual earnings of the wrongfully dismissed or laid –off employees to hold unduly extended hearings for each and every employee awarded back wages and thereby render practically nugatory such award and compel the employees to agree to unconscionable settlements of their back wages award in order to satisfy their dire need. Pines City Educational Center v. NLRC (93) We concur with these factual findings, there being no showing that they were resolved arbitrarily. Thus, the order for their reinstatement and payment of full back wages and other benefits and privileges from the time they were dismissed up to their actual reinstatement is proper, conformably with Article 279 of the Labor Code, as amended by Section 34 of Republic Act No. 6715 which took effect on march 21, 1989. It should be noted that private respondents were dismissed illegally on March 31, 1989, or after the effectivity of said amendatory law. However, in ascertaining the total amount of back wages payable to them, we go back to the rule prior to the Mercury Drug rule that the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom. We restate the underlying reason that employees should not be permitted to enrich themselves at the expense of their employer. In addition, the law abhors double compensation. To this extent, our ruling in Alex Ferrer, et al. v. NLRC, promulgated on July 5, 1993, is hereby modified. Lopez v. NLRC (96) With respect to the total amount of back wages payable to petitioner, the case of Pines City Educational Center, et al. v. NLRC which was cited in the recent case of Zenaida Gaco v. NLRC, enunciated the prevailing jurisprudence on the matter:
in ascertaining the total amount of back wages payable to them, we go back to the rule prior to the Mercury Drug rule that the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom. We restate the underlying reason that employees should not be permitted to enrich themselves at the expense of their employer. In addition, the law abhors double compensation.

Bustamante v. NLRC (96) The Court deems it appropriate to reconsider such earlier ruling on the computation of back wages as enunciated in said Pines City Educational Center case, by now holding that conformably with the evident legislative intent as expressed in RA 6715, back wages to be awarded to an illegally dismissed employee, should not, as a general rule be diminished or reduced by the earnings derived by him elsewhere during the period of his illegal dismissal. The underlying reason for this ruling is that the employee, while litigating the legality (illegality) of his dismissal, must still earn a living to support himself and family, while full back wages have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing his employee. The clear legislative intent of the amendment in RA 6715 is to give more benefits to workers than was previously given them under the Mercury Drug rule or the “deduction of earnings elsewhere” rule. Thus, a closer adherence to the legislative policy behind RA 6715 points to “full back wages” as meaning exactly that, i.e. without deducting from back wages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. Food Traders House, Inc. v. NLRC (98) As the law now stands, an illegally dismissed employee is entitled to his full back wages, without deduction of earrings earned elsewhere, from the time his compensation was withheld until his actual reinstatement. As such, earnings earned elsewhere during the pendency of the case should not be deducted from the computation of back wages. The rationale is that –
the employee, while litigating the legality (illegality) of his dismissal, must still earn a living

UP LAW BAROPS 2007 ONE UP
118 of 132

Part II : Labor Standards Law Labor Standards
to support himself and family, while full back wages have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing his employee. The clear legislative intent of the amendment in RA 6715 is to give more benefits to workers than was previously given them under the Mercury Drug rule or the “deduction of earnings elsewhere” rule. Thus, a closer adherence to the legislative policy behind RA 6715 points to “full back wages” as meaning exactly that, i.e. without deducting from back wages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal.

cause of labor with the blemishes of their own character. Fernan, C. J., dissenting: XXX I am in accord with the opinion of Justice Sarmiento that we should not rationalize compassion and that of Justice Padilla that the awards of financial assistance should be left to the discretion of the National Labor Relations Commission as may be warranted by the “environmental facts” of the case. Salavarria v. Letran College (98) We rule that the NLRC correctly awarded to petitioner the amount of P45,000.00 as "severance pay" which is synonymous with "separation pay." As a general rule, an employee who is dismissed for cause is not entitled to any financial assistance. However, equity considerations provide an exception. In PLDT v. NLRC, equity has been defined as justice outside law, being ethical rather than jural and belonging to the sphere of morals than of law. It is grounded on the precepts of conscience and not on any sanction of positive law, for equity finds no room for application where there is law. Further, it was held that the grant of separation pay is not merely based on equity but on the provisions of the Constitution regarding the promotion of social justice and protection of the rights of the workers. NOT ALLOWED Phil. Construction Corp. v. NLRC (89) While it is true that in some earlier case, We held that employees dismissed for cause are nevertheless entitled to separation pay on the ground of social and compassionate justice, that doctrine was abandoned by this Court in the recent case of Philippine Long Distance Telephone Co. v. NLRC, where We held that:
henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense, involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.

Torres v. NLRC (2000) The respondent agency's contention that there has been a change in the situation of the parties making execution inequitable because petitioner accepted employment from another agency without resigning from it is patently without merit. In the recent ruling of the Court, we said that the rule enunciated in Pines City no longer controls. Now, the rule is that back wages awarded to an illegally dismissed employee shall not be diminished or reduced by the earnings derived by him elsewhere during the period of his illegal dismissal. EFFECT OF INFLATION Lantion v. NLRC (90) In respect of the argument that the inflation that has supervened justifies the imposition of interest, this Court has held that the effects of extraordinary inflation are not to be applied without an agreement between the parties and without an official declaration thereof by competent authorities (Velasco v. manila Electric Co.; Commissioner of Public Highways v. Burgos) 23.11 FINANCIAL ASSISTANCE ALLOWED FINANCIAL ASSISTANCE Phil. Long Distance Telephone Co. v. NLRC (88) We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense, involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice. XXX The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every human society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives are blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the

XXX The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every human society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives are blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character. Eastern Paper Mills, Inc. v. NLRC (89) An award of separation pay to an employee who was dismissed for a valid cause is legally

UP LAW BAROPS 2007 ONE UP
119 of 132

Part II : Labor Standards Law Labor Standards
indefensible. It contravenes Rule 1, Sec. 7, Book VI of the Omnibus Rules Implementing the LC. The only cases when separation pay shall be paid, although the employee was lawfully dismissed, are when the cause of termination was not attributable to the employee's fault but due to: (1) the installation of labor-saving devices, (2) redundancy, (3) retrenchment, (4) cessation of the employer's business, or (5) when the employee is suffering from a disease and his continued employment is prohibited by law or is prejudicial to his health and to the health of his co-employees. (Art. 283 & 284, LC) Other than these cases, an employee who is dismissed for a just and lawful cause is not entitled to separation pay even if the award were to be called by another name. clause. Stated differently, when an employer customarily furnishes his employee board, lodging or other facilities, the fair and reasonable value thereof, as determined by the Secretary of Labor and Employment, is included in "wage." In order to ascertain whether the subject allowances form part of petitioner's "wages," we divide the discussion on the following — "customarily furnished;" "board, lodging or other facilities;" and, "fair reasonable value as determined by the Secretary of Labor." "Customary" is founded on long-established and constant practice connoting regularity. The receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and forming part of salary because the nature of the grant is a factor worth considering. Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term as including articles or services for the benefit of the employee or his family but excluding tools of the trade or articles or service primarily for the benefit of the employer or necessary to the conduct of the employer's business. XXX In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose. BASIS Complex Electronics Employees Assn. v. NLRC (99) It is settled that in case of closures or cessation of operation of business establishments not due to serious business losses or financial reverses, the employees are always given separation benefits. In the instant case, notwithstanding the financial losses suffered by Complex, such was, however, not the main reason for its closure. Complex admitted in its petition that the main reason for the cessation of the operations was the pull-out of the materials, equipment and machinery from the premises of the corporation as dictated by its customers. It was actually still capable of continuing the business but opted to close down to prevent further losses. Under the facts and circumstances of the case, we find no grave abuse of discretion on the part of the public respondent in awarding the employees one (1) month pay for every year of service as termination pay. EFFECT OF ACCEPTANCE Anino v. NLRC (98) The recognized and accepted doctrine is that a dismissed employee who has accepted separation pay is not necessarily estopped from challenging the validity of his or her dismissal. Neither does it relieve the employer of legal obligations. Waivers and quitclaims, on the other hand, are generally looked upon with disfavor. In Agoy vs. NLRC, the Court explained that the employee's acknowledgment of his notice of termination without any outright objection does not altogether mean voluntariness on his part. Neither do the execution of a final settlement and the receipt of amounts agreed upon foreclose his right to pursue a claim for illegal dismissal or unfair labor practice. The reasons for such policy were laid down in AFP Mutual Benefit Association, Inc. vs. AFP-MBAI-EU as follows:

Chua v. NLRC (93) Financial assistance, whatever form it may assume, is permissible where the employee has been validly dismissed, only in those instances where the cause of dismissal was something other than serious misconduct on the part of the employee or other cause reflecting adversely on the employee’s moral character. 23.12 SEPARATION PAY WHEN – ALTERNATIVE Imperial Textile Mills, Inc. v. NLRC (93) With respect to the award of separation pay, we declared in Santos v. NLRC, et al. that where the decision ordering the reinstatement of the employee may no longer be enforced, or is no longer feasible because of the strained relations between the parties, the employee may be awarded separation pay as an alternative to reinstatement. COMPUTATION Millares v. NLRC (99) In case of retrenchment to prevent losses, Art. 283 of the Labor Code imposes on the employer an obligation to grant to the affected employees separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. Since the law speaks of "pay," the question arises, "What exactly does the term connote?" We correlate Art. 283 with Art. 97 of the same Code on definition of terms. "Pay" is not defined therein but "wage." In Songco the Court explained that both words (as well as salary) generally refer to one and the same meaning, i.e., a reward or recompense for services performed. Specifically, "wage" is defined in letter (f) as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. We invite attention to the above-underlined

UP LAW BAROPS 2007 ONE UP
120 of 132

Part II : Labor Standards Law Labor Standards
In labor jurisprudence, it is well established that quitclaims and/or complete releases executed by the employees do not estop them from pursuing their claims arising from the unfair labor practice of the employer. The basic reason for this is that such quitclaims and/or complete releases are against public policy and, therefore, null and void. The acceptance of termination pay does not divest a laborer of the right to prosecute his employer for unfair labor practice acts. (Cariño vs. ACCFA; Philippine Sugar Institute vs. CIR; Mercury Drug Co. vs. CIR ) In the Cariño case, supra, the Supreme Court, speaking thru Justice Sanchez, said:
Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee, obviously, do not stand on the same footing. The employer drove the employee to the wall. The latter must have to get hold of money. Because, out of job, he had to face the harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent their claim. They pressed it. They are deemed not to have waived any of their rights. Renuntiatio non praesumitur.

LIABILITY OF CORPORATE OFFICERS LIABILITY RULE Bogo-Medellin Sugarcane Planters Assn., Inc. v. NLRC (98) Unless they have exceeded their authority, corporate officers are, as a general rule, not personality liable for their official acts, because a corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders and members. However, this fictional veil may be pierced whenever the corporate personality is used as a means of perpetuating a fraud or an illegal act, evading an existing obligation, or confusing a legitimate issue. In cases of illegal dismissal, corporate directors and officers are solidarily liable with the corporation, where terminations of employment are done with malice or in bad faith. 23.13 DAMAGES MORAL/EXEMPLARY Cruz v. NLRC (2000) There is merit in petitioner’s submission that the award of moral and exemplary damages in her favor is warranted by her unjustified dismissal. Award of moral and exemplary damages for an illegally dismissed employee is proper where the employee had been harassed and arbitrarily terminated by the employer. Moral damages may be awarded to compensate one for diverse injuries such as mental anguish, besmirched reputation, wounded feelings and social humiliation occasioned by the employer’s unreasonable dismissal of the employee. This Court has consistently accorded the working class a right to recover damages for unjust dismissals tainted with bad faith; where the motive of the employer in dismissing the employee is far from noble. The award of such damages is based not on the Labor Code but on Article 220 of the Civil Code. Nueva Ecija Electric Cooperative, Inc. v. NLRC (2000)

To warrant an award of moral damages, it must be shown that the dismissal of the employee was attended to by bad faith, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. Unfair labor practices violate the constitutional rights of workers and employees to selforganization, are inimical to the legitimate interests of both labor and management, including their right to bargain collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect; and disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations. As the conscience of the government, it is the Court’s sworn duty to ensure that none trifles with labor rights. For this reason, we find it proper in this case to impose moral and exemplary damages on private respondent. However, the damages awarded by the labor arbiter, to our mind, are excessive. In determining the amount of damages recoverable, the business, social and financial position of the offended parties and the business and financial position of the offender are taken into account. It is our view that herein private respondents had not fully acted in good faith. However, we are cognizant that a cooperative promotes the welfare of its own members. The economic benefits filter to the cooperative members. Either equally or proportionally, they are distributed among members in correlation with the resources of the association utilized. Cooperatives help promote economic democracy and support community development. Under these circumstances, we deem it proper to reduce moral damages to only P10,000.00 payable by private respondent NEECO I to each individual petitioner. We also deem it sufficient for private respondent NEECO I to pay each individual petitioner P5,000.00 to answer for exemplary damages, based on the provisions of Articles 2229 and 2232 of the Civil Code. Permex, Inc. v. NLRC (2000) Nonetheless, we find that the award of moral and exemplary damages by the public respondent is not in order and must be deleted. Moral damages are recoverable only where the dismissal of the employee was tainted by bad faith or fraud, or where it constituted an act oppressive to labor, and done in a manner contrary to morals, good customs, or public policy. Exemplary damages may be awarded only if the dismissal was done in a wanton, oppressive, or malevolent manner. None of these circumstances exist in the present case. Misact

SECTION 24 - RETIREMENT
24.01 RETIREMENT Art. 287 – Retirement (as amended by RA 8558) Any employee may be retired upon reaching the retirement age established in:  The Collective Bargaining Agreement; or  Other applicable employment contract.

UP LAW BAROPS 2007 ONE UP
121 of 132

Part II : Labor Standards Law Labor Standards
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned:  Under existing laws and  Any collective bargaining agreement and  Other agreements: Provided, however, that an employee’s retirement benefits under any Collective Bargaining Agreement and other agreements shall not be less than those provided herein. In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee:  Upon reaching the age of 60 years or more, but not beyond 65 years which is hereby declared the compulsory retirement age,  Who has served at least 5 years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least ½ month salary for every year of service, a fraction of at least 6 months being considered as 1 whole year. Unless the parties provide for broader inclusions, the term “one half (½) month salary” shall mean 15 days plus 1/12 of the 13th month pay sever his employment with the former. The very essence of retirement is the termination of the employer-employee relationship. Hence, the retirement of an employee does not, in itself, affect his employment status especially when it involves all rights and benefits due to him, since these must be protected as though there had been no interruption of service. It must be borne in mind that the retirement scheme was part of the employment package and the benefits to be derived therefrom constituted, as it were, a continuing consideration for services rendered, as well as an effective inducement for remaining with the corporation. It is intended to help the employee enjoy the remaining years of his life, releasing him from the burden of worrying for his financial support, and are a form of reward for his loyalty. XXX When an employee has retired but his benefits under the law or the CBA have not yet been given, he still retains, for the purpose of prosecuting his claims, the status of an employee entitled to the protection of the Labor Code, one of which is the protection of the labor union. ELIGIBILITY Brion v. South Phil. Union Mission of the Seventh Day Adventist Church (99) Again, it has been held that “pension and retirement plans create a contractual obligation in which the promise to pay benefits is made in consideration of the continued faithful service of the employee for the requisite period.” In other words, before a right to retirement benefits or pension vests in an employee, he must have met the stated conditions of eligibility with respect to the nature of employment, age and length of service. This is a condition precedent to his acquisition of rights thereunder. Under the law, service for five years is enough to entitle an employee who meets the requisite age to retirement benefits. 24.02 ACCRUAL OF BENEFITS Llora Motors, Inc. v. Drilon (89) Examination of Article 287 shows that entitlement to retirement benefits may accrue either (a) under existing laws or (b) under a collective bargaining agreement or other employment contract. It is at once apparent that Article 287 does not itself purport to impose any obligation upon employers to set up retirement scheme for their employees over and above that already established under existing laws. In other words, Article 287 recognizes that existing laws already provide for a scheme by which retirement benefits may be earned or accrue in favor of employees, as part of a broader social security system that provides not only for retirement benefits but also death and funeral benefits, permanent disability benefits, sickness benefits and maternity leave benefits. 24.03 PRIVATE PLAN EMPLOYER OBLIGATION GVM Security and Protective Agency v. NLRC (93) The first paragraph of Article 287 deals with the retirement age of an employee, which is the

and the cash equivalent of not more than 5 days of service incentive leaves. Retail, service, and agricultural establishments or operations employing not more than 10 employees or workers are exempted from the coverage of this provision. Violation of this provision is hereby declared unlawful and subject to the penal provisions under Art. 288 of this Code. BASIS Aquino v. NLRC (92) Retirement benefits, where not mandated by law, may be granted by agreement of the employees and their employer or as a voluntary act on the part of the employer. Retirement benefits are intended to help the employee enjoy the remaining years of his life, lessening the burden of worrying for his financial support, and are a form of reward for his loyalty and service to the employer. AGE MAI Phils., Inc. v. NLRC (88) Yet a third serious mistake, amounting to grave abuse of discretion, too, may be ascribed to the Commission; and that is, its refusal, or neglect to consider the fact – again quite plain from the record and to which MAI had adverted more than once – that the matter of Nolasco’s reinstatement had become moot and academic at the time that he filed his second action before the labor arbiter’s office against MAI on August 16, 1982; for as of that day, he had already reached the age of 60 years, which is the retirement age fixed by the Labor Code. RATIONALE Producers Bank of the Phils. v. NLRC (98) Retirement results from a voluntary agreement between the employer and the employee whereby the latter after reaching a certain age agrees to

UP LAW BAROPS 2007 ONE UP
122 of 132

Part II : Labor Standards Law Labor Standards
age established in (a) collective bargaining agreement or (b) other applicable retirement contract. The second paragraph of said Article deals with the retirement benefits to be received by a retiring employee and which are the retirement benefits as the employee may have earned under (a ) an existing law, (b) collective bargaining or (c) other agreements. As stressed in Llora Motors, Inc., Article 287 does not in itself purport to impose any obligation upon employers to set up a retirement scheme for their employees over and above that already established under existing laws, like Social Security Act. There are 3 kinds of retirement schemes. The first type is compulsory and contributory in character. The second type is one set up by agreement between the employer and the employees in collective bargaining agreements or other agreements between them (Llora v. Drilon). The third type is one that is voluntarily given by the employer, expressly as in an announced company policy or impliedly as in a failure to contest the EE’s claim for retirement benefits (Allied Investigation Bureau, Inc. v. Ople). The requirement for an emergency hospital or dental clinic shall not be applicable in case there is a hospital or dental clinic which is accessible from the employers establishment and he makes arrangement for the reservation therein of the necessary beds and dental facilities for the use of his employees. EMPLOYER ASSISTANCE – OBLIGATION (ART. 161) It shall be the duty of any employer to provide all the necessary assistance to ensure the adequate and immediate medical and dental attendance and treatment to an injured or sick employee in case of emergency.

SECTION 25 - MEDICAL, DENTAL AND OCCUPATIONAL SAFETY
FIRST AID TREATMENT (ART. 156) Every employer shall keep in his establishment such first-aid medicines and equipment as the nature and conditions of work may require, in accordance with such regulations as the Department of Labor shall prescribe. The Employer shall take steps for the training of a sufficient number of employees in first-aid treatment. EMERGENCY MEDICAL AND DENTAL SERVICES WHEN REQUIRED (ART. 157) It shall be the duty of every employer to furnish his employees in any locality with free medical and dental attendance and facilities consisting of:  The Secretary of Labor shall provide by appropriate regulations the services that shall be required where the number of employees does not exceed fifty and shall determine by appropriate order hazardous workplaces for purposes of this Article In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot stay in the premises of the establishment for at least 2 hours, in the case of those employed on full-time basis. Where the undertaking is non-hazardous in nature, the physician and dentist may be engaged on retained basis, subject to such regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental treatment and attendance in case of emergency.

WHEN NOT REQUIRED (ART. 158)

UP LAW BAROPS 2007 ONE UP
123 of 132

Part III : Social Legislation Labor Standards
A. SOCIAL SECURITY SERVICE INSURANCE COMPENSATION AND FUND 25.01 Policy Objectives LAW CONCEPT Sulit v. Employees Compensation Commission (81) It now appears that after the government had experimented for more than 20 years with such employee-oriented application of the law, the lawmaker found the result to be unsatisfactory because it destroyed the parity or balance between the competing interests of the employer and employee with respect to workmen’s compensation. The balance was tilted unduly in favor of the workmen. Hence, to restore a sensible equilibrium between the employer’s obligation to pay workmen’s compensation and the employee’s right to receive reparation for work-connected death or disability, the old law was jettisoned and in its place we have the employee’s compensation and state insurance fund in the Labor Code, as amended. Santos v. ECC (93) The reason behind the present doctrine is that the New Labor Code has abolished the presumption of compensability for illness contracted by a worker during employment. To be entitled to disability benefits, the claimant has to present evidence to prove that his ailment was the result of, or the risk of contracting the same were aggravated by working conditions or the nature of his work. However, while the presumption of compensability and theory of aggravation under the Workmen’s Compensation Act may have been abandoned under the new Labor Code, the liberality of the law in general in favor of the working man still prevails. The Employee’s Compensation Act is basically a social legislation designed to afford relief to the working man and woman in our society. The ECC, as the agency tasked with implementing the social justice mandate guaranteed by the Constitution, should be mor eliberal in resolving compensation claims of employees especially where there is some basis in facts for inferring a workconnection to the cause of death. This interpretation gives meaning and substance to the liberal and compassionate spirit of the law as embodied in Article 4 of the New Labor. The policy is to extend the applicability of PD 626 to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the state to give maximum aid and protection to labor. 25.02 Definitions Latagan v. ECC (92) Article 167, par. (l), of the Labor Code, as amended, defines a compensable sickness as “illness definitely accepted as an occupational disease listed by the Commission or any illness caused by employment subject to proof that the risk of contracting the same is increased by working conditions. For this purpose, the Commission is empowered to determine and approve occupational ACT; GOVERNMENT ACT; EMPLOYEES STATE INSURANCE diseases and work-related illnesses that may be considered compensable based on peculiar hazards of employment.” 25.03 Coverage COVERAGE Philippine Blooming Mills Co., Inc. v. Social Security System (68) Membership in the SSS is not the result of a bilateral, consensual agreement where the rights and obligations of the parties are defined by and subject to their will. RA 1161 requires the compulsory coverage of employers and employees under the system. It is actually a legal imposition, on said employers and employees designed to provide Social Security to the workingmen. Membership in the SSS, is therefore, in compliance with a lawful exercise of the police power of the State, to which the principle of non-impairment of the obligation of contract is not a proper defense. Sta. Rita v. Court of Appeals (95) Section 8 (j) (5) simply defines the term “employment” and does not in any way relate to the scope of coverage of the Social Security System. That coverage is, upon the other hand, set out in Section 9 of RA No. 1161 as amended, which defines the scope of SSS coverage. Thus, the Standard Contract of Employment to be entered into between foreign shipowners and Filipino seafarers is the instrument by which the former express their assent to the inclusion of the latter in the coverage of the Social Security Act. In other words, the extension of the coverage of the Social Security System to Filipino seafarers arises by virtue of the assent given in the contract of employment signed by the employer and seafarer; that the same contract binds petitioner, who is solidarily liable with the foreign shipowners/employers. 25.04 25. 05 Effect of Separation from Employment Reporting Requirements

Poblete Construction Co. v. Asian (67) It was the duty of the employer to “report immediately to the System” his name, age, civil status, occupation, salary and dependents. Compliance with this duty did not depend upon the employee’s willingness to give his share of the contribution. Section 24 is mandatory, to such an extent that if the employee should die or become sick or disabled without the report having been made by the employer, the latter is liable for an amount equivalent to the benefits to which the employee would have been entitled had such report been made. XXX The collection of the employee’s share is a duty imposed by law, and his unwillingness to have it deducted from his salary does not excuse the employer’s failure to make the report aforesaid. It is precisely in this situation that the employer is liable, and there is no question as to the amount of such liability in this case. 25.06 Funding

FUND OWNERSHIP

UP LAW BAROPS 2007 ONE UP
124 of 132

Part III : Social Legislation Labor Standards
CMS Estate, Inc. v. Social Security System (84) The Social Security Law was enacted pursuant to the policy of the government "to develop, establish gradually and perfect a social security system which shall be suitable to the needs of the people throughout the Philippines, and shall provide protection against the hazards of disability, sickness, old age and death" (Sec. 2, RA 1161, as amended). It is thus clear that said enactment implements the general welfare mandate of the Constitution and constitutes a legitimate exercise of the police power of the State. The taxing power of the State is exercised for the purpose of raising revenues. However, under our Social Security Law, the emphasis is more on the promotion of the general welfare. The Act is not part of out Internal Revenue Code nor are the contributions and premiums therein dealt with and provided for, collectible by the Bureau of Internal Revenue. The funds contributed to the System belong to the members who will receive benefits, as a matter of right, whenever the hazards provided by the law occur. All that is required of appellant is to make monthly contributions to the System for covered employees in its employ. These contributions, contrary to appellant's contention, are not 'in the nature of taxes on employment.' Together with the contributions imposed upon employees and the Government, they are intended for the protection of said employees against the hazards of disability, sickness, old age and death in line with the constitutional mandate to promote social justice to insure the well-being and economic security of all the people. Because of the broad social purpose of the Social Security Act, all doubts in construing the Act should favor coverage rather than exemption. 25.07 Effect of Non-remittance Contrary to petitioners' contention, the penalty of 3% per month imposed on the employer, if any premium contribution is not paid to the System, prescribed by Section 22 of the Act from the date the contribution falls due until paid, does not necessarily make the employer the agent of the System. The prescribed penalty is intended to exact compliance by the employer. It is evidently of a punitive character to assure that employers do not take lightly the State's exercise of the police power in the implementation of the Republic's declared policy to develop, establish gradually, and perfect a Social Security System which shag be suitable to the needs of the people throughout the Philippines and to provide protection to employees against the hazards of disability, sickness, old age, and death.' Benedicto v. Abad (90) The 20-year prescriptive period is found in Section 22 of the Social Security Act which deals generally with the remittance of contributions to the SSS. Section 22 (b) does not deal with penal sanctions for violations of provisions of the Social Security Act nor of the rules and regulations promulgated by the Social Security Commission. The penal sanctions established by the Social Security Act are found in Section 28 which forms part of the final portion or chapter of the Act denominated as "G. Miscellaneous Provisions." In contrast, Section 22 is found in chapter E entitled "Sources of Funds — Employment Records and Reports." But an examination of Section 28 entitled "Penal Clauses" shows that none of the subsections thereof purports to establish a prescriptive period in respect of such criminal sanctions. If the 20-year period of prescription had been intended by the legislative authority to apply to the penal sanctions established by the statute, one would expect it either to be textually located in chapter G "Miscellaneous Provisions" and not in chapter E "Sources of Funds," or at the very least to refer to the sections on penal sanctions in chapter G. In other words, the context of Section 22 (b) indicates that it does not relate to criminal sanctions at all. Secondly, close examination of Section 22 (b) will show that the "necessary action against the employer" referred to in the second paragraph thereof is an action that is brought against the employer for the collection of contributions payable under the Social Security Act which the employer has refused or neglected to pay. Thirdly, a 20-year statute of limitation if made applicable in respect of criminal liability of an employer for failure to remit contributions to the SSS would constitute a disproportionately long statute of limitations if one compared it with either the applicable prescriptive periods in respect of crimes punishable under the Revised Penal Code or the prescriptive periods applicable to crimes punished by special statutes under Act No. 3326, as amended. It thus appears to us that to apply a single, uniform 20-year prescriptive period to both civil actions for collection of unremitted SSS premiums and to criminal prosecutions for violations of provisions of the Social Security Act and of rules and regulations promulgated by the Social Security Commission, would be both grossly disproportional and too simplistic. Such a result cannot lightly be assumed to have been intended by the legislative authority in enacting Section 22 (b), second

SSS FAILURE TO REMIT Santiago v. Court of Appeals (84) Clearly, if the employer neglects to pay the premium contributions, the System may proceed with the collection in the same manner as the Bureau of Internal Revenue in case of unpaid taxes. Plainly, too, notwithstanding non-remittance by employers of the premium contributions, covered employees are entitled to the benefits of the coverage, such as death sickness, retirement, and permanent disability benefits. These benefits continue to be enjoyed by the employees by operation of law and not, as petitioners allege, because the premium contributions and salary loan installment payments have already became the money of the System upon payment by the employees to the employer. It should be remembered that funds contributed to the System by compulsion of law are funds belonging to the members, which are merely held in trust by the government. The mentioned benefits, however, do not include the salary loan privileges that memberemployees apply for. The System may or may not grant those loans pursuant to its rules and regulations. The salary loans are not covered by law but by contract between the System as lender, and the private employee, as borrower.

UP LAW BAROPS 2007 ONE UP
125 of 132

Part III : Social Legislation Labor Standards
paragraph, of the Social Security Act. In the case at bar, the information was filed against petitioner Benedicto ten (10) years after the alleged violations had been discovered by the SSS. We hold that the statutory crime here charged had prescribed by then, the prescriptive period here applicable being four (4) years. The foregoing, however, is concerned only with the extinguishment of the criminal liability for the offense charged in the information. The extinction of the criminal liability of petitioner by reason of prescription has had no impact upon the related civil action for enforcement of the civil liability of petitioner. Said civil action, in accordance with the provisions of Section 22 (b), second paragraph quoted above of the Social Security Act, may be brought within twenty (20) years from the time the employer's delinquency was discovered. Since at the time of the institution of the criminal proceedings against petitioner Benedicto, so far as the record shows, no reservation had been made for institution of a separate civil action for recovery of the civil liability arising from the criminal acts charged, such civil action must be deemed to have been instituted simultaneously with the commencement of the criminal proceedings. Such civil action may proceed notwithstanding the extinction of the criminal action against petitioner Benedicto. 25.08 Benefits afterwards from some ailments like headaches, dizziness, weakness, inability to properly sleep, inability to walk without support and failure to regain her memory. All these circumstances ineluctably demonstrate the seriousness of her condition, contrary to the claim of petitioner. More than that, it was also undisputed that private respondent was made to take her medication for life. A person's disability may not manifest fully at one precise moment in time but rather over a period of time. It is possible that an injury which at first was considered to be temporary may later on become permanent or one who suffers a partial disability becomes totally and permanently disabled from the same cause. Distinction – Disability GSIS v. Court of Appeals (99) The labor Code classifies employees' disability into three distinct categories, namely: a) temporary total disability; b) permanent total disability; and c) permanent partial disability. Section 2, Rule VII, of the Rules and Regulation Implementing Title II, Book IV of the Labor Code defines and clarifies these categories, as follows:
Sec. 2. Disability. — (a) A total disability is temporary if as a result of the injury or sickness the employee is unable to perform any gainful occupation for a continuous period not exceeding 120 days, except as otherwise provided for in Rule X of these Rules. (b) A disability is total and permanent if as a result of the injury or sickness the employee is unable to perform any gainful occupation for a continuous period exceeding 120 days except as otherwise provided for in Rule X of these Rules. (c) A disability is partial and permanent if as a result of the injury or sickness the employee suffers a permanent partial loss of the use of any part of his body.

GSIS RETIREMENT BENEFITS Conte v. Commission on Audit (96) Said Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the creation of any insurance or retirement plan — other than the GSIS — for government officers and employees, in order to prevent the undue and inequitous proliferation of such plans. It is beyond cavil that Res. 56 contravenes the said provision of law and is therefore invalid, void and of no effect. No ignore this and rule otherwise would be tantamount to permitting every other government office or agency to put up its own supplementary retirement benefit plan under the guise of such "financial assistance". We are not unmindful of the laudable purposes for promulgating Res. 56, and the positive results it must have had, not only in reducing costs and expenses on the part of the SSS in connection with the pay-out of retirement benefits and gratuities, but also in improving the quality of life for scores of retirees. But it is simply beyond dispute that the SSS had no authority to maintain and implement such retirement plan, particularly in the face of the statutory prohibition. The SSS cannot, in the guise of rule-making, legislate or amend laws or worse, render them nugatory. ECSIF CASES Manifestation Government Service Insurance System v. CA (98) While it is true that the degree of private respondent's physical condition at the time of her retirement was not considered as permanent total disability, yet, it cannot be denied that her condition subsequently worsened after her head operation and consequent retirement. In fact, she suffered

In Vicente vs. Employees Compensation Commission, the Court laid down the litmus test and distinction between Permanent Total Disability and Permanent Partial Disability, to wit:
. . . While "permanent total disability" invariably results in an employee's loss of work or inability to perform his usual work, "permanent partial disability," on the other hand, occurs when an employee loses the use of any particular anatomical part of his body which disables him to continue with his former work. Stated otherwise, the test of whether or not an employee suffers from "permanent total disability" is a showing of the capacity of the employee to continue performing his work notwithstanding the disability he incurred. Thus, if by, reason of the injury or sickness he sustained, the employee is unable to perform his customary job for more than 120 days and he does not come within the coverage of Rule X of the Amended Rules on Employees Compensability (which, in a more detailed manner, describes what constitutes temporary total disability). then the said employee undoubtedly suffers from "permanent total disability" regardless of whether or not he loses the use of any part of his body.

Permanent Total Disability GSIS v. Court of Appeals (98) Judicial precedents likewise show that disability is intimately related to one's earning capacity. It has been a consistent pronouncement of this Court that "permanent total disability means disablement of an employee to earn wages in the same kind of work, or work of a similar nature that she was

UP LAW BAROPS 2007 ONE UP
126 of 132

Part III : Social Legislation Labor Standards
trained for or accustomed to perform, or any kind of work which a person of her mentality attainment could do." "It does not mean state of absolute helplessness, but inability to do substantially all material acts necessary to prosecution of an occupation for remuneration or profit in substantially customary and usual manner." The Court has construed permanent total disability as the "lack of ability to follow continuously some substantially gainful occupation without serious discomfort or pain and without material injury or danger to life." It is, therefore, clear from established jurisprudence that the loss of one's earning capacity determines the disability compensation one is entitled to. Santos v. Employees Commission (93) Nazaro v. Employees Commission (90) Unknown Cause Pano v. Employees Compensation Commission (89) Permanent – Total Bejerano v. Employees Compensation Commission (92) It has been repeatedly held by this Court that "permanent total disability means disablement of an employee to earn wages in the same kind of work, or work of a similar nature that she was trained for or accustomed to perform, or any kind of work which a person of her mentality and attainment could do." It does not mean state of absolute helplessness, but inability to do substantially all material acts necessary to prosecution of an occupation for remuneration or profit in substantially customary and usual manner. Permanent total disability is the lack of ability to follow continuously some substantially gainful occupation without serious discomfort or pain and without material injury or danger to life. It is therefore clear from the aforecited rulings that the loss of one's earning capacity determines the disability compensation one is entitled to. Thus, this Court ruled: In disability compensation, it is not the injury which is compensated, but rather it is the incapacity to work resulting in the impairment of one's earning capacity (Ulibas vs. Republic; Roma vs. WCC). A thorough examination of the records convinces us that petitioner's claim is substantiated with enough evidence to show that his disability is permanent and total. Occupational Disease GSIS v. Court of Appeals (98) While it is true that the degree of private respondent's physical condition at the time of her retirement was not considered as permanent total disability, yet, it cannot be denied that her condition subsequently worsened after her head operation and consequent retirement. In fact, she suffered afterwards from some ailments like headaches, dizziness, weakness, inability to properly sleep, Compensation Compensation inability to walk without support and failure to regain her memory. All these circumstances ineluctably demonstrate the seriousness of her condition, contrary to the claim of petitioner. More than that, it was also undisputed that private respondent was made to take her medication for life. A person's disability may not manifest fully at one precise moment in time but rather over a period of time. It is possible that an injury which at first was considered to be temporary may later on become permanent or one who suffers a partial disability becomes totally and permanently disabled from the same cause. In the same vein, this Court has ruled that "disability should not be understood more on its medical significance but on the loss of earning capacity." Private respondent's persistent illness indeed forced her to retire early which, in turn, resulted in her unemployment, and loss of earning capacity. Judicial precedents likewise show that disability is intimately related to one's earning capacity. It has been a consistent pronouncement of this Court that "permanent total disability means disablement of an employee to earn wages in the same kind of work, or work of a similar nature that she was trained for or accustomed to perform, or any kind of work which a person of her mentality attainment could do." "It does not mean state of absolute helplessness, but inability to do substantially all material acts necessary to prosecution of an occupation for remuneration or profit in substantially customary and usual manner." The Court has construed permanent total disability as the "lack of ability to follow continuously some substantially gainful occupation without serious discomfort or pain and without material injury or danger to life." It is, therefore, clear from established jurisprudence that the loss of one's earning capacity determines the disability compensation one is entitled to. 25.09 Basis of Claim

BASIS – INCREASED RISKS Riño v. Employees Compensation Commission (2000) Under the Labor Code, as amended, the beneficiaries of an employee are entitled to death benefits if the cause of death is a sickness listed as occupational disease by the ECC; or any other illness caused by employment, subject to proof that the risk of contracting the same is increased by the working conditions. As we ruled in Sante v. Employees’ Compensation Commission, "x x x a claimant must submit such proof as would constitute a reasonable basis for concluding either that the conditions of employment of the claimant caused the ailment or that such working conditions had aggravated the risk of contracting that ailment. What kind and quantum of evidence would constitute an adequate basis for a reasonable man (not necessarily a medical scientist) to reach one or the other conclusion, can obviously be determined only on a case-to-case basis. That evidence must, however, be real and substantial, and not merely apparent; for the duty to prove work-causation or work-aggravation imposed by existing law is real x x x not merely apparent."

UP LAW BAROPS 2007 ONE UP
127 of 132

Part III : Social Legislation Labor Standards
COMING AND GOING RULE Lentejas v. Employees Compensation Commission (91) In a line of cases, this Court has held that an injury sustained by the employee while on his way to or from his place of work, and which is otherwise compensable, is deemed to have arisen out of and in the course of his employment. In Vda. de Torbela V. Employees' Compensation Commission, the Court held:
The claim is compensable. When an employee is accidentally injured at a point reasonably proximate to the place at work, while he is going to and from his work, such injury is deemed to have arisen out of and in the course of his employment.

much as homicide or murder. 25.10 Prescriptive Period

REMITTANCE Benedicto v. Abad Santos (90) We note, in the first place, that the 20-year prescriptive period is found in Section 22 of the Social Security Act which deals generally with the remittance of contributions to the SSS. Section 22 (b) does not deal with penal sanctions for violations of provisions of the Social Security Act nor of the rules and regulations promulgated by the Social Security Commission. The penal sanctions established by the Social Security Act are found in Section 28 which forms part of the final portion or chapter of the Act denominated as "G. Miscellaneous Provisions." In contrast, Section 22 is found in chapter E entitled "Sources of Funds — Employment Records and Reports." But an examination of Section 28 entitled "Penal Clauses" shows that none of the subsections thereof purports to establish a prescriptive period in respect of such criminal sanctions. If the 20-year period of prescription had been intended by the legislative authority to apply to the penal sanctions established by the statute, one would expect it either to be textually located in chapter G "Miscellaneous Provisions" and not in chapter E "Sources of Funds," or at the very least to refer to the sections on penal sanctions in chapter G. In other words, the context of Section 22 (b) indicates that it does not relate to criminal sanctions at all. Secondly, close examination of Section 22 (b) will show that the "necessary action against the employer" referred to in the second paragraph thereof is an action that is brought against the employer for the collection of contributions payable under the Social Security Act which the employer has refused or neglected to pay. Thirdly, a 20-year statute of limitation if made applicable in respect of criminal liability of an employer for failure to remit contributions to the SSS would constitute a disproportionately long statute of limitations if one compared it with either the applicable prescriptive periods in respect of crimes punishable under the Revised Penal Code or the prescriptive periods applicable to crimes punished by special statutes under Act No. 3326, as amended. We note also that under the National Internal Revenue Code (in the form it existed at the time of the commission of the acts here involved) to which Section 22 (b) of the Social Security Act refers, penal sanctions for violations of provisions of that Code prescribe in five (5) years and that the period of prescription applicable in respect of civil remedies for the collection of internal revenue taxes is also five (5) years. REGISTRATION People v. Montiero (90) 25.11 Exclusivity of Benefits

In Alano v. Employees' Compensation Commission, the Court held as follows: In this case, it is not disputed that the deceased died while going to her place of work. She was at the place where, as the petitioner puts it, her job necessarily required to be if she was to reach her place of work on time. There was nothing private or personal about the school principal's being at the place of the accident. She was there because her employment required her to be there. We note that under the foregoing cases, it is quite clear that although Victorio might have been on his way home from Barangay Banti at the time he was attacked and killed by Arnulfo Luaton, that circumstance did not by itself operate to render his death non- compensable. We note, at the same time, that in all the cases noted above from Vda. de Torbela to Lazo, the events which caused or precipitated injury or death did not involve the intentional inflicting of harm or injury or death upon the employee concerned. In the instant case, however, as noted earlier, Victorio's death was the result of a murderous assault upon him. Thus, the precise technical issue here is whether or not the circumstance that Victorio's death was the result of a criminal attack by another person, not a member of the staff of the Calbayog City Engineer's Office, had the effect of rendering his death non-compensable although such death had occurred in the course of performance of official functions. After careful examination of the Vda. de Torbela, Alano and Lazo cases, we believe and so hold that the case at bar falls within the scope of the rule set out in those cases. There is no question that the deceased in the instant case did not foresee, and could not have foreseen, the attack on himself when he undertook to go to Barangay Banti to inspect and oversee the municipal construction work then ongoing in that place. In so far as the mind and will of the victim were concerned, the homicidal intent on the part of Arnulfo Luaton was as external and fortuitous an event as a speeding mini-bus or a recklessly negligent jeepney driver. In other words, we do not think that the third person's criminal intent should be regarded as a supervening cause having the effect of nullifying the circumstance that, when Victorio was attacked and killed, he was where his work required him to be and that he was then in the course of performing his official duties. It seems pertinent to note that inflicting physical injuries or death through negligence constitutes a criminal offense both under the Revised Penal Code (Article 365) and a special statute (Republic Act No. 4136, the Land Transportation and Traffic Code), just as

EXCLUSIVITY Ysmael Maritime Corp. v. Avelino (87) OFFICIAL FUNCTIONS

UP LAW BAROPS 2007 ONE UP
128 of 132

Part III : Social Legislation Labor Standards
Hinoquin v. Employees Compensation Commission (89) The concept of a "work place" referred to in the Amended (Implementing) Rules cannot always be literally applied to a soldier on active duty status. Obviously, a soldier must go where his company is stationed. A place in which soldiers have secured lawful permission to be at cannot be very different, legally speaking, from a place where they are required to go by their commanding officer. In this case, the 3 soldiers were on an overnight pass not on vacation leave. Moreover, they were required or authorized to carry their firearms with which presumably they were to defend themselves if NPA elements happened to attack them while en route to and from Aritao or with which to attack and seek to capture such NPA elements as they might encounter. A soldier on active duty status is really on 24 hours a day official duty status and is subject to military discipline and military law 24 hours a day. He is subject to call and to the orders of his superior officers at all times, 7 days a week, except, of course, when he is on vacation leave status. While going to a fellow soldier's home for a few hours for a meal and some drinks was not a specific military duty, he was nonetheless in the course of performance of official functions. Indeed, it appears to us that a soldier should be presumed to be on official duty unless he is shown to have clearly and unequivocally put aside that status or condition temporarily by, e.g., going on an approved vacation leave. Even vacation leave may, it should be remembered, be preterminated by superior orders. 25.12 Benefit Protection 25.13 Dispute Settlement There is hereby created the National health Insurance Program which shall provide health insurance coverage and ensure affordable, acceptable, available, and accessible health care services for all citizens of the Philippines, in accordance with the policies and specific provisions of this Act. This social insurance program shall serve as the means for the healthy to help pay for the care of the sick and for those who can afford medical care to subsidize those who cannot. It shall initially consist of Programs I and II of Medicare and be expanded progressively o constitute one universal health insurance program for the entire population. The Program shall include a sustainable system of funds constitution, collection, management and disbursement for financing the availment of a basic minimum package and other supplementary packages of health insurance benefits by a progressively expanding proportion of the population. The Program shall be limited to paying for the utilization of health services by covered beneficiaries or to purchasing health services in behalf of such beneficiaries. It shall be prohibited from providing health care directly, from buying and dispensing drugs and pharmaceuticals, from employing physicians and other professional for the purpose of directly rendering care, and from owning or investing in health care facilities.

COVERAGE Sec. 7. Enrollment. - The Program shall enroll beneficiaries in order for them to be placed under coverage that entitles them to avail of benefits with the assistance of the financial arrangements provided by the Program. The process of enrollment shall include:    identification of beneficiaries, issuance of appropriate documentation specifying eligibility to benefits, and indicating how membership was obtained or is being maintained. The enrollment shall proceed in accordance with these specific policies: a. All persons currently eligible for benefits under Medicare Program I, including SSS and GSIS members, retirees, pensioners and their dependents, shall immediately and automatically be made members of the National Health Insurance Program; b. All persons eligible for benefits through health insurance plans established by local governments as part of Program II of Medicare or in accordance with the provisions of this Act, including indigent members, shall also be enrolled in the Program c. All persons eligible for benefits as members of local health insurance plans established by t he Corporation

A. NATIONAL HEALTH INSURANCE ACT OF 1995 Law - National Health Insurance Act of 1995 - RA 7875 OBJECTIVES Sec. 2 Declaration of Principles and Policies Section 11, Article XIII of the 1987 Constitution declares that the State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost. Priority for the needs of the underprivileged, sick, elderly, disabled, women and children shall be recognized. Likewise, it shall be the policy of the State to provide fee medical care to paupers. (b) Universality – The Program shall provide all citizens with the mechanism to gain financial access to health services, in combination with other government health programs. The National Health Insurance Program shall give the highest priority to achieving coverage of the entire population with at least a basic minimum package of health insurance benefits. Sec. 5 Establishment and Purpose

UP LAW BAROPS 2007 ONE UP
129 of 132

Part III : Social Legislation Labor Standards
in accordance with the implementing rules and regulations of this Act shall also be deemed to have enrolled in the Program. Enrollment of persons who have no current health insurance coverage shall be given priority by the corporations; and d. All persons eligible for benefits as members of other government-initiated health insurance programs, communitybased health care organizations, cooperatives, or private non-profit health insurance planes shall be enrolled in the Program upon accreditation by the Corporation which shall devise and provide incentives to ensure that such accredited organizations will benefit form their participation in the program. FUNDING Sec. 24 Creation of the Fund. National Health Insurance b. Contributions from selfemployed member shall be based primarily on household earnings and assets; their total contributions for one year shall not, however, exceed three percent (3%) of their estimated actual net income for the preceding year. Contributions made in behalf of indigent members shall not exceed the minimum contributions set for employed members.

c.

There is hereby created a National Health Insurance Fund, hereinafter referred to as the Fund, that shall consist of: a. Contributions from Program members; b. Current balances of the Health Insurance Funds of the SSS and the GSIS collected under the Philippine Medical Care Act of 1969, as amended, including arrearages of the Government of the Philippines with the GSIS for the said Fund; c. Other appropriations earmarked by the national and local governments purposely for the implementation of the Program; d. Subsequent appropriations provided for under Sections 46 and 47 of this Act; e. Donations and grants-in-aid; and f. All accruals thereof. Sec. 28 – Contributions All members of the Program shall contribute to the Fund, in accordance with a reasonable, equitable and progressive contribution schedule to be determined by the Corporation on the basis of applicable actuarial studies and in accordance with the following guidelines: a. Formal sector employees and current Medicare members and their employers shall continue paying the same monthly contributions as provided for by law until such time that the Corporation shall have determined the contribution scheduled mentioned herein: Provided, That their monthly contrubtion shall not exceed 3% of their respective monthly salaries.

Sec. 29. Payment for Indigent Contributions. - Contributions for indigent members shall be subsidized partially by the local government unit where the member resides. The Corporation shall provide counterpart financing equal to the LGU's subsidy for indigents: Provided, That in the case of fourth, fifth and sixth class LGUs, the National Government shall provide up to ninety percent (90%) of the subsidy for indigents for a period not exceeding five (5) years. The share of the LGUs shall be progressively increased until such time that its share becomes equal to that of the National Government. BENEFITS AND EXCLUSION Sec. 10, Benefit Package Sec. 11 Excluded Personal Health Services. - The benefits granted under this Act shall not cover expenses for the services enumerated hereunder except when the Corporation, after actuarial studies, recommend their inclusion subject to the approval of the Board: non-prescription drugs and devices; outpatient psychotherapy and counseling for mental disorders; drug and alcohol abuse or dependency treatment; cosmetic surgery; home and rehabilitation services; optometric services; normal obstetrical delivery; and cost-ineffective procedures which shall be defined by the Corporation. Sec. 12. Entitlement to Benefits. - A member whose premium contributions for at least three (3) months have been paid within the six (6) months prior to the first day of his or his dependents' availment, shall be entitled to the benefits of the Program: Provided, That such member can show that he contributes thereto with sufficient regularity, as evidenced in their health insurance ID card: and Provided, further, That he is not currently subject to legal penalties as provided for in Section 44 of this Act.

UP LAW BAROPS 2007 ONE UP
130 of 132

Part III : Social Legislation Labor Standards
The following need not pay the monthly contributions to be entitled to the Program's benefits: Retirees and pensioners of the SSS and GSIS prior to the effectivity of this Act; Members who reach the age of retirement as provided for by law and have paid at least one hundred twenty (120) monthly contributions; and Enrolled indigents. and other legally formed health service groups; A combination of both; and Any or all of the above, subject to a global budget.

 

Each Office shall recommend the appropriate payment mechanism within its jurisdiction for approval by the Corporation. Special consideration shall be given to payment for services rendered by public and private health care providers serving remote or medically underserved areas. Sec. 37. Quality Assurance. - Under the guidelines approved by the Corporation and in collaboration with their respective Offices, health care providers shall take part in programs of quality assurance, utilization review, and technology assessment that have the following objectives: QUC to ensure that the quality of personal health services delivered, measured in terms of inputs, process, and outcomes, are of reasonable quality in the context of the Philippines over time; to ensure that the health care standards are uniform within the Office's jurisdiction and eventually throughout the nation; and to see to it that the acquisition and use of scarce and expensive medical technologies and equipment are consistent with actual needs and standards of medical practice, and that: the performance of medical procedures and the administration of drugs are appropriate, necessary and unquestionably consistent with accepted standards of medical practice and ethics. Drugs for which payments will be made shall be those included in the Philippine National Drug Formulary, unless explicit exception is granted by the Corporation. the performance of medical procedures and the administration of drugs are appropriate, consistent with accepted standards of medical practice and ethics, and respectful of the local culture. Sec. 38. Safeguards Against Over and Under Utilization. - It is incumbent upon the Corporation to set up a monitoring mechanism to be operationalized through a contract with health care providers to ensure that there are safeguards against: OUIUI over-utilization of services; unnecessary diagnostic and therapeutic procedures and intervention; irrational medication and prescriptions; under-utilization of services; and inappropriate referral practices. The Corporation may deny or reduce the payment for claims when such claims are attended by false or incorrect information and when the claimant fails without justifiable cause to comply with the pertinent rules and regulations of this Act. GRIEVANCE AND APPEAL Sec. 39.

HEALTH CARE PROVISIONS Sec. 30. Free Choice of Health Facility, Medical or Dental Practitioner. - Beneficiaries requiring treatment or confinement shall be free to choose from accredited health care providers. Such choice shall, however, be subject to limitations based on the area of jurisdiction of the concerned Office and on the appropriateness of treatment in the facility chosen or by the desired provider. Sec. 31. Authority to Grant Accreditation. - The Corporation shall have the authority to grant to health care providers accreditation which confers the privilege of participating in the Program. Sec. 33. Minimum Requirements for Accreditation. - The minimum accreditation requirements for health care providers are as follows:  human resource, equipment and physical structure in conformity with the standards of the relevant facility, as determined by the Department of Health;  acceptance of formal program of quality assurance and utilization review;  acceptance of the payment specified in the mechanisms following section;  adoption of referral protocols and health resources sharing arrangements;  recognition of the rights of patients; and  acceptance of information system requirements and regular transfer of information. Sec. 34. Provider Payment Mechanisms. - The following mechanisms for public and private providers shall be allowed in the Program:  Fee-for-service based on mechanisms established by the Corporation;  Capitation of health care professionals and facilities, or networks of the same including HMOs, medical cooperatives,

UP LAW BAROPS 2007 ONE UP
131 of 132

Part III : Social Legislation Labor Standards
Grievance System. - A system of grievance is hereby established, wherein members, dependents, or health care providers of the Program who believe they have been aggrieved by any decision of the implementors of the Program, may seek redress of the grievance in accordance with the provisions of this Article. Sec. 40. Grounds for Grievances. - The following acts shall constitute valid grounds for grievance action: ANDDO any violation of the rights of patients; a willful neglect of duties of Program implementors that results in the loss or non-enjoyment of benefits by members or their dependents; unjustifiable delay in actions on claims; delay in the processing of claims that extends beyond the period agreed upon; and any other act or neglect that tends to undermine or defeat the purposes of this Act. Sec. 41 Grievance and Appeal Procedures. - A member, his dependent, or a health care provider may file a complaint for grievance based on any of the above grounds, in accordance with the following procedures: A complaint for grievance must be filed with the Office which shall rule on the complaint ninety (90) calendar days from receipt thereof. Appeals from Office decisions must be filed with the Board within thirty (30) days from receipt of notice of dismissal or disallowance by the Office. The Offices shall have no jurisdiction over any issue involving the suspension or revocation of accreditation, the imposition of fines, or the imposition of charges on members or their dependents in case of revocation of their entitlement. All decisions by the Board as to entitlement to benefits of members or to payments of health care providers shall be considered final and executory. and other records and to testify therein on any question arising out of this Act. Any case of contumacy shall be dealt with in accordance with the provisions of the Revised Administrative Code and the Rules of Court. The Board or the Committee, as the case may be, shall prescribe the necessary administrative sanctions such as fines, warnings, suspension or revocation of the right to participate in the Program.

Sec. 42. Grievance and Appeal Review Committee. - The Board shall create a Grievance and Appeal Review Committee, composed of three (3) to five (5) members, hereinafter referred to as the Committee, which, subject to the procedures enumerated above, shall receive and recommend appropriate action on complaints from members and health care providers relative to this Act and its implementing rules and regulations. The Committee and the Board, in the exercise of their quasi-judicial function, as specified in Section 17 hereof, can: administer oaths, certify to official acts and issue subpoena to compel the attendance and testimony of witnesses, and subpoena duces tecum ad testificadum to enjoin the production of books, papers

UP LAW BAROPS 2007 ONE UP
132 of 132

Sign up to vote on this title
UsefulNot useful