1.

Duncan vs Glaxo (Management Prerogative)

ARTICLE 297 (former: ART. 282) Termination by Employer due to-

a. Serious Misconduct or willful disobedience by the employee of the lawful order of his employer or
representative in connection with his work

FACTS: Petitioner Pedro A. Tecson was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical
representative. Tecson signed a contract of employment which stipulates to disclose to management any existing or
future relationship by consanguinity or affinity with co-employees or employees of competing drug companies and
should management find that such relationship poses a possible conflict of interest, to resign from the company.

Tecson was initially assigned to market Glaxo’s products in the Camarines Sur-Camarines Norte sales area.
Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals
(Astra), a competitor of Glaxo. Bettsy was Astra’s Branch Coordinator in Albay. She supervised the district managers and
medical representatives of her company and prepared marketing strategies for Astra in that area.

Tecson married Bettsy. Tecson’s superiors informed him that his marriage to Bettsy gave rise to a conflict of
interest. Tecson’s superiors reminded him that he and Bettsy should decide which one of them would resign from
their jobs, although they told him that they wanted to retain him as much as possible because he was performing his job
well.

CA held that Glaxo’s policy prohibiting its employees from having personal relationships with employees of competitor
companies is a valid exercise of its management prerogatives.

TECSON ARGUMENT: the transfer is constructive dismissal; violation of equal protection as to the right to marry

GLAXO DEFENSE: valid exercise of management prerogative

Issue: W/N GLAXO CAN TRANSFER/ TERMINATE TECSON DUE HIS VIOLATION OF COMPANY POLICY

RULING: Yes.

Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential
programs and information from competitors, especially so that it and Astra are rival companies in the highly
competitive pharmaceutical industry.

The prohibition against personal or marital relationships with employees of competitor companies upon Glaxo’s employees
is reasonable under the circumstances because relationships of that nature might compromise the interests of the company.
In laying down the assailed company policy, Glaxo only aims to protect its interests against the possibility that a
competitor company will gain access to its secrets and procedures.

That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes
the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on investments and to
expansion and growth. Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the
protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes
that management has rights which are also entitled to respect and enforcement in the interest of fair play.

It is a legitimate business practice to guard business confidentiality and protect a competitive position by even-handedly
disqualifying from jobs male and female applicants or employees who are married to a competitor.

2. Distinguish 3 Kinds of Managerial Employees under (Art. 82, Art. 219 (m), Article 297 (c) )

AS TO BOOK

Article 82 -Book III

Article 219 (m) - Book V

Article 297 (c) - Book VI

AS TO RIGHT

Article 82- pertains to managerial employees’ right to Humane Conditions of Employment

-they are not entitled to overtime pay, night shift differentials, holiday pay, service incentive leave.

Article 219 (m) - pertains to managerial employees’ Right to Self-Organization

-they are not allowed to join union, but may join, assist or form separate labor organizations of their own;

Article 297 (c) - pertains to managerial employees’ Right of Security of Tenure

-managerial employees are entitled to security of tenure

 -they can be dismissed for loss of confidence as a just cause

-they are not entitled to separation pay if they are dismissed due to a just cause like loss of confidence but it will
not prejudice their rights, benefits and privileges that they may have under applicable individual or collective
bargaining agreement or voluntary employer policy or practice (Sec. 7, Rule 1, Book VI, Rules and Regulation
Implementing the Labor Code)

Note: JUST CAUSE -the reason for termination of the employee by the employer is due to the wrongful act on the part
of the employee or that it is the employee who initiated the dismissal process- termination due to a just cause does
not entitle the employee separation pay as a general rule; exception: separation pay may be allowed where the
employee is dismissed for causes other than serious misconduct or those reflecting on his moral character

AS TO DEFINITION

Art. 82 defines Managerial Employees as 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 the other officers or members of the managerial
staff.

-they are vested with the confidence of the executives

- they are considered managerial employees, if they meet all of the following conditions:

(1) Their primary duty consists of the management of the establishment in which they are employed or of a
department or sub-division thereof.

(2) They customarily and regularly direct the work of two or more employees therein.

(3) They have the authority to hire or fire employees of lower rank; or their suggestions and recommendations as to
hiring and firing and as to the promotion (Sec. 2 (b), Rule 1, Book III, Rules and Regulation Implementing the Labor
Code)

Art. 219 (m) defines Managerial Employee as the one who is vested with the powers or prerogatives to lay down and execute
management policies and or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees.

-Under this article, its definition is stricter than Article 82.

Art. 297 (c) defines Managerial Employees as employee who may be terminated by the employer due to fraud or willful
breach of the trust reposed in him by his employer or duly authorized representative

3. Suppose that you are the owner of a hotel and collecting service charge as provided under Article 96 wherein
the former law provides that 85% of the collection goes to the employees and 15% to the employer. After
the amendment, such provision of 85-15 % division was abolished and 100% of the collection charges will
go to the employees. Therefore, you imposed a policy not to collect service charge since you are not entitled
to it anymore. Will it tantamount to diminution of benefits?

ANSWER: Yes. It will tantamount to diminution of benefit.

Artice 100 of the Labor Code provides for the prohibition against elimination or diminution of employees benefits.

Thus, if a company already practices giving favorable benefits to its employees like collection of service charges and
distributing such to its employees, such benefit cannot be eliminated by the employer under the rule on non-diminution
of benefit, even if the employer receives nothing from the collection.

Therefore, the employer’s imposition of a policy not to collect service charge to be distributed to its employees is a
violation to the principle of non-diminution of benefit because the employees were already enjoying such benefit prior
to the amendment of Article 96.

Moreover, the Labor Code, specifically Article 96, despite of its amendment, still allows and mandates the collection by
hotels, restaurants and other similar establishments of service charges to be distributed solely to its employees.

4. Kinds of Separation Pay

Separation pay has been defined as the amount that an employee receives at the time of his severance and is designed to
provide the employee with the wherewithal during the period he is looking for another employment.

a) Separation pay to an employee whose services are validly terminated for authorized causes under the Labor
Code such as:

1. Introduction of labor-saving devices (Article 298 [f. 283])- also known as automation, termination by
replacing muscle power with machine power for greater efficiency in method of production.
 2. Redundancy (Article 298 [f. 283])- where services of employee are in excess of what is reasonably demanded
by actual requirement of an enterprise. Caused by over-hiring of workers or decreased volume of business,
etc.
3. Retrenchment (Article 298 [f. 283])- or downsizing, is a reduction of personnel due to poor financial
returns to cut down cost of operation in terms of salaries and wages to prevent bankruptcy.
4. Closure or Cessation of business (Article 298 [f. 283])
5. Disease of the employee found to be suffering and whose continued employment is prohibited by law or is
prejudicial to his health as well as the health of his co-employees. (Article 299 [f. 284])

Note: AUTHORIZED CAUSE -the reason for the termination of an employee is initiated by the employer as a management
prerogative, unlike in just causes, termination under authorized causes entitles the employee a separation pay

b) Where there is illegal dismissal and reinstatement is no longer feasible- where reinstatement is no longer feasible
because of strained relations between the employee and the employer, separation pay is granted.

c) OTHER CAUSES – On Social Justice and Equitable grounds

1. Separation pay as financial assistance only in those instances where the employee is validly dismissed for
just causes other than serious misconduct or those reflecting on his moral character.
2. When the payment of separation pay is part of the Company policy or a benefit granted under the CBA of
the employer and the employee.

5.Salary vs Wage

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).

The distinction between wages and salary was adverted to in Bell vs. Indian Livestock Co. (Tex. Sup.), 11 S.W. 344,
wherein it was said: "'Wages' are the compensation given to a hired person for service, and the same is true of 'salary'.
The words seem to be synonymous, convertible terms, though we believe that use and general acceptation have given
to the word 'salary' a significance somewhat different from the word 'wages' in this: that the former is understood to
relate to position of office, to be the compensation given for official or other service, as distinguished from 'wages', the
compensation for labor." Annotation 102 Am. St. Rep. 81, 95.

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. (In short, Art 1708 of the NCC applies to wages only.)

6. Time and motion study on per piece rate basis

"Time and Motion Study" means the systematic determination of work methods and time standards using various
tools/technologies. D.O 125-13

CONDUCT OF TIME AND MOTION STUDY

Section 1. Filing of Application for the conduct of time and motion study
a. How filed. Application may be filed personally or by registered mail using the prescribed form (NWPC-TMS Form-
Ol) and shall be accompanied by the following documentary requirements:
1. Business permit for the current year issued by the appropriate government agency;
2. List of the company's employees with their corresponding wages;
3. Job activities with their existing wage rates;
4. Method of payment of wages (e.g. pakyaw, takay, commission); and
5. Proof of notice of filing of application for the determination of piece rate or production standard setting.
Applications with incomplete documentary requirements shall not be accepted. If the application was sent
through registered mail or e-mail, it shall be returned upon receipt using the Reply Form NWPC-TMS Form-02
with all the submitted documents, indicating the reason/s for denying the application.

b. By whom filed. The application may be filed by the union, a worker or owner/manager or the duly authorized
representative of a micro, small, or medium establishments in person or by registered mail. In case the application
is filed by a union or worker, mere application will suffice and the RTWPB shall immediately notify the owner/
manager who shall be required to submit the documentary requirements.
 c. Where to file. The application for the determination or approval of piece rates and/or production standard setting
with the appropriate RTWPB having jurisdiction over the workplace using the prescribed form (NWPCTMS Form-
01). Applications filed with the DOLE-RO and field offices shall immediately be forwarded to the appropriate RTWPB.

d. When to file. The application for the determination of piece rates shall be filed before such rates are given effect.
Applications for the approval of existing piece rates, on the other hand, may be filed at any time at the discretion of
the requesting party, without prejudice to the right of the workers concerned to recover the difference between the
amount to which they are entitled to receive under the standards or rates as determined by the RTWPB and that
actually paid to them.

Section 2. Actions on Application. The RTWPB secretariat shall, within 30 days from the determination of the
completeness of the application, act on the same as follows:
1. Secure Authority to Conduct TMS from the RTWPB Chairperson/ DOLE Regional Director and set the schedule and
prepare the agenda for the Initial Conference ensuring the attendance and participation of union/workers' and
management's representatives.

2. Conduct the initial conference with the RTWPB Board Secretary as Chair, to discuss the rules of engagement, such
as details of the application, terms of reference for the conduct of the TMS and coverage of the study, among
others.The RTWPB Secretariat shall prepare the minutes of the meeting which need to be approved by the
representatives present thereat using the NWPC-TMS Form-03 for TMS to be conducted.

3. Conduct of TMS. (NWPC-TMS Forms-04 and 05)

a. Observe, obtain and record information about the job, the operator, the operation, the surroundings and
working conditions and other factors/observations likely to affect the accomplishment of the work.
b. Study the activity/ies which will be the subject of a TMS (Refer to process flow chart, if any).
c. Examine the detailed breakdown of the job operation/activity. (classify if cyclical or non cyclical elements).
d. Using the tools and timing techniques, measure and record the time taken to perform each "element" of the
operation, i.e. average, normal, basic and standard time by using a stop watch, video or any similar device.
e. After gathering the necessary information, re-convene the participants in the initial conference to discuss the
process conducted and succeeding activities to be undertaken with corresponding timelines.
f. Compute and analyze the information gathered from the establishment.
g. Conduct exit conference to discuss the results of the TMS and corresponding recommendations.
h. Submit to the DOLE Regional Director as R1WPB Chairman for his consideration and approval, a report to
include the agreements and the recommended standard rates as stated in the Time Study Summary Sheet

(NWPC-TMS Form-OS, whichever is applicable) together with the following documents:

1. Application or Request Form(NWPC-TMS Form-01)

2. Initial Conference (NWPC-TMS Form-03)
3. Time Study Observation Sheet (NWPC-TMS Form-04)
4. Time Study Summary Sheet (NWPC-TMS Form-OS) concurred by theworkers' and employers' authorized
representatives
5. Minutes of the pre and post conference and all records pertinent tothe narrative report.

7. Prohibition on wages

A. Wage deduction prohibited

The law prohibits the employer from making deductions from the wages of an employee. The evil sought to be
prevented is to forestall the commission of unwarranted practices of employers by making
unnecessary deductions without employee's knowledge or authorization (Galvadores v Trajano, 144 SCRA 138)

GR: No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of
his employees (LC, Art. 113).

XPNs:
1. Deductions under Art. 113 of the LC for insurance premiums.
2. Union dues in cases where the right of the worker or his union to check off has been recognized by the
Er or authorized in writing by the individual worker concerned (LC, Art. 113). NOTE: Art. 241(o) of the LC
provides that special assessments may be validly checked-off provided that there is an individual written
authorization duly signed by every Ee.
3. Deductions for SSS, PhilHealth and Pag-ibig premiums
4. Taxes withheld pursuant to the Tax Code
 5. Deductions under Art. 114 of the LC for loss or damage to tools, materials or equipment supplied by
themployer when the latter 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
SLE
6. Deductions made with the written authorization of the Ee for payment to a third person (IRR, Book III,
Rule VIII, Sec 13).
7. Deductions as disciplinary measures for habitual tardiness (Opinion dated March 10, 1975 of the Labor
Secretary).
8. Agency fees under Art. 248(e)of the LC
9. Deductions for value of meals and facilities freely agreed upon
10. In case where the Ee is indebted to the Er where such indebtedness has become due and demandable (NCC,
Art. 1706).
11. In court awards, wages may be subject of execution or attachment, but only for debts incurred for food,
shelter, clothing, and medical attendance (NCC, Art. 1703).
12. Salary deduction of a member of a legally established cooperative (R.A. 6938; LC, Art. 59).

B. Non-Interference in Disposal of Wages

Er shall not limit or interfere with the freedom of any Ee to dispose his wages. He shall not force, compel or
oblige his Ees to purchase merchandise, commodities or other property from any other person, or otherwise
make use of any store services of such Er or any other person

C. Deposit for Loss or Damage

Er shall not require his worker to make deposits from which deductions shall be made for the reimbursement
of loss of or damage to tools, materials, or equipment supplied by the Er.

XPN: Er is engaged in such trade or business where the practice of making deductions or requiring deposits
is a recognized one, or is necessary or desirable as determined by the SLE.

Other Prohibitions:

1. Withholding of wages from a worker through inducement, force, stealth, intimidation, threat or by any other
means without his consent —-amounts to deprivation of property.
2. To make deductions from wages for the benefit of the Er or his representative as consideration of a
promise of Employment or retention in employment —-contrary to law, morals, good customs, and public policy

8. XPN of Elimination and diminution (Art. 106)

INSULAR HOTEL EMPLOYEES UNION-NF vs. WATERFRONT INSULAR HOTEL DAVAO [G.R. No. 174040-41
September 22, 2010] PERALTA, J

On August 22, 2002, Joves and Debbie Planas filed a Notice of Mediation before the National Conciliation and Mediation
Board (NCMB), Region XI, Davao City. The issue raised in said Notice was the "Diminution of wages and other benefits
through unlawful Memorandum of Agreement."

ISSUE: WON Article 100 of the Labor Code applies only to benefits already enjoyed at the time of the promulgation of the
Labor Code?

RULING: YES.

Article 100 of the Labor Code provides:

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.

Clearly, the prohibition against elimination or diminution of benefits set out in Article 100 of the Labor Code is
specifically concerned with benefits already enjoyed at the time of the promulgation of the Labor Code. In other words,
Article 100 does NOT purport to apply to situations arising after the promulgation date of the Labor Code.

Even assuming arguendo that Article 100 applies to the case at bar, the same does NOT prohibit a union from offering
and agreeing to reduce wages and benefits of the employees. In Rivera v. Espiritu, this Court ruled that the right to free
collective bargaining, after all, includes the right to suspend it. In construing a CBA, the courts must be practical and
realistic and give due consideration to the context in which it is negotiated and the purpose which it is intended to
serve.
 Besides, the agreement was the result of voluntary collective bargaining negotiations undertaken in the light of the
severe financial situation faced by the employer, with the peculiar and unique intention of not merely promoting its
industrial peace, but preventing the latter's closure.

9. Distinction between Articles 128 and 129 (see separate document)

10. Labor contracting requirement specifically SUBSTANTIAL CAPITAL “or EQUIPMENT)

a. LEO V. MAGO AND LEILANIE E. COLOBONG, Petitioners, v. SUN POWER MANUFACTURING

LIMITED, Respondent. [G.R. No. 210961, January 24, 2018]

FACTS
Petitioners filed a complaint for illegal dismissal and regularization

During the mandatory conference, JOBCREST clarified that the petitioners were not dismissed from employment and
offered to accept them when they report back to work. The petitioners refused and insisted that they were regular
employees of Sunpower, not Jobcrest.

PETITIONERS insist that Jobcrest is a labor-only contractor, and that the DOLE Certificate of Registration is not
conclusive of Jobcrest's legitimate status as a contractor. They further argue that, aside from lacking substantial
capital, Jobcrest only supplied manpower to Sunpower.53 These services, the petitioners allege, are directly related and
necessary to Sunpower's business.

RULING:
Jobcrest is a legitimate and independent contractor.

Article 106 of the Labor Code defines labor-only contracting as a situation "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."

Thus, in order to become a legitimate contractor, the contractor must:

1. have substantial capital OR investment, and
2. must carry a distinct and independent business free from the control of the principal.

In addition, the Court requires the agreement between the principal and the contractor or subcontractor to assure the
contractual employees' entitlement to all labor and occupational safety and health standards, free exercise of the right
to self-organization, security of tenure, and social welfare benefits.

Furthermore, the Court considers job contracting or subcontracting as permissible when the principal agrees to farm
out the performance of a specific job, work or service to the contractor, for a definite or predetermined period of time,
regardless of whether such job, work, or service is to be performed or completed within or outside the premises of the
principal.

GR: Contractor is presumed to be a labor-only contractor, unless the contractor is able to discharge the burden of
overcoming this presumption. In cases when it's the principal claiming the legitimacy of the contractor, then the burden
is borne by the principal.

Preliminarily, there is no such burden resting on either Sunpower or Jobcrest in this case. It is true that Sunpower
maintained its position that Jobcrest is a legitimate and independent contractor. But since the petitioners do not
dispute that Jobcrest was a duly-registered contractor under Section 11 of DOLE DO No. 18-02, there is no operative
presumption that Jobcrest is a labor-only contractor. Conversely, the fact of registration with DOLE does not
necessarily create a presumption that Jobcrest is a legitimate and independent contractor. Nevertheless, the DOLE
Certificate of Registration issued in favor of Jobcrest is presumed to have been issued in the regular performance of
official duty.

Jobcrest has substantial capital.

The law and the relevant regulatory rules require the contractor to have substantial capital or investment, in order to
be considered a legitimate and independent contractor.

Substantial capital or investment was defined in DOLE DO No. 18-02 as "capital stocks and subscribed capitalization in
the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by
the contractor or subcontractor in the performance or completion of the job, work or service contracted out."
The records show that as early as the proceedings before the LA, Jobcrest established that it had an authorized capital
stock of Php 8,000,000.00, Php 2,000,000.00 of which was subscribed, and a paid-up capital stock of Php 500,000.00,
in full compliance with Section 13 of the Corporation Code. For the year ended December 31, 2011, the paid-up capital
of Jobcrest increased to Php 8,000,000.00, notably more than the required capital under DOLE DO No. 18-A.

Evidently, Jobcrest had substantial capital to perform the business process services it provided Sunpower. It has its
own office, to which the petitioners admittedly reported to, possessed numerous assets for the conduct of its business,
and even continuously earned profit as a result. The Court can therefore reasonably conclude from Jobcrest's financial
statements that it carried its own business independent from and distinctly outside the control of its principals.

PETITIONERS argue that the amount of substantial capital is irrelevant because Sunpower provided the tools and
owned the work premises. These supposedly negate the claim that Jobcrest has substantial capital. untenable

DOLE DO No. 18-02 and DO No. 18-A, as well as Article 106 of the Labor Code itself, all use the conjunctive term "or"
in prescribing that the contractor should have substantial capital or investment. Having established that Jobcrest had
substantial capital, it is unnecessary for this Court to determine whether it had sufficient investment in the form of
tools, equipment, machinery and work premises.

The agreement between Jobcrest and Sunpower also complied with the statutory requirement of ensuring the
observance of the contractual employees' rights under the law. Specifically, paragraph 7 of the Service Contract
Agreement obligates Jobcrest to observe all laws, rules and regulations pertaining to the employment of its employees.

b. JOEB M. ALIVIADO, et. al., Petitioners, vs. PROCTER & GAMBLE PHILS., INC., and PROMM-GEM
INC., Respondents. [G.R. No. 160506. June 6, 2011]

FACTS
PETITIONERS worked as merchandisers of P&G from various dates, allegedly starting as early as 1982 or as late as
June 1991, to either May 5, 1992 or March 11, 1993. They all individually signed employment contracts with either
Promm-Gem or SAPS for periods of more or less five months at a time. They were assigned at different outlets,
supermarkets and stores where they handled all the products of P&G. They received their wages from Promm-Gem or
SAPS.

SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual
absenteeism, dishonesty or changing day-off without prior notice.

PETITIONERS filed a complaint against P&G for regularization, service incentive leave pay and other benefits with
damages. The complaint was later amended to include the matter of their subsequent dismissal.

RULING
PETITIONERS insist that they are employees of P&G. They assert that Promm-Gem and SAPS are labor-only
contractors providing services of manpower to their client. They claim that the contractors have neither substantial
capital nor tools and equipment to undertake independent labor contracting. Petitioners insist that since they had
been engaged to perform activities which are necessary or desirable in the usual business or trade of P&G, then they
are its regular employees.

Labor-only contracting and

job contracting

Clearly, the law and its implementing rules allow contracting arrangements for the performance of specific jobs, works
or services. Indeed, it is management prerogative to farm out any of its activities, regardless of whether such activity
is peripheral or core in nature. However, in order for such outsourcing to be valid, it must be made to an independent
contractor because the current labor rules expressly prohibit labor-only contracting.

To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places
workers to perform a job, work or service for a principal and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.

In the instant case, the financial statements of Promm-Gem show that it has authorized capital stock of ₱1 million and
a paid-in capital, or capital available for operations, of ₱500,000.00 as of 1990. It also has long term assets worth
₱432,895.28 and current assets of ₱719,042.32. Promm-Gem has also proven that it maintained its own warehouse
and office space with a floor area of 870 square meters. It also had under its name three registered vehicles which
were used for its promotional/merchandising business. Promm-Gem also has other clients30 aside from P&G. Under
 the circumstances, we find that Promm-Gem has substantial investment which relates to the work to be performed.
These factors negate the existence of the element specified in Section 5(i) of DOLE Department Order No. 18-02.

The records also show that Promm-Gem supplied its complainant-workers with the relevant materials, such as
markers, tapes, liners and cutters, necessary for them to perform their work. Promm-Gem also issued uniforms to
them. It is also relevant to mention that Promm-Gem already considered the complainants working under it as its
regular, not merely contractual or project, employees.32 This circumstance negates the existence of element (ii) as
stated in Section 5 of DOLE Department Order No. 18-02, which speaks of contractual employees. This, furthermore,
negates – on the part of Promm-Gem – bad faith and intent to circumvent labor laws which factors have often been
tipping points that lead the Court to strike down the employment practice or agreement concerned as contrary to
public policy, morals, good customs or public order.

Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. It is a legitimate independent
contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only ₱31,250.00. There
is no other evidence presented to show how much its working capital and assets are. Furthermore, there is no showing
of substantial investment in tools, equipment or other assets.

SAPS failed to show that its paid-in capital of ₱31,250.00 is sufficient for the period required for it to generate its
needed revenue to sustain its operations independently. Substantial capital refers to capitalization used in
the performance or completion of the job, work or service contracted out. In the present case, SAPS has failed to show
substantial capital.

Furthermore, the petitioners have been charged with the merchandising and promotion of the products of P&G, an
activity that has already been considered by the Court as doubtlessly directly related to the manufacturing
business,which is the principal business of P&G. Considering that SAPS has no substantial capital or investment and
the workers it recruited are performing activities which are directly related to the principal business of P&G, we find
that the former is engaged in "labor-only contracting".
"Where ‘labor-only’ contracting exists, the Labor Code itself establishes an employer-employee relationship between
the employer and the employees of the ‘labor-only’ contractor."

The statute establishes this relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the
labor-only contractor as if such employees had been directly employed by the principal employer.

11. Refusal by Er to pay or reduce wages or benefits in discrimination of any Ee who has filed any
complaint or instituted any proceedings under the code or has testified or about to testify —-Still an Ee
despite existing controversy. hh. Battered woman leave; are consequences upon the Er valid?

Yes. In keeping with the principle of parens patriae, the State may validly impose upon the private sectors to render support
and relief to Vawc victims. Such would not amount to oppression to management for after all, the State and the private
employer are both obligated to maintain and achieve efforts to fully protect the interests of workers. The BW leave would
serve this purpose since it would also eventually redound in the Erʼs interest because a BW Ee would be expected to better
serve his duties while equipped with balanced and recovered mental and emotional faculties. Hence, the provision of the
Bw leave is valid.

12. Definition of immorality as a ground for dismissal; was it a validly justified

CHERYLL SANTOS LEUS, Petitioner, vs. ST. SCHOLASTICA'S COLLEGE WESTGROVE and/or SR. EDNA
QUIAMBAO, OSB, Respondents. [G.R. No. 187226. January 28, 2015]

Petitioner was hired by St. Scholastica's College Westgrove (SSCW), a Catholic educational institution, as a non-
teaching personnel, engaged in pre-marital sexual relations, got pregnant out of wedlock, married the father of her
child, and was dismissed by SSCW, in that order. The question that has to be resolved is whether the petitioner's
conduct constitutes a ground for her dismissal.

RULING:
The labor tribunals’ respective
conclusions that the petitioner’s
pregnancy is a "disgraceful or
immoral conduct" were arrived at
arbitrarily.

Sec. 94. Causes of Terminating Employment – In addition to the just causes enumerated in the Labor Code,
the employment of school personnel, including faculty, may be terminated for any of the following causes:

e. Disgraceful or immoral conduct;

The fact of the petitioner’s pregnancy out of wedlock, without more, is not enough to characterize the petitioner’s
conduct as disgraceful or immoral. There must be substantial evidence to establish that pre-marital sexual relations
and, consequently, pregnancy outof wedlock, are indeed considered disgraceful or immoral.

The totality of the circumstances

surrounding the conduct alleged to
be disgraceful or immoral must be
assessed against the prevailing
norms of conduct.

The determination of whether a conduct is disgraceful or immoral involves a two-step process:

1. first, a consideration of the totality of the circumstances surrounding the conduct; and
2. second, an assessment of the said circumstances vis-à-visthe prevailing norms of conduct, i.e., what the society
generally considers moral and respectable.

That the petitioner was employed by a Catholic educational institution per se does not absolutely determine whether
her pregnancy out of wedlock is disgraceful or immoral. There is still a necessity to determine whether the petitioner’s
pregnancy out of wedlock is considered disgraceful or immoral in accordance with the prevailing norms of conduct.

Public and secular morality should

determine the prevailing norms of
conduct, not religious morality.

Accordingly, when the law speaks of immoral or, necessarily, disgraceful conduct, it pertains to public and secular
morality; it refers to those conducts which are proscribed because they are detrimental to conditions upon which
depend the existence and progress of human society.

It cannot be judged based on personal bias, specifically those colored by particular mores. Nor should it be grounded
on "cultural" values not convincingly demonstrated to have been recognized in the realm of public policy expressed in
the Constitution and the laws.

Under these tests, two things may be concluded from the fact that an unmarried woman gives birth out of wedlock:
(1) if the father of the child is himself unmarried, the woman is not ordinarily administratively liable for disgraceful and
immoral conduct. There is no law which penalizes an unmarried mother under those circumstances by reason of
her sexual conduct or proscribes the consensual sexual activity between two unmarried persons.

(2) if the father of the child born out of wedlock is himself married to a woman other than the mother, then there is a
cause for administrative sanction against either the father or the mother. In sucha case, the "disgraceful and
immoral conduct" consists of having extramarital relations with a married person. The sanctity of marriage is
constitutionally recognized and likewise affirmed by our statutes as a special contract of permanent union.

The petitioner’s pregnancy out of

wedlock is NOT a disgraceful or
immoral conduct since she and the
father of her child have no
impediment to marry each other.

Admittedly, the petitioner is employed in an educational institution where the teachings and doctrines of the Catholic
Church, including that on pre-marital sexual relations, is strictly upheld and taught to the students. Nevertheless,
petitioner’s conduct CANNOT be considered as disgraceful or immoral; such conduct is not denounced by public and
secular morality. It may be an unusual arrangement, but it certainly is not disgraceful or immoral within the
contemplation of the law.

To stress, pre-marital sexual relations between two consenting adults who have no impediment to marry each other,
and, consequently, conceiving a child out of wedlock, gauged from a purely public and secular view of morality, does
not amount to a disgraceful or immoral conduct under Section 94(e) of the 1992 MRPS.

There is no substantial evidence to

prove that the petitioner’s pregnancy
out of wedlock caused grave scandal
to SSCW and its students.

Court finds that SSCW failed to adduce substantial evidence to prove that the petitioner’s indiscretion indeed caused
grave scandal to SSCW and its students. Other than the SSCW’s bare allegation, the records are bereft of any evidence
that would convincingly prove that the petitioner’s conduct indeed adversely affected SSCW’s integrity in teaching the
moral doctrines, which it stands for. The petitioner is only a non-teaching personnel; her interaction with SSCW’s
 students is very limited. It is thus quite impossible that her pregnancy out of wedlock caused such a grave scandal,
as claimed by SSCW, as to warranther dismissal.

The petitioner’s dismissal is not a

valid exercise of SSCW’s
management prerogative.

The Court has held that "management is free to regulate, according to its own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods, time, place and manner of work, processes to be
followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers and
discipline, dismissal and recall of workers. The exercise of management prerogative, however, is not absolute as it
must be exercised in good faith and with due regard to the rights of labor." Management cannot exercise its prerogative
in a cruel, repressive, or despotic manner.

SSCW, as employer, undeniably has the right to discipline its employees and, if need be, dismiss themif there is a valid
cause to do so. However, as already explained, there is no cause to dismiss the petitioner. Her conduct is not considered
by law as disgraceful or immoral. Further, the respondents themselves have admitted that SSCW, at the time of the
controversy, does not have any policy or rule against an employee who engages in pre-marital sexual relations and
conceives a child as a result thereof. There being no valid basis in law or even in SSCW’s policy and rules, SSCW’s
dismissal of the petitioner is despotic and arbitrary and, thus, not a valid exercise of management prerogative.

In sum, the Court finds that the petitioner was illegally dismissed as there was no just cause for the termination of
her employment. SSCW failed to adduce substantial evidence to establish that the petitioner’s conduct, i.e., engaging
in pre-marital sexual relations and conceiving a child out of wedlock, assessed in light of the prevailing norms of
conduct, is considered disgraceful or immoral.

THREE VISITORIAL POWERS AND OTHER POWERS OF DOLE SEC:

Visitorial power over recruitment

ART 37. Art. 37. Visitorial Power.

-The Secretary of Labor 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 violation of any provisions of this Title.-

VISITORIAL POWER OVER ESTABLISHMENTS (AIOK)

Art. 128. Visitorial and enforcement power. a.

-The Secretary of Labor and Employment or his duly authorized representatives, including labor regulation officers,

- shall have access to employer’s records and premises at any time of the day or night whenever work is being
undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or
matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any
labor law, wage order or rules and regulations issued pursuant thereto.
b. Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists

-- the Secretary of Labor and Employment or his duly authorized representatives shall have

---the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in
the course of inspection. The Secretary or his duly authorized representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of
the labor employment and enforcement officer and raises issues supported by documentary proofs which were not
considered in the course of inspection. (As amended by Republic Act No. 7730, June 2, 1994).

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this Article may
be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected
only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary
of Labor and Employment in the amount equivalent to the monetary award in the order appealed from. (As amended by
Republic Act No. 7730, June 2, 1994)

c. -The Secretary of Labor and Employment

-may likewise order stoppage of work or suspension of operations of any unit or department of an establishment
when non-compliance with the law or implementing rules and regulations poses grave and imminent danger to the
health and safety of workers in the workplace.

Within twenty-four hours, a hearing shall be conducted to determine whether an order for the stoppage of work or
suspension of operations shall be lifted or not. In case the violation is attributable to the fault of the employer, he shall
pay the employees concerned their salaries or wages during the period of such stoppage of work or suspension of
operation.

d. It shall be unlawful for any person or entity to obstruct, impede, delay or otherwise render ineffective the orders of
the Secretary of Labor and Employment or his duly authorized representatives issued pursuant to the authority granted
under this Article, and no inferior court or entity shall issue temporary or permanent injunction or restraining order or
otherwise assume jurisdiction over any case involving the enforcement orders issued in accordance with this Article.

e. Any government employee found guilty of violation of, or abuse of authority, under this Article shall, after appropriate
administrative investigation, be subject to summary dismissal from the service.

f.The Secretary of Labor and Employment may, by appropriate regulations, require employers to keep and maintain
such employment records as may be necessary in aid of his visitorial and enforcement powers under this Code.

VISITORIAL POWER OVER UNIONS

Art. 274. Visitorial power.

-The Secretary of Labor and Employment or his duly authorized representative is hereby empowered

-to inquire into the financial activities of legitimate labor organizations upon the filing of a complaint under oath and
duly supported by the written consent of at least twenty percent (20%) of the total membership of the labor
organization concerned and

to examine their books of accounts and other records to determine compliance or non-compliance with the law and

to prosecute any violations of the law and the union constitution and by-laws: Provided, That such inquiry or
examination shall not be conducted during the sixty (60)-day freedom period nor within the thirty (30) days immediately
preceding the date of election of union officials. (As amended by Section 31, Republic Act No. 6715, March 21, 1989)

CARLOU’S:

VALIDITY OF QUITCLAIM-96

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