Statutory Reference:
Chapter 1, Article 1-6 of the renumbered Labor Code
Article 1. Name of Decree. — This Decree shall be known as the
“Labor Code of the Philippines.”
● The Labor Code is defined as the "charter of human rights and a
bill of obligations” for every working man. It is designed to be an
institution for national development.
● Basic reforms and features:
○ Emancipation of Labor Relations. Court of Industrial
Relations under the old system replaced by faster-moving National
Labor Relations Commission which administers speedy labor justice
for it is not governed by the rigid and technical rules of procedure and
evidence.
○ Transformation of Workmen's Compensation. Integrated
the Social Security System and the Government Service Insurance
System. Under this principle, speedy delivery of benefits to an injured
or disabled worker is effected.
○ Abolition of the Permit System. Abolished the permit
system in labor administration. The reporting system is introduced in
its place to eradicate the breeding place of graft and corruption.
○ Civil Service. Placing of Government Corporations with
original charters under the Civil Service.
○ Creation of Overseas Employment Development Board
and National Seamen Board, are already abolished and their
functions assumed by the Philippine Overseas and Employment
Administration created under E.O. 797 signed on 1 May 1982
reorganizing the Department of Labor and Employment.
○ Incorporation of Agrarian Reform. The Code has
incorporated agrarian reform emphasizing the policy of the State to
promote social justice.
○ Updating of all Labor and Social Legislations.
○ Physically, the Code is divided into seven (7) books:
a) Book I – Pre-employment, covering recruitment and
placement of workers, and employment of non-resident aliens;
b) Book II – Human Resources Development, dealing with
national manpower development program, and training and
employment of special workers;
c) Book III – Conditions of Employment, dealing with working
conditions, rest periods, wages, etc.;
d) Book IV -- Health, Safety and Social Welfare Benefits —
covering, medical, dental and occupational safety;
e) Book V – Labor Relations, covering labor organization,
unfair labor practices, collective bargaining, strikes, lockouts, etc.;
f) Book VI — Post Employment, covering termination of
employment and retirement from the service; and
g) Book VII — Penal Provisions, Prescription, Transitory, and
Final Provisions.
○ The seven (7) books can be classified into three (3) main
parts: Pre-employment; State of employment; and Post-employment.
ART. 2. Date of Effectivity. This Code shall take effect six (6) months
after its promulgation.
● The Labor Code was promulgated on 1 May 1974, and took effect
on 1 November 1974 after the lapse of a six-month transition.
A. Declaration of Basic Policy
1. Rights of Employees and Workers
a. For dismissals done for an authorized cause, the employee
is not entitled to backwages. (SMART Communications, Inc. vs.
Astorga, G.R. No. 148132 January 28, 2008)
b. The right of labor to security of tenure as guaranteed in the
Constitution arises only if there is an employer-employee relationship
under labor laws. (Sonza v ABS-CBN, G.R. No. 138051, June 10,
2004) 2. Management Rights/Management Prerogative
a. 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.
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. (Duncan vs Glaxo, G.R. No. 162994, September
17, 2004)
b. Management may terminate employees due to redundancy.
We believe 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.
(SMART Communications, Inc. vs. Astorga, G.R. No. 148132 January
28, 2008)
c. The Court reiterates that while an employer has its own
interest to protect, and pursuant thereto, it may terminate an
employee for a just cause, such prerogative to dismiss or lay off an
employee must be exercised without abuse of discretion. Its
implementation should be tempered with compassion and
understanding. The employer should bear in mind that, in the
execution of said prerogative, what is at stake is not only the
employees position, but his very livelihood, his very breadbasket.
(PLDT v Teves, G.R. No. 143511, November 15, 2010)
d. The employer bears the burden of proving that the
employee's dismissal was for just and valid cause. That Peflor did
indeed file a letter of resignation does not help the company's case
as, other than the fact of resignation, the company must still prove
that the employee voluntarily resigned. There can be no valid
resignation where the act was made under compulsion or under
circumstances approximating compulsion, such as when an
employees act of handing in his resignation was a reaction to
circumstances leaving him no alternative but to resign.In sum, the
evidence does not support the existence of voluntariness in Peflors
resignation. (Penaflor v Outdoor, G.R. No. 177114, January 21 2010)
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.
● Purpose of labor legislation - to give life into the Constitutional
mandate of providing protection to labor.
● To place labor 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 to accommodate the interests of the working
class on the human justification that those with less privi leges in life
should have more pprivileges in law (Phil. Air Lines, Inc. v. Santos,
Jr., et al., G.R. No. 77875, 4 February 1993).
Protection to labor does not signify the promotion of employment
alone. What concerns the Constitution more paramountly is that such
employment be above all, decent, just, and humane (Phil. Association
of Service Exporters, Inc. v. Drilon, G.R. No. 81958, 30 June 1988).
The policy of the law is to apply it to a greater number of employees
(Francisco v. NLRC, G.R. No. 170087, 31 August 2006).
B. Construction in favor of labor
ART. 4. 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.
● The above provision reaffirms Art. 1702 of the Civil Code which
states that "all labor legislations and all labor contracts shall be
construed in favor of the safety and decent living for the laborer." ●
The Civil Code also provides that "neither capital nor labor shall act
oppressively against each other, or impair the interest or convenience
of the public.” Thus, in all contractual, property, or other relations,
when one of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age or
other handicaps, the court must be vigilant for his protection.
● In carrying out and interpreting Labor Code provisions including its
implementing rules and regulations, the worker's welfare should be
the primordial and paramount consideration (Songco, et al. v. NLRC,
G.R. Nos. 50999-51000, 23 March 1990), for an exploited working
class is a discontented working class. It is a treadmill to progress and
a threat to freedom. Thus, all efforts must be exerted to dignify the lot
of the employee, elevating him to the same plane as his employer,
that they may better work together as equal partners in the quest for a
better life (Ocampo, Jr. v. NLRC, G.R. No. 81077, 6 June 1990).
● Protection to labor does not mean that every labor dispute will be
decided in favor of the workers. The law also recognizes the
employer's rights which are entitled to respect and enforcement in the
interest of fair play (Duncan v. Glaxo, G.R. No. 162994, 17 September
2004).
● In the guise of affording protection to labor, courts cannot render
decisions on the basis of sympathy and solicitude for the workers at
the expense of the employer for this would run afoul with the avowed
principle of non-oppression ordained in the Civil Code (Caltex v. PLO,
92 Phil. 1014).
● The rule of liberal construction in favor of labor applies only in case
there is doubt. If the contractual provision is crystal-clear, then it must
be applied in accordance with its express terms. The rule, according
to the Code Commission, is justified on grounds of public policy.
C. Rule-making power and the implementing rules and
regulations
ART. 5. Rules and Regulations. The 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. Such rules and
regulations shall become effective fifteen (15) days after
announcement of their adoption in newspapers of general circulation.
● The following are the rules on effectivity:
○ Laws shall take effect after fifteen (15) days following the
completion of their publication in the Official Gazette, unless it is
otherwise provided (Art. 2, Civil Code).
○ In addition to other rule-making requirements provided by
law not inconsistent with this Book, each rule shall become effective
fifteen (15) days from the date of filing as above provided unless a
different date is fixed by law, or specified in the rule in cases of
imminent danger to public health, safety and welfare, the existence of
which must be expressed in a statement accompanying the rules. The
agency shall take appropriate measures to make emergency rules
known to persons who may be affected by them (Chapter 2, Book VII,
1987 Administrative Code).
● Administrative rules and regulations must be published if their
purpose is to enforce or implement existing law pursuant also to a
valid delegation. However, interpretative regulations and those merely
internal in nature, that is, regulating only the personnel of the
administrative agency and not the public, need not be published.
Neither is publication required of the so-called letters of instructions
issued by administrative superiors concerning the rules or guidelines
to be followed by their subordinates in the performance of their duties
(Tañada v. Tuvera, 146 SCRA 446).
● The Department of Labor and Employment, other agencies tasked
to administer and enforce the Labor Code or any part thereof and to
promulgate the necessary implementing rules and regulations are the
following: National Labor Relations Commission, Philippine Overseas
Employment Administration, National Wages and Productivity
Commission, Employees Compensation Commission, Social Security
Commission, OWWA, GSIS, etc.
● Regulations adopted under legislative authority by a particular
department must be in harmony with the provisions of the law and for
the sole purpose of carrying into effect its general provisions. By such
regulations, the law itself cannot be extended. So long as they relate
solely to carrying into effect the provisions of the law, they are valid
(United States v. Molina, 29 Phil. 119). It is elementary that an Act of
Congress cannot be amended by a rule promulgated by the
Workmen's Compensation Commission (Santos v. Hon Estenzo, et
al., 109 Phil. 419). It is also settled that rules and regulations duly
promulgated and adopted in pursuance of properly delegated
authority have the force and effect of law where they are legislative in
character, but rules and regulations which are merely executive or
administrative views as to the meaning and construction of the statute
are not controlling on the courts, and cannot alter or extend the plain
meaning of a statute, although they are entitled to great weight where
the statute is ambiguous (82 CJS, 770-771).
● The implementing rules partake the nature of a statute and are
binding as if written in the law itself. They have the force and effect of
law and enjoy the presumption of constitutionality and legality until
they are set aside with finality in an appropriate case by a competent
court (Dela Salle Araneta University v. Bernardo, G.R. No. 190809, 13
February 2017).
ART. 6. Applicability. All rights and benefits granted to workers under
this Code shall, except as may otherwise be provided.
Note: Chapter 2 - Emancipation of Tenants specifically, Articles 7 to
11 of the renumbered Labor Code, is now amended by RA 6657 or
the Comprehensive Agrarian Reform Law of 1988 as amended by RA
7881 and is part of the subject Agrarian Law & Social Legislation
D. Applicability of the Labor Code
1. Definitions, Book V, Title I, Chapter 1, Art. 219 (e), (f), (m), and
Art. 291 of the Labor Code
● "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. (Book V, Title I, Chapter 1, Art. 219 (e) of the Labor Code)
● "Employee" includes any person in the employ of an employer. The
term shall not be limited to the employees of a particular employer,
unless the 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. (Book V, Title I, Chapter 1, Art. 219 (f) of the Labor
Code)
● "Managerial employee" is 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. Supervisory employees are those who, in the interest of
the employer, effectively recommend such managerial actions if the
exercise of such authority is not merely routinary or clerical in nature
but requires the use of independent judgment. All employees not
falling within any of the above definitions are considered rank-and-file
employees for purposes of this Book. (Book V, Title I, Chapter 1, Art.
219 (m) of the Labor Code)
● Article 291. Government Employees. The terms and conditions of
employment of all government employees, including employees of
government-owned and 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. 291 of the
Labor Code)
2. Employer-Employee Relationship
● Proof of employment relation is of first importance, for the reason
that the existence of the employer-employee relationship is the
jurisdictional foundation for a compensation claim (Asia Steel Corp. v.
WCC, L-7636, 27 June 1955). This is so that an employee can enjoy
all the rights and benefits under the Labor Code if such a relationship
exists.
● The basic factor underlying the exercise of rights and the filing of
claims for benefits under the Labor Code and other presidential
issuances or labor legislations is the status and nature of one's
employment. Whether an employer-employee relationship exists and
whether such employment is managerial in character or that of a rank-
and-file employee are primordial considerations before extending
labor benefits (Villuga, et al. v. NLRC, G.R. No. 75038, 23 August
1993).
3. Tests to determine EE-EE
● Four-fold test (Indicia of determination); “Economic or Economic
Reality Test"
○ The existence or non-existence of the employer-employee
relationship is commonly determined by examination of certain factors
or aspects of the relationship, as follows:
■ (a) the manner of selection and engagement of the
putative employee;
■ (b) the mode of payment of wages;
■ (c) the presence or absence of the power of
dismissal; and
■ (d) the presence or absence of a power to control the
putative employee's conduct (Hijos De F. Escano, Inc. v.
NLRC, G.R. No. 59229, 22 August 1991), i.e., the power to
control the employee with respect to the means and methods
by which the work is to be accomplished.
● Control Test
○ The control test assumes primacy in the overall
consideration. Under this test, an employment relation obtains where
work is performed or services rendered under the control and
supervision of the party contracting for the service, not only as to the
result of the work but also as to the manner and details of the
performance (Iloilo Chinese Commercial School v. Fabrigar, L-16600,
27 December 1961; Jimenez, et al. v. NLRC, G.R. No. 116960, 2 April
1996).
○ The power of control refers merely to the existence of the
power and not to the actual exercise thereof (MAM Realty Dev. Corp.
v. NLRC, G.R. No. 114787, 2 June 1995).
■ Not every form of control establishes employer
employee relationships. A demarcation line should be drawn
between:
(a) rules that merely serve as guidelines which only
promote the result, and
(b) rules that fix the methodology and bind or restrict
the party hired to the use of such means or methods. Under
the first category, there exists no employer employee
relationship. In the second category it has the effect of
establishing employer-employee relationships (Insular Life
Assurance Co., Ltd. v. NLRC, 179 SCRA 439; Consulta v.
C.A., G.R. No. 145443, 18 March 2005);
■ The skills rendered, source of instrumentalities and
tools, location of the work, duration of the relationship, the
hired party's discretion when and how long to work, the
manner of payment, whether the work is part of the regular
business of the hiring party, the contract provisions on benefits
*(Sonza v. ABS-CBN, G.R. No. 138051, 10 June 2004);
■ The bus owner has control over a bus driver, an
employee, although paid on commission basis (R. Transport v.
Ejandra, G.R. No. 148508, 20 May 2004)
■ Employment does not exist for a sales agent who
receives commission on his gross sales (Abante v. Lamadrid
Bearing and Parts, G.R. No. 615989, 28 May 2004);
■ Where there is less control in the exercise, the more
likely the person hired is an independent contractor (Sonza v.
ABS-CBN, G.R. No. 138051, 10 June 2004);
■ Where the hirer cannot discipline or dismiss the hired
person over his performance (Ibid);
 ■ The worker performs subject to employer's (5) the amount of initiative, skill, judgment or foresight required
specifications indicating control (Dy Keh Beng v. ILMUP, G.R. for the success of the claimed independent enterprise;
No. 32245, 23 May 1979);
(6) the permanency and duration of the relationship between
■ The company has direct control and supervision over the worker and the employer; and
the activities of pakiao workers (PRC v. C.A., G.R. No. 29590,
(7) the degree of dependency of the worker upon the employer
30 September 1982);
for his continued employment in that line of business (Francisco v.
■ Since the owner controls the work performance of a NLRC, G.R. No. 170087, 31 August 2006; Sevilla v. C.A., G.R. Nos.
caretaker of a barber shop, he is an employee of the L-41182 3, 15 April 1988).
establishment (Jov. NLRC, G.R. No. 121605, 2 February
● The "two-tiered” test: economic dependence and control test ○
2000).
There are certain cases the control test is not sufficient to give a
■ Insurance agents whose time and effort spent by complete picture of the relationship between the parties, owing to the
them are solely dependent on their own will and they are paid complexity of such a relationship where several positions have been
on their commissions based on a certain percentage of their held by the worker.
sales. No employer-employee relationship exists between the
○ The better approach would therefore be to adopt a two-tiered
insurance company and such agents (Great Pacific Life v.
test involving:
Judico, 180 SCRA 445).
(1) the putative employer's power to control the employee with
● The "whole economic activity or totality of economic circumstances"
respect to the means and methods by which the work is to be
test
accomplished; and
○ The need to consider the existing economic conditions
(2) the underlying economic realities of the activity or
prevailing between the parties, in addition to the standard of right-of-
relationship.
control like the inclusion of the employee in the payrolls, to give a
clearer picture in determining the existence of an employer-employee ○ This two-tiered test would provide us with a framework of
relationship based on an analysis of the totality of economic analysis, which would take into consideration the totality of
circumstances of the worker. Thus, the determination of the circumstances surrounding the true nature of the relationship between
relationship between employer and employee depends upon the the parties.
circumstances of the whole economic activity, such as:
○ Appropriate where there is no written agreement or terms of
(1) the extent to which the services performed are an integral reference to base the relationship due to the complexity of the
part of the employer's business; relationship based on the various positions and responsibilities given
to the worker over the period of the latter's employment. (Ibid.)
(2) the extent of the worker's investment in equipment and
facilities;
(3) the nature and degree of control exercised by the
employer;
(4) the worker's opportunity for profit and loss;