COMPENDIUM on LABOR LAW ANTONIO H. ABAD, JR. Dean, College of Law, Adamson University Former Dean, Institute of Law, Far Bastern University Bar Reviewer, Ateneo de Manila School of Lat, Lecturer, U.P. Law Center, Institute of Judicial Administration and ANNA MARIA D. ABAD Former Vice-Dean, Lyceum College of Law Faculty member: Far Eastern University Institute of Law ge of Education Graduate Level uezon City and Asian Center for REX Book Store 856 Nicanor Reyes, .t. os. 7605-67 -F3518.68Philippine Copyright 2015 by ‘ONION. ABAD, JR. ANNA MARIA D. ABAD ISBN 978-971-23-7126-4 No portion of this book may be copied or reproduced in books, pamphlets, outlines or notes, whether printed, mimeographed, typewritten, copied indifferent electronic devices or in any other form, for distribution or sale, without the written permission of the author except brief passages in books, arti reviews, legal papers, and judicial or other off proceedings with proper citation. Any copy of this book without the eorrespond- ing number and the signature of any of the authors con this page either proceeds from an illegitimate source or is in possession of one who has no authority to dispose of the same. ALL RIGHTS RESERVED BY THE AUTHORS: No, 0881 wn PREFACE FOR 2015 EDITION ‘The 2015 Edition of the Labor Law Compendium has been updated to include new trends and developments in labor law ju- risprudence until November 2014, as well as new laws and Depart- ment Orders. Jude: Republic Act No. 10361 (Batas Kasambahay of 2013); Republic Act No. 10161 (2011), allowing the employment of DOLE Department Order No. 119-12 (24 January 2012) Implementing Rules of RA 10151, in reference to the transportation and sleeping quarters requirement of nightshift work ers; DOLE Department Order No. 112-A (22 May 2012) amending the guidelines on the Implementation of the special gynecological leave benefit for women employees in the private sector; DOLE Department Order No. 18-4, series of 2011 (14 November 2011), which imposed new requirements for independent contractors, as well as additional activities which cannot be validly sub-contracted out; and DOLE Department Order No. 1, series of 2012 (January 2012) which exempted the construction industry and the businese process outsourcing industry from the coverage of DOLE Dep: ment Order No, 18-4. With bar reviewers and labor law practitioners in mind, addi- tional graphs used for labor law bar review subjects of the authors have been incorporated for s clearer grasp of the procedures. We wish to acknowledge with gratitude the scholarly con: tribution and tremendous sacrifices made by our associates and paralegals in the law office relative to the researches of new 2013 ‘nd 2014 jurisprudence: Atty. Isagani Coruna and Atty. Annaliza Mercone-Pulmones, Annafelle Abello, Alden Peis, Edmee Santos and Allan Chua; as well as for new laws and Department Orders, by Atty. Maria Lorena E. Palmares. As ever, we are grateful for the tireless efforts of Ms. Theresa Casteneda-Cunanan, Kitchie Castaneda-Sinongeo and Myra Perer-Soteco for typing and printing the several drafts in the editing of this book. ‘The AuthorsCONTENTS CHAPTER I—THE CONSTITUTION AND PROTECTION TO LABOR Principles of social and distributive justice as found in Constitution and the Labor Code... Constitutional rights of workers Labor contracts are impressed with public interest; ‘The Constitution protects rights of the workingman... Principles of Social and Distributive Justice: Balancing of interests in case worker's and management's rights co Social justice ceases to be an effective instrument for the “equalization of the social and economic forces” by the State when it is used to shield wrongdoing......... — Social justice policy mandates compassionate attitude towards the working class; while the constitution’s protection to labor does not condone wrongdoing, it urges moderation of the sanctions that may be imposed........ CHAPTER II—GENERAL LABOR CONCEPTS, Construction in favor of labor... Burden of proof is always upon employer to show validity of its exercise of management prerogatives, especially as regards termination of employment. “No Work, No Pay” Principle.. “Last in, First out” (LIFO) Rule 12“One union-One company” Pol “Equal Pay for equal work” Principle Non-diminution of Benefits... CHAPTER III—EMPLOYER-EMPLOYEE RELATIONSHIP Concept of employer-employee relationship... Four-fold test: The control testis the most crucial indication of the existence ofan employer emplovoo lationship However, not every form of control will have the effect of establishing an employer-employee relationship... Examples where supreme court ruled that an employer-employee relationship existed .... Examples where the supreme court ruled that there was no employer-employee relationship IF there being no employer-employer relationship, then there can be no compulsory coverage under the social Security Act. Difference between an employee and contractor. CHAPTER IV—JOB-CONTRACTING 7 20 21 24 24 29 33 34 34 AND LABOR-ONLY CONTRACTING ARRANGEMENTS 1 Contracting out is valid as an exercise of management prerogative for as long as it complies with the limits and standards provided by the Labor Code. Valid independent contracting or subcontracting arrangements... = Labor ony contracting arrangements prohibited by law... Whether the DOLB Certification that one isa legitimate job-contractor constitutes sufficient proof of compliance with requirements. 57 2, 3. 4 6 1. 8 9. 1 Effect for failure of owner of project to require the contractor to post bond... When are the workers deemed to be performing. activities which are “directly related to the main Business of the principal Where principal exercises control, then. labor-only contracting arrangement. Burden of proving that a contractor is not a labor-only contractor is with the principal _ Example of independent contractor: Masiador and sentenciador in a cockpit CHAPTER V-MANAGEMENT PREROGATIVES ‘The free will of management to conduct its own affairs to achieve its purpose cannot be denied. Examples of the valid exercise of management prerogatives.. CHAPTER VI—CLASSIFICATION OF EMPLOYMENT Classification of employees for compensation purposes is essentially an exercise of management prerogative. Article 280, Labor Code; Deconstructed... Regular employment. Probationary employees. Term employment wm Project employment Seasonal employment... Casual employment ... Are seafarers regular or contractual employees?... (0, Managerial employees wn z 58. 62 90 91 92 95 ul ur 132 186 136 13811. Supervisory Employees........ sven 139 6. Procedure for Certification Elections ............ 190 12, Rank-and-File Employees...... vse 140 7. Requirement to have a valid elections. 192 8. Requirement for certifieation ofthe union 182 CHAPTER VII—RIGHT TO 9. Run-Off Election; elements and nuances. fee freee 10. Juri :tion to determine employer-employee 1. Existence of employer-employee relationship is, relationship in certification election cases. 195, essential for the determination of whether or no i he tion of whether or not 11. Protests and other questions arising from the one may exercise right of self-organization for 5 arene ae ay conduct of the election . ; 198 2 Rationale for uni aa 12, May the legitimacy of a labor union, which has 3. Who may unionize for purposes of lleged to be composed of a mixture of rank bargaining negotiations . 141 and-file and supervisory employees, be questioned 4. Salient Features of Republic Act No, 9481... 182 etc een » 88 ification and/or misrepresentation in the CHAPTER IX—COLLECTIVE BARGAINING, Adoption of Constitution and By-Laws or as a Ground for Cancellation of Union Registration ... 161 NEGOTIATIONS AND AGREEMENT 8. No more prohibition against a national A. COLLECTIVE BARGAINING AND NEGOTIATIONS federation representing both the rank-and-file 1. Collective Bargaining, defined _ 187 union and the supervisory union in one employer na unit. : so 164 2. Nature of collective bargaining 197 7. Relationship between the mother union and the 3. Duty to bargain collectivel 198 Jocal Uni0M enn : 7 seni 165 4. Mandatory aspects of bargaining... 200 8. Disaffiliation of the local union from the 5. Bargaining representative. 201 mother union ose 7 sence 166 gaining sepresent 6. Scope of bargaining agent's representation.. 202 ‘evance machine! 202 CHAPTER VIII—APPROPRIATE BARGAINING UNIT ct AND CERTIFICATION ELECTION 8. ULP in collective barge’ 208 1. Appropriate Bargaining Unit... - 168 9. Bargaining in bad faith. 203 2. Certification Election nee 370 10. Refusal to bargain... 7 . 205 3. Whether a petition to cancel/revoke registration is @ 11, Violations of CBA no longer ULP...-» 206 Fi judicial question to the petition for certification 12. Individual bargaining, explained. 207 election? vs ne 184 i Jeadlock in collective bargaining s.r. 2 4. Who can vote inthe certification election? 184 a ons a ara : 14, Collective Bargaining Agreement (OBA), defined: ... 5. Onretractions, recantations, or withdrawals 189 ective Bargaining Agreement (CBA), z 145. Collective Bargaining Agreement as a contract... 20918, 19, 20, 21. Union Security Clause.. Check-offs of union dues, special assessments, and agency fees., Registration of the CBA operates as a bar to the filing of a petition for certification election during its lifetime, except only during the freedom period ... Duration of the CBA Automatic retroactivity of CBA benefits... Expiration of CBA CHAPTER X—UNFAIR LABOR PRACTICE Concept of Unfair Labor Practice. Unfair Labor Practices of employers. Examples of ULP committed by employers. guilty of ULP... : Unfair Labor Practices of labor organizations Cases of ULP of labor organizations: CHAPTER XI-STRIKES, LOCKOUTS AND PICKETING Constitutional and statutory Basis «ren Definition of terms... Who may declare a strike or lockout? Requisites for a valid strike; a synthesis... First Requirement: Lawful purpose.. Second Requirement: Lawful means in conducting the strike ‘Third Requirement: Compliance with procedural requirements of the Labor Code... 214 222 224 205 227 228 229 230 238 239 239 240 244 245, 248 249 250 & Assumption of jurisdiction by the Secretary of Labor or Certification of the labor dispute to the National Labor Relations Commission for compulsory arbitration ....nnm- of Labor... No Strike, No Lock-out” Clause “Runaway shop,” defined 12, Labor Injunction; “Innocent bystander Rule” 13. Question of compensation of striking workers... 14. Waiver of illegality of strike 15, Lockout 16. Picketing.. CHAPTER XII—TERMINATION OF EMPLOYMENT Basic principles in termination cases Requirements for legality... Just causes for termination. Authorized causes... Procedural due process gality in the manner of dismissal liefs for illegal dismissal Right to recover damages for dismissals 9. Constructive dismissal. 10. Preventive suspension... 11. Temporary lay-off. 12. Termination of employment by the employee 18. Retirement, 2am 283 286 286 287 . 287 sane 289) 289 290 293 . 296 296 344 368 377 383 391 392 393 393 394 307CHAPTER XII—JURISDICTION, ACTIONS, REMEDIES, A 1 2. 3. 4 5. 6. 1. 8. 8 u 12, ). Grievance Machinery... 10. AND PROCEEDINGS - JURISDICTION Jurisdiction; how determined.. Labor Arbiter., ‘National Labor Relations Commi: Court of Appeal: ‘Supreme Court. Regional Director... Secretary of Labor. Bureau of Labor Relat Voluntary Arbitration, . National Conciliation and Mediation Board: . ‘National Wages and Productivity Commission (NWPC) and Regional Tripartite Wages and Productivity Board (RTWB)... REMEDIES AND PROCEEDINGS Execution of judgments... Liability of corporate official . Transferee of an enterprise is not liable as a general rule Compromise settlement. Workers’ preference in case of bankruptcy Prescription Labor Injunctions.... Attorney's Fees; Motion for Intervention... CHAPTER XIV—LABOR STANDARDS Labor Standards, defined..... Wages, 402 404 a5 430 . 441 443 447 451 455 456 461 463 465 467 469 470 . 474 475 . 480 484 486 486 3, Hours of Work..... woe 497 4, Rest Day... Bil 5. Holiday Pay. Bil 6 18th Month Pay, : 515 7. Piece Rate Workers.. 516 8 Incentive Leave Pay BT 9. Service Charges... 521 10. Nature of a Bonus: a prerogative, not an obi 522 11, Employment of apprentices. 522 12, Employment of women .... 522 13. Employment of minors. . 624 14. Employment of househelpers . 526 15. Homeworker, defined. 528 16. Employment permit Required of non-resident 528 ons only... CHAPTER XV—RECRUITMENT, PLACEMENT AND COMPENSABILITY OF INJURY FOR OVERSEAS WORKERS 1. “Recruitment and Placement,” defined. 529 2. Illegal Recruitment, defined ....unnnennn 530 3. Inillegal recruitment cases, the number of persons victimized is determinative... eee Ad 4, Illegal recruitments as economic sabotage. 585 5. Conviction for both illegal recruitment and esta. 6. Solidary and foreign princi 7. doint and several liability of manning agent for unpaid salaries of workers.... & Compensation and benefits for death 9. Liability and compensability for disability.....2... 588 cal employment agency10. Effect if there is @ contractual stipulation that the OFW's employment contract shall be governed by the laws of the foreign country, 11. Joint and several liability of private recruitment agency with the foreign principal... 12. Pre-termination of seafarers’ overseas employment contracts; money clairas. 15. Preseription af action of money claims of seafarers. 1M. Do the provisions of the Labor Code still apply to Filipino OFWs who have been deployed abroad and are retrenched by the foreign principal? 15. Whether the fact that the foreign principal changed its mind and chose another applicant, ean be considered a valid cause for non-deployment? .. 16. Suicide not compensable, CHAPTER XVI_SPECIAL LAWS AND NEW DEPARTMENT ORDERS A. REPUBLIC ACT NO. 10361 (“‘BATAS KASAMBAHAY”) 1. Applicable to the following personnel whether under a live-in or live-out arrangements, Not applicable to the following personnel.. 2, 3. Employment contract. 4. Rights of Kasambahay. 5. Standard Treatment B, REPUBLIC ACT NO. 10151 (AN ACT ALLOWING THE EMPLOYMENT OF NIGHT WORKERS, THEREBY REPEALING ARTICLES 130 AND 181 OF PRESIDENTIAL DECREE NUMBER FOUR HUNDRED FORTY-TWO, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES) 1. Definition. 2. New general rule on who may be a night worker: 3. Some salient features of this new law D. 562, Consultation on night work schedules ‘Transportation and sleeping quarters requirement of nightshift workers as amended by DOLE Department Order No, 119-12... so : nm 62 REPUBLIC ACT NO. 7277 (MAGNA CARTA FOR DISABLED PERSONS) Coverage “ 563 Disabled persons and disability defined 563 What are the rights and privileges of disabled persons in respect of employment? cients 564 What constitutes acts of diserimination?... 565 ‘What are the two pronged incentive to the employers under this act? oo : . 566 REPUBLIC ACT NO. 7877 (THE ANTI-SEXUAL HARASSMENT ACT OF 1995) Declaration of policy ins. sense 667 Sexual harassment; when committed 567 Elements . 568 Who may be considered an vets of sexual = ses Liability nee mm . 569 REPUBLIC ACT NO. 8972 (SOLO PARENT'S WELFARE ACT OF 2000) Declaration of policy : soem, 869 Who is Considered as a “Solo Parent . 569 Who are Considered as “Children?” ..., 570 What are the Employment-Related Benefits Available to All “Solo Parents"? snr senennenes TL REPUBLIC ACT NO, 8187 (PATERNITY LEAVE ACT OF 1996) REPUBLIC ACT NO. 9710 (THE MAGNA CARTA OF WOMEN) Declaration of policy CoverageDiscrimination, defined: Benefits and protection granted: 5. Penalties: .... APPENDICES Diagramatic presentation of the right to self-organization, collective bargaining and strikes. Chart A: Registration Procedure. Chart B: Certification Election (CE) Chart B-1: Appeal from Denial of Petition for Certification Election : Chart B-2: Conduct of Certification Election Chart C: Collective Bargaining, Deadlock Chart D: Collective Bargaining Agreement Chart E: Collective Bargaining, Assumption of Jurisdiction by the Secretary se Chart E-1 Requisites for a Valid Strike... Chart E-2 Flowchart for a Valid Strike. Chart F: Flowchart of Cases from Labor Arbi to Supreme Court. : Chart G: Jurisdiction of Department of Labor and its Bureaw/Regional Offices... - Chart G-1 Jurisdiction of Departmental of Labor and its Bureaus/Regional Offices. . ' ‘The Rules of Provedure af the Single Entry Approach (SEMA) wnsncnnnnmninnennrnnn Conciliation—-Mediation Process Workflow (Notice of Strike/Lockout Case Flow)... Conciliation—Mediation Process Workflow (Preventive Mediation Case Flow) PORA-SEC (Standard Employment Contract)... vee 606 578 579 580 604 605 CHAPTER THE CONSTITUTION AND PROTECTION TO LABOR PRINCIPLES OF SOCIAL AND DISTRIBUTIVE JUSTICE AS FOUND IN CONSTITUTION AND THE LABOR CODE ‘The law itself laid down a compassionate policy which vivifies and enhances the provisions of the 1987 Constitution on labor and the Working man. The duties and responsibilities of the State are imposed not so much to express sympathy for the working man ae to forcefully and meaningfully underscore labor as a primary social and economic force, x x x an indispen- sable partner for the nation’s progress and stability. (Garcia v. Philippine Airlines, G.R. No. 164856, 20 January 2009) serving legal protection. The social justice a bor provisions in the Constitution dictate so. (Capito! Medical Center v. Meris, G.R. No, 155098, 470 SCRA 125 [16 September 2005) L1 ART. II (State Policies), Sec. 9: Section 9. The State shall promote a just and dy. namic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living, and an improved quality of life for all. 1.2 ART, XII (National Economy and Patrimony), Sees. 1, 6, and 12. Section 1. The goals of the national economy are a more equitable distri ion of opportunit and wealth; a sustained increase in the amow sand services produced by the nation for thie ben 113 COMPENDIUM ON LABOR LAW the people; and an expanding productivity as the key to raising the quality of life for all, especially the under- privileged. The State shall promote industrialization and employment based on sound agricultural developm and agrarian reform, through industries that make and efficient use of human and natural resources, and which are competitive in both domestic and foreign mar: kets. However, the State shall protect Filipino enterprises In the pursuit of the economy and all regions of the country shall be given, optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collec: tive organizations, shall be encouraged to broaden the buse of their ownership. Section 6. The use of property bears a social ine tion, and al includ. ing corporations, cooperatives, and similar collective or- ganizations, shall have the right to own, establish, and ‘operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands, Section 12. The State shall promote the prefere: tial use of Filipino labor, domestic materials and local ly produced goods, and adopt measures that help make them competitive. ART. XIII (on Social Justice and Human Rights), See. 1: ‘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 economic, and pe cultural inequities by equitably diffusing wealth and po- litical power for the common good. To thi tion, ownership, use, and disposition of property and its, increments. THE CONSTITUTION ON TO LABOR 14 ART. XII (on Labor), Sec. Section 8 Tho State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employ- ment opportunities for all It shall guarantee the rights of all workers to self-organization, collective bargaining and nogotia- tions, and peaceful concerted activities, including th right to strike in accordance with law. Th titled to security of tenure, humane conditions and a living wage, They and decision-making process 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. ‘The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns to investments, and to expansion and growth, 1.5 ART. 3, Labor Code: Declaration of Policy ART. 3. Declaration of basic policy. — The State shall afford protection to labor, promote full employ- ment, ensure equal work opportunities regardless of sex, race or creed and regulate the relations between work: ers and employers. The State shall assure the rights of workers to self-ory rity of tenure, and just and humane conditions of work. CONSTITUTIONAL RIGHTS OF WORKERS (Art. IIT, See. 1, 8; Art. XIIT, Sec. 3) 2.1 Right to property and due process Employment is not merely a contractual relation- has assumed the nature of property fight. [t may the difference whether or not a family will have food on their table, roof over their heads and education2.2 2.8 24 25 26 ‘ional Building, San Mareelino COMPENDIUM ON LABOR LAW for their children. Itis for this reason that the State has taken up measures to protect employees from unjusti fied dismissals. It is also because of this that the right to security of tenure is not only a statutory right but, more s0, a constitutional right, (Gonzalez v NLRC- 5th Divi sion Cagayan de Oro and Ateneo de Davao University, GAR. No, 125735, 313 SORA 169 [August 26, 1999). Right to selforganization Right to security of tenure, collective bargaining, strike and to concerted activities Right to just and humane conditions of work, such a) right to regular workdays/hours b) right to overtime work/premium pay ©) right to weekly rest periods ) right to service incentive leave pay ©) right to holiday pay/13th month pay Right toa living wage ‘What is a living wage? — The living wage is de. fined as the amount of family income needed to provide for the family’s food and non-food expenditures with sufficient allowance for savings/investments for social ‘Security so as to enable the family to live and maintain a decent standard of human existence beyond mere subsistence level, taking into account all of the family’s physiological, social and other needs.” Right to participate in policy and decision mak- ing: the doctrine of co-determination In the light of Articles 212 (g) and 255 of the La- bor Code, the employees have the right to participate in policy-making affecting their rights, duties, welfare and benefits. Hence, in the formulation of a’ Code of and Productivity Commiasion, 2001." copy of this arch Division of the NWPC, ded Floor, Dy Interna omer Malvar Street, Malate Manila, CHAPTER 5 ‘THE CONSTITUTION AND PROTECTION TO LABOR Discipline among employees, this is a shared respon- sibility of the employer and the employees, (Philippine Airlines, Inc, v. NLRC, 225 SCRA 301 [1998)]. Right to just share in the fruits of production (profit). LABOR CONTRACTS ARE IMPRESSED WITH PUBLIC INTEREST; THE CONSTITUTION PROTECTS RIGHT OF THE WORKINGMAN. A contract of labor is so impressed with public interest that the New Civil Code expressly subjects it to special laws on labor unions, collective bargaining, strikes and lock-outs, closed shop, wages, working conditions, hours of labor and similar subjects, (Fair Shipping Corp. v. Medel, 679 SCRA 360, GR. No, 177907, 29 August 2012.) Tt must be underscored that no less than our Constitu- tion looks with compassion on the workingman and protects his rights, not only under a general statement of a state poli- cy, but under the Article on Social Justice and Human Rights, thus placing labor contracts on a higher plane and with great er safeguards. Verily, relations between capital and labor are not merely contractual. They are impressed with publie inter- est and labor contracts must, perforce, yield to the common good. (Brewmaster International, Inc. v. National Federation of Labor Unions, 271 SCRA 275 (1997), 3.1 Why Courts should be vigilant in protecting the rights of the working class as enshrined in the Constitution. Courts should be ever vigilant in the preservation of the constitutionally enshrined rights of the working class. Without the protection accorded by our laws and the tempering of courts, the natural and historical in- clination of capital to ride roughshod over the rights of labor would run unabated. (Mabeza v. NLRC, 271 SCRA 670 [1997},) 3.2. Under the Constitution, labor is entitled to “hu- mane conditions of work” and “equality of em- ployment opportunities.” . Public policy abhors inequality and discrimination Our Constitution and laws reflect the policy againstCOMPENDIUM ON LABOR LAW these evils. 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 specif- ically provides that labor is entitled to "humane condi- tions 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 to promote “equality of employment opportunities for all.” (International School Alliance of Educators [ISAEJ v. Quisumbing, et al., 333 SCRA 13 [2000).) PRINCIPLES OF SOCIAL AND DISTRIBUTIVE JUSTICE: BALANCING OF INTERESTS IN CASE WORKER'S AND MANAGEMENT'S RIGHTS COLLIDE. ‘The policy of social justice is not intended to coun- tenance 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 humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be [a] refuge of scoundrels any more than can equi- ty 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 poli cy of our Constitution is not meant for the protection of those who have proved they are not worthy oft, like the workers who have tainted the cause of labor with the blemishes of their own character. (Tirazona v. Phil. Eds Techno-Service [PET INC.], G.R. No. 169712, 20 Janu- ary 2009; See also: Reynaldo Moya v. First Solid Rubber Industries, G.R. No. 184011, 18 September 2013) 4.1 General rule: Worker's rights to be favored. ‘The State is bound under the Constitution to afford full protection to labor and when conflicting interests of labor and capital are to he weighed on the scales of so- cial justice, the heavier influence of the latter should be counterbalanced with the sympathy and compassion the CHAPTER L 1 ‘THE CONSTITUTION AND PROTECTION TO LABOR law accords the less privileged workingman. This is only fair if the worker is to be given the opportunity and the right to assert and defend his cause, not as a subordi nate, but as part of management with which he can ne- gotiate on even plane. Thus, labor is not a mere employ- ee of capital but its active and equal partner. (Fuentes, etal. v. NLRC, et al., 266 SCRA 24 [1997)) 4.2 However, the constitutional protection given to labor is not designed to oppress or destroy capi- tal. (Capili v. NLRC, 270 SCRA 488 (1997)) 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 rights which are entitled to respect and enforcement in the interest of simple fair play. Thus, where management prerogative to transfer employees is validly exercised, as in this case, courts will decline to interfere. (Best Wear Garments v. De Lemos, G.R. No 191281, 05 December 2012) ‘The constitutional policy of providing full protec- tion to labor is not intended to oppress or destroy man- agement. The commitment of the Supreme Court to the ‘cause of labor does not prevent the High Tribunal from sustaining the employer when it is in the right. (Garcia v, NLRC, 284 SCRA 632 /1994)) SOCIAL JUSTICE CEASES TO BE AN EFFECTIVE INSTRUMENT FOR THE “EQUALIZATION OF THE SOCIAL AND ECONOMIC FORCES” BY THE STATE WHEN IT IS USED TO SHIELD WRONGDOING. (Jamer v. NLRC, 278 SCRA 632 (197) “The cause of social justice is not served by upholding the interest of the employees in disregard of the right of the com pany. Social justice ceases to be an effective instrument for the “equalization of the social and economic forces” by the State when it is used to shield wrongdoing. While it is true that com passion 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COMPENDIUM ON LABOR LAW employer to retain the services of an employee who has been shown to be a gross liability to the employer. It should be made clear that when the law tilts the scale of justice it is but ition of im favor of 1 inherent mi een labor and management, The intent is ce 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, Justi- cia remini regarda est (Justice is to be denied to none.)” (Jamer v. NLRC, 278 SCRA 682 [1997]; See also: Mansion Printing Center v. Bitara, dr, G.R, No. 168120, 25 January 2012 citing Associate Justice Mo. Alicia Austria-Martines in Philippine Long Distance and Telephone Company, Inc, v. Bal. astro, GR No. 157202, 28 March 2007). (Emphasis supplied) SOCIAL JUSTICE POLICY MANDATES COMPASSIONATE ATTITUDE TOWARDS THE WORKING CLASS; WHILE THE CONSTITUTION'S PROTECTION TO LABOR DOES NOT CONDONE WRONGDOING, IT URGES MODERATION OF THE SANCTIONS THAT MAY BE IMPOSED. (Gandara Mill Supply v. NLRC, 300 SCRA 702 [1998),) In holding the constitutional mandate of protection to labor, the rigid rules of procedure may sometimes be dis. pensed with to give room for compassion. The doctrine of “compassionate justice” is applicable under the premises, in view of the fact chat the worker is the breadwinner of his family. ‘The Social Justice policy mandates a compassionate attitude toward the working class in its relation to management, In calling for the protection to labor, the Constitution does not condone wrongdoing by the employee, it nevertheless urges a ‘moderation of the sanctions that may be applied to him in the light of the many disadvantages that weigh heavily on him like an albatross on his neck, 1 CHAPTER Il GENERAL LABOR CONCEPTS CONSTRUCTION IN FAVOR OF LABOR LL 12 General Rule: Asticle 4, Labor Code. — Alf doubts in the imple- mentation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor. Moreover, Article 1702 of the New Civil Code pro- vides that, in case of doubt, all labor legislation and all labor contracts shall be construed iz favor of the safety and decent living of the laborer. Any doubt or ambigui- ty in the contract between management and the union ‘members should be resolved in favor or the latter. There- fore, there is no doubt, in this case, that the welfare of the laborers stand supreme. (BPI v. BPI Employees Un ion ~ Metro Manila, G.R. No. 175678 [22 August 2012)) Interpretation of Labor Code. — In interpreting Labor Code provisions, the workingman’s welfare should be the primordial and paramount consid- eration. In carrying out and interpreting the Labor Code's provisions and its implementing regulations, the work: ingman's welfare should be the primordial and para- mount consideration, This kind of interpretation gives meaning and substance to the liberal and compassion. ate spirit of the Iaw as provided for in Article 4 of the Labor Code as amended, which states 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 labo,” as well as,10 13 COMPENDIUM ON LABOR LAW ‘the Constitutional mandate that the State shall afford full protection to labor and promote full exaployment op ortunities for all. (PLDT v. NLRC, 276 SCRA 1 (1997)) In the interpretation of contracts relating to em- ployment, the constitutiona} policy of according utmost protection and justice to labor should be upheld, a. In relation to employment contracts being in the nature of contracts of adhesion, the ambi- guity is to be resolved in favor of labor. “The employment status of a petsan is defined and proscribed by law and not by what the parties, say it should be. Equally important to consider is that a contract of employment is impressed with public interest such that labor contracts must yield, to the common good. Thus, provisions of applica ble statutes are deemed written into the contract, and the parties are not at liberty to insulate them selves and their relationships from the impact of labor laws and regulations by simply contracting with each other. petitioners’ contracts in as the circumstances sur- the Court is convi ‘wore meant only to circumvent pet security of tenure and are, therefore, contracts of employment submitted by respondents are highly suspect for not only being ambiguous, but also for appearing to be tampered with. x xx Bven assuming that petitioners Tength of am- ployment is material, given respondents’ muddled this Court adheres to its pronounce ras. Natal Tabor Retin ion, to the effect that where a contract sf emnlavment, sing a sontradt of adhesion ia ambiguous, any ambiguity therein should be con- The Court is, thus, compelled to conclude that pe- titioners’ contracts of employment became effective 13 CHAPTER IE n GENERAL LABOR CONCEPTS. 1999, and that they were already working continuously for INNODATA for a year.” (Cherry J. Price, et al., v. Innodata Phils, Inc., GR. ‘No, 178505, 30 September 2008) on 16 Februar b. In relation to Collective Bargaining Agree- ments. In this case, the company misinterprets the declaration of the Labor Arbiter in the assailed decision that “when the pendulum of judgment ‘swings to and fo, and the forces are equal on both sides, the same must be stilled in favor of labor.” While the company acknowledges that all doubts in the interpretation of the Labor Code shall be resolved in favor of labor, it insists that what is involved here is the amended CBA which is es: sentially a contract between private persons. What the company has lost eight of is the avowed policy of the State, enshrined in our Constitution, to per Mining Corporation v. NLRC, 255 SORA 322 11996). Cases on collective bargaining contract in- terpretation are discussed in Chagter 9 of this Book. As applied to evidence. ~ If doubts exist between the evidence presented by the employer and the employee, the doubt should be resolved in favor of the employee. In this case, there are serious doubts in the evi- dence on record as to the factual basis of the charges against the employee. These doubts shall be resolved in her favor in line with the policy under the Labor Code to afford protection to labor and construe doubts in favor of labor. The consistent rule is that if doubts exist be- tween the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of jer must affirmatively chow ration. ally adequate evidence that the dismissal was for a jus tifiable cause. Not having satisfied its burden of proof,2 2 ‘COMPENDIUM ON LABOR LAW the Court concluded that the employer dismissed the employee without any just cause. Hence, the termina. tion is illegal. Asuncion v. NERC, 362 SORA 56 (2001); Pehaflor v. Outdoor Clothing Manufacturing Corp., GR. No. 177114, January 21, 2010, citing Fujitsu Computer Products Corporation of the P) Court of Ap- peals, 494 Phil. 697 (2005) 1.4 In the interpretation of an employer's program providing for separation benefits, all doubts should be construed in favor of labor. Under the separation program of the Company in is case, an employee may qualify if he has rendered “at least one year of continuous service.” The plain lan- guage of the program did not require that continuous service be immediately rendered prior to the employee's separation, It appears that if the worker's other previ- ous stints with the company are consideted, it would qualify him under the program. That the duration of the worker's last stint was less than one year does not mil itate against his qualification under the program. The Court granted this liberality in this favor in the light of the rule in labor law that “when a conflicting inter est of labor and capital are weighed on the scales of s0- Gal justice, the heavier influence of the latter must be counter-balanced by the sympathy and compassion the law must accord the underprivileged worker.” (PNCC ». NERO, 277 SORA 91 [1997)) In the interpretation of an employer's program providing for separation benefits, al doubts should be construed in favor of labor. After all, workers are the in- tended beneficiaries of such program and our Constitu- tion mandates a clear bias in favor of the working class. Mid.) BURDEN OF PROOF IS ALWAYS UPON EMPLOYER TO SHOW VALIDITY OF ITS EXERCISE OF MANAGEMENT PREROGATIVES, ESPECIALLY AS REGARDS TERMINATION OF EMPLOYMENT. 2.1 In termination cases, the burden of proof rests on the employer to show that the dismissal is for just cause. a. 2.2 IAPTER TL 18 GENERAL LABOR CONCEPTS. When there is no showing of a clear, valid and le- gal cause for the termination of employment, the law considers the matter a case of illegal dismiseal and the burden is on the employer to prove that the termination was for a valid or authorized cause. And the quantum of proof which the employer must discharge is substan- tial evidence. An employed’s dismissal due to serious foniduct must be supported by substantial evidence. Substantial evidence is that amount of relevant evidence ‘a8 a reasonable mind might accept as adequate to sup- port a conclusion, even if other minds, equally reasona. ble, might conceivably opine otherwise. (Alex Gurango ‘Best Chemicals and Plastics Inc. and Moon Pyo Hong, G. 174593, 25 August 2010 citing AMA Comp er College — East Rizal v. Ignacio, G.R. No. 178520, 23 June 2009, 590 SCRA 633). BUT employee must first prove the fact of dismiss- al. While in cases of illegal dismissal, the employer bears the burden of proving that the dismissal is for a valid or authorized cause, the emplovee must fizst is ial evi = missal. Note that petitioner did not deny having left the school on July 2001 and did not come back for an extended period of time. Moreover, petitioner failed to refute Forest Hills’ claim that when she expressed her intention 40 resume teaching, classes were already on- going for School Year 2002-2008, In. the absence then of petitioner's written conformity to the deduction of the 10% tithe from her salary, the deduction made by Forest ‘Wills was illegal even assuming that this was part of their religious practice. (Lilia Labadan v. Forest Hills Academy et al., G.R. No. 172295, 23 December 2008; See also: Reynaldo Madrilejos v. Geminilou Trucking Ser- viee, et al.,G-R. No. 179174, 24 December 2008). “NO WORK, NO PAY” PRINCIPLE. 31“ B2 3.8 COMPENDIUM ON LABOR LAW Id rule governing the relation between la. 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, suspend. ed or dismissed, or otherwise illegally prevented from working. It would neither be fair nor just to allow the workers to recover something they have not earned and could not have earned because they did not render ser- vices. (Aklan Electric Cooperative, Ine. v. NLRC, 223 ‘SCRA 258 (2000}) Project or work pool employees who have gained the status of regular employees are subject to the 10 work, no pay” principle. (Tomas Lao Construc- nu. NLRC, 278 SCRA 716 (1997]) Hence, in com- puting backwages, the amount corresponding to the period they did not work when the employer did not undertake any project, should be deduct- ed. (Imbuido v. NLRC, 329 SCRA 357 (2000) Complying with the principles of “suspension of work” and “no work, no pay” between the end of one pro- ject and the start of a new one, in computing worker's backwages, the amounts corresponding to what could have been earned during the periods from the date she was dismissed until her reinstatement when the compa hy was not undertaking any project, should be deducted (mbuido v. NLRC, ibid.) “No Work, No Pay” principle does not apply when the employee himself was forced out of job. (Nee- land v. Villanueva, 364 SCRA 204 [2001)). “Back salaries and other economic benefits cannot be denied on the ground that the employee did not work. For the principle of “no work, no pay” does not apply when the employee himself was forced out of job. As ruled 5 nan Faculty Un Iniversity of Pangasinan, (127 ‘SCRA 691 [1984)), the “no work, no pay” principle does not apply where the employee is “constrained to take mandatory leave from work,” and for this, the employee cara 15 GENERAL LABOR. cannot altogether be faulted or begrudged for asserting and claiming that which is due him under the law. In- deed, it is not always true that back salaries are paid only when work was done. Thus in Serrano v. NLRC, (323 SCRA 445 [2000)), the employer is liable for back wages when he fails to give notice to the employee before the latter is dismissed from work, regardless of fault. Back wages, too, are paid to an employee who is merely reinstated in the payroll under Art, 229 of the Labor Code which provides that: “(in any event, the decision of the Labor Arbiter rein: stating a dismissed or separated employee, insofar as the reinstated aspect is concerned, shall be immediate- ly executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or sepa- ion of the employer, merely reinstat- ration of, at the o ed in the payrol For another, the poor employee could offer no work since he wae forced out of work. Thus, to always require complete exoneration or performance of work would ul- timately leave the dismissal uncompensated no matter how grossly disproportionate the penalty was. Clearly, it does not serve justice to simply restore the dismissed employee to his position and deny him his claim for back salaries and other economic benefits on these grounds. We would otherwise be serving justice in halves.” (Nee- land v. Villanueva, ibid.) FIRST OUT” (LIFO) RULE. — LIFO RULE APPLIES ION OF EMPLOYMENT IN THE LINE OF WORK. It is not disputed that (per CBA), the LIFO rule applies to termination of employment in the line of work. Verily, what is contemplated in the LIFO rule js that when there are two or more employees occupying the same position in the company affected by the retrenchment program, the last one employed will necessarily be the first to go. (Maya Farms Employees Or- ganization v. NLRC, 239 SCRA 508 (1994). 4.1 In the absence of any CBA provision, the “lat in, first ‘out” method yields to the sound exercise of management prerogatives.16 42 COMPENDIUM ON LABOR LAW In De La Salle University v. De La Salle Universi- ty Employees Association, (330 SCRA 3463 (2000), was held that the employer can adopt valid and equita- Dle grounds as basis for lay-off or separation. Thus “With respect to the use of the “last-in-frst-out” method in case of retrenchment and transfer to other schools or units, the voluntary arbitrator upheld th elementary right and prerogative of the management of the University to select and/or choose its employees, a right equally recognized by the Constitution and the Jaw. The employer, in the exercise of this right, can adopt valid and equitable grounds as basis for lay-off or separation, like performance, qualifications, compe- tence, ete Xxx “On the issue regarding the Union's proposal for the use of the “last-in-first-out” method in case of lay. off, termination due to retrenchment and transfer of em. ployees, the Union relies on social justice and equity to support its proposition, and submits that the Unive ty's prerogative to select and/or choose the employees ted, either by law or agreement, especial ere the exercise of this prerogative might result in e loss of employment. The Union further insists that its proposal is *. .. in keeping with the avowed State policy “(@) To ensure the participation of workers in deci. sion and policy-making processes affecting their rights, duties and welfare.” (Art 211, Labor Code, as artenced,} “On the other hand, the University asserts its management prerogative and counters that “[wJhile it is recognized that this right of employees and workers to ‘participate in policy and decision-making processes affecting their rights and benefits as may be provided by Jaw’ has been enshrined in the Constitution (Art. XID Sec. 3, par. id participation, however, does not automatically entitle the Union to dictate as to how an ‘employer should choose the employees to be affected by a retrenchment program. The employer still retains the prerogative to determine the reasonable basis for select. ing such employees’ (CHAPTER IL 1 “We agree with the voluntary arbitrator that as aan exercise of management prerogative, the University has the right to adopt valid and equitable grounds a3 basis for terminating or transferring employees. As we ruled in the case of Autobus Workers’ Union (AWU) and Ricardo Escanlar v. National Labor Relations Commis- sion, (291 SCRA 219 /1998), “[a) valid exercise of man- ‘agement prerogative is one which, among others, covers: ‘work assignment, working methods, time, supervision of ‘workers, transfer of employees, work supervision, and the discipline, dismissal and recall of workers. Except as provided for, or limited by special laws, an employer is free to regulate, according to hie own discretion and judgment, all aspects of employment.” 5. “ONE UNION-ONE COMPANY” POLICY. bal As a general rule, there should only be one union in one employer unit. The proliferation of unions in one employer unit should be discouraged unless there are compelling reasons which would deny a class of employees the right to self-organi- zation, (Philtranco Service Enterprises v. Bureau of La- bor Relations, 174 SCRA 388 (1989]) In this case, the Supreme Court was constrained to disallow the formation of another union. There is no dispute that there exists a labor union in the company, which is the collective bargaining agent of the rank-and- file employees in the Company. Article 2 of the Collective Bargaining Agreement between the Company and the incumbent Union under the subtitle Appropriate Bargaining Unit provides: Section 1 regular rank-and-file employees of the compa- ny. Managerial, confidential, casuals, tempo- rary, probationary and contractual employ- ees as well as trainees, apprentices, security personnel and foreman are excluded from the bargaining unit and therefore, not covered by this AGREEMENT. The job description out. side the bargaining unit are enumerated in® ‘COMPENDIUM ON LABOR LAW the list hereto attached as Annes ‘I’ and made an integral part hereof. ‘The Court saw no need for the formation of anoth- er union in the Company. The qualified members of the challenger union may join the incumbent union if they want to be union members, and to be consistent with the one-union, one-company policy of the Department of Labor and Employment, and the laws it enforces. As held in the case of General Rubber and Footwear Corp. vy. Bureau of Labor Relations: (155 SCKA 283 /1987)}: “.. It has been the policy of the Bureau to en- courage the formation of an employer unit ‘unless circumstances otherwise require. The proliferation of unions in an employer unit is discouraged as a matter of poli- cy unless there are compelling reasons which would deny a certain class of em- ployees the right to self-organization for Purposes of collective bargaining. This case does not fall squarely within the excep- tion.” (Emphasis supplied). are no compelling reasons in this case, such to the challenger-union group of the right distinctions warranting the recognition of a separate group of rank-and-file workers. Precisely, the incumbent union intervened to make it clear it has no objections to qualified rank-and-file workers joining its union. x xx It is natural in almost al} fairly sived companies to have groups of workers discharging different fune. tions. No company could possibly have all employees performing exactly the same work, A variety of tasks is to be expected. It would not be in the interest of sound labor-management relations if each group of employees assigned to a specialized function or section would decide to break away from their fellow-workers and form their own separate bar- gaining unit. The Court cannot allow one unit for typ. ists and clerks, one unit for accountants, another unit 52 CHAPTER TL 19 GENERAL LABOR CONCEPTS for messengers anil drivers, and s0 on in needless profu- sion, Where shall the line be drawn? A contrary rule ean only lead to confusion, discord and labor strife." Tt was alleged by the Union that this case is an ex ception to the general rule considering thet substantial differences exist between the office employees or profes technical, administrative and confidential em vis-a-vis the field workers or drivers, conductors and mechanics of the petitioner. Against this conten: tion, the Court found that the “substantial differences” jn the terms and conditions of employment between the challenger-union’s members and the rest of the compa: ny’s rank and file employees are more imagined than real, The Court held that the differences alleged are not ‘Substantial or significant enough to merit the formation of another union. (Philiranco Service Enterprises v. Bu reau of Labor Relations, (174 SCRA 388 (1989) CONTRA: The one company-one union policy must yield to the right of the employees to form unions br associations for purposes not contrary to law, to self-organization and to enter into collective bargaining neg mns, among others, which the Constitution guarantees. “The “one union-one company” rule is not without exception. The exclusion of the subject employees from the rank-and-file bargaining unit and the CBA is deft nitely a “compelling reason” for it completely deprived. them of the chance to bargain collectively with their em- ployer, and are, thus, left with no recourse but to group themselves into a separate and distinct bargaining unit and form their own organization. The rationale behi the exception to the aforementioned policy is further Gidated in Knitjoy Manufacturing, Inc. v. (214 SCRA 174 [1992)), thus: “The suggested bias of the Labor Code in favor of the ane company-one union policy, an~ chored on the greater mutual benefits which the parties could derive, especially in the case of employees whose bargaining strength could undeniably be enhanced by their unity and solidarity but diminished by their disunity,2» 58 (COMPENDIUM ON LABOR LAW division and dissension, is not without excep- tions. eax orez 0 xxx “The usual exception, of course, the employer or a sub- division thereof: the recognition of these excep- tions takes employees of the fullest freedom in exercising their rights, Otherwise stated, the one compa- ny-one union policy must yield to the right of the employees to form unions or associations for purposes not contrary to ppines, Ine. v, Nagkakaisang Supervisor ng Barbizon Philippines, Inc. NAFLU, 261 SCRA 738 11996). Rationale for “one company-one union” policy. ‘The ends of unionism are better served if all the rank-and-file employees, with substantially the same interests and who invoke their right to self-organi- zation, are part of a single unit so that they can deal with their employer with just one and yet potent voice. ‘The employees’ bargaining power with manage- ment is strengthened thereby. (Pagkahaisa ng mga Manggagawa sa Triumph International-United Lumber and General Workers of the Phils. v. Ferrer-Calleja, 181 SCRA 119 [1990)). 6. “EQUAL PAY FOR EQUAL WORK” PRINCIPLE. 61 62 ‘The long-honored legal truism dictates that persons who work with substar re id be tid similar salaries. (International School Alliance of Educators [ISAE] v. Quisumbing, Maccaniey and Inter national School, Inc., 383 SCRA 13 [2000)). Ifan employer accords employees the same position and rank, the presumption is that these employees perform a CHAPTER 1 GENERAL LABOR CONCEPTS equal work. Hence, the doctrine of “equal pay for equal work” will apply. (Philex Gold Philippines, Inc. v. Philex Bulawan Supervisors Union, 468 SCRA 111 (2005)) NON-DIMINUTION OF BENEFITS. Article 100, Labor Code. Prohibition against elimina- tion or diminution of benefits, — Nothing in this Book shall +e construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promul- gation of this Code. ‘7.1 Requisites for voluntary employer practice such that the same cannot be unilaterally withdrawn anymore: (a) It should have been practiced over a long period of time; and (b) It must be shown to have been consistent and deliberate. (Sevilla Trading Company v ‘Semana, 428 SCRA 239 [2004], citing Globe Mackay Ca- ble and Radio Corp. v. NLRC, 163 SCRA 71 [1988)) 7.2 Asto length of time required to ripen into a corpo- rate policy: ‘The test of long practice has been enunciated thus: where the company agreed to continue giving holiday pay knowing fully well that said employees are not cov- ered by the law requiring payment of holiday pay. (Oce- anic Pharmacal Employees Union (FFW) v. Inciong, 94 ‘SCRA 270 [1979)) With regard to the length of time the company practice should have been exercised to constitute vol- ‘untary employer practice which cannot be unilaterally withdrawn by the employer, the Court held that juris- prudence has not laid down any rule requiring a specific minimum number of years. In the case of Davao Fruits Corporation v. Asnoci- ated Labor Unions (225 SCRA 562 [1993)), the company practice lasted for six (6) years. In another case, Davao Integrated Port Stevedoring Services v. Abarquez. (220 SCRA 197 /1983}), the employer, for three (8) years and nine (9) months, approved the commutation fo cash of the unenjoyed portion of the sick leave with pay benefits ofits Intermittent workers. While in Tiangco v. Leogar- do, dr. (122 SCRA 267 [1983]), the employer carried on13 74 COMPENDIUM ON LABOR LAW the practice of giving a fixed monthly emergency allow: ance from November 1976 to February 1980, or three (2) years and four (4) months. In all these eases, this Court, held that the grant of these benefits has ripened into company practice or policy which cannot be perempto: rily withdrawn. In the case of Sevilla Trading Compa- ny v. Semana, 428 SCRA 239 [2004], the employer kept the practice of including non-basic benefits such as paid leaves for unused sick leave and vacation in the compu tation of their 13th-month pay for at least two (2) years. This constitutes voluntary employer practice which con- not be unilaterally withdrawn by the employer without, violating Art. 100 of the Labor Code, As an act of liberality: To ripen into a company prac tice that is demandable as a matter of right, the giving of the benefit should not be by reason of a strict legal or contractual obligation, but by reason of an act of liberali ty on the part of the employer. (Pag-asa Steel Works, Inc. v, Court of Appeals, 486 SCRA 475 [2006}) Nature of “benefit”; entitlement to the same will not require additional service The requirement of rendering additional service differentiates overtime pay from benefits such as thir teenth month pay or yearly merit increase. These ben- ire_an nal service fr their beneficiaries. Thus, overtime pay does not fall within the definition of benefits under Article 100 of the Labor Code. (San Miguel Corporation v. Numeriano Layoc, Jr. et al. GR. No, 149640, 19 October 2007) Respondent employer is not obliged to allow all its employees to render overtime work every day for the whole year; but only those employees whose services ‘were needed after their regular working hours and only ‘upon instructions of management. The overtime work was not given to each employee consistently, deliberately and unconditionally, but as compensation for additional services rendered. Thus overtime pay does not fall with- in the definition of benefits under Art. 100 of the Labor Code on probibition against elimination of diminution of ‘benefits. See alsa: (Manila Jockey Club Employees Union v, Manila sJockey Ciub, G.R. No, 16770, 07 March 2007), 18 CHAPTER. 23 GENERAL LABOR CONCEPTS ‘Nature of bonus: A bonus is generally an act of gra- ‘tity or liberality and hence, not demandable as a mat ter of right. However, a bonus becomes a demandable or enforceable obligation when it is made part of the wage or salary or compensation of the employee. It cannot be unilaterally withdrawn even if there were company loss- es, without the consent of the employee. Hence, a stip ulation in the Collective Bargaining Agreement provid- ing for 13th, 14th, and 16th month pay bonuses without qualifications of conditions, is demandable on the part ‘ofthe employees, and the employer cannot validly refuse to give the same on account of business losses. Thus: “A reading of the above provision reveals that the same provides for the giving of 13th, Ldth, and 15th month bonuses without @ fication. The wording of the provision does ne ‘allow any other interpretation, There were no conditions specified in the CBA Side Agree- ‘ments for the grant of the benefits contrary to the claim of ETPS that the same is justi- fied only when there are profits earned by the company. Terse and clear, the said provision does not state that the subject bonuses shall be ‘made to depend on the ETPI’s financial stand- ing or that their payment was contingent upon, the realization of profits. Neither does it state that if the company derives no profits, no bo- ruses are to be given to the employees. In fine, the payment of these bonuses was not related to the profitability of business operations.” (Eastern Telecommunications Phils. v. East- em. Telecommunications Employees Union, GR. No, 185665, 08 February 2012).CHAPTER Il EMPLOYER-EMPLOYEE RELATIONSHIP ‘CONCEPT OF EMPLOYER-EMPLOYEE RELATIONSHIP ‘The employer-employee relationship is contractual in character. It arises from the agreement of the parties, e.g, for one to render services to another in exchange for remunera- tion or compensation. However, such relationship is so impressed with the public interest that labor contracts must yield to the common good (Civil Code, Ari, 1700) ‘Thus, employment contracts are subject to laws on minimum standards of wages, hours of work, right to self-organization (union, collective bargening strike, picketing and other cal lective actions. FOUR-FOLD TEST; THE CONTROL TEST IS THE MOST CRU- CIAL INDICATION OF THE EXISTENCE OF AN EMPLOY- ER-EMPLOYEE RELATIONSHIP. (The Manila Hotel Corp. v NLRC, 248 SCRA 1 [2000]; Jo v. NERC, 324 SORA 437 [2000]; Canlubang Security Agency Corporation v. National Labor Re: lations Commission, et al, 216 SCRA 280 (1992)) In determining whether a given set of circumstances con- stitute or exhibit an employer-employee relationship, the ac. cepted rule is that the elements or circumstances relating to the following matters shall be examined and considered: 2. the selection and engagement of the employees; b. the payment of wages; c. the power of dismissal; and d. the power to control the employees’ conduct. 21 The Contro} Test. Of these four tests however, the most important test is the element of control, which has been defined By 22 CHAPTER I 25 EMPLOYER- EMPLOYEE RELATIONSHIP as “one where the employer has reserved the Fight to control not only the work to be achieved, but the manner ‘and method by which such work is to be achieved.” (LVN Pictures v. LVN Musician's Guild, 1 SCRA 132). Simply ‘ut, an employer-employee relationship is deemed to texist where the employer has a right te control the con. Guct of the employee in relation to his work. (See also: Great Pacific Life Assurance Corp. v. National Labor Re- lations, 187 SCRA 694 [1990}; Hydro Resources Contrac- tor’s Corporation v. Pagalilouan, 172 SCRA 899 {1 989). In detormining the existence af an employer-em- ployee relationship, the following elements are consid ered: (1) the selection and engagement of the workers: (2) the payment of wages by whatever means; (8) the power of dismissal; and (4) the power to control the ‘warker's conduct, with the latter assuming primacy in the overall consideration. The most important element is the employer's control of the employee's conduct, not only as to the result ofthe work to be done, but also as to the means and methods to accomplish. (bid., LVN case; see also: Charlie Jao v. BCC Products Sales, Ine. and Terrance Ty, G.R, Na, 168700, 18 April 2012; Bernard A Tena2as, Jaime Francisco, and Isidro Endraca v. R. Vit legas Taxi Transport, G.R. No. 192998, 02 April 2014) ‘The power of control refers to the existence of the power and not necessarily to the actual ex- excise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the employer has the right to wield that power. (Republic ofthe Philip- pines represented by the Social Security Commission and Social Security Services v. Asiapro Cooperative, G.R. No. 172101, 28 November 2007; Citations omitted; emphasis supplied.) Economic Reality Test. [Aside from the control test, the Supreme Court has also used the economic reality test. The economic reali ties prevailing within the activity ox between the parties are examined, taking into consideration thé totality of circumstances surrounding the true nature of the rela tionship between the parties. This is especially appro-% 23 COMPENDIUM ON LABOR LAW priate when there is no written agreement or contract, on which to base the relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible employment relationships for purposes of applying the Labor Code ought to be the economic dependence of the worker on his employer. (Orozco v, Fifth Division of the Court of Appeals, 562 SCRA 36 [2008); citing Francisco v. NRG, 500 SCRA 690 [2006)). 22.1 When a worker possesses some attributes of an employee and others of an independent contrac: tor, which make him fall within an intermediate area, he may be classified under the eategory of an employee when the economie facts of the re: lations make it more nearly one of employment than one of independent business enterprise respect to the ends sought to be accom: lished. (Social Security System v. Court of Ap- eals, 848 SCRA 1 [2000].) 2.2.2 The doubt ought to be resolved in favor of the gory which is most beneficial to the worker. Employment must first be established by compe- tent evidence. There is no hard and fast rule designed to estab: lish the aforesaid elements. Any competent and relevant. evidence to prove the relationship may be admitted. Identification cards, cash vouchers, social security reg- istration, appointment letters or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of employee status, Hero, complainant Francisco simply relied on his allegation that he was an employee of the company with- out aity other evidence support his claim. Unfortunately for him, a mere allegation in the position paper is not tantamount to evidence. Bereft of any evidence, the CA correctly ruled that Francisco could not be considered an employee of the respondents. (Bernard A. Tenazas, Jaime Francisco, and Isidro Endraca v. R. Villegas Taxi ‘Transport, G.R. No. 192998, 02 April 2014) CHAPTER I a -EMPLOYER-EMPLOYEE RELATIONSHIP HOWEVER, NOT EVERY FORM OF CONTROL WILL HAVE ‘THE EFFECT OF ESTABLISHING AN EMPLOYER-EMPLOY- EE RELATIONSHIP. (Insular Life Assurance Oo. Ltd. v. NLRC and Melecio Basiao, G.R. 84484, 179 SCRA 459 [15 November 1989]; See also: Orozco v. Fifth Division of the Court of Appeals, 562 SCRA 36 (2008), ibid.) Thus, a line should be drawn between: ‘a, Rules that merely serve as guidelines, which only pro- mote the result. In such case, no employer-employee rela- tionship exists. b, Rules that fix the methodology and bind or restrict the party hired to the use of such means of methods. These address both the result and the means employed to achieve it and hence, employer-employee relationship ex: ists. the Supreme Court ruted that 19 these princi 3.1 Insurance agents are not employees of the insur- ‘ance companies, in the absence of evidence that rules or regula yns were promulgated or issued ely controlled or restricted the of methods — or the methods them- g insurance. (Insular Life Assur- ance Co., Lid., v. NLRC and Melecio Basiao, G.R. No. 84484, 15 November 1989, 179 SCRA 459). In this case, it appears that the company simply bound the agent to observe and conform to such rules and regulations already fixed by the Insurance Code and enforced by the Insurance Commissioner, as well as such rules and regulations that the company might prescribe from time to time, None of these really invades the agent's contractual prerogative to adopt his own sell- ing methods or to sell insurance at his own time and convenience. Hence, the existence of said rules and regu- lations cannot justifiably be said to establish an employ- ex-employee relationship between him and the company. (Insular Life, ibid.) Note: But this is not to say that ance agents are NOT employees of th company. As the Supreme Court clarified in the case of28 82 COMPENDIUM ON LABOR LAW Tongho v. Manufacturers’ Life Insurance Company Phils.) Inc. G.R. No. 167622, 29 June 2010, En Banc), the Insular Life ruling above was tempered with the qualification that had there been evidence that the com: Pany promulgated rules or regulations that effectively controlled or restricted an insurance agent's choice of methods or the methods themselves in selling insur- ance, an employer-employee relationship existed. In other words, the Court in Insular Life in efi held that insurance agents are not employees of insurance companies, but rather made the same on a case-to-case basis. Caddies are not employees in absence of control. In the case of Manila Golf & Country Chub, the question before the Court here is whether persons ren- doring exddying services for members of golf clubs and their guests in said clubs’ courses or premises are the employees of such clubs and therefore within the com ulsory coverage of the Social Security System (SSS). As long as it is, the list made detailing the various matters of conduct, dress, language, ete. covered by the club's regulations, does not, in the mind of the Court, s0 circumscribe the actions or judgment of the caddies concerned as to leave them little or no freedom of choice whatsoever in the manner of carrying out thoir servic es. In the very nature of things, caddies must submit to some supervision of their conduct while enjoying the privilege of pursuing their occupation within the prem- ises and grounds of whatever club they do their work in. For all that is made to appear, they work for the club to which they attach themselves on sufferance but, on the other hand, also without having to observe any working hours, free to leave anytime they please, to stay away for as long they like. It is not pretended that if found re- miss in the observance of said rules, any discipline may bbe meted them beyond barring them from the premises which, it may be supposed, the Club may do in any case even absent any breach of the rules, and without violat- ing any right to work on their part. All these consider- ations clash froatally with the concept of employment. (Manila Golf & Country Club, Ine. v. IAC, 237 SCRA 207 [1994)). 29 4. EXAMPLES WHERE SUPREME COURT RULED THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED: 4.1 Where the relationship is that of employer-em- ployee, and not of lessor-lessee. a. Jeepney owners/operators on one hand, and jeepney drivers on the other (Jardin, et al. v. NLRC, 326 SCRA 299 [2000].) ‘The argument that there exists a lessor-les- see relationship in this case cannot be given merit. In the lease of chattels, the lessor loses complete control over the chattel leased. In the case of jeepney owners/operators and jeepney drivers, the former exercise supervision and control over the latter. The management of the business is in the owner’s hands, ‘The owner, as holder of the certificate of public convenience, must see to it that the driver follows the route preseribed by the franchising authority and the rules promul- gated as regards its operation. Moreover, jeepney drivers perform activities which are usually neces- sary or desirable in the usual business or trade of their employer. Bus company and the bus driver. (R. Transport Corporation v. Rogelio Ejandra, G.R. No. 148508, 20 May 2004), Denying the existence of an employer-emplo- yee relationship, petitioner insists that the parties’ Agreement was for a contract of lease of services ship. In its petition filed before the Court, ps voked our to dismiss an employee for just cause. Petitioner maintained that private respondent was justifiably dismissed due to abandonment of work. By adopt- ing said rulings, nner impliedly admitted that it was in fact the employer of private respondent. ‘According to the control test, the poweP to dismiss an employee is one of the indications of an em: ployer-employee relationship. Petitioner's claimCOMPENDIUM ON LABOR LAW that private respondent was legally dismissed for abandonment was in fact a negative pregnant: an acknowledgement that there was no mutual termination of the alleged contract of lease Gnd that private respondent was its employee. The fact that petitioner paid private respondent on commission basis did not rule out the presence of an employee-employer relationship. Article 97(f) of the Labor Code clearly provides that an employee's ‘wages can be in the form of commissions.” Taxi operator/owner, and taxi driver. (Paguio ‘Transport v. NLRC and Melchor, G.R. No. 119500, 28 August 1998 citing Martinez case; see below.) Jeepney drivers on boundary system. (Martinez v. NLRC, 272 SCRA 793 [1997], citing NLU v. Dinglasan, 98 Phil. 649). ‘The relationship of taxi owners and taxi driv- ers is the same as that between jeepney owners and jeepney drivers under the “boundary system.” In both cases, the employer-employee relationship was deemed to exist, viz.: “The relationship between jeepney owners/operators on one hand, and jeepney drivers on the other under the boundary system is that of employer-employee and not of lessor-lessee. x x x In the lease of chat- tels{,] the lessor loses complete control over the chattel leased x x x. In the case of jeep ney owners/operators and jeepney drivers, the former exercise supervision and control over the latter. The fact that the drivers do not receive fixed wages but get only the ex. ‘ess of that so-called boundary they pay to the owner /operator is not sufficient to with- draw the relationship between them from that of employer and employee. The doc trine is applicable in the present case. Thus, private respondents were employees x x x because they had been engaged to perform activities which were usually necessary or 42 CHAPTER. BMPLOYER-EMPLOYEE RELATIONSHIP desirable in the usual trade or business of the employer.” ident physicians are also employees of Hospi- tal; control test used, (Calamba Medical Center, Inc. v. NERC et al, G.R. No, 176484, 25 November 2008) “Under the ‘control test,’ an employment relation- ship exists between a physician and a hospital if the hospital controls both the means and the details of the process by which the physician is to accom In this case, the resident doctors mai work-schedules as determined by the } ‘and hospital supervised and monitored the resident doc- tors’ work through the nursing supervisors, charge nurs- es and orderlies. Respo: jere made subject to hospital’s Code of Ethics, the provisions of which cover administrative and disciplinary measures on negligence of duties, personnel conduct and behavior, and offens- es against persons, property and the hospital's interest. Lastly, IDs, BIR forms and SSS/Medicare program en- rollment all prove that resident doctors were employees. With respect to respondents’ sharing in some hospital foes, this scheme does not sever the employment tie be- tween them and petitioner as this merely mirrors addi- tional form or another form of compensation or incentive similar to what commission-based employees receive as, contemplated in the Labor Code.” 4.2.1 CONTRA: Old cases where the Supreme Court ruled that there is no employer-em- ployee relationship between a resident jan and the training hospital. (The iwersity of the East Ramon Magsaysay Me- morial Medical Center Resident Doctors Union [UERMMMC-R.D.U.] v. The Honorable Under- secretary of Labor, Bienvenido Laguesma, et al GR. Nos. 125425-26, November 24, 1993; See also: Felix v. Buenaseda, 240 SCRA 139 [1995].) “It is clear that physicians under, dency training in order to hone their ski develop or improve their knowledge if a specit ized medical field or discipline, Hence, residency is basically and simply a continuation of their92 43 COMPENDIUM ON LABOR LAW medical course. However, they are not required or mandated under any law to further undergo a residence training program. Having passed the medical board examinations, they are already licensed physicians and could very well engage in the general practice of medicine. It is for the practice of highly specialized medical disciplines which necessitates further on-the-job training thereon, Viewed from this perspective, residency training clearly amounts to a pursuit of fur- ther_education on a specific discipline, Thus, the relationship between the teaching/training hospital and the resident doctor is not one of employer-employee. The training/tesching hos- pital may simply he likened to a medical school/ university, but in this instance, the emphasis is on the practical application and training of its students, the resident doctors.” 4.2.2 Authors’ notes: It now appears that the Su. preme Court's trend is toward the existence of an employer-employee relationship, especially where the element of control is established not- withstanding the fact that the engagement is also of academic nature. Where circumstances show that worker is an em- ployee, and not an industrial partner. As to the issue of whether the worker is an employ- ee or an industrial partner, the Court held as follows: “Art. 1767 of the Civil Code states that in 4@ contract of partnership two or more persons bind themselves to contribute money, prop erty or industry to a common fund, with the intention of dividing the profits among them- selves. Not one of these circumstances is p ent in this cage. No written agreement exist to the parties. Private respondent did not contribute money, Property or industry for the purpose of engaging in the supposed business. There is no proof that he a the management, administration and adop- tion of policies in the business, Records of the case show that private respondent actually engaged in work as an. employee, During the entire course of his em- ployment he did have the freedom to deter- mine where he would go, what he would do, and how he would do it. He merely followed of petitioners and was content to do 50, as long as he was paid his wages. Indeed, he worked as truck helper and driver not for his own pleasure but uncer petitioner's control.” (Sy, et al. v. Court of Appeals, G.R. No, 142293, 27 February 2003.) 4.4 Drivers or helpers of salesmen are employees of the Company. (Alhambra Industries v. CIR, 35 SCRA 550 (1970). 4.5 Handicraft workers on “pakyaw” system (Dy Keh Beng v. Int! Labor, 90 SCRA 161 (1979) 4.6 Tailors, pressers and stitchers in COD tailoring department. (Rosario Bros. v. Ople, 131 SCRA 72 (1984), 4.7 Musicians who were engaged by musical director for background music in making of movies. (LVN v. Phil. Musicians Guild (1 SORA 132 (1961). EXAMPLES WHERE THE SUPREME COURT RULED THAT THERE WAS NO EMPLOYER-EMPLOYEE RELATIONSHIP (BUT ONE OF INDEPENDENT CONTRACTOR ARRANGE- MENT): 5.1 Insurance company vis-a-vis commission agents. (Insular Life v. NLRC, 179 SCRA. 459 [1989]; AFP Mu- tual Benefit Association, Inc. v. NLRC, 267 SCRA 47 [1997]; BUT SEE CONTRA, newer case of Tongko v.a (COMPENDIUM ON LABOR LAW ‘Mamafacturers' Life Assurance Company [G.R. No. 167622, 29 June 2010, En Banc] discussed in Section 3.1 above), 5.2 Company v. collecting agents on commission basis. (Singer Sewing Machine v. Drilon, 193 SCRA 270 L991) 5.3 Softdrinks company v. independent contractors selling softdrinks. (Mafinco v. Ople, 70 SCRA 139 aas76) 5.4 Shoe shine boys. (Besa v. Trajano, 146 SCRA 501 (1986). If THERE 1S NO EMPLOYER-EMPLOYEE RELATIONSHIP, ‘THEN THERE CAN BE NO COMPULSORY COVERAGE UNDER ‘THE SOCIAL SECURITY ACT. (Villavilla v. CA, 212 SCRA 488 119921) In this case, the Court found that the arrangement be- tween the boat owner and the crew members, one of whom ‘died, partook of the nature of a joint venture: the crew men- bers did not receive fixed compensation as they only shared in atch; they ventured to the sea irrespective of the instruc- tions of the boat owners, ie., upon their own best judgment as to when, how long, and where to go fishing; the boat owners did not hire them but simply joined the fishing expedition upon invitation of the ship master, even without the knowledge of the boat owner. In short, there was neither right of control nor actual exercise of such right on the part of the boat owner over his crew. Consequently, it is clear that there was no employer-em- ployee relationship between the boat owner and the crew mem- ber who died. As such, said crew member could not be made subject of compulsory coverage under the Social Security Act; hence, the boat owner cannot be said to have violated said law when they did not register him with the Social Security Sys- tem. A fortiori, he is not answerable to the heirs of the crew ‘membet who died for any death benefits under the law. DIFFERENCE BETWEEN AN EMPLOYEE AND INDEPENDENT CONTRACTOR. (Tan v. Lagrama, 387 SCRA 393 [2002],) Of the four elements of the employer-employee relation- ship, the “control test” is the most important. Compared to an employee, an independent contractor is one who carries on a 36 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, free from the control and direction of the principal in all matters connected with the performance of the work except as to the restilts thereof, Hence, while an independent contractor enjoys dependence and freedom from the control and supervision of incipal, an employee is subject to the employer's power to ol the means and methods by which the employee's work be performed and accomplished. (See also: Chapter IV ‘on Job Contracting and Law-only Contracting Arrange- ments) 7. Where a person whe warks for another performs his job ‘more or less at his own pleasure, in the manner he sees fit, not subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof, no-employer-employee rela~ tionships exists. (Abante, Jr. v. Lamadrid Bearing and Parts Corporation, G.R. No. 159890, 430 SCRA 368 [28 May 2004),) 7.2 Thus, in the case of Wilhelmina 8. Orozeo v. The ifth Division of the Honorable Court Of Appeals, Philippine Daily Inquirer, and Leticia Jimenez Magsanoc, (G.R. No. 155207, 29 April 2005), the Su- preme Court held that a newspaper columnist is not an employee of the newspaper which publishes the column but an independent contractor engaged to do independ ent work, viz. yner was engaged as a columnist I, experience, and her unique advocate, How she iting her column was not subject to dictation by respondent, xxx Respondent PDI was not involved in the ac- tual performance that produced the finished product, It only reserved the right to shorten ‘petitioner's articles based on the newspaper's capacity to accommodate the same. This fact [the Court} note[s], was not unique to petition: a's column. It is a reality in the newspaper business that space constraints often. dictate36 18 ‘COMPENDIUM ON LABOR LAW the length of articles and columns, even those that regularly appear therein. Furthermore, respondent PDI did not supply petitioner with the tools and instru. mentalities she needed to perform her work Petitioner only needed her talent and skill to come wp with a column every week. As such, she had all the tools she needed to perform her work." (Orozco, ibid.) The Orozco case above presents a parallel to the earlier case of Jose Sonza v. ABS-CBN Broadcasting Cor- poration (G.R. 138051, 431 SCRA 583 [10 June 2004)), where the Supreme Court held that Sonza was not an employee of ABS-CBN, but an independent contractor. Although ABS-CBN supplied the equipment, crew and airtime needed to broadcast the grams, the equipment, crew and ai “tools and instrumentalities” Sonza needed to perform his job. What Sonza principally needed were his talent, or skills and the costumes necessary for Even though ABS-CBN provided Sonza with the place of work and the necessary equipment, Sonza was still an independent contractor since ABS-CBN did not super- vise and control his work. ABS-CBN's sole concern was for Sonza to display his talent during the airing of the programs. “A radio broadcast specialist who works wndar min- {mal supervision is an independent contractor. Sonza’s work as television and radio program host required spe- cial skills and talent, which Sonza admittedly possesses, ‘The records do not show that ABS.CBN exercised any supervision and control how Sonza utilized his skills and talent in his shows. ABS.CBN was not involved in the actual performance that produced the finished prod- uct of SONZA’s work. ABS-CBN did not instruct SONZA hhow to perform his job. ABS.CBN merely reserved the to modify the program format and airtime sched x more effective programming CONTRA: ABS-CBN “off-camera talents” are NOT independent contractors, but are CHAPTER 37 _BMPLOYER-EMPLOYEE RELATIONSHIP employees. (Farley Fulache et. al., ». ABS-CBN Broadcasting Corporation, G.R. No, 183810, 610 SCRA 567, 21 January 2010). Complainants in this case wore off-camera personnel (drivers/cameramen, drivers, camer- amen/editors, PA/Teleprompter Operator-Edit- ing, and VIR man/editor) who worked for ABS- CBN for more than one year. They claimed that they should be recognized as regular employees entitled to security of tenure and to the privi- leges and benefits enjoyed by regular employees pursuant to law and the OBA. Pending the regu- larization case filed before the NLRC, ABS-CBN dismissed the drivers for their refusal to sign up employment contracts with service contractor ABLE services. ABS-CBN alleged that the complainants were contracted persons called “talents” and are considered independent contractors who offer their services to broadcasting companies. Instead of salaries, ABS-CBN pointed out that the talents are paid a pre-arranged considera- tion called “talent fee” taken from the budget of fa particular program and subject to a ten per- cent (10%) withholding tax. Talents do not un- dergo probation. Their services are engaged for fa specific program or production, or a segment thereof. Their contracts are terminated once the program, production or segment is completed. ‘The Supreme Court decided in favor of the complainants (petitioner in this case) and held that they are regular employees of ABS-CBN, ‘and not independent contractors. The parties’ 1999-2002 CBA provided in its Article I (Seope of the Agreement) that: “Section 1. APPROPRIATE BARGAINING UNIT. — The parties agree that the appropriate bargain ing unit shall be regular rank-and- file employees of ABS-CBN BROAD-a5 COMPENDIUM ON LABOR LAW CASTING CORPORATION but shall not include: ) Personnel classified as Supervi sor and Confidential employees; ») ©) Personnel who are on “contract status or who are paid for speci fed unite of work such as writer producers, talent-artists, and singers.d) The inclusion or exclusion of new job classifications into the bargain- ing unit shall be subject of discussion between the COMPANY and the UN- JON." femphasis supplied} Said the Supreme Court: “Under these terms, the petitioners are members of the ap- propriate bargaining unit because they are reg- ular rank-and-file employees and do not belong to any of the excluded categories. Specifically, nothing in the records shows that they are su- pervisory or confidential employees; neither are they casual nor probationary employees. Most importantly, the labor arbiter’s decision of Jan- uary 17, 2002-affirmed al they are independent contractors. Th ular rank-and-file employees, they CBA coverage under the CBA’s express and are entitled to its benefits.” (Furlache, CHAPTER IV JOB-CONTRACTING AND LABOR-ONLY CONTRACTING ARRANGEMENTS, CONTRACTING OUT IS VALID AS AN EXERCISE OF MAN- AGEMENT PREROGATIVE FOR AS LONG AS IT COMPLIES WITH THE LIMITS AND STANDARDS PROVIDED BY THE LABOR CODE. ‘The Supreme Court has held in a number of cases that an employer's good faith in implementing a redundancy program is NOT necessarily destroyed by the availment of the services of an independent contractor, to replece the servives of the ter- minated employees. The reduction of employees in a company made necessary by the introduction of the services of an inde- pendent contractor is justified when the latter is undertaken in order to effectuate more economic and efficient methods of pro- duction. Burden of proof is thus on the complaining employees to show that the management acted in a malicious or arbitrary mamner in engaging the services of an independent contrac- tor to do a specific activity. Absent such proof, the Supreme Court has no basis to interfere with the bona fide decision of management to effect 2 mare economic and efficient methods of production. (Asian Alcohol Corporation v. NLRC, 305 SCRA 416, at 435-486 [1998], ef. Serrano v. NLRC, G.R. No. 117040 27 January 2000; Emphasis supplied) ‘The engagement of contractual workers from PESO is a particular act which falls within the concept of management prerogative, However, such a declaration is significantly dif. ferent from acknowled such act is thereof, What the VA and the CA correctly ruled was that the Company's act of contracting out/outsourcing is with- in the purview of management prerogative. Both did not say, however, that such act is a valid exercise thereof. Obvi- ously, this is due to the recognition that the CBA-provisions 29agreed upon by the Company and the Union dé exercise of management prerogative pertaining to the hiring of contractual emplayoes, Indeed, the VA opined that “the ight of the management to outsource parts of its operations COMPENDIUM ON LABOR LAW CBA” (Goya Inc. v. Goya Inc. Employees Union-FFW, G.R. No, 170054, 21 January 2018) LL Essentially for job-contracting arrangement to validly exist, there must be proof of capitalization, and of control over his employees on the part of the independent contractor. In the case of Coca-Cola Bottlers v. Dela Cruz, et al, (G.R. No. 184977, 07 December 2009), the Supreme Court said: “Contracting and subcontracting are “hot” labor issues for two reasons. The first is Job contracting and labor-only contrac ing are technical Labor Code concepts that are easily misunderstood. For one, there is a security of tenure. This Court, through its decisions, can ly help address the problem of misun- the problem through the cases that are brought before us. Hither way, however, the need is for clear decisions that the workers, most eapecial- ily understand and appreciate. We resolve the present case with these thoughts in mind. The law allows contracting and sub- contracting involving services but closely 2 CHAPTER IV a out part ofits operations, provided it coms indards provided in the implementing rules. x = x In strictly layman's terms, a manufacturer can sell its products on its own, or allow contrac: tors, independently operating on their own, to sell and distribute these products in a manner that does not violate the regulations. From the terms of the above-quoted D.O. 18-02, the legi imate job contractor must have the capitaliza- wuipment to undertake the sale and ‘bution of the manufacturer's products, and selling methods. x: "(Co Emphasis supplied.) Job-contracting or outsourcing is a legitimate activity in the exercise of management's prerog- atives, for as long as it is done in good faith, pur- suant to the employer's valid interests and not for the circumvention of the employees’ rights. (Temic Automotive Phils. v. Temic Automotive Phils Inc. Employees Union-FFW, GR. No, 186965, 23 December 2003). In the case of Temic Automotive Phils (ibid.), the company was engaged in the manufacture of electronic brake systems and comfort body electronies for automo- tive vehicles. Complainant union members were regular rank-and-file employees working in warehouse receiv- ing section, raw materials, and finished goods section. Temic Automative management however contracted out the forwarding, packing, loading of raw materials and finished goods to independent contractors — forwarding ‘companies. An issue was raised on the validity of con- tracting out of said jobs to forwarding companies, to the detriment of the regular workers. The Supreme Court ruled that this was a valid exercise of management pre rogative, as follows: “As forwarders they act as travel agents for cargo. They specialize in arranging trans