Notes On Labor Standards: San Beda University - College of Law

SAN BEDA UNIVERSITY – COLLEGE OF LAW
NOTES ON
LABOR
STANDARDS
Prof. Ryan Mercader
Ferdinand Jomilla Jr.

TABLE OF CONTENTS
I. CONSTITUTIONAL PRINCIPLES IN RELATION TO LABOR LAW ..................................................................................................................1
Constitutional and Statutory Provisions ..........................................................................................................................................................1
Due Process in Labor Cases ...............................................................................................................................................................................1
Equal Protection..................................................................................................................................................................................................3
Right to Counsel..................................................................................................................................................................................................4
Right Against Self-Incrimination ......................................................................................................................................................................6
Right Against Unreasonable Searches and Seizures.......................................................................................................................................6
II. EMPLOYER-EMPLOYEE RELATIONSHIP ..........................................................................................................................................................7
Employee, defined ..............................................................................................................................................................................................7
Employer, defined ...............................................................................................................................................................................................7
Elements of an Employer-Employee Relationship ..........................................................................................................................................7
The ABS-CBN cases ........................................................................................................................................................................................................................ 12
The alternative, two-tiered economic realities test ............................................................................................................................................................... 15
Corporate officers and intra-corporate disputes .................................................................................................................................................................... 16
III. CLASSES OF EMPLOYEES ............................................................................................................................................................................... 19
Classified According to Rank ......................................................................................................................................................................... 19
Managerial........................................................................................................................................................................................................................................ 19
Supervisory........................................................................................................................................................................................................................................ 19
Rank-and-file ................................................................................................................................................................................................................................... 19
Nature of Employment .................................................................................................................................................................................... 19
Regular ............................................................................................................................................................................................................................................... 19
Probationary..................................................................................................................................................................................................................................... 20
Project ................................................................................................................................................................................................................................................ 25
Seasonal............................................................................................................................................................................................................................................. 30
Casual ................................................................................................................................................................................................................................................ 32
Fixed Term......................................................................................................................................................................................................................................... 34
IV. LEGITIMATE JOB CONTRACTING AND LABOR-ONLY CONTRACTING ................................................................................................... 38
Legitimate Job Contracting ............................................................................................................................................................................ 38
Trilateral relationship in legitimate contracting .................................................................................................................................................................... 40
Elements of legitimate contracting ............................................................................................................................................................................................ 41
Mandatory registration requirement and effect of nonregistration ................................................................................................................................. 44
Liability of the principal to the contractor’s employees ....................................................................................................................................................... 45
Effects and liabilities arising from termination of an employee of the contractor....................................................................................................... 46
Labor-only Contracting ................................................................................................................................................................................... 46
Elements of labor-only contracting ........................................................................................................................................................................................... 46
Effects of a finding of a labor-only contracting...................................................................................................................................................................... 49

LABOR 1 NOTES – PROF. RYAN MERCADER
FERDINAND JOMILLA JR.
Other Prohibitions under D.O. 174 ................................................................................................................................................................ 50
Prohibited practices under D.O. 174 ......................................................................................................................................................................................... 50
Effects of such prohibited practices ............................................................................................................................................................................................ 50
V. RECRUITMENT OF LOCAL AND MIGRANT WORKERS ............................................................................................................................... 51
Recruitment of Local Workers ........................................................................................................................................................................ 51
Qualifications for licensure as a private recruitment and placement .............................................................................................................................. 51
Fees that may be collected ........................................................................................................................................................................................................... 51
Acts constituting illegal recruitment.......................................................................................................................................................................................... 51
Rules on replacement of recruited workers ............................................................................................................................................................................. 51
Recruitment and Deployment of Overseas Workers.................................................................................................................................... 51
Definition of “Overseas Filipino Worker” ................................................................................................................................................................................. 52
Deployment of Migrant Workers ................................................................................................................................................................................................ 52
Illegal Recruitment ......................................................................................................................................................................................................................... 52
Jurisdiction over disputes .............................................................................................................................................................................................................. 55
Money claims ................................................................................................................................................................................................................................... 57
Insurance coverage for agency-hired overseas workers ...................................................................................................................................................... 61
Direct Hiring..................................................................................................................................................................................................... 62
Local Employment of Foreign Nationals....................................................................................................................................................... 62
Criteria for granting an employment permit .......................................................................................................................................................................... 62
Exemptions and exclusions from permit requirement .......................................................................................................................................................... 62
Validity of and renewal of permit .............................................................................................................................................................................................. 63
Grounds for denial of application for new or renewal of permit....................................................................................................................................... 63
Grounds for cancellation or revocation of permit ................................................................................................................................................................. 63
VI. HOURS OF WORK .......................................................................................................................................................................................... 63
Coverage and Exclusions................................................................................................................................................................................. 63
Normal Hours of Work.................................................................................................................................................................................... 64
Exception (Health Personnel)....................................................................................................................................................................................................... 64
Compressed workweek .................................................................................................................................................................................................................. 65
Work Interruption Due to Brownouts ............................................................................................................................................................ 67
Meal Breaks ...................................................................................................................................................................................................... 67
General rule ...................................................................................................................................................................................................................................... 67
When compensable ........................................................................................................................................................................................................................ 67
Idle time ............................................................................................................................................................................................................ 68
Waiting time .................................................................................................................................................................................................... 68
Commuting time and travel time .................................................................................................................................................................. 68
Overtime work ................................................................................................................................................................................................. 69
Definition and Nature of Overtime Work ................................................................................................................................................................................ 69
Overtime Pay ................................................................................................................................................................................................................................... 70
Emergency overtime work ............................................................................................................................................................................................................ 70

Waiver of overtime pay ................................................................................................................................................................................................................. 71
Rest Days .......................................................................................................................................................................................................... 71
Right to weekly rest days .............................................................................................................................................................................................................. 71
When work on a rest day may be required ............................................................................................................................................................................. 71
Premium work pay for work rendered on a rest day ............................................................................................................................................................ 71
Holidays ............................................................................................................................................................................................................ 71
Definition of a holiday ................................................................................................................................................................................................................... 71
Holiday pay....................................................................................................................................................................................................................................... 72
Premium work pay for work rendered on holidays ............................................................................................................................................................... 76
Special Holidays .............................................................................................................................................................................................. 76
Coverage ........................................................................................................................................................................................................................................... 76
Premium pay for work rendered on special holidays ........................................................................................................................................................... 76
Night Work ....................................................................................................................................................................................................... 76
Coverage ........................................................................................................................................................................................................................................... 76
Night worker, defined .................................................................................................................................................................................................................... 76
Health assessment .......................................................................................................................................................................................................................... 76
Mandatory facilities ........................................................................................................................................................................................................................ 76
Transfers ............................................................................................................................................................................................................................................ 76
Night shift differential pay ........................................................................................................................................................................................................... 76
Service Incentive Leave ................................................................................................................................................................................... 76
VII. WAGES ............................................................................................................................................................................................................ 79
Definition of wages ......................................................................................................................................................................................... 79
Minimum wage................................................................................................................................................................................................................................ 80
Wages vs. salary .............................................................................................................................................................................................................................. 81
Coverage ........................................................................................................................................................................................................... 81
Payments due to the employee ...................................................................................................................................................................... 82
Basic wage ........................................................................................................................................................................................................................................ 82
Cost-of-living allowance ............................................................................................................................................................................................................... 82
Facilities and supplements ........................................................................................................................................................................................................... 82
Commissions .................................................................................................................................................................................................................................... 84
Service charges ................................................................................................................................................................................................................................ 87
Thirteenth-month pay ................................................................................................................................................................................................................... 87
Non-diminution of benefits ............................................................................................................................................................................ 89
Company practice ........................................................................................................................................................................................................................... 89
Bonuses .............................................................................................................................................................................................................................................. 89
Prohibitions regarding wages ........................................................................................................................................................................ 90
Deductions from wages................................................................................................................................................................................................................. 90
Interference in the disposal of wages ........................................................................................................................................................................................ 90
Wages exempt from execution or attachment ....................................................................................................................................................................... 90

Requiring deposits .......................................................................................................................................................................................................................... 91
Withholding of wages .................................................................................................................................................................................................................... 92
Deductions to ensure employment ............................................................................................................................................................................................ 93
Retaliatory acts by employer ....................................................................................................................................................................................................... 93
False statements in a report or record ...................................................................................................................................................................................... 93
Wage-fixing ..................................................................................................................................................................................................... 93
Criteria for fixing the minimum wage ...................................................................................................................................................................................... 93
Methods for fixing the minimum wage .................................................................................................................................................................................... 93
Wage distortion ............................................................................................................................................................................................................................... 93
CBA in relation to Wage Orders..................................................................................................................................................................... 96
Worker preference in case of bankruptcy ..................................................................................................................................................... 96
VIII. SPECIAL GROUPS OF WORKERS................................................................................................................................................................... 98
Women .............................................................................................................................................................................................................. 98
Prohibited acts under the Labor Code ...................................................................................................................................................................................... 98
Anti-Sexual Harassment Act ...................................................................................................................................................................................................... 102
Maternity Leave ............................................................................................................................................................................................................................. 104
Paternity Leave .............................................................................................................................................................................................................................. 104
Magna Carta for Women............................................................................................................................................................................................................ 104
Solo Parent Leave ......................................................................................................................................................................................................................... 105
VAWC Leave ................................................................................................................................................................................................................................... 105
Child workers ................................................................................................................................................................................................. 106
Working child, defined................................................................................................................................................................................................................. 106
Working hours of a child ............................................................................................................................................................................................................ 106
Prohibited employment in certain undertakings ................................................................................................................................................................. 106
Employment of children below 15 ........................................................................................................................................................................................... 106
Working Child permit .................................................................................................................................................................................................................. 107
Kasambahay................................................................................................................................................................................................... 107
Coverage and exclusions ............................................................................................................................................................................................................ 108
“Kasambahay” or “domestic worker,” defined ...................................................................................................................................................................... 108
Employment.................................................................................................................................................................................................................................... 108
Rights and privileges of a kasambahay .................................................................................................................................................................................. 108
Termination of employment ...................................................................................................................................................................................................... 109
Homeworker ................................................................................................................................................................................................... 110
Qualified employees with disabilities ......................................................................................................................................................... 110
Definitions ....................................................................................................................................................................................................................................... 111
Kinds of employment available ................................................................................................................................................................................................ 111
Employer incentives...................................................................................................................................................................................................................... 111
Apprenticeship ............................................................................................................................................................................................... 112
Learnership ..................................................................................................................................................................................................... 113

DISCLAIMER
These notes reflect the author’s academic capacity during his sophomore year and the professor’s syllabus
then, which may or may no longer be sufficient. Reader uses at their own risk. The author makes no
guarantee that the reader will pass the subject with flying colors, or that the contents of this document
correspond to the professor’s questions. Some stray cases may not be fully digested (notably pp. 89, 96); it
would be wise to look up the original text.
Best of luck,
F.
FERDINAND JOMILLA JR. | 2018-2019
I. CONSTITUTIONAL PRINCIPLES IN RELATION TO of property, the obligation of the State to protect workers,
LABOR LAW both organized and unorganized, and insure their enjoyment
of humane conditions of work and a living wage, and the right
Constitutional and Statutory Provisions of labor to a just share in the fruits of production.
CONST., Art. XIII, Sec. 3 - The State shall afford full protection to In resolving this, the Court ruled that the standard in
labor, local and overseas, organized and unorganized, and promote determining the existence of grave abuse does not have to be
full employment and equality of employment opportunities for all. constitutional—the proper yardstick is reasonableness, i.e., the
mere absence of arbitrariness. This is the more proper standard
Labor Code (LC), Art. 3. Declaration of basic policy. - The State
because it achieves the same result without requiring
shall afford protection to labor, promote full employment, ensure
constitutional interpretation. Where two options are presented
equal work opportunities regardless of sex, race or creed and
to achieve a desired outcome, one requiring constitutional
regulate the relations between workers and employers. The State
interpretation and another not requiring constitutional
shall assure the rights of workers to self-organization, collective
interpretation, the latter option must be favored.
bargaining, security of tenure, and just and humane conditions of
work. 3. The Labor Secretary disregarded and misappreciated
evidence, particularly with respect to the award of wages.
LC, Art. 266. Injunction prohibited. No temporary or permanent
MERALCO presented evidence that was more reasonable and
injunction or restraining order in any case involving or growing out
reliable with regard to projected wages, and this is because it
of labor disputes shall be issued by any court or other entity, except
was based on actual and undisputed figures, while the union’s
as otherwise provided in Arts. 218 and 264 of this Code.
evidence on the projected wages was merely based on
Manila Electric Co. v. Quisumbing (1999) speculation.
Standards for determining grave abuse of discretion by Secretary of 4. Art. 245 of the LC provides that managerial employees may
Labor in ruling over a labor dispute not join any labor organization, and that supervisory
employees may form their own labor organization, but may
Facts: MERALCO and the Meralco Workers’ Association (MEWA) not join that of the rank-and-file employees. This is because
entered into negotiations for a Collective Bargaining Agreement confidential employees do not share in the same community
(CBA) but could not enter into any agreement, so MEWA staged a of interests as the rank-and-file employees, because of a
strike. MERALCO filed a petition with the DOLE praying that the conflict in interest.
Labor Secretary assume jurisdiction, which was granted. Upon
assuming jurisdiction, the Labor Secretary issued a ruling heavily in
favor of the workers, all of which were contested by DOLE as grave Due Process in Labor Cases
abuse of discretion.
Agabon v. NLRC (2004)
Issues: Due process in the termination of an employee due to just cause
1. W/N the power of judicial review over the ruling of a Labor
Secretary over a labor dispute is limited to a determination of Facts: Private respondent Riviera Home Improvements is a seller
grave abuse of discretion in the exercise of his powers – NO. and installer of ornamental and construction materials. Petitioners
2. W/N the standards for determining grave abuse of Virgilio & Jenny Agabon were employed as gypsum board and
discretion should be limited to those laid out in the cornice installers from 1992-1999 for abandonment of work. RHI
Constitution – NO. did not send a written notice to the last known addresses of its
3. W/N the Labor Secretary’s appreciation & consideration of the employees because it argued that it would have been useless
evidence is reasonable and free from arbitrariness – NO. because they did not reside there anymore. Petitioners filed a
4. W/N the scope of the bargaining unit should include complaint for illegal dismissal.
managerial employees – NO.
Issues and Rulings:
Ruling: 1. W/N there was just cause to terminate petitioner’s
1. The Court may also look into the amount of the award itself if employment – YES.
the determination of such amount (i.e. the appreciation of the
In 1996, petitioners did not report for work because they were
evidence presented) is also tainted with grave abuse of
already working for another company. RHI sent a warning that they
discretion.
would be dismissed if this happened again, but this was ignored,
2. The Court ruled against MEWA’s argument that the Labor
and this shows a clear intention to abandon the work and to sever
Secretary’s ruling is proper just because it met the
employer-employee relationship.
constitutional standards of the promotion of workers welfare,
namely: the promotion of workers’ welfare, the principle of 2. W/N petitioner’s dismissal was attended with due process
distributive justice, the right of the State to regulate the use – NO.
1
Art. 282 provides for three requirements of notice to meet the process (aka other privileges and
due process requirement for termination based on just causes: (i) A Wenphil or Belated full back wages
written notice served on the employee specifying the ground or Due Process Rule).
grounds for termination, and giving to said employee reasonable
opportunity within which to explain his side; (ii) A hearing or
conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given JAKA Food Processing v. Pacot (2005)
opportunity to respond to the charge, present his evidence or rebut Due process in the termination of an employee due to authorized
the evidence presented against him; and (iii) a written notice of cause
termination served on the employee indicating that upon due
Facts: Private respondents were earlier hired by petitioner JAKA,
consideration of all the circumstances, grounds have been
and were later terminated (retrenchment) because of JAKA’s
established to justify his termination.
financial problems. However, JAKA failed to comply with the
In this case, the dismissal was for just cause, but procedural requirement that the employee must be given notice one (1) month
due process was not observed (see table below). To reiterate, RHI before the date of termination. Private respondents then filed a case
did not send a written notice to the last known addresses of its before the LA for illegal dismissal and nonpayment of monetary
employees because it argued that it would have been useless benefits.
because they did not reside there anymore.
Issue and Ruling: W/N the failure of JAKA to observe due
Where the dismissal is for a just cause, the lack of statutory process in terminating respondents for an authorized cause
due process should not nullify the dismissal, or render it illegal, or should be the same as failure to observe due process in
ineffectual. However, the employer should indemnify the employee terminating for just cause – YES, but with stricter penalties.
for the violation of his statutory rights.
The Court referred to the Agabon case, but noted that the
Held: Dismissal upheld, but RHI is ordered to pay each of the difference is that, in the instant case, the dismissal is for authorized
petitioners the amount of P30,000.00 as nominal damages for non- cause (management prerogatives even though the employee did
compliance with statutory due process. not commit any violation) under LC Art. 283, whereas in Agabon,
the dismissal was due to just cause (employee committed a
Note: In Agabon, the Court overturned its own ruling from Serrano violation against the employer) under LC Art. 284.
v. NLRC. The Court in Serrano ruled that even if dismissal was with
Where the dismissal process was initiated by the employer’s
just/authorized cause, it is ineffectual if not met with due process.
exercise of his management prerogative, the sanction for
Here in Agabon, the Court said that the Serrano ruling can cause
failure to comply with the notice requirement should be
unfairness and injustice.
harsher. Nevertheless, the dismissal itself should be upheld.
Note: The amount of the nominal damages for violation of due
Held: Dismissal upheld, but JAKA must pay each respondent
process depends on a case-to-case basis, as may be determined
P50,000.00 (a higher amount than in Agabon) for non-compliance
according the sound discretion of the court.
with statutory due process.
Matrix; legality of dismissal and compliance with due process;
effects:
Dismissal with Dismissal without
Abbot Laboratories v. Alcaraz (2013)
just/authorized just/authorized
caused or for cause Due process in the termination of a probationary employee due to
health reasons failure to meet the standards for regularization
Due process Dismissal valid; Dismissal illegal; Facts: Petitioner Abbot Laboratories, Philippines published in a
observed employer not liable employee is entitled newspaper that it was hiring a Regulatory Affairs Manager.
to reinstatement Respondent Alcaraz applied for the position and got accepted, with
without loss of an initial probationary period of 6 months. Her job involved
seniority rights and handling employees of Abbott’s Hospira Affiliate Local Surveillance
other privileges and Unit (Hospira ALSU).
full back wages
During the course of her employment, she noticed that some of the
Due process not Dismissal valid, but Dismissal illegal; ALSU staff had disciplinary problems, so she reprimanded them
observed employer should be employee is entitled accordingly. However, her immediate supervisor considered
held liable for non- to reinstatement Alcaraz’s disciplinary methods to be “too strict” and told Alcaraz to
compliance with the without loss of
let management handle it. However, she noticed that her
procedural seniority rights and
immediate supervisor was evaluating her in ways outside the
requirements of due
2
normal process of probationary employee evaluation (secretly Once an employer establishes an express personnel policy and
asking other employees how Alcaraz performed, etc.). the employee continues to work while the policy remains in effect,
the policy is deemed an implied contract for so long as it remains
Later, she was informed by management that she was unable to in effect. This is akin to estoppel.
meet the standards for regularization and was told to resign or else
they’d terminate her themselves. On 23 May 2005, she was handed Abbott informed Alcaraz of the procedure for the latter’s
a letter stating that she had been terminated effective 19 May 2005. evaluation, but Abbott failed to comply with these procedures.
Another copy was received on 27 May 2005. Company personnel policies create an obligation on the part of
both the employee and the employer to abide by the same.
She filed a complaint for illegal dismissal, alleging that she should
have already been considered a regular employee because she was Held: Termination upheld, but because of Abbott’s breach of its
not informed of the reasonable standards upon which own company policy which violated the employee’s rights, Abbott
regularization would be based. must pay P30,000.00. The amount is the same as in Agabon,
because in this case, the dismissal process is imputable to an act by
LA: Termination was justified because Alcaraz did not meet the the employee, similar to the circumstances in Agabon.
standards for regularization.
NLRC: LA ruling set aside. There was no evidence that Alcaraz was
apprised of her probationary status and the requirements which Equal Protection
she should have complied with for regularization, thus she should
be deemed a regular employee at the onset. Duncan Association of Detailman-PTGWO v. Glaxo Wellcome
(2004)
Issues & Ruling: A company policy requiring employees who enter into relationships
1. W/N Alcaraz was, at the time of engagement, informed of with employees of competing companies to disclose such fact to the
the standards under which she would qualify as a regular company does not violate the Constitution
employee, and thus should have been considered a
probationary employee – YES Facts: Respondent Glaxo Wellcome is a pharmaceutical company
that hired petitioner Pedro Tecson as medical representative. One
According to Sec. 6(d), Rule I, Book VI of the Implementing of the rules in the employment contract stated that Tecson should
Rules of the Labor Code, in all cases of probationary employment, disclose to Glaxo any existing or future relationship with co-
the employer shall make known to the employee the standards employees, or employees of competing drug companies. Later,
under which he will qualify as a regular employee at the time of his Tecson entered into a relationship with Bettsy, and employee of a
engagement. Where no standards are made known to the competing drug company, whom he later married.
employee at that time, he shall be deemed a regular employee.
Tecson was later ordered transferred to Surigao in order to prevent
Considering the totality of the circumstances, Abbott was complications arising from his relationship with an employee of a
found to have sufficiently informed Alcaraz of the nature of the competing drug company, but he defied the order and assailed
latter’s employment (probationary), and Alcaraz was also found to Glaxo’s company policy prohibiting its employees from entering
have been sufficiently aware of her duties and responsibilities. into relationships with employees of competitors.
2. W/N Abbott’s termination of Alcaraz, as a probationary CA: Glaxo’s policy on relationships is valid, and Glaxo has the right
employee, was attendant with due process – YES to transfer Tecson to another sales territory.
A probationary employee may be terminated on three
grounds: (i) just cause; (ii) authorized cause; or (iii) failure to meet Petitioners contend that Glaxo’s policy against employees marrying
the standards for regularization. The two-notice rule is required employees of competitor companies violates the equal protection
only for the first two grounds of termination. For the third ground, clause of the Constitution because it creates invalid distinctions
a written notice served to the employee, within a reasonable time among employees on account only of marriage. They claim that the
from the effective date of termination, is sufficient (Sec. 2, Rule I, policy restricts the employees’ right to marry
Book VI, Implementing Rules of the Labor Code).
Issue & Ruling: W/N Glaxo’s company policy of prohibiting its
The letters received by Alcaraz on 23 May and 27 May were employees from entering into relationships with employees of
considered to have sufficiently met the criteria in the Implementing a competing company violates the equal protection clause of
Rules of the LC. Thus, the Labor Code requirement for due process the Constitution – NO
have been complied with.
This policy is found on the employment contract which Tecson
3. W/N Abbott violated its own company policies and procedure signed at the beginning, and it is a valid exercise of management
in evaluating the performance of Alcaraz – YES prerogative. The prohibition against personal or marital
relationships with employees of competitor companies upon
Glaxos employees is reasonable under the circumstances
3
because relationships of that nature might compromise the 2. W/N the weight standards constitute a bona fide occupational
interests of the company. In laying down the assailed company qualification which justifies petitioner’s dismissal – YES
policy.
As a general rule, employment in particular jobs may not be limited
The Constitution itself recognizes the right of enterprises to persons of a particular sex, religion, or national origin based on
to adopt and enforce such a policy to protect its right to reasonable sex, religion, nationality, or the like, unless the employer can show
returns on investments and to expansion and growth. Indeed, while that they constitute an actual qualification for performing the job,
our laws endeavor to give life to the constitutional policy on social called bona fide occupational qualification (BFOQ).
justice and the protection of labor, it does not mean that every
labor dispute will be decided in favor of the workers. For a BFOQ to be valid, it only needs to be reasonable. There is no
need for a statute to justify it. A BFOQ is valid provided it reflects an
Further, the equal protection clause applies only to acts inherent quality reasonably necessary for satisfactory job
of the state or of those acting under its authority. It does not performance.
protect against private conduct, however discriminatory or
wrongful. In this case, the weight standards imposed are reasonable and
constitute a valid BFOQ. Weight is important to consider in an
Furthermore, there is no absolute prohibition on the emergency involving an aircraft’s constricted cabin space. Being
relationships sought to be avoided. Glaxo merely seeks to avoid a overweight may impede passengers from evacuating aircraft,
conflict of interest but never did it outright get in the way of contrary to a flight steward’s duty to ensure swift evacuation in case
Tecson’s relationship and marriage with Bettsy. Lastly, the fact that of emergency.
Tecson knowingly entered into an employment contract containing
such stipulation, he is estopped from questioning said policy. The 3. W/N petitioner may invoke the equal protection clause
stipulations therein have the force of law between them and, thus, against PAL – NO
should be complied with in good faith.
First, petitioner failed to adduce any evidence of discrimination.
Held: Petition denied. Glaxo’s company policy upheld. Except for pointing out the names of the supposed overweight
cabin attendants, petitioner never presented any more data to
substantiate his claims.
Yrasuegui v. Philippine Airlines (2008) Second, the equal protection clause of the Constitution cannot
The legality of the dismissal of a flight steward due to failure to be invoked. In the absence of governmental interference, the
adhere to company weight standards was upheld liberties guaranteed by the Constitution cannot be invoked;
the Bill of Rights is not meant to be invoked against acts of
Facts: Petitioner was a flight steward of PAL. For his height, his ideal private individuals. Private actions, no matter how egregious,
weight according to the PAL Cabin and Crew Administration cannot violate the equal protection guarantee.
Manual was 166 lbs. He failed multiple weight checks over the
course of 8 years and he repeatedly refused to show up for routine Held: CA decision upheld, but modified to entitle petitioner to
weight checks. He was finally terminated on 1993. His last noted separation pay.
weight was 205 lbs. He filed a complaint for illegal dismissal.
The concept of a BFOQ (which justifies discrimination based on
LA: Dismissal was illegal. Weight standards are reasonable but do race, sex, nationality, religion, etc.) is statutory in nature; it needs a
not justify the grave penalty of dismissal. Petitioner must be law to legally exist. In the Philippines, BFOQs are recognized in the
reinstated. following laws:
• CONST., Art. XIII, Sec. 3
NLRC: Affirmed LA Decision. Obesity is a disease in itself. • Labor Code, Art. 3
• RA 7277 aka Magna Carta for Disabled Persons (Sec. 32)
CA: Reversed NLRC decision. Weight standards constitute a
continuing qualification. Failure to adhere constitutes analogous Right to Counsel
cause for dismissal under LC Art. 282.
Manuel v. N.C. Construction Supply (1997)
Issues & Ruling: Inapplicability of constitutional right to counsel in an administrative
investigation
1. W/N petitioner’s obesity is an analogous cause for dismissal
under Art. 282(e) of the LC – YES Facts: Private respondents Johnny Lim and Anita Sy, owned NC
Construction Supply, and they employed petitioners as drivers.
The SC agreed that weight standards constitute a continuing
Petitioners were later named by other employees as involved in a
qualification for an employee to keep the job. Petitioner advanced
foiled attempt to steal two rolls of electrical wire worth P500.00
the argument that obesity is a disease he could not control, but the
from company premises.
Court was not convinced because there were recorded instances of
petitioner successfully bringing his weight down in the past.
4
Respondent’s lawyer interrogated the petitioners on their NLRC: Punzal was guilty of misconduct, but the penalty of dismissal
involvement, who later admitted their guilt and offered to resign in was disproportionate to her actions. Since reinstatement was no
exchange for the withdrawal of criminal charges. Their resignations longer feasible, NLRC ordered payment of separation pay.
were accepted by the lawyer.
CA: Reinstated LA order. Ruled that the gravity of her actions
Petitioners later filed a complaint for illegal dismissal, alleging that justified dismissal, and due process was attendant in Punzal’s
they were not informed of the charge against them nor were they dismissal.
given an opportunity to dispute the same.
Issue & Ruling: W/N the dismissal was violative of Punzal’s
LA: Dismissal was illegal. The admissions of petitioners cannot be right to freedom of expression – NO
admitted into evidence as it was taken without the assistance of
counsel, violating Sec. 12, Art. III of the Constitution. Punzal’s remarks were not merely a statement of opinion about SVP
Geisert’s disapproval; they were directed against Geisert himself.
NLRC: Reversed LA decision. Petitioners failed to prove vitiation of Also, Punzal relies on Samson v. NLRC, where the Court ruled that
their admission in the thefts. Further, Sec. 12 Art. III applies only to the penalty for dismissal was too harsh for an employee who made
criminal proceedings, not administrative proceedings. derogatory remarks behind the employer’s back during a Christmas
party. Petitioner’s reliance is misplaced because in this case, her
Issue: W/N petitioners may invoke the right to counsel in Art. remarks were directed against her superior, while in Samson, the
III of the Constitution to assail the validity of their dismissal – remarks were not directed towards the superior.
NO
The Court referred to Philippines Today, Inc. v. NLRC where it was
The right to counsel under Sec. 12 of the Bill of Rights is meant to ruled that no matter how [much] the employee dislikes the
protect a suspect in a criminal case under custodial investigation. employer professionally, and even if he is in a confrontational
In this case, petitioners were not under custodial investigation for disposition, he cannot afford to be disrespectful and dare to talk
they were not yet accused by police of committing a crime. The with an unguarded tongue and/or with a bileful pen.
investigation was merely an administrative investigation conducted
by the employer, not a criminal investigation. • W/N Punzal was denied due process because she was not
informed of her right to counsel during the hearing with
Nevertheless, the employer still violated the petitioners’ right to her immediate superior – YES
due process by failing to comply with the twin-notice rule. They are
obliged to indemnify petitioners for this violation. The records do not show that she was informed of her right
to be represented by counsel during the conference. The Labor
Held: NLRC decision affirmed. Validity of dismissal upheld. Code expressly provides that the burden of providing assistance
falls upon the management: “the employer xxx shall afford [the
worker whose employment is sought to be terminated] ample
opportunity to be heard and to defend himself with the assistance of
Punzal v. ETSI Technologies Inc. (2007)
Legality of a dismissal due to malicious remarks made by an his representatives if he so desires in accordance with company rules
and regulations pursuant to guidelines set by the Department of
employee directed against the employer and circulated among co-
Labor and Employment.”
workers.
Following Agabon, the violation of petitioners statutory due
Facts: Petitioner Lorna Punzal was an employee of ETSI. During her
process right entitles her to an award of nominal damage, which
employment, she planned to hold an office Halloween party, and
informed her colleagues of this via email. However, the Senior VP, this Court fixes at P30,000.00.
whose approval was required for the holding of such party, did not Held: Dismissal upheld; ETSI must pay nominal damages worth
approve of it. Because of this, Punzal sent another round of emails P30,000.00 for violation of due process.
to her co-workers labeling the SVP as unfair along with other
derogatory remarks.
The SVP later sent Punzal an email ordering her to explain her Lopez v. Alturas Group of Companies (2011)
recent actions, under threat of disciplinary sanction for improper Non-mandatory nature of right to counsel in termination cases
conduct or discourtesy or disrespect. These offenses may be
subjected to suspension or termination. Facts: Petitioner Quirico Lopez was employed as a truck driver for
respondent. He was allegedly caught stealing scrap iron from
Punzal’s immediate superior along with the AVP of HR did not find company premises, and he allegedly admitted to the crime.
Punzal’s explanation acceptable and sent her an email on 26 Responding to a show-cause order, he denied the allegations
November 2001, informing her that she was terminated effective against him.
immediately. Punzal filed complaint for illegal dismissal.
LA: Dismissal upheld.
5
Respondent later terminated Lopez, finding his explanation hearing, he must testify unless he can secure a proper restraining
unsatisfactory. It then filed a case for Qualified Theft against Lopez order.
for smuggling cartons, in addition to a previous charge of the same
offense for stealing scrap iron. Lopez later filed a complaint for Pascual thus petitioned for an injunction before the lower court,
illegal dismissal. praying that the BME be restrained from compelling him to testify
against himself. The lower court granted the petition.
LA: The dismissal was justified; stealing company property was a
violation of the trust reposed in him. On their part, the BME argued that the right against self-
incrimination is available only when a question calling for an
NLRC. Set aside LA decision. Lopez should have been afforded his incriminating answer is asked to Pascual, where he must then
right to counsel; any evaluation based only on his response to the object. Nevertheless, he may still be per se asked to take the witness
show-cause order and on any so-called investigation but without stand.
confrontation of vital witnesses is insufficient.
Issue: W/N the right against self-incrimination may be invoked
CA: Set aside NLRC decision. The evidence supporting the criminal by Pascual in an administrative case against him for
charges are enough to show prima facie guilt. However, there was malpractice – YES
a deprivation of procedural due process because Respondent failed
to give Lopez a chance to defend himself in a proper hearing. The Court referred to the old case of Cabal v. Kapunan, where the
Court ruled that the accused may refuse not only from answering
Issue: W/N petitioner was deprived of procedural due process incriminatory questions, but also from taking the witness stand
– NO. altogether. It is of no matter that the present case is administrative,
whereas Cabal was criminal. There is a similarity in both cases: a
It is immaterial that there was no formal hearing. What is important penalty is imposed. The potential disadvantage is just as great:
is that there was a chance to be heard, which in this case was petitioner is at risk of losing his medical license.
afforded to petitioner when he was given a show-cause order which
he responded to, which was his chance to explain his side of the In all cases, the right against self-incrimination must be construed
controversy. liberally in favor of the person invoking it.
Second, the NLRC erred in ruling that petitioner should have been Respondent misinterprets the right against self-incrimination when
afforded counsel or advised of the right to counsel. The right to it claims that it only applies to the valid refusal to answer
counsel and the assistance of one in investigations involving incriminating questions, but not to taking the witness stand. The
termination cases is neither indispensable nor mandatory, accused has a perfect right to remain silent, and his silence cannot
except when the employee himself requests for one or that he be used as a presumption of guilt.
manifests that he wants a formal hearing on the charges
against him. Held: In an administrative hearing against a medical practitioner
for alleged malpractice, respondent Board of Medical Examiners
In petitioner’s case, there is no showing that he requested for a cannot, consistently with the self-incrimination clause, compel the
formal hearing to be conducted or that he be assisted by counsel. person proceeded against to take the witness stand without his
Thus, the serving of the subsequent notice upon him of his consent.
termination constitutes sufficient compliance with procedural due
process.
Held: Dismissal upheld, but CA award of P30,000.00 nominal Right Against Unreasonable Searches and Seizures
damages for violation of procedural due process is deleted.
Social Justice Society v. Dangerous Drugs Board and Philippine
Drug Enforcement Agency (2008)
Constitutionality of mandatory drug testing of officers and
Right Against Self-Incrimination employees of public and private offices
Pascual v. Board of Medical Examiners (1969) Facts: The Comprehensive Dangerous Drugs Act of 2002 was
The right against self-incrimination extends to administrative cases enacted, and it mandated drug testing for:
• High school and college students;
Facts: Petitioner Pascual is the defendant in an administrative case • Officers and employees of public and private offices;
filed by Salvador & Enriqua Gatbonton charging him of • All persons charged before the prosecutor’s office with a
malpractice. The counsel for complainant attempted to present him criminal offense;
as first witness, but he objected, claiming the constitutional right to • All candidates for public office.
be exempt from being a witness against himself. The Respondent
BME noted such defense, but ruled that at the next scheduled
6
Issue & Ruling: W/N the provisions on mandatory drug testing whose work has ceased as a result of or in connection with any
violate the right against unreasonable searches and seizures, current labor dispute or because of any unfair labor practice if he
with respect to employees – NO has not obtained any other substantially equivalent and regular
employment.
Searches and seizures by themselves are not prohibited, it is the
unreasonable ones that are. Thus, a government search or intrusion Azucena: This is not a definition; this is a circumlocution. The Social
Security Law provides for a better definition:
is valid if proven to be reasonable. Reasonableness is determined
by the balancing of the government intrusion against some RA 8282, Sec. 8. Terms Defined
compelling state interest, and for that multiple factors must be
considered. xxx
The first factor to consider is the expectation of privacy that an (c) Employer ‐ Any person, natural or juridical,
employee has in the workplace, which is to a large extent domestic or foreign, who carries on it the
circumscribed by company policies, the CBA, and the inherent right Philippines any trade, business, industry,
undertaking or activity of any kind and uses the
of an employer to maintain discipline. Thus, in the workplace the
services of another person who is under his
expectation of privacy is reduced, and a degree of impingement
orders as regards the employment, except the
upon such privacy has been upheld. The provisions of RA 9165 so
Government and any of its political subdivisions,
far do not go against this factor. branches or instrumentalities, including
corporations owned or controlled by the
The second factor to consider is the character of the intrusion. The
Government: Provided, That a self‐employed
scope of such intrusion must be clearly set, or narrowly
person shall be both employee and employer at
drawn/focused. RA 9165 also meets this requirement, as the the same time.
provisions on mandatory drug testing are accompanied by proper
safeguards to maximize the privacy of individuals subject to the (d) Employee ‐ Any person who performs
random tests. services for an employer in which either or both
mental and physical efforts are used and who
Regarding the last factor, which is the compelling state interest, the receives compensation for such services, where
Court ruled that, after considering the ill effects of drugs in the there is an employer‐employee relationship:
workplace, the need for drug testing is substantial enough to Provided, That a self‐employed person shall be
override individuals’ privacy interests in the premises. Random drug both employee and employer at the same time.
testing is reasonable enough to tackle the drug problem, which
permeates across gender, age group, and socioeconomic activities. Elements of an Employer-Employee Relationship
1. Selection
Held: The mandatory drug testing provisions in RA 9165 are 2. Payment of wages
reasonable and constitutional, all relevant factors considered 3. Power to dismiss
(expectation of privacy, well-defined limits set forth in the law 4. Control
to guide authorities in the conduct of the testing, and
compelling state interest). Azucena: The 4-fold test is considered the traditional or
conventional test of employment, but it is not the sole test. There
Q: If you downloaded porn onto a company laptop, and the are other tests the Supreme Court uses from time to time, such as
company orders a search of that laptop (based on mere suspicion), the economic reality test and the economic dependency test (see
and subsequently finds porn for which you were fired, can you Francisco at 15).
claim as a defense that the evidence was obtained illegally, in
violation of privacy rights? LVN Pictures, Inc. v. Philippine Musicians Guild (1961)
Where a film company controls not only the result of the acts of
Sir: No you cannot. You do not have an expectation of privacy on musicians working for it, but also the means by which those results
a company laptop; that’s their laptop. are achieved, said musicians are deemed employees of the film
company, regardless of the musicians being labelled as “independent
II. EMPLOYER-EMPLOYEE RELATIONSHIP contractors.”
Employee, defined Note: The Labor Code was not yet in effect when this case was
Employer, defined decided; the Court applied RA 875 which was patterned after
American law, so reference was made to American cases
ART. 219. Definitions. - "Employer" includes any person acting in
the interest of an employer, directly or indirectly. The term shall not Facts: Petitioners LVN Pictures, Inc. (along with Sampaguita
include any labor organization or any of its officers or agents except Pictures, Inc. and Premiere Productions, Inc. are film companies that
when acting as employer. employ musicians for the music used in such films. 95% of all the
musicians employed by these companies are members of the
"Employee" includes any person in the employ of an employer. The
Philippine Musicians Guild (“Guild”), and so the Guild asked the
term shall not be limited to the employees of a particular employer,
lower court that it be certified as the sole and exclusive bargaining
unless the Code so explicitly states. It shall include any individual
agency for all musicians working in the three companies, since
7
there was no other legitimate labor organization working for those a relationship comparable to lessor-lessee. In a lease, the lessor
companies. The motion was granted despite the petitioners’ loses complete control over the thing leased. On the other hand, in
contention that they did not have any musicians as employees, but a taxi boundary system, the taxi owner still exercises control and
only as independent contractors. supervision over the driver. The fact that the drivers do not receive
fixed wages but get only the excess the boundary they pay to the
Issue & Ruling: W/N there was an employer-employee owner/operator is not sufficient to withdraw the relationship
relationship between the petitioner companies and the between them from that of employer and employee.
musicians working for them – YES
Further, private respondent is an employee because he had been
In applying and interpreting the provisions of RA 875, the Supreme engaged to perform activities which were usually necessary or
Court used the control test; an employer-employee relationship desirable in the usual trade or business of the employer.
exist where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but Held: Petition is DISMISSED. Melchor is an employee of
also the manner and means to be used in reaching the end. The petitioner and must be reinstated with back wages.
nomenclature of “independent contractor” is immaterial.
In this case, the companies did exert control over the musicians as
seen in the following circumstances: Teng v. Pahagac (2010)
1. The company would call the musicians through “call slips” in Where a businessman hires fishing experts who then hire their own
the name of such company; crew, but the businessman controls the crew and provides
2. The company arranges the schedules in its studio for equipment, the crew will be deemed to be directly employed by the
recording sessions; businessman (labor-only contracting)
3. The company provides meals and transportation;
4. The company, through the film Director, supervises and Facts: Teng has a deep sea fishing business and thus owns boats
directs in detail the musicians’ performance before the camera and other fishing equipment. He enters into joint venture
in order to suit the music they are playing. agreement with fishing masters (maestros) who are charged with
the management of fishing expeditions. These maestros then hire
Further, it is the Film Director (not the Musical Director), an their own crew, which includes respondents.
employee of the film company, who supervises the musicians and
tells them what to do in every detail. Respondents claimed that Teng assigned them to serve as his “eyes
and ears” aboard the boats and to classify the volume of fish caught
Held: The lower court’s order certifying the Guild as the sole in the voyages. They also claimed that they received regular salaries
and exclusive bargaining unit is AFFIRMED, since the musicians and bonuses from Teng. At some time in 2002, Teng doubted the
are in fact employees of the film companies. correctness of the respondents’ reports on the volume of fish
caught, and he terminated their services, so they filed a complaint
for illegal dismissal.
Paguio Transport Corporation v. NLRC (1998) Teng’s argument on the other hand was that there was no EER
Taxi drivers are employees of the taxi owners, even if working under because his role was limited to providing capital, tools, and
a boundary system agreement. equipment. Everything else, including the hiring, was done by the
maestros, not him.
Facts: Private respondent Wilfredo Melchor was hired as a taxi
driver (boundary system) for petitioner-company. Later while at Issue & Ruling: W/N an EER exists between Teng and the
work, he accidentally bumped into a car which stopped at an respondent workers – YES
intersection despite the traffic light being green. After submitting a
traffic accident report to Paguio, he was told to stop working and Teng’s company issued IDs to the workers which showed that they
to rest. When he came back, he was told that his services were no were employees of Teng’s company. “Generally, in a business
longer needed, and so he filed a complaint for illegal dismissal. establishment, IDs are issued to identify the holder as a bona fide
employee of the issuing entity.”
Paguio, on the other hand, denied the existence of an employer-
employee relationship, arguing that there was no control and Additionally, the element of control is present. Teng not only
payment of compensation on their part. owned the tools the workers were to use, he also ordered them to
check the volume of the fish and instructed them where and when
Issue & Ruling: W/N there was an employer-employee to unload the catch. Teng cannot use as a defense the fact that it
relationship (EER) between Melchor and Paguio Transport – was the maestros he hired, and that the respondents were in turn
YES hired by these maestros.
Paguio argued that because they had no control over the routes This is a clear case of “labor-only contracting,” where the person
and hours of Melchor, they are not exerting control over him. (the maestros) supplying workers (respondents) to an employer
However, this contention is wrong. (Teng) does not have substantial capital or investment in the form
of tools, equipment, etc. and the workers recruited are performing
The Court simply looked to the case of Martinez v. NLRC, where it activities directly related to the principal business of the employer.
was ruled that taxi drivers and taxi owners have an EER, and not
8
This was a case of “labor-only contracting” for three reasons: Facts: Melecio Basiao was hired as an insurance agent for Insular
1. Teng solely provided the capital and equipment, while the Life, receiving compensation by commission. Basiao was free to
maestros supplied only workers. decide when he would sell/solicit insurance plans from prospective
2. Teng exercised the power of control, not the maestros; and customers, and to decide how he would do this. He was also subject
3. The workers performed tasks necessary and desirable in to the rules in Insular’s Rate Book and Agent Manual. The contract
Teng’s business also included provisions on Illegal Practices and Grounds for
Termination. More specifically, it contained a provision precluding
In a labor-only contracting scenario, the intermediary the existence of EER despite having Basiao conform to the Company’s
(maestros) shall be considered to be merely an agent of the regulations.
employer, and the workers shall be deemed to have been
directly employed by the employer. The parties later entered into an Agency Manager’s Contract (AMC),
which Basiao continued to honor along with the first contract.
Held: Petition denied. EER exists and Teng illegally dismissed When the AMC was terminated, Basiao sued Insular in a civil action,
the workers. and this prompted Insular to terminate the first contract as well.
Basiao filed a complaint with the Ministry of Labor, and Insular
contested jurisdiction, claiming that Basiao was not an employee.
Dy Keh Beng v. International Labor and Marine Union of the Issue & Ruling: W/N the first contract between Basiao and
Philippines, et al. (1979) Insular established an EER between them – NO
The power of control needs only to exist, not necessarily be actually
exercised, and the pakyaw system does not preclude the existence of The insurance business is one affected with public interest, and so
EER it is expected for insurance companies to have a set of rules to
guide its agents in selling its policies so that it may not violate the
Facts: Dy Keh Beng is a proprietor of a basket factory who law.
dismissed his workers Solano and Tudia for union activities. Both
were members of the International Labor and Marine Union of the The rules set forth in Basiao’s contract merely (1) prescribed the
Philippines (ILMUP). Both filed a case for unfair labor practice (ULP) qualifications of insurable persons, (2) subject insurance
against Dy Keh Beng, who contended that he did not know Tudia, applications to the processing of the Company, and (3) reserve to
and that Solano was not his employee because Solano was merely the Company the determination of the premiums to be paid and
working on a pakyaw basis (piece workers; each piece of work was the schedules of payment. None of these really invade the agent's
done under a separate contract), and that he did not control the contractual prerogative to adopt his own selling methods or to sell
manner and method of their work. insurance at his own time and convenience, hence they cannot
justifiably be said to establish an employer-employee relationship
Issues & Rulings: between him and the company.
• W/N the power to control needs to actually be exercised
in order for it to meet the criteria for the existence of EER Regarding the contention that Basiao was subject to rules and
– NO regulations that the Company might later on from time to time
prescribe, no evidence was presented that such rules were
The Court ruled that the control test calls merely for the existence promulgated, or even existed, so the rule stipulating that Basiao
of the right to control the manner of doing the work, not the was free to decide when, where, and how to sell insurance
actual exercise of the right. DKB’s business is in the remained.
manufacturing of baskets (kaing), and it is natural to expect that
those making baskets for him would have to conform to his Held: Basiao is not an employee of the Company, but is a
requirements of size and quality. This already puts the situation commission agent, an independent contractor. The claim for
under the ambit of the power of control. unpaid commissions should have been litigated in an ordinary civil
action, and not with the Labor Arbiter.
• W/N working on a piece basis precludes the existence of EER
– NO Difference between Paguio (taxi boundary) and Insular (insurance
commission):
The Court referred to Sunrise Coconut Products Co. v. Court of • While both taxi drivers and insurance agents are techcnically
Industrial Relations, where it was ruled that the pakyaw system is in free to work whenever/wherever they please, in a commission
fact a labor contract between employers and employees. system, you merely get a cut from every saly you make, while
in a boundary system, you are required to pay a fixed amount
Held: DKB found guilty of ULP. Respondents must be
every day, the excess of which is yours. The boundary system
reinstated with back wages.
has been held to be a form of exercising control as
contemplated in the 4-fold test.
Insular Life Assurance Co., Ltd. v. NLRC (1989)

Insurance agents with freedom to decide when, where, and how to
sell insurance policies are not employees of the insurance company
9
Tongko v. Manufacturer’s Life Insurance Company (2010) in attaining it, and those that control or fix the methodology
The control allowed by the Insurance Code for insurance companies and bind or restrict the party hired to the use of such means.
is not necessarily the same control contemplated in the Labor Code
Held: In the context of the established evidence, Tongko remained
for determining the existence of EER
an agent all along; although his subsequent duties made him a lead
Facts: Tongko and Manulife entered into an Agreement whereby agent with leadership role, he was nevertheless only an agent
Tongko would be an Agent for Manulife and considered as an whose basic contract yields no evidence of means-and-manner
independent contractor, whereby he agreed to comply with rules control.
and regulations of Manulife and to maintain a sufficient standard
of knowledge and competency of Manulife’s products.
In 1996, she became a Regional Sales Manager, but he later AFP Mutual Benefit Association v. NLRC (1997)
received a letter from Manulife informing him of the termination of The absence of supervisory authority to control the method and the
his Agency Agreement, because of his failure to constantly meet details of performance of the service being rendered indicates that
the growth objectives of the company (his region was consistently the relationship is an independent contractorship
the lowest-performing region) in line with his obligation as a
Regional Sales Manager to recruit agents for Manulife. Facts: Eutiqio Bustamante was an insurance underwriter for
petitioner AFPMBAI. His Agent Agreement stipulated that he shall
Tongko filed a complaint for illegal dismissal, alleging that he was solicit exclusively for petitioner, controlled where he will work,
an employee of Manulife, despite an express provision in his provided for commissions, and specified that there was no EER
Agency Agreement to the contrary. between them. He was dismissed by the company for selling
insurance for another company, in violation of the Agreement.
Issue & Ruling: W/N Manulife exercised control, as defined in
the Labor Code, over Tongko so as to make him an employee – At the time of the termination, he had accrued commissions worth
NO P354,796.00 which he had not yet received. Petitioner told him that
his due was only P75,000.00-100,000.00, and he believed it, so he
The Insurance Code provides for its own rules and qualifications signed a quitclaim in favor of petitioner.
over insurance agents, and it provides rules regarding desired
results (e.g. the required volume to continue to qualify as a company He later learned that he was actually owed P354,796.00 so he filed
agent, rules to check on the parameters on the authority given to the a case before the Insurance Commissioner, who told him that the
agent, and rules to ensure that industry, legal and ethical rules are DOLE has jurisdiction over the complaint. The Labor Arbiter then
followed) which are built-in elements of control specific to an ruled that the dismissal is valid, but AFPMBAI must pay the
insurance agency and should not and cannot be read as remaining P319,796.00. The Insurance Commissioner affirmed the
elements of control that attend an employment relationship LA ruling.
governed by the Labor Code.
Petitioner filed a case before the Supreme Court, claiming that the
A commitment to abide by the rules and regulations of an Insurance Commissioner was wrong in ruling that the Labor Arbiter
insurance company does not ipso facto make the insurance agent had jurisdiction over the case.
an employee. In determining the existence of “control” as defined
in the Labor Code, the control must be on the manners and Issues & Ruling:
methods inasmuch as it is on the desired result of the employee’s
W/N petitioner exercised control over the manner and
work.
methods of Bustamante’s work – NO
Even if Tongko ascended the ranks of Manulife to become a
The exclusivity agreement does not fall under “control” as stated in
Regional Sales Manager that handles and supervises his own
the Labor Code. This rule stems from Insurance Commission
agents, he never abandoned his status as a sales agent of
regulations, not from petitioner’s intent to control the manner and
Manulife. The title of Branch Manager used by the parties is really a
method of Bustamante’s work.
misnomer; the more accurate description is lead agent, since Tongko
never really performed managerial duties, what he did was he had Second, the company policies, memo/circulars, and rules &
his own corps of agents and received commissions from their sales. regulations that bound Bustamante do not evince control. The
What simply happened in this case was the grant of an expanded policies and rules in this case concerned payment
sales agency role that recognized him as leader amongst agents in accountabilities, cash advances, and awards concerning the
an area that Manulife defined. selling of insurance. Bustamante was never subject to rules
concerning work standards, performance appraisals, merit
Additionally, the obligation to recruit more agents is also not an
increases, promotions, etc.
indicator of control; it is not a means-and-method kinds of control
since it does not affect how Tongko performs his job. Third, regarding territorial assignment, Bustamante failed to rebut
petitioner’s contention that it never issued any territorial
The line should be drawn between rules that merely serve as
assignment at all.
guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed The significant factor in determining the relationship of the
parties is the presence or absence of supervisory authority to
10
control the method and the details of performance of the Petitioners did not perform their responsibilities according to their
service being rendered, and the degree to which the principal own manner and method. Additionally, did not have a substantial
may intervene to exercise such control. The test to determine the capital or investment; they only owned the tools (scissors, cutters,
existence of independent contractorship is whether one claiming razors, etc.) which cannot be considered substantial capital
to be an independent contractor has contracted to do the work necessary to operate a barber shop.
according to his own methods and without being subject to the
control of the employer except only as to the result of the work. Further, respondent has the power of control over petitioners,
evidenced by petitioners working only in the barber shop owned
Bustamante was never subject to working hours or conditions, and by respondents; respondent controlled the work hours of
was merely compensated according to the result of his efforts. petitioners; petitioners were prohibited from working elsewhere;
one petitioner was instructed with watching over the work of the
W/N the Insurance Commission & the Labor Arbiter had others.
jurisdiction – NO
Held: Petitioners were employees of Lao Enteng Co. Inc. but the
They have jurisdiction over cases arising out of or in connection validity of the dismissal is upheld due to serious business losses. As
with an EER, which is not the case here. Bustamante’s claim should employees, petitioners are entitled to separation pay in case of
have been litigated in an ordinary civil action. closure/cessation of employee’s business equivalent to 1 month of
pay for each year of service.
HELD: The LA and IC rulings are set aside, without prejudice to
Bustamante’s right to file a suit for collection of unpaid
commissions.
Maraguinot v. NLRC (1998)
Continuous rehiring and performance of tasks necessary to the
employer’s primary business are indicators of regular employment
Corporal v. NLRC (2000)
Barber shop workers may be considered employees; the tools used Facts: Petitioners were assigned to work with a filming crew,
when working in barbershops are not substantial capital assisting in fixing the lights, equipment, and performance of other
tasks that the director may assign. When they asked for a salary
Facts: The five petitioners were employed as barbers, manicurists,
increase in accordance with the minimum wage, their supervisor
and watchers in New Look Barber Shop owned and managed by
only agreed if they signed a blank employment contract, which of
Vicente Lao. Later, the NLBS was taken over by a company (Lao
course they refused. They later found out that their services have
Enteng Co. Inc.) organized by Vicente Lao’s children. The NLBS was
been terminated, so they sued for illegal dismissal.
later sold and the petitioners, who were initially allowed to continue
working, were terminated. Respondent VIVA Films, on the other hand, claimed that, as film
distributors (not filmmakers), they merely contract associate
Petitioners filed a complaint for illegal dismissal. Respondent
producers to produce/make movies. Petitioners were project
contended that the barber shop had always been a joint venture
employees of the associate producers, and therefore, there is no EER
partnership with petitioners, and that the operation and
between petitioners and VIVA
management of the barbershop was left entirely to them.
Petitioners were all joint venture partners; Vicente Lao provided the LA: Dismissal was illegal; petitioners are labor-only contractors, and
place of business and payment of utilities, while the petitioners as such, are employees of VIVA.
supplied the labor.
NLRC: Reversed LA ruling. Petitioners are project employees
LA & NLRC: No EER; they were engaged in a joint venture. because of their irregular work load and work schedule.
Issue & Ruling: W/N the petitioners are employees of Lao OSG: Since petitioners were hired not for one project, but for
Enteng Co. Inc. – YES several, they should be deemed regular employeees.
An independent contractor is one who undertakes "job Issue & Ruling:
contracting", i.e., a person who:
(a) carries on an independent business and undertakes W/N there is an EER between petitioners and VIVA – YES
the contract work on his own account under his own responsibility
according to his own manner and method, free from the control The associate producers do not have the tools, equipment,
and direction of his employer or principal in all matters connected machinery, work premises, and other materials necessary to be
with the performance of the work except as to the results thereof, considered as independent contractors; movie-making equipment
and are all owned by VIVA.
(b) has substantial capital or investment in the form of The relationship between VIVA and its producers or associate
tools, equipment, machineries, work premises, and other materials producers seems to be that of agency, as the latter make movies
which are necessary in the conduct of the business. (Section 8, Rule on behalf of VIVA, whose business is to make movies. As such, the
VIII, Book III of the Omnibus Rules Implementing the Labor Code). employment relationship between petitioners and producers is
actually one between petitioners and VIVA, with the latter
being the direct employer.
11
The petitioners are considered controlled by VIVA as to the means 1. Selection and engagement – NO EER. ABS-CBN specifically
and methods of the work, the movie must be acceptable to VIVA selected and hired Sonza for his unique skills, talent, and
who has the right to interfere in the production process. Thus, the celebrity status. This is indicative, but not conclusive of an
petitioners are actually subject to VIVA’s control—the director independent contractual relationship.
handling them merely instructs them on how to better comply with 2. Payment of wages – NO EER. SONZAs talent fees, amounting
VIVA’s requirements. In addition, petitioners were issued control to P317,000 monthly in the second and third year, are so huge
slips commanding them to observe the rules and regulatons of and out of the ordinary that they indicate more an
VIVA, and VIVA’s corporate heading appears in these slips. independent contractual relationship rather than an
employer-employee relationship. The power to bargain talent
W/N petitioners were validly dismissed – NO fees way above the salary scales of ordinary employees is a
circumstance indicative, but not conclusive, of an independent
VIVA: Petitioners are project employees whose emploment was
contractual relationship.
automatically terminated upon completion of the respective
3. Power of dismissal – NO EER. SONZA failed to show that ABS-
projects.
CBN could terminate his services on grounds other than
Petitioners: they are regular employees. breach of contract, such as retrenchment to prevent losses as
provided under labor laws.
Petitioners should be considered regular employees. If they had 4. POWER OF CONTROL – NO EER. The less control the hirer
been hired initially as project employees, they attained regular exercises, the more likely the worker is considered an
employee status because (1) there was a continuous rehiring even independent contractor. ABS-CBN did not instruct SONZA
after the completion of a project, and (2) the tasks they performed how to perform his job. ABS-CBN merely reserved the right to
are vital, necessary and indispensable to the usual business or modify the program format and airtime schedule for more
trade of the employer. effective programming. ABS-CBNs sole concern was the
quality of the shows and their standing in the ratings. Clearly,
As petitioners had already gained the status of regular employees, ABS-CBN did not exercise control over the means and
their dismissal was unwarranted, for the cause invoked by private methods of performance of SONZAs work.
respondents for petitioners dismissal, viz., completion of project,
was not, as to them, a valid cause for dismissal under Article 282 of Sonza does not have the right to security of tenure because it is
the Labor Code. granted only when EER exists.
Held: Petitioners are regular employees, LA ruling reinstated. Held: Petition denied. Sonza is an independent contractor, not an
employee of ABS CBN.
The ABS-CBN cases

Workers who are hired for their special skills/talents, have ABS-CBN v. Marlyn Nazareno (2006)
bargaining power for wages more than a regular employee has, Employees who have consistently performed work desirable to the
may be dismissed only for causes provided in the contract, and are employer’s trade are regular employees; the duration and scope of
not controlled as to the means and methods of their work are project employees’ project must have been determined at time of
independent contractors (Sonza). engagement
Otherwise, they are regular employees, notwithstanding any clause Facts: Respondents were hired by ABS CBN as Production
in the employment contract which states that they are merely hired Assistants (PA), and they were under the control and supervision of
as talents or the employment contract itself being designated as a the Asst. Station Manager and the News Manager.
“Talent Contract” (Begino).
The rank-and-file employees entered into a CBA with ABS CBN, but
Sonza v. ABS-CBN (2004) the respondents were not included because ABS CBN did not
Nature of relationship between TV/radio station and its talents; a recognize PAs as part of the bargaining unit.
person hired for his skills and talents is not an ordinary employee
ABS CBN contended that respondents were program employees in
Facts: Sonza entered into an agreement with ABS-CBN wherein he that, as distinguished from regular or station employees, they are
would exclusively be a co-host for the Mel & Jay radio and TV basically engaged by the station for a particular or specific program
programs of ABS CBN. Sonza later resigned and filed a complaint broadcasted by the radio station. As program employees, a PAs
against ABS CBN for non-payment of salaries and pays. engagement is coterminous with the completion of the program
and may be extended/renewed provided that the program is on-
LA & NLRC: A talent is not an employee. Being employed because going.
of his skillset, the hirer does not have control over the manner and
methods of the talent’s work. Talent fees should not be deemed Issue & Ruling: Whether respondents are project employees or
salaries/wages. regular employees of ABS CBN – REGULAR
Issue & Ruling: W/N Sonza, a talent, should be considered an Respondents cannot be considered talents because they are not
employee of ABS CBN – NO actors or actresses or radio specialists or mere clerks or utility
employees. They are regular employees who perform several
The SC applied the four-fold test:
12
different duties under the control and direction of ABS-CBN NLRC: petitioners were regular employees because they were
executives and supervisors. Thus, there are two kinds of regular engaged to perform activities usually necessary or desirable in ABS-
employees under the law: (1) those engaged to perform activities CBN's trade or business; they cannot be considered contractual
which are necessary or desirable in the usual business or trade of employees since they were not paid for the result of their work,
the employer; and (2) those casual employees who have rendered but on a monthly basis and were required to do their work in
at least one year of service, whether continuous or broken, with accordance with the company’s schedule. Their dismissal is also
respect to the activities in which they are employed. legal due to redundancy.
The principal test is whether or not the project employees were Issue & Ruling:
assigned to carry out a specific project or undertaking, the duration
and scope of which were specified at the time the employees were W/N petitioners should be considered regular employees of
engaged for that project. In this case, respondents performed the ABS-CBN – YES
same activities for an average of five years. Their assigned tasks
The SC merely affirmed the rulings of the lower tribunals, all of
are necessary or desirable in the usual business or trade of the
whom have uniformly ruled that there is an EER between petitioners
petitioner. The persisting need for their services is sufficient
and ABS CBN. As such, they are included in the CBA.
evidence of the necessity and indispensability of such services to
petitioners business or trade. W/N the dismissal is valid – NO
The Court applied the 4-fold test: The petitioners were dismissed in bad faith; they were dismissed
1. In the selection and engagement of respondents, no peculiar because they filed a regularization case against ABS CBN, which
or unique skill, talent or celebrity status was required from was granted. While the appeal of ABS CBN was pending, they took
them because they were merely hired through petitioners matters into their own hands and dismissed petitioners, claiming
personnel department just like any ordinary employee. redundancy.
2. The so-called talent fees of respondents correspond to wages
given as a result of an employer-employee relationship. ABS CBN forgot that by claiming redundancy as authorized
Respondents did not have the power to bargain for huge cause for dismissal, it impliedly admitted that the petitioners were
talent fees, a circumstance negating independent contractual regular employees whose services, by law, can only be terminated
relationship. for the just and authorized causes defined under the Labor Code.
3. Petitioner could always discharge respondents should it find Management prerogative can be valid only if it is undertaken in
their work unsatisfactory, and respondents are highly good faith and with no intent to defeat or circumvent the rights of
dependent on the petitioner for continued work. its employees under the laws or under valid agreements.
4. The degree of control and supervision exercised by
petitioner over respondents through its supervisors negates Held: Petition granted. Petitioners are regular employees, entitled
the allegation that respondents are independent contractors. to all the benefits of the CBA. Their dismissal is illegal and they
should be reinstated.
As regular employees, they are also entitled to the benefit of the
CBA.
Held: Respondents are regular employees. Petition denied. Begino v. ABS-CBN (2015)
Employees hired as project employees but act and work like regular
employees are regular employees
Fulache v. ABS-CBN (2010) Facts: Villafuerte is employed as Manager for ABS CBN. Villafuerte
ABS CBN trying to dismiss talents as not regular employees; when then hired petitioners Begino, Del Valle, Sumayao and Llorin. They
they were regularized, they were dismissed; bad faith circumvention were hired through “Talent Contracts” which, though regularly
of labor laws renewed, provided for the duration of a particular project and other
details per project.
Facts: Petitioners were hired by ABS CBN as cameramen, editors,
and drivers. On 1999, ABS CBN entered into a CBA with the rank- The Talent Contracts provided for: (a) rules mandating compliance
and-file employees, but petitioners were excluded from the with ABS CBN guidelines concerning intellectual property creators
coverage because they were project employees, so they filed a industry codes, etc. (b) exclusivity, (c) results-oriented nature of the
regularization case against ABS CBN. work with no requirement to observe a fixed set of working hours/
ABS CBN alleged that they were not employees, but talents, Petitioners then filed a complaint for regularization before the
acquired and selected because of the technical skill and expertise NLRC. During the pendency of the case, they were terminated so
they possess. Their services are engaged for a specific program or they filed an illegal dismissal and ULP case.
production, or a segment thereof. Their contracts are terminated
once the program, production or segment is completed. Issue & Ruling: Whether petitioners are regular employees or
project employees of ABS CBN – REGULAR
LA: Petitioners are regular employees, but the dismissal was valid
(redundancy – authorized cause). The test to determine whether employment is regular or not is the
reasonable connection between the activity performed by the
employee in relation to the business or trade of the employer. As
13
cameramen/editors and reporters, petitioners were article should conform to the standards of the newspaper and the
undoubtedly performing functions necessary and essential to general tone of the particular section.
ABS-CBN’s business of broadcasting television and radio
content. Aside from the constraints presented by the space allocation of her
column, there were no restraints on her creativity; petitioner was
If the employee has been performing the job for at least one free to write her column in the manner and style she was
year, even if the performance is not continuous or merely accustomed to and to use whatever research method she
intermittent, the law deems the repeated or continuing deemed suitable for her purpose. The apparent limitation that
performance as sufficient evidence of the necessity, if not she had to write only on subjects that befitted the Lifestyle section
indispensability of that activity in the business. did not translate to control but was simply a logical consequence
of the fact that her column was in the Lifestyle section.
As cameramen/editors and reporters, it also appears that
petitioners were subject to the control and supervision of In addition, Orozco was engaged as a columnist for her talent, skill,
respondents which, first and foremost, provided them with the experience, and her unique viewpoint as a feminist advocate. As
equipments essential for the discharge of their functions. Prepared such, she should be considered an independent contractor, similar
at the instance of respondents, petitioners’ Talent Contracts to the case of Sonza v. ABS-CBN.
tellingly provided that ABS-CBN retained “all creative,
administrative, financial and legal control” of the program to which Held: Orozco, as a columnist of PDI who was free to work on her
they were assigned. own manner and method, is not an employee of PDI.
Held: Rather than the project and/or independent contractors

respondents claim them to be, it is evident from the foregoing
disquisition that petitioners are regular employees of ABS-CBN. Television and Production Exponents, Inc. v. Servaña (2008)
This conclusion is borne out by the ineluctable showing that Security guard retained by a company for over a year becomes an
petitioners perform functions necessary and essential to the employee, and is not an independent contractor
business of ABS-CBN which repeatedly employed them for a long-
Facts: Servaña was employed as a security guard for petitioner
running news program of its Regional Network Group in Naga City.
TAPE for 13 years. He was first connected with a security agency
that contracted with TAPE, but when the contract terminated, TAPE
retained Servaña’s services, which they agreed would last until TAPE
Orozco v. CA (2008) engages the services of another professional security agency, which
A newspaper columnist who performs her job more or less at her own TAPE subsequently did, and thus terminated Servaña’s services.
pleasure, in the manner she sees fit, not subject to definite hours or
Servaña filed a complaint for illegal dismissal alleging that his work
conditions of work, and is compensated according to the result of her
was necessary and desirable, to which TAPE argued that Servaña
efforts and not the amount thereof, is not an employee of the
was an independent contractor.
newspaper whom she writes articles for
Issue & Ruling: W/N Servaña’s retention following TAPE’s
Facts: Wilhelmina Orozco was a writer for the PDI who was hired to
termination of contract with the security agency elevated
write a weekly column in the Lifestyle section from 1990 until 1992,
Servaña to an employee – YES
when her column was cut down because her column “failed to
improve and continued to be superficially and poorly written.” The 4-fold test has been met. TAPE regularly paid Servaña monthly
Orozco thus filed a complaint for illegal dismissal. “talent fees,” but the Court ruled that “wages” are considered as
such no matter the designation.
Issue & Ruling: W/N Orozco, a columnist for the PDI, should be
considered as an employee – NO The power to dismiss is also evident in TAPE’s memorandum to
Servaña informing him of the discontinuance of his services.
The SC ruled that Orozco’s claims of control were not those
contemplated by the Labor Code as “control” for purposes of The power of control is also evident by the fact that TAPE regularly
determining EER. True enough, the PDI did maintain some form of controlled Servaña’s working hours through time cards; he was
control over the quality, length and deadline of Orozco’s articles, required to report daily and observe definite working hours.
but these were merely guidelines towards the achievement of a
mutually desired result. Servaña cannot be said to be an independent contractor because
he had no substantial capital/investment by which to perform his
Not every form of control that the hiring party reserves to himself work on his own resources, and the “specific work” which
over the conduct of the party hired in relation to the services independent contractors perform was not found in the
rendered may be accorded the effect of establishing an employer- employment contract.
employee relationship between them in the legal or technical sense
of the term. Thus, because of the length of time of Servaña’s length of service
(13 years), he is deemed a regular employee.
Applying the rules to the case, the SC found that the “control” that
PDI exercised are inherent conditions in running a newspaper
business. At most, PDI only imposed the general guideline that the
14
Held: Servaña was a regular employee, and his dismissal was for a Existing jurisprudence already provides that cab drivers are
valid cause (redundancy), but TAPE should pay damages because employees of the cab owners.
there was no observance of procedural due process.
Cab owner-cab driver relationship not the same as lessor-lessee
relationship
In lease, the lessor (lender) loses complete control over the thing
Calamba Medical Center v. NLRC (2008) leased subject to the condition that the lessee (borrower) be not
Employees are employees regardless of how often they work and reckless in the use of the thing.
regardless of any fee-sharing scheme which are just additional
wages; what matters is that the 4-fold test is met In the boundary system (as is usually practiced in taxis and
jeepneys), the owners/operators still exercise control and
Facts: Respondents are the Lanzanas spouses, both doctors who supervision over the drivers. The owner as holder of the certificate
were hired by petitioner as part of its team of resident physicians. of public convenience must see to it that the driver follows the
They worked two shifts a week, each shift being 24 hours, and paid route prescribed by the franchising authority and the rules
a monthly “retainer.” promulgated as regards its operation. Now, the fact that the drivers
do not receive fixed wages but get only that in excess of the so-
One day, a co-worker overheard the husband’s conversation with called “boundary” they pay to the owner/operator is not sufficient
another employee about the low admission of patients into the to withdraw the relationship between them from that of employer
hospital. Because of this, petitioner placed him on preventive and employee.
suspension, and his wife (who was not involved in the issue), was
not given work schedule. Both of them filed a complaint for illegal Held: The cab drivers are employees of the cab owner. The mere
dismissal, respectively. fact that the remunerations are derived from excesses of the
“boundary” does not remove EER.
Issue & Ruling: W/N respondents are employees of Calamba
Medical Center, notwithstanding the fact that they are allowed
to work for others during the other five days of the week – YES
The alternative, two-tiered economic realities test
In determining the existence of CMC’s control, the SC primarily
noted the control over respondent’s work schedule: bi-weekly 24- This test is 2-fold:
hour shifts that were strictly to be observed under pain of 1. Control over the manner and method by which the employee
administrative sanctions performs his work (same control contemplated in the 4-fold
test); and
An additional indicator of control is that anywhere the respondents 2. The employee’s dependency on the alleged employer for
performed their jobs (operating room, emergency room, etc.), their continued employment in the employer’s line of business.
work was monitored by petitioner’s workers, and its
approval/consent was required before respondents could do This is used in cases where the 4-fold test is insufficient to embrace
anything. the realities of the relationship between the worker and the hirer,
especially in cases where the worker has held multiple positions.
They were also subject to CMC’s Code of Ethics which covered
disciplinary measures on conduct & behavior, and the IDs and
Francisco v. NLRC (2006)
payslips designated respondents as employees.
Facts: Petitioner was hired by Kasei Corporation, first as Accountant
Held: Respondents are employees, primarily because of the facts
& Corporate Secretary and Liaison Manager, then as Acting
that their shift was controlled and that their actions relating to the
Manager, then later as Technical Assistant. She began receiving
performance of their work were subject to approval.
reduced salaries, then subsequently she was not receiving her
salaries at all, so she filed a complaint for constructive dismissal.
Issue & Ruling: W/N petitioner is an employee of Kasei – YES

Jardin v. NLRC (2000)
The relationship between cab owner and cab driver is different from The SC ruled that the 4-fold test is not the best test to be used here,
that of lessor and lessee because of the complexity of the relationship owing to the several
positions she has held and because of the lack of a written
Facts: Petitioners worked as taxi drivers for respondent Philjama
agreement to base the relationship on, so they used the economic
International, Inc, (PII) every day for 24 hours under the boundary
realities of the employment relations to see if she is an
system. Petitioners later formed a labor union to protect their rights
employee, an independent contractor, a corporate officer, or some
and interests; PII refused to let petitioners drive the taxicabs so they
other worker.
filed a complaint for illegal dismissal.
The two-tiered test involves: (1) power to control with respect to
The NLRC ruled that there was no EER, so the petitioners elevated
the means and methods of the work, and (2) the underlying
the case to the SC.
economic realities of the activity or the relationship.
Issue & Ruling: W/N taxicab drivers under the boundary
system are employees of the cab owners – YES
15
In looking at the entirety of the economic activity, the SC looked Further reinforcing the fact that Galera is an employee, the SC
into whether or not the worker is dependent on the alleged agreed with the CA’s findings that WPP controlled where Galera
employer for his continued employment in that line of business. worked (control test), controlled Galera’s wages (payment of
wages), and subjected Galera to the regular disciplinary procedures
Is Francisco dependent on Kasei for employment? Yes. She worked (power to dismiss). Other indicators are that the employment
for 6 years prior to her dismissal, she received wages from Kasei, contract clearly stated that she was a permanent employee and that
she received benefits and allowances, she was registered by Kasei intellectual property borne out of her employment belong to WPP.
with the SSS (a corporation’s registration of its workers with the SSS
is proof that the workers are its employees because SSS coverage Held: Galera is an employee who was illegally dismissed, but
is predicated on EER). because her employment was in violation of labor laws on alien
employment (she was employed before she got her work permits),
Held: Francisco is an employee of Kasei, applying the broader two- the Court refused to grant her awards.
tiered test (which is applicable because of the nature of her
relationship with Kasei, such as the multiple positions she held).
Tabang v. NLRC (1997)

Intra-corporate disputes are corporate affairs that are outside the
Corporate officers and intra-corporate disputes
application of the Labor Code; they are within the application of the
Corporate officers are those mentioned in the Corporation Code
Corporation Code, and thus are under the jurisdiction of the SEC
and in a corporation’s by-laws or articles of incorporation as such. [now RTC], not the labor tribunals
Disputes between them and the corporation are considered intra-
corporate disputes where the Corporation Code applies, not the Facts: Petitioner Tabang was a founding member, a member of the
Labor Code. Thus, they do not have the same protections afforded Board of Trustees, and corporate secretary of respondent Pamana
to employees, and jurisdiction of intra-corporate disputes is vested Golden Care Medical Center Foundation, Inc. (Pamana).
with the RTC, not the labor tribunals.
On 1990, she was appointed Medical Director and Hospital
Administrator. She received a monthly “retainer fee” until
WPP Marketing Communications v. Galera (2010)
November 1991. On 1993, she was relieved of her position as
Company cannot defeat its own by-laws by electing an employee
Director and Administrator. She filed a complaint for illegal
into a non-existent corporate office; illegally dismissed employee
dismissal before the LA. Pamana contested the LA’s jurisdiction,
cannot be given redress if her employment is in violation of
arguing that this was an ICD, and therefore it was the SEC that had
immigration and labor laws
jurisdiction.
Facts: Galera is an American citizen who was hired to work for WPP
Tabang on the other hand, argued that her position as Director and
as Managing Director. Her employment contract provided that any
Admin is separate from her position as BOT member, and that she
intellectual property she creates while employed and relating to her
filed the complaint in her capacity as such Director and Admin.
employment is considered property of WPP. Only when she had
been working for 4 months did WPP file before the Bureau of Issue & Ruling: W/N the case is an intra-corporate dispute over
Immigration an application for Galera’s working visa, where she was which the SEC has jurisdiction – YES
designated as Vice-President. 11 months later, WPP informed Galera
of the termination of her employment, so she filed a case for illegal Contrary to the contention of petitioner, a medical director and a
dismissal. hospital administrator are considered as corporate officers under
the by-laws of Pamana. They are offices that are expressly
Issue & Ruling: Whether Galera was an employee or a designated which the Board of Trustees may appoint according to
corporate officer of WPP – EMPLOYEE the By-Laws.
As a rule, corporate officers are not employees of the companies In any case, the payment of the retainer fee does not alter/affect
they work for, and disputes concerning their removal are intra- her status as a corporate officer.
corporate disputes and are outside the jurisdiction of the labor
tribunals. It is the RTCs that have jurisdiction over intra-corporate Held: Tabang is a corporate officer; the SEC has jurisdiction.
disputes.
Galera may have been appointed Vice-President, but this was an

appointment to a non-existent office. At the time of her Matling Industrial v. Coros (2010)
appointment, (1) WPP’s by-laws allowed for only one VP, and (2) A position must be expressly mentioned in the By-Laws in order to
there was already someone else who was VP. be considered as a corporate office; the creation of an office pursuant
to or under a By-Law enabling provision is not enough to make a
Neither can she be a director (not even Managing Director) because position a corporate office.
all five directorship positions were already held by others.
Facts: Ricardo Coros was VP for Finance and Administration of
Granted, the Amended by-laws of WPP provided for more than one Matling Industrial, who was dismissed along with some other
VP and two additional directors, but Galera’s dismissal was way corporate officers. He filed a complaint for illegal dismissal with the
after the amendments took effect. NLRC.
16
The petitioners challenged the jurisdiction of the NLRC, seeing that Held: Coros is an employee, not a corporate officer. His
it was the RTC that had the jurisdiction to decide intra-corporate appointment as VP for Finance and Administration made him an
controversies. officer of Matling, but not a corporate officer as envisioned in the
Corporation Code and in Matling’s By-Laws. Therefore, the labor
On the other hand, Coros alleged that he was not yet a corporate tribunals retain jurisdiction over the case.
officer because he had not been formally elected as such; that he
did not own a single share of stock in Matling; and that even
assuming that he had been a Director of Matling, he had been
removed as the VP for Finance and Administration, not as a Director Malcaba v. Prohealth Pharma Philippines (2018)
A President of a corporation is a corporate officer; a president’s
Issue & Ruling: W/N Coros was a corporate officer at the time removal as such is an intra-corporate dispute which is under the
of dismissal, therefore granting jurisdiction to the SEC, and not jurisdiction of the RTC
the labor tribunals – NO
Facts: Malcaba was the President of Prohealth, and was one of its
An intra-corporate dispute (ICD), over which the RTC has primary incorporators and Directors. He took a leave of absence and when
jurisdiction, is one where the controversy arises out of intra- he returned, his salary was lowered. Petitioner Nepomuceno was
corporate or partnership relations: District Business Manager who was dismissed because of an
1. between and among stockholders, members, or associates unexplained 1-day absence. Petitioner Palit-Ang was Finance
2. intra-corporate or partnership relations between any or all of Officer who was terminated because of failure to release a
the stockholders, members, or associates, and the P3,000.00 cash advance.
corporation, partnership, or association of which they are
stockholders, members, or associates, respectively; or Issue & Ruling: Whether Malcaba was a corporate officer, or an
3. between such corporation, partnership, or association and the employee of Prohealth – CORPORATE OFFICER
State insofar as the controversy concerns their individual
franchise or right to exist as such entity. Under Sec. 25 of the Corporation Code, the President of a
corporation is a corporate officer, thus, the dismissal of a President
An ICD is also one where the controversy involves the election or is an intra-corporate dispute, not a labor dispute. The jurisdiction
appointment of a director, trustee, officer, or manager of such thus rests with the RTC, and not the labor tribunals.
corporation, partnership, or association.
The SC held that the case of Prudential Bank was inapplicable,
In determining whether Coros was a corporate officer, the SC because it involved a case where the employer was estopped from
looked into the creation of his office: the VP for Finance and raising the fact of an intra-corporate dispute only in the SC. In
Administration. This was a position that was not listed among addition, the employee in that case was a “Vice President,” not
those in the By-Laws of Matling Industrial. The explicit corporate listed in the Corporation Code or the company’s By-Laws, and
officers (those elected by the BOD, which includes the President) therefore, not a corporate officer. In this case, however, Malcaba
were found in By-Law No. III which was called Directors & Officers was a President, an officer specifically stated in the Corporation
while Coros’ position (which was created by the President) is found Code to be a corporate officer.
in By-Law No. V, called Officers.
Held: Malcaba is a corporate officer. The legality/illegality of his
The officers appointed by the President are ordinary officers or non- dismissal is a corporate matter that is under the jurisdiction of the
corporate officers. To be considered a corporate officer, one must RTC.
be elected by the BOD or the stockholders.
According to the Corporation Code, corporate officers are the

president, the treasurer, a secretary, and others provided for in the Republic v. Asiapro Cooperative (2007)
by-laws. A position must be expressly mentioned in the By-Laws in An owner-member of a cooperative can still be an employee of such
order to be considered as a corporate office. Thus, the creation of cooperative
an office pursuant to or under a By-Law enabling provision is not
enough to make a position a corporate office; such officers under Facts: Asiapro is a cooperative composed of “members-owners,”
such provisions could be considered only as employees or who belong to either of two categories: regular or associate. These
subordinate officials. members-owners do not receive wages; they receive service
surpluses which Asiapro receives from engaging in various credit
To rule otherwise would be to allow the BOD to circumvent an and savings engagements, one of which is with a company called
employee’s security of tenure by appointing him as a corporate Stanfilco.
officer (one not listed in the Corporation Code or the by-laws), and
then subsequently removing him without the protection of the The SSS later told Asiapro to register itself as an employer, because
Labor Code. its owners-members are its employees. Asiapro answered that the
owners-members are not its employees, because they are the
The criteria for distinguishing between corporate officers who may cooperative itself.
be ousted from office at will, on one hand, and ordinary corporate
employees who may only be terminated for just cause, on the other Issue & Ruling: W/N the owners of a cooperative may be
hand, do not depend on the nature of the services performed, but considered employees of the cooperative – YES
on the manner of creation of the office.
17
As a preliminary matter, the SC ruled that the SSC (and not just the
LA/NLRC) has jurisdiction to determine the existence of EER if it is
for the purpose of determining claims for Social Security.
For this case, the SC used the 4-fold test, all criteria of which were
met with regard to Asiapro’s engagement with Stanfilco.
The SC acknowledged its past ruling regarding cooperatives which

merely said that owners-members cannot engage in collective
bargaining with the cooperative because he would be bargaining
with himself. But this does not mean that an owner-member
cannot be an employee of the cooperative.
A cooperative has its own juridical personality and Board of

Directors. Thus, an EER can exist between it and its owners.
Held: The owner-members are employees of Asiapro.
18
III. CLASSES OF EMPLOYEES De Leon v. NLRC (1989)

In determining the kind of employment, all the activities performed
Classified According to Rank
by the employee must be considered, not just the activity for which
Managerial he was hired at the start
ART. 219. Definitions. - "’Managerial employee’ is one who is
vested with the powers or prerogatives to lay down and execute Facts: De Leon was employed at La Tondena, with painting and
management policies and/or to hire, transfer, suspend, lay-off, maintenance jobs. After a year, he was dismissed after requesting
recall, discharge, assign or discipline employees. […]” to be included in the payroll of regular workers, so he filed a case
for illegal dismissal.
Supervisory
“[…] Supervisory employees are those who, in the interest of the Respondent argued that De Leon was merely a casual employee
employer, effectively recommend such managerial actions if the tasked to paint a building, and that his employment terminated
exercise of such authority is not merely routinary or clerical in upon the completion of the painting job.
nature but requires the use of independent judgment. […]”
Issue & Ruling: Whether De Leon was a regular or a casual
Rank-and-file employee – REGULAR
“[…] All employees not falling within any of the above definitions
Had it been shown that petitioner’s activity was exclusively limited
are considered rank-and-file employees for purposes of this Book.
to painting that certain building, respondent company’s theory of
[…]
casual employment would have been considered.
Nature of Employment
But De Leon’s tasks included not only painting of company
Regular buildings, equipment and tools but also cleaning and oiling
ART. 295. Regular and casual employment. – “The provisions of machines, even operating a drilling machine, and other odd jobs
written agreement to the contrary notwithstanding and regardless assigned to him when he had no painting job. In determining the
of the oral agreement of the parties, an employment shall be kind of employment, all the activities performed must be
deemed to be regular where the employee has been engaged to considered, not just the activity for which he was hired at the start.
perform activities which are usually necessary or desirable in
the usual business or trade of the employer, except where the It is not tenable to argue that the painting and maintenance work
employment has been fixed for a specific project or undertaking of petitioner are not necessary in respondent’s business of
the completion or termination of which has been determined at the manufacturing liquors and wines, otherwise, there would have been
time of the engagement of the employee or where the work or no need for the regular Maintenance Section of respondent
service to be performed is seasonal in nature and the employment company’s Engineering Department.
is for the duration of the season.”
In any case, he was employed for more than one year, and by that
virtue, he should be considered regular.
a. Definition of regular employment
Held: De Leon is a regular employee because his activities
A regular employee is one who, not being a project
employee (p. 25) or a regular seasonal employee (p. 30), performs consisted of a multitude of jobs that involved painting and
activities necessary or desirable to the usual business or trade of maintenance. And even assuming that he was casual, his
the employer. employment for more than a year is enough to deem him regular.
It also covers casual employees who have been initially

employed as such but have worked for more than one year,
whether such employment was continuous or intermittent (see Magsalin & Coca-Cola Bottlers v. National Organization of
Philippine Geothermal at 33). Working Men (2003)
Multiple instances of intermittent hiring should be counted as a
whole for determining whether employment is regular or casual
b. Test in determining regular employment
Facts: Petitioner Coke hired respondents as “sales route helpers”
The primary test in determining regular employment is
(loading and unloading softdrinks in various delivery points) for 5
the necessity or desirability of the employee’s work/services to
months, after which they were hired on a day-to-day basis. They
the usual business or trade of the employer.
were hired to substitute for the helpers whenever there was a
shortage. Every morning they waited outside the gates of Coke’s
Note: It is possible for a kind of work to be necessary, but not
sales office: if they were hired, they would get paid. Ultimately,
desirable in the usual course of the employer’s line of work, e.g.,
respondents requested regularization, which Coke refused, so they
necessary emergency repairs to an employer’s machines in order to
filed the case with the NLRC. In the meantime, their services were
make them able to continue what they were doing in their business. terminated so they filed a case for illegal dismissal.
(San Miguel Corporation v. NLRC)
19
Issue & Ruling: W/N the respondents, as substitute sales route (c) The services of an employee who has been engaged on
helpers hired on a day-to-day basis, may be considered regular probationary basis may be terminated only for a just cause or when
employees – YES authorized by existing laws, or when he fails to qualify as a regular
employee in accordance with reasonable standards prescribed by
The main determinant was the necessity of the respondents’
the employer.
activities to the main business of Coke. The SC was not persuaded
by Coke’s argument that respondents’ “postproduction activities”
(d) In all cases involving employees engaged on probationary basis,
of loading and unloading was not indispensable to the usual
the employer shall make known to the employee the standards
business or trade of softdrink manufacturing.
under which he will qualify as a regular employee at the time of his
The repeated rehiring of respondent workers and the continuing engagement.”
need for their services clearly attest to the necessity or desirability
of their services in the regular conduct of the business or trade of Canadian Opportunities Unlimited v. Dalangin (2012)
petitioner company. The Court of Appeals has found each of Failure to meet standards for regularization is a valid cause to
respondents to have worked for at least one year with petitioner dismiss a probationary employee, and these standards are up to the
company. The subsequent day-to-day hiring is a mockery of the company to decide, so long as they are reasonable
law.
FACTS: Dalangin was hired as Immigration and Legal Manager by
Held: The sales route helpers are employees of Coke. Canadian Opportunities Unlimited. During his probationary period,
he continually refused to stay beyond office hours on Sunday, and
refused to attend seminars provided by the management, arguing
Probationary that they have no relation with his job.
c. Definition of probationary employment Dalangin’s services were subsequently terminated without notice
and hearing.
Definition (Omnibus Rules Implementing the Labor Code, Book VI,
Rule I, Section 6; Int’l Catholic Migration Commission v. NLRC) – a The NLRC upheld the dismissal as it was in the exercise of the
probationary employee is one who is on trial by an employer, companys management prerogative. On the other hand, the CA
during which, the latter determines whether or not he is qualified found that the dismissal was not supported by substantial evidence
for permanent employment, based on reasonable standards made and that the company did not allow Dalangin to prove that he had
known to the employee at the time of engagement. the qualifications to meet the companys standards for his regular
employment. The CA did not believe that the company could fully
A probationary appointment gives the employer an opportunity to assess Dalangin’s performance within a month. It viewed Dalangin’s
observe the fitness of a probationer while at work, and to ascertain dismissal as arbitrary, considering that the company had very little
whether he would be a proper and efficient employee. time to determine his fitness for the job.
Article 281. Probationary employment. – “Probationary Issues & Ruling: W/N there was basis to terminate Dalangin’s
employment shall not exceed six (6) months from the date the employment – YES
employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an employee Regarding the Values Formation Seminar, it highlighted his lack of
who has been engaged on a probationary basis may be terminated interest in familiarizing himself with the company’s objectives and
for a just cause or when he fails to qualify as a regular employee in policies, and lack of interest in establishing a good working
accordance with reasonable standards made known by the relationship with his co-workers.
employer to the employee at the time of his engagement. An
employee who is allowed to work after a probationary period shall He was also found to be repeatedly displaying negative working
be considered a regular employee.” habits, as well as unsatisfactorily handling client concerns.
Rules Governing Probationary Employment W/N Dalangin, as a probationary employee, was terminated in
Omnibus Rules to Implement the Labor Code, Book 6, Rule 1, accordance with procedural due process – NO
Section 6. Probationary employment. —
Section 2, Rule I, Book VI of the Labor Codes Implementing Rules
“(a) Where the work for which an employee has been engaged is
and Regulations provides that a written notice is sufficient for a
learnable or apprenticeable in accordance with the standards
probationary employee, as long as it is given within a reasonable
prescribed by the Department of Labor, the probationary
time. In this case, Dalangin was dismissed on the very day the notice
employment period of the employee shall be limited to the
was given to him. For this, Dalangin is entitled to nominal damages.
authorized learnership or apprenticeship period, whichever is
applicable. Held: The complaint is DISMISSED for lack of merit. Petitioner
Canadian Opportunities Unlimited, Inc. is DIRECTED to pay
(b) Where the work is neither learnable nor apprenticeable, the
respondent Bart Q. Dalangin, Jr. nominal damages in the amount
probationary employment period shall not exceed six (6) months
of P10,000.00.
reckoned from the date the employee actually started working.
20
d. Right to be informed of standards for regularization Magtibay alleges that he was illegally dismissed; because he had
been working a total of ten (10) months as a telephone operator,
The employer must make the standards for
he should be considered to be a regular employee.
regularization known to the employee at the time of engagement,
otherwise, the employee will be deemed to have been a regular PDI argued that Magtibay cannot tack the period worked on
employee from the start. “At the time of engagement” does not contractual employment, to the period worked on probationary
necessarily have to be at the exact moment of signing; it extends employment.
to the early phases of the probationary period (see Enchanted
Kingdom at 22). LA: Ruled for PDI. The previous contractual employment cannot be
considered part of the subsequent probationary employment.
Aliling v. Feliciano (2012)
NLRC and CA: Ruled for Magtibay. There was illegal dismissal. PDI
The communication of, and agreement to regularization standards
failed to prove that they informed Magtibay that their rules and
must have taken place at the time of employment
regulations constituted part of the standards for regulatization. At
Facts: Aliling was hired as Account Executive for Wide Wide World most, they may be considered just causes for termination, but PDI
Express Corporation on a probationary basis; he was tasked to did not raise them as issues.
handle domestic cargo forwarding services.
Issue & Ruling: W/N Magtibay was informed of the standards
His employment contract stated that conversion to regular status for regularization at the time of his employment – YES
shall be determined on the basis of work performance, and that
PDI has actually informed Magtibay of the standards. There was a
the standards for regularization were to be agreed upon by
1-on-1 seminar between Magtibay and PDI’s Personnel Assistant;
both Aliling and his supervisor. Later, he was terminated on the
Magtibay’s direct superior also briefed him on his responsibilities.
grounds that she failed to meet the standards for regularization.
Both of these were ignored by the NLRC and CA.
WWEC also alleged that they sent a memo asking why Aliling
should not be terminated for failing to meet the sales quota (which Common practice is also contrary to the CA’s ruling that company
served as the notice of the standards for regularization). Aliling, in rules and regulations are not necessarily part of the standards for
turn, denied receiving the memo which showed the standards for regularization, unless explicitly stated. All employees, be they
regularization, and therefore, he should be considered a regular regular or probationary, are expected to comply with company-
employee from day one. imposed rules and regulations, else why establish them in the first
place. Probationary employees unwilling to abide by such rules
Issue & Ruling: W/N Aliling was informed of the standards for
have no right to expect, much less demand, permanent
regularization at the time of employment – NO
employment.
While the contract does state that regularization depends on
Likewise, there is no violation of due process where termination is
satisfactory work performance, and that the standards for
automatic because of failure to meet standards for regularization.
regularization were to be agreed upon, no such agreement was
It is in apprising the employee of the standards against which
shown to have taken place. Thus, there were no performance
his performance shall be continuously assessed where due
standards to speak of. In addition, Aliling was assigned to GX
process lies, and not in notice and hearing as in the case of just
Trucking, different from Seafreight Sales for he which he was
cause.
originally chosen and hired.
HELD: PDI had basis to terminate Magtibay. There was also no
HELD: Aliling is entitled to back wages, separation pay (instead of
violation of due process in his automatic termination.
reinstatement, because of strained relationship), and nominal
damages.
Abbot Laboratories v. Alcaraz (2013)

Where no standards are made known to the employee at that time,
Philippine Daily Inquirer v. Magtibay (2007)
he shall be deemed a regular employee
Facts: Magtibay was hired, on contractual basis, by PDI as
Facts: Petitioner Abbot Laboratories, Philippines published in a
telephone operator for 5 months. After the expiration of this period,
newspaper that it was hiring a Regulatory Affairs Manager.
another vacancy opened for the position of telephone operator,
Respondent Alcaraz applied for the position and got accepted, with
Magtibay was hired again, but this time on probationary basis,
an initial probationary period of 6 months. Her job involved
good for 6 months. However, one week before the expiration of
handling employees of Abbott’s Hospira Affiliate Local Surveillance
this period, Magtibay was terminated for failure to meet company
Unit (Hospira ALSU).
standards for regularization.
During the pre-employment orientation, Alcaraz was
comprehensively briefed by the Transition Manager on her
21
duties and responsibilities as Regulatory Affairs Manager. The Later, his fellow section head made a Recommendation that Verzo
next month, she was given an explanation of the evaluation be NOT regularized, since he was not doing his job of maintaining
procedure for probationary employees and was also given the park’s facilities properly. Another section head also noted that
copies of Abbot’s Code of Conduct and Probationary Verzo was acting more like a rank-and-file employee than an actual
Performance Standards and Evaluation (PPSE) and Section Head. Thus, EK informed Verzo that they were no longer
Performance Excellence Orientation Modules (Performance going to regularize him for failing to meet the standards for
Modules) which she had to apply in line with her task of regularization.
evaluating the Hospira ALSU staff, and which were important
in determining her compliance with regularization standards. For his part, Verzo claimed that it was only after he was formally
hired by Enchanted that he was informed of his probationary status.
During the course of her employment, she noticed that some of the And even after despite being placed on a probationary status, he
ALSU staff had disciplinary problems, so she reprimanded them was not advised as to the standards required for his regularization.
accordingly. However, her immediate supervisor considered He also claimed that he was never given a reason as to why he was
Alcaraz’s disciplinary methods to be “too strict” and told Alcaraz to being terminated. When he was given a copy of the memoranda,
let management handle it. However, she noticed that her he asked for tim to answer the allegations against him, but before
immediate supervisor was evaluating her in ways outside the he could reply, he was terminated.
normal process of probationary employee evaluation (secretly
asking other employees how Alcaraz performed, etc.). Issue & Ruling: W/N Verzo was informed of the standards for
regularization – YES
Later, she was informed by management that she was unable to
meet the standards for regularization and was told to resign or else As a GENERAL RULE, for an employee to be considered
they’d terminate her themselves. probationary, 2 requirements must be met: (1) the employer must
communicate the standards of regularization to the employee, and
She filed a complaint for illegal dismissal, alleging that she should (2) such communication must be made at the time of engagement.
have already been considered a regular employee because she was
not informed of the reasonable standards upon which As an EXCEPTION, the notification rules do not apply when the
regularization would be based. employee acted in a manner contrary to basic knowledge and
common sense in regard to which there was no need to spell out a
Issues & Ruling: W/N Alcaraz was, at the time of engagement, policy or standard to be met,
informed of the standards under which she would qualify as a
regular employee, and thus should have been considered a Regardless, the letter from EK clearly shows that they have met the
probationary employee – YES twin-notice rule regarding probationary employment. To deserve
According to Sec. 6(d), Rule I, Book VI of the Implementing regularization, he must be able to conduct "mechanical and
Rules of the Labor Code, in all cases of probationary employment, structural system assessments," as well as inspect and evaluate the
the employer shall make known to the employee the standards "conditions, operations and maintenance requirements of rides,
under which he will qualify as a regular employee at the time of his facilities and buildings to ensure compliance with applicable codes,
engagement. Where no standards are made known to the regulations and standards."
employee at that time, he shall be deemed a regular employee.
The requirement that the notice be served immediately at the time
Considering the totality of the circumstances, Abbott was of engagement is not strict, provided that there is substantial
found to have sufficiently informed Alcaraz of the nature of the compliance. As long as the probationary employee is given a
latter’s employment (probationary), and Alcaraz was also found to reasonable time and opportunity to be made fully aware of what is
have been sufficiently aware of her duties and responsibilities. expected of him during the early phases of the probationary period,
the requirement of the law has been satisfied. There is substantial
compliance in this case because only 14 days have passed since
Verzo’s employment when he was informed of the nature of his
Enchanted Kingdom v. Verzo (2015) employment.
The requirement that the notice be served immediately at the time
of engagement is not hard-and-fast; it is enough that the Thus dismissal is valid because considering the totality of
probationary employee is given a reasonable time and opportunity circumstances, Verzo evidently lacked basic competence, prudence,
to be made fully aware of what is expected of him during the early and due diligence in performing his job. He was also consistently
phases of the probationary period tardy.
Facts: Verzo was hired by EK as Section Head for Mechanical & Held: Dismissal upheld. Verzo was a probationary employee who
Instrumentation Maintenance, in charge with inspecting and was validly terminated.
evaluating rides, facilities, and buildings to ensure compliance with
safety & operational standards.
22
e. Period of probation Facts: In April 2002, respondent Manalo was hired as principal for
Magis Young Achievers’ Learning Center (MYALC). On March 29,
General Rule 2003, she filed her resignation letter. 2 days later, she received a
letter of termination, stating that the position of principal was being
GR: 6 months, MAXIMUM.
abolished. Manalo filed a complaint for illegal dismissal, claiming
XPT: When the probationary period is covered by an
that petitioner did not comply with the 30-day notice requirement.
apprenticeship agreement stipulating a longer period.
On the other hand, petitioner claimed that Manalo’s termination
International Catholic Migration Commission v. NLRC (1989) was valid because she failed to meet the standards for
There is no obligation to maintain a minimum period of keeping the regularization for teachers, citing the Department of Culture,
probationary employee employed Education and Sports’ Manual of Regulation for Private Schools,
which provides that teachers shall be considered permanent after
Facts: ICMC hired Bernadette Galang as a cultural orientation three years of satisfactory service. Allegedly, Manalo’s probationary
teacher on a probationary basis. After three months, she was period was one year.
informed that she was being terminated because of failure to meet
the standards for regularization. Issues & Ruling: W/N the employment of Manalo has reached
permanent status – NO
When she got home, ICMC sent to her father the proportionate
For academic personnel, the upper limit for the probationary period
amount of her 13th month pay and the equivalent of her two-week
is 3 consecutive school years for those in the elementary and
pay. Respondent then filed for illegal dismissal, ULP, and unpaid
secondary levels, Common practice is for a school and a teacher to
wages. enter into a contract for one school year. If the contract is not
renewed, the employment is validly terminated. If the contract is
LA: Upheld the dismissal, but ordered ICMC to pay the remaining
renewed, then the probationary employment continues. It is at the
P6,000.00 for the last 3 months of her employment period,
end of the third year that the employer determines if they will
pursuant to the verbal contract. renew the contract to give the teacher permanent employment.
Until then, the teacher has no right to claim security of tenure and
OSG (contention): Probationary employment for six (6) months is
compel the employer to renew the contract.
an employment for a definite period of time and, as such, the
employer is duty-bound to allow the probationary employee to work An employment contract for a teacher that does not explicitly
until the termination of the probationary employment before her specify its probationary period is deemed to be binding for the full
re-employment could be refused. three years.
Issue & Ruling: W/N Galang was entitled to the remaining Manalo has not completed the three-year probationary period, and
three months’ worth of salary – NO therefore, cannot claim permanency of employment. Further, she
was only an Acting Principal, which was essentially a temporary
The LA’s basis for ordering the payment of the remaining 3 months’ appointment. One who holds a temporary office has no fixed terms,
salary is the ground that a probationary employment for six (6) and employment may be terminated any time.
months is an employment for a "definite period" which requires the
W/N the resignation of Manolo was valid – NO
employer to exhaust the entire probationary period. This is wrong.
The word “probationary” describes the purpose of employment, The SC did not believe that the resignation was valid and voluntary,
not length. The length of time is immaterial in determining the for two reasons: (1) there was no express acceptance by the
correlative rights of both in dealing with each other during said employer, and (2) it is inconsistent with Manalo’s subsequent filing
period. There is no obligation to maintain a minimum period of for illegal dismissal.
keeping the probationary employee employed. If the employee
W/N Manalo’s employment was for a fixed-term of 1 year, or
does not meet the reasonable standards for regularization set upon
was one without a fixed term – 1 YEAR
him by the employer, the employer has authority to terminate.
Manalo presented an employment agreement which showed a
HELD: Validity of dismissal upheld; no obligation to pay salary blank period of effectivity, while the petitioner presented one which
corresponding to the remaining probationary period. showed a one-year term of effectivity. Absent compelling and
corroborated evidence from either side, the SC construed the
doubt in favor of labor, and the employment agreement against
the employer.
Teachers
The SC upheld Manalo’s version of the employment agreement.
Magis Young Achievers’ Learning Center v. Manalo (2009)
For elementary and secondary level teachers, the maximum HELD: Dismissal overturned. Absent any concrete and competent
probationary period is 3 consecutive school years; absent any proof that her performance as a teacher was unsatisfactory from
provision in the employment contract, the presumed period is 3 years her hiring on April 18, 2002 up to March 31, 2003, respondent is
entitled to continue her three-year period of probationary period,
23
such that from March 31, 2003, her probationary employment is Buiser v. Leogardo (1984)
deemed renewed for the following two school years.
Facts: Petitioners were employed on probationary status by the
General Telephone Directory Company (in charge with the
publication of the PLDT directory) as sales representatives. The
Mercado v. AMA Computer College (2010)
contract provided that the probationary period would be 18
In an overlap between an employment contract which partakes of
months.
both a fixed-term and a probationary nature, the probationary
nature prevails They were prescribed sales quotas, and because of their failure to
Facts: Petitioners were hired as Professors and Instructors in AMA, meet these quotas, their services were terminated 1 year after they
and their Teacher’s Contracts, which were renewed per trimester, were employed, so they filed a case for illegal dismissal.
stipulated that their employment is effective until “the last term that
Issue & Ruling: W/N the petitioners have already acquired
the TEACHER is given a working load.”
permanent employment status – NO
They did not pass the new screening guidelines set by AMA so their
salary wasn’t increased. Because of this, they filed a complaint for As an exception to the general rule that probationary period must
underpayment of wages. Subsequently, upon the expiration of their be no longer than 6 months, the employer and employee may
teaching contracts, they were informed that their contracts would stipulate for a longer period when established by company policy
not be renewed. or the nature of the work required.
Petitioners filed a complaint for illegal dismissal, arguing that the Policy Instruction No. 11 has clarified that the 6-month rule stated
non-renewal was illegal because it was connected to their in the Labor Code is not absolute; the actual probationary period
complaint for monetary benefits. On the other hand, AMACC may change as long as it is the period deemed needed to learn the
argued petitioners merely failed to meet the standards for job.
regularization, and that they were still within the three-year
probationary period. Because of the nature of soliciting ads, the evaluation of the
petitioners’ efficiency can be made only after a year of the
Issue & Ruling: W/N the non-renewal of the contracts
publication of the yellow pages. In addition, the CBA itself
constituted illegal dismissal – YES
recognizes that telephone/sales reps have an 18-month
For teachers, the primary applicable law is the Manual for probationary period.
Regulations of Private Schools, which states that, for teachers in the
tertiary level, the probationary period is 9 consecutive semesters. Held: The stipulated probationary period is valid, there is no illegal
dismissal. Further, failure to meet sales quotas has already been
The Court in this case noted that the Contracts were a mixture of ruled as just cause for dismissal.
probationary and fixed-term employment. They were merely fixed-
term on a trimestral basis in order to accommodate the school
calendar. Nevertheless, the fact that the fixed terms operate during
the probationary period means that Art. 281 of the LC applies. Mariwasa Manufacturing v. Leogardo (1989)
In an overlap between an employment contract which partakes Facts: Dequila was hired by Mariwasa as a general utility worker on
of both a fixed-term and a probationary nature, the probation. He was informed, after the 6-month period, that his
probationary nature prevails. This is for the protection of the work failed to meet the standards for regularization. However,
employee. Thus, the SC must look into the evidence presented as
instead of being dismissed outright, he was given a 3-month
to the inability of the workers to meet the standards for
extension. Still, his performance did not improve, so his services
regularization.
were terminated. He filed a complaint for illegal dismissal.
The SC ultimately ruled that there was a glaring lack of evidence on
the exact terms of the standards and on how such standards were Issue & Ruling: W/N Dequila acquired regular employment
applied to the petitioners. status – NO
Held: Dismissal illegal. Because of changes in circumstances (in the The 6-month probationary period provided in the LC allows for
academic world and in AMACC), petitioners should be paid extensions as stipulated by the parties, as the Court cited Buiser.
separation pay instead of reinstatement.
The Court ruled that the employer’s gratuity should not be turned
against it to compel it to keep someone who does not meet their
standards. In addition, by voluntarily agreeing to an extension of
Colegio del Santisimo Rosario v. Rojo (2013) the probationary period, Dequila waived any benefit attaching to
the completion of said period if he still failed to meet the standards.
By agreement, nature of the work, required or established by Held: Dismissal was valid.
company policy
24
a specific undertaking, the duration and scope of which were

specified at the time the employees were engaged for the project.
Project
See also: Department Order No. 19, Series of 1993 “Project” may thus be defined two ways: (1) a particular job that is
within the usual business of the company, but may be identifiable
Project employment has 2 requisites in order for it to be properly
from the other undertakings of the company, such that the job’s
classified as such:
end time is determinable; and (2) jobs/undertakings not within the
1. The employment contract specifies an undertaking or project
company’s regular business.
which has a fixed date of termination, whether specified or
determinable; The component projects of the Five-Year Expansion Program
2. The fact of employment for a project with a fixed termination (construction of buildings and installation of machinery) are all
date is made known to the employee at the time of identifiable from the ordinary business of NSC. It was something it
engagement. did for itself, not for its customers/clients. In addition, it was a steel-
making company, not a construction company.
As such, the employment is deemed coterminous with the
termination of the project (or a phase thereof, if the employee was During the course of petitioners’ employment in the FAYEP, their
hired merely for a phase or some phases). Each termination of a work was limited to the component projects of the FAYEP alone.
specific project requires that the employer submit a Termination Thus, the LA correctly determined that they were project
Report to the DOLE, otherwise, his project employees may be employees.
deemed regular employees.
W/N petitioners’ employment of more than 6 years should
Length of time is immaterial in project employment, since a single automatically qualify them as regular employees – NO
project may last for years on end. However, if a project employee is
repeatedly re-hired for the many more projects, it may be an The employment duration is immaterial for project employees. The
indicator that he has become a regular employee. 2nd paragraph of Art. 280 relates only to casual employees. It does
not apply to those who fall within the 1st paragraph, namely: regular
The usual test in determining regular employment (necessity & and project employees, as ruled in Mercado v. NLRC.
desirability) is not enough to strip project employment of its status
as such. Project employment may cover both necessary & desirable Held: Petitioners are project employees, and they have not attained
services and incidental services. In determining whether project regular employment status by the mere long duration of their
employment has turned into regular employment, all relevant employment.
circumstances must be considered as a whole (necessity &
desirability; submission of Termination Reports; employee’s
performance of functions other than the project; repeated re-
Leyte Geothermal Power Progressive Employees Union v.
hiring; etc.).
PNOC (2011)
ALU-TUCP v. NLRC (2011) Facts: PNOC is a corporation engaged in providing power and
Project employment may be necessary & desirable to the employer’s electricity to various parts of Luzon. One of its projects was the
principal business or merely incidental; this does not affect the fact Leyte Geothermal Power Project, to provide electricity throughout
of project employment Luzon, so it hired hundreds of employees on a contractual basis,
the contracts of which specified that the employment would end
Facts: Petitioners were hired by the National Steel Corporation in
upon the termination of the project.
connection with the Five-Year Expansion Program. They were hired
in the mid-80s until the early 90s, the time when they filed a Most of the hired employees became members of petitioner, which
complaint for regularization with the LA. was a legitimate labor organization. Petitioner demanded
recognition as the collective bargaining agent of said employers,
NLRC: Petitioners are project employees because they were hired
but PNOC denied. When the project was about to be completed,
to perform work in a specific undertaking, the completion of which
PNOC terminated the employees that were members of the union.
was already predetermined, and that such operation was not
directly related to NSC’s main business of steel manufacturing. Issue & Ruling: W/N the employees that were members of the
Union are project employees of PNOC – YES
Petitioners appealed to the SC, arguing that they were regular
employees. In the case at bar, the records reveal that the officers and the
members of petitioner Union signed employment contracts
Issue & Ruling: Whether petitioners are regular or project
indicating the specific project or phase of work for which they were
employees – PROJECT
hired, with a fixed period of employment. In addition, both the
The proper test for determining whether an employment is for a NLRC and CA are consistent with their findings that the union
project is to determine if the employees were assigned to carry out members are project employees.
25
It is immaterial that the activities they were hired to perform Held: Dismissal illegal. Since petitioners are regular employees,
were necessary and desirable to the business of PNOC. The SC they may be dismissed only for just or authorized causes, none of
cited ACU-TUCP v. NLRC which ruled that a project employee may which are present.
perform both necessary and incidental businesses.
The Union also alleged that a lack of interval in the employee

contract negates their status as mere project employees. To this, Maraguinot v. NLRC (1998)
the SC ruled that the continuous nature of their employment for Applicability of DO 19 to non-construction industries
more than a year does not equate to their regular employment.
Where employment has been fixed for a specific project or Facts: Petitioners were assigned to work with a filming crew,
assisting in fixing the lights, equipment, and performance of
undertaking, the completion or termination of which has been
other tasks that the director may assign (more particularly,
determined at the time of the engagement of the employee, the
Maraguinot was hired first as filming crew in 1989, then Asst.
employment is for a project, regardless of continuity or duration.
Electrician in 1990, then Electrician in 1991). When they asked for a
salary increase in accordance with the minimum wage, their
Held: Employees are project employees.
supervisor only agreed if they signed a blank employment contract,
which of course they refused. They later found out that their
services have been terminated, so they sued for illegal dismissal.
Malicdem v. Marulas Industrial Corporation (2014) Respondent VIVA Films, on the other hand, claimed that, as film
distributors (not filmmakers), they merely contract associate
Facts: Respondent Marulas Industrial is a corporation engaged in
producers to produce/make movies. Petitioners were project
manufacturing sacks intended for local and export markets.
employees of the associate producers, and therefore, there is no EER
Petitioners were hired as extruder operators (operators for
between petitioners and VIVA
machines that shape thermoplastic materials). The arrangement
was every year they would sign an employment contract good for OSG’s contention: Since petitioners were hired not for one project,
one year, sign a resignation/quitclaim in favor of Marulas, then sign but for several, they should be deemed regular employees.
another employment contract good for another year. One day, they
Issue & Ruling:
were told to stop reporting for work, so they filed for illegal
dismissal. W/N petitioners became regular employees – YES
Issue & Ruling: W/N the continuous rehiring of petitioners VIVA’s allegation: Petitioners are project employees (who allege
granted them regularization – YES that they are regular employees) whose employment was
automatically terminated upon completion of the respective
The employment contract stipulated for a 6-month probationary projects.
period, and that upon satisfactory completion of this period,
petitioners would be reclassified as project employees. Petitioners’ allegation: they are regular employees.
The SC referred to Maraguinot, which ruled that a project employee Petitioners should be considered regular employees. If they had
been hired initially as project employees, they attained regular
that has been (1) continuously, as opposed to intermittently,
employee status because (1) there was a continuous rehiring even
rehired, and (2) performing tasks vital and necessary to the
after the completion of a project, and (2) the tasks they performed
employer’s business, that employee must be deemed regular.
are vital, necessary and indispensable to the usual business or
trade of the employer.
The test to determine whether employment is regular or not is the
reasonable connection between the particular activity performed Enero was employed for at least 2 years and worked on 18 projects.
by the employee in relation to the usual business or trade of the Maraguinot was employed for 3 years and worked on 23 projects.
employer. If the employee has been performing the job for at least
one year, even if the performance is not continuous or merely In this case, the Court referred to another case that just because
intermittent, the law deems the repeated and continuing need for during the time between projects, the workers are free to work for
its performance as sufficient evidence of the necessity, if not other employers, it does not automatically mean that they cannot
be regular, for cessation of activities at the end of every project is a
indispensability of that activity to the business.
foreseeable suspension of work. But that’s just it: suspension.
There is no actual project. The only stipulations in the contracts There is no severance of EER.
were the dates of their effectivity, and the rights and obligations of
The Court acknowledged that the case referred to (Tomas Lao
the parties. Construction v. NLRC) involved the construction industry to
which PI 20/DO 19 applies, the Court nevertheless said that
Even assuming they were project employees, they must be
there is no reason not to apply the principles therein to
considered regular employees in view of their continuous rehiring,
industries other than the construction industry, as long as they
showing that their work was necessary to the usual business of the concern projects with foreseeable suspension of work.
employer.
26
As petitioners had already gained the status of regular employees, employment. But in this case, length of time was not what the SC
their dismissal was unwarranted, for the cause invoked by private used in determining the nature of Liganza’s employment. Here,
respondents for petitioners dismissal, viz., completion of project, respondent had been a project employee several times over. His
was not, as to them, a valid cause for dismissal under Article 282 of employment ceased to be coterminous with specific projects when
the Labor Code. he was repeatedly re-hired due to the demands of petitioner's
Held: Petitioners are regular employees, LA ruling reinstated. business.
Held: Liganza is a regular employee. His dismissal was illegal.
Liganza v. RBL Shipyard Corporation (2006)
Facts: Liganza was employed as a carpenter for RBL Shipyard from PNOC-Energy Development Corporation v. NLRC (2007)
1991 to 1999. Out of nowhere, he was informed that his
Facts: PNOC had a Geothermal Production Field in Negros Oriental
employment was terminated so he claimed illegal dismissal.
with two phases. For Phase II, it hired respondents to work in the
Respondent, on the other hand, claimed that Liganza was a project Administration and Maintenance Section. The initial employment
employee and that his termination was coterminous with the contracts specified termination/expiration dates which were
completion of the project for which he was hired. renewed and extended. On 30 June 1998, after submitting reports
to DOLE, PNOC informed the respondents that their services were
The NLRC ruled that Liganza was a project employee, in view of the being terminated due to the completion of the civil works phase in
project employment contracts that were renewed every six months, Phase II. They filed a complaint for illegal dismissal, alleging that
and that the total duration of eight years was not the controlling they had rendered continuous services ranging from 2-3 years.
factor in determining his employment status.
Respondent on the other hand, alleged that they were project
Issue & Ruling: W/N Liganza has become a regular employee – employees who were validly terminated upon the completion of
YES the projects to which they were assigned.
The SC ruled that the CA and NLRC misappreciated the project Issue & Ruling: W/N the repeated rehiring and continued need
employment contracts submitted as evidence. They are not always for the services of respondents conferred regular employment
conclusive of the nature of one’s employment. status – YES
Respondent was only able to submit project employment contracts Project employees are those workers hired (1) for a specific project
covering the years 1997-2000. The termination reports likewise or undertaking, and (2) the completion or termination of such
covered only 1999-2000. No contracts were presented covering the project or undertaking has been determined at the time of the
years 1991-1997. No evidence satisfied the SC that Liganza has engagement of the employee.
been a project employee since 1991; they did not buy respondent’s
excuse that the documents from 1991 were destroyed. In this case, the employment contracts of the respondents did not
satisfactorily identify the supposed specific projects or
The Court also noted that while technically Liganza was free to seek undertakings that they were hired for. There is also the matter of
employment in other places in between contracts, the time intervals the repeated rehiring to do the same kind of work. Thus, the Court
between the termination of a contract and the entry into another concluded that they are regular employees.
one was not spaced far enough as to allow Liganza to seek lucrative
employment elsewhere. In addition, each contract extension had the respondents working
on new or different projects. Their employment ceased to be
Even assuming that Liganza was a project employee, Respondent coterminous with any projects when they were repeatedly re-hired.
still has not been able to prove with sufficient evidence that the
“project” has finished. Held: Respondents are regular employees because of the failure of
petitioner to show that the scope and termination of a specific
In any case, an employment ceases to be coterminous with specific project or undertaking was stated in the employment contracts, in
projects when the employee is continuously rehired due to the addition to the repeated rehiring.
demands of employer's business and re-engaged for many more
projects without interruption. Assuming, without granting that
petitioner was initially hired for specific projects or
undertakings, the repeated re-hiring and continuing need for
his services for over eight (8) years have undeniably made him
a regular employee.
Respondent additionally banks its case on the rule that length of

employment is not controlling in determining the nature of
27
Construction company cases project completed indicates that respondents were not project
Project employment in construction companies is governed by employees.
DOLE DO 19 (1993). Notably, it precludes continuous rehiring of
the same person for different projects/phases as giving rise to In addition, the paying of a “completion bonus” (assuming it were
regular employment because of the recognition that experience is true) was still unsatisfactory. HANJIN did not show the conditions
always more preferred in the construction industry. to receive such a bonus, and its computation. A completion bonus,
if paid as a mere afterthought, cannot be used to determine
In the construction industry, one construction “project” may have whether or not the employment was regular or merely for a project.
different phases, where some finish earlier than others. Thus, the Otherwise, an employer may defeat the workers' security of tenure
completion of a phase of a project is considered the completion by paying them a completion bonus at any time it is inclined to
of the project for an employee employed in such phase. unjustly dismiss them.
HANJIN Heavy Industries v. Ibanez (2008) Held: Respondents are regular because of the repeated rehiring
When it comes to construction workers hired for a project, their and the failure of HANJIN to present and substantial evidence in
length of service and repeated rehiring does not automatically confer their favor. In addition, the dismissals were valid for failure to
regular employment status, but in such project employment cases, comply with the twin-notice rule as well.
the employer must present the employment contracts which show
that the employment was coterminous with the project
Facts: HANJIN is a foreign company engaged in the construction Date of termination need only be determinable, not specific
business in the Philippines. Respondents are work pool employees
Filsystems v. Puente (2005)
claiming illegal dismissal. They also claim that they were assigned
The lack of a specified date in the termination of a project
to work in various construction projects, including the North
employment contract does not negate the status of the employment
Harbor project, Manila International Port, Batangas Port, Batangas
as project, it is enough that the date of termination is determinable
Pier, and the La Mesa Dam.
Facts: Respondent Puente was hired by Filsystems (construction
HANJIN argued that they were merely project employees employed
company) first as installer, then later as mobile crane operator,
for 3 months, for the MRT project. However, HANJIN failed to
continuously and without interruption for 10 years, after which he
produce these employment contracts as evidence. Respondents
was dismissed for being a project employee.
denied having signed any such contract.
Filsystems alleged that Puente is indeed a project employee, that
Issue & Ruling: W/N the repeated re-hiring of the respondents,
each employment contract showed different project assignments,
who are construction workers, granted them regular
and that after completion of each project, each employment was
employment status – NO
terminated and reported to the DOLE.
When it comes to construction workers, their length of service and
CA: The employment contracts do not have specified durations per
repeated rehiring does not automatically confer regular
project; petitioner was always attending to the maintenance of
employment status, since it is only a consequence of the fact that
mobile cranes for 10 continuous years. He was a regular employee.
experienced workers are preferred in the construction industry.
Issue & Ruling: W/N Puente is a project employee – YES
However, in cases where the SC ruled that construction workers
that are repeatedly hired retain their status as project employees, The SC found that the multiple contracts of Puente showed that he
the employers in that case were able to produce the employment was hired for different projects (with specified termination dates),
contracts showing that employment was coterminous with the upon termination of which reports were submitted to the DOLE.
project.
The lack of a specified date in the project employment contract
For an employee to be considered a project employee, the scope does not negate the status of the employment as project. Clause
and duration of the project employment must be made known to 3.3(a) of DOLE Order No. 19 specifically states that the “day certain”
them at the time of employment. Absent any other proof that the for the termination of the relationship need only be determinable,
project employees were informed of their status as such, it will even without the exact specification.
be presumed that they are regular employees in accordance
with Clause 3.3 (a) of Department Order No. 19, Series of 1993. In this case, although the employment contract did not state a
particular date, it did specify that the termination of the parties'
In addition, HANJIN was unable to present any evidence at all to employment relationship was to be on a "day certain" — the day
refute the respondents’ claims that they were repeatedly assigned when the phase of work termed "Lifting & Hauling of
to various projects. They were also unable to present Termination Materials" for the "World Finance Plaza" project would be
Reports other than the one from April 2002. The failure of an completed. Thus, respondent cannot be considered to have been
employer to file a Termination Report with the DOLE every time a a regular employee. He was a project employee.
28
Held: Puente is a project employee because each employment When Altell informed Sykes in 2009 (6 years later) that they were
contract specified a project or undertaking with a determinable terminating the services from Sykes, petitioners were in turn
termination date, and upon each termination, reports were informed by Sykes that their services would no longer be needed.
submitted to the DOLE. They filed complaints for illegal dismissal.
Sykes alleged that petitioners were merely project-based

employees for the Altell Project, and that their employment was
E. Ganzon, Inc. v. Ando (2017) coterminous with the duration of the Project.
Project employment does not require that the employment specifies
an exact day for the termination of the employment. It is enough that Issue & Ruling: W/N the petitioners were just project
the day is determinable. employees for the Altell Project – YES
Facts: Respondent Ando was hired as a finishing carpenter in the For an employee to be considered project-based, the employer
construction business of petitioner EGI. He alleged that he was must show compliance with two (2) requisites, namely that: (a) the
repeatedly rehired from 2010 January until 2011 April and then he employee was assigned to carry out a specific project or
was terminated without prior notice and hearing. undertaking; and (b) the duration and scope of which were
specified at the time they were engaged for such project.
On the other hand, EGI countered that Ando was a project worker
as shown by the three employment contracts showing different In this case, the SC found that Sykes complied with both
projects with their corresponding termination dates. requirements. The employment contracts clearly provided that
petitioners were hired in connection with the Altell Project. Thus,
Issue & Ruling: W/N Ando should be considered a regular the “termination of the Altell Project” is considered a determinable
employee – NO time, meeting the second requisite as well.
To be considered as project-based, the employer has the burden of In other words, when the Alltel Project was terminated, petitioners
proof to show that: (a) the employee was assigned to carry out a no longer had any project to work on, and hence, Sykes Asia may
specific project or undertaking and (b) the duration and scope of validly terminate them from employment.
which were specified at the time the employee was engaged for
such project or undertaking. Held: Petitioners are project employees. No illegal dismissal.
The CA ruled that Ando’s employment contracts are not project

employment contracts because his tenure remained indefinite. The
appellate court ruled that the stipulation that his services "could be Mercado v. NLRC (1991)
extended or shortened depending on the work phasing" runs The “>1 year rule” in Art. 280(2) of the LC applies only to casual
counter to the very essence of project employment since the employees. Project and seasonal employees may be validly
certainty of the completion or termination of the projects is in terminated upon the date agreed upon for termination, even if it
question. exceeds 1 year.
The SC disagreed with this. Project employment does not require Facts: Petitioners were hired as agricultural workers by respondents
that the employment specifies an exact day for the termination in all the agricultural phases of work on the land owned by
of the employment. It is enough that the day is determinable. respondents, who were all dismissed in 1979. Everyone has worked
The determining factor is the fact of the specified activity, not the at least 19 years, the longest being 30 years.
exact date of termination. The employment contract specified the
Respondent alleged that petitioners were not their regular workers,
termination of the employment upon the completion of the project,
but they merely engaged them through their “mandarols,” i.e.
which already meets this requirement.
persons who take charge in supplying the number of workers
Held: Ando is not a regular employee because all his instances of needed by owners of various farms, but only to do a particular
employment were covered by separate employment contracts with phase of agricultural work necessary. Outside the required phases,
different projects and termination dates specified therein. they’re free to work for other farm owners.
Petitioners submit on the other hand that even if they were initially
seasonal employees, the fact that their employment continued for
Gadia v. Sykes Asia (2015) so many years made them regular employees as stated in Art.
Date of termination of project employment need only be 280(2) of the LC.
determinable; a specific or exact date is not required
Issue & Ruling: W/N the dismissed petitioners are regular
Facts: Sykes Asia, an international BPO firm, was contacted in 2003 employees – NO
by Altell (from USA) to provide workers as customer service
The 1-year rule in the second paragraph of Art. 280 of the LC only
representatives. Thus, Sykes hired petitioners for the Altell Project.
applies to casual employees. Casual employees that have been
29
employed for more than one year are clearly performing an activity petitioners reported the termination of respondents' supposed
necessary and desirable to the business of the employer, and thus project employment to the DOLE as project employees.
must be considered regular. This does not apply to project and
seasonal employees. No matter the nature of their job, their Employment ceases to be coterminous with specific projects
employment will still terminate on the date agreed upon. when the employee is continuously rehired due to the
demands of employer's business and re-engaged for many
Held: Petitioners being project employees, or, to use the correct more projects without interruption.
term, seasonal employees, their employment legally ends upon
completion of the project or the season. The termination of their Held: Because of the lack of proof that respondents are project
employment cannot and should not constitute an illegal dismissal. employees, and because they do work other than those designated
for them, they are regular.
Cocomangas Hotel Beach Resort v. Visca (2008)

Seasonal
Employment ceases to be coterminous with specific projects when the
employee is continuously rehired and re-engaged for many more Hacienda Fatima v. National Federation of Sugarcane Workers
projects without interruption (2003)
Seasonal workers should be hired only for one season; repeated
Facts: Respondents allege that they were employed by petitioner
rehiring for the same phases/tasks will give rise to regular
as foremen, carpenters, and masons (one was hired for 3 years, one
employment
was hired for 12). They were tasked with the maintenance and
repair of facilities. They were suspended from working, being told Facts: The respondent workers, who have been hired repeatedly as
that the reason was budgetary constraints, although they later sugarcane workers for several years, organized themselves into a
found out that petitioner hired other workers to do the work they union for purposes of CBA negotiations. When the union was
used to do. They filed a complaint for illegal dismissal. certified, the petitioner refused to sit down with the union for
negotiations, which led the respondents to strike. The strike was
Petitioners countered that respondent Visca was an independent
settled through the signing of a MoA which provided that the
contractor who was merely called upon from time to time, and that
parties will sit down for CBA negotiations.
the other respondents were merely selected and hired by Visca.
Subsequently, petitioner alleged that the workers were unable to
NLRC ruled that they were employees and ordered back wages, but
meet the terms of the MoA, so petitioner again refused to sit down
later retracted their first decision, ruling that the respondents were
with the union for CBA negotiations, which forced the workers to
project employees who were validly terminated.
go on strike once again.
CA: Respondents are regular employees because petitioners failed
Issue & Ruling: Whether the employees were regular or
to set specific periods when employment relationship would be
seasonal – REGULAR
terminated.
For employees to be considered seasonal employees, there are two
Issue & Ruling: W/N the respondents are project employees –
requirements: (1) they perform work or services that are seasonal
NO
in nature, and (2) they must also be employed only for the duration
The Court first admonished the petitioners for changing their of one season.
stance upon appeal. First, they alleged that there was no EER at all;
In this case, only the first requirement was met; the second was not
then they alleged that respondents were their project employees
but were validly terminated. Respondents in this case were hired for more than one season.
Respondents cannot be classified as project employees, since they Mercado v. NLRC is not applicable. In Mercado, the workers were
worked continuously for petitioners from three to twelve years not hired for the same phases of agricultural work, but on and
without any mention of a "project" to which they were off for any single phase, between which their services would also
specifically assigned. be available to any other farm owner. In this case, however,
respondents performed the same tasks for petitioners over the
While they had designations as "foreman", "carpenter" and
course of several years.
"mason", they performed work other than carpentry or masonry.
They were tasked with the maintenance and repair of the furniture, Held: Respondents are regular—not seasonal—employees of
motor boats, cottages, and windbreakers and other resort facilities. petitioner. Thus, not giving them work assignments, which
There is likewise no evidence of the project employment effectively equates to dismissal, is illegal for being without basis. At
contracts covering respondents' alleged periods of best, they were dismissed because they organized themselves into
employment. More importantly, there is no evidence that a union.
30
them. As the owner of the farm where Jaime worked, Gapayao had
the right to review the quality of work done by Jaime.
Regular seasonal workers
The allegation that Jaime was merely an independent contractor
Gapayao v. Fulo (2013) was dismissed because it was merely based on a self-serving
Seasonal employees made to work for more than one season are testimony from petitioner’s daughter. No other proof was
both regular & seasonal; they are regular seasonal employees presented.
Facts: Jaime Fulo died (acute renal failure—kidney failure) from Held: Jaime was an employee of Gapayao, and since there was EER,
burns and electrocution while doing repairs at the residence and Jaime had a right to be covered by the SSS, and thus Gapayao must
business establishment of petitioner Gapayao. Fulo left behind his remit the contributions.
widow, respondent in this case, who executed a Compromise
Agreement stating that Gapayao will pay P40,000.00 to respondent
in exchange for releasing Gapayao from all claims she may file
against him. Universal Robina Sugar Milling Corporation v. Acibo (2014)
Respondent then filed a claim for social security benefits with the Facts: Petitioner URSUMCO is a company engaged in sugarcane
SSS, but the SSS claimed that Jaime was not registered. The SSS milling. Respondents are its employees who were hired as crane
thus conducted an investigation, which found that Jaime Fulo was operators, mechanics, welders, carpenters, etc. At the start of their
employed by Gapayao as a farm laborer from 1983-1977. Thus, the respective engagements, their employment contracts were good
SSS demanded that Gapayao remit the social security contributions for only one month or for a given season, after which they were
of Jaime. Gapayao then denied that Jaime was his employee, but made to sign new contracts for another month or another given
rather a mere independent contractor whom he did not have season.
control over, and that even assuming Jaime was his employee,
This went on for at 6-14 years (different for different complainants)
Jaime was merely seasonal, not regular.
until they filed a complaint for regularization and entitlement to
Issue & Ruling: W/N Jaime Fulo was a seasonal regular claims under the CBA, which was dismissed by the LA, ruling that
employee – YES they were seasonal/project workers, not regular ones.
As a farm worker, Jaime was indeed a seasonal worker, but seasonal 7/22 appealed the ruling to the NLRC, which ruled that they were
workers may still be considered regular (seasonal regular regular employees since their activities were necessary and
employee). desirable to the principal trade of the employer, in addition to the
fact that they were repeatedly rehired for the same undertaking
A seasonal regular employee is one who is called to work from time every season.
to time, is laid-off during the offseason, but is reemployed during
the season when their services are needed. As a matter of Issue & Ruling: Whether the employees were regular
exception, a seasonal employee is not regular when they were employees or seasonal employees – REGULAR SEASONAL
employed only for the duration of one season.
The court compared the situation to a project employee. A project
A seasonal employee is to be considered regular when, in employee—when the project lasts for more than a year OR when
addition to employment for more than one season, the work there is a continuous rehiring even after the cessation of the
they perform is necessary or desirable in the usual business or project—may be considered a regular employee when such
trade of the employer. employee performs activities necessary and indispensable to the
usual business/trade of the employer. Same concepts apply to a
In this case, Jaime has been in the regular employ of petitioner from seasonal employee on regularization.
1983 until his death. From year to year, he was continuously
working on petitioner’s land, harvesting and processing farm With seasonal employees, their continuous and repeated rehiring
products and clearing weeds. He has been employed for more than for the same tasks/activities for several seasons or even after the
one season. cessation of the season, such length of time serves as a badge of
regular employment.
In addition, he also performed other tasks; he was also a
construction worker and a helper in other business owned by In fact, even though denominated as “seasonal workers,” if
petitioner. these workers are called to work from time to time and are only
temporarily laid off during the off-season, the law does not
Finally, the Compromise Agreement described Gapayao as consider them separated from the service during the off-
employer of Jaime, which is also a strong indicator. season period. The law simply considers these seasonal
workers on leave until re-employed.
Control
Even if Jaime was a pakyaw worker, pakyaw workers may still be
considered regular if the employer had the power of control over
31
In this case, the employees are considered regular seasonal workers and desirable despite the fact that they worked only during the
because of the fact of continuous and repeated rehiring. It is of no tobacco season). In Mercado, despite the repeated rehiring, the
moment that they signed numerous one-month contracts, because workers were not hired regularly and repeatedly for the same
the Court saw the case as an employer imposing the period phase(s) of agricultural work, but on-and-off for any single phase
precisely to avoid security of tenure. Thus, the employee should be of the given agricultural work.
deemed regular.
In addition, the work performed by Paz was necessary and
desirable, given that she was regularly hired as a sorter during the
tobacco seasons for 29 years.
Paz v. Northern Tobacco Redrying Co., Inc. (2015)
A seasonal employee repeatedly rehired to perform the same tasks is Held: Because Paz was repeatedly rehired to perform the same
considered a regular seasonal employee, notwithstanding the fact tasks even if only seasonally, she is deemed as a regular seasonal
that such employee is free to seek employment during the worker. Thus, between the seasons, she is merely considered to be
“offseason” on-leave from the employment, but the EER itself is not severed.
Facts: Respondent NTRCI is a company in the tobacco leaves

business, which hires employees with seasonal workers. The
Casual
seasonal workers sort, process, and transport tobacco leaves during
the tobacco (March-September). ART. 280. Regular and casual employment. “The provisions of
written agreement to the contrary notwithstanding and regardless
Petitioner Paz was hired as a seasonal sorter sometime in 1974 and
of the oral agreement of the parties, an employment shall be
was rehired every tobacco season since then. When she turned 63,
deemed to be regular where the employee has been engaged to
NTRCI informed her that she was considered retired, and was
perform activities which are usually necessary or desirable in the
informed that she would be receiving P12,000.00 separation pay.
usual business or trade of the employer, except where the
She filed a complaint for illegal dismissal, which she later amended
employment has been fixed for a specific project or undertaking
into a Complaint for payment of retirement benefits, contending
the completion or termination of which has been determined at the
that P12,000.00 is insufficient pay for 29 years of service.
time of the engagement of the employee or where the work or
NTRCI argued that since there was no CBA, it computed the service to be performed is seasonal in nature and the employment
retirement pay of seasonal workers under Art. 287 of the LC, under is for the duration of the season.
which for a year to be included in the computation, there must be
An employment shall be deemed to be casual if it is not covered by
6 months of service in that year. For the 29 years that Paz worked
the preceding paragraph: Provided: That any employee who has
for NTRCI, she worked for at least 6 months only in 3 of those years.
rendered at least one year of service, whether such service is
Thus, the amount of P12,000.00 is correct.
continuous or broken, shall be considered a regular employee with
The LA ruled in favor of NTRCI, but the NLRC ruled that all the respect to the activity in which he is employed and his employment
months that Paz worked for 28 years in the service of NTRCI should shall continue while such activity exists.”
be added and divided by 6 to get the number of years for her
The limitation on casual employment becoming regular is that
retirement pay.
regular employment is only for the work activity for which the
The CA had a different formula: ([½ month pay] * [29 years of (originally) casual employee was hired.
service]) / 2 = P60,356.25.
For example, a painting job was originally casual, but the employee
NTRCI’s argument on the six-month rule should be applied to hired to do it has been doing it for more than one year. The
seasonal workers. Because seasonal workers are able to offer their employment may be on-and-off. The employee in this case would
services to other employers during the offseason, the six-month be deemed a regular employee, but only with respect to the
rule avoids the situation where seasonal workers receive retirement pointing job; every time the work activity occurs, he is the one
pay twice — an even more favorable position compared with to be re-hired.
regular employees.
Issue & Ruling: W/N NTRCI’s computation of retirement pay

.
for seasonal employees is correct – YES
Kimberly Independent Labor Union v. Drilon (1990)
The Court reconciled the seemingly contradictory rulings in
The processing of regularization documents is not the operative fact
Mercado v. NLRC (the seasonal workers were not considered regular
in determining when casual employees are regularized. Casual
despite repeated rehiring because outside the seasons when they
employees who have rendered at least 1 year of service are
were hired, their services were available to any other farm owner)
automatically deemed to be regularized, by operation of law, on the
and Abasolo v. NLRC (the seasonal employees were considered
1st day after their 1st year of service.
regular seasonal because their services were considered necessary
32
Facts: Kimberly-Clark Philippines, Inc. (KIMBERLY) negotiated a declared as such before he can acquire a regular status. Obviously,
CBA with United Kimberly-Clark Employees Union-Philippine where the law does not distinguish, no distinction should be drawn.
General Workers’ Organization (UKCEU-PTGWO), good for 3 years.
Within the 60-day period prior to its expiration, and during the Thus, the Minister was wrong in ruling that regularization was
negotiations for CBA renewal, some members formed a union deemed to have occurred only at the time of his decision.
called Kimberly Independent Labor Union (petitioner), which then Regularization automatically happens at the time the casual
filed petition for certification election in the Ministry of Labor and employee continues rendering service past his first year.
Employment. The petition was not objected to, but KIMBERLY and
Held: The petitioners (non-janitorial regular workers), whose
UKCEO-PTGWO objected to the inclusion of contractual workers as
regularization is deemed to have occurred prior to the certification
among the qualified voters.
elections, should be deemed qualified to vote in such elections, and
KIMBERLY contested the eligibility to vote of 64 casual workers, their challenged votes counted as valid.
contending that they were not employees of KIMBERLY, but of
RANK (an independent contractor), but allowed them to vote
anyway subject to challenges on their votes. The results of the
Philippine Geothermal Inc. v. NLRC (1990)
election came in, with UKCEU-PTGWO winning over Petitioner by a
Casual employees are automatically deemed regular upon the lapse
margin of 20 votes, not including the votes of the 64 casual workers
of 1 year of service and their continued service, notwithstanding that
whose votes were contested. their employment is intermittent and on contractual basis.
The Minister of Labor and Employment later declared that the
Facts: Petitioner PGI is a US corporation engaged in the geothermal
casual workers performing janitorial services were under LJC and energy resources industry. Respondents are employees of PGI who
therefore NOT employees of Kimberly (therefore not entitled to
have worked various positions under different contracts,
vote in the certification elections), and that the other non-janitorial
categorized as contractual employment, ranging from 15 days – 3
casual workers were under LOC, and therefore should be months. These contracts were regularly renewed; in effect,
considered regularized, but only as of the date of the decision petitioners had been working for 3-5 years until PGI terminated
(therefore, their votes in the certification election should still not be
their employment by stopping the renewal of their contracts. PGI
counted).
thereafter entered into a job contracting agreement with Dra.
KIMBERLY and UKCEU-PTGWO later entered into a new CBA, which Gonzales, who supplies PGI with manpower.
Petitioner contested.
Subsequently, respondents organized themselves into a union and
Petitioner thus contends the validity of the Minister’s ruling that the filed a petition for certification election. Because of this, they were
janitorial workers are employees of RANK, and not of KIMBERLY, replaced by PGI with “contract workers,” and so respondents filed
and the ruling that the non-janitorial workers are regular but a case for ULP and illegal dismissal.
deemed only upon the date of the Minister’s decision.
Issue & Ruling: W/N respondents may be considered regular
Issues & Ruling: employees due to their length of service despite the fact that
the employment is on contractual basis – NO
1. W/N the Minister was correct in ruling that the non-janitorial
casual workers are regular employees of KIMBERLY, but PGI’s argument: Respondents were aware of the nature of their
became regular only upon the date of decision -- NO contracts at the time of the repeated engagements, since this was
always designated in the employment contracts. When their
There are two kinds of regular employees: (1) those engaged in contracts were not renewed, there was no unwarranted dismissal;
activities necessary & desirable to the principal business of the there was simply expiration of the agreed-upon tenure of
employer; and (2) those casual employees who have rendered employment and the completion of the phase of the project for
service for at least one year, whether continuous or intermittent, which they were hired.
with respect to the activity in which they are employed. The
petitioners in this case (the non-janitorial ones) are regular PGI is clearly trying to circumvent the regularization of its
employees under the second kind. employees here. Art. 106 of the LC provides that casual employees
are deemed regularized upon the completion of their 1 year of
However, they became regular, by operation of law, upon the lapse service and subsequent working.
of the one-year period of their service for KIMBERLY. Even if the
actual processing of the documents for regularization came To uphold the contractual arrangement between the employer and
later, the fact remains that the reckoning point for regularization is the employee would in effect be to permit employers to avoid the
the day immediately after the end of their 1st year of service. necessity of hiring regular or permanent employees indefinitely on
a temporary or casual status, thus to deny them security of tenure
The law does not provide the qualification that the employee must in their jobs. Article 106 of the Labor Code is precisely designed to
first be issued a regular appointment or must first be formally prevent such result.
33
Held: The employees are deemed regular by virtue of their length term employments (overseas employment, administrative positions
of service, despite their repeated employments being on in educational institutions, elected company officials), assuming of
contractual basis. Thus, the non-renewal of their contracts without course, there was no intention based on bad faith to merely prelude
just/authorized cause equate to illegal dismissal. acquisition of tenurial security, for which Art. 280 of the LC was
specifically designed. In addition, a narrow interpretation of LC
(one which deems fixed-term employment as illegal) is an
unreasonable restriction on an employer to freely stipulate
Fixed Term
employment duration with his employee.
Brent School, Inc. v. Zamora and Doroteo Alegre (1990)
Where the reason for the law ceases to exist, the law itself ceases
Fixed-term employment contracts are valid under the LC as long as
to exist. The reason behind the enactment of Art. 280 was to
they are freely agreed upon by both parties and that there was no
prevent the circumvention by employers of the acquisition security
intention to circumvent acquisition of tenurial security
of tenure by their employees. If the fixed period was freely agreed
Facts: Respondent Doroteo Alegre was hired as athletic director for upon by both employer and employee, there is no reason to view
Brent School; his contract stipulated a period of 5 years (July 1971- it as prohibited.
July 196). When the termination of his contract was approaching,
Held: The fixed-term employment contract is valid, and freely
Brent School announced the termination of his contract, which he
agreed upon by the parties. Thus, it must be upheld, and
protested. He argued that since his services were necessary and
cannot give rise to regularization by mere fact of length of
desirable to the principal business of his employer (Brent School),
service.
and that he had been employed for 5 years, he should be deemed
a regular employee, and thus may be removed only for Note: The SC has subsequently ruled that the ruling in Brent should
just/authorized cause. be strictly construed and applied only to cases where it appears
that the employer and the employee were on equal footing during
Regional Director, Labor Secretary, and Office of the President:
employment negotiations. Ruling against regularization should be
Denied Brent School’s petition. Alegre is a regular employee.
treated as the exception, and not as the general rule.
Issues & Ruling: W/N the fixed-term employment was a valid
arrangement – YES
By definition, a fixed-term employment is one whose termination is Pakistan International Airlines v. Ople (1990)
not hinged on any particular season or project but is hinged Where stipulations in fixed-term employment contracts are clearly
specifically on a date agreed upon by the parties. indicative of an intent to circumvent acquisition of tenurial security,
the provisions will be struck down as void
Considering the fact that the employment contract was entered
into prior to the effectivity of the Labor Code, the Court looked into Facts: Petitioner PIA (Pakistani corporation licensed to do business
the governing laws at the time as well as prior laws. In analyzing in MNL) entered into 2 employment contracts with the 2
the Termination Pay Law, the Code of Commerce, and the Civil respondents. The contracts specified: (1) fixed term of three years,
Code, the Court found that all these laws implicitly recognized the (2) reservation of PIA’s right to terminate employees any time
propriety/legality of fixed-term employment. subject only the requirement of prior notice by one month, and (3)
applicability of Pakistani laws and exclusive jurisdiction of Pakistani
Thus, the legality of the contract at the time of its entering into is courts out of matters arising out of the agreement.
clear. Subsequently, the effectivity of the Labor Code did not affect
its legality, given that it contained explicit references to fixed- After training, the employees began working with their base station
period employment, and that the nature of the job to be performed in Manila. 1 year and 4 months prior to the scheduled expiration of
(whether necessary or incidental) is not necessarily mutually their contracts (i.e., 2 years and 8 months into their employment),
exclusive with the concept of having a fixed period. they received a notice from PIA that their employments are to be
terminated after one month, pursuant to PIA’s reservation of such
As an example, the Court referred to seasonal and project right of termination stated in the employment contract. Thus,
employments, where a period is necessarily implied. respondents instituted a complaint for illegal dismissal.
However, the subsequent amendments to the Labor Code (BP 130) For its part, PIA defended its actions by saying that respondents a
seem to have removed every reference to fixed-term or fixed-period
employment. re habitual absentees, and they regularly bring in sizeable
quantities of “personal effects” despite advice from customs
In determining whether it was the legislature’s intent to outlaw officials to discontinue such practice.
stipulations in employment contracts laying down a definite period,
the Court ultimately ruled that such stipulations remain to be Regional Director and MOLE Deputy Minister: Respondents have
valid, given the nature of certain jobs that reasonably require fixed- acquired regular employment status since they have rendered
34
more than a year of service already. Further, the 3-year fixed-period Philips Semiconductors v. Fadriquela (2004)
was invalid for being violative of the Labor Code.
Facts: Petitioner is a domestic corporation in the semiconductor
Issue & Ruling: assembly business; its clients are domestic and foreign
corporations that manufacture computers, telecommunications
1. W/N the stipulations of the PIA on reservation of right to
equipment, and cars. It regularly hired both regular and contractual
dismiss were valid – NO
workers. Contractuals were required to maintain a 3.0 performance
PIA argued that since the employment contract was one freely
appraisal rating to maintain good standing.
entered into by the parties, it should be considered as the
governing law on the matter, instead of the Labor Code. While the Respondent Fadriquela entered into an employment contract with
SC acknowledged the validity of this as a general rule, this is not petitioner to work as production operator; the initial period was 3
absolute. Contracts are respected as the law between the parties, months, but was extended repeatedly for a total of 1 year and 1
but only provided that they are not contrary to law, customs, public month. In her last contract extension, she became a habitual
morals, or public policy. absentee, incurring 12 absences with no justification.
In determining the legality/illegality of fixed-term employment Thus, her performance rating declined to below the minimum level
contracts per se, the Court looked back to Brent School v. Zamora, required for retention (2.8 out of the required 3.0), and her contract
where it was ruled that the validity of fixed-term employment was no longer renewed.
contracts will be upheld, provided that it was not used to circumvent
the security of tenure which is acquired by regular employees. Respondent filed a case for illegal dismissal before the NLRC. In
addition, she argued that since she served for more than 6 months
In examining the provisions of the employment contract, the 3-year already, she should be considered regularized.
period stipulated in the contract is effectively neutralized by the
subsequent paragraph which allows the employer to dismiss the On the other hand, petitioner argued that there was no dismissal;
employee at any time subject only to the requirement of prior there was merely an expiry of the term of a contract with a fixed
notice. Since the net effect of these provisions is to render the period for employment.
employment of respondents at the mercy of PIA, the Court
CA: Reversed LA and NLRC. The CBA did not cover contractual
concluded that these were intended to prevent the acquisition of
employees, and thus the 17-month probationary did not apply to
security of tenure, and thus must be struck down as contrary to law
her. Respondent was performing activities necessary and desirable
and public policy.
to the principal business of petitioner, and has been working for
2. W/N PIA may rely on the provision which stipulates more than a year, and thus should be considered regular. The
Pakistani law as the governing law – NO stipulations in the contract, considered with the fact of repeated
Employment contracts are imbibed with public interest, and thus hiring, must be viewed as attempts by the employer to circumvent
the applicability of Philippine laws and regulations cannot be done acquisition of tenurial security.
away by mere stipulation by the parties.
Issue & Ruling: W/N the dismissal of Fadriquela based on the
Regarding the supposed exclusive jurisdiction of Pakistani courts, expiration of the contract’s term was valid, notwithstanding
this may also not be sought as refuge. The circumstances of the the fact of repeated rehiring and length of service of more than
case show multiple instances of contact between PH courts and the 1 year – NO
parties in this case. For instance, the contract was both executed
The Court agreed with the CA; it saw the provisions of the
and performed in the Philippines; petitioner does business in
employment contract as attempts by the employer to circumvent
Manila, while respondent is a resident of the Philippines; and the
acquisition of tenurial security.
home base of the respondents is in Manila. All these point to
Philippine courts and administrative agencies as a proper forum for Respondent was hired as a production operator, assigned to wire-
resolution of contractual disputes. building at the transistor division. The necessity/desirability of her
job is indisputable. Her repeated rehiring for 4 times to the same
Regardless, assuming Pakistani law was even applicable, PIA never
position with the same chores, for a total duration of 1 year and
even plead and proved the contents of Pakistani law, thus they will
1 months is sufficient evidence of the necessity of her job. Thus, by
be legally presumed to be similar to Philippine law.
operation of law, she is deemed to have acquired regular status
Held: Respondents are regular employees of petitioner who were upon the completion of her 1 year.
illegally dismissed. The Order of the MOLE DM, affirming the ruling
The Court referred to Romares v. NLRC, which listed down criteria
of the RD, which ruled that respondents have acquired regular
under which term employment is not in circumvention of the
employment status, is affirmed. They should be reinstated; if not
acquisition of tenurial security, and is thus valid, namely:
feasible, they should be paid separation pay.
1. The fixed period of employment was knowingly and
voluntarily agreed upon by the parties without any force,
35
duress, or improper pressure being brought to bear upon the correspondents. Fuji also had the power to dismiss her, control over
employee and absent any other circumstances vitiating his her working hours, and control over the mode of transportation she
consent; or would use when going to work.
2. It satisfactorily appears that the employer and the employee
dealt with each other on more or less equal terms, with no 2. Whether Arlene was a regular employee or a fixed-term
moral dominance exercised by the former or the latter. employee – BOTH; she was a regular employee with a
fixed-term
None of these criteria are present in this case. The mere fact that In determining regularity, the necessity and desirability of the
employees sign an employment contract does not automatically employee’s work with relation to the principal business of the
mean that employer and employee deal with each other on more employer is the prime consideration.
or less equal terms. Almost always, employees agree to any terms
of an employment contract just to get employed considering that Fuji alleges that Arlene was merely a freelancer, but her job
it is difficult to find work given their ordinary qualifications. Their designation was “News Talent/Reporter/Producer.” She did all
freedom to contract is empty and hollow because theirs is the activities related to news gathering and used Fuji’s equipment in
freedom to starve if they refuse to work as casual or contractual every work she performed for Fuji. In addition, she was not hired
workers. for any special skill she had. Lastly, because of her contract’s
repeated renewal for the same job and the same work to be
Held: CA decision affirmed. Fadriquela acquired regular status performed, Arlene’s status as a regular employee was further
upon the completion of 1 year. cemented.
Regarding her status as both a regular and fixed-term employee,

the Court ruled that just because an employment contract is on a
Fuji Network Television v. Espiritu (2014) fixed term, it does not automatically mean that the employee can
Respondent was a news correspondent whose employment was never be regular. The ruling in Brent should be treated as an
terminated because of lung cancer; repeated renewal of fixed-term exception, not the general rule. Brent also stated that a regular
contracts may give way to regularization; Brent ruling should be employee may opt to have a fixed date of termination in the
treated as an exception, not as general rule contract, which should be upheld.
Facts: In 2005, Arlene Espiritu was hired by Fuji as a “news Held: Arlene is a regular employee, and thus could only be
correspondent/producer” with a one-year contract that was dismissed for just/authorized cause (other than expiration of the
renewed regularly. She was later diagnosed with lung cancer and term agreed upon). The manner by which Fuji informed Arlene that
informed Fuji about this, but she also insisted that she could still her contract would no longer be renewed is tantamount to
work properly. However, she later agreed with Fuji that she would constructive dismissal. Because Fuji did not comply with Art. 284 of
sign a nonrenewal contract which stipulated that her contract the Labor Code (disease as grounds for dismissal), and Book VI,
would end on May 2009. She signed it under protest. One day after Rule 1, Sec. 8 of the Labor Code’s IRR, the dismissal was illegal.
signing the contract, she filed a complaint for illegal dismissal,
alleging that she was forced to sign it when Fuji became aware of
her illness. Until she signed it, her salaries and bonuses were
allegedly withheld from her. Samonte v. La Salle Greenhills (2016)
Repeated renewal of fixed-term contracts may turn a fixed-term
Fuji’s contentions: Arlene was hired as a freelancer who could employee into a regular employee
perform her work free from Fuji’s control, and that Arlene dealt and
negotiated with them on more or less equal terms. Facts: From 1989-2004, LSGH hired medical professionals to
comprise a Health Service Team (HST), which petitioners are
Issue & Ruling: members of. Petitioners signed a Contract of Retainer good for
June-March (one school year), which was continually renewed for
1. W/N Arlene was an employee of Fuji – YES 15 years. After the 15 years, petitioners were informed that their
Fuji cannot claim that Arlene was a contractor because she had an contracts would no longer be renewed because LSGH hired 2 full-
employment contract that happened to have a fixed-term. Fixed- time doctors and dentists, one of whom came from the HST.
term employment contracts are contradictory to the concept of
independent contractorship. The test in this kind of contract is not Petitioners then filed a complaint for illegal dismissal.
the kind of work (necessary/desirable) performed by the employee,
but the “day certain” agreed upon by the employer and employee. Petitioners’ argument: They served 9 hours/week, and were on call
for medical emergencies outside work hours. They were also
In addition, Arlene did not appear to be hired because of any required to attend staff meetings, participate in various school
special skill she possessed (as opposed to Sonza in Sonza v. ABS- activities, made to participate in medical missions, made to
CBN, which Fuji relied on). She also didn’t have celebrity status, and formulate a Health Services Unit Manual, and made to regularly
neither did she have a salary higher than most other news inspect canteen and concessionaire facilities.
36
LSGH’s argument: The HST was hired as independent contractors, Estoquia’s argument: He claimed that both his demotion to RO and
retained for their medical skills and expertise; they were paid subsequent termination were without cause and due process.
retainer fees and not monthly salaries, were not subject to
disciplinary measures, and were not controlled as to the manner Poseidon Fishing’s argument: Estoquia was merely a contractual or
and method of work casual employee whose services could be terminated at the end of
the contract even without just/authorized cause. In addition, at the
Issue & Ruling: W/N petitioners became regular employees time of engagement, he was aware that he was being employed
despite starting out as fixed-term employees – YES only on a “per trip” basis, and at the end of each trip for which he
was hired, his employment would be terminated.
The SC opened by affirming the NLRC finding of EER, and stating
that fixed-term contracts will be upheld as such only if the term was LA, NLRC, and CA: Estoqoia was a casual employee who became
voluntarily and knowingly entered into by the parties who must regular since he served more than one year.
have dealt with each other on more or less equal terms, with neither
party exercising moral dominance over the other. Thus, a contract Issue & Ruling:
that was initially fixed-term may still pave way for the regularization
1. W/N Estoquia was a fixed-term employee whose
of the employee if repeatedly renewed, as was in the case of Fuji v.
termination was valid because of the end of the trip – NO
Espiritu.
The SC found that the repeated hiring of Estoquia after each trip
In this case, the petitioners’ contracts were indeed repeatedly was merely a ruse on the part of Poseidon to frustrate Estoquia’s
renewed, indicative of the necessity of their work. That being said, acquisition of security of tenure. His job was related directly to the
the fixed-term nature of their contracts will be upheld only if it business of Poseidon and therefore, necessary & desirable, and
appears that they were on more or less equal footing with the therefore, he should be considered “regular” on that factor alone.
employer at the time of negotiation.
Petitioners misapplied the ruling in Brent. The employment contract
The fact that the Contracts of Retainer in this case were contracts in this case failed to state an actual/specified date for termination
of adhesion solely prepared by LSGI, an indicator against “equal of the employment period. The fact that he was also repeatedly
footing.” The Contracts also did not specify what kind of jobs rehired further cements the status of his work as necessary and
petitioners would take, yet contained a provision that LSGH, may desirable.
terminate the contract should the worker fail to perform the task
All circumstances considered (no terminated date in employment
assigned. This clearly showed that LSGH had the power of control.
contract, repeated rehiring, and actual nature of work), Estoquia is
Held: Petitioners are fixed-term employees who became regular by a regular employee of Poseidon.
virtue of the repeated renewal of the yearly employment contracts.
2. W/N Estoquia is a seasonal employee – NO
Case remanded to NLRC for computation of separation pay and
The activity of catching fish is a continuous process that is hardly
back wages.
seasonal in nature. In this case, petitioners have not shown that
private respondent was informed that he will be assigned to a
“specific project or undertaking.” As earlier noted, neither has it
Poseidon Fishing v. NLRC (2006) been established that he was informed of the duration and scope
Boat crew; promotion and then demotion; failure to record one call; of such project or undertaking at the time of their engagement.
where the employment contract fails to specify a date, it is not for a
Held: Estoquia is a regular employee who was illegally dismissed.
fixed-term
As such, he is entitled to back wages and other benefits without
Facts: Respondent Jimmy Estoquia was hired as boat crew for deductions/conditions.
Poseidon Fishing. First, he was Chief Mate, then promoted to Boat
Captain, then later demoted to Radio Operator. As RO, he
monitored daily activities in the office and logged names of those
Fabella v. San Miguel Corporation (2007)
who would call.
Repeated hiring of relief salesmen; SMC used “new system” to justify
One day, he failed to record a morning call in one of the logbooks fixed-term contracts; fixed-term contracts not upheld since found to
but recorded it in the other logbook. When he reviewed both be a ruse to prevent tenurial security acquisition
logbooks, he corrected the omission in the first one. Petitioner
Facts: Petitioners were hired by SMC as “Relief Salesmen” under
Terry de Jesus noticed the oversight and ordered Estoquia to
fixed-term employment contracts. They were repeatedly rehired for
explain.
2-6 years (different durations for different petitioners) until SMC
The next day, Estoquia was summoned to receive his separation pay refused to enter into another contract with them.
of P55k. He refused to accept it, believing he did nothing wrong
SMC’s argument: There was never an intent to hire them
worth terminating his employment for, and filed a complaint for
permanently; they were hired only because of intermittent needs to
illegal dismissal.
37
fill in work vacuums because of SMC’s transition to a new system The Court also agreed with the CA that even assuming that the
of product sale and delivery. Petitioners’ employment periods were respondents were project employees, they nevertheless have
coterminous with the completion of the training periods of regular attained regular status because of the continuous rehiring.
Route Crew.
Not fixed-term employees
Petitioners filed illegal dismissal case before the LA. Fixed-term employment is valid only when both employer and
employee negotiated the employment contract on more or less
Issue & Ruling: Whether petitioners were fixed-term equal footing, as when the prospective employee is in a position to
employees or regular employees – REGULAR be able to make demands upon the employer, in which case the
law sees less of a need to afford stringent protections.
SMC did not dispute the necessity or desirability of the work
performed by employees. They bank their arguments on the fact In this case, GMA merely hired and rehired respondents on fixed
that the fixed-term contracts were entered into validly. terms depending on its needs, which is a clear indication that GMA
and the respondents are not more or less on equal footing.
The SC found that the contracts were invalid, and that they were
utilized to deprive petitioners of their security of tenure. One of the In addition, the SC found that respondents were not in a position
employment contracts (entered into in 1995) stated that the to refuse signing the fixed-term contracts (which were actually cash
transition period would be 12 months, yet upon expiry, the disbursement vouchers).
petitioner was re-hired for another 4 months. And even before this,
said petitioner was already working for SMC as early as 1992, one- Held: Respondents are regular employees; their fixed-term
year before SMC began its shift into its new Pre-Selling System. contracts cannot be upheld as such because they were not on equal
footing at the time of negotiations.
Therefore, the NLRC was correct in concluding that the “new
system” was not the basis for the creation of the fixed-term
contracts, and that the periods were only fixed to prevent the
acquisition of tenurial security. IV. LEGITIMATE JOB CONTRACTING AND LABOR-ONLY
CONTRACTING
Held: Petitioners are regular employees; the validity of their fixed-
term employment contracts cannot be upheld because the periods Legitimate Job Contracting
were clearly fixed to merely prevent the employees’ acquisition of
In legitimate job contracting (LJC), businessman “A” may choose to
tenurial security.
assign a specific piece of work to contractor “B,” who then assigns
the work to employees “C.” In this case, there is an EER between
B and C, but not between A and B or between A and C. This is
GMA Network v. Pabriga (2013) assuming that B is a fully-qualified contractor.
Hiring by GMA as technical operators; alleged mere substitutes;
In this case, B is a direct employer while A is an indirect employer.
employees are neither project nor fixed-term because of repeated
rehiring and lack of equal footing between employer and employee LJC has four features:
1. There are at least three parties: the principal, the contractor,
Facts: Respondents were hired by GMA as Technical Operators,
and the employee. There may also be a subcontractor, in case
Transmitter/VTR men, maintenance staff, and cameramen. Due
the job is subcontracted further;
to miserable working circumstances, they filed a complaint before
2. The contract calls for a specific job, work, or service;
the NLRC. When GMA discovered the complaint, they were barred
3. The job, work, or service is to be completed within a definite
from entering the premises and reporting for work. All their
or predetermined period; and
requests to be allowed to work again were totally ignored, so they
4. The contracted job, work, or service may be performed inside
or outside the premises of the principal.
Issue & Ruling: Whether respondents are regular, project, or
Note: not all instances of job contracting are trilateral (involve three
fixed-term employees – REGULAR
parties). Jurisprudence has recognized another kind of
Not project employees independent contractor: individuals with unique skills and talents
The Court started by saying that the jobs which respondents were that set them apart from ordinary employees. There is no trilateral
assigned to were clearly within the regular/usual business of GMA. relationship in this case because the independent contractor
The mere fact that they were considered substitute or fill-ins does himself or herself performs the work for the principal (Fuji TV
not negate the nature of the jobs they perform. Network v. Espiritu).
In addition, another circumstance negating project employment is D.O. 174-17 (Implementing Arts. 106-19 of the Labor Code)
the fact that there were no reports made to the DOLE office of does not apply to independent contractorship, i.e. contracting
completion of any projects. out of job or work to a professional or individual with unique skills
and talents who himself performs the job or work for the principal
38
(DOLE D.C. No. 01-17, Clarifying the Applicability of D.O. 174-17, Definition of “Right to control”
Sec. V).
Right reserved to the person
Job contractors are required to register with the Regional Office of for whom the services of the
the DOLE. Failure to register gives rise to the presumption that the contractual workers are
contractor is engaged in labor-only contracting (DOLE D.O. 174-17, performed, to determine not
No definition
only the end to be achieved,
Sec. 14).
but also the means and
Officials and employees of the DOLE are prohibited from engaging manners used to reach that
or having interest in any contracting or subcontracting business end
(DOLE D.O. 174-17, Sec. 34).
Definition of “Substantial Capital”
Comparison of DOLE Department Orders 18-A (2011) and 174- For corporations,
17 (2017), both implementing Arts. 106-109 of the Labor Code partnerships, and
cooperatives: P3,000,000.00
18-A (2011) 174-17 (2017) P5,000,000.00 for both
worth in paid-up capital
stocks/shares categories (corporations,
Coverage
partnerships, & cooperatives; and
All parties of contracting and sole proprietorships
All parties in an arrangement with
sub-contracting arrangement
EER. For single proprietorships:
with EER.
P3,000,000.00 net worth
Definition of “Contractor”
Definition of “Trilateral Relationship”
Provides either services,
Provides services for a specific Relationship between the
skilled workers, temporary
job or undertaking farmed out by three parties involved in a
workers, or a combination of
a principal under a Service contracting/subcontracting
services to a principal under a No definition
Agreement arrangement: (1) principal, (2)
Service Agreement
contractor, (3) contractual
Definition of “contractor’s employee” workers
Includes regular employees of Legitimate contracting/subcontracting

the contractor whose
Refers only to employees of
functions are not dependent
contractor hired to perform or
on the performance or Labor-only contracting
complete a job or work farmed
completion of a specific job,
out by the principal
work, or service within a Essential element (EE): the
definite period of time contractor/subcontractor merely
recruits, supplies, or places workers
Net Financial Contracting Capacity to perform a job for a principal
Formula to determine
contractor’s financial capacity
to carry out the job, work or Confirmatory elements (CE)
1. Contractor has no
service.
substantial capital or
Two ways (1st CE has two
investments in the form
No definition requisites, both of which must be
of […]; or
met):
2. Contractor has no right
of control over
[Assets] – [Liabilities] = K employee’s performance
of work. (1)
1. Contractor/subcontractor
Definition of “Principal” does not have substantial
capital OR does not have
Any person (natural or juridical),
Any employer who farms out investments in the form of
whether an employer or not, who
a job, work, or service to a tools, equipment,
farms out a job or work to a
contractor machineries, supervision,
contractor
work premises, etc.; AND
39
2. Contractor’s/subcontractor’s CA: Peerless and Excellent are engaged in labor-only contracting,

employees recruited and finding that they provided only manpower to Coke.
placed are performing
activities directly related to Issue & Ruling: Whether Peerless and Excellent are legitimate
the main business operation job contractors or labor-only contractors – LABOR-ONLY
of the principal CONTRACTORS
The Court referred to the then-in-force DOLE D.O. 18-02 which

defined LOC as an arrangement where the contractor or
OR
subcontractor merely recruits/supplies/places workers to perform
a job (ESSENTIAL ELEMENT), and any of the ff. elements
(CONFIRMING ELEMENTS) are present:
(2) Contractor or subcontractor 1. Contractor/subcontractor does not have sufficient capital or
does not have right to control investment which relates to the job, and the employees are
performance of work of employee
performing activities related directly to the main business of
the principal; or
2. The contractor or subcontractor does not exercise the right to
Trilateral relationship in legitimate contracting control over the performance of the work of the contractual
employee.
There is a trilateral relationship because of the existence of at least
three parties: (1) the principal, (2) the contractor, and (3) the In analyzing the contracts between Coke and Peerless & Excellent,
employee (Omnibus Rules Implementing the Labor Code, Book III, it was found that: (1) the contractor retained the powers to select
Rule VIII-A, Sec. 3). As between the principal and the contractor, & engage and pay wages; and (2) the extent of control that Coke
there is contract for a specific job, work, or service (Service exercised was merely on the result to be accomplished by the work
Agreement), and as between the contractor and the employee, or services specified, and not the means and methods of
there is a contract of employment. If the contractor chooses to accomplishing the result. This is what the LA & NLRC used.
subcontract the job further, such contractor becomes a principal to However, the CA did not limit itself to what the contract said, but
that subcontractor insofar as their relationship goes. looked at how the parties actually operated; it looked into the
Service Contracts.
Between the principal and contractor, the governing laws are the
Civil Code and other commercial laws. Between the contractor and The Service Contracts showed that the sole obligation of Peerless
the employee, the governing laws are the Labor Code and other and Excellent was to provide Coke with services of contractual
special labor laws. employees, and nothing more.
Coca-Cola Bottlers v. Dela Cruz (2009) In addition, there was nothing to prove that P&E had substantial
Coke contracted with LOCs to provide Route Helpers; the Route capital or investment, other than bare allegations.
Helpers were deemed regular employees of Coke
Held: P&E are LOC. Thus, the employees they provided for Coke
Facts: Respondents are “Route Helpers” hired by Coca-Cola should be regarded as Coke’s direct employees.
assigned to work in Coke’s trucks. Some of them were hired
directly, and some were hired through contractors, but none of
them enjoy full salary compared to Coke’s regular sales force. They
Temic Automotive Philippines v. Temic Automotive Phils. Inc.
filed a complaint for regularization before the LA, arguing that their
Employees Union (2009)
services are necessary & desirable in Coke’s regular business.
Facts: Members of respondent are rank-and-file employees
Coke’s argument: It entered into a contracting agreement with
working for the warehouse department of Temic Automotive; they
Peerless and Excellent Partners Cooperative, Inc. (Excellent) to
are in charge of electronic braking systems and comfort body
provide personnel for various kinds of work. Excellent retained the
electronics, and they work as clerks, handlers, and encoders. At the
“4 powers” (hiring, dismissal, wages, and control), in exchange for
same time, Temic contracts out some of the work in the warehouse
which Coke paid Excellent a fee. Thus, there was no EER between
department to three independent forwarders who have their own
Coke.
employees. Temic’s regular employees and the employees of the
Both parties heavily contest the degree of control exercised by forwarder all share the same work area and tools, which all belong
Coke; respondents argue that they work under supervisors from to Temic. This prompted the union to demand that the employees
Coke, while Coke argues that they only cared about the results of of the forwarders be absorbed into Temic’s regular employee force,
respondents’ work. which Temic contended as invalid, arguing that their arrangement
with the forwarders constitute LJC, and that the regular employees
LA and NLRC: Dismissed complaint for lack of jurisdiction, finding and the forwarders’ employees perform different functions.
no EER between respondents and Coke.
40
Issue & Ruling: W/N the employees of the forwarders should itself created. Further, it was PG who dismissed them by informing
be considered as part of Temic’s regular workforce – NO them that their contracts would no longer be renewed.
Job contracting is considered as legal only if it has been entered PG’s argument: No EER between PG and petitioners because all 4
into in good faith and without intention to undermine employees’ indicators of EER were exercised by either Promm-Gem or SAPS.
security of tenure.
LA, NLRC and CA: No EER between petitioners and PG; Promm-Gem
On the matter of the legality of the contracting itself, the SC found and SAPS are LJCs. The 4-fold test was met by Promm-Gem and
that the contracting arrangement with the forwards has been in SAPS.
place since 1998 and no evidence shows that regular employees
have been displaced/dismissed by the forwarders’ employees since Issue & Ruling: W/N petitioners are regular employees of
then. Neither are there instances showing that the outsourcing has Procter & Gamble – YES
resulted in a reduction of work hours or a splitting of the bargaining
Promm-Gem is a legitimate job contractor. Regarding substantial
unit, either of which would have made the contracting arrangement
capital or investment: as of 1990, its authorized capital stock was
illegal.
P1 million and its paid-up capital only amounted to P500,000.00. It
On the matter of whether certain forwarders’ employees should be also had its own warehouse and office space, its own vehicles for
considered regular employees, the SC ruled that forwarding its business, and had clients other than PG. It also supplied its
services should be viewed as a whole package involving the entire workers with the relevant materials necessary to work with. In
transport service, include packing, loading, handling, and shipping. addition, it considered the complainants working under it to be its
regular employees.
Merely performing similar services between the forwarders’
employees and the company’s employees does not automatically SAPS, on the other hand, is a labor-only contractor. Its paid-up
mean that the former are workers of the company. The SC applied capital is only P32,500.00. It likewise has no substantial investment
the control test in determining which party controls which in tools, equipment, or other assets. One month’s worth of wages
employees (the forwarders control the manner and method of their for its workers already amounted to P44,561.00, yet it had a 6-
employees’ work, while Temic controls the manner and method of month contract with PG. Its paid-in capital of P31,250.00 is not
their employees work). sufficient for the period required for it to generate its needed
revenue to sustain its operations independently.
In addition, the contracting services were already in place at the
time the CBA was signed. The forwarders’ employees were not part Substantial capital refers to capitalization used in the
of the bargaining unit as already constituted. Likewise, the performance or completion of the job, work or service
evidence that the union itself presented showed that the contracted out. In the present case, SAPS has failed to show
employees of the forwarders performed functions directly related substantial capital. In addition, merchandising and promotion are
to forwarding. considered to be directly related to the business of manufacturing,
which is PG’s principal business. Since SAPS has no substantial
Held: Petition granted. The forwarders’ employees are not regular capital or investment as well, it is engaged in LOC. Therefore, its
employees of Temic because they: (1) perform functions directly workers are considered direct employees of PG.
related to the contracted job of forwarding, and (2) are not
controlled by Temic on the manner and method of their work. Held: Petition partially granted. Promm-Gem’s workers are
considered to be employees of Promm-Gem, but those working for
SAPS are direct, regular employees of Procter & Gamble.
Regardless, all employees were dismissed illegally; Promm-Gem
Aliviado v. Procter & Gamble (2010) failed to comply with substantive due process, while SAPS
dismissed the employees upon the initiative of PG.
Facts: Petitioners worked as merchandisers for PG, starting from
1982 (some as late as 1991) until their terminations in 1992-1993.
They signed employment contracts with job contractors Promm-
Gem or SAPS, each employment contract lasting around 5 months Elements of legitimate contracting
at a time, and their wages also came from Promm-Gem or SAPS.
• The contractor/subcontractor is engaged in a distinct and
PG, which is primarily engaged in the manufacture and production
independent business and undertakes to perform the job or
of health products, contracted with Promm-Gem and SAPS for
work on its own responsibility, according to its own manner
promotion and merchandising of its products. Petitioners later filed
and method;
a complaint for regularization.
• The contractor/subcontractor has substantial capital to carry
Petitioners’ argument: They were already hired by PG to work long out the job farmed out by the principal on his account,
before Promm-Gem and SAPS even existed. After PG’s realignment manner, and method, OR investment in the form of tools,
program, they were ordered to report to these agencies which PG equipment, machinery, and supervision;
41
• In performing the work farmed out, the Vinoya v. NLRC (2000)

contractor/subcontractor is free from the control and/or
direction of the principal in all matters connected with the Facts: Respondent Regent Food Corp. (RFC) is engaged in the
performance of the work except as to the result thereto; and manufacture and sale of various food products; its president is
• The Service Agreement ensures compliance with all the respondent Ricky See. Petitioner Vinoya was hired as sales
rights and benefits for all the employees of the representative until his termination in 1991.
contractor/subcontractor under the labor laws.
Petitioner’s allegation: He was hired by RFC as sales representative,
Source: Sec. 8, DOLE DO 174-17 he was issued an ID, he reported daily to the RFC office, he was
assigned to various supermarkets and stores where he booked
Neri v. NLRC (1993) sales orders and collected payments, he was required to put up a
The law does not require both substantial capital and investment in P200.00 bond to guarantee his performance, he was under the
the form of tools, equipment, machineries, etc. for a contractor to be direct control and supervision of RFC employees, and that he was
considered legitimate transferred to PMCI, an agency which provides RFC with contractual
workers, after which he was assigned as sales representative, and
Facts: Building Care Corporation (BCC) is a company which subsequently terminated. Since the dismissal was without notice or
provides janitorial, maintenance, engineering, housekeeping, investigation, he claims illegal dismissal.
security, and other specific services to various firms. It hired
petitioners and assigned them to work with Far East as radio Respondent’s allegation: No EER; Vinoya is an employee of PMCI, an
operator and the other as janitor, and later as messenger. It was independent service contractor. RFC admitted it exercised control
contracted by Far East Bank. Subsequently, petitioners sued Far East and supervision over Vinoya, but it did this in coordination with
to compel the latter to recognize them as regular employees. PMCI. The termination of Vinoya was merely due to the expiration
of the term in the Contract of Service.
Petitioners’ argument: BCC had no investment in the form of tools,
equipment, machineries, etc. which are necessary in the conduct of LA: RFC was the true employer of Vinoya, applying the control and
its business. They also argue that they performed functions directly wage test. Additionally, the termination was brought about by
related to the principal business of Far East. instructions from RFC.
LA & NLRC: No EER between petitioners and Far East. BCC had NLRC: PMCI is an independent contractor with substantial capital
substantial capital and is therefore a legitimate job contractor. and is the true employer of Vinoya.
Issue & Ruling: W/N petitioners should be considered as direct Issue & Ruling: Whether Vinoya is an employee of RFC or of
regulary employees of Far East – NO PMCI – RFC
There is no need for BCC to prove investment in the form of tools, PMCI has authorized capital stock (ACS) of P1 Million, P300,000.00
equipment, machineries, etc. because it has already proben of which is subscribed, and P75,000.00 is paid-in. While proving
substantial capital (P1 million fully subscribed and paid for). substantial capital no longer requires proving investment, this is
not the only requirement.
The law does not require both substantial capital and
investment in the form of tools, equipment, machineries, etc. In Neri, the SC also considered, in addition to the ACS, the fact that
This is clear from the use of the conjunction “or.” the independent contractor performed the contract according to
its own manner and method.
Further, the SC has already ruled that janitorial, security, and other
similar services may be considered directly related to an employer’s But even in the substantial capital requirement, PMCI already falls
principal business, they are not necessary in the conduct of the short. P75,000.00 worth of paid-up capital cannot be considered
employer’s principal business. In addition, BCC’s status as LJC has substantial capitalization. Along with that, PMCI was not carrying
already been affirmed in ALU-TUCP v. NLRC. on an independent business, and neither was it performing the
contract according to its own manner and method. RFC had the
Also, even assuming that petitioners were performing activities power to require the workers to work more than eight hours, and
necessary to the principal business of Far East, the power of control even petitioner himself admitted that RFC exercised control and
nevertheless remained with BCC. Far East merely controled the end- supervision over him.
result of the task; the manner and methods were controlled by BCC.
It was also BCC which hired and selected petitioners and had the Also, PMCI was not performing a specific and special job or service.
power to reassign petitioners. Its only undertaking was to provide RFC with a temporary
workforce to carry out whatever service RFC may require.
Held: Petition dismissed. Petitioners are employees of BCC, not of
Far East. Lastly, the job performed by Vinoya was one directly related to the
principal business of RFC. Sales is directly related to the business of
manufacturing.
42
The SC also applied the four-fold test to find that RFC was the true Lastly, the evidence is clear that respondents performed activities
employer: it was the one who hired and selected Vinoya, the wages which were directly related to petitioner’s main line of business.
to paid to Vinoya may have been delivered by PMCI but actually Petitioner is primarily engaged in manufacturing and marketing of
came from RFC, RFC had the power to dismiss Vinoya as per the beer products, and respondents’ work of segregating and cleaning
Contract of Service, and Vinoya was under the control and bottles is unarguably an important part of its manufacturing and
supervision of RFC, not PMCI. marketing process.
Held: PMCI is a labor-only contractor, and therefore, Vinoya’s Held: AMPCO is a labor-only contractor because it has neither
true employer is RFC. Because of Vinoya’s length of service, he substantial capital nor investment, and that it did not exercise
should be considered a regular employee. control over the workers it allegedly employs. Thus, respondents
are direct employees of SMC.
San Miguel Corporation v. Semillano (2010)

Baguio v. NLRC (1991)
Facts: Respondents were hired by AMPCO to work in SMC’s Hiring of construction contractor to build an annex building; under
Bottling Plant as segregators, cleaners, loaders, unloaders, and Art. 109 of the LC, the principal is solidarily liable for all the
whatever job SMC gave them; they also used SMC’s equipment. The employee’s claims for any violation of the LC, whether the
contract lasted more than 6 months. Subsequently, SMC entered arrangement is LOC or LJC
into a contract with AMPCO designating AMPCO as the employer
of respondents. As such, respondents were unable to claim the Facts: Respondent Feliciano Lupo, a building contractor, entered
benefits due to regular employees. into a contract with co-respondent General Milling Corp. (GMC), a
corporation engaged in flour and feeds manufacturing, for the
On 1995, they were barred from entering SMC premises, after construction of an annex building inside GMC premises. With this,
which they were told to wait for further instructions from SMC. They LUPO hired petitioners as carpenters, masons, or laborers, after
never did. which he terminated their employments on different dates.
Petitioners’ allegation: They were under the control of SMC, and Petitioners filed a case against Lupo and GMC for unpaid wages.
SMC merely utilized AMPCO to evade the obligation to pay benefits
due. LA: Lupo and GMC are solidarily liable based on Art. 109 of the LC.
Respondent’s allegation: AMPCO is the employer; AMPCO paid the NLRC: GMC is not liable, only Lupo is, because petitioners were not
wages. meant to be employed by GMC, but only by Lupo.
Issue & Ruling: W/N AMPCO is a legitimate job contractor – Issue & Ruling: W/N GMC is solidarily liable with Lupo for the
NO petitioners’ unpaid wages –YES
Under DOLE DO 10 (1997), there is LJC when the contractor (1) Petitioners’ contentions are based on Art. 106 of the LC, which
carries on an independent business and undertakes the work free provides that the principal and the contractor are solidarily liable
from the control of the employer except as to the result, AND (2) for wage claims. However, GMC and the NLRC argue that Art. 106
the contractor has substantial capital or investment. is inapplicable because it is only applicable where the work
performed by the contractor’s employees are directly related to the
AMPCO’s substantial capital was dedicated not to job contracting, principal business of the employer.
but to its main business of trading and maintaining a store. Neither
did it have substantial investment in equipment, tools, machineries, The SC found that GMC should be solidarily liable, but the premise
tools, etc. All of the tools utilized by respondents are owned by is not Art. 106 of the LC, because it applies to LOC, which is not the
SMC—AMPCO therefore has no independent business. case here. The construction of an annex building has no relation
whatsoever with GMC’s principal business of flour and feeds
The SC also found that it was SMC who had the power of control manufacturing, therefore, LOC cannot exist.
over respondents, and not AMPCO, when AMPCO told respondents
to “wait for instructions” from SMC regarding the prohibition from The premise should be Art. 107, which provides that the solidary
entering premises. liability clause in Art. 106 of the LC applies to “indirect employers,”
i.e. persons/corporations which, not being an employer, contracts
AMPCO’s certificate of registration as an independent contractor with an independent contractor for the performance of any work
from DOLE is not conclusive evidence of its status as such. (legitimate job contracting).
Registration merely prevents the presumption of LOC from arising,
but it may still be proven through consideration of the totality of There is [legitimate] job contracting where (1) the contractor carries
the facts. on an independent business on his own account and according to
his own manner and method (except as to the result of the work),
43
and (2) the contractor has substantial capital or investment in the Petitioners’ allegation: They were under the control of SMC, and
form of tools, machineries, equipment, etc. SMC merely utilized AMPCO to evade the obligation to pay benefits
due.
Art. 109 provides that the solidary liability of the principal (in case
of LOC) and of the indirect employer (in case of LJC) with the Respondent’s allegation: AMPCO is the employer; AMPCO paid the
contractor extends to all claims of violation of the LC. wages.
Thus, since GMC is an indirect employer, he falls under the ambit Issue & Ruling: W/N AMPCO’s registration is sufficient proof
of Art. 109 and is solidarily liable for claims that the employee may that AMPCO is a legitimate contractor – NO
pursue, even against Lupo.
Under DOLE DO 10 (1997), there is LJC when the contractor (1)
Additionally, under Art. 108, GMC should have required Lupo to carries on an independent business and undertakes the work free
post a bond equal to the cost of labor under the contract. Since no from the control of the employer except as to the result, AND (2)
bond was posted, GMC must answer for whatever liabilities Lupo the contractor has substantial capital or investment.
may have incurred, and just go after Lupo for such advances.
AMPCO’s certificate of registration as an independent
Held: GMC is an indirect employer of petitioners, and thus is contractor from DOLE is not conclusive evidence of its status
solidarily liable with Lupo for the unpaid wages. as such. Registration merely prevents the presumption of LOC
from arising, but it may still be proven through consideration
NOTE: The SC, in Rosewood Processing v. NLRC (1998), has had an of the totality of the facts.
opportunity to resolve the apparent unfairness resulting from
making the principal in an LJC solidarily liable with the Held: AMPCO is a labor-only contractor because it has neither
contractor/subcontractor for all claims of LC violations, not just substantial capital nor investment, and that it did not exercise
claims for unpaid wages or benefits. control over the workers it allegedly employs. Thus, respondents
are direct employees of SMC.
The Court ruled that in case of legitimate contracting, the principal
is solidarily liable with the contractor/subcontractor only when the
liability is for failure to pay wages or benefits derived from or
provided for by law. In case the liability is invested with a punitive Consolidated Building Maintenance, Inc. v. Asprec (2018)
character (i.e. award for back wages, separation pay, damages, etc.) Pizza Hut case; the existence of registration in favor of a contractor
the liability is solely that of the contractor. is a strong badge of legitimacy in favor of the contractor. There is a
presumption of regularity on the part of the DOLE when it issues a
Liability derived from law =/= liability derived from a judgement Certificate, thus, the burden now falls on the one alleging LOC to
imposing a punishment. disprove the presumption
The only time that a principal is solidarily liable even for liabilities Facts: Petitioner CBMI is a corporation providing janitorial, kitchen,
invested with a punitive character is if there is a finding that the messengerial, etc. services to various clients, one of which is Pizza
principal committed or conspired in the illegal dismissal. Hut.
Respondents’ allegation: they are regular employees of Pizza Hut,

one hired as team member/slice cashier and the other as rider.
Mandatory registration requirement and effect of
Upon the expiration of their respective contracts, they were
nonregistration
each told to go on a leave of at least one month before being re-
San Miguel Corporation v. Semillano (2010) hired. Upon rehiring, they were told to sign a contract with CBMI,
after which they resumed the same duties at the same branch.
Facts: Respondents were hired by AMPCO to work in SMC’s
Bottling Plant as segregators, cleaners, loaders, unloaders, and CBMI’s allegation: Respondents were its employees. They were
whatever job SMC gave them; they also used SMC’s equipment. The investigated based on an incident report that one delivery boy
contract lasted more than 6 months. Subsequently, SMC entered delivered 2 excess boxes of pizza, which was not reported.
into a contract with AMPCO designating AMPCO as the employer
On this regard, respondent Asprec claimed to have no involvement,
of respondents. As such, respondents were unable to claim the
yet because of this, he was suspended. Bataller, on the other hand,
benefits due to regular employees.
to whom the rider delivered the excess boxes recognized the error
On 1995, they were barred from entering SMC premises, after only after the erring rider left, but it was allegedly retrieved later
which they were told to wait for further instructions from SMC. They that day. Yet, she was prohibited from returning to work.
never did.
Both respondents later filed a case for illegal dismissal.
Issue & Ruling: Whether CBMI is a legitimate contractor or a

labor-only contractor – LEGITIMATE CONTRACTOR
44
In proving that it’s a legitimate contractor, CBMI presented its During the mandatory conference, Jobcrest clarified that the
Certificate of Registration with the DOLE, which is required under petitioners were not dismissed from employment and offered to
DO No. 18-02 (the DO in force at the time). The existence of accept them when they report back to work. The petitioners refused
registration in favor of a contractor is a strong badge of and insisted that they were regular employees of Sunpower,
legitimacy in favor of the contractor. There is a presumption of not Jobcrest.
regularity on the part of the DOLE when it issued the
Certificate, which is valid for 3 years, thus, the burden now falls Issue & Ruling: Whether Jobcrest is a legitimate contractor or
on respondents to disprove the legitimacy of CBMI as a a labor-only contractor – LEGITIMATE CONTRACTOR
contractor.
Ordinarily, the presumption is that a contractor is a labor-only
Yet, the validity of the CoR is only from 2008-2011, so the status of contractor until proven otherwise by the one alleging legitimacy.
CBMI prior to the CoR should be based on their activities and status However, the presumption is reversed when the contractor is
prior to the registration. Nevertheless, CBMI meets the duly registered with the DOLE. In case the contractor presents a
requirements of LJC, after the Court looked into its assets and CoR from the DOLE, there is now a presumption (albeit rebuttable)
authorized capital stock (its paid-up capital amounted to P3.5 that the contractor is legitimate. Thus, the burden now falls on the
million; the law in force at the time required merely P3 million paid- party alleging LOC to disprove this presumption.
up capital to be considered substantial).
At this point, the SC looked into other factors which further
Regarding the element of control, the employment contracts also reinforced the legitimacy of Jobcrest: (1) it has substantial capital—
place the power of control squarely within CBMI. its paid-up stock at the time of its registration amounted to
P500,000.00; while the law in force, DOLE DO 18-A required a
Held: CBMI is the employer of respondents, since the proof of minimum of P3,000,000.00 paid-up capital stock, the certificate of
registration (along with the other elements of LJC) constitute strong registration was issued under the previous DO 18-02, which
evidence in favor of LJC. prescribed no amount, so the CoR remains valid until expiration—
amounting to P8 million by the end of December 2011; (2) it
exercised control over the manner and method of petitioners’ work;
and (3) the 4-fold test for determining regular employment was
Mago v. Sun Power Manufacturing (2018) met by Jobcrest.
Contractor’s employees who were both in a relationship went on
leave due to pregnancy of one; violation of contractor’s policies; Held: Jobcrest is a legitimate job contractor, and thus should be
ordinarily, the presumption is that a contractor is a labor-only considered the employer of the petitioners, not Sunpower. CA
contractor until proven otherwise by the one alleging legitimacy. decision affirmed.
However, the presumption is reversed when the contractor is duly
registered with the DOLE
Facts: Petitioners are former employees of Jobcrest, a contracting Liability of the principal to the contractor’s employees
corporation registered with the DOLE as a contractor.
Jaguar Security and Investigation Agency v. Sales (2008)
In 2008, Jobcrest entered into a Service Contract with Sunpower, a Both principal and contractor/subcontractor (whether the
corporation engaged in the manufacture of computer and arrangement is legitimate or labor-only) are solidarily liable for
electronic parts, whereby Jobcrest would provide business process employees’ claims of unpaid monetary benefits
services. Jobcrest then trained its employees (petitioners) for
Facts: Petitioner is a company engaged in providing security
engagement with Sunpower, after which they were assigned to
services to its clients, one of whom is Delta Milling Industries, Inc.
Sunpower’s plant. Petitioners were under the supervision of a
Respondents were hired by petitioner as security guards, and
Jobcrest employee during this assignment.
assigned at Delta premises. On 1998, two of them were dismissed
In 2011, Sunpower allegedly effected an operational alignment by Jaguar, and claimed illegal dismissal, back wages, and
which effected some of its segments. During this time, both separation pay. The rest filed a claim for unpaid monetary
petitioners were on paternity & maternity leave because they were benefits.
expecting a child. When petitioner Leo formally filed his paternity
LA: Dismissed the illegal dismissal claim, but ruled that Jaguar and
leave, he was informed that his employment was terminated, yet
Delta were solidarily liable for the unpaid money claims.
Jobcrest and his supervisor denied this fact.
Jaguar filed a partial appeal, arguing that only Delta should be held
Leo was later served a notice that he violated Jobcrest policy by
liable for the payment of the monetary claims.
failing to disclose his relationship with his co-petitioner Leilanie.
Leilanie on the other hand was informed that she would be NLRC: The question of Delta’s liability should not be decided by the
transferred to another company. NLRC. Jaguar is the direct employer of the guards and should be
held principally liable to the employees. As regards the liability of
45
Delta, Jaguar should file a civil action before a regular court to Labor-only contracting (LOC) is defined in Art. 106 of the Labor
prove the liability of Delta. Code, and further in the Implementing Rules of 2011 (D.O. No. 18-
A), and of 2017 (D.O. 174-17).
Issue & Ruling: W/N Jaguar’s cross-claim against Delta may be
raised in the NLRC – NO Elements of labor-only contracting
The liability itself of both Jaguar (contractor) and Delta (principal) Labor-only contracting (LOC) has two kinds of elements: the
is unquestioned: both are solidarily liable for the payment of wages, essential element (EE) and 2 confirming elements (CE). There is LOC
as provided for in Arts. 106, 107, and 109 of the Labor Code. The when the EE is present, and either of the 2 CEs are present.
rationale for this solidary liability is to guarantee payment of the
Thus: LOC = EE + [CE1 or CE2]
workers’ performance of any work, task, job or project, thus giving
the workers ample protection. The EE is that the contractor or subcontractor merely recruits or
supplies workers to perform a job, work, or service.
It is also given that petitioner, if it pays the guards, has the right of
reimbursement against Delta Milling, but this may be raised only in The 2 CEs, either of which may exist with the EE to show the
a civil court; where no EER exists, and no issue is involved which existence of LOC, are:
may be resolved by the LC, the RTC has jurisdiction. 1. The contractor or subcontractor does not have
substantial capital or investment which relates to the job,
Even if the resolution of the issue involves the application of labor
work, or service to be performed AND the employees
laws, but only for the determination of the solidary liability of
recruited, supplied, or placed by such contractor or
the petitioner to the respondent where no employer-employee
subcontractor are performing activities which are directly
relation exists, jurisdiction remains with the civil courts.
related to the main business of the principal;
There is no EER between Jaguar and Delta. In addition, the right to 2. The contractor or subcontractor does not exercise the
reimbursement has not yet arisen because Jaguar has not even paid right to control over the performance of the work of the
the guards yet. contractual employee.
Held: Both Jaguar and Delta are solidarily liable; Jaguar must raise
its claims against Delta with the regular courts and not the NLRC;
According to Sec. 3(l) of DOLE DO 174-17, substantial capital is set
Jaguar’s right to reimbursement has not yet arisen because it has
at least P5,000,000.00 worth of paid-up capital stocks/shares (if the
not paid the guards the monetary claims yet.
contractor is a corporation, partnership, or cooperative), or at least
P5,000,000.00 net worth (if the contractor is a single proprietor).
Effects and liabilities arising from termination of an employee In addition to net worth or paid-up capital stocks/shares, the
of the contractor contractor must also have financial capacity to do the contracted
job, by proving his “Net Financial Contracting Capacity (NFCC).” The
Where termination of employment is caused by the pre- NFCC should equal the contract cost. Further, the Service
termination of the Service Agreement not due to authorized Agreement between the principal and the contractor should
causes under Art. 298 of the LC: Employee’s right to unpaid stipulate a “standard administrative cost” of not less than 10% of
wages and other unpaid benefits including unremitted legal the total contract cost.
mandatory contributions shall be borne by the party at fault,
without prejudice to the solidary liability of the parties pursuant to
the Service Agreement.
Coca-Cola Bottlers v. Agito (2009)
Where termination of employment results from the expiration
of the Service Agreement, or from the completion of the phase The respondents were hired as salesmen for Coca-Cola, but they
of the job/work for which the employee was engaged: the were hired through a job contractor: Interserve. When they were
employee may opt to wait 3 months for re-employment before dismissed, they filed a case for illegal dismissal against petitioner
resigning and transferring to another contractor-employer. Failure Coca-Cola Bottlers and against Interserve.
of the contractor to provide new employment entitles the
LA: Dismissed the case. There was no EER between the respondents
terminated employee to payment of separation benefits, without
and Coca-Cola, since Interserve was a legitimate job contractor, and
prejudice to completion bonuses or other emoluments, including
that their job functions (being salesmen) were not indispensable to
retirement benefits whenever applicable.
the principal business of Coca-Cola, which was the manufacturing
Source: Sec. 13, DOLE D.O. 174 (2017) and bottling of softdrinks. In addition, the LA also considered the
fact that Interserve was registered with DOLE as an independent
job contractor, with its own assets, and it was the one maintaining
the employee records of the respondent.
Labor-only Contracting
46
NLRC: Affirmed the LA’s decision, considering its assets and Coca-Cola’s security guards every time they leave or enter company
registration with DOLE, and the fact that Interserve paid the wages, premises.
and remitted the respondents’ SSS contributions.
The Court noted that the Contract may have provided that Coca-
CA: Ruled against Coke. It found that Interserve’s assets were Cola may request for the removal/replacement of personnel if
insufficient capital and investment for the services it was contracted deemed unable to complete the jobs specified within the time limit,
to perform (the CA was not satisfied with Interserve’s investments but the fact that the Contract did not specify exactly what kind of
worth P710,000.00). In addition, the respondents were using the jobs respondents should be doing, this effectively allowed Coca-
tools and facilities of petitioner in their operations. The CA also Cola to remove/replace contracted workers at will, in the guise of
found that it was petitioner, and not Interserve, which exercised inability to perform their functions. This equates to the power to
control over the respondents. dismiss, which is the strongest indication of power of control.
Issue & Ruling: Whether there is legitimate job contracting or The Contract also stated that Interserve would provide for
labor-only contracting – LABOR-ONLY CONTRACTING replacement personnel in case of absences. But this is a red flag. An
independent job contractor answers only for the results of the work
The two-fold requirement in Art. 106 of the Labor Code that was contracted; they have no obligation to adhere to policies
According to the Labor Code, there are two prerequisites which of the employer on attendance and on how the workers should
must be met in order to find that there is labor-only contracting: perform their jobs.
1. the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, The Contract also stated that it will “employ the necessary
equipment, machineries, work premises, among others, and personnel,” further showing that it had no personnel of its own.
2. the workers recruited and placed by such persons are
performing activities directly related to the principal business In other words, Interserve did not bind itself to perform an
of such employer. identifiable service for Coca-Cola, it merely bound itself to provide
Coca-Cola with specific types of employees.
As regards the second requirement (which the Court discussed
first), the Delivery Agreement between petitioner and TRMD Inc. Irrelevance of the DOLE certification
stated that petitioner is engaged in the manufacture, distribution, The DOLE certification that Interserve is an independent job
and sale of softdrinks. Clearly, the work of respondents, which is contractor is likewise misleading because the Articles of
selling the softdrinks, is directly related to petitioner’s principal Incorporation of Interserve states that its principal business is to
business. This is supported by the fact that they were repeatedly provide janitorial and allied services. Thus, the DOLE certification
re-hired, and that petitioner has numerous departments and offices merely shows that Interserve has substantial capital and equipment
dedicated to Sales. for janitorial and allied services, but not necessarily for sales
services.
As regards the first requirement, the Court noted that while
Interserve may have capital stock amounting to P2M, only P625k HELD: Since Interserve was a labor-only contractor, Coca-Cola is
was paid up. In determining what amount of capital is “substantial” deemed to be the true employer of the respondents and is
for an independent job contractor, there is no set figure; the figure solidarily liable with Interserve not only for claims on wages, but on
is determined as against the type of work the contractor is all claims of violation of the Labor Code. The dismissal is illegal for
obligated to perform for the principal. However, this is impossible failure to show just/authorized cause and is further penalized by
in this case because the Contract between petitioner and Interserve failure to adhere to procedural due process.
does not specifically describe the type of work to be performed; it
only says “tasks and activities considered contractible under
existing laws.”
Garden of Memories Park v. NLRC (2012)
The Court noted that petitioner never submitted any evidence Utility worker for memorial park; the person supplying workers must
regarding the amount that Interserve has invested for its service have substantial capital or investment, the workers must be
vehicles and equipment. Thus, the Court found no reason to performing activities directly related to the primary business of the
overturn the CA’s ruling that Interserve’s investment on equipment principal, and the contractor must exercise control over its employee.
is only worth P710,000.00. Facts: Petitioner is the operator of a memorial park in Pateros,
Power of control Manila, and sells memorial plans and services. Respondent Cruz is
In addition, the Court also used the fact that Interserve did not exert a worker in Garden of Memories, as a utility worker from 1991-
control over respondents, in order to hardline the fact that 1998. She filed a complaint for illegal dismissal and GM moved to
Interserve was merely a labor-only contractor. The Contract have petitioner Paulina Requiño impleaded; GM alleged that it was
between Interserve and Coca-Cola showed that Interserve’s Requiño who was the actual employer of Cruz, because Requiño
was contracted by GM.
personnel were obliged to comply with Coca-Cola’s rules &
regulations, and that they are subject to on-the-spot searches by
47
Respondent’s argument: She worked as a utility worker for GM; the

root of her dismissal is a misunderstanding with her co-worker
Adoracion Requiño about the use of a hose. After 3 days, she was Facts: Petitioners worked as merchandisers for PG, starting from
told that she has been replaced by another worker. 1982 (some as late as 1991) until their terminations in 1992-1993.
They signed employment contracts with job contractors Promm-
Petitioner’s argument: GM is not liable because Cruz was an Gem or SAPS, each employment contract lasting around 5 months
employee of Paulina Requiño, who was hired by GM as an at a time, and their wages also came from Promm-Gem or SAPS.
independent contractor and maintained the park for a price. PG, which is primarily engaged in the manufacture and production
Requiño, for her part, prayed that the complaint be dismissed, of health products, contracted with Promm-Gem and SAPS for
because it was her mother who hired Cruz, and that she (Paulina) promotion and merchandising of its products. Petitioners later filed
merely took over the supervision and management of the workers. a complaint for regularization.
Issue & Ruling: Whether Paulina Requiño is a legitimate job Petitioners’ argument: They were already hired by PG to work long
contractor or a labor-only contractor – LABOR-ONLY before Promm-Gem and SAPS even existed. After PG’s realignment
program, they were ordered to report to these agencies which PG
All three prior tribunals (LA, NLRC, and CA) are one in ruling that itself created. Further, it was PG who dismissed them by informing
Requiño was LOC, that she was not registered as such and lacked them that their contracts would no longer be renewed.
substantial capital or investment.
PG’s argument: No EER between PG and petitioners because all 4
The SC applied Art. 106 of the LC and Secs. 7 & 8 of DOLE DO 10 indicators of EER were exercised by either Promm-Gem or SAPS.
(1997), the latter of which provided the ff. elements of LOC:
1. A person is supplying workers to an employer; LA, NLRC and CA: No EER between petitioners and PG; Promm-Gem
2. Such person does not have substantial capital or investment and SAPS are LJCs. The 4-fold test was met by Promm-Gem and
in the form of tools, equipment, machineries, work premises SAPS.
and other materials; and
3. The workers recruited and placed by such persons are Issue & Ruling: W/N petitioners are regular employees of
performing activities which are directly related to the principal Procter & Gamble – YES
business or operations of the employer in which workers are
Promm-Gem is a legitimate job contractor. Regarding substantial
habitually employed.
capital or investment: as of 1990, its authorized capital stock was
In addition, the SC also applied Sec. 5 of Rule VIII-A of the Omnibus P1 million and its paid-up capital only amounted to P500,000.00. It
Rules Implementing the LC, which added another instance where also had its own warehouse and office space, its own vehicles for
LOC is present: that the contractor does not exercise the right to its business, and had clients other than PG. It also supplied its
control over the performance of the work of the contractual workers with the relevant materials necessary to work with. In
employee. addition, it considered the complainants working under it to be its
regular employees.
In this case, the SC found that both the capitalization requirement
and the power of control are lacking from Requiño. SAPS, on the other hand, is a labor-only contractor. Its paid-up
capital is only P32,500.00. It likewise has no substantial investment
Generally, there is a presumption that contractors are LOC unless in tools, equipment, or other assets. One month’s worth of wages
proven by the one alleging their legitimacy. In this case, GM is the for its workers already amounted to P44,561.00, yet it had a 6-
one alleging legitimacy, but it did not present any evidence to this month contract with PG. Its paid-in capital of P31,250.00 is not
effect. In addition, Requiño was not licensed as a contractor. sufficient for the period required for it to generate its needed
revenue to sustain its operations independently.
Regarding the power of control, the Service Contract Agreement
between GM and Requiño clearly indicates that Requiño has no Substantial capital refers to capitalization used in the
discretion to determine the means and manner by which the performance or completion of the job, work or service
work is performed. Rather, the work should be in strict compliance contracted out. In the present case, SAPS has failed to show
with, and subject to, all requirements and standards of Garden of substantial capital. In addition, merchandising and promotion are
Memories. considered to be directly related to the business of manufacturing,
which is PG’s principal business. Since SAPS has no substantial
Held: Requiño is engaged in LOC, and is considered merely an capital or investment as well, it is engaged in LOC. Therefore, its
agent of GM. As such, any workers she has supplied (including Cruz) workers are considered direct employees of PG.
are employees of GM, who is responsible to the employees of the
LOC as if they were directly employed. Held: Petition partially granted. Promm-Gem’s workers are
considered to be employees of Promm-Gem, but those working for
SAPS are direct, regular employees of Procter & Gamble.
Regardless, all employees were dismissed illegally; Promm-Gem
Aliviado v. Procter & Gamble (2010)
48
failed to comply with substantive due process, while SAPS

dismissed the employees upon the initiative of PG.
W.M. Manufacturing v. Dalag (2015)
Facts: Petitioner (principal) and respondent Golden Rock

Manila Memorial Park v. Lluz (2016) (contractor) entered into a Service Agreement where Golden Rock
would provide “the necessary number of workers” to petitioner,
Facts: Petitioner contracted with respondent Ward Trading and whereby petitioner reserves the right to request for replacement to
Services (WTS) for the latter to render interment and exhumation relive workers as the need arises, for any reason whatsoever.
services and other related operations.
As such, GR hired Dalag to work as Factory Worker for petitioner
Respondent was among those assigned by WTS to work for Manila for 5 months. The employment contract was good for 5 months,
Memorial. They later filed a complaint for regularization, asking and provided that he may be terminated at any time for any cause.
Manila Memorial to consider them as regular workers within the
appropriate bargaining unit, Manila Memorial Park Free Workers A few months later, he was prevented from entering work premises,
Union (Union). Petitioner refused because they were considered so he filed a complaint for illegal dismissal. He alleged that he was
employees of WTS. Respondents joined the Union anyway. hired by GR through LOC.
Respondents were later dismissed by Manila Memorial, so they
Issue & Ruling: W/N W.M. Manufacturing was engaged in
labor-only contracting – YES
Issue & Ruling: Whether WTS is engaged in legitimate job
This is the case where the Court distinguished between the
contracting or labor-only contracting – LABOR-ONLY
essential element (EE) of LOC which is mere supplying of workers,
Petitioner banked its arguments on the sufficiency of capitalization and either of the two confirmatory elements (CEs; see p. 45).
of WTS, and the allegation that it did not control the manner and
The Court ruled that GR had no substantial capital or investment; it
method of respondents’ work.
noted that DO 18-02 defines this not only in the context of financial
The SC reiterated the elements of LOC provided in Art. 106 of the capacity, but also the tools and equipment actually used by the
LC: contractor to perform the job/work/service contracted out. In this
1. A person is supplying workers to an employer; case, Dalag used equipment of petitioner, not of GR. The first
2. Such person does not have substantial capital or investment confirmatory element exists.
in the form of tools, equipment, machineries, work premises
Regarding control, the Court found that the contract may have
and other materials; and
reserved the right of control to GR, but actual control was exercised
3. The workers recruited and placed by such persons are
by petitioner.
performing activities which are directly related to the principal
business or operations of the employer in which workers are Held: Since the EE and both CEs were met (even though only one
habitually employed. CE was needed, GR is engaged in LOC, and Dalag is considered
directly employed.
It also applied DO 18-02 which, in addition to the above elements,
provided that there is LOC if the contractor does not exercise the
power of control over its employees.
Effects of a finding of a labor-only contracting
Looking at the Contract of Services, the SC found that WTS does
not have substantial capital or investment, because the tools and The effects of finding LOC are:
equipment used are all owned by petitioner. The Contract provided 1. The contractor is bypassed, and the principal is deemed to
that Manila Memorial would sell the machineries to WTS, but no have directly employed the employees;
evidence was presented to show that this sale actually took place. 2. The principal and the contractor/subcontractor are solidarily
liable for all claims of the workers, whether stemming from
In addition, Manila Memorial reserved the right to rent the the Labor Code (unpaid wages and other monetary benefits)
equipment should it deem necessary, which is a clear indicator or from a judgement with a punitive character (damages, back
against ownership, since it is a limitation on the supposed owner’s wages, separation pay, etc.)
unlimited right to enjoy and dispose of the thing.
Diamond Farms Inc. v. Southern Philippines Federation of
The SC also found that WTS exercised no control over repsondents,
Labor Workers (2016)
and since WTS was not registered with the DOLE, a presumption
arises that it is engaged in LOC, which has not been rebutted. Facts: Petitioner DFI owned 800 hectares of plantation land which
was covered by the Comprehensive Agrarian Reform Law. It was
Held: WTS is engaged in LOC; Manila Memorial is deemed the
awarded to beneficiaries who were the same farmers already
employer of respondents.
working on it prior to the Agrarian Reform. They organized
49
themselves into a multi-purpose cooperative called (Diamond The principal shall be deemed the direct employer of the
Farms Cooperative or DFC). DFC then entered into an agreement contractor’s or subcontractor’s employees (Sec. 7, DOLE DO 174).
to grow and sell bananas exclusively to DFI. To assist DFC in its
business of selling bananas, it engaged the services of respondent
SPFL who provided workers.
Issue & Ruling: Whether the employer of the plantation

workers is DFI, DFC, or SPFL – DFI
The Court found that SPFL was engaged in LOC., primarily based
on SPFL’s own admissions before the LA and NLRC. That rules out
SPFL as the employer.
DFC cannot be said to be the principal employer because it is DFI

which owns the plantation premises where the workers perform
their jobs. Further, it is DFI that exercises control.
As such, DFI is solidarily liable with SPFL for the claims of the
employees as if they were directly employed by DFI.
Other Prohibitions under D.O. 174
Prohibited practices under D.O. 174
i. Labor-only contracting
ii. Farming out of work to a “cabo”
iii. Contracting out of job/work through in-house agency
iv. Contracting out of job/work through in-house cooperative
which merely supplies workers to the principal
v. Contracting out of job/work by reason of a strike or lockout,
whether actual or imminent
vi. Contracting out of job/work being performed by union
members and such will interfere with, restrain or coerce
employees in the exercise of their rights to self-organization
vii. Requiring the contractor’s/subcontractor’s employees to
perform functions currently being performed by the
principal’s employees
viii. Requiring employees to sign as a condition to employment or
continued employment, an antedated resignation letter, a
blank payroll, a waiver of labor standards, a quitclaim
releasing principal/contractor from liability as to future claims,
or requiring employees to become a member of a cooperative
ix. Repeated hiring of employees under an employment contract
of short duration
x. Requiring employees under a contracting arrangement to sign
a contract fixing the period of employment to a term shorter
than the term of the Service Agreement, unless the contract
is divisible into phases for which substantially different skills
are required and this is made known to the employee at the
time of the engagement; and
xi. Such other practices, schemes, or employment arrangements
designed to circumvent the right of workers to security of
tenure.
Effects of such prohibited practices
50
V. RECRUITMENT OF LOCAL AND MIGRANT WORKERS viii. Contract Substitution
Recruitment of Local Workers Rules on replacement of recruited workers
See: Dept. Order 141-2014 – Revised Rules and Regulations Source: Secs. 37-39, D.O. 141-2014.
Governing Private Recruitment and Placement Agency for Local
G.R.: Employer must pay additional service fee when requesting for
Employment.
a worker to be replaced.
Qualifications for licensure as a private recruitment and
placement for local employment XPT: An employer may have a worker replaced with no cost, or with
• Single proprietorship – owner must be Filipino a refund of 75% of the service fee:
• Partnership/corporation – at least 75% of the authorized • If the worker is certified by a physician to be suffering from a
capital stock is owned and controlled by Filipino citizens medical or mental illness within 1 month from the first day of
(Sec. 4, D.O. 141-2014). work, rendering him incapable of discharging the minimum
requirements of the job; or
Disqualifications: The following may not engage in recruitment • If the worker abandons the job, voluntarily resigns, commits
and placement for local employment: theft, or any other acts prejudicial to the employer or his
1. Those who are convicted of illegal recruitment, trafficking in family within 3 months from the first day of work.
persons, anti-child labor violation, or crimes involving moral
turpitude; If, after 1 month of the receipt of the request from the employer,
2. Those against whom probable cause or prima facie finding of the agency fails to provide a worker to replace the one with the
guilt for illegal recruitment or other related cases exist conditions above, the employer is entitled to a 75% refund of the
particularly to owners or directors of agencies who have service fee.
committed illegal recruitment or other related cases.
The employer is deemed to have waived the right to replacement
3. Those agencies whose licenses have been previously revoked
without cost or with 75% refund, if he fails to avail of either, within
or cancelled by the Department under Sec. 54 of these rules.
30 days after the lapse of either 1 month (for illness) or 3 months
4. Cooperatives whether registered or not under the
(for prejudicial actions of the employee).
Cooperative Act of the Philippines.
5. Law enforcers and any official and employee of the
Department of Labor and Employment (DOLE).
6. Sole proprietors of duly licensed agencies are prohibited from Recruitment and Deployment of Overseas Workers
securing another license to engage in recruitment and
See:
placement (Sec. 5, DO 141-2014).
• RA 8042 (Migrant Workers and Overseas Filipinos Act of 1995),
Fees that may be collected as amended by RA 10022; and
The employment/recruiting agency may not collect any fees from • IRR of RA 10022
the workers, but may charge the following against the employer • Revised POEA Rules and Regulations Governing the
(never against the worker’s salary): Recruitment and Employment of Landbased Overseas Filipino
• Service fee. – The amount is that agreed upon by the agency Workers
and the employer.
• Transportation expenses. – for the transfer of the worker from People v. Panis (1990)
the place of residence to the place of work (Sec. 35, D.O. 141- Any of the acts mentioned in Art. 13(b) may still be considered as
2014). recruitment and placement even if only one prospective worker is
involved; the proviso merely creates a presumption
Acts constituting illegal recruitment
Facts: 4 Informations were filed against Abug, alleging that he
Source: Sec 6, D.O. 141-2014; Art. 38, LC.
operated a private employment agency for employment in Saudi
Committed by a non-holder of a license: Any act of canvassing, Arabia, without being licensed by the Ministry of Labor. He
enlisting, contracting, utilizing, hiring, or procuring workers. allegedly charged and promised employment to 4 individuals.
The provision at hand is Art. 13(b) of the LC:

Committed by either licensed or non-licensed person:
“‘Recruitment and placement’ refers to any act of canvassing,
i. Overcharging
enlisting, contracting, transporting, hiring, or procuring workers, and
ii. False Notice
includes referrals, contract services, promising or advertising for
iii. Misrepresentation to Secure License
employment, locally or abroad, whether for profit or not:
iv. Inducing to Quit
v. Inducement not to employ Provided, that any person or entity which, in any manner, offers or
vi. Recruitment for Harmful Jobs promises for a fee employment to two or more persons shall be
vii. Inspection Obstruction deemed engaged in recruitment and placement.”
51
Abueg’s argument: There is no offense charged because in each of o Must have at least 75% of the authorized and voting
the Informations, he was recruiting only one person. There just capital stock owned and controlled by Filipino
happened to be 4 Informations. However, all acts of recruitment citizens.
must involve dealings with 2 or more persons to constitute an o Must have a minimum paid-up capital of
offense under Art. 13(b) of the LC. P5,000,000.00.
Petitioner’s argument: the requirement of two or more persons is Those with already-existing licenses must, until 2020, increase their
imposed only where the recruitment and placement consist of an capitalization or paid up capital to P5,000,000.00) at the rate of
offer or promise of employment to such persons and always in Seven Hundred Fifty Thousand Pesos (PhP750,000.00) every year
consideration of a fee (second sentence). The other acts mentioned (Rule I, Part II, Revised POEA Rules and Regulations Governing the
in the body of the article (the first sentence) may involve even only Recruitment and Employment of Land-based OFWs of 2016).
one person and are not necessarily for profit.
Issue & Ruling: Which interpretation of Art. 13(b) is correct? –

NEITHER Illegal Recruitment
See: Sec. 6, RA 8042; and Art. 38, LC

The number of persons dealt with is not an essential ingredient of
the act of recruitment and placement of workers. Any of the acts a. Definition
mentioned in the basic rule in Article 13(b) will constitute
recruitment and placement even if only one prospective worker is Committed by a non-holder of a license: Any act of canvassing,
involved. enlisting, contracting, utilizing, hiring, or procuring workers.
The proviso (“provided…”) creates neither a rule nor an exception, Committed by either licensed or non-licensed person:
but merely a presumption that the person is engaged in recruitment i. Overcharging
and placement if, in the course of canvassing, enlisting, ii. False Notice
contracting, transporting, hiring, or procuring, he deals with iii. Misrepresentation to Secure License
two or more persons in consideration of a fee. iv. Inducing to Quit
v. Inducement not to employ
Definition of “Overseas Filipino Worker”
vi. Recruitment for Harmful Jobs
“A person who is to be engaged, is engaged, or has been engaged
vii. Inspection Obstruction
in a remunerated activity in a state of which he or she is not a citizen
viii. Contract Substitution
or on board a vessel navigating the foreign seas other than a
ix. Failure to Submit Reports
government ship used for military or non-commercial purposes or
x. Engagement of Officer/Agent of recruitment/placement
on an installation located offshore or on the high seas; to be used
agency in the management of a travel agency
interchangeably with migrant worker." (Sec. 3[a], RA 8042).
xi. Withholding/denying travel documents from applicant
Deployment of Migrant Workers workers before departure for unauthorized monetary or
Deployment is allowed only in countries where the rights of Filipino financial considerations
migrant workers are protected. The following are recognized as xii. Failure to deploy without valid reason
guarantees of such protection from the foreign country: xiii. Failure to reimburse expenses incurred by the workers in
a. It has existing labor and social laws protecting the rights of connection with his documentation and processing for
migrant workers; purposes of deployment, in cases where the deployment does
b. It is a signatory to multilateral conventions, declaration or not actually take place without the worker's fault.
resolutions relating to the protection of migrant workers;
b. Other prohibitions
c. It has concluded a bilateral agreement or arrangement with
the government protecting the rights of overseas Filipino
workers; and
d. It is taking positive, concrete measures to protect the rights of c. Syndicated Illegal Recruitment
migrant workers (Sec. 4, RA 8042).
Committed by a syndicate - carried out by a group of three (3)
Qualifications for licensure as a private recruitment and or more persons conspiring or confederating with one another.
placement agency for land-based OFWs
• Sole proprietorship: People v. Gallo (2010)
o must be Filipino In establishing conspiracy to commit illegal recruitment by a
o must have minimum capitalization of P5,000,000.00. syndicate, actual proof of direct acts by all conspirators is not needed
• Corporation or partnership: as long as they acted in concert pursuant to the same objective
Facts: Respondent Rodolfo Gallo and 11 others were charged with

syndicated illegal recruitment & estafa. Since the other 9 were still
52
at large, only 3 (including Gallo) defendants were tried, and the

other 2 were later acquired. Thus, only Gallo was convicted of
syndicated illegal recruitment and estafa. d. Large-scale Illegal Recruitment
Committed in large scale - committed against three (3) or more

According to the prosecution, Gallo presented himself along with 6
persons individually or as a group.
others as MPM Agency, a recruitment & placement agency that has
sent many Filipinos to work in Korea. They convinced a certain Dela
People v. Dela Piedra (2001)
Caza to pay P45,000.00 as downpayment for the placement fee.
Illegal recruitment on a large scale requires recruitment of at least 3
When Dela Caza returned to the office 2 weeks later, he discovered
persons; receipt of payment, or the lack thereof, is immaterial
it has relocated and renamed itself. He wanted to withdraw his
application and tried to ask for a refund, but Gallo denied any Facts: Carol Dela Piedra along with her co-defendants were
knowledge about the P45,000.00 paid. Dela Caza and his co- arrested in Zamboanga City during a sting operation designed to
applicants waited another 2 months in vain, so they had the police catch illegal recruitment, after a call was made to the POEA
arrest Gallo and the others. regarding Dela Piedra’s legitimacy. The police found that Dela
Piedra gave out application forms and even offered to secure the
According to Gallo, he cannot be held criminally liable for illegal
passports of their applicant(s). In the course of investigations, the
recruitment because he was neither an officer nor employee of
Criminal Investigation Service (CIS) found that Dela Piedra et al.
MPM.
were not able to present any authority to recruit.
Issue & Ruling: W/N Gallo is guilty of illegal recruitment
For the defense, they merely denied all charges of recruitment, and
committed by a syndicate – YES
attacked the constitutionality of Sec. 13(b) of PD 442.
The Court laid down the following elements of syndicated illegal
Issues & Ruling: W/N Dela Piedra is guilty of illegal recruitment
recruitment, as stated in the Labor Code:
on a large scale – NO
(1) the offender undertakes either any activity within the
meaning of “recruitment and placement” defined under Article The Court found only the first 2 (out of the three) elements of illegal
13(b), or any of the prohibited practices enumerated under Art. recruitment on a large scale to be present:
34 of the Labor Code; (1) the offender undertakes either any activity within the
(2) he has no valid license or authority required by law to meaning of “recruitment and placement” defined under Article
enable one to lawfully engage in recruitment and placement of 13(b), or any of the prohibited practices enumerated under Art.
workers; and 34 of the Labor Code;
(3) the illegal recruitment is committed by a group of (3) or (2) he has no valid license or authority required by law to
more persons conspiring or confederating with one another.” enable one to lawfully engage in recruitment and placement of
workers.
The Court found that MPM Agency was never licensed by the POEA
to recruit workers for overseas employment. The third element is not present, namely:
(3) that the accused commits said acts against three or more
The Court also found Gallo guilty of syndicated illegal recruitment
persons, individually or as a group.
found in the Migrant Workers Act, when he: (1) charged an amount
greater that that allowed by the Labor Secretary; (2) failed to deploy For illegal recruitment to be on a large scale, each case of
Dela Caza without a valid reason; and (3) failed to reimburse recruitment must deal with the commission of the act against
expenses incurred by Dela Caza in connection with his three or more persons. In this case, only two persons (Araneta
documentation and processing, when the deployment didn’t take and Modesto) were proven to have been recruited by Dela Piedra.
place. There was another one in the Information, but the fact of her
recruitment was not sufficiently proven.
Gallo’s participation in the illegal recruitment is unmistakable. He
was the one who issued and signed the receipt, and the Court Dela Piedra also cannot be convicted for the illegal recruitment of
found that the conspiracy between Gallo and the rest of MPM the CIS agent, nor of the other persons present in the “briefing”
Agency was clear at one purpose: to scam people of their money that Araneta witnessed, since only three persons were named in the
under the pretext of foreign employment. In establishing Information. Otherwise, Dela Piedra’s right to be informed of the
conspiracy, no actual proof is needed that all conspirators took nature of the case against her would be violated.
direct part; it is enough that they acted in concert pursuant to
the same objective (note: Sir Merc is also a Criminal Law professor, Held: Dela Piedra is guilty of 2 counts of simple illegal recruitment,
so he might also ask about conspiracy and other criminal law not on a large scale. The life imprisonment penalty is reduced to 4-
concepts in the succeeding cases). 6 years for each count.
Held: Rodolfo Gallo is guilty of the crimes of syndicated illegal

recruitment, as well as estafa.
People v. Chua (2010)
53
An employee may be held as principal by direct participation for f. Persons criminally liable for illegal recruitment
illegal recruitment along with the employer, if she actively and
Natural persons – the principals, accomplices, and the accessories.
consciously participated in the recruitment process.
Juridical persons – the officers having control, management, or
Facts: The defendants were charged with illegal recruitment on a direction of the business.
large scale for recruiting—without a license—5 people for overseas
g. Jurisdiction over illegal recruitment cases
employment, for a fee, and charging amounts greater than that
allowed. They were recruiting for employment in Taiwan, as factory Two options:
workers, and offered to process the papers of the applicants. Only 1. RTC of the province or city where the offense was committed;
Chua was arraigned because the other co-accused (Josie Campos) or
remained at large. 2. RTC of the province or city where the offended party actually
resides at the same time of the commission of the offense.
All three applicants paid their respective payments for the
placement fees, yet none of them were ever deployed to Taiwan. The court where the criminal action is first filed acquires jurisdiction
to the exclusion of other courts. (Sec. 9, RA 8042)
Chua’s defense: She worked as a temporary cashier (not recruitment
agent) for Golden Gate, and that Golden Gate was a licensed
David v. Marquez
agency, and that the money she received from 2 of the 3 applicants
Alternative venue for illegal recruitment cases; a criminal action
were turned over to the documentation officer.
arising from illegal recruitment may also be filed where the offended
Issue & Ruling: W/N Chua is guilty of illegal recruitment on a party actually resides at the time of the commission of the offense
large scale – YES
Facts: In 2005, David approached Marquez, representing that she
The Court found that Golden Gate was a licensed recruitment (David) could recruit her to work abroad. Petitioner demanded fees
agency, but the license has already expired therefore, it is as good for the processing of documents and application; Marquez’
as operating as an unlicensed agency. application was denied but her money was never returned.
It is immaterial that Chua was merely a temporary cashier for David’s defense: Alibi, it was physically impossible for her to have
Golden Gate; an employee may be held as principal by direct recruited because she was in Canada at the time; she never
participation for illegal recruitment along with the employer, if she engaged in recruitment; the money she received was not for her,
actively and consciously participated in the recruitment process. but for her friend in Canada who handled the application; and
assuming the recruitment allegations were true, the proper venue
It is irrelevant that Chua was unaware of the illegal nature of the should be in Kidapawan City and not in Manila (because the crime
recruitment; RA 8042 is a special law which does not require was committed in Kidapawan).
criminal intent, only that the prohibited act be consummated.
The Manila RTC dismissed the case on reconsideration, ruling that
Held: Chua is guilty of illegal recruitment on a large scale, along it had no jurisdiction because the main elements of the crime were
with her employer. fulfilled in Kidapawan City, not in Manila.
e. Illegal recruitment as economic sabotage Issues & Ruling: W/N the Manila RTC has jurisdiction to try the
case notwithstanding the allegation that the crimes charged
“Illegal recruitment when committed by a syndicate or in large were committed in Kidapawan – YES
scale shall be considered an offense involving economic sabotage”
(Sec. 6[m], RA 8042). The Rules of Court allow for alternative venues because Sec. 15(a)
of Rule 110 has the phrase “subject to existing laws.” On this regard,
Sec. 9 of RA 8042 states that a criminal action arising from illegal
f. Illegal recruitment and estafa recruitment may also be filed where the offended party actually
resides at the time of the commission of the offense and that
A person convicted of illegal recruitment may, in addition, be
the court where the criminal action is first filed shall acquire
convicted of estafa as penalized under Article 315, paragraph 2(a)
jurisdiction to the exclusion of other courts. Respondent Marquez
of the Revised Penal Code, if a person defrauds another through
resides in Sampaloc, Manila, and therefore the filing of the case
any of the ff. means:
before the Manila RTC was proper.
3. Using fictitious name;
4. Falsely pretending to possess power, influence, qualifications, Since the Information alleges that the estafa (arising from the illegal
property, credit, agency, business or imaginary transactions; recruitment) was committed in Manila, the trial court should have
or taken cognizance of the case and dismissed it for lack of jurisdiction
5. Other similar deceits executed prior to or simultaneous with only when in the course of the trial, it was proven that the offense
the commission of the fraud. (People v. Chua, 2010) was committed somewhere else.
54
Held: CA decision affirmed; the case is reinstated and remanded to Trans Action Overseas Corporation v. DOLE Secretary (1997)
the Manila RTC. The power to suspend or cancel any license or authority to recruit
employees for overseas employment is concurrently vested with the
POEA and the Secretary of Labor.
Jurisdiction over disputes Facts: Petitioner is a private employment agency scouring for
potential recruits in Iloilo City to be deployed to Hong Kong.
Republic v. Principalia Management and Personnel
Respondents are applicants who sought employment with
Consultants (2006)
petitioner, and thus paid placement fees ranging from P1,000.00-
When a suspension order from the POEA has been issued a TRO and
14,000.00, but they were never deployed. Their demands for
has been appealed to the DOLE, the POEA may not implement the
refunds were likewise unheard.
TRO while the appeal is still pending with the DOLE
In its defense, petitioner argued that Aragon and the Domincil
Facts: Two complaints were filed with the POEA against respondent
spouses were individuals unauthorized to receive and collect
Principalia; the first is from an applicant (Concha) who alleged that
payments, therefore, petitioner cannot be held liable for the money
she paid P20,000.00 to apply for employment as caregiver &
claims. Nevertheless, the Labor Undersecretary cancelled the
therapist in either the US or in Canada, but she was never deployed;
license of petitioner.
the second is from an applicant (Baldoza) who was assured
employment as a machine operator in Doha or Qatar and thus paid Petitioner attacks the jurisdiction of the DOLE to do this, arguing
a P20,000.00 placement fee, but when he got there, he was made that jurisdiction to decide illegal recruitment cases including the
to work as a welder, and later repatriated, because he insisted that cancellation of licenses is with the POEA. His argument was that the
he was hired as a machine operator and that he had no skills as a POEA’s absorption of the functions of the Overseas Employment
welder. Board, National Seamen Board, and the overseas employment
function of the Bureau of Employment Services effectively rendered
Principalia entered into a quitclaim with Baldoza, where both
Art. 35 of the Labor Code ineffective, which provides that the power
parties agreed that Baldoza would be redeployed, but this never
to suspend or cancel any license/authority to recruit employees is
happened. Thus, POEA suspended Principalia’s documentary
vested with the Minister of Labor.
processing which was reconsidered. However, just when POEA was
supposed to lift the suspension, Principalia filed a complaint Issue & Ruling: W/N the Labor Undersecretary had jurisdiction
against the Administrator and the Conciliator of POEA for the to cancel the license of petitioner – YES
annulment of the suspension order with prayer for TRO.
The Court stood by Art. 35 of the Labor Code and referred to
The RTC granted the TRO, and subsequently, the writ of injunction Eastern Assurance and Surety Corp v. Secretary of Labor and People
because the appeal from the Suspension Order was still pending v. Diaz, which affirmed that the POEA has authority from the Labor
with the Labor Secretary, and because of the possibility that Secretary to cancel and suspend licenses as well.
Principalia will suffer tremendous losses and irreparable damage in
the meantime. Thus, the power to suspend or cancel any license or authority to
recruit employees for overseas employment is concurrently
On appeal, the CA dismissed Principalia’s case because of technical vested with the POEA and the Secretary of Labor.
grounds: failure to attach copies of its Memorandum and
transcripts of the hearings.
Issues & Ruling: W/N the RTC’s granting of the writ of Estate of Nelson Dulay v. Aboitiz Jebsen Maritime (2012)
preliminary prohibitory injunction was proper – YES Cases arising from the interpretation/implementation of a CBA are
within the jurisdiction of a voluntary arbitrator
The fact of clear and irreparable damage was sufficiently proven by
Principalia; this is something that does not have to be quantified. Facts: Dulay was employed by General Charterers Inc. (GCI), which
is a subsidiary of respondent Aboitiz. He worked first as seaman,
In addition, the POEA no longer has authority to exercise regulatory
then as officer for the ship “Kickapoo Belle”.” 25 days after the
functions over Principalia because the matter has already been
completion of his contract, he died. At the time of his death, he was
brought before the DOLE when Principalia was granted its license.
a member of the collective bargaining unit with GCI, so his wife
Were POEA to suspend Principalia’s license before final judgement
claimed the death benefits through the grievance procedure of the
by the DOLE, it would amount to a violation of Principalia’s rights.
CBA, but the company refused to grant the benefits, so the wife
Held: POEA’s appeal from the issuance of the writ of injunction is filed a complaint before the NLRC.
denied.
GCI refused to recognize the jurisdiction of the NLRC because there
was no EER between them and Nelson at the time of death. Both
the LA and NLRC ruled for Dulay, having found a “reasonable causal
connection” between the EER and the claims asserted.
55
The CA ruled that the money claims involve interpretation and First, respondent is still liable for damages despite the non-
application of CBA provisions, and as such, jurisdiction is with the consummation of the contract. The perfection of the contract
voluntary arbitrator, not the labor arbitrator, so the case was already brings about rights and obligations on both parties, a
referred to the NCMB. breach of which gives rise to a cause of action against the erring
party.
Petitioner’s argument: Sec. 10 of RA 8042, which vests jurisdiction
over CBA interpretation disputes with the NLRC, effectively There is no EER in this case because the contract was never
amended Art. 217(c) of the Labor Code, which vests jurisdiction consummated, but the NLRC nevertheless has jurisdiction. The
over CBA interpretation disputes with the voluntary arbitrator. NLRC’s jurisdiction is not limited to cases where EER exists, as
provided in Sec. 10 of RA 8042 which vests jurisdiction with the
Issue & Ruling: Whether CBA interpretation disputes are within NLRC over money claims arising out of any law or contract
the jurisdiction of the labor arbiters or that of the voluntary involving Filipino workers for overseas employment including
arbitrators – VOLUNTARY ARBITRATORS claims for damages.
Sec. 10 of RA 8042 actually makes no mention of CBA interpretation Since the contract in this case involves Santiago’s overseas
or implementation. On the other hand, Arts. 217(c) and 261 of the employment, the case falls under the above article and thus, within
Labor Code specifically state that voluntary arbitrators have the NLRC’s jurisdiction.
jurisdiction over cases arising from CBA interpretation or
implementation.
This case involves a situation where the special law refers to a Stolt-Nielsen Transportation Group v. Medequillo (2012)
subject in general, which the general law treats in the particular. In case of a recruitment agency’s failure without valid cause to deploy
a Filipino for overseas employment, claims for compensation are
The CBA itself also provides that disputes arising out of the
within the jurisdiction of the labor arbiters
interpretation/application of its provisions shall be settled through
negotiation, conciliation, or voluntary arbitration. It is only in the Facts: Respondent Medequillo was hired by petitioner to work as
absence of a CBA that parties may submit disputes to the NLRC or Third Asst. Engineer on the vessel “Stolt Aspiration” for 9 months.
to compulsory arbitration. Only 3 months in, he was ordered to disembark and he was
repatriated to Manila for no reason. When he went to the office,
petitioner transferred his employment to another ship: the “Stolt
Pride,” but Medequillo was never deployed for this. Thus, he filed
Santiago v. CF Sharp Crew Management (2007)
with the POEA two complaints against petitioner: one for illegal
The NLRC’s jurisdiction is not limited to cases where EER exists; it also
dismissal, and another for failure to deploy.
has jurisdiction over money claims arising out of any law or contract
involving Filipino workers for overseas employment including claims The case was transferred to the Labor Arbiter (upon the effectivity
for damages of the Migrant Workers Act), but none of the parties submitted their
pleadings. The LA then ruled that there was no liability for the first
Facts: Santiago had been working as a seafarer for respondent
contract because there was a novation, but there was a liability for
Smith Bell for about 5 years and signed a new 9-year contract which
the second contract, and found that there was a constructive
was approved by the POEA. However, a week before his supposed
dismissal. The NLRC and CA affirmed this ruling.
departure date, the VP of Smith Bell sent a message to the ship
captain, warning him that Santiago might just jump ship in Canada Issue & Ruling: W/N the labor arbiters have jurisdiction over
like his brother did one year prior. Because of this, both agreed to the compensation claims – YES
cancel Santiago’s departure.
The Court found that the POEA Rules Governing the Recruitment
Santiago thus filed a complaint for illegal dismissal with claims for and Employment of Seafarers cannot apply because the claims in
damages. that law are those arising from EER or for any personal injury, illness,
or death. But this doesn’t mean that the seafarer is without any
Petitioner’s argument: Deployment is a condition for the
remedy other than the mere return of his documents at no cost.
consummation of the contract, and since respondent unilaterally
and arbitrarily prevented his deployment without valid basis, the Thus, the Court ruled that Sec. 10 of RA 8042 was applicable, which
contract should be deemed consummated. Since the contract is vests original and exclusive jurisdiction with the Labor Arbiters over
deemed consummated, he should be considered an employee, and claims by virtue of any law or contract involving Filipino workers for
thus the LA and/or the NLRC has jurisdiction over the case. overseas deployment including claims for damages.
Issue & Ruling: W/N the labor tribunals have jurisdiction to try
the case notwithstanding the fact that Santiago was never
deployed, such deployment being a condition for EER to exist Industrial Personnel and Management Services v. De Vera
– YES
56
Foreign law may validly govern an overseas employment contract, for overseas employment and shall be a condition precedent for its
provided that 4 stringent requisites are met approval” (Sec. 10, RA 8042).
Facts: Arriola was hired by SNC-Lavalin through petitioner Datuman v. First Cosmopolitan Manpower (2008)
Industrial Personnel and Management Services as a Safety Officer Recruitment agencies are solidarily liable with the foreign employer
in Madagascar. His employment contract was processed and for any and all claims in connection with the employment contract
signed in the Philippines. After 3 months, he received a notice of
pre-employment due to diminishing workload in his area of Facts: Datuman was recruited by respondent to work as a saleslady
expertise, and that there are no more alternative assignments in Bahrain. However, upon her arrival in 1989, her employer
available. When he was repatriated to the Philippines, he filed a immediately took her passport and forced her to work as a
complaint for illegal dismissal, alleging that SNC-Lavalin had no domestic helper with a lower salary ($100.00 equivalent, as
reason for his early termination. opposed to the $370.00 in her employment contract). Her employer
later forced her to sign another employment contract. She kept
Employer’s defense: Canadian laws governed the contract because working unpaid and against her will until 1993, when she was finally
of the principle of lex loci celebrationis; the employment contracts able to return home with the help of the Bahrain Passport and
were processed in Canada, and SNC-Lavalin’s primary office was in Immigration Department. She filed a case against respondent for
Ontario, Canada. Thus, since the dismissal is valid according to non-payment of salary.
Canadian laws, which should govern the contract, therefore, Arriola
cannot file a case for illegal dismissal based on Philippine laws. Respondent’s defense: Datuman actually agreed to work as a
housemaid but agreed with respondent to put “saleslady” in the
Issue & Ruling: Whether Philippine or Canadian laws governed application form, because overseas employment was not yet
Arriola’s employment contract – PHILIPPINE LAWS allowed by the POEA at the time. It was also Datuman who violated
the contract when she transferred employers without respondent’s
The Court first acknowledged the validity of foreign laws governing
knowledge and consent.
employment contracts, but these must be subject to 4 requisites
first: The LA and NLRC ruled in favor of Datuman, but the CA ruled that
a. The employment contract must expressly state that it is to be respondent’s solidary liability for the nonpayment of wages is only
governed by foreign laws; as regards to the first contract; recruitment agencies cannot be
b. The foreign law invoked must be proven and pleaded in made the prime insurer against all untoward acts that foreign
court, pursuant to Philippine rules on evidence; employers may commit against the overseas workers.
c. The foreign law stipulated in the overseas employment
contract must not be contrary to law, morals, good customs, Issue & Ruling: W/N respondent may be held solidarily liable
public policy, or public morals of the Philippines; and for Datuman’s money claims – YES
d. The contract must be processed through the POEA.
Private employment agencies are solidarily liable with the foreign
In this case, the Court found that that the first and third requisites employer for any violation of the recruitment agreement or
were missing. As regards the first requisite, the employment employment contract to ensure immediate and sufficient payment.
contract made no express stipulation on the application of
The court did not accept the CA’s ruling that the liability only
Canadian laws (the provisions contained references to “Expatriation
applies to the first contract. The signing of the “substitute”
Policies” and location of SNC-Lavalin’s offices, which the Court said
contracts against Datuman’s will were considered continuing
that SNC-Lavalin was merely stretching to be able to invoke foreign
breaches of the first, POEA-approved contract. To accept that
law).
ruling, the Court ruled, would be to open the floodgates for abuse
As regards the third requisite, the contract was also violative of by recruitment agencies by simply colluding with the foreign
Philippine employment laws because said foreign laws did not employer to make a new contract so as to escape liability.
require a ground for early termination of employment and allowed
RA 8042 likewise explicitly prohibits the substitution or alteration
the employer to dispense with the requirement of notice of
of the POEA-approved employment contracts, where such
termination to an employee by merely paying severance pay.
substitution or alteration would be prejudicial to the employee.
Thus, to further protect the rights of the employee, the Court ruled
The Court also noted respondent’s admission of bad faith in
that Philippine labor laws must apply since the 4 requisites were
making false claims in the POEA-approved contract (saleslady
not all met.
instead of domestic helper), so respondent cannot claim innocence
Money claims and good faith here.
a. Solidary liability of principal and recruiter

“The liability of the principal/employer and the recruitment or
placement agency for any and all claims under this section shall Gagui v. Dejero (2013)
be [solidary]. This provision shall be incorporated in the contract
57
Corporate officers and directors may also be liable for money claims Contracts contain not only what the parties stipulate, but also the
advanced by the overseas worker, but they must be found remiss in relevant laws on the matter; a manning agency’s President is
managing the affairs of the agency for their liability to arise personally answerable for money claims of overseas workers
Facts: Respondents Dejero and Permejo filed complaints for illegal Facts: The overseas worker is respondent. The recruitment agency
dismissal, nonpayment of wages and overtime pay, refund of is Sealanes Marine Services, and its President is Christopher
transportation expenses, attorney’s fees, and damages, against Dumatol. The employer is Arklow Shipping Netherlands. The job is
PRO Agency Manila (the local recruitment agency) and Abdul to work onboard the M/V Arklow Venture for 9 months. There was
Rahman Al Mahwes (foreign employer). The LA ruled in their favor an inter-country CBA between Dela Torre’s union and the
with an order for the respondents to solidarily pay a total of
Netherlands Maritime Employers Association.
$81,109.90, but the writ of execution was returned unsatisfied.
After 7 months onboard, Dela Torre fractured his lower back, and
Respondents then moved to implead PRO Agency’s officers and
the physician assessed him with a “Grade 11 disability” for losing
directors as judgement debtors, which included petitioner, who
one-third of motion or lifting power of the trunk.
is the Vice-President, and Stockholder and Director of the
company, which was granted. Dela Torre filed a complaint for disability benefits, medical
reimbursement, underpaid sick leave, damages, and attorney’s fees.
The 2nd Alias Writ of Execution was issued, which resulted in the
The LA awarded him $80,000.00 disability benefits based on the
garnishment of petitioner’s bank deposits of P85,430.48. The claim
Dutch CBA, but not based on the physician’s assessment, because
remained unsatisfied because the total in pesos is a little more than
it was issued 120 days after the accident, and especially because
P4,000,000.00.
Dela Torre was still unable to work even after 240 days of treatment.
A 3rd Alias Writ of Execution was issued, which resulted in the
Petitioner’s contention: Petitioner disputed the amount granted
levying of two parcels of lot owned by petitioner. Petitioner then
because under the Dutch CBA, computation of benefits should be
moved to quash the writs of execution, arguing that she was never
based solely on grading, and not on number of days of treatment.
made aware that she was impleaded as a party to the case.
Respondent’s defense: The Grade 11 rating was merely temporary in
Issues & Ruling:
order to comply with the 240-day period maximum under the Rules
1. W/N corporate officers and directors are solidarily liable
on Employee Compensation. Since his treatment exceeded 240
with the recruitment agency for money claims of the
days, he should be entitled to total disability benefits, since his
overseas workers – YES, BUT THIS IS NOT AUTOMATIC
disability is total and permanent.
The inclusion of corporate officers and directors as solidarily liable
The Court ultimately ruled that the LA’s computation is correct.
requires first that they be separately found remiss in directing
the affairs of the recruitment/placement agency, such as when Issue & Ruling: W/N petitioner is solidarily liable with Arklow
they sponsored or tolerated the conduct of illegal activities. Shipping Netherlands – YES
In this case, there was no finding of neglect on the part of Gagui. The Court merely applied Sec. 10 of RA 8042 in affirming the
Respondents actually made no mention of any instance where soildarily liability of the manning agency, the foreign principal, and
Gagui contributed to the illegal dismissal and nonpayment of the corporate officers & directors of the manning agency. The
wages. Court also acknowledged that when manning agencies apply for a
license to operate a seaferer’s manning agency, its officers and
2. W/N it is essential to the case that such corporate officers
directors submitted a verified undertaking that they will be
and directors be impleaded first in the case before holding
solidarily liable with the company over claims arising from EER.
them liable – YES
This is already deemed incorporated in employment contracts and
The decision ordering PRO Agency to pay the respondents had
there is no need for the parties to repeat it, because contracts
already become final and executory before Gagui was impleaded.
contain not only what the parties stipulate, but also the relevant
Impleading her for the purpose of execution of the ruling is
laws.
tantamount to modifying a decision that was already final and
executory. This violated the doctrine on immutability of
judgements.
Gargallo v. DOHLE Seafront Crewing (2016)
Once a decision or order becomes final and executory, it becomes
Corporate officers and directors are not liable for the liabilities of the
immutable and unalterable.
corporation, unless a specific provision of law makes them so
Facts: Petitioner filed a complaint for permanent total disability

benefits against respondents, alleging that when he accidentally fell
Sealanes Marine Services v. Dela Torre (2015)
on his left arm, he became permanently unfit for sea service, and
58
such permanent disability was certified by his physician, and this The Court found that, for the months that Magasca was able to
certification must prevail over that of the company’s physician. work, she had been paid adequately. As to the remaining unexpired
3-month portion of her contract, however, she remained unpaid.
On 2015, the Supreme Court upheld the CA which ruled that the
claim was premature because Gargallo was still undergoing Regarding the liability for the remaining 3 months, the SC did not
medical treatment, and because it was the company physicians who accept the petitioners’ defenses. Sec. 10 of RA 8042 is clear that the
were more fit to determine his fitness, since they were the one solidary liability of the foreign employer with the recruitment
closely monitoring him. The Court, however, ordered the agency along with the agency’s corporate officers and directors, is
respondents to solidarily pay Gargallo income benefits arising from absolute and without qualification. Moldes is included,
permanent total disability, but didn’t hold Padiz (corporate officer) regardless of whether she acted with malice or bad faith.
liable because there was no showing that he acted with malice or
beyond the scope of his authority. Both parties moved to Reconciling the Gagui ruling with those in Sealanes, Gargallo,
reconsider the decision. and PTCPI
Issue & Ruling: W/N Padiz should be held solidarily liable with To follow.
the respondents – YES
The Court affirmed the general rule that corporate officers and
directors are not liable for the liabilities of the corporation. But it Powerhouse Staffbuilders International v. Rey (2016)
found application in the exception: personal liability of the The solidary liability of the principal and the recruitment agency to
corporate officer attaches with the corporation when a specific the employees shall not be affected by any substitution, amendment
provision of law makes him personally answerable, and this is or modification for the entire duration of the employment contract.
found in Sec. 10 of RA 8042. The Court also re-affirmed its ruling in
Facts: Powerhouse (petitioner/recruitment agency) hired
Sealanes v. Dela Torre. respondents as operators to work for Catcher Technical Co. (foreign
employer based in Taiwan) for a 2-year period upon arrival at the
jobsite. After 8 months, they were informed that their working days
Princess Talent Center Production Inc. v. Magasca (2018) would be reduced, and a month after that, they were repatriated.
Corporate officers and directors are solidarily liable with the
Upon their return, they filed complaints for illegal dismissal and
recruitment agency and the foreign employer, absolutely and
money claims against both Powerhouse and Catcher
without qualification
Powerhouse’s defense: Respondents voluntarily left their jobs after
Facts: Respondent, who was previously approached by a talent
they were informed that their working days would be reduced, and
manager following her audition for a singing contest, went to the
that they accepted payments by way of settlement.
office of petitioner PTCPI. PTCPI’s President, Moldes, persuaded
Magasca to apply for a job as a singer/entertainer in South Korea. At some point before the LA, JEJ Int’l Manpower Services was
impleaded, because Catcher’s accreditation had allegedly been
The employment contract with SAENCO (Korean employer)
transferred to it. JEJ argued that the transfer of accreditation did
provided for work duration of 6 months, extendible for another 6
not affect the solidary liability of Powerhouse in favor of
months. When she arrived in Korea, she was made to work in a
respondents. It also argued that any contract between it and
different place than that stated in her Employment Contract
Powerhouse is immaterial because it does not involve any EER and
without being paid her salaries. She was also made to sign multiple
is therefore outside the LA’s jurisdiction.
employment contracts and spurious loan documents. When she
hired the services of a Philippine law firm, she was repeatedly Issue & Ruling: W/N the transfer of accreditation from
threatened and intimidated to dismiss her lawyers. Powerhouse to JEJ made JEJ solidarily liable to the
respondents as well – NO
After 9 months of work, she was repatriated, and she filed a
complaint for unpaid wages (the remaining 3 months) against The transfer of accreditation was not made with the approval of the
PTCPI and SAENCO. PTCPI defended itself by claiming that it was POEA. At best, the Court ruled that it merely worked as an
unaware of the extension of the employment contract beyond 6 appointment making JEJ an agent of Powerhouse. The last
months; additionally, Moldes defended herself by claiming that all paragraph of Sec. 10 of RA 8042 clearly states that the solidary
her acts were done in her capacity as corporate officer of PTCPI, liability of the principal and the recruitment agency to the
and she did not act with malice or bad faith. employees shall not be affected by any substitution,
amendment or modification for the entire duration of the
Issue & Ruling: W/N there is solidary liability between PTCPI
employment contract.
and SAENCO – YES
Even if there was transfer of accreditation by Catcher from
Powerhouse to JEJ, Powerhouse’s liability to respondent employees
59
remained intact because respondent employees are not privy to c. Extent of liability
such contract, and in their overseas employment contract approved
Relevant provision: “ … In case of termination of overseas
by POEA, Powerhouse is the recruitment agency of Catcher.
employment without just, valid or authorized cause […] the worker
To relieve Powerhouse from liability arising from the approved shall be entitled to the full reimbursement of his placement fee and
overseas employment contract is to change the contract without the deductions made with interest at twelve percent (12%) per
the consent from the other contracting party. annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of the
unexpired term, whichever is less.” (Sec. 10, RA 8042)
b. Theory of imputed knowledge NOTE: The portion with strikethrough has been declared
unconstitutional in Serrano v. Gallant Maritime Services, Inc.
Sunace International Management Services v. NLRC (2006)
The theory of imputed knowledge states that knowledge of the agent Yap v. Thenamaris Ship Management (2011)
is equivalent to knowledge of the principal, not the other way around. “Salaries” is understood as basic pay excluding overtime, leave pays,
and other bonuses. Additional inclusions into the basic salary clause
Facts: Divina was a domestic helper who was deployed by
of the employment contract form part of the “salary” unless expressly
petitioner Sunace—with the assistance of Edmund Wang, a
stated
Taiwanese broker—to Taiwan for 12 months, upon the expiration
of which she continued working for another 2 years. When she Facts: The petitioner-worker is Claudio Yap, electrician onboard the
returned to the Philippines, she filed a case against Wang, Sunace, M/T Seascout. The manning agency is Intermare Maritime
an Adelaide Perez, and her Taiwanese employer Xiong, alleging that Agencies, Inc. The foreign employer is Vulture Shipping Limited.
she was underpaid and jailed for three months. For its part, Sunace The job duration was 12 months.
alleged that it had no knowledge of the 2-year extension of the
contract, and therefore no liability could ever attach to Sunace. 3 months into the job, the Seascout was sold, and Yap received his
bonuses. However, he refused to accept his one-month basic wage,
The Labor Arbiter and the Court of Appeals rejected Sunace’s insisting that he was entitled to the payment of the unexpired
argument that it should not be held liable because during the portion of his contract because he was illegally dismissed.
extension period, Sunace and Wang were in communication with Respondents, on the other hand, allege that there was no illegal
each other, yet Sunace’s alleged non-consent was not established. dismissal.
Thus, by applying the theory of imputed knowledge, they both Yap filed a complaint for illegal dismissal, damages, and attorney’s
ruled that knowledge of the principal (the foreign employer) is fees. Impleaded were Intermare, Thenamaris, Capt. Adviento, a
equivalent to knowledge of the agent (Sunace) What Sunace certain CJ Martionos, Interseas Trading, and Vulture Shipping Ltd.
should have done was write to the POEA objecting to the extension; He alleged that he was entitled to the unexpired portion of his
because it didn’t, it is presumed to have consented to the salary.
extension.
The LA granted the complaint, as well as the NLRC, but the NLRC
Issue & Ruling: W/N Sunace should be deemed to have reduced the award from 9 months’ worth to 3 months’ worth, citing
knowledge of Divina’s contract extension – NO Sec. 10 of RA 8042. The CA affirmed this along with the adding of
petitioner’s tanker allowance of $130.00 (which was already done
Sunace was never in constant communication with the foreign
by the LA) to his computation of basic salary.
employer, and it only communicated once with the Taiwanese
broker (Wang).and it was about Divina’s savings, not about her However, the Court has already ruled that the 3-month-per-year
extension. option in Sec. 10 of RA 8042 is unconstitutional.
Likewise, the theory of imputed knowledge was misapplied. It Issue & Ruling:
states that knowledge of the agent is equivalent to knowledge of
the principal, not the other way around. The LA and CA thought 1. W/N the doctrine of operative fact serves to except this
that because the foreign employer-principal knew of the contract case from the unconstitutionality of the latter portion of
extension, the agent (Sunace) should automatically be deemed RA 8042 – NO
informed as well, but this is not the case. Thus, since there is no
The Court ruled that operative fact doctrine applies only when the
proof that Sunace had knowledge of the extension, it cannot be
declaration of unconstitutionality imposes an undue burden on
liable for claims arising from it.
those who have relied on the invalid law. In this case, it was not
In addition, there was already an implied revocation of the agency Yap’s fault that he lost his job, so the ruling of unconstitutionality
relationship when the foreign principal directly negotiated with must/may be given retractive application because void laws create
Divina and entered into a new and separate employment contract. no obligations and confer no rights.
60
2. W/N the tanker allowance is included in the term “salary” paid a placement fee of P70,000.00. The foreign employer is Taiwan
– YES Wacoal, Co. Ltd. The monthly salary is 15,360.00 New Taiwan
Dollars (NTD). When she got to Taiwan, she was made to work as a
According to Serrano, salary is understood as the basic wage, cutter.
exclusive of overtime, leave pay, and other bonuses. However, in
this case, the employment contract itself already states that the Less than one month after working, her employer terminated her
tanker allowance is included in the basic salary. If respondents employment and she was repatriated. She alleged earning only
intended to exclude it from the salary, it should have said so in the 9,000.00 NTD, and Wacoal deducted 3,000.00 NTD to cover her
contract. plane ticket. When she returned, she filed an illegal dismissal case
against Sameer and Wacoal and claimed entitlement to a refund of
her placement fee, withheld amount for repatriation costs, unpaid
salary for 23 months, and damages.
Insurance coverage for agency-hired overseas workers
Source: Sec. 37-A of RA 8042, as added by RA 10022 Sameer’s defense: There was no illegal dismissal, and no placement
fee was paid. In addition, Sameer’s accreditation was already
G.R.: Each migrant worker deployed by a recruitment/manning
transferred to Pacific Manpower, and so it should be Pacific held
agency shall be covered by a compulsory insurance policy which
liable. Pacific denied involvement and liability.
shall be secured at no cost to the said worker.
Issue & Ruling:
XPT: Insurance coverage is optional when the migrant worker is
classified as a rehire, name hire, or direct hire, in which case they 1. W/N Cabiles is entitled to her money claims – YES
may request their foreign employer to pay for the cost of the
insurance coverage, or they may pay for it themselves (Sec. 14, The Court, applying Sec. 10 of RA 8042, ruled that Cabiles is entitled
Omnibus Rules Implementing RA 10022). to her salary, equivalent to the unexpired portion of her contract
(thus reversing the NLRC and CA’s award of merely 3 months’
Coverage (minimum values) worth), together with attorney’s fees and reimbursement of
• Accidental death ($10,000.00); amounts withheld from her salary.
• Permanent total disablement ($7,500.00);
• Repatriation and transport of personal belongings when The Court then discussed the effect of a clause declared
termination is without valid cause; unconstitutional, but then subsequently reinstated in an
• Subsistence allowance benefit ($100.00); amendatory law. To illustrate, the declaration of unconstitutionality
• Money claims arising from employer’s liability (3 months for was in 2009, but RA 10022 which amended RA 8042, was passed in
every year of the employment contract); 2010, reinstating the same clause declared unconstitutional a year
prior. In this case, the clause remains unconstitutional despite a
Additional inclusions legislative reinstatement. J. Leonen went into a detailed
• Compassionate visit (when hospitalized and confined for at discussion on how the classification between overseas workers with
least 7 consecutive days); more than one year in their contract vis-à-vis those with less than
• Medical evacuation (when an adequate medical facility is not a year in their contract is an invalid classification irrelevant to the
available proximate to the worker); purpose of the law.
• Medical repatriation (when medically necessary as determined
by the attending physician) The costs of repatriation and transfer of personal belongings are
also borne by the agency, as provided in Sec. 15 of RA 8042.
Obligation to pay premiums
The obligation rests with the employer. Should there be a finding 2. W/N BSP Circular 799 revising the interest rates for loans
that the migrant worker paid for the premium, the agency shall lose or forbearance from 12% to 6% applies – YES, partially
its license and all its directors, partners, proprietors, officers and
The CB Circular only applies in cases where the law does not
employees shall be perpetually disqualified from engaging in the
provide otherwise. Sec. 10 of RA 8042 provides that the worker is
business of recruitment of overseas workers.
entitled to a full reimbursement of his placement fee and
Sameer Overseas Placement Agency v. Cabiles (2014) deductions made with interest at 12%. This clause is deemed
The clause in RA 8042 allowing the employer to pay merely 3 months automatically incorporated in employment contracts, so as regards
per year of the unexpired term remains unconstitutional despite the interest rates stemming from the reimbursement of
subsequent legislative reinstatement; BSP Circular interest rates are placement fees, the BSP Circular does not apply. The interest
at 12% for reimbursement of placement fees, and 6% for judgements rate remains at 12%.
on awards for payment of salary
However, when the case concerns awards for unpaid salaries,
Facts: The worker is respondent Joy Cabiles, who applied for a job the BSP Circular applies because the law does not provide for an
in quality control in Taiwan through petitioner Sameer Overseas interest rate.
Placement Agency. She signed a 1-year employment contract and
61
To clarify: 4. Other employers as may be allowed by the Secretary of

• Interest rate from the reimbursement of placement fee and Labor and Employment, such as:
deductions made: 12% per annum; (as the law provides) a. Those provided in (a), (b) and (c) who bear a lesser rank,
• Interest rate from the awards for unpaid salaries: 6% (the law if endorsed by the Philippine Overseas Labor Office
does not provide, so BSP Circular will control). (POLO), or Head of Mission in the absence of the POLO;
b. Professionals and skilled workers with duly executed or
authenticated contracts containing terms and
conditions over and above the standards set by the
Maersk-Filipinas Crewing v. Avestruz (2015) POEA. The number of professional and skilled Overseas
Filipino Workers hired for the first time by the employer
Facts: The overseas worker is respondent Avestruz, as Chief Cook
shall not exceed five (5). For the purpose of determining
onboard the M/V Nedlloyd Drake. The recruitment agency is
petitioner Maersk, and the foreign employer is A.P. Moller the number, workers hired as a group shall be counted
as one; or
Singapore Pte. Ltd. The employment contract was for 6 months.
c. Workers hired by a relative/family member who is a
1 month into the new job, Avestruz and his captain, Charles permanent resident of the host country.
Woodward got into a heated argument (which included shoving) (Sec. 124, Revised POEA Rules and Regulations Governing
about the cleanliness of the garbage bin in the kitchen, which was the Recruitment and Employment of Land-based OFWS of
the job of Avestruz to keep clean. Later that afternoon, Woodward 2016)
informed Avestruz that the latter would be dismissed from service.
A week after that, Avestruz was disembarked in Sri Lanka and
arrived in the Philippines another day after.
Upon his return to the Philippines, he filed a complaint for illegal

dismissal, payment for the unexpired portion of his contract,
damages, and attorney’s fees. Impleaded were Maersk, AP Moller Local Employment of Foreign Nationals
and Jesus Agbayani, who was an officer of Maersk. See:
• Dept. Order 186-2017 – Revised Rules for the Issuance of
More specifically, Maersk asked for the ff.: basic wages, guaranteed Employment Permits to Foreign Nationals
overtime, vacation leave, onboard allowance, ship maintenance
bonus, hardship allowance, damages, and attorney’s fees. Criteria for granting an employment permit
The applicant must be a foreign national who intends to engage
The CA found that Avestruz was illegally dismissed and granted in “gainful employment,” i.e. a state or condition which creates
awards only for reimbursement of placement fee and deductions EER between the Philippine-based employer and the foreign
made, interest thereon, salaries for the unexpired portion of the national where the former has the power to hire or dismiss the
contract, and attorney’s fees. foreign national from employment, pays the salaries or wages
thereof and has the authority to control the performance the
Issue & Ruling: W/N Avestruz is entitled to the monetary
performance or conduct of the tasks and duties (Sec. 1).
awards he is claiming – NO
Exemptions and exclusions from permit requirement
On the legality of the dismissal, the Court found that there was
neither substantive nor procedural due process. Exemptions (Sec. 2)
• All members of the diplomatic service and foreign gov’t
On the monetary claims, the Supreme Court merely affirmed the
officials accredited by and with reciprocity arrangement with
CA’s computation in accordance with RA 8042. The other money
the Philippine gov’t;
claims denied by the CA were likewise denied by the SC.
• Officers and staff of international organizations of which the
Philippine gov’t is a member, and their legitimate spouses
Direct Hiring desiring to work in the Philippines;
G.R.: Direct hiring is prohibited (Sec. 123, Revised POEA Rules and • Owners and representatives of foreign principals whose
Regulations Governing the Recruitment and Employment of Land- companies are accredited by the POEA, who come to the
based OFWs of 2016; Art. 18, Labor Code). Philippines for a limited period and solely for the purpose of
interviewing Filipino applicants for employment abroad;
XPT: The following are exempt from the ban on direct hiring: • Foreign nationals who come to the Philippines to teach,
1. Members of the diplomatic corps; present and/or conduct research studies in universities and
2. International organizations; colleges as visiting, exchange or adjunct professors under
3. Heads of state and government officials with the rank of at formal agreements between the universities or colleges in the
least deputy minister; or Philippines and foreign universities or colleges; or between
62
the Philippine government and foreign government; provided • Conviction of a criminal offense or a fugitive from justice in
that the exemption is on a reciprocal basis; the country or abroad;
• Permanent residence foreign nationals and probationary or • Grave misconduct in dealing with or ill treatment of workers;
temporary resident visa holders under Sec. 13 (a-f) of the • Availability of a Filipino who is competent, able, and willing to
Philippine Immigration Act of 1940 and Sec. 3 of the Alien do the job intended for or being performed by the foreign
Social Integration Act of 1995 (RA 7917); national based on data in the PEIS, PRC Registry of
• Refugees and stateless persons recognized by the DOJ Professional and TESDA Registry of Certified Workers;
pursuant to Art. 17 of the UN Convention and Protocol • Worked without valid AEP for more than a year; and
Relating to the Status of Refugees and Stateless Persons; and • Application for renewal with expired visa or with temporary
• All foreign nationals granted exemption by law. visitor’s visa (Sec. 12, D.O. 186-2017).
Grounds for cancellation or revocation of permit

• Non-compliance with any of the requirements or conditions
Exclusions (Sec.3) for which the AEP was issued;
• Members of the governing board with voting rights only and • Misrepresentation of facts in the application including
do not intervene in the management of the corporation or in fraudulent misrepresentation, i.e. false statement that has a
the day-to-day operation of the enterprise; negative effect in the evaluation of the application made
• President and Treasurer, who are part-owner of the company; knowingly, or without belief in its truth, or recklessly whether
• Those providing consultancy services who do not have it is true or false;
employers in the Philippines; • Submission of falsified or tampered documents;
• Intra-corporate transferee who is a manager, executive or • Meritorious objection or information against the employment
specialist as defined below in accordance with Trade of the foreign national;
Agreements and an employee of the foreign service supplier • Foreign national has been convicted of a criminal offense or is
for at least 1-year continuous employment prior to a fugitive from justice;
deployment to a branch, subsidiary, affiliate, or representative • Employer terminated the employment of foreign national; and
office in the Philippines; • Grave misconduct in dealing with or ill treatment of workers
• Contractual service supplier who is a manager, executive, or (Sec. 13, D.O. 186-2017).
specialist and an employee of a foreign service supplier which
has no commercial presence in the Philippines;
• Representative of the Foreign Principal/Employer in the Office VI. HOURS OF WORK
of the Licensed Manning Agency (OLMA) in accordance with
the POEA law, rules, and regulations. Coverage and Exclusions
Applies to: employees in all establishments and undertakes

Validity of and renewal of permit
Validity is good for 1 year, unless the contract or mode of whether for profit or not.
engagement provides otherwise, in which case it shall not exceed
Does not apply to (GMFDDPR):
3 years (Sec. 10, D.O. 186-2017).
• Government employees (they are governed by Civil Service
Renewal shall be filed not earlier than 60 days before expiration rules and regulations);
except if the foreign national needs to leave the country or there o If the employee works for government agencies and
are similar circumstances that will hinder the filing of renewal within government corporations incorporated under the
the prescribed period. Corporation Code, the Labor Code still applies.
• Managerial employees (those whose primary duty consists of
For officers whose appointment/election takes place before the the management of the establishment in which they are
expiration of the AEP, the application must be filed not later than employed or of a department or a subdivision thereof, and
15 working days after the appointment, or before its expiration, those other officers of members of the managerial staff);
whichever is later. (Sec. 11, D.O. 186-2017). • Field personnel (non-agricultural employees who regularly
perform their duties away from the principal place of business
or branch office of the employer and whose actual work hours
Grounds for denial of application for new or renewal of permit in the field cannot be determined with reasonable certainty);
• Misrepresentation of facts in the application including
• Dependent family members of the employee;
fraudulent misrepresentation, i.e. false statement that has a
• Domestic helpers;
negative effect in the evaluation of the application made
• Persons in the personal service of another (NOTE: if the
knowingly, or without belief in its truth, or recklessly whether
house personnel was hired by a company and is paid for by
it is true or false;
the company itself to maintain a staff house, it is not a
• Submission of falsified documents;
domestic helper, but a regular employee of the company); and
63
• Workers who are paid by results as determined by the Labor Semestral breaks are still considered working days for teachers; thus,
Secretary. they are still entitled to salaries and ECOLA during this period
(Art. 83, Labor Code)
Facts: Petitioner is composed of respondent’s professors,
instructors, and teachers. They work for a total of 10 months per
Normal Hours of Work school year, at 5 months per semester, at 2 semesters, and paid on
a monthly basis.
Rule: No more than 8 hours a day.
During the semestral break, they were not paid their Emergency
Rada v. NLRC (1992) Cost of Living Allowance (ECOLA), which respondent claimed
Actions performed that are related/mandatory to one’s job are they’re not entitled to because of the “no work, no pay” policy.
considered performed during work hours, and therefore should be
computed as part of overtime pay if done outside regular working Aside from their regular loads, some teachers were made to teach
hours extra classes during the AY ’81-82 (specifically 16-30 September),
and they claimed that they were not paid for those loads.
Facts: Rada was hired as a driver for Philnor during the construction
supervision phase of the Manila North Expressway, good for 24 Issues & Ruling: W/N petitioners are entitled to their salaries
months. during the semestral break – NO
After multiple contract renewals and extensions, he finally applied The basis for ECOLA payment is the receiving of salary. Absences
for clearance, received cash, and signed a waiver and quitclaim. without pay are to be deducted from the monthly allowances.
2 years later, Rada filed a complaint for non-payment of overtime However, semestral breaks should be considered mere work
pay despite being made to work overtime for 3 hours from Monday interruptions beyond the employees’ control and cannot be
to Saturday for 3 years. Philnor defended by claiming that Rada considered as absences from which deductions may be made from
never rendered overtime pay. the monthly allowances. Thus, their absences during the semestral
breaks cannot be considered as absences from which they shall not
Philnor’s defense: It allowed certain employees to use the company be entitled to ECOLA.
vehicle to and from the project field office; Rada’s alleged “overtime
work” was merely him picking up and dropping off other Sec. 4 of the Labor Code’s IRR likewise states that an employee’s
employees along EDSA, and him enjoying the benefit and inactivity by reason of work interruptions beyond his control shall
convenience of free transportation. be considered as time worked, because such time cannot be
considered as time that can be utilized effectively and gainfully in
Issue & Ruling: W/N Rada’s use of the company vehicle and his own interest. This is so because the very nature of teaching
picking up and dropping off other employees is considered requires that the teacher prepare adequately and keep abreast of
working hours and therefore entitles him to overtime pay – YES developments even during work inactivity.
Rada’s picking up and dropping off Philnor employees at certain

specified points along EDSA is not merely incidental to his job as a
driver. On the contrary, this transportation arrangement was Exception (Health Personnel)
adopted, not for the convenience of the employees, but primarily
Health personnel: resident physicians, nurses, nutritionists,
for the benefit of Philnor. It was Rada, the project driver, who
dieticians, pharmacists, social workers, laboratory technicians,
had the job of picking up and/or dropping off his fellow
paramedical technicians, psychologists, midwives, attendants, and
employees.
all other hospital or clinic personnel. (Art. 83, Labor Code)
This is further reinforced by the fact that when Rada is absent,
G.R.: Those personnel in cities and municipalities with a population
someone else is designated employee driver. If this wasn’t part of
of at least 1,000,000 OR in hospitals and clinics with a bed capacity
his job, then someone else wouldn’t be designated to pick up and
of at least 100 are subject to the 40-hour/5-day workweek at 8
drop off the other employees. It is clearly indispensable and
hours of work per day exclusive of mealtime.
mandatory, and therefore the cumulative 3 hours he takes (1.5
hours in the morning and 1.5 hours in the afternoon) in picking up - Mealtime is at least 1-hour and is non-compensable. A shorter
and dropping off the employees is part of his work, outside his mealtime (at least 20 mins) is allowed provided such mealtime is
working hours, and should be counted in computing overtime pay. credited as compensable (Sec. 5, DO 182-17)
XPT: If they are required by the nature of their work to work for 6
days (48 hours), they are entitled to additional compensation of at
University of Pangasinan Faculty Union v. University of
least 30% of their regular wage for the work on the 6th day.
Pangasinan (1984)
See: DO 182-17
64
San Juan de Dios Hospital Employees Association v. NLRC Conditions for validity
(1997)
1. Voluntary agreement by the workers to work more than 8
Hospital personnel are covered by the 40-hour/5-day workweek but
hours/day, as long as the total hours per week does not
they are not entitled to pay during their days off
exceed their normal weekly hours;
Facts: Petitioners requested with their employer the 2. No diminution in the weekly or monthly pay and benefits;
implementation of the 40-hours/5-day work week with 3. Working in excess of the normal weekly hours prior to the
compensable 2 days off provided by RA 5901 and clarified by adoption of the compressed workweek scheme still entitles
Policy Instruction No. 54. PI 54 mandated a 40-hour/5-day the employee to overtime pay;
workweek for hospital personnel, with the caveat that they would 4. Appropriate waivers with respect to overtime premium pay
be paid for a full 7 days. 5. Effectivity and implementation of the new working time
arrangement is by agreement of the parties (D.O. 21).
The LA and NLRC denied their complaints, so they filed the case
before the Court. Effects of a compressed workweek
Issue & Ruling: W/N Policy Instruction No. 54 is valid in Philippine Graphics Arts v. NLRC (1988)
providing that hospital personnel are also entitled pay even An employer may validly force its employees to go on vacation leave
during their 2 days off – NO as long as not done to defeat or circumvent the rights of its
employees under special laws or valid agreements
At the outset, PI 54 seems to implement RA 5901, but the SC ruled
that this is misplaced because it has already been repealed by the Facts: Because of economic circumstances, petitioner corporation
Labor Code. The only valid gauge for the validity of PI 54 is Art. 83 had to require its employees to go on a mandatory vacation leave
of the Labor Code. in different batches for different periods (15, 30, or 45 days). The
workers were paid while on leave but the pay was charged
However, what this Article merely provides is that hospital against their respective earned leaves.
employees are subject to the 40-hour/5-day workweek, and that if
they are required to work for 48 hours a week (6 days), then they Respondents filed a complaint for ULP and discrimination. The LA
are entitled to additional compensation. It does not state that dismissed the complaint, but the NLRC ordered that petitioner
such personnel are entitled to wages worth 7 days if they refund the amount equivalent to the earned leave of each
complete the 5-day workweek. complainant.
Even assuming that RA 5901 was not repealed, PI 54 is still Issue & Ruling: W/N the forced vacation leave without pay was
erroneous because RA 5901 itself does not provide that 7 days’ improper – NO
worth of wages be given to hospital employees who have
Even the respondents themselves admitted the existence of an
completed the 5-day workweek. Even the IRR of RA 5901 itself
economic crisis. Petitioner had basis to reduce the work schedule
provided that there shall be extra compensation for those who
temporarily, which was taken with notice and consultations with the
worked for more than 5 days a week, which would make no sense
workers and supervisors; this action was also in consonance with
if all non-working days for hospital personnel are already paid.
the CBA between the employers and employees.
Compressed workweek
NOTE: Compressed workweeks are not allowed in health services

or in occupations/workplaces where employees are exposed to Unicorn Safety Glass v. Basarte (2004)
airborne contaminants, human carcinogens, substances, chemicals, A compressed workweek is management prerogative, but this must
or noises that exceed threshold limit values or tolerance levels for be done in good faith with no intent to circumvent the rights of the
an 8-hour workday as prescribed under the Occupational Safety employees; it must also be justified by business necessity
and Health Standards pursuant to DOLE DA 02-2004 (Sec. 9, DO
Facts: Petitioner is a corporation engaged in glass manufacturing.
182-1&).
Respondent employees had a normal workweek of 6 days, paid
See: Department Advisories, 02-2004, 02-2009, and 04-2010 weekly. Petitioner announced that due to the economic crisis, it
would be implementing a compressed 3-day workweek, which the
respondents doubted, alleging that this was just the petitioner’s
way of getting back at them for forming a union.
Flexible Work Arrangements
Respondents later filed a case for ULP and constructive dismissal.
Definition: Alternative arrangements or schedules other than the
traditional or standard work hours, workday, and workweek. Issue & Ruling: W/N the compressed workweek implemented
by USG amounted to constructive dismissal – YES
65
Petitioner’s reasons for the compressed workweek were not management prerogative. The Court made a lateral application of
supported by anything more than mere assertions. They had to to the standards set in justifying retrenchment and work suspension—
prove that the rotation scheme was a genuine business necessity by these standards, petitioner’s workweek compression was
and not meant to subdue the organized union, but the reasons they unjustifiable.
cited were too general; at most, they cited reduction in electric
consumption as proof of an economic slump, which was not
enough to justify the rotation scheme.
Bisig Manggagawa sa Tryco v. NLRC (2008)
In addition, the fact that petitioners were unyielding—they were The benefits of overtime pay may be validly waived provided that the
unwilling to negotiate with the respondents to come up with an employee makes the waiver with full understanding, and with
alternative scheme—in their implementation of the compressed compliance with the pertinent DOLE rules
workweek showed that business necessity was not the only reason.
Facts: Respondent Tryco Pharma is a manufacturer of veterinary
The SC acknowledged that compressed workweeks, retrenchment, medicines in Caloocan and petitioners are its employees as helpers
laying off, etc. are all management prerogatives, the exercise of and factory workers, who are member of the labor union. Tryco
management prerogative cannot be utilized as an implement to entered into separate MOAs with its employees for compressed
circumvent our laws and oppress employees. However, the manner workweeks with working hours from 8am-6:12pm, whereby the
by which petitioners exercised their prerogative is indicative of bad employee waives the right to claim overtime pay from 5pm-6:12pm
faith (singling out of union officers, unwillingness to have a (work exceeding 6:12 pm shall be considered for overtime pay).
dialogue).
Tryco later received a letter from the Department of Agriculture
stating that it should produce (propagation, processing,
compounding, finishing, filling, repacking, labeling, advertising,
Linton Commercial v. Hellera (2007) storage, distribution or sale) its drugs in San Rafael, Bulacan.
A compression of a workweek cannot be done arbitrarily; despite
negative economic circumstances, as long as the employer makes As such, Tryco directed petitioners to report to the plant site in
enough to sustain its operations, it cannot justifiably reduce the Bulacan. All refused, and the union declared a strike and filed a
workweek despite loss of income complaint for illegal dismissal, underpayment of wages
nonpayment of overtime pay and SIL, and refusal to bargain.
Facts: Petitioner is a corporation engaged in the steel retail and
fabrication business. It issued a memo to its employees that it will The union alleged that the transfer of operations was done in bad
be suspending operations from 18 December 1997 - 5 January faith to paralyze the union.
1998 due to the economic crisis. Upon the resumption of its
Issue & Ruling: W/N the MOAs entered into are valid
operations, it implemented a compressed 3-day workweek on a
notwithstanding the waivers of overtime pay contained – YES
rotation basis without DOLE approval, and likewise submitted an
establishment termination report concerning the rotation. If a person makes a waiver voluntarily, with full understanding of
what he was doing, and the consideration for the quitclaim is
Respondents filed a complaint for illegal reduction of workdays,
credible and reasonable, the transaction must be recognized as a
also contending that this was done in violation of Art. 283 of the
valid and binding undertaking.
Labor Code, which required submission of a notice one month
prior. The CA ruled that this equated to constructive dismissal. In this case, the Court found that when the employees signed the
MOA, they were fully aware of what they were doing, and the
Issue & Ruling: W/N the compressed workweek implemented
considerations were sufficient (less transportation fares per week,
by Linton was valid – NO
longer weekends, etc.). The Court saw the benefit in increasing the
A reduction of the number of regular working days is valid only work hours in exchange for decreasing the work days.
where it is resorted to by the employer to prevent serious losses
Further, the MOA complied with DO 21, which set the conditions
due to causes beyond his control, such as when there is a
for a valid compressed workweek scheme:
substantial slump in the demand for his goods or services or when
1. Voluntary agreement by the workers to work more than 8
there is lack of raw materials.
hours/day, as long as the total hours per week does not
Petitioner’s allegation that the Asian currency crisis was causing exceed their normal weekly hours;
financial losses was found by the SC to be insufficient. while the 2. No diminution in the weekly or monthly pay and benefits;
company suffered a loss of P3,645,422.00 in 1997, it retained a 3. Working in excess of the normal weekly hours prior to the
considerable amount of earnings and operating income for it adoption of the compressed workweek scheme still entitles
to sufficiently sustain its operations. the employee to overtime pay;
4. Appropriate waivers with respect to overtime premium pay
At the time of the case, there were still no definite standards to 5. Effectivity and implementation of the new working time
determine the validity of compressing a workweek as per arrangement is by agreement of the parties.
66
Conditions for validity
Work Interruption Due to Brownouts Pan American World Airways System v. Pan American
Employees Association (1961)
See: Policy Instruction No. 36, 22 May 1978
Meal breaks are considered working hours if the employees are
required to be on-call during such hour
Durabilt Recapping Plant v. NLRC (1987)
Inability to work not attributable to the employer (such as in the case Facts: A decision from the CIR ordered petitioner to adopt a
of brownouts) should not be considered in the computation of work straight 8-hour shift and to include the one-hour meal period in the
days for backwages computation for overtime work.
Facts: Reynaldo Bodegas filed a complaint for illegal dismissal Issue & Ruling: W/N the one-hour meal period should be
against his employer Durabilt, a tire recapping company. When the considered overtime work after the deduction of 15 minutes
judgement became final, the Ministry of Labor and Employment for eating – YES
computed backwages covering a period of 26 days per month.
Durabilt contested this, alleging that the period was intermittently In this particular case, the Court found that during the 1-hour meal
interrupted due to frequent brownouts and machine troubles, as a period, were required to stand by for emergency work; that if they
result of which Bodegas only had 250 days of attendance (as happened not to be available when called, they were reprimanded
opposed to 312 in the MLE’s computation). by the lead-man; that as in fact it happened on many occasions, the
mechanics had been called from their meals or told to hurry up
Issue & Ruling: W/N work days missed due to brownouts eating to perform their work. Thus, it is clear that the supposed “1-
should be deducted in the computation of backwages – YES hour meal period” is not one of complete rest, but actually a work
hour because the laborers had to be ready on call.
The Ministry’s Policy Instruction 36 itself states that brownouts
running for more than 20 minutes should not be treated as hours
worked if the employees: (1) can leave their work place to go
elsewhere, and (2) can use the time for their own interest. Sime Darby Pilipinas v. NLRC (1998)
Changing of work hours to add a full work-free lunch break without
In this case, the brownouts lasted one whole day for every week.
pay, effectively replacing the old 30-minute on-call lunch break with
Where failure to work cannot be attributed to the employer, the
pay, in order to maximize worker efficiency, is a valid exercise of
employees cannot shift the burden to the employer. Each party
management prerogative
must bear his own loss.
Facts: Petitioner is a company engaged in the manufacture of tire
Bodegas never worked during the days of the brownout, and so he
and rubber products, while respondent is an association of
cannot be allowed to recover something he has not earned.
petitioner’s salaried employees. Prior to the controversy, all
company factory workers in Marikina worked from 7:45 am – 3:45
pm with a 30-minute paid lunch break where they were on call.
Meal Breaks
Petitioner changed the work hours of respondents to 7:45 am – 3:30
General rule pm. The lunch break was now one hour without pay. Because of
Mealtime is at least 60 minutes, in which case it is non- this pay, respondents filed a complaint for ULP, discrimination, and
compensable (Art. 85, Labor Code). evasion of liability.
When compensable Issue & Ruling: W/N the petitioner’s implementation of a 1-

Mealtime is compensable when it is less than 60 minutes, in which hour lunch break without pay in lieu of a 30-minute on-call
case it must be at least 20 minutes (if it is less than 20 minutes, it lunch break was a valid exercise of management prerogative –
is a rest period, not a mealtime). Mealtime may be compensable YES
with full pay under the ff. situations:
a. The work is non-manual or does not involve serious The right to fix the work schedules of the employees rests
physical exertion; principally on their employer. It implemented the full one-hour
b. The establishment regularly operates not less than 16 lunch break where the employees are no longer on call to improve
hours a day; efficiency in its business operations because the employees have
c. There are actual or impending emergencies or there is an entire rest period.
urgent work to be performed on machineries,
Likewise, there is no discrimination in this case because the
equipment, or installation to avoid serious loss which the
schedule affected all employees regardless of membership in the
employer would otherwise suffer;
union.
d. The work is necessary to prevent serious loss of
perishable goods.
67
PAL v. NLRC (1999) Assembly time is long-practiced and institutionalized by mutual

The 8-hour work period does not include meal breaks consent of the parties where the proceedings are not complex as
to deprive the workers of their personal pursuits. They are not
Facts: Respondent Herminio Fabros was employed as a flight subject to the absolute control of the company during this period,
surgeon for PAL; his work hours were from 4 pm – 12 am. One night, otherwise, their failure to report in the assembly time would justify
he left his clinic at around 7 pm to have dinner at his residence 5 the company to impose disciplinary measures.
minutes away. He received an emergency call from PAL that an
employee was having a heart attack. The employee arrived at the The Court noted that this exact same case had already been
hospital at 7:50. Fabros immediately rushed and got to the clinic at decided in a previous case which the petitioners filed through the
7:51, but Eusebio already left with the patient, who died the next ALU in ALU v. Stanfilco.
day.
During the investigation, Fabros explained that he was entitled to a

30-minute meal break every day and that he immediately left when Commuting time and travel time
he was called. PAL didn’t find his explanation acceptable and Generally, any work which an employee is required to perform while
charged him with abandonment of post. After hearing the traveling is considered in hours worked.
explanations, PAL suspended Fabros.
More specifically, to determine if commuting/travel time is working
PAL’s argument: As a full-time employee, Fabros is obligated to stay time, one must look at the kind of travel involved. There are 3 kinds:
in company premises for at least 8 hours, during which he may not (1) Travel from home to work; (2) Travel that is all in the day’s work;
leave, even for meals. and (3) Travel away from home.
Issue & Ruling: W/N Fabros is obliged to stay for a full 8 hours Travel from home to work (and vice-versa)
in company premises, even for meal time – NO Generally, this is not working time. Ordinary home-to-work travel
is a normal incident of employment, whether the employee works
Art. 83 of the Labor Code specifically provides that the 8-hour at a fixed location or at different jobsites.
workday is exclusive of meal time for health personnel. There is
no rule that employees must take their meals inside company As an exception, when an employee receives an emergency call
premises. As long as employees return to their posts on time, they outside his regular working hours and is then required to travel
may take their meals anywhere. Therefore, respondent’s act of to the workplaces, all that time spent traveling is considered
leaving PAL premises to have dinner is not abandonment. working time.
Travel that is all in the day’s work

If travel is part of the employee’s principal activity, it is counted as
Idle time
hours worked, such as when the employee is required to report to
If the employee was “waiting to be engaged” i.e. he was, on his own
a meeting place to receive instructions, or perform some work
volition, waiting for the time of his next job/engagement during
there, or to pick and to carry tools.
which his time is not controlled by the employer, such waiting time
is not considered working time. If an employee normally finishes his work at 5 pm and is sent to
another job which he finished at 8 pm and is required to return to
his employer’s premises at 9 pm, the period between 5-9 pm is
Waiting time
considered working time. But if he went straight home after 8 pm
On the other hand, if the employee was “engaged to wait” i.e. made
and didn’t go back to the employer’s premises, the period between
to wait by the employer, such waiting time is working time.
8-9 pm is considered home-to-work and is not considered hours
Arica v. NLRC (1989) worked.
Assembly time is not compensable working time
Travel away from home
Facts: Petitioners are employees of STANFILCO who are required This is travel that keeps an employee away from home overnight. It
to be in company premises 30 minutes before actual working time. is considered working time when it cuts across the employer’s
They filed a complaint against Stanfilco for assembly time on workday. In this scenario, during regular hours on both working and
whether it should be considered working time. non-working days, the employee is considered to be working, i.e.
when he regularly works from 9-5 pm Monday-Friday, his time
During the assembly time, petitioners take part in a roll call, get travel away from home from 9-5 pm on Saturdays is considered
their individual assignments from the foreman, accomplish their hours worked as well.
Daily Accomplishment Report, go to the stockroom to get
equipment, and travel to the field with their equipment. In this case, regular meal period is not counted, and times spent on
travel away from home outside regular working hours is also not
Issue & Ruling: W/N assembly time should be considered considered as working time.
waiting time (working time) – NO
68
are no longer required to be paid overtime compensation. The

company likened their employees’ situation to the pakyaw basis,
Overtime work which is expressly excluded from the Eight-Hour Law.
Definition and Nature of Overtime Work The respondent filed a complaint against SMB demanding better
employment conditions, more specifically, with regard to overtime,
Salazar v. NLRC (1996)
night-shift differential, and attorney’s fees.
Managerial staff officers/members are not entitled to overtime pay,
rest day, and holiday pay Issue & Ruling: W/N outside sales personnel who make
commissions in addition to their salary are entitled to overtime
Facts: Petitioner was employed by respondent HL Carlos
pay – NO
Construction Co. as an engineer for the Monte de Piedad building
in Cubao. They allegedly orally agreed that Salazar would receive a The Eight-Hour Law, and by extension, overtime pay, applies only
share in the profits after the completion of the project, and that when a worker is paid on a monthly or daily basis, such as when he
work performed in excess of 8 hours and performed on weekends is made to work beyond the 8-hour period, he should be paid
and holidays would be considered compensable overtime work. additional compensation. This does not apply to employees on a
piece-work or commission basis.
On 1991, he received a memo that he was being terminated due to
the impending completion of the building. Thus, he filed a True enough, these employees have a basic salary, but the salary is
complaint for illegal dismissal and non-payment of wages and also compounded with commission per sale. insofar as the extra
overtime rendered (among others). work they perform, they can be considered as employees paid on
piece work, "pakiao", or commission basis.
Petitioner’s argument: He falls under the category of “field
personnel,” but his actual working hours can be determined by the
disbursement vouchers containing payment of salaries and
overtime services. PAL Employees Savings and Loan Associations v. NLRC (1996)
An employee may be separately entitled to overtime pay despite his
Issue & Ruling: W/N Salazar was entitled to overtime pay – NO
contract of employment stipulating for 12 hours of work; an
Salazar works in a supervisory role: he supervises laborers in the employment contract must be clear in delineating what the basic
construction project. Thus, under Sec. 2(c) of the Labor Code’s salary covers
Omnibus Implementing Rules, he is not entitled to payment of the
Facts: Private respondent Esquejo is a security guard for PAL who
benefits he is asking for because he falls under the category of
filed a complaint for non-payment of overtime pay. His
“officers/members of a managerial staff.” These kinds of
employment contract stipulated that he would work for 12 hours
workers are not entitled to overtime, rest day, and holiday pay;
each day, with 1 day off per week. Throughout the years, his salary
their work is directly related to the management policies of the
was constantly increased, from P1990.00 to P3720.00 per month.
employer (Sec. 2, Rule I, Book III, Omnibus Rules Implementing the
His salary also included a living allowance of P510.00. Throughout
Labor Code).
his employment, he alleged that he was never given overtime pay.
In addition, the Court ruled that just because the employer gave
PESALA also alleged that Esquejo was administratively charged with
him overtime pay, it does not mean that he is entitled to this. Good
serious misconduct/disobedience and gross/habitual neglect of
for him that he received such pay, but he has no right to demand
duties so he was suspended.
this from the employer.
PESALA’s argument: By virtue of the fact that the appointment
states 12 hours/day, the overtime pay rendered for the extra 4
hours is already absorbed in the basic salary of P1990.00 in the
San Miguel Brewery v. Democratic Labor Union (1963)
contract.
The 8-hour workday rule does not apply to outside or field sales
personnel who are paid commissions, and thus, they are not entitled Issue & Ruling: Is an employee entitled to overtime pay for
to overtime pay work rendered in excess of eight hours a day, given the fact
that his employment contract specifies a twelve-hour workday
Facts: The outside sales personnel of SMB leave at 7 am (soft
at a fixed monthly salary rate that is above the legal minimum
drinks) or 8 am (beer). The routes are planned so that they can all
wage? – YES
be completed within 8 hours at most. The moment they leave the
plant, they are on their own until they go back to the plant. The SC found that the basic salary plus emergency allowance did
Compensation is uncertain depending on sales commissions and not include OT pay. If it did include the OT pay, the total basic salary
other factors; it ranges from P30-P109 a month). + ECOLA should amount to P2800.50 (1413.00 + 877.50). But
Esquejo was only paid P2500.00 (1990.00 + 510.00). PESALA’s own
The contention is that since the employees are paid a commission
computation clearly establishes that OT pay is not included.
outside their 8-hour workday in addition to their basic salary, they
69
The SC was not convinced by PESALA’s argument that there was a

meeting of the minds regarding overtime pay because the contract
was definite only as to number of hours of work, but vague as to STEPS FOR COMPUTING OVERTIME PAY:
what is covered by the salary. 1. Determine base pay (see non-bold percentages above)
2. Determine amount of OT pay—whether 25% or 30%—
depending on when OT was rendered.
3. Add OT pay depending on base pay.
Overtime Pay i.e. if base pay is 200% (regular holiday) and OT pay is 30%:
OT pay will be at 30% of 200% (so +60%, NOT 200% + 30%.).
Components of overtime pay
Therefore, total pay will be 260%.
PNB v. PNB Employees Association (1982)
Emergency overtime work
OT pay is based only on extra work performed; extra pay such as
COLA and longevity pay which are based on other things cannot be General rule
included in the computation for OT pay Overtime is optional and may not be imposed/forced by the worker
upon the employee.
Facts: A conflict arose between PNB and PNBEA whereby the
employees went on strike because PNB allegedly failed to organize Exceptions when overtime work may be compelled
a Committee on Personal Affairs to take charge of the screening
and promotion of employees covered by the CBA. Article 89, Labor Code.
i. When the country is at war or when any other national or
Another source of the conflict was PNB’s recomputation of local emergency has been declared by the National Assembly
overtime pay retroacting to 1954, affecting the one-hour and extra or the Chief Executive;
OT already rendered by the officers and employees. PNBEA ii. When it is necessary to prevent loss of life or property or
allegedly repeatedly asked PNB to include COLA and longevity pay in case of imminent danger to public safety due to an
in the computation of OT pay. actual or impending emergency in the locality caused by
serious accidents, fire, flood, typhoon, earthquake, epidemic,
In a previous case, the SC already ruled that OT pay shall be based or other disaster or calamity;
on (salary + COLA + longevity pay) with the rate set at 150%. iii. When there is urgent work to be performed on machines,
installations, or equipment, in order to avoid serious loss or
Issue & Ruling: W/N other pays, such as COLA and longevity
damage to the employer or some other cause of similar
pay may be included in the computation for OT pay – NO
nature;
In determining OT pay where the CBA does not contain any iv. When the work is necessary to prevent loss or damage to
provision, there are 2 main considerations: perishable goods; and
1. The additional pay is for extra work done or services rendered; v. Where the completion or continuation of the work started
and before the eighth hour is necessary to prevent serious
2. The additional pay is intended to be permanent and regular, obstruction or prejudice to the business or operations of the
not contingent or temporary. employer.
When additional pay is not for extra effort beyond that

contemplated in the employment contract, it cannot be included in
the computation for OT pay. R.B. Michael Press v. Galit (2008)
An employer may validly compel a worker to render emergency
Overtime pay rates overtime work and an unjustified refusal constitutes a ground for
dismissal
Ordinary days:
= Regular hourly rates (100%) + OT pay (+25%) Facts: Respondent Galit was a machine operator for RB Michael
Press; he was repeatedly tardy and absent without excuse. When
On a rest day or a special day: he was ordered to render overtime service to meet a production
= Rest/special day hourly rates (130%) + OT pay (+30% of 130%) deadline on a printing job order, he refused to do so, and the
following day, RBMP ordered him to stop reporting for work. Galit
On a rest day which falls on a special day
thus filed a complaint for illegal dismissal.
= Rest day on special day rates (150%) + OT pay (+30% of 150%)
Issue & Ruling: W/N Galit’s refusal to render emergency
Overtime on a regular holiday:
overtime work is justifiable – NO
= Regular holiday rates (200%) + OT pay (+30% of 200%)
Willful disobedience is a valid cause for dismissal when 2 requisites
Overtime on a rest day which falls on a regular holiday
concur:
= Regular holiday rates (200%) + rest day rates (+60% = 30% of
200) + OT pay (+30% of 260%)
70
1. Such disobedience must be willful (characterized by a f. Under other circumstances analogous or similar to the
wrongful and perverse attitude); foregoing as determined by the Secretary of Labor and
2. The order violated must have reasonable, lawful, made known Employment. (Art. 92, Labor Code)
to the employee, and must pertain to the duties which he had
been engaged to discharge. Premium work pay for work rendered on a rest day
a. Computation: Regular pay rates (100%) + rest day pay (30%);

Regarding the first requisite, the SC ruled that the mere fact that
b. If nature of the work is such that the employee has no regular
respondent refused despite his knowledge that there is a
workdays and no regular rest days, work performed on
production deadline that needs to be met and without him, no
Sundays and holidays have an additional 30% pay;
printing can be had, is enough to show his wrongful and perverse
c. Work performed on special holiday which is also a rest day:
attitude.
Regular pay rates (100%) + special holiday rest day rates
Regarding the second requisite, the Court applied Art. 89 of the (+50%);
Labor Code to justify the order to render emergency overtime work. d. CBA or employment contract provisions stipulating higher
Paragraph (c) of said Article allows emergency OT work when there premium pay for work rendered on rest day are valid (Art. 93,
is urgent work to be performed on machines, installations, or Labor Code).
equipment, in order to avoid serious loss or damage to the
employer or some other cause of similar nature.
Holidays
Thus, the order to render emergency OT work was valid, and Galit’s
willful disobedience as grounds for the dismissal was likewise valid. Definition of a holiday
A consecrated day, religious festival, or day on which ordinary

occupations are suspended, a day of exception, i.e. a cessation from
Waiver of overtime pay
work, or day of festivity, recreation, or amusement (Secretary of
General rule Justice Opinion No. 100, Series of 1954).
Overtime pay is non-waivable. Any stipulation in the employment
If a regular holiday falls on a Sunday, the following Monday shall
contract providing for the waiver of overtime pay is null and void.
not be considered a holiday, unless otherwise declared by a
Exceptions proclamation.
The 12 regular holidays are:

1. New Year’s Day
Rest Days 2. Maundy Thursday
3. Good Friday
Right to weekly rest days
4. Araw ng Kagitingan
Each employer must provide his employees a rest period of not less 5. Labor Day
than 24 consecutive hours after every 6 consecutive normal 6. Independence Day
work days. The exact rest day is up to the employer subject to the 7. National Heros’ Day
CBA and DOLE rules and regulations. Employers must respect 8. Eidl Fitr
employee preferences on weekly rest days if such preferences are 9. Eidl Adha
based on religious grounds (Art. 91, Labor Code). 10. Bonifacio Day
11. Christmas Day
When work on a rest day may be required 12. Rizal Day
a. In case of actual or impending emergencies caused by
serious accident, fire, flood, typhoon, earthquake, epidemic or Muslim Holidays (Art. 169-170, Code of Muslim Personal Laws)
other disaster or calamity to prevent loss of life and property, The following are the 5 holidays specifically for the Muslim areas:
or imminent danger to public safety; 1. Amun Jadid or New Year (first day of the lunar month of
b. In cases of urgent work to be performed on the machinery, Muharram);
equipment, or installation, to avoid serious loss which the 2. Maulid-un-Nabi or Birthday of the Prophet Muhammad (12th
employer would otherwise suffer; day of the 3rd lunar month of Rabi-ul-Awwal);
c. In the event of abnormal pressure of work due to special 3. Lailatul Isra Wal Mi Rai or Nocturnal Journey and Ascension
circumstances, where the employer cannot ordinarily be of the Prophet Muhammad (27th day of the 7th lunar month of
expected to resort to other measures; Rajab);
d. To prevent loss or damage to perishable goods; 4. Id-ul-Fitr
e. Where the nature of the work requires continuous 5. Id-ul-Adha
operations and the stoppage of work may result in
irreparable injury or loss to the employer; and
71
The last two are already included as regular holidays observed • They have the authority to hire or fire other employees
nationally. of lower rank, or their suggestions and
recommendations as to hiring, firing, and promotion, or
The ff. areas are recognized as Muslim areas where Muslim holidays any other change of status of other employees are given
are to be officially observed: a particular weight.
Provinces 5. Officers of members of a managerial staff, if they perform
1. Lanao del Norte the ff. duties and responsibilities;
2. Lanao del Sur • Primarily perform work directly related to management
3. Maguindanao policies of their employer;
4. North Cotabato • Customarily and regularly exercise discretion and
5. Sultan Kudarat independent judgement;
6. Sulu • (a) Regularly and directly assist a proprietor or
7. Tawi-tawi managerial employee in the management of the
8. Zamboanga del Norte establishment or subdivision thereof in which he or she
9. Zamboanga del Sur is employed; or (b) executed, under general supervision,
work along specialized or technical lines requiring special
Cities
training, experience, or knowledge; or (c) execute, under
1. Cotabato
general supervision, special assignments and tasks.
2. Iligan
6. Field personnel and other employees whose time and
3. Marawi
performance are unsupervised by the employer, including
4. Pagadian
those who are engaged on task or contract basis, purely
5. Zamboanga
commission basis or those who are paid a fixed amount for
Muslim employees working outside the Muslim areas are excused performing work irrespective of the time consumed in the
from reporting for work during Muslim holidays, with pay. performance thereof.
In Muslim areas, all employees are entitled to holiday pay rates, Union of Filipino Employees v. Vivar (1992)
regardless of religion. Sales personnel who work in the field and whose work hours cannot
be determined with reasonable certainty are excluded from holiday
Holiday pay pay coverage
If the worker does not work on a regular holiday, he still gets 100%
Facts: Sales personnel employees of Filipro (now Nestle) were
of his usual pay. If he works on a regular holiday, he gets 200%.
excluded from receiving holiday pay.
In case of double regular holidays (as when Araw ng Kagitingan and
These personnel report to the office and start their field work at
Good Friday fall on the same day), an employee who does not work
8:00 am, and then come back to the office at 4:00 (or 4:30 pm if
is still entitled to 200% of his regular rates (100% * 2 for each
Makati-based).
holiday). An employee who works, is entitled to 300% of his regular
rates (200% for the rate which he still would have gotten had he The rule on the exclusion of field personnel from holiday pay
not worked, and 100% for actually working). Overtime pay will be defines field personnel as those who perform their duties outside
at 390% (300% + [30% of 300 which is 90]). See Asian the employer’s principal place of business, and whose actual work
Transmission Corporation v. CA at 74. hours in the field cannot be determined with reasonable certainty.
Coverage Petiitoner alleges that the hours of the sales personnel can be
determined with reasonable certainty because they start field work
Holiday pay rules apply to all employees except:
at 8 am, and come back at 4 pm; thus, they are not under the
1. Government employees; definition of “field personnel.”
2. Those working in retail/service establishments employing
Issue & Ruling: W/N the sales personnel are considered field
less than 10 workers;
personnel for purposes of determining inclusion for holiday
3. Househelpers and persons in the personal service of
pay – YES
another;
4. Managerial employees who meet all of the ff. conditions: The law requires that the actual hours of work in the field be
• Their primary duty is to manage the establishment in reasonably ascertained. The company has no way of determining
which they are employed or of a department or whether or not these sales personnel, even if they report to the
subdivision thereof; office before 8:00 a.m. prior to field work and come back at 4:30
• They customarily and regularly direct the work of 2 or p.m., really spend the hours in between in actual field work.
more employees therein; Effective supervision over them during these hours is practically a
physical impossibility.
72
In addition, the Implementing Rules of the Labor Code provide that Grand Asian Shipping Lines v. Galvez (2014)
holiday pay excludes those “other employees whose time and Managerial employees are not entitled to holiday pay; employees
performance is unsupervised by the employer.” Petitioner’s that are paid for all days of the year are deemed to have holiday pay
argument thus, is that because there is a “Supervisor for the Day,” included in their salary already
the field personnel are not excluded from holiday pay coverage.
The Court, however, noted that the “Supervisor of the Day” Facts: Petitioner is a corporation that transports LPG for Petron
schedule is merely to ensure that the field personnel are out by 8 from Bataan to Pasig and Cavite. Co-petitioners are the President
am and back by 4 pm. and the GM of GASLI, while the respondents are crew members.
Petitioner also had another argument: because Filipro gave One of the vessel’s Oilers reported to the Crewing Manager of
quarterly incentive bonuses, this should be indicative of the fact illegal, that unconsumed oil is stored in the fuel tanks, but the Chief
that the personnel’s actual work hours can be determined with Engineer would mis-declare this as consumed fuel and sells it to
reasonable certainty. On this regard, the Court ruled that these other vessels. The respondents then divide the proceeds of this sale
incentive bonuses are given based on the result of the personnel’s among themselves. GASLI conducted an audit and indeed found
work, precisely because their actual hours of field work cannot be that there was an overstatement of fuel oil consumption amounting
measured. to P74,737.86.
A complaint for qualified theft was filed against respondents, which

ended up with all of them being suspended and after
Jose Rizal College v. NLRC (1987) administrative hearings, terminated (except for one, Sales).
Even teachers who are paid hourly are still covered by the law on
The LA ruled that the dismissals were illegal because the mere filing
holiday pay; this is not offset even if the school extends the academic
of a case against the respondents did not justify their dismissal. In
calendar to make up for days lost
doing so, it also awarded premium pay for holiday and rest day,
Facts: Petitioner has three kinds of employees: (1) monthly holiday pay, and SIL.
employees, who receive their salary every month regardless of
On the matter of the illegality of the dismissals, the SC ruled that
actual number of working days per month; (2) daily employees
the managerial employees (Galvez the Ship Captain and Gruta the
whose wages are based on actual days worked, and they receive
chief Engineer) were validly dismissed due to loss of trust and
unworked holiday pay; and (3) collegiate faculty who are paid on
confidence, but the others were not.
the basis of student contract hour.
Issue & Ruling:
Since the teachers did not receive their holiday pay, they filed a
complaint against the college. 1. W/N Galvez and Gruta are entitled to their claims for
holiday pay – NO
JRC’s argument: The hourly collegiate faculty are not entitled to
holiday pay because regular holidays are not included in their work Art. 82 of the LC specifically provides that managerial employees
schedule (they experience no “work interruption”), and if there is a are excluded from the coverage from the rules on hours of work,
regular holiday, the school calendar is extended to compensate weekly rest periods, holidays, SIL, and service charges.
for it.
2. W/N the rest of the employees are entitled to their claims
Issue & Ruling: W/N teaching personnel paid hourly are for holiday pay – NO
entitled to regular holiday pay – YES
The SC ruled that they do not fall under “field personnel” as defined
As regards regular holidays, there is no deprivation of work on the in Art. 82 of the LC. During the entire course of the voyage,
part of the professors because these days are deemed “no class respondents remain on board the vessel, and they were constantly
days” from the start; there is no expectation of payment. under the supervision of the ship captain, a managerial employee.
As regards special public holidays, however, when a special public Nevertheless, they’re still not entitled to holiday pay because in
holiday is declared, the faculty member paid by the hour is computing their salaries, petitioner used “365” as the divisor,
deprived of expected income, and it does not matter that the meaning that they are already paid for all days of the year, ergo,
school calendar is extended in view of the days or hours lost, for holiday pay is already incorporated in their salaries.
their income that could be earned from other sources is lost
during the extended days.
The purpose of holiday pay is defeated when the school imposes San Miguel Corporation v. CA (2002)
calendar extensions. All employees in official Muslim areas, regardless of religion, are
entitled to holiday pay premiums during Muslim holidays
73
Facts: The DOLE found that the SMC office in Iligan City (a Muslim 2. W/N the petitioners’ salaries already include holiday pay
area required to observe Muslim holidays) was not paying Muslim – NO
holiday pay to its employees, so DOLE ordered SMC to consider
Muslim holidays as regular holidays and to pay both Muslim and In the yearly computation of worked days for computing OT
non-Muslim employees holiday pay. The CA agreed but modified compensation, Chartered Bank uses “251” as a divisor, meaning it
Muslim holiday pay from 200% to 150%. considers the workers to have worked 251 days per year, whether
actually worked or not.
Issue & Ruling: W/N non-Muslim employees working in a
Muslim area are entitled to holiday pay premiums during However, the 251 working days divisor is the result of subtracting
Muslim holidays – YES all Saturdays, Sundays and the ten (10) legal holidays from the total
number of calendar days in a year. If the employees are already
In determining the coverage of holiday pay with respect to Muslim paid for all non-working days, the divisor should be 365 and not
holidays observed in Muslim areas, wages and other emoluments 251.
granted by law are determined on the basis of the criteria laid down
by laws and not on the basis of the worker’s faith or religion. Since
all offices are required to observe Muslim holidays in these areas,
all employees regardless of religion are not required to report for Wellington Investment v. Trajano (1995)
work in such holidays. A legal holiday falling on a Sunday creates no legal obligation for
the employer to pay extra, aside from the usual holiday pay
In addition, Article 3(3) of Presidential Decree No. 1083 also
declares that “x x x nothing herein shall be construed to operate to Facts: A Labor Enforcement Officer inspected Wellington Flour
the prejudice of a non-Muslim.” Mills (owned by petitioner) and found that monthly-paid
employees were not receiving holiday pay for regular holidays.
Wellington’s defense: The monthly salaries of the monthly-paid

Rules on entitlement
employees already include holiday pay for regular holidays; this is
The employee should not have been absent without pay on the
shown by the use of “314” as a divisor in determining the number
working day preceding the regular holiday. Rationale: if he was
of days per year that such employees are considered to have
absent without pay, the assumption is that he would have been
worked. [NOTE: a divisor of 314 means that an employee is
absent also on the following day if it were not a holiday.
considered to have worked 6x a week for 51 of the 52 weeks in a
Components of holiday pay year; in this case, Wellington deducted 51 Sundays, every other day
of the year was considered “worked” on the part of the employees]
Chartered Bank Employees Association v. Ople (1985)
Employees paid on a monthly basis are entitled to holiday pay Issue & Ruling: W/N Wellington’s “314 factor” is deemed to
include regular holiday pay in the salaries of its monthly-paid
Facts: The petitioners issued a complaint against Chartered Bank workers – YES
for the payment of 10 unworked legal holidays, as well as for
premium and overtime differentials for work during those holidays. The Labor Officer’s argument was that the “314 factor” excluded
the Sundays, yet didn’t consider the fact that some holidays fell on
The Minister of Labor denied their claim, ruling that employees a Sunday, and therefore these are un-compensated holidays; thus,
uniformly paid by the month, irrespective of the number of working Wellington should have used the “317 factor” because 3 holidays
days, and with a salary of not less than the minimum wage, are in 1988 fell on a Sunday.
presumed paid for all days in the month, whether worked or not.
His basis was Sec. 2, Rule IV, Book III of the Integrated Rules. In However, the SC countered by saying that because Wellington used
addition, he also cited Policy Instruction No. 9, which states that the “314 factor,” it still effectively recognized all the regular and
holiday pay is intended primarily to benefit principally daily special holidays no matter what day they might have fell on;
employees. this way, it is immaterial that some holidays fell on Sundays.
The SC, however, said that both have already been ruled invalid. Respondent’s theory (creating an additional working day every
time a regular holiday falls on a Sunday) in effect adds 3 more
Issues & Ruling: working days to a year; 368 instead of 365.
1. W/N the petitioners who are paid on a monthly basis are What the law merely requires is that the monthly minimum wage
entitled to holiday pay – YES should consider the worker to have worked for 365 days of the year,
The assailed section in the Integrated Rules, along with PI No. 9, are whether actually worked or not.
valid applications/interpretations of holiday pay rules in the LC.
They exclude monthly-paid employees, which is a taking away or a
deprivation which is not found in the LC itself. Both rules effectively
went beyond the very rules they were trying to implement. Producers Bank of the Philippines v. NLRC (2001)
74
The use of 314 as a divisor leads to the inevitable conclusion that the Lim v. HMR Philippines (2014)
ten legal holidays are already included therein Whether or not holiday pay is included in the monthly salary of an
employee, may be gleaned from the divisors used by the company in
Facts: Private respondent (PB Employees’ Association) charged
the computation of overtime pay and employees’ absences.
petitioner with non-payment of holiday pay. Similar to Wellington,
petitioner also used “314” as a divisor in determining the Facts: Conrado Lim filed a case for illegal dismissal against HMR. In
employees’ daily rates. ruling for Lim, the LA, NLRC, and CA ordered his reinstatement with
backwages. In computing backwages, there was a contention if his
Issue & Ruling: W/N the use of 314 as a divisor means that the
salary already included holiday pay.
legal holidays are already included in the salaries -- YES
Issue & Ruling: W/N holiday pay was included in Lim’s salary –
The divisor of 314 is arrived at by subtracting all Sundays from the
TO BE DETERMINED
total number of calendar days in a year, since Saturdays are
considered paid rest days, as stated in the interoffice Regarding holiday pay, the Court merely remanded this matter to
memorandum. Thus, the Court ruled that the use of 314 as a the LA for proper computation regarding the divisor.
divisor leads to the inevitable conclusion that the ten legal
holidays are already included therein. Whether or not holiday pay is included in the monthly salary of an
employee, may be gleaned from the divisors used by the company
in the computation of overtime pay and employees’ absences. To
illustrate, if all nonworking days are paid, the divisor of the monthly
Odango v. NLRC and ANTECO (2004) salary to obtain daily rate should be 365. If nonworking days are
To consider all of a monthly-paid employee’s regular working days not paid, the divisor is 251, which is a result of subtracting all
as “worked” for purposes of computation—the number of “days” Saturdays, Sundays, and the ten legal holidays.
worked is not reduced despite the number of regular holidays—it
obviously indicates that holiday pay is already included in the salary. NOTE: It is thus clear, that if the divisor is a number between 252-
364, then some holidays are considered paid, and some are
Facts: Petitioners are monthly-paid employees of ANTECO, who considered unpaid. This would depend on different factors, most
work regularly from Mon-Fri, and half a day every Saturday. After a notably the actual working days of the employee.
routine inspection, the DOLE found ANTECO liable for
underpayment of wages. In this case, the divisor used by ANTECO
in determining the daily rates of its monthly-paid employees is
“304.” Asian Transmission Corporation v. CA (2004)
Double holidays; To rule that two holidays falling on the same day
Petitioners’ argument: Monthly-paid employees should be entitle an employee to receive pay benefits for only one of them
considered to have worked all 365 days a year. Thus, since ANTECO would effectively reduce the number of legal holidays that an
used only a divisor of 304, the employees have not been paid for employee is entitled to benefit from per year.
61 days’ worth of salary.
Facts: On 1993, the DOLE issued an Explanatory Bulletin on double
The mere use of a divisor less than 365 does not automatically holidays, when both the Araw ng Kagitingan and Good Friday, fell
mean that there is underpayment on the part of the employer. on the same day.
The employees work 5 full days, and one half-day per week. Thus,
the minimum allowable divisor (wherein holiday pay can be The bulletin stated that in case of double regular holidays (as when
deemed included) is 287 (365 – 52 Sundays – 26 Saturdays). Araw ng Kagitingan and Good Friday fall on the same day), an
employee who does not work is still entitled to 200% of his regular
Holiday pay is effectively a reduction in a working day yet still rates (100% * 2 for each holiday). An employee who works, is
allows the employee to be paid despite not working on such entitled to 300% of his regular rates (200% for the rate which he
holiday. To consider all of a monthly-paid employee’s regular still would have gotten had he not worked, and 100% for actually
working days as “worked” for purposes of computation—the working). Overtime pay will be at 390% (300% + [30% of 300
number of “days” worked is not reduced despite the number of which is 90]).
regular holidays—it obviously indicates that holiday pay is already
included in the salary. The same double holiday occurred in 1998, this time when Araw ng
Kagitingan and Maundy Thursday, both legal holidays, fell on the
In this case, ANTECO’s computation considered all of the monthly- same day. The DOLE reiterated the rules in its 1993 Bulletin.
paid employees’ working days as having been worked on, with no
deduction for holidays. They actually used 304 as a divisor, way Issue & Ruling: W/N two holidays falling on one day make the
more than the minimum of 287 required. employee entitled to receive the pay benefits of both holidays
– YES
75
Each year has a set number of legal holidays. To rule that two without the workers' consent and shall not be used to their
holidays falling on the same day entitle the employee to receive detriment.
pay benefits for only one of them would effectively reduce the
number of legal holidays that an employee is entitled to benefit Mandatory facilities
Suitable first-aid facilities shall be made available for workers
from per year.
performing night work, including arrangements where such
In this case, there is nothing in the law which provides or indicates workers, where necessary, can be taken immediately to a place for
that the entitlement to ten days of holiday pay shall be reduced to appropriate treatment. The employers are likewise required to
nine when two holidays fall on the same day. provide safe and healthful working conditions and adequate or
reasonable facilities such as sleeping or resting quarters in the
establishment and transportation from the work premises to the
nearest point of their residence subject to exceptions and
Premium work pay for work rendered on holidays
guidelines to be provided by the DOLE.
• 200% of employee’s regular wages.
Transfers
Special Holidays
Night workers who are certified as unfit for night work, due to
There are two kinds of special holidays: working and non-working
health reasons, shall be transferred, whenever practicable, to a
special holidays.
similar job for which they are fit to work.
Coverage
"If such transfer to a similar job is not practicable, these workers
shall be granted the same benefits as other workers who are unable
to work, or to secure employment during such period
Premium pay for work rendered on special holidays
Special non-working holiday: No work, no pay. If the employee
works, he gets 130% of his usual pay.
Night shift differential pay
Special working holiday: No work, no pay. If the employee works,
Definition
he gets 100%, or his usual rate.
Coverage
Computation
Within regular work hours

Night Work
Within overtime hours
Coverage
All persons, who shall be employed or permitted or suffered to Within work rendered on a rest day, special day, or regular holiday
work at night, except those employed in agriculture, stock raising,
fishing, maritime transport and inland navigation, during a period Service Incentive Leave
of not less than seven (7) consecutive hours, including the interval Every employee who has rendered at least 1 year of service is
from midnight to five o'clock in the morning, to be determined by entitled to a yearly SIL of 5 days with pay.
the Secretary of Labor and Employment, after consulting the
workers' representatives/labor organizations and employers. One year of service is defined as service within 12 months, whether
continuous or broken. It includes authorized absences, unworked
Night worker, defined weekly rest days, and paid regular holidays.
Any employed person whose work requires performance of a
substantial number of hours of night work which exceeds a Entitlement to SIL pay begins the first year of service. E.g. if an
specified limit. employee begins working on January 2011, he is entitled to SIL
covering the year 2012.
Health assessment
At their request, workers shall have the right to undergo a health Fernandez v. NLRC (1998)
assessment without charge and to receive advice on how to reduce There is no provision in the law that limits SIL pay
or avoid health problems associated with their work:
a) Before taking up an assignment as a night worker; Facts: Petitioners filed an illegal dismissal case against respondent
b) At regular intervals during such an assignment; and Agencia Cebuana-H. Lhuillier and its sole proprietor, Margueritte
c) If they experience health problems during such, an Lhuillier. All of them were dismissed in 1990. They alleged that
assignment which are not caused by factors other than before their dismissal, they demanded a salary increase since the
the performance of night work. business was doing good and that Lhuillier was evading taxes
With the exception of a finding of unfitness for night work, the anyway. They also informed her of their intent to join the Assoc.
findings of such assessments shall not be transmitted to others Labor Union (ALU). Because of this, Lhuillier threatened them with
76
their employment, suspected that they were stealing jewelry from 1. W/N Bautista is entitled to SIL pay – YES
the pawnshop, and eventually told them to stop reporting for work. The exclusion “field personnel and other employees whose
performance is unsupervised by the employer” is not a separate
The Labor Arbiter ruled that they must be reinstated and granted classification in itself, but augments the Labor Code’s definition of
different amounts of service incentive leave pay (SIL) depending on “field personnel” who are those whose actual work hours in the field
the tenure of the dismissed workers, from 6 years to 33 years. The cannot be determined with reasonable certainty. The same applies
Solicitor-General, however, recommended that the SIL pay to those paid on commission basis; they are not a separate
computation be limited to 3 years. category but must be construed together with the phrase “field
personnel.” Hence, the mere fact of being paid on commission
Issue & Ruling: W/N the amount of service incentive leave pay
basis does not automatically exempt one from being covered
may be limited – NO
by SIL pay—they also have to be field personnel.
Service incentive leave pay is a right that accrues to every employee
So who are field personnel? The Court stated that they are those
who has rendered at least one year of service, whether continued
who regularly perform their duties away from the principal place of
or broken, unless the working days in the establishment—as a
business of the employer, and whose actual work hours cannot be
matter of practice or policy, or that provided in the employment
determined with reasonable certainty. In this case, the Court found
contracts—is less than 12 months, in which case said period shall
that Bautista was under constant supervision in the performance of
be considered as one year. (Sec. 3, Rule V, Book III, Labor Code IRR).
his work, whose departure and arrival from work premises are
It is equivalent to five days of pay per year, which the employee constantly monitored, and even their driving routes are monitored
may use as leave days, or have it collected in its monetary value. by inspectors at strategic places. Thus, Bautista is not a field
There is no provision in the law that limits SIL pay. Generally, personnel and is entitled to SIL pay.
as long as an employee has rendered at least one year of
2. How much SIL pay is Bautista entitled to, considering the
service, that employee is entitled to SIL pay.
effects of prescription?
However, the benefits of SIL pay start only on Dec. 16, 1975, so for Money claims prescribe after three years. However, SIL pay is a
those petitioners who started working before Dec. 16, 1975, their unique animal. At the end of every year, it may be commuted to its
SIL pay must be computed only from Dec. 16, 1975. monetary equivalent. Further, unused and/or uncommuted SIL that
has accrued may be commuted by an employee upon his
(NOTE: the full text verbatim says “Hence, petitioners, except Lim resignation/separation.
and Canonigo, should be entitled to service incentive leave pay
from December 16, 1975 up to their actual reinstatement,” even if Thus, for prescription purposes the 3-year period begins upon the
some of them started working after Dec. 16, 1975). employer’s refusal to pay the monetary equivalent of SIL, not from
the time the employee is actually entitled to it. In this case, Bautista
No benefits were awarded to 2 of the petitioners (Lim and has neither used nor commuted his SIL pay, and because he filed
Canonigo) since they were found to have voluntarily resigned. his money claims only one month after his dismissal, he is still
entitled to it.
Auto Bus Transport v. Bautista (2005)

Payment of salaries on commission basis does not determine JPL Marketing v. CA (2005)
entitlement or non-entitlement to SIL pay
Facts: JPL is a recruitment and placement corporation that
Facts: Petitioner Autobus employed respondent Bautista as driver- employed respondents as merchandisers. On 1996, they were
conductor on 1995 with routes covering Manila, Tuguegarao, informed that JPL would stop its merchandising activities so they
Baguio, and Tabuk. Bautista was paid on commission basis, 7% of filed a complaint for illegal dismissal and SIL pay before the LA. The
gross income, paid twice a month.
In computing for the SIL pay, the NLRC and the CA ruled that is
In 2000, he hit another autobus along Nueva Vizcaya, because the should be computed from the first day of employment until the
other bus suddenly stopped at a sharp curve. Bautista’s defense is finality of its judgement.
that he was made to drive from Manila to Isabela despite not
having slept for 24 hours. He also alleged that he was not allowed JPL additionally argued that assuming SIL pay is required, it should
to work until he paid 30% of the cost of the damaged buses. He be computed from the second year of service since it accrues only
was later terminated by Autobus, so he instituted a complaint for after 1 year, and should be computed until the date of termination,
illegal dismissal. He had been working for 5 years. not until the date of finality of the NLRC judgement.
The LA and NLRC both ruled for Bautista, and they both awarded Issues and Ruling:
SIL pay.
1. W/N respondents are entitled to SIL pay – YES
Issue & Ruling:
77
JPL is not among those specifically exempt from paying SIL pay,
and respondents have in fact rendered more than one year of
service. In this regard, the SC agreed with the CA, claiming that the Paloma v. PAL (2008)
mere difference in the wages and the minimum wage cannot be The commutability of SIL pay to cash is not a demandable right
considered SIL pay.
Facts: Paloma worked for 35 years for PAL, eventually retiring as
2. W/N SIL pay should be computed from start of Senior VP for Finance. 9 months before he retired, however, PAL
employment until the finality of the NLRC ruling – NO was privatized. After his retirement, Paloma demanded the
SIL pay should be computed starting from a year after monetary equivalent of his unused sick leave credits. PAL claimed
commencement of service (because it is only then that SIL pay that it had already been paid, and that there was a ceiling for
becomes a matter of right) until the last day that the employee has unused sick leave credits at 230 days. Paloma thus filed a complaint
worked for the employer (otherwise, it would be unfair because the for Commutation of Accrued Sick Leaves, alleging that he accrued
employee never worked for the employer during this period). 450 days worth of sick leave and commuted 58, leaving him with a
balance of 392. In addition, he used EO 1077 which provided that
retiring government employees were entitled to all leave credits
without limit.
David v. Macasio (2014)
Payment of salaries on task basis alone does not exclude an Issues & Ruling:
employee from coverage of SIL pay
1. W/N Paloma is considered a government employee for
Facts: Macasio filed a complaint against Yiels Hog Dealer for non- determining the applicability of EO 1077 – NO
payment of SIL pay. He claimed that he had been working as a First, the Court noted that PAL was incorporated as a GOCC, and
butcher/chopper since 1995, under the constant supervision of the 1973 Constitution considered GOCCs as part of the civil service.
David, especially on work days and hours, and the manner of work. Despite this however, years, PAL functioned as a private
David’s defense is that Macasio is a worker hired on pakyaw basis. corporation and managed as such for profit. Their personnel were
never considered government employees. The Civil Service rules
Issues & Ruling: were never made to apply to PAL. In addition, when Paloma filed
his complaint, PAL was already privatized.
1. W/N workers hired on task basis must also be considered
field personnel to be entitled to SIL pay – YES Thus, the court ruled that the existing company policies of PAL were
First, the Court ruled that Macasio is actually an employee of David, more controlling, which limited accrued sick leave credits to 230
noting that method/manner of payment is irrelevant, and that the days.
control exercised by David over Macasio shows EER, but on a
pakyaw/task basis. 2. W/N the 230 days may be commuted to cash – NO
Commutation is allowed by voluntary endowment through
The SC ruled that “field personnel” and “workers paid by results” company policy or CBA. PAL’s policy allows for the commutation of
are separately categorized by Art. 82 of the LC; thus, one does not 75% of sick leave credits by the end of the year, with the remaining
need to be both a field personnel and a pakyaw basis worker to be 25% being added to the accrued sick leave credits which are
excluded from SIL pay coverage—it is enough that he is either of capped at 230 days, but no longer commutable. Thus, the 230
the two. However, under the IRR, those engaged on task basis are accrued SL credits are no longer commutable.
not excluded under a separate and distinct category—they are
merged into one classification. It seems that there are conflicting
interpretations.
Sugue v. Triumph International (2009)
But this has already been resolved by prior jurisprudence, where
the Court has already ruled that the payment of an employee on Facts: Triumph International hired Sugue in 1990 as Asst.
task or pakyaw basis alone is insufficient to exclude one from the Marketing Manager with a subsequent promotion to Mktg.
coverage of SIL and holiday pay. They are exempted from SIL pay Services Manager. Valderrama was hired as a Direct Sales Manager.
only if they qualify as “field personnel.” On 1999, they filed a complaint for money claims against the
company and attended the preliminary conference for the case
The IRR should be construed as a valid qualification/limitation on during company time. This caused the company to charge the ½
the exclusion of workers paid by results. day they utilized to attend the hearing to their VL credits.
Valderrama and Sugue were later dismissed due to multiple
2. W/N Macasio, in addition to being a worker paid on task
absences without leave and abandonment of work. Their defense is
basis, is also considered field personnel – NO
that they were constructively dismissed due to unreasonable
Macasio performed his work at David’s principal place of business,
pressures & harrassments. When the case was before the CA,
his actual work hours could be determined with reasonable
Valderrama passed away. The CA ruled that there was constructive
certainty, and David supervised his duties. Therefore the exclusion
dismissal and ordered separation pay, backwages, and damages.
from SIL pay does not apply to Macasio.
78
Issue & Ruling: During this time, the complainants were paid their salaries.
However, after the return, from June ’92 – March ’93, they
The Court found that Triumph acted reasonable and in a non- complained that they were not paid their salaries.
discriminatory manner and that the petitioners were not
constructively dismissed, hence, they are considered to have Akelco’s defense on the other hand, was that these workers
abandoned their work. abandoned their posts by not working in Kalibo.
Issue & Ruling: W/N the petitioners are entitled to their wages
from June ’92 – March ’93 – NO
Soriano v. PNCC Skyway Corporation (2010)
VL privileges are not a demandable right; the CBA may validly The evidence presented by the respondents (letter from the office
provide the employer with the prerogative of scheduling VLs manager recommending wages; memorandum making an
assurance; own computation of wages) was found by the SC to be
Facts: Petitioner is a labor union that entered into a CBA with PNCC, insufficient to establish that services were actually rendered.
with relevant provisions on VL and SL. The CBA provided that the
company shall schedule the employees’ VL considering the In addition, respondents themselves admitted that they did not
employees’ preferences. Petitioner objected to this, claiming that report to the Kalibo office because they saw the move as illegal.
individual workers have the right to schedule their own VLs, and However, it was not for them to declare the illegality of the transfer
that the individual scheduling was done to avoid the commutation since it was not made in bad faith or with malice.
to cash.
Thus, since the respondents were found not to have worked during
Issue & Ruling: W/N a CBA provision stating that the company the said period, they are not entitled to wages, applying the “no
may schedule VLs for its workers is valid – YES work, no pay” principle.
The Court ruled that the terms of the CBA are clear in the use of the
word “shall,” in that the scheduling is left to the option of the
employer. If the petitioners were given the exclusive right to Philex Gold Philippines v. Philex Bulawan Supervisors Union
schedule their vacation leave then said right should have been (2005)
incorporated in the CBA. The court also noted that the multitude or Equal pay for equal work does not necessarily apply where similar
scarcity of personnel manning the tollways should not rest upon workers have different seniority statuses, skills, experience, and other
the option of the employees, as the public using the skyway system factors; where a group of similar workers already started with higher
should be assured of its safety, security and convenience. wages, “equal work for equal pay” is violated
Vacation leave privileges are considered management prerogative Facts: Philex is a gold mining company with a site in Sipalay,
and cannot be demanded by right, and the employer may compel Negros Occidental. Respondent PSU entered into a CBA with Philex,
its employees to exhaust it with no option for monetary Philex made the emploees of Philex Mining Corporation from
commutation. The purpose of a VL is rest, not additional salary. Benguet (ex-Padcal) its regular supervisory employees, when Philex
absorbed the gold mining operations.
It later turned out that the ex-Padcal employees were kept under a
VII. WAGES confidential payroll with different benefits and higher salaries
compared to the locally-hired supervisors of similar rank and
Definition of wages classification performing similar duties and functions. Thus, PSU file
a complaint for payment of wage differentials and rectification of
“All remuneration or earnings paid by an employer to a worker for
the discriminatory salary structure and benefits.
services rendered on normal working days and hours but does not
include cost-of-living allowances, profit sharing payments, Issue & Ruling: W/N the “equal pay for equal work” doctrine
premium payments, 13th month pay or other monetary benefits may overturn management prerogative to afford different
which are not considered as part of or integrated into the regular salaries for similar workers based on seniority, skill, experience,
salary of the workers on the date the Act became effective.” and dislocation factor – NO,
Aklan Electric Cooperative v. NLRC (2000) If an employer accords employees the same position and rank, the
No work, no pay presumption is that these employees perform equal work. In this
case, an ex-Padcal supervisor and a locally hired supervisor of equal
Facts: Akelco’s offices were temporarily transferred from Lezo, rank do the same kind of work.
Aklan to Amon Theater, Kalibo, Aklan, and subsequently back to
Lezo (main office) again. When the operations were at Kalibo, some The Court did not accept the argument that the difference in wage
workers kept working in Lezo, and when the operations were was based on seniority, skill, or experience, because there was no
returned to Lezo, some workers stayed at Kalibo.
79
showing that their wages were initially the same. The records only foreign employees cannot be used as an argument because the
show the fact that they have higher salaries. determining factor should be actual work performed.
Thus, the “point-of-hire” classification is invalid since there is no

reasonable distinction between the services rendered.
International School Alliance v. Quisumbing (2000)
Foreign hires cannot be paid higher wages than local hires Minimum wage
performing similar jobs just because they are foreigners
METRO MANILA (Wage Order No. RB-NCR-22, effective 22
Facts: Petitioner is a school primarily established for dependents of November 2018)
foreign diplomatic personnel and other temporary residents. It
Non-agriculture: P537.00
employs both foreign and local teaching personnel who are exempt
from otherwise applicable laws regarding their employment, except Agriculture, Retail/Service Establishments employing at most 15
those for the protection of employees. workers, and Manufacturing Establishments regularly employing
less than 10 workers: P500.00
For an employee to be classified as a “foreign hire,” it must meet
ALL of the ff. requirements: (1) domiciled abroad, (2) home Domestic workers (monthly): P3,500.00
economy is abroad, (3) economic allegiance is owed to a foreign
state, and (4) the individual was hired abroad specifically to work in Effect of violation of minimum wage rates and/or wage
International School, and International School was responsible for increases: Fine (P25,000-100,000.00), and/or imprisonment (2-4
bringing such employee to the Philippines. The foreign-hires have years). In addition, the employer will be required to pay an amount
a salary higher by 25% compared to the local hires, justified on double the unpaid benefits owed to the employer. The payment of
dislocation factor and limited tenure. the amount does not affect the employer’s criminal liability for non-
payment of wages. "If the violation is committed by a corporation,
The bargaining unit contested the difference in payment in the trust or firm, partnership, association or any other entity, the
subsequent CBA negotiations, and this issue eventually caused a penalty of imprisonment shall be imposed upon the entity's
deadlock. responsible officers, including but not limited to, the president,
vice-president, chief executive officer, general manager, managing
Respondent’s argument: The point-of-hire classification of salaries
director or partner. (Sec. 1, RA 8188)
is racially discriminatory.
DEFINITIONS (RA 6727, IRR)
Petitioner’s argument: There is no racial discrimination because
even some non-Filipinos were classified as local hires. Retail Establishment - one principally engaged in the sale of goods
to end-users for personal or household use;
Issue: W/N the difference in salaries between and local- and
foreign-hires violates the “equal work for equal pay” principle Service Establishment - one principally engaged in the sale of
– YES service to individuals for their own or household use and is
generally recognized as such;
The Court noted that the international character of the School
requires the hiring of foreign personnel to deal with different Cottage/Handicraft Establishment - one engaged in an
nationalities and different cultures, among the student population. economic endeavor in which the products are primarily done in the
In addition, there are certain benefits that need to be given to home or such other places for profit which requires manual dexterity
foreigners to entice them to work abroad. and craftmanship and whose capitalization does not exceed
P500,000, regardless of previous registration with the defunct
The Court also noted that the foreign-hires have limited
NACIDA;
employment durations, while the local hires have security of tenure.
Thus, to apply equal wages, there must also be a semblance of Basic Wage - all remuneration or earnings paid by an employer to
equality in the employment contracts. a worker for services rendered on normal working days and hours
but does not include cost-of-living allowances, profit sharing
However, the Court disagreed with the classification because both
payments, premium payments, 13th month pay or other monetary
domestic and international law proscribe discrimination. With
benefits which are not considered as part of or integrated into the
regard to the Labor Code, the Court turned to Arts. 135 (prohibiting
regular salary of the workers on the date the Act became effective;
wage discrimination based on sex), and 248 (prohibiting wage
discrimination to encourage or discourage membership in labor Statutory Minimum Wage - the lowest wage rate fixed by law that
organizations). The International School is subject to this rule an employer can pay his workers;
despite its “international character.”
Wage Distortion - a situation where an increase in prescribed
There is no evidence that the foreign-hires perform 25% more wage rates results in the elimination or severe contraction of
efficiently than local hires. Higher salaries for the enticement of intentional quantitative differences in wage or salary rates between
80
and among employee groups in an establishment as to effectively Gaa then filed an action to lift the garnishment, contending that her
obliterate the distinctions embodied in such wage structure based salaries are exempt from execution under Art. 1708 of the NCC,
on skills, length of service, or other logical bases of differentiation; which provides that a laborer’s wages shall not be subject to
execution or attachment.
Issue & Ruling: W/N Gaa is a laborer whose wages are exempt
C Planas Commercial v. NLRC (2005) from execution or attachment – NO
The burden of proving exemption from the minimum wage law falls
upon the employer claiming such exemption In looking to US cases, the Court found that the term “laborer”
refers to one who is engaged in some form of manual or
Facts: C. Planas is a company engaged in the wholesale of plastic physical labor. Gaa is an employee responsible for planning,
produts and different fruits, and it employed respondents as controlling, and directing the activities of the Hotel’s housekeeping
helpers/laborers. Respondents filed a complaint for underpayment personnel; she is occupying a position equivalent to that of a
of wages against C Planas, alleging payment below the minimum managerial or supervisory position.
wage for 3 years (1990-1993).
Art. 1708 refers to “wages” and not “salaries.” The term "wages" as
Petitioner’s argument: Respondents (8 of them) are helpers for the distinguished from "salary", applies to the compensation for
delivery trucks in the loading and unloading of products, who work manual labor, paid at stated times, and measured by the day, week,
from 10a-6p, and that they stopped working sometime in month, or season, while "salary" denotes a higher degree of
September 1993 because they were already working for other stalls employment, or a superior grade of services, and implies a position
in Divisoria. In addition, they are exempt from the minimum wage of office: by contrast, the term "wages" indicates considerable pay
law because they regularly employ only less than 10 employees, for a lower and less responsible character of employment, while
and the burden of proving non-exemption falls on respondents, "salary" is suggestive of a larger and more important service.
who allege that C. Planas employs 24 employees.
Issue & Ruling: W/N C. Planas is exempted from the

application of the minimum wage law – NO Coverage
G.R.: All workers and employees in the private sector regardless of
For a retail/service establishment to be exempt from the coverage their position, designation or status, and irrespective of the method
of the minimum wage law, two requisites must be fulfilled: (1) they by which their wages are paid.
must be regularly employing not more than 10 workers, and (2)
they have applied for such exemption with the appropriate XPT:
Regional Board. The burden of proving this is with the company 1. Household or domestic helpers, including family drivers and
claiming the exemption, yet C. Planas has not shown any evidence workers in the personal service of another;
that they have applied for said exemption, and that such 2. Homeworkers engaged in needlework;
application has been granted. Thus, C. Planas cannot merely allege 3. Workers duly employed in any establishment duly registered
the fact of employing regularly less than 10 workers, and with the National Cottage Industries Development Authority
subsequently push the burden on to the employees to prove the provided that they perform work in their respective homes;
fact of non-exemption. 4. Workers in any duly registered cooperative when so
recommended by the Bureau of Cooperative Development
and upon approval of the Secretary of Labor.
5. Workers and employees in retail/service establishments
Wages vs. salary regularly employing not more than 10 workers, when
exempted from compliance with the Act, for a period fixed by
Rosario Gaa v. CA (1985)
the Commission/Boards in accordance with Section 4 (c) of the
The term “laborer” refers to one who is engaged in some form of
Act and Section 15, Chapter 1 of these Rules;
manual or physical labor; laborers receive wages, non-laborers
6. Workers and employees in new business enterprises outside
receive salaries; only wages are exempt from attachment and
the National Capital Region and export processing zones
execution.
for a period of not more than two or three years, as the case
Facts: Rosario Gaa was the building administrator of a building in may be, from the start of operations when exempted in
TM Kalaw St., Manila, and respondent Europhil Industries was a accordance with Section 5 of the Act and Section 15, Chapter
tenant. In 1973, Europhil filed a case for damages against Gaa for 1 of the IRR;
cutting of the electricity, removing Europhil’s name from the 7. Workers and employees receiving a basic wage of more than
building directory and from the gate passes of the building P537.00 per day.
employees. The case was granted, and when it became executory, 8. Barangay Micro-Business Enterprises, which are defined as
a writ for garnishment was issued against Gaa’s “salary, business entities or enterprises engaged in the production,
commission, and/or remuneration” upon the El Grande Hotel processing or manufacturing of products or commodities,
where she works. including agro-processing, trading and services, whose total
81
assets including those arising from loans but exclusive of the length of time he worked during the year, reckoned from the time
land on which the particular business entity's office, plant and he started working during the calendar year. No work, no pay
equipment are situated, shall not be more than P3,000,000.00 applies in the computation of 13th month pay only in case of
(Sec.3[a], RA 9178). The definition of BMBE includes the resignation or separation from work.
individual owning such BMBE (Sec. 2[b], RA 9178 IRR).
In addition, there was no evidence showing that Honda practiced a
Effectivity of wage increases: 1 July 1989. pro-rated computation ever in the past. Thus, “present practice” as
stated in the CBA with regard to 13th month pay computation
Payments due to the employee referred to the payment of full month basic pay.
Basic wage
Honda Philippines v. Samahan ng Malayang Manggagawa sa

Cost-of-living allowance
Honda (2005) The COLA is a benefit mandated by the DOLE. It is not included in
“Total basic salary” means 1/12th of the standard monthly wage of the definition of “basic wage/salary.”
the employee regardless of actual hours worked
Facts: A CBA was entered into between Honda and its workers
which was good until 2000 and provided for 13th and 14th month Facilities and supplements
pays. When that CBA was about to expire, the parties entered into
- Definition of “supplements” and “facilities”
re-negotiations which couldn’t be settled amicably, and thus led to
Supplements – extra remuneration or special privileges or benefits
a deadlock and strike for 31 days.
given to or received by the laborers over and above their ordinary
When the deadlock and strike were resolved, Honda issued a earnings or wages.
memorandum announcing the new computation of the 13th and
Facilities – Items of expense necessary for the laborer’s and his
14th month pays (BASED ON THE SAME CBA GOOD UNTIL 2000),
family’s existence and subsistence so that by express provision of
and that 1/12 of the employees’ basic salary will be deducted from
law (Sec. 2[g]), they form part of the wage and when furnished by
these bonuses. If, however, the strike should be subsequently
the employer are deductible therefrom, since if they are not so
declared legal, the 1/12 deductions will be paid. Basically, they
furnished, the laborer would spend and pay for them just the same.
computed the 13th month pay based on days actually worked.
It includes articles or services for the benefit of the employee or his
Issue & Ruling: W/N the deductions on the 13th and 14th month family but excluding tools of the trade or articles or service primarily
pays based on 1/12 of the employees’ basic salaries are valid – for the benefit of the employer or necessary to the conduct of the
NO employer’s business. (Sec. 5, Rule VII-A, Book III, Omnibus Rules
Implementing the Labor Code).
The CBA’s “present practice” with regard to the 13th month pay was
not clear whether it was based on the employee’ basic salary of one - Supplements and facilities, distinguished
full month, or pro-rated cased on computation actually received. The distinction between supplements and facilities is based on the
Thus, this should be resolved in favor of the workers, and purpose of the privilege, not the kind. if a benefit or privilege
should be based on the basic salary of one full month. The granted to the employee is clearly for the employer’s
computation of the 13th month pay should thus be based on the convenience, it will not be considered as a facility but a
length of service and not on the actual wage earned by the worker. supplement (Our Haus v. Parlan).
Under PD 851, the minimum 13th month pay is at least 1/12th of If it constitutes an extra remuneration above and over his basic or
the total basic salary earned by an employee within a calendar ordinary earning or wage, it is a supplement.
year. The definition of “total basic salary” under this law is not the
Requisites for valid deduction of facilities from basic wage
amount actually received by an employee, but 1/12 of their
- The facilities must be customarily furnished by the employer
standard monthly wage multiplied by their length of service
to the employee;
within a given calendar year. Thus, the following are excluded
- The employee’s acceptance of the facilities must be voluntary
from the definition of “basic salary:”
and in writing (Sec. 7, Rule VII-A, Book 3, Omnibus Rules).
1. Sick leaves
- The facilities are charged at a fair and reasonable value.
2. Vacation leaves
3. Maternity leaves Millares v. NLRC (1999)
4. Night differentials Additional conveniences afforded to the employee, but not
5. Regular holiday pay; and customary or not for the benefit of the employee will not be
6. Premiums for work done on rest days and special holidays. considered as facilities for computation of the 13th month pay
Thus, the pro-ration of the 13th month pay is not valid because Facts: Petitioners (116 of them) were Technical Staff, Managers,
under PD 851, an employee is entitled to a pay in proportion to the and Vice-President in the mill site of Respondent Paper Industries
82
Corporation in Bislig, Surigao del Sur. When PICOP experienced a Issue & Ruling: W/N the cost of food and snacks that were
financial setback, it implemented a retrenchment and terminated provided are considered “facilities” and therefore included as
the services of petitioners. Petitioners were then paid separation wages that have been paid – NO
pay computed at 1-month basic pay per year of service.
Even assuming they were facilities, for facilities to be deductible
However, petitioners believed that the computation of the 13th from wages, certain conditions have to be met:
month pay should include (1) staff/manager’s allowance such as a. proof that such facilities are customarily furnished by the
free housing facilities, (2) transportation allowance for those who trade;
use their personal cars, and (3) Bislig Allowance. The Bislig b. the provision of deductible facilities is voluntarily accepted in
Allowance is given to Division Managers and corporate officers writing by the employee; and
assigned in Bislig on account of the hostile environment. c. the facilities are charged at fair and reasonable value.
Petitioners argued that these allowances are “facilities” as defined Mayon Hotel clearly failed to comply with these requirements. Food
in Art. 97(f) of the Labor Code (“... and includes the fair and or snacks or other convenience provided by the employers are
reasonable value, as determined by the Secretary of Labor and deemed as supplements if they are granted for the convenience of
Employment, of board, lodging, or other facilities customarily the employer. In this case, the “conveniences” given to the
furnished by the employer to the employee.”) employees were required of them so they do not leave the
premises. Since the purpose was not to make “additional
Issue & Ruling: W/N the additional allowances should be conveniences,” it cannot be considered as “wages.”
considered “facilities” included in the definition of “wages”
and thus, in the computation of the 13th month pay – NO
With regard to the phrase “customarily furnished,” the subject SLL International v. NLRC (2011)
allowances are not customary they were paid only temporarily and Subsidies for meals and snacks shall not be less than 30% of the fair
depending on existing circumstances or contingencies. and reasonable value of the facilities, and the employer may not
deduct more than 70% of the value of the meals and snacks from the
With regard to “facilities,” the Labor Code IRR defines them as
employees’ wages
including “articles or services for the benefit of the employee or his
family but excluding tools of the trade or articles or service primarily Facts: Petitioner Lagon hired private respondents (3 of them) as
for the benefit of the employer or necessary to the conduct of the apprentice or trainee linemen. They were paid the full minimum
employer’s business.” In this regard, the only allowance that may wage but because they were still trainees, they reported for work
possibly fall under “facilities” is the staff/manager’s allowance. only when substitutes or extra manpower was needed.
However, the staff/manager’s allowance and transportation After their training, they were hired as project employees from
allowance were not fixed by the proper authority, but by March – December 1997, after which they were paid the minimum
respondent company in lieu of actual housing and transportation wage of P145.00 at the time in Bohol.
needs.
By October 1997, however, the min. wage was increased to P155.00.
Thus, having not met the definition of “facilities,” these allowances
do not form part of the basic wage and cannot be included in the From March-September 1998, they were hired as project
computation of separation pay. employees again in Rizal, and received a wage of P145.00, but the
minimum wage in Rizal at the time was P160.00.
They were repeatedly employed for various projects for which they
Mayon Hotel and Restaurant v. Adana (2005) were paid amounts below the minimum wage. The employees later
Additional conveniences imposed by the employer upon the filed a case for non-payment of wages.
employee are not facilities that are included as wages
Petitioner’s argument: The food allowance of P63.00 per day as well
Facts: Mayon Hotel is a single-proprietor business employing 16 as private respondents’ allowance for lodging, transportation,
employees (respondents on this case) in various capacities. When electricity, water and snacks allowance should be added to their
the operations were transferred to a new street in Legazpi City, only basic pay. With these, petitioners claimed that private respondents
9 of the original 16 continued working. The 16 employees later filed received higher wage rate than that prescribed in Rizal and Manila.
a complaint for underpayment of wages. Mayon Hotel also alleges
that the cost of the food and snacks provided to respondents as Issue & Ruling: W/N the food allowance given to the
facilities should have been included in reckoning the payment of employees should be considered as forming part of their wages
wages. – NO
Sec. 1 of DOLE Memorandum Circular No. 2 provides that an

employer may provide subsidized meals and snacks to his
83
employees provided that the subsidy shall not be less that 30% Regarding the custom test, the Court ruled that the kasunduans
of the fair and reasonable value of such facilities. In such cases, presented by Our Haus to prove customary furnishing (which
the employer may deduct from the wages of the employees not requires the existence of a company policy or guideline showing
more than 70% of the value of the meals and snacks enjoyed that provisions for a facility were designated as part of the
by the latter, provided that such deduction is with the written employees’ salaries) were self-serving because they were produced
authorization of the employees concerned. only when the NLRC ruled that there was no “customary”
furnishing.
I.e.: If the fair and reasonable value of a facility is P100, the employer
must provide a subsidy worth at least P30, and may not deduct more In addition, the board and lodging were given on a per project
than P70 from the wages of the employees. basis. In addition, they cannot claim that this was customary
business practice because this was a requirement imposed by DOLE
In addition, the employer failed to comply with the three upon construction companies, which shall be integrated to the
requirements for facilities to be deductible from wages: overall cost of the project.
a. proof that such facilities are customarily furnished by the
trade; Regarding the purpose test, if an additional convenience it is
b. the provision of deductible facilities is voluntarily accepted in primarily for the employee’s gain, then the benefit is a facility; if its
writing by the employee; and provision is mainly for the employer’s advantage, then it is a
c. the facilities are charged at fair and reasonable value. supplement.
None of these requirements were met. The Court also made a In the construction industry where manual labor and continuous
distinction between facility and supplement (see p. 82). work are the norm, it will be more convenient to the employer if its
workers are housed near the construction site to ensure their ready
availability during urgent or emergency circumstances. Thus, the
food and lodging provided by the employer in this is clearly for its
Additional test to determine if additional benefits provided by the
benefit, not for the employee’s. It cannot be considered as part of
employer are facilities:
the wages.
• Purpose test – the purpose of the convenience must be
primarily for the benefit of the employee, not the Regarding the fair and reasonable value criterion, petitioner’s
employer. Otherwise, it is a supplement. computation of raw food value sans cooking costs were not
supported by relevant documents and company receipts. There is
Our Haus Realty Development Corporation v. Parian (2014) no corroborative evidence at hand.
In addition to the 3 requirements for additional benefits to be
considered a facility, they must also meet the purpose test to be Commissions
considered as facilities deductible from the computation of wages
Philippine Duplicators v. NLRC (1993)
Facts: Respondents are all laborers working for petitioner, a Where commissions are meant to represent an integral portion of the
construction company. Each of their daily wages amounted P312- employees’ salary, they are to be included in the computation of the
383.00; only one met the min. wage requirement). When Our Haus 13th month pay
experienced financial distress, it temporarily suspended some of its
construction projects. When it asked respondents to report back to Facts: Petitioner is a corporation engaged in the distribution of
work, they instead filed a complaint for underpayment of daily foreign copying machines and related consumables. It employs
wages. salesmen who are paid a fixed salary, along with commissions
based on duplicating machines they have sold.
Petitioner’s defense: The 3 meals per day and the free lodging given
to respondents should be considered in determining compliance As of the relevant time, all rank-and-file employees have been
with the minimum wage laws. To prove this, there were 5 entitled to 13th month pay “based on total earnings on both fixed
agreements which constitute written authorization, and that the wage and commission.” The union asked for the computation of
70% deduction ceiling was complied with because only the raw the 13th month pay to include commissions of the salesmen, but
value of the food was deducted—the cooking costs were not. petitioner refused.
Issue & Ruling: W/N the meals and the lodging should be Petitioner’s argument: The Explanatory Bulletin and Opinion which
considered as part of the “wages” of respondents – NO provide for the inclusion of commissions in the computation of 13th
month pay are void for being contrary to the IRR of the Labor Code.
First, the Court resolved the issue of whether there is a difference In addition, the Bulletin and Opinion have been rendered
between “deduction” and “charging” as argued by Our Haus. There ineffective by the Revised Guidelines on the Implementation of 13th
is none. They both lessen the actual take-home pay of the Month Pay, which excluded “allowances and benefits not
employee. considered or integrated as forming part of the basic salary.”
84
Issue & Ruling: W/N the commissions of the salesmen should More generally, a bonus is an amount granted and paid ex gratia
be included in the computation of the 13th month pay – YES to the employee; its payment constitutes an act of enlightened
generosity and self-interest on the part of the employer, rather than
“Wages” are defined as “all remunerations or earnings however as a demandable or enforceable obligation.
designated. Thus, there is no question that commissions form part
of the compensation or remuneration paid to salesmen and thus Further, the employees in Boie-Takeda are medical representatives,
are part of the wages or salaries. not salesmen. They promote certain medical products, but they do
not sell them.
The term “basic salary” was coined to distinguish the “fringe
benefits” that are received by the employees but do not form part
of the bulk of salaries and wages. In the case of salesmen, however,
sales commissions do form part of their wages. The Court merely Boie-Takeda Chemicals v. De la Serna (1993)
referred to the previous case of Songco v. NLRC. Where commissions are merely in the nature of profit-sharing
payments, or more akin to fringe benefits, they are not considered
In addition, the term “basic salary” in the Labor Code does not wages for the computation of the 13th month pay
exclude sales commissions, and that the Revised Guidelines on the
Implementation of the 13th Month Pay itself provided that Facts: A routine inspection was conducted in the premises of Boie-
employees paid by results are entitled to 13th month pay which is Takeda Chemicals, Inc. and it was found that the commissions
based on both salaries and commissions. earned by its medical representatives were not included in the
computation of the 13th month pay.
Boie-Takeda’s argument: The law only requires “regular/basic

Philippine Duplicators v. NLRC (1995) salary” for the computation of 13MP and commissions do not form
part of said regular/basic salary, because commissions are paid only
Facts: In the Motion for Reconsideration of the 1993 case, when sales are made. Additionally, PD 851 is based solely on basic
petitioner submits that the ruling in Boie-Takeda should serve to salary; thus, the Revised Guidelines which provided for the inclusion
reverse the ruling in the 1993 Philippine Duplicators case. Boie- of commissions were issued in excess of authority.
Takeda declared null and void the 2nd paragraph of Sec. 5(a) of the
Revised Guidelines on the Implementation of the 13th Month Pay. Issue & Ruling: W/N the commissions made by the medical
representatives should be included in the computation of the
Issue & Ruling: W/N the ruling in Boie-Takeda applies to 13th month pay – NO
Philippine Duplicators – NO
The Court referred to San Miguel v. Inciong, which likewise referred
The doctrines in Phil. Duplicators and Boie-Takeda co-exist with and to the Supplementary IRR for PD 851: overtime pay, earnings, and
are not contrary to each other. The Court stood by its ruling in other remunerations are excluded from the coverage of basic
Duplicators especially since it found that the “fixed salaries” salary.
received by the salesmen compose only 15-30% of their total
earnings; thus, the commissions are rightfully included in the bulk Commissions are given for extra efforts exerted in consummating
of their salaries. sales or other related transactions. They are, as such, additional pay,
which do not form part of the “basic salary.”
In Duplicators, the commissions made by the salesmen are a
portion of the salary structure which represents an automatic With regard to Songco v. NLRC, the Court said that Songco involved
increment to the monetary value initially assigned to each unit of salesmen who were not paid a fixed wage but relied entirely on
work rendered by a salesman. commissions. Likewise, Songco does not apply because it merely
discussed “wages/salaries,” not exactly “basic wages or salaries.”
In Boie-Takeda on the other hand, the additional payments made
to the employees were “productivity bonuses.” Productivity The Court declared null and void Sec. 5(a) of the Revised Guidelines
bonuses are generally tied to the productivity, or capacity for on the Implementation of the 13th Month Pay Law. Said Section 5(a)
revenue production, of a corporation; such bonuses closely provided that employees who are paid a fixed wage plus
resemble profit-sharing payments and have no clear, direct or commission are entitled to 13th month pay based on both fixed
necessary relation to the amount of work actually done by each wage and commission. The Court ruled that such provision
individual employee. expanded the scope of the Rules which it implemented, so it was
void.
Additional payments made to employees, to the extent they
partake of the nature of profit- sharing payments, are properly
excluded from the ambit of the term "basic salary" for purposes of
computing the 13th month pay due to employees.
85
Iran v. NLRC (1998) Issue & Ruling: W/N the average monthly sales commission
The nature of the employees’ work must be considered in should be included in the computation of retirement benefits
determining whether commissions form part of wages for purposes and 13th month pay – NO
of determining compliance with the minimum wage law
As ruled in Duplicators and Boie-Takeda, factual circumstances
Facts: Tones Iran Enterprises (owned by petitioner Antonio Iran) is determine whether commissions form part of the employee’s “basic
a softdrink merchandiser and distributor. It employs truck drivers wages.”
who also work as salesmen, truck helpers, and non-field personnel.
If they are closely akin to fringe benefits, overtime pay or profit-
Respondents were hired as truck helpers who promoted, sold, and
sharing statements, they are excluded in computing retirement pay.
delivered softdrinks to various outlets in Mandaue.
However, if they are effectively an integral portion of the basic
Respondents received commissions per case of softdrinks sold. salary structure of an employee, they shall be included in
determining the retirement pay.
Iran later found shortages and other irregularities allegedly
committed by respondents. Pending investigation, the employees According to the New Retirement Law, retirement pay is equivalent
abandoned their work so Iran terminated their services and filed a to at least ½ monthly salary for every year of service, with six
complaint for estafa. Respondents filed a complaint for illegal months being considered 1 year.
dismissal and underpayment of 13th month pay.
The term ½ month salary is composed of:
The LA ruled that there was underpayment; Iran contested this by • 15 days salary based on the employee’s latest salary rate,
arguing that the commissions the respondents made should have which includes all remunerations including commissions, but
been included in the computation of wages. excludes COLA, profit-sharing payments, and other monetary
benefits not considered as part of or integrated into the
Issue & Ruling: W/N the commissions made by the regular salary of the employee;
respondents form part of their wages – YES • 1/12th of the employee’s 13th month pay;
• the cash equivalent of not more than 5 days of SIL; and
Art. 97(f) of the LC defines “wage” as the remuneration or earnings
• All other benefits agreed upon.
of an employee, whether ascertained on a time, task, piece, or
commission basis. Commissions are explicitly included. The nature In this case, Reyes was receiving P10.9k salary corresponding to his
of the work of a salesman and the reason for such type of position as Unit Manager. Thus, the “overriding commission” he has
remuneration for services rendered demonstrate clearly that been receiving cannot be considered as the same kind of sales
commissions are part of a salesman’s wage or salary. commission in Duplicators (which was considered as part of the
basic salary) because Unit Managers are not salesmen; they do not
The commissions earned by the salesmen/truck drivers form part
sell anything. Thus, any commission they receive is not part of the
of the remunerations they receive, and thus must be considered as
basic salary they receive which measures the standard or amount
part of the “salaries” for determining compliance with the minimum
of work he does. They are more akin to a profit-sharing scheme.
wage law.
Additionally, Reyes did not receive sales commissions regularly; he
received them only when the salesmen he supervises were able to
collect. Thus, any commissions that Reyes receives do not form part
Reyes v. NLRC (2007)
of his salary structure.
Factual circumstances determine whether commissions form part of
the employee’s basic wages or are merely fringe benefits or profit- The Court once again referred to San Miguel v. Inciong as to the
sharing systems. definition of basic salary (see Boie-Takeda).
Facts: Petitioner Reyes was employed as a salesman for Universal

Robina Corporation on 1977. He was eventually appointed as unit
manager of the Sales Department which he held until he retired on Philippine Spring Water Resources v. CA (2014)
1997. Commissions are not included in the computation of backwages
because the main consideration in computing backwages is the
When he retired, he contested the computation of his retirement
degree of assuredness to an employee that he would have had them
benefits and 13th month pay, arguing that they should be based on
if he wasn’t illegally dismissed
both basic salary (10.9k) and monthly commissions (31.8k). So, he
filed a complaint before the NLRC for money claims. Facts: Petitioner hired respondent Mahilum as VP for Sales and
Marketing. He had a fixed monthly salary of P15,000.00 and
URC’s contention: The commissions made by Reyes are profit-
commission of 0.25% for every COD and another 0.25% for new
sharing payments, and thus are not considered wages.
accounts.
86
Mahilum was appointed over-all chairman of the inauguration of If a restaurant does not collect service charges but has a
the Bulacan plant and the company Christmas party (held on the practice/policy of collecting tips, such tips will be distributed in the
same day). However, it was postponed and Mahilum delegated the same way as service charges.
task to Ms. Evangelista, VP for Finance. The subsequent meetings
and even the inauguration itself were conducted without Mahilum. Tip pocketing
Where a restaurant requires a waiter to drop the tips he
Mahilum got into an argument with the CEO because the CEO was has.received in a “tip box,” failure to do so is equivalent to “tip
not recognized and made to speak in the program, despite the CEO pocketing.” It is a serious offense of dishonesty that may cost the
previously saying that he might be too busy to attend. Thus, waiter his job (Azucena, 303).
Mahilum was preventively suspended, and later, he was terminated.
He executed a Release, Waiver, and Quitclaim, and received
P43,998.56.
Thirteenth-month pay
Later, the CA ruled that Mahilum was illegally dismissed and that Coverage and exclusions
the quitclaim was void for lack of consideration. The P43,998.56 Covered: All employers in the private sector; all rank-and-file
Mahilum received was money he was legally entitled to (salaries, employees who have worked at least 1 month during the calendar
13th month pay, and commissions), and cannot be considered as year.
consideration for the quitclaim.
Excluded:
Issue & Ruling: W/N the 0.25% commission Mahilum received 1. Cost-of-living allowances;
per cash-on-delivery sales made should be considered in the 2. Profit-sharing payments;
computation of his backwages – NO 3. Sick leaves;
4. Vacation leaves;
The SC found that Mahilum was indeed illegally dismissed. As such,
5. Maternity leaves;
he is entitled to full backwages inclusive of allowances and other
6. Overtime pay;
benefits or their monetary equivalent.
7. Night differentials;
The outstanding feature of backwages is the degree of assuredness 8. Regular holiday pay;
to an employee that he would have had them as earnings had he 9. Premiums for work done on rest days and special holidays;
not been illegally terminated from his employment. Commissions 10. Commissions (only when they are in the nature of “additional
are not an assured monetary benefit. They are dependent on actual pay” not integrated in the basic salary, such as profit-sharing
market transactions. schemes; otherwise, if they are effectively integrated into the
employee’s salary structure, they are included in the
Thus, Mahilum’s 0.25% commission based on the monthly sales and computation of 13th month pay-) – see Boie-Takeda and
0.25% commission for cash payments are in the nature of Duplicators (1995);
overriding commission, not sales commission. The commission is 11. All other earnings and benefits that are not considered
actually more of a profit-sharing based on quota. integrated in the employee’s basic salary.
Service charges Managerial employees are also provided an equivalent of the 13th
Art. 96 of the LC covers hotels, restaurants, and similar month pay, but this is only by accepted practice, not mandated
establishments. The distribution is 85% for all covered employees by law (Azucena).
and 15% for management. The charge is equally distributed
among all employees. If the service charge is [subsequently] NOTE: According to the TRAIN law, the 13th month pay and other
abolished, the share of the covered employees will be considered equivalent benefits are tax-exempt for a maximum of P90,000.00.
integrated in their wages and will computed as the average
Nature of 13th month pay
monthly share of each employee for the past 12 months
immediately preceding the abolition. The 13th month pay is a payment equivalent to 1/12th of an
employee’s basic annual salary. An employee’s “basic salary” is
A more thorough coverage: hotels, restaurants, lodging houses,
comprised of all earnings and remunerations excluding the fringe
night clubs, cocktail lounges, massage clinics, bars, casinos &
benefits or the additional allowances given that are not in
gambling houses, and similar enterprises, including entities
consideration of the services rendered by the employee.
operating primarily as private subsidiaries of the government (Sec.
1, Rule VI, Book III, Labor Code IRR). Central Azucarera de Tarlac v. CATLU-NLU (2010)
Rate of distribution: at least once every 2 weeks, or twice a month Facts:

at an interval not exceeding 16 days (Sec. 4, Rule VI, Book III, Labor
Code IRR).
Tips
87
Honda Philippines v. Samahan ng Malayang Manggagawa sa Facts: A routine inspection was conducted in the premises of Boie-
Honda (2005) Takeda Chemicals, Inc. and it was found that the commissions
earned by its medical representatives were not included in the
Facts: A CBA was entered into between Honda and its workers computation of the 13th month pay.
which was good until 2000 and provided for 13th and 14th month
pays. When that CBA was about to expire, the parties entered into Boie-Takeda’s argument: The law only requires “regular/basic
re-negotiations which couldn’t be settled amicably, and thus led to salary” for the computation of 13MP and commissions do not form
a deadlock and strike for 31 days. part of said regular/basic salary, because commissions are paid only
when sales are made. Additionally, PD 851 is based solely on basic
When the deadlock and strike were resolved, Honda issued a salary; thus, the Revised Guidelines which provided for the inclusion
memorandum announcing the new computation of the 13th and of commissions were issued in excess of authority.
14th month pays (BASED ON THE SAME CBA GOOD UNTIL 2000),
and that 1/12 of the employees’ basic salary will be deducted from Issue & Ruling: W/N the commissions made by the medical
these bonuses. If, however, the strike should be subsequently representatives should be included in the computation of the
declared legal, the 1/12 deductions will be paid. Basically, they 13th month pay – NO
computed the 13th month pay based on days actually worked.
The Court referred to San Miguel v. Inciong, which likewise referred
Issue & Ruling: W/N the deductions on the 13th and 14th month to the Supplementary IRR for PD 851: overtime pay, earnings, and
pays based on 1/12 of the employees’ basic salaries are valid – other remunerations are excluded from the coverage of basic
NO salary.
The CBA’s “present practice” with regard to the 13th month pay was Commissions are given for extra efforts exerted in consummating
was not clear whether it was based on the employee’ basic salary sales or other related transactions. They are, as such, additional pay,
of one full month, or pro-rated cased on computation actually which do not form part of the “basic salary.”
received. Thus, this should be resolved in favor of the workers,
With regard to Songco v. NLRC, the Court said that Songco involved
and should be based on the basic salary of one full month. The
salesmen who were not paid a fixed wage but relied entirely on
computation of the 13th month pay should thus be based on the
commissions. Likewise, Songco does not apply because it merely
length of service and not on the actual wage earned by the worker.
discussed “wages/salaries,” not exactly “basic wages or salaries.”
Under PD 851, the minimum 13th month pay is at least 1/12th of
The Court declared null and void Sec. 5(a) of the Revised Guidelines
the total basic salary earned by an employee within a calendar
on the Implementation of the 13th Month Pay Law. Said Section 5(a)
year. The definition of “total basic salary” under this law is not the
provided that employees who are paid a fixed wage plus
amount actually received by an employee, but 1/12 of their
commission are entitled to 13th month pay based on both fixed
standard monthly wage multiplied by their length of service
wage and commission. The Court ruled that such provision
within a given calendar year. Thus, the following are excluded
expanded the scope of the Rules which it implemented, so it was
from the definition of “basic salary:”
void.
1. Sick leaves
2. Vacation leaves
3. Maternity leaves
4. Night differentials Philippine Duplicators v. NLRC (1995)
5. Regular holiday pay; and
6. Premiums for work done on rest days and special holidays. Facts: In the Motion for Reconsideration of the 1993 case,
petitioner submits that the ruling in Boie-Takeda should serve to
Thus, the pro-ration of the 13th month pay is not valid because reverse the ruling in the 1993 Philippine Duplicators case. Boie-
under PD 851, an employee is entitled to a pay in proportion to the Takeda declared null and void the 2nd paragraph of Sec. 5(a) of the
length of time he worked during the year, reckoned from the time Revised Guidelines on the Implementation of the 13th Month Pay.
he started working during the calendar year. No work, no pay
applies in the computation of 13th month pay only in case of Issue & Ruling: W/N the ruling in Boie-Takeda applies to
resignation or separation from work. Philippine Duplicators – NO
In addition, there was no evidence showing that Honda practiced a The doctrines in Phil. Duplicators and Boie-Takeda co-exist with and
pro-rated computation ever in the past. Thus, “present practice” as are not contrary to each other. The Court stood by its ruling in
stated in the CBA with regard to 13th month pay computation Duplicators especially since it found that the “fixed salaries”
referred to the payment of full month basic pay. received by the salesmen compose only 15-30% of their total
earnings; thus, the commissions are rightfully included in the bulk
of their salaries.
Boie-Takeda Chemicals v. De la Serna (1993)
88
In Duplicators, the commissions made by the salesmen are a Generally, employees have a vested right over existing benefits
portion of the salary structure which represents an automatic voluntarily granted to them by the employer
increment to the monetary value initially assigned to each unit of
work rendered by a salesman. Arco Metal Products v. SAMARM-NAFLU (2008)
The number of employees receiving a benefit is immaterial in
In Boie-Takeda on the other hand, the additional payments made determining whether such benefit has ripened into practice
to the employees were “productivity bonuses.” Productivity
bonuses are generally tied to the productivity, or capacity for
revenue production, of a corporation; such bonuses closely
Metrobank v. NLRC (2009)
resemble profit-sharing payments and have no clear, direct or
If the company grants improved benefits to its officers in each CBA
necessary relation to the amount of work actually done by each
signing with its rank-and-file employees, it is indicative of a
individual employee.
unilateral and voluntary act to give said benefits, which may not be
Additional payments made to employees, to the extent they peremptorily withdrawn
partake of the nature of profit- sharing payments, are properly
UE v. UE Employees Association (2011)
excluded from the ambit of the term "basic salary" for purposes of
Where the law provides for a mandatory profit-sharing scheme but
computing the 13th month pay due to employees.
does not provide for the manner, the company may change the
More generally, a bonus is an amount granted and paid ex gratia manner of distribution from equal sharing to percentage-based and
to the employee; its payment constitutes an act of enlightened this will not result into a diminution of benefits.
generosity and self-interest on the part of the employer, rather than
Wesleyan University v. Wesleyan University Faculty and Staff
as a demandable or enforceable obligation.
Association (2014)
Further, the employees in Boie-Takeda are medical representatives, A company giving two retirement plans consistently and deliberately
not salesmen. They promote certain medical products, but they do is considered as having done this in a manner that has ripened into
not sell them. practice
Bonuses
King of Kings Transport v. Mamac (2007)
Bus drivers paid on commission only are not entitled to 13 th month A bonus is an amount granted and paid to an employee for his
pay industry and loyalty which contributed to the success of the
employer’s business and made possible the realization of profits. It
is an act of generosity granted by an enlightened employer to spur
Non-diminution of benefits the employee to greater efforts for the success of the business and
Any benefit and supplement being enjoyed by the employees realization of bigger profits.
cannot be reduced, diminished, discontinued or eliminated by the
Generally, a bonus is not a demandable and enforceable obligation,
employer.
except when it is made part of the wage, salary or
There is a diminution of benefits when the ff. requisites are present: compensation of the employee.
1. The grant or benefit is founded on a policy OR has ripened
There are two ways by which a bonus becomes demandable:
into a practice over a long period of time;
1. It has been promised by the employer and expressly
2. The practice is consistent and deliberate;
agreed upon by the parties; OR
3. The practice is not due to error in the construction or
2. It has had a fixed amount and it has been a long and
application of a doubtful/difficult question of law; and
regular practice on the part of the employer.
4. The diminution/discontinuance is done unilaterally by the
employer. American Wire and Cable Daily Rated Employees Union v.
American Wire and Cable Co. (2005)
There is no specific length of time to determine when a benefit has
The granting of benefits above and beyond those strictly due to the
ripened into company practice.
employees by law is a management prerogative and may be
The benefit must be characterized by regularity, voluntariness, and withdrawn unless made part of the employees’ salary; For a bonus to
deliberate intent of the employer to grant the benefit over a be enforceable, it must have been promised by the employer and
considerable period of time. expressly agreed upon by the parties, or it must have had a fixed
amount and had been a long and regular practice on the part of the
Company practice employer
Vergara v. Coca-Cola (2013) Protacio v. Laya Mananghaya (2009)
89
Additional incentives that were distributed based on the company’s 7. Salary deductions of a member of a legally established
financial position is a bonus that may not be demanded by right cooperative;
8. SSS, Medicare, and PAG-IBIG contributions;
Lepanto Ceramics v. Lepanto Ceramics Employees Association 9. Deductions in other cases where the employer is authorized
(2010) by law or by regulations issued by the Secretary of Labor.
Bonuses integrated in the CBA partakes the nature of a demandable 10. Deductions by security agencies, with a maximum of 1 month
obligation worth of a salary deposit, or 20% of weekly salary if weekly
deduction.
Mega Magazine Publications v. Defensor (2014)
Where the employer has never refused or rejected an employee’s
requests for bonuses, and even negotiated with the employee on the Conditions for validity
schedule of rates and revenues, the grant of bonuses will be deemed • That the employee concerned is clearly shown to be
a demandable obligation responsible for the loss or damage;
• That the employee is given reasonable opportunity to show
TSPIC Corporation v. TSPIC Employees Union (2008)
cause why deduction should not be made;
Overpayment to employees as a result of an error which has been
• That the amount of such deductions is fair and reasonable and
rectified immediately upon discovery does not vest a right upon the
shall not exceed the actual loss or damage; and
employees to demand the overpayments as bonuses
• That the deduction from the wages of the employee does not
Eastern Telecommunications v. Eastern Telecoms Employees exceed 20% of the employee’s wages in a week (LC Omnibus
Union (2012) Rules, Sec. 11, Rule VIII, Book III).
A bonus may be granted on equitable consideration when the giving
of such bonus has been the company’s long and regular practice
Interference in the disposal of wages
Prohibitions regarding wages Employers are not allowed to interfere in the freedom of the
• Employee uniforms are explicitly unauthorized as employees to dispose of their wages. Neither may they compel
deductions employees to purchase commodities or other products belonging
• Cash deposits for loss or damage to the employer or any other person.
• Training fees
Penalty: Fine of P1,000-10,000.00 and/or imprisonment of 3
Deductions from wages months to 3 years.
Omnibus Rules Implementing the LC, Sec. 10, Rule VIII, Book III: Wages exempt from execution or attachment
• When the deductions are authorized by law, (see 2 and 3 Rosario Gaa v. CA (1985)
below); Only wages, not salaries, are exempt from execution or attachment.
• When the deductions are with the written authorization of the
Facts: Rosario Gaa was the building administrator of a building in
employees for payment to the third person and the employer
TM Kalaw St., Manila, and respondent Europhil Industries was a
agrees to do so, provided that he does not receive any
tenant. In 1973, Europhil filed a case for damages against Gaa for
pecuniary benefit from the transaction.
cutting of the electricity, removing Europhil’s name from the
Labor Advisory No. 11 Series of 2014 building directory and from the gate passes of the building
employees. The case was granted, and when it became executory,
Dept. Order 195-2018 a writ for garnishment was issued against Gaa’s “salary,
commission, and/or remuneration” upon the El Grande Hotel where
When allowed
she works.
1. Deductions for meals and other facilities;
2. Deductions for employee’s insurance premiums paid by the Gaa then filed an action to lift the garnishment, contending that her
employer, where the insurance is with consent of the salaries are exempt from execution under Art. 1708 of the NCC,
employer; which provides that a laborer’s wages shall not be subject to
3. Deductions for union dues, where the right of the worker or execution or attachment.
his union to check-off has been recognized by the employer
or authorized in writing by the employee concerned; Issue & Ruling: Issue & Ruling: Whether Gaa receives wages or
4. Deductions where the employee is indebted to the employer, salaries – SALARIES
where such indebtedness has become due and demandable
(Art. 1706, NCC); In looking to US cases, the Court found that the term “laborer”
5. In court awards, but only for debts incurred for food, shelter, refers to one who is engaged in some form of manual or physical
clothing, and medical attendance (Art. 1708, NCC); labor.
6. Withholding tax;
90
Art. 1708 refers to “wages” and not “salaries.” The term "wages" Simply applying Art. 114, the SC ruled that it does not allow
as distinguished from "salary", applies to the compensation for deposits to defray deficiencies incurred in the remittance of the
manual labor, paid at stated times, and measured by the day, boundary.
week, month, or season, while "salary" denotes a higher degree
of employment, or a superior grade of services, and implies a Nevertheless, Sabsalon was able to withdraw his deposits through
position of office: by contrast, the term "wages" indicates vales or he incurred shortages, such that he is even indebted to
considerable pay for a lower and less responsible character of petitioners in the amount of P3,448.00.
employment, while "salary" is suggestive of a larger and more
important service.
Wages are the ones exempt from attachment and execution. Since Nina Jewelry v. Montecillo (2011)
Gaa is an employee responsible for planning, controlling, and An employer may require deposits from her employees only when
directing the activities of the Hotel’s housekeeping personnel; she the practice of making deposits is recognized, or when it is necessary
is occupying a position equivalent to that of a managerial or or desirable as determined by the Labor Secretary
supervisory position. She receives salaries, not wages. They are Facts: Montecillo and Trinidad were employed as goldsmiths in
NOT exempt from execution or attachment.
Nina Jewelry Manufacturing. Their GM was Elisea Abella. For
context, there have been incidents of theft involving goldsmiths
Requiring deposits
employed by Abella, so she imposed a policy requiring goldsmiths
Article 114, LC. “Deposits for loss or damage. — No employer to post cash bonds or deposits at most 15% of a goldsmith’s weekly
shall require his worker to make deposits from which deductions salary. They were intended to answer for losses or damages that
shall be made for the reimbursement of loss of or damage to tools, Nina Jewelry may sustain due to the goldsmiths’ fault or
materials, or equipment supplied by the employer, except when the negligence.
employer is engaged in such trades, occupations or business where
Abella gave the option to goldsmiths to, in lieu of cash deposits,
the practice of making deposits is a recognized one, or is necessary
authorize Abella to deduct 15% of their take home money should
or desirable as determined by the Secretary of Labor in appropriate
it be found that they lost the gold entrusted to them. The
rules and regulations.”
respondents alleged that they were constructively dismissed by
Five J Taxi v. NLRC (1994) Niña Jewelry as their continued employments were made
Taxi operators may not require deposits from their taxi drivers in dependent on their readiness to post the required deposits.
order to cover possible deficiencies in the boundaries
Thus, because of defiance against the new policy, respondents
Facts: Respondents Maldigan and Sabsalon were hired by Five J as stopped reporting for work.
taxi drivers, and they worked 4x/week on a 24-hour shifting
Issue & Ruling: W/N Abella could validly require deposits or
schedule. In addition to their boundary, they were also required to
salary deductions from the goldsmiths as security against lost
pay P20.00 for car washing, and a P15.00 deposit to answer for
or damaged gold/jewelry – NO
any deficiency in their boundary, for every actual working day.
First, the Court agreed with the LA and NLRC that there was no
It was later revealed that Maldigan started working for a different
constructive dismissal, so the CA should not have taken up the case
taxi company, and that Sabsalon was held up by an armed
at all. Nevertheless, it took it upon itself to discuss the
passenger who took all his money and stabbed him.
validity/propriety of the deposit requirement.
Sabsalon was later re-admitted on an “alternative basis” but it was
Petitioners failed to prove that their imposition of the new policy
also discovered that he started working for a different taxi
upon the goldsmiths under Niña Jewelry’s employ falls under the
company, after he failed to remit his boundary and abandoned the
exceptions. Contrary to petitioner’s arguments, the court ruled that
taxicab in Makati.
they are not allowed to determine on a case-to-case basis what
While Maldigan was still working as a driver, he asked for a practices are “recognized, necessary, or desirable” as an exception
reimbursement of the daily deposits he paid for 2 years, but he was to the rule prohibiting employers from requiring deposits from the
refused, because the entire amount (and more) was used to repair employees.
the taxi. When he insisted on the refund, his services were
Art. 113 provides for only three exceptions: deductions for
terminated. For Sabsalon, he was terminated because he refused to
insurance premiums advanced by the employer, deductions for
pay the P20.00/day car wash fee.
union dues, and other deductions authorized by the Labor
Issue & Ruling: W/N requiring taxi drivers to pay deposits for Secretary.
boundary deficiencies is a recognized or necessary & desirable
The petitioners failed to prove that the deposit requirements were
practice as an exception to the prohibition on deposits under
a recognized practice in their industry, or that they were
Art. 114 of the LC – NO
91
determined by the Labor Secretary to be recognized, necessary, or Facts: Petitioners are employees of respondent Solid Mills. As
desirable practices. employees, they and their families were allowed to occupy SMI
Village (owned by Solid Mills) on the condition that they vacate the
premises anytime Solid Mills deems fit.
Withholding of wages In 2003, Solid Mills stopped operations due to business losses,
which was recognized in a Memorandum of Agreement with the
Special Steel Products v. Villareal (2004)
bargaining agent. The MoA provided that the Union members will
An employer may not withhold its employees’ wages as security for
be given financial assistance sans accountabilities, with the First
the employees’ car loans and training expenses
check due on January 2004, and every 5th day of the month until 5
Facts: Special Steel is a seller, importer, and marketer of steel December 2004.
products. Respondents Villareal and So are its asst. sales manager
The MoA also provided that Solid Mills will pay any accrued
and salesman.
benefits the employees are entitled to in the form of a One-Time
Villareal later secured a car loan with Special Steel as the surety. Cash Payment.
However, he later resigned and joined a different company as Exec.
When Solid Mills stopped operations, it required its employees to
VP.
first sign a memorandum of agreement with release and
Regarding So, petitioner sponsored him to take a training course quitclaim before they could receive their vacation and sick
in Austria as a reward for outstanding performance. When he leave benefits, 13th month pay, and separation pay.
returned, he signed an agreement to continue working for Special
Those who signed the MoA were considered to have agreed to
Steel for another 3 years, otherwise he will refund the training
vacate SMI Village, and to the demolition of the constructed houses
expenses incurred. 2 years and 4 months later, he resigned.
inside as condition for the release of their termination benefits
Respondents later demanded monetary benefits and 13th month and separation pay.
pay, but this was withheld by Special Steel. It argued that, as
Issue & Ruling: W/N the petitioners’ continued possession of
Villareal’s guarantor, it could withhold the benefits as a preliminary
Solid Mills property is an “accountability” that justifies
remedy, and as regards So, it could withhold the benefits due to
withholding the benefits until possession is returned – YES
the memorandum/agreement he signed.
As a general rule, Art. 113 prohibits the withholding of wages from
Issue & Ruling: W/N Special Steel’s withholding of
employees. As a matter of exception, the same article provides that
respondents’ benefits was valid – NO
it is allowed where authorized by law. In the same regard, Art. 1706
As regards Villareal, Art. 113 is clear that no withholding of wages of the NCC provides that wages may be withheld by the employer
may be made without the employee’s consent. An employer cannot for a debt due.
simply refuse to pay the wages or benefits of its employee because
“Debt” in this case refers to any obligation due from the employee
he has either defaulted in paying a loan guaranteed by his
to the employer. It includes any accountability that the
employer; or violated their memorandum of agreement; or failed
employee may have to the employer.
to render an accounting of his employer’s property. Petitioner also
cannot rely on Art. 2071, because it applies to guaranty, and not The MoA between Solid Mills and NAFLU (the bargaining unit)
surety. The car loan was secured by a suretyship. Petitioner may provided that the benefits will be released only once the
only protect its right as surety by instituting an ‘action to demand accountabilities have been cleared. “Accountability,” in its ordinary
a security.’ sense, means obligation or debt. The ordinary meaning of the term
“accountability” does not limit the definition of accountability to
As regards So, petitioner’s argument is that there is legal
those incurred in the worksite. As long as the debt or obligation
compensation or set-off between them. However, So and Special
was incurred by virtue of the employer-employee relationship,
Steel are not mutual debtors and creditors. The Memorandum
generally, it shall be included in the employee’s
states that the refund shall be made to BOHLER (the company that
accountabilities that are subject to clearance procedures.
provided the training), not to Special Steel. Hence, it is BOHLER that
is the creditor. Clearance procedures are established standard practice instituted
to ensure that the employer’s properties are returned to him before
the employee’s departure.
Milan v. NLRC (2015) The return of the property’s possession became an obligation or
An employer is allowed to withhold terminal pay and benefits liability on the part of the employees when the employer-employee
pending the employee’s return of its properties. relationship ceased. Thus, respondent Solid Mills has the right to
withhold petitioners’ wages and benefits because of this existing
debt or liability.
92
An employee cannot fault an employer for withholding benefits, In accordance with the October 1998 Wage Order, petitioner
while the employee simultaneously withholds the employer’s demanded an additional P10.00/day increase, despite already
property. receiving an amount higher than the min. wage prescribed by the
Wage Order.
Deductions to ensure employment
Such deductions, including deductions for retention in Issue & Ruling: W/N respondent employer is mandated to
employment are invalid, even if the employee agreed to them. increase its daily wages in accordance with the Wage Order
despite already paying wages higher than the minimum
prescribed – NO
Retaliatory acts by employer
This refers consequences imposed by an employer towards an Petitioner banks its argument on Sec. 2 of the CBA, which provides
employee for filing a complaint or instituting a proceeding or that in the event that a law is enacted increasing minimum wage,
testifying or is about to testify. It is not allowed in any case, and “an across-the-board increase shall be granted by the Company
includes refusal to pay wages/benefits, or in any other manner according to the provisions of the law.”
discriminate against the employee.
However, this interpretation ignores the phrase “according to the
provisions of the law.” Reading the contract as a whole, it is clear
False statements in a report or record that the intention of the Wage Order was not to impose an across-
the-board increase in the wages per se, but merely to fix a higher
minimum wage.
Wage-fixing
The Court discussed the two methods of adjusting the minimum
Criteria for fixing the minimum wage
wage: “floor wage” and “salary-ceiling.” The floor wage method
merely fixes a set amount in the prevailing minimum wage rates.
On the other hand, the salary-ceiling method imposes a wage
increase for workers receiving up to a certain amount (“those
receiving a wage of not more than P400.00/day”). In this case, the
Methods for fixing the minimum wage
Wage Order is a floor wage method increase.
Floor wage
Thus, petitioner cannot demand a P10.00 increase from the Wage
“The “floor wage” method involves the fixing of a determinate
Order simply because they are outside its coverage because they
amount to be added to the prevailing statutory minimum wage
are already being paid above the amount required. There may be
rates.” (Norkis Union v. Norkis Trading)
an increase in wages resulting from the new minimum wage, but
Salary ceiling this is not across-the-board. It applies only to those who, without
In the “salary-ceiling” method, the wage adjustment was to be a salary increase, would be paid below the minimum wage
applied to employees receiving a certain denominated salary under the new Wage Order.
ceiling. In other words, workers already being paid more than the
existing minimum wage (up to a certain amount stated in the Wage distortion
Wage Order) are also to be given a wage increase. (Norkis Union v. Definition
Norkis Trading) “A situation where an increase in prescribed wage rates results
in the elimination or severe contraction of intentional quantitative
Norkis Free and Independent Workers Union v. Norkis Trading
differences in wage or salary rates between and among employee
(2005)
groups in an establishment as to effectively obliterate the
An employee cannot be compelled to grant an across-the-board
distinctions embodied in such wage structure based on skills,
increase in its employees’ wages when it was already paying the
length of service, or other logical bases of differentiation” (RA 6727
employees more than the minimum wage.
IRR).
Facts: In October 1998, the Regional Tripartite Wages and
It “presupposes an increase in the compensation of the lower ranks
Productivity Board (RTWPB) issued a Wage Order increasing the
in an office hierarchy without a corresponding raise for higher-
minimum daily wage by P10.00. Prior to its issuance, respondent
tiered employees in the same region of the country, resulting in
had already entered into a CBA with petitioner union where it
the elimination or the severe diminution of the distinction between
provided that there will be an across-the-board increase in the
the two groups.” (Prubankers Association v. Prudential Bank, 1999).
minimum wage.
NOTE: The reason for the requirement that the distortion happens
In 1998, they re-negotiated for an across-the-board P10.00
in the same region is that wage rates are different across different
increase in the daily wage. Thus, as of August 1998, they were
regions, considering factors such as cost of living, worker needs,
receiving P175.00/day. The Wage Order of October 1998 mandated
standards of living, etc.
a minimum wage of P165.00/day (from P155.00/day).
93
NOTE: Correctional measures for wage distortion is required only 76% > 50%
where the quantitative changes are caused by the ∴ There is wage distortion because of a severe contraction.
implementation of wage orders fixing new minimum wage
rates, or when the distortion is caused unilaterally by the employer Elements of wage distortion
in such a manner that it amounts to bad faith. Where the
Prubankers Association v. Prudential Bank (1999)
quantitative difference is agreed upon by employers and
The implementation of wage orders in one region but not in others
employees in the CBA, there is no obligation to correct such
does not in itself necessarily result in wage distortion.
quantitative differences.
Facts: The RTWPB issued a Wage Order providing for a COLA for
There are 2 ways by which wage distortion is committed:
private sector workers in the different towns and cities of the Bicol
5. Elimination of pay differentials between employee groups; Region. Subsequently, it issued another Wage Order integrating
6. Severe contraction of pay differentials between employee the COLA into the basic pay of all workers and mandating a
groups. minimum wage increase in certain provinces. The two Wage Orders
do not necessarily cover the same areas of the country.
There is elimination if a pay differential between two employees of
different ranks becomes 0 as a result of the implementation of a Thus, the Bank granted a P17.50 COLA to its workers in its Naga
wage order. Branch (the only branch covered by the first WO) and integrated
the P150.00/month COLA into the basic pay of its rank-and-file
Example: X and Y are employees for a company, and Y has a higher employees in the branches covered by the second WO.
rank. X receives P537.00/day, while Y receives P600.00/day. If a
Wage Order prescribing an increase in the minimum wage from Prubankers Association alleged that the Bank committed wage
P537-600 is issued, X is entitled to receive an increase of distortion.
P43.00/day, while Y is not entitled to because his situation would
Issue & Ruling: W/N the wage changes for the Bank’s workers
not be violative of the new minimum wage law. Since they now
in different regions constituted wage distortion – NO
receive P600.00/day because of the new Wage Order despite their
difference in ranks, there is a wage distortion. Wage distortion involves four elements:
1. An existing hierarchy of positions with corresponding salary
According to the DOLE-NWPC, there is severe contraction if the
rates;
contraction is more than 50% of the intended quantitative
2. A significant change in the salary rate of a lower pay class
differences in pay between two groups of workers in an
without a concomitant increase in the salary rate of a
establishment.
higher one; and
Example: In the above example, change Y’s salary to P620.00. Upon 3. The elimination of the distinction between the two levels; and
the implementation of the wage order, X’s salary is now P600.00. 4. The existence of the distortion in the same region of the
Y’s salary is unchanged because his situation is still compliant. The country.
pay differential between them was not eliminated but has been
In this case, the salary rates of all pay classes in the affected
severely contracted because the contraction was more than
branches were covered (element #2 not met). Also, the hierarchy of
50% of the intended quantitative difference. From a difference
positions based on skills, length of service and other logical bases
of P83.00, the difference is now P20.00. There has been a
of differentiation was preserved (element #3 not met).
contraction of P75%.
Petitioner banks its argument on the fact that the employees in the
How to compute for severe contraction (c):
affected regions have higher compensation than their counterparts
x = old difference in pay
of the same level in other regions. However, a disparity in wages
y = new difference in pay
between employees holding similar positions but in different
z=x–y
regions does not constitute wage distortion.
c=?
1. Subtract y from x to get z (x-y=z); Because of the factors listen in Art. 124 of the LC, disparity in wages
2. Divide z by x (z/x); between similar employees in different regions is necessarily
3. Move the decimal point of the quotient two places to the right expected. A uniform national wage structure is antithetical to the
to get the percentage of the contraction (c). purpose of RA 6727 because its main purpose is the regionalization
c = >50%: there is a severe contraction. of wage rates. The fact that a person is receiving more in one region
c = <50%: there is no severe contraction. does not necessarily mean that he/she is better off than a person
receiving less in another region.
Example (using the situation above):
x–y=z With regard to petitioner’s argument that the Bank has adopted a
83 – 20 = 63 uniform wage policy across the nation which has attained the status
63/83 = 0.76 = 76% of established management practice, the Court said that this policy
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was enacted prior to RA 6727. When 6727 was enacted, the Bank The following month, RA 6727 was enacted, providing for a P25
then became mandated to impose regionalization of rates. There increase in the minimum wage for the private sector, covering
can be no conclusion that the Bank has established management those receiving above the minimum wage rates up to P100.00/day.
practice. It also provided that wage increases granted 3 months before the
Act’s effectivity will be considered compliance with the law.
Thus, the bank gave the P25.00/day increase (P750/month) to all

Employer’s Confederation of the Philippines v. National Wages probationary employees and those promoted to regular status
and Productivity Commission (1991) before 1 July 1989. However, it did not give the same increase to
The RTWPB’s fixing of wages according to the salary-ceiling method employees already receiving more than P100/day and employees
is a valid delegation of legislative power to fix rates who received the P900 CBA increase. Thus, one group received
an increase of P750/month, while the other group received an
Facts: Petitioner contested the validity of WO NCR-01-A, which was increase of P900/month. The difference is a mere P150.00.
promulgated pursuant to RA 6727.
The basis of differentiation is regular employment as of 01
First, WO NCR-01 was promulgated increasing the minimum wage January 1989.
by 17.00/day. Then, WO NCR-01-A amended the original WO,
imposing a “salary ceiling” increase. It provided for an increase of The union alleged that Metrobank committed wage distortion,
P17.00/day for workers earning up to P125.00/day. because its implementation of RA 6727 resulted into the
categorization of employees into (a) the probationary employees
Petitioner’s main argument is that NWPC’s “across-the-board” as of 30 June 1989 and regular employees receiving P100 or less a
wage increase to workers already being paid above the minimum day who had been promoted to permanent or regular status before
wage is in excess of its authority because RA 6727 allegedly allows 01 July 1989, and (b) the regular employees as of 01 January 1989,
them to impose only minimum wages, not salary ceilings. whose pay was over P100 a day; and that the salary gap between
In defense of the WO, the OSG argued that the salary-ceiling these two groups was substantially reduced.
method was imposed to rectify wage distortions which are brought Issue & Ruling: W/N the contraction in the salary gaps between
about by floor-wage increases. the workers, as a result of Metrobank’s implementation of RA
6727 was severe enough as to warrant wage distortion – YES
Issue & Ruling: W/N NCR-01-A is an unlawful legislation for
providing for an “across-the-board” wage increase affecting The Court agreed with the NLRC Commissioner’s dissent that there
even employees paid above the minimum wage – NO may not have been a total obliteration/elimination of quantitative
differences but there is a contraction that amounted to 83%, which
It is true that wage fixing, like rate-fixing, constitutes an act of
Congress; it is also true, however, that Congress may delegate the is definitely severe enough to warrant the correctional measures
required by RA 6727.
power to fix rates provided that, as in all delegations cases,
Congress leaves sufficient standards. As this Court has indicated, it Thus, the Court accepted Comm. Bonto-Perez’ suggested formula
is impressed that the standards in Art. 124 of the LC are sufficient. of:
By rationalizing wages and creating a permanent board to decide [Minimum Wage/Actual Salary] = % x Prescribed Increase =
wage levels for the different regions, Congress is not abdicating Distortion Adjustment.
from its duty to legislate, but is merely leaving the question of
wages to experts. The question of minimum wage rates is not
limited to how much it should be, but also to ensure that the wages
are not distributed un-evenly and that social justice is met. Metro Transit Organization v. NLRC (1995)
CBA provisions entered into prior to new wage rates may be
considered as compliance with such wage rates and there is no need
to impose additional increases where the prior CBA provisions
Metrobank Employees Union v. NLRC (1993) already render the employer compliant with the new rates
Wage distortion is not limited to the total obliteration of quantitative
differences in wages between employee groups; it is enough that Facts: Petitioner is the operator of the LRT in Manila. It entered into
there is a severe contraction its first CBA with the respondent union on December 1989. Prior
to this, only rank-and-file employees had a CBA with Metro
Facts: In May 1989, Metrobank entered into an agreement with its Transit; supervisory employees did not have one. Before any
union granting a P900 wage increase, a P600 increase, and a P200 CBA was entered into, whenever rank-and-file employees received
increase (implemented subsequently). Only regular employees as a statutorily mandated wage increase, supervisory employees also
of 01 January 1989 were included; probationary employees were received the same amount + P50.00.
not.
95
On April 1989, Metro Transit increased the salary of the rank-

and-files by P500.00/month pursuant to the CBA but did not
extend the same to supervisory employees. Bankard Employees Union v. NLRC (2004)
For purposes of determining the existence of wage distortion,
On December 1989, Metro Transit, in compliance with the new CBA, employees cannot create their own independent classification and
increased the salary of supervisory employees by P800.00/month. use it as a basis to demand an across-the-board increase in salary.
On April 1990, both rank-and-files and supervisory employees Facts: Respondent Bankard unilaterally adopted a new salary scale
received a salary increase of P600.00. For the rank-and-files, the that increased the hiring rates of new employees However, old
increase was in compliance with the CBA, while for the supervisory employees were not affected by this new scheme.
employees, the increase was advanced from their second-year
salary increase which was P1000.00/month effective December This prompted the union to increase the salary of the old regular
1990. On December 1990, Metro Transit paid the remaining employees but Bankard countered by claiming that it had no
balance of P400.00/month. obligation to grant across-the-board salary increases.
The union later filed a case with the NCMB for correction of Issue & Ruling: W/N Bankard is obligated to extend the
disparity/inequity in pay with rank-and-file employees. increased salary scheme for old employees, not just new,
incoming employees – NO
Metro’s argument: The grant of corresponding increases to
supervisory employees was merely out of generosity and should The union arbitrarily created its own classification: the newly-hired
not be regarded as mandatory. employees vs. the old employees. It did not base its classification
on different ranks or levels in the salary structure.
Issue & Ruling: W/N there was a wage distortion between the
salaries of the rank-and-files and of the supervisory employees It is thus clear that there is no hierarchy of positions between
– YES the newly hired and regular employees of Bankard, hence, the
first element of wage distortion provided in Prubankers is
The increase of April 1989 for rank-and-file employees’ salaries but wanting.
not for supervisory employees constituted wage distortion. The
Court was not persuaded by Metro’s argument that the increase for The third element of wage distortion is also wanting, because
supervisory employees was merely a bonus because it did not the gaps between the workers are not significant enough as to
depend on the success or profits of Metro. Those increases were obliterate intentional quantitative differences.
precisely designed to correct or minimize the wage distortion
Absent any indication that the voluntary increase of salary rates by
effects of increases given to rank-and-file employees (under their
an employer was done arbitrarily and illegally for the purpose of
CBA or under Wage Orders). This highlights the fact that those
circumventing the laws or was devoid of any legitimate purpose
increases were part of the wage structure of supervisory employees.
other than to discriminate against the regular employees, the Court
The demanded increase, therefore, is an enforceable obligation so will not step in to interfere with this management prerogative.
far as the supervisory employees of Metro are concerned. However, Employees are of course not precluded from negotiating with its
the P550.00 increase is demandable by SEAM only in respect of the employer and lobby for wage increases through appropriate
period beginning 17 April 1989 and ending on 30 November 1989. channels, such as through a CBA.
W/N the CBA forged in December 1989 effectively rectified the

wage distortion – YES
Philippine Geothermal Employees Union v. Chevron (2018)
Along with the P550.00/month increase awarded in the first issue,
the Court found that the new mandatory increases in the new CBA
effectively corrected the wage distortion issue. After all the CBA in relation to Wage Orders
corrections, the supervisory employees are now receiving P1,500.00
more per month. There is a P690.00 gap between the salary of the Filipinas Golf and Country Club v. NLRC (1989)
highest-paid rank-and-file, and the lowest-paid supervisory
employee. Philippine Telegraph and Telephone Corporation v. NLRC
(1995)
Additionally, the Court held that the P550.00/month increase award
in the first issue should already be held as included already in the
mandated increase of P800 in the new CBA. Stated differently, the
Worker preference in case of bankruptcy
additional P550/month should be paid covering the period
from April-November 1989, but from December onwards, the DBP v. NLRC (1990)
P800/month increase is sufficient to remove wage distortion.
DBP v. NLRC (1994)
96
Digests not available.
97
VIII. Special Groups of Workers despite the fact that she was already married a few months
prior.
Women
When petitioner learned of this discrepancy, she was sent a
LC 130-136; RA 7877; RA 9710 memorandum requiring de Guzman to explain herself, reminding
her that married women are not allowed to be hired as a matter of
Under Art. 130 of the Labor Code (as amended by RA 10151, which
policy. De Guzman’s defense was that she was not aware of this
repealed the prohibition on women night work), the Labor
policy, but PT&T was unconvinced and terminated her services.
Secretary shall, by regulations, require employers to:
• Provide seats proper for women and permit them to use such Issue & Ruling: W/N PT&T’s policy of not accepting married
seats when they are free from work and during working hours, woman is valid – NO
provided they can perform their duties in this position without
detriment to efficiency; The Court discussed the various laws and policies of the Philippines,
• Establish a nursery in a workplace; citing the Constitution, the Labor Code, the UN CEDAW, RA 6727
• Determine appropriate minimum age and other standards for (Wage Rationalization, RA 6955 (banning mail-order brides), RA
retirement or termination in special occupations such as those 7192 (Women in Development and Nation Building Act), RA 7322
of flight attendants and the like. (increasing maternity benefits), RA 7877 (Anti-Sexual Harassment
Law), RA 8042 (Migrant Workers Act), and finally, the due process
Prohibited acts under the Labor Code requirement.
• Art. 133: To discriminate against any woman employee solely
The Court was not convinced by PT&T’s argument that dishonesty
on account of her sex (such as payment of a lesser
was the reason for her termination, because the various
compensation to a female employee as against a male
communications between PT&T and de Guzman reiterate the
employee for work of equal value; and favoring a male
company’s policy against hiring married women. This is expressly
employee over a female employee with respect to promotion,
prohibited in Art. 136 of the Labor Code.
training opportunities, study and scholarship grants solely on
account of sex). The Court ruled that de Guzman’s concealment of her civil status is
• Art. 134: To require as a condition of employment or not in bad faith because she was forced by the illegal company
continuation of employment that a woman employee shall not policy to do so. While loss of confidence is a just cause for
get married, or to stipulate that upon getting married, a termination of employment, it should not be simulated. It must rest
women employee shall be deemed resigned or separated, or on an actual breach of duty committed by the employee and not
to actually dismiss or otherwise prejudice a woman employee on the employer’s caprices. If anyone was dishonest, it was the
merely by reason of her marriage. company.
• Art. 135: To (1) deny any woman employee the benefits
provided for in this Chapter—maternity leave and family The Court also looked back to a previous case which ruled void a
planning services—or to discharge any woman employed for PAL policy of hiring only single flight attendants, automatically
the purpose of preventing her from enjoying any of the terminating the services of those who marry.
benefits under the Labor Code; (2) to discharge such woman
The Court was also not convinced by de Guzman’s admission that
on account of her pregnancy, or while on leave or in
she misappropriated funds because this was self-serving for the
confinement due to her pregnancy; or (3) to discharge or
benefit of the company. Another point worth noting is that de
refuse the admission of such woman upon returning to her
Guzman was dismissed right as her probationary period ended, so
work for fear that she may again be pregnant.
the Court concluded that the dismissal was also motivated by a
desire to prevent security of tenure.
Philippine Telegraph & Co. v. NLRC (1997)

A company policy that prohibits the hiring of married women and
Lakpue Drug v. Belga (2005)
dismissing those who are found to be married, is void for being
Absences due to the physical aftereffects of pregnancy cannot
unlawful and discriminatory
constitute grounds for a woman employee’s dismissal
Facts: Respondent de Guzman worked as a reliever
Facts: In 1995, Belga was hired first as a bookkeeper and
(“Supernumerary Project Worker”) for another employee of Phil.
subsequently as asst. cashier for Tropical Biological Phils. Inc. In
Telegraph, who went on maternity leave. Under the Agreement, she
2001, Belga, who was pregnant at the time, brought her daughter
was set to work until April 1991. She was hired again twice as
to the hospital for treatment of broncho-pneumonia. She gave her
reliever for a different employee after her first employment, after
notice of emergency leave to the Technical Manager of Tropical
which she was terminated. When she was later asked to be a
and gave birth at the hospital on the same day. As a consequence,
probationary employee, she indicated that he was single,
she was unable to report to work for more than a week. When she
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attended the clarificatory conference set by Tropical, she was The fact of Velasco’s pregnancy and the fact that her absences were
dismissed that day. caused by her pregnancy was not disputed by the parties.
Tropical’s defense was that the concealment was the reason for the Issue & Ruling: W/N Velasco’s repeated absences (caused by
dismissal, and the repeated subsequent refusal to show up despite her pregnancy) without leave, but with a medical certificate,
memoranda. warranted her dismissal from service – NO
Issue & Ruling: W/N Belga’s inability to report for work due to The Court noted that pregnancy-related illnesses cannot be
her pregnancy was a valid reason for her dismissal – NO confined to the periods stated in the Medical Certificates. It also
took judicial notice of the fact that the first trimester of pregnancy
For misconduct to constitute a ground for dismissal, there must be causes all kinds of sicknesses.
wrongful intent and the misconduct itself must be grave. However,
Belga’s absence was justified since she just had a child. Having a The Court agreed with the CA that the absences were pregnancy-
child is not a forbidden act, nor is it a dereliction of duty. related, and therefore, terminating Velasco on this ground would
violate Art. 137 of the LC, which prohibits the discharge of women
The Court was not convinced by Tropical’s defense of concealment, on account of pregnancy, while on leave or in confinement due to
because it was impossible for them to not notice that Belga’s belly her pregnancy. It was also petitioner’s policies which allowed for
was growing bigger, considering that she was still working a few subsequent justification of absences.
hours before she gave birth. The failure to give a formal notice is
not a misconduct so grave as to warrant dismissal.
The Court also did not accept Tropical’s defense that Belga was Star Paper v. Simbol (2006)
disobedient. The memoranda requiring her to report was given 2 Employees got marries after meeting each other during employment;
days after she gave birth, so it was physically impossible for Belga Spouses may not be banned from working in the same company just
to comply. because they are spouses
The Court likewise did not accept Tropical’s contention that Belga Facts: Petitioner is a corporation engaged in the trade of paper
breached their trust. Belga was an assistant cashier whose functions products. Respondent Simbol is an employee of the company who
were mostly clerical, not requiring independent judgement or met Dayrit, a fellow employee. Before they were to get married, the
discretion. company advised one of them to resign should they pursue the
marriage, pursuant to company policy which prohibits relatives up
Finally, the Court did not accept Tropical’s defense that Belga’s
to the 3rd degree of relationship to be co-workers in the same
absence disrupted their financial transactions as to justify her
company.
termination. She was worked 7 years without blemish, and her mere
absence for 16 days could not have been enough to ruin Tropical’s The same case occurred for respondents Comia and Estrella.
operations. Simbol’s and Comia’s argument was that they were forced to
resign, while Simbol contended that she met a man who disclosed
the fact that he was still married. When Simbol was impregnated
by this man, she discovered that the man was in fact, still married,
Del Monte v. Velasco (2007)
so she separated from him to avoid dismissal. She was later
Pregnancy-related sickness; A woman cannot be dismissed because
dismissed for immoral conduct.
of repeated absences on account of her pregnancy, because the
nature of pregnancy sometimes creates physical impossibilities for Issue & Ruling: W/N Star Paper’s policy of prohibiting
the woman to work employees to marry or be related up to the 3rd degree, is valid
– NO
Facts: Velasco was a Field Laborer for Del Monte who was
repeatedly warned for her absences without permission. Because The case falls under Art. 136 of the LC, which prohibits an employer
of this, she was terminated from service. Her defense was that she to require a woman employee to stipulate that she shall be deemed
had a pregnancy-borne UTI. She also contended that the resigned or separated should she be married.
company doctor himself and even an outside doctor advised her to
rest. She claimed that she no longer filed an application for leave Star Paper’s defense was that the case does not fall under LC 136,
because company policy dictated that a medical certificate was because it gives the spouses the option to choose who among
enough. them may resign; it does not per se require the woman employee
to resign.
Del Monte argued that Velasco was also absent from service on
several other days which were not supported by any illness (totaling The Court noted that the company policy was an anti-nepotism
10 unjustified absences). policy designed to prevent employment due to relationship with
another employee already working. However, it referred to US
99
cases which utilize two theories to determine employment Capin-Cadiz v. Brent Hospital and Colleges (2016)
discrimination: disparate treatment and disparate impact. An employer may not dismiss an employee on the ground of
pregnancy out of wedlock, and may not impose marriage with the
Under the disparate treatment analysis, the plaintiff must prove
father as a condition for reinstatement
that an employment policy is discriminatory on its face. No-
spouse employment policies requiring an employee of a particular Facts: Petitioner Christine Capin-Cadiz was HR Officer for
sex to either quit, transfer, or be fired are facially discriminatory. respondent when she was indefinitely suspended for
“Unprofessionalism and Unethical Behavior Resulting to Unwed
On the other hand, to establish disparate impact, the complainants
Pregnancy.” She became pregnant out of wedlock, and
must prove that a facially neutral policy has a disproportionate
respondent suspended her, declaring that the suspension will be
effect on a particular class. For example, although most
lifted only if she marries her boyfriend who got her pregnant.
employment policies do not expressly indicate which spouse will be
required to transfer or leave the company, the policy often Issue & Ruling: W/N Brent Hospital may validly suspend
disproportionately affects one sex. indefinitely an employee who got pregnant out of wedlock
until she marries the man who impregnated her – NO
The Court applied the bona fide occupational qualification
(BFOQ) rule parallel to the reasonableness test to determine the Indeed, Brent’s Policy Manual provides that immorality,
validity of a discriminatory rule. Such discrimination is only valid if concubinage, and bigamy (or any immoral act which is sinful and
it is important for an employee’s performance of the job, and if it is vulgar in nature) are acts constituting serious misconduct which are
reasonable (see Glaxo Wellcome). therefore punishable by dismissal at first offense. But the question
is: Is pregnancy out of wedlock immoral? The Court said NO.
In this case, there was no reasonable necessity to force
employees getting married to choose which among them shall First, the Court referred to Leus v. St. Scholastica’s College
resign. Westgrove, which involved similar facts, although the employer was
a Catholic school. But Leus already ruled that the standard for
The company policy is originally created to prevent nepotism, but
morality should be religious, not secular. It was ruled in that case
in this case, the employees got married after they were found to
that an immoral act is “one detrimental to conditions upon which
be fit for the job, and before they were married.
depend the existence and progress of human society.”
The Court did not accept Star Paper’s contention that the policy
In this case, Brent erroneously relied on the standard dictionary
should be upheld because employees were free to marry people
definition of fornication as a form of illicit relation and
that were not their co-employees. This does not pass the
proceeded to conclude that Cadiz’s acts fell under such
reasonableness test. The policy is premised on the mere fear—an
classification, thus constituting immorality. However, at the time of
unproven presumption—that employees married to each other will
petitioner’s pregnancy, she and her boyfriend had no legal
be less efficient.
impediment to marry, and they eventually did. Additionally,
It is immaterial that there is no statute expressly prohibiting marital petitioner and her boyfriend did not flaunt their premarital relations
discrimination because the various protections given to labor are in scandalous circumstances.
already extensive enough.
The fact that Brent is a sectarian institution does not automatically
Finally, the Court did not believe Star Paper’s contention that subject Cadiz to its religious standard of morality absent an
Estrella voluntarily resigned out of a fear of being looked down express statement in its manual of personnel policy and
upon. If this were the case, she would not have gone back to work regulations, prescribing such religious standard as gauge as
at all, but she did. these regulations create the obligation on both the employee and
the employer to abide by the same. Basically, if the Manual itself
Distinguishing Star Paper v. Simbol from Duncan v. Glaxo- provided that pregnancy out of wedlock constituted an immoral
Wellcome: First, the policy in Star Paper creates a prohibition, while act, the indefinite suspension could have been valid, but that is not
the policy in Duncan merely discourages and requires disclosure. the case here.
Second, the policy in Star Paper refers to marriages and Accordingly, Brent may not impose marriage with the father as a
relationships up to the third degree between their own employees, condition for petitioner’s reinstatement. Art. 136 of the Labor Code
while the policy in Duncan refers to relationships between their own provides that marriage shall not affect an employee’s employment.
employee and that of a rival company. Also, the Magna Carta of Women expressly protects a woman’s
right to choose a spouse freely and marry only with her free and
Third, the policy in Star Paper was ruled invalid by the court because full consent. Brent’s condition is violative of these laws. It is
it was premised on a mere speculation of inefficiency, while the coercive, oppressive, and discriminatory. It forces petitioner to
policy in Duncan was upheld by the Court as management marry for economic reasons (to stay employed), depriving her of
prerogative to protect company interests and trade secrets. the right to choose whom and when to marry. Brent failed to prove
that this marriage is a bona fide occupational qualification.
100
Having ruled that the relationship was not immoral by public

standards, the burden then fell on St. Vincent to prove that the
Inocente v. St. Vincent Foundation (2016) relationship was prejudicial to its interests. It was not. Marlon and
Religious standards of morality cannot be used as basis for Zaida kept their relationship private and discreet and went
immorality and an employee’s termination undiscovered from 2002-2009. St. Vincent failed to show any of its
interests that were prejudiced by this private relationship.
Facts: Respondent is a Catholic organization dedicated to the
assistance of children and the aging, and it is financially supported 2. W/N Zaida’s relationship with Marlon was a violation of
by CFCA, a Catholic organization as well. the Non-Fraternization Policy – NO
The Court focused on the fact that the Policy merely discouraged,
Petitioner Zaida Inocente was hired by respondent in 2000, first as
not prohibited relationships described therein. It would have been
Program Assistant, then later promoted her to Program Officer. At
different if relationships were formed by an employee taking undue
this time, she was still single, and her surname was Ranido.
advantage of his/her ascendancy or authority, but even in this case,
In 2001, she met Marlo Inocente who was also working for St. the act would be frowned upon, but not enough to warrant
Vincent. They later became romantically involved with each other. dismissal. Additionally, there is no requirement that such
relationships be disclosed to management.
In 2006, St. Vincent adopted the CFCA’s Non-Fraternization Policy,
which strongly discouraged employees who direct and coordinate All things considered, Zaida’s termination by St. Vincent
the work of others from engaging in consensual romantic or sexual Foundation is invalid for being without basis.
relationships with any employee or volunteer of CFCA. Despite this,
Marlon and Zaida discreetly continued their relationship even after
Marlon’s resignation in 2008.
Union School International v. Dagdag (2018)
In 2009, Zaida suffered a miscarriage and informed St. Vincent of A teacher cannot be dismissed from work for the mere reason that
the situation. She also had a subsequent ectopic pregnancy. she got pregnant out of wedlock; the standard for morality should be
secular, not religious
Later, St. Vincent informed her that she had violated the Non-
Fraternization Policy by committing immoral acts. Zaida’s defense Facts: Dagdag was employed as a probationary Elementary School
was that her relationship began long before the Non-Fraternization Teacher, and during her employment (4 months after she was
Policy took effect, that Marlon was no longer connected with St. hired), she found out that she was 2 months and 5 days pregnant.
Vincent since 2008, that the relationship was not immoral because She was single at the time, so when she informed the school about
they were both of legal age and had no impediment to marry, that this, the matter of her being charged with immorality and the
they were private/discreet, and they had planned to marry anyway. matter of her resignation were discussed.
St. Vincent was not convinced and terminated Zaida’s employment She subsequently went AWOL (this was the second time already)
for immorality, gross misconduct, and violation of Code of Conduct. so she was suspended for a total of 5 days. During the hearing with
the school, she was convinced to resign based on the Handbook
Issues & Ruling: for Faculty and Staff, which included the offense of gross
immorality. She thus filed a petition for illegal dismissal.
1. W/N Zaida’s relationship with Marlon was immoral – NO
Once again, the Court reiterated that the standard for morality or Issue & Ruling: W/N Dagdag’s dismissal due to her pregnancy
immorality should be secular, and not religious. Public morality while she was still single, and the fact that the father was
and religious morality should be distinguished. The Court has married to another woman, was valid – NO
jurisdiction only over the former.
The Court ruled that Dagdag was constructively dismissed because
Marlon and Zaida’s relationship is not immoral by public standards. the school told her that the other choice would merit harsher
At all times, they had no impediment to marry, and their penalties (if she did not resign, she would be dismissed from work,
relationship was consensual. While their actions might not have which would affect her chances of finding another job).
strictly conformed with the beliefs, ways, and mores of St. Vincent
— which is governed largely by religious morality — or with the The Court went into a discussion of whether Dagdag’s conduct was
personal views of its officials, these actions are not prohibited disgraceful or immoral, which required a consideration of the
under any law nor are they contrary to conduct generally accepted totality of circumstances vis-à-vis the prevailing norms of conduct.
by society as respectable or moral. In this regard, the Court referred to Capin-Cadiz which ruled that
the standard of morality should be public and secular, not
The voluntary intimacy between two unmarried adults, where both religious. The fact that a particular act does not conform to the
are not under any impediment to marry, where no deceit exists, and traditional moral views of a certain sectarian institution is not
which was done in complete privacy, is neither criminal nor so sufficient reason to qualify such act as immoral unless it, likewise
unprincipled as to warrant disciplinary action does not conform to public and secular standards.
101
Further, Dagdag’s dismissal is not justified because, at the time of Acts punished
conception, there was no legal impediment between her and the
In a work-related or employment environment:
father to marry each other.
1. The sexual favor is made as a condition in the hiring or in the
employment, re-employment or continued employment of
said individual, or in granting said individual favorable
Jardeleza’s Concurring Opinion on Union School International: compensation, terms, conditions, promotions, or
It is a woman’s right to have consensual sex with a man and have privileges; or the refusal to grant the sexual favor results
children with him, whether they are married or not. Such in limiting, segregating or classifying the employee which
circumstance should not constitute just cause for dismissal from in any way would discriminate, deprive or diminish
work, unless proven grossly immoral, otherwise, we would be employment opportunities or otherwise adversely affect said
violating the constitutional guarantee of equal protection of laws. employee;
2. The above acts would impair the employee’s rights or
Pregnancy out of wedlock should not constitute just cause for privileges under existing labor laws; or
termination 3. The above acts would result in an intimidating, hostile, or
The right of an unmarried woman to have sex with and bear a child offensive environment for the employee.
with an unmarried man should be recognized as a “fundamental
right,” in order to raise the standard of scrutiny to “strict scrutiny,” In an education or training environment:
not merely “rational basis.” a. Against one who is under the care, custody or supervision
of the offender;
The general definition of “fundamental right” are those explicitly or b. Against one whose education, training, apprenticeship or
implicitly guaranteed by the Bill of Rights. Although the tutorship is entrusted to the offender;
Constitution admittedly does not guarantee the right of unmarried c. When the sexual favor is made a condition to the giving of a
couples to have sex and bear children, past Supreme Court passing grade, or the granting of honors and scholarships, or
decisions support the recognition of this right as fundamental. the payment of a stipend, allowance or other benefits,
privileges, or considerations; or
For this, Jardeleza referred to US cases upholding the right to
d. When the sexual advances result in an intimidating, hostile
privacy (Griswold v. Connecticut and Eisenstadt v. Bard). He also
or offensive environment for the student, trainee or
referred to Philippine cases (Morfe v. Mutuc upholding Griswold,
apprentice.
Leus v. St. Scholastica’s College Westgrove, Capin-Cadiz, and
Republic v. Manalo). Basically, a woman should be given the right
to choose how to raise her child, and if she would be doing this
married or not. Persons liable
1. The person actually committing sexual harassment;
Jardeleza also referred to existing facts and contemporary Filipino 2. Any person who directs or induces another to commit any
traditions supporting the recognition of this right as fundamental. act of sexual harassment (Sec. 3);
He cited statistics showing the increase in pregnancies and births 3. Any person who cooperates in the commission thereof by
out of wedlock (which, while not celebrated, are increasingly another without which it would not have been committed
tolerated and accepted), and our laws provide maternity benefits (Sec. 3); and
to women without distinguishing if they are married or not. Solo 4. The employer or head of office, educational or training
parents are also entitled to government support. institution, who shall be solidarily liable for damages arising
from the acts of sexual harassment committed in the
While the "conventional" view may still be that sex and pregnancy
employment, education or training environment IF the
should be kept within the confines of marriage, this should not
employer or head of office, educational or training institution
restrict an unmarried woman's exercise of her liberty to decide
is (1) informed of such acts by the offended party and (2) no
whether to adhere to this "convention" or not.
immediate action is taken thereon (Sec. 5).
Upholding the validity of termination due to pregnancy out of
wedlock violates the equal protection clause
Jurisprudence has plenty of rulings (Soberano v. Villanueva, Reyes Duty of the employer
v. Wong, Radaza v. Tejano, and Figueroa v. Barranco, Jr.) that for an
unmarried man, having sex and bearing a child with an unmarried SEC. 4. Duty of the Employer or Head of Office in a Work-related,
woman is insufficient to warrant his dismissal. The equal protection Education or Training Environment. — x x x:
clause compels us to apply the same standard to unmarried • Promulgate appropriate rules and regulations (which
women. shall include, among others, guidelines on proper
decorum in the workplace and educational or training
institutions) in consultation with and jointly approved by
the employees or students or trainees, through their duly
Anti-Sexual Harassment Act
102
designated representatives, prescribing the procedure Villarama singularly addressed the issue of a managerial employee
for the investigation of sexual harassment cases and committing sexual harassment.
the administrative sanctions therefor; and
• (b) Create a committee on decorum and investigation The Court was not persuaded by Libres’ defense that the delay in
of cases on sexual harassment. The committee shall instituting the complaint shows that it was merely an afterthought.
conduct meetings, as the case may be, with officers and A delay is expected because Libres is Capiral’s superior and she had
employees, teachers, instructors, professors, coaches, a fear of retaliation and humiliation which was normal. Libres
trainors and students or trainees to increase himself never even contended the truthfulness of Capiral’s
understanding and prevent incidents of sexual allegations; he only attacked the fact of late filing.
harassment. It shall also conduct the investigation of
Finally, the Court ruled that there was no violation of procedural
alleged cases constituting sexual harassment.
due process because Libres was given a Notice of Investigation
informing him of the charges against him, and he was allowed to
explain himself multiple times.
Libres v. NLRC (1999)

The Anti-Sexual Harassment Law cannot be applied retroactively so
an application of the common connotation of “sexual harassment” Domingo v. Rayala (2008)
was proper; managerial employees are bound by higher ethical The demand, request, or requirement of a sexual favor may be
standards and work ethic gleaned from the offender’s acts; In an administrative case, the
determination of whether a crime is malum in se or malum
Facts: Carlos Libres was a managerial employee for the National
prohibitum is immaterial
Steel Corporation when he received a notice requesting him to
explain his side regarding a charge of sexual harassment allegedly Facts: Domingo was a Stenographic Reporter for the NLRC who
committed by him against Susan Capiral, the secretary of the VP. filed an administrative complaint for sexual harassment against
NLRC Chairman Rayala for making repeated moves on her, and
Referring to the Manual of the Phil. Daily Inquirer, the Mgt.
even told her that she should take up Law after her degree, and
Evaluation Committee concluded that Libres’ acts of touching a
that Rayala will take care of it. Rayala offered money and insisted
female subordinate’s hand and shoulder and telling other people
that Domingo take it, which Domingo did, out of fear that her
that she was the one who hugged him are unauthorized acts that
employment may be compromised.
damaged Capiral’s honor. The MEC recommended suspension,
which NSC adopted. The penalty for sexual harassment was 6 months and 1 day, based
on the IRR of RA 7877. However, the Office of the President, in
Libres’ defense: The MEC failed to apply RA 7877 in determining
finding Rayala guilty, dismissed Rayala because of the
ether he committed sexual harassment. Specifically, he cites public
circumstances of the case. The CA ultimately changed the penalty
respondent’s failure to show that his acts of fondling the hand and
to maximum of 1 year.
massaging the shoulders of Capiral “discriminated against her
continued employment,” “impaired her rights and privileges under Domingo contested the CA’s modifying of the penalty, arguing that
the Labor Code,” or “created a hostile, intimidating or offensive the President has the prerogative to determine the proper penalty
environment.” Basically, he admitted his acts, he just contested to be imposed on an erring Presidential appointee.
whether they were qualified as “sexual harassment” under RA 7877.
Rayala defended himself by claiming that he committed no sexual
Issues & Ruling: harassment under RA 7877. He contends that Domingo failed to
allege and establish any sexual favor, demand, or request from
W/N the NLRC should have applied RA 7877 in this case – NO
petitioner in exchange for her continued employment or for her
Libres never raised the applicability any time prior to the SC. In
promotion. He also argues that sexual harassment is an offense
addition, RA 7877 was not yet in effect at the time the act
against a person, therefore, deliberate criminal intent should be
complained of occurred. So, both the LA and the NLRC had to agree
required.
with the MEC when it relied on the common connotation of sexual
harassment. Issues & Ruling:
W/N the lower tribunals’ reliance on Villarama v. NLRC to W/N Rayala’s conduct amounts to sexual harassment under RA
determine whether sexual harassment was committed was 7877 – YES
correct – YES First, the Court noted that Rayala’s liability is not solely based on
The Court also did not accept Libres’ argument that Villarama v. Sec. 3 of RA 7877 because he is charged with the administrative
NLRC is inapplicable because the victim in Villarama immediately offense, not criminal infraction, of sexual harassment. As such, it is
filed her resignation letter, whereas in this case, the victim waited 1 enough that there be substantial evidence to support the charge.
year. The difference in the periods of filing is immaterial since
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Despite this, even if we apply the strict standards in Sec. 3 of RA • For live childbirth, 105 days with full pay, with an option to
7877, Rayala is still liable. The demand, request, or requirement of extend for an add’l 30 days without pay (Sec. 3, RA 11210).
a sexual favor need not be explicit; it may be discerned from the o If the parent is also a Solo Parent, as defined, they shall be
acts of the offender. In this case, Rayala’s holding & squeezing of granted an additional 15 days maternity leave with full pay.
Domingo’s shoulders, running his fingers across her neck, having • For cases of miscarriage or emergency termination,
inappropriate conversations with her, and giving her money with a maternity leave is at 60 days with full pay.
promise of future privileges all obviously show that he is soliciting
sexual favors. Features of the maternity leave benefit
• Extended the previous coverage of 60 days (normal
It is likewise not essential that the demand, request, or requirement delivery) or 78 days (cesarean delivery) to 105 days, with
be made as a condition of continued employment or promotion. It an option to extend for another 30 days without pay.
is enough that the offender’s acts create an intimidating, hostile, or • Removed the 4-pregnancy cap.
offensive environment for the employee, which is obvious by the • Removed the requirement that the female worker must
fact that Domingo informed an officemate and even filed for a leave have rendered service of 6 months for the last 12 months.
of absence. • May still be availed even if the pregnant worker has a
pending administrative case.
The Court did not accept the applicability of Aquino v. Acosta • Makes no distinctions whether the delivery was normal
because in that case, the kisses of the judge were made to his or cesarean.
employees indiscriminately and on festive occasions, thus, without
malice (?)
W/N sexual harassment under RA 7877 should require criminal Paternity Leave
intent because it is an offense against a person – NO
RA 8187 (and IRR)
In an administrative case, the determination of an offense as malum
in se or malum prohibitum is immaterial. Persons entitled to paternity leave
W/N the President has the prerogative to determine the • Married male employees (must be employed at time of
penalty to be imposed on an erring Presidential appointee – delivery, must notify employer as soon as he learns that
NO his wife is pregnant).
Under the Labor Code, the Chairman of the NLRC may be removed
before retirement age for cause as provided by law. The latter Extent of benefits granted
phrase places a limitation on the power of the President to impose
• 7 days with full pay (basic salary, all allowances, and other
a penalty; he may only place the penalty stated by law.
monetary benefits) for the first 4 deliveries of the
The imposable penalty under the law is 6 months to 1 year. The legitimate spouse with whom he is cohabiting.
aggravating circumstance of abuse of high government position is, • May not be availed 60 days after delivery.
at most, an aggravating circumstance, which serves to increase the
Paternity leave in relation to Expanded Maternity Leave Law
penalty to its maximum period: 1 year.
Any person entitled to maternity leave may allocate up to 7 days
credit to the father of the child, whether married or not. This is in
addition to whatever benefits provided in the Paternity Leave Law
Maternity Leave
(another 7 days, for a total of 14 days). Further, in case the
RA 11210 aka the Expanded Maternity Leave Act (and IRR) beneficiary female worker dies or is incapacitated, the balance of
the maternity leave shall accrue to the father or to a qualified
Persons entitled to maternity leave benefit caregiver (Sec., 6, RA 11210).
• Any pregnant female worker in the public sector, private
- This may be allocated to an alternate caregiver in case the
sector, or informal economy
father is dead, absent, or incapacitated.
• Any pregnant female workers who are voluntary
contributors to the SSS
• Female national athletes (RA 11210 IRR).
Magna Carta for Women
Requirements for availing of the benefit
RA 9710 (and IRR)
Cannot be deferred, but must be availed of before or after the
actual period of delivery in a continuous and uninterrupted Non-discrimination against women
manner, not exceeding 105 days, as the case may be.
Definition of “Discrimination Against Women” - any gender-
Extent of benefits granted based distinction, exclusion, or restriction which impairs or nullifies
the exercise by women, human rights and fundamental
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freedoms in the political, economic, social, cultural, civil, or any Solo Parent Leave
other field.
Source: RA 8972, aka the Solo Parents’ Welfare Act of 2000.
It includes any act or omission, including by law, policy,
Solo parent, defined
administrative measure, or practice, that excludes or restricts
women in the recognition and promotion of their rights and their Any individual who falls under any of the following categories:
access to and enjoyment of opportunities, benefits, or privileges. (1) A woman who gives birth as a result of rape and other crimes
against chastity even without a final conviction of the
A measure or practice of general application is discrimination
offender: Provided, That the mother keeps and raises the child;
against women if it fails to provide for mechanisms to offset or
(2) Parent left solo or alone with the responsibility of parenthood
address sex or gender-based disadvantages or limitations of
due to death of spouse;
women, resulting to women being denied or restricted in the
recognition and protection of their rights and in their access to and
while the spouse is detained or is serving sentence for a
enjoyment of opportunities, benefits, or privileges; or women, more
criminal conviction for at least one (1) year;
than men, are shown to have suffered the greater adverse effects
of those measures or practices.
due to physical and/or mental incapacity of spouse as
Discrimination compounded by or intersecting with other grounds certified by a public medical practitioner;
such as ethnicity, age, poverty, or religion shall also be considered (5) Parent left solo or alone with the responsibility of parenthood
discrimination against women under the Magna Carta for Women. due to legal separation or de facto separation from spouse
for at least one (1) year, as long as he/she is entrusted with
The State has the primary duty to refrain from discrimination and the custody of the children;
protect women and their rights from discrimination. (Sec. 5, Magna (6) Parent left solo or alone with the responsibility of parenthood
Carta for Women). due to declaration of nullity or annulment of marriage as
decreed by a court or by a church as long as he/she is
The State is obliged to take all appropriate measures to ensure entrusted with the custody of the children;
equal rights in all matters relating to marriage and family relations, (7) Parent left solo or alone with the responsibility of parenthood
such as the right to leave or enter into marriages, the right to due to abandonment of spouse for at least one (1) year;
choose a spouse freely and only with free and full consent, the right (8) Unmarried mother/father who has preferred to keep and rear
to a joint decision on the number and spacing of children (Sec. 19, her/his child/children instead of having others care for them
Magna Carta for Women). or give them up to a welfare institution;
(9) Any other person who solely provides parental care and
Special Leave Benefit for gynecological surgery
support to a child or children;
Definition of “gynecological disorders” - disorders that would (10) Any family member who assumes the responsibility of head
require surgical procedures such as, but not limited to, dilatation of family as a result of the death, abandonment,
and curettage and those involving female reproductive organs such disappearance or prolonged absence of the parents or solo
as the vagina, cervix, uterus, fallopian tubes, ovaries, breast, adnexa parent.
and pelvic floor, as certified by a competent physician.
Gynecological surgeries shall also include hysterectomy, A change in the status or circumstance of the parent claiming
ovariectomy, and mastectomy (Sec. 7, Rule II, Magna Carta for benefits under this Act, such that he/she is no longer left alone with
Women IRR). the responsibility of parenthood, shall terminate his/her eligibility
for these benefits (Sec. 3[a], RA 8972).
Special Leave Benefit for gynecological surgery – leave
entitlement of 2 months with full pay based on gross monthly Extent of benefit granted
compensation. Any woman in the public or private sector is Parental leave of a maximum of 7 working days (Sec. 8, RA 8972).
entitled to this upon the concurrence of the following conditions:
i. She has had surgery caused by gynecological disorders; Conditions for entitlement
ii. She has rendered continuous aggregate employment
service of at least 6 months for the last 12 months. The solo parent employee must have rendered service of at least 1
year (Sec. 8, RA 8972).
If an extended leave is necessary, the woman may use her earned
leave credits.
VAWC Leave
This special leave benefit is non-cumulative and non-convertible
to cash (Sec. 21, Rule III, Magna Carta for Women IRR). Sources: RA 9262 (and IRR)
At any time during the application of any protection order (whether

barangay, temporary, or permanent), victims under the VAWC Law
105
are entitled to take a paid leave of absence up to ten (10) days • All time during which a child is suffered or permitted to work,
in addition to other paid leaves under the Labor Code and Civil inclusive of costume/wardrobe fitting, make-up application,
Service Rules and Regulations, extendible when the necessity arises practice or rehearsal while at the workplace, and waiting time.
as specified in the protection order (Sec. 43, RA 9262). • Rest periods of short duration during work hours.
The kagawad, prosecutor, or Clerk of Court shall issue a certification Not included in hours of work (Sec. 2.3, D.C. 02-2017):
at no cost to the woman that such an action is pending, and this is • Sleeping time; and
all that is required for the employer to comply with the 10-day • Travel time from his/her to the workplace
paid leave.
Prohibited employment in certain undertakings
For government employees, in addition to the certification, they
Certain advertisements: Children may not be employed as child
must also file an application for leave, citing RA 9262 as basis.
models in all commercials or advertisements promoting alcoholic
The VAWC Leave covers the days that she has to attend to medical beverages, intoxicating drinks, tobacco and its byproducts,
and legal concerns. This is non-cumulative and non-convertible gambling, any form of pornography, or any form of violence
to cash. (Sec. 5, RA 9231).
Worst forms of child labor (Sec. 5, D.O. 65-2004):

• All forms of slavery as defined under the “Anti-Trafficking
Child workers in Persons Act of 2003” or practices similar to slavery;
• Use of a child for prostitution, for the production of
Sources:
pornography, or for pornographic performances;
• RA 7610 (Special Protection of Children Against Child Abuse,
• Use of a child for illegal or illicit activities, including the
Exploitation and Discrimination Act) and IRR;
production/trafficking of dangerous drugs or volatile
• RA 9231, amending RA 7610;
substances prohibited under existing laws;
• Dept. Order 65-2004, aka IRR for RA 9231;
• Work which, by its nature or the circumstances in which
• Dept. Advisory 01-2008;
it is carried out, is hazardous or likely to be harmful to
• Dept. Circular 02-2017; and
the health, safety, or morals of children.
• Dept. Circular 02-2018.
Working child, defined

Employment of children below 15
According to Sec. 3(c) of DO 65-04, a working child is any child
engaged as follows: General rule
• below 15 years of age: (i) in work where he/she is directly Children below 15 years of age may not be employed (Sec. 2, RA
under the responsibility of his/her parents or legal guardian 9231).
and where only members of the child ‘s family are employed;
OR (ii) in public entertainment or information (see Sec. 2 of RA Exceptions
9231 below).
According to Sec. 2 of RA 9231:
• 15-17 years of age: in work or economic activity that is not
1. When a child works directly under the sole responsibility of
child labor as defined in [Sec. 3(b) of RA 9231];
his/her parents or legal guardian and where only members
According to Sec. 3(b) of D.O. 65-04, child labor is any work or of his/her family are employed: Provided, that his/her
economic activity performed by a child that subjects him/her to employment neither endangers his/her life, safety, health, and
any form of exploitation or is harmful to his/her health and morals, nor impairs his/her normal development: Provided,
safety or physical, mental or psychosocial development. further, that the parent or legal guardian shall provide the said
child with the prescribed primary and/or secondary education;
or
2. Where a child’s employment or participation in public
Working hours of a child
entertainment or information through cinema, theater,
Below 15 years of age: Maximum 20 hours a week, maximum 4 radio, television or other forms of media is essential:
hours a day; no work from 8 pm - 6 am. (20/4/8-6) Provided, that the employment contract is concluded by the
child’s parents or legal guardian, with the express agreement
15-17 years of age: Maximum 40 hours a week, maximum 8 hours of the child concerned, if possible, and the approval of the
a day; no work from 10 pm – 6 am (40/8/10-6) (Sec. 3, RA 9231). DOLE: Provided, further, that the following requirements in all
instances are strictly complied with:
Included in hours of work (Sec. 2.2, D.C. 02-2017):
a. The employer shall ensure the protection, health, safety,
• All time during which a child is required to be at a prescribed
morals and normal development of the child;
workplace;
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b. The employer shall institute measures to prevent the Kasambahay

child’s exploitation or discrimination taking into account
the system and level of remuneration, and the duration Sources: RA 10361; IRR of RA 10361
and arrangement of working time; and
Apex Mining v. NLRC (1991)
c. The employer shall formulate and implement, subject to
A househelp in the staff houses of an industrial company is
the approval and supervision of competent authorities, a
considered a regular employee of said company
continuing program for training and skills acquisition of
the child. Facts: Respondent Candido was employed by Apex Mining to
perform laundry services at its staff house in Davao. While she was
In the exceptional cases listed above, the employer is required to
working and hanging her laundry, she slipped and hit her back on
first secure a work permit from the DOLE before engaging the
a stone, as a result of which she was not able to continue for work.
services of the child (D.C. 02-2017).
Her employer offered her P5,000.00 to quit the job but she refused
NOTE: “Public entertainment or information” refers to artistic, and preferred to return to work. She was not allowed to return to
literary, and cultural performances for television show, radio work and was dismissed.
program, cinema or film, theater, commercial advertisement, public
Issue & Ruling: Whether Candido, a househelp in the staff
relations activities or campaigns, print materials, internet, and other
house of an industrial company, should be considered a
media (Sec. 3[m], D.O. 65-04).
domestic helper or a regular employee – REGULAR EMPLOYEE
The Labor Code IRR defines a domestic helper as “any person,

Working Child permit whether male or female, who renders services in and about the
employer’s home and which services are usually necessary or
Required for children below 15 years of age when the child: desirable for the maintenance and enjoyment thereof, and
• Engaged in “public entertainment or information,” ministers exclusively to the personal comfort and enjoyment of
whether local or overseas; the employer’s family.”
• Is a foreign national and will be engaged in “public
entertainment or information” in the Philippines; In this case, Candido attends to the needs of the company’s guests
• Will be engaged as a regular extra or as part of a crowd and other persons availing of the its facilities. She does not cater to
and is included in the script or storyboard; the personal comfort and enjoyment of her employer. It is not
• Has been selected for a project after undergoing required that she actually cater to certain aspects of the employer’s
auditions, workshops, or VTR screenings; or business. The mere fact that she is working within the premises of
• Has been selected as a semi-finalist in a singing, dance, the business and in relation to or in connection with its business
or talent contest for a television show. shows that she is an employee, not a domestic helper.
Not required for children below 15 years of age when the child: The Court did not accept petitioner’s defense that Candido
• Is a spot extra or is cast outright on the day of filming or abandoned her work because Candido’s accident made it physically
taping of a project; impossible for her to work.
• Will join auditions or VTR screenings;
• Is part of the audience of a live television show unless the
child’s participation is expected;
Barcenas v. NLRC (1990)
• Is picked or chosen as a contestant from the audience of
A temple worker who performs tasks necessary for the operation and
a live television show;
religious functions of the temple is an employee of the temple, not a
• Is a contestant of a singing, dance, or talent contest for a
domestic helper of the Head Monk
television show but has not yet been selected as a semi-
finalist; Facts: Barcenas was hired a secretary and Chinese interpreter for
• Is a recipient of gift-giving activities in television; the Buddhist Temple of Manila and Baguio. Her duties included
• Is a participant in a school-related performance such as assist with Chinese temple visitors, as well as run errands for the
a play, skit, or recital; Head Monk (including paying utility bills and acting as liaison in
• Is a participant in sports activities, trainings, or government offices). As such, she received additional allowances
workshops aimed at developing the child’s talents or per month and free lodging, and subsequently had amorous
skills; or relations with the Head Monk.
• Will be featured in a documentary material.
(Sec. 1, D.C. 02-2018). When she was 4 months pregnant, she went home to Bicol. When
the Head Monk died, Barcenas remained in her job. The new
President and Chairman of the Buddhist Association discontinued
the allowances for Barcenas, and she was forcibly evicted from her
lodging in the temple by 6 police officers and was forced to sign a
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written undertaking not to return to the Buddhist temple in incidental to education, i.e. "baon", transportation,
exchange for P10,000.00. school projects and school activities.
Respondents’ defense: Barcenas was not an employee of the

Buddhist Temple, but a domestic servant who attended to the “Kasambahay” or “domestic worker,” defined
personal needs of her the late Head Monk, thus, her position was
Any person engaged in domestic work within an employment
co-terminus with that of the late Head Monk.
relationship, whether on a live-in or live-out arrangement.
Issue & Ruling: Whether Barcenas is a domestic servant or an
• “Domestic work” refers to work performed in or for a
employee of the Buddhist Temple – FORMER EMPLOYEE
household (Sec. 3d, RA 10361 IRR).
The By-Laws of the Buddhist Association authorized Chua Se Su
The term shall not include children who are under foster family
(the late Head Monk) to hire Barcenas. Board approval was required
arrangement and are provided access to education and given an
only for “dealings with the public” and from 1978-present, the
allowance incidental to education, i.e. "baon", transportation,
Board never had a problem with Barcenas’ employment.
school projects and school activities. (Sec. 4d, RA 10361).
More importantly, the work that Barcenas performed was not
domestic work. Barcenas attended to Chinese visitors, arranged
Employment
meetings between these visitors and Su, supervised the preparation
of temple food, acted as tour guide for foreign visitors, and paid Mode of hiring and related expenses
the utility bills of the temple. These tasks were essential to the Directly between the employer and the domestic worker, or
operation and religious functions of the temple. through a private employment agency (PEA) (Rule II, Sec. 1, RA
10361 IRR).
Despite all this, however, Barcenas’ employment ended when she
returned to Bicol without filing any leave or having been granted Pre-employment requirements
any leave. She gave birth on October 1982 but returned only on a. Medical/health certificate issued by a local government
July 1983 after the death of Su. She clearly abandoned her work. health officer;
b. Barangay and police clearance;
Her return to the temple was no longer as an employee, but as a
c. NBI clearance; and
mistress of Su who wanted to protect the proprietary and
d. Duly authenticated birth certificate or any other
hereditary rights of her son and nephew.
document showing the age of the kasambahay.
A labor case is not the proper tribunal to hear the forceful eviction,
The cost of the above requirements is to be borne by the
harassment, and threats upon Barcenas. Finally, regarding the
employer/agency.
money claims, the Court ruled that all these have. Prescribed since
she filed for these 4 years after the accrual of the cause of action. Necessity of written employment contract
The employment contract (which shall be based on the DOLE
Standard Employment Contract or Form BK-1) shall be written and
Coverage and exclusions shall be in a language or dialect understood by both the
kasambahay and the employer.
Covers: All parties to an employment contract for the services of
the following Kasambahay, whether on a live-in or live-out
arrangement, such as: Rights and privileges of a kasambahay
• General househelp;
• Yaya; Minimum wage
• Cook; Wage rate
• Gardener; • P3,500.00 per month in the NCR (as of Nov. 2018);
• Laundry person; or • At least P2,000.00 per month in cities and first-class
• Any person who performs domestic work in one municipalities; and
household on an occupational basis. • At least P1,500.00 per month for those employed in other
municipalities.
Excludes:
• Service providers; Allowable deductions
• Family drivers; • Those mandated by law;
• Any person who performs domestic work only • Loans extended by the employer, but the deduction shall
occasionally or sporadically and not on an occupational not exceed 20% of the worker’s monthly wages;
basis. • Deductions for loss or damages, provided the deductions
• Children who are under foster family arrangement and are made under the following conditions:
are provided access to education and given an allowance
108
• The kasambahay is clearly responsible for the loss or - Humane sleeping conditions that respect the worker’s
damage; privacy, for live-in arrangement;
• He or she is given reasonable opportunity to show cause - Appropriate rest and medical assistance in the form of first-
why deduction should not be made; aid medicines, in case of illnesses and injuries sustained
• The total amount of deductions is fair and reasonable during service, without loss of benefits (Sec. 13, Rule IV, RA
and shall not exceed the actual loss or damage; 10361 IRR).
• The deduction from the kasambahay’s wages shall not
exceed 20% a month. Privacy
The right of the helper to privacy shall extend to all forms of
Rules on payment communication and personal effects and shall be respected at all
• Cash only. No other means allowed. times (Sec. 14, Rule IV, RA 10361 IRR).
Outside communication
Non-interference The grant of access to outside communication shall be granted
during free time. Such access shall be granted during work time in
• Employers may not interfere with the freedom of
case of emergency. Use of the employer’s phone or other
domestic workers to dispose of their wages. They may
communication facilities shall be borne by the helper, unless
also not compel or oblige the domestic worker to
waived by the employer (Sec. 15, Rule IV, RA 10361 IRR).
purchase merchandise or properties from the employer
or from any other person, or otherwise make us of any Education and training
store or services of such employer or any other person The opportunity to finish basic education (elementary and
(Sec. 27, RA 10361; Sec. 5, Rule V, RA 10361 IRR). secondary education) shall be afforded by the employer. Access to
alternative learning systems and, as far as practicable, higher
education or technical/vocational education and training may also
Hours of work and rest periods
be provided. Access to education may also include financial
The daily rest period is 8 hours aggregated (does not have to be
assistance (Sec. 16, Rule IV, RA 10361 IRR).
continuous).
Forming, joining, assisting in a labor organization
The weekly rest period is 24 hours consecutive
The helper has the right to join a labor organization of his/her.
Service incentive leave pay Choice for purposes of mutual aid and collective negotiation (Sec.
SIL of at least 5 days with pay accrues to domestic helpers who 17, Rule IV, RA 10361 IRR).
have rendered at least 1 year of service. Unused SIL pay is not
Religious beliefs and cultural practices
cumulative and may non-convertible to cash (Sec. 7, Rule IV, RA
10361 IRR). Religious beliefs and cultural practices shall be considered in
providing for the domestic worker’s meals.
13th month pay
13th month pay is equivalent to 1/12th of total basic salary earned
in a calendar year and accrues after 1 month of service (Sec. 8, Rule
IV, RA 10361 IRR). Termination of employment
Coverage under SSS, PhilHealth, and Pag-IBIG Termination of service

A domestic helper is entitled to SSS, Employees’ Compensation
Pre-termination is allowed. If the employment contract stipulates
Commission, PhilHealth and Pag-IBIG coverage upon 1 month of
the duration of the employment, both the domestic worker and the
service (Sec. 9, Rule IV, RA 10361 IRR).
employer may mutually agree to terminate the contract before the
Mandatory premium payments or contributions will be shouldered expiration of the term.
by the employer, except if the domestic helper is receiving
If the employment contract or the nature of service does not
P5,000.00 monthly, in which case the domestic helper shall pay his
stipulate the duration of the employment, either the employer or
proportionate share in the premium payments.
the domestic worker may terminate the employment by giving
Standard of treatment notice 5 days before the intended termination of employment
With respect; no kind of abuse, violence, or harassment is allowed (Sec. 1, Rule VII, RA 10361 IRR).
(Sec. 12, Rule IV, RA 10361 IRR).
Board, lodging, and medical attendance

The employer is required to provide the following for the domestic Termination by domestic worker
helper:
According to Sec. 2, Rule VII of the RA 10361 IRR, the domestic
- At least 3 adequate meals a day considering the worker’s
worker may terminate the employment relationship at any time for
religious and cultural beliefs;
any of the following causes:
109
• Verbal or emotional abuse of the domestic worker by Definitions:

the employer or any member of the household; • Home - any room, house, apartment, or other premises used
• Inhuman[e] treatment including physical abuse of the regularly, in whole or in part, as a dwelling place, except those
domestic worker by the employer or any member of the situated within the premises or compound of an employer,
household; contractor, and the work performed therein is under the active
• Commission of a crime or offense against the domestic or personal supervision by, or for, the latter.
worker by the employer or any member of the • Processing - means manufacturing, fabricating, finishing,
household; repairing, altering, packing, wrapping or handling any
• Violation by the employer of the terms and conditions material.
of the employment contract and other standards set • Employer – any person who, for his or someone else’s benefit:
forth under this law; o Delivers or causes to be delivered any goods or articles
• Any disease prejudicial to the health of the domestic to be processed in or about a home and thereafter to
worker, the employer, or member/s of the household; be returned or to be disposed of or distributed in
and accordance with his direction;
• Other causes analogous to the foregoing. o Sells any goods or articles for the purpose of having
such goods or articles processed in or about a home
In case of unjustified leave by the domestic worker, the unpaid and then repurchases them himself or through another
salary due at most 15 days’ worth of work shall be forfeited. after such processing.
Payment of work – Immediately upon receipt of the finished

goods or articles, except where payment is made to a contractor or
Termination by employer
a sub-contractor, in which case the homeworker shall be paid
According to Sec. 3, Rule VII of the RA 10361 IRR, the employer may within a week after the contractor or sub-contractor has collected
terminate the employment relationship at any time for any of the the goods or articles from the homeworkers.
following causes:
• Misconduct or willful disobedience by the domestic
worker of the lawful order of the employer in connection Qualified employees with disabilities
with the former’s work;
• Gross or habitual neglect or inefficiency by the Bernardo v. NLRC (1999)
domestic worker in the performance of duties; Qualified disabled persons as defined in the MC for Disabled Persons
• Fraud or willful breach of the trust reposed by the should be given the same employment terms and conditions as
employer on the domestic worker; qualified able-bodied persons, including the rules on regular
• Commission of a crime or offense by the domestic employment.
worker against the person of the employer or any
immediate member of the employer’s family; Facts: Complainants are deaf-mutes who were hired by respondent
• Violation by the domestic worker of the terms and Far East Bank as Money Sorters and Counters. Their employment
conditions of the employment contract and other contracts were all worded similarly: the contract would be for 6
standards set forth under this law; months (with a 1-month probation/training period), Far East would
• Any disease prejudicial to the health of the domestic pay their wages, they would work 5 times a week 8 hours a day,
worker, the employer, or member/s of the household; may be required to work OT, and they were entitled to benefits.
and
However, the contract also stated that they were employed under
• Other causes analogous to the foregoing.
a special employment program that excludes them from the
In case of dismissal for other causes than those listed above, the application of the rules for regular employees and the LC provisions
domestic worker shall be paid the compensation already earned + on regulation of employment and separation. It also stated that
15 days’ worth of compensation. their employment is governed solely by the contract.
The contracts were renewed every 6 months, and by the time of the
case, a total of 56 deaf-mutes (from 1988-1993) had been working
Homeworker for Far East, with 37 of them having had their contracts renewed.
Source: Rule XIV, Book III, Labor Code IRR Petitioner’s argument: they are regular employees because their
tasks were necessary and desirable to the business of the bank, and
Coverage: any homeworker who performs in or about his home their employment contracts merely served as a bar to becoming
any processing of goods or materials, in whole or in part, which regular employees.
have been furnished directly or indirectly by an employer and
thereafter to be returned to the latter. Far East’s argument: petitioners were not regular employees, but
rather, employees hired temporarily under a special employment
110
agreement only; their employment was only done to accommodate • Handicap - a disadvantage for a given individual, resulting
requests from gov’t officials and civic-minded citizens. from an impairment or a disability, that limits or prevents the
function or activity, that is considered normal given the age
Issue & Ruling: W/N the deaf-mutes should be considered and sex of the individual;
regular employees – YES (except for 16 of them) • Qualified Individual with a Disability - an individual with a
disability who, with or without reasonable accommodations,
For the 37 whose contracts were renewed, it showed that their tasks can perform the essential functions of the employment
were beneficial and necessary to the bank. The contracts they position that such individual holds or desires. However,
signed were akin to probationary employment contracts; when they consideration shall be given to the employer's judgment as to
were renewed, they became regular employees. More importantly, what functions of a job are essential, and if an employer has
they were qualified disabled employees, i.e. their disabilities did not prepared a written description before advertising or
render them unqualified for their tasks. interviewing applicants for the job, this description shall be
considered evidence of the essential functions of the job;
The Magna Carta for Disabled Persons mandates that a qualified • Reasonable Accommodation includes:
disabled employee should be give the same terms and conditions i. improvement of existing facilities used by employees
of employment as a qualified able-bodied person. Thus, they in order to render these readily accessible to and
became covered by Art. 280 of the Labor Code, which provides for usable by disabled persons; and
rules on regular employment. In this regard, the Court ruled that ii. modification of work schedules, reassignment to a
vacant position, acquisition or modification of
the task of counting and sorting bills was necessary and desirable.
equipment or devices, appropriate adjustments or
The 27 employees whose contracts were renewed should be
modifications of examinations, training materials or
deemed regular employees.
company policies, rules and regulations, the provision
of auxiliary aids and services, and other similar
The Brent ruling regarding fixed-term employment is inapplicable
accommodations for disabled persons.
because the term limit in the employment contracts of the disabled
employees were not negotiated by the employees on equal
footing; rather, it was premised on the fact that they were disabled. Kinds of employment available
1. Sheltered Employment - productive work for disabled
Thus, the 27 employees whose contracts were renewed were
persons through workshops providing special facilities,
deemed regular.
income-producing projects or homework schemes. This is
resorted to when suitable employment cannot be found for
NOTE: Under Labor Advisory 14-2018, all qualified employees with
disabled persons through open employment.
disabilities are entitled to all rights and benefits under the LC.
2. Apprenticeship – this is subject to LC provisions, provided
They are also mandatorily covered under SSS, PhilHealth, and
that (1) the handicap of the disabled apprentice does not
Pag-IBIG whenever applicable.
effectively impede the performance of job operations in the
They are also entitled to the following leaves, in addition to the SIL particular operation for which they are hired; and (2) when the
under the Labor Code: apprenticeship period has lapsed, the disabled apprentice
- Maternity Leave; shall be eligible for employment if found satisfactory in the
- Paternity Leave; job performance.
- Solo Parent Leave;
- VAWC Leave; and
Employer incentives
- Special Leave for Women.
Under Sec. 8, Chapter I, Title II of RA 7277:
Sources: RA 7277 (Magna Carta for Disabled Persons)
• For private entities that employ disabled persons either as
Definitions regular employee, apprentice, or learner: 25% of the total
• Disabled persons - those suffering from restriction or amount paid as salaries and wages to disabled persons will be
different abilities, as a result of a mental, physical or sensory deducted from the entities’ gross income.
impairment, to perform an activity in the manner or within the o Such entities must present proof as certified by the DOLE
range considered normal for a human being; that they employ disabled persons; and
• Impairment - any loss, diminution or aberration of o The disabled employee must be DOLE- and DOH-
psychological, physiological, or anatomical structure or accredited as to his disability, skills, and qualifications.
function; • For private entities that improve or modify their physical
• Disability shall mean:
facilities in order to provide reasonable accommodations for
i. a physical or mental impairment that substantially
disabled persons: 50% of the direct cost of the improvements
limits one or more psychological, physiological or
or modifications will be deducted from the entities’ net
anatomical function of an individual or activities of
such individual; taxable income.
ii. a record of such an impairment; or
iii. being regarded as having such an impairment;
111
o Improvements or modifications to enhance the mobility The apprenticeship agreement itself was executed on 28 May 1990
of disabled persons as required of the employee under but the program was filed with the DOLE only on 7 June 1990.
BP 344 are not included in this exemption. Nevertheless, the apprenticeship agreement was enforced the day
it was signed, even without DOLE approval.
Apprenticeship
Issue & Ruling: W/N Capili became an apprentice by the mere
Definitions under RA 7796: signing of an apprenticeship agreement – NO
• Apprenticeship - training within employment with
compulsory related theoretical instructions involving a Apprenticeship agreements shall be entered into only in
contract between an apprentice and an employer on an accordance with the apprenticeship program approved by the
approved apprenticeable occupation; Labor Minister; prior approval is thus a condition sine qua non,
• Apprentice - a person undergoing training for an approved without which an apprenticeship agreement is not valid.
apprenticeable occupation during an established period
assured by an apprenticeship agreement; The mere filing of the apprenticeship with the DOLE does not
• Apprenticeship Agreement - a contract wherein a automatically create an employer-apprentice relationship because
prospective employer binds himself to train the apprentice it is merely a preliminary step towards its approval.
who in turn accepts the terms of training for a recognized
Thus, because Capili began working for Nitto before DOLE approval
apprenticeable occupation emphasizing the rights, duties and
of the apprenticeship agreement, he was hired as an employee, not
responsibilities of each party;
as an apprentice. There was also no stipulation of any probationary
• Apprenticeable Occupation - an occupation officially
period, so he should be considered a regular employee.
endorsed by a tripartite body and approved for
apprenticeship by the [TESDA];
Only employers in the highly technical industries may employ

Century Canning Corporation v. Court of Appeals (2007)
apprentices and only in apprenticeable occupations approved by TESDA approval of apprenticeship programs is required prior to entry
the TESDA.
into apprenticeship agreements; Where the apprenticeship
Apprenticeship agreements may validly provide for wage rates agreement is void, the worker hired as apprentice should be
below the minimum wage, subject to the following conditions: considered as a regular employee.
1. The stipulated wage shall not fall below 75% of the
Facts: Century Canning hired Gloria Palad as a “fish cleaner” at
applicable minimum wage; and Century’s tuna and sardine factory. She signed an apprenticeship
2. The agreement providing for the stipulated wage must
agreement on 17 July 1997, Century submitted the apprenticeship
be entered into only in accordance with apprenticeship
program to the TESDA-DOLE on 25 July 1997, and the TESDA
programs approved by the DOLE. approved the program on 26 September 1997.
Summary of rules for apprenticeships:
According to Century’s performance evaluator, Palad scored only
1. The employer must be in a highly-technical industry; 27.75/100 and incurred numerous tardiness and absences, leading
2. The employer may employ apprentices only in apprenticeable
to her termination and filing of a complaint for illegal dismissal on
occupations as approved by the TESDA;
November 1997.
3. The employer’s apprenticeship program must first be
approved by the TESDA before it may enter into Issue & Ruling: Whether Palad was hired as an apprentice or as
apprenticeship agreements. This is non-negotiable. a regular employee – REGULAR EMPLOYEE
Nitto Enterprises v. NLRC (1995) As with Nitto, the Court reiterated that prior approval of the
Prior DOLE approval of an enterprise’s apprenticeship program is apprenticeship program is a condition sine qua non for an employer
required before any employer may enter into apprenticeship to enter into apprenticeship agreements.
agreements; the mere filing of the apprenticeship program with the
RA 7796 which created the TESDA, transferred the authority of
DOLE is in itself insufficient to create an employer-apprentice
apprenticeship programs from the DOLE’s Bureau of Local
relationship
Employment to the TESDA, reiterated TESDA approval as a pre-
Facts: Petitioner hired Roberto Capili as an apprentice machinist, requisite for the hiring of apprentices. This is to prevent abuse by
molder, and core maker with a 6-month apprenticeship agreement employers who merely wish to take advantage of the lower wage
from May-November 1990. In August 1990, he got into accidents rates for apprentices.
injuring his co-worker’s leg, and later his left thumb (when he
In this case, the apprenticeship agreement is void because it was
operated a machine without authority). Because of these, he was
enforced prior to TESDA approval of the apprenticeship program,
told to resign, and he executed a Quitclaim and Release, leading
contrary to both RA 7796 and DO 68-04 (which merely provided
him to file a complaint for illegal dismissal.
112
that no enterprise shall hire apprentices unless its apprenticeship

program is registered and approved by the TESDA).
Thus, Palad is a regular employee performing the job of a fish

cleaner. Her job is clearly necessary in Century’s business as a tuna
and sardine factory.
Learnership
Definitions in RA 7796:
• Learners - persons hired as trainees in semi-skilled and other

industrial occupations which are non-apprenticeable.
Learnership programs must be approved by the Authority.
Differences between apprentices and learners:
APPRENTICE LEARNER
Qualifications
1. At least 14 years old
2. Physically fit for the
occupation;
3. Possesses vocational 1. At least 15 (if below 18,
aptitude and capacity only in non-hazardous
4. Has the ability to occupations);
comprehend and follow
oral and written
instructions.
Salary
75% of the statutory At least 75% of the applicable
minimum wage minimum wage
Type of work
Highly-technical industries, Semi-skilled and other non-
and only under apprenticeable industrial
apprenticeable occupations occupations
Duration of training
Maximum 6 months Maximum 3 months
113

Notes On Labor Standards: San Beda University - College of Law

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SAN BEDA UNIVERSITY – COLLEGE OF LAW

Ferdinand Jomilla Jr.

I. CONSTITUTIONAL PRINCIPLES IN RELATION TO LABOR LAW ..................................................................................................................1

Constitutional and Statutory Provisions ..........................................................................................................................................................1

Due Process in Labor Cases ...............................................................................................................................................................................1

Right Against Self-Incrimination ......................................................................................................................................................................6

Right Against Unreasonable Searches and Seizures.......................................................................................................................................6

II. EMPLOYER-EMPLOYEE RELATIONSHIP ..........................................................................................................................................................7

Employee, defined ..............................................................................................................................................................................................7

Employer, defined ...............................................................................................................................................................................................7

Elements of an Employer-Employee Relationship ..........................................................................................................................................7

The ABS-CBN cases ........................................................................................................................................................................................................................ 12

The alternative, two-tiered economic realities test ............................................................................................................................................................... 15

Corporate officers and intra-corporate disputes .................................................................................................................................................................... 16

III. CLASSES OF EMPLOYEES ............................................................................................................................................................................... 19

Classified According to Rank ......................................................................................................................................................................... 19

Nature of Employment .................................................................................................................................................................................... 19

IV. LEGITIMATE JOB CONTRACTING AND LABOR-ONLY CONTRACTING ................................................................................................... 38

Legitimate Job Contracting ............................................................................................................................................................................ 38

Trilateral relationship in legitimate contracting .................................................................................................................................................................... 40

Elements of legitimate contracting ............................................................................................................................................................................................ 41

Mandatory registration requirement and effect of nonregistration ................................................................................................................................. 44

Liability of the principal to the contractor’s employees ....................................................................................................................................................... 45

Effects and liabilities arising from termination of an employee of the contractor....................................................................................................... 46

Labor-only Contracting ................................................................................................................................................................................... 46

Elements of labor-only contracting ........................................................................................................................................................................................... 46

Effects of a finding of a labor-only contracting...................................................................................................................................................................... 49

Other Prohibitions under D.O. 174 ................................................................................................................................................................ 50

Prohibited practices under D.O. 174 ......................................................................................................................................................................................... 50

Effects of such prohibited practices ............................................................................................................................................................................................ 50

V. RECRUITMENT OF LOCAL AND MIGRANT WORKERS ............................................................................................................................... 51

Recruitment of Local Workers ........................................................................................................................................................................ 51

Qualifications for licensure as a private recruitment and placement .............................................................................................................................. 51

Fees that may be collected ........................................................................................................................................................................................................... 51

Acts constituting illegal recruitment.......................................................................................................................................................................................... 51

Rules on replacement of recruited workers ............................................................................................................................................................................. 51

Recruitment and Deployment of Overseas Workers.................................................................................................................................... 51

Definition of “Overseas Filipino Worker” ................................................................................................................................................................................. 52

Deployment of Migrant Workers ................................................................................................................................................................................................ 52

Illegal Recruitment ......................................................................................................................................................................................................................... 52

Jurisdiction over disputes .............................................................................................................................................................................................................. 55

Money claims ................................................................................................................................................................................................................................... 57

Insurance coverage for agency-hired overseas workers ...................................................................................................................................................... 61

Local Employment of Foreign Nationals....................................................................................................................................................... 62

Criteria for granting an employment permit .......................................................................................................................................................................... 62

Exemptions and exclusions from permit requirement .......................................................................................................................................................... 62

Validity of and renewal of permit .............................................................................................................................................................................................. 63

Grounds for denial of application for new or renewal of permit....................................................................................................................................... 63

Grounds for cancellation or revocation of permit ................................................................................................................................................................. 63

VI. HOURS OF WORK .......................................................................................................................................................................................... 63

Coverage and Exclusions................................................................................................................................................................................. 63

Normal Hours of Work.................................................................................................................................................................................... 64

Exception (Health Personnel)....................................................................................................................................................................................................... 64

Compressed workweek .................................................................................................................................................................................................................. 65

Work Interruption Due to Brownouts ............................................................................................................................................................ 67

Meal Breaks ...................................................................................................................................................................................................... 67

General rule ...................................................................................................................................................................................................................................... 67

When compensable ........................................................................................................................................................................................................................ 67

Idle time ............................................................................................................................................................................................................ 68

Waiting time .................................................................................................................................................................................................... 68

Commuting time and travel time .................................................................................................................................................................. 68

Overtime work ................................................................................................................................................................................................. 69

Definition and Nature of Overtime Work ................................................................................................................................................................................ 69