RECRUITMENT AND PLACEMENT OF WORKERS

Recruitment and placement refers to any act of canvassing, enlisting, transporting,

contracting, hiring, utilizing, or procuring (C.E.T.C.H.U.P.) workers, and includes contract
services, referrals, advertising or promising (C.R.A.P.) for employment, locally or abroad,
whether for profit or not; provided, that any person or entity which, in any manner, offers or
promises for a fee, employment to 2 or more persons shall be deemed engaged in
recruitment and placement.

Regardless of the number of persons dealt with, recruitment and placement is still constituted.
Any of the acts mentioned will constitute recruitment and placement even if only one
prospective worker is involved. The provision merely lays down a rule of evidence that
where a fee is collected in consideration of a promise or offer of employment to 2 or more
prospective workers, the individual or entity who dealt with them shall be deemed to be
engaged in recruitment and placement.

Who may engage in recruitment and placement

General Rule: Only public employment offices can engage in recruitment and placement of
workers for overseas employment (Ban on direct hiring). It is a form of protection for the
Filipino workers, so that OFWs may be assured that they have the best possible terms and
conditions of employment and that they will be protected from abuse or exploitation by
unscrupulous employers.

Exceptions to the ban on direct hiring

a. Private sector
i. Private employment agencies
ii. Private recruitment entities
iii. Shipping or manning agencies
iv. Construction contractors
b. Members of the diplomatic corps and international organizations
c. Other persons/entities as may be allowed by the Secretary of Labor
d. Missionaries actually engaged in missionary work
e. Name hire – a worker who is able to secure contract for employment overseas on his
own, without the assistance or participation of any agency. However, he should still
undergo processing by the POEA.

The private sector may participate in the recruitment and placement of workers, locally and
overseas, but subject to such rules and regulations as may be issued by the DOLE.
However, such private sector may be allowed only if it is owned by Filipino citizens, or in the
case of partnerships or corporations, at least 75% of the authorized and voting capital stock is
owned and controlled by Filipino citizens.
Private employment agency Private recruitment entity
Any person or entity engaged in the Any person or association engaged in the
recruitment and placement of workers for a recruitment and placement of workers,
fee which is charged, directly or indirectly, locally or overseas, without charging,
from the workers or employers or both. directly or indirectly, any fee from the
workers or employers.
License Authority
A document issued by DOLE authorizing a A document issued by the DOLE
person/entity to operate a private authorizing a person/entity to engage in
employment agency recruitment and placement activities as a

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 private recruitment entity
Travel agencies and Sales agencies of Airline Companies are prohibited to recruit.
Travel agencies and sales agencies of airline companies, including any corporation or
partnership whose officers, partners or members of the Board are engaged in the business of a
travel agency are prohibited to engage in the business of recruitment and placement of
migrant workers.

Travel agencies and sales agencies of airline companies are prohibited from engaging in the
business of recruitment and placement of workers for overseas employment, whether for
profit or not.

Why? Travel agencies are under the supervisory powers of the Dept. of Tourism, not the
DOLE. Otherwise, confusion may arise to the detriment and disadvantage of an overseas
applicant-worker or may lead to exploitation of the applicant-worker who will be at the
economic mercy of the travel agency or sales agencies of airline companies from the time his
papers are processed to the time he departs.

Non-transferability of license or authority

Limitations on the use of license or authority:
a. A license or authority cannot be used directly or indirectly by any person other than
the one in whose favor it was issued
b. A license or authority cannot be used in any place other than that stated in the license
or authority
c. A license or authority cannot be transferred, conveyed or assigned to any person or
entity.

Transfer or change of ownership as a single proprietorship licensed to engage in overseas

employment shall cause the automatic revocation of the license. The new owner shall be
required to apply for a license in accordance with the Rules.

A change in the relationship of the partners in a partnership duly licensed to engage in

overseas employment which materially interrupts the course of the business or results in the
actual dissolution of the partnership shall likewise cause the automatic revocation of the
license. Single proprietorship/partnership can convert into corporation for upgrading
purposes, which causes the revocation of the license of the former.

Suspension or cancellation of license or authority

The DOLE Secretary has the power to suspend or cancel any license or authority to recruit
employees for overseas employment for violation of rules and regulations issued by the
DOLE, POEA, and other applicable laws relating to recruitment and placement.

Prohibited practices
A. OVERCHARGING
To charge or accept, directly or indirectly, any amount greater than that specified in
the schedule of allowable fees prescribed by the Secretary of Labor, or to make a
worker pay any amount greater than that actually received by him as a loan or
advance

B. FALSE NOTICE

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 To furnish or publish any false notice or information or document in relation to
recruitment or employment

C. MISREPRESENTATION TO SECURE LICENSE/AUTHORITY

To give any false notice, testimony or information or document or commit any act of
misrepresentation for the purpose of securing a license or authority

D. INDUCING WORKER TO QUIT

To induce or attempt to induce a worker already employed to quit his employment in
order to offer him to another unless the transfer is designed to liberate the worker
from oppressive terms and conditions of employment

E. INDUCEMENT NOT TO EMPLOY

To influence or to attempt to influence any person or entity not to employ any worker
who has not applied for employment through his agency

F. RECRUITMENT FOR HARMFUL JOBS

To engage in the recruitment or placement of workers in jobs harmful to the public
health or morality or to the dignity of the Republic of the Philippines

G. OBSTRUCTING INSPECTION
To obstruct inspection by the Secretary of Labor or his duly authorized
representatives

H. NON-SUBMISSION OF REPORTS
To fail to file reports on the status of employment, placement vacancies, remittance of
foreign earnings, separation from jobs, departures and such other matters or
information as may be required by the Secretary of Labor

I. CONTRACT SUBSTITUTION
To substitute or alter employment contracts approved and verified by the Department
of Labor from the time of actual signing thereof by the parties up to and including the
periods of expiration of the same without the approval of the Secretary of Labor

The prohibition is designed to insure that the employee shall not thereby be placed in
a disadvantageous position and to see to it that the contract is within the minimum
standards set by the POEA. However, there is no prohibition against stipulating in a
contract more benefits to the employee than those required by law. Thus, a
“supplementary contract” entered into affording greater benefits to the employee,
although the same was not submitted for approval is valid and enforceable.

J. INVOLVEMENT IN TRAVEL AGENCY

To become an officer or member of the Board of any corporation engaged in travel
agency or to be engaged directly or indirectly in the management of a travel agency

K. WITHHOLDING OF DOCUMENTS

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 To withhold or to deny travel documents from applicant workers before departure for
monetary or financial considerations other than those authorized by the law or the
rules

Illegal Recruitment
Illegal recruitment is defined as recruitment activities, including the prohibited practices,
undertaken by licensees, non-licensees or non-holders of authority.

A person is guilty of illegal recruitment when he gives the impression that he has the power
to send workers abroad for work such that the latter were convinced to part with their money
in order to be so employed. It is important that there must at least be a promise or offer of an
employment from the person posing as a recruiter, whether locally or abroad.

Money is not material to a prosecution of illegal recruitment as the definition of “recruitment

and placement” in the Labor Code includes the phrase “whether for profit or not.”

Types of illegal recruitment

1. Simple illegal recruitment
i. Illegal recruitment committed by a licensee or holder of authority against one or two
persons only
ii. Illegal recruitment committed by a non-licensee or non-holder of authority
2. Illegal recruitment as economic sabotage
i. Syndicated –if carried out by a group of 3 or more persons in conspiracy or
confederation with one another
ii. Large scale – if committed against 3 or more persons, individually or as a group

Kinds of illegal recruiter

a. Non-licensee or non-holder of authority – by performing any acts constituting
recruitment or placement or by performing any of the prohibited practices
b. Licensee or holder of authority – by performing any of the prohibited practices

Elements of illegal recruitment

i. the offender is a licensee/non-licensee or holder/non-holder of authority engaged in the
recruitment and placement of workers; and
ii. the offender undertakes either any of recruitment activities, or any of the prohibited
practices

Illegal Recruitment Estafa

Malum prohibitum
It is not required that it be shown that the
recruiter wrongfully represented himself as
a licensed recruiter. It is enough that the
victims were deceived as they relied on the
misrepresentation and scheme that caused
Malum in se
The accused defrauded another by abuse of
confidence, or by means of deceit. It is
essential that the false statement or
fraudulent representation constitutes the
very cause or the only motive which

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 them to entrust their money in exchange of induces the complainant to part with his
what they later discovered was a vain hope property.
of obtaining employment

Illegal recruitment and estafa may be filed simultaneously or separately. The filing of charges
for illegal recruitment does not bar the filing of estafa and vice versa.

Liability of local recruitment agency and foreign employer

a. Solidary liability
- A local recruitment agency shall be jointly and solidarily liable with its principal
or foreign employer for any violation of the recruitment agreement or employment
contract
- The local recruitment agency is jointly and solidarily liable with the foreign
employer for any violation of the recruitment agreement or employment contract
to assure the aggrieved worker of immediate and sufficient payment of what is
due him.
b. Theory of imputed knowledge
- Knowledge of the agent is knowledge of the principal, but not the other way
around.
- Thus, if the principal, acting on his own, extends the employment contract, the
contract cannot be said to have a binding effect on the agent. Therefore, the agent
cannot be liable for any violation of the extended employment contract.

Thus, private employment agencies are jointly and severally liable with the foreign-based
employer for any violation of the recruitment agreement or the contract of employment. The
philosophy behind the requirement is that employees with legitimate demands against the
employer would be helpless to enforce them because the latter has no office or properties in
this jurisdiction. Also, the requirement assures the employee that he has remedies available in
this country even if the culpable employer is beyond the reach of our courts.

The manning agent and its principal are solidarily liable for unpaid salaries of their seamen.
The fact that the manning agent and its principal have already terminated their agency
agreement does not relieve the former of its liability.

Termination of contract of migrant workers.

A migrant worker who is terminated without valid cause shall have the following reliefs:
a. Full reimbursement of his placement fee with interest, and
b. Payment of salaries for the unexpired portion of his employment contract.

In Serrano v. Gallant Maritime, the SC declared as unconstitutional the clause that an

employee shall be entitled to the payment of salaries equivalent to 3 months of every year of
the unexpired term, for being discriminatory. Thus, an illegally dismissed OFW is now
entitled to all his salaries for the entire unexpired portion of his employment contract,
regardless of the stipulated term or duration.

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The award of salaries for the unexpired portion of an OFW’s employment contract is not in
the nature of backwages or separation pay but as an indemnity for an OFW who was illegally
dismissed

Mandatory remittance of foreign exchange earnings.

It is mandatory for all Filipino workers abroad to remit a portion of their foreign exchange
earnings to their families, dependents and/or beneficiaries in the country. The objective of the
requirement is to boost the Philippine foreign exchange reserves.

Effect of failure to remit:

a. Migrant worker shall be suspended or excluded from the list of eligible workers
for overseas employment. Subsequent violations shall warrant his repatriation from
the job site at the expense of the employer or at his expense.
b. Employers shall be excluded from the overseas employment program,
c. Local private employment agencies/entities shall face cancellation or revocation of
their licenses or authority to recruit, without prejudice to other liabilities under
existing laws and regulations.

Exceptions to mandatory remittance

a. Where the worker’s immediate family members, dependents or beneficiaries are
residing with him abroad
b. Filipino servicemen working in U.S. military installations
c. Immigrants and Filipino professionals and employees working with U.N. agencies or
specialized bodies.

Mandatory benefits of OFWs

- Each migrant worker deployed by a recruitment/manning agency shall be covered
by a compulsory insurance policy which shall be secured at no cost to the worker.

Repatriation of migrant workers

General Rule: Repatriation of the migrant worker, including the transport of his personal
belongings, shall be the responsibility of the principal or the recruitment agency.
XPN: when the migrant worker is terminated for a cause or due to his sole responsibility, in
which case, the principal or the recruitment agency shall not be liable.

In case of death of the migrant worker, the repatriation of his remains and the transport of his
personal belongings shall be the responsibility of the principal and/or the recruitment agency.

In case of war, epidemic, disasters or calamities, natural or manmade, and the like, the
Overseas Workers Welfare Administration (OWWA) shall undertake the repatriation of
migrant workers. The OWWA shall be reimbursed by the responsible principal or agency.

Employment of Non-Resident Aliens

Any alien seeking admission to the Philippines for employment purposes and any domestic or
foreign employer who desires to engage an alien for employment in the Philippines shall
obtain an employment permit from the DOLE.

The Alien Employment Permit may be issued to

a. a non-resident alien or an employer

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 b. after a determination of the non-availability of a person in the Philippines who is
competent, able and willing at the time of application to perform the services for
which the alien is desired.

Persons exempted from securing an alien employment permit

a. Resident foreign nationals
b. Members of the diplomatic services and foreign government officials
c. Officers and staff of international organizations
d. Aliens elected as members of the Board
e. All foreign nationals granted exemption by law
f. Foreign nationals who come to the Philippines to teach, present, and/or conduct
research studies in universities and colleges as visiting, exchange or adjunct
professors
Prohibition against transfer of employment
After the issuance of an employment permit, the alien shall not transfer to another job or
change his employer without prior approval of the Secretary of Labor.
LABOR STANDARDS

The provisions of the Code dealing with hours of work, weekly rest periods, holidays, service
incentive leaves and service charges covers all employees in all establishments, whether for
profit or not, except the following:

a. Government employees
b. Managerial employees
c. Officers and members of the managerial staff
d. Field personnel
e. Members of the family of the employer who are dependent on him for support
f. Domestic helpers
g. Persons in the personal service of another
h. Workers paid by results

The aforementioned employees are not entitled to overtime pay, premium pay for rest days
and holidays, night shift differential pay, holiday pay, service incentive leave and service
charges.

A. Government employees- refer to those employed by the Government. In the case of

GOCCs with original charters, they are primarily governed by their charters. But GOCCs
without original charters or those incorporated under the General Corporation Law are
governed by the Labor Code. (Original charter test or Manner of creation test)

B. Managerial employees – They are employed as such by virtue of their special training or
expertise, experience or knowledge and for positions which require the exercise of
independent judgment or discretion. They are not subject to the rigid observance of office
hours, as the true worth of their services do not depend much on the time they spend in office
but more on the results of their accomplishments. They refer to those who meet the following
conditions:
i. Their primary duty consists of the management of the establishment in which
they are employed

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 ii. They customarily and regularly direct the work of 2 or more employees
therein
iii. They have the authority to hire or fire employees of lower rank.

C. Officers and members of the managerial staff – They are exempted from the coverage
if they perform the following duties and responsibilities:
i. Their primary duty consists in the performance of work directly related to
management policies of their employer
ii. They customarily and regularly exercise discretion and independent judgment
iii. They regularly and directly assist a proprietor or a managerial employee; or
execute under general supervision, work along specialized or technical lines
requiring special training, experience or knowledge; or execute under general
supervision special assignments and tasks
iv. They do not devote more than 20% of their hours worked in a workweek to
activities which are not directly and closely related to the performance of the
work described above.

D. Field personnel – refers those employees who regularly perform their duties away from
the principal place of business and whose actual hours of work in the field cannot be
determined with reasonable certainty. They are exempted from the coverage due to the nature
of their function which requires performance of service away from the principal place of
business. Hence, they are free from the personal supervision of the employer and the latter
cannot determine with reasonable certainty the actual number of hours of work expended for
the employer’s interest.

E. Members of the family of the employer - The members of the family of the employer
dependent upon him for support are exempted from the coverage, for the support given by the
employer may exceed the benefit for which an employee may be entitled.

F. Domestic servants/persons in the personal service of another - those who perform

services in the employer’s home which are usually necessary or desirable for the maintenance
and enjoyment thereof, or minister to the personal comfort, convenience, or safety of the
employer as well as the members of his employer’s household. They are exempted from the
coverage because the terms and conditions of their employment are governed by the
Kasambahay Law.

A laundrywoman in staff houses of a company or within the premises of the business of the
employer, not actually serving the family of the employer, is a regular employee. She is not
included in the definition of domestic servants. She is thus governed by the provisions of the
Labor Code on hours of work, premium pay for rest days and holidays, etc.

G. Workers paid by results – include those who are paid on piece-work, takay, pakiao or
task basis. To be exempted from the coverage, their output should be fixed. Payment of this
type of worker is determined by the results of the work performed or the number of units
produced, not the number of hours worked.

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Tailors and similar workers hired in the tailoring establishment, although paid weekly wages
on piece-work basis, are employees and not independent contractors, and accordingly, as
regular employees paid on a piece-rate basis, they are not entitled to overtime pay, holiday
pay, premium pay for holiday/rest day and service incentive leave pay.

Autobus Transport v. Bautista (2005)

Bus drivers and bus conductors are not field personnel. Along the routes plied by bus
companies are its inspectors assigned at strategic places who board the bus and inspect the
passengers, the punched tickets, and the conductors’ reports. They too, must be at a specific
place at a specified time. In each and every depot, there is always the dispatcher whose
function is to see to it that the bus and its crew leave the premises at specific times and arrive
at an estimated time. The driver was therefore under constant supervision while in the
performance of his work. He cannot be considered a field personnel.

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 HOURS OF WORK.

Principles in determining hours worked

1. All hours are hours worked which the employee is required to give to his employer,
regardless of whether or not such hours are spent in productive labor or involve
physical or mental exertion.
2. An employee need not leave the premises of the workplace in order that his rest
period shall not be counted, it being enough that he stops working, may rest
completely and may leave his workplace, to go elsewhere, whether within or outside
the premises of his workplace
3. If the work performed was necessary, or it benefitted the employer, or the employee
could not abandon his work at the end of his normal working hours because he had no
replacement, all time spent for such work shall be considered as hours worked, if the
work was with the knowledge of his employer or immediate supervisor
4. The time during which an employee is inactive by reason of interruptions in his work
beyond his control shall be considered working time if the imminence of the
resumption of work requires the employee’s presence at the place of work or if the
interval is too brief to be utilized effectively and gainfully in the employee’s own
interest

Normal Hours of Work

Gen. Rule: The normal hours of work shall not exceed 8 hours a day.
XPN:
1. Health personnel
2. Compressed workweek
The 8-hour requirement does not preclude the employer to reduce the number of working
hours, provided that there is no diminution of existing benefits. It is a management
prerogative, whenever exigencies of the service require, to change the working hours of its
employees as long as such prerogative is exercised in good faith.

1. Health personnel in (i) cities and municipalities with a population of at least 1 million or
(ii) in hospitals and clinics with a bed capacity of at least 100, shall hold regular office hours
for 8 hours/day, for 5 days/week, exclusive of the time for meals.

BUT where the exigencies of the service require that such personnel work for 6 days or 48
hours, in which case, they shall be entitled to an additional compensation of at least 30% of
their regular wage for work on the 6th day.

The above provision merely provides that: (1) health personnel shall have regular office
hours of 8 hours a day, 5 days per week, and (2) where the exigencies of service require them
to work for 6 days or 48 hours, then they shall be entitled to an additional compensation of at
least 30% of their regular wage for work on the 6th day. There is nothing in the law that
supports the Sec. of Labor’s assertion that personnel in hospitals and clinics are entitled to a
full weekly wage for 7 days if they have completed the 40-hour/5-day workweek in any given
workweek. The Secretary exceeded his authority by including a 2 days off with pay in
contravention of the clear mandate of the statute. Thus, hospital employees are not entitled to

10
full weekly salary with paid 2 days’ off although they completed the 40-hour/5-day
workweek.
2. The compressed workweek scheme (CWW) is an alternative arrangement whereby the
normal working period during the week is reduced to less than 6 days but the total number of
hours worked during the week shall remain at 48 hours. The normal workday is increased to
more than 8 hours, but not to exceed 12 hours, without payment of overtime premium.

Conditions for the validity of a compressed work week

1. Employee voluntarily agrees to it in writing
2. There is no diminution in their salary, wage or fringe benefits
3. The benefits are more than or at least equal to what is due to the employee without a
compressed work week
4. Employee is entitled to overtime pay for work on those days which should have
ceased to be working days because of the compressed work week
5. No strenuous physical exertion or that they are given adequate rest periods
6. Compressed work week must be for a temporary period

NOTE: Workdays can be reduced on account of serious business losses incurred by the
company. This can be attributed to a substantial slump in the demand of its goods and
services or there is lack of raw materials. Since the reduction of workdays is resorted to as a
cost-saving device, it would unfair to require the company to pay wages and cost-of-living
allowances even on unworked days taken off from the workweek.

Night Shift Differential

Every employee shall be paid a night shift differential of not less than 10% of his regular
wage for each hour of work performed between 10:00 p.m. and 6:00 a.m. As a general rule,
all employees are entitled to night shift differential.
XPNs:
a. Government employees
b. Those employed in retail and service establishments regularly employing not more
than 5 workers
c. Domestic helpers and persons in the personal service of another
d. Managerial employees
e. Field personnel, those paid by results, on commission basis or contract basis

The receipt of overtime pay does not preclude the receipt of night differential pay. The latter
is payment for work done during the night and the other is payment for the excess of the
regular 8-hour work.

Overtime Work and Overtime Pay

Overtime work is the service rendered in excess of the 8-hour regular working hour.
Overtime pay is the additional compensation of at least 25% or 30% on the regular wage for
the overtime work.

Computation of overtime pay:

i. Overtime pay on a Regular day = Basic pay x 125%

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 Overtime work on a regular working day shall be paid an additional compensation at a
rate equivalent to the regular wage plus at least 25% thereof.
ii. Work on a Holiday or Rest day = Basic pay x 130%
Work performed during a holiday or rest day shall be paid at a rate equivalent to the
regular wage plus 30% thereof.
iii. Overtime pay on a Holiday or Rest day = Basic pay x 169%
Overtime work on a holiday or rest day shall be paid an additional compensation of
30% of the regular wage and the premium pay for the work rendered on a holiday or
rest day

Computation of additional compensation. For purposes of computing overtime and other

additional remuneration, the “regular wage” of an employee shall include the cash wage only,
without deduction on account of facilities regularly furnished by the employer. They do not
include cost-of-living allowance, longevity pay or fringe benefits.

Condition for entitlement to overtime pay. Entitlement to overtime pay must first be
established by sufficient proof that said overtime work was actually performed, before an
employee may avail of said benefit.

Undertime not offset by overtime. Undertime work on any particular day shall not be offset
by overtime work on any other day. Permission given to the employee to go on leave on some
other day of the week shall not exempt the employer from paying the additional
compensation.
To allow undertime work on a particular day to be offset by overtime work will work to the
great advantage of the employer, for it will exempt him from paying additional pay for
overtime work. The proper method should be to deduct undertime or absences against the
employee’s accrued leave but pay him the overtime to which he is rightfully entitled.

Emergency overtime work. Any employee may be required by the employer to perform
overtime work in any of the following cases:
a) When the country is at war or during any other national or local emergency
b) When it is necessary to prevent loss of life or property or in case of imminent danger
to public safety due to an actual or impending emergency in the locality caused by
serious accidents, fire, flood, typhoon, earthquake, epidemic or other disaster or
calamity;
c) When there is urgent work to be performed on machines, installation or equipment, in
order to avoid serious loss or damage to the employer or some other cause of similar
nature;
d) When the work is necessary to prevent loss or damage to perishable goods;
e) Where the completion or continuation of the work started before the 8th hour is
necessary to prevent serious obstruction or prejudice to the business or operations of
the employer;
f) When overtime work is necessary to avail of favorable weather or environmental
conditions where performance or quality of work is dependent thereon.

As a general rule, all employees are entitled to overtime pay for overtime work rendered.
XPN:

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 a. Compressed workweek- No overtime pay for work performed beyond 8 hours but not
to exceed 12 hours. Work rendered beyond 12 hours is compensable overtime work
b. Built-in overtime – In a built-in overtime, the overtime pay is integrated in the base
pay of the employee. But in order to be valid, the legal wage rate and the overtime pay,
if computed separately, should be equal to or higher than the separate amounts legally
due.

Compensable Hours and Non-Compensable Hours

Compensable hours worked shall include:

a. All time during which an employee is required to be on duty or to be at the
employer’s premises or to be at a prescribed workplace
b. All time during which an employee is suffered or permitted to work
c. Rest periods of short durations (less than 20 minutes) during working hours
d. Meal periods of less than 20 minutes

Meal periods
Gen. Rule: Employees are entitled to at least 1 hour time-off for regular meals. Meal period is
therefore not compensable because the employee is completely relieved from duty during the
1-hour period.
XPNs: Meal period is compensable when:
i. The laborer is required to stand by for emergency work; or
ii. The said meal-hour is not one complete rest

Note: A shorter meal period may be allowed, but in no case shorter than 20 minutes.

Power interruptions or brownouts

Gen. Rule: Time spent during which an employee is inactive by reason of interruptions
beyond his control is working time, such as 20-minute electric power failure or machine
breakdowns. The pay for this non-productive time is known as idle-time pay.

XPN: Brownouts running for more than 20 minutes may not be treated as compensable hours
worked if any of the following conditions is present:
i. The employees can leave their workplace or go elsewhere within or without
the work premises, or
ii. The employee can use the time effectively for his own interest

In each case, the employer can extend the working hours of his employees outside the regular
working schedules to compensate for the loss of productive man-hours without being liable
for overtime payment

Travel Time
Travel time is compensable if it is in connection with the work of the employee. If not, it is
not considered as compensable working time.

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1. Travel that is all in a day’s work is compensable working time if the time spent in travel is
part of the employee’s principal activity.

2. Travel from home to work is not working time.

XPNs:
i. During emergency call outside of the regular working hours
ii. When done under vexing and dangerous circumstances
iii. When done under the supervision and control of the employer
iv. When done through a conveyance provided by the employer

3. Travel away from home – is compensable when the travel requires an overnight stay by the
employee, when it cuts across the working hours during regular working day or on working
hours of non-working days. Outside of these working hours, travel away from home is not
considered working time.

Waiting Time
Waiting time spent by an employee shall be considered as working time if
i. waiting is an integral part of his work;
ii. the employee is required or engaged by the employer to wait; or
iii. the employee is required to remain on call in the employer’s premises or so close
thereto that he cannot use the time effectively and gainfully for his own purpose

Other instances
i. Sleeping time is compensable working time if the nature of the employee’s work
allows sleeping without interrupting or prejudicing the performance of his work.
ii. Time spent by the Union’s officers in the collective bargaining table is not
compensable working time, unless it is so provided in the CBA
iii. Attendance in CBA negotiations or grievance machinery conference is compensable
hours worked
iv. Attendance in lectures, meetings and training programs is not compensable working
time if (i) the attendance is outside the employee’s regular working hours, (ii)
attendance is in fact voluntary, and (iii) the employee does not perform any
productive work during such attendance
v. Preliminary (before work) and postliminary (after work) activities are deemed
performed during working hours, where such activities are controlled or required by
the employer and are pursued necessarily and primarily for the employer’s benefit.
vi. Semestral break of teachers is considered as compensable hours worked for it is a
form of an interruption beyond their control

REST PERIODS
It shall be the duty of every employer, whether operating for profit or not, to provide each of
his employees a rest period of not less than 24 consecutive hours after every 6 consecutive
normal work days.

Gen. Rule: The employer shall determine and schedule the weekly rest day of his employees.
XPN: When the preference of the employee as to his day of rest is based on religious
grounds, the same shall be respected by the employer. The employee shall make

14
 known his preference to the employer in writing at least 7 days before the desired
effectivity of the initial rest day so preferred.

When employee may be compelled to work on a rest day.

a. In case of actual or impending emergencies or calamities to prevent loss of life and
property or imminent danger to public safety;
b. In case of urgent work to be performed on the machinery, equipment or installation to
avoid serious loss to the employer;
c. In the event of abnormal pressure of work due to special circumstances, where the
employer cannot ordinarily be expected to resort to other measures;
d. To prevent loss or damage to perishable goods;
e. Where the nature of the work requires continuous operations and the stoppage of
work may result in irreparable injury or loss to the employer; and
f. When the work is necessary to avail of favorable weather or environmental conditions
where performance or quality of work is dependent thereon.

Service Charges
All service charges collected by hotels, restaurants and similar establishments shall be
distributed completely and equally among covered workers, except managerial employees. In
case the service charge is abolished, the share of the covered employees shall be integrated
into their wages.

All employees are covered, regardless of their position, designation, employment status,
irrespective of the method by which their wages are paid, except managerial employees.

15
 WAGES

Wage means the remuneration or earnings, however designated, capable of being expressed
in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis,
or other method of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to be done or for
services rendered or to be rendered and includes the fair and reasonable value of board,
lodging or other facilities customarily furnished by the employer to the employee. “Fair and
reasonable value” shall not include any profit to the employer or to any person affiliated with
the employer.

Twin attributes of wages:

- Cash wage – takes the form of ready money paid by the employer for the services
rendered by the employee
- Facilities – are articles or services customarily given for the benefit of the employee
and are voluntarily accepted by him

Wage
Wages apply to compensation for manual
labor
As a general rule, wages are not subject to
execution
XPN: Debts incurred for food, shelter,
clothing and medical attendance
Salary
Salary denotes a higher grade of
employment, or a superior grade of services
and implies a position or office
Subject to execution

The distinction between salary and wage is only for the purpose of Article 1708 of the Civil
Code which mandates that “the laborer’s wages shall not be subject to execution or
attachment except for debts incurred for food, shelter, clothing and medical attendance.”

Facilities v. Supplements
Facilities include those articles or services which are provided by the employer to the
employee for the latter’s benefit. These include rice ration, housing, recreational facilities,
medical treatment to dependents, school facilities, cost of light, water, fuel, meals or snacks.
Facilities are deductible from the cash wage of the employee.

Requirements for deductibility of facilities from wages:

i. The provision of deductible facilities must be voluntarily accepted in writing by the
employee
ii. Facilities must be charged at fair and reasonable value.
iii. Proof must be shown that such facilities are customarily furnished by the trade.

Determination of facilities beneficial to employer or employee

Those articles or services which are not beneficial to the employee cannot be charged against
his cash wage. Articles or tools of the trade that are primarily for the benefit of the employer

16
or necessary to the conduct of his business cannot be deducted from the employer’s wages
because they are not considered as facilities.

The value of the facilities should not be more than the actual cost to the employer. The fair
and reasonable value does not include any profit to the employer.

Supplements are extra remunerations or benefits given to an employee over and above his
ordinary earnings or wages. e.g. vacation leave pay, overtime pay in excess of the legal rate,
profit-sharing benefits, sick pension, retirement and death benefits, family allowances. Since
they are not considered as part of wages, their value cannot be deducted from the cash wage
of an employee.
Facilities Supplements
Form part of the wage Independent of the wage
Deductible from the wage Not deductible from the wage
For the benefit of the employee Granted for convenience of the employer

The controlling test in determining whether the benefit granted is a facility or supplement is
not so much with the kind of such benefit or item (food, lodging, bonus or sick leave) given
but its purpose. Thus, free meals supplied by the ship operator to crew members, out of
necessity, cannot be considered as facilities but supplements which could not be reduced
having been given not as part of wages but as a necessary matter in the maintenance of the
health and efficiency of the crew personnel during the voyage.

Bonus
Bonus refers to payment in excess of regular or guaranteed wages. It is granted to an
employee for his tangible contribution to the success of the employer’s business, without
which the employer may not realize bigger profits. The contribution of the employee which
warranted the grant of the bonus may be in the form of his commitment to the job, his
industry and loyalty.

Bonus is not considered as part of wages if it is paid only upon realization of profits or
amount of production or output. In other words, where the bonus is paid only if profits are
realized or if a certain level of productivity is achieved, it cannot be considered part of the
wage.

The payment of bonus is a management function, not a demandable and enforceable

obligation, which cannot be forced upon the employer who may not be obliged to assume the
onerous burden of granting bonuses or other benefits aside from the employee’s basic salaries
or wages. However, in the following instances, bonus can be demanded as a matter of right;
thus, an enforceable obligation:
a. If it is given without any condition; hence, it is a part of the wage or salary
b. If the grant thereof is the result of an agreement such as the CBA
c. If it is given on account of company policy or practice
d. If the grant is mandated by law

Productivity bonus Sales commissions

Productivity bonuses are generally tied to Commissions are paid upon the specific

17
 the productivity or profit generation of the results achieved by a salesman-employee.
employer corporation.
Productivity bonuses are not directly Sales commissions are those intimately
dependent on the extent an individual related to or directly proportional to the
employee exerts himself. extent or energy of an employee’s
endeavors.
A productivity bonus is something extra for It is a percentage of the sales closed by a
which no specific additional services are salesman and operates as an integral part of
rendered by any particular employee; hence, such salesman’s basic pay.
not legally demandable, absent a contractual
undertaking to pay it.

13th month pay

It is a monetary benefit equivalent to the monthly basic salary received by the employee,
computed pro rata according to the number of months within a year that the employee
rendered service to the employer.

In the computation of the 13th month pay, monetary benefits and allowances that are not
considered or integrated as part of the basic salary, e.g. overtime pay, night shift differential
pay, etc. cannot be included.

Minimum service requirement: The statutory benefit of a 13thmonth pay is automatically

vested in the employee who has at least worked for 1 month during the calendar year. Such
benefit may not be lost or forfeited even if the employee is dismissed for cause.

Employees covered by the 13th month pay law.

- All rank-and-file employees of covered employers are entitled to 13th month pay
regardless of their position, designation or employment status, and irrespective of the
method by which their wages are paid. Thus, extras, casuals and seasonal employees
are entitled to the proportionate 13th month pay
- Workers paid on piece-rate basis
- XPN: The following are not entitled to 13th month pay
i. Managerial employees
ii. Employees paid purely on commission, boundary, or task basis
iii. Seafarers

Employers covered by the 13th month pay law.

- All employers are covered.
- XPN: The following employers are not covered by the 13th month pay law
1. Government
2. Employers already paying 13th month pay or more in a calendar year or its equivalent,
e.g. midyear pay equivalent to 1 month pay
3. Employers of household helpers and persons in the personal service of another
Employers of those who are paid on purely commission, boundary, or task basis

Voluntary and contractual bonuses can be credited for the purpose of determining liability for
the 13th month pay. The law did not envision a double burden on the employer already paying
18
a 13th month or its equivalent. Thus, Christmas bonuses, not contingent on profit, are
equivalent to the 13th month pay. Construing the term “its equivalent,” the same was defined
as inclusive of Christmas bonus, mid-year bonus, profit-sharing payments and other cash
bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and
stock dividend, cost of living allowances and all other allowances regularly enjoyed by the
employee, as well as non-monetary benefits.
Compensation for rest day, Sunday or holiday work.
Premium pay or differential compensation is an additional pay granted to a covered employee
for services rendered on holidays or rest days. This implies that Sunday is an ordinary
working day, unless it is the established rest day of the employee in which case, he is entitled
to premium pay.

Rates of premium pay:

Work on a scheduled rest day 30% of regular wage
Work on a Sunday and Holidays when the 30% of regular wage
employee has no regular workdays and no
regular rest days
Work on a Special Holiday 30% of regular wage
Work on a Special Holiday which also falls 50% of regular wage
on scheduled rest day

Additional compensation for work on any legal holiday = 30% of regular wage
Additional compensation where holiday work also falls on scheduled rest day = 50%
of regular wage
If the CBA or other employment contracts provide for higher premiums, the same
shall apply

Holiday Pay
Holiday pay is a one-day pay given by law to an employee even if he does not work on a
regular holiday.
Regular Holidays Special Holidays
New Year’s Day Ninoy Aquino Day
Maundy Thursday All Saint’s Day
Good Friday Last day of the Year
Eidul Fitre
Eidul Adha
Araw ng Kagitingan
Labor Day
Independence Day
National Heroes Day
Bonifacio Day
Christmas Day
Rizal Day
A covered employee who does not report A covered employee who fails to report for
for work during regular holidays is paid work on a special holiday is not entitled to
100% of his regular wage. any compensation under the principle of

19
 “no-work, no-pay”
A covered employee who reports for work A covered employee who works on special
on regular holidays is entitled to 200% of holidays is paid an additional compensation
his regular wage. of not less than 30% of his basic pay. If the
special holiday falls on his scheduled rest
day, he is entitled to an additional pay
equivalent to at least 50% over his basic pay
Who are entitled to holiday pay
Gen. Rule: All employees are entitled
XPNs:
a. Government employees
b. Retail and service establishments regularly employing less than 10 workers
c. Managerial employees and other members of the managerial staff
d. Domestic helpers and persons in the personal service of another
e. Employees engaged on task or contract basis,
f. Employees paid purely on commission basis
g. Family members of the employer who are dependent on him for support
h. Field personnel
i. Employees paid fixed amount for performing work irrespective of the time
consumed in the performance thereof.

Monthly-paid and daily-paid employees

A monthly-paid employee is one whose salary includes payments for every day of the month
although he does not regularly work on his rest days, regular and special holidays. A daily-
paid employee is one who is paid on the days he actually worked except unworked regular
holidays when he is present or on leave of absence with pay on the working day immediately
preceding the legal holiday.

Effects of absences on holiday pay; successive regular holiday

a. If an employee is on leave of absence with pay, he is entitled to holiday pay
b. If an employee is on leave of absence without pay on the day immediately preceding
the regular holiday, he is not entitled to holiday pay
c. If the day immediately preceding the holiday is a non-working day or the scheduled
rest day of an employee, he is not considered to be on leave of absence on that day, in
which case he shall be entitled to holiday pay if the employee should work on the day
immediately preceding the non-working day or rest day
d. If there are 2 successive regular holidays like Holy Thursday and Good Friday, an
employee is not entitled to holiday pay for both holidays if he absents himself from
work without pay on the day immediately preceding the first regular holiday. But if he
works on the first holiday, he is entitled to holiday pay on the second holiday.

Double holiday pay

If 2 regular holidays fall on the same day (such as Good Friday falling on Araw ng
Kagitingan), the employees should be paid 400% of the basic wage for both holidays
provided he worked on that day or was on a leave of absence with pay or was on authorized
absence on the day prior to the regular holiday.

20
21
Principles
No work, no pay; fair day’s wage for a fair day’s labor
If there is no work performed by the employee there can be no wage or pay unless, of course,
the laborer was able, willing and ready to work but was illegally locked out, suspended or
dismissed, or otherwise illegally prevented from working, a situation which we find is not
present in the instant case. It would neither be fair nor just to allow a worker to recover
something he has not earned and could not have earned because he did not render services
during a period.

Principle of fair day’s wage for a fair day’s labor

The payment of wages of a worker is based primarily on the work performed by him for the
benefit of the employer. In other words, if he does not perform his work; he should not expect
any wage from the employer based on this age-old principle.

Equal pay for equal work

Persons who work with substantially equal qualification, skill, effort and responsibility, under
similar conditions, should be paid similar salaries. Such that "if an employer accords
employees the same position and rank, the presumption is that these employees perform equal
work.

Principle of non-elimination or non-diminution of benefits.

This principle mandates that the reduction or diminution or withdrawal by employers of any
benefits, supplements or payments as provided in existing laws, individual agreements or
collective bargaining agreements between workers and employers or voluntary employer
practice or policy, is not allowed.

Thus, a company practice favorable to the employees that had been established and the
payment made pursuant thereto, ripened into benefits enjoyed by them, and any benefit and
supplement being enjoyed by the employees could not be reduced, diminished, discontinued
or eliminated by the employer under the non-diminution rule.

Stoplock gate or non-chargeability clause

This means that benefits derived from law are exclusive of benefits arrived at through
negotiation and agreement. Having entered into an agreement with its employees, an
employer may not be allowed to renege on its obligation under a CBA should, at the same
time, the law grants the employees the same or better terms and conditions of employment.
Employee benefits derived from law are exclusive of benefits arrived at through negotiation
and agreement unless otherwise provided by the agreement itself or by law.

Any allowance/wage granted under the CBA cannot be credited to similar form of benefit
that may thereafter be ordained by the government through legislation. Such portion of the
contract is the “stoplock” gate.

This doctrine was resounded in this manner: the CBA provides “It is hereby agreed that these
salary increases shall be exclusive of any wage increase that may be provided by law as a
result of any economic change.” The Supreme Court rules that the provision in the CBA is
clear that the salary increases shall not include any wage increase that may be provided by
law as a result of economic change. The CBA needs no interpretation as it is not ambiguous.

22
Thus, the wage increase granted by the petitioner to its employees under the CBA cannot be
considered as creditable benefit.

Minimum Wage
Minimum wage is the lowest wage rate fixed by law that an employer can pay his workers.
The purpose of minimum-wage law is to set a barrier below which wages may not fall, in
order to develop competition on a high level of efficiency rather than competition on a low
level of wages.

The employer cannot exempt himself from liability to pay minimum wages because of poor
financial condition of the company. The payment of minimum wages is not dependent on the
employer’s ability to pay.

National Wages and Productivity Commission

- Prescribes rules and regulations for the determination of appropriate minimum wage
and productivity measures at the regional, provincial or industry levels
- Reviews regional wage levels set by the RTWPB to determine if these are in
accordance with the prescribed guidelines
Regional Tripartite Wage and Productivity Board
- Determines and fixes minimum wage rates applicable in their regions, province or
industries therein and issues the corresponding wage orders, subject to the guidelines
set by the NWPC
*** The NWPC reviews the minimum wage rates fixed by the RTWPB. But a wage order
issued by the RTWPB does not require prior approval by the NWCP.

Two methods of determining wages

 Floor-wage method – involves the fixing of a determinate amount that would be
added to the prevailing statutory minimum wage
 Salary-ceiling method – involves a wage adjustment applied to employees receiving a
certain denominated salary ceiling

Two methods of payment

 Time wages – refer to pay by the hour, day or month, without specifying the amount
of work to be done
 Production wages – refer to pay related to the amount of work the individual or group
performs regardless of the time involved in its performance. This applies to workers
paid by results

*** Workers paid by results including those who are paid on piece-work, takay or pakiao or
task basis shall receive not less than the prescribed statutory minimum wage rate for an 8-
hour work or a proportion thereof for less than 8 hours work.

Payment of Wages
Wages shall be paid in legal currency. No employer shall pay the wages of an employee by
means of promissory notes, vouchers, coupons, tokens, or any object other than legal tender,
even when expressly requested by the employee.

23
Frequency of payment.
Gen. Rule: Wages shall be paid at least once every 2 weeks or twice a month at intervals not
exceeding 16 days.
XPN: In cases of force majeure or circumstances beyond the employer’s control, the
employer shall pay the wages immediately after such force majeure or circumstances
have ceased.
No employer shall make payment with less frequency than once a month. Undue delay in the
payment of wages constitutes unjust and inhumane condition of work for which the employer
may be held liable. Delayed payment is only justified on account of force majeure and
fortuitous event.

Place of payment.
As a general rule, the place of payment shall be at or near the place of undertaking.
Payment in recreational establishments such as bars, night clubs, massage clinics, or casinos
is prohibited. This prohibition does not apply to persons employed in said places.

Direct payment of wages (Direct payment principle).

Gen. Rule: Wages shall be paid directly to the workers to whom they are due.
XPNs:
1. In case of force majeure or under other special circumstances, where the worker
authorizes another in writing to receive his wage
2. Where the employee authorizes his employer in writing to pay his wages to a family
member
3. When payment to another person is authorized by law
4. Payments for insurance premium of the employee and union dues where the right to
check-off has been recognized by the employer in accordance with a CBA or when
such payment is authorized in writing by the individual-employees concerned
5. In case of death of the employee, the employer may pay the wages of the deceased
worker to his heirs without the necessity of intestate proceedings.

Liability of employer to the employees of the Contractor, Sub-Contractor, Labor-Only

Contracting.
There is job contracting or subcontracting (and this is legitimate) when a principal farms
out the performance of a part of its business to another, called the contractor or subcontractor.
For the purpose of undertaking the principal's business that is farmed out, the contractor or
subcontractor then employs its own employees.

If the contractor or subcontractor fails to pay the wages of his employees, the employer shall
be jointly and severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him.

There is “labor-only” contracting (this is prohibited) where the person supplying workers to
an employer
1. does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and

24
 2. the workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer.
In labor-only contracting, the person or intermediary shall be considered merely as an agent
of the employer. The employer shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.

Thus, where “labor-only” contracting exists, the statute itself implies or establishes an
employer-employee relationship between the employer (the owner of the project) and the
employees of the “labor-only” contractor. In other words, the principal employer is
considered the direct employer of the employees of the “labor-only” contractor.

Worker preference in case of bankruptcy.

In case bankruptcy or liquidation of an employer’s business, his workers shall enjoy first
preference as regards their unpaid wages and other monetary claims, any provision of law to
the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full
before the claims of the Government and other creditors may be paid. Worker’s preference
may not be invoked in the absence of a formal declaration of bankruptcy and insolvency or
judicial liquidation order.

Prohibitions regarding wages

Non-interference in disposal of wages. 
No employer shall limit or otherwise interfere with the freedom of any employee to dispose
of his wages. He shall not force, compel, or oblige his employees to purchase merchandise,
commodities or other property from any other person, or otherwise make use of any store or
services of such employer or any other person.

Prohibition against wage deduction. 

Gen Rule: No employer shall make any deduction from the wages of his employees. This is
to forestall the commission of unwarranted practices of employers by making unnecessary
deductions without the employee’s knowledge.
XPNs:
a. Amount of insurance premium paid by the employer, where the worker is insured
with his consent; 
b. For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the worker concerned;
and 
c. Other authorized deductions such as
i. the fair and reasonable value of facilities
ii. debts owed to the employer, provided they are due and demandable
iii. agency fees
iv. deductions for loss or damage
v. deductions for SSS, etc.
vi. deductions for tardiness

Check-Off
This is a system by which union dues and other assessments are deducted from the
employee’s wage by the employer upon authorization from the worker or by mandate of the
law. The check-off authorization, even if declared irrevocable, is good only as long as the

25
employee remains a member of the union concerned. It ceases to be valid the moment he is
separated from the union.

Deposits for loss or damage. 

Gen. Rule: No employer shall require his worker to make deposits from which deductions
shall be made for the reimbursement of loss of or damage to tools, materials, or equipment
supplied by the employer
XPN:
i. when the employer is engaged in such trades, occupations or business where
the practice of making deductions or requiring deposits is a recognized one, or
ii. is necessary or desirable as determined by the Secretary of Labor and
Employment in appropriate rules and regulations.

Requisites for payment of loss and damage:

a. The employee is clearly responsible for the loss or damage
b. He is given reasonable opportunity to show cause why deduction should not be made
c. Total amount of the deduction does not exceed the actual loss or damage
d. Deduction does not exceed 20% of his wages in a month

Other prohibitions regarding wages.

i. Withholding of wages
ii. Deduction from wages in payment of a promise of employment or retention in
employment
iii. Refusal to pay wages or reduction of wages as a retaliatory measure on the part of the
employer

26
Wage Determination
Wage Order.
Whenever conditions in the region so warrant, the RTWPB shall investigate and study all
pertinent facts, and based on the prescribed standards and criteria, shall proceed to determine
whether a Wage Order should be issued. 

In the performance of its wage-determining functions, the RTWPB shall conduct public
hearings/consultations, giving notices to employees’ and employers’ groups, and other
interested parties. Wage Order issued by the RTWPB without the required public hearing or
consultation, and without publication in newspapers of general circulations, is null and void. 

Gen. Rule:
A Wage Order may not be disturbed for 12 months from its effectivity, and no petition for
wage increase shall be entertained within the said period.
XPN: In case of supervening conditions, such as inflation.

In case of non-compliance with the wage order, the employer concerned shall be ordered to
pay an amount equivalent to double the unpaid benefits (unpaid wage rate) owing to the
employee.

Wage Distortion. 
Wage distortion is a situation where there is an increase in the compensation of the lower pay
class in an office hierarchy without a corresponding raise for high-level employees in the
same region of the country, resulting in the elimination or severe diminution of the distinction
between the 2 groups or classes. 

It is the disappearance or virtual disappearance of pay differentials between lower and higher
positions in an enterprise because of compliance with a wage order.

Wage distortion arises when 4 essential elements are present: 

a. An existing hierarchy of positions with corresponding salary rate
b. A significant change or increase in the salary rate of a lower pay class without a
corresponding increase in the salary rate of the higher class
c. The elimination of the distinction between the 2 groups or classes
d. The distortion exists in the same region of the country. 

A distortion does not arise when a wage order provides employees in one branch of a bank
higher compensation than that given to their counterparts in other regions occupying the same
pay scale, who are not covered by the same wage order. The wage distortion contemplated by
law is that existing within a region. Å disparity in wages between employees holding similar
position, but in different regions, does not constitute wage distortion.

Settlement of Wage Distortion. 

A. In unionized establishment
1. The employer and the union shall negotiate to correct the distortions using the
grievance machinery procedure in the CBA.
2. If it remains unresolved, it shall be decided through voluntary arbitration. 
B. In non-unionized establishment
1. The employer and the workers shall endeavor to correct the wage distortion.
2. If the negotiation fails, it shall be settled through the NCMB.

27
 3. If it remains unresolved, the dispute shall be referred to the NLRC for compulsory
arbitration. 
The law encourages the parties to solve the problem of wage distortion through voluntary
negotiations or arbitration, rather than strikes, lockouts or other concerted activities. A
unilateral grant of wage increase by the employer is recognized as a means of correcting
wage distortions.
*The pendency of the dispute arising from a wage distortion shall not in any way delay the
applicability of any wage increase.

Wage Distortion is a non-strikeable issue

It was the legislative intent to solve wage distortion problems through the machineries of
voluntary negotiation or arbitration not by strikes, lockouts or other concerted activities.

Case1: The RTWPB of Region II issued a Wage Order granting all employees in the private
sector across-the-board increase of P15 daily. Is the Wage Order valid?
- The Wage Order is valid insofar as the mandated increase applies to employees
earning the prevailing minimum wage rate at the time of the passage of the Wage
Order.
- It is void with respect to its application to employees receiving more than the
prevailing minimum wage rate at the time of the passage of the Wage Order

Case2: Bankard Inc. approved a new salary scale which increased the hiring rates of new
employees. The union pressed the company for the increase in the salary of its old and
regular employees. The company refused. The union filed a notice of strike on the ground of
discrimination, claiming that a wage distortion exist. Is there a wage distortion?
- NO. The union cannot legally obligate Bankard to correct the alleged “wage
distortion” as the increase in the wages and salaries of the newly-hired was not due to
a prescribed law or wage order.

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 LEAVES

Service Incentive Leave

Gen. Rule: Every employee who has rendered at least 1 year of service shall be entitled to a
yearly service incentive leave of 5 days with pay. If unused at the end of the year, this benefit
is convertible to its cash equivalent based on the salary rate at the date of commutation.

XPNs:
1. Those employed in establishments regularly employing less than 10
employees
2. Government employees
3. Persons in the personal service of another
4. Managerial employees
5. Officers and members of the managerial staff
6. Field personnel
7. Those enjoying vacation leave with pay of at least 5 days

“at least 1 year service” means service of not less than 12 months, whether continuous or
broken reckoned from the date the employee started working, including authorized absences
and paid regular holidays.

There is no law which makes the grant of vacation leave and its benefits mandatory on the
part of the employer. The claim for vacation leave with pay can only be availed of through an
agreement, through a voluntary unilateral grant by the employer, or through company
practice.
Vacation and sick leaves when accorded by the employer pursuant to a company practice
become a matter of right and not a mere privilege on the part of the employees.

Expanded Maternity Leave

Benefits granted:
1. Paid leave of 105 days for live childbirth, regardless of the mode of delivery, plus 15
days paid leave if the female worker is a solo parent; OR
2. Paid leave of 60 days for miscarriage or emergency termination of pregnancy; and
3. An option to extend for an additional 30 days without pay in case of childbirth
(extended maternity leave)

Maternity leave applies to all qualified female workers in the:

a. Public sector
b. Private sector
c. Informal economy – refers to the self-employed, occasionally or personally hired
workers, etc.
d. Voluntary contributors to the SSS
e. National athletes

Who may avail

- All qualified female workers, regardless of civil status, employment status, and the
legitimacy of the child
- Maternity leave shall be granted to a qualified female worker in every instance of
pregnancy, miscarriage or emergency termination of pregnancy, regardless of
frequency

29
To qualify for the grant of maternity leave, the female worker in the private sector must meet
the following requirements:
1. She must have made at least 3 monthly contributions in the 12-month period
immediately preceding the semester of her childbirth, miscarriage or emergency
termination of pregnancy, and
2. There must be notice to the employer of her pregnancy and the probable date of her
childbirth

In case of live childbirth, a qualified female worker entitled to maternity leave benefits may,
at her option, allocate up to 7 days of said benefits to:
1. The child’s father, whether or not the same is married to the female worker; OR
2. In case of his death, absence or incapacity, to an alternate caregiver, who may be:
2.a. A relative within the 4th degree of consanguinity, or
2.b. The current partner, regardless of sexual orientation, of the female worker.

Paternity Leave
Every married male employee in the private and public sector is entitled to a paternity leave
of 7 days with pay for the first 4 deliveries or miscarriages of his legitimate spouse with
whom he is cohabiting.

The male employee must be:

a. Legally married to, and is cohabiting with the woman who delivers the baby;
b. Employed in the public or private sector;
c. May be availed of only for the first 4 deliveries (or miscarriages) of the legitimate
spouse with whom he is cohabiting; and
d. He must have notified his employer of the pregnancy of his legitimate spouse and the
expected date of delivery

Parental leave for solo parents

Parental leave of not more than 7 days every year shall be granted to any solo parent
employee who has rendered service of at least 1 year. This is in addition to the legally
mandated leaves such as service incentive leave, expanded maternity leave, paternity leave,
or SSS sick leave.

Conditions for entitlement to parental leave:

1. He/she must be a solo parent
2. Must have actual and physical custody of the child
3. Must have rendered at least 1 year of service to his/her employer
4. He/she must remain a solo parent
5. He/she must have a DSWD-issued solo parent ID
6. He must notify the employer of the availment thereof within a reasonable period

A change in the status or circumstance of the parent such that he/she is no longer left alone
with the responsibility of parenthood, shall terminate his/her eligibility for parental leave
benefits.

Gynecological Leave

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A woman employee having rendered continuous aggregate employment service of at least 6
months for the last 12 months shall be entitled to a special leave benefit of 2 months with pay
following surgery caused by gynecological disorders.

Conditions for entitlement:

1. Female employee must have rendered continuous aggregate employment service of at
least 6 months for the last 12 months prior to surgery
2. The gynecological disorder requires surgical procedure such as dilatation and
curettage, hysterectomy, mastectomy, and those involving female reproductive organs
such as the vagina, cervix, breasts

Gynecological leave may be availed of for every instance of surgery due to gynecological
disorders, but for a maximum period of 2 months per year.

Battered-woman leave
A victim of violence against women (and their children) may avail of a paid leave of up to 10
days, in addition to other paid leaves. The employee has to submit a certification from the
Punong Barangay or Kagawad, prosecutor, or clerk of court that an action under RA 9262 has
been filed or is pending.

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 SEXUAL HARASSMENT IN THE WORK ENVIRONMENT

Sexual Harassment under the Anti-Sexual Harassment Act:

Requisites of sexual harassment:
1. An act is committed in a work environment
2. The harasser (may be of any gender) is any person who has authority, influence or
moral ascendancy over another
3. Harasser demands or requests or requires a sexual favor from the victim
4. It does not matter whether such demand is accepted or not

Sexual harassment in work-related environment is committed in the following manner:

A. 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 compensation, terms, conditions, promotions, or privileges; or
the refusal to grant the sexual favor results in limiting, segregating or classifying the
employee which in any way would discriminate, deprive or diminish employment
opportunities or otherwise adversely affect said employee (quid pro quo sexual
harassment/this for that)
B. The above acts would impair the employee’s rights and privileges under existing labor
laws
C. The above acts would result in an intimidating hostile, or offensive environment for
the employee (hostile environment harassment)

While the provision states that there must be a demand, request or requirement of a sexual
favor, it is not necessary that the demand, request or requirement of a sexual favor be
articulated in a categorical manner. It may be discerned from the acts of the offender.

Likewise, it is not essential that the demand, requires or requirement be made as a condition
for continued employment or for promotion to a higher position. It is enough that the
respondent’s act result in creating an intimidating, hostile or offensive environment for the
employee.

Duties of the Employer

- Prevent or deter the commission of acts of sexual harassment; and
- Provide the procedure for the resolution, settlement or prosecution of acts of sexual
harassment

Liability of the Employer

- He shall be solidarily liable for damages arising from acts of sexual harassment
committed in the work environment, provided:
a. That he is informed of such acts by the offended party; and
b. No immediate action is taken.

3-Fold Liability under the Sexual Harassment Act

- An act of sexual harassment may give rise to civil, criminal and administrative
liability on the part of the offender, each may proceed independently of the other.

Case 1: A Personnel Manager, while interviewing an attractive applicant for employment,

stared directly at her for prolonged periods, albeit in a friendly manner. After the interview,
the manager accompanied the applicant to the door, shook her hand, and patter her on the

32
shoulder. He then asked the applicant if he could invite her for dinner and dancing at some
future time. Is there sexual harassment?
- Yes. The Personnel Manager is in a position to grant or not to grant a favor (a job) to
the applicant. Under the circumstances, inviting the applicant for dinner or dancing
creates a situation hostile or unfriendly to the applicant’s chances for a job if she turns
down the invitation.

Gender-Based Sexual Harassment under the Safe Spaces Act:

a. An act involving any unwelcome sexual advances, requests or demand for sexual
favors or any act of sexual nature, whether done verbally, physically or through the
use of technology, or through any other forms of information and communication
systems, that has or could have a detrimental effect on the conditions of an
individual’s employment or education, job performance or opportunities;
b. A conduct of sexual nature and other conduct-based on sex affecting the dignity of a
person, which is unwelcome, unreasonable, and offensive to the recipient, whether
done verbally, physically or through the use of technology or through any other forms
of information and communication systems;
c. A conduct that is unwelcome and pervasive and creates an intimidating, hostile or
humiliating environment for the recipient:

Under the Safe Spaces Act, the crime of gender-based sexual harassment may also be
committed between peers and those committed to a superior officer by a subordinate, or to a
teacher by a student, or to a trainer by a trainee.

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 WORKING CONDITIONS OF SPECIAL GROUPS

Apprentices and Learners

Apprenticeship
Apprenticeship involves training on the job
supplemented by related theoretical
instructions in highly technical industries,
i.e. it involves the application of advanced
technology, e.g. aircraft and automobile
mechanics
Apprentices are trained in apprenticeable
occupations, that is, any trade, form of
employment or occupation which requires
more than 3 months of practical training on
the job with compulsory related theoretical
instruction
Apprentices must be at least 15 years of age
Apprenticeship period must not be less than
3 months nor more than 6 months
Employer is not required to hire the
apprentice
Wage rate: at least 75% of the statutory
minimum wage
Learnership
Learnership involves training in semi-
skilled industries which need not be
supplemented by related theoretical
instructions, e.g. hairdressing and
cosmetics.
Learners are trained in non-apprenticeable
occupations, and they are hired only when
no experienced workers are available
Learners must be at least 15 years of age
Learnership period must not be more than 3
months
Employer is required to hire the learner after
the lapse of the learnership period
Wage rate: at least 75% of the statutory
minimum wage

XPN: No compensation required whenever

the on-the-job training is required by the
school curriculum, as a prerequisite for
graduation, or for taking a board
examination.
Incentives: An employer who pays the full
Incentives: An employer who pays the full minimum wage to the apprentice may avail
minimum wage to the apprentice may avail of a deduction from taxable income of 50%
of a deduction from taxable income of 50% of the value of the training expenses,
of the value of the training expenses, provided that the deduction shall not exceed
provided that the deduction shall not exceed 10% of the direct labor wage
10% of the direct labor wage

Both apprenticeship and learnership programs are under the direct supervision of the
Technical Education and Skills Development Authority pursuant to the TESDA Act of 1994.

Apprenticeship/Learnership period is treated as a probationary period. Probationary period is

the span of time within which the employer is able to determine the employee’s fitness,
characteristics, and habits to a given job. It is the period one has to learn or familiarize with
the job. Thus, it may be shorter. If the job is apprenticeable, then the probationary period is
the apprenticeable period. If the job is learnable, the probationary period is within 3 months
or less. In both cases, upon completion of the apprenticeship or learnership period, they may
become employees in the company where they are trained. After the training period, they
shall no more undergo a probationary period for this would be tantamount to double
probation proscribed by law.

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Rule on working scholars
There is no employer-employee relationship between students and schools, where there is a
written agreement between them under which the former agree to work for the latter in
exchange for the privilege to study free of charge, provided the students are given real
opportunities, as may be reasonable and necessary to finish their chosen courses under such
agreement.

NOTE: The student is not considered an employee for purposes of administering and
enforcing the provisions of the Labor Code on conditions of employment.

Hence, it is not the decisive law in a civil suit for damages instituted by an injured person
during a vehicular accident against a working student of a school and against the school itself.
An IRR cannot be used by an employer as a shield to avoid liability under the substantive law
provisions of the Civil Code.

In a civil suit for damages filed by an injured person against a working scholar and the
school, the later claimed non-existence of employer-employee relationship. It must be noted
that for purposes of imposing liability for tortious act, the working scholar is considered an
employee and the school as employer

Disabled Workers

The Magna Carta for Disabled Persons ensures equal opportunities for disabled persons and
prohibits discrimination against them.

Persons with disability are those whose earning capacity is impaired by:
a. Physical deficiency
b. Age
c. Injury
d. Disease
e. Mental deficiency
f. Illness

A qualified disabled employee is subject to the same terms and conditions of employment
and the same compensation, privileges, allowances or benefits as a qualified able-bodied
employee.

Wage Rate of Disabled Persons:

Gen. Rule: Handicapped/disabled employees are entitled to not less than 75% of the
minimum wage.

XPN: All qualified handicapped workers shall receive the full amount of the
minimum wage.

Under Article 80 of the Code, handicapped workers are entitled to not less than 75% of the
applicable minimum wage. However, under the Magna Carta for Disabled Persons, persons
with disability are entitled to equal opportunity for employment and they are subject to the
same terms and conditions of employment and the same compensation, privileges, benefits,

35
fringe benefits, incentives or allowances as a qualified able-bodied person. Thus, all qualified
handicapped workers shall receive the full amount of the minimum wage rate.

The disability must be related to the work for which he was hired; otherwise, he is not
considered as handicapped or disabled worker. He may have some disability but if the same
is not related to his work, he cannot be considered a disabled worker in relation to the
particular work for which he was hired. Thus, if the efficiency or quality of work is not
impaired by the disability in relation to the work performed, he is not classified as a
handicapped worker.

Incentives for employers

Employers who are employing disabled employees are entitled to an additional deduction
from their gross income, equivalent to 25% of the total amount paid as salaries and wages to
disabled persons.

Thus, the financial incentive granted by law to a factory whose cutters and sewers in its
garment-for-export operations staffed with 80% deaf-mute workers is a deduction from gross
income equivalent to 25% of the amount paid as salaries and wages to disabled persons.

Gender
Discrimination is a prejudicial treatment with respect to the terms and conditions of
employment solely on account of sex:
a. Discrimination in pay
b. Discrimination in employment opportunity
c. Discrimination in hiring
d. Discrimination in dismissal

Stipulation against marriage

It shall be unlawful for an employer to require as a condition of employment or continuation
of employment that:
1. A woman shall not get married;
2. That upon getting married, she is deemed resigned or separated; or
3. To dismiss, discriminate or otherwise prejudice a woman employee merely by reason
of her marriage

A no-spouse employment policy, a policy banning spouses from working in the same
company, can only be valid when the employer proves that the reasonable demands of the
business requires a distinction based on marital status and there is no better or acceptable
policy which would better accomplish the business purpose (Bona Fide Occupational
Qualification Rule). There must be a finding of any Bona Fide Occupational Qualification
Rule to justify the employer’s no spouse employment policy.

A Bona Fide Occupational Qualification is a qualification based on sex, age, or civil status.
This is an allowable exception to the general rule that there should be no discrimination in
employment opportunities. An employer may be allowed to exercise discretion in providing
certain qualifications and employment policies for his employees, even if it may prejudice a
person on account of his/her sex, age or civil status.

However, a Bona Fide Occupational Qualification is valid only if the employer can prove that
there is a reasonable business necessity justifying such qualification or employment policy.

36
Meaning, the qualification must be inherently related and reasonably necessary to the
performance of the job.

Case 1: Glaxo, a company which has a policy against employees having relationships with
employees of its competitors, employed Tecson as a medical representative. Tecson married
Bettsy, a branch coordinator in one of Glaxo’s competitors. Tecson was then transferred to
another area but he did not accept such transfer. Is the policy of Glaxo valid and reasonable?
- YES. The prohibition against personal or marital relationships with employees of
competitor companies upon Glaxo’s employees is reasonable under the circumstances
because relationships of that nature might compromise the interest of the company.

Prohibited acts:
It shall be unlawful for the employer to:
1. Deny any woman benefits provided by law
2. Discharge a woman on account of her pregnancy
3. Discharge or refuse admission of such woman upon returning to her work for fear
that she may again be pregnant.

Thus, a series of absences due to pregnancy and its related ailments is not a ground to dismiss
an employee. Also, concealment of pregnancy is not a ground for dismissal.

Facilities for women

1. Seats proper for women and permit them to use such seats when they are free from
work and during working hours, provided they can perform their duties in this
position without detriment to efficiency
2. Establish separate toilet rooms and lavatories for men and women
3. Establish a nursery in a workplace

Women working in night clubs, etc.

Any woman who is permitted or suffered to work with or without compensation, in any night
club, cocktail lounge, beer house, massage clinic, bar or similar establishments, under the
effective control or supervision of the employer for a substantial period of time as determined
by the Secretary of Labor, shall be considered as an employee of such establishments for
purposes of labor and social legislation.

Minors
Children under 15 years of age not be employed, except
a. when the child works directly under the sole responsibility of his parents or legal
guardians and where only members of the family are employed, provided that:
 the employment does not endanger or impair the normal development of the
child, i.e. does not impair his physical, psychological, moral or spiritual
growth
 the child must be provided at least an elementary and secondary education

b. when the child’s employment or participation in public entertainment or information

through cinema, theatre, radio or television is essential provided the employment does
not involve advertisement or commercials promoting
i. alcoholic beverages
ii. intoxicating drinks
iii. tobacco and its by-products

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 iv. gambling
v. pornography
vi. exhibiting violence

Children above 15 but over 18 may be employed provided that the undertaking is non-
hazardous or non-deleterious in nature.

Child labor is any work or economic activity performed by a child that subjects him/her to
any form of exploitation or is harmful to his/her health and safety or physical, mental or
psychological development.

A working child is a child engaged as follows

a. when the child is below 18 years of age in a work or economic activity that is not
child labor, or
b. When the child is below 15 years of age:
i. In work where he is directly under the responsibility of his parents or legal
guardian or where only members of the child’s family are employed; or
ii. In public entertainment or information

Kasambahays (Batas Kasambahay)

All kasambahays (must be at least 15 years old) engaged in domestic work, whether on a
live-in or live-out arrangement, such as, but not limited to, the following:
a. General househelp
b. Nursemaid or yaya
c. Cook
d. Gardener
e. Laundry person
f. Working children or domestic workers 15 years and above but below 18 years of age
g. Any person who regularly performs domestic work in one household on an
occupational basis (live-out arrangement)

Persons not covered by Batas Kasambahay

a. Family drivers
b. Children under foster family arrangement and are provided access to education and
given an allowance incidental to education
c. Any other person who performs work occasionally or sporadically and not on an
occupational and regular basis

Domestic workers cannot acquire regularity of employment. All indicia of regularity of

employment remain absent in the employment of domestic helpers.

A domestic servant or househelper is one who is employed in the employer’s home to

minister exclusively to the personal comfort and enjoyment of the employer’s family.

Homeworkers
Homeworkers are those who perform in their own home any processing or fabrication of
goods or materials which have been furnished by an employer and sold thereafter to the latter.

Immediately upon receipt of the finished goods and articles, the employer shall pay the
homeworker for the work performed.

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Case 1: Josie is a confidential secretary of the Chairman of the Board of the bank. She is
presently on maternity leave. In an arrangement where the Chairman can still have access to
her services, the bank allows her to work in her residence during her leave. For this purpose,
the bank installed a fax machine in her residence, and gave her a cellphone and a beeper. Is
Josie a homeworker?
- NO. Josie cannot be considered a homeworker because she is not engaged in the
processing or fabrication of goods or materials in her own home for sale to her
employer.

Solo Parents
Solo parents are given a parental leave of 7 days a year, and they may opt for a flexible
working schedule.

Night Workers
A night worker is any person employed whose work is from 10pm to 6am, provided that the
worker performs no less than 7 consecutive hours of work.

Night workers have the following rights:

1. Right to health assessment without charge – if he is found medically unfit for night
work, he shall be transferred, whenever practicable, to a day job for which he is fit to
work.
- If such transfer is not practicable, or if he is unable to render night work for a
continuous period of not less than 6 months, he may be terminated as these constitute
authorize causes.
2. Right to safe and adequate facilities such as sleeping and means of transport
3. Right to observance of legal process to decide appropriate action where a worker is
found unfit for night work. Such process includes transfer of worker to a day work, if
practicable, and separation from employment as a last recourse.

Migrant Workers

Each migrant worker deployed by a recruitment/manning agency shall be covered by a

compulsory insurance policy which shall be secured at no cost to said worker.

Minimum conditions of overseas employment:

1. Guarantee wages for regular work hours and overtime pay, not lower than the
minimum wage in the host country, in the Philippines or in a bilateral agreement,
2. Free transportation to and from the worksite
3. Free food and accommodation
4. Just/authorized causes of termination of the contract of service or act of service

Security Guards
Security guards may be placed in a work pool or on reserved status due to lack of service
assignment after the expiration or termination of the Service Agreement with the principal
where he is assigned and no other assignment is available.

However, no security guard can be placed in a work pool or on reserved status in any of the
following:
a. After expiration of the contract, if there other principals where he can be assigned;

39
 b. As a measure to constructively dismiss the security guard
c. As an act of retaliation for filing any complaint against the employer for violation of
labor laws

40
 EMPLOYER-EMPLOYEE RELATIONSHIP
An employer is a natural or juridical person, domestic or foreign, who carries on in the
Philippines any trade, business or industry or activity of any kind and uses the services of
another person who is under his orders as regards the employment.

An employee is a natural person who performs services for an employer in which either or
both mental or physical efforts are used, and who receives compensation for such services,
where there is an employer-employee relationship.

Test to determine existence of employer-employee relationship

1. Four-Fold Test
a. Selection and engagement of the employee
b. Payment of wages
c. Power to dismiss
d. Power of control

The power of control refers to the power of the employer to fix the means and methods by
which the result is to be accomplished by the employee. This is the most important element in
the 4-fold test and its absence negates the existence of the employer-employee relationship.

The employment relationship is determined by law and not by the contract or by what the
parties say it should be. Its existence depends upon the facts of the case.

Case 1: Romel is working as a pianist in a restaurant of a hotel for almost 7 years. During his
employment, he was given a time for his performance fixed at 7-10pm for 3-6x a week, the
manager requires him to conform with the venue’s motif and is subjected to the rules and
regulations of the employees of the hotel. His salary was given every night. Is there an
employer-employee relationship?
- YES. The factors that determine the issue include who has the power to select the
employee, who pays the employee’s wages, who has the power to dismiss, and who
exercises control of the means and methods by which the work of the employee is
accomplished.

There are 2 kinds of control that may be exercised by an employer.

a. Rules that merely serve as guidelines, which only aims to promote the result.
- No employer-employee relationship exists
b. Rules that fix the means and methods by which the result is to be accomplished, and
bids the party hired to the use of such means and methods.
- Employer-employee relationship exists

Case 1: Genesis entered into a Career’s Agent Agreement with EmoLife Insurance. In the
Agreement, it provides that the agent is an independent contractor and nothing therein shall
be construed or interpreted as creating an employer-employee relationship. It further provides
that the agent must comply with 3 requirements: (a) comply with the regulations and
requirements of the company; (b) maintain a level of knowledge of the company’s products;
and (c) compliance with a quota of new businesses. Is there an employer-employee
relationship?
- NO. The concept of control in an employer-employee relationship must be
distinguished from that which exists in a principal-agent relationship. Under the first,
the employer fixes the means and methods by which the result is to be accomplished.

41
 Under the second, the principal may impose on the agent some parameters in
undertaking an assigned task. Foremost among these are the directives that the
principal may impose on the agent to achieve the assigned task to the extent that they
do not involve the means and methods of undertaking this task.

In certain cases, the control test is not sufficient to give a complete picture of the relationship
between the parties, owing to the complexity of the relationship where several positions have
been held by the worker. In such cases, the better approach is to adopt the two-tiered test.

Bus drivers and conductors, jeepney or taxi drivers are employees of the operators. This is
because the operators exercise the power of control over them such that the former have to
follow a certain route, operate at particular periods, etc.

A “boundary-hulog system” creates a dual juridical relationship: that of an employer-

employee relationship, and that of a vendor-vendee. Under this system, the operator exercises
control and supervision over the driver.

2. Economic dependency test (Two-Tiered Test)

a. The putative employer’s power to control the employee with respect to the means and
methods by which the result is to be accomplished (First tier is the power of control);
and
b. The underlying economic realities of the activity or relationship (Second
tier/economic reality test).

The two-tiered test provides a framework of analysis which would take into consideration the
totality of circumstances surrounding the true nature of the relationship between the parties.

The proper standard for economic dependence is whether the worker is dependent on the
alleged employer for his continued employment in that line of business. The determination of
the relationship between the employer and the employee depends upon the circumstances of
the whole economic activity, such as:
 The extent to which the services performed are an integral part of the employer’s
business
 The permanency and duration of the relationship between the worker and the
employer
 The degree of dependency of the worker upon the employer for his continued
employment in that line of business

NOTE: The mode of compensation is not determinative of the employer-employee

relationship. Thus, piece-rate, boundary, pakyaw are merely methods of payment and do not
prove (or disprove) the existence of the employer-employee relationship.

Thus, the mere fact that the garbage truck collectors are paid on a per trip basis is irrelevant
because this is merely the method of computing the proper compensation due them.

Contracting/Subcontracting vs. Labor-Only Contracting

There is contracting or subcontracting (and this is legitimate) when an employer-principal

farms out the performance of a part of its business to another, called the contractor or

42
subcontractor. For the purpose of undertaking the principal's business that is farmed out, the
contractor or subcontractor then employs its own employees.

A person is considered engaged in legitimate job contracting/subcontracting if the following

requisites are present:
a. The contractor/subcontractor carries on a distinct and independent business and
undertakes to perform the job/service on its own account and under its own
responsibility according to its own manner and method, and free from the control and
direction of the principal in all matters connected to the performance of the work,
except as to the results thereof; and
b. The contractor/subcontractor has substantial capital OR investment.

Thus, it is essential that the independent contractor/subcontractor undertakes the service

according to his own means and methods and without being under the control of the
employer-principal, except as to the results of the work, and that he has substantial capital or
investment in undertaking the job/service contracted.

In a legitimate contracting, there exists a trilateral relationship under which there is a

contract for a specific job work or service between the principal and the
contractor/subcontractor, and a contract of employment between the contractor/subcontractor
and its workers. The 3 parties involved are:
1. Principal – the employer who decides to farm out a job or service to a contractor. He
is also called the indirect employer
2. Contractor/subcontractor – who has the capacity to independently undertake the
performance of the job/service. He is also called the independent contractor.
3. Employees of the contractor

There is “labor-only” contracting (this is prohibited) where the person supplying workers to
an employer
1. does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and
2. the workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer.

In labor-only contracting, the person or intermediary shall be considered merely as an agent

of the employer. The employer shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.

Thus, where “labor-only” contracting exists, the statute itself implies or establishes an
employer-employee relationship between the employer (the owner of the project) and the
employees of the “labor-only” contractor. In other words, the principal employer is
considered the direct employer of the employees of the “labor-only” contractor.
Job Contracting/Subcontracting Labor-Only Contracting
The principal-employer is merely an The employer-principal is the direct
indirect employer of his contractor’s employer of the contractor’s employees

43
 employees
The law creates an employer-employee
relationship for the purpose of paying the
unpaid wages of the contractor’s employees
The principal becomes solidarily liable with
the contractor for the unpaid wages of the
latter’s employees
The independent contractor has substantial
capital or investment
Lawful
The law creates an employer-employee
relationship for a comprehensive purpose
The principal, as the direct employer, is
liable not only for the unpaid wages but also
for all the rightful claims of the employees
The contractor has no substantial capital or
investment
Unlawful

In-House Agency
An in-house agency (this is illegal) refers to a contractor or subcontractor engaged in the
supply of labor which:
a. is owned, managed or controlled by the principal, and
b. operates solely for the principal.

Liabilities in job contracting/subcontracting and labor-only contracting.

In a legitimate job contracting/subcontracting, the principal, as the indirect employer, is
jointly and severally liable with the contractor for the payment of unpaid wages. This is why
the employer may require the independent contractor to post a bond to answer for the wages
of the latter’s employees.

In a labor-only contracting, the principal, as the true employer, shoulders all the obligations
of an employer and is thus liable not only for the unpaid wages, but also for all the rightful
claims of the employees.

Case 1: LMI provides janitorial services to the POEA since March 2009. Its service contract
was renewed every 3 months. However, in the bidding held in June 2012, LMI was
disqualified and excluded. In 2013, 6 janitors of LMI formerly assigned to the POEA filed a
complaint for underpayment of wages. Both LMI and POEA were impleaded as respondents.
Should POEA, a government agency subject to budgetary appropriations by Congress, be
held solidarily liable with LMI for the payment of salary differentials due to the complainant?
- YES, but only to the extent of work performed under the contract. POEA, as the
indirect employer of the 6 janitors, is solidarily liable for the payment of unpaid
wages of said employees. The fact that POEA is a government agency is of no
moment. The State may be sued if it enters into a business contract.

Case 2: Star Crafts is a lantern maker supplying Christmas lanterns in Luzon and Visayas. Its
factory employs 2,000 workers who make different lanterns all year round. Because of
increased demand, Star Crafts entered into a contractual arrangement with People Plus, a
service contractor, to supply the former with 100 workers for 4 months. The contract states
that all equipment and raw materials will be supplied by Star Crafts with the express
condition that the workers cannot take any of the designs home and must complete their tasks
within the premises of Star Crafts. Is there an employer-employee relationship between Star
Crafts and the 100 workers?
- YES. People-Plus is a labor-only contractor as it has no substantial capital or
investment to perform the services required by the employer. It has no work premises
of its own, or tools, equipment, and raw materials. The law creates an employer-

44
 employee relationship when a labor-contracting exists, such that the principal is
considered as the direct employer of the employees of the contractor.

KINDS OF EMPLOYMENT
1. Regular
2. Casual
3. Contractual
4. Project
5. Seasonal
6. Fixed-term
7. Probationary

Regular Employment
Regular employees are those:
- Who were engaged to perform activities which are usually necessary and desirable in
the business or trade of the employer, or
- Those who have rendered at least 1 year of service, whether continuous or broken

The primary test in determining regular employment is whether the employee performs
activities that are usually necessary and desirable in the business or trade of the employer.

Also, the performance of a job for at least 1 year is sufficient evidence of the job’s necessity,
if not indispensability, to the business. The status of regular employment attaches to the
casual employee on the day immediately after the end of his first year in service. Thus,
repeated hiring and re-hiring are sufficient evidence of the necessity and indispensability of
an employee’s services to the employer’s business or trade.

*** Seafarers cannot be considered as regular employees. The contract which they sign every
time they are hired governs their employment, and their employment is terminated when the
contract expires. Their employment is fixed for a certain time.

Case 1: MetroMedia entered, for the 5th time, into an agreement with Efren appointing him to
be an account executive of the firm. He was tasked to solicit advertisements for The Manila
Times. The written contract provides that “You are not an employee of MetroMedia nor does
the company have any obligations towards anyone you may employ, nor any responsibility
for your operating expenses or for any liability you may incur. Is Efren a regular employee?
- YES. His services which consists in soliciting advertisements is clearly necessary and
desirable for the survival and continued operation of the business of the corporation.
- The law, in defining the contractual relationship of the employer and the employee,
does so, not necessarily and exclusively upon the written or oral contract of the
parties, but on the nature of the work which the employee is called upon to perform.
Thus, when the employee performs activities that are usually necessary and desirable
in the business or trade of the employer, he is considered a regular employee.

Casual Employment
Casual employment is an employment where the employee is engaged in an activity which is
not usually necessary or desirable in the usual business or trade of the employer, provided the

45
employment is neither seasonal nor project. He performs only an incidental job in relation to
the principal activity of the employer.

Requisites of casual employment:

a. Employee is engaged to perform a job, work or service which is merely incidental to
the business of the employer, and
b. Such job, work or service is for a definite period made known to the employee at the
time of engagement.

Casual employee may become a regular employee if he has rendered at least 1 year of
service, whether continuous or broken, with respect to the activity in which he is employed
and his employment shall continue while such activity exists.

Thus, a casual employee is only casual for a year, and it is the passage of time that gives him
a regular status.

Case 1: Yakult Phils. is engaged in the manufacture of cultured milk. The workers were hired
to cut cogon grass and weeds at the back of the factory building used by Yakult. They were
not required to work on fixed schedule and they worked on any day of the week on their own
discretion and convenience. The services of the workers were terminated by Yakult before
the expiration of the 1 year period. Is the dismissal valid?
- YES. The usual business or trade of Yakult Phils. is the manufacture of cultured milk.
The cutting of the cogon grasses in the premises is hardly necessary or desirable in its
usual business.
- The workers are casual employees. When they were dismissed from their employment
before the expiration of the 1-year period, they cannot lawfully claim that their
dismissal is illegal.

Project Employment
A project has reference to a particular job/undertaking that may or may not be within the
regular or usual business of the employer. In either case, the project must be distinct, separate
and identifiable from the main business of the employer, and its duration must be determined
or determinable.

Requisites in determining project employees:

1. The project employee was assigned to carry out a specific project or undertaking
2. The employee was apprised of the duration and scope of the project at the time of his
engagement
3. The employee must have been dismissed every after completion of his project (e.g. he
is free to offer his services to other employers)

Where the employment of a project employee is extended long after the supposed project was
completed, the employees are removed from the scope of project employees and considered
as regular employees. However, if the employment is extended (beyond the target completion
date) until the completion of the same specific project, the same is still considered as project
employment. What is important is that the employees were apprised at the time of their
engagement of the target completion date, that their employment is co-terminous with the
project, and the purpose of the extension is only to complete the same specific project.

46
Project employees are not entitled to separation pay if their services are terminated as a result
of the completion of the project. XPN: if the project has not yet been completed when their
services are terminated. Project employees enjoy the security of tenure during the limited
time of their employment.

Seasonal Employment
Seasonal employment is one where the employee is engaged to work only for the duration of
the season. For seasonal employees, the employment legally terminates upon the end of the
season. Passage of time does not make a seasonal worker regular or permanent. During off
season, the relationship of employer-employee is not severed; the seasonal employee is
merely considered on leave of absence without pay.

Seasonal employees who are repeatedly engaged from season to season performing the same
tasks are deemed to have acquired regular employment.

Seasonal employees can be considered as regular employees. The fact that seasonal
employees do not work continuously for one whole year but only for the duration of the
season does not detract from considering them in regular employment. Seasonal workers who
are called to work from time to time and are temporarily laid off during off-season are not
separated from service in that period, but merely considered on leave until re-employed.

If the seasonal employee has been performing the job for at least a year, even if the
performance is not continuous and merely intermittent, the law deems repeated and
continuing need for its performance as sufficient evidence of the necessity, if not
indispensability, of that activity to the business. Hence, the employment is considered
regular, but only with respect to such activity and while such activity exists.

Fixed-Term Employment
A fixed-term employment is a contract of employment for a definite period and terminates by
its own terms at the end of such period.

Under the Brent Doctrine, a fixed-term employment is allowed even where the duties of the
employee consist of activities usually necessary or desirable in the usual business of the
employer, but if under the circumstances, it is apparent that the periods have been imposed to
preclude acquisition of tenurial security by the employee, they should be struck down or
disregarded as contrary to public policy.

Overseas seafarers are contractuals. Their employment is governed by the contracts they sign
every time they are rehired and their employment is terminated when the contract expires.
However, domestic seafarers are not contractuals. They are permanent employees who enjoy
security of tenure.

Case 1: Darell was hired as an athletic director in Amorita School for a period of 5 years. As
such, he oversees the work of coaches and related staff involved in intercollegiate athletic
programs. However, he was not rehired upon the expiration of the 5-year contract. Is he a
regular employee?
- NO. Darell is under a fixed-term contract. While it can be said that the services he
rendered were usually necessary and desirable to the business of the school, it cannot
also be denied that his employment was for a fixed term of 5 years. The decisive
determinant in fixed-term employment should not be the activities that the employee

47
 is called upon to perform, but the day certain agreed upon by the parties for the
commencement and termination of their employment relation.

Case 2: OKS DesignTech hired Caccam as an accountant under a contract of employment for
a fixed period from Jan. 21, 2008 to June 21, 2008. Thereafter, the contract was renewed for
another 1-year period. She received a letter informing her of the expiration of the contract.
Caccam filed a case for illegal dismissal, claiming she is a regular employee. Is she a regular
employee?
- NO. Caccam is a fixed-term employee, that is, her employment is only for a specific
period. She is lawfully terminated by the expiration of her contract of employment.
There is nothing essentially contradictory between a definite period of employment
and the nature of the employee’s duties. The decisive determinant in fixed-term
employment should not be the activities that the employee is called upon to perform
but the day certain agreed upon by the parties for the commencement and termination
of their employment relationship.

Probationary Employment.
Probation is the period during which the employer may determine if the employee is qualified
for possible inclusion in the regular force.

Requisites of probationary employment:

a. The employee is made to undergo a trial period
b. During which the employer determines his fitness to qualify for regular employment
c. Based on reasonable standards made known to the employee at the time of
engagement.

Rules on probationary employment

- Employer shall make known to the employee at the time he is hired, the standards by
which he will qualify as a regular employee. If he is not informed of such standards at
the time of engagement, he is considered a regular employee
- The probationary employment must have been expressly agreed upon. Without such
express agreement, he is considered a regular employee
- An employee allowed to continue to work after the probationary period shall be
considered a regular employee
- During the probationary period, the employee enjoys security of tenure. He can only
be terminated for just or authorized cause.

Period of probationary employment

Gen. Rule: The probationary employment shall not exceed 6 months.
XPNs:
- When the parties voluntarily agree that the probationary period shall exceed 6
months. In such a case, the employee is deemed to have waived the benefit of the
6-month period.
- When employer gives the employee a second chance to pass the standards set.
- When the same is required by the nature of the work, e.g. probationary period for
professors, instructors and teachers is 3 consecutive years (6 semesters) of
satisfactory service pursuant to the DOLE Manual of Regulations for private
schools
- When the same is established by company policy.

48
The law prohibits double or successive probation. Thus, when a learner or apprentice has
already finished the learnership or apprenticeship period, he cannot be placed on probationary
employment. After the learnership or apprenticeship period, he is deemed a regular
employee.

A probationary employee may be terminated during or after the probationary period:

- For just or authorized causes, or
- For failing to meet the standards set during the trial period, provided he is informed of
the standards at the time of his engagement

Case 1: Michelle was employed on a probationary basis as marketing assistant by Clarion

Printing but during her employment, she was not informed of the standards that would
qualify her as a regular employee. 30 days later, Clarion Printing informed Michelle that her
employment contract had been terminated without any reason. She was informed that her
termination was part of Clarion’s cost-cutting measure. Is Michelle considered as a regular
employee and hence entitled to its benefits?
- YES. In all cases of probationary employment, the employer shall make known to the
employee the standards under which he will qualify as a regular employee at the time
of his engagement. Where no standards are made known to the employee at that time,
he shall be considered a regular employee from the day he was hired.

Probationary Period for Private School Teachers

The probationary employment of academic teaching personnel shall not be more than a
period of 6 consecutive semesters or 3 years of satisfactory service, provided that the
professor, instructor or teacher must be engaged as a full-time personnel, that is, he is must be
completely devoted to the school and he is not receiving other regular remunerative
employment.

Thus, in order to attain the status as a regular employee, the academic personnel must:
a. Be a full-time teaching personnel
b. He must have rendered a total of 3 consecutive years of service
c. Such service must be satisfactory

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 TERMINATION BY EMPLOYER

No worker shall be dismissed except for a just or authorized cause provided by law, and after
due process.

It is management prerogative to transfer, demote, discipline and even to dismiss an employee

to protect its business, provided it is not tainted with unfair labor practice. A company has the
right to dismiss its erring employees if only as a measure of self-protection against acts
inimical to its interest.

Requisites for a Lawful Dismissal

1. Substantive Due Process – refers to the existence of a just or authorized cause of
dismissal
2. Procedural Due Process – refers to the legality of the manner of dismissal, i.e. two-
notice rule and opportunity to be heard must have been afforded the employee

Just Cause Authorized Cause

Initiated by the employee, that is, he
committed acts which are valid grounds for
dismissal
Employer is not required to pay separation
pay
Initiated by the employer in the exercise of
management prerogative
Employer is required to pay separation pay

Procedural Requirements for Dismissal for Just Cause

1. Notice (two-notice rule)
a. First Notice
- The first notice must contain the specific cause/ground for termination, and a
directive that the employee is given a reasonable period within which to meet
the accusation against him. This should be construed as a period of at least 5
days from receipt of notice to give the employee an opportunity to study the
accusation against him
b. Second Notice
- The second notice must contain the decision informing the employee of the
decision to dismiss him, which notice must come only after the employee is
given the opportunity to be heard, to answer the charge or to defend himself.

2. Hearing or reasonable opportunity to be heard

Procedural Requirements for Dismissal for Authorized Cause

- If the dismissal is based on an authorized cause, written notices shall be given to all
employees affected and the DOLE at least 1 month before the intended date of
termination. The service of the notice must be given individually upon each affected
employee
- No hearing is required

* Where the employer has just cause to dismiss the employee but has failed to comply with
the procedural due process, the dismissal may be upheld but the employer will be penalized
to pay an indemnity to the employee

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 JUST CAUSES FOR TERMINATION

1. Serious misconduct or willful disobedience

2. Gross and habitual neglect of duty
3. Fraud or willful breach of the trust reposed in him by the employer or his duly authorized
representative
4. Commission of a crime or offense by the employee against the person of his employer, his
immediate family, or his duly authorized representative
5. Other analogous causes

Serious Misconduct
It is an improper or wrong conduct, the commission of a forbidden act, willful in character,
and implies a wrongful intent and not mere error of judgment. To be considered as serious,
the misconduct must be grave in character and not merely trivial.

Requisites:
1. It must be serious or grave in character
2. It must relate to the performance of the employee’s duties
3. It must render the employee unfit to continue working
4. It must be performed with wrongful intent

Examples: sexual harassment, fighting within company premises, gross immorality

Case 1: Cheryll was a non-teaching personnel employed in St. Scholastica’s College. Cheryll
and her boyfriend conceived a child out of wedlock. St. Scholastica’s College dismissed her
on the ground that her pregnancy out of wedlock constitutes serious misconduct or gross
immorality.
- The dismissal is unlawful. Pre-marital sexual relations between two consenting adults
does not constitute serious misconduct or gross immorality.
- A teacher engaging in extra-marital affair with another married person is serious
misconduct.

Case 2: Jose and Erica, former sweethearts, both worked as sales representative for Magna.
Although the couple had already broken off their relationship, Jose continued to have special
feelings for Erica. One afternoon, Jose chanced upon Erica riding in the car of Paolo, a co-
employee and Erica’s ardent suitor, on their way back to the office. In a fit of extreme
jealousy, Jose rammed Paolo’s car, causing injuries to both Paolo and Erica. As lawyer for
Magna, advise the company on whether just and valid grounds exist to dismiss Jose.
- Jose can be dismissed for serious misconduct and commission of a crime against the
representatives of the employer. In order to constitute serious misconduct, the
misconduct must be grave in character that the employee is unfit to continue working.
The act of Jose in ramming a car out of jealousy constitutes serious misconduct.

*** Assuming that Jose was dismissed and you are the lawyer for Jose, how would you argue
his case?
- The alleged misconduct does not relate to the performance of his duties as a sales
representative of Magna.

Willful Disobedience

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There is willful disobedience when there is wanton disregard to follow orders of the
employer. The employee’s disobedience must relate to substantial matters, not merely to
trivial or unimportant matters.

Requisites:
1. The employee’s conduct must have been willful, or characterized by a wrongful and
perversed attitude; and
2. The disobeyed order must be:
a. Reasonable and lawful, and
b. In connection with the duties of the employee

Willful Disobedience and the Right to Transfer Employees.

The management has the right to transfer or reassign an employee and the refusal to obey a
valid transfer order constitutes willful disobedience. The right to transfer the employees in the
interest of the efficient and economic operation of the business of the employer cannot be
seriously challenged. XPN: Where the transfer is vitiated by improper motive and is merely a
disguised attempt to remove or punish the employee sought to be transferred. Thus, the right
to transfer cannot be used as a subterfuge by the employer to rid himself of an undesirable
worker.

Also, for a transfer not to be considered a constructive dismissal, the employer must be able
to show that such transfer is not unreasonable, inconvenient and prejudicial to the employee
(as when the employee is required to be transferred from Basilan to Manila without the
employer paying for his transportation cost); nor does it involve a demotion in rank, or a
diminution of salaries, privileges and other benefits. Failure of the employer to overcome this
burden of proof, the employee’s demotion shall no doubt be tantamount to unlawful
constructive dismissal.

The right of employees to security of tenure does not given them vested rights to their
positions to the extent of depriving management of its prerogative to change their
assignments or to transfer them.

Gross and Habitual Negligence

Gross neglect is the absence of or failure to exercise slight care or diligence. Habitual neglect
is the repeated failure to perform one’s duties over a period of time.

In order to constitutes a just cause for dismissal, the neglect must not only be gross but also
habitual in character. XPN: When an employee who was grossly negligent in the performance
of his duty, though not habitual, may be dismissed especially if the grossly negligent act
results in substantial damage to the company.

Examples: Habitual tardiness and absenteeism; abandonment

Poor and unsatisfactory ratings

The fact that an employee is found to be poor or unsatisfactory does not necessarily mean that
he is grossly and habitually negligent. A poor or unsatisfactory rating can only be considered
as a just cause for dismissal if it amounts to gross and habitual neglect of duties.

Inefficiency as a just cause for dismissal

52
Failure to observe prescribed standards of work or to fulfill reasonable work assignments due
to inefficiency may constitute just cause for dismissal. Such inefficiency is understood to
mean failure to attain work goals or quotas, either by failing to complete the same within the
allotted time or by producing unsatisfactory results. This ground is considered analogous to
gross and habitual neglect of duty.

Abandonment as a just cause for termination

Abandonment means the deliberate and unjustified refusal of an employee to resume his
employment. In order to constitute abandonment, two requisites must be present:
a. Failure to report to work or absence without valid or justifiable reasons; and
b. A clear intention to sever the employer-employee relationship

Fraud or Willful Breach of Trust

1. The employee
a. Holds a position of trust and confidence (e.g. confidential employee,
managerial employee)
b. Charged with the care and custody of the employer’s money or property
2. He commits any willful act that would justify such loss of trust and confidence
3. The act must be work-related and substantial

In order to constitute a just cause for dismissal, it is enough that the employer had reasonable
ground to believe that the employee is responsible for the misconduct which renders him
unworthy of the trust and confidence reposed in him. Proof beyond reasonable doubt is not
required. Thus, mere failure to account for the missing company funds constitutes willful
breach of trust.

Commission of a crime or offense

This refers to an offense committed against (i) the person of the employer, (ii) any immediate
member of his family, or (iii) his duly authorized representative. A criminal case need not be
filed against the employee. It is enough that he committed the crime.

Other Analogous Causes

a. Violation of company rules and regulations
b. Immorality, drunkenness
c. Gross inefficiency
d. Theft of company property

Doctrine of incompatibility
- Where the employee has done something that is contrary or incompatible with the
faithful performance of his duties, his employer has a just cause for terminating his
employment

Doctrine of commensurate penalty/Proportionality rule

- Infractions committed by an employee should merit only the corresponding penalty
demanded by the circumstances. The penalty must be commensurate with the act,
conduct or omission imputed to the employee.
- The following are the factors to be considered in imposing the penalty
 Length of service
 Gravity of the offense
 Nature of the position

53
  Nature of the business
 First offense rule
 Totality of infractions
 Principle of equity

Totality of infractions doctrine

- The number of infractions committed by the erring employee during his employment
should be considered in determining the imposable penalty.

AUTHORIZED CAUSES

Authorized causes of termination refer to those initiated by the employer in the exercise of
management prerogative and for which the employer is liable to pay separation pay as
mandated by law.

Authorized causes:
1. Installation of labor-saving devices
2. Redundancy
3. Retrenchment
4. Closing or cessation of operation of the establishment
5. Disease

Installation of labor-saving devices/Automation

Automation is a management prerogative of replacing manpower with machine power in
order to effect more economy and greater efficiency.

Requisites for a valid automation:

1. Written notice to the DOLE and the employee at least 1 month prior to the date of
termination
2. Payment of separation pay of at least 1 month for every year of service
3. Good faith in the discharge of the employees
4. Reasonable criteria to be used in implementing automation

Redundancy
It is the superfluity in the performance of a particular work. It exists where the services of an
employee are in excess of what is reasonably demanded by the actual requirements of the
enterprise.

Redundancy does not necessarily refer to duplication of work. The characterization of

services as no longer necessary or sustainable and therefore properly terminable, is an
exercise of business judgment on the part of the employer.

A position is redundant when it is superfluous. Superfluity is the outcome of some factors

such as: over-hiring of workers, decline in the volume of business, or closure of a particular
line of an economic activity.

Requisites of a valid redundancy as authorized cause for termination:

54
 1. Written notice served on the DOLE and the employees at least 1 month prior to the
date of termination
2. Payment of separation pay equivalent to at least 1 month pay or at least 1 month pay
for every year of service, whichever is higher
3. Good faith in abolishing redundant positions
4. Fair and reasonable criteria in ascertaining what positions are to be declared
redundant, e.g. efficiency, seniority

There is bad faith in terminating employees on the ground of redundancy when the employer
hires new employees while firing the old ones.

Retrenchment
Retrenchment is the reduction of personnel usually due to poor financial returns as to cut
down on costs of operations in terms of salaries and wages to prevent bankruptcy.

Requisites of a valid retrenchment:

1. Written notice served on both the employees and the DOLE at least 1 month prior to
the date of retrenchment
2. Payment of separation pay equivalent to at least 1 month or at least 1/2 month pay for
every year of service, whichever is higher
3. Good faith in effecting retrenchment
4. Proof of expected or actual losses
5. Employer must show that he instituted cost reduction measures in other areas of
production before undertaking retrenchment
6. Fair and reasonable criteria in ascertaining who should be retained and who should be
terminated

The kind of losses contemplated by law in allowing retrenchment may either be actual losses
or impending losses. Thus, preventive retrenchment is allowed “to prevent losses.”
Retrenchment of personnel is authorized to be undertaken by the employer sometime before
the losses anticipated are actually sustained or realized. It is not the intention of the lawmaker
to compel the employer to stay his hand and keep all his employees until sometime after
losses shall have materialized.

Last In, First Out Rule

When there are two or more employees occupying the same position in the company affected
by the retrenchment program, the last one employed will necessarily be the first one to go.

The Last In, First Out Rule is mandatory in cases of installation of labor-saving devices,
redundancy and retrenchment. XPN: When an employee volunteers to be separated from
employment.

Closure of Business
Closure of business is a unilateral and voluntary act on the part of the employer to close the
business establishment.

2 Kinds of Closure:
1. Partial Closure
a. There must be written notice to the DOLE and the employee at least 1 month
before the date of termination

55
 b. Separation pay equivalent to at least ½ month pay for every year of service
c. Cessation of business is bonafide in character

2. Total Closure
a. There must be written notice to the DOLE and the employee at least 1 month
before the date of termination
b. Payment of separation pay equivalent to at least 1 month or 1/2 month pay for
every year of service, whichever is higher, except when closure is due to serious
business losses
c. Closure of business must be exercised in good faith

Payment of separation pay is not required when the closure is due to serious business reverses
or if it due to the act of Government.
But while serious business losses generally exempt the employer from paying separation
benefits, it must be pointed out that the exemption only pertains to the obligation of the
employer under Art. 297 (separation benefits sourced from law). However, it does not exempt
the employer from the obligation to pay separation benefits sourced from contract or a
collective bargaining agreement.

Piercing the Veil of Corporate Fiction

As a general rule, a corporation has a separate and distinct personality from its stockholders
and from other corporations it may be connected with. However, such personality may be
disregarded or the veil of corporate fiction may be pierced attaching personal liability against
responsible persons if the corporation’s personality is used to defeat public convenience,
justify wrong, protect fraud or defend crime, or is used as a device to defeat (labor) laws.

Disease
When the employee suffers from a disease and:
1. His continued employment is prohibited by law, or prejudicial to his health, or to the
health of his co-employees; and
2. There must be a certification from a competent public health authority that the disease
is incurable within 6 months despite medication and treatment
3. Compliance with the twin notice rule. No hearing requirement.
4. Payment of separation pay

Thus, if the disease can be cured within 6 months, the employer shall not terminate the
employee but shall ask him to take a leave.

*HIV/AIDS is not a ground for termination pursuant to RA 8504.

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 PREVENTIVE SUSPENSION

During the pendency of an investigation, the employer may place the employee under
preventive suspension leading to termination when there is an imminent threat or a
reasonable possibility of a threat to the lives and properties of the employer, his family and
representatives as well as the offender’s co-workers by the continued service of the
employee.

Duration of preventive suspension

It should not last for more than 30 days. The employee should be made to resume his work
after 30 days. It can, however, be extended for another period of 30 days provided that the
employee’s wages are paid during such extended period. Thus, after the initial 30-day period,
the employee must be reinstated or reinstated in the payroll.

The period is intended only for the purpose of investigating the offense to determine whether
he is to be dismissed or not. It is not a penalty.

Preventive suspension exceeding 30 days will amount to a constructive dismissal.

Case 1: Cantor and Pepito were preventively suspended pending application for their
dismissal by Manila Doctor’s Hospital after being implicated by one Macatubal when they
refused to help him when he was caught stealing x-ray films from the hospital. Was the
preventive suspension of Cantor and Pepito proper?
- NO. Preventive suspension is proper only where the continued employment of an
employee poses a serious or imminent threat to the life and property of the employer,
his immediate family members or the employee’s co-workers.

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 ILLEGAL DISMISSAL

A. Illegal dismissal for want of just or authorized cause

B. Constructive dismissal
Constructive dismissal occurs where there is cessation of work because continued
employment is rendered impossible, unreasonable, or unlikely as when there is a demotion in
rank or diminution in pay or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to the employee leaving the latter with no other option but to
quit.

Case 1: Sangil was a utility man of the passenger cruise vessel Crown Odyssey under a 1-
year contract. Sangil suffered head injuries after an altercation with a Greek member of the
crew. He informed the captain that he no longer intends to return aboard the vessel for fear
that further trouble may erupt between him and the other Greek crew members. Was Sangil
constructively dismissed?
YES. There is constructive dismissal where the act of a seaman in leaving ship was not
voluntary but was impelled by a legitimate desire for self-preservation or because of fear for
his life. Constructive dismissal does not always involve diminution in pay or rank but may be
inferred from an act of clear discrimination, insensibility, or disdain by an employer may
become unbearable on the part of the employee that he is left with no other option except to
forego his continued employment

Burden of proof
The employee who is complaining of constructive dismissal has the burden of proof to prove
that her resignation was not voluntary, but was actually a case of constructive dismissal, with
clear, positive, and convincing evidence.

Liability of officers
Gen. Rule: Officers of a corporation are not personally liable for their official acts
XPN: When the corporation is used to commit fraud or when it is used as a mere
conduit of a person or when it is used to defeat public convenience, the veil of
corporate fiction may be pierced to impose liability on the officers of the corporation

Reliefs from illegal dismissal

1. Reinstatement, if feasible, or separation pay, if reinstatement is no longer feasible,
AND
2. Payment of full backwages
3. Damages

Backwages
Backwages refers to the relief given to an employee to compensate him for the lost earnings
during the period of his dismissal. It presupposes illegal termination.

Full backwages means that there shall be no deduction, i.e. no deduction from backwages the
earnings derived elsewhere by the employee during the period of his illegal dismissal.

Period covered by the payment of backwages:

58
The backwages shall be paid from the time that wages are unlawfully withheld until the time
of actual reinstatement or, if reinstatement is no longer feasible, until the finality of judgment
awarding backwages.

Reinstatement
Reinstatement is the restoration of the employee to the position from which he has been
unjustly removed or separated, without loss of seniority rights and other privileges.

Forms of reinstatement:
1. Actual or physical reinstatement
- The employee should be reinstated to his position which he occupied prior to his
illegal dismissal under the same terms and conditions prevailing prior to his dismissal
or separation or, if no longer available, to a substantially equivalent position
2. Payroll reinstatement
- The employee may be reinstated in the payroll
The employer is given the option to reinstate the employee either actually or in payroll.

An order of reinstatement by the Labor Arbiter is not the same as actual reinstatement of a
dismissed or separated employee. Thus, until the employer continuously fails to actually
implement the reinstatement aspect of the decision of the Labor Arbiter, their obligation to
the illegally dismissed employee, insofar as accrued backwages and other benefits are
concerned, continues to accumulate. It is only when the illegally dismissed employee receives
the separation pay (in case of strained relations) that it could be claimed that the employer-
employee relationship has formally ceased thereby precluding the possibility of
reinstatement.

Is an illegally dismissed employee entitled to reinstatement as a matter of right?

Gen. Rule: YES.
XPN:
1. When reinstatement is no longer feasible
2. When it will not serve the best interest of the parties
3. When there is strained relations (applies to confidential and managerial employees
only)
4. When the position has been abolished
In the foregoing instances, it would be more prudent to order payment of separation
pay instead of reinstatement.

An order of reinstatement is self-executory and does not need the issuance of a writ of
execution.

Rule on wages during reinstatement pending appeal

Dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to
receive wages pending appeal upon reinstatement, which is immediately executory. Unless
there is a restraining order, it is ministerial upon the Labor Arbiter to implement the order of
reinstatement and it is mandatory on the employer to comply therewith.

Wenphil Doctrine
In case of payroll reinstatement, the reinstated employee is not required to return the salary he
received during the period the lower court or tribunal declared that he was illegally

59
dismissed, even if the employer’s appeal would eventually be ruled in its favor. Such non-
requirement to reimburse salary presupposes that salary must in fact be paid to the concerned
employee when he is ordered reinstated pending appeal.

Doctrine of Strained Relations

It is when the employer can no longer trust the employee and vice versa or there were
imputations of bad faith to each other, reinstatement could not effectively serve as a remedy.
This rule applies only to positions which require trust and confidence. Thus, it applies only to
confidential employees and managerial employees.

When the employment relationshio has become so strained to preclude a harmonious working
relationship and that all hopes at reconciliation are naught after reinstatement, it would be
more beneficial to accord the employee backwages and separation pay.

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Separation pay
Separation pay is granted when the termination of employment is
a. due to causes authorized by law
b. due to a disease
c. in case of bona fide suspension of business operations and the employee is not
reinstated after the lapse of 6 months (constructive dismissal)
d. when the employee is placed on a floating status and he is not recalled after
the lapse of 6 months (constructive dismissal)
e. termination of employment without just cause
f. when granted unilaterally by way of a company policy or practice, or pursuant
to a CBA

2. Employer is not required to pay separation benefits when the ground of termination is due
to the closure of the business on account of serious financial reverses, or if the closure is due
to an act of Government

3. Separation benefits may likewise be ordered paid upon an employee when the termination
has been declared illegal, but reinstatement is no longer feasible for some valid reason

4. Acceptance of the separation pay is not a bar to question the illegality of dismissal

Four Kinds of Separation Pay

i. As employer’s statutory obligation in cases of legal termination due to authorized
causes
ii. In lieu of reinstatement, where it is no longer feasible
iii. As an employment benefit granted in the CBA or as a company policy
iv. As financial assistance, as an act of social justice, even in case of legal dismissal,
at the court’s discretion provided that the employee is not dismissed due to
serious misconduct

Case 1: Delfin and Luisito are licensed drivers of public utility jeepneys owned by Capili.
When Capili assumed overall ownership and operation of the jeepneys, the drivers were
required to sign individual contracts of lease of the jeepneys. The drivers gathered the
impression that signing the contract was a condition precedent before they could continue
driving. The drivers stopped plying their assigned routs and a week later filed with the Labor
Arbiter a complaint for illegal dismissal praying not for reinstatement but for separation pay.
Are they entitled to separation pay?
- NO. When the drivers voluntarily chose not to return to work, they must be
considered as having resigned from their employment. The common denominator of
those instances where payment of separation pay is warranted is that the employee
was dismissed by the employer.

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Possible Situations
Termination is
1. For just/authorized cause
2. With due process
Termination is
1. With just/authorized
cause
2. Without due process
Termination is
1. Without just/authorized
cause
2. With due process
Termination is
1. Without just/authorized
cause
2. Without due process
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Effect of Termination Liability of the Employer
Termination is VALID Employer has no liability
XPN: Employer is liable to pay
separation benefits if the
termination is for authorized
cause
Termination is VALID Liable for damages, for non-
compliance with procedural
requirements
Note: Employer is liable to pay
separation benefits if the
termination is for authorized
cause
Termination is Reinstatement with Full
INVALID Backwages
If reinstatement is no longer
feasible, separation pay
Termination is Reinstatement with Full
INVALID Backwages
If reinstatement is no longer
feasible, separation pay
63
When employee is not deemed dismissed
1. When there is a bona fide suspension of business operations for a period not
exceeding 6 months
2. Floating status or temporary lay-off
3. Fulfillment by the employee of a military or civic duty

Bona fide suspension of business operations

a. The suspension of business operations must not exceed 6 months
b. The employer shall reinstate the employee to his former position without loss of
seniority rights
c. The employee must indicate his desire to resume his work not later than 1 month from
the resumption of business operations (Failing which, the employee is deemed
resigned and shall not be entitled to separation pay)

During the 6-month suspension period, the employees are not entitled to their wages and
benefits because the employer-employee relationship is deemed suspended. When the
suspension of business operations exceeds 6 months, the employment is deemed terminated
and the employer is liable to pay separation benefits.

When the employer resumes business operations within 6 months, he is required to reinstate
the employees to their former positions. And if he resumes business operations without
reinstating the employees, there is constructive dismissal and the employees are entitled to (i)
reinstatement and (ii) payment of backwages.

Floating Status or Temporary Lay-Off

There is no specific provision of law which treats of a temporary retrenchment or lay-off and
provides for the requisites in effecting it or a period or duration therefor. However, Art. 301
may be applied but only by analogy to set a specific period that employees may remain
temporarily laid-off or in floating status.

Thus, the temporary lay-off should not exceed 6 months. Within 6 months or immediately
thereafter, the employees should be recalled to work or permanently retrenched following the
requirements of the law, and that failing to comply with this would be tantamount to
dismissing the employees and the employer will be liable for such dismissal.

A floating status should not last for more than 6 months. If the employee is not recalled to
work within that period or immediately thereafter, he is deemed to have been constructively
dismissed. Thus, he is entitled to the corresponding benefits for his separation.

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 TERMINATION BY EMPLOYEE

Termination by employee with written notice:

An employee may terminate without just cause the employer-employee relationship by

serving written notice on the employer at least 1 month in advance. The employer upon
whom no such notice was served may hold the employee liable for damages.

Termination by employee without written notice:

An employee may put an end to the employer-employee relationship without serving any
notice on the employer for any of the following just causes:
a. Serious insult by the employer or his representative on the honor and person of the
employee
b. Inhuman and unbearable treatment accorded the employee by the employer or his
representative
c. Commission of a crime by the employer or his representative against the person of the
employee or any of the immediate members of his family
d. Other analogous causes

Resignation may be withdrawn, even if the employee has called it irrevocable. But after it is
accepted or approved by the employer, its withdrawal needs the employer’s consent.

Resignation Constructive Dismissal

Voluntary
Employee is not entitled to separation pay,
unless it is a company practice or provided
in the CBA
Burden of proving voluntariness is on the
employee
Involuntary or forced resignation
Entitled to either reinstatement or separation
pay and backwages
Burden of proving constructive dismissal is
on the employee

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 RETIREMENT

Retirement is the result of a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter after reaching a certain age agrees and/or
consents to sever his employment with the former.

Retirement benefits are intended to help the employee enjoy the remaining years of his life,
lessening the burden of worrying for his financial support, and are a form of reward for his
loyalty and service to the employer.

Persons not covered by retirement benefits

1. Government employees
2. Employees of retail, service and agricultural establishments employing not more than
10 employees

Kinds of Retirement Schemes

a. Compulsory and contributory in nature
b. One set up by the agreement between the employer and the employees in the CBA or
other agreements
c. One that is voluntarily given by the employer as a company policy or practice

Retirement Age
The age of retirement is the age specified in the
1. CBA
2. Employment contract
3. Retirement plan
If the foregoing do not apply, the retirement age may be
a. Optional retirement age
- Upon reaching 60 years old, provided the employee has rendered 5 years of
service
b. Compulsory retirement age
- 65 years old, regardless of years of service

Although a retirement plan forms part of the employment contract, before a right to
retirement benefits or pension vests in an employee, he must have met the stated conditions
of eligibility with respect to the nature of employment, age, and length of service. This is a
condition precedent to his acquisition of rights thereunder.

Upon the compulsory retirement of an employee, his employment is deemed terminated. The
matter of extension of service of such employee is addressed to the sound discretion of the
employer.

May an employee be entitled to a retirement pay and separation pay at the same time?
- YES. Retirement pay and separation are not mutually exclusive. Retirement benefits
are a form of reward for an employee’s loyalty. Separation pay is that amount given to
the employee for his severance from employment, designed to provide the employee
with the wherewithal during the period that he is looking for another employment.
- In Aquino v. NLRC, the Court held that the employee is entitled to recover both the
separation pay and retirement pay if there is no prohibition in the retirement plan or in
the CBA.

66
Computation of retirement benefits in the absence of an applicable agreement or retirement
plan
- A retiree is entitled to a retirement pay equal to at least 1/2 month salary for every
year of service, a fraction of at least 6 months is considered as 1 whole year.

“Superiority of Benefits Rule”

- Once the employee retires, it is not Article 302 that is controlling but the retirement
plan under the CBA or other applicable employment contract. Article 302 becomes
relevant only in the matter of ensuring that the retirement benefits are not less than
those provided therein.
- Thus, when the retirement benefits under the CBA, employment contract or
retirement plan are less than those provided in Article 302; the computation of
retirement benefits should then be based on Article 302.

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 SOCIAL SECURITY SYSTEM LAW

The funds contributed to the SSS are not public funds, but funds belonging to the members
which are merely held in trust by the Government.

Benefits receivable under the SSS Law are in the nature of a special privilege, and are not
part of the estate of the member.

The SSS Law is not a law on succession. It is not the heirs of the employee but the designated
beneficiaries who are to receive the social security benefits. It is only when the beneficiary is
the estate, or when there is no designated beneficiary, or if the designation is void, that the
SSS is required to pay the employee’s heirs.

Compulsory Coverage
1. All employees not over 60 years of age and their employers
2. Domestic helpers
3. All self-employed persons or professionals
4. Partners and single proprietors
5. Actors, directors, scriptwriters, and news correspondents who do not fall within the
definition of the term “employee”
6. Professional athletes, coaches, trainers, jockeys
7. Individual farmers and fishermen

Voluntary Coverage
1. Spouses who devote full time to managing the household and family affairs
2. Filipinos recruited by foreign-based employers for employment abroad
3. Employees separated from employment who want to maintain their right to full
benefits
4. Self-employed who realizes no income for a certain month

Effect of non-reporting or non-remittance

- If the employer fails to report the employee for SSS coverage, or
- If he fails to remit the premium contributions
Such failure or refusal shall subject him to damages, penalties and criminal liability,
in addition to the payment of the unremitted contributions

Exclusions from Coverage

1. Employees who are purely casual and not for the purpose of occupation or business of
the employer
2. Seafarers in an alien vessel
3. Government employees
4. Employees of foreign governments or international organizations
5. Such other services performed by temporary employees; provided that employees of
independent contractors shall not be deemed employees of the employer who engaged
the services of the independent contractors

Case 1: A textile company hired 10 carpenters to repair the roof of its factory which was
destroyed by a typhoon. Are the carpenters subject to compulsory coverage under the SSS
Law?

68
 - NO. The employment is purely casual and not for the purpose of the occupation or
business of the employer as a textile company. Their engagement is occasioned by the
passage of the typhoon; they are not hired on a regular basis.

Case 2: The owners of Falcon Factory, a company engaged in the assembling of automotive
components, decided to have their building renovated. 50 persons, composed of engineers,
architects, and other construction workers, were hired by the company for this purpose. The
work was estimated to be completed in 3 years. The workers contended that since the work
would be completed after more than 1 year, they should be subject to compulsory coverage of
the SSS Law. Decide
- Employment of purely casual employees and are not for the purpose of the occupation
or business of the employer is excluded from the compulsory coverage of the SSS
Law. The 50 persons were hired to renovate the building of Falcon. Their
employment is purely casual and is not for the purpose of the occupation or business
of the employer which is to assemble automotive components. They are thus excluded
from the compulsory coverage of the SSS Law.

Benefits under the SSS Law

1. Sickness benefits
2. Permanent disability benefits
3. Maternity leave benefits
4. Retirement benefits
5. Death and funeral benefits

On her way home from work, Mikaela, a machine operator in a sash factory, decided to
watch a movie in a movie house. However, she was stabbed by an unknown assailant. When
she filed a claim for sickness benefits under the SSS Law, it was denied on the ground that
her injury is not work-connected. Is the denial legal?
- NO. It is not necessary for the enjoyment of benefits under the SSS Law that the
injury be work-connected. What is important is membership in the SSS and not the
causal connection of the work of the employee to his injury or sickness.

Dependents and Beneficiaries

A. Primary Beneficiaries
i. The dependent spouse, until he/she remarries
ii. The dependent children, whether legitimate, illegitimate or adopted

B. Secondary Beneficiaries
i. In the absence of the primary beneficiaries, the dependent parents of the
member
ii. In the absence of the foregoing, the person designated as beneficiary

The “dependents” refer to the

- Legal spouse entitled by law to receive support from the member
- The legitimate, illegitimate, or adopted child who is unmarried, not gainfully
employed, and has not reached 21 years of age, or if over, he is incapable of self-
support, physically or mentally
- The parent who is receiving support from the member

69
Case 1: John died in an accident while in the performance of his duties as an electrician. At
the time of his demise, he was childless and unmarried, predeceased by his adoptive parent
during his minority, and survived by his biological parent Bernardina. Bernardina filed a
claim for death benefits with the SSS but the claim was denied on the ground that she is no
longer considered a primary beneficiary, because she is no longer John’s legitimate parent
due to his legal adoption. Is the SSS correct?
- NO. The term “parents” in the phrase “dependent parents” ought to be taken in its
general sense and cannot be unduly limited to “legitimate parents”. The phrase
dependent parents should, therefore, include all parents, whether legitimate or
illegitimate and whether by nature or adoption.
“Dependent for support”
- The entitlement to benefits as a primary beneficiary requires not only legitimacy (at
least for the spouse), but also dependence.
- The Court defined a dependent as one who derives his or her main support from
another.

Spouse Beneficiary
In order to be qualified as a beneficiary, the spouse must have been legally married to the
retiree-pensioner at the time of the latter’s death.

Case 1: Rodolfo, an SSS member, was survived by the following: his legal wife Editha, who
is now cohabiting with another man; another wife Yolanda, whom Rodolfo married and had 4
illegitimate children now over 21 years of age; and another common-law wife Gina, with
whom he had 2 illegitimate minor children. All wives filed a claim before the SSS for death
benefits. Who among the claimants are qualified and/or disqualified?
- The 2 illegitimate minor children are qualified to be beneficiaries. Children, whether
legitimate, illegitimate or adopted, who are under 21 years of age, unmarried, and not
gainfully employed are qualified as beneficiaries
- Editha is disqualified because she is not dependent on the deceased for support and
this is presumed from the fact that she is cohabiting with another man
- Yolanda is disqualified because she is not the legal spouse
- The 4 illegitimate children of Rodolfo with Yolanda are disqualified because they are
over 21 years of age.
- Gina is disqualified because she is not the legal spouse of the deceased.

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 GOVERNMENT SERVICE INSURANCE SYSTEM LAW

Compulsory Coverage
Gen. Rule: All employees receiving compensation who have not reached the compulsory
retirement age, irrespective of employment status,
XPNs:
a. Members of the AFP, PNP
b. Contractuals who have no employer-employee relationship with the agencies
they serve
**Members of the judiciary and constitutional commissions who shall have life insurance
only. (Thus, employees of the judiciary and constitutional commissions are still under the
compulsory coverage of the GSIS Law)

Benefits:
1. Life insurance,
2. Retirement benefits
3. Disability benefits,
4. Survivorship benefits (aka death benefits),
5. Separation benefits
6. Unemployment benefits.

Dependents and Beneficiaries

A. Primary Beneficiaries
i. The legal dependent spouse until he/she remarries and
ii. The dependent children

B. Secondary Beneficiaries
i. The dependent parents and,
ii. The legitimate descendants (subject to the restrictions on dependent children)

The term “dependents” shall refer to:

a. the legitimate spouse dependent for support upon the member or pensioner;
b. the legitimate, legitimated, legally adopted child, including the illegitimate child, who
is unmarried, not gainfully employed, not over the age of majority, or is over the age
of majority but incapacitated and incapable of self-support due to a mental or physical
defect acquired prior to age of majority; and
c. the parents dependent upon the member for support;

Retirement benefits
1. The member has rendered at least 15 years of service
2. He is at least 60 years old at the time of retirement
3. He is not receiving a monthly pension benefit from permanent total disability
*a member cannot enjoy the monthly income benefit for permanent disability and the old-age
retirement simultaneously.

Permanent disability benefits

A member who suffers permanent disability for reasons not due to his grave misconduct,
notorious negligence, habitual intoxication, or willful intention to kill himself or another, is
entitled to permanent disability benefits. The disability need not be work-connect in order to

71
be entitled to the permanent disability benefits. It is enough that the employee is a member of
the GSIS.
Survivorship benefits
Upon the death of a member, the primary (or secondary or legal heirs) beneficiaries shall be
entitled to survivorship pension, provided that the deceased was in the service at the time of
his death; or if separated from the service has paid a certain number of monthly contributions.

Case 1: Odeck, a policeman, was on leave for a month. While resting in his house, he heard
two of his neighbors fighting with each other. Odeck rushed to the scene intending to pacify
them. However, he was shot to death by one of the protagonists. Zhop, a housemaid, was
Odeck’s surviving spouse whom he had abandoned for another woman years back. When she
learned of Odeck’s death, Zhop filed a claim with the GSIS for death benefits. However, her
claim was denied because (a) when Odeck was killed, he was on leave, and (b) she was not a
dependent spouse of Odeck when he died. Resolve whether GSIS is correct in denying the
claim.
- GSIS is correct. Zhop has been abandoned by Odeck, which means she is not a
dependent of the deceased at the time of his death. Also, Odeck was on leave when he
was killed. The 24-hour duty rule does not apply when the policeman is on vacation
leave.

Case 2: Luis, a PNP officer, was off duty and resting at home when he heard a scuffle outside
his house. He saw two of his neighbors fighting and he rushed out to pacify them. One of the
neighbors shot Luis by mistake, which resulted in Luis’ death. Marian, Luis’ widow, filed a
claim with the GSIS seeking death benefits. The GSIS denied the claim on the ground that
the death of Luis was not service-related as he was off duty when the incident happened. Is
the GSIS correct?
- NO. Luis, a policeman, is covered by the 24-hour duty rule. He is deemed on round-
the-clock duty unless on official leave, in which case his death outside performance of
official peace-keeping mission will bar claim for death benefits. In this case, Luis was
not on official leave and he died in the performance of a peacekeeping mission.
Therefore, his death is compensable.

LIMITED PORTABILITY LAW

Limited portability rule

A covered worker who transfers employment from one sector to another or is employed in
both sectors shall have his creditable services or contributions in both Systems credited to his
service or contribution record in each of the Systems and shall be totalized for purposes of
old-age, disability, survivorship and other benefits in case the covered member does not
qualify for such benefits in either or both Systems without totalization.

Under the Portability Law, government retirees who do not meet the required number of
years may still avail themselves of retirement and other benefits by combining their years of
service in the private sector represented by contributions to the SSS with their government
service and contributions to the GSIS to satisfy the required years of service, and vice versa.

However, if retirees have already satisfied the required years of service under either the GSIS
or SSS Laws, they would not be allowed to incorporate their contributions to the SSS/GSIS
anymore for availment of additional benefits.

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In case of death, disability and old age, the periods of creditable services or contributions to
the SSS and GSIS shall be added to entitle retirees to receive such benefits.

73