Management Prerogative

This refers to an employer's right to freely regulate all aspects of employment through the
adoption of strategies or schemes geared toward attaining profit, subject, however, to
limitations set by law, the CBA and the principles of fairness and justice and must be effected in
good faith and not tainted by unfair labor practice.

*** Management Prerogative is not absolute there are set limitation either by law, it can be
collective bargaining agreement which is participated into by both the management and the
employees and it can also be the basic principles of fairness and justice because if management
prerogative were to be absolute, then you can just imagine the list of abuses that employees
would be experiencing.

General Rule: It is the right of an Er (employer) to regulate, according to his own discretion
and judgment, all aspects of employment, including:

a. Discipline
The Er has the prerogative to instill discipline in his Ees (employees) and to impose
reasonable penalties, including dismissal, on erring Ees pursuant to company rules and
regulations. (San Miguel Corporation v. NLRC, G.R. No. 78277, May 12, 1989)

** To instill discipline is still expected in the management or administrative systems because

you would have to set rules and guidelines, the first thing that you have when you enter any
job is a company handbook to give any idea to the basic guidelines and frame work that would
guide and maybe even dictate upon you at times but more so to actually tell you what is
expected.

b. Transfer of Employees
In the pursuit of its legitimate business interests, especially during adverse business
conditions, the management has the prerogative to transfer or assign Ees from one office or
area of operation to another provided there is no demotion in rank or diminution of salary,
benefits and other privileges and the action is not motivated by discrimination, bad faith, or
effected as a form of punishment or demotion without sufficient cause. This privilege is
inherent in the right of Ers to control and manage their enterprises effectively.

*** In some instances, there is a need for the employer to transfer some of his employees to
other branches. These pandemic had resulted to a wave of transfer of employees in a lot of
companies and this is for the reason why it can be management prerogative in as long as it is
not seen as form of punishment or demotion.

** This means it can be a valid exercise of management prerogative if it were in the instances of
saving the company or possibly maintain the employment of the individuals without having to
suffer economic losses in the side of the company.
c. Productivity Standard
An Er is entitled to impose productivity standards for its workers, and in fact, non-
compliance may be visited with a penalty even more severe than demotion.
Failure to meet the sales quota assigned to each of them constitute a just cause of
their dismissal, regardless of the permanent or probationary status of their employment.
Failure to observe prescribed standards of work, or to fulfill reasonable work assignments due
to inefficiency may constitute just cause for dismissal. (Leonardo vs. NLRC, G.R. No.
125303,June 16, 2000).

** The reason why you have companies or organizations that employ people is because their
main objective to obtain profit so the economic side deems itself as important.

** Speaking of productivity standards, we sometimes talk about quotas wherein you are
expected to produce a particular things or a number of particular things and that is part of the
evaluation given to you or failure to actually reach this can be the basis for you to be
terminated and that can be part of management prerogative.

d. Bonus
It is an amount granted and paid to an Ee for his industry and loyalty which contributed to the
success of the Ers business and made possible the realization of profits.

****Employers grant this as a means of rewarding industry and loyalty.

****There can be incentive allowances or incentive pay and these might be as a reward of
being loyal. Ex: In companies or in schools, after one year of service, you have what you call an
incentive leave with pay which means if you will not use such leave, then you can have the
equivalent cash amount. A lot of companies do this, because it is provided by law.

General Rule: Bonus is not demandable as a matter of right. It is a management prerogative

given in addition to what is ordinarily received by or strictly due to recipient. (Producers Bank of
the Phil. v. NLRC, G.R. No. 100701, March 28, 2001)

Exceptions: Given for a long period of time

1. Consistent and deliberate – Er continued giving benefit without any condition imposed
for its payment;
2. Er knew he was not required to give benefit;
3. Nature of benefit is not dependent on profit; and
4. Made part of the wage or compensation agreed and stated in the employment
contract.

e. Change of Working Hours

The management retains the prerogative, whenever exigencies of the service so
require, to change the working hours of its Ees. In the exercise of its management
prerogatives, may schedule a work shift consisting of less than eight hours. And following the
principle of “a fair day’s wage for a fair day’s labor”, the Er is not obliged to pay an Ee, working
for less than eight hours a day, the wages due for eight hours. Nonetheless, if by voluntary
practice or policy, the Ee for a considerable period of time has been paying his Ees wages due
for eight hours work although the work shift less than eight hours (e.g. seven) it cannot later on
increase the working hours without an increase in the pay of the employees affected.

*** You would have certain companies adjusting their working hours sometimes to the
advantage of the employees. This can be seen especially in our case where you have online
classes that instructors are not technically mandated to go to school in as long as at their own
homes, we have internet connection, then online classes can go on. And these happens several
times in the sense that the change of working hours is still to maintain the pay but the change
of working hours might be to make certain adjustments in given changes in working conditions.

** There are some companies who decide not to have Saturdays as working days. What they do
is that they would compress their working hours for their employees from Mondays to Fridays
and sometimes they extend beyond usual 8-5 schedule or for some they would have less time
for their lunch break and you would have it in order for them to have the same number of
hours per week but it is compressed so that you would have less days to actually come in.

** For those who still maintain the same jobs, even during the pandemic, the working hours
can also be a health protocol because of course, in order for us to be exposed every day, and to
have to go out and be exposed to possible carriers of the virus will also endanger employees
and that’s the reason why such changes can be part of management prerogative

An Er is not allowed to withdraw a benefit which he has voluntarily given.

f. Marriage between employees of competitor-employers

The company policy prohibiting marriage between co-workers is valid if there is a
finding of a bona fide occupational qualification (BFOQ) to justify an Er’s No Spouse Rule.
There must be a compelling business necessity for which no alternative exists other than the
discriminating practice. (Star Paper vs. Simbol, G.R. No. 164774, April 12, 2006)

**** The prohibition may exist if it is a management prerogative for one reason or the other.
But what can be deemed as management prerogative in the general sense is marriage between
employees of competitor-employers for the very practical reason of competition because you
have to care of trade secrets and sometimes being related to or even married to someone in a
company that is in direct competition with yours can be actually a question of loyalty and if
whether you can keep such trade secrets.

** For example if there are contest, raffles or the like, in government companies or private
companies the contest would prohibit those who are related to employees of the said company
so that there would not be any bias in terms of the results because people might say you won
the price because you knew someone inside so this is related to the idea of prohibiting or
limiting marriage.
** Marriage per se is not prohibited but it can be part of management prerogative especially
when you have to justify the no spouse rule if you have trade secrets to provide or to protect.

Factors that the Er must prove in order to justify BFOQ

1. That the employment qualification is reasonably related to the essential operation of the job
involved; and

2. That there is a factual basis for believing that all or substantially all persons meeting the
qualification would be unable to properly perform the duties of the job. (Star Paper et al. vs.
Simbol, G.R. No. 164774, April 12, 2006)

g. Post-employment ban
There is a distinction between restrictive covenants barring an Ee to accept a post-
employment competitive employment or restraint on trade in employment contracts and
restraints on post-retirement competitive employment in pension and retirement plans
eitherincorporated in employment contracts or in collective bargaining agreements between
the Er and the union of Ees, or separate from said contracts or collective bargaining agreements
which provide that an Ee who accepts post retirement competitive employment will forfeit
retirement and other benefits or will be obliged to restitute the same to the employer.

** Trade secret may also be a reason for this part. Usually when you look at companies, they
have a clause that when you sign your employment contract that says that there is a period of
time for you after you have terminated your employment or to the other side if you have been
dismissed from service that you are banned from being employed in a competitive industry.

** This has something to do with the protection of trade secrets. Post-employment ban is
sometimes related to also a non-disclosure agreement. Companies make you sign this so that
whenever it is that you may have taken, that you may have learned from the company, your
previous employer should not be shared with a new employer.

**This can also be economic in nature because sometimes the sale of information can be a sale
of profit of a company that you would work with.

The strong weight of authority is that forfeitures for engaging in subsequent competitive
employment included in pension and retirement plans are valid even though unrestricted in
time or geography. A post-retirement competitive employment restriction is designed to
protect the Er against competition by former Ee who may retire and obtain retirement or
pension benefits and, at the same time, engage in competitive employment. (Rivera vs.
Solidbank, G.R. No. 163269, April 19,2006)

Note: So long as a company’s prerogatives are exercised in good faith for the advancement of
the Er’s interest and not for the purpose of defeating or circumventing the rights of the Ees
under special laws or under valid agreements, the Supreme Court will uphold them.
Limitations on management prerogative

1.) It must be exercised in good faith.

*** Most of our actions can be deemed in good faith and as long as our action show it, but also
our intention show it as well, but as it say, it is the combination of our behavior and our
intention that we see good faith to prove that what we have done is not because we want to
deliberately hurt someone or deliberately violate the law. But there are certain mandates for
this.

2.) It must not be tainted with unfair labor practice.

*** It should be within the set limitations of the law.

3.) The exercise of management prerogative must be within the limitations set by law.

4.) It must also be within the limitations set by the Collective Bargaining Agreement; and
*** Collective Bargaining Agreement- We are referring to agreement, negotiation that has been
entered into by both the employer and the employees and whatever is set and provider for by
their agreement is supposed to be followed by both parties.

** Management prerogative can be exercised only within what is negotiated and you would
have it as limitation in itself and the principles.

5.) The exercise must be consistent with the principles of fair play and justice.

Topic 4:
Recruitment and Placement
Recruitment and Placement is any act of canvassing, enlisting, transporting,
contracting, hiring, utilizing, or procuring workers, and includes contract services, referrals,
advertising or promising 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 two
or more persons shall be deemed engaged in recruitment and placement.

**Even the mere promise of an employment can be deemed a violation of the rule for
recruitment.

** First, you would have a company offering jobs, they intend to recruit people into those jobs
but they would need a company to hire them and that’s the reason why you would have this
placement agencies that you hear of. Those that will process your employment and the one
that you will be communicating to the employer abroad your qualification and possibly to trim
down among the applicants who the most qualified are and ultimately, they can even decide
who can be hired.

According to law, this has to be protected as an act because there have been several violations.
Recruitment includes the act of referral or the “act of passing along or forwarding of an
applicant for employment after an initial interview of a selected applicant for employment to a
selected employer, placement officer or bureau” (Rodolfo vs. People, G.R. No. 146964, August
10, 2006).

The number of persons dealt with is not an essential ingredient of the act of
recruitment and placement of workers. The proviso merely created a presumption (People vs.
Panis, G.R. No. L-58674-77, July 11, 1990).

A. Illegal Recruitment

License vs. authority

What is a license?
It is issued by DOLE authorizing a person or entity to operate a private employment
agency.

What is an Authority?
It is a document issued by the DOLE authorizing a person or association to engage in
recruitment and placement activities as a private recruitment entity.

*** These two things are important dependent on what agency you are going to establish.
Because without these, then that can constitute illegal recruitment.

Who are the persons prohibited from engaging the business of recruiting migrant
workers?
1. Unlawful for any official or employee of the:
a. DOLE;
b. POEA;
c. Overseas Workers Welfare Administration (OWWA);
d. DFA; and
e. Other government agencies involved in the implementation of this Act
2. Their relatives within the 4th civil degree of consanguinity or affinity, to engage,
directly or indirectly in the business of recruiting migrant workers. (Sec. 8, R.A.
8042)

** This is important because more often, you would have such limitations to erase biases or
doubts that the reason why you get jobs abroad is because you would have connections in the
said agencies. So the very idea of agencies that are in recruiting or in placing workers abroad
are those who have direct knowledge of companies can be deemed as unlawful.

Who is a non-licensee / non-holder of authority?

Any person, corporation, or entity:
A. Which has not been issued a valid license or authority to engage in recruitment and
placement by the Secretary of Labor and Employment (SoLE); or
B . Whose license or authority has been suspended, revoked or cancelled by the POEA
or the SoLE (Secretary of Labor and Employment).

** It is a basis for us to know if they have been suspended or if they do not hold any authority
or license then they should not be in the business of engaging or recruiting migrant workers.

What are the grounds for revocation of license? (**Revocation of stripping your license)

1. Incurring an accumulated 3 counts of suspension by an agency based on final and

executory orders within the period of validity of its license.

** If you have been given a suspension by a final and executory order, then three counts of
which, you may already have your license revoked.

2. Violations of the conditions of license.

3. Engaging in acts of misrepresentation for the purpose of securing a license or

renewal.

** This can be in the forms of fraud, so imagine yourself to be representing the company and
claiming that the company is dealing with legal legitimate businesses which in fact it is an
illegal enterprise can also be a ground for revocation.

4. Engaging in the recruitment or placement of workers to jobs harmful to the public

health or morality or to the dignity of the country (Sec. 3, Rule I, Book VI, Rules and
Regulations Governing Overseas Employment).

**** To recruit workers in a job that are actually harmful to the public health or morality
identity of the country so you would have instances where you may have been deceived as
what you will be engaging in and then you would be sent to other countries then later on find
out that you would be part of illegal activities, that where you would have drug trafficking even
white slavery where you have women deceived to believing that they would have jobs abroad
when in fact they have been sold to the highest bidder or they would be dimmed as prostitutes.

** This could mean a permanent revocation of your license.

1. Elements
What are the elements of Illegal Recruitment?
** If the law that provides for the crimes is coming from the revised penal code then more
often it is mala in se which is to say that intent is necessary to be proven before the elements
of the crime had to be proven. So it counts that even if the elements maybe present that your
intention might be different and that’s the reason why you can use it as a defense but in special
laws, especially that deal with illegal recruitment, these special law is malum prohibitum which
means that the mere violation of any of the grounds set can already constitute the crime itself
and you can be found guilty of the same.

1. Offender is a non-licensee or non-holder of authority to lawfully engage in the

recruitment/placement of workers
2. Offender undertakes:
a. Any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or
procuring workers, and includes referrals, contact services, promising or advertising for
employment, locally or abroad, whether for profit or not (Art. 13[b]); or
b. Any of prohibited practices under Art.34

** It does not have to be all of these acts that are committed to be found guilty of illegal
recruitment, it can be just one.

2. Prohibited Acts
What are prohibited practices in recruitment/placement? (Art. 34.)
1. Furnishing or publishing any false notice/information/document related to
recruitment/employment.
2. Failure to file reports required by DOLE.
3. Inducing or attempting to induce a worker already employed to quit his employment in
order to offer him another unless the transfer is designed to liberate a worker from
oppressive terms and conditions.
4. Recruitment/placement of workers in jobs harmful to public health or morality or to the
dignity of the country;
5. Engaging directly or indirectly in the management of a travel agency;
6. Substituting or altering employment contracts without approval of DOLE;
7. Charging or accepting any amount greater than that specified by DOLE or make a
worker pay any amount greater than actually received by him;
8. Committing any act of misrepresentation to secure a license or authority;
9. Influencing or attempting to influence any person/entity not to employ any worker who
has not applied of employment through his agency;
10. Obstructing or attempting to obstruct inspection by Secretary of Labor and
Employment or by his representatives;
11. Withholding or denying travel documents from applicant workers before departure for
monetary considerations other than authorized by law;
12. Granting a loan to an OFW which will be used for payment of legal and allowable
placement fees;
13. Refusing to condone or renegotiate a loan incurred by an OFW after his employment
contract has been prematurely terminated through no fault of his or her own;
14. For a suspended recruitment/manning agency to engage in any kind of recruitment
activity including the processing of pending workers’ applications; and
15. For a recruitment/manning agency or a foreign principal/ Er to pass on the OFW or
deduct from his or her salary the payment of the cost of insurance fees, premium or
other insurance related charges, as provided under the compulsory worker’s
insurance coverage
16. Imposing a compulsory and exclusive arrangement whereby an OFW is required to:
a. Avail a loan only from specifically designated institutions, entities, or persons;
b. To undergo health examinations only from specifically designated medical,
entities or persons, except seafarers whose medical examination cost is
shouldered by the shipowner; and
c. To undergo training of any kind only from designated institutions, entities, or
persons, except for recommendatory trainings mandated by principals/shipowners
(Sec. 6, R.A.10022).

3. Types of Illegal Recruitment

Simple illegal recruitment

It is considered simple illegal recruitment when it involves less than three (3) victims
or recruiters.Illegal recruitment in large scale It is committed against 3 or more persons
individually or as a group.

** There is no necessity that these three people have to be all recruited at the same time, they
can be individually recruited in as long as they can be three or more then that can already
constitute illegal recruitment in a large scale.

** It matters because the punishment is not the same.

Illegal recruitment as economic sabotage

When is illegal recruitment considered as economic sabotage?
When it is committed:
1. By a syndicate – carried out by 3 or more persons conspiring/confederating with
one another or

** There has to be a proof that these three or more persons are in collusion with each other

2. In large scale – committed against 3 or more persons individually or as a group.

(Sec. 6,10022)
*** The difference of the two is dependent on who you are referring as two or more

4. Illegal Recruitment versus estafa

Illegal recruitment is a malum prohibitum, whereas estafa is malum in se, meaning the
criminal intent is NOT necessary for conviction in the former, but it is necessary in the latter.
It is not required that it be shown that the recruiter wrongfully represented himself as a
licensed recruiter.
NOTE: It is enough that the victims were deceived as they relied on the
misrepresentation and scheme that caused them to entrust their money in exchange of what
they later discovered was a vain hope of obtaining employment abroad.
Accused defrauded another by abuse of confidence, or by means of deceit.
NOTE: It is essential that the false statement or fraudulent representation constitutes
the very cause or the only motive which induces the complainant to part with the thing of value
Illegal recruitment and estafa cases may be filed simultaneously or separately.
The filing of charges for illegal recruitment does not bar the filing of estafa, and vice
versa. Double jeopardy will not set.
5. Liability of Local Recruitment agency versus Foreign Employment
a. Solidary Liability
What is the liability of the private employment agency and the principal or foreign-
based employer?
They are jointly and severally liable for any violation of the recruitment agreement and
the contracts of employment.
Note: This joint and solidary liability imposed by law against recruitment agencies and
foreign employers is meant to assure the aggrieved worker of immediate and sufficient
payment of what is due him. If the recruitment/placement agency is a juridical being, the
corporate officers and directors and partners, shall themselves be jointly and solidarily liable
with the corporation or partnership for the claims and damages (Becmen Service Exporter
and Promotion v. Cuaresma, G.R. Nos. 182978-79, April 7, 2009).
b. Theory of imputed knowledge
What is the theory of imputed knowledge?
A rule in insurance law that any information material to the transaction, either
possessed by the agent at the time of the transaction or acquired by him before its completion,
is deemed to be the knowledge of the principal, at least so far as the transaction is concerned,
even though in fact the knowledge is not communicated to the principal at all. (Leonor v.
Filipinas Compania, 48OG 243)
6. Termination of contract of migrant worker without just or valid cause
What are the effects of termination of overseas employment without just, valid, or
authorized cause?
The worker shall be entitled to the full reimbursement if his placement fee and the
deductions made with interest at twelve percent (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less (Sec. 7, RA 10022)
7. Direct Hiring
What is Direct hiring?
It is when an employer hires a Filipino worker for overseas employment without going
through the POEA or entities authorized by the Secretary of Labor.
What is the ban on direct hiring?
General Rule: An employer may only hire Filipino worker for overseas employment through
POEA or entities authorized by DOLE.
Exception:
Direct hiring by:
1. International organizations;
2. Name hires;
3. Members of the diplomatic organizations; and
4. Other Employers as may be allowed by DOLE.
Why is direct-hiring prohibited?
1. To ensure the best possible terms and conditions of employment for the worker;
2. To assure the foreign employer that he hires only qualified Filipino workers; and
3. To ensure full regulation of employment in order to avoid exploitation.
B. Regulation of Recruitment and Placement Activities
Suspension or cancellation of license or authority (Art. 35, Labor Code)
What are the grounds for suspension or cancellation of license?
1. Prohibited acts under Art. 34;
2. Publishing job announcements w/o POEA’s approval;
3. Charging a fee which may be in excess of the authorized amount before a worker is
employed;
4. Deploying workers w/o processing through POEA; and
5. Recruitment in places outside its authorized area (Sec. 4, Rule II, Book IV, POEA
Rules).
Regulatory and visitorial powers of the DOLE secretary
What are the regulatory powers of the Secretary of Labor and Employment (SOLE)?
1. Restrict and regulate the recruitment and placement activities of all agencies; and
2. Issue orders and promulgate rules and Regulations.
What constitute visitorial power?
1. Access to employer’s records and premises at any time of the day or night, whenever
work is being undertaken;
2. To copy from said records; and
3. Question any employee and investigate any fact, condition or matter which may be
necessary to determine violations or which may aid in the enforcement of the Labor
Code and of any labor law, wage order, or rules and regulation issued pursuant thereto.
Give 4 instances where the visitorial power of the SLE may be exercised under the
Labor Code.
Power to:
1. Inspect books of accounts and records of any person or entity engaged in recruitment
and placement; require it to submit reports regularly on prescribed forms and act in
violations of any provisions of the LC on recruitment and placement. (Art. 37)
2. Have access to employer’s records and premises to determine violations of any
provisions of the LC on recruitment and placement. (Art. 128)
3. Conduct industrial safety inspections of establishments. (Art. 165)
4. Inquire into the financial activities of legitimate labor organizations (LLO) and examine
their books of accounts upon the filing of the complaint under oath and duly supported
by the written consent of at least 20% of the total membership of the LO concerned.
Can SOLE issue search warrants or warrants of arrest?
No. Only a judge may issue search and arrest warrants. Art 38 © of the Labor Code is
unconstitutional inasmuch as it gives the SLE the power to issue search or arrest warrants.
The labor authorities must go through the judicial process.
Remittance of foreign exchange earnings
What is the rule on remittance of foreign exchange earnings?
General Rule: It shall be mandatory for all OFWs to remit a portion of their foreign exchange
earnings to their families, dependents, and/or beneficiaries ranging from 50%-80% depending
on the worker’s kind of job. (Rule VIII, Book III,POEA Rules)

Exceptions:
1. The worker’s immediate family members, beneficiaries and dependents are
residing with him abroad;
2. Immigrants and Filipino professionals and employees working with the UN
agencies or specialized bodies; and
3. Filipino servicemen working in U.S. military installations (Resolution No. 1-83,
Inter-Agency Committee for Implementation of E.O.857).
What is the effect of failure to remit?
1. Workers – Shall be suspended or removed from the list of eligible workers for
overseas employment; and
2. Employers – Will be excluded from the overseas employment program. Private
employment agencies shall face cancellation or revocation of their licenses or
authority to recruit. (Sec. 9, E.O. 857)
C. Employment of Non-resident Aliens
Alien Employment Permit (AEP) is required for entry into the country for
employment purposes and is issued after 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.
All foreign nationals who intended to engage in gainful employment in the Philippines
shall apply for AEP (Department Order No. 97-09, Sec. 1)
Who is required to acquire AEP?
1. All foreign nationals seeking admission to the Philippines for the purpose
of employment;
2. All non-resident foreign nationals already working in the Philippines;
3. Non-resident foreign nationals admitted to the Philippines on non-working
visas and who wish to seek employment; and
4. Missionaries or religious workers who intend to engage in gainful
employment.
Validity/Renewal
AEP shall be valid for one (1) year unless the employment contract, consultancy
services, or other modes of engagement provides otherwise, which in no case shall exceed
five (5) years.
An application for renewal shall be filed before its expiration. Application with expired
AEP shall be considered new application (D.O. No. 75-06, May 31, 2006).
NOTE: Employment permit should be secured regardless of the source of compensation and
duration of the employment, whether the employment is part-time or temporary (Revised
Guidelines for issuance of Alien Employment Permit, Secs. 2 and 3)
An AEP is issued based on the following:
1. Compliance by the applicant employer or the foreign national with the
substantive and documentary requirements;
2. Determination of the DOLE Secretary that there is no available Filipino
national who is competent, able and willing to do the job for the employer;
and
3. Assessment of the DOLE Secretary that the employment of the foreign
national will redound to national benefit.
Note: D.O. No. 12 and the accompanying DOLE Primer state that the Understudy Training
Program is no longer a requirement in the issuance of AEP and the employer has now the
option to implement transfer technology.