LABOR LAW REVIEW – 1ST EXAM
undertake, in cooperation with the private sector, a continuing
Xandredg Sumpt L. Latog
I underprivileged and homeless citizens in urban centers and
PRELIMINARY CONSIDERATIONS
A. BASIC POLICY ON LABOR
Article 3. Declaration of Basic Policy. – The State shall
afford protection to labor, promote full employment, ensure equal
work opportunities regardless of sex, race or creed and regulate the
relations between workers and employers. The State shall assure the
rights of workers to self-organization, collective bargaining, security of
tenure, and just and humane conditions of work.
The foregoing principles, being constitutionally
mandated, should be treated as the standard to which all labor laws
and social legislations should conform and upon which their
legality and validity should be gauged and measured. Both under
the Constitution and Article 3 of the Labor Code, the State is duty-
bound to provide and guarantee the following:
a. Full protection to labor;
b. Promotion of full employment;
c. Promotion of equal work opportunities regardless of
sex, race, or creed;
d. Regulation of relations between workers and
employers;
e. Protection of the rights of workers to:
i. Self-organization;
ii. Collective bargaining;
iii. Security of tenure; and
iv. Just and humane conditions of work.
B. CONSTITUTIONAL MANDATES
The basic rights of workers guaranteed by the
Constitution are: the rights to organize themselves; to conduct
collective bargaining or negotiation with management; to engage in
peaceful concerted activities, including to strike in accordance with
law; to enjoy security of tenure; to work under humane conditions;
to receive a living wage; and to participate in policy and decision-
making processes affecting their rights and benefits as may be
provided by law.
Other provisions in the new Constitution protect the
rights or promote the welfare of workers. Among these provisions
are:
(1) The right of the people, including those employed in
the public and private sectors, to form unions, associations, or
societies for purposes not contrary to law shall not be abridged
[Article III, Section 8].
(2) The right of self-organization shall not be denied to
government employees. No officer or employee of the civil service
shall be removed or suspended except for cause provided by law.
Temporary employees of the Government shall be given such
protection as may be provided by law [Article IX-B, Section (2),
(5) and (6)].
(3) Regular farmworkers shall have the right to own
directly or collectively the lands they till. Other farmworkers shall
receive a just share of the fruits of the land they till. The State
recognizes the right of farmworkers, along with other groups, to
take part in the planning, organization and management of the
agrarian reform program. Landless farmworkers may be resettled
by the Government in its own agricultural estates' [Article XIII,
Sections (4), (5) and (6)].
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4) The State shall, by law, and for the common good,
program of urban land reform and housing which will make
available at affordable cost decent housing and basic services to
resettlement areas. It shall also promote adequate employment
opportunities to such citizens [Article XIII, Section 9].
(5) The State shall protect working women by providing
safe and healthful working conditions taking into account their
maternal functions, and such facilities and opportunities that will
enhance their welfare and enable them to realize their full potential
in the service of the nation [Article XIII, Section 14].
(6) Along with other sectors, labor is entitled to seats
allotted to party-list representatives for three consecutive terms
after the ratification of the Constitution [Article VI].
(7) The goals of the national economy are a more
equitable distribution of opportunities, income, and wealth; a
sustained increase in the amount of goods and services produced by
the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all,
especially the underprivileged. The State shall promote
industrialization and full employment based on sound agricultural
development and agrarian reform, through industries that make full
and efficient use of human and natural resources [Article XII,
Section 1].
(8) Congress shall create an agency to promote the
viability and growth of cooperatives as instruments for social
justice and economic development [Article XII, Section 15].
(9) At the earliest possible time, the Government shall
increase the salary scales of the other officials and employees of
the National Government [Article XVIII, Section 18].
(10) Career civil service employees separated from the
service not for cause but as a result of the reorganization shall be
entitled to appropriate separation pay and to retirement and other
benefits under existing laws. In lieu thereof, they may also be
considered for reemployment in the Government. Those whose
resignations have been accepted in line with the existing policy
shall also have this right [Article XVIII, Section 16].
Police Power of the State
The police power of the State. It is the power of
Government to enact laws, within constitutional limits, to promote
the order, safety, health, morals and general welfare of society
[People v. Vera Reyes]. It is settled that state legislatures may enact
laws for the protection of the safety and health of employees as an
exercise of the police power, and this is true even though such laws
affect, not the health of the community generally, but the health or
welfare of operatives in any given situation.
An example of valid regulation as an exercise of police
power is Department Order No. 1 (Series of 1988) which
temporarily suspended the deployment of female domestic workers
abroad. The petitioner, an association of service exporters,
challenged the constitutional validity of the department order
because "it does not apply to all Filipino workers but only to
domestic helpers and females with similar skills," and that it
violates the right to travel.
Philippine Association of Service Exporters v. Drilon
Held: The Court denied the petition by explaining that the
concept of police power is well established in this jurisdiction. It has been
defined as the "state authority to enact legislation that may interfere with
personal liberty or property in order to promote the general welfare." The
Court further ruled that the petitioner has shown no satisfactory reason why
the contested measure should be nullified. There is no question that
Department Order No. 1 applies only to "female contract workers," but it
does not thereby make an undue discrimination between the sexes. It is
well-settled that "equality before the law" under the Constitution does not
import a perfect identity of rights among all men and women. It admits of
classifications, provided that (1) such classifications rest on substantial
distinctions; (2) they are germane to the purposes of the law; (3) they are
not confined to existing conditions; and (4) they apply equally to all
members of the same class. The Court is satisfied that the classification
made — the preference for female workers — rests on substantial
distinctions.
C. THE CIVIL CODE
It is the Civil Code, not the Labor Code, that describes
the nature of labor management relations. It states that:
'The relations between capital and labor are not
merely contractual. They are so impressed with public interest
that labor contracts must yield to the common good. Therefore,
such contracts are subject to the special laws on labor unions,
collective bargaining, strikes and lockouts, closed shop, wages,
working conditions, hours of labor and similar subjects."
(Article 1700.)
This being so, "Neither capital nor labor shall act
oppressively against the other, or impair the interest or
convenience of the public." (Article 1701.)
Similarly, no provision in the Labor Code requires that
employment relationship should be voluntary. This is not needed in
the Labor Code because involuntary servitude is already proscribed
in the Constitution's Bill of Rights and in Article 1703 of the Civil
Code. It states: "No contract which practically amounts to
involuntary servitude, under any guise whatsoever, shall be valid."
Because of this law an employer cannot forbid an employee from
resigning from his job, subject to the observance of the terms of the
employment contract itself and the procedure on resignation under
Article 285 of the Labor Code.
The Civil Code further contains provisions regarding
wages, househelpers, and injuries sustained by employees. These
provisions will be mentioned in the chapters of the Labor Code
where they pertain. Among the labor-related issues that call for
application of the Civil Code instead of the Labor Code are those
relating to awards of damages, interpretation of a collective
bargaining agreement, validity of a waiver, preference of workers'
claims, and fixed-period employment.
D. SOCIAL JUSTICE
The primordial reason for the passage of labor laws is
social justice. The Constitution says that “the State affirms labor as
a primary social economic force, and therefore, it shall protect the
rights of workers and promote their welfare” [Anflo Management
v. Bolanio].
Social justice, in the sense it is used in the Constitution,
simply means the equalization of economic, political and social
opportunities with special emphasis on the duty of the state to tilt
the balance of social forces by favouring the disadvantaged in life
[Bernas].
How Social Justice is translated in the Labor Sector
Article XIII, Section 3 of the 1987 Constitution promises
that “the State shall afford full protection to Labor, local and
overseas, organized and unorganized.” Furthermore, the State is
mandated to guarantee “the rights of all workers to self-
organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with
law.
Distinguish the Equal Protection Clause in Article III,
Section 1 from Protection to Labor Clause in Article XIII, Setion
3 of the Constitution
The equal protection clause is a specific constitutional
guarantee of the Equality of the Person. The equality it guarantees
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is “legal equality or, as it is usually put, the equality of all persons
before the law. Under it, each individual is dealt with as an equal
person in the law, which does not treat the person differently
because of who he is what he is or what he possesses. The goddess
of justice is portrayed with a blindfold, not because she must be
hindered in seeing where the right lies, but she may note
discriminate against suitors before her, dispensing instead an even
handed justice to all” [Bernas].
The protection to labor clause is implemented in three
stages: (1) the legislature passes laws in favour of labor; (2) the
executive has a department that executes and implements those
labor laws; (3) there is a system of labor tribunals which insure the
speedy and inexpensive way of resolving labor cases. And all
courts are instructed by the Labor Code, Article 4 and the Civil
Code, Article 1702, that all labor legislation and labor contracts are
interpreted in favour of labor.
Doctrine of Compassionate Justice in Labor
In the case of Almira v. B.F. Goodrich, the Supreme
Court held:
It would imply at the very least that where a penalty
less punitive would suffice, whatever missteps may committed
by labor ought not to be visited with a consequence so severe. It
is not only because of the law’s concern for the workingman.
There is, in addition, his family to consider. Unemployment
brings untold hardships and sorrows on those dependent on the
wage-earner. Where a decision may be made to rest an
informed judgement rather than rigid rules, all the equities of the
case must be accorded their due weight. Finally, labor law
determinations should not only secudum rationem but also
secundum caritatem.
This basic doctrine underlying the provisions of the
Constitution so solicitous of labor as well as the applicable
statutory norms is that both the working force and the
management are necessary components of the economy. The
right of labor has been expanded. Concern is evident for its
welfare. The advantages thus conferred, however, call for
attendant responsibilities. The ways of the law are not to be
ignored. Those who seek comfort from the shelter that it affords
should be the last to engage in activities which negate the very
concept of a legal order as antithetical to force and coercion. It
is even more important that reason and not violence should be
its milieu.
The promotion of social justice, however, is to be
achieved not through a mistaken sympathy towards any given
group. Social justice is neither communism, nor despotism, nor
atomism, nor anarchy, but the humanization of laws and the
equalization of social and economic forces by the State so that
justice in its rational and objectively secular conception may at
lease be approximated. Social justice means the promotion f the
welfare of all the people, the adoption by the Government of
measures calculated to insure economic stability of all the
competent elements of society, through the maintenance of a
proper economic and social equilibrium in the interrelations of the
members of the community, constitutionally, through the adoption
of measures legally justifiable, or extra-constitutionally, through
the exercise of powers underlying the existence of all government
on the time-honored principle of salus populi est suprema lex
[Calalang v. Williams].
The policy of social justice is not intended to
countenance wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it certainly
will not condone the offense. Compassion for the poor is an
imperative of every humane society but only when the recipient is
not a rascal claiming an undeserved privilege. Social justice cannot
be permitted to be the refuge of scoundrels any more than can
equity be an impediment to the punishment of the guilty. Those
who invoke social justice may do so only if their hands are clean
and their motives blameless and not simply because they happen to
be poor. This great policy of our Constitution is not meant for the
protection of those who have proved they are not worthy of it, like
the workers who have tainted the cause of labor with the blemishes
of their own character [PLDT v. NLRC].
Social justice, therefore, must be founded on the
recognition of the necessity of interdependence among diverse
units of a society and of the protection that should be equally and
evenly extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount
objective of the state of promoting the health, comfort, and quiet of
all persons, and of bringing about the greatest good to the greatest
number [Calalang v. Williams].
PLDT v. NLRC
Held: [S]eparation pay shall be allowed as a measure of social
justice only in those instances where the employee is validly dismissed for
causes other than serious misconduct or those reflecting on his moral
character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit
sexual relations with a fellow worker, the employer may not be required
to give the dismissed employee separation pay, or financial assistance,
or whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have
the effect, of rewarding rather than punishing the erring employee for his
offense. And we do not agree that the punishment is his dismissal only and
that the separation pay has nothing to do with the wrong he has committed.
Of course it has. Indeed, if the employee who steals from the company is
granted separation pay even as he is validly dismissed, it is not unlikely that
he will commit a similar offense in his next employment because he thinks
he can expect a like leniency if he is again found out. This kind of
misplaced compassion is not going to do labor in general any good as it will
encourage the infiltration of its ranks by those who do not deserve the
protection and concern of the Constitution.
Cebu Royal Planters v. Minister of Labor
Held: We agree that there was here an attempt to circumvent the
law by separating the employee after five months' service to prevent him
from becoming a regular employee, and then rehiring him on probation,
again without security of tenure.  We cannot permit this subterfuge if
we are to be true to the spirit and mandate of social justice.  On the other
hand, we have also the health of the public and of the dismissed employee
himself to consider.  Hence, although we must rule in favor of his
reinstatement, this must be conditioned on his fitness to resume his work, as
certified by competent authority.
We take this opportunity to reaffirm our concern for the lowly
worker who, often at the mercy of his employers, must look up to the law
for his protection.  Fittingly, that law regards him with tenderness and even
favor and always with faith and hope in his capacity to help in shaping the
nation's future.  It is error to take him for granted.  He deserves our abiding
respect.  How society treats him will determine whether the knife in his
hands shall be a caring tool for beauty and progress or an angry weapon of
defiance and revenge.  The choice is obvious, of course.  If we cherish him
as we should, we must resolve to lighten "the weight of centuries" of
exploitation and disdain that bends his back but does not bow his head.
E. CONSTRUCTION IN FAVOR OF LABOR
Article 4. Construction in favor of labor. - All doubts in the
implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in
favor of labor.
In interpreting the Constitution's protection to labor and
social justice provisions and the labor laws and rules and
regulations implementing the constitutional mandate, the Supreme
Court adopts the liberal approach which favors the exercise of
labor rights [Euro-Linea Phils. Inc. v NLRC].
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In the matter of employment bargaining, there is no
doubt that the employer stands on higher footing than the
employee. First of all, there is greater supply than demand for
labor. Second, the need for employment by labor comes from vital,
and even desperate, necessity. Consequently, the law must protect
labor, at least, to the extent of raising him to equal footing in
bargaining relations with capital and to shield him from abuses
brought about by the necessity for survival. It is safe to presume,
therefore, that an employee or laborer who waives in advance any
benefit granted him by law does so, certainly not in his interest or
through generosity but under the forceful intimidation of urgent
need, and hence, he could not have so acted freely and voluntarily
[Sanchez v. Harry-Lyons Construction].
1. Rule in case of employment contracts
The general rule remains that where the law speaks in
clear and categorical language, there is no room for interpretations;
there is only room for application [Leoncio v. MST Marine
Services]. Contracts which are not ambiguous are to be interpreted
according to their literal meaning and not beyond their obvious
intendment. Only when the law is ambiguous or of doubtful
meaning may the court interpret or construe its true intent. Thus,
the liberal interpretation of the Labor Code and its Implementing
Rules in its Article 4 has been applied to employment contracts by
virtue of Article 1702 of the New Civil Code which mandates that
“all labor contracts” shall likewise be construed in favor of the
labourer.
2. Rule in case of collective agreements
In the area of employment bargaining, the employer
stands on higher footing than the employee. The law must protect
labor to the extent, at least, of raising him to equal footing in
bargaining relations with capital and to shield him from abuses
brought about by the necessity to survive [Sanchez v. Harry Lyons
Construction]. Thus, the rule is laid that while a CBA’s terms and
conditions constitute the law between the parties, it is not an
ordinary contract to which is applied the principles of law
governing ordinary contracts. Not being an ordinary contract as it
is impressed with public interest, a CBA must be construed
liberally rather than narrowly and technically, and the courts must
place a special and realistic construction upon it, giving due
consideration to the context in which it is negotiated and the
purpose for which it is intended to serve [Marcopper Mining v.
NLRC].
3. Quitclaims/Waivers
Courts must undertake a meticulous and rigorous review
of quitclaims or waivers, more particularly those executed by
employees Quitclaims, releases and other waivers of benefits
granted by laws or contracts in favor of workers should be strictly
scrutinized to protect the weak and the disadvantaged. The waivers
should be carefully examined, in regard not only to the words and
terms used, but also the factual circumstances under which they
have been executed. Not all waivers and quitclaims are invalid as
against public policy. If the agreement was voluntarily entered into
and represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of
mind. It is only where there is clear proof that the waiver was
wangled from an unsuspecting or gullible person, or the terms of
settlement are unconscionable on its face, that the law will step in
to annul the questionable transaction. But where it is shown that
the person making the waiver did so voluntarily, with full
understanding of what he was doing, and the consideration for the
quitclaim is credible and reasonable, the transaction must be
recognized as a valid and binding undertaking [Periquet v. NLRC].
 EDI-Staffbuilders v. NLRC
Held: The Court finds the waiver and quitclaim null and void for
the following reasons:
1. The salary paid to Gran upon his termination, in the
amount of SR 2,948.00, is unreasonably low. As correctly pointed out by
the court a quo, the payment of SR 2,948.00 is even lower than his monthly
salary of SR 3,190.00 (USD 850.00). In addition, it is also very much less
than the USD 16,150.00 which is the amount Gran is legally entitled to get
from petitioner EDI as backwages.
2. The Declaration reveals that the payment of SR
2,948.00 is actually the payment for Gran’s salary for the services he
rendered to OAB as Computer Specialist. If the Declaration is a quitclaim,
then the consideration should be much much more than the monthly salary
of SR 3,190.00 (USD 850.00)—although possibly less than the estimated
Gran’s salaries for the remaining duration of his contract and other benefits
as employee of OAB. A quitclaim will understandably be lower than the
sum total of the amounts and benefits that can possibly be awarded to
employees or to be earned for the remainder of the contract period since it
is a compromise where the employees will have to forfeit a certain portion
of the amounts they are claiming in exchange for the early payment of a
compromise amount. The court may however step in when such amount is
unconscionably low or unreasonable although the employee voluntarily
agreed to it. In the case of the Declaration, the amount is unreasonably
small compared to the future wages of Gran.
3. The factual circumstances surrounding the execution
of the Declaration would show that Gran did not voluntarily and freely
execute the document. Consider the following chronology of events:
a. On July 9, 1994, Gran received a copy of his letter of
termination;
b. On July 10, 1994, Gran was instructed to depart
Saudi Arabia and required to pay his plane ticket;[65]
c. On July 11, 1994, he signed the Declaration;
d. On July 12, 1994, Gran departed from Riyadh, Saudi
Arabia; and
e. On July 21, 1994, Gran filed the Complaint before
the NLRC.
The foregoing events readily reveal that Gran was “forced” to
sign the Declaration and constrained to receive the amount of SR 2,948.00
even if it was against his will—since he was told on July 10, 1994 to leave
Riyadh on July 12, 1994. He had no other choice but to sign the Declaration
as he needed the amount of SR 2,948.00 for the payment of his ticket. He
could have entertained some apprehensions as to the status of his stay or
safety in Saudi Arabia if he would not sign the quitclaim.
4. The court a quo is correct in its finding that the
Declaration is a contract of adhesion which should be construed against the
employer, OAB. An adhesion contract is contrary to public policy as it
leaves the weaker party—the employee—in a “take-it-or-leave-it” situation.
Certainly, the employer is being unjust to the employee as there is no
meaningful choice on the part of the employee while the terms are
unreasonably favorable to the employer.
Thus, the Declaration purporting to be a quitclaim and waiver is
unenforceable under Philippine laws in the absence of proof of the
applicable law of Saudi Arabia.
In order to prevent disputes on the validity and enforceability of
quitclaims and waivers of employees under Philippine laws, said
agreements should contain the following:
1. A fixed amount as full and final compromise
settlement;
2. The benefits of the employees if possible with the
corresponding amounts, which the employees are giving up in
consideration of the fixed compromise amount;
3. A statement that the employer has clearly explained
to the employee in English, Filipino, or in the dialect known to the
employees—that by signing the waiver or quitclaim, they are forfeiting or
relinquishing their right to receive the benefits which are due them under
the law; and
4. A statement that the employees signed and executed
the document voluntarily, and had fully understood the contents of the
document and that their consent was freely given without any threat,
violence, duress, intimidation, or undue influence exerted on their person.
It is advisable that the stipulations be made in English and
Tagalog or in the dialect known to the employee. There should be two (2)
witnesses to the execution of the quitclaim who must also sign the
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quitclaim. The document should be subscribed and sworn to under oath
preferably before any administering official of the Department of Labor and
Employment or its regional office, the Bureau of Labor Relations, the
NLRC or a labor attaché in a foreign country. Such official shall assist the
parties regarding the execution of the quitclaim and waiver.[67] This
compromise settlement becomes final and binding under Article 227 of the
Labor Code which provides that:
[A]ny compromise settlement voluntarily agreed upon with the
assistance of the Bureau of Labor Relations or the regional office of the
DOLE, shall be final and binding upon the parties and the NLRC or any
court “shall not assume jurisdiction over issues involved therein except in
case of non-compliance thereof or if there is prima facie evidence that the
settlement was obtained through fraud, misrepresentation, or coercion.
It is made clear that the foregoing rules on quitclaim or waiver
shall apply only to labor contracts of OFWs in the absence of proof of the
laws of the foreign country agreed upon to govern said contracts.
Otherwise, the foreign laws shall apply.
Hanjin v. Ibanez
Held: Finally, the Quitclaims which the respondents signed
cannot bar them from demanding what is legally due them as regular
employees. As a rule, quitclaims and waivers or releases are looked upon
with disfavor and frowned upon as contrary to public policy. They are thus
ineffective to bar claims for the full measure of a worker's legal rights,
particularly when the following conditions are applicable: 1) where there is
clear proof that the waiver was wangled from an unsuspecting or gullible
person, or (2) where the terms of settlement are unconscionable on their
face. To determine whether the Quitclaims signed by respondents are valid,
one important factor that must be taken into account is the consideration
accepted by respondents; the amount must constitute a reasonable
settlement equivalent to the full measure of their legal rights. In this case,
the Quitclaims signed by the respondents do not appear to have been made
for valuable consideration. Respondents, who are regular employees, are
entitled to backwages and separation pay and, therefore, the Quitclaims
which they signed cannot prevent them from seeking claims to which they
are entitled.
II
EMPLOYER-EMPLOYEE RELATIONSHIP
The existence of the employer-employee relationship is
essential in that it comprises as the jurisdictional basis for recovery
under the law. Only cases arising from said relationship are
cognizable by the labor courts [Madrigal Shipping v. Melad].
A. BASIC PRINCIPLES ON EMPLOYER-EMPLOYEE
RELATIONSHIP
 The relationship of ER-EE is contractual in nature,
either written or oral.
 Terminologies used in a contract is not controlling.
 Mode of paying salary or compensation of a worker is
not the basis of existence of ER-EE relationship.
 Retainer fee arrangement does not give rise to
employment relationship.
B. FOUR-FOLD TEST
In determining the existence of employer-employee
relationship, the following elements are generally considered,
namely: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to
control the employees' conduct – although the latter is the most
important element [Viana v. Al-Lagadan]
The quantum of proof necessary is substantial evidence,
or such amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion.’ The burden of
proof rests upon the party who asserts the affirmative of an issue’
[Valencia v. Classic].
The difference in the manner of "selection and
engagement" does not prove, however, the alleged absence of
employer-employee relationship. Most business enterprises have
employees of different classes, necessarily requiring different
methods of selection and contracts of services of various types,
without detracting from the existence of said relationship [Ysmael
v. Court of Industrial Relations].
An employee-employer relationship actually exists
between the respondent cooperative and its owners-members. The
four elements in the four-fold test have been complied with. The
existence of an employer-employee relationship cannot be negated
by expressly repudiating it in a contract, when the terms and
surrounding circumstances show otherwise. The employment status
of a person is defined and prescribed by law and not by what the
parties say it should be [Republic v. SSC].
The mere fact that the respondent is a labor union does
not mean that it cannot be considered an employer of the persons
who work for it. Much less should it be exempted from the very
labor laws which it espouses as labor organization [Bautista v.
ALU].
C. CONTROL TEST
It is well settled that "an employer-employee relationship
exists where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also
the means to be used in reaching such end. The decisive nature of
said control over the "means to be used", is illustrated in the case of
Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210,
pp. 1197, 1199-1201), in which, by reason of said control, the
employer-employee relationship was held to exist between the
management and the workers, notwithstanding the intervention of
an alleged independent contractor, who had, and exercised, the
power to hire and fire said workers [LVN v. Philippine Musicians
Guild].
The test of the existence of employee and employer
relationship is whether there is an understanding between the
parties that one is to render personal services to or for the benefit of
the other, and recognition by them of the right of one to order and
control the other in the performance of the work and to direct the
manner and method of its performance [Dy Keh Beng v.
International Labor].
LVN v. Philippine Musicians Guild
Held: The right of control of the film company over the
musicians is shown (1) by calling the musicians through 'call slips' in the
name of the company; (2) by arranging schedules in its studio for recording
sessions; (3) by furnishing transportation and meals to musicians; and (4)
by supervising and directing in detail, through the motion picture director,
the performance of the musicians before the camera, in order to suit the
music they are playing to the picture which is being flashed on the screen.
Does the mere fact that the employee is not under
supervision while performing his duties render him a contractor?
No. The Supreme Court held in Sterling Products v. Sol:
We cannot accept this argument. Respondent Sol was
directed to listen to certain broadcasts, directing her, in the
instructions given her, when to listen and what to listen, petitioners
herein naming the stations to be listened to, the hours of
broadcasts, and the days when listening was to be done.
Respondent Sol had to follow these directions. The mere fact that
while performing the duties assigned to her she was not under the
supervision of the petitioners does not render her a contractor,
because what she has to do, the hours that she has to work and the
report that she has to submit—all these are according to
instructions given by the employer. It is not correct to say,
therefore, that she was an independent contractor, for an
independent contractor is one who does not receive instructions as
to what to do, how to do, without specific instructions.
Page 5 of 88
Finally, the very act of respondent Sol in demanding
vacation leave, Christmas bonus and additional wages shows that
she considered herself an employee. A contractor is not entitled to
a vacation leave or to a bonus nor to a minimum wage. This act of
hers in demanding these privileges are inconsistent with the claim
that she was an independent contractor.
Actual exercise of control, not necessary
It should be borne in mind that the control test calls
merely for the existence of the right to control the manner of doing
the work, not the actual exercise of the right [Dy Keh Beng v.
International Labor].
Dy Keh Beng v. International Labor
Petitioner contends that the private respondents "did not meet
the control test in the light of the ... definition of the terms employer and
employee, because there was no evidence to show that petitioner had the
right to direct the manner and method of respondent's work."[ Moreover, it
is argued that petitioner's evidence showed that "Solano worked on
a pakiaw basis" and that he stayed in the establishment only when there was
work.
Held: While this Court upholds the control test under which an
employer-employee relationship exists "where the person for whom the
services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end," it finds no
merit with petitioner's arguments as stated above.  It should be borne in
mind that the control test calls merely for the existence of the right to
control the manner of doing the work, not the actual exercise of the
right. Considering the finding by the Hearing Examiner that the
establishment of Dy Keh Beng is "engaged in the manufacture of baskets
known as kaing,"[ it is natural to expect that those working under Dy would
have to observe, among others, Dy's requirements of size and quality of
the kaing.  Some control would necessarily be exercised by Dy as the
making of the kaing would be subject
to Dy's specifications.  Parenthetically, since the work on the baskets is
done at Dy's establishments, it can be inferred that the proprietor Dy could
easily exercise control on the men he employed.
As to the contention that Solano was not an employee because
he worked on piece basis, this Court agrees with the Hearing Examiner that
"circumstances must be construed to determine indeed if
payment by the piece is just a method of compensation and does not define
the essence of the relation.  Units of time ... and units of work are in
establishments like respondent (sic) just yardsticks whereby to determine
rate of compensation, to be applied whenever agreed upon.  We cannot
construe payment by the piece where work is done in such an establishment
so as to put the worker completely at liberty to turn him out and take in
another at pleasure."
At this juncture, it is worthy to note that Justice Perfecto,
concurring with Chief Justice Ricardo Paras who penned the decision in
"Sunripe Coconut Products Co. v. Court of Industrial Relations" (83 Phil.
518, 523), opined that
"judicial notice of the fact that the so-called 'pakyaw' system
mentioned in this case as generally practiced in our country, is, in fact, a
labor contract between employers and employees, between capitalists and
laborers."
Continuity of Control, not necessary
In the case of Industrial-Commercial-Agricultural
Workers Organization vs. CIR, the Supreme Court held 'that during
the temporary layoff the laborers are considered free to seek other
employment is natural, since the laborers are not being paid, yet
must find means of support' and such temporary cessation of
operations 'should not mean starvation for employees and their
families'."
Thus, in RJL Martinez Fishing v. NLRC, the Supreme
Court held:
We further find that the employer-employee
relationship between the parties herein is not co-terminous with
each loading and unloading job. As earlier shown, respondents
are engaged in the business of fishing. For this purpose, they
 have a fleet of fishing vessels. Under this situation, respondents'
activity of catching fish is a continuous process and could hardly
be considered as seasonal in nature. So that the activities
performed by herein complainants, i.e. unloading the catch of
tuna fish from respondents' vessels and then loading the same to
refrigerated vans, are necessary or desirable in the business of
respondents. This circumstance makes the employment of
complainants a regular one, in the sense that it does not depend
on any specific project or seasonal activity.
xxx
"The Court holds, therefore, that the employer-
employee relationship existed between the parties
notwithstanding evidence to the fact that petitioners Visayas and
Bergado, even during the time that they worked with respondent
company alternated their employment on different vessels when
they were not assigned on the company's vessels. For, as was
stressed in the above-quoted case of Industrial-Commercial-
Agricultural Workers Organization vs. CIR, (16 SCRA 562
(1966), 'that during the temporary layoff the laborers are
considered free to seek other employment is natural, since the
laborers are not being paid, yet must find means of support' and
such temporary cessation of operations 'should not mean
starvation for employees and their families'."
Indeed, considering the length of time that private
respondents have worked for petitioner - since 1978 - there is
justification to conclude that they were engaged to perform
activities usually necessary or desirable in the usual business or
trade of petitioners and are, therefore, regular employees.As
such, they are entitled to the benefits awarded them by
respondent NLRC.
Sterling products vs. Sol says that there is no need for the
employer and the employee to be in the same place for control to
take place. Control that satisfies employer-employee relationship
can be met even if the employee is not juxtaposed with the
employer in the same physical location.
And then in Dy keh beng vs International labor, the
Supreme Court has said that piece-rate system, a payment on a
piece-rate basis, neither affirms nor negates the existence of
employer-employee relationship. It is neutral. It does not prove or
disprove. It merely proves payment.
Now, the Supreme Court further said that in order to
arrive at a conclusion that there exists an employee-employer
relationship by virtue of the satisfaction of the control test that it is
not necessary to proffer evidence of actual exercise of control. All
you need is evidence that there is RESERVATION OF THE
POWER TO CONTROL. Namely that the employer COULD
HAVE exercised the control because he deserves that right to
control. The issue in the specks of the baskets that Dy Keh Beng
paid for those two so called “Employees” of his whom he claimed
he was just buying Kaings from them. Kaings, big baskets,
according to Dy Keh Beng’s specification.
In RJL Martinez fishing, the test of power of control can
be met even if the exercise is not continuous. It need not be
uninterrupted.
D. ECONOMIC REALITY/DEPENDENCE TEST
In addition to the standard of right-of-control, the
existing economic conditions prevailing between the parties, like
the inclusion of the employee in the payrolls, can help in
determining the existence of an employer-employee relationship.
However, 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 such a relationship where several positions have
been held by the worker. There are instances when, aside from the
employer’s power to control the employee with respect to the
means and methods by which the work is to be accomplished,
economic realities of the employment relations help provide a
comprehensive analysis of the true classification of the individual,
Page 6 of 88
whether as employee, independent contractor, corporate officer or
some other capacity [Francisco v. NLRC].
The better approach would therefore be to adopt a two-
tiered test involving: (1) the putative employer’s power to control
the employee with respect to the means and methods by which the
work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship. This two-tiered test would
provide us with a framework of analysis, which would take into
consideration the totality of circumstances surrounding the true
nature of the relationship between the parties. This is especially
appropriate in this case where there is no written agreement or
terms of reference to base the relationship on; and due to the
complexity of the relationship based on the various positions and
responsibilities given to the worker over the period of the latter’s
employment [Ibid].
In Sevilla v. Court of Appeals,  we observed the need to
consider the existing economic conditions prevailing between the
parties, in addition to the standard of right-of-control like the
inclusion of the employee in the payrolls, to give a clearer picture
in determining the existence of an employer-employee relationship
based on an analysis of the totality of economic circumstances of
the worker.
Thus, the determination of the relationship between
employer and employee depends upon the circumstances of the
whole economic activity,  such as: (1) the extent to which the
services performed are an integral part of the employer’s business;
(2) the extent of the worker’s investment in equipment and
facilities; (3) the nature and degree of control exercised by the
employer; (4) the worker’s opportunity for profit and loss; (5) the
amount of initiative, skill, judgment or foresight required for the
success of the claimed independent enterprise; (6) the permanency
and duration of the relationship between the worker and the
employer; and (7) the degree of dependency of the worker upon the
employer for his continued employment in that line of business
[Francisco v. NLRC]. 
E. DETERMINATION OF EXISTENCE OF EMPLOYER-
EMPLOYEE RELATIONSHIP
Under labor laws, it is not only the Labor Arbiters and
the NLRC that are vested with the power to determine the
existence of employer-employee relationship.
1. DOLE Secretary and the DOLE Regional
Directors
It can be assumed that the DOLE in the exercise of its
visitorial and enforcement power somehow has to make a
determination of the existence of an employer-employee
relationship. Such prerogatival determination, however, cannot be
coextensive with the visitorial and enforcement power itself.
Indeed, such determination is merely preliminary, incidental and
collateral to the DOLE's primary function of enforcing labor
standards provisions. The determination of the existence of
employer-employee relationship is still primarily lodged with the
NLRC. This is the meaning of the clause "in cases where the
relationship of employer-employee still exists" in Art. 128 (b)
[Bombo Radyo v. Secretary].
Like the NLRC, the DOLE has the authority to rule on
the existence of an employer-employee relationship between the
parties, considering that the existence of an employer-employee
relationship is a condition sine qua non for the exercise of its
visitorial power. Nevertheless, it must be emphasized that without
an employer-employee relationship, or if one has already been
terminated, the Secretary of Labor is without jurisdiction to
determine if violations of labor standards provision had in fact been
committed,24 and to direct employers to comply with their alleged
violations of labor standards [South Cotabato v. Sto. Tomas].

2. Med-Arbiters
As the authority to determine the employer-employee
relationship is necessary and indispensable in the exercise of
jurisdiction by the med-arbiter, his finding thereon may only be
reviewed and reversed by the Secretary of Labor who exercises
appellate jurisdiction. It is absurd to suggest that the med-arbiter
and Secretary of Labor cannot make their own independent finding
as to the existence of such relationship and must have to rely and
wait for such a determination by the labor arbiter or NLRC in a
separate proceeding.  For then, given a situation where there is no
separate complaint filed with the labor arbiter, the med-arbiter
and/or the Secretary of Labor can never decide a certification
election case or any labor-management dispute properly brought
before them as they have no authority to determine the existence of
an employer-employee relationship.  Such a proposition is, to say
the least, anomalous [M.Y. San Biscuits v. Laguesma].
3. Social Security Commission (SSC)
The SSC is also vested with this power. In Republic v.
Asiapro Cooperative, involving the issue of coverage of owner-
members of respondent cooperative under the Social Security
System (SSS), it was held that it is not only the Labor Arbiter or
the NLRC that has the exclusive jurisdiction to determine the
existence of the employer-employee relationship. The SSC also has
that power.
III
CLASSIFICATION OF EMPLOYEES
There are five (5) classifications of employees and
Article 295 provides for four (4) of them.
Article 295. Regular and Casual Employment. The provisions
of written agreement to the contrary notwithstanding and regardless of
the oral agreement of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which
has been determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature and
the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That any employee
who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment
shall continue while such activity exists.
A. REGULAR EMPLOYEES
Regular employees are those who have been engaged to
perform activities which are usually necessary or desirable in the
usual business or trade of the employer.
There are two kinds of regular employees, to wit:
a. Those engaged to perform activities which are
usually necessary or desirable in the usual business
or trade of the employer; and
b. Those who have rendered at least one (1) year of
service, whether such service is continuous or
broken, with respect to the activity which they are
employed.
The law presumes regularity of employment. No
declaration or appointment paper is necessary to make one a
regular employee [Philips Semiconductors v. Fadriquela].
Page 7 of 88
Written or oral agreement is immaterial to determine
regularity of employment [Association of Trade Unions v. Abella].
However, there is a need to execute a written employment contract
if the intention is to stipulate on such other kinds of employment
such as probationary, project, seasonal, casual, or fixed-term
because in the absence thereof, it will be presumed regular.
The Doctrine of Adhesion applies to employment
contracts. However, it does not apply if the contract is clear and
unambiguous because a contract of adhesion is not prohibited per
se [RCBC v. Court of Appeals].
The primary standard, therefore, of determining a regular
employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual business
or trade of the employer.  The test is whether the former is usually
necessary or desirable in the usual business or trade of the
employer.  The connection can be determined by considering the
nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety.  Also, if the employee
has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law
deems the 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 also considered
regular, but only with respect to such activity and while such
activity exists [De Leon v. NLRC].
Thus, contrary agreements notwithstanding, an
employment is deemed regular when the activities performed by
the employee are usually necessary or desirable in the usual
business or trade of the employer. Not considered regular are the
so-called "project employment" the completion or termination of
which is more or less determinable at the time of employment, such
as those employed in connection with a particular construction
project, and seasonal employment which by its nature is only
desirable for a limited period of time. However, any employee who
has rendered at least one year of service, whether continuous or
intermittent, is deemed regular with respect to the activity he
performed and while such activity actually exists [Baguio Country
Club v. NLRC].
Beta v. NLRC
Held: That she had been hired merely on a "temporary basis"
"for purposes of meeting the seasonal or peak demands of the
business,"[9] and as such, her services may lawfully be terminated "after the
accomplishment of [her] task"[10] is untenable. The private respondent was
to all intents and purposes, and at the very least, a probationary employee,
who became regular upon the expiration of six months. Under Article 281
of the Labor Code, a probationary employee is "considered a regular
employee" if he has been "allowed to work after [the] probationary
period.” The fact that her employment has been on a contract-to-contract
basis can not alter the character of employment, because contracts can not
override the mandate of law. Hence, by operation of law, she has become a
regular employee.
In the case at bar, the private employee was employed from
December 15, 1986 until June 22, 1987 when she was ordered laid-off. Her
tenure having exceeded six months, she attained regular employment.
The petitioner can not rightfully say that since the private
respondent’s employment hinged from contract to contract, it was ergo,
"temporary", depending on the term of each agreement. Under the Labor
Code, an employment may only be said to be “temporary" "where [it] has
been fixed for a specific undertaking the completion of or termination of
which has been determined at the time of the engagement of the employee
or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.” Quite to the contrary, the
private respondent's work, that of "typist-clerk" is far from being "specific"
or "seasonal", but rather, one, according to the Code, "where the employee
has been engaged to perform activities which are usually necessary or
desirable in the usual business.”
The petitioner can not insist that the private respondent had been
hired "for a specific undertaking i.e. to handle the backlogs brought about
by the seasonal increase in the volume of her work.” The fact that she had
been employed purportedly for the simple purpose of unclogging the
petitioner's files does not make such an undertaking "specific" from the
standpoint of law because in the first place, it is "usually necessary or
desirable in the usual business or trade of the employer," a development
which disqualifies it outrightly as a "specific undertaking", and in the
second place, because a "specific undertaking" is meant, in its ordinary
acceptation, a special type of venture or project whose duration is
coterminous with the completion of the project,  e.g., project work. It is not
the case in the proceeding at bar.
Manalo v. TNS
Held: In Maraguinot, Jr. v. NLRC, the Court held that once a
project or work pool employee has been: (1) continuously, as opposed to
intermittently, rehired by the same employer for the same tasks or nature of
tasks; and (2) these tasks are vital, necessary and indispensable to the usual
business or trade of the employer, then the employee must be deemed a
regular employee.
Although it is true that the length of time of the employee’s
service is not a controlling determinant of project employment, it is vital in
determining whether he was hired for a specific undertaking or in fact
tasked to perform functions vital, necessary and indispensable to the usual
business or trade of the employer. Petitioners’ successive re-engagement in
order to perform the same kind of work firmly manifested the necessity and
desirability of their work in the usual business of TNS as a market research
facility. Undisputed also is the fact that the petitioners were assigned office-
based tasks from 9:00 o’clock in the morning up to 6:00 o’clock in the
evening, at the earliest, without any corresponding remuneration.
The project employment scheme used by TNS easily
circumvented the law and precluded its employees from attaining regular
employment status in the subtlest way possible.Petitioners were rehired not
intermittently, but continuously,contract after contract, month after month,
involving the very same tasks.
Settled Principles
• The act of hiring and rehiring employees over a period of
time without considering them as regular evidences bad
faith on the part of the employer [Bustamante v. NLRC].
• Manner and method of payment of wage or salary is
immaterial to the issue of whether the employee is
regular or not [Columbus Philippines v. NLRC].
B. PROJECT EMPLOYEES
Project employees are those whose employment has been
fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the
engagement of the employee. Employment automatically
terminates upon completion of the project.
If the project or the phase of the project the project
employee is working on has not yet been completed and his
services are terminated without just or authorized cause and there is
no showing that his services are unsatisfactory, the project
employee is entitled to reinstatement with backwages to his former
position or substantially equivalent position. If the reinstatement is
no longer possible, the employee is entitled to his salaries for the
unexpired portion of the agreement [FilSystems, Inc. v. Puente].
The principal test for determining whether particular
employees are properly characterized as "project employees" as
distinguished from "regular employees," is whether or not the
"project employees" were assigned to carry out a "specific project
or undertaking," the duration (and scope) of which were specified
at the time the employees were engaged for that project. In the
realm of business and industry, we note that "project" could refer to
one or the other of at least two (2) distinguishable types of
activities. Firstly, a project could refer to a particular job or
undertaking that is within the regular or usual business of the
employer company, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company.
Page 8 of 88
Such job or undertaking begins and ends at determined or
determinable times. The typical example of this first type of project
is a particular construction job or project of a construction
company [ALU-TUCP v. NLRC].
It is not enough that an employee is hired for a specific
project or phase of work. There must also be a determination of, or
a clear agreement on, the completion or termination of the project
at the time the employee was engaged if the objectives of Article
280 are to be achieved [Chua v. NLRC].
Thus, in order to safeguard the rights of workers against
the arbitrary use of the word “project” to prevent employees from
attaining the status of regular employees, employers claiming that
their workers are project employees should not only prove that the
duration and scope of the employment was specified at the time
they were engaged, but also that there was indeed a project.  As
discussed above, the project could either be (1) a particular job or
undertaking that is within the regular or usual business of the
employer company, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company;
or (2) a particular job or undertaking that is not within the regular
business of the corporation.  As it was with regard to the distinction
between a regular and casual employee, the purpose of this
requirement is to delineate whether or not the employer is in
constant need of the services of the specified employee.  If the
particular job or undertaking is within the regular or usual business
of the employer company and it is not identifiably distinct or
separate from the other undertakings of the company, there is
clearly a constant necessity for the performance of the task in
question, and therefore said job or undertaking should not be
considered a project [GMA v. Pabriga].
Fegurin v. NLRC
Held: We find merit in petitioners' stand that they are regular
and permanent employees. Under Article 281 of the Labor Code, any
employee who has rendered at least one year of service, or who performs
activities usually necessary or desirable in the usual business of the
employer, is considered a regular employee, the provision of written
agreement to the contrary notwithstanding.
In this case, four of the petitioners had been working with the
Company for nine years, one 4 for 8 years, another for 6 years, the shortest
term being 3 years.  The Company has not rebutted petitioners' averments
that they had been employed for several years before their services were
terminated. The Notices of Employment, therefore, do not reflect accurately
petitioners' respective lengths of service as they give the starting point of
petitioners' employment as between 1975 and 1977, or just a few months
before their dismissal. Moreover, they performed activities usually
necessary or desirable in the usual business of the Company, their
employer, hence, their employment is deemed regular.
Policy Instructions No. 20 of the Minister of Labor, intended to
stabilize employer-employee relations in the construction industry, also lays
down the distinction between project employees and non-project
employees, thus:
Generally, there are two types of employees in the construction
industry, namely: 1) Project employees, and 2) Non-Project employees.
Project employees are those employed in connection with a
particular construction project. Non-project employees are those employed
by a construction company without reference to any particular project.
xxx xxx xxx
Members of a work pool from which a construction company
draws its project employees, if considered employees of the construction
company while in the work pool, are non-project employees or employees
for an indefinite period. If they are employed in a particular project, the
completion of the project or of any phase thereof will not mean severance
of employer-employee relationship.
Considering the nature of the work of petitioners, that of
carpenter, laborer or mason, their respective jobs would actually be
continuous and on-going. When a project to which they are individually
assigned is completed, they would be assigned to the next project or a phase
thereof. In other words, they belonged to a "work pool" from which the
Company would draw workers for assignment to other projects at its
discretion. They are, therefore, actually "non-project employees".
Moreover, as brought out by the Solicitor General, in the
Collective Bargaining Agreement between petitioners' Union and the
Company, the latter had categorically recognized petitioners as regular and
permanent employees effective May 1, 1976 "for the purpose of forming a
core group of permanent and regular construction workers" for the
Company. Thus, Section 1, Article I of the CBA provides:
Section 1. The Company recognizes the Union as the only and
properly designated and authorized representative for the permanent and
regular employees of the company, except the following:
a. Supervisory personnel;
b. Workers hired on casual basis;
c. Workers hired on contract basis for the construction of
company's projects;
d. Company watchmen and security guards.
For the purpose of forming a core group of permanent and
regular construction workers, the Company hereby extends permanent and
regular employment effective May 1, 1976 to the individuals named in
Annex 'A' (Annex 'B-l' of this Petition) hereof; and effective November 1,
1974 to the individuals named in Annex 'B' (Annex 'B-2' of this Petition)
hereof. Vacancies in the said core group occassioned by retirement,
dismissal, death or permanent disability may be filled by the Company at its
option, upon consultation with the Union, whose opinion shall be regarded
as advisory.
The names of petitioners appear in Annex "A" of the
CBA except in respect of petitioner Pedro B. Barber who obtained
employment with the Company in August, 1968. Having been in the
Company's employ for several years, even the Notices of Employment
(supra) would show a clear violation of the CBA, which recognizes
petitioners as "regular and permanent" employees of the Company. The
terms and conditions of the CBA must be complied with as they constitute
the law between the parties.  A project employee or a member of a work pool may
The fact that petitioners did not present the CBA as evidence
before the agencies below will not alter the conclusion arrived at because
the Supreme Court has the authority to review matters even if they are not
assigned as errors in the appeal, if it is found that their consideration is
necessary in arriving at a just decision of the case. 
ALU-TUCP v. NLRC
Held: The term "project" could also refer to, secondly, a
particular job or undertaking that is not within the regular business of the
corporation. Such a job or undertaking must also be identifiably separate
and distinct from the ordinary or regular business operations of the
employer. The job or undertaking also begins and ends at determined or
determinable times. The case at bar presents what appears to our mind as a
typical example of this kind of "project."
NSC undertook the ambitious Five Year Expansion Program I
and II with the ultimate end in view of expanding the volume and
increasing the kinds of products that it may offer for sale to the public. The
Five Year Expansion Program had a number of component projects: e.g.,
(a) the setting up of a "Cold Rolling Mill Expansion Project"; (b) the
establishment of a "Billet Steel-Making Plant" (BSP); (c) the acquisition
and installation of a "Five Stand TDM"; and (d) the "Cold Mill Peripherals
Project." Instead of contracting out to an outside or independent contractor
the tasks of constructing the buildings with related civil and electrical
works that would house the new machinery and equipment,
the installation of the newly acquired mill or plant machinery and
equipment and the commissioning of such machinery and equipment, NSC
opted to execute and carry out its Five Year Expansion Projects "in house,"
as it were, by administration. The carrying out of the Five Year Expansion
Program (or more precisely, each of its component projects) constitutes a
distinct undertaking identifiable from the ordinary business and activity of
NSC. Each component project, of course, begins and ends at specified
times, which had already been determined by the time petitioners were
engaged. We also note that NSC did the work here involved -- the
construction of buildings and civil and electrical works, installation of
machinery and equipment and the commissioning of such machinery
-- only for itself. Private respondent NSC was not in the business of
constructing buildings and installing plant machinery for the general
business community, i.e., for unrelated, third party, corporations. NSC
did not hold itself out to the public as a construction company or as an
engineering corporation.
Page 9 of 88
Rada v. NLRC
Held: It must be stressed herein that although petitioner worked
with Philnor as a driver for eight years, the fact that his services were
rendered only for a particular project which took that same period of time to
complete categorizes him as a project employee. Petitioner was employed
for one specific project.
A non-project employee is different in that the employee is hired
for more than one project. A non-project employee, vis-a-vis a project
employee, is best exemplified in the case of Fegurin, et al. vs. National
Labor Relations Commission, et al. wherein four of the petitioners had been
working with the company for nine years, one for eight years, another for
six years, the shortest term being three years. In holding that petitioners are
regular employees, this Court therein explained:
"Considering the nature of the work of petitioners, that of
carpenter, laborer or mason, their respective jobs would actually be
continuous and on-going. When a project to which they are individually
assigned is completed, they would be assigned to the next project or a phase
thereof. In other words, they belonged to a ‘work pool’ from which the
company would draw workers for assignment to other projects at its
discretion. They are, therefore, actually ‘non-project employees’."
From the foregoing, it is clear that petitioner is a project
employee considering that he does not belong to a "work pool" from which
the company would draw workers for assignment to other projects at its
discretion. It is likewise apparent from the facts obtaining herein that
petitioner was utilized only for one particular project, the MNEE Stage 2
Project of respondent company. Hence, the termination of herein petitioner
is valid by reason of the completion of the project and the expiration of his
employment contract.
4. Becoming a Regular Employee
acquire the status of a regular employee when the following
concur:
b. There is a continuous rehiring of project employees
even after cessation of a project; and
c. The tasks performed by the alleged “project
employee” are vital, necessary and indispensable to
the usual business or trade of the employer.
However, the length of time during which the employee
was continuously re-hired is not controlling, but merely serves as a
badge of regular employment [Maraguinot, Jr. v. NLRC].
2. Workpool
A work pool may exist although the workers in the pool
do not receive salaries and are free to seek other employment
during temporary breaks in the business, provided that the worker
shall be available when called to report for a project. Although
primarily applicable to regular seasonal workers, this set-up can
likewise be applied to project workers insofar as the effect of
temporary cessation of work is concerned. This is beneficial to
both the employer and employee for it prevents the unjust situation
of “coddling labor at the expense of capital” and at the same time
enables the workers to attain the status of regular employees
[Ibid]. 
The Supreme Court ruled that a project employee or a
member of a work pool may acquire the status of a regular
employee when the following concur:
a. There is a continuous rehiring of project employees
even after cessation of a project; and
b. The tasks performed by the alleged project
employee are vital, necessary and indispensable to
the usual business or trade of the employer.
 The circumstances set forth by law and the jurisprudence
is present in this case.  In fine, even if private respondents are to be
considered as project employees, they attained regular employment
status, just the same [GMA v. Pabriga].
PNCC v. NLRC
Held: After a careful consideration of the petition and the
comment filed by the Solicitor General for the respondents, We hold that
the NLRC did not abuse its discretion in affirming the Labor Arbiter's
conclusion that the private respondent was a member of the work pool and
that he was illegally dismissed from his job.
Members of a work pool from which a construction company
draws its project employees, if considered employee of the construction
company while in the work pool, are non-project employees or employees
for an indefinite period. If they are employed in a particular project, the
completion of the project or any phase thereof will not mean severance of
employer-employee relationship.
.... Any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity which he is employed and his
employment shall continue while such actually exists. (Art. 280, Labor
Code.)
A project employee is one whose "employment has been fixed
for a specific project or undertaking the completion or termination of which
has been determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season." (Sec. 280, Labor Code;
Sandoval Shipping Inc. vs. NLRC, 136 SCRA 674.)
In finding that Porciuncula was a regular employee, the Labor
Arbiter noted that it was the petitioner's practice to rehire him after the
completion of every project and this re-hiring continued throughout
Porciuncula's 13 years of employment in the company.
The Labor Arbiter also observed that the petitioner never
reported the completion of its projects and the termination of the employees
(like Porciuncula) in its finished projects, to the nearest Public Employment
Office as required by Policy Instruction No. 20 of the Secretary of Labor. In
the case of Ochoco vs. NLRC, 120 SCRA 774, the failure of the employer
to report to the nearest employment office the termination of the workers
everytime it completed a project was considered by this Court as proof that
they were not project employees.
3. Settled Principles
• Project employees enjoy security of tenure only during
the term of their project employment
• If they are terminate without just or authorized cause
before the completion of the project, they are entitled to
reinstatement or salaries for the unexpired portion of the
agreement.
• Project employees are not entitled to separation pay at
the completion of the project.
• Project employees are presumed to be regular if they are
allowed to work beyond the completion of the project.
Having become regular employees, they can no longer be
terminated on the basis of completion of the project.
• Advanced notice of termination of project employment is
not required.
• Report to DOLE on termination of project employees is
required. Report should be made after every completion
of project or phase thereof.
• Payment of completion bonus is an indicator of project
employment.
• Burden of proof in termination of project employment
rests on the employer.
C. SEASONAL EMPLOYEES
Seasonal employees are those who work or perform
services which are seasonal in nature, and the employment is for
the duration of the season.
Page 10 of 88
Seasonal employment operates much in the same way as
project employment, albeit it involves work or service that is
seasonal in nature or lasting for the duration of the season. As with
project employment, although the seasonal employment
arrangement involves work that is seasonal or periodic in nature,
the employment itself is not automatically considered seasonal so
as to prevent the employee from attaining regular status.  To
exclude the asserted “seasonal” employee from those classified as
regular employees, the employer must show that: (1) the employee
must be performing work or services that are seasonal in nature;
and (2) he had been employed for the duration of the
season. Hence, when the “seasonal” workers are continuously and
repeatedly hired to perform the same tasks or activities for several
seasons or even after the cessation of the season, this length of
time may likewise serve as badge of regular employment. In fact,
even though denominated as “seasonal workers,” if these workers
are called to work from time to time and are only temporarily laid
off during the off-season, the law does not consider them separated
from the service during the off-season period [Universal Robina v.
Acibo].
In Manila Hotel v. CIR, it was held that where it appears
that the questioned employees were never separated from the
service but their status is that of regular seasonal employees who
are called to work from time to time, mostly during summer
season, and the nature of their relationship with the hotel is such
that during off season they are temporarily laid off but during
summer season they are re-employed, or when their services are
needed, and they are not strictly speaking separated from the
service but are merely considered as on leave of absence without
pay until they are re-employed, it is held that their employment
relationship is never severed but only suspended, and as such, they
can be considered as in the regular employment of the hotel.
Universal Robina v. Acibo
Held: In light of the above legal parameters laid down by the
law and applicable jurisprudence, the respondents are neither project,
seasonal nor fixed-term employees, but regular seasonal workers of
URSUMCO.  The following factual considerations from the records
support this conclusion:
First, the respondents were made to perform various tasks that
did not at all pertain to any specific phase of URSUMCO’s strict milling
operations that would ultimately cease upon completion of a particular
phase in the milling of sugar; rather, they were tasked to perform duties
regularly and habitually needed in URSUMCO’s operations during the
milling season. The respondents’ duties as loader operators, hookers, crane
operators and drivers were necessary to haul and transport the sugarcane
from the plantation to the mill; laboratory attendants, workers and laborers
to mill the sugar; and welders, carpenters and utility workers to ensure the
smooth and continuous operation of the mill for the duration of the milling
season, as distinguished from the production of the sugarcane which
involves the planting and raising of the sugarcane until it ripens for milling.
The production of sugarcane, it must be emphasized, requires a different set
of workers who are experienced in farm or agricultural work.  Needless to
say, they perform the activities that are necessary and desirable in
sugarcane production. As in the milling of sugarcane, the plantation
workers perform their duties only during the planting season.
Second, the respondents were regularly and repeatedly hired to
perform the same tasks year after year. This regular and repeated hiring of
the same workers (two different sets) for two separate seasons has put in
place, principally through jurisprudence, the system of regular seasonal
employment in the sugar industry and other industries with a similar nature
of operations.
Under the system, the plantation workers or the mill employees
do not work continuously for one whole year but only for the duration of
the growing of the sugarcane or the milling season.  Their seasonal work,
however, does not detract from considering them in regular employment
since in a litany of cases, this Court has already settled that seasonal
workers who are called to work from time to time and are temporarily laid
off during the off-season are not separated from the service in said period,
but are merely considered on leave until re-employment. Be this as it may,
regular seasonal employees, like the respondents in this case, should
not be confused with the regular employees of the sugar mill such as
the administrative or office personnel who perform their tasks for the
entire year regardless of the season.  The NLRC, therefore, gravely
erred when it declared the respondents regular employees of
URSUMCO without qualification and that they were entitled to the
benefits granted, under the CBA, to URSUMCO’S regular employees.
Third, while the petitioners assert that the respondents were free
to work elsewhere during the off-season, the records do not support this
assertion.  There is no evidence on record showing that after the completion
of their tasks at URSUMCO, the respondents sought and obtained
employment elsewhere.
Regular seasonal workers, if not rehired for the next
season, are deemed illegally dismissed
Regular seasonal workers are called to work from time to
time, mostly during certain seasons. The nature of their relationship
with the employer is such that during off-season, they are
temporarily laid off but they are re-employed during the season or
when their services may be needed. They are not, strictly speaking,
separated from the service but are merely considered as on leave of
absence without pay until they are re-employed. Their employment
relationship is never severed but only suspended. As such, they can
be considered as being in the regular employment of the employer
[Abasolo v. NLRC].
D. CASUAL EMPLOYEES
Casual employees are those who are not regular, project,
or seasonal employees. Employment automatically terminates upon
the lapse of the agreed period.
There is casual employment where an employee is
engaged to perform a job, work or service which is merely
incidental to the principal business of the employer, and such job,
work, or service is for a definite period made known to the
employee at the time of engagement [Conti v. NLRC].
There is such a thing as qualified security of tenure of
casual employees. Any employee who has rendered at least one
year of service, whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while
such activity exists. No regular appointment papers are necessary
for a casual employee to become regular [Kimberly v. Drilon].
Repeated rehiring of a casual employee makes him a
regular employee [Tan v. Lagarma].
Capule v. NLRC
Held: The Solicitor General opines that the cutting of the cogon
grass at the back portion of the building of private respondents may be
considered to be usually necessary or desirable in the usual business or
trade of private respondent.  The Court disagrees.  The usual
business or trade of private respondents is the manufacture of cultured
milk.  The cutting of the cogon grasses in the premises of its factory is
hardly necessary or desirable in the usual business of the private
respondents.  Indeed, it is alien thereto.
Thus, petitioners are casual employees who cannot be
considered regular employees under the aforestated provision of the Labor
Code.  Nevertheless, they may be considered regular employees if they
have rendered services for at least one (1) year.  When, as in this case, they
were dismissed from their employment before the expiration of the one-
year period they cannot lawfully claim that their dismissal was illegal.
Indeed, private respondent had shown that the services of the
petitioners were found to be unsatisfactory, so, their termination.
Settled Principles
• Causal employee becomes regular after one year of
service by operation of law. One year period reckoned
from the hiring date.
Page 11 of 88
• No regular appointment papers necessary for casual
employees to become regular.
• Repeated rehiring of a casual employee makes him a
regular employee.
• The wages and benefits of a casual employee whose
status is converted into regular should not be diminished.
E. PROBATIONARY EMPLOYEE
Article 296. Probationary Employment. Probationary
employment shall not exceed six (6) months from the date the employee
started working, unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has been
engaged on a probationary basis may be terminated for a just cause or
when he fails to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at
the time of his engagement. An employee who is allowed to work after
a probationary period shall be considered a regular employee.
Regardless of the kind of employment arrangement
between the parties, an employer has the right to put a newly-hired
employee under a probationary period or it may choose not to do
so, as part and parcel of its power to hire. If the employer puts the
employee under probationary employment, the employee would
then be given a certain period of time within which to prove that he
deserves to be regularized. Throughout such probationary period,
he will be under constant observation, evaluation and trial by the
employer during which the employer shall determine whether or
not he is qualified for permanent employment. During the
probationary period, the employer is given the opportunity to
observe the skill, competence, attitude and fitness of the
probationary employee while the latter seeks to prove to the
employer that he has the qualifications to meet the reasonable
standards for permanent employment [Dela Cruz v. NLRC].
Being in the nature of a "trial period" the essence of a
probationary period of employment fundamentally lies in the
purpose or objective sought to be attained by both the employer
and the employee during said period.  The length of time is
immaterial in determining the correlative rights of both in dealing
with each other during said period.  While the employer, as stated
earlier, observes the fitness, propriety and efficiency of a
probationer to ascertain whether he is qualified for permanent
employment, the probationer, on the other, seeks to prove to the
employer that he has the qualifications to meet the reasonable
standards for permanent employment. It is well settled that the
employer has the right or is at liberty to choose who will be hired
and who will be denied employment.  In that sense, it is within the
exercise of the right to select his employees that the employer may
set or fix a probationary period within which the latter may test and
observe the conduct of the former before hiring him permanently
[International v. NLRC]. 
The probationary period may be extended but only upon
the mutual agreement by the employer and the probationary
employee. Absent such agreement would make the extension
invalid, hence, the employee would be considered as having
become a regular employee after the lapse of the original
probationary period [Dusit Hotel Nikko v. Gatbonton].
1. Probationary period, how reckoned and
computed
In Cebu Royal Plant v. Deputy Minister of Labor, it was
held that if the period is six (6) months, it shall be reckoned “from
the date of appointment up to the same calendar date of the 6 th
month following.” This means that if a probationary employee is
hired on January 1, his probationary period expires on July 1 which
is the same calendar date of the 6th month following the date of
appointment.

Philips Semiconductors v. Fadriquela
Held:  The agreement embodied in the "Minutes of Meeting"
between the representative union and private respondent, providing that
contractual employees shall become regular employees only after seventeen
months of employment, cannot bind petitioner. Such a provision runs
contrary to law not only because contractual employees do not form part of
the collective bargaining unit which entered into the CBA with private
respondent but also because of the Labor Code provision on regularization.
The law explicitly states that an employee who had rendered at least one
year of service, whether such service is continuous or broken, shall be
considered a regular employee. The period set by law is one year. The
seventeen months provided by the "Minutes of Meeting" is obviously much
longer.
2. Exceptions to the 6-Month Probationary Period
The following are the exceptions to the 6-month
probationary period:
a. When the probationary employment is covered by
an apprenticeship agreement stipulating a longer
period.
b. When the employer and employee agree on a shorter
or longer period, such as when the same is
established by company policy or when the same is
required by the nature of work to be performed by
the employee. [Buiser vs. Leogardo].
In the latter case, there is recognition of the exercise of
managerial prerogatives especially where the employee must learn
a particular kind of work or when the job requires certain
qualifications, skills, experience or training (131 SCRA 151). In
the Buiser case, for example, the Supreme Court justified the 18-
month probationary period by the fact that the company can only
evaluate the efficiency, conduct, and selling ability of its sales
representatives upon publication of the solicited ads which will
occur only a year after the sale has been made, and that such period
is provided in the collective bargaining agreement of the company
and the employee’s union.
Octavanio v. NLRC
Held: For one, probationary employment should not exceed six
(6) months from the date the employee started working, unless it is covered
by an apprenticeship agreement stipulating a longer period.[8] True, the
services of an employee who has been engaged on a probationary basis may
be terminated for a just cause or when he fails to qualify as a regular
employee in accordance with the reasonable standards made known by the
employer to the employee at the time of his employment. But the law is
explicit that an employee who is allowed to work after a probationary
period shall be considered a regular employee.
It is clear from the foregoing that Lina should be considered a
regular employee on all counts.  First, the nature of her job as a parts clerk
required her to perform activities which were deemed necessary and
desirable in the usual business of General Diesel Power Corporation, in
connection with dealing in parts, sales, and services.  (She was neither
contracted for a specified project nor required to perform work that was
seasonable in nature.) Under Article 280 of the Labor Code, when one
performs such activities, he is deemed a regular employee, "[t]he provisions
of written agreement to the contrary notwithstanding . . ." Second, her
employment was not covered by any apprenticeship agreement.  Third, she
was rehired on May 22, 1985 and on January 20, 1986.  This fact of
rehiring negates management's claims that she failed to qualify as a regular
employee.  On the contrary, management promoted her to parts clerk. 
Finally, at the risk of being repetitious, Lina had been re-hired to work not
only after her first six-month probationary period from November 21, 1984
to May 21,1985, she had been also re-hired to work immediately after her
second six-month probationary period from May 22, 1985 to November 21,
1985; and then again on January 20, 1986, she was rehired on a
probationary status — her third — and was again terminated on June 5,
1986.  Thus, we can readily see that Lina had been hired and again and
Page 12 of 88
again rehired and again and again and again fired.  We perceive these
successive hirings and firings as a ploy to avoid the obligations imposed by
law on employers for the protection and benefit of probationary employees,
who, more often than not, are kept in the bondage, so to speak, of unending
probationary employment without any complaint due to the serious
unemployment problem besetting our country today.  The Court can not
countenance this overreaching.  No member of the country's work force
must be allowed to be taken advantage of by any employer.
An employee who is allowed to work after a probationary
period, shall be considered a regular employee. The fact that Lina worked
on a contract-to-contract basis can not alter the character of her
employment, because contracts can not override the mandate of law. Hence,
by operation of law, she has likewise, become a regular employee.
We find self-defeating the private respondent's arguments that
the petitioner, while in her probationary periods, had failed to measure up
to the standards of her work and had been found unfit for her job, in the
light of the circumstance discussed earlier.  Second, the private respondent
failed to establish that there had been reasonable standards set forth by the
company by which Lina would measure up to as a regular employee. 
Mariwasa v. Leogardo
Held: The single difference between Buiser and the present
case:  that in the former involved an eighteen-month probationary period
stipulated in the original contract of employment, whereas the latter refers
to an extension agreed upon at or prior to the expiration of the statutory six-
month period, is hardly such as to warrant or even suggest a different ruling
here.  In both cases the parties' agreements in fact resulted in extensions of
the period prescribed by law.  That in this case the inability of the
probationer to make the grade became apparent only at or about the end of
the six-month period, hence an extension could not have been pre-arranged
as was done in Buiser assumes no adverse significance, given the lack, as
pointed out by the Solicitor General, of any indication that the extension to
which Dequila gave his agreement was a mere stratagem of petitioners to
avoid the legal consequences of a probationary period satisfactorily
completed.
For aught that appears of record, the extension of Dequila's
probation was ex gratia, an act of liberality on the part of his employer
affording him a second chance to make good after having initially failed to
prove his worth as an employee.  Such an act cannot now unjustly be turned
against said employer's account to compel it to keep on its payroll one who
could not perform according to its work standards.  The law, surely, was
never meant to produce such an inequitable result.
By voluntarily agreeing to an extension of the probationary
period, Dequila in effect waived any benefit attaching to the completion of
said period if he still failed to make the grade during the period of
extension.  The Court finds nothing in the law which by any fair
interpretation prohibits such a waiver.  And no public policy protecting the
employee and the security of his tenure is served by proscribing voluntary
agreements which, by reasonably extending the period of probation,
actually improve and further a probationary employee's prospects of
demonstrating his fitness for regular employment.
3. Security of Tenure of Probationary Employees
Within the limited 6-month probationary period,
probationary employees are entitled to security of tenure
notwithstanding their limited tenure and non-permanent status
[Philippine Daily Inquirer v. Magtibay, Jr.]. Hence, during their
probationary employment, they cannot be dismissed except under
any of the following three (3) grounds:
a. For just cause; or
b. For authorized cause; or
c. When the probationary employee fails to qualify as
a regular employee in accordance with reasonable
standards made known by the employer to the
employee at the start of the employment.
Due process for a probationary employee consists in
having informed him of the standards against which his
performance will be continuously assessed during the probationary
period. These work standards should be understood at the time of
his engagement and then, if he fails to meet these standards, a
written notice is served to the him by the employer within a
reasonable time from the effective date of termination. 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 deemed a
regular employee [Philippine Daily Inquirer v. Magtibay, Jr].
Valid severance of the probationary employer-employee
relationship outside of the just and authorized causes presupposes
that the employer had accomplished the following things:
a. The employer must communicate to the employee
that he is being hired on a probationary basis;
b. The employer must convey to the probationary
employee the reasonable standards to qualify for
regularization;
c. The probationary status of the newly-hired
employee must be communicated to him prior to the
commencement of his employment;
d. The employer must convey these reasonable
standards at the start of the probationary employee’s
engagement and not in the course thereof or towards
its end; otherwise, he becomes a regular employee
from day one of his employment.
e. The employer must evaluate the performance of the
probationary employee in relation to the duly
communicated reasonable standards; and
f. The employee fails to comply with these reasonable
standards before the completion of the probationary
period [Tamson’s Enterprises v. Court of Appeals].
Failure to qualify as a regular employee in accordance
with the reasonable standards of the employer is a just cause for
terminating a probationary employee specifically recognized under
Article 296 [International v. NLRC].
Oreta v. NLRC
Held: The law is clear to the effect that in all cases involving
employees engaged on probationary basis, the employer shall make known
to the employee at the time he is hired, the standards by which he will
qualify as a regular employee.  Nowhere in the employment contract
executed between petitioner company and respondent Grulla is there a
stipulation that the latter shall undergo a probationary period for three
months before he can qualify as a regular employee.  There is also no
evidence on record showing that the respondent Grulla had been apprised of
his probationary status and the requirements which he should comply in
order to be a regular employee.  In the absence of these requisites, there is
justification in concluding that respondent Grulla was a regular employee at
the time he was dismissed by petitioner.  As such, he is entitled to security
of tenure during his period of employment and his services cannot be
terminated except for just and authorized causes enumerated under the
Labor Code and under the employment contract.
Abbott Laboratories v. Alcaraz
Held: A probationary employee, like a regular employee, enjoys
security of tenure. However, in cases of probationary employment, aside
from just or authorized causes of termination, an additional ground is
provided under Article 295 of the Labor Code, i.e., the probationary
employee may also be terminated for failure to qualify as a regular
employee in accordance with the reasonable standards made known by the
employer to the employee at the time of the engagement. Thus, the services
of an employee who has been engaged on probationary basis may be
terminated for any of the following: (a) a just or (b) an authorized cause;
and (c) when he fails to qualify as a regular employee in accordance with
reasonable standards prescribed by the employer.
Corollary thereto, Section 6(d), Rule I, Book VI of the
Implementing Rules of the Labor Code provides that if the employer fails
to inform the probationary employee of the reasonable standards upon
Page 13 of 88
which the regularization would be based on at the time of the engagement,
then the said employee shall be deemed a regular employee, viz.:
(d) 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 deemed a regular
employee.
In other words, the employer is made to comply with two (2)
requirements when dealing with a probationary employee: first, the
employer must communicate the regularization standards to the
probationary employee; and second, the employer must make such
communication at the time of the probationary employee’s engagement. If
the employer fails to comply with either, the employee is deemed as a
regular and not a probationary employee.
Keeping with these rules, an employer is deemed to have made
known the standards that would qualify a probationary employee to be a
regular employee when it has exerted reasonable efforts to apprise the
employee of what he is expected to do or accomplish during the trial period
of probation. This goes without saying that the employee is sufficiently
made aware of his probationary status as well as the length of time of the
probation.
The exception to the foregoing is when the job is self-
descriptive in nature, for instance, in the case of maids, cooks, drivers, or
messengers.[61] Also, in Aberdeen Court, Inc. v. Agustin, it has been held
that the rule on notifying a probationary employee of the standards of
regularization should not be used to exculpate an employee who acts in a
manner contrary to basic knowledge and common sense in regard to which
there is no need to spell out a policy or standard to be met. In the same
light, an employee’s failure to perform the duties and responsibilities which
have been clearly made known to him constitutes a justifiable basis for a
probationary employee’s non-regularization.
In this case, petitioners contend that Alcaraz was terminated
because she failed to qualify as a regular employee according to Abbott’s
standards which were made known to her at the time of her engagement.
Contrarily, Alcaraz claims that Abbott never apprised her of these standards
and thus, maintains that she is a regular and not a mere probationary
employee.
The Court finds petitioners’ assertions to be well-taken.
A punctilious examination of the records reveals that Abbott had
indeed complied with the above-stated requirements. This conclusion is
largely impelled by the fact that Abbott clearly conveyed to Alcaraz her
duties and responsibilities as Regulatory Affairs Manager prior to, during
the time of her engagement, and the incipient stages of her employment. On
this score, the Court finds it apt to detail not only the incidents which point
out to the efforts made by Abbott but also those circumstances which would
show that Alcaraz was well-apprised of her employer’s expectations that
would, in turn, determine her regularization.
Verily, basic knowledge and common sense dictate that the
adequate performance of one’s duties is, by and of itself, an inherent and
implied standard for a probationary employee to be regularized; such is a
regularization standard which need not be literally spelled out or mapped
into technical indicators in every case. In this regard, it must be observed
that the assessment of adequate duty performance is in the nature of a
management prerogative which when reasonably exercised – as Abbott did
in this case – should be respected. This is especially true of a managerial
employee like Alcaraz who was tasked with the vital responsibility of
handling the personnel and important matters of her department.
In fine, the Court rules that Alcaraz’s status as a probationary
employee and her consequent dismissal must stand. Consequently, in
holding that Alcaraz was illegally dismissed due to her status as a regular
and not a probationary employee, the Court finds that the NLRC committed
a grave abuse of discretion.
To elucidate, records show that the NLRC based its decision on
the premise that Alcaraz’s receipt of her job description and Abbott’s Code
of Conduct and Performance Modules was not equivalent to being actually
informed of the performance standards upon which she should have been
evaluated on.[64] It, however, overlooked the legal implication of the other
attendant circumstances as detailed herein which should have warranted a
contrary finding that Alcaraz was indeed a probationary and not a regular
employee – more particularly the fact that she was well-aware of her duties
and responsibilities and that her failure to adequately perform the same
would lead to her non-regularization and eventually, her termination.
 Accordingly, by affirming the NLRC’s pronouncement which is
tainted with grave abuse of discretion, the CA committed a reversible error
which, perforce, necessitates the reversal of its decision.
C.  Probationary employment; termination procedure.
A different procedure is applied when terminating a
probationary employee; the usual two-notice rule does not govern. Section
2, Rule I, Book VI of the Implementing Rules of the Labor Code states that
“[i]f the termination is brought about by the x x x failure of an employee to
meet the standards of the employer in case of probationary employment, it
shall be sufficient that a written notice is served the employee, within a
reasonable time from the effective date of termination.”
As the records show, Alcaraz's dismissal was effected through a
letter dated May 19, 2005 which she received on May 23, 2005 and again
on May 27, 2005. Stated therein were the reasons for her termination, i.e.,
that after proper evaluation, Abbott determined that she failed to meet the
reasonable standards for her regularization considering her lack of time and
people management and decision-making skills, which are necessary in the
performance of her functions as Regulatory Affairs Manager.
[66]
 Undeniably, this written notice sufficiently meets the criteria set forth
above, thereby legitimizing the cause and manner of Alcaraz’s dismissal as
a probationary employee under the parameters set by the Labor Code.[67]
4. Settled Jurisprudential Principles
• Purpose and not length of the probationary period is
material.
• Employee is deemed regular absent any written contract
to prove probationary employment [San Miguel
Corporation v. Del Rosario].
• Repetitive rehiring of a probationary employee means he
has become a regular employee [Octaviano v. NLRC].
• Regular workers of previous owner of business may be
hired as probationary employees of a new owner [Espina
v. Court of Appeals].
• Probationary employment cannot be ad infinitum
[Cathay Pacific v. Marin].
F. FIXED-TERM EMPLOYEES
This is the exception to the rule that an employee
becomes regular by reason of nature of work or period of
employment [Brent School, Inc. v. Zamora] because in a fixed
period employment, these factors are not decisive indicators of
regularity of employment. The decisive determinant is the day
certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being
understood to be “that which must necessarily come, although it
may not be known when” [Pantranco North Expres, Inc.].
Employment automatically terminates upon he expiration of the
fixed period.
This, however, is not provided in the Labor Code but
recognized only in jurisprudence [Innodata Knowledge Services v.
Inting]. Fixed Term employment must comply with at least two
criteria: (1) The fixed period employment was knowingly and
freely agreed upon by the parties; no circumstance such as force,
duress or improper pressure vitiates the employee’s consent; and
(2) employer and the employee dealt with each other on more or
less equal terms with no moral dominance exercised by the former
over the latter [Romares v. NLRC].
Purefoods v. NLRC
Held: None of these criteria had been met in the present case. As
pointed out by the private respondents:
[I]t could not be supposed that private respondents and all other
so-called “casual” workers of [the petitioner] KNOWINGLY and
VOLUNTARILY agreed to the 5-month employment contract. Cannery
workers are never on equal terms with their employers. Almost always,
they agree to any terms of an employment contract just to get employed
considering that it is difficult to find work given their ordinary
qualifications. Their freedom to contract is empty and hollow because theirs
Page 14 of 88
is the freedom to starve if they refuse to work as casual or contractual
workers. Indeed, to the unemployed, security of tenure has no value. It
could not then be said that petitioner and private respondents "dealt with
each other on more or less equal terms with no moral dominance whatever
being exercised by the former over the latter.
The petitioner does not deny or rebut private respondents'
averments (1) that the main bulk of its workforce consisted of its so-called
“casual” employees; (2) that as of July 1991, “casual” workers numbered
1,835; and regular employees, 263; (3) that the company hired “casual”
every month for the duration of five months, after which their services were
terminated and they were replaced by other “casual” employees on the
same five-month duration; and (4) that these “casual” employees were
actually doing work that were necessary and desirable in petitioner’s usual
business.
As a matter of fact, the petitioner even stated in its position
paper submitted to the Labor Arbiter that, according to its records, the
previous employees of the company hired on a five-month basis numbered
about 10,000 as of July 1990. This confirms private respondents’ allegation
that it was really the practice of the company to hire workers on a
uniformly fixed contract basis and replace them upon the expiration of their
contracts with other workers on the same employment duration.
This scheme of the petitioner was apparently designed to
prevent the private respondents and the other “casual” employees from
attaining the status of a regular employee. It was a clear circumvention of
the employees’ right to security of tenure and to other benefits like
minimum wage, cost-of-living allowance, sick leave, holiday pay, and 13th
month pay. Indeed, the petitioner succeeded in evading the application of
labor laws. Also, it saved itself from the trouble or burden of establishing a
just cause for terminating employees by the simple expedient of refusing to
renew the employment contracts.
The five-month period specified in private respondents’
employment contracts having been imposed precisely to circumvent the
constitutional guarantee on security of tenure should, therefore, be struck
down or disregarded as contrary to public policy or morals. To uphold the
contractual arrangement between the petitioner and the private respondents
would, in effect, permit the former to avoid hiring permanent or regular
employees by simply hiring them on a temporary or casual basis, thereby
violating the employees’ security of tenure in their jobs.
Viernes v. NLRC
Held: The principle we have enunciated in Brent applies only
with respect to fixed term employments. While it is true that petitioners
were initially employed on a fixed term basis as their employment contracts
were only for October 8 to 31, 1990, after October 31, 1990, they were
allowed to continue working in the same capacity as meter readers without
the benefit of a new contract or agreement or without the term of their
employment being fixed anew. After October 31, 1990, the employment of
petitioners is no longer on a fixed term basis. The complexion of the
employment relationship of petitioners and private respondent is thereby
totally changed. Petitioners have attained the status of regular employees.
Millares v. NLRC
Held: As a Filipino seaman, petitioner is governed by the
Rules and Regulations Governing Overseas Employment and the said
Rules do not provide for separation or termination pay. What is
embodied in petitioner’s contract is the payment of compensation arising
from permanent partial disability during the period of employment. We find
that private respondent complied with the terms of contract when it paid
petitioner P42,315.00 which, in our opinion, is a reasonable amount, as
compensation for his illness.
Lastly, petitioner claims that he eventually became a regular
employee of private respondent and thus falls within the purview of
Articles 284 and 95 of the Labor Code. In support of this contention,
petitioner cites the case of Worth Shipping Service, Inc., et al. v. NLRC, et
al., wherein we held that the crew members of the shipping company had
attained regular status and thus, were entitled to separation pay. However,
the facts of said case differ from the present. In Worth, we held that the
principal and agent had “operational control and management” over the MV
Orient Carrier and thus, were the actual employers of their crew members.
From the foregoing cases, it is clear that seafarers are considered
contractual employees. They can not be considered as regular employees
under Article 280 of the Labor Code. Their employment is governed by the
contracts they sign everytime they are rehired and their employment is
terminated when the contract expires. Their employment is contractually
fixed for a certain period of time. They fall under the exception of Article
280 whose employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of
engagement of the employee or where the work or services to be performed
is seasonal in nature and the employment is for the duration of the season.
[19]
 We need not depart from the rulings of the Court in the two
aforementioned cases which indeed constitute stare decisis with respect to
the employment status of seafarers.
Petitioners insist that they should be considered regular
employees, since they have rendered services which are usually necessary
and desirable to the business of their employer, and that they have rendered
more than twenty(20) years of service. While this may be true, the Brent
case has, however, held that there are certain forms of employment which
also require the performance of usual and desirable functions and which
exceed one year but do not necessarily attain regular employment status
under Article 280.[20] Overseas workers including seafarers fall under this
type of employment which are governed by the mutual agreements of the
parties.
In this jurisdiction and as clearly stated in the Coyoca case,
Filipino seamen are governed by the Rules and Regulations of the POEA.
The Standard Employment Contract governing the employment of All
Filipino seamen on Board Ocean-Going Vessels of the POEA, particularly
in Part I, Sec. C specifically provides that the contract of seamen shall be
for a fixed period. And in no case should the contract of seamen be longer
than 12 months. It reads:
Section C. Duration of Contract
The period of employment shall be for a fixed period but in no
case to exceed 12 months and shall be stated in the Crew Contract. Any
extension of the Contract period shall be subject to the mutual consent of
the parties.
Moreover, it is an accepted maritime industry practice that
employment of seafarers are for a fixed period only. Constrained by the
nature of their employment which is quite peculiar and unique in itself, it is
for the mutual interest of both the seafarer and the employer why the
employment status must be contractual only or for a certain period of time.
Seafarers spend most of their time at sea and understandably, they can not
stay for a long and an indefinite period of time at sea.[21] Limited access to
shore society during the employment will have an adverse impact on the
seafarer. The national, cultural and lingual diversity among the crew during
the COE is a reality that necessitates the limitation of its period.[22]
Petitioners make much of the fact that they have been
continually re-hired or their contracts renewed before the contracts expired
(which has admittedly been going on for twenty (20) years). By such
circumstance they claim to have acquired regular status with all the rights
and benefits appurtenant to it.
Such contention is untenable. Undeniably, this circumstance of
continuous re-hiring was dictated by practical considerations that
experienced crew members are more preferred. Petitioners were only given
priority or preference because of their experience and qualifications but this
does not detract the fact that herein petitioners are contractual employees.
They can not be considered regular employees.
Settled Principles
• Fixed-term employment is valid even if duties are usually
necessary or desirable in the employer’s usual business
or trade.
• Notice of termination not necessary in fixed-term
employment.
• Employee is deemed regular if contract failed to state the
specific fixed period of employment, if they are allowed
to work beyond the fixed term, if they render work for
more than 1 year, and if they are successively renewed
for work.
• Termination prior to the lapse of the fixed term should be
for just or authorized cause.
Probationary v. Fixed-Term Employment
The distinction between probationary employment and
fixed-term employment lies in the intention of the employer and
employee. Both employments involve fixed period in terms of
Page 15 of 88
duration of employment. However, in probationary employment,
the parties mutually intend to make their relationship regular after
the lapse of the period; while in fixed-term employment, no such
intention exists and the relationship automatically terminates at the
expiration of the period.
IV
MANAGEMENT PREROGATIVE
A. CONCEPT AND COVERAGE
It is the employer’s prerogative, based on its assessment
and perception of its employees’ qualifications, aptitudes, and
competence, to move them around in the various areas of its
business operations in order to ascertain where they will function
with maximum benefit to the company [Pecson v. Robinson].
Management is free to regulate, according to its own
discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, time, place and
manner of work, processes to be followed, supervision of workers,
working regulations, transfer of employees, work supervision, lay
off of workers and discipline, dismissal and recall of workers.  The
exercise of management prerogative, however, is not absolute as it
must be exercised in good faith and with due regard to the rights of
labor [Julie’s Bakeshop v. Arnaiz].
B. TRANSFER, PROMOTION, DEMOTION
1. Transfer
An employee’s right to security of tenure does not give
him such a vested right in his position as would deprive the
company of its prerogative to change his assignment or transfer
him where he will be most useful.  When his transfer is not
unreasonable, nor inconvenient, nor prejudicial to him, and it does
not involve a demotion in rank or a diminution of his salaries,
benefits, and other privileges, the employee may not complain that
it amounts to a constructive dismissal [Pecson v. Robinsons].
Thus, as further held in Philippine Japan Active Carbon
Corporation, when the transfer of an employee is not unreasonable,
or inconvenient, or prejudicial to him, and it does not involve a
demotion in rank or a diminution of his salaries, benefits and other
privileges, the employee may not complain that it amounts to a
constructive dismissal.
But, like other rights, there are limits thereto. The
managerial prerogative to transfer personnel must be exercised
without grave abuse of discretion, bearing in mind the basic
elements of justice and fair play. Having the right should not be
confused with the manner in which that right is exercised. Thus, it
cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker.[9] In particular, the employer must be able to
show that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; nor does it involve a demotion in rank
or a diminution of his salaries, privileges and other benefits.
[10]
 Should the employer fail to overcome this burden of proof, the
employee’s transfer shall be tantamount to constructive dismissal,
which has been defined as a quitting because continued
employment is rendered impossible, unreasonable or unlikely; as
an offer involving a demotion in rank and diminution in
pay. Likewise, constructive dismissal exists when an act of clear
discrimination, insensibility or disdain by an employer has become
so unbearable to the employee leaving him with no option but to
forego with his continued employment [Blue Dairy v. NLRC].
In the resolution of whether the transfer of the
respondents from one area of operation to another was valid,
finding a balance between the scope and limitation of the exercise
of management prerogative and the employees' right to security of
tenure is necessary. We have to weigh and consider, on the one
hand, that management has a wide discretion to regulate all aspects
of employment, including the transfer and re-assignment of
employees according to the exigencies of the business; and, on the
other, that the transfer constitutes constructive dismissal when it is
unreasonable, inconvenient or prejudicial to the employee, or
involves a demotion in rank or diminution of salaries, benefits and
other privileges, or when the acts of discrimination, insensibility or
disdain on the part of the employer become unbearable for the
employee, forcing him to forego her employment [Chateau v.
Balba].
Concerning the transfer of employees, these are the
following jurisprudential guidelines: (a) a transfer is a movement
from one position to another of equivalent rank, level or salary
without break in the service or a lateral movement from one
position to another of equivalent rank or salary; (b) the employer
has the inherent right to transfer or reassign an employee  for   relegated to a subordinate or less important position constituting a
legitimate   business  purposes;   (c)  a  transfer   becomes unlawful
where it is motivated by discrimination or bad faith or is effected as
a form of punishment or is a demotion without sufficient cause; (d)
the employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee
[Automatic v. Deguildo].
Blue Dairy v. NLRC
Held: In the present case, petitioners failed to justify Recalde’s
transfer from the position of food technologist in the laboratory to a worker
in the vegetable processing section. We recall that what triggered Recalde’s
transfer was the 21 October incident where she was found to have allegedly
utilized company vehicle in looking for a new residence during office hours
without permission from management. In petitioners’ view, she was
dishonest such that they lost their trust and confidence in her. Yet, it does
not appear that Recalde was provided an opportunity to refute the reason for
the transfer. Petitioners merely relied on the narrations of the company
driver. Nor was Recalde notified in advance of her impending transfer
which was, as we shall elucidate later, a demotion in rank.
Chateau v. Balba
Held: In this case of constructive dismissal, the burden of proof
lies in the petitioner as the employer to prove that the transfer of the
employee from one area of operation to another was for a valid and
legitimate ground, like genuine business necessity. We are satisfied that the
petitioner duly discharged its burden, and thus established that, contrary to
the claim of the respondents that they had been constructively dismissed,
their transfer had been an exercise of the petitioner's legitimate
management prerogative.
To start with, the resignations of the account managers and the
director of sales and marketing in the Manila office brought about the
immediate need for their replacements with personnel having
commensurate experiences and skills. With the positions held by the
resigned sales personnel being undoubtedly crucial to the operations and
business of the petitioner, the resignations gave rise to an urgent and
genuine business necessity that fully warranted the transfer from the
Nasugbu, Batangas office to the main office in Manila of the respondents,
undoubtedly the best suited to perform the tasks assigned to the resigned
employees because of their being themselves account managers who had
recently attended seminars and trainings as such. The transfer could not be
validly assailed as a form of constructive dismissal, for, as held in Benguet
Electric Cooperative v. Fianza, management had the prerogative to
determine the place where the employee is best qualified to serve the
interests of the business given the qualifications, training and performance
of the affected employee.
Secondly, although the respondents' transfer to Manila might be
potentially inconvenient for them because it would entail additional
expenses on their part aside from their being forced to be away from their
families, it was neither unreasonable nor oppressive. The petitioner rightly
points out that the transfer would be without demotion in rank, or without
diminution of benefits and salaries. Instead, the transfer would open the
way for their eventual career growth, with the corresponding increases in
pay. It is noted that their prompt and repeated opposition to the transfer
effectively stalled the possibility of any agreement between the parties
regarding benefits or salary adjustments.
Page 16 of 88
Thirdly, the respondents did not show by substantial evidence
that the petitioner was acting in bad faith or had ill-motive in ordering their
transfer. In contrast, the urgency and genuine business necessity justifying
the transfer negated bad faith on the part of the petitioner.
Lastly, the respondents, by having voluntarily affixed their
signatures on their respective letters of appointment, acceded to the terms
and conditions of employment incorporated therein. One of the terms and
conditions thus incorporated was the prerogative of management to transfer
and re-assign its employees from one job to another "as it may deem
necessary or advisable.
2. Promotion and Demotion
Promotion is the advancement from one position to
another with an increase in duties and responsibilities as authorized
by law, and usually accompanied by an increase in salary.
Conversely, demotion involves a situation where an employee is
reduction to a lower grade or rank, with a corresponding decrease
in duties and responsibilities, and usually accompanied by a
decrease in salary [Echo 2000 v. Obrero].
For promotion to occur, there must be an advancement
from one position to another or an upward vertical movement of
the employee's rank or position. Any increase in salary should only
be considered incidental but never determinative of whether or not
a promotion is bestowed upon an employee. An employee is not
bound to accept a promotion, which is in the nature of a gift or
reward. Refusal to be promoted is a valid exercise of a right. Such
exercise cannot be considered in law as insubordination, or willful
disobedience of a lawful order of the employer, hence, it cannot be
the basis of an employee's dismissal from service [Ibid].
C. COMPANY POLICIES AND DECISIONS
Managerial prerogatives are subject to limitations
provided by law, collective bargaining agreements, and the general
principles of fair play and justice. In the exercise of its
management prerogative, an employer must therefore ensure that
the policies, rules and regulations on work-related activities of the
employees must always be fair and reasonable and the
corresponding penalties, when prescribed, commensurate to the
offense involved and to the degree of the infraction [Mirant v.
Caro].
D. LIMITATIONS AND CONDITIONS IN EMPLOYMENT
1. Non-Compete/Non-Solicitation Clause
In cases where an employee assails a contract containing
a provision prohibiting him or her from accepting competitive
employment as against public policy, the employer has to adduce
evidence to prove that the restriction is reasonable and not greater
than necessary to protect the employer's legitimate business
interests. The restraint may not be unduly harsh or oppressive in
curtailing the employee's legitimate efforts to earn a livelihood and
must be reasonable in light of sound public policy [Rivera v.
Solidbank].
Thus, in determining whether the contract is reasonable
or not, the trial court should consider the following factors: (a)
whether the covenant protects a legitimate business interest of the
employer; (b) whether the covenant creates an undue burden on the
employee; (c) whether the covenant is injurious to the public
welfare; (d) whether the time and territorial limitations contained in
the covenant are reasonable; and (e) whether the restraint is
reasonable from the standpoint of public policy. Not to be ignored
is the fact that the banking business is so impressed with public
interest where the trust and interest of the public in general is of
paramount importance such that the appropriate standard of
diligence must be very high, if not the highest degree of diligence
[Rivera v. Solidbank].
Rivera v. Solidbank
Held: A post-retirement competitive employment restriction is
designed to protect the employer against competition by former employees
who may retire and obtain retirement or pension benefits and, at the same
time, engage in competitive employment.
We have reviewed the Undertaking which respondent impelled
petitioner to sign, and find that in case of failure to comply with the
promise not to accept competitive employment within one year from
February 28, 1995, respondent will have a cause of action against petitioner
for "protection in the courts of law." The words "cause of action for
protection in the courts of law" are so broad and comprehensive, that they
may also include a cause of action for prohibitory and mandatory injunction
against petitioner, specific performance plus damages, or a damage suit (for
actual, moral and/or exemplary damages), all inclusive of the restitution of
the P963,619.28 which petitioner received from respondent. The
Undertaking and the Release, Waiver and Quitclaim do not provide for the
automatic forfeiture of the benefits petitioner received under the SRP upon
his breach of said deeds. Thus, the post-retirement competitive employment
ban incorporated in the Undertaking of respondent does not, on its face,
appear to be of the same class or genre as that contemplated in Rochester.
Del Castillo v. Richmonde
Held: placed upon the right of the plaintiff is, that he shall "not
open, nor own, nor have any interest directly or indirectly in any other
drugstore either in his own name or in the name of another; nor have any
connection with or be employed by any other drugstore as pharmacist or in
any capacity in any drugstore situated within a radius of four miles from the
district of Legaspi, municipality and Province of Albay, while the said
Shannon Richmond or his heirs may own or have open a drugstore, or have
an interest in any other one within the limits of the districts of Legaspi,
Albay, and Daraga of the municipality of Albay, Province of Albay." It will
be noted that the restrictions placed upon the plaintiff are strictly limited (a)
to a limited district or districts, and (b) during the time while the defendant
or his heirs may own or have open a drugstore, or have an interest in any
other one within said limited district.
The law concerning contracts which tend to restrain business or
trade has gone through a long series of changes from time to time with the
changing conditions of trade and commerce. With trifling exceptions, said
changes have been a continuous development of a general rule. The early
cases show plainly a disposition to avoid and annul all contract which
prohibited or restrained any one from using a lawful trade "at any time or at
any place," as being against the benefit of the state. Later, however, the rule
became well established that if the restraint was limited to "a certain time"
and within "a certain place," such contracts were valid and not "against the
benefit of the state." Later cases, and we think the rule is now well
established, have held that a contract in restraint of trade is valid providing
there is a limitation upon either time or place. A contract, however, which
restrains a man from entering into a business or trade without either a
limitation as to time or place, will be held invalid. (Anchor Electric Co. vs.
Hawkes, 171 Mass., 101; Alger vs. Thacher, 19 Pickering [Mass.], 51;
Taylor vs. Blanchard, 13 Allen [Mass.], 370; Lufkin Rule Co. vs. Fringeli,
57 Ohio State, 596; Fowle vs. Park, 131 U. S., 88, 97; Diamond Match Co.
vs. Roeber, 106 N. Y., 473; National Benefit Co. vs. Union Hospital Co.,
45 Minn., 272; Swigert and Howard vs. Tilden, 121 Iowa, 650.)
The public welfare of course must always be considered, and if
it be not involved and the restraint upon one party is not greater than
protection to the other requires, contracts like the one we are discussing will
be sustained. The general tendency, we believe, of modern authority, is to
make the test whether the restraint is reasonably necessary for the
protection of the contracting parties. If the contract is reasonably necessary
to protect the interest of the parties, it will be upheld. (Ollendorff vs.
Abrahamson, 38 Phil., 585.)
In that case we held that a contract by which an employee agrees
to refrain for a given length of time, after the expiration of the term of his
employment, from engaging in a business, competitive with that of his
employer, is not void as being in restraint of trade if the restraint imposed is
not greater than that which is necessary to afford a reasonable protection. In
all cases like the present, the question is whether, under the particular
circumstances of the case and the nature of the particular contract involved
in it, the contract is, or is not, unreasonable. Of course in establishing
Page 17 of 88
whether the contract is a reasonable or unreasonable one, the nature of the
business must also be considered. What would be a reasonable restriction as
to time and place upon the manufacture of railway locomotive engines
might be a very unreasonable restriction when imposed upon the
employment of a day laborer.
Considering the nature of the business in which the defendant is
engaged, in relation with the limitation placed upon the plaintiff both as to
time and place, we are of the opinion, .and so decide, that such limitation is
legal and reasonable and not contrary to public policy. Therefore the
judgment appealed from should be and is hereby affirmed, with costs. So
ordered.
Consulta v. Court of Appeals
Held: Consulta’s appointment had an exclusivity provision.  The
appointment provided that Consulta must represent Pamana on an exclusive
basis. She must not engage directly or indirectly in activities of other
companies that compete with the business of Pamana.  However, the fact
that the appointment required Consulta to solicit business exclusively for
Pamana did not mean that Pamana exercised control over the means and
methods of Consulta’s work as the term control is understood in labor
jurisprudence.[20] Neither did it make Consulta an employee of Pamana. 
Pamana did not prohibit Consulta from engaging in any other business, or
from being connected with any other company, for as long as the business
or company did not compete with Pamana’s business.
The prohibition applied for one year after the termination of the
contract with Pamana.  In one of their meetings, one of the Managing
Associates reported that he was transferring his sales force and account
from another company to Pamana.[21] The exclusivity provision was a
reasonable restriction designed to prevent similar acts prejudicial to
Pamana’s business interest.  Article 1306 of the Civil Code provides that
“[t]he contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy.”
2. Retention Clause
In Almario v. PAL, PAL invested for the training of
Almario to enable him to acquire a higher level of skill,
proficiency, or technical competence so that he could efficiently
discharge the position of A-300 First Officer.  Given that, PAL
expected to recover the training costs by availing of Almario's
services for at least three years.  The expectation of PAL was not
fully realized, however, due to Almario's resignation after only
eight months of service following the completion of his training
course.  He cannot, therefore, refuse to reimburse the costs of
training without violating the principle of unjust enrichment.
3. Anti-Nepotism Policy
In Pili v. NLRC, it was held that respondent company
cannot be denied the right to prescribe rules and regulations in the
hiring of employees in the exercise of its management prerogative.
Petitioner therefore can be validly dismissed for violating the
policy of the company against the hiring of relatives of incumbent
employees within the degrees earlier stated. In addition, it will be
noted that respondent company dismissed the petitioner not only
for violation of said company policy but for falsification of his
application for employment, by concealing his relationship to an
uncle-employee, in violation of the aforementioned policy
4. Anti-Marriage Clause
Article 134. Stipulation Against Marriage. It shall be
unlawful for an employer to require as a condition of employment or
continuation of employment that a woman employee shall not get
married, or to stipulate expressly or tacitly that upon getting married,
a woman employee shall be deemed resigned or separated, or to
actually dismiss, discharge, discriminate or otherwise prejudice a
woman employee merely by reason of her marriage.
 While a marriage or no-marriage qualification may be
justified as a "bona fide occupational qualification," The employer
must prove two factors necessitating its imposition, viz: (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 [Capin-Cadiz v. Brent].
The concept of a bona fide occupational qualification is
not foreign in our jurisdiction. We employ the standard
of reasonableness of the company policy which is parallel to the
bona fide occupational qualification requirement. In the recent case
of Duncan Association of Detailman-PTGWO and Pedro Tecson
v. Glaxo Wellcome Philippines, Inc., we passed on the validity of
the policy of a pharmaceutical company prohibiting its employees
from marrying employees of any competitor company. We held
that Glaxo has a right to guard its trade secrets, manufacturing
formulas, marketing strategies and other confidential programs and
information from competitors. We considered the prohibition
against personal or marital relationships with employees of
competitor companies upon Glaxo's employees reasonable under
the circumstances because relationships of that nature might
compromise the interests of Glaxo. In laying down the assailed
company policy, we recognized that Glaxo only aims to protect its
interests against the possibility that a competitor company will gain
access to its secrets and procedures.
The requirement that a company policy must
be reasonable under the circumstances to qualify as a valid
exercise of management prerogative was also at issue in the 1997
case of Philippine Telegraph and Telephone Company v.
NLRC. In said case, the employee was dismissed in violation of
petitioner's policy of disqualifying from work any woman worker
who contracts marriage. We held that the company policy violates
the right against discrimination afforded all women workers under
Article 136 of the Labor Code, but established a permissible
exception, viz.:
[A] requirement that a woman employee must remain
unmarried could be justified as a "bona fide occupational
qualification," or BFOQ, where the particular requirements of the
job would justify the same, but not on the ground of a general
principle, such as the desirability of spreading work in the
workplace. A requirement of that nature would be valid provided it
reflects an inherent quality reasonably necessary for satisfactory
job performance.
The cases of Duncan and PT&T instruct us that the
requirement of reasonableness must be clearly established to
uphold the questioned employment policy. The employer has the
burden to prove the existence of a reasonable business necessity.
The burden was successfully discharged in Duncan but not in
PT&T [Star Paper v. Simbol].
V arising out of violation of rules and regulations
RECRUITMENT AND PLACEMENT OF
WORKERS
A. STATEMENT OF OBJECTIVES AND DEFINITIONS
Article 12. Statement of Objectives. It is the policy of the
State:
a) To promote and maintain a state of full employment
through improved manpower training, allocation and utilization;
b) To protect every citizen desiring to work locally or
overseas by securing for him the best possible terms and conditions of
employment;
c) To facilitate a free choice of available employment by
persons seeking work in conformity with the national interest;
Page 18 of 88
d) To facilitate and regulate the movement of workers in
conformity with the national interest;
e) To regulate the employment of aliens, including the
establishment of a registration and/or work permit system;
f) To strengthen the network of public employment offices
and rationalize the participation of the private sector in the
recruitment and placement of workers, locally and overseas, to serve
national development objectives;
g) To insure careful selection of Filipino workers for
overseas employment in order to protect the good name of the
Philippines abroad
Article 13. Definitions. (a) "Worker" means any member of
the labor force, whether employed or unemployed.
(b) "Recruitment and placement" refers to any act of
canvassing, enlisting, contracting, transporting, utilizing, hiring or
procuring workers, and includes referrals, contract services, promising
or advertising 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.
(c) "Private fee-charging employment agency" means any
person or entity engaged in recruitment and placement of workers for
a fee which is charged, directly or indirectly, from the workers or
employers or both.
(d) "License" means a document issued by the Department
of Labor authorizing a person or entity to operate a private
employment agency.
(e) "Private recruitment entity" means any person or
association engaged in the recruitment and placement of workers,
locally or overseas, without charging, directly or indirectly, any fee
from the workers or employers.
(f) "Authority" means a document issued by the Department
of Labor authorizing a person or association to engage in recruitment
and placement activities as a private recruitment entity.
(g) "Seaman" means any person employed in a vessel
engaged in maritime navigation.
(h) "Overseas employment" means employment of a worker
outside the Philippines.
(i) "Emigrant" means any person, worker or otherwise, who
emigrates to a foreign country by virtue of an immigrant visa or
resident permit or its equivalent in the country of destination.
B. PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION (POEA)
The POEA’s jurisdiction is now confined to recruitment
or pre-employment cases which are administrative in nature,
involving or arising out of recruitment laws, rules, and regulations,
including money claims arising therefrom or violation of the
conditions for issuance of license to recruit workers.
It has original exclusive jurisdiction over the following
cases:
a. Recruitment violations and other related cases – all
cases administrative in character, involving or
relating to licensing and registration of recruitment
and employment agencies or entities, including
refund of fees collected from workers and violation
of the conditions for the issuance of license to
recruit workers.
b. Disciplinary action cases and other special cases –
which are administrative in character, involving
employers, principals, contracting partners and
Filipino migrant workers.
C. BAN ON DIRECT HIRING
Article 18. Ban on Direct-Hiring. No employer may hire a
Filipino worker for overseas employment except through the Boards
and entities authorized by the Secretary of Labor. Direct-hiring by
members of the diplomatic corps, international organizations and such
other employers as may be allowed by the Secretary of Labor is
exempted from this provision
“Direct Hiring” refers to the process of directly hiring
workers by employers for overseas employment as authorized by
the DOLE Secretary and processed by the POEA, including:
a. Those hired by international organizations;
b. Those hired by members of the diplomatic corps;
c. Name hires or workers who are able to secure
overseas employment opportunity with an employer
without the assistance or participation of any
agency.
Unless the employment contract of an OFW is processed
through the POEA, the same does not bind the concerned OFW
because if the contract is not reviewed by the POEA, certainly the
State has no means of determining the suitability of foreign laws to
our overseas workers [Dagasdas v. Grand Placement].
1. Nationality of Employer
It must be emphasized that pertinent laws and regulations
generally make reference to employment of Filipinos overseas, i.e.,
outside the Philippines. They do not limit the coverage to non-
Filipino employers. Filipinos working overseas share the same
risks and burdens whether their employers be Filipino or foreign
[Philippine-Singapore Ports v. NLRC]. For instance, it is well-
known that foreign-owned and foreign-registered vessels have
frequently also secured Philippine registration where the interest of
convenience of the owners dictated such second or dual
registration. The underlying regulatory policy is that Filipino
seamen working in ocean-going vessels should receive the same
wages and benefits without regard to the nationality or nationalities
of the vessels on which they serve.
2. Exemption
It is the general rule under Article 18 that no employer
shall directly hire an OFW for overseas employment. The
following, however, are exempted from this ban on direct hiring:
a. Members of the diplomatic corps;
b. International organizations;
c. Heads of State and government officials with the
rank of at least deputy minister; or
d. Other employers as may be allowed by the DOLE
Secretary, such as:
(i) Those provided in (a), (b), and (c) above,
who bear a lesser rank, if endorsed by the
Philippine Overseas Labor Office (POLO),
or Head of Mission in the absence of the
POLO;
(ii) Professionals and skilled works with duly
executed/authenticated contracts containing
terms and conditions over and above the
standards set by the POEA. The number of
professional and skilled OFWs hired for the
first time by the employer shall not exceed
five (5). For the purpose of determining the
number, workers hired as a group shall be
counted as one; or
Page 19 of 88
(iii) Workers hired by a relative/family member
who is a permanent resident of the host
country.
D. LOCAL RECRUITMENT (DOLE D.O. 141-14)
1. Qualifications
Section 4. Qualifications. – The applicant for a license to
operate a private employment agency must possess the following:
a. Filipino citizens for single proprietorship and seventy five
percent (75%) of the authorized capital stock is owned and controlled
by Filipino citizens for partnership and corporation.
b. Minimum net worth of P1,000,000.00 in case of single
proprietorship and a minimum paid up capital of P1,000,000.00 in case
of partnership and corporation; and
c. Not otherwise disqualified by law or other government
rules and regulations to engage in the business of recruitment and
placement of workers for local employment.
2. Disqualifications
Section 5. Disqualification. – The following are not qualified
to engage in the business of recruitment and placement for local
employment:
a. Those who are convicted of illegal recruitment, trafficking
in persons, anti-child labor violation, or crimes involving moral
turpitude;
b. Those against whom probable cause or prima facie
finding of guilt for illegal recruitment or other related cases exist
particularly to owners or directors of agencies who have committed
illegal recruitment or other related cases.
c. Those agencies whose licenses have been previously
revoked or cancelled by the Department under Sec. 54 of these rules.
d. Cooperatives whether registered or not under the
Cooperative Act of the Philippines.
e. Law enforcers and any official and employee of the
Department of Labor and Employment (DOLE).
f. Sole proprietors of duly licensed agencies are prohibited
from securing another license to engage in recruitment and placement.
g. Sole proprietors, partnerships or corporations licensed to
engage in private recruitment and placement for local employment are
prohibited from engaging in job contracting or sub contracting
activities.
3. Bond Requirement
Section 11. Posting of bonds and payment of license fee. –
Upon approval of application, the applicant shall pay a license fee of
P15,000.00. It shall also post a cash bond in the amount of P50,000.00
and surety bond in the sum of P100,000.00.
The bond shall answer for all valid and legal claims arising
from the use of license. It shall likewise guarantee compliance with the
provisions of the Labor Code, its implementing riles and relevant
issuances of the Department on recruitment and placement.
4. Non-Transferability
Section 15. Non-transferability of license or authority. – The
license or authority to recruit shall not be transferred, conveyed or
assigned to any person or entity other than the one in whose favor it
was issued.
5. Change of Ownership
Section 16. Change of ownership. – An agency desiring to
transfer ownership shall surrender its license to the issuing Regional
Office. The new owner/s of the agency must apply for a new license.
A change or transfer of ownership of a sing proprietorship
shall cause the automatic revocation of the license.
 In case of death of a single proprietor, the license may be
extended for not more than six (6) months from the death of the
proprietor upon the request of the heirs to continue only for the
purpose of winding up the business operations or until its expiration
whichever comes first.
A change in the relationship among the partners in a
partnership shall cause the immediate dissolution of the partnership
resulting to the automatic revocation of the license.
6. Appointment/Change of Officers and Personell
Section 17. Appointment/ Change of Officers and personnel. –
Any change in the composition of the Board of directors of a
corporation and appointment of officers and personnel shall be
registered with the Regional office within five (5) days from the date of
such change or appointment. The agency shall submit a Board
secretary’s certificate of election, letter of appointment or contract of
employment with their bio-data, 2×2 photos and NBI clearances.
The regional Office may deny the acknowledgement of the
new officers and personnel for non-compliance with the requirements.
Change in the entire partnership of the Board of Directors
shall cause the revocation of the license.
7. Change of Address
Section 18. Change of address. – An agency intending to
transfer to a new place of business shall notify the Regional Office that
issued the license within fifteen (15) days prior to the intended date of
transfer.
In case of transfer to another region and within fifteen (15)
days prior to the date of transfer, the agency shall:
a. Secure a clearance of no pending case from the issuing
Regional Office;
b. Notify the Regional Office which has jurisdiction over the
new place of business;
c. Submit to the receiving Regional Office a clearance of no
pending case, location map of the new office and a copy of the contract
of lease or certificate of ownership; and
d. Publish the new address for two (2) consecutive weeks in a
newspaper of general circulation.
The receiving Regional Office must conduct an ocular
inspection of the agency’s new office to ensure compliance with
requirements.
8. Fees to be Paid by Workers (P.D. 442)
Article 32. Fees to be Paid by Workers.31 Any person
applying with a private fee-charging employment agency for
employment assistance shall not be charged any fee until he has
obtained employment through its efforts or has actually commenced
employment. Such fee shall be always covered with the appropriate
receipt clearly showing the amount paid. The Secretary of Labor shall
promulgate a schedule of allowable fees
9. Suspension and/or Cancellation of License of
Authority (P.D. 442)
Article 35. Suspension and/or Cancellation of License or
Authority. The Minister of Labor shall have 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
Ministry of Labor, the Overseas Employment Development Board, or
for violation of the provisions of this and other applicable laws,
General Orders and Letters of Instructions.
The penalties of suspension and cancellation of license or
authority are prescribed for violations of the above quoted
provisions, among others. And the Secretary of Labor has the
power under Section 35 of the law to apply these sanctions, as well
as the authority, conferred by Section 36, not only to "restrict and
Page 20 of 88
regulate the recruitment and placement activities of all agencies,"
but also to "promulgate rules and regulations to carry out the
objectives and implement the provisions" governing said activities.
Pursuant to this rule-making power thus granted, the Secretary of
Labor gave the POEA,6 "on its own initiative or upon filing of a
complaint or report or upon request for investigation by any
aggrieved person, . . (authority to) conduct the necessary
proceedings for the suspension or cancellation of the license or
authority of any agency or entity" for certain enumerated offenses
including —
a. the imposition or acceptance, directly or indirectly,
of any amount of money, goods or services, or any
fee or bond in excess of what is prescribed by the
Administration, and
b. any other violation of pertinent provisions of the
Labor Code and other relevant laws, rules and
regulations.
The Administrator was also given the power to order the
dismissal of the case of the suspension of the license or authority of
the respondent agency or contractor or recommend to the Minister
the cancellation thereof [TransAction v. Secretary of Labor].
E. OVERSEAS RECRUITMENT (R.A. No. 8042)
1. Disqualifications
Section 1, Rule V of Omnibus Rules and Regulations
Implementing the Migrant Workers and Overseas Filipino Act of
1995 provides:
Section 1. Disqualification. The following personnel
shall be prohibited from engaging directly or indirectly in the
business of recruitment of migrant workers:
(a) Any official or employee of the DOLE, POEA,
OWWA, DFA, DOJ, DOH, BI, IC, NLRC, TESDA, CFO, NBI,
Philippine National Police (PNP), Manila International Airport
Authority (MIAA), Civil Aviation Authority of the Philippines
(CAAP), and other government agencies involved in the
implementation of the Act, regardless of the status of his/her
employment; and
(b) Any of his/her relatives within the fourth civil
degree of consanguinity or affinity.
Any government official or employee found to be
violating this section shall be charged administratively,
according to Civil Service Rules and Regulations without
prejudice to criminal prosecution.
The government agency concerned shall monitor and
initiate, upon its initiative or upon the petition of any private
individual, action against erring officials and employees, and/or
their relatives.
2. Qualifications
Section 2, Rule 1, Part II of Revised POEA Rules and
Regulations Governing the Recruitment of Landbased OFWs
provides:
SECTION 2. Who may participate; Required
Capitalization. — Any Filipino citizen acting as a sole
proprietor or a partnership, or a corporation at least seventy-five
percent (75%) of the authorized and voting capital stock of
which is owned and controlled by Filipino citizens, may engage
in the business of recruitment and placement of Filipino
workers.
The sole proprietor and partnership shall have a
minimum capitalization of Five Million Pesos
(PhP5,000,000.00) and a minimum paid up capital of Five
Million Pesos (PhP5,000,000.00) in case of a corporation.
 Those with existing licenses shall, within four (4)
years from effectivity hereof, increase their capitalization or
paid up capital, as the case may be, to Five Million Pesos
(PhP5,000,000.00) at the rate of Seven Hundred Fifty Thousand
Pesos (PhP750,000.00) every year.
Section 2, Rule 1, Part II of POEA Rules and
Regulations Governing the Recruitment of Seafarers provides:
SECTION 2. Who may participate; Required
Capitalization. — Any Filipino citizen acting as a sole
proprietor or a partnership, or a corporation at least seventy-five
percent (75%) of the authorized and voting capital stock of
which is owned and controlled by Filipino citizens, may engage
in the business of recruitment and placement of Filipino
seafarers.
The sole proprietor or the partnership shall have a
minimum capitalization of Five Million Pesos
(PhP5,000,000.00); and a minimum paid-up capital of Five
Million Pesos (PhP5,000,000.00) in case of a corporation.
Those with existing licenses shall, within four (4)
years from effectivity hereof, increase their capitalization or
paid-up capital, as the case may be, to Five Million Pesos
(PhP5,000,000.00) at the rate of Seven Hundred Fifty Thousand
Pesos (PhP750,000.00) every year.
3. Non-Transferability of License
Section 21, Rule 1, Part II of Revised POEA Rules and
Regulations Governing the Recruitment of Landbased OFWs
provides:
SECTION 21. Non-Transferability of License. — No
license shall be used, directly or indirectly, by any person other
than the one in whose favor it was issued, nor at any place other
than that stated in the license, nor may such license be
transferred, conveyed or assigned to any other person or entity.
Section 22, Rule 1, Part II of POEA Rules and
Regulations Governing the Recruitment of Seafarers provides:
SECTION 22. Non-Transferability of License. — No
license shall be used directly or indirectly by any person other
than the one in whose favor it was issued, nor at any place other
than that stated in the license, nor may such license be
transferred, conveyed or assigned to any other person or entity.
4. Revocation of License
Sections 22 and 23, Rule 1, Part II of Revised POEA
Rules and Regulations Governing the Recruitment of Landbased
OFWs provides:
SECTION 22. Revocation of License of Sole
Proprietorship. — The license of the sole proprietorship shall
automatically be revoked upon the death of the sole proprietor.
The next-in-rank officer of the agency shall, within ten (10)
days, report such death to the Administration. Failure to report
shall automatically include such next-in-rank officer in the list
of persons with derogatory record.
SECTION 23.Revocation of License of a Partnership
Due to Death or Withdrawal of Partner. — The license of a
partnership shall be automatically revoked upon the death or
withdrawal of a partner which materially interrupts the course of
business or results in the actual dissolution of the partnership.
The surviving partner/s shall, within ten (10) days, report such
death or withdrawal to the Administration. Failure to report shall
automatically include the surviving partner/s in the list of
persons with derogatory record.
Section 23 and 24, Rule 1, Part II of POEA Rules and
Regulations Governing the Recruitment of Seafarers provides
Page 21 of 88
SECTION 23. Revocation of License of Sole
Proprietorship. — The license of the sole proprietorship shall
automatically be revoked upon the death of the sole proprietor.
The next-in-rank officer of the agency shall, within ten (10)
days, report such death to the Administration. Failure to report
shall automatically include such next-in-rank officer in the list
of persons with derogatory record.
SECTION 24. Revocation of License of a
Partnership Due to Death or Withdrawal of Partner. — The
license of a partnership shall be automatically revoked upon the
death or withdrawal of a partner which materially interrupts the
course of business or results in the actual dissolution of the
partnership. The surviving partner/s shall, within ten (10) days,
report such death or withdrawal to the Administration. Failure to
report shall automatically include the surviving partner/s in the
list of persons with derogatory record.
5. Escrow Deposit
Section 9(f), Rule 2, Part II of Revised POEA Rules and
Regulations Governing the Recruitment of Landbased OFWs
provides:
SECTION 9. Submission of Post-Qualification
Requirements.— Upon receipt of the notification, the applicant
shall submit the following post-qualification requirements prior
to the issuance of the provisional license:
xxx
f. An escrow agreement with a bank authorized by
the Bangko Sentral ng Pilipinas to handle trust accounts, with
deposit in the amount of One Million Pesos (PhP1,000,000.00).
The escrow deposit shall answer for all valid and
legal claims arising from contracts of employment and
violations of the conditions for the grant and use of the license,
including fines imposed by the Administration.
The escrow shall likewise guarantee compliance with
prescribed recruitment procedures, rules and regulations,
appropriate terms and conditions of employment, and relevant
issuances of the DOLE. The escrow deposit shall not be sourced
from the capitalization requirement.
Section 9(F), Rule II, POEA Rules on Seafarers
provides:
SECTION 9. Submission of Post-Qualification
Requirements. — Upon receipt of the notification, the applicant
shall submit the following post-qualification requirements prior
to the issuance of the provisional license:
f. An escrow agreement with a bank authorized by
the Bangko Sentral ng Pilipinas to handle trust accounts, with
deposit in the amount of One Million Pesos (PhP1,000,000.00).
The escrow deposit shall answer for all valid and
legal claims arising from contracts of employment and
violations of the conditions for the grant and use of the license,
including fines imposed by the Administration.
The escrow shall likewise guarantee compliance with
prescribed recruitment procedures, rules and regulations,
appropriate terms and conditions of employment, and relevant
issuances of the DOLE. The escrow deposit shall not be sourced
from the capitalization requirement.
6. Fees Paid by Workers/Chargeable to Employers
Sections 50 to 52, Rule II of POEA Rules on Seafarers
provides:
SECTION 50. Chargeable Fees and Costs
a. Fees Chargeable to Principal/Employer:
1. Manning Fees - Licensed manning agencies shall
charge from their principal/employer a manning fee to cover
services rendered in the recruitment and deployment of
seafarers.
 2. Processing Fees - All processing fees required for
deployment such as preemployment medical examination in the
principal’s/employer’s designated clinic, POEA and OWWA
fees, visas, principal’s/employer’s flag State ship requirements,
principal’s/employer’s required trainings and other
requirements.
However, in case of seafarer’s failure or unjustified
refusal to join ship after all processing fees have been incurred
by the principal/employer, the said fees shall be refunded by the
seafarer within thirty (30) days from demand.
b. Costs Chargeable to the Seafarer. Documentation
costs of all statutory requirements such as, but not limited to,
passport, seafarer’s identification and record book (SIRB),
NBI/police/barangay clearance, Seafarer’s Registration
Certificate (SRC) and birth certificate.
SECTION 51. Utilization and Accounting of
Maritime Welfare Fund. — Contributions to the OWWA
Welfare Fund by the seafarers shall be used to address welfare
concerns of contributing seafarers and must be accounted for
separately from the General Fund of OWWA. A report of
receipts and disbursements shall be published annually in a
newspaper of general circulation and be made available to
contributing seafarers, licensed manning agencies and
shipowners.
SECTION 52. Prohibition on Charging and
Collecting of Other Fees. — No other charges in whatever form,
manner or purpose, shall be imposed on and be paid by the
seafarer, unless otherwise provided by law.
Placement Fee refers to any and all amounts charged by a
recruitment agency from a worker for its recruitment and
placement services as prescribed by the Secretary of Labor and
Employment.
Service Fee refers to the amount paid to a licensed
recruitment agency or to the Administration (in the case of
government-to-government hired workers) by foreign
principals/employers, as payment for actual services rendered in
relation to the recruitment and placement of workers.
Manning Agency Fee refers to the amount charged by a
licensed manning agency to its principal/employer as payment for
actual services rendered in relation to the recruitment and
placement of seafarers.
F. ILLEGAL RECRUITMENT AND PROHIBITED
PRACTICES
1. Local Illegal Recruitment and Prohibited
Practices (P.D. No. 442)
Section 42. Acts constituting illegal recruitment. – Illegal
recruitment shall mean any act of canvassing, enlisting, contracting,
utilizing, hiring or procuring workers and includes referrals, contract
services, promising or advertising for local employment, whether for
profit or not, when undertaken by a non-licensee or non-holder of
authority; provided, that any such non-licensee or non-holder of
authority; provided, that any such non-licensee or non-holder of
authority who, in any manner, offer or promises for a free employment
to two or more persons shall be deemed so engaged.
The following acts shall be unlawful when committed by any
person whether or not a holder of a license or authority:
a. To charge or accept directly or indirectly any amount or
to make a worker pay the agency or its representatives any amount
greater than that actually loaned or advanced to him;
b. To furnish or publish any false notice or information in
relation to recruitment or employment;
c. To give any false notice, testimony, information or
document or commit any act of misrepresentation for the purpose of
securing a license or authority;
Page 22 of 88
d. To induce or attempt 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 of employment;
e. To influence or attempt to influence any person or entity
not to employ any worker who has not applied for employment
through his agency;
f. To engage in the recruitment or placement of workers in
jobs harmful to public health or morality or to the dignity of the
Republic of the Philippines;
g. To obstruct or attempt to obstruct inspection by the
Secretary or by his/her duly authorized representatives;
h. To substitute or alter to the prejudice of the worker,
employment contract prescribed by the Department from the time of
actual signing thereof by the parties up to and including the period of
the expiration of the same without the approval of the Department.
Section 45. Where to file complaints for illegal recruitment.
– The victim of illegal recruitment or other related illegal acts or his
parents or legal guardians may file a written report or complaint under
oath with the Regional Offices or Field Office having jurisdiction over
the place where the illegal act was committed.
Section 46. Surveillance. – The Regional Director or his duly
authorized representative, may motu proprio, conduct surveillance on
reported illegal recruitment activities.
Where the complaint/ report alleges that illegal recruitment
activities are continuously committed, the Regional Director or his duly
authorized representative shall conduct surveillance and if such
activities are confirmed, a closure order may be issued thereof by the
Regional Director or Field Officer.
If sufficient basis for criminal action is found, the case shall
be immediately indorsed to the appropriate office.
Section 47. Issuance of cease and desist order. – The
Regional Director or his duly authorized representatives shall conduct
a preliminary examination to determine whether the activities of a non-
licensee constitute a danger to life, limb, property or public order or
will lead to further exploitation of job seekers.
If upon the preliminary examination or surveillance, the
Regional Director is satisfied that such danger or exploitation exists, a
written order shall be issued for the closure of the establishment being
used for such recruitment activity.
In case of a business establishment whose license or permit
to operate a business was issued by the local government, the Regional
Director concerned shall likewise recommend to the granting authority
the immediate cancellation/revocation of the licensee or permit to
operate its business.
Section 48. Execution of cease and desist order. – A cease
and desist order shall be served by the DOLE Sheriff upon the offender
or the person in charge of the establishment subject thereof. Whenever
necessary, the assistance and support of the appropriate law
enforcement agencies shall be secured for such purpose.
Section 50. Institution of criminal action. – The Regional
Director concerned, or his/her duly authorized representatives or any
aggrieved person, may initiate filing of appropriate criminal action
with the office of the prosecutor.
Where a complaint is filed with the Regional Office and the
same is proper for preliminary investigation, it shall be endorsed to the
office of the prosecutor together with the supporting documents.
Section 51. Classification of offenses. – Administrative
offenses are classified into serious, less serious and light, depending on
the gravity. The Regional Director, after observance of due process,
shall impose the appropriate administrative penalties in very
recruitment violation.
a. The following are considered serious offenses with the
penalty of cancellation of license/authority:
1. Recruitment and placement of workers in violation of
anti-child labor laws.
 2. Engaging in acts of misrepresentation for the purpose of
securing a license or renewal thereof.
3. Engaging in the recruitment or placement of workers in
jobs harmful to public health or morality or to the dignity of the
Republic of the Philippines.
4. Transferring, conveying or assigning the license/authority
to any person or entity other than the one in whose favor it was issued.
5. Charging or accepting directly or indirectly any amount
form the worker.
6. Continuous operation despite suspended license or
authority.
7. Conviction for violation of any of the provisions of
Republic Act No. 9208, known as the Anti-Trafficking in Persons Act
of 2003, or Republic Act No. 7610, as amended by Republic Act No.
9231 and the Implementing Rules and Regulations.
8. Obstructing or attempting to obstruct inspection by the
Secretary, the Regional Director or their duly authorized
representatives.
9. Substituting or altering to the prejudice of the worker,
employment contracts to be approved by the Regional Office form the
time of actual signing thereof by the parties up to and including the
period of the expiration of the same without the approval of the
Regional Office.
10. Inducing or attempting to induce an already employed
worker to transfer from or leave his employment for another unless the
transfer is designed to liberate a worker from oppressive terms and
conditions of employment.
11. Influencing or attempting to influence any person or
entity not to employ any worker who has not applied for employment
through his agency.
b. The following are less serious offenses with their
corresponding penalties:
First Offense – Suspension of license for two (2) months to
six (6) months
Second Offense – Suspension of license for six (6) months to
one (1) year
Third Offense – Cancellation of License
1. Engaging in acts of misrepresentation in connection with
recruitment and placement of workers.
2. Engaging in recruitment activities in places other than
that specified in the license without previous authorization from the
Department.
3. Appointing or designating agents, representatives or
employees without prior approval of the Department.
4. Failure to comply with the undertaking to provide Pre-
Employment Orientation (PEO) to workers.
5. Coercing workers to accept prejudicial arrangements in
exchange for certain benefits that rightfully belong to the workers.
6. Disregard of orders, notices and other legal processes
issued by the Department.
7. Failure to submit within the prescribed period the
required reports related to local recruitment and placement.
8. Violation of other pertinent provisions of the Code and
other relevant laws, rules and regulations, guidelines and issuances on
recruitment and placement of workers for local employment and the
protection of their welfare, including the filing or renewal of license or
authority beyond the prescribed period.
Article 34. Prohibited Practices. It shall be unlawful for any
individual, entity, licensee, or holder of authority:
(a) 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) To furnish or publish any false notice or information or
document in relation to recruitment or employment;
(c) To give any false notice, testimony, information or
document or commit any act of misrepresentation for the purpose of
securing a license or authority under this Code;
(d) 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;
Page 23 of 88
(e) 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) To engage in the recruitment or placement of workers in
jobs harmful to public health or morality or to the dignity of the
Republic of the Philippines;
(g) To obstruct or attempt to obstruct inspection by the
Secretary of Labor or by his duly authorized representatives;
(h) To fail to file reports on the status of employment,
placement vacancies, remittance of foreign exchange earnings,
separation from jobs, departures and such other matters or
information as may be required by the Secretary of Labor;
(i) 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;
(j) 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; and
(k) To withhold or deny travel documents from applicant
workers before departure for monetary or financial considerations
other than those authorized under this Code and its implementing
rules and regulations.
2. Overseas Illegal Recruitment and Prohibited
Practices (R.A. No. 8042)
Section 6. Definition. - For purposes of this Act, illegal
recruitment shall mean any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring, or procuring workers and includes
referring, contract services, promising or advertising for employment
abroad, whether for profit or not, when undertaken by non-licensee or
non-holder of authority contemplated under Article 13(f) of
Presidential Decree No. 442, as amended, otherwise known as the
Labor Code of the Philippines: Provided, That any such non-licensee
or non-holder who, in any manner, offers or promises for a fee
employment abroad to two or more persons shall be deemed so
engaged. It shall likewise include the following acts, whether committed
by any person, whether a non-licensee, non-holder, licensee or holder
of authority:
(a) 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 and Employment, or to make a worker pay
or acknowledge any amount greater than that actually received by him
as a loan or advance;
(b) To furnish or publish any false notice or information or
document in relation to recruitment or employment;
(c) To give any false notice, testimony, information or
document or commit any act of misrepresentation for the purpose of
securing a license or authority under the Labor Code, or for the
purpose of documenting hired workers with the POEA, which include
the act of reprocessing workers through a job order that pertains to
nonexistent work, work different from the actual overseas work, or
work with a different employer whether registered or not with the
POEA;
(d) To include or attempt 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 of employment;
(e) To influence or attempt to influence any person or entity
not to employ any worker who has not applied for employment
through his agency or who has formed, joined or supported, or has
contacted or is supported by any union or workers' organization;
(f) To engage in the recruitment or placement of workers in
jobs harmful to public health or morality or to the dignity of the
Republic of the Philippines;
(h) To fail to submit reports on the status of employment,
placement vacancies, remittance of foreign exchange earnings,
separation from jobs, departures and such other matters or
information as may be required by the Secretary of Labor and
Employment;
(i) To substitute or alter to the prejudice of the worker,
employment contracts approved and verified by the Department of
Labor and Employment from the time of actual signing thereof by the In the prosecution of offenses punishable under this section,
parties up to and including the period of the expiration of the same the public prosecutors of the Department of Justice shall collaborate
without the approval of the Department of Labor and Employment; with the anti-illegal recruitment branch of the POEA and, in certain
(j) For an officer or agent of a recruitment or placement cases, allow the POEA lawyers to take the lead in the prosecution. The
agency to become an officer or member of the Board of any POEA lawyers who act as prosecutors in such cases shall be entitled to
corporation engaged in travel agency or to be engaged directly or receive additional allowances as may be determined by the POEA
indirectly in the management of travel agency; Administrator.
(k) To withhold or deny travel documents from applicant The filing of an offense punishable under this Act shall be
workers before departure for monetary or financial considerations, or without prejudice to the filing of cases punishable under other existing
for any other reasons, other than those authorized under the Labor laws, rules or regulations.
Code and its implementing rules and regulations;
(l) Failure to actually deploy a contracted worker without
Section 7. Penalties. -
valid reason as determined by the Department of Labor and
(a) Any person found guilty of illegal recruitment shall
Employment;
suffer the penalty of imprisonment of not less than twelve (12) years
(m) Failure to reimburse expenses incurred by the worker in
and one (1) day but not more than twenty (20) years and a fine of not
connection with his documentation and processing for purposes of
less than One million pesos (P1,000,000.00) nor more than Two million
deployment, in cases where the deployment does not actually take place
pesos (P2,000,000.00).
without the worker's fault. Illegal recruitment when committed by a
(b) The penalty of life imprisonment and a fine of not less
syndicate or in large scale shall be considered an offense involving
than Two million pesos (P2,000,000.00) nor more than Five million
economic sabotage; and
pesos (P5,000,000.00) shall be imposed if illegal recruitment constitutes
(n) To allow a non-Filipino citizen to head or manage a
economic sabotage as defined therein.
licensed recruitment/manning agency.
Provided, however, That the maximum penalty shall be
Illegal recruitment is deemed committed by a syndicate if
imposed if the person illegally recruited is less than eighteen (18) years
carried out by a group of three (3) or more persons conspiring or
of age or committed by a non-licensee or non-holder of authority.
confederating with one another. It is deemed committed in large scale
(c) Any person found guilty of any of the prohibited acts
if committed against three (3) or more persons individually or as a
shall suffer the penalty of imprisonment of not less than six (6) years
group.
and one (1) day but not more than twelve (12) years and a fine of not
In addition to the acts enumerated above, it shall also be
less than Five hundred thousand pesos (P500,000.00) nor more than
unlawful for any person or entity to commit the following prohibited
One million pesos (P1,000,000.00).
acts:
If the offender is an alien, he or she shall, in addition to the
(1) Grant a loan to an overseas Filipino worker with interest
penalties herein prescribed, be deported without further proceedings.
exceeding eight percent (8%) per annum, which will be used for
In every case, conviction shall cause and carry the automatic
payment of legal and allowable placement fees and make the migrant
revocation of the license or registration of the recruitment/mining
worker issue, either personally or through a guarantor or
agency, lending institutions, training school or medical clinic.
accommodation party, postdated checks in relation to the said loan;
(2) Impose a compulsory and exclusive arrangement
whereby an overseas Filipino worker is required to avail of a loan only Section 12. Prescriptive Periods – Illegal recruitment cases
from specifically designated institutions, entities or persons; under this Act shall prescribe in five (5) years: Provided, however,
(3) Refuse to condone or renegotiate a loan incurred by an That illegal recruitment cases involving economic sabotage as defined
overseas Filipino worker after the latter's employment contract has herein shall prescribe in twenty (20) years.
been prematurely terminated through no fault of his or her own;
(4) Impose a compulsory and exclusive arrangement 3. Types of Illegal Recruitment
whereby an overseas Filipino worker is required to undergo health
examinations only from specifically designated medical clinics,
institutions, entities or persons, except in the case of a seafarer whose
a. Simple Illegal Recruitment
medical examination cost is shouldered by the principal/shipowner; The following are the 2 elements of simple illegal
(5) Impose a compulsory and exclusive arrangement recruitment:
whereby an overseas Filipino worker is required to undergo training,
seminar, instruction or schooling of any kind only from specifically (i) The offender has no valid license or authority
designated institutions, entities or persons, except fpr recommendatory required by law to enable one to lawfully
trainings mandated by principals/shipowners where the latter shoulder
engage in recruitment and placement of
the cost of such trainings;
(6) For a suspended recruitment/manning agency to engage workers; and
in any kind of recruitment activity including the processing of pending (ii) He undertakes either any activity within the
workers' applications; and meaning of “recruitment and placement”
(7) For a recruitment/manning agency or a foreign defined under Article 13(b), (see above
principal/employer to pass on the overseas Filipino worker or deduct
from his or her salary the payment of the cost of insurance fees,
enumeration) or any prohibited practices (see
premium or other insurance related charges, as provided under the above enumeration) under Article 34 of the
compulsory worker's insurance coverage. Labor Code.
The persons criminally liable for the above offenses are the
principals, accomplices and accessories. In case of juridical persons, A survey indicates that the criminal cases where the
the officers having ownership, control, management or direction of
foregoing elements were used as the guidepost in determining the
their business who are responsible for the commission of the offense
culpability of the accused for illegal recruitment, involve persons
and the responsible employees/agents thereof shall be liable.
In the filing of cases for illegal recruitment or any of the who are non-licensees and non-holders of authority. The above
prohibited acts under this section, the Secretary of Labor and enumeration of the elements curiously failed to consider that under
Employment, the POEA Administrator or their duly authorized the broadened concept of illegal recruit under R.A. No. 8042,
representatives, or any aggrieved person may initiate the which, it must be noted, has not been changed by the latest
corresponding criminal action with the appropriate office. For this amendment introduced by R.A. No. 10022, the term illegal
purpose, the affidavits and testimonies of operatives or personnel from recruitment, unlike illegal recruitment as defined under the Labor
the Department of Labor and Employment, POEA and other law
Code which is limited to recruitment activities undertaken by non-
enforcement agencies who witnessed the acts constituting the offense
licensees or non-holders of authority [People v. Tolentino], now
shall be sufficient to prosecute the accused.
includes the commission of the prohibited acts enumerated
Page 24 of 88
thereunder, “whether commited by any person, whether a non-
licensee, non-holder, licensee, or holder of authority.” Therefore,
under Section 6 of RA 8042 as amended, illegal recruitment (for
overseas employment) may be committed not only by non-
licensees or non-holders of authority but also by licensees or
holders of authority [Ibid]. Section 6 enumerates 14 acts or
practices plus 7 additional prohibited acts, which constitute illegal
recruitment, whether committed by any person, whether a non-
licensee, non-holder, licensee or holder of authority. Except for the
last three acts [(l), (m), and (n)] as well as the seven additional
prohibited acts, on the list under Section 6, the first eleven (11)
acts or practices are also listed in Article 34 of the Labor Code
under the heading “Prohibited Practices.”
Simply put, under RA 8042, as amended, a non-licensee
or non-holder of authority contains illegal recruitment for overseas
employment in two ways:
(i) By any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring,
or procuring workers, and includes
referring, contract services, promising or
advertising for employment abroad,
whether for profit or not; and
(ii) By undertaking any of the acts
enumerated under Section 6 of RA 8042
as amended.
On the other hand, a licensee or holder of authority is
also liable for illegal recruitment for overseas employment when he
or she undertakes any of the prohibited acts or practice listed under
Section 6 of RA 8042 [Ibid].
Consequently, if a recruiter is charged with violation of
any of the prohibited acts under Section 6, there is no more need to
prove whether he is a licensee or holder of authority or not because
it is no longer an element of the crime [People v. Ang].
Moreover, since illegal recruitment becomes qualified if
committed by 3 or more recruiters (syndicated) or when there are 3
or more recruitees (large-scale), as the case may be, the total
number of recruiters and/or recruitees in order for a case to remain
one for simple illegal recruitment should not be more than two (2)
persons.
In light of the foregoing, the elements of simple illegal
recruitment should now be re-stated as follows:
(i) That the offender engages in acts of
recruitment and placement of workers as
defined under Article 13(b) of the Labor Code,
or in any prohibited activities enumerated
under the law, irrespective whether the
offender is a non-licensee, non-holder of
authority, licensee or holder of authority;
(ii) That the offender has no valid license or
authority required by law to enable himt o
lawfully engage in the recruitment and
placement of workers; and
(iii) That the number of recruiter/s who committed
the unlawful acts and/or recruitee/s who fell
victim/s thereto should not be more than two
(2) persons.
Relevant Principles
 Mere impression that a person could deploy
workers overseas is sufficient to constitute illegal
recruitment. But if no such impression is given,
Page 25 of 88
the accused should not be convicted for illegal
recruitment.
 Mere promise or offer of employment abroad
amounts to recruitment.
 There is no need to show that accused represented
himself as a licensed recruiter.
 Referrals may constitute illegal recruitment.
 It is illegal recruitment to induce applicants to part
with their money upon false misrepresentations
and promises in assuring them that after they paid
the placement fee, jobs abroad were waiting for
them and that they would be deployed soon.
 Recruitment whether done for profit or not is
immaterial.
 The act of receiving money far exceeding the
amount as required by law is not considered as
“recruitment and placement” as this phrase is
contemplated under the law.
 Actual receipt of fee is not an element of the crime
of illegal recruitment.
 Conduct of interviews amountsto illegal
recruitment.
 Absence of receipt is not essential to hold a person
guilty of illegal recruitment.
 Conviction for illegal recruitment may be made on
the strength of the testimonies of the
complainants.
 Absence of documents evidencing the recruitment
activities strengthens, not weakens, the case for
illegal recruitment.
 Only one person recruited is sufficient to convict
one for illegal recruitment.
 Non-prosecution of another suspect is immaterial.
 Execution of affidavit of desistance affects only
the civil liability but has no effect on the criminal
liability for illegal recruitment.
 Defense of denial cannot prevail over positive
identification. Positive identification where
categorical and consistent and not attended by any
showing of ill motive on the part of the
eyewitnesses on the matter prevails over alibi and
denial. Between the categorical statements of the
prosecution witnesses, on the one hand, and bare
denials of the accused, on the other hand, the
former must prevail.
b. Illegal Recruitment Involving Economic
Sabotage (By a Syndicate)
Illegal recruitment committed by a syndicate if it is
carried out by a group of three (3) or more persons conspiring or
confederating with one another.
The essential elements of the crime of illegal recruitment
committed by a syndicate are as follows:
(i) There are at least three (3) persons who,
conspiring and/or confederating with one
another, carried out any unlawful or illegal
recruitment and placement activities as defined
under Article 13(b) or committed any
prohibited activities under Article 34 of the
Labor Code; and
 (ii) Said persons are not licensed or authorized to
do so, either locally or overseas.
The law does not require that the syndicate should recruit
more than one (1) person in order to constitute the crime of illegal
recruitment by a syndicate. Recruitment of one (1) person would
suffice to qualify the illegal recruitment act as having been
committed by a syndicate.
People v. Sison
Held: Under RA 8042, a non-licensee or non-holder of authority
commits illegal recruitment for overseas employment in two ways: (1) by
any act of canvassing, enlisting, contracting, transporting, utilizing, hiring,
or procuring workers, and includes referring, contract services, promising
or advertising for employment abroad, whether for profit or not; or (2) by
undertaking any of the acts enumerated under Section 6 of RA 8042.41
In this case, Sison herself admits that she has no license or
authority to undertake recruitment and placement activities'. The Court has
held in several cases that an accused who represents to others that he or she
could send workers abroad for employment, even without the authority or
license to do so, commits illegal recruitment.42
It is the absence of the necessary license or authority to recruit
and deploy workers that renders the recruitment activity unlawful. To prove
illegal recruitment, it must be shown that "the accused gave the
complainants the distinct impression that she had the power or ability to
deploy the complainants abroad in a manner that they were convinced to
part with their money for that end."43
On the other hand, illegal recruitment committed by a syndicate,
as in the present case, has the following elements: (a) the offender does not
have the valid license or authority required by law to engage in recruitment
and placement of workers; (b) the offender undertakes any of the
"recruitment and placement" activities defined in Article 13(b) of the Labor
Code, or engages in any of the prohibited practices enumerated under now
Section 6 of RA 8042; and (c) the illegal recruitment is "carried out by a
group of three or more persons conspiring and/or confederating with one
another in carrying out any unlawful or illegal transaction, enterprise or
scheme."44 In the third element, it "is not essential that there be actual proof
that all the conspirators took a direct part in every act. It is sufficient that
they acted in concert pursuant to the same objective."45
The acts of Sison, Dedales, and Bacomo show a common
purpose and and each undertook a part to reach their objective. Their
concerted action is evident in that either Sison or Dedales was receiving
payments from the recruits; that Dedales signed the acknowledgment
receipt from Sison; and that the three accompanied their recruits together in
seeking out their visas in Malaysia and Indonesia. Further, the impression
given to Castuera and other recruits was that the three were indeed working
together.
Since it was proven that the three accused were acting in concert
and conspired with one another, their illegal recruitment activity is
considered done by a syndicate, making the offense illegal recruitment
involving economic sabotage.
c. Illegal Recruitment Involving Economic
Sabotage (Large-Scale)
Illegal recruitment considered in large scale if committed
against three (3) or more persons individually or as a group.
The elements of illegal recruitment in large scale, as
distinguished from simple illegal recruitment, are as
(i) The accused engages in the recruitment and
placement of workers as defined under Article
13(b) or committed any prohibited activities
under Article 34 of the Labor Code; and
(ii) The accused commits the same against three
(3) or more persons, individually or as a group.
People v. Abellanosa
Held: We agree with the trial court and the CA that the
prosecution was able to establish that appellant was engaged in illegal
recruitment in large scale. It was proved that appellant was a non-licensee
Page 26 of 88
or non-holder of authority to recruit workers for deployment abroad; she
offered or promised employment abroad to private complainants; she
received monies from private complainants purportedly as placement or
processing fees; that private complainants were not actually deployed to
Brunei; that despite demands, appellant failed to reimburse or refund to
private complainants their monies; and that appellant committed these
prohibited acts against three or more persons, individually or as a group.
To recall, private complainants Pomar, Pastolero, Cathedral,
Orias, Suobiron, Bueron, and Pelipog testified that appellant went to Pavia,
Iloilo and represented herself as a recruiter who could send them to Brunei
for work; that appellant impressed upon them that she had the authority or
ability to send them overseas for work by showing them a job order from
Brunei and a calling card; and appellant collected processing or placement
fees from the private complainants in various amounts ranging from
P5,000.00 to P20,000.00; and that she did not reimburse said amounts
despite demands.
In addition, it was proved that appellant does not have any
license or authority to recruit workers for overseas employment as shown
by the certification issued by the Philippine Overseas Employment
Administration.16
Finally, appellant recruited seven persons, or more than the
minimum of three persons required by law, for illegal recruitment to be
considered in large scale.
Verily, the RTC and the CA correctly found the appellant guilty
of large scale illegal recruitment.
Distinguished from illegal recruitment by a syndicate
As distinguished from illegal recruitment committed by a
syndicate, illegal recruitment in large scale may be committed by
only one (1) person. What is important as qualifying element is that
there should be at least three (3) victims of such illegal recruitment,
individually or as a group.
Recruitment in large scale or by a syndicate is malum
prohibitum and not malum in se.
4. Illegal Recruitment and Estafa
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. Sy's
acquittal in the illegal recruitment case does not prove that she is
not guilty of estafa. Illegal recruitment and estafa are entirely
different offenses and neither one necessarily includes or is
necessarily included in the other. A person who is convicted of
illegal recruitment may, in addition, be convicted of estafa under
Article 315, paragraph 2(a) of the RPC. In the same manner, a
person acquitted of illegal recruitment may be held liable
for estafa. Double jeopardy will not set in because illegal
recruitment is malum prohibitum, in which there is no necessity to
prove criminal intent, whereas estafa is malum in se, in the
prosecution of which, proof of criminal intent is necessary [Sy v.
People].
5. Authority to Arrest in Illegal Recruitment
 The Secretary of Labor, not being a judge, may no
longer issue search or arrest warrants. Hence, the authorities must
go through the judicial process. To that extent, it was declared that
Article 38, paragraph (c), of the Labor Code, is unconstitutional
and of no force and effect [Salazar v. Achacoso].
6. Venue
Section 9. Venue. – A criminal action arising from illegal
recruitment as defined herein shall be filed with the Regional Trial
Court of the province or city where the offense was committed or
where the offended party actually resides at the time of the commission
of the offense: Provided, That the court where the criminal action is
first filed shall acquire jurisdiction to the exclusion of other courts:
Provided, however, That the aforestated provisions shall also apply to
those criminal actions that have already been filed in court at the time
of the effectivity of this Act.
E. EMPLOYMENT OF NON-RESIDENT ALIENS
1. Alien Employment Permit (AEP)
Article 40. Employment Permit 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 Department of Labor.
The employment permit may be issued to a non-resident
alien or to the applicant employer 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.
For an enterprise registered in preferred areas of
investments, said employment permit may be issued upon
recommendation of the government agency charged with the
supervision of said registered enterprise.
2. Exemption
The following categories of foreign nationals are exempt
from securing an AEP:
a. All members of the diplomatic service and foreign
government officials accredited by and with
reciprocity arrangement with the Philippine
government;
b. Officers and staff of international organizations of
which the Philippine government is a member, and
their legitimate spouses desiring to work in the
Philippines;
c. Owners and representatives of foreign principals
whose companies are accredited by the POEA, who
come to the Philippines for a limited period and
solely for the purpose of interviewing Filipino
applicants for employment abroad;
d. 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 under formal agreements between
the universities or colleges in the Philippines and
foreign universities or colleges; or between the
Philippine government and foreign government,
provided that the exemption is on reciprocal basis;
e. Permanent resident foreign nationals and
probationary or temporary resident VISA holders
under Section 13(a-f) of the Philippine Immigration
Act of 1940 and Section 3 of the Alien Social
Integration Act of 1995 (R.A. 7917);
f. Refugees and Stateless Persons recognized by DOJ
pursuant to Article 17 of the UN Convention and
Protocol Relating to status of Refugees and Stateless
Persons; and
g. All foreign nationals granted exemption by law.
3. Exclusion
The following categories of foreign nationals are
excluded securing an AEP:
a. Members of the governing board with voting rights
only and do not intervene in the management of the
Page 27 of 88
corporation or in the day to day operation of the
enterprise.
b. President and Treasurer, who are part-owners of the
company.
c. Those providing consultancy services who do not
have employers in the Philippines.
d. Intra-corporate transferee who is a manager,
executive or specialist as defined below in
accordance with Trade Agreements and an
employee of the foreign service supplier for at least
one (1) year continuous employment prior to
deployment to a branch, subsidiary, affiliate or
representative office in the Philippines.
e. Contractual service supplier who is a manager,
executive or specialist and an employee of a foreign
service supplier which has no commercial presence
in the Philippines:
(i) Who enters the Philippines temporarily to
supply a service pursuant to a contract
between his/her employer and a service
consumer in the Philippines;
(ii) Must possess the appropriate educational
and professional qualifications; and
(iii) Must be employed by the foreign service
supplier for at least one year prior to the
supply of service in the Philippines.
f. Representative of the Foreign Principal/Employer
assigned in the Office of Licensed Manning Agency
(OLMA) in accordance with the POEA law, rules
and regulations.
4. Prohibition Against Transfer of Employment
Article 41. Prohibition Against Transfer of Employment. (a)
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.
(b) Any non-resident alien who shall take up employment in
violation of the provision of this Title and its implementing rules and
regulations shall be punished in accordance with the provisions of
Articles 289 and 29043 of the Labor Code.
In addition, the alien worker shall be subject to deportation
after service of his sentence.
5. Submission of List
Article 42. Submission of List. Any employer employing non-
resident foreign nationals on the effective date of this Code shall submit
a list of such nationals to the Secretary of Labor within thirty (30) days
after such date indicating their names, citizenship, foreign and local
addresses, nature of employment and status of stay in the country. The
Secretary of Labor shall then determine if they are entitled to an
employment permit.
VI
TRAINING AND EMPLOYMENT OF SPECIAL
WORKERS
A. APPRENTICES
“Apprentice” is a person undergoing training for an
approved apprenticeable occupation during an established period
assured by an apprenticeship agreement.
 “Apprenticeship” training within employment with
compulsory related theoretical instructions involving a contract
between an apprentice and an employer on an approved
apprenticeable occupation.
“Apprenticeable Occupation” is an occupation officially
endorsed by a tripartite body and approved for apprenticeship by
the Authority (RA 7796).
1. Qualification
Article 59. Qualifications of Apprentice. To qualify as an
apprentice, a person shall:
(a) Be at least fourteen (14) years of age;
(b) Possess vocational aptitude and capacity for appropriate
tests; and
(c) Possess the ability to comprehend and follow oral and
written instructions.
Trade and industry associations may recommend to the
Secretary of Labor appropriate educational requirements for different
occupations.
2. Apprenticeship Agreement
“Apprenticeship Agreement” is a contract wherein a
prospective employer binds himself to train the apprentice who in
turn accepts the terms of training for a recognized apprenticeable
occupation emphasizing the rights, duties and responsibilities of
each party.
a. Contents
Article 61. Contents of Apprenticeship Agreements. 62
Apprenticeship agreements, including wage rates of apprentices, shall
conform to the rules issued by the Minister of Labor and Employment.
The period of apprenticeship shall not exceed six months.
Apprenticeship agreements providing for wage rates below the legal
minimum wage, which in no case shall start below 75 per cent of the
applicable minimum wage, may be entered into only in accordance
with apprenticeship programs duly approved by the Minister of Labor
and Employment. The Ministry shall develop standard model
programs of apprenticeship.
Republic Act No. 7796 (RA 7796), which created the
TESDA, has transferred the authority over apprenticeship programs
from the Bureau of Local Employment of the DOLE to the
TESDA. RA 7796 emphasizes TESDA's approval of the
apprenticeship program as a pre-requisite for the hiring of
apprentices.
In Century Canning v. Court of Appeals, the
apprenticeship agreement was entered into between the parties
before petitioner filed its apprenticeship program with the TESDA
for approval. Petitioner and Palad executed the apprenticeship
agreement on 17 July 1997 wherein it was stated that the training
would start on 17 July 1997 and would end approximately in
December 1997. On 25 July 1997, petitioner submitted for
approval its apprenticeship program, which the TESDA
subsequently approved on 26 September 1997. Clearly, the
apprenticeship agreement was enforced even before the TESDA
approved petitioner's apprenticeship program. Thus, the
apprenticeship agreement is void because it lacked prior approval
from the TESDA. The TESDA's approval of the employer's
apprenticeship program is required before the employer is allowed
to hire apprentices. Prior approval from the TESDA is necessary to
ensure that only employers in the highly technical industries may
employ apprentices and only in apprenticeable occupations. Thus,
under RA 7796, employers can only hire apprentices for
apprenticeable occupations which must be officially endorsed by a
tripartite body and approved for apprenticeship by the TESDA.
b. Signing of Agreement
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Article 62. Signing of Apprenticeship Agreement. Every
apprenticeship agreement shall be signed by the employer or his agent,
or by an authorized representative of any of the recognized
organizations, associations or groups and by the apprentice.
An apprenticeship agreement with a minor shall be signed in
his behalf by his parent or guardian or, if the latter is not available, by
an authorized representative of the Department of Labor, and the same
shall be binding during its lifetime.
Every apprenticeship agreement entered into under this
Title shall be ratified by the appropriate apprenticeship committees, if
any, and a copy thereof shall be furnished both the employer and the
apprentice.
c. Venue of Programs
Article 63. Venue of Apprenticeship Programs. Any firm,
employer, group or association, industry organization or civic group
wishing to organize an apprenticeship program may choose from any
of the following apprenticeship schemes as the training venue for
apprentice:
(a) Apprenticeship conducted entirely by and within the
sponsoring firm, establishment or entity;
(b) Apprenticeship entirely within a Department of Labor
and Employment training center or other public training institution; or
(c) Initial training in trade fundamentals in a training center
or other institution with subsequent actual work participation within
the sponsoring firm or entity during the final stage of training.
d. Sponsoring
Article 64. Sponsoring of Apprenticeship Program. Any of the
apprenticeship schemes recognized herein may be undertaken or
sponsored by a single employer or firm or by a group or association
thereof or by a civic organization. Actual training of apprentices may
be undertaken:
(a) In the premises of the sponsoring employer in the case of
individual apprenticeship programs;
(b) In the premises of one or several designated firms in the
case of programs sponsored by a group or association of employers or
by a civic organization; or
(c) In a Department of Labor and Employment training
center or other public training institution.
e. Investigation of Violation
Article 65. Investigation of Violation of Apprenticeship
Agreement. Upon complaint of any interested person or upon its own
initiative, the appropriate agency of the Department of Labor and
Employment or its authorized representative shall investigate any
violation of an apprenticeship agreement pursuant to such rules and
regulations as may be prescribed by the Secretary of Labor and
Employment.
f. Appeal
Article 66. Appeal to the Secretary of Labor and Employment.
The decision of the authorized agency of the Department of Labor and
Employment may be appealed by any aggrieved person to the
Secretary of Labor and Employment within five (5) days from receipt
of the decision. The decision of the Secretary of Labor and
Employment shall be final and executory.
g. Exhaustion of Administrative Remedies
Article 67. Exhaustion of Administrative Remedies. No person
shall institute any action for the enforcement of any apprenticeship
agreement or damages for breach of any such agreement, unless he has
exhausted all available administrative remedies.
h. Deductibility of Training Costs

Article 71. Deductibility of Training Costs. An additional
deduction from taxable income of one-half (1/2) of the value of labor
training expenses incurred for developing the productivity and
efficiency of apprentices shall be granted to the person or enterprise
organizing an apprenticeship program: Provided, That such program
is duly recognized by the Department of Labor and Employment:
Provided, further, That such deduction shall not exceed ten (10%)
percent of direct labor wage: and Provided, finally, That the person or
enterprise who wishes to avail himself or itself of this incentive should
pay his apprentices the minimum wage.
3. Apprentices Without Compensation
Article 72. Apprentices Without Compensation. The Secretary
of Labor and Employment may authorize the hiring of apprentices
without compensation whose training on the job is required by the
school or training program curriculum or as requisite for graduation
or board examination.
B. LEARNERS
Article 73. Learners Defined. Learners are persons hired as
trainees in semi-skilled and other industrial occupations which are
non-apprenticeable and which may be learned through practical
training on the job in a relatively short period of time which shall not
exceed three (3) months.
“Learners” refer to persons hired as trainees in semi-
skilled and other industrial occupations which are non-
apprenticeable. Learnership programs must be approved by the
Authority.
1. When Learners May Be Hired
Article 74. When Learners May Be Hired. Learners may be
employed when no experienced workers are available, the employment
of learners is necessary to prevent curtailment of employment
opportunities, and the employment does not create unfair competition
in terms of labor costs or impair or lower working standards.
2. Learnership Agreement
Article 75. Learnership Agreement. Any employer desiring to
employ learners shall enter into a learnership agreement with them,
which agreement shall include:
(a) The names and addresses of the learners;
(b) The duration of the learnership period, which shall not
exceed three (3) months;
(c) The wages or salary rates of the learners which shall
begin at not less than seventy-five percent (75%) of the applicable
minimum wage; and
(d) A commitment to employ the learners if they so desire, as
regular employees upon completion of the learnership.
All learners who have been allowed or suffered to work
during the first two (2) months shall be deemed regular employees if
training is terminated by the employer before the end of the stipulated
period through no fault of the learners. The learnership agreement
shall be subject to inspection by the Secretary of Labor and
Employment or his duly authorized representative.
3. Learners in Piecework
Article 76. Learners in Piecework. Learners employed in
piece or incentive-rate jobs during the training period shall be paid in
full for the work done.
C. HANDICAPPED WORKERS
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Article 78. Definition. Handicapped workers are those whose
earning capacity is impaired by age or physical or mental deficiency or
injury.
1. When Employable
Article 79. When Employable. Handicapped workers may be
employed when their employment is necessary to prevent curtailment
of employment opportunities and when it does not create unfair
competition in labor costs or impair or lower working standards.
2. Employment Agreement
Article 80. Employment Agreement. Any employer who
employs handicapped workers shall enter into an employment
agreement with them, which agreement shall include:
1. The names and addresses of the handicapped workers to
be employed;
2. The rate to be paid the handicapped workers which shall
not be less than seventy five (75%) percent of the applicable legal
minimum wage;
3. The duration of employment period; and
4. The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection by
the Secretary of Labor or his duly authorized representative.
3. Eligibility for Apprenticeship (R.A. 7277)
SECTION 7. Apprenticeship. Subject to the provision of the
Labor Code as amended, disabled persons shall be eligible as
apprentices or learners; Provided, That their handicap is not much as
to effectively impede the performance of job operations in the
particular occupation for which they are hired; Provided, further, That
after the lapse of the period of apprenticeship if found satisfactory in
the job performance, they shall be eligible for employment.
4. Equal Opportunity for Employment (R.A. 7277)
SECTION 5. Equal Opportunity for Employment. No disabled
persons shall be denied access to opportunities for suitable
employment. A qualified disabled employee shall be subject to the same
terms and conditions of employment and the same compensation,
privileges, benefits, fringe benefits, incentives or allowances as a
qualified able-bodied person. Five percent (5%) of all casual,
emergency and contractual positions in the Department of Social
Welfare and Development; Health; Education, Culture and Sports;
and other government agencies, offices or corporations engaged in
social development shall be reserved for disabled persons.
5. Discrimination on Employment (R.A. 7277)
SECTION 32. Discrimination on Employment : No entity,
whether public or private, shall discriminate against a qualified
disabled person by reason of disability in regard to job application
procedures, the hiring, promotion, or discharge of employees,
employee compensation, job training, and other terms, conditions, and
privileges of employment. The following constitute acts of
discrimination:
(a). Limiting, segregating or classifying a disabled job
applicant in such a manner that adversely affects his work
opportunities;
(b). Using qualification standards, employment tests or other
selection criteria that screen out or tend to screen out a disabled person
unless such standards, tests or other selection criteria are shown to be
jobrelated for the position on question and are consistent with business
necessity;
(c). Utilizing standards, criteria, or methods of
administration that:
1). have the effect of discrimination on the basis of disability;
or
 2). perpetuate the discrimination of others who are subject
to common administrative control;
(d). Providing less compensation, such as salary, wage or
other forms of remuneration and fringe benefits, to a qualified disabled
employee, by reason of his disability, than the amount to which a non-
disabled person performing the same work is entitled;
(e). Favoring a non-disabled employee over a qualified
disabled employee with respect to promotion, training opportunities,
study and scholarship grants, solely on account of the latter’s
disability;
(f). Re-assigning or transferring a disabled employee to a job
or position he cannot perform by reason of his disability;
(g). Dismissing or terminating the services of a disabled
employee by reason of his disability unless the employer can prove that
he impairs the satisfactory performance of the work involve to the
prejudice of the business entities; Provided, however, That the
employer first sought provide reasonable accommodations for disabled
persons;
(h). Failing to select or administer in the effective manner
employment tests which accurately reflect the skills, aptitude or other
factor of the disabled applicant or employee that such test purports to
measure, rather than the impaired sensory, manual or speaking skills
of such applicant or employee, if any; and
(i). Excluding disabled persons from membership in labor
unions or similar organization.
D. EMPLOYMENT OF STUDENTS (R.A. No. 9547)
Section 1. Any provision of law to the contrary
notwithstanding, any person or entity employing at least ten (10)
persons may employ poor but deserving students, out-of-school youth
(OSY) or, dependents of displaced or would-be displaced workers due
to business closures, or work stoppages, or natural calamities,
intending to enroll in any secondary, tertiary or technical-vocational
institutions, fifteen (15) years of age but not more than thirty (30) years
old, paying them a salary or wage not lower than the minimum wage
for private employers and the applicable hiring rate for the national
and local government agencies: Provided, That students enrolled in the
secondary level shall only be employed during summer and/or
Christmas vacations, while the OSY and those enrolled in tertiary,
vocational or technical education may be employed at any time of the
year: Provided, further, That their period of employment shall be from
twenty (20) to seventy-eight (78) working days only, except that during
Christmas vacation, employment shall be from ten (10) to fifteen (15)
days which may be counted as part of the students’ probationary
period should they apply in the same company or agency after
graduation: Provided, finally, That students employed in activities
related to their course may earn equivalent academic and practicum or
on-the-job training credits as may be determined by the appropriate
government agencies.
For purposes of this Act, poor but deserving students, OSY,
and dependents of displaced or would-be displaced workers due to
business closures, or work stoppages, or natural calamities refer to
those whose parents’ combined income, together with their own, if any,
does not exceed the annual regional poverty threshold level for a family
of six (6) for the preceding year as may be determined by the National
Economic and Development Authority (NEDA). Employment
facilitation services for applicants to the program shall be done by the
Public Employment Service Office (PESO).
Participating employers, in coordination with the PESO,
must inform their SPES employees of their rights, benefits, and
privileges under existing laws, company policies, and employment
contracts.
Section  2. Sixty per centum (60%) of the said salary or wage
shall be paid by the employer in cash and forty per centum (40%) by
the government also in the form of cash directly to the student or
through financial institutions or other payment facilities, subject to the
existing rules on procurement which shall be applicable in the payment
for the student’s tuition fees, books, and other education-related
expenses, including their daily allowance for food and transportation in
going to school: Provided, That local government units (LGUs) may
assume responsibility for paying in full the salary or wages; Provided,
Page 30 of 88
further, That for low income LGUs employing SPES beneficiaries, the
national government share may be increased up to seventy-five per
centum (75%) depending on the LGUs’ financial capacity to pay the
SPES beneficiaries.
The national government share shall be paid within thirty
(30) working days upon submission of the partner-employer or
participating establishment of their report on payment of salary or
wages which shall be the basis of the portion of the salary or wages to
be paid by the national government through the Department of Labor
and Employment.
In case of sickness, absence, or death of the SPES
beneficiary, the immediate heirs may claim the salary; Provided, That
proof to this effect has been clearly established.
Likewise, the SPES beneficiary shall be entitled to social
protection by virtue of am insurance coverage with the Government
Service Insurance System (GSIS) for a period of one (1) year.
E. EMPLOYMENT OF WOMEN
1. Facilities for Women
Article 130. Facilities for Women. The Secretary of Labor
and Employment shall establish standards that will ensure the safety
and health of women employees. In appropriate cases, he shall, by
regulations, require any employer to:
(a) Provide 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;
(b) To establish separate toilet rooms and lavatories for men
and women and provide at least a dressing room for women;
(c) To establish a nursery in a workplace for the benefit of
the women employees therein; and
(d) To determine appropriate minimum age and other
standards for retirement or termination in special occupations such as
those of flight attendants and the like.
2. Discrimination Prohibited
Article 133. Discrimination Prohibited. It shall be unlawful
for any employer to discriminate against any woman employee with
respect to terms and conditions of employment solely on account of her
sex.
The following are acts of discrimination:
(a) Payment of a lesser compensation, including wage, salary
or other form of remuneration and fringe benefits, to a female
employee as against a male employee, for work of equal value; and
(b) Favoring a male employee over a female employee with
respect to promotion, training opportunities, study and scholarship
grants solely on account of their sexes.
Criminal liability for the willful commission of any unlawful
act as provided in this article or any violation of the rules and
regulations issued pursuant to Section 2 hereof96 shall be penalized as
provided in Articles 288 and 289 of this Code: Provided, That the
institution of any criminal action under this provision shall not bar the
aggrieved employee from filing an entirely separate and distinct action
for money claims, which may include claims for damages and other
affirmative reliefs. The actions hereby authorized shall proceed
independently of each other.
3. Stipulation Against Marriage
Article 134. Stipulation Against Marriage. It shall be
unlawful for an employer to require as a condition of employment or
continuation of employment that a woman employee shall not get
married, or to stipulate expressly or tacitly that upon getting married,
a woman employee shall be deemed resigned or separated, or to
actually dismiss, discharge, discriminate or otherwise prejudice a
woman employee merely by reason of her marriage.
 The doctrine of management prerogative gives an
employer the right to "regulate, according to his own discretion and
judgment, all aspects of employment, including hiring, work
assignments, working methods, the time, place and manner of
work, work supervision, transfer of employees, lay-off of workers,
and discipline, dismissal, and recall of employees." In Cadiz v.
Brent, Brent imposed on Cadiz the condition that she subsequently
contract marriage with her then boyfriend for her to be reinstated.
According to Brent, this is "in consonance with the policy against
encouraging illicit or common-law relations that would subvert the
sacrament of marriage." eighed against these safeguards, it
becomes apparent that Brent's condition is coercive, oppressive and
discriminatory. There is no rhyme or reason for it. It forces Cadiz
to marry for economic reasons and deprives her of the freedom to
choose her status, which is a privilege that inheres in her as an
intangible and inalienable right.  While a marriage or no-marriage
qualification may be justified as a "bona fide occupational
qualification," Brent must prove two factors necessitating its
imposition, viz: (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. Brent has not
shown the presence of neither of these factors. Perforce, the Court
cannot uphold the validity of said condition.
A requirement that a woman employee must remain
unmarried could be justified as a "bona fide occupational
qualification," or BFOQ, where the particular requirements of the
job would justify the same, but not on the ground of a general
principle, such as the desirability of spreading work in the
workplace. A requirement of that nature would be valid provided it
reflects an inherent quality reasonably necessary for satisfactory
job performance. The cases of Duncan and PT&T instruct us that
the requirement of reasonableness must be clearly established to
uphold the questioned employment policy. The employer has the
burden to prove the existence of a reasonable business necessity.
The burden was successfully discharged in Duncan but not in
PT&T.
In PT&T v. NLRC, the Supreme Court held that
Private respondent Grace de Guzman was illegally
dismissed. In this case, petitioner's policy of not accepting or
considering as disqualified from work any woman worker who
contracts marriage runs afoul of the test of, and the right against
discrimination, afforded all women workers by our labor laws
and by no less than the Constitution. Contrary to petitioner's
assertion that it dismissed private respondent from employment
on account of her dishonesty, the record discloses clearly that
her ties with the company were dissolved principally because of
the company's policy that married women are not qualified for
employment in PT&T, and not merely because of her supposed
acts of dishonesty.
It is not relevant that the rule is not directed against
all women but just against married women. And, where the
employer discriminates against married women, but not against
married men, the variable is sex and the discrimination is
unlawful. Upon the other hand, a requirement that a woman
employee must remain unmarried could be justified as a "bona
fide occupational qualification," or BFOQ, where the particular
requirements of the job would justify the same, but not on the
ground of a general principle, such as the desirability of
spreading work in the workplace. A requirement of that nature
would be valid provided it reflects an inherent quality
reasonably necessary for satisfactory job performance.
Petitioner's policy is not only in derogation of the provisions of
Article 136 of the Labor Code on the right of a woman to be free
from any kind of stipulation against marriage in connection with
her employment, but it likewise assaults good morals and public
policy, tending as it does to deprive a woman of the freedom to
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choose her status, a privilege that by all accounts inheres in the
individual as an intangible and inalienable right
According to the Supreme Court, to justify a bona
fide occupational qualification the employer must the two (2)
factors:
a. That the employment qualification is reasonably
related to the essential operation of the job involved.
b. That there is a factual basis for believing that all
persons meeting the qualification would be unable
to properly perform the duties of the job.
In Duncan v. Glaxo Welcome, the prohibition against
marriage embodied in the following stipulation in the employment
contract was declared valid:
“10. You agree to disclose to management any
existing or future relationship you may have, either by
consanguinity or affinity or co-employees or employees of
competing drug companies. Should it pose a possible conflict of
interest in management discretion, you agree to resign
voluntarily from the Company as a matter of Company policy.”
The Supreme Court ruled that the dismissal based on
above stipulation in the employment contract is a valid exercise of
management prerogative. The prohibition against personal or
marital relationships with employees of competitor companies
upon its employees was held reasonable under the circumstances
because relationships of this nature might compromise the interests
of the company. In laying down the assailed company policy, the
employer only aims to protect its interests against the possibility
that a competitor company will gain access to its secrets and
procedures. Thus:
Tecon’s wife holds a sensitive supervisory position
as Branch Coordinator in her employer-company which requires
her to work in close coordination with District Managers and
Medical Representatives. She therefore takes an active
participation in the market war characterized as it is by stiff
competition among pharmaceutical companies. Moreover, and
this is significant, petitioner’s sales territory covers Camarines
Sur and Camarines Norte while his wife is supervising a branch
of her employer in Albay. The proximity of their areas of
responsibility, all in the same Bicol Region, renders the conflict
of interest not only possible, but actual, as learning by one
spouse of the other’s market strategies in the region would be
inevitable.
By the very nature of his employment, a drug
salesman or medical representative is expected to travel. He
should anticipate reassignment according to the demands of
their business. It would be a poor drug corporation which cannot
even assign its representatives or detail men to new markets
calling for opening or expansion or to areas where the need for
pushing its products is great. More so if such reassignments are
part of the employment contract.
Star Paper v. Simbol
Held: We do not find a reasonable business necessity in this
case. Petitioners’ sole contention that "the company did not just want to
have two (2) or more of its employees related between the third degree by
affinity and/or consanguinity" is lame. That the second paragraph was
meant to give teeth to the first paragraph of the questioned rule is evidently
not the valid reasonable business necessity required by the law.
It is significant to note that in the case at bar, respondents were
hired after they were found fit for the job, but were asked to resign when
they married a co-employee. Petitioners failed to show how the marriage of
Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an
employee of the Repacking Section, could be detrimental to its business
operations. Neither did petitioners explain how this detriment will happen
in the case of Wilfreda Comia, then a Production Helper in the Selecting
Department, who married Howard Comia, then a helper in the cutter-
machine. The policy is premised on the mere fear that employees married to
each other will be less efficient. If we uphold the questioned rule without
valid justification, the employer can create policies based on an unproven
presumption of a perceived danger at the expense of an employee’s right to
security of tenure.
Disparate Impact Theory
Petitioners contend that their policy will apply only when one
employee marries a co-employee, but they are free to marry persons other
than co-employees. The questioned policy may not facially violate Article
136 of the Labor Code but it creates a disproportionate effect and under the
disparate impact theory, the only way it could pass judicial scrutiny is a
showing that it is reasonable despite the discriminatory, albeit
disproportionate, effect. The failure of petitioners to prove a legitimate
business concern in imposing the questioned policy cannot prejudice the
employee’s right to be free from arbitrary discrimination based upon
stereotypes of married persons working together in one company.
Lastly, the absence of a statute expressly prohibiting marital
discrimination in our jurisdiction cannot benefit the petitioners. The
protection given to labor in our jurisdiction is vast and extensive that we
cannot prudently draw inferences from the legislature’s silence that married
persons are not protected under our Constitution and declare valid a policy
based on a prejudice or stereotype. Thus, for failure of petitioners to present
undisputed proof of a reasonable business necessity, we rule that the
questioned policy is an invalid exercise of management prerogative.
Corollarily, the issue as to whether respondents Simbol and Comia resigned
voluntarily has become moot and academic.
4. Prohibited Acts
Article 135. Prohibited Acts. It shall be unlawful for any
employer:
(1) To deny any woman employee the benefits provided for
in this Chapter or to discharge any woman employed by him for the
purpose of preventing her from enjoying any of the benefits provided
under this Code;
(2) To discharge such woman on account of her pregnancy,
or while on leave or in confinement due to her pregnancy;
(3) To discharge or refuse the admission of such woman
upon returning to her work for fear that she may again be pregnant.
5. Classification of Certain Women Workers
Article 136. Classification of Certain Women Workers. Any
woman who is permitted or suffered to work, with or without
compensation, in any night club, cocktail lounge, 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 and Employment, shall be considered as an
employee of such establishment for purposes of labor and social
legislation.
6. Maternity Leave (R.A. 11210)
Section 3. Grant of Maternity Leave.— All covered female
workers in government and the private sector, including those in the
informal economy, regardless of civil status or the legitimacy of her
child, shall be granted one hundred five (105) days maternity leave
with full pay and an option to extend for an additional thirty (30) days
without pay: Provided, That in case the worker qualifies as a solo
parent under Republic Act No. 8972, or the "Solo Parents’ Welfare
Act", the worker shall be granted an additional fifteen (15) days
maternity leave with full pay.
Enjoyment of maternity leave cannot be deferred but should
be availed of either before or after the actual period of delivery in a
continuous and uninterrupted manner, not exceeding one hundred five
(105) days, as the case may be.
Maternity leave shall be granted to female workers in every
instance of pregnancy, miscarriage or emergency termination of
pregnancy, regardless of frequency: Provided, That for cases of
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miscarriage or emergency termination of pregnancy, sixty (60) days
maternity leave with full pay shall be granted.
Section 4. Maternity Leave for Female Workers in the Public
Sector.— Any pregnant female worker in the government service,
regardless of employment status, in National Government Agencies
(NGAs), Local Government Units (LGUs), Government-Owned or -
Controlled Corporations (GOCCs), or State Universities and Colleges
(SUCs), shall be granted a maternity leave of one hundred five (105)
days with full pay regardless if the delivery was normal or
caesarian: Provided, That, in case the employee qualifies as a solo
parent under Republic Act No. 8972, or the "Solo Parents’ Welfare
Act", the employee shall be paid an additional maternity benefit of
fifteen (15) days. An additional maternity leave of thirty (30) days,
without pay, can be availed of, at the option of the female
worker: Provided, further, That, the head of the agency shall be given
due notice, in writing, at least forty-five (45) days before the end of her
maternity leave: Provided, finally, That no prior notice shall be
necessary in the event of a medical emergency but subsequent notice
shall be given to the head of the agency.
Maternity leave of sixty (60) days, with full pay, shall be
granted for miscarriage or emergency termination of pregnancy.
Section 5. Maternity Leave for Female Workers in the Private
Sector.— Any pregnant female worker in the private sector shall be
granted a maternity leave of one hundred five (105) days with full pay,
regardless of whether she gave birth via caesarian section or natural
delivery, while maternity leave of sixty (60) days with full pay shall be
granted for miscarriage or emergency termination of pregnancy.
(a) A female Social Security System (SSS) member who has
paid at least three (3) monthly contributions in the twelve (12)-month
period immediately preceding the semester of her childbirth,
miscarriage, or emergency termination of pregnancy shall be paid her
daily maternity benefit which shall be computed based on her average
monthly salary credit for one hundred five (105) days, regardless of
whether she gave birth via caesarian section or natural delivery,
subject to the following conditions:
(1) That the female worker shall have notified her employer
of her pregnancy and the probable date of her childbirth, which notice
shall be transmitted to the SSS in accordance with the rules and
regulations it may provide;
(2) That the full payment shall be advanced by the employer
within thirty (30) days from the filing of the maternity leave
application;
(3) That payment of daily maternity benefits shall be a bar
to the recovery of sickness benefits provided under Republic Act No.
1161, as amended, for the same period for which daily maternity
benefits have been received;
(4) That the SSS shall immediately reimburse the employer
of one hundred percent (100%) of the amount of maternity benefits
advanced to the female worker by the employer upon receipt of
satisfactory and legal proof of such payment; and
(5) That if a female worker should give birth or suffer a
miscarriage or emergency termination of pregnancy without the
required contributions having been remitted for her by her employer
to the SSS, or without the latter having been previously notified by the
employer of the time of the pregnancy, the employer shall pay to the
SSS damages equivalent to the benefits which said female member
would otherwise have been entitled to.
In case the employee qualifies as a solo parent under
Republic Act No. 8972, or the "Solo Parents’ Welfare Act", the
employee shall be paid an additional maternity benefit of fifteen (15)
days.
(b) An additional maternity leave of thirty (30) days, without
pay, can be availed of, at the option of the female
worker: Provided, That the employer shall be given due notice, in
writing, at least forty-five (45) days before the end of her maternity
leave: Provided, further, That no prior notice shall be necessary in the
event of a medical emergency but subsequent notice shall be given to
the head of the agency.
(c) Workers availing of the maternity leave period and
benefits must receive their full pay. Employers from the private sector
shall be responsible for payment of the salary differential between the
actual cash benefits received from the SSS by the covered female
workers and their average weekly or regular wages, for the entire
duration of the maternity leave, with the following exceptions, subject
to the guidelines to be issued by the Department of Labor and
Employment (DOLE):
(1) Those operating distressed establishments;
(2) Those retail/service establishments and other enterprises
employing not more than ten (10) workers;
(3) Those considered as micro-business enterprises and
engaged in the production, processing, or manufacturing of products
or commodities including agro-processing, trading, and services, whose
total assets are not more than Three million pesos (₱3,000,000.00); and
(4) Those who are already providing similar or more than
the benefits herein provided.
Provided, That said exemptions shall be subject to an annual
submission of a justification by the employer claiming exemption for
the approval of the DOLE.
Section 6. Allocation of Maternity Leave Credits.— Any
female worker entitled to maternity leave benefits as provided for
herein may, at her option, allocate up to seven (7) days of said benefits
to the child’s father, whether or not the same is married to the female
worker: Provided, That in the death, absence, or incapacity of the
former, the benefit may be allocated to an alternate caregiver who may
be a relative within the fourth degree of consanguinity or the current
partner of the female worker sharing the same household, upon the
election of the mother taking into account the best interests of the
child: Provided, further, That written notice thereof is provided to the
employers of the female worker and alternate
caregiver: Provided, furthermore, That this benefit is over and above
that which is provided under Republic Act No. 8187, or the "Paternity
Leave Act of 1996": Provided, finally, That in the event the beneficiary
female worker dies or is permanently incapacitated, the balance of her
maternity leave benefits shall accrue to the father of the child or to a
qualified caregiver as provided above.
Section 7. Maternity Leave for Women Regardless of Civil
Status.— All female workers in the government and female members of
the SSS, regardless of their civil status, shall be granted maternity
leave, with full pay, upon compliance with the preceding section.
Section 8. Maternity Leave With Pay in Case of Childbirth,
Miscarriage, or Emergency Termination of Pregnancy After the
Termination of an Employee’s Service.— Maternity leave with full pay
shall be granted even if the childbirth, miscarriage, or emergency
termination of pregnancy occurs not more than fifteen (15) calendar
days after the termination of an employee’s service, as her right thereto
has already accrued: Provided, That such period is not applicable when
the employment of the pregnant woman worker has been terminated
without just cause, in which case the employer will pay her the full
amount equivalent to her salary for one hundred five (105) days for
childbirth and sixty (60) days for miscarriage or emergency
termination of pregnancy based on her full pay, in addition to the other
applicable daily cash maternity benefits that she should have received
had her employment not been illegally terminated.
Section 9. Maternity Leave Credits.— The maternity leave
can be credited as combinations of prenatal and postnatal leave as long
as it does not exceed one hundred five (105) days and provided that
compulsory postnatal leave shall not be less than sixty (60) days.
Section 10. Maternity Leave Benefits for Women in the
Informal Economy and Voluntary Contributors to the SSS.— Maternity
benefits shall cover all married and unmarried women, including
female workers in the informal economy.
Female workers in the informal economy are entitled to
maternity leave benefits if they have remitted to the SSS at least three
(3) monthly contributions in the .twelve (12)-month period immediately
preceding the semester of her childbirth, miscarriage, or emergency
termination of pregnancy.
Section 11. Maternity Benefits for Female Workers Who are
Non-Members of the SSS.— Female workers who are neither voluntary
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nor regular members of the SSS shall be governed by the Philippine
Health Insurance Corporation (PhilHealth) Circular No. 022-2014 or
the "Social Health Insurance Coverage and Benefits for Women About
to Give Birth".
Section 12. Maternity Leave of a Female Worker With
Pending Administrative Case. — The maternity leave benefits granted
under this Act shall be enjoyed by a female worker in the government
service and in the private sector even if she has a pending
administrative case.
Section 13. Maternity Leave for Female National Athletes.—
In the event a national athlete becomes pregnant, she will be referred
to the team physician or an accredited physician of the Philippine
Sports Commission (PSC) or an obstetrician-gynecologist to determine
her fitness to continue training. She will be allowed to participate in all
team-related activities, unless the physician advises that participation is
not medically safe or should be limited. Upon medical advice, she shall
go on maternity leave until cleared to return to training. She shall
continue receiving her allowance and be entitled to the same benefits
while on maternity leave prior to childbirth and up to six (6) months
after, unless she can resume sooner as advised by her physician, in
which case, she will be entitled to the allowance and benefits she had
prior to pregnancy: Provided, That a female national athlete employed
in the public sector shall not receive double compensation or benefits.
Section 14. Non-Diminution of Benefits. - Nothing in this Act
shall be construed as to diminish existing maternity benefits currently
enjoyed whether or not these are granted under collective bargaining
agreements (CBA) or present laws, if the same are more beneficial to
the female worker. Any other working arrangement which the female
worker shall agree to, during the additional maternity leave period,
shall be allowed: Provided, That this shall be consented to in writing by
the female worker and shall primarily uphold her maternal functions
and the requirements of postnatal care.
Section 15. Security of Tenure. - Those who avail of the
benefits of this Act, whether in the government service or private
sector, shall be assured of security of tenure. As such, the exercise of
this option by them shall not be used as basis for demotion in
employment or termination. The transfer to a parallel position or
reassignment from one organizational unit to another in the same
agency or private enterprise shall be allowed: Provided, That it shall
not involve a reduction in rank, status, salary, or otherwise amount to
constructive dismissal.
7. VAWC Leave (R.A. 9262)
SECTION 43. Entitled to Leave. – Victims under this Act
shall be entitled to take a paid leave of absence up to ten (10) days in
addition to other paid leaves under the Labor Code and Civil Service
Rules and Regulations, extendible when the necessity arises as specified
in the protection order.
Any employer who shall prejudice the right of the person
under this section shall be penalized in accordance with the provisions
of the Labor Code and Civil Service Rules and Regulations. Likewise,
an employer who shall prejudice any person for assisting a co-
employee who is a victim under this Act shall likewise be liable for
discrimination.
8. Magna Carta for Women Leave (R.A. 9710)
SECTION 18.       Special Leave Benefits for Women. — A
woman employee having rendered continuous aggregate employment
service of at least six (6) months for the last twelve (12) months shall be
entitled to a special leave benefit of two (2) months with full pay based
on her gross monthly compensation following surgery caused by
gynecological disorders.
F. EMPLOYMENT OF MINORS (R.A. No. 7610)
 Section 12. Employment of Children - Children below fifteen
(15) years of age shall not be employed except:
1) When a child works directly under the sole responsibility
of his/her parents or legal guardian and where only members of his/her
family are employed: Provided, however, That his/her employment
neither endangers his/her life, safety, health, and morals, nor impairs
his/her normal development: Provided, further, That the parent or legal
guardian shall provide the said child with the prescribed primary
and/or secondary education; or
2) Where a child's employment or participation in public
entertainment or information through cinema, theater, radio, television
or other forms of media is essential: Provided, That the employment
contract is concluded by the child's parents or legal guardian, with the
express agreement of the child concerned, if possible, and the approval
of the Department of Labor and Employment: Provided, further, That
the following requirements in all instances are strictly complied with:
(a) The employer shall ensure the protection, health, safety,
morals and normal development of the child;
(b) The employer shall institute measures to prevent the
child's exploitation or discrimination taking into account the system
and level of remuneration, and the duration and arrangement of
working time; and
(c) The employer shall formulate and implement, subject to
the approval and supervision of competent authorities, a continuing
program for training and skills acquisition of the child.
In the above-exceptional cases where any such child may be
employed, the employer shall first secure, before engaging such child, a
work permit from the Department of Labor and Employment which
shall ensure observance of the above requirements.
For purposes of this Article, the term "child" shall apply to
all persons under eighteen (18) years of age.
Section 12-A. Hours of Work of a Working Child. - Under the
exceptions provided in Section 12 of this Act, as amended:
(1) A child below fifteen (15) years of age may be allowed to
work for not more than twenty (20) hours a week: Provided, That the
work shall not be more than four (4) hours at any given day;
(2) A child fifteen (15) years of age but below eighteen (18)
shall not be allowed to work for more than eight (8) hours a day, and in
no case beyond forty (40) hours a week;
(3) No child below fifteen (15) years of age shall be allowed
to work between eight o'clock in the evening and six o'clock in the
morning of the following day and no child fifteen (15) years of age but
below eighteen (18) shall be allowed to work between ten o'clock in the
evening and six o'clock in the morning of the following day."
Section 12-B. Ownership, Usage and Administration of the
Working Child's Income. - The wages, salaries, earnings and other
income of the working child shall belong to him/her in ownership and
shall be set aside primarily for his/her support, education or skills
acquisition and secondarily to the collective needs of the
family: Provided, That not more than twenty percent (20%) of the
child's income may be used for the collective needs of the family.
The income of the working child and/or the property
acquired through the work of the child shall be administered by both
parents. In the absence or incapacity of either of the parents, the other
parent shall administer the same. In case both parents are absent or
incapacitated, the order of preference on parental authority as
provided for under the Family Code shall apply.
Section 12-C. Trust Fund to Preserve Part of the Working
Child's Income. - The parent or legal guardian of a working child
below eighteen (18) years of age shall set up a trust fund for at least
thirty percent (30%) of the earnings of the child whose wages and
salaries from work and other income amount to at least two hundred
thousand pesos (P200,000.00) annually, for which he/she shall render a
semi-annual accounting of the fund to the Department of Labor and
Employment, in compliance with the provisions of this Act. The child
shall have full control over the trust fund upon reaching the age of
majority.
Section 12-D. Prohibition Against Worst Forms of Child
Labor. - No child shall be engaged in the worst forms of child labor.
The phrase "worst forms of child labor" shall refer to any of the
following:
(1) All forms of slavery, as defined under the "Anti-
trafficking in Persons Act of 2003", or practices similar to slavery such
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as sale and trafficking of children, debt bondage and serfdom and
forced or compulsory labor, including recruitment of children for use
in armed conflict; or
(2) The use, procuring, offering or exposing of a child for
prostitution, for the production of pornography or for pornographic
performances; or
(3) The use, procuring or offering of a child for illegal or
illicit activities, including the production and trafficking of dangerous
drugs and volatile substances prohibited under existing laws; or
(4) Work which, by its nature or the circumstances in which
it is carried out, is hazardous or likely to be harmful to the health,
safety or morals of children, such that it:
a) Debases, degrades or demeans the intrinsic worth and
dignity of a child as a human being; or
b) Exposes the child to physical, emotional or sexual abuse,
or is found to be highly stressful psychologically or may prejudice
morals; or
c) Is performed underground, underwater or at dangerous
heights; or
d) Involves the use of dangerous machinery, equipment and
tools such as power-driven or explosive power-actuated tools; or
e) Exposes the child to physical danger such as, but not
limited to the dangerous feats of balancing, physical strength or
contortion, or which requires the manual transport of heavy loads; or
f) Is performed in an unhealthy environment exposing the
child to hazardous working conditions, elements, substances, co-agents
or processes involving ionizing, radiation, fire, flammable substances,
noxious components and the like, or to extreme temperatures, noise
levels, or vibrations; or
g) Is performed under particularly difficult conditions; or
h) Exposes the child to biological agents such as bacteria,
fungi, viruses, protozoans, nematodes and other parasites; or
i) Involves the manufacture or handling of explosives and
other pyrotechnic products."
Section 14. Prohibition on the Employment of Children in
Certain Advertisements. - No child shall be employed as a model in any
advertisement directly or indirectly promoting alcoholic beverages,
intoxicating drinks, tobacco and its byproducts, gambling or any form
of violence or pornography.
G. SOLO PARENTS (R.A. 8972)
Section 8. Parental Leave. - In addition to leave privileges
under existing laws, parental leave of not more than seven (7) working
days every year shall be granted to any solo parent employee who has
rendered service of at least one (1) year.
H. MALE WORKERS (R.A. 8187)
Section 2. Notwithstanding any law, rules and regulations to
the contrary, every married male employee in the private and public
sectors shall be entitled to a paternity leave of seven (7) days with full
pay for the first four (4) deliveries of the legitimate spouse with whom
he is cohabiting. The male employee applying for paternity leave shall
notify his employer of the pregnancy of his legitimate spouse and the
expected date of such delivery.
For purposes of this Act, delivery shall include childbirth or
any miscarriage.
Section 3. Definition of Term. – For purposes of this
Act, Paternity Leave refers to the benefits granted to a married male
employee allowing him not to report for work for seven (7) days but
continues to earn the compensation therefor, on the condition that his
spouse has delivered a child or suffered a miscarriage for purposes of
enabling him to effectively lend support to his wife in her period of
recovery and/or in the nursing of the newly-born child.
I. EMPLOYMENT OF NIGHT WORKERS
 Article 154. Coverage. - This chapter' shall apply to all
persons, who shall be employed or permitted or suffered to work at
night, except those employed in agriculture, stock raising, fishing,
maritime transport and inland navigation, during a period of not less
than seven (7) consecutive hours, including the interval from midnight
to five o'clock in the morning, to be determined by the Secretary of
Labor and Employment, after consulting the workers'
representatives/labor organizations and employers.
'Night worker' means any employed person whose work
requires performance of a substantial number of hours of night work
which exceeds a specified limit. This limit shall be fixed by the
Secretary of Labor after consulting the workers' representatives/labor
organizations and employers.
Article 155. Health Assessment. - At their request, workers
shall have the right to undergo a health assessment without charge and
to receive advice on how to reduce or avoid health problems associated
with their work:
(a) Before taking up an assignment as a night worker;
(b) At regular intervals during such an assignment; and
(c) If they experience health problems during such, an
assignment which are not caused by factors other than the
performance of night work.
With the exception of a finding of unfitness for night work,
the findings of such assessments shall not be transmitted to others
without the workers' consent and shall not be used to their detriment.
Article 156. Mandatory Facilities. - Suitable first·aid facilities
shall be made available for workers performing night work, including
arrangements where such workers, where necessary, can be taken
immediately to a place for appropriate treatment. The employers are
likewise required to provide safe and healthful working conditions and
adequate or reasonable facilities such as sleeping or resting quarters in
the establishment and transportation from the work premises to the
nearest point of their residence subject to exceptions and guidelines to
be provided by the DOLE.
Article 157. Transfer. - Night workers who are certified as
unfit for night work, due to health reasons, shall be transferred,
whenever practicable, to a similar job for which they are fit to work.
If such transfer to a similar job is not practicable, these
workers shall be granted the same benefits as other workers who are
unable to work, or to secure employment during such period. A night
worker certified as temporarily unfit for night work shall be given the
same protection against dismissal or notice of dismissal as other
workers who are prevented from working for reasons of health.
Article 158. Women Night Workers. - Measures shall be
taken to ensure that an alternative to night work is available to women
workers who would otherwise be called upon to perform such work:
(a) Before and after childbirth, for a period of at least
sixteen (16) weeks, which shall be divided between the time before and
after childbirth;
(b) For additional periods, in respect of winch a medical
certificate IS produced stating that said additional periods are
necessary for the health of the mother or child:
(1) During pregnancy;
(2) During a specified time beyond the period, after
childbirth is fixed pursuant to subparagraph (a) above, the length of
which shall be determined by the DOLE after consulting the labor
organizations and employers.
During the periods referred to in this article:
(i) A woman worker shall not be dismissed or given notice of
dismissal, except for just or authorized causes provided for in this
Code that are not connected with pregnancy, childbirth and childcare
responsibilities.
(ii) A woman worker shall not lose the benefits regarding
her status, seniority, and access to promotion which may attach to her
regular night work position.
Pregnant women and nursing mothers may be allowed to
work .at night only if a competent physician, other than the company
physician, shall certify their fitness to render night work, and specify,
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in the case of pregnant employees, the period of the pregnancy that
they can safely work.
The measures referred to in this article may include transfer
to day work where this is possible, the provision of social security
benefits or an extension of maternity leave.
The provisions of this article shall not leave the effect of
reducing the protection and benefits connected with maternity leave
under existing laws.
Article 159. Compensation. The compensation for night
workers in the form of working time, pay or similar benefits shall
recognize the exceptional nature of night work."
Article 160. Social Services. - Appropriate social services
shall be provided for night workers and, where necessary, for workers
performing night work.
Article 161. Night Work Schedules. - Before introducing
work schedules requiring the services of night workers, the employer
shall consult the workers' representatives/labor organizations
concerned on the details of such schedules and the forms of
organization of night work that are best adapted to the establishment
and its personnel, as well as on the occupational health measures and
social services which are required. In establishments employing night
workers, consultation shall take place regularly.
J. AGED WORKERS (R.A. 10911)
Section 5. Prohibition of Discrimination in Employment on
Account of Age -
(a) It shall be unlawful for an employer to:
(1) Print or publish, or cause to be printed or published, in
any form of media, including the internet, any notice of advertisement
relating to employment suggesting preferences, limitations,
specifications, and discrimination based on age;
(2) Require the declaration of age or birth date during the
application process;
(3) Decline any employment application because of the
individual’s age;
(4) Discriminate against an individual in terms of
compensation, terms and conditions or privileges of employment on
account of such individual’s age;
(5) Deny any employee’s or worker’s promotion or
opportunity for training because of age;
(6) Forcibly lay off an employee or worker because of old
age; or
(7) Impose early retirement on the basis of such employee’s
or worker’s age.
(b) It shall be unlawful for a labor contractor or
subcontractor, if any, to refuse to refer for employment or otherwise
discriminate against any individual because of such person’s age.
(c) It shall be unlawful for a labor organization to:
(1) Deny membership to any individual because of such
individual’s age;
(2) Exclude from its membership any individual because of
such individual’s age; or
(3) Cause or attempt to cause an employer to discriminate
against an individual in violation of this Act.
(d) It shall be unlawful for a publisher to print or publish
any notice of advertisement relating to employment suggesting
preferences, limitations, specifications, and discrimination based on
age.
Section 6. Exceptions. - It shall not be unlawful for an
employer to set age limitations in employment if:
(a) Age is a bona fide occupational qualification reasonably
necessary in the normal operation of a particular business or where the
differentiation is based on reasonable factors other than age;
(b) The intent is to observe the terms of a bona fide seniority
system that is not intended to evade the purpose of this Act;
(c) The intent is to observe the terms of a bona fide employee
retirement or a voluntary early retirement plan consistent with the
purpose of this Act: Provided, That such retirement or voluntary
retirement plan is in accordance with the Labor Code, as amended,
and other related laws; or
(d) The action is duly certified by the Secretary of Labor and
Employment in accordance with the purpose of this Act.
K. KASAMBAHAYS (R.A. 10361)
1. Rights And Privileges
Section 5. Standard of Treatment. – The employer or any
member of the household shall not subject a domestic worker or
“kasambahay” to any kind of abuse nor inflict any form of physical
violence or harassment or any act tending to degrade the dignity of a
domestic worker.
Section 6. Board, Lodging and Medical Attendance. – The
employer shall provide for the basic necessities of the domestic worker
to include at least three (3) adequate meals a day and humane sleeping
arrangements that ensure safety.
The employer shall provide appropriate rest and assistance
to the domestic worker in case of illnesses and injuries sustained during
service without loss of benefits.
At no instance shall the employer withdraw or hold in
abeyance the provision of these basic necessities as punishment or
disciplinary action to the domestic worker.
Section 7. Guarantee of Privacy.  – Respect for the privacy of
the domestic worker shall be guaranteed at all times and shall extend
to all forms of communication and personal effects. This guarantee
equally recognizes that the domestic worker is obliged to render
satisfactory service at all times.
Section 8. Access to Outside Communication. – The employer
shall grant the domestic worker access to outside communication
during free time: Provided, That in case of emergency, access to
communication shall be granted even during work time. Should the
domestic worker make use of the employer’s telephone or other
communication facilities, the costs shall be borne by the domestic
worker, unless such charges are waived by the employer.
Section 9. Right to Education and Training.  – The employer
shall afford the domestic worker the opportunity to finish basic
education and may allow access to alternative learning systems and, as
far as practicable, higher education or technical and vocational
training. The employer shall adjust the work schedule of the domestic
worker to allow such access to education or training without
hampering the services required by the employer.
Section 10. Prohibition Against Privileged Information.  – All
communication and information pertaining to the employer or
members of the household shall be treated as privileged and
confidential, and shall not be publicly disclosed by the domestic worker
during and after employment. Such privileged information shall be
inadmissible in evidence except when the suit involves the employer or
any member of the household in a crime against persons, property,
personal liberty and security, and chastity.
2. Pre-Employment
Section 11. Employment Contract.  – An employment contract
shall be executed by and between the domestic worker and the
employer before the commencement of the service in a language or
dialect understood by both the domestic worker and the employer. The
domestic worker shall be provided a copy of the duly signed
employment contract which must include the following:
(a) Duties and responsibilities of the domestic worker;
(b) Period of employment;
(c) Compensation;
(d) Authorized deductions;
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(e) Hours of work and proportionate additional payment;
(f) Rest days and allowable leaves;
(g) Board, lodging and medical attention;
(h) Agreements on deployment expenses, if any;
(i) Loan agreement;
(j) Termination of employment; and
(k) Any other lawful condition agreed upon by both parties.
The Department of Labor and Employment (DOLE) shall
develop a model employment contract for domestic workers which
shall, at all times, be made available free of charge to domestic
workers, employers, representative organizations and the general
public. The DOLE shall widely disseminate information to domestic
workers and employers on the use of such model employment contract.
In cases where the employment of the domestic worker is
facilitated through a private employment agency, the PEA shall keep a
copy of all employment contracts of domestic workers and shall be
made available for verification and inspection by the DOLE.
Section 12. Pre-Employment Requirement. – Prior to the
execution of the employment contract, the employer may require the
following from the domestic worker:
(a) Medical certificate or a health certificate issued by a local
government health officer;
(b) Barangay and police clearance;
(c) National Bureau of Investigation (NBI) clearance; and
(d) Duly authenticated birth certificate or if not available,
any other document showing the age of the domestic worker such as
voter’s identification card, baptismal record or passport.
However, Section 12(a), (b), (c) and (d) shall be standard
requirements when the employment of the domestic worker is
facilitated through the PEA.
The cost of the foregoing shall be borne by the prospective
employer or agency, as the case may be.
Section 13. Recruitment and Finder’s Fees. –  Regardless of
whether the domestic worker was hired through a private employment
agency or a third party, no share in the recruitment or finder’s fees
shall be charged against the domestic worker by the said private
employment agency or third party.
Section 14. Deposits for Loss or Damage. – It shall be
unlawful for the employer or any other person to require a domestic
worker to make deposits from which deductions shall be made for the
reimbursement of loss or damage to tools, materials, furniture and
equipment in the household.
Section 15. Prohibition on Debt Bondage. – It shall be
unlawful for the employer or any person acting on behalf of the
employer to place the domestic worker under debt bondage.
Section 16. Employment Age of Domestic Workers. –  It shall
be unlawful to employ any person below fifteen (15) years of age as a
domestic worker. Employment of working children, as defined under
this Act, shall be subject to the provisions of Section 10(A), paragraph
2 of Section 12-A, paragraph 4 of Section 12-D, and Section 13 of
Republic Act No. 7610, as amended, otherwise known as the “Special
Protection of Children Against Child Abuse, Exploitation and
Discrimination Act”.
Working children shall be entitled to minimum wage, and all
benefits provided under this Act.
Any employer who has been sentenced by a court of law of
any offense against a working child under this Act shall be meted out
with a penalty one degree higher and shall be prohibited from hiring a
working child.
3. Employment – Terms and Conditions
a. Health and Safety
Section 19. Health and Safety. – The employer shall
safeguard the health and safety of the domestic worker in accordance
with laws, rules and regulations, with due consideration of the peculiar
nature of domestic work.
b. Daily Rest Period
Section 20. Daily Rest Period. – The domestic worker shall be
entitled to an aggregate daily rest period of eight (8) hours per day.
c. Weekly Rest Period
Section 21. Weekly Rest Period. –  The domestic worker shall
be entitled to at least twenty-four (24) consecutive hours of rest in a
week. The employer and the domestic worker shall agree in writing on
the schedule of the weekly rest day of the domestic
worker: Provided, That the employer shall respect the preference of the
domestic worker as to the weekly rest day when such preference is
based on religious grounds. Nothing in this provision shall deprive the
domestic worker and the employer from agreeing to the following:
(a) Offsetting a day of absence with a particular rest day;
(b) Waiving a particular rest day in return for an equivalent
daily rate of pay;
(c) Accumulating rest days not exceeding five (5) days; or
(d) Other similar arrangements.
d. Assignment to Non-Household Work
Section 22. Assignment to Nonhousehold Work.  – No
domestic worker shall be assigned to work in a commercial, industrial
or agricultural enterprise at a wage rate lower than that provided for
agricultural or nonagricultural workers. In such cases, the domestic
worker shall be paid the applicable minimum wage.
The work that petitioner performed in the temple could
not be categorized as mere domestic work. The petitioner attended
to the visitors, mostly Chinese, who came to pray or seek advice
before Buddha for personal or business problems; arranged
meetings between these visitors and Su and supervised the
preparation of the food for the temple visitors; acted as tourist
guide of foreign visitors; acted as liaison with some government
offices; and made the payment for the temple’s Meralco, MWSS
and PLDT bills. Indeed, these tasks may NOT be deemed activities
of a household helper. They were essential and important to the
operation and religious functions of the temple [Barcenas v.
NLRC].
The employee provided laundry services at the staff
house of the company. A househelper is are actually serving the
family while the employee here renders service in the staffhouses
or within the premises of the business of the employer. In such
instance, she is an employee of the company or employer in the
business concerned entitled to the privileges of a regular employee
[Apex Mining v. NLRC].
e. Extent of Duty
Section 23. Extent of Duty.  – The domestic worker and the
employer may mutually agree for the former to temporarily perform a
task that is outside the latter’s household for the benefit of another
household. However, any liability that will be incurred by the domestic
worker on account of such arrangement shall be borne by the original
employer. In addition, such work performed outside the household
shall entitle the domestic worker to an additional payment of not less
than the existing minimum wage rate of a domestic worker. It shall be
unlawful for the original employer to charge any amount from the said
household where the service of the domestic worker was temporarily
performed.
f. Minimum Wage
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Section 24. Minimum Wage. – The minimum wage of
domestic workers shall not be less than the following:
(a) Two thousand five hundred pesos (P2,500.00) a month
for those employed in the National Capital Region (NCR);
(b) Two thousand pesos (P2,000.00) a month for those
employed in chartered cities and first class municipalities; and
(c) One thousand five hundred pesos (P1,500.00) a month for
those employed in other municipalities.
After one (1) year from the effectivity of this Act, and
periodically thereafter, the Regional Tripartite and Productivity Wage
Boards (RTPWBs) shall review, and if proper, determine and adjust
the minimum wage rates of domestic workers.
g. Payment of Wages
Section 25. Payment of Wages. – Payment of wages shall be
made on time directly to the domestic worker to whom they are due in
cash at least once a month. The employer, unless allowed by the
domestic worker through a written consent, shall make no deductions
from the wages other than that which is mandated by law. No employer
shall pay the wages of a domestic worker by means of promissory
notes, vouchers, coupons, tokens, tickets, chits, or any object other than
the cash wage as provided for under this Act.
The domestic worker is entitled to a thirteenth month pay as
provided for by law.
h. Pay Slip
Section 26. Pay Slip. –  The employer shall at all times
provide the domestic worker with a copy of the pay slip containing the
amount paid in cash every pay day, and indicating all deductions made,
if any. The copies of the pay slip shall be kept by the employer for a
period of three (3) years.
i. Prohibition on Interference in the Disposal
of Wages
Section 27. Prohibition on Interference in the Disposal of
Wages. –  It shall be unlawful for the employer to interfere with the
freedom of any domestic worker to dispose of the latter’s wages. The
employer shall not force, compel or oblige the domestic worker to
purchase merchandise, commodities or other properties from the
employer or from any other person, or otherwise make use of any store
or services of such employer or any other person.
j. Prohibition Against Withholding of Wages
Section 28. Prohibition Against Withholding of Wages. – It
shall be unlawful for an employer, directly or indirectly, to withhold
the wages of the domestic worker. If the domestic worker leaves
without any justifiable reason, any unpaid salary for a period not
exceeding fifteen (15) days shall be forfeited. Likewise, the employer
shall not induce the domestic worker to give up any part of the wages
by force, stealth, intimidation, threat or by any other means
whatsoever.
k. Leave Benefits
Section 29. Leave Benefits. – A domestic worker who has
rendered at least one (1) year of service shall be entitled to an annual
service incentive leave of five (5) days with pay: Provided, That any
unused portion of said annual leave shall not be cumulative or carried
over to the succeeding years. Unused leaves shall not be convertible to
cash.
l. Social and Other Benefits
Section 30. Social and Other Benefits. – A domestic worker
who has rendered at least one (1) month of service shall be covered by
the Social Security System (SSS), the Philippine Health Insurance
Corporation (PhilHealth), and the Home Development Mutual Fund or
Pag-IBIG, and shall be entitled to all the benefits in accordance with
the pertinent provisions provided by law.
Premium payments or contributions shall be shouldered by
the employer. However, if the domestic worker is receiving a wage of
Five thousand pesos (P5,000.00) and above per month, the domestic
worker shall pay the proportionate share in the premium payments or
contributions, as provided by law.
The domestic worker shall be entitled to all other benefits
under existing laws.
L. HOMEWORKERS
1. Regulation of Industrial Homeworkers
Article 151. Regulation of Industrial Homeworkers. The
employment of industrial homeworkers and field personnel shall be
regulated by the government through the appropriate regulations
issued by the Secretary of Labor and Employment to ensure the
general welfare and protection of homeworkers and field personnel
and the industries employing them.
2. Distribution of Homework
Article 153. Distribution of Homework. For purposes of this
Chapter, the "employer" of homeworkers includes any person, natural
or artificial who, for his account or benefit, or on behalf of any person
residing outside the country, directly or indirectly, or through an
employee, agent contractor, sub-contractor or any other person:
(1) Delivers, or causes to be delivered, any goods, articles or
materials to be processed or fabricated in or about a home and
thereafter to be returned or to be disposed of or distributed in
accordance with his directions; or
(2) Sells any goods, articles or materials to be processed or
fabricated in or about a home and then rebuys them after such
processing or fabrication, either by himself or through some other
person
VII
WORKING CONDITIONS AND REST PERIODS
A. COVERAGE
Article 82. Coverage. The provisions of this Title shall apply
to employees in all establishments and undertakings whether for profit
or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent
on him for support, domestic helpers, persons in the personal service of
another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
As used herein, "managerial employees" refer to those
whose primary duty consists of the management of the establishment in
which they are employed or of a department or subdivision thereof,
and to other officers or members of the managerial staff.
"Field personnel" shall refer to non-agricultural employees
who regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty.
B. EXCLUDED EMPLOYEES
In the situation where employment relationship exists*
the next matter of concern is coverage, that is, who are the
employees that are or are not covered by the law on conditions of
employment. Article 82 says that the whole Title I — from Articles
82 to 96 (Working Conditions and Rest Periods) — applies to all
employees in all establishments, except the following: (1)
government employees, (2) managerial employees, including other
officers or members of the managerial staff, (3) field personnel, (4)
Page 38 of 88
the employer's family members who depend on him for support, (5)
domestic helpers, (6) persons in the personal service of another, (7)
workers who are paid by results as determined under DOLE
regulations.
1. Government Employees
As noted in the Preliminary Title, government employees
are governed by the Civil Service rules and regulations, not by the
Labor Code, particularly this Title on employment conditions. But
this exclusion does not refer to employees of government agencies
and government corporations that are incorporated under the
Corporation Code. To them the Labor Code applies.
Government employees are those in the national
government, its agencies, instrumentalities, local governments,
provincial, city, municipal governments, and government owned
and controlled corporations with original charter. And that last
category is the problematic category, those that are employed by
government owned and controlled corporations with original
charter. With original charter came only in the 1987 Constitution. It
was not in the 1973 constitution. All of the sudden in the 1987
Constitution, they broadened government employees, so that they
will be under the labor code.
As noted in the Preliminary Title, government employees
are governed by the Civil Service rules and regulations, not by the
Labor Code, particularly this Title on employment conditions. But
this exclusion does not refer to employees of government agencies
and government corporations that are incorporated under the
Corporation Code. To them the Labor Code applies.
The test to determine whether a corporation is
government owned or controlled, or private in nature is simple. Is
it created by its own charter for the exercise of a public function,
or by incorporation under the general corporation law? Those
with special charters are government corporations subject to its
provisions, and its employees are under the jurisdiction of the Civil
Service Commission, and are compulsory members of the
Government Service Insurance System [PSPCA v. Court of
Appeals]. 
The Boy Scouts of the Philippines is a public corporation
created by law for a public purpose attached to DepEd under its
charter (CA 111 as amended by RA 7278) and EO 292. Its funds
are subject to COA audit. The BSP is a Public Corporation Not
Subject to the Test of Government
Ownership or Control and Economic
Viability. The BSP is a public corporation or a government agency
or instrumentality with juridical personality, which does not fall
within the constitutional prohibition in Article XII, Section 16,
notwithstanding the amendments to its charter.  Not all
corporations, which are not government owned or controlled,
are ipso facto to be considered private corporations as there exists
another distinct class of corporations or chartered institutions
which are otherwise known as "public corporations."  These
corporations are treated by law as agencies or instrumentalities of
the government which are not subject to the tests of ownership or
control and economic viability but to different criteria relating to
their public purposes/interests or constitutional policies and
objectives and their administrative relationship to the government
or any of its Departments or Offices [BSP v. COA].
PNRC is a Private Organization Performing Public
Functions. The PNRC is not government-owned but privately
owned. The vast majority of the thousands of PNRC members are
private individuals, including students. Under the PNRC Charter,
those who contribute to the annual fund campaign of the PNRC are
entitled to membership in the PNRC for one year. Thus, any one
between 6 and 65 years of age can be a PNRC member for one year
upon contributing P35, P100, P300, P500 or P1,000 for the year.
[20]
 Even foreigners, whether residents or not, can be members of
the PNRC. Section 5 of the PNRC Charter, as amended by
Presidential Decree No. 1264, reads:
SEC. 5. Membership in the Philippine National Red
Cross shall be open to the entire population in the Philippines
regardless of citizenship. Any contribution to the Philippine
National Red Cross Annual Fund Campaign shall entitle the
contributor to membership for one year and said contribution
shall be deductible in full for taxation purposes.
Thus, the PNRC is a privately owned, privately funded,
and privately run charitable organization. The PNRC is not a
government-owned or controlled corporation [Liban v. Gordon].
2. Managerial Employees
They are employees, there is ER EE relationship but not
covered by labor standards. Hours of work, rates of pay, leaves,
and so on. They are not covered because managerial employees are
not engaged for the time that they put in. They are not time
employees. They are engaged for their specific qualifications,
technical qualifications or the results that they would produce.
Managerial employees and other officers or members of
the managerial staff are also excluded from the coverage of
Articles 82 to 96. The Implementing Rules of Book III defines the
workers that belong to these categories. Since "managerial
employees" include managerial staff, the definition therefore
covers more people than does the definition in Article 212(m).
"Managerial employee" in Article 82 includes supervisors, but
"managerial employee" under Article 212(m) does not. In effect, a
supervisor is manager for purposes of Book III, but he is not so for
purposes of Book V. It follows that under Book V, supervisors,
unlike managers, are allowed to form, join or assist the labor union
of fellow supervisors. But under Book III, supervisors, like
managers, are riot entitled to the benefits under Articles 83 through
96, such as overtime pay or rest day or holiday pay. If a supervisor
is given these benefits, it is not because of law but the employer's
voluntary act or contractual obligation.
The following are the Kinds of Managerial Employees:
(a) Those who manage the establishment in
which they are employed;
(b) Other officers or members of the
managerial staff
a.
Those who manage the establishment in
which they are employed.
Employees are considered occupying managerial
positions if they meet all of the following conditions, namely:
(i) Their primary duty consists of management of
the establishment in which they are employed
or of a department or subdivision thereof;
(ii) They customarily and regularly direct the work
of two or more employees therein;
(iii) They have the authority to hire or fire other
employees of lower rank; or their suggestions
and recommendations as to the hiring and
firing and as to the promotion or any other
change of status of other employees are given
particular weight [Clientlogic v. Castro].
Dela Cruz v. NLRC
Held: A managerial employee is therefore excluded from the
coverage of the law as regards conditions of employment which include
hours of work, weekly rest periods, holidays, service incentive leaves and
service charges.
Page 39 of 88
The labor arbiter classified petitioner as a managerial employee.
We have not been provided with any compelling reason to overturn this
factual finding. As chief patron of the M/DCA Sheenly Joy, albeit an
unlicensed one, petitioner was tasked to take complete charge and
command of the vessel and perform the responsibilities and duties of a ship
captain. Petitioner, an employee who falls squarely within the category of
officers or members of a managerial staff, is thus exempted from payment
of overtime pay, premium pay for holidays and rest days and service
incentive leave pay. Therefore, the labor arbiter was correct in holding that
petitioner was not entitled to overtime pay, legal holiday pay, premium pay
for holidays and rest days.
Cruz v. BPI
Held: The test of “supervisory” or “managerial status” depends
on whether a person possesses authority to act in the interest of his
employer and whether such authority is not merely routinary or clerical in
nature, but requires the use of independent judgment.
In respondent's Position Paper before the NLRC and its
Memorandum,24 respondent stated that the responsibility of petitioner,
among others, were as follows: (1) to maintain the integrity of the signature
card files of certificates of deposits and/or detect spurious signature cards in
the same files; (2) to ensure that releases of original CDS are done only
against valid considerations and made only to the legitimate depositors or
their duly authorized representatives; (3) to approve payments or
withdrawals of deposits by clients to ensure that such withdrawals are valid
transactions of the bank; and (4) to supervise the performance of certain
rank-and-file employees of the branch.
Petitioner holds a managerial status since she is tasked to act in
the interest of her employer as she exercises independent judgment when
she approves pre-termination of USD CDs or the withdrawal of deposits. In
fact, petitioner admitted the exercise of independent judgment when she
explained that as regards the pre-termination of the USD CDs of Uymatiao
and Caluag, the transactions were approved on the basis of her independent
judgment that the signatures in all the documents presented to her by the
traders matched, as shown in her reply dated April 23, 2002 to respondent's
memorandum asking her to explain the unauthorized
preterminations/withdrawals of U.S. dollar deposits in the BPI Ayala
Avenue Branch.
b. Officers or Members of the Managerial Staff
They are considered as officers or members of a
managerial staff if they perform the following duties and
responsibilities:
(i) The primary duty consists of the performance
of work directly related to management
policies of their employer;
(ii) Customarily and regularly exercise discretion
and independent judgment;
(iii) (i) Regularly and directly assist a proprietor or
a managerial employee whose primary duty
consists of management of the establishment in
which he is employed or subdivision thereof;
or (ii) execute under general supervision work
along specialized or technical lines requiring
special training, experience, or knowledge; or
(iii) execute, under general supervision, special
assignment and tasks [Clientlogic v. Castro].
3. Field Personnel
It has a specific definition. The definition contains 3
requisites: 1. they are non-agricultural; 2. they regularly perform
their duties away from the principal place of business; 3. their
hours of work cannot be determined with reasonable certainty.
As a general rule; "field personnel" are those whose
performance of their job/service is not supervised by the employer
or his representative, the workplace being away from the principal
office and whose hours and days of work cannot be determined
with reasonable certainty; hence, they are paid specific amount for
rendering specific service or performing specific work. If required
to be at specific places at specific times, employees including
drivers cannot be said to be field personnel despite the fact that
they are performing work away from the principal office of the
employer.
San Miguel Brewery v. Democratic Labor
Organization
Held: Where after the morning roll call the outside or field sales
personnel leave the plant of the company to go on their respective sales
routes and they do not have a daily time record but the sales routes are so
planned that they can be completed within 8 hours at most, and they receive
monthly salaries and sales commissions in variable amounts, so that they
are made to work beyond the required eight hours similar to piece-work,
pakiao, or commission basis regardless of the time employed, and the
employees' participation depends on their industry, it is held that the
Eighthour Labor Law has no application to said outside or field sales
personnel and that they are not entitled to overtime compensation.
In our opinion, the Eight-hour Labor Law only has application
where an employee or laborer is paid on a monthly or daily basis, or is paid
a monthly or daily compensation, in which case, if he is made to work
beyond the requisite period of eight hours, he should be paid the additional
compensation prescribed by law. This law has no application when the
employee or laborer is paid on a piece-work, pakiao, or commission basis,
regardless of the time employed. The philosophy behind this exemption is
that his earnings in the form of commission is based on the gross receipts of
the day. His participation depends upon his industry so that the more hours
he employs in the work, the greater are his gross returns and the higher his
commission. This philosophy is better explained in Jewel Tea Co. vs.
Williams, CCA. Okla., 118 F. 2d 202, as follows:
The reasons for excluding an outside salesman are fairly
apparent. Such salesman, to a greater extent, works individually. There are
no restrictions respecting the time he shall work and he can earn as much or
as little, within the range of his ability, as his ambition dictates. In lieu of
overtime, he ordinarily receives commissions as extra compensation. He
works away from his employer's place of business, is not subject to the
personal supervision of his employer, and his employer has no way of
knowing the number of hours he works per day.
Union of Filipino Employees v. Vivar
Held: It is undisputed that these sales personnel start their field
work at 8:00 a.m. after having reported to the office and come back to the
office at 4:00 p.m. if they are Makati-based. The petitioner [union]
maintains that the period between 8:00 a.m. [and] 4:00 or 4:30 p.m.
comprises the sales personnel's working hours which can be determined
with reasonable certainty. The Court does not agree. The law requires that
the actual hours of work in the field be reasonably ascertained. The
company has no way of determining whether or not these sales personnel,
even if they report to the office before 8:00 a.m. prior to field work and
come back at 4:30 p.m., really spend the hours in between in actual field
work. Despite the above ruling, the entitlement to overtime pay of piece-
work employees has to be reexamined under Article 101 where the different
kinds of piece-work employees are explained.
Auto Bus Transport System v. Bautista
Held: Bus drivers and conductors are supervised; their actual
work hours are monitored. The definition of a "field personnel" is not
merely concerned with the location where the employee regularly performs
his duties but also with the fact that the employee's performance is
unsupervised by the employer. As discussed above, field personnel are
those who regularly perform their duties away from the principal place
of business of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. Thus, in order to
conclude whether an employee is a field employee, it is also necessary to
ascertain if actual hours of work in the field can be determined with
reasonable certainty by the employer. In so doing, an inquiry must be made
as to whether or not the employee's time and performance are constantly
supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court
of Appeals: It is of judicial notice that along the routes that are plied by
these bus companies, there are its inspectors assigned at strategic places
who board the bus and inspect the passengers, the punched tickets, and the
Page 40 of 88
conductor's reports. There is also the mandatory once-a-week car barn or
shop day, where the bus is regularly checked as to its mechanical, electrical,
and hydraulic aspects, whether or not there are problems thereon as
reported by the driver and/or conductor. They too, must be at specific place
as [sic] specified time, as they generally observe prompt departure and
arrival from their point of origin to their point of destination. In each and
every depot, there is always the Dispatcher whose function is precisely to
see to it that the bus and its crew leave the premises at specific times and
arrive at the estimated proper time. These are present in the case at bar. The
driver, the complainant herein, was therefore under constant supervision
while in the performance of this work. He cannot be considered a field
personnel.
The same is true with respect to the phrase "those who are
engaged on task or contract basis, purely commission basis. "Said phrase
should be related with "field personnel," applying the rule on ejusdem
generis that general and unlimited terms are restrained and limited by the
particular terms that they follow. Hence, employees engaged on task or
contract basis or paid on purely commission basis are not automatically
exempted from the grant of service incentive leave, unless they fall under
the classification of field personnel.
Therefore, petitioner's contention that respondent [a driver-
conductor plying Manila-Tuguegarao-Baguio] is not entided to the grant of
service incentive leave just because he was paid on purely commission
basis [7% of gross income per trip] is misplaced. What must be ascertained
in order to resolve the issue of propriety of the grant of service incentive
leave to respondent is whether or not he is a field personnel.
Dasco v. Philtranco
Held: Guided by the foregoing norms, the NLRC properly
concluded that the petitioners are not field personnel but regular employees
who perform tasks usually necessary and desirable to the respondents'
business. Evidently, the petitioners are not field personnel as defined above
and the NLRC's finding in this regard is supported by the established facts
of this case: (1) the petitioners, as bus drivers and/or conductors, are
directed to transport their passengers at a specified time and place; (2) they
are not given the discretion to select and contract with prospective
passengers; (3) their actual work hours could be determined with
reasonable certainty, as well as their average trips per month; and (4) the
respondents supervised their time and performance of duties.
In order to monitor their drivers and/or conductors, as well as
the passengers and the bus itself, the bus companies put checkers, who are
assigned at tactical places along the travel routes that are plied by their
buses. The drivers and/or conductors are required to be at the specific bus
terminals at a specified time. In addition, there are always dispatchers in
each and every bus terminal, who supervise and ensure prompt departure at
specified times and arrival at the estimated proper time. Obviously, these
drivers and/or conductors cannot be considered as field personnel because
they are under the control and constant supervision of the bus companies
while in the performance of their work.
[I]t is undisputed that [the petitioners] as bus drivers/conductors
ply specific routes of [PSEI], x x x averaging 2 to 5 days per round trip.
They follow fixed time schedules of travel and follow the designated route
of [PSEI]. Thus, in carrying out their functions as bus drivers/conductors,
they are not at liberty to deviate from the fixed time schedules for departure
or arrival or change the routes other than those specifically designated for
[PSEI], in accordance with the franchise granted to the [PSEI] as a public
utility provider. In other words, [the petitioners] are clearly under the strict
supervision and control of [PSEI] in the performance of their functions
otherwise the latter will not be able to carry out its business as public utility
service provider in accordance with its franchise.
The Court agrees with the above-quoted findings of the NLRC.
Clearly, the petitioners, as bus drivers and/or conductors, are left alone in
the field with the duty to comply with the conditions of the respondents'
franchise, as well as to take proper care and custody of the bus they are
using. Since the respondents are engaged in the public utility business, the
petitioners, as bus drivers and/or conductors, should be considered as
regular employees of the respondents because they perform tasks which are
directly and necessarily connected with the respondents' business. Thus,
they are consequently entitled to the benefits accorded to regular employees
of the respondents, including overtime pay and SIL pay.
 If usage of work hours is supervised, the employee is
not a "field personnel." Same rule applies to an employee paid
on task or commission basis.
The clause "whose time and performance is unsupervised
by the employer" did not amplify but merely interpreted and
expounded the clause "whose actual hours of work in the field
cannot be determined with reasonable certainty." The former clause
is still within the scope and purview of Article 82 which defines
field personnel. Hence, in deciding whether or not an employee's
actual working hours in the field can be determined with
reasonable certainty, query must be made as to whether or not such
employee's time and performance is constantly supervised by the
employer.
Mercidar Fishing Corporation v. NLRC
Held: In the case at bar, during the entire course of their fishing
voyage, fishermen employed by petitioner have no choice but to remain on
board its vessel. Although they perform non-agricultural work away from
petitioners business offices, the fact remains that throughout the duration of
their work they are under the effective control and supervision of petitioner
through the vessel's patron or master as the NLRC correcdy held. 2 Hence,
the fishermen are not "field personnel.".
Union Filipro v. Vivar
Held: The law requires that the actual hours of work in the field
be reasonably ascertained. The company has no way of determining
whether or not these sales personnel, even if they report to the office before
8:00 a.m. prior to field work and come back at 4:30 p.m., really spend the
hours in between in actual field work. The requirement that "actual hours of
work in the field cannot be determined with reasonable certainty" must be
read in conjunction with Rule IV, Book III of the Implementing Rules
which provides: "Rule IV Holidays with Pay Section 1. Coverage — This
rule shall apply to all employees except: . . . (e) Field personnel and other
employees whose time and performance is unsupervised by the employer . .
. The aforementioned rule did not add another element to the Labor Code
definition of field personnel. The clause "whose time and performance is
unsupervised by the employer" did not amplify but merely interpreted and
expounded the clause "whose actual hours of work in the field cannot be
determined with reasonable certainty." The former clause is still within the
scope and purview of Article 82 which defines field personnel. Hence, in
deciding whether or not an employee’s actual working hours in the field
can be determined with reasonable certainty, query must be made as to
whether or not such employee’s time and performance is constantly
supervised by the employer.
4. Employer’s Family Members
Workers who are family members of the employer, and
dependent on him for their support, are outside the coverage of this
Tide on working conditions and rest periods.
5. Kasambahays
Then the fifth group belong to the “domestics” according
to article 82, but because there has been a new law covering
domestics. They are now called “kasambahay.”
Domestic worker or "Kasambahay" refers to any person
engaged in domestic work within an employment relationship such
as, but not limited to, the following: general househelp, nursemaid
or "yaya", cook, gardener, or laundry person, but shall exclude any
person who performs domestic work only occasionally or
sporadically and not on an occupational basis. The term shall not
include children who are under foster family arrangement, and are
provided access to education and given an allowance incidental to
education, i.e. "baon", transportation, school projects and school
activities.
Excluded also from the coverage of the law on working
conditions are domestic servants and persons in the personal
service of another if they perform such services in the employer's
home which are usually necessary or desirable for the maintenance
or the enjoyment thereof, or minister to the personal comfort,
Page 41 of 88
convenience or safety of the employer, as well as the members of
the employer's household.
However, house personnel hired by a ranking company
official, a foreigner, but paid for by the company itself, to maintain
a staff house provided for the official, are not the latter's domestic
helpers but regular employees of the company [Cadiz v. Philippine
Sinter Corporation]. Since the rules require that domestic servants
must perform their services in the employer's home, a family cook,
who is later assigned to work as a watcher and cleaner of the
employer's business establishment, becomes an industrial worker
entlitled to receive the wages and benefits flowing from such
status. Waiters of a hotel do not fall under the term "domestic
servants and persons in the personal service of another," nor under
the terms "farm laborers," "laborers who prefer to be paid on piece
work basis," and "members of the family of the employer working
for him;" therefore, they do not fall within any of the exceptions
provided for in Section 2 of CA. No. 44, and their work is within
the scope of the Eight-hour Labor Law.
Section 4(d) of the Kasambahay Law pertaining to who
are included in the enumeration of domestic or household help
cannot also be interpreted to include family drivers because the
latter category of worker is clearly not included. It is a settled rule
of statutory construction that the express mention of one person,
thing, or consequence implies the exclusion of all others — this is
expressed in the familiar maxim, expressio unius est exclusio
alterius [Atienza v. Saluta].
Remington v. Castaneda
Held: The criteria is the personal comfort and enjoyment of the
family of the employer in the home of said employer. While it may be true
that the nature of the work of a househelper, domestic servant or
laundrywoman in a home or in a company staffhouse may be similar in
nature, the difference in their circumstances is that in the former instance
they are actually serving the family while in the latter case, whether it is a
corporation or a single proprietorship engaged in business or industry or
any other agricultural or similar pursuit, service is being rendered in the
staffhouses or within the premises of the business of the employer. In such
instance, they are employees of the company or employer in the business
concerned entitled to the privileges of a regular employee.
Petitioner contends that it is only when the househelper or
domestic servant is assigned to certain aspects of the business of the
employer that such househelper or domestic servant may be considered as
such an employee. The Court finds no merit in making any such distinction.
The mere fact that the househelper or domestic servant is working within
the premises of the business of the employer and in relation to or in
connection with its business, as in its staffhouses for its guest or even for its
officers and employees, warrants the conclusion that such househelper or
domestic servant is and should be considered as a regular employee of the
employer and not as a mere family househelper or domestic servant as
contemplated in Rule XIII, Section 1(b), Book 3 of the Labor Code, as
amended.
In the case at bar, the petitioner itself admits in its position
paper33 that respondent worked at the company premises and her duty was
to cook and prepare its employees’ lunch and merienda. Clearly, the situs,
as well as the nature of respondent’s work as a cook, who caters not only to
the needs of Mr. Tan and his family but also to that of the petitioner’s
employees, makes her fall squarely within the definition of a regular
employee under the doctrine enunciated in the Apex Mining case. That she
works within company premises, and that she does not cater exclusively to
the personal comfort of Mr. Tan and his family, is reflective of the
existence of the petitioner’s right of control over her functions, which is the
primary indicator of the existence of an employer-employee relationship.
Moreover, it is wrong to say that if the work is not directly
related to the employer's business, then the person performing such work
could not be considered an employee of the latter. The determination of the
existence of an employer-employee relationship is defined by law
according to the facts of each case, regardless of the nature of the activities
involved.34 Indeed, it would be the height of injustice if we were to hold
that despite the fact that respondent was made to cook lunch
and merienda for the petitioner’s employees, which work ultimately
redounded to the benefit of the petitioner corporation, she was merely a
domestic worker of the family of Mr. Tan.
We note the findings of the NLRC, affirmed by the Court of
Appeals, that no less than the company’s corporate secretary has certified
that respondent is a bonafide company employee;35 she had a fixed schedule
and routine of work and was paid a monthly salary of ₱4,000.00; 36 she
served with the company for 15 years starting in 1983, buying and cooking
food served to company employees at lunch and merienda, and that this
service was a regular feature of employment with the company.37
Indubitably, the Court of Appeals, as well as the NLRC,
correctly held that based on the given circumstances, the respondent is a
regular employee of the petitioner.
6. Workers paid by result
Workers paid by result are not covered by the law on
working conditions.
There are two categories of employees paid by results:
(1) those whose time and performance are supervised by the
employer. (Here, there is an element of control and supervision
over the manner as to how the work is to be performed. A piece-
rate worker belongs to this category especially if he performs his
work in the company premises.); and (2) those whose time and
performance are unsupervised. (Here, the employers control is over
the result of the work. Workers on pakyao and takay basis belong
to this group.) Both classes of workers are paid per unit
accomplished. Piece-rate payment is generally practiced in garment
factories where work is done in the company premises, while
payment on pakyao and takay basis is commonly observed in the
agricultural industry, such as in sugar plantations where the work is
performed in bulk or in volumes difficult to quantify [Lambo v.
NLRC].
Examples are workers paid per piece and those paid per
task. Their common denominator is that they are paid by results
and not on the basis of the time spent in working, such as those
being paid straight wages by the hour, day, week or month. In the
case of task work, the emphasis is on the task itself, in the sense
that payment is not reckoned in terms of numbers of units produced
because one task may take hours or even days to finish, but in
terms of completion of the work. Examples of this kind of work are
plowing a piece of land at a specific price, painting a barn, or
digging a ditch, at so much a cost. Pursuant to the statutory
exclusion, piece-rate workers in the coconut industry whose rate
was fixed by the Wage Commission are not entitled to overtime
pay for work in excess of eight hours a day.
The reasons for excluding an outside salesman are fairly
apparent. Such salesman, to a greater extent, works individually.
There are no restrictions respecting the time he shall work and he
can earn as much or as little, within the range of his ability, as his
ambition dictates. In lieu of overtime he ordinarily receives
commissions as extra compensation. He works away from his
employer's place of business, is not subject to the personal
supervision of his employer, and his employer has no way of
knowing the number of hours he works per day [San Miguel v.
Democratic Labor Organization].
Similarly, a taxi driver who is not observing any
working hours is not covered by the Eight-hour Labor Law [or
Article 87 of the Labor Code].
Red V Coconut v. CIR
Held: Although the Eight-Hour Labor Law provides that it does
not cover those workers who prefer to be paid on piece-work basis (Sec. 2,
CA 444), nothing in said law precludes an agreement for the payment of
overtime compensation to piece-workers. And in agreeing to the provision
for payment of shift differentials to the petitioners-workers aforementioned.
In the bargaining agreement, as well as in actually paying to them said
differentials, though not in full, the company in effect freely adhered to an
application and implementation of the Eight-Hour Labor Law, or its
objectives, to said workers. It should be observed that while the provision
Page 42 of 88
in the bargaining agreements speaks of shift differentials for the "second
shift" and the "third shift" and Group B has no third shift, said Group B has
a second shift, which performs work equivalent to that of the corresponding
shifts of Group A. It follows that respondent court did not err in ordering
the company to pay the full and equivalent amount of said differentials
(P.90) corresponding, under the bargaining agreements, to the workers who
performed 12 hours of work, from 4 P.M. to 4 A.M.
And, finally, the laborers in question are not strictly under the
full concept of piece-workers as contemplated by law for the reason that
their hours of work - that is, 12 hours per shift - are fixed by the employer.
As ruled by this Court in Lara vs. Del Rosario, 94 Phil. 780, 781-782, the
philosophy underlying the exclusion of piece workers from the Eight-Hour
Labor Law is that said workers are paid depending upon the work they
do "irrespective of the amount of time employed" in doing said work. Such
freedom as to hours of work does not obtain in the case of the laborers
herein involved, since they are assigned by the employer to work in two
shifts for 12 hours each shift. Thus it cannot be said that for all
purposes these workers fall outside the law requiring payment of
compensation for work done in excess of eight hours. At least for the
purpose of recovering the full differential pay stipulated in the bargaining
agreement as due to laborers who perform 12 hours of work under the night
shift, said laborers should be deemed pro tanto or to that extent within the
scope of the aforestated law.
C. HOURS OF WORK
1. Normal Hours of Work
Article 83. Normal Hours of Work. The normal hours of
work of any employee shall not exceed eight (8) hours a day.
Health personnel in cities and municipalities with a
population of at least one million (1,000,000) or in hospitals and clinics
with a bed capacity of at least one hundred (100) shall hold regular
office hours for eight (8) hours a day, for five (5) days a week, exclusive
of time for meals, except where the exigencies of the service require
that such personnel work for six (6) days or forty-eight (48) hours, in
which case, they shall be entitled to an additional compensation of at
least thirty percent (30%) of their regular wage for work on the sixth
day. For purposes of this Article, "health personnel" shall include
resident physicians, nurses, nutritionists, dieticians, pharmacists, social
workers, laboratory technicians, paramedical technicians,
psychologists, midwives, attendants and all other hospital or clinic
personnel.
The Eight-hour Labor Law was enacted not only to
safeguard the health and welfare of the laborer or employee, but in
a way to minimize unemployment by forcing employers, in cases
where more than 8-hour operation is necessary, to utilize different
shifts of laborers or employees working only for 8 hours each
[Manila Terminal v. Court of Industrial Relations].
Considering the purpose of the law, as mentioned above,
it is not prohibited to have "normal hours of work" of less than
eight hours a day. What the law regulates is work hours exceeding
eight. It prescribes a maximum but not a minimum. Article 83 does
not say that the normal hours of work is or should be eight hours
but that it shall not exceed eight. Therefore, part-time work, or a
day's work of less than eight hours, is not prohibited.
It bears emphasizing that the employer retains the
management prerogative, whenever exigencies of the service so
require, to change the working house of its employees [Union
Carbide Labor Union v. Union Carbide Philippines]. Moreover, the
age-old rule which governs the relationship between labor and
capital or management and employee of “no work, no pay” or a
“fair day’s wage for a fair day’s labor,” remains the basic factor in
determining the employees’ wages and backwages [Durabilt
Recapping Plant Company v. NLRC].
The second paragraph of Article 83 applies particularly
to health personnel. Health personnel covered by the forty-hour
workweek shall include, but not be limited to, resident physicians,
nurses, nutritionists, dieticians, pharmacists, social workers,
laboratory technicians, paramedical technicians, psychologists,
midwives, attendants, and all other hospital or clinic personnel.
San Juan De Dios Hospital Employees Assn v. NLRC
Held: A cursory reading of Article 83 of the Labor Code betrays
petitioners' position that "hospital employees" are entided to "a full weekly
salary with paid two (2) days' off if they have completed the 40-hour/5-day
workweek." In other words they want seven days' pay for five days' work.
What Article 83 merely provides are: (1) the regular office hour of eight
hours a day, five days per week for health personnel, and (2) where the
exigencies of service require that health personnel work for six days or
forty-eight hours then such health personnel shall be entided to an
additional compensation of at least thirty percent of their regular wage for
work on the sixth day. There is nothing in the law that supports then
Secretary of Labor's assertion that "personnel in subject hospitals and
clinics are entitled to a full weekly wage for seven (7) days if they have
completed the 40-hour/5-day workweek in any given workweek." Needless
to say, the Secretary of Labor exceeded his authority by including [in P.I.
No. 54] two days off with pay in contravention of the clear mandate of the
statute. Such act the Court shall not countenance. Administrative
interpretation of the law, we reiterate, is at best merely advisory, and the
Court will not hesitate to strike down an administrative interpretation that
deviates from the provision of the statute... Policy Instructions No. 54 being
inconsistent with and repugnant to the provision of Article 83 of the Labor
Code, as well as to Republic Act No. 5901, should be, as it is hereby,
declared void.
2. Hours Worked
Article 84. Hours Worked. Hours worked shall include (a) all
time during which an employee is required to be on duty or to be at a
prescribed workplace; and (b) all time during which an employee is
suffered or permitted to work.
Rest periods of short duration during working hours shall be
counted as hours worked.
Sections 3 and 4, Rule 1, Book III of the IRR provides:
SECTION 3. Hours worked. — The following shall
be considered as compensable hours worked:
(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 work place; and
(b) All time during which an employee is suffered or
permitted to work.
SECTION 4. Principles in determining hours
worked. — The following general principles shall govern in
determining whether the time spent by an employee is
considered hours worked for purposes of this Rule:
(a) All hours are hours worked which the employee
is required to give his employer, regardless of whether or not
such hours are spent in productive labor or involve physical or
mental exertion.
(b) An employee need not leave the premises of the
work place in order that his rest period shall not be counted, it
being enough that he stops working, may rest completely and
may leave his work place, to go elsewhere, whether within or
outside the premises of his work place.
(c) If the work performed was necessary, or it
benefited 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.
(d) The time during which an employee is inactive by
reason of interruptions in his work beyond his control shall be
considered working time either 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.
Page 43 of 88
The term “work day” means the twenty-four consecutive-
hour period which commences from the time the employee
regularly starts to work. It must be emphasized that “work day”
does not necessarily mean the ordinary calendar day from 12:00
midnight to 12:00 midnight unless the employee starts working at
the unusual hour of 12:00 midnight, in which case, his “work day”
is the calendar day.
NDC v. CIR
Held: Indeed, it has been said that no general rule can be laid
down is to what constitutes compensable work, rather the question is one of
fact depending upon particular circumstances, to be determined by the
controverted in cases. (31 Am. Jurisdiction Sec. 626 pp. 878.)
In this case, the CIR's finding that work in the petitioner
company was continuous and did not permit employees and laborers to rest
completely is not without basis in evidence and following our earlier
rulings, shall not disturb the same. Thus, the CIR found:
While it may be correct to say that it is well-high impossible for
an employee to work while he is eating, yet under Section 1 of Com. Act
No. 444 such a time for eating can be segregated or deducted from his
work, if the same is continuous and the employee can leave his working
place rest completely. The time cards show that the work was continuous
and without interruption. There is also the evidence adduced by the
petitioner that the pertinent employees can freely leave their working place
nor rest completely. There is furthermore the aspect that during the period
covered the computation the work was on a 24-hour basis and previously
stated divided into shifts.
From these facts, the CIR correctly concluded that work in
petitioner company was continuous and therefore the mealtime breaks
should be counted as working time for purposes of overtime compensation.
a. Broken Hours
The normal eight working hours mandated by law do not
always mean continuous and interrupted eight hours of work. As
may be required by peculiar circumstances of employment, it may
mean broken hours of, say, for hours in the morning and four hours
in the evening or a variation thereof, provided the total of eight
hours is accomplished within one work day as this term is
understood in law.
b. Waiting time
Section 5, Rule 1, Book III of the IRR provides:
SECTION 5. Waiting time. — (a) Waiting time spent
by an employee shall be considered as working time if waiting is
an integral part of his work or the employee is required or
engaged by the employer to wait.cralaw
(b) An employee who 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 shall be
considered as working while on call. An employee who is not
required to leave word at his home or with company officials
where he may be reached is not working while on call.
Whether waiting time constitutes working time depends
upon the circumstances of each particular case and is a question of
fact to be resolved by appropriate findings of the trial court. The
facts may show that the employee was engaged to wait or may
show that he waited to be engaged. The controlling factor is
whether waiting time spent in idleness is so spent predominandy
for the employer's benefit or for the employee's. For instance, the
mere fact that a large part of the time of the employees engaged in
a stand-by capacity in the employer's auxiliary fire-fighting service
was spent in idleness or in playing cards and other amusement, the
facilities for which were provided by the employer, did not render
inapplicable the overtime provisions of the Act [Armour v.
Wantock].
Similarly, a truck driver who has to wait at or near the
jobsite for goods to be loaded is working during the loading period.
If the driver reaches his destination and while awaiting the return
trip is required to take care of his employer's property, he is also
working while waiting. In both cases, the employee is engaged to
wait. Waiting is an integral part of the job. On the other hand, for
example, if the truck driver is sent from Manila to Dagupan,
leaving at 6 a.m. and arriving at 12 noon, and is completely and
specifically relieved from all duty until 6 p.m. when he again goes
on duty for the return trip, the idle time is not working time. He is
waiting to be engaged.
c. Sleeping time
The rule is that sleeping time may be considered working
time if it is subject to serious interruption or takes place under
conditions substantially less desirable than would be likely to exist
at the employee's home. However, sleeping time will not be
regarded as working time within the meaning of the Act if there is
an opportunity for comparatively uninterrupted sleep under fairly
desirable conditions, even though the employee is required to
remain on or near the employer's premises and must hold himself
in readiness for a call to action employment [Skid v. Swift Co.].
d. On-Call
The time when a public health worker is placed on "On
Call" status shall not be considered as hours worked but shall
entitle the public health worker to an "On Call" pay equivalent to
fifty percent (50%) of his/her regular wage. "On call" status refers
to a condition when public health workers are called upon to
respond to urgent or immediate need for health/medical assistance
or relief work during emergencies such that he/she cannot devote
the time for his/her own use. (Sec. 15, R.A. No. 7305)
e. Travel Time
As for travel time, travel from home to office and vice-
versa is not compensable. However, travel away from home on
official duty is considered as compensable.
f. Lectures, Meetings, Training Programs
Section 6, Rule 1, Book III of the IRR provides:
SECTION 6. Lectures, meetings, training programs.
— Attendance at lectures, meetings, training programs, and
other similar activities shall not be counted as working time if
all of the following conditions are met:
(a) Attendance is outside of the employee's regular
working hours;
(b) Attendance is in fact voluntary; and
(c) The employee does not perform any productive
work during such attendance.
g. Semestral Breaks
The Court has enunciated in the case of University of
Pangasinan Faculty Union v. University of Pangasinan that
semestral breaks may be considered as "hours worked" under the
Rules implementing the Labor Code and that regular professors
and teachers are entitled to ECOLA during the semestral breaks,
their "absence" from work not being of their own will.
h. Telecommuting Programs (R.A. 11165)
Telecommuting- work arrangement in the private sector
that allows an employee to work from an alternative workplace,
with the use of telecommunications and/or computer technologies
The employer in the private sector may offer a
Telecommuting Program to an employee on voluntary basis, but
granting the same labor standards benefits required by law such as
minimum wage, overtime pay and others.
Page 44 of 88
The employer shall ensure that the telecommuting
employee are given the same treatment as that of comparable
employees are given the same treatment as that of comparable
employees working at the time employer's premises. All
telecommuting employee shall:
(a) Receive a rate of pay, including overtime and night
shift differential, and other similar monetary
benefits not lower than those provided in applicable
laws, and collective bargaining agreements.
(b) Have the right to rest periods, regular holidays, and
special nonworking days.
(c) Have the same or equivalent workload and
performance standards as those of comparable
worker at the employer's premises.
(d) Have the same access to training and career
development opportunities as those of comparable
workers at the employer's premises, and be subject
to the same appraisal policies covering these
workers.
(e) Receive appropriate training on the technical
equipment at their disposal, and the characteristics
and conditions of telecommuting.
(f) Have the same collectible rights as the workers at
the employer's premises, and shall not be barred
from communicating with workers' representatives.
The employer shall also ensure that measures are taken to
prevent the telecommuting employee from being isolated from the
rest of the working community in the company by giving the
telecommuting employee the opportunity to meet with colleagues
on a regular basis, and opportunity to meet with colleagues on a
regular basis, and allowing access to company information.
3. Meal Periods
Article 85. Meal Periods. Subject to such regulations as the
Secretary of Labor may prescribe, it shall be the duty of every
employer to give his employees not less than sixty (60) minutes time-off
for their regular meals.
Section 7, Rule 1, Book III of the IRR provides:
SECTION 7. Meal and Rest Periods. — Every
employer shall give his employees, regardless of sex, not less
than one (1) hour time-off for regular meals, except in the
following cases when a meal period of not less than twenty (20)
minutes may be given by the employer provided that such
shorter meal period is credited as compensable hours worked of
the employee:
a. Where the work is non-manual work in nature or
does not involve strenuous physical exertion;
b. Where the establishment regularly operates not
less than sixteen (16) hours a day;
c. In case of actual or impending emergencies or
there is urgent work to be performed on machineries, equipment
or installations to avoid serious loss which the employer would
otherwise suffer; and
d. Where the work is necessary to prevent serious
loss of perishable goods. Rest periods or coffee breaks running
from five (5) to twenty (20) minutes shall be considered as
compensable working time.
The employee must be completely relieved from duty for
the purpose of eating regular meals. The meal time is not
compensable if he is completely freed from duties during his meal
period even though he remains in the workplace. But the employee
is not relieved if he is required to perform his duties, whether
active or inactive, while eating. For example, an office employee
who is required to eat at his desk or a factory worker who is
required to be at his machine is working while eating. In one case,
the Supreme Court held that when "during the so-called onehour
meal period, the mechanics were required to stand-by for
emergency work; that if they happened not to be available when
called, they were reprimanded by the leadman; that as in fact it
happened on many occasions, the mechanics had been called from
their meals or told to hurry up eating to perform work during this
period," such meal period (after deducting 15 minutes) is not rest
period but overtime work [Pan American World Airways System v.
PAWAS Employees Association].
National Development Company v. CIR
Facts: At the petitioner company, there were four work shifts of
eight hours each with one-hour meal time per shift. Petitioner credited the
workers with eight hours of work per shift and paid them for that number of
hours. But since 1953 whenever workers in one shift were required to
continue working until the next shift, petitioner, instead of crediting them
with 8 hours of overtime work, has been paying them for only six hours.
The employer claimed that the two hours corresponding to the meal time
periods should not be included in computing compensation. The employees
maintained the opposite view.
Held: The idle time that an employee may spend for resting
during which he may leave the spot or place of work (though not the
premises of his employer), is not counted as working time only where the
work is broken or not continuous.
In this case, evidence showed that the work in the petitioner
company is continuous, to wit, time cards showed work was uninterrupted;
employees cannot freely leave their working places nor rest completely; and
during the period covered by the computation, the work was on a 24-hour
basis divided into shifts.
The work being continuous, the meal time breaks should be
counted as working time for purposes of overtime compensation. Petitioner
should therefore credit employees sixteen (16) hours when they work in
two shifts and not fourteen.
a.
Shortening of Meal Time to not less than 20
minutes, when not compensable
The law allows a situation where the employees
themselves request for the shortening of meal period to not less
than 20 minutes for the purpose of allowing them to leave work
earlier than the lapse of the eight hours required by law. This
shortened period, however, shall not be considered compensable
working time provided the following conditions are complied with:
(i) The employees voluntarily agree in writing to a
shortened meal period of 30 minutes and are
willing to waive the overtime pay for such
shortened meal period;
(ii) There will be no diminution whatsoever in the
salary and other fringe benefits of the
employees existing before the effectivity of the
shortened meal period;
(iii) The work of the employees does not involve
strenuous physical exertion and they are
provided with adequate "coffee breaks" in the
morning and afternoon;
(iv) The value of the benefits derived by the
employees from the proposed work
arrangement is equal to or commensurate with
the compensation due them for the shortened
meal period as well as the overtime pay for 30
minutes as determined by the employees
concerned;
Page 45 of 88
(v) The overtime pay of the employees will
become due and demandable if ever they are
permitted or made to work beyond 4:30 pm;
and
(vi) The effectivity of the proposed working time
arrangement shall be of temporary duration as
determined by the Secretary of Labor and
Employment.
b. Effect of shortening of meal time to less
than 20 minutes
The law does not allow that meal time be shortened to
less than twenty minutes. If so reduced, the same shall no longer be
considered as meal time but merely as rest period or coffee break
and, therefore, becomes compensable working time.
c. Changing from 30-minute paid “on call”
lunch break to one hour meal time without
pay, effect
Where the practice has been to give employees only
thirty minutes meal break, with pay, can the employer change this
to one hour without pay?
The case of Sime Darby Pilipinas v. NLRC is illustrative:
In the company in whose case this question was
raised, the work schedule was 7:45 a.m. to 3:45 p.m. with a 30-
minute paid 'on call' lunch break. Sometime in 1992 the
employer changed this to 7:45 a.m. to 4:45 p.m. The lunch break
from 12:00 noon to 1:00 p.m. would be without pay. The union
of the affected employees complained against the change. The
labor arbiter dismissed the complaint on the ground that the
change in the work schedule and the elimination of the 30-
minute paid lunch break of the factory workers constituted a
valid exercise of management prerogative and that the new work
schedule, break time and one-hour lunch break did not have the
effect of diminishing the benefits granted to factory workers as
the working time did not exceed eight (8) hours.
On appeal the NLRC ultimately reversed the arbiter's
decision, invoking a 1990 case involving the same company and
further declaring that the new work schedule deprived the
employees of the benefits of a time-honored company practice
of providing its employees a 30-minute paid lunch break. The
change, said the NLRC, was an unjust diminution of company
privileges prohibited by Article 100 of the Labor Code, as
amended.
On review, the Supreme Court sustained the change.
Speaking through Justice Bellosillo, the Court ruled:
The right to fix the work schedules of the employees
rests principally on their employer. In the instant case petitioner,
as the employer, cites as reason for the adjustment the efficient
conduct of its business operations and its improved production.
It rationalizes that while the old work schedule included a 30-
minute paid lunch break, the employees could be called upon to
do jobs during that period as they were "on call." Even if
denominated as lunch break, this period could very well be
considered as working time because the factory employees were
required to work if necessary and were paid accordingly for
working. With the new work schedule, the employees are now
given a one-hour lunch break without any interruption from their
employer. For a full one-hour undisturbed lunch break, the
employees can freely and effectively use this hour not only for
eating but also for their rest and comfort which are conducive to
more efficiency and better performance in their work. Since the
employees are no longer required to work during this one-hour
lunch break, there is no more need for them to be compensated
for this period. We agree with the Labor Arbiter that the new
work schedule fully complies with the daily work period of
eight (8) hours without violating the Labor Code. Besides, the
new schedule applies to all employees in the factory similarly
situated, whether they are union members or not.
 Necessarily, the Court dimissed the union's
contention that the change in work schedule constituted unfair
labor practice. Because the change applied to all factory
employees engaged in the same line of work whether or not they
are union members, it cannot be said that the new scheme
prejudices the right to self-organization.
4. Night Shift Differential
Article 86. Night Shift Differential. Every employee shall be
paid a night shift differential of not less than ten percent (10%) of his
regular wage for each hour of work performed between ten o'clock in
the evening and six o'clock in the morning.
a. Rationale
Night work cannot be regarded as desirable, either from
the point of view of the employer or the wage earner. It is
uneconomical unless overhead costs are unusually heavy.
Frequendy the scale of wages is higher as an inducement to
employment on the night shift, and the rate of production is
generally lower. The lack of sunlight tends to produce anemia and
tuberculosis and to predispose to other ills. Night work brings
increased liability to eyestrain and accident. Serious moral dangers
also are likely to result from the necessity of traveling the street
alone at night, and from the interference with normal home life.
From an economic point of view, moreover, the investigations
showed that night work was unprofitable, being inferior to day
work both in quality and in quantity. Wherever it had been
abolished, in the long run the efficiency both of the management
and of the workers was raised. Furthermore, it was found that night
work laws are a valuable aid in enforcing acts fixing the maximum
period of employment [Shell Company v. NLRC].
b. Not waivable
In Mercury Drug v. Dayao, the Supreme Court said that
the "waiver rule" is not applicable in the case at bar. Additional
compensation for nighttime work is founded on public policy,
hence the same cannot be waived (Article 6, Civil Code). On this
matter, we believe that the respondent court acted according to
justice and equity and the substantial merits of the case, without
regard to technicalities or legal forms and should be sustained.
c. Night shift differential v. Overtime pay
When the work of an employee falls at night time, the
receipt of overtime pay shall not preclude the right to receive night
differential pay. The reason is the payment of the night differential
pay is for the work done during the night; while the payment of the
overtime pay is for work in excess of the regular 8 working hours.
d. Computation
i. Where night shift (10pm-6am) work is regular work.
 On an ordinary day: Plus 10% of the basic hourly rate
or a total of 110% of the basic hourly rate.
 On a rest day, special holiday, or regular holiday: Plus
10% of the regular hourly rate on a rest day, special
day or regular holiday or a total of 110% of the
regular hourly rate.
ii. Where night shift (10pm-6am) work is overtime work
 On an ordinary day: plus 10% of the overtime hourly
rate on an ordinary day or a total of 110% of the
overtime hourly rate on an ordinary day.
 On a rest day, or special holiday or regular holiday: plus
10% of the overtime hourly rate on a rest day or special
day or regular holiday.
Page 46 of 88
iii. For overtime work in the night shift. Since overtime work is
not usually 8 hours, the compensation for overtime night
shift work is also computed on the basis of the hourly rate.
 On an ordinary day: plus 10% of 125% of basic hourly
rate or a total of 110% of 125% of basic hourly rate.
 On a rest day or special holiday or regular holiday: plus
10% of 130% of regular hourly rate on said days or a
total of 110% of 130% of the applicable regular hourly
rate.
If it has been established in this case that their work is
from 8am-5pm but extends from 5pm-12midnight. There is
overtime and night shift differential. But who has the burden of
proof that the employee actually worked for that additional
hours? It is the employee. You must show proof as to what days
you worked beyond 8 hours to be entitled to night shift differential.
Once it is established, the burden of proof is now upon the
employer to show that he has paid the corresponding labor standard
benefit. The ruling in National Semiconductor vs. NLRC is correct
because it has already been established that the working schedule
of the employee is from 10pm-6am. So, the burden of proof is with
the employer that he has paid that additional 10% of his regular
wage for the night shift differential.
5. Overtime Work
Article 87. Overtime Work. Work may be performed beyond
eight (8) hours a day provided that the employee is paid for the
overtime work, an additional compensation equivalent to his regular
wage plus at least twenty-five percent (25%) thereof. Work performed
beyond eight hours on a holiday or rest day shall be paid an additional
compensation equivalent to the rate of the first eight hours on a holiday
or rest day plus at least thirty percent (30%) thereof.
Work rendered after or beyond the normal 8 hours of
work is called “overtime work.” An express instruction from the
employer to the employee to render overtime work is not required
for the employee to be entitled to overtime pay; it is sufficient that
the employee is permitted or suffered to work.
In AL Ammen Transportation v. Borja, it was held that a
verbal instruction to render overtime work prevails over a
memorandum prohibiting such work. Petitioner claims that the
Court of Industrial Relations erred in disregarding the
memorandum of the company prohibiting respondent from
working in excess of eight hours daily. Such memorandum could
not fairly apply to respondent because there was sufficient
evidence showing that in spite of it, respondent had received verbal
instructions from superior authority to inspect the first trip, noon
trip, and last trip; that he had submitted to petitioner a daily report
of inspection which stated the period or number of hours he had
worked for the day; that respondent had been rendering overtime
service with full knowledge of petitioner. All these show
conclusively that the Court of Industrial Relations was right in
awarding to respondent the corresponding overtime compensation.
a. Computation
In computing overtime work, “regular wage” or “basic
salary” means “cash” wage only without deduction for facilities
provided by the employer.
i. For overtime work performed on an ordinary day,
the overtime pay is plus 25% of the basic hourly
rate.
ii. For overtime work performed on a rest day or on a
special day, the overtime pay is plus 30% of the
 basic hourly rate which includes 30% additional
compensation as provided in Article 93[a] of the
Labor Code.
iii. For overtime work performed on a rest day which
falls on a special day, the overtime pay is plus 30%
of the basic hourly rate which includes 50%
additional compensation as provided in Article 93[c]
of the Labor Code.
iv. For overtime work performed on a regular holiday,
the overtime pay is plus 30% of the basic hourly rate
which includes 100% additional compensation as
provided in Article 94[b] of the Labor Code.
v. For overtime work performed on a rest day which
falls on a regular holiday, the overtime pay is plus
30% of the basic hourly rate which includes 160%
additional compensation.
b. Premium pay vs. Overtime pay
Premium pay refers to the additional compensation
required by law for work performed within 8 hours on non-
working days, such as rest days and regular and special holidays.
On the other hand, overtime pay refers to the additional
compensation for work performed beyond 8 hours a day. Every
employee who is entitled to premium pay may likewise be entitled
to the benefit of overtime pay if he/she has rendered overtime work
on such premium days as rest days and regular and special
holidays.
RULE: Simultaneous premium and overtime pay is
possible; but it shall not be included in the computation of 13th
month pay, retirement pay, and separation pay
c. Waiver or Quitclaim
The right to overtime pay cannot be waived. The right is
intended for the benefit of the laborers and employees. Any
stipulation in the contract that the laborer shall work beyond the
regular eight hours without additional compensation for the extra
hours is contrary to law and null and void. Thus, in a case where
the appellant allegedly signed a quitclaim deed in favor of the
appellee to the effect that he was renouncing any and all kinds of
claim against the appellee, the Supreme Court held that said
quitclaim deed cannot deprive the appellant of his right to collect
overtime and legal holiday wages under the provisions of the
Eight-hour Labor Law [Cruz v. Yee Sing].
But if the waiver is one in exchange for and in
consideration of certain valuable privileges, among them that of
being given tips when doing overtime work, there being no proof
that the value of said privileges did not compensate for such work,
such waiver may be considered valid [Meralco Workers Union v.
MERALCO].
d. Built-in overtime pay
In case of the employment contract stipulates that the
compensation includes built-in overtime pay and the same is duly
approved by the Director of the Bureau of Employment Services
(now Bureau of Local Employment), the non-payment by the
employer of any overtime pay for overtime work is justified and
valid [Engineering Equipment, Inc. v. Minister of Labor].
In PESALA v. NLRC, where the period of normal
working hours per day was increase to 12 hours, it was held that
the employer remains liable for whatever deficiency in the amount
for overtime work in excess of the first 8 hours, after
recomputation shows such deficiency.
6. Undertime Not Offset by Overtime
Page 47 of 88
Article 88. 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 required in this Chapter.
Where a worker incurs undertime hours during his
regular daily work, said undertime hours should not be offset
against the overtime hours. If it were otherwise, the unfairness
would be evident from the fact that the undertime hours represent
only the employee's hourly rate of pay while the overtime hours
reflect both the employee's hourly rate of pay and the appropriate
overtime premium such that, not being of equal value, offsetting
the undertime hours against the overtime hours would result in the
undue deprivation of the employees' overtime premium. The
situation is even more unacceptable where the undertime hours are
not only offset against the overtime hours but are also charged
against the accrued leave of the employee, for under this method
the employee is made to pay twice for his undertime hours because
his leave is reduced to that extent while he is made to pay for the
undertime hours with work beyond the regular working hours. The
proper method should be to deduct the undertime hours from the
accrued leave but to pay the employee the overtime compensation
to which he is entided. Where the employee has exhausted his
leave credits, his undertime hours may simply be deducted from his
day's wage, but he should still be paid his overtime compensation
for work in excess of eight hours a day [NWSA v. NWSA
Consolidated Unions].
7. Emergency Overtime Work
Article 89. 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 when any other national
or local emergency has been declared by the National Assembly or the
Chief Executive;
(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,
installations, 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; and
(e) Where the completion or continuation of the work
started before the eighth hour is necessary to prevent serious
obstruction or prejudice to the business or operations of the employer.
Any employee required to render overtime work under this
Article shall be paid the additional compensation required in this
Chapter.
The general rule remains that no employee may be
compelled to render overtime work against his will. The existence
of the abovementioned are the exceptions and an employee cannot
validly refuse to render overtime work under any of the foregoing
circumstances. When an employee refuses to ender emergency
overtime work, he may be dismissed on the ground of
insubordination or willful disobedience of the lawful order of the
employer.
8. Computation
Article 90. Computation of Additional Compensation. - For
purposes of computing overtime and other additional remuneration as
required by this Chapter the "regular wage" of an employee shall
include the cash wage only, without deduction on account of faculties
provided by the employer.

This provision should be clarified or modified. "Cash
wage" necessarily excludes noncash value of facilities; hence,
saying "without deduction on account of facilities" is contradictory.
But if only the cash wage is the basis of overtime rate, this is unfair
to the worker because as defined in Article 97(f), "wage" includes
the value of facilities, hence the value of facilities should not be
excluded when computing overtime pay. Therefore, overtime rate
should be based on the "regular wage" which is understood to
include the value of facilities.
9. Compressed Work Week
Under the DOLE Advisory, there are three flexible
arrangements that companies and their employees may consider.
These are the following:
(a) Compressed work week, where the normal work
week is reduced to less than six (6) days, but the
total number of work hours of 48 hours per week
shall remain. In this arrangement, the normal work
day is extended to more than eight (8) hours, but
should not exceed 12 hours, without corresponding
overtime premium;
(b) Gliding, or flexi-time schedule, where the
employees are required to complete the core work
hours, but are free to determine their arrival and
departure time;
(c) Flexi-holidays schedule, where the employees agree
to avail the holidays at some other days, provided
there is no diminution of existing benefits as a result
of such arrangement.
The idea of a compressed work week has been floated
recently by some sectors, arguing that it will minimize vehicular
traffic in the metropolis, among other cited benefits.
The compressed workweek scheme was originally
conceived for establishments wishing to save on energy costs,
promote greater work efficiency and lower the rate of employee
absenteeism, among others. Workers favor the scheme considering
that it would mean savings on the increasing cost of transportation
fares for at least one (1) day a week; savings on meal and snack
expenses; longer weekends, or an additional 52 off-days a year,
that can be devoted to rest, leisure, family responsibilities, studies
and other personal matters, and that it will spare them for at least
another day in a week from certain inconveniences that are the
normal incidents of employment, such as commuting to and from
the workplace, travel time spent, exposure to dust and motor
vehicle fumes, dressing up for work, etc. Thus, under this scheme,
the generally observed workweek of six (6) days is shortened to
five (5) days but prolonging the working hours from Monday to
Friday without the employer being obliged for pay overtime
premium compensation for work performed in excess of eight (8)
hours on weekdays, in exchange for the benefits abovecited that
will accrue to the employees [Bisig v. NLRC].
D. WEEKLY REST PERIODS
1. Right to Weekly Rest Day
Article 91. Right to Weekly Rest Day. (a) 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 twenty-four (24)
consecutive hours after every six (6) consecutive normal work days.
(b) The employer shall determine and schedule the weekly
rest day of his employees subject to collective bargaining agreement
Page 48 of 88
and to such rules and regulations as the Secretary of Labor and
Employment may provide. However, the employer shall respect the
preference of employees as to their weekly rest day when such
preference is based on religious grounds.
2. Employee Preference
Section 4, Rule III, Book III of the IRR provides:
SECTION 4. Preference of employee. — The
preference of the employee as to his weekly day of rest shall be
respected by the employer if the same is based on religious
grounds. The employee shall make known his preference to the
employer in writing at least seven (7) days before the desired
effectivity of the initial rest day so preferred.
Where, however, the choice of the employee as to his
rest day based on religious grounds will inevitably result in
serious prejudice or obstruction to the operations of the
undertaking and the employer cannot normally be expected to
resort to other remedial measures, the employer may so schedule
the weekly rest day of his choice for at least two (2) days in a
month.
3. Work on a Rest Day
Article 92. When Employer May Require Work on a Rest Day.
The employer may require his employees to work on any day:
(a) In case of actual or impending emergencies caused by
serious accident, fire, flood, typhoon, earthquake, epidemic or other
disaster or calamity to prevent loss of life and property, or imminent
danger to public safety;
(b) In cases of urgent work to be performed on the
machinery, equipment, or installation, to avoid serious loss which the
employer would otherwise suffer;
(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) Under other circumstances analogous
or similar to the foregoing as determined by the Secretary of Labor
and Employment.
No employee shall be required against his will to work
on his scheduled rest day except under the circumstances provided
therein where work on such day may be compelled. However, in
case work on rest day is required and not one of the said
circumstances is present, the employee may work on such rest day
but only on voluntary basis. And once an employee volunteers to
work on his rest day, he should express such willingness and desire
to work in writing. Accordingly, he should be paid the additional
compensation for working on his rest day under the law
4. Compensation on Rest Day, Sunday or Holiday
Work
Article 93. Compensation on Rest Day, Sunday, or Holiday
Work. - (a) Where an employee is made or permitted to work on his
scheduled rest day, he shall be paid an additional compensation of at
least thirty percent (30%) of his regular wage. An employee shall be
entitled to such additional compensation for work performed on
Sunday only when it is his established rest day.
(b) When the nature of the work of the employee is such that
he has no regular workdays and no regular rest days can be scheduled,
he shall be paid an additional compensation of at least thirty percent
(30%) of his regular wage for work performed on Sundays and
holidays.
(c) Work performed on any special holiday shall be paid an
additional compensation of at least thirty percent (30%) of the regular
wage of the employee. Where such holiday work falls on the employee's
scheduled rest day, he shall be entitled to an additional compensation other change of status of other
of at least fifty percent (50%) of his regular wage. employees are given particular weight.
(d) Where the collective bargaining agreement or other
applicable employment contract stipulates the payment of a higher
e. Officers or members of a managerial staff, if
premium pay than that prescribed under this Article, the employer
shall pay such higher rate. they perform the following duties and responsibilities:

Where the weekly rest is given to all employees (i) Primarily perform work directly related
simultaneously, the employer should make known such rest period to management policies of their
by means of a written notice posted conspicuously in the workplace employer;
at least one week before it becomes effective. (ii) Customarily and regularly exercise
Where the rest period is not granted to all employees discretion and independent judgement;
simultaneously and collectively, the employer shall make known to (iii) Regularly and directly assist a
the employees their respective schedules of weekly rest day proprietor or managerial employee in
through written notices posted conspicuously in the workplace at the management of the establishment or
least one week before they become effective. subdivision thereof in which he or she
An express waiver of compensation for work on rest days is employed; or execute under general
and holidays provided in an employment contract which fixes
supervision, work along specialized or
annual compensation of the employees is not valid and does not
technical lines requiring special
operate to bar claims for extra compensation therefor [Mercury
training, experience, or knowledge; or
Drug v. Dayao].
Rest day cannot be offset by regular workdays [Lagatic execute, under general supervision,
v. NLRC]. special assignments and tasks; and
(iv) Do not devote more than 20% of their
E. HOLIDAY PAY hours worked in a workweek to
activities which are not directly and
Article 94. Right to Holiday Pay. (a) Every worker shall be closely related to the performance of
paid his regular daily wage during regular holidays, except in retail the work described in paragraphs (a),
and service establishments regularly employing less than ten (10) (b), and (c) above;
workers;
(b) The employer may require an employee to work on any
f. Field personnel and those whose time and
holiday but such employee shall be paid a compensation equivalent to
twice his regular rate; and performance are unsupervised by the employer, including
(c) As used in this Article, "holiday" includes: New Year's those who are engaged on task or contract basis, purely
Day, Maundy Thursday, Good Friday, the ninth of April, the first of commission basis, or those who are paid a fixed amount of
May, the twelfth of June, the fourth of July, the thirtieth of November, performing work irrespective of the time consumed in the
the twenty-fifth of December and the day designated by law for holding
performance thereof.
a general election.

2. Overtime Pay on a Holiday

1. Coverage
Section 5, Rule IV, Book III of the IRR provides:
Applies to all employees except:
SECTION 5. Overtime pay for holiday work. — For
a. Government employees, whether employed by work performed in excess of eight hours on a regular holiday, an
the National Government or any of its political employee shall be paid an additional compensation for the
subdivisions, including those employed in government- overtime work equivalent to his rate for the first eight hours on
owner and/or controlled corporations with original charters such holiday work plus at least 30% thereof.
or created under special laws; Where the regular holiday work exceeding eight
hours falls on the scheduled rest day of the employee, he shall
b. Those of retail and service establishments be paid an additional compensation for the overtime work
regularly employing not more than 5 workers; equivalent to his regular holiday-rest day for the first 8 hours
c. Kasambahay and persons in the personal plus 30% thereof. The regular holiday rest day rate of an
service of another; employee shall consist of 200% of his regular daily wage rate
d. Managerial employees, if they meet all of the plus 30% thereof.
following conditions:
3. Absences
Section 6, Rule IV, Book III of the IRR provides:
(i) Their primary duty is to manage the
establishment in which they are SECTION 6. Absences. — (a) All covered
employed or of a department or employees shall be entitled to the benefit provided herein when
subdivision thereof; they are on leave of absence with pay. Employees who are on
(ii) They customarily and regularly direct leave of absence without pay on the day immediately preceding
a regular holiday may not be paid the required holiday pay if he
the work of two or more employees
has not worked on such regular holiday.
therein; and (b) Employees shall grant the same percentage of the
(iii) They have the authority to hire or fire holiday pay as the benefit granted by competent authority in the
other employees of lower rank; or their form of employee's compensation or social security payment,
suggestions and recommendations as to whichever is higher, if they are not reporting for work while on
such benefits.
hiring, firing, and promotion, or any
(c) Where the day immediately preceding the holiday
is a non-working day in the establishment or the scheduled rest
Page 49 of 88
 day of the employee, he shall not be deemed to be on leave of
absence on that day, in which case he shall be entitled to the
holiday pay if he worked on the day immediately preceding the
non-working day or rest day.
4. Holiday During Shutdown
Section 7, Rule IV, Book III of the IRR provides:
SECTION 7. Temporary or periodic shutdown and
temporary cessation of work. — (a) In cases of temporary or
periodic shutdown and temporary cessation of work of an
establishment, as when a yearly inventory or when the repair or
cleaning of machineries and equipment is undertaken, the
regular holidays falling within the period shall be compensated
in accordance with this Rule.
(b) The regular holiday during the cessation of
operation of an enterprise due to business reverses as authorized
by the Secretary of Labor and Employment may not be paid by
the employer.
5. Monthly-Paid Employees
In Insular Asia v. Inciong, it was held that monthly paid
employees are not excluded from the benefits of holiday pay.
However, the implementing rules on holiday pay promulgated by
the then Secretary of Labor excludes monthly paid employees from
the said benefits by inserting, under Rule IV, Book Ill of the
implementing rules, Section 2, which provides that: "employees
who are uniformly paid by the month, irrespective of the number of
working days therein, with a salary of not less than the statutory or
established minimum wage shall be presumed to be paid for all
days in the month whether worked or not. "
Manstrade v. Bacungan
Held:  Respondent arbitrator opined that respondent corporation
does not have any legal obligation to grant its monthly salaried employees
holiday pay, unless it is argued that the pertinent section of the Rule and
Regulations implementing Section 94 of the Labor Code is not in
conformity with the law, and thus, without force and effect. This issue was
subsequently decided on October 24, 1984 by a division of this court in the
case of Insular Bank of Asia and American Employees’ Union (IBAAEU)
v. Inciong, wherein it held as follows: "We agree with petitioner’s
contention that Section 2, Rule IV, Book III of the implementing rules and
Policy Instruction No. 9 issued by the then Secretary of Labor are null and
void since in the guise of clarifying the Labor Code’s provisions on holiday
pay, they in effect amended them enlarging the scope of their exclusion (p.
11, rec.). . . . "From the above-cited provisions, it is clear that monthly paid
employees are not excluded from the benefits of holiday pay. However, the
implementing rules on holiday pay promulgated by the then Secretary of
Labor excludes monthly paid employees from the said benefits by inserting
under Rule IV, Book III of the implementing rules, section 2, which
provides that: ‘employees who are uniformly paid by the month,
irrespective of the number of working days therein , with the salary of not
less than the statutory or established minimum wage shall be presumed to
be paid for all days in the month whether worked or not." (132 SCRA 663,
672-673) This ruling was reiterated by the court en banc on August 28,
1985 in the case of Chartered Bank Employees Association v. Ople,
wherein it added that: "The questioned Sec. 2, Rule IV, Book III of the
Integrated Rules and the Secretary’s Policy Instruction No. 9 add another
excluded group, namely ‘employees who are uniformly paid by the month’.
While additional exclusion is only in the form of a presumption that all
monthly paid employees have already been paid holiday paid, it constitutes
a taking away or a deprivation which must be in the law if it is to be valid.
An administrative interpretation which diminishes the benefits of labor
more than what the statute delimits or withholds is obviously ultra vires."
(138 SCRA 273, 282. See also CBTC Employees Union v. Clave, January
7, 1986, 141 SCRA 9.)
6. Field Personnel
The requirement that "actual hours of work in the field
cannot be determined with reasonable certainty" must be read in
conjunction with Rule IV, Book III of the Implementing Rules
Page 50 of 88
which provides: "Rule IV Holidays with Pay Section 1. Coverage
— This rule shall apply to all employees except: . . . (e) Field
personnel and other employees whose time and performance is
unsupervised by the employer . . . The aforementioned rule did not
add another element to the Labor Code definition of field
personnel. The clause "whose time and performance is
unsupervised by the employer" did not amplify but merely
interpreted and expounded the clause "whose actual hours of work
in the field cannot be determined with reasonable certainty." The
former clause is still within the scope and purview of Article 82
which defines field personnel. Hence, in deciding whether or not an
employee’s actual working hours in the field can be determined
with reasonable certainty, query must be made as to whether or not
such employee’s time and performance is constantly supervised by
the employer [Union of Filipro Employees v. Vivar].
7. Holiday for Certain Employees
Section 8, Rule IV, Book III of the IRR provides:
SECTION 8. Holiday pay of certain employees. —
(a) Private school teachers, including faculty members of
colleges and universities, may not be paid for the regular
holidays during semestral vacations. They shall, however, be
paid for the regular holidays during Christmas vacation;
(b) Where a covered employee, is paid by results or
output, such as payment on piece work, his holiday pay shall not
be less than his average daily earnings for the last seven (7)
actual working days preceding the regular holiday; Provided,
However, that in no case shall the holiday pay be less than the
applicable statutory minimum wage rate.
(c) Seasonal workers may not be paid the required
holiday pay during off-season when they are not at work.
(d) Workers who have no regular working days shall
be entitled to the benefits provided in this Rule.
In Jose Rizal College v. NLRC, the Supreme Court held:
The problem, however, lies with its faculty members,
who are paid on an hourly basis, for while the Labor Arbiter
sustains the view that said instructors and professors are not
entitled to holiday pay, his decision was modified by the
National Labor Relations Commission holding the contrary.
Otherwise stated, on appeal the NLRC ruled that teaching
personnel paid by the hour are declared to be entitled to holiday
pay.
Under [Article 94(a) and (b) of the Labor Code, and
the Omnibus Rules, Book III, Rule IV, Section 8], apparently,
the JRC, although a non-profit institution is under obligation to
give pay even on unworked regular holidays to hourly paid
faculty members subject to the terms and conditions provided
for therein.
We believe that the aforementioned implementing
rule is not justified by the provisions of the law which after all is
silent with respect to faculty members paid by the hour who
because of their teaching contracts are obliged to work and
consent to be paid only for work actually done (except when an
emergency or a fortuitous event or a national need calls for the
declaration of special holidays). Regular holidays specified as
such by law are known to both school and faculty members as
"no class days;" certainly the latter do not expect payment for
said unworked days, and this was clearly in their minds when
they entered into the teaching contracts. On the other hand, both
the law and the Implementing Rules governing holiday pay are
silent as to payment on Special Public Holidays.
It is readily apparent that the declared purpose of the
holiday pay which is the prevention of diminution of the
monthly income of the employees on account of work
interruptions is defeated when a regular class day is cancelled on
account of a special public holiday and class hours are held on
another working day to make up for time lost in the school
calendar. Otherwise stated, the faculty member, although forced
to take a rest, does not earn what he should earn on that day. Be
 it noted that when a special public holiday is declared, the
faculty member paid by the hour is deprived of expected
income, and it does not matter that the school calendar is
extended in view of the days or hours lost, for their income that
could be earned from other sources is lost during the extended
days. Similarly, when classes are called off or shortened on
account of typhoons, floods, rallies, and the like, these faculty
members must likewise be paid, whether or not extensions are
ordered.
ORDER: (a) Exempting JRC from paying hourly
paid faculty members their pay for regular holidays, whether the
same be during the regular semesters of the school year or
during semestral, Christmas, or Holy Week vacations; (b) but
ordering JRC to pay said faculty members their regular hourly
rate on days declared as special holidays or for some reason
classes are called off or shortened for the hours they are
supposed to have taught, whether extensions of class days be
ordered or not; in case of extensions said faculty members shall
likewise be paid their hourly rates should they teach during said
extensions.
8. Holiday on a Sunday
Section 9, Rule IV, Book III of the IRR provides:
SECTION 9. Regular holiday falling on rest days or
Sundays. — (a) A regular holiday falling on the employee's rest
day shall be compensated accordingly.
(b) Where a regular holiday falls on a Sunday, the
following day shall be considered a special holiday for purposes
of the Labor Code, unless said day is also a regular holiday.
In Wellington v. Trajano, the basic issue raised in this
case is "whether or not a monthly-paid employee receiving a fixed
monthly compensation, is entitled to an additional pay aside from
his usual holiday pay, whenever a regular holiday falls on a
Sunday. The monthly salary in Wellington-which is based on the
so-called "314 factor" accounts for all 365 days of a year; with the
exception only of 51 Sundays. The respondents’ theory that there
was "an increase of three (3) working days resulting from regular
holidays falling on Sundays" ; hence Wellington "should pay for
317 days, instead of 315 days" would make each of the year in
question (1988, 1989, 1990), a year of 368 days. Pursuant to this
theory, no employer opting to pay his employees by the month
would have any definite basis to determine the number of days in a
year for which compensation should be given to his work force.
There is no provision of law requiring any employer to make such
adjustments in the monthly salary rate set by him to take account of
legal holidays falling on Sundays in a given year, or, contrary to
the legal provisions bearing on the point, otherwise to reckon a
year at more than 365 days.
9. Double Holiday
Section 10, Rule IV, Book III of the IRR provides:
SECTION 10. Successive regular holidays. —
Where there are two (2) successive regular holidays, like Holy
Thursday and Good Friday, an employee may not be paid for
both holidays if he absents himself from work on the day
immediately preceding the first holiday, unless he works on the
first holiday, in which case he is entitled to his holiday pay on
the second holiday.
SUMMARY
1) For regular holidays
a) If it is an employee's regular workday
 If unworked — 100%
 If worked lst 8hrs. — 200%
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 excess of 8 hrs — plus 30% of hourly rate on
said day
b) If it is an employee's rest day
 If unworked — 100%
 If worked - 1st 8 hrs. — plus 30% of 200
 excess of 8 hrs — plus 30% of hourly rate on
said day
2) For declared special days such as Special Non-
Working Day, Special Public Holiday, Special National Holiday, in
addition to the two (2) nationwide special days, the following rules
shall apply:
a) If unworked
 No pay, unless there is a favorable company
policy, practice or collective bargaining
agreement (CBA) granting payment of wages,
on special days even if unworked.
b) If worked
 1st 8 hrs. — plus 30% of the daily rate of
100%
 excess of 8 hrs. — plus 30% of hourly rate on
said day
c) Falling on the employee's rest day and if worked
 1st hrs. — plus 50% of the daily rate of 100%
 excess of 8 hrs. — plus 30% of hourly rate on
said day
3) For those declared as special working holidays, the
following rules shall apply:
For work performed, an employee is entided only to his
basic rate. No premium pay is required since work performed on
said days is considered work on ordinary working day.
F. SERVICE INCENTIVE LEAVE
Article 95. Right to Service Incentive Leave. (a) Every
employee who has rendered at least one year of service shall be entitled
to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already
enjoying the benefit herein provided, those enjoying vacation leave
with pay of at least five days and those employed in establishments
regularly employing less than ten employees or in establishments
exempted from granting this benefit by the Secretary of Labor and
Employment after considering the viability or financial condition of
such establishment.
(c) The grant of benefit in excess of that provided herein
shall not be made a subject of arbitration or any court or
administrative action.
1. Coverage
Section 1, Rule V, Book III of the IRR provides:
SECTION 1. Coverage. — This rule shall apply to
all employees except:
(a) Those of the government and any of its political
subdivisions, including government-owned and controlled
corporations;
(b) Domestic helpers and persons in the personal
service of another;
(c) Managerial employees as defined in Book Three
of this Code;
(d) Field personnel and other employees whose
performance is unsupervised by the employer including those
who are engaged on task or contract basis, purely commission
basis, or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof;
 (e) Those who are already enjoying the benefit herein
provided;
(f) Those enjoying vacation leave with pay of at least
five days; and
(g) Those employed in establishments regularly
employing less than ten employees.
In David v. Macasio, the payment of an employee on task
or pakyaw basis alone is insufficient to exclude one from the
coverage of SIL and holiday pay. They are exempted from the
coverage of Title I (including the holiday and SIL pay) only if they
qualify as “field personnel.”  The IRR therefore validly qualifies
and limits the general exclusion of “workers paid by results” found
in Article 82 from the coverage of holiday and SIL pay.  This is the
only reasonable interpretation since the determination of excluded
workers who are paid by results from the coverage of Title I is
“determined by the Secretary of Labor in appropriate regulations.”
The Court has already held that company drivers who are
under the control and supervision of management officers — like
respondent herein — are regular employees entitled to benefits
including service incentive leave pay [HSY Marketing v.
Villastique].
2. Right to Service Incentive Leave
Sections 2 and 3, Rule V, Book III of the IRR provides:
SECTION 2. Right to service incentive leave. —
Every employee who has rendered at least one year of service
shall be entitled to a yearly service incentive leave of five days
with pay.
SECTION 3. Definition of certain terms. — The
term "at least one-year service" shall mean service for not less
than 12 months, whether continuous or broken reckoned from
the date the employee started working, including authorized
absences and paid regular holidays unless the working days in
the establishment as a matter of practice or policy, or that
provided in the employment contract is less than 12 months, in
which case said period shall be considered as one year.
The phrase “leave with pay” means that the employee is
entitled to his full compensation during his leave of absence from
work.
The term “at least one year of service” should mean
service within 12 months, whether continuous or broken, reckoned
from the date the employee started working, including authorized
absences and paid regular holidays, unless the number of working
days in the establishment as a matter of practice or policy, or that
provided in the employment contract, is less than 12 months, in
which case, said period should be considered as 1 year for the
purpose of determining entitlement to the service incentive leave
benefit [Integrated Contractor and Plumbing Works v. NLRC].
In JPL Marketing v. Court of Appeals, where an
employee was never paid his service incentive leave during all the
time he was employed, it was held that the same should be
computed not from the start of employment but a year after
commencement of service, for it is only then that the employee is
entitled to said benefit. This is because the entitlement to said
benefit accrues only from the time he has rendered at least one year
of service to his employer. The computation thereof should only be
up to the date of termination of employment. There is no cause for
granting said incentive to one who has already terminated his
relationship with the employer.
G. SERVICE CHARGES
Article 96. Service Charges. - All service charges collected by
hotels, restaurants and similar establishments shall be distributed
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completely and equally among the covered workers except managerial
employees.
In the event that the minimum wage is increased by law of
wage order, service charges paid to the covered employees shall not be
considered in determining the employer's compliance with the
increased minimum age.
To facilitate resolution of any dispute between the
management and the employees on the distribution of service charges,
a grievance mechanism shall be established. If no grievance mechanism
is established or if inadequate, the grievance shall be referred to the
regional office of the Department of Labor and Employment which has
jurisdiction over the workplace for conciliation.
For purposes of this Article, managerial employees refer to
any person vested with powers or prerogatives to lay down and execute
management policies or hire, transfer, suspend, pay-off, recall,
discharge, assign or discipline employees or to effectively recommend
such managerial actions.
Tips and service charges are two different things. Tips
are given by customers voluntarily to waiters and other people who
serve them out of recognition of satisfactory or excellent service.
There is no compulsion to give tips under the law. The same may
not be said of service charges which are considered integral part of
the cost of the food, goods, or services ordered by the customers.
As a general rule, tips do not form part of the service charges
which should be distributed in accordance with the sharing ratio
prescribed under Article 96 of the Labor Code. However, where a
restaurant or similar establishment does not collect service charges
but has a practice or policy of monitoring and pooling tips given
voluntarily by its customers to its employees, the pooled tps should
be monitored, accounted for and distributed in the same manner as
the service charges. Hence, the 85%;15% sharing ratio should be
observed.
Service charge is not in the nature of profit share and,
therefore, cannot be deducted from wage. It is not part of wages
[Mayon Hotel v. Adana].
VIII
PROTECTION AGAINST HARASSMENT
A. ANTI-SEXUAL HARASSMENT ACT (R.A. 7877)
1. Work, Education or Training-Related Sexual
Harassment
Section 3. Work, Education or Training-related Sexual
Harassment Defined. – Work, education or training-related sexual
harassment is committed by an employer, employee, manager,
supervisor, agent of the employer, teacher, instructor, professor, coach,
trainor, or any other person who, having authority, influence or moral
ascendancy over another in a work or training or education
environment, demands, requests or otherwise requires any sexual favor
from the other, regardless of whether the demand, request or
requirement for submission is accepted by the object of said Act.
(a) In a work-related or employment environment, sexual
harassment is committed when:
(1) The sexual favor is made as a condition in the hiring or in
the employment, re-employment or continued employment of said
individual, or in granting said individual favorable 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;
(2) The above acts would impair the employee’s rights or
privileges under existing labor laws; or
(3) The above acts would result in an intimidating, hostile, or
offensive environment for the employee.
(b) In an education or training environment, sexual
harassment is committed:
 (1) Against one who is under the care, custody or supervision
of the offender;
(2) Against one whose education, training, apprenticeship or
tutorship is entrusted to the offender;
(3) When the sexual favor is made a condition to the giving
of a passing grade, or the granting of honors and scholarships, or the
payment of a stipend, allowance or other benefits, privileges, or
considerations; or
(4) When the sexual advances result in an intimidating,
hostile or offensive environment for the student, trainee or apprentice.
Any person who directs or induces another to commit any
act of sexual harassment as herein defined, or who cooperates in the
commission thereof by another without which it would not have been
committed, shall also be held liable under this Act.
2. Duty of Employer or Head of Office
Section 4. Duty of the Employer or Head of Office in a Work-
related, Education or Training Environment. – It shall be the duty of the
employer or the head of the work-related, educational or training
environment or institution, to prevent or deter the commission of acts
of sexual harassment and to provide the procedures for the resolution,
settlement or prosecution of acts of sexual harassment. Towards this
end, the employer or head of office shall:
(a) Promulgate appropriate rules and regulations in
consultation with and jointly approved by the employees or students or
trainees, through their duly designated representatives, prescribing the
procedure for the investigation of sexual harassment cases and the
administrative sanctions therefor.
Administrative sanctions shall not be a bar to prosecution in
the proper courts for unlawful acts of sexual harassment.
The said rules and regulations issued pursuant to this
subsection (a) shall include, among others, guidelines on proper
decorum in the workplace and educational or training institutions.
(b) Create a committee on decorum and investigation of
cases on sexual harassment. The committee shall conduct meetings, as
the case may be, with officers and employees, teachers, instructors,
professors, coaches, trainors and students or trainees to increase
understanding and prevent incidents of sexual harassment. It shall also
conduct the investigation of alleged cases constituting sexual
harassment.
In the case of a work-related environment, the committee
shall be composed of at least one (1) representative each from the
management, the union, if any, the employees from the supervisory
rank, and from the rank and file employees.
In the case of the educational or training institution, the
committee shall be composed of at least one (1) representative from the
administration, the trainors, teachers, instructors, professors or
coaches and students or trainees, as the case may be.
The employer or head of office, educational or training
institution shall disseminate or post . copy of this Act for the
information of all concerned.
3. Liability of Employer, Head of Office, Education
or Training Institution
Section 5. Liability of the Employer, Head of Office,
Educational or Training Institution.  – The employer or head of office,
educational or training institution shall be solidarily liable for damages
arising from the acts of sexual harassment committed in the
employment, education or training environment if the employer or
head of office, educational or training institution is informed of such
acts by the offended party and no immediate action is taken thereon.
B. GENDER-BASED SEXUAL HARASSMENT IN THE
WORKPLACE (R.A. 11313)
Section 16. Gender-Based Sexual Harassment in the
Workplace. -The crime of gender-based sexual harassment in the
workplace includes the following:
Page 53 of 88
(a) An act or series of acts 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 such as text messaging or electronic mail 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 such as text messaging or
electronic mail 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: Provided, That 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; and
(d) Information and communication system refers to a
system for generating, sending, receiving, storing or otherwise
processing electronic data messages or electronic documents and
includes the computer system or other similar devices by or in which
data are recorded or stored and any procedure related to the recording
or storage of electronic data messages or electronic documents.
1. Duties of Employers
Section 17. Duties of Employers. -Employers or other persons
of authority, influence or moral ascendancy in a workplace shall have
the duty to prevent, deter, or punish the performance of acts of gender-
based sexual harassment in the workplace. Towards this end, the
employer or person of authority, influence or moral ascendancy shall:
(a) Disseminate or post in a conspicuous place a copy of this
Act to all persons in the workplace;
(b) Provide measures to prevent gender-based sexual
harassment in the workplace, such as the conduct of anti-sexual
harassment seminars;
(c) Create an independent internal mechanism or a
committee on decorum and investigation to investigate and address
complaints of gender-based sexual harassment which shall:
(1) Adequately represent the management, the employees
from the supervisory rank, the rank-and-file employees, and the union,
if any;
(2) Designate a woman as its head and not less than half of
its members should be women;
(3) Be composed of members who should be impartial and
not connected or related to the alleged perpetrator;
(4) Investigate and decide on the complaints within ten (10)
days or less upon receipt thereof;
(5) Observe due process;
(6) Protect the complainant from retaliation; and
(7) Guarantee confidentiality to the greatest extent possible;
(d) Provide and disseminate, in consultation with all persons
in the workplace, a code of conduct or workplace policy which shall:
(1) Expressly reiterate the prohibition on gender-based
sexual harassment;
(2) Describe the procedures of the internal mechanism
created under Section 17(c) of this Act; and
(3) Set administrative penalties.
2. Liability of Employers
Section 19. Liability of Employers.— In addition to liabilities
for committing acts of gender-based sexual harassment, employers may
also be held responsible for:
(a) Non-implementation of their duties under Section 17 of
this Act, as provided in the penal provisions; or
(b) Not taking action on reported acts of gender-based
sexual harassment committed in the workplace.
 Any person who violates subsection (a) of this section, shall
upon conviction, be penalized with a fine of not less than Five thousand
pesos (₱5,000.00) nor more than Ten thousand pesos (₱10,000.00).
Any person who violates subsection (b) of this section, shall
upon conviction, be penalized with a fine of not less than Ten thousand
pesos (₱10,000.00) nor more than Fifteen thousand pesos (₱15,000.00).
C. GENDER-BASED SEXUAL HARASSMENT IN
EDUCATIONAL AND TRAINING INSTITUTIONS
(R.A. 11313)
Section 21. Gender-Based Sexual Harassment in Educational
and Training Institutions.— All schools, whether public or private, shall
designate an officer-in-charge to receive complaints regarding
violations of this Act, and shall, ensure that the victims are provided
with a gender-sensitive environment that is both respectful to the
victims’ needs and conducive to truth-telling.
Every school must adopt and publish grievance procedures
to facilitate the filing of complaints by students and faculty members.
Even if an individual does not want to file a complaint or does not
request that the school take any action on behalf of a student or faculty
member and school authorities have knowledge or reasonably know
about a possible or impending act of gender-based sexual harassment
or sexual violence, the school should promptly investigate to determine
the veracity of such information or knowledge and the circumstances
under which the act of gender-based sexual harassment or sexual
violence were committed, and take appropriate steps to resolve the
situation. If a school knows or reasonably should know about acts of
gender-based sexual harassment or sexual violence being committed
that creates a hostile environment, the school must take immediate
action to eliminate the same acts, prevent their recurrence, and address
their effects.
Once a perpetrator is found guilty, the educational
institution may reserve the right to strip the diploma from the
perpetrator or issue an expulsion order.
The Committee on Decorum and Investigation (CODI) of all
educational institutions shall address gender-based sexual harassment
and online sexual harassment in accordance with the rules and
procedures contained in their CODI manual.
1. Duties of School Heads
Section 22. Duties of School Heads. -School heads shall have
the following duties:
(a) Disseminate or post a copy of this Act in a conspicuous
place in the educational institution;
(b) Provide measures to prevent gender-based sexual
harassment in educational institutions, like information campaigns;
(c) Create an independent internal mechanism or a CODI to
investigate and address complaints of gender-based sexual harassment
which shall:
(1) Adequately represent the school administration, the
trainers, instructors, professors or coaches and students or trainees,
students and parents, as the case may be;
(2) Designate a woman as its head and not less than half of
its members should be women;
(3) Ensure equal representation of persons of diverse sexual
orientation, identity and/or expression, in the CODI as far as
practicable;
(4) Be composed of members who should be impartial and
not connected or related to the alleged perpetrator;
(5) Investigate and decide on complaints within ten (10) days
or less upon receipt, thereof;
(6) Observe due process;
(7) Protect the complainant from retaliation; and
(8) Guarantee confidentiality to the greatest extent possible.
(d) Provide and disseminate, in consultation with all persons
in the educational institution, a code of conduct or school policy which
shall:
(1) Expressly reiterate the prohibition on gender-based
sexual harassment;
Page 54 of 88
(2) Prescribe the procedures of the internal mechanism
created under this Act; and
(3) Set administrative penalties.
2. Liability of School Heads
Section 23. Liability of School Heads.— In addition to
liability for committing acts of gender-based sexual harassment,
principals, school heads, teachers, instructors, professors, coaches,
trainers, or any odier person who has authority, influence or moral
ascendancy over another in an educational or training institution may
also be held responsible for:
(a) Non-implementation of their duties under Section 22 of
this Act, as provided in the penal provisions; or
(b) Failure to act on reported acts of gender-based sexual
harassment committed in the educational institution.
Any person who violates subsection (a) of this section, shall
upon conviction, be penalized with a fine of not less than Five thousand
pesos (₱5,000.00) nor more than Ten thousand pesos (₱10,000.00).
Any person who violates subsection (b) of this section, shall
upon conviction, be penalized with a fine of not less than Ten thousand
pesos (₱10,000.00) nor more than Fifteen thousand pesos (₱15,000.00).
IX
WAGES
A. DEFINITION
"Wage" paid to any employee shall mean 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, as determined by the
Secretary of Labor and Employment, 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.
The term facilities includes articles or services for the
benefit of the employee of his family but does not include tools of
the trade or articles or services primarily for the benefit of the
employer of necessary to the conduct of the employer’s business.
They are items of expense necessary for the laborer’s and his
family’s existence and subsistence which form part of the wage
when furnished by the employer, are deductible therefrom, since if
they are not o furnished, the labourer would spend and pay for
them just the same [State Marine Cooperation v. Cebu Seamen’s
Association].
Example of an occupation where facilities are customary:
Waiter of a famous restaurant, part of your wages can be the meals
that are granted to you. House helpers, waiters, waitresses.
What about supplements?
The term “supplements” means extra remuneration or
special privilege or benefits given to or received by the laborers
over and above their ordinary earnings or wages [Atok Big Wedge
Mining v. ABW Mutual Benefit Association].
Facilities v. Supplements
The benefit or privilege given to the employee which
constitutes an extra remuneration over and above his basic or
ordinary earning or wage is supplement; and when said benefit or
privilege is made part of the laborer’s basic wage, it is a facility.
The criterion is not so much with the kind of benefit or item (food,
lodging, bonus or sick leave) given but its purpose. Thus, free
meals suspplied by the ship operator to crew members, out of
necessity, cannot be considered as facilities btu supplmenets which
could not be reduced having been given not as part of wages btu as
a necessary matter in the maintenance of the health and efficiency
of the crew during the voyage [Mayon Hotel & Restaurant v.
Adana].
Some Principles on Facilities and Supplements:
 Facilities are deductible from wage but not supplements.
 Legal requirements must be complied with before facilities
may be deducted from wages. The employer simply cannot
deduct the value from the employee’s wages without
satisfying the following:
(1) Proof that such facilities are customarily furnished
by the trade;
(2) The provision of deductible facilities is voluntarily
accepted in writing by the employee;
(3) The facilities are charged at fair and reasonable
value; and
(4) There must be no financial or material gain on the
part of the employer or anyone who is affiliated
with the employer.
 An employer may provide subsidized meals and snacks to his
employees provided that the subsidy shall not be less than
30% of the fair and reasonable value of such facilities. In such
a case, the employer may deduct from the wages of the
employees not more than 70% of the value of the meals and
snacks enjoyed by the employees, provided that such
deduction is with the written authorization of the employees
concerned.
 The free board and lodging petitioner SIP furnished its
employees cannot operate as a sef-off for the underpayment of
their wages [Art. 124].
B. PROHIBITION AGAINST ELIMINATION OR
DIMINUTION OF BENEFITS
Article 100. Prohibition Against Elimination or Diminution of
Benefits. Nothing in this Book shall be construed to eliminate or in any
way diminish supplements, or other employee benefits being enjoyed at
the time of promulgation of this Code.
Article 127. Non-Diminution of Benefits. No wage order
issued by any regional board shall provide for wage rates lower than
the statutory minimum wage rates prescribed by Congress.
1. Benefits
In Royal Plant Workers Union v. Coca-Cola Bottlers
Philippines, Inc.-Cebu Plant, the Court had the occasion to rule
that the term "benefits" mentioned in the non-diminution rule refers
to monetary benefits or privileges given to the employee with
monetary equivalents. Stated otherwise, the employee benefits
contemplated by Article 100 are those which are capable of being
measured in terms of money. Thus, it can be readily concluded
from past jurisprudential pronouncements that these privileges
constituted money in themselves or were convertible into monetary
equivalents.
In Royal Plant Workers Union v. Coca-Cola Bottlers
Philippines, Inc.-Cebu Plant, the Court had the occasion to rule
that the term "benefits" mentioned in the non-diminution rule refers
to monetary benefits or privileges given to the employee with
monetary equivalents. Stated otherwise, the employee benefits
contemplated by Article 100 are those which are capable of being
Page 55 of 88
measured in terms of money. Thus, it can be readily concluded
from past jurisprudential pronouncements that these privileges
constituted money in themselves or were convertible into monetary
equivalents.
Coca-Cola Bottlers v. ICCPELU
Held: As compared to the factual milieu in the Eastern
Telecommunications case, the CBA between CCBPI and the respondent has
no analogous provision which grants that the 50% premium pay would have
to be paid regardless of the occurrence of Saturday work. Thus, the non-
payment of the same would not constitute a violation of the diminution of
benefits rule.
Also, even assuming arguendo that the Saturday work involved
in this case falls within the definition of a "benefit" protected by law, the
fact that it was made subject to a condition (i.e., the existence of operational
necessity) negates the application of Article 100 pursuant to the established
doctrine that when the grant of a benefit is made subject to a condition and
such condition prevails, the rule on non-diminution finds no application.
Otherwise stated, if Saturday work and its corresponding premium pay
were granted to CCBPI's employees without qualification, then the
company's policy of permitting its employees to suffer work on Saturdays
could have perhaps ripened into company practice protected by the non-
diminution rule.
Lastly, the Court agrees with the assertion of CCBPI that since
the affected employees are daily-paid employees, they should be given their
wages and corresponding premiums for Saturday work only if they are
permitted to suffer work. Invoking the time-honored rule of "a fair day's
work for a fair day's pay," the CCBPI argues that the CA's ruling that such
unworked Saturdays should be compensated is contrary to law and the
evidence on record.
The CA, for its part, ruled that the principle of "a fair day's work
for a fair day's pay" was irrelevant to the instant case. According to the
appellate court, since CCBPI's employees are daily-paid workers, they
should be paid their whole daily rate plus the corresponding premium pay
in the absence of a specific CBA provision that directed wages to be paid
on a different rate on Saturdays. This was notwithstanding the fact that the
duration of Saturday work lasted only for four hours or half the time spent
on other workdays.
The CA erred in this pronouncement. The age-old rule
governing the relation between labor and capital, or management and
employee, of a "fair day's,wage for a fair day's labor" remains the basic
factor in determining employees' wages. 67 If there is no work performed by
the employee, there can be no wage. 68 In cases where the employee's failure
to work was occasioned neither by his abandonment nor by termination, the
burden of economic loss is not rightfully shifted to the employer; each party
must bear his own loss.69 In other words, where the employee is willing and
able to work and is not illegally prevented from doing so, no wage is due to
him. To hold otherwise would be to grant to the employee that which he did
not earn at the prejudice of the employer.
In the case at bar, CCBPI's employees were not illegally
prevented from working on Saturdays. The company was simply exercising
its option not to schedule work pursuant to the CBA provision which gave
it the prerogative to do so. It therefore follows that the principle of "no
work, no pay" finds application in the instant case.
Having disposed of the issue on wages for unworked Saturdays
in consonance with the well-settled rule of "no work, no pay," this Court
deems it unnecessary to belabor on the CA ruling that the concerned
employees should be paid their whole daily rate, and not the amount
equivalent to one-half day's wage, plus corresponding premium.
2. Company Practice
The 2014 case of Wesleyan University-Philippines v.
Wesleyan University-Philippines Faculty and Staff Association,
succinctly pointed out that the Non-Diminution Rule found in
Article 100 of the Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their employees.
This rule, however, applies only if the benefit is based on any of
the following:
a. An express policy;
b. A written contract; or
c. A company practice.

Company practice is a custom or habit shown by an
employer’s repeated, habitual customary or succession of acts of
similar kind by reason of which, it gains the status of a company
policy that can no longer be disturbed or withdrawn.
Since there is no hard and fast rule which may be used
and applied in determining whether a certain act of the employer
may be considered as having ripened into a practice, the following
criteria may be used to determine whether an act has ripened into a
company practice:
a. The act of the employer has been done for a
considerable period of time;
b. The act should be done consistently and
intentionally; and
c. The act should not be a product of erroneous
interpretation or construction of a doubtful or
difficult question of law or provision in the
CBA.
a. Considerable Period of Time
If done only once as in the case of Philippine Appliance
Corporation (Philacor) v. Court of Appeals, where the CBA
signing bonus was granted only once during the 1997 CBA
negotiation, the same cannot be considered as having ripened into a
company practice.
In the following cases, the act of the employer was
declared company practice because of the considerable period of
time it has been practiced:
(i) Davao Fruits Corporation v. Associated Labor
Unions. - The act of the company of freely and
continuously including in the computation of
the 13th month pay, items that were expressly
excluded by law has lasted for six (6) years,
hence, was considered indicative of company
practice.
(ii) Sevilla Trading Company v. A. V. A. Semana. -
The act of including non-basic benefits such as
paid leaves for unused sick leave and vacation
leave in the computation of the employees’
13th month pay for at least two (2) years was
considered a company practice.
(iii) The 2010 case of Central Azucarera de Tarlac
v. Central Azucarera de Tarlac Labor Union-
NLU, also ruled as company practice the act of
petitioner of granting for thirty (30) years, its
workers the mandatory 13th month pay
computed in accordance with the following
formula: Total Basic Annual Salary divided by
twelve (12) and Including in the computation
of the Total Basic Annual Salary the following:
basic monthly salary; first eight (8) hours
overtime pay on Sunday and legal/special
holiday; night premium pay; and vacation and
sick leaves for each year.
b. Consistency and Intention
In Tiangco v. Leogardo, Jr., where the employer has
consistently been granting fixed monthly emergency allowance to
the employees from November, 1976 but discontinued this practice
effective February, 1980 insofar as non-working days are
concerned based on the principle of “no work, no pay.” The
Supreme Court ruled that the discontinuance of said benefit
Page 56 of 88
contravened Article 100 of the Labor Code which prohibits the
diminution of existing benefits.
c. Not a Product of Erroneous Interpretation
or Construction of a Doubtful or Difficult
Question of Law or Provision in the CBA
The general rule is that if it is a past error that is being
corrected, no vested right may be said to have arisen therefrom nor
any diminution of benefit may have resulted by virtue of the
correction thereof. The error, however, must be corrected
immediately after its discovery; otherwise, the rule on non-
diminution of benefits would still apply.
The following cases would illuminate this principle:
(i) Globe Mackay Cable and Radio Corporation
v. NLRC, where the Supreme Court ruled on
the proper computation of the cost-of-living
allowance (COLA) for monthly-paid
employees. Petitioner corporation, pursuant to
Wage Order No. 6 (effective October 30,
1984), increased the COLA of its monthly-paid
employees by multiplying the P3.00 daily
COLA by 22 days which is the number of
working days in the company. The union
disagreed with the computation, claiming that
the daily COLA rate of P3.00 should be
multiplied by 30 days which has been the
practice of the company for several years. The
Supreme Court, however, upheld the
contention of the petitioner corporation. It held
that the grant by the employer of benefits
through an erroneous application of the law
due to absence of clear administrative
guidelines is not considered a voluntary act
which cannot be unilaterally discontinued.
(ii) TSPIC Corp. v. TSPIC Employees Union
[FFW], where the Supreme Court reiterated the
rule enunciated in Globe-Mackay, that an
erroneously granted benefit may be withdrawn
without violating the prohibition against non-
diminution of benefits. No vested right accrued
to individual respondents when TSPIC
corrected its error by crediting the salary
increase for the year 2001 against the salary
increase granted under Wage Order No. 8, all
in accordance with the CBA. Hence, any
amount given to the employees in excess of
what they were entitled to, as computed above,
may be legally deducted by TSPIC from the
employees’ salaries.
But if the error does not proceed from the interpretation
or construction of a law or a provision in the CBA, the same may
ripen into a company practice.
C. WITHHOLDING BONUS
A bonus is an amount granted and paid to an employee
for his industry and loyalty which contributed to the success of the
employer's business and made possible the realization of profits. It
is an act of generosity granted by an enlightened employer to spur
the employee to greater efforts for the success of the business and
realization of bigger profits. The granting of a bonus is a
management prerogative, something given in addition to what is
ordinarily received by or strictly due the recipient. Thus, a bonus is
not a demandable and enforceable obligation, except when it is
made part of the wage, salary or compensation of the employee
[Producer’s Bank v. NLRC].
However, an employer cannot be forced to distribute
bonuses which it can no longer afford to pay. To hold otherwise
would be to penalize the employer for his past generosity. Thus,
in Traders Royal Bank v. NLRC,16 we held that -
It is clear x x x that the petitioner may not be obliged to
pay bonuses to its employees. The matter of giving them bonuses
over and above their lawful salaries and allowances is entirely
dependent on the profits, if any, realized by the Bank from its
operations during the past year.
From 1979-1985, the bonuses were less because the
income of the Bank had decreased. In 1986, the income of the
Bank was only 20.2 million pesos, but the Bank still gave out the
usual two (2) months basic mid-year and two months gross year-
end bonuses. The petitioner pointed out, however, that the Bank
weakened considerably after 1986 on account of political
developments in the country. Suspected to be a Marcos-owned or
controlled bank, it was placed under sequestration by the present
administration and is now managed by the Presidential
Commission on Good Government (PCGG).
In light of these submissions of the petitioner, the
contention of the Union that the granting of bonuses to the
employees had ripened into a company practice that may not be
adjusted to the prevailing financial condition of the Bank has no
legal and moral bases. Its fiscal condition having declined, the
Bank may not be forced to distribute bonuses which it can no
longer afford to pay and, in effect, be penalized for its past
generosity to its employees. -
Private respondent's contention, that the decrease in the
mid-year and year-end bonuses constituted a diminution of the
employees' salaries, is not correct, for bonuses are not part of labor
standards in the same class as salaries, cost of living allowances,
holiday pay, and leave benefits, which are provided by the Labor
Code.
This doctrine was reiterated in the more recent case
of Manila Banking Corporation v. NLR17 wherein the Court made
the following pronouncements –
By definition, a "bonus" is a gratuity or act of liberality
of the giver which the recipient has no right to demand as a matter
of right. It is something given in addition to what is ordinarily
received by or strictly due the recipient. The granting of a bonus is
basically a management prerogative 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, especially so if it is incapable
of doing so.
xxx xxx xxx
Clearly then, a bonus is an amount given ex gratia to an
employee by an employer on account of success in business or
realization of profits. How then can an employer be made liable to
pay additional benefits in the nature of bonuses to its employees
when it has been operating on considerable net losses for a given
period of time?
Records bear out that petitioner Manilabank was already
in dire financial straits in the mid-80's. As early as 1984, the
Central Bank found that Manila bank had been suffering financial
losses. Presumably, the problems commenced even before their
discovery in 1984. As earlier chronicled, the Central Bank placed
petitioner bank under comptrollership in 1984 because of liquidity
problems and excessive interbank borrowings. In 1987, it was
placed under receivership and ordered to close operation. In 1988,
it was ordered liquidated.
Page 57 of 88
It is evident, therefore, that petitioner bank was operating
on net losses from the years 1984, 1985 and 1986, thus, resulting to
its eventual closure in 1987 and liquidation in 1988. Clearly, there
was no success in business or realization of profits to speak of that
would warrant the conferment of additional benefits sought by
private respondents. No company should be compelled to act
liberally and confer upon its employees additional benefits over
and above those mandated by law when it is plagued by economic
difficulties and financial losses. No act of enlightened generosity
and self-interest can be exacted from near empty , if not empty
coffers.
D. PAYMENT BY RESULTS
Article 101. Payment by Results. - The Secretary of Labor
shall regulate the payment of wages by results, including pakyao,
piecework and other nontime work, in order to ensure the payment of
fair and reasonable wage rates, preferably through time and motion
studies or in consultation with representatives of workers and
employer's organizations.
Section 9, Rule VII, Book III of the IRR provides:
SECTION 9. Workers Paid by Results. —
a) All workers paid by results, including those who
are paid on piecework, takay, pakyaw, or task basis, shall
receive not less than the applicable statutory minimum wage
rates prescribed under the Act for the normal working hours
which shall not exceed eight hours work a day, or a proportion
thereof for work of less than the normal working hours.
The adjusted minimum wage rates for workers paid
by results shall be computed in accordance with the following
steps:
1) Amount of increase in AMW - Previous AMW x
100 = % Increase;
2) Existing rate/piece x % increase = increase in
rate/piece;
3) Existing rate/piece + increase in rate/piece =
Adjusted rate/piece.
Where AMW is the applicable minimum wage
rate.cralaw
b) The wage rates of workers who are paid by results
shall continue to be established in accordance with Article 101
of the Labor Code, as amended and its implementing
regulations.
E. FORMS OF PAYMENT
Article 102. Forms of Payment. No employer shall pay the
wages of an employee by means of promissory notes, vouchers,
coupons, tokens, tickets, chits, or any object other than legal tender,
even when expressly requested by the employee.
Payment of wages by check or money order shall be allowed
when such manner of payment is customary on the date of effectivity of
this Code, or is necessary because of special circumstances as specified
in appropriate regulations to be issued by the Secretary of Labor and
Employment or as stipulated in a collective bargaining agreement.
Section 2, Rule VIII, Book III of the IRR provides:
SECTION 2. Payment by check. — Payment of
wages by bank checks, postal checks or money orders is allowed
where such manner of wage payment is customary on the date of
the effectivity of the Code, where it is so stipulated in a
collective agreement, or where all of the following conditions
are met:
a. There is a bank or other facility for encashment
within a radius of one (1) kilometer from the workplace;
b. The employer or any of his agents or
representatives does not receive any pecuniary benefit directly
or indirectly from the arrangement;
 c. The employees are given reasonable time during
banking hours to withdraw their wages from the bank which
time shall be considered as compensable hours worked if done
during working hours; and
d. The payment by check is with the written consent
of the employees concerned if there is no collective agreement
authorizing the payment of wages by bank checks.
F. TIME OF PAYMENT
Article 103. Time of Payment. - Wages shall be paid at least
once every two (2) weeks or twice a month at intervals not exceeding
sixteen (16) days. If on account of force majeure or circumstances
beyond the employers control, payment of wages on or within the time
herein provided cannot be made, 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.
The payment of wages of employees engaged to perform a
task which cannot be completed in two (2) weeks shall be subject to the
following conditions, in the absence of a collective bargaining
agreement or arbitration award:
(1) That payments are made at intervals not exceeding
sixteen (16) days, in proportion to the amount of work completed;
(2) That final settlement is made upon completion of the
work.
G. PLACE OF PAYMENT
Article 104. Place of Payment. Payment of wages shall be
made at or near the place of undertaking, except as otherwise provided
by such regulations as the Secretary of Labor and Employment may
prescribe under conditions to ensure greater protection of wages.
Section 4, Rule VII, Book III of the IRR provides:
SECTION 4. Place of payment. — As a general rule,
the place of payment shall be at or near the place of undertaking.
Payment in a place other than the work place shall be
permissible only under the following circumstances:
(a) When payment cannot be effected at or near the
place of work by reason of the deterioration of peace and order
conditions, or by reason of actual or impending emergencies
caused by fire, flood, epidemic or other calamity rendering
payment thereat impossible;
(b) When the employer provides free transportation
to the employees back and forth; and
(c) Under any other analogous circumstances;
Provided, That the time spent by the employees in collecting
their wages shall be considered as compensable hours worked;
(d) No employer shall pay his employees in any bar,
night or day club, drinking establishment, massage clinic, dance
hall, or other similar places or in places where games are played
with stakes of money or things representing money except in the
case of persons employed in said places.
North Davao Mining v. NLRC
Held: Anent the award of back wages and transportation
allowance, the issues raised in connection therewith are factual, the
determination of which is best left to the respondent NLRC. It is well
settled that this Court is bound by the findings of fact of the NLRC, so long
as said findings are supported by substantial evidence.
As the Solicitor General pointed out in his comment:
"It is undisputed that because of security reasons, from the time
of its operations, petitioner NDMC maintained its policy of paying its
workers at a bank in Tagum, Davao del Norte, which usually took the
workers about two and a half (2 1/2) hours of travel from the place of work
and such travel time is not official.
Records also show that on February 12,1992, when an
inspection was conducted by the Department of Labor and Employment at
the premises of petitioner NDMC at Amacan, Maco, Davao del Norte, it
Page 58 of 88
was found out that petitioners had violated labor standards law, one of
which is the place of payment of wages (p.109, Vol. 1, Record).
Section 4, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code provides that:
‘Section 4. Place of payment. - (a) As a general rule, the place of
payment shall be at or near the place of undertaking. Payment in a place
other than the workplace shall be permissible only under the following
circumstances:
(1) When payment cannot be effected at or near the place of
work by reason of the deterioration of peace and order conditions, or by
reason of actual or impending emergencies caused by fire, flood, epidemic
or other calamity rendering payment thereat impossible;
(2) When the employer provides free transportation to the
employees back and forth; and
(3) Under any analogous circumstances; provided that the time
spent by the employees in collecting their wages shall be considered as
compensable hours worked.
(b)  xxx  xxx  xxx.’
(Italics supplied)
Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1,
Record), the Regional Director, Regional Office No. XI, Department of
Labor and Employment, Davao City, ordered petitioner NDMC, among
others, as follows:
‘WHEREFORE, x x x. Respondent is further ordered to pay its
workers salaries at the plantsite at Amacan, New Leyte, Maco, Davao del
Norte or whenever not possible, through the bank in Tagum, Davao del
Norte as already been practiced subject, however to the provisions of
Section 4 of Rule VIII, Book III of the rules implementing the Labor Code
as amended.’
Thus, public respondent Labor Arbiter Antonio M. Villanueva
correctly held that
‘From the evidence on record, we find that the hours spent by
complainants in collecting salaries at a bank in Tagum, Davao del Norte
shall be considered compensable hours worked. Considering further the
distance between Amacan, Maco to Tagum which is 2½ hours by travel and
the risks in commuting all the time in collecting complainants’ salaries,
would justify the granting of backwages equivalent to two (2) days in a
month as prayed for.
‘Corollary to the above findings, and for equitable reasons, we
likewise hold respondents liable for the transportation expenses incurred by
complainants at P40.00 round trip fare during pay days.’
On the contrary, it will be petitioners’ burden or duty to present
evidence of compliance of the law on labor standards, rather than for
private respondents to prove that they were not paid/provided by petitioners
of their backwages and transportation expenses."
Other than the bare denials of petitioners, the above findings
stands uncontradicted. Indeed we are not at liberty to set aside findings of
facts of the NLRC, absent any capriciousness, arbitrariness, or abuse or
complete lack of basis. In Maya Farms Employees Organizations vs.
NLRC,[16] we held:
"This Court has consistently ruled that findings of fact of
administrative agencies and quasi-judicial bodies which have acquired
expertise because their jurisdiction is confined to specific matters are
generally accorded not only respect but even finality and are binding upon
this Court unless there is a showing of grave abuse of discretion, or where it
is clearly shown that they were arrived at arbitrarily or in disregard of the
evidence on record."
H. WITHHOLDING OF WAGES
Article 116. Withholding of Wages and Kickbacks Prohibited.
It shall be unlawful for any person, directly or indirectly, to withhold
any amount from the wages of a worker or induce him to give up any
part of his wages by force, stealth, intimidation, threat or by any other.
Although management prerogative refers to "the right to
regulate all aspects of employment," it cannot be understood to
include the right to temporarily withhold salary/wages without the
consent of the employee. To sanction such an interpretation would
be contrary to Article 116 of the Labor Code [SHS Perforated v.
Diaz].
I. DIRECT PAYMENT FO WAGES
Article 105. Direct Payment of Wages. Wages shall be paid
directly to the workers to whom they are due, except:
(a) In cases of force majeure rendering such payment
impossible or under other special circumstances to be determined by
the Secretary of Labor and Employment in appropriate regulations, in
which case, the worker may be paid through another person under
written authority given by the worker for the purpose; or
(b) Where the worker has died, in which case, the employer
may pay the wages of the deceased worker to the heirs of the latter
without the necessity of intestate proceedings. The claimants, if they
are all of age, shall execute an affidavit attesting to their relationship to
the deceased and the fact that they are his heirs, to the exclusion of all
other persons. If any of the heirs is a minor, the affidavit shall be
executed on his behalf by his natural guardian or next-of-kin. The
affidavit shall be presented to the employer who shall make payment
through the Secretary of Labor and Employment or his representative.
The representative of the Secretary of Labor and Employment shall act
as referee in dividing the amount paid among the heirs. The payment
of wages under this Article shall absolve the employer of any further
liability with respect to the amount paid.
J. PAYMENT OF WAGES IN CASE OF CONTRACTING
Article 109. Solidary Liability. The provisions of existing laws
to the contrary notwithstanding, every employer or indirect employer
shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining
the extent of their civil liability under this Chapter, they shall be
considered as direct employers.
Article 107. Indirect Employer. The provisions of the
immediately preceding article shall likewise apply to any person,
partnership, association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any
work, task, job or project.
“Contracting” or “subcontracting” refers to an
arrangement whereby a principal agrees to farm out to a contractor
the performance or completion of a specific job or work within a
definite or predetermined period, regardless of whether such job or
work is to be performed or completed within or outside the
premises of the principal.
This Court held in Eagle Security, Inc. vs.
NLRC and Spartan Security and Detective Agency, Inc. vs.
NLRC that the joint and several liability of the contractor and the
principal is mandated by the Labor Code to assure compliance with
the provisions therein including the minimum wage. The contractor
is made liable by virtue of his status as direct employer. The
principal, on the other hand, is made the indirect employer of the
contractor’s employees to secure payment of their wages should
the contractor be unable to pay them. Even in the absence of an
employer-employee relationship, the law itself establishes one
between the principal and the employees of the agency for a
limited purpose i.e. in order to ensure that the employees are paid
the wages due them.
This joint and several liability of the contractor and the
principal is mandated by the Labor Code to assure compliance of
the provisions therein including the statutory minimum wage
(Article 99, Labor Code).  The contractor is made liable by virtue
of his status as direct employer.  The principal, on the other hand,
is made the indirect employer of the contractor's employees for
purposes of paying the employees their wages should
the contractor be unable to pay them.  This joint and several
liability facilitates, if not guarantees, payment of the workers’
performance of any work, task, job or project, thus giving the
workers ample protection as mandated by the 1987 Constitution
[Rabago v. NLRC].
Page 59 of 88
Rabago v. NLRC
Held: Our conclusion is that Ace Building Care and the
Philippine Tuberculosis Society are solidarily liable to the complainants for
their differential pay under Wage Orders Nos. 5 and 6, PTS being
considered in the circumstances of this case to be the indirect employer of
workers in the private sector.
Filipinas Synthetif Fiber v. NLRC
Held: With respect to its liability, however, petitioner cannot
totally exculpate itself from the fact that respondent DE LIMA is an
independent job contractor. We agree with the Solicitor General that
notwithstanding the lack of a direct employer-employee relationship
between FILSYN and Felipe Loterte, the former is still jointly and severally
liable with respondent DE LIMA for Loterte's monetary claims under Art.
109 of the Labor Code19 which explicitly provides-
The provisions of existing laws to the contrary notwithstanding,
every employer or indirect employer shall be held responsible with his
contractor or subcontractor for any violation of any provision of this
Code. For purposes of determining the extent of their civil liability under
this Chapter, they shall be considered as direct employers.
Vigilla v. Philippine College of Criminology
Held: A Labor-only Contractor is Solidarily
Liable with the Employer
The issue of whether there is solidary liability between the
labor-only contractor and the employer is crucial in this case. If a labor-
only contractor is solidarily liable with the employer, then the releases,
waivers and quitclaims in favor of MBMSI will redound to the benefit of
PCCr. On the other hand, if a labor-only contractor is not solidarily liable
with the employer, the latter being directly liable, then the releases, waivers
and quitclaims in favor of MBMSI will not extinguish the liability of PCCr.
On this point, petitioners argue that there is no solidary liability
to speak of in case of an existence of a labor-only contractor. Petitioners
contend that under Article 10631 of the Labor Code, a labor-only
contractor’s liability is not solidary as it is the employer who should be
directly responsible to the supplied worker. They argue that Article 109 32 of
the Labor Code (solidary liability of employer/indirect employer and
contractor/subcontractor) and Article 1217 of the New Civil Code
(extinguishment of solidary obligation) do not apply in this case. Hence, the
said releases, waivers and quitclaims which they purportedly issued in favor
of MBMSI and Atty. Seril do not automatically release respondents from
their liability.
Again, the Court disagrees.
The NLRC and the CA correctly ruled that the releases, waivers
and quitclaims executed by petitioners in favor of MBMSI redounded to the
benefit of PCCr pursuant to Article 1217 of the New Civil Code. The
reason is that MBMSI is solidarily liable with the respondents for the valid
claims of petitioners pursuant to Article 109 of the Labor Code.
As correctly pointed out by the respondents, the basis of the
solidary liability of the principal with those engaged in labor-only
contracting is the last paragraph of Article 106 of the Labor Code, which in
part provides: "In such cases labor-only contracting, the person or
intermediary shall be considered merely as an agent of the employer who
shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him."
Section 19 of Department Order No. 18-02 issued by the
Department of Labor and Employment (DOLE), which was still in effect at
the time of the promulgation of the subject decision and resolution,
interprets Article 106 of the Labor Code in this wise:
Section 19. Solidary liability. The principal shall be deemed as
the direct employer of the contractual employees and therefore, solidarily
liable with the contractor or subcontractor for whatever monetary claims
the contractual employees may have against the former in the case of
violations as provided for in Sections 5 (LaborOnly contracting), 6
(Prohibitions), 8 (Rights of Contractual Employees) and 16 (Delisting) of
these Rules. In addition, the principal shall also be solidarily liable in case
the contract between the principal and contractor or subcontractor is
preterminated for reasons not attributable to the fault of the contractor or
subcontractor. [Emphases supplied].
The DOLE recognized anew this solidary liability of the
principal employer and the labor-only contractor when it issued Department
Order No. 18-A, series of 2011, which is the latest set of rules
implementing Articles 106-109 of the Labor Code. Section 27 thereof
reads:
Section 27. Effects of finding of labor-only contracting and/or
violation of Sections 7, 8 or 9 of the Rules. A finding by competent
authority of labor-only contracting shall render the principal jointly and
severally liable with the contractor to the latter’s employees, in the same
manner and extent that the principal is liable to employees directly hired by
him/her, as provided in Article 106 of the Labor Code, as amended.
A finding of commission of any of the prohibited activities in
Section 7, or violation of either Sections 8 or 9 hereof, shall render the
principal the direct employer of the employees of the contractor or
subcontractor, pursuant to Article 109 of the Labor Code, as amended.
(Emphasis supplied.)
These legislative rules and regulations designed to implement a
primary legislation have the force and effect of law. A rule is binding on the
courts so long as the procedure fixed for its promulgation is followed and
its scope is within the statutory authority granted by the legislature.33
Jurisprudence is also replete with pronouncements that a job-
only contractor is solidarily liable with the employer. One of these is the
case of Philippine Bank of Communications v. NLRC 34 where this Court
explained the legal effects of a job-only contracting, to wit:
Under the general rule set out in the first and second paragraphs
of Article 106, an employer who enters into a contract with a contractor for
the performance of work for the employer, does not thereby create an
employer-employees relationship between himself and the employees of the
contractor. Thus, the employees of the contractor remain the contractor's
employees and his alone. Nonetheless when a contractor fails to pay the
wages of his employees in accordance with the Labor Code, the employer
who contracted out the job to the contractor becomes jointly and severally
liable with his contractor to the employees of the latter "to the extent of the
work performed under the contract" as such employer were the employer of
the contractor's employees. The law itself, in other words, establishes an
employer-employee relationship between the employer and the job
contractor's employees for a limited purpose, i.e., in order to ensure that the
latter get paid the wages due to them.
A similar situation obtains where there is "labor only"
contracting. The "labor-only" contractor-i.e "the person or intermediary" -
is considered "merely as an agent of the employer." The employer is made
by the statute responsible to the employees of the "labor only" contractor as
if such employees had been directly employed by the employer. Thus,
where "labor-only" contracting exists in a given case, 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, this time for a comprehensive purpose: "employer for purposes
of this Code, to prevent any violation or circumvention of any provision of
this Code." The law in effect holds both the employer and the "laboronly"
contractor responsible to the latter's employees for the more effective
safeguarding of the employees' rights under the Labor Code. [Emphasis
supplied].
The case of San Miguel Corporation v. MAERC Integrated
Services, Inc. also recognized this solidary liability between a labor-only
contractor and the employer. In the said case, this Court gave the
distinctions between solidary liability in legitimate job contracting and in
labor-only contracting, to wit:
In legitimate job contracting, the law creates an employer-
employee relationship for a limited purpose, i.e., to ensure that the
employees are paid their wages. The principal employer becomes jointly
and severally liable with the job contractor only for the payment of the
employees' wages whenever the contractor fails to pay the same. Other than
that, the principal employer is not responsible for any claim made by the
employees.
On the other hand, in labor-only contracting, the statute creates
an employer-employee relationship for a comprehensive purpose: to
prevent a circumvention of labor laws. The contractor is considered merely
an agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been
directly employed by the principal employer. The principal employer
therefore becomes solidarily liable with the labor-only contractor for all the
rightful claims of the employees.37 [Emphases supplied; Citations omitted]
Recently, this Court reiterated this solidary liability of labor-
only contractor in the case of 7K Corporation v. NLRC where it was ruled
that the principal employer is solidarily liable with the labor-only contractor
for the rightful claims of the employees.
Conclusion
Page 60 of 88
Considering that MBMSI, as the labor-only contractor, is
solidarily liable with the respondents, as the principal employer, then the
NLRC and the CA correctly held that the respondents’ solidary liability was
already expunged by virtue of the releases, waivers and quitclaims executed
by each of the petitioners in favor of MBMSI pursuant to Article 1217 of
the Civil Code which provides that "payment made by one of the solidary
debtors extinguishes the obligation."
This Court has constantly applied the Civil Code provisions on
solidary liability, specifically Articles 1217 and 1222, to labor cases. In
Varorient Shipping Co., Inc. v. NLRC, this Court held:
The POEA Rules holds her, as a corporate officer, solidarily
liable with the local licensed manning agency. Her liability is inseparable
from those of Varorient and Lagoa. If anyone of them is held liable then all
of them would be liable for the same obligation. Each of the solidary
debtors, insofar as the creditor/s is/are concerned, is the debtor of the entire
amount; it is only with respect to his co-debtors that he/she is liable to the
extent of his/her share in the obligation. Such being the case, the Civil Code
allows each solidary debtor, in actions filed by the creditor/s, to avail
himself of all defenses which are derived from the nature of the obligation
and of those which are personal to him, or pertaining to his share [citing
Section 1222 of the Civil Code]. He may also avail of those defenses
personally belonging to his co-debtors, but only to the extent of their share
in the debt. Thus, Varorient may set up all the defenses pertaining to
Colarina and Lagoa; whereas Colarina and Lagoa are liable only to the
extent to which Varorient may be found liable by the court.
xxxx
If Varorient were to be found liable and made to pay pursuant
thereto, the entire obligation would already be extinguished [citing Article
1217 of the Civil Code] even if no attempt was made to enforce the
judgment against Colarina. Because there existed a common cause of action
against the three solidary obligors, as the acts and omissions imputed
against them are one and the same, an ultimate finding that Varorient was
not liable would, under these circumstances, logically imply a similar
exoneration from liability for Colarina and Lagoa, whether or not they
interposed any defense.
In light of these conclusions, the Court holds that the releases,
waivers and quitclaims executed by petitioners in favor of MBMSI
redounded to the respondents' benefit. The liabilities of the respondents to
petitioners are now deemed extinguished. The Court cannot allow
petitioners to reap the benefits given to them by MBMSI in exchange for
the releases, waivers and quitclaims and, again, claim the same benefits
from PCCr.
1. Legitimate Job Contracting
Article 106. Contractor or Subcontractor. Whenever an
employer enters into a contract with another person for the
performance of the former's work, the employees of the contractor and
of the latters' subcontractor, if any, shall be paid in accordance with
the provisions of this Code.
In the event that the contractor or subcontractor fails to pay
the wages of his employees in accordance with this Code, 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.
The Secretary of Labor and Employment may, by
appropriate regulations, restrict or prohibit the contracting-out of
labor to protect the rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who
among the parties involved shall be considered the employer for
purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person
supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such
person are performing activities which are directly related to the
principal business of such employer. In such cases, the person or
intermediary shall be considered merely as an agent of the employer
who shall be responsible to the workers in the same manner and extent
as if the latter were directly employed by him.
Under Department Order No. 174 Series of 2017, the
concurrence of the following is essential for a contractor to be
considered as a legitimate job contractor:
a) The contractor must be duly registered with the
DOLE;
b) The contractor is engaged in a distinct and
independent business and undertakes to perform
the job or work on its own responsibility,
according to its own manner and method, and
free from control and direction of the principal
in all matters connected with the performance of
the work except as to the results thereof;
c) The contractor has substantial capital to carry out
the job farmed out by the principal on his account,
manner and method, investment in the form of
tools, equipment, machinery and supervision;
d) The Service Agreement ensures compliance with
all the rights and benefits for all the employees
of the contractor or subcontractor under the labor
laws.
Absence of any of the foregoing requisites makes the
arrangement a labor-only arrangement [Philippine School of
Business Administration v. NLRC].
In Consolidated Building Maintenance Inc. vs Asprec
Jr., “job contracting is deemed legitimate and permissible when the
contractor has substantial capital or investment and runs a business
that is independent and free from the control of the principal.” This
“substantial capital” requirement refers to paid-up capital
stock/shares of at least P5 million in the case of corporations and
partnerships, and a net worth of at least P5 million for single
proprietorships.
Exclusions
 Does not include technology-based services
 Business Process Outsourcing
 Knowledge Process Outsourcing
 Legal Process Outsourcing
 IT Infrastructure Outsourcing
 Application Development
 Hardware/Software Support
 Medical Transcription
 Animation Services
 Back office operations/support
 Construction industry- except when there are labor
standards violations
 Other contractual relationships such as contract of sale,
contract of carriage, contract of lease, toll
manufacturing, growership, contract of management
 Private Security Agencies-covered by DO 150, s 2016
2. Labor-Only Contracting
Labor-only contracting has the following elements:
a. (i) The contractor or subcontractor does not have
substantial capital; or (ii) the contractor or
subcontractor does not have investments in the form
of tools, equipment, machineries, supervision and
work premises, among others; and
Page 61 of 88
b. The contractor’s or subcontractor’s employees
recruited and placed are performing activities which
are directly related to the main business operation of
the principal; or
c. The contractor or subcontractor does not exercise
the right to control the performance of the work of
the employees.
Where labor-only contracting exists in a given case, the
law itself implies or establishes an employer-employee relationship
between the employer and the employees of the labor-only
contractor to prevent any violation or circumvention of provisions
of the Labor Code [Vallum Security v. NLRC].
The law does not require both substantial capital and
investment in the form of tools, equipment, machineries, etc. This
is clear from the use of the conjunction "or". If the intention was to
require the contractor to prove that he has both capital and the
requisite investment, then the conjunction "and" should have been
used [Neri v. NLRC].
Examples of Control
 There was control when the guards were instructed to stay
in their posts although the security service agreement was
already terminated [Lopez v. PLDT].
 Control was evident since the determination of work
assignments and what news to be broadcasted were present
[Murillo v. NLRC].
 PAL exercised control over the agency employees who
loaded and unloaded cargo and the delivered the baggages.
PAL failed to prove that the agency supervised the
employees through an assigned supervisor [PAL v. Ligan].
 SMC is the real employer because the workers’ loading and
unloading of bottles was supervised by SMC and not by the
agency. The SMC supervisors were also the ones who gave
instructions to the worker [SMC v. Semillano]
 Sumifru exercised control over the employees because it
required monitoring sheets and imposed disciplinary action
for violations of No ID- No Entry Policy and No Helmet-No
Entry Policy [Sumifru v. NAMASUFA].
 The cooperative exercised all the rights of an employer. It
was the one who hired the workers and the principal did not
even know the workers who were engaged. It paid the
salaries of workers. It disciplined the workers and controlled
the means and methods of doing the work. Hence, there is
independent contracting [Travea’o v. Bobongon Farmers].
 The Contract of Service itself provides that RFC can require
the workers assigned by PMCI to render services even
beyond the regular eight hour working day when deemed
necessary. Furthermore, RFC undertook to assist PMCI in
making sure that the daily time records of its alleged
employees faithfully reflect the actual working hours. With
regard to petitioner, RFC admitted that it exercised control
and supervision over him [Vinoya v. NLRC].
SUMMARY OF FORMS OF LABOR-ONLY
CONTRACTING
 Contractor does not have substantial capitalization AND
employees perform jobs that are directly related to
Principal’s business
 Contractor does not have substantial capitalization AND
employees are controlled by the Principal
  Contractor does not have tools and equipment to render
services AND employees perform jobs that are directly
related to Principal’s business
 Contractor does not have tools and equipment to render
services AND employees are controlled by the Principal
3. Posting of Bond
Article 108. Posting of Bond. An employer or indirect
employer may require the contractor or subcontractor to furnish a
bond equal to the cost of labor under contract, on condition that the
bond will answer for the wages due the employees should the
contractor or subcontractor, as the case may be, fail to pay the same.
4. Other Illicit Forms of Employment
Arrangements
(a) When the Principal farms out work to a
Cabo
CABO refers to a person or a group of persons or a labor
group, under the guise of a labor organization, cooperative or any
entity, supplies workers to an employer, with or without any
monetary consideration, whether in the capacity of an agent of the
employer or as an ostensible independent contractor
(b) Contracting out a job or work through an
in-house agency
IN-HOUSE AGENCY refers to a contractor which is
owned, managed and controlled directly or indirectly by the
principal, or one where the principal owns/represents any share of
stock, and which operates solely and mainly for the principal.
(c) Contracting out of job or work through an
in-house cooperative which merely supplies
workers to the principal
IN-HOUSE COOPERATIVE- refers to a cooperative
which is managed or controlled directly or indirectly by the
principal, or one where the principal or any of its officers, owns or
represents any equity or interest, and which operates solely or
mainly for the principal
K. WORKER PREFERENCE IN CASE OF BANKRUPTCY
Article 110. Worker preference in case of bankruptcy. - In the
event of bankruptcy or liquidation of an employer's business, bis
workers shall enjoy first preference as regards their wages and other
monetary claims, any provisions of law to the contrary
notwithstanding. Such unpaid wages and monetary claims shall be paid
in full before claims of the government and other creditors may be
paid.
In implementation of the foregoing, Section 10, Rule
VIII, Book III of the Revised Rules and Regulations Implementing
the Labor Code, as amended, provides:
"Section 10.  Payment of wages in case of
bankruptcy.  Unpaid wages earned by the employees before
the declaration of bankruptcy or judicial liquidation of the
employer's business shall be given first preference and shall be
paid in full before other creditors may establish any claim to a
share in the assets of the employer."  does not exist in any effective way prior to, and apart from, the
This provision is not a Labor provision, this is a
provision on concurrence and preference of credits - credit
transactions: there is a listing of the seniority of rights of creditors,
the ranking of creditors. The Supreme Court laid down the ruling
Page 62 of 88
that Article 110 of the Labor Code, which cannot be viewed in
isolation of, and must always be reckoned with the provisions of
the Civil Code on concurrence and preference of credits, may
not be invoked by employees or workers in the absence of a formal
declaration of bankruptcy or a judicial liquidation order [DBP v.
Secretary of Labor]
The preferential right accorded to employees and
workers under Article 110 may be invoked only during bankruptcy
or judicial liquidation proceedings against the employer.  The law
is unequivocal and admits of no other construction [DBP v.
Secretary of Labor].
The rationale for making the application of Article 110 of
the Labor Code contingent upon the institution of bankruptcy or
judicial liquidation proceedings against the employer is premised
upon the very nature of a preferential right of credit.  A preference
of credit bestows upon the preferred creditor an advantage of
having his credit satisfied first ahead of other claims which may be
established against the debtor.  Logically, it becomes material only
when the properties and assets of the debtor are insufficient to pay
his debts in full; for if the debtor is amply able to pay his various
creditors in full, how can the necessity exist to determine which of
his creditors shall be paid first or whether they shall be paid out of
the proceeds of the sale of the debtor's specific
property?  Indubitably, the preferential right of credit attains
significance only after the properties of the debtor have been
inventoried and liquidated, and the claims held by his various
creditors have been established [PS Bank v. Lantin].
 A distinction should be made between a preference of
credit and a lien.  A preference applies only to claims which do not
attach to specific properties.  A lien creates a charge on a particular
property.  The right of first preference as regards unpaid wages
recognized by Article 110 does not constitute a lien on the property
of the insolvent debtor in favor of workers.  It is but a preference of
credit in their favor, a preference in application.  It is a method
adopted to determine and specify the order in which credits should
be paid in the final distribution of the proceeds of the insolvent's
assets.  It is a right to a first preference in the discharge of the funds
of the judgment debtor.  In the words of Republic vs. Peralta:
"Article 110 of the Labor Code does not purport to
create a lien in favor of workers or employees for unpaid wages
either upon all of the properties or upon any particular property
owned by their employer.  Claims for unpaid wages do not
therefore fall at all within the category of specially preferred
claims established under Articles 2241 and 2242 of the Civil
Code, except to the extent that such claims for unpaid wages are
already covered by Article 2241, number 6:  ‘claims for
laborers’ wages, on the goods manufactured or the work done;
or by Article 2242, number 3:  ‘claims of laborers and other
workers engaged in the construction, reconstruction or repair of
buildings, canals and other works, upon said buildings, canals
and other works, upon said buildings, canals or other works.’ To
the extent that claims for unpaid wages fall outside the scope of
Article 2241, number 6 and 2242, number 3, they would come
within the ambit of the category of ordinary preferred credits
under Article 2244."
It bears repeating that a preference of credit points out
solely the order in which creditors would be paid from the
properties of a debtor inventoried and appraised during bankruptcy,
insolvency or liquidation proceedings.  Moreover, a preference
institution of these proceedings, for it is only then that the legal
provisions on concurrence and preference of credits begin to
apply.  Unlike a lien, a preference of credit does not create in favor
of the preferred creditor a charge or proprietary interest upon any
particular property of the debtor.  Neither does it vest as a matter of
course upon the mere accrual of a money claim against the
debtor.  Certainly, the debtor could very well sell, mortgage or
pledge his property, and convey good title thereon, to third parties
free from such preference [Kuenzle & Streiff v. Villanuena].
In fine, the right to preference given to workers under
Article 110 of the Labor Code cannot exist in any effective way
prior to the time of its presentation in distribution proceedings.  It
will find application when, in proceedings such as insolvency, such
unpaid wages shall be paid in full before the "claims of the
Government and other creditors" may be paid.  But, for an orderly
settlement of a debtor's assets, all creditors must be convened, their
claims ascertained and inventoried, and thereafter the preferences
determined in the course of judicial proceedings which have for
their object the subjection of the property of the debtor to the
payment of his debts or other lawful obligations.  Thereby, an
orderly determination of preference of creditors' claims is assured
(Philippine Savings Bank vs. Lantin, No. L-33929, September 2,
1983, 124 SCRA 476); the adjudication made will be binding on all
parties-in-interest, since those proceedings are proceedings in rem;
and the legal scheme of classification, concurrence and preference
of credits in the Civil Code, the Insolvency Law, and the Labor
Code is preserved in harmony [DBP v. NLRC].
NOTES:
 It is only partly true that the workers are preferred, even ahead
of government. According to the Supreme Court, unpaid
wages cannot be preferred ahead of government sovereignty
claims, like taxes.
 The Supreme Court says this provision applies only to so
called free property. “Free property” is property that is
unencumbered. Examples of encumbered property are:
mortgaged property. Property that is subject to Chattel
Mortgage. Property that is subject to lease purchase
agreement. Therefore this only covers free property.
L. WAGE OF DISTORTION
Article 124. Standards/Criteria for Minimum Wage Fixing.
The regional minimum wages to be established by the Regional Board
shall be as nearly adequate as is economically feasible to maintain the
minimum standards of living necessary for the health, efficiency and
general well-being of the employees within the framework of the
national economic and social development program. In the
determination of such regional minimum wages, the Regional Board
shall, among other relevant factors, consider the following:
(a) The demand for living wages;
(b) Wage adjustment vis-à-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the
countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of
employers;
(i) Effects on employment generation and family income;
and
(j) The equitable distribution of income and wealth along the
imperatives of economic and social development.
The wages prescribed in accordance with the provisions of
this Title shall be the standard prevailing minimum wages in every
region. These wages shall include wages varying with industries,
provinces or localities if in the judgment of the Regional Board,
conditions make such local differentiation proper and necessary to
effectuate the purpose of this Title.
Any person, company, corporation, partnership or any other
entity engaged in business shall file and register annually with the
appropriate Regional Board, Commission and the National Statistics
Office, an itemized listing of their labor component, specifying the
names of their workers and employees below the managerial level,
Page 63 of 88
including learners, apprentices and disabled/handicapped workers who
were hired under the terms prescribed in the employment contracts,
and their corresponding salaries and wages.
Where the application of any prescribed wage increase by
virtue of a law or wage order issued by any Regional Board results in
distortions of the wage structure within an establishment, the employer
and the union shall negotiate to correct the distortions. Any dispute
arising from wage distortions shall be resolved through the grievance
procedure under their collective bargaining agreement and, if it
remains unresolved, through voluntary arbitration. Unless otherwise
agreed by the parties in writing, such dispute shall be decided by the
voluntary arbitrators within ten (10) calendar days from the time said
dispute was referred to voluntary arbitration.
In cases where there are no collective agreements or
recognized labor unions, the employers and workers shall endeavor to
correct such distortions. Any dispute arising therefrom shall be settled
through the National Conciliation and Mediation Board and, if it
remains unresolved after ten (10) calendar days of conciliation, shall be
referred to the appropriate branch of the National Labor Relations
Commission (NLRC). It shall be mandatory for the NLRC to conduct
continuous hearings and decide the dispute within twenty (20) calendar
days from the time said dispute is submitted for compulsory
arbitration.
The pendency of a dispute arising from a wage distortion
shall not in any way delay the applicability of any increase in
prescribed wage rates pursuant to the provisions of law or wage order.
As used herein, a wage distortion shall mean a situation
where an increase in prescribed wage rates results in the elimination or
severe contraction of intentional quantitative differences in wage or
salary rates between and among employee groups in an establishment
as to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical bases of
differentiation.
All workers paid by result, including those who are paid on
piecework, takay, pakyaw or task basis, shall receive not less than the
prescribed wage rates per eight (8) hours of work a day, or a
proportion thereof for working less than eight (8) hours.
All recognized learnership and apprenticeship agreements
shall be considered automatically modified insofar as their wage
clauses are concerned to reflect the prescribed wage rates.
1. Two Ways of Adjusting the Minimum Wage
a. Floor Wage - involves the fixing of
determinate amount that would be added to the
prevailing statutory minimum wage
b. Salary Ceiling Method - where the wage
adjustment is applied to employees receiving a
certain denominated salary ceiling.
When neither of the 2 methods is used and instead what
was granted was an across-the-board (ATB) wage incease, the
Regional Board is deemed to have exceeded its authority by
extending the coverage of the Wage Order to wage earners
receiving more than the prevailing minimum wage rate without a
denominated salary ceiling [Metrobank v. NWPC].
Employees Confederation of the Philippines v. NWPC
Held: The Court is inclined to agree with the Government.  In
the National Wages and Productivity Commission's Order of November 6,
1990 the Commission noted that the determination of wages has generally
involved two methods, the “floor-wage" method and the "salary-ceiling"
method.  We quote:
Historically, legislation involving the adjustment of the
minimum wage made use of two methods.  The first method involves the
fixing of determinate amount that would be added to the prevailing
statutory minimum wage.  The other involves "the salary-ceiling method"
whereby the wage adjustment is applied to employees receiving a certain,
denominated salary ceiling.  The first method was adopted in the earlier
wage orders, while the latter method was used in R.A. Nos. 6640 and 6727. 
Prior to this, the salary-ceiling method was also used in no less than eleven
issuances mandating the grant of cost-of-living allowances (P.D. Nos. 525,
1123. 1614. 1634, 1678. 1713 and Wage Order Nos. 1, 2, 3, 5 and 6).  The
shift from the first method to the second method was brought about by
labor disputes arising from wage distortions, a consequence of the
implementation of the said wage orders.  Apparently, the wage order
provisions that wage distortions shall be resolved through the grievance
procedure was perceived by legislators as ineffective in checking industrial
unrest resulting from wage order implementations.  With the establishment
of the second method as a practice in minimum wage fixing, wage
distortion disputes were minimized.[11]
As the Commission noted, the increasing trend is toward the
second mode, the salary-cap method, which has reduced disputes arising
from wage distortions (brought about, apparently, by the floor-wage
method).  Of course, disputes are appropriate subjects of collective
bargaining and grievance procedures, but as the Commission observed and
as we are ourselves agreed, bargaining has helped very little in correcting
wage distortions.  Precisely, Republic Act No. 6727 was intended to
rationalize wages, first, by providing for full-time boards to police wages
round-the-clock, and second, by giving the boards enough powers to
achieve this objective.  The Court is of the opinion that Congress meant the
boards to be creative in resolving the annual question of wages without
labor and management knocking on the legislature's door at every turn.  The
Court's opinion is that if Republic No. 6727 intended the boards alone to set
floor wages, the Act would have no need for a board but an Accountant to
keep track of the latest consumer price index or better, would have
Congress done it as the need arises as the legislature, prior to the Act, has
done so for years.  moment.  At the moment, we find it to be reasonable policy (apparently,
The Court is not convinced that the Regional Board of the
National Capital Region, in decreeing an across-the-board hike, performed
an unlawful act of legislation.  It is true that wage-fixing, like rate-fixing,
constitutes an act Congress;[13] it is also true, however, that Congress may
delegate the power to fix rates[14] provided that, as in all delegations cases. 
Congress leaves sufficient standard.  As this Court has indicated, it is
impressed that the above-quoted standards are sufficient, and in the light of
the floor-wage method's failure, the Court believes that the Commission
correctly upheld the Regional Board of the National Capital Region.
Apparently, ECOP is of the mistaken impression that Republic
Act No. 6727 is .meant to "get the Government out of the industry" and
leave labor and management alone in deciding wages.  The Court does not
think that the law intended to deregulate the relation between labor and
capital for several reasons:  (1) The Constitution calls upon the State to
protect the rights of workers and promote their welfare; (2) the Constitution
also makes it a duty of the State "to intervene when the common goal so
demands" in regulating property and property relations; (3) the Charter
urges Congress to give priority to the enactment of measures, among other
things, to diffuse the wealth of the nation and to regulate the use of
property; (4) the Charter recognizes the just share of labor in the fruits of
production;" (5) under the Labor Code, the State shall regulate the relations
between labor and management; (6) under Republic Act No. 6727 itself the
State is interested in seeing that workers receive fair and equitable
wages; and (7) the Constitution is primarily a document of social justice,
and although it has recognized the importance of the private sector, it has
not embraced fully the concept of laissez faire or otherwise, relied on pure
market forces to govern economy.  We can not give to the Act a meaning or
intent that will conflict with these basic principles.
It is the Court's thinking, reached after the Court's own study of
the Act, that the Act is meant to rationalize wages, that is, by having
permanent boards to decide wages rather than leaving wage determination
to Congress year after year and law after law.  The Court is not of course
saying that the Act is an effort of Congress to pass the buck, or worse, to
abdicate its duty, but simply, to leave the question of wages to the expertise
of experts.  As Justice Cruz observed, "[w]ith the proliferation or
specialized activities and their attendant peculiar problems, the national
legislature has found it more necessary to entrust to administrative agencies
the power of subordinate legislation as it is called."
The Labor Code defines "wage" as follows:
"Wage" paid to any employee shall mean 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, as determined by the
Secretary of Labor of board, lodging, or other facilities customarily
Page 64 of 88
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.
The concept of "minimum wage" is however, a different thing,
and certainly, it means more than setting a floor wage to upgrade existing
wages, as ECOP takes it to mean. "Minimum wages" underlies the effort of
the State, as Republic Act No. 6727 expresses it, "to promote productivity-
improvement and gain-sharing measures to ensure a decent standard of
living for the workers and their families; to guarantee the rights of labor to
its just share in the fruits of production; to enhance employment generation
in the countryside through industry dispersal; and to allow business and
industry reasonable returns on investment, expansion and growth," and as
the Constitution expresses it, to affirm "labor as a primary social economic
force.” As the Court indicated, the statute would have no need for a board if
the question were simply "how much".  The State is concerned, in addition,
that wages are not distributed unevenly, and more important that social
justice is subserved.
It is another question, to be sure, had Congress created "roving"
boards, and were that the case, a problem of undue delegation would have
ensued; but as we said, we do not see a Board (National Capital Region)
"running riot" here, and Wage Order No. NCR-01-A as an excess of
authority.
It is also another question whether the salary-cap method
utilized by the Board may serve the purposes of Republic Act No. 6727 in
future cases and whether that method is after all, a lasting policy of the
Board; however, it is a question on which we may only speculate at the
it has since been Government policy); and if in the future it would be
perceptibly unfair to management, we will take it up then.
“Floor Wage" Wage Order does not Require Across-
the-Board Pay Increase
Where the wage order, such as Wage Order No. RDVII-
06, prescribes a minimum or "floor wage" to upgrade the wages of
employees receiving less than the minimum wage set by the Order,
the employer cannot be compelled to grant an across-the-board
increase to its employees who, at the time of the promulgation of
the Wage Order, were already being paid more than the existing
minimum wage.
2. Reasons For Having A Minimum Wage
"Minimum wages" underlie the effort of the State, as
Republic Act No. 6727 expresses it, "to promote productivity-
improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to guarantee
the rights of labor to its just share in the fruits of production; to
enhance employment generation in the countryside through
industry dispersal and to allow business and industry reasonable
returns on investment, expansion and growth," and as the
Constitution expresses it, to affirm "labor as a primary social
economic force." The statute would have no need for a wage board
if the question were simply "how much." The State is concerned, in
addition, that wages are not distributed unevenly, and more
importantly, that social justice is subserved [ECOP v. NWCP].
3. Wage Distortion
Wage distortion contemplates a situation where an
increase in prescribed wage rates results in either of the following:
a. Elimination of the quantitative differences in the
rates of wages or salaries; or
b. Severe contraction of intentional quantitative
differences in wage or salary rates between and
among employee groups in an establishment as to
effectively obliterate the distinctions embodied in
such wage structure based on the following criteria:
(a) Skills;
(b) Length of service; or
 (c) Other logical bases of differentiation.
Wage distortion presupposes a classification of positions
and ranking of these positions at various levels. One visualizes a
hierarchy of positions with corresponding ranks basically in terms
of wages and other emoluments. Where a significant change occurs
at the lowest level of positions in terms of basic wage without a
corresponding change in the other level in the hierarchy of
positions, negating as a result thereof the distinction between one
level of position from the next higher level, and resulting in a
parity between the lowest level and he next higher level or rank,
between new entrants and old hires, there exists a wage distinction.
The concept of wage distortion assumes an existing grouping or
classification of employees which establishes distinctions among
such employees on some relevant or legitimate basis. This
classification is reflected in a differing wage rate for each of the
existing classes of employees [National Federation of Labor v.
NLRC].
The following are the elements of wage distortion:
a. An existing hierarchy of positions with
corresponding salary rates;
b. A significant change in the salary of a lower pay
class without concomitant increase in the salary
rate of a higher one;
c. The elimination of the distinction between the two
levels; and
d. The existence of the distortion in the same region
of the country [Prubankers Association v.
Prudential Bank].
Normally, a company has a wage structure or method of
determining the wage of its employees. In a problem dealing with
wage distortion, the basic assumption is that there exists a grouping
or classification of employees that establishes distinctions among
them on some relevant or legitimate bases [National Federation of
Labor v. NLRC].
Involved in the classification of employees are various
factors such as degrees of responsibility, the skills and knowledge
required, the complexity of the job, or other logical basis of
differentiation. The differing wage rate for each of the existing
classes of employees reflects this classification.
Elimination vs. Severe Contraction
In order to justify adjustment in wage rates, it is not
required that there should be a complete elimination of quantitative
wage differences. The existence of “sever contraction” of such
quantitative wage differences is sufficient.
The law mentions “intentional quantitative differences”
in wage or salary rates between and among employee-groups in an
establishment. By term “intentional” means that the quantitative
differences had been arrived at through the collective bargaining
process and concluded by the parties. The intention of the parties
on the issue whether or not the benefits under the CBA should be
equated with those granted by law must prevail and should be
given full effect.
Prubankers v. Prudential Bank
FACTS: On Nov 18 1993 the Regional Tripartite Wages and
Productivity Board of Region V issued Wage Order No. RB 05-03 which
provided for a Cost of Living Allowance (COLA) to workers in the private
sector who had rendered service for at least 3 months before its effectivity,
and for the same period thereafter, in the following categories:
 P17.50 in Naga & Legaspi;
 P15.50 in the municipalities of Tabaco, Daraga & Pili and the
city of Iriga;
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 P10.00 in all other areas of the Bicol Region. On Nov 23
1993 the Regional Tripartite Wages and Productivity Board of Region VII
issued Wage Order No. RB VII-03, which directed the integration of the
COLA mandated pursuant to Wage Order No. RO VII-02-A into the basic
pay of all workers. The wage order also called for an increase in the
minimum wage rates for all workers and employees in the private sector as
follows:
 P10.00 in Cebu, Mandaue & Lapulapu;
 P5.00 in the municipalities of Compostela, Liloan,
Consolacion, Cordova, Talisay, Minglanilla, Naga and the cities of Davao,
Toledo, Dumaguete, Bais, Canlaon and Tagbilaran. Pursuant to the said
wage orders, RESP granted a COLA of P17.50 to its employees at its Naga
branch and integrated the P150.00 per month COLA into the basic pay of
its rank-and-file employees at its Cebu, Mabolo and P. del Rosario
branches. On June 7 1994, PET wrote to RESP requesting that a Labor
Management Committee be convened to discuss and resolve the wage
distortions that resulted from the implementation of the wage orders. PET
also demanded that PET extend the application of the wage orders to its
employees outside Region V & Region VII, claiming that the regional
implementation of the said orders resulted in a wage distortion.
VA: Ruled that the regional implementation of the wage orders
by PET resulted in a wage distortion nationwide which should be resolved
in accordance with Art. 124 of Labor Code.
CA: Ruled that there was no wage distortion on the following
grounds:
 The variance in the salary rates in different regions are
justified by R.A. 6727.
 The distinctions between each employee group in the region
are maintained, as all employees were granted an increase in minimum
wage rate.
PET’s contentions: RESP’s regional implementation:
1. A wage distortion exists, because the implementation of the
two Wage Orders has resulted in the discrepancy in the compensation of
employees of similar pay classification in different regions.
2. Implementation violated the principle of equal work, equal
pay;
3. RESP-Bank when it adopted a uniform wage policy has
sufficiently established a management practice thus, it is estopped from
implementing a wage order for a specific region only.
ISSUE: WON a wage distortion resulted from RESP’s
implementation of the aforecited Wage Orders? (NO)
HELD: NO. There was no wage distortion as there is no wage
parity between employees in different rungs, instead there is a wage
disparity between employees in the same rung but located in different
regions of the country.
A disparity in wages between employees holding similar
positions but in different regions does not constitute wage distortion as
contemplated by law. – Different regional wages are mandated by the law
(specifically RA 6727) as there is recognition that there exist regional
disparities in the cost of living. RA 6727 recognizes that there are different
needs for the different situations in different regions of the country.
EQUAL PAY, EQUAL WORK: RA 6727 mandates that wages
in every region must be set by the particular wage board of that region,
based on the prevailing situation therein. Necessarily, the wages in different
regions will not be uniform. Thus, under RA 6727, the minimum wage in
Region 1 may be different from that in Region 13, because the
socioeconomic conditions in the two regions are different.
In this case, the fourth element of wage distortion is absent. The
Supreme Court emphasized that we are talking about different regions with
different minimum wages. This disparity in wages between employees
holding similar positions but in different regions does not constitute wage
distortion. It is the hierarchy of positions and disparity of their
corresponding wages and other emoluments that are sought to be preserved
by the concept of wage distortion. Petition is DENIED.
Metrobank v. NLRC
Held: In this case, the majority of the members of the NLRC, as
well as its dissenting member, agree that there is a wage distortion arising
from the bank’s implementation of the P25 wage increase; they do differ,
however, on the extent of the distortion that can warrant the adoption of
corrective measures required by the law. The "intentional quantitative
differences" in wage among employees of the bank has been set by the
CBA to about P900 per month as of 01 January 1989. It is intentional as it
has been arrived at through the collective bargaining process to which the
parties are thereby concluded. The Solicitor General, in recommending the
grant of due course to the petition, has correctly emphasized that the
intention of the parties, whether the benefits under a collective bargaining
agreement should be equated with those granted by law or not, unless there
are compelling reasons otherwise, must prevail and be given effect. In
keeping then with the intendment of the law and the agreement of the
parties themselves, along with the often repeated rule that all doubts in the
interpretation and implementation of labor laws should be resolved in favor
of labor, we must approximate an acceptable quantitative difference
between and among the CBA agreed work levels.
4. Wage Distortion, How Rectified
a. In organized establishments. – Where the application of any
prescribed wage increase by virtue of a Wage Order issued by
the RTWPB results in the distortions of the wage structure
within an establishment, the employer and the union should
negotiate to correct the distortions. Any dispute arising from
wage distortions should be resolved through the grievance
procedure under their CBA and, if it remains unresolved,
through voluntary arbitration. Unless otherwise agreed by the
parties in writing, such dispute should be decided by the
Voluntary Arbitrator or panel of Voluntary Arbitrators
within ten (10) days from the time said dispute was referred to
voluntary arbitration.
b. In unorganized establishments. – In cases where there are no
collective agreements or recognized labor unions, the
employers and workers should endeavour to correct such
distortions. Any dispute arising therefrom should be settled
through the National Conciliation and Mediation Board
(NCMB) and, if it remains unresolved after ten (10) days of
conciliation, should be referred to any of the Labor Arbiters of
the appropriate branch of the NLRC. It shall be mandatory for
the NLRC to conduct continuous hearings and decide the
dispute within twenty (20) days from the time said dispute is
submitted for compulsory arbitration.
c. Effect of pendency of a wage distortion dispute. – The
pendency of a dispute arising from wage distortion shall not,
in any way, delay the applicability of any increase in
prescribed wage rates pursuant to the provisions of the Wage
Order.
Ilaw at Buklod v. NLRC
Held: The strike involving the issue of wage distortion is illegal
as a means of resolving it. The legality of these activities is usually
dependent on the legality of the purposes sought to be attained and the
means employed therefore. It goes without saying that these joint or
coordinated activities may be forbidden or restricted by law or contract. In
the instance of "distortions of the wage structure within an establishment"
resulting from "the application of any prescribed wage increase by virtue of
a law or wage order," Section 3 of Republic Act No. 6727 prescribes a
specific, detailed and comprehensive procedure for the correction thereof,
thereby implicitly excluding strikes or lockouts or other concerted activities
as modes of settlement of the issue.
The provision states that the employer and the union shall
negotiate to correct the distortions. Any dispute arising from wage
distortions shall be resolved through the grievance procedure under their
collective bargaining agreement and, if it remains unresolved, through
voluntary arbitration. Unless otherwise agreed by the parties in writing,
such dispute shall be decided by the voluntary arbitrator or panel of
voluntary arbitrators within ten (10) calendar days from the time said
dispute was referred to voluntary arbitration. In cases where there are no
collective agreements or recognized labor unions, the employers and
workers shall endeavor to correct such distortions. Any dispute arising there
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from shall be settled through the National Conciliation and Mediation
Board and, if it remains unresolved after ten (10) calendar days of
conciliation, shall be referred to the appropriate branch of the National
Labor Relations Commission (NLRC). It shall be mandatory for the NLRC
to conduct continuous hearings and decide the dispute within twenty (20)
calendar days from the time said dispute is submitted for compulsory
arbitration. The pendency of a dispute arising from a wage distortion shall
not in any way delay the applicability of any increase in prescribed wage
rates pursuant to the provisions of law or Wage Order.
The legislative intent that solution of the problem of wage
distortions shall be sought by voluntary negotiation or arbitration, and not
by strikes, lockouts, or other concerted activities of the employees or
management, is made clear in the rules implementing RA 6727 issued by
the Secretary of Labor and Employment pursuant to the authority granted
by Section 13 of the Act. Section 16, Chapter I of these implementing rules,
after reiterating the policy that wage distortions be first settled voluntarily
by the parties and eventually by compulsory arbitration, declares that, "Any
issue involving wage distortion shall not be a ground for a strike/lockout."
Wage Distortion, When Correctible
The employer cannot legally be obligated to correct
“wage distortion” if the increase in the wages and salaries of the
newly-hired employees was not due to a prescribed law or wage
order but due to increases it voluntarily granted to them. The
wordings of Article 124 are clear. If it was the intention of the
legislators to cover all kinds of wage adjustments, then the
language of the law should have been broad, not restrictive, as it is
currently phrased.
The mere factual existence of wage distortion does not
ipso facto result to an obligation to rectify it absent a law or other
source of obligation which requires its rectification.
In the case of Bankard Employees Union v. NLRC, the
petitioner cited Metro Transit v. NLRC to support its claim that the
obligation to rectify wage distortion is not confined to wage
distortion resulting from government decreed law or wage order.
Reliance on Metro Transit is, however, misplaced as the obligation
therein to rectify the wage distortion was not by virtue of Article
124 of the Labor Code but on account of a then existing “company
practice” that whenever rank-and-file employees were paid a
statutorily mandated salary increase, supervisory employees were,
as a matter of practice, also paid the same amount plus an added
premium.
Metro Transit v. NLRC
Held: In respect of the issue of existence of a wage distortion,
the Court finds and so holds that a wage distortion did occur when the
salaries of rank-and-file employees were increased by P500.00 per month
on 17 April 1989 as stipulated in their CBA and no corresponding increase
was paid to the supervisory employees.  This fact was admitted by Atty.
Virgilio C. Abejo, counsel for petitioner Metro, during the oral hearing and
Metro is bound by that admission.
In addition, Atty. Abejo explained that his client, as a matter of
practice, granted its supervisory employees a salary increase (and a
premium) whenever it paid its rank-and-file employees a salary increase.
The defense of management prerogative or discretion invoked
by petitioner Metro in asserting that it is not obligated to grant supervisory
employees a salary increase whenever rank-and-file employee are granted
an increase is, in this case, unavailing.
Basically, Metro's argument is that such increase was merely a
bonus given to supervisory employees.  A "bonus" is an amount granted
and paid to an employee for his industry and loyalty which contributed to
the success of the employer's business and made possible the realization of
profits. It is something given in addition to what is ordinarily received by or
strictly due to the recipient.
The general rule is that a bonus is a gratuity or an act of
liberality which the recipient has no right to demand as a matter of right.
[8]
 A bonus, however, is a demandable or enforceable obligation when it is
made part of the wage or salary or compensation of the employee.
[9]
 Whether or not a bonus forms part of wages depends upon the
circumstances and conditions for its payment.  If it is additional
compensation which the employer promised and agreed to give without any
conditions imposed for its payment, such as success of business or greater (c) Should a wage distortion exist, there is no legal requirement
production or output, then it is part of the wage.  But if it is paid only if that, in the rectification of that distortion by re-adjustment of the wage rates
profits are realized or if a certain level of productivity is achieved, it can not of the differing classes of employees, the gap which had previously or
be considered part of the wage.  Where it is not payable to all but only to historically existed be restored in precisely the same amount. In other
some employees and only when their labor becomes more efficient or more words, correction of wage distortion may be done by re-establishing a
productive, it is only an inducement for efficiency, a prize therefor, not a substantial or significant gap (as distinguished from the historical gap)
part of the wage. between the wage rates of the differing classes of employees.
In the case at bar, the increase of P550.00 sought by private (d) The re-establishment of a significant difference in wage rates
respondent SEAM was neither an inducement nor was it contingent on (a) may be the result of resort to grievance procedures or collective bargaining
the success of the business of petitioner Metro; or (b) the increased negotiations.
production or work output of the company or (c) the realization of profits.   In the present case, the Court must confront the task of
The demand for this increase was based on a company practice, admitted by determining whether the CBA forged by Metro and SEAM had, along with
Metro, of granting a salary increase (and a premium) to supervisory the award of P550.00 per month from 17 April 1989 to 1 December 1989,
employees whenever rank-and-file employees were granted a salary referred to in Part I above, adequately corrected the wage distortion.
increase.  That those increases were precisely designed to correct or After careful examination of the provisions of the CBA between
minimize the wage distortion effects of increases given to rank-and-file Metro and SEAM, in particular the provisions relating to anniversary salary
employees (under their CBA or under Wage Orders), highlights the fact increases every 1 December beginning 1989 to 1991, we believe and so
that those increases were part of the wage structure of supervisory hold that together with the increase of P550.00 referred to in Part I above,
employees. The demanded increase therefore is not a bonus that is generally those provisions will have adequately rectified the wage distortion which
not demandable as a matter of right. The demanded increase, in this arose in respect of rank-and-file and supervisory employees.
instance, is an enforceable obligation so far as the supervisory employees of
Metro are concerned.
Nasipit v. Nasipit
We conclude that the supervisory employees, who then (i.e., on
Held: Wage Order RXIII-02’s coverage is specific Section 1 of
17 April 1989) had, unlike the rank-and-file employees, no CBA governing
WO RXIII-02, an Section 1(a) of the IRR provides the Coverage which
the terms and conditions of their employment, had the right to rely on the
states that “The minimum wage rates prescribed under the Order shall apply
company practice of unilaterally correcting the wage distortion effects of a
to the minimum wage earners in the private sector regardless of their
salary increase given to the rank-and-file employees, by giving the
position, designation or status and irrespective of the method by which their
supervisory employees a corresponding salary increase plus a premium. 
wages are paid.”
For reasons, however, shortly to be stated in the disposition of the second
Moreover, Section 1(c) of the IRR provides that “Workers and
issue, we hold that the P550.00 increase is demandable by SEAM only in
employees who, prior to the effectivity of the Order were receiving a basic
respect of the period beginning 17 April 1989 and ending on 30 November
wage rate per day or its monthly equivalent of more than those prescribed
1989.
under the Order, may receive wage increases through the correction of
It is true enough that, in the present case, the wage distortion to
wage distortions in accordance with Section 1, Rule IV of this Rules.
be corrected by the award of P550.00 increase for supervisory employees
Under the principle of expressio unius est exclusio alterius, the
beginning 17 April 1989, was due to the time gap between the effectivity
express mention of one excludes all others. The wage order is specific
date (17 April 1989) of the increase of P500.00 per month given to rank-
enough to cover only minimum wage earners. Necessarily excluded are
and-file employees under their CBA end the effectivity date (1 December
those receiving rates above the prescribed minimum wage. The only
1989) of the P800.00 increase given to supervisory employees under their
situation when employees receiving a wage rate higher than that prescribed
own CBA.  It is also true that had the P800.00 increase to supervisory
by the Wage Order may still benefit from such order is through the
employees been made retroactive to 17 April 1989 by an appropriate
correction of wage distortions.
synchronizing provision in the Metro-SEAM CBA, no wage distortion
Authority of RTWPB
would have arisen.  The fact, however, remains that Metro and SEAM did
Moreover, as discussed in Metropolitan Bank and Trust
not agree upon such remedy in their CBA and that the CBA increase given
Company, Inc. vs National Wages and Productivity Commission:
to rank-and-file employees did produce a distortion effect by obliterating or
R.A. No. 6727 declared it a policy of the State to rationalize the
drastically reducing the previous gap between the salary rates of rank-and-
fixing of minimum wages and to promote productivity improvement and
file and supervisory employees.  The point to be stressed is that considering
gain-sharing measures to ensure a decent standard of living for the workers
the prior practice of petitioner Metro, its supervisory employees had the
and their families; to guarantee the rights of labor to its just share in the
right to expect rectification of that distortion.
fruits of production; to enhance employment generation in the countryside
We turn to the issue of whether the wage distortion referred to
through industrial dispersal; and to allow business and industry reasonable
above was effectively rectified by petitioner Metro in accordance with law.
returns on investment, expansion and growth.
This issue arises because, as already noted, the NLRC in its 30
In line with its declared policy, R.A. No. 6727 created the
March 1994 Decision decreed that Metro shall pay the "P550.00 per month
NWPC, vested with the power to prescribe rules and guidelines for the
wage increase effective April 17, 1989 and onwards" and similarly ordered
determination of appropriate minimum wage and productivity measures at
the payment of P600.00 per month which it found to have been underpaid
the regional, provincial or industry levels; and authorized the RTWPB to
"effective December 1, 1990 and onwards."
determine and fix the minimum wage rates applicable in their respective
It is helpful to recall the general principles laid down in National
regions, provinces, or industries therein and issue the corresponding wage
Federation of Labor v. National Labor Relations Commission,[11] where
orders, subject to the guidelines issued by the NWPC. Pursuant to its wage
the Court discussed at some length the relatively obscure concept of wage
fixing authority, the RTWPB may issue wage orders which set the daily
distortion. Those principles may be summarily stated in the following
minimum wage rates, based on the standards or criteria set by Article 124
manner:
of the Labor Code.
(a) The concept of wage distortion assumes an existing grouping
Interpretation of the CBA Provision
or classification of employees which establishes distinctions among such
Furthermore, the Union’s reliance on the above quoted CBA
employees on some relevant or legitimate basis. This classification is
provision and on the flawed arbitrator’s case disposition is really misplaced.
reflected in a differing wage rate for each of the existing classes of
Consider that in his decision, Chavez, after admitting that NIASSI’s
employees.
employees were receiving a wage rate higher than the prescribed minimum
(b)Wage distortions have often been the result of government-
wage, proceeded to fault NIASSI for not presenting evidence to show that
decreed increases in minimum wages. There are, however, other causes of
the overage or excess resulted from general wage increases granted by the
wage distortions, like the merger of two (2) companies (with differing
company itself within one year from the effectivity of the CBA in 1997. By
classifications of employees and different wage rates) where the surviving
company absorbs all the employees of the dissolved corporation. (In the simplistically utilizing the adage "doubt is resolved in labor," instead of
present Metro case, as already noted, the wage distortion arose because the relying on the case records and the evidence adduced, the voluntary
effectivity dates of wage increases given to each of the two (2) classes of arbitrator extended the coverage of WO RXIII-02 to include those who, by
employees (rank-and-file and supervisory) had not been synchronized in the terms of the order, are not supposed to receive the benefit. If only the
their respective CBAs.) voluntary arbitrator was circumspect enough to consider the facts on hand,

Page 67 of 88
he would have seen that the CBA provision on noncreditability finds no
application in the present case, because creditability is not the real issue in
this case. And neither is the interpretation of the CBA provision.
Restoration of Substantial Differentiation
It must be noted that in correcting wage distortion, the
law does not require the difference which had previously existed
between and among the employees of different classes be restored
in exactly the same amount. What is required is substantial
difference in such wage rates [National Federation of Labor v.
NLRC].
M. 13TH MONTH PAY (P.D. 851)
1. Coverage
All employers are required to pay their rank-and-file
employees thirteenth-month pay, regardless of the nature of their
employment and irrespective of the methods by which their wages
are paid, provided they worked for at least one (1) month during a
calendar year. The thirteenth-month pay should be given to the
employees not later than December 24 of every year.
The Labor Code, as amended, distinguishes a rank-and-
file employee from a managerial employee. A managerial
employee is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer,
suspend, layoff, recall, discharge, assign, or discipline employees,
or to effectively recommend such managerial actions. All
employees not falling within this definition are considered rank-
and-file employees. The above distinction shall be used as guide
for the purpose of determining who are rank-and-file employees
entitled to the thirteenth-month pay.
2. Minimum Amount
The thirteenth-month pay shall not be less than one-
twelfth (1/12) of the total basic salary earned by an employee in a
calendar year. The "basic salary" of an employee for the purpose of
computing the thirteenthmonth pay shall include all remunerations
or earnings paid by his or her employer for services rendered. It
does not include allowances and monetary benefits which are not
considered or integrated as part of the regular or basic salary, such
as the cash equivalent of unused vacation and sick leave credits,
overtime, premium, night shift differential and holiday pay, and
cost of living allowance (COLA). However, these salary-related
benefits should be included as part of the basic salary in the
computation of the thirteenth-month pay if these are treated as part
of the basic salary of the employees, through individual or
collective agreement, company practice or policy.
3. Exempted Employers
The following employers are not covered by PD 851:
a. The government and any of its political
subdivisions, including government-owned and
controlled corporations, except those corporations
operating essentially as private subsidiaries of the
government;
b. Employers who are already paying their
employees thirteenth- month pay or more in a
calendar year or its equivalent at the time of the
issuance of PD 851;
c. Persons in the personal service of another in
relation to such workers; and
d. Employers of those who are paid on purely
commission, boundary or task basis, and those
who are paid a fixed amount for performing
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specific work, irrespective of the time consumed
in the performance thereof (except those workers
who are paid on piece-rate basis, in which case
their employer shall grant them thirteenth-month
pay.
As used herein, “workers paid on piece-rate basis” shall
refer to those who are paid a standard amount for every piece or
unit of work produced that is more or less regularly replicated,
without regard to the time spent in producing the same.
The term "its equivalent" as used in item D.2 above shall
include Christmas bonus, midyear bonus, cash bonuses, and other
payments amounting to not less than one-twelfth (1/12) of the basic
salary but shall not include cash and stock dividends, cost of living
allowance, and all other allowances regularly enjoyed by the
employee, as well as non-monetary benefits.
PD 851 contemplates the situation of land-based workers,
and not of seafarers who generally earn more than domestic land-
based workers [Petroleum v. NLRC].
4. Time of Payment
The thirteenth-month pay shall be paid not later than
December 24 of every year. An employer, however, may give to
his or her employees one-half (1/2) of the thirteenth month pay
before the opening of the regular school year and the remaining
half on or before December 24 of every year. The frequency of
payment of this monetary benefit may be the subject of an
agreement between the employer and the recognized/collective
bargaining agent of the employees.
5. Thirteenth-Month Pay for Certain Types of
Employees
Employees who are paid on piecework basis are entitled
to the thirteenth-month pay.
Government employees working part-time in a private
enterprise, including private educational institutions, as well as
employees working in two or more private firms, whether on full-
time or part-time basis, are entitled to the thirteenth- month pay
from all their private employers, regardless of their total earnings
from each of their employers.
Employees who are paid a fixed or guaranteed wage plus
commission are also entitled to the thirteenth-month pay, based on
their earnings during the calendar year (i.e., on both their fixed or
guaranteed wage and commission).
In the consolidated cases of Boie Takeda Chemicals, Inc.
vs. Dionisio de la Serna, and Philippine Fuji Xerox Corporation
vs. Cresenciano B. Trajano, the Supreme Court ruled that
commissions, while included in the generic term wage, are not part
of "basic salary/wage" and therefore should not be included in
computing the thirteenth-month pay. Thus:
In remunerative schemes consisting of a fixed or
guaranteed wage plus commission, the fixed or guaranteed wage
is patently the "basic salary" for this is what the employee
receives for a standard work period. Commissions are given for
extra efforts exerted in consummating sales or other related
transactions. They are, as such, additional pay, which this Court
has made clear do not form part of the "basic salary" (228 SCRA
329 [1993]).
6. Resigned or Separated Employee
An employee who has resigned or whose services are
terminated at any time before the time of payment of the thirteenth-
month pay is entitled to this monetary benefit in proportion to the
length of time he or she has worked during the year, reckoned from
the time he or she has started working during the calendar year up
to the time of his or her resignation or termination from the service.
Thus, if he or she worked only from January to September, his or
her proportionate thirteenth-month pay should be equal to one-
twelfth (1/12) of his or her total basic salary earned during that
period.
N. ATTORNEY’S FEES
Article 111. Attorney's fees. - (a) In cases of unlawful
withholding of wages the culpable party may be assessed attorney's
fees equivalent to ten percent of the amount of wages recovered.
(b) It shall be unlawful for any person to demand or accept,
in any judicial or administrative proceedings for the recovery of the
wages, attorney's fees, which exceed ten percent of the amount of wages
recovered.
There are two commonly accepted concepts of attorney's
fees, the so-called ordinary and extraordinary. In its ordinary
concept, an attorney's fee is the reasonable compensation paid to a
lawyer by his client for the legal services the former has rendered
to the latter. The basis of this compensation is the fact of the
attorney's employment by and his agreement with the client. In its
extraodinary concept, attorney's fees are deemed indemnity for
damages ordered by the court to be paid by the losing party in a
litigation. The instances in which these may be awarded are those
enumerated in Article 2208 of the Civil Code, specifically
paragraph 7 thereof, which pertains to actions for recovery of
wages, and is payable not to the lawyer but to the client, unless
they have agreed that the award shall pertain to the lawyer as
additional compensation or as part thereof. Article 111 of the Labor
Code, as amended, contemplates the extraordinary concept of
attorney's fees.
In Taganasvs. NLRC, the Court ruled that, despite
agreement of the client, a lawyer cannot demand 50% (of the
benefits won by an employee) as a contingent fee for handling the
case. Such arrangement, said the court, is contrary to law as it is
prohibitively high.
Although the law allows, under certain circumstances,
non-lawyers to appear before the National Labor Relations
Commission or any Labor Arbiter, this, however, does not mean
that they are entitled to attorney's fees. Their act of representing,
appearing or defending a party litigant in a labor case does not, by
itself, confer upon them legal right to claim for attorney's fees.
Entitlement to attorney's fees presupposes the existence of
attorney-client relationship. This relationship cannot exist unless
the client's representative is a lawyer [Five J Taxi v. NLRC].
Moreover, it is an immoral act for a lawyer to enter into
an agreement whereby the union president will share in his
attorney's fees. Canon 34 of Legal Ethics proscribes and condemns
this arrangement. It provides that no division of fees for legal
services is proper except with another lawyer based upon a division
of service or responsibility. Since the union president is not the
lawyer for the workers, he cannot be allowed to share in the
attorney's fees [Amalgamated Laborers v. CIR].
Awarded attorney's fee may not exceed ten percent, but
between lawyer and client quantum meruit may apply
In Traders Bank Employees Union v. NLRC, the Supreme
Court held:
The ten percent (10%) attorney's fees provided for in
Article 111 of the Labor Code and Section 11, Rule VIII, Book
III of the Implementing Rules is the maximum of the award that
may thus be granted. Article 111 thus fixes only the limit on the
amount of attorney's fees the victorious party may recover in
any judicial or administrative proceedings and it does not even
prevent the NLRC from fixing an amount lower than the ten
Page 69 of 88
percent (10%) ceiling prescribed by the article when
circumstances warrant it.
The measure of compensation for private
respondent's services as against his client should properly be
addressed by the rule of quantum meruit long adopted in this
jurisdiction. Quantum meruit, meaning "as much as he deserves”
is used as the basis for determining the lawyer's professional
fees in the absence of a contract, but recoverable by him from
his client.
Where a lawyer is employed without a price for his
services being agreed upon, the courts shall fix the amount on
quantum meruit basis. In such a case, he would be entitled to
receive what he merits for his services.
It is essential for the proper operation of the principle
that there is an acceptance of the benefits by one sought to be
charged for the services rendered under circumstances as
reasonably to notify him that the lawyer performing the task was
expecting to be paid compensation therefore. The doctrine of
quantum meruit is a device to prevent undue enrichment based
on the equitable postulate that it is unjust for a person to retain
benefit without paying for it.
In Lambo v. NLRC, the Supreme Court said that
disqualified from being awarded attorney's fees are the lawyers
from the Public Attorney's Office (PAO) of the Department of
Justice. In one case the Supreme Court affirmed the labor arbiter's
decision but disallowed the award of attorney's fees, "it appearing
that petitioners were represented by the Public Attorney's Office."
In what labor cases may attorney's fees be awarded?
In Reahs Corporation v. NLRC, the Supreme Court cites
only two kinds of cases where attorney's fees may be assessed: (1)
cases arising from unlawful withholding of wages and (2) cases
arising from collective bargaining negotiations.
When they say ten percent, that is the ceiling. That is not
the minimum. The court can lower it. And the court made this
pronouncement in the landmark case of Traders Royal Bank v.
NLRC.
O. NON-INTERFERENCE IN DISPOSAL OF WAGES
Article 112. 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 in any manner 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.
In addition to the Labor Code provisions on prohibitions
regarding wages, the following provisions of the Civil Code should
be noted:
Article 1705. The laborer's wages shall be paid in
legal currency.
Article 1706. Withholding of the wages, except for a
debt due, shall not be made by the employer.
Article 1707. The laborer's wages shall be a lien on
the goods manufactured or the work done.
Article 1708. The laborer's wages shall not be subject
to execution or attachment, except for debts incurred for food,
shelter, clothing and medical attendance.
Article 1709. The employer shall neither seize nor
retain any tool or other articles belonging to the laborer.
P. WAGE DEDUCTION
Article 113. Wage Deduction. No employer, in his own behalf
or in behalf of any person, shall make any deduction from the wages of
his employees, except:
 (a) In cases where the worker is insured with his consent by
the employer, and the deduction is to recompense the employer for the
amount paid by him as premium on the insurance;
(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 individual worker concerned; and
(c) In cases where the employer is authorized by law or
regulations issued by the Secretary of Labor and Employment.
The general rule is that an employer, by himself or
through his representative, is prohibited from making any
deduction from the wages of his employees. The employer is not
allowed to make unnecessary deductions without the knowledge or
authorizations of the employees [Galvadores v. Trajano].
Apodaca v. NLRC
Held: The question is whether the nonpayment of stock
subscriptions can be offset against a money claim of an employee against
the employer.
The corporation admitted that there was due to the employee the
amount of PI 7,060.07, but this was applied to the unpaid balance of his
subscription in the amount of P95.439.93. The employee questioned the set-
off, alleging that there was no call or notice for the payment of the unpaid
subscription and that, accordingly, the alleged obligation was not
enforceable.
The the set-off was without lawful basis, if not premature. As
there was no notice or call for the payment of unpaid subscriptions, the
same is not yet due and payable. Assuming that there was a call for
payment of the unpaid subscription, the NLRC cannot validly set it off
against the wages and other benefits due the petitioner. Article 113 of the
Labor Code allows such a deduction from the wages of the employees by
the employer, only in three instances.
Other permissible deductions from wages aside from
those enumerated under Article 113:
a. Deductions for loss or damage under Article 114;
b. Deductions made for agency fees from non-union
members who accept the benefits under the CBA
negotiated by the bargaining union. This form of
deduction does not require the written authorization
of the non-bargaining union member concerned;
c. Union service fees;
d. When the deductions are with the written
authorization of the employee for payment to a
third person and the employer agrees to do so,
provided that the latter does not receive any
pecuniary benefit, directly or indirectly from the
transaction;
e. Deductions for value of meal and other facilities;
f. Deductions for premiums for SSS, PhilHealth,
employees’ compensation and Pag-IBIG;
g. Withholding tax mandated under the NIRC;
h. Withholding of wages because of the employee’s
debt to the employer which is already due;
i. Deductions made pursuant to a court judgement
against a worker under circumstances where the
wages may be the subject of attachment or execution
but only for debts incurred for food, clothing,
shelter, and medical attendance;
j. When deductions from wages are ordered by a
court;
k. Salary deductions of a member of a cooperative.
Page 70 of 88
Q. LIABILITY FOR WAGES AND BENEFITS IN CASE
OF CHANGE OF CORPORATE PERSONALITY
The rule is settled that unless expressly assumed labor
contracts are not enforceable against the transferee of an enterprise.
The reason for this is that labor contracts are in personam.
Consequently, it has been held that claims for backwages earned
from the former employer cannot be filed against the new owners
of an enterprise. Nor is the new operator of a business liable for
claims for retirement pay of employees [Robledo v. NLRC].
Avondale v. NLRC
Held: Petitioner failed to establish that Avon Dale Garments,
Inc., is a separate and distinct entity from Avon Dale Shirt Factory, absent
any showing that there was indeed an actual closure and cessation of the
operations of the latter. The mere filing of the Articles of Dissolution with
the Securities and Exchange Commission, without more, is not enough to
support the conclusion that actual dissolution of an entity in fact took place.
On the contrary, the prevailing circumstances in this case
indicated that petitioner company is not distinct from its predecessor Avon
Dale Shirt Factory, but in fact merely continued the operations of the latter
under the same owners, the same business venture, at same address 6, and
even continued to hire the same employees (herein private respondents).
Thus, conformably with established jurisprudence, the two
entities cannot be deemed as separate and distinct where there is a showing
that one is merely the continuation of the other.7 In fact, even a change in
the corporate name does not make a new corporation, whether effected by a
special act or under a general law, it has no effect on the identity of the
corporation, or on its property, rights, or liabilities. 8 Respondent NLRC
therefore, did not commit any grave abuse of discretion in holding that
petitioner should likewise include private respondents' employment with
Avon Dale Shirt Factory in computing private respondents' separation pay
as petitioner failed to substantiate its claim that it is a distinct entity.
R. WAGE STUDIES, AGREEMENTS, DETERMINATION
1. National Wages and Productivity Commission
Article 120. Creation of National Wages and Productivity
Commission. There is hereby created a National Wages and
Productivity Commission, hereinafter referred to as the Commission,
which shall be attached to the Department of Labor and Employment
(DOLE) for policy and program coordination.
Article 121. Powers and Functions of the Commission. The
Commission shall have the following powers and functions:
(a) To act as the national consultative and advisory body to
the President of the Philippines and Congress on matters relating to
wages, incomes and productivity;
(b) To formulate policies and guidelines on wages, incomes
and productivity improvement at the enterprise, industry and national
levels;
(c) To prescribe rules and guidelines for the determination
of appropriate minimum wage and productivity measures at the
regional, provincial, or industry levels;
(d) To review regional wage levels set by the Regional
Tripartite Wages and Productivity Boards to determine if these are in
accordance with prescribed guidelines and national development plans;
(e) To undertake studies, researches and surveys necessary
for the attainment of its functions and objectives, and to collect and
compile data and periodically disseminate information on wages and
productivity and other related information, including, but not limited
to, employment, cost-of-living, labor costs, investments and returns;
(f) To review plans and programs of the Regional Tripartite
Wages and Productivity Boards to determine whether these are
consistent with national development plans;
(g) To exercise technical and administrative supervision over
the Regional Tripartite Wages and Productivity Boards;
(h) To call, from time to time, a national tripartite
conference of representatives of government, workers and employers
for the consideration of measures to promote wage rationalization and
productivity; and
 (i) To exercise such powers and functions as may be
necessary to implement this Act.
The Commission shall be composed of the Secretary of
Labor and Employment as ex-officio chairman, the Director-General
of the National Economic and Development Authority (NEDA) as ex-
officio vice-chairman, and two (2) members each from workers and
employers sectors who shall be appointed by the President of the
Philippines upon recommendation of the Secretary of Labor and
Employment to be made on the basis of the list of nominees submitted
by the workers and employers sectors, respectively, and who shall
serve for a term of five (5) years. The Executive Director of the
Commission shall also be a member of the Commission.
The Commission shall be assisted by a Secretariat to be
headed by an Executive Director and two (2) Deputy Directors, who
shall be appointed by the President of the Philippines, upon the
recommendation of the Secretary of Labor and Employment.
The Executive Director shall have the same rank, salary,
benefits and other emoluments as that of a Department Assistant
Secretary, while the Deputy Directors shall have the same rank, salary,
benefits and other emoluments as that of a Bureau Director. The
members of the Commission representing labor and management shall
have the same rank, emoluments, allowances and other benefits as
those prescribed by law for labor and management representatives in
the Employees’ Compensation Commission.
2. Regional Tripartite Wages and Productivity
Boards
Article 122. Creation of Regional Tripartite Wages and
Productivity Boards. There is hereby created Regional Tripartite Wages
and Productivity Boards, hereinafter referred to as Regional Boards, in
all regions, including autonomous regions as may be established by
law. The Commission shall determine the offices/headquarters of the
respective Regional Boards. The Regional Boards shall have the
following powers and functions in their respective territorial
jurisdictions:
(a) To develop plans, programs and projects relative to
wages, incomes and productivity improvement for their respective
regions;
(b) To determine and fix minimum wage rates applicable in
their regions, provinces or industries therein and to issue the
corresponding wage orders, subject to guidelines issued by the
Commission;
(c) To undertake studies, researches, and surveys necessary
for the attainment of their functions, objectives and programs, and to
collect and compile data on wages, incomes, productivity and other
related information and periodically disseminate the same;
(d) To coordinate with the other Regional Boards as may be
necessary to attain the policy and intention of this Code;
(e) To receive, process and act on applications for exemption
from prescribed wage rates as may be provided by law or any Wage
Order;88 and
(f) To exercise such other powers and functions as may be
necessary to carry out their mandate under this Code.
Implementation of the plans, programs, and projects of the
Regional Boards referred to in the second paragraph, letter (a) of this
Article, shall be through the respective regional offices of the
Department of Labor and Employment within their territorial
jurisdiction; Provided, however, That the Regional Boards shall have
technical supervision over the regional office of the Department of
Labor and Employment with respect to the implementation of said
plans, programs and projects.
Each Regional Board shall be composed of the Regional
Director of the Department of Labor and Employment as chairman,
the Regional Directors of the National Economic and Development
Authority and the Department of Trade and Industry as vice-sectors
who shall be appointed by the President of the Philippines, upon the
recommendation of the Secretary of Labor and Employment, to be
made on the basis of the list of nominees submitted by the workers’ and
employers’ sectors, respectively, and who shall serve for a term of five
(5) years.
Each Regional Board to be headed by its chairman shall be
assisted by a Secretariat.
Page 71 of 88
The foregoing clearly grants the NWPC, not the
RTWPB, the power to "prescribe the rules and guidelines" for the
determination of minimum wage and productivity measures. While
the RTWPB has the power to issue wage orders under Article 122
(b) of the Labor Code, such orders are subject to the guidelines
prescribed by the NWPC. One of these guidelines is the "Rules on
Minimum Wage Fixing," which was issued on June 4, 1990.  15 Rule
IV, Section 2 thereof, allows the RTWPB to issue wage orders
exempting enterprises from the coverage of the prescribed
minimum wages. 16 However, the NWPC has the power not only to
prescribe guidelines to govern wage orders, but also to issue
exemptions therefrom, as the said rule provides that "[w]henever a
wage order provides for exemption, applications thereto shall be
filed with the appropriate Board which shall process the
same, subject to guidelines issued by the Commission." In short, the
NWPC lays down the guidelines which the RTWPB implements
[Nasipit v. NWPC].
3. Wage Order
Article 123. Wage Order. Whenever conditions in the region
so warrant, the Regional Board shall investigate and study all pertinent
facts; and based on the standards and criteria herein prescribed, shall
proceed to determine whether a Wage Order should be issued. Any
such Wage Order shall take effect after fifteen (15) days from its
complete publication in at least one (1) newspaper of general
circulation in the region.
In the performance of its wage-determining functions, the
Regional Board shall conduct public hearings/consultations, give
notices to employees’ and employers’ groups, provincial, city and
municipal officials and other interested parties.
Any party aggrieved by the Wage Order issued by the
Regional Board may appeal such order to the Commission within ten
(10) calendar days from the publication of such order. It shall be
mandatory for the Commission to decide such appeal within sixty (60)
calendar days from the filing thereof.
The filing of the appeal does not stay the order unless the
person appealing such order shall file with the Commission, an
undertaking with a surety or sureties satisfactory to the Commission
for the payment to the employees affected by the order of the
corresponding increase, in the event such order is affirmed.
The term wage order refers to the order promulgated by
the RTWPB pursuant to its wage fixing authority.
Prescribed increases or adjustments refer to the amount
of increases or adjustments in the wage rate of workers fixed by the
RTWPB which the employer is mandated to pay upon effectivity of
the Wage Order.
Pursuant to Article 121 (c) of the Labor Code, as
amended by Secdon 3 of Republic Act No. 6727, the National
Wages and Productivity Commission adopted and promulgated
NWPC Guidelines No. 001-95 [Revised Rules of Procedure on
Minimum Wage Fixing] on November 29, 1995.
The Rules govern proceedings in the National Wages and
Productivity Commission (NWPC) and the Regional Tripartite
Wages and Productivity Boards in the fixing of minimum wage
rates.
a. Issuance of Wage Order
Within thirty (30) days after conclusion of the last
hearing, the Board shall decide on the merits of the petition, and
where appropriate, issue a wage order establishing the regional
minimum wage rates to be paid by employers, which shall in no
case be lower than the applicable statutory minimum wage rates.
The Wage Order may include wages by industry, province or
locality as may be deemed necessary by the said Board: Provided,
however, That such wage rates shall not be lower than the regional
minimum wage rates unless expressly specified in the Wage Order.
The Board shall furnish the National Wages and Productivity
Commission a copy of the decision on the petition or the Wage
Order.
b. Contents of Wage Order
A Wage Order shall specify the region, province or
industry to which the minimum wage rates prescribed under the
Order shall apply and provide exemptions, if any, subject to
guidelines issued by the Commission.
c. Frequency of Wage Order
Any Wage Order issued by the Board may not be
disturbed for a period of twelve (12) months from its effectivity,
and no petition for wage increase shall be entertained within the
said period. In the event, however, that supervening conditions,
such as extraordinary increases in prices of petroleum products and
basic goods/services, demand a review of the minimum wage rates
as determined by the Board and confirmed by the Commission, the
Board shall proceed to exercise its wage fixing function even
before the expiration of the said period.
d. Effectivity of Wage order
A Wage Order shall take effect fifteen (15) days after its
publication in at least one (1) newspaper of general circulation in
the region.
e. Implementing Rules/Regulations of the
Wage Order.
The Board shall prepare, for approval of the Secretary of
Labor and Employment, upon recommendation of the Commission,
the necessary Implementing Rules and Regulations, not later than
ten (10) days from the issuance of a Wage Order. The Secretary of
Labor and Employment shall act on the Implementing Rules within
a period of twenty (20) days from receipt of the said Implementing
Rules by the Commission. Once approved, the Board shall cause
the publication of the Implementing Rules and Regulations in at
least one (1) newspaper of general circulation in the region.
f. Review of Wage Order
The Commission may review the Wage Order issued by
the Board motu proprio or upon appeal. An appeal may be filed on
the following grounds:
(1) Non-conformity with prescribed guidelines and/or
procedure;
(2) Questions of law
(3) Grave abuse of discretion.
The appeal does not stay the order unless the appellant
files adequate surety.
g. Public hearings and publication, mandatory
Hearings may be conducted by the Regional Board en
banc or by a duly authorized committee thereof wherein each
sector shall be represented. No preliminary or permanent injunction
may be issued by any court, tribunal or any other entity against any
proceeding before the Commission or Regional Board.
Failure to conduct public hearings/consultations and to
publish a wage order renders it invalid [Cagayan Sugar Millling v.
Sectretary of Labor].
Cagayan Sugar Milling v. Secretary of Labor
Held: The record shows that there was no prior public
consultation or hearings and newspaper publication insofar as Wage Order
No. R02-02-A is concerned. In fact, these allegations were not denied by
public respondents in their Comment. Public respondents' position is that
there was no need to comply with the legal requirements of consultation
Page 72 of 88
and newspaper publication as Wage Order No. R02-O2-A merely clarified
the ambiguous provision of the original wage order. The Court was not
persuaded. To begin with, there was no ambiguity in the provision of Wage
Order R02-02 as it provided in clear and categorical terms for an increase in
statutory minimum wage of workers in the region. Hence, the subsequent
passage of R02-02-A providing instead for an across-the-board increase in
wages did not clarify the earlier order but amended the same. In truth, it
changed the essence of the original order. Hence, R02-02-A was struck
down as a violation of Article 123 of the Labor Code.
h. Applicability of Wage Order
Wage increases mandated by wage orders apply only to
covered employees specified therein [Capitol Wireless v. Bate].
If none of the employees are receiving salaries below the
prescribed minimum wage, an employer is not obliged to grant the
wage increase to any of them [Pag-Asa Steel v. Court of Appeals].
i. Non-Compliance
Section 12 of RA 6727 provides:
Sec. 12. Any person, corporation, trust, firm,
partnership, association or entity which refuses or fails to pay
any of the prescribed increases or adjustments in the wage rates
made in accordance with this Act shall be punished by a fine
[of] not less than Twenty–five thousand pesos (P25,000) nor
more than One hundred thousand pesos (P100,000) or
imprisonment of not less than two (2) years nor more than four
(4) years or both such fine and imprisonment at the discretion of
the court: Provided, That any person convicted under this Act
shall not be entitled to the benefits provided for under the
Probation Law.
The employer concerned shall be ordered to pay an
amount equivalent to double the unpaid benefits owing to the
employees: Provided, That payment of indemnity shall not
absolve the employer from the criminal liability under this Act.
If the violation is committed by a corporation, trust
or firm, partnership, association or any other entity, the penalty
of imprisonment shall be imposed upon the entity’s responsible
officers including but not limited to, the president, vice
president, chief executive officer, general manager, managing
director or partner.
S. ADMINISTRATION AND ENFORCEMENT
1. Visitorial and Enforcement Power
Article 128. Visitorial and Enforcement Power. (a) The
Secretary of Labor and Employment or his duly authorized
representatives, including labor regulation officers, shall have access to
or night whenever work is being undertaken therein, and the right to
copy therefrom, to 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 this Code and of any labor law,
wage order or rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of
this Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based on the
findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his
duly authorized representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in
cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by
documentary proofs which were not considered in the course of
inspection. An order issued by the duly authorized representative of
the Secretary of Labor and Employment under this Article may be
appealed to the latter. In case said order involves a monetary award,
an appeal by the employer may be perfected only upon the posting of a
cash or surety bond issued by a reputable bonding company duly
accredited by the Secretary of Labor and Employment in the amount
equivalent to the monetary award in the order appealed from.
(c) The Secretary of Labor and Employment may likewise
order stoppage of work or suspension of operations of any unit or
department of an establishment when non-compliance with the law or
implementing rules and regulations poses grave and imminent danger
to the health and safety of workers in the workplace. Within twenty-
four hours, a hearing shall be conducted to determine whether an
order for the stoppage of work or suspension of operations shall be
lifted or not. In case the violation is attributable to the fault of the
employer, he shall pay the employees concerned their salaries or wages
during the period of such stoppage of work or suspension of operation.
(d) It shall be unlawful for any person or entity to obstruct,
impede, delay or otherwise render ineffective the orders of the
Secretary of Labor and Employment or his duly authorized
representatives issued pursuant to the authority granted under this
Article, and no inferior court or entity shall issue temporary or
permanent injunction or restraining order or otherwise assume
jurisdiction over any case involving the enforcement orders issued in
accordance with this Article.
(e) Any government employee found guilty of violation of, or
abuse of authority, under this Article shall, after appropriate
administrative investigation, be subject to summary dismissal from the
service.
(f) The Secretary of Labor and Employment may, by
appropriate regulations, require employers to keep and maintain such
employment records as may be necessary in aid of his visitorial and
enforcement powers under this Code.
Article 128 basically enunciates the three kinds of power
which the DOLE Secretary and/or the Regional Directors, his duly
authorized representatives, may exercise in connection with the
administration and enforcement of the labor standards provisions of
the Labor Code and of any labor law, wage order or rules and
regulations issued pursuant thereto.
What is being inspected in the exercise of the visitorial
and enforcement powers granted to the DOLE Secretary or the
DOLE Regional Directors under Article 128 is the employer-
establishment and not the employees thereof. Consequently, in case
of a finding of violation of the labor standards, the awards granted
in the inspection case are not confined to employees who signed
the complaint inspection but are equally applicable to all those who
were employed by the establishment concerned at the time the
complaint was filed, even if they were not signatories [Maternity
Children’s Hospital v. Secretary of Labor].
A portion of Article 128(b) providing for the exception
grants jurisdiction to Labor Arbiters over contested cases falling
thereunder.
In interpreting the afore-quoted provision of the
exception clause, three elements must concur to divest the Regional
Directors or their representatives of jurisdiction thereunder, to wit:
(i) That the employer contests the findings of the
labor inspector and raises issues thereon;
(ii) That in order to resolve such issues, there is a
need to examine evidentiary matters; and
(iii) That such matters are not verifiable in the
normal course of inspection [Ex-Bataan
Veterans v. Laguesma].
Reluctantly, if the said elements are present and therefore
the labor standards case is covered by said exception clause, then
the Regional Director will have to endorse the case to the Labor
Arbiters of the NLRC [Ex-Bataan Veterans v. Laguesma].
2. Small Money Claims Cases
Article 129. Recovery of Wages, Simple Money Claims and
Other Benefits. Upon complaint of any interested party, the Regional
Page 73 of 88
Director of the Department of Labor and Employment or any of the
duly authorized hearing officers of the Department is empowered,
through summary proceeding and after due notice, to hear and decide
any matter involving the recovery of wages and other monetary claims
and benefits, including legal interest, owing to an employee or person
employed in domestic or household service or househelper under this
Code, arising from employer-employee relations: Provided, That such
complaint does not include a claim for reinstatement: Provided,
further, That the aggregate money claims of each employee or
househelper do not exceed five thousand pesos (P5,000.00). The
Regional Director or hearing officer shall decide or resolve the
complaint within thirty (30) calendar days from the date of the filing of
the same. Any sum thus recovered on behalf of any employee or
househelper pursuant to this Article shall be held in a special deposit
account, and shall be paid, on order of the Secretary of Labor and
Employment or the Regional Director directly to the employee or
househelper concerned. Any such sum not paid to the employee or
househelper, because he cannot be located after diligent and reasonable
effort to locate him within a period of three (3) years, shall be held as a
special fund of the Department of Labor and Employment to be used
exclusively for the amelioration and benefit of workers.
Any decision or resolution of the Regional Director or
hearing officer pursuant to this provision may be appealed on the same
grounds provided in Article 22392 of this Code, within five (5) calendar
days from receipt of a copy of said decision or resolution, to the
National Labor Relations Commission which shall resolve the appeal
within ten (10) calendar days from the submission of the last pleading
required or allowed under its rules.
The Secretary of Labor and Employment or his duly
authorized representative may supervise the payment of unpaid wages
and other monetary claims and benefits, including legal interest, found
owing to any employee or house helper under this Code.
The DOLE Regional Director has original jurisdiction
over small money claims cases arising from labor standards
violations in the amount not exceeding P5000.00 and not
accompanied with a claim for reinstatement under Article 129 of
the Labor Code.
Article 129 contemplates the recovery of wages and other
monetary claims and benefits, including legal interest, owing to an
employee arising from employer-employee relationship provided
the claim does not exceed P5000.00
The following requisites for the valid exercise of
jurisdiction over small money claims must all concur, to wit:
a. The claim is presented by an employee or domestic
worker or kasambahay;
b. The claimant, no longer being employed, does not
seek reinstatement; and
c. The aggregate money claim of the employee does
not exceed P5000.00.
In the absence of any of the aforesaid three (3) requisites,
the Labor Arbiters have original and exclusive jurisdiction over all
claims arising from employer-employee relations, other than claims
for employees’ compensation, social security, PhilHealth and
maternity benefits.
Brokenshire v. MOLE
Held: We hereby adopt the view taken by Mr. Justice Andres
Narvasa in his Separate Opinion in the case of Briad Agro Dev. Corp., as
reconsidered, a portion of which reads:
In the resolution, therefore, of any question of jurisdiction over a
money claim arising from employer-employee relations, the first inquiry
should be into whether the employment relation does indeed still exist
between the claimant and the respondent.
If the relation no longer exists, and the claimant does not seek
reinstatement, the case is cognizable by the Labor Arbiter, not by the
Regional Director. On the other hand, if the employment relation still
exists, or reinstatement is sought, the next inquiry should be into the
amount involved.
If the amount involved does not exceed P5,000.00, the Regional
Director undeniably has jurisdiction. But even if the amount of the claim
exceeds P5,000.00, the claim is not on that account necessary removed
from the Regional Director's competence. In respect thereof, he may still
exercise the visitorial and enforcement powers vested in him by Article 128
of the Labor Code, as amended, supra; that is to say, he may still direct his
labor regulations officers or industrial safety engineers to inspect the
employer's premises and examine his records; and if the officers should find
that there have been violations of labor standards provisions, the Regional
Director may, after due notice and hearing, order compliance by the
employer therewith and issue a writ of execution to the appropriate
authority for the enforcement thereof. However, this power may not, to
repeat, be exercised by him where the employer contests the labor
regulation officers' findings and raises issues which cannot be resolved
without considering evidentiary matters not verifiable in the normal course
of inspection. In such an event, the case will have to be referred to the
corresponding Labor Arbiter for adjudication, since it falls within the
latter's exclusive original jurisdiction.
Article 129 vs. Article 128
Article 129 Article 128
Adjudication powers Visitorial and enforcement powers
Power to hear and decide any Inspection of establishments and
claim for recovery of wages, the issuance of orders to comply
simple (small) money claims, and with labor standards, wage orders,
other benefits of employees, and other labor laws and
domestic worker, or kasambahay, regulations
arising from a severed employer-
employee relationship
No employer-employee Employment relationship is
relationship required
Appealable to the NLRC Appealable to the DOLE
Secretary
3. Jurisdiction of the Labor Arbiter
Article 224. [217] Jurisdiction of the Labor Arbiters and the
Commission. (a) Except as otherwise provided under this Code, the
Labor Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the absence
of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
(1) Unfair labor practice cases;
(2) Termination disputes;
(3) If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
(5) Cases arising from any violation of Article 264 of this
Code, including questions involving the legality of strikes and lockouts;
and
(6) Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims arising
from employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied with a
claim for reinstatement.
xxx
(c) Cases arising from the interpretation or implementation
of collective bargaining agreements and those arising from the
interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in
said agreements.
a. Jurisdiction over ULP Cases
The Labor Arbiters have jurisdiction only on the civil
aspect of ULP which may include claims for actual, moral,
Page 74 of 88
exemplary and other forms of damages, attorney’s fees and other
affirmative reliefs. It must be noted that recovery of civil liability
in the administrative proceeding before the LA bars recovery under
the Civil Code.
b. Jurisdiction over Termination Disputes
The validity of the exercise of jurisdiction by Labor
Arbiters over illegal dismissal cases is not dependent on the kind or
nature of the ground cited in support of the dismissal; hence,
whether the dismissal is for just cause or authorized cause, it is of
no consequence [C. Alcantara & Sons v. Court of Appeals].
In case of conflict of jurisdiction between Labor Arbiter
and the Voluntary Arbitrator over termination cases, the former’s
jurisdiction shall prevail for the following reasons:
(i) Termination of employment is not a grievable
issue that must be submitted to the grievance
machinery or voluntary arbitration for
adjudication [Navarro III v. Damasco]. The
jurisdiction thereover remains within the
original and exclusive ambit of the Labor
Arbiter and not of the Voluntary Arbitrator
[Maneja v. NLRC].
(ii) Even if the CBA provides that termination
disputes are grievable, the same is merely
discretionary on the part of the parties thereto
[San Miguel Corporation v. NLRC].
(iii) Once there is actual termination, jurisdiction is
conferred upon Labor Arbiters by operation of
law [Atlas Farms v. NLRC].
(iv) Interpretation of CBA and enforcement of
company personnel policies are merely
corollary to an illegal dismissal case [Maneja
v. NLRC].
(v) Article 224 is deemed written into the CBA
being an intrinsic part thereof [Landtex
Industries v. Court of Appeals].
In other words, a Voluntary Arbitrator will only have
jurisdiction over illegal dismissal cases when there is express
agreement of the parties in the CBA, i.e., the employer and the
bargaining agent, to submit the termination case to voluntary
arbitration. Absent the express mutual agreement of the parties, the
Voluntary Arbitrator cannot acquire jurisdiction over termination
cases [Maneja v. NLRC].
The express agreement must be stated in the CBA or, in
its absence, there must be enough evidence on record unmistakably
showing that the parties have agreed to resort to voluntary
arbitration [University of the Immaculate Conception v. NLRC].
Atlas Farms v. NLRC
Held: Records show, however, that private respondents sought
without success to avail of the grievance procedure in their CBA. On this
point, petitioner maintains that by so doing, private respondents recognized
that their cases still fell under the grievance machinery. According to
petitioner, without having exhausted said machinery, the private
respondents filed their action before the NLRC, in a clear act of forum-
shopping. However, it is worth pointing out that private respondents went
to the NLRC only after the labor arbiter dismissed their original complaint
for illegal dismissal. Under these circumstances private respondents had to
find another avenue for redress. We agree with the NLRC that it was
petitioner who failed to show proof that it took steps to convene the
grievance machinery after the labor arbiter first dismissed the complaints
for illegal dismissal and directed the parties to avail of the grievance
procedure under Article VII of the existing CBA. They could not now be
faulted for attempting to find an impartial forum, after petitioner failed to
listen to them and after the intercession of the labor arbiter proved futile.
The NLRC had aptly concluded in part that private respondents had already
exhausted the remedies under the grievance procedure. It erred only in
finding that their cause of action was ripe for arbitration.
In the case of Maneja vs. NLRC, we held that the dismissal case
does not fall within the phrase “grievances arising from the interpretation or
implementation of the collective bargaining agreement and those
arising from the interpretation or enforcement of company personnel
policies.” In Maneja, the hotel employee was dismissed without hearing.
We ruled that her dismissal was unjustified, and her right to due process
was violated, absent the twin requirements of notice and hearing. We also
held that the labor arbiter had original and exclusive jurisdiction over the
termination case, and that it was error to give the voluntary arbitrator
jurisdiction over the illegal dismissal case.
In Vivero vs. CA, private respondents attempted to justify the
jurisdiction of the voluntary arbitrator over a termination dispute alleging
that the issue involved the interpretation and implementation of the
grievance procedure in the CBA. There, we held that since what was
challenged was the legality of the employee’s dismissal for lack of cause
and lack of due process, the case was primarily a termination dispute. The
issue of whether there was proper interpretation and implementation of the
CBA provisions came into play only because the grievance procedure in the
CBA was not observed, after he sought his union’s assistance. Since the
real issue then was whether there was a valid termination, there was no
reason to invoke the need to interpret nor question an implementation of
any CBA provision.
One significant fact in the present petition also needs stressing.
Pursuant to Article 260 of the Labor Code, the parties to a CBA shall name
or designate their respective representatives to the grievance machinery and
if the grievance is unsettled in that level, it shall automatically be referred
to the voluntary arbitrators designated in advance by the parties to a CBA.
Consequently only disputes involving the union and the company shall be
referred to the grievance machinery or voluntary arbitrators. In these
termination cases of private respondents, the union had no participation, it
having failed to object to the dismissal of the employees concerned by the
petitioner. It is obvious that arbitration without the union’s active
participation on behalf of the dismissed employees would be pointless, or
even prejudicial to their cause.
Coming to the merits of the petition, the NLRC found that
petitioner did not comply with the requirements of a valid dismissal. For a
dismissal to be valid, the employer must show that: (1) the employee was
accorded due process, and (2) the dismissal must be for any of the valid
causes provided for by law. No evidence was shown that private
respondents refused, as alleged, to receive the notices requiring them to
show cause why no disciplinary action should be taken against them.
Without proof of notice, private respondents who were subsequently
dismissed without hearing were also deprived of a chance to air their side at
the level of the grievance machinery. Given the fact of dismissal, it can be
said that the cases were effectively removed from the jurisdiction of the
voluntary arbitrator, thus placing them within the jurisdiction of the labor
arbiter. Where the dispute is just in the interpretation, implementation or
enforcement stage, it may be referred to the grievance machinery set up in
the CBA, or brought to voluntary arbitration. But, where there was already
actual termination, with alleged violation of the employee’s rights, it is
already cognizable by the labor arbiter.
In sum, we conclude that the labor arbiter and then the NLRC
had jurisdiction over the cases involving private respondents’ dismissal,
and no error was committed by the appellate court in upholding their
assumption of jurisdiction.
c. Jurisdiction over Money Claims Cases
Money claims falling within the original and exclusive
jurisdiction of the Labor Arbiters may be classified as follows:
(i) Any money claim, regardless of amount,
accompanied with a claim for reinstatement; or
(ii) Any money claim, regardless of whether
accompanied with a claim for reinstatement,
exceeding the amount of P5,000.00.
Money claims must arise out of employer-employee
relationship [San Miguel Corporation v. NLRC]. If not, jurisdiction
is with the regular courts [Lapanday Agricultural v. Court of
Appeals].
Page 75 of 88
The money claim in Item (i) above presupposes that it
proceeds from a termination case, it being accompanied with a
claim for reinstatement. Hence, it falls within the jurisdiction of the
Labor Arbiter since it is principally a termination dispute.
The money claim in item (ii) above does not necessarily
arise from or involve a termination case btu because the amount
exceeds P5,000.00, it falls within the jurisdiction of the Labor
Arbiter. If the amount does not exceed P5,000.00, it is the Regional
Director of the DOLE or his duly authorized hearing officers who
have jurisdiction to take cognizance thereof [Article 129].
The award of statutory benefits even if not prayed for is
valid [Oasis Academy v. DOLE].
San Miguel Corporation v. NLRC
Held: While paragraph 3 above refers to "all money claims of
workers," it is not necessary to suppose that the entire universe of money
claims that might be asserted by workers against their employers has been
absorbed into the original and exclusive jurisdiction of Labor Arbiters. In
the first place, paragraph 3 should be read not in isolation from but rather
within the context formed by paragraph 1 related to unfair labor practices),
paragraph 2 (relating to claims concerning terms and conditions of
employment), paragraph 4 (claims relating to household services, a
particular species of employer-employee relations), and paragraph 5
(relating to certain activities prohibited to employees or to
employers).<äre||anº•1àw> It is evident that there is a unifying element
which runs through paragraphs 1 to 5 and that is, that they all refer to cases
or disputes arising out of or in connection with an employer-employee
relationship. This is, in other words, a situation where the rule of noscitur a
sociis may be usefully invoked in clarifying the scope of paragraph 3, and
any other paragraph of Article 217 of the Labor Code, as amended. We
reach the above conclusion from an examination of the terms themselves of
Article 217, as last amended by B.P. Blg. 227, and even though earlier
versions of Article 217 of the Labor Code expressly brought within the
jurisdiction of the Labor Arbiters and the NLRC "cases arising from
employer employee relations," 6 which clause was not expressly carried
over, in printer's ink, in Article 217 as it exists today. For it cannot be
presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would
therefore fall within the general jurisdiction of the regular courts of justice,
were intended by the legislative authority to be taken away from the
jurisdiction of the courts and lodged with Labor Arbiters on an exclusive
basis. The Court, therefore, believes and so holds that the money claims of
workers" referred to in paragraph 3 of Article 217 embraces money claims
which arise out of or in connection with the employer-employee
relationship, or some aspect or incident of such relationship. Put a little
differently, that money claims of workers which now fall within the
original and exclusive jurisdiction of Labor Arbiters are those money
claims which have some reasonable causal connection with the employer-
employee relationship.
Applying the foregoing reading to the present case, we note that
petitioner's Innovation Program is an employee incentive scheme offered
and open only to employees of petitioner Corporation, more specifically to
employees below the rank of manager. Without the existing employer-
employee relationship between the parties here, there would have been no
occasion to consider the petitioner's Innovation Program or the submission
by Mr. Vega of his proposal concerning beer grande; without that
relationship, private respondent Vega's suit against petitioner Corporation
would never have arisen. The money claim of private respondent Vega in
this case, therefore, arose out of or in connection with his employment
relationship with petitioner.
Labor Arbiter vs. Voluntary Arbitrator
The original and exclusive jurisdiction of the Labor
Arbiters under Article 224(c), over cases for money claims is
limited only to those arising from statutes or contracts other than a
CBA. The voluntary Arbitrators, under Article 274, have original
and exclusive jurisdiction over money claims “arising from the
interpretation or implementation of the CBA and, those arising
from the interpretation or enforcement of company personnel
policies.”
 San Jose v. NLRC ruled that it was correct for the NLRC
to hold that the Labor Arbiter has no jurisdiction to hear and decide
the employee’s money claims (underpayment of retirement
benefits), as the controversy between the parties involved an issue
“arising from the interpretation or implementation” of a provision
of the CBA. The Voluntary Arbitrator has original and exclusive
jurisdiction over this controversy under Article 274.
4. Prescription
The prescriptive period of money claims (like separation
pay) and benefits arising from employer-employee relationship is
three (3) years under Article 306 of the Labor Code, reckoned from
the time the cause of action accrued; otherwise, they shall be
forever barred [IRR].
Money claims under Article 306 include those arising
from:
a. Law
b. CBA
c. Incremental proceeds from tuition increases
d. Overseas employment of OFWs.
A cause of action for money claims accrues upon the
categorical denial of a claim. The three-year prescriptive period is
not applicable to execution of final judgment which should be done
within 5 years.
Autobus v. Bautista
Held: Correspondingly, it can be conscientiously deduced that
the cause of action of an entitled employee to claim his service incentive
leave pay accrues from the moment the employer refuses to remunerate its
monetary equivalent if the employee did not make use of said leave credits
but instead chose to avail of its commutation. Accordingly, if the employee
wishes to accumulate his leave credits and opts for its commutation upon
his resignation or separation from employment, his cause of action to claim
the whole amount of his accumulated service incentive leave shall arise
when the employer fails to pay such amount at the time of his resignation or
separation from employment.
Applying Article 291 of the Labor Code in light of this
peculiarity of the service incentive leave, we can conclude that the three
(3)-year prescriptive period commences, not at the end of the year when the
employee becomes entitled to the commutation of his service incentive
leave, but from the time when the employer refuses to pay its monetary
equivalent after demand of commutation or upon termination of the
employee’s services, as the case may be.
The above construal of Art. 291, vis-à-vis the rules on service
incentive leave, is in keeping with the rudimentary principle that in the
implementation and interpretation of the provisions of the Labor Code and
its implementing regulations, the workingman’s welfare should be the
primordial and paramount consideration.18 The policy is to extend the
applicability of the decree to a greater number of employees who can avail
of the benefits under the law, which is in consonance with the avowed
policy of the State to give maximum aid and protection to labor.19
In the case at bar, respondent had not made use of his service
incentive leave nor demanded for its commutation until his employment
was terminated by petitioner. Neither did petitioner compensate his
accumulated service incentive leave pay at the time of his dismissal. It was
only upon his filing of a complaint for illegal dismissal, one month from the
time of his dismissal, that respondent demanded from his former employer
commutation of his accumulated leave credits. His cause of action to claim
the payment of his accumulated service incentive leave thus accrued from
the time when his employer dismissed him and failed to pay his
accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for
service incentive leave pay only commenced from the time the employer
failed to compensate his accumulated service incentive leave pay at the
time of his dismissal. Since respondent had filed his money claim after only
one month from the time of his dismissal, necessarily, his money claim was
filed within the prescriptive period provided for by Article 291 of the Labor
Code.
Page 76 of 88
X
MEDICAL, DENTAL AND OCCUPATIONAL
SAFETY
A. MEDICAL AND DENTAL SERVICES
1. First-Aid Treatment
Article 162. First-Aid Treatment. Every employer shall keep
in his establishment such first-aid medicines and equipment as the
nature and conditions of work may require, in accordance with such
regulations as the Department of Labor and Employment shall
prescribe.
The employer shall take steps for the training of a sufficient
number of employees in first-aid treatment.
2. Emergency Medical and Dental Services
Article 163. Emergency Medical and Dental Services. It shall
be the duty of every employer to furnish his employees in any locality
with free medical and dental attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the
number of employees exceeds fifty (50) but not more than two hundred
(200) except when the employer does not maintain hazardous
workplaces, in which case, the services of a graduate first-aider shall be
provided for the protection of workers, where no registered nurse is
available. The Secretary of Labor and Employment shall provide by
appropriate regulations the services that shall be required where the
number of employees does not exceed fifty (50) and shall determine by
appropriate order, hazardous workplaces for purposes of this Article;
(b) The services of a full-time registered nurse, a part-time
physician and dentist, and an emergency clinic, when the number of
employees exceeds two hundred (200) but not more than three hundred
(300); and
(c) The services of a full-time physician, dentist and a full-
time registered nurse as well as a dental clinic and an infirmary or
emergency hospital with one bed capacity for every one hundred (100)
employees when the number of employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage
the services of a physician or a dentist who cannot stay in the premises
of the establishment for at least two (2) hours, in the case of those
engaged on part-time basis, and not less than eight (8) hours, in the
case of those employed on full-time basis. Where the undertaking is
non-hazardous in nature, the physician and dentist may be engaged on
retained basis, subject to such regulations as the Secretary of Labor
and Employment may prescribe to insure immediate availability of
medical and dental treatment and attendance in case of emergency.
3. When Emergency Hospital Not Required
Article 164. When Emergency Hospital Not Required. The
requirement for an emergency hospital or dental clinic shall not be
applicable in case there is a hospital or dental clinic which is accessible
from the employer’s establishment and he makes arrangement for the
reservation therein of the necessary beds and dental facilities for the
use of his employees.
4. Health Program
Article 165. Health Program. The physician engaged by an
employer shall, in addition to his duties under this Chapter, develop
and implement a comprehensive occupational health program for the
benefit of the employees of his employer.
5. Qualifications of Health Personnel
Article 166. Qualifications of Health Personnel. The
physicians, dentists and nurses employed by employers pursuant to this
Chapter shall have the necessary training in industrial medicine and
occupational safety and health. The Secretary of Labor and
Employment, in consultation with industrial, medical, and
occupational safety and health associations, shall establish the
qualifications, criteria and conditions of employment of such health
personnel.
6. Assistance of Employer
Article 167. Assistance of Employer. It shall be the duty of
any employer to provide all the necessary assistance to ensure the
adequate and immediate medical and dental attendance and treatment
to an injured or sick employee in case of emergency.
B. OCCUPATIONAL HEALTH AND SAFETY
1. Safety and Health Standards
ART. 168. Safety and Health Standards. The Secretary of
Labor and Employment shall, by appropriate orders, set and enforce
mandatory occupational safety and health standards to eliminate or
reduce occupational safety and health hazards in all workplaces and
institute new, and update existing, programs to ensure safe and
healthful working conditions in all places of employment.
2. Research
Article 169. Research. It shall be the responsibility of the
Department of Labor and Employment to conduct continuing studies
and research to develop innovative methods, techniques and
approaches for dealing with occupational safety and health problems;
to discover latent diseases by establishing causal connections between
diseases and work in environmental conditions; and to develop medical
criteria which will assure insofar as practicable that no employee will
suffer impairment or diminution in health, functional capacity, or life
expectancy as a result of his work and working conditions.
3. Training Programs
Article 170. Training Programs. The Department of Labor
and Employment shall develop and implement training programs to
increase the number and competence of personnel in the field of
occupational safety and industrial health.
4. Administration of Safety and Health Laws
Article 171. Administration of Safety and Health Laws. (a)
The Department of Labor shall be solely responsible for the
administration and enforcement of occupational safety and health laws,
regulations and standards in all establishments and workplaces
wherever they may be located; however, chartered cities may be
allowed to conduct industrial safety inspections of establishments
within their respective jurisdictions where they have adequate facilities
and competent personnel for the purpose as determined by the
Department of Labor and subject to national standards established by
the latter.
(b) The Secretary of Labor may, through appropriate
regulations, collect reasonable fees for the inspection of steam boilers,
pressure vessels and pipings and electrical installations, the test and
approval for safe use of materials, equipment and other safety devices
and the approval of plans for such materials, equipment and devices.
The fee so collected shall be deposited in the national treasury to the
credit of the occupational safety and health fund and shall be expended
exclusively for the administration and enforcement of safety and other
labor laws administered by the Department of Labor.
XI
EMPLOYEES’ COMPENSATION AND STATE
INSURANCE: WORK-RELATED INJURY AND SICKNESS
A. POLICY
Page 77 of 88
Article 172. Policy. The State shall promote and develop a
tax-exempt employees’ compensation program whereby employees and
their dependents, in the event of work-connected disability or death,
may promptly secure adequate income benefit and medical related
benefits.
B. COVERAGE
Article 174. Compulsory Coverage. Coverage in the State
Insurance Fund shall be compulsory upon all employers and their
employees not over sixty (60) years of age; Provided, That an employee
who is over sixty (60) years of age and paying contributions to qualify
for the retirement or life insurance benefit administered by the System
shall be subject to compulsory coverage.
C. COMPENSABLE WORK-RELATED INJURY
Section 1(a), Rule III of the Amended Rules on
Employees’ Compensation (AEC) provides:
SECTION 1. Grounds. (a) For the injury and the
resulting disability or death to be compensable, the injury must
be the result of accident arising out of and in the course of the
employment. (ECC Resolution No. 2799, July 25, 1984).
"Injury" means any harmful change in the human
organism from any accident arising out of and in the course of the
employment.
1. Arising out of , in the Course of Employment
To be compensable, an injury must have resulted from an
accident arising out of and in the course of employment. It must be
shown that it was sustained within the scope of employment while
the claimant was performing an act reasonably necessary or
incidental thereto or while following the orders of a superior.
Indeed, the standard of "work connection" must be satisfied even
by one who invokes the 24-hour-duty doctrine; otherwise, the
claim for compensability must be denied [Valeriano v. ECC].
In Iloilo Dock & Engineering Co. v. Workmen's
Compensation Commission, the Court explained the phrase
"arising out of and in the course of employment" in this wise:
The two components of the coverage formula -
"arising out of" and "in the course of employment" - are said to
be separate tests which must be independently satisfied;
however, it should not be forgotten that the basic concept of
compensation coverage is unitary, not dual, and is best
expressed in the word, "work-connection, because an
uncompromising insistence on an independent application of
each of the two portions of the test can, in certain cases, exclude
clearly work-connected injuries. The words "arising out of" refer
to the origin or cause of the accident, and are descriptive of its
character, while the words "in the course of" refer to the time,
place and circumstances under which the accident takes place.
As a matter of general proposition, an injury or
accident is said to arise "in the course of employment" when it
takes place within the period of the employment, at a place
where the employee may reasonably . . . be, and while he is
fulfilling his duties or is engaged in doing something incidental
thereto.
Thus, for injury to be compensable, the standard of
"work connection" must be substantially satisfied. The injury and
the resulting disability sustained by reason of employment are
compensable regardless of the place where the injured occurred, if
it can be proven that at the time of the injury, the employee was
acting within the purview of his or her employment and performing
an act reasonably necessary or incidental thereto. Petitioner
Valeriano was not able to demonstrate solidly how his job as a
firetruck driver was related to the injuries he had suffered. That he
sustained the injuries after pursuing a purely personal and social
function - having dinner with some friends - is clear from the
records of the case. His injuries were not acquired at his work
place; nor were they sustained while he was performing an act
within the scope of his employment or in pursuit of an order of his
superior. Thus, we agree with the conclusion reached by the
appellate court that his injuries and consequent disability were not
work-connected and thus not compensable [Valeriano v. ECC].
In Sepulveda v. Employees Compensation Commission, a
public school teacher, assigned to a remote rural area, died of
myocardial infarction. In sustaining the claim for compensation
benefits, we held that due to his occupation as a school teacher
assigned to one of the remotest parts of Tangub City, his illness
was directly brought about by his employment or was a result of
the nature of such employment.
In Cortes v. Employees Compensation Commission, we
ruled that myocardial infarction is now considered an occupational
disease by the ECC and is, therefore, compensable.
Then in Eastern Shipping Lines, Inc. v. Philippine
Overseas Employment Administration, we upheld the ruling of the
POEA awarding compensation benefits to the heirs of a Filipino
seaman who died of myocardial infarction while his vessel was in
Japan.
In Roldan v. Republic, we held that a poor schoolteacher
who gave the best years of her life in the service and who in the
process, contracted heart ailment and hypertension, is entitled to
compensatory benefits corresponding to her claim.
In Tibulan v. Inciong, a barge captain died of myocardial
infarction. We held that where an employee had entered
employment in good health and suffered an illness in the course of
an employment which he never had before, he has in his favor the
statutory presumption that his illness or disease is compensable.
We reiterated our ruling in the Heirs of the Late R/O Reynaldo
Aniban v. National Labor Relations Commission. In this case, a
ship radio operator, who was healthy when he boarded his vessel,
died of myocardial infarction three months later. We ruled that his
disease is compensable on the ground that any kind of work or
labor produces stress and strain normally resulting in wear and tear
of the human body.
In Government Service Insurance System v. Gabriel, we
ruled that acute myocardial infarction is listed as an occupational
disease, and its incidence, whether or not associated with a non-
listed ailment, is enough basis for requiring compensation. And
in Republic v. Mariano, we reiterated our ruling in Gabriel that
heart disease and hypertension are compensable illnesses.
2. Proximate Cause Rule
If the injury is the proximate cause of his death or
disability for which compensation is sought, the previous physical
condition of the employee is unimportant and recovery may be had
for injury independent of any pre-existing weakness or disease.
3. Direct Premises Rule
Injury sustained in the premises of the employer is
compensable.
a. Going to or Coming From Work Rule
The general rule applying the "going to and coming from
work" rule or the "street peril’’ principle is that "in the absence of
special circumstances, an employee injured, in going to, or coming
from his place of work is excluded from the benefits of workmen s
compensation acts." The reason given is that accidents do not arise
out of and in the course of employment. This rule, however, admits
of exceptions. The very case of Afable says that "we do not of
course mean to imply that an employee can never recover for
Page 78 of 88
injuries suffered while on his way to and from work. That depends
on the nature of his employment." The case of Iloilo Dock
Engineering Co. even enumerates four well-recognized exceptions,
to wit: (1) where the employee is proceeding to or from his work
on the premises of his employer; (2) where the employee is about
to enter or about to leave the premises of his employer by way of
the exclusive or customary means of ingress and egress; (3) where
the employee is charged, while on his way to or from his place of
employment or at his home, or during his employment with some
duty or special errand connected with his employment; and (4)
where the employer, as an incident of the employment, provides
the means of transportation to and from his place of employment
[De Licardo v. WCC].
When an employee is accidentally injured at a point
reasonably proximate to the place of work, while he is going to and
from his work, such injury is deemed to have arisen out of and in
the course of his employment [Alano v. ECC].
More recently, in Vano vs. GSIS & ECC, 6 this Court,
applying the above quoted decisions, enunciated:
Filomeno Vano was a letter carrier of the Bureau of
Posts in Tagbilaran City. On July 31, 1983, a Sunday, at around
3:30 p.m. Vano was driving his motorcycle with his son as
backrider allegedly on his way to his station in Tagbilaran for
his work the following day, Monday. As they were approaching
Hinawanan Bridge in Loay, Bohol, the motorcycle skidded,
causing its passengers to be thrown overboard. Vano's head hit
the bridge's railing which rendered him unconscious. He was
taken to the Engelwood Hospital where he was declared dead on
arrival due to severe hemorrhage.
We see no reason to deviate from the foregoing
rulings. Like the deceased in these two (2) aforementioned
cases, it was established that petitioner's husband in the case at
bar was on his way to his place of work when he met the
accident. His death, therefore, is compensable under the law as
an employment accident.
In the above cases, the employees were on their way to
work. In the case at bar, petitioner had come from work and was on
his way home, just like in the Baldebrin case, where the employee
"... figured in an accident when he was ping home from his official
station at Pagadian City to his place of residence at Aurora,
Zamboanga del Sur ...." Baldebrin, the Court said:
The principal issue is whether petitioner's injury
comes within the meaning of and intendment of the phrase
'arising out of and in the course of employment.'(Section 2,
Workmen's Compensation Act). In Philippine Engineer's
Syndicate, Inc. vs. Flora S. Martin and Workmen's
Compensation Commission, 4 SCRA 356, We held that 'where
an employee, after working hours, attempted to ride on the
platform of a service truck of the company near his place of
work, and, while thus attempting, slipped and fell to the ground
and was run over by the truck, resulting in his death, the
accident may be said to have arisen out of or in the course of
employment, for which reason his death is compensable. The
fact standing alone, that the truck was in motion when the
employee boarded, is insufficient to justify the conclusion that
he had been notoriously negligent, where it does not appear that
the truck was running at a great speed.'And, in a later
case, Iloilo Dock & Engineering Co. vs. Workmen's
Compensation Commission, 26 SCRA 102, 103, We ruled that
'(e)mployment includes not only the actual doing of the work,
but a reasonable margin of time and space necessary to be used
in passing to and from the place where the work is to be done. If
the employee be injured while passing, with the express or
implied consent of the employer, to or from his work by a way
over the employer's premises, or over those of another in such
proximity and relation as to be in practical effect a part of the
employer's premises, the injury is one arising out of and in the
course of the employment as much as though it had happened
 while the employee was engaged in his work at the place of its
performance.
Lazo v. ECC
Held: In the case at bar, it can be seen that petitioner left his
station at the Central Bank several hours after his regular time off, because
the reliever did not arrive, and so petitioner was asked to go on overtime.
After permission to leave was given, he went home. There is no evidence
on record that petitioner deviated from his usual, regular homeward route or
that interruptions occurred in the journey.
While the presumption of compensability and theory of
aggravation under the Workmen's Compensation Act (under which
the  Baldebrin case was decided) may have been abandoned under the New
Labor Code, it is significant that the liberality of the law in general in favor
of the workingman still subsists. As agent charged by the law to implement
social justice guaranteed and secured by the Constitution, the Employees
Compensation Commission should adopt a liberal attitude in favor of the
employee in deciding claims for compensability, especially where there is
some basis in the facts for inferring a work connection to the accident.
This kind of interpretation gives meaning and substance to the
compassionate spirit of the law as embodied in Article 4 of the New Labor
Code which states that 'all doubts in the implementation and interpretation
of the provisions of the Labor Code including its implementing rules and
regulations shall be resolved in favor of labor.'
The policy then is to extend the applicability of the decree (PD
626) to as many employees who can avail of the benefits thereunder. This is
in consonance with the avowed policy of the State to give maximum aid
and protection to labor.
There is no reason, in principle, why employees should not be
protected for a reasonable period of time prior to or after working hours and
for a reasonable distance before reaching or after leaving the employer's
premises.
If the Vano ruling awarded compensation to an employee who
was on his way from home to his work station one day before an official
working day, there is no reason to deny compensation for accidental injury
occurring while he is on his way home one hour after he had left his work
station.
We are constrained not to consider the defense of the street peril
doctrine and instead interpret the law liberally in favor of the employee
because the Employees Compensation Act, like the Workmen's
Compensation Act, is basically a social legislation designed to afford relief
to the working men and women in our society.
b. Shuttle Bus Rule
Company that provides means of transportation in going
to and coming from place of work and is liable for injury sustained
by employees while on board said vehicle. The vehicle is deemed
an extension of the premises
4. Incidents of Employment Rule
a. Acts of Ministration
Where due to the number of workers engaged in the
loading work, the sanitary facilities on board the ship being loaded
were rendered inadequate, thus compelling some of the laborers,
including the deceased, to answer the call of nature by going down
a barge tied along the right side of the ship, it is but logical to
consider said barge as an extension of the working premises of the
laborers, and inasmuch as they took their evening meal on board
the ship and were supposed to resume their work a reasonable time
thereafter, they were not free to leave the vessel; it is, therefore,
held that facts of the case do not support the defense of notorious
negligence, and the accident must be deemed to be one arising out
of, or in the course of employment [Visayan v. WCC].
Luzon v. WCC
Held: While in the strict sense death caught up with Cordero
when he was not in the barge where he is supposed to be for 24 hours
watching and taking care of it but swimming with some companions
somewhere in the Pasig river near where the barge was moored, it may be
Page 79 of 88
said that he died in line of duty for he was then undertaking something that
is necessary to his personal need and comfort since the taking of bath is not
only habitual in a sailor but necessary to the human body. He went
swimming not for pleasure, not for fun, but in answer to the daily need
nature, in the same manner as a human being needs to answer other calls,
such as eating, sleeping and the like. When these needs are satisfied in the
course of employment and something takes place that may cause injury,
harm or death to the employee or laborer, it is fair and logical that the
happening be considered as one occurring in the course of employment for
under the circumstances it cannot be undertaken in any other way. The
situation would be different if the mishap occurs in a manner that it may
clearly show that the laborer has acted beyond his duty or course of
employment. Not so in this case.
Neither can it be contended that in going out with some
companions to swim the deceased is guilty of notorious negligence for the
reason that if his purpose was to take a bath he could have done it with the
aid of a water tank on board the barge. If the deceased were one who does
not know how to swim or is not a sailor accustomed to the perils of the
water, the argument may have some value but not so in the case of the
deceased who undisputable was a swimmer. He must have preferred to take
a bath while swimming than by pouring water over his body on board the
barge because of his awareness that he was swimmer and for him to swim
in a river was merely routine. And if he died in the course thereof it must be
due to an event that he has not foreseen. At any rate there is no clear
evidence that his death 
b. Acts for the Employer's Benefit
An act outside an employee's regular duties which is
undertaken in good faith to advance the employer's interests,
whether or not the employee's own assigned work is hereby
furthered, is within the course of employment. Simply stated, 'if the
act is one for the benefit of the employer or for the mutual benefit
of both, an injury arising out of it will usually be compensable
[Paez v. WCC].
5. Special Errand Rule
In Vda. de Licardo v. WCC, the Supreme Court held that
the death of petitioner’s husband arose out of and in the course of
his employment since at the time of the accident in question he was
performing a special messengerial work which was not part of his
daily morning routine of reporting for work, and which special
errand, brought him to the place where he met the accident. The
Court further held that to deny death compensation to the heirs of
an employee, who died while in the pursuit of accomplishing
something for the good of the service, is violative of the
Workmen’s Compensation Act, which was enacted to assuage
pecuniarily the sufferings of the heirs of employees who die of
illnesses or accidents arising out of or in the course of employment.
6. Dual Purpose Doctrine
Any injury sustained by an employee while on a trip
undertaken for the benefit of the employer is compensable even if
in the course thereof the employee pursues also a personal purpose.
The ECC issued the following guidelines:
a. the trip will be done for the employer even by someone
else even if not coincided with the personal purpose.
Includes fieldtrips, out of town trips, miscellaneous
errands
b. the trip is deemed personal if the employee would have
made the trip even if no official business or he would not
have made the trip if the personal reason did not push
through
c. the trip is official if the employee would have made the
trip despite the absence of personal reasons. Any other
employee would have been compelled to make the trip
for the employer. 
 TEST: if the work tends to create the necessity for travel
he is deemed to be in the course of employment although the
employee serves at the same time some personal purpose.
7. Force Majeure
 The doctrine is generally accepted that the employer is
not responsible for accidents arising from force majeure or an act
of God, as it is usually called, when the employee has not been
exposed to a greater danger than usual. However, in the case of the
deceased and in that of a sailor, it cannot be denied that upon
contracting their services to navigate in the waters of the
archipelago, having to render extraordinary services in cases of
typhoon, they are exposed to greater risk than usual, in comparison
with other employees working on land [Murillo v. Mendoza].
8. Assault
Increased risk to assault supplies the link or connection
between the injury and the employment.
(J)urisprudence is to the effect that injuries sustained by
an employee while in the course of his employment, as the result of
an assault upon his person by another employee, or by a third
person, no question of the injured employee’s own culpability
being involved, is compensable where, from the evidence
presented, a rational mind is able to trace the injury to a cause set
in motion by the nature of the employment, or some condition,
obligation or incident therein, and not by some other agency [Dela
Rea v. ECC].  An occupational disease is one "which results from the
Among the jobs enumerated as increasing the risk of
assault are (a) jobs having to do with keeping the peace or guarding
property; (b) jobs having to do with keeping or carrying of money
which subject to the employee to the risk of assault because of the
increased temptation to robbery; (c) jobs which expose the
employee to direct contact with lawless and irresponsible members
of the community, like that of a bartender; and (d) work as bus
driver, taxi driver or street car conductor.
9. Violation of Company Rules
There is practical unanimity in *the proposition that
violation of a rule promulgated by a Commission or board is not
negligence per se; but it may be evidence of negligence. This order
of the employer (prohibition rather) couldn't be of a greater
obligation than the rule of a Commission or board.  And the referee
correctly considered this violation as possible evidence of
negligence; but it declared that under the circumstances, the laborer
could not be declared to have acted with negligence [Marinduque
v. WCC].
Although in violation of the company’s regulations, the
driver cannot be considered negligent by having the members of
his family in the vehicle, where it is not certain that such presence
caused the accident. As his wife and children were present, the
driver must have been extremely careful, not reckless [Davao Gulf
v. del Rosario].
D. COMPENSABLE ILLNESS/SICKNESS
Section 1(b), Rule III, of the AEC provides:
(b) For the sickness and the resulting disability or
death to be compensable, the sickness must be the result of an
occupational disease listed under Annex “A” of these Rules with
the conditions set therein satisfied, otherwise, proof must be
shown that the risk of contracting the disease is increased by the
working conditions.
Moreover, Section 2 provides:
Page 80 of 88
SECTION 2. Occupational diseases. (a) The diseases
listed in Annex “A” of these Rules are occupational when the
nature of employment is as described therein.
(b) The employer shall require pre-employment
examination of all prospective employees; provide periodic
medical examination to employees who are exposed to
occupational diseases and take such other measures as may be
necessary.
xxx
"Sickness" means any illness definitely accepted as an
occupational disease listed by the Commission, or any illness
caused by employment subject to proof that the risk of contracting
the same is increased by working conditions. For this purpose, the
Commission is empowered to determine and approve occupational
diseases and work-related illnesses that may be considered
compensable based on peculiar hazards of employment.
The aforequoted provisions clearly establish that for an
illness to be compensable, it must either be:
a. An illness definitely accepted as an
occupational disease; or
b. An illness caused by employment subject to
proof by the employee that the risk of
contracting the same is increased by working
conditions.
nature of the employment, and by nature is meant conditions to
which all employees of a class are subject and which produce the
disease as a natural incident of a particular occupation, and attach
to that occupation a hazard which distinguishes it from the usual
run of occupations and is in excess of the hazard attending the
employment in general" To be occupational, the disease must be
one "due wholly to causes and conditions which are normal and
constantly present and characteristic of the particular
occupation; that is, those things which science and industry have
not yet learned how to eliminate. Every worker in every plant of
the same industry is alike constantly exposed to the danger of
contracting a particular occupational disease" An occupational
disease is one which develops as a result of hazards peculiar to
certain occupations, due to toxic substances (as in the organic
solvents industry), radiation (as in television repairmen), repeated
mechanical injury, emotional strain, etc. [Menez v. ECC].
Menez v. ECC
Held: From the foregoing definitions of occupational diseases or
ailments, rheumatoid arthritis and pneumonitis can be considered as such
occupational diseases. All public high school teachers, like herein
petitioner, admittedly the most underpaid but overworked employees of the
government, are subject to emotional strains and stresses, dealing as they do
with intractable teenagers especially young boys, and harassed as they are
by various extra-curricular or non- academic assignments, aside from
preparing lesson plans until late at night, if they are not badgered by very
demanding superiors. In the case of the petitioner, her emotional tension is
heightened by the fact that the high school in which she teaches is situated
in a tough area - Binondo district, which is inhabited by thugs and other
criminal elements and further aggravated by the heavy pollution and
congestion therein as well as the stinking smell of the dirty Estero de la
Reina nearby. Women, like herein petitioner, are most vulnerable to such
unhealthy conditions. The pitiful situation of all public school teachers is
further accentuated by poor diet for they can ill-afford nutritious food.
In her work, petitioner also has to contend with the natural
elements, like the inclement weather — heavy rains, typhoons — as well as
dust — and disease-ridden surroundings peculiar to an insanitary slum area.
These unwholesome conditions are "normal and consistently
present in" or are the "hazards peculiar to" the occupation of a public high
school teacher. It is therefore evident that rheumatoid arthritis and
pneumonitis are the "natural incidents" of petitioner's occupation as such
public high school teacher.
But even if rheumatoid arthritis and pneumonitis are not
occupational diseases, there is ample proof that petitioner contracted such
ailments by reason of her occupation as a public high school teacher due to
her exposure to the adverse working conditions above-mentioned.
Indisputably, petitioner contracted pneumonitis and/or
bronchiectasis with hemoptysis and rheumatoid arthritis on January 27,
1975 after being drenched and the consequent "chilling during the course of
employment which are permanent and recurring in nature and work-
connected." Undoubtedly, petitioner's ailments thus become compensable
under the New Labor Code since under Rule 111, Section 1 (c) of its
Implementing Rules, "only sickness or injury which occurred on or after
January 1, 1975 and the resulting disability or death shall be compensable
under these Rules."
It must be borne in mind that petitioner was a teacher of the Raja
Soliman High School which is located in the heart of Binondo District. She
was constantly exposed to the heavily polluted air and congestion
(squatter's area) characteristic of the area. She was not only exposed to the
elements - varying degrees of temperature throughout the day and night -
but also had to withstand long hours of standing while performing her
teaching job. Likewise, she had to regularly negotiate long trips from her
home in Project 2, Quirino District, Quezon City (her residence) to said
high school in Binondo, scampering from one ride to another, rain or shine,
and sweating in the process.
The law, as it now stands requires the claimant to prove
a positive thing – the illness was caused by employment and the
risk of contracting the disease is increased by the working
conditions. To say that since the proof is not available, therefore,
the trust fund has the obligation to pay is contrary to the legal
requirement that proof must be adduced. The existence of
otherwise non-existent proof cannot be presumed [Raro v. ECC].
In Navalta v. Government Service Insurance
System (G.R. No. 46684, April 27, 1988) this Court recognized the
fact that cancer is a disease of still unknown origin which strikes;
people in all walks of life, employed or unemployed. Unless it be
shown that a particular form of cancer is caused by specific
working conditions (e. g. chemical fumes, nuclear radiation,
asbestos dust, etc.) we cannot conclude that it was the employment
which increased the risk of contracting the disease.
To understand why the "Presumption of compensability"
together with the host of decisions interpreting the "arising out of
and in the course of employment" provision of the defunct law has
been stricken from the present law, one has to go into the
distinctions between the old workmen's compensation law and the
present scheme [Raro v. ECC].
Dabatian v. SSS
Held: The present Labor Code, P.D. 442 as amended, abolished
the presumption of compensability and the rule on aggravation of illness
caused by the nature of employment, the reason being — "to restore a
sensible equilibrium between the employer's obligation to pay workmen's
compensation and the employee's right to receive reparation for work-
connected death or disability ... " 4 It was found, and rightly so, that the old
law, the Workmen's Compensation Act, destroyed the parity or balance
between the competing interests of employer and employee with respect to
workmen's compensation. The balance was tilted unduly in favor of the
workmen since it was possible to stretch the work-related nature of an
ailment beyond seemingly rational its. 5
Thus, under the present law, 6 in order for the employee to be
entitled to sickness or death benefits, the sickness or death resulting
therefrom must be, or must have resulted from either a) any illness
definitely accepted as an occupational disease listed by the Commission or
b) any illness caused by employment subject to proof that the risk of
contracting the same is increased by working conditions.
Since peptic ulcer is not included in the list of occupational
diseases as drawn up by the Commission, then petitioner has the burden of
proving that the nature of her husband's work increased the risk of
contracting the disease.
Page 81 of 88
Aside from the undisputed fact that the deceased is a heavy
coffee drinker, which was his way of warding off sleepiness, no evidence
was ever adduced by petitioner to bolster the theory that her husband's work
increased the risk of contracting the ailment.
Being a heavy coffee drinker may have aggravated his peptic
ulcer, but, aggravation of an illness is no longer a ground for compensation
under the present law.
E. WHEN DISABILITY AND DEATH ARE NOT
COMPENSABLE
Article 178. Limitation of Liability. The State Insurance Fund
shall be liable for compensation to the employee or his dependents,
except when the disability or death was occasioned by the employee’s
intoxication, willful intention to injure or kill himself or another,
notorious negligence, or otherwise provided under this Title.
In Mabuhay Shipping v. NLRC, it was held that the mere
death of the seaman during the term of his employment does not
automatically give rise to compensation. The circumstances which
led to the death as well as the provisions of the contract, and the
right and obligation of the employer and seaman must be taken into
consideration, in consonance with the due process and equal
protection clauses of the Constitution. There are limitations to the
liability to pay death benefits. When the death of the seaman
resulted from a deliberate or willful act on his own life, and it is
directly attributable to the seaman, such death is not compensable.
No doubt a case of suicide is covered by this provision. By the
same token, when as in this case the seaman, in a state of
intoxication, ran amuck, or committed an unlawful aggression
against another, inflicting injury on the latter, so that in his own
defense the latter fought back and, in the process, killed the
seaman, the circumstances of the death of the seaman could be
categorized as a deliberate and willful act on his own life directly
attributable to him. First, he challenged everyone to a fight with an
axe. Thereafter, he returned to the messhall picked up and broke a
cup and hurled it at an oiler Ero who suffered injury. Thus
provoked, the oiler fought back. The death of seaman Sentina is
attributable to his unlawful aggression and thus is not compensable.
F. RECOVERY OF BENEFITS, LIMITATIONS
Article 179. Extent of Liability. Unless otherwise provided,
the liability of the State Insurance Fund under this Title shall be
exclusive and in place of all other liabilities of the employer to the
employee, his dependents or anyone otherwise entitled to receive
damages on behalf of the employee or his dependents. The payment of
compensation under this Title shall not bar the recovery of benefits as
provided for in Section 699 of the Revised Administrative Code,
Republic Act Numbered Eleven Hundred Sixty-One, as amended,
Republic Act Numbered Six Hundred Ten, as amended, Republic Act
Numbered Forty-Eight Hundred Sixty-Four, as amended, and other
laws whose benefits are administered by the System or by other
agencies of the government.
1. Recovery under the Labor Code and the Civil
Code
If a person is able to claim under the Employees’
Compensation, he cannot claim under the Civil Code, except where
a claimant who has already been paid under the Workmen’s
Compensation Act may still sue for damages under the Civil Code
on the basis of supervening facts or developments occurring after
he opted for the first remedy [Candano v. Sugata-on].
2. Liability of Third Party
 Article 180. Liability of Third Parties. (a) When the disability
or death is caused by circumstances creating a legal liability against a
third party, the disabled employee or the dependents, in case of his
death, shall be paid by the System under this Title. In case benefit is
paid under this Title, the System shall be subrogated to the rights of
the disabled employee or the dependents, in case of his death, in
accordance with the general law.
(b) Where the System recovers from such third party
damages in excess of those paid or allowed under this Title, such excess
shall be delivered to the disabled employee or other persons entitled
thereto, after deducting the cost of proceedings and expenses of the
System.
G. EMPLOYEES’ COMPENSATION COMMISSION
Article 182. Employees Compensation Commission. (a) To
initiate, rationalize, and coordinate the policies of the employees’
compensation program, the Employees’ Compensation Commission is
hereby created to be composed of five ex-officio members, namely: the
Secretary of Labor and Employment as Chairman, the GSIS General
Manager, the SSS Administrator, the Chairman of the Philippine
Medical Care Commission,133 and the Executive Director of the ECC
Secretariat, and two appointive members, one of whom shall represent
the employees and the other, the employers, to be appointed by the
President of the Philippines for a term of six years. The appointive
member shall have at least five years’ experience in workmen’s
compensation or social security programs. All vacancies shall be filled
for the unexpired term only.
(b) The Vice Chairman of the Commission shall be
alternated each year between the GSIS General Manager and the SSS
Administrator. The presence of four members shall constitute a
quorum. Each member shall receive a per diem of two hundred pesos
for every meeting that is actually attended by him, exclusive of actual,
ordinary and necessary travel and representation expenses. In his
absence, any member may designate an official of the institution he
serves on full-time basis as his representative to act in his behalf.135
(c) The general conduct of the operations and management
functions of the GSIS or SSS under this Title shall be vested in its
respective chief executive officers, who shall be immediately
responsible for carrying out the policies of the Commission.
(d) The Commission shall have the status and category of a
government corporation, and it is hereby deemed attached to the
Department of Labor for policy coordination and guidance.
Article 183. Powers and Duties. The Commission shall have
the following powers and duties:
a) To assess and fix a rate of contribution from all
employers;
(b) To determine the rate of contribution payable by an
employer whose records show a high frequency of work accidents or
occupational diseases due to failure by the said employer to observe
adequate safety measures;
(c) To approve rules and regulations governing the
processing of claims and the settlement of disputes arising therefrom as
prescribed by the System;
(d) To initiate policies and programs toward adequate
occupational health and safety and accident prevention in the working
environment, rehabilitation other than those provided for under
Article 190 hereof, and other related programs and activities, and to
appropriate funds therefor;
(e) To make the necessary actuarial studies and calculations
concerning the grant of constant help and income benefits for
permanent disability or death and the rationalization of the benefits for
permanent disability and death under the Title with benefits payable
by the System for similar contingencies: Provided, That the
Commission may upgrade benefits and add new ones subject to
approval of the President; and Provided, further, That the actuarial
stability of the State Insurance Fund shall be guaranteed; Provided,
finally, That such increases in benefits shall not require any increases
in contribution, except as provided for in paragraph (b) hereof;
(f) To appoint the personnel of its staff, subject to civil
service law and rules, but exempt from WAPCO law and regulations;
Page 82 of 88
(g) To adopt annually a budget of expenditures of the
Commission and its staff chargeable against the State Insurance Fund:
Provided, That the SSS and GSIS shall advance on a quarterly basis
the remittances of allotment of the loading fund for the Commission’s
operational expenses based on its annual budged as duly approved by
the Ministry of Budget and Management;
(h) To have the power to administer oath and affirmation,
and to issue subpoena and subpoena duces tecum in connection with
any question or issue arising from appealed cases under this Title;
(i) To sue and be sued in court;
(j) To acquire property, real or personal, which may be
necessary or expedient for the attainment of the purposes of this Title;
(k) To enter into agreements or contracts for such services
and as may be needed for the proper, efficient and stable
administration of the program;
(l) To perform such other acts as it may deem appropriate
for the attainment of the purposes of the Commission and proper
enforcement of the provisions of this Title.
H. CONTRIBUTIONS
Article 189. Employers' Contributions. (a) Under such
regulations as the System may prescribe, beginning as of the last day of
the month when an employee’s compulsory coverage takes effect and
every month thereafter during his employment, his employer shall
prepare to remit to the System a contribution equivalent to one (1)
percent of his monthly salary credit.
(b) The rate of contribution shall be reviewed periodically
and, subject to the limitations herein provided, may be revised as the
experience in risk, cost of administration, and actual or anticipated as
well as unexpected losses, may require.
(c) Contributions under this Title shall be paid in their
entirety by the employer and any contract or device for the deduction
of any portion thereof from the wages or salaries of the employees shall
be null and void.
(d) When a covered employee dies, becomes disabled or is
separated from employment , his employer’s obligation to pay the
monthly contribution arising from that employment shall cease at the
end of the month of contingency and during such months that he is not
receiving wages or salary.
Article 190. Government Guarantee. The Republic of the
Philippines guarantees the benefits prescribed under this Title, and
accepts general responsibility for the solvency of the State Insurance
Fund. In case of any deficiency, the same shall be covered by
supplemental appropriations from the national government
XII
EMPLOYEES’ COMPENSATION AND STATE
INSURANCE BENEFITS
A. MEDICAL BENEFITS
1. Medical Services
Article 191. Medical Services. Immediately after an employee
contracts sickness or sustains an injury, he shall be provided by the
System during the subsequent period of his disability with such
medical services and appliances as the nature of his sickness or injury
and progress of his recovery may require, subject to the expense
limitation prescribed by the Commission.
2. Liability
Article 192. Liability. The System shall have the authority to
choose or order a change of physician, hospital or rehabilitation facility
for the employee, and shall not be liable for compensation for any
aggravation of the empl sickness resulting from unauthorized changes
by the employee of medical services, appliances, supplies, hospitals,
rehabilitation facilities or physicians.

3. Refusal of Examination or Treatment
Article 194. Refusal of Examination or Treatment. If the
employee unreasonably refuses to submit to medical examination or
treatment, the System shall stop the payment of further compensation
during such time as such refusal continues. What constitutes an
unreasonable refusal shall be determined by the System which may, on
its own initiative, determine the necessity, character and sufficiency of
any medical services furnished or to be furnished.
4. Fees and Other Charges
Article 195. Fees and Other Charges. All fees and other
charges for hospital services, medical care and appliances, including
professional fees, shall not be higher than those prevailing in wards of
hospitals for similar services to injured or sick persons in general and
shall be subject to the regulations of the Commission. Professional fees
shall only be appreciably higher than those prescribed under Republic
Act Numbered Sixty-One Hundred Eleven, as amended, otherwise
known as the Philippine Medical Care Act of 1969.
5. Rehabilitation Services
Article 196. Rehabilitation Services. (a) The System shall, as
soon as practicable, establish a continuing program, for the
rehabilitation of injured and handicapped employees who shall be
entitled to rehabilitation services, which shall consist of medical,
surgical or hospital treatment, including appliances if they have been
handicapped by the injury, to help them become physically
independent.
(b) As soon as practicable, the System shall establish centers
equipped and staffed to provide a balanced program of remedial
treatment, vocational assessment and preparation designed to meet the
individual needs of each handicapped employee to restore him to
suitable employment, including assistance as may be within its
resources, to help each rehabilitee to develop his mental, vocational or
social potential.
6. Duration
Section 2, Rule VIII, of the AEC provides:
SECTION 2. Period of Entitlement. - The medical
services, appliances and supplies shall be provided to the afflicted
employee beginning on the first day of the injury or sickness, during
the subsequent period of his disability, and as the progress of his
recovery may require, subject to Section 5 of Rule IV.
B. DISABILITY BENEFITS
1. Temporary Total Disability
Article 197. Temporary Total Disability. (a) Under such
regulations as the Commission may approve, any employee under this
Title who sustains an injury or contracts sickness resulting in
temporary total disability shall, for each day of such a disability or
fraction thereof, be paid by the System an income benefit equivalent to
ninety percent of his average daily salary credit, subject to the
following conditions: the daily income benefit shall not be less than Ten
Pesos nor more than Ninety Pesos, nor paid for a continuous period
longer than one hundred twenty days, except as otherwise provided for
in the Rules, and the System shall be notified of the injury or sickness.
(b) The payment of such income benefit shall be in
accordance with the regulations of the Commission.
2. Permanent Total Disability
Article 198. Permanent Total Disability. (a) Under such
regulations as the Commission may approve, any employee under this
Title who contracts sickness or sustains an injury resulting in his
Page 83 of 88
permanent total disability shall, for each month until his death, be paid
by the System during such a disability, an amount equivalent to the
monthly income benefit, plus ten percent thereof for each dependent
child, but not exceeding five, beginning with the youngest and without
substitution: Provided, That the monthly income benefit shall be the
new amount of the monthly benefit for all covered pensioners, effective
upon approval of this Decree.
(b) The monthly income benefit shall be guaranteed for five
years, and shall be suspended if the employee is gainfully employed, or
recovers from his permanent total disability, or fails to present himself
for examination at least once a year upon notice by the System, except
as otherwise provided for in other laws, decrees, orders or Letters of
Instructions.
(c) The following disabilities shall be deemed total and
permanent:
(1) Temporary total disability lasting continuously for more
than one hundred twenty days, except as otherwise provided for in the
Rules;
(2) Complete loss of sight of both eyes;
(3) Loss of two limbs at or above the ankle or wrist;
(4) Permanent complete paralysis of two limbs;
(5) Brain injury resulting in incurable imbecility or insanity;
and
(6) Such cases as determined by the Medical Director of the
System and approved by the Commission.
(d) The number of months of paid coverage shall be defined
and approximated by a formula to be approved by the Commission.
In Government Service Insurance System v. Court of
Appeals, it was held that while permanent total disability invariably
results in an employees loss of work or inability to perform his
usual work, permanent partial disability occurs when an employee
loses the use of any particular anatomical part of his body which
disables him to continue with his former work. Stated otherwise,
the test of whether or not an employee suffers from permanent total
disability is the capacity of the employee to continue performing
his work notwithstanding the disability he incurred. If by reason of
the injury or sickness he sustained, the employee is unable to
perform his customary job for more than 120 days and he does not
come within the coverage of Rule X of the Amended Rules on
Employees Compensability (which, in a more detailed manner,
describes what constitutes temporary total disability), then the said
employee undoubtedly suffers from a permanent total disability
regardless of whether or not he loses the use of any part of his
body. Permanent total disability does not mean a state of absolute
helplessness, but means disablement of an employee to earn wages
in the same kind of work, or work of similar nature, that he was
trained for, or any work which a person of similar mentality and
attainment could do.
3. Permanent Partial Disability
Article 199. Permanent Partial Disability. (a) Under such
regulations as the Commission may approve, any employee under this
Title who contracts sickness or sustains an injury resulting in
permanent partial disability shall, for each month not exceeding the
period designated herein, be paid by the System during such a
disability an income benefit for permanent total disability.
xxx
c) A loss of a wrist shall be considered as a loss of the hand,
and a loss of an elbow shall be considered as a loss of the arm. A loss of
an ankle shall be considered as loss of a foot, and a loss of a knee shall
be considered as a loss of the leg. A loss of more than one joint shall be
considered as a loss of one-half of the whole finger or toe: Provided,
That such a loss shall be either the functional loss of the use or physical
loss of the member.
(d) In case of permanent partial disability less than the total
loss of the member specified in the preceding paragraph, the same
monthly income benefit shall be paid for a portion of the period
established for the total loss of the member in accordance with the
proportion that the partial loss bears to the total loss. If the result is a
decimal fraction, the same shall be rounded off to the next higher
integer.
(e) In cases of simultaneous loss of more than one member or
a part thereof as specified in this Article, the same monthly income
benefit shall be paid for a period equivalent to the sum of the periods
established for the loss of the member or the part thereof. If the result
is a decimal fraction, the same shall be rounded off to the next higher
integer.
(f) In cases of injuries or illnesses resulting in a permanent
partial disability not listed in the preceding schedule, the benefit shall
be an income benefit equivalent to the percentage of the permanent loss
of the capacity to work.
(g) Under such regulations as the Commission may approve,
the income benefit payable in case of permanent partial disability may
be paid in monthly pension or in lump sum if the period covered does
not exceed one year.
existing laws, issuances, and company policies or practices or
agreements between the employer and the employees.
Sec. 6. The Department of Labor and Employment for the
private sector and the Civil Service Commission for the government
sector, together with the SSS and the GSIS shall, within ninety (90)
days from the effectivity of this Act, promulgate the rules and
regulations necessary to implement the provisions hereof: Provided,
That any conflict in the interpretation of the law and the implementing
rules and regulations shall be resolved in favor of the workers.
XIV
SOCIAL SECURITY LAW
(R.A. No. 11199)
A. COMPULSORY COVERAGE

C. PRESCRIPTIVE PERIOD Section 9. Coverage -

(a) Coverage in the SSS shall be compulsory upon all
Article 207. Prescriptive Period. No claim for compensation employees including kasambahays or domestic workers not over sixty
shall be given due course unless said claim is filed with the System (60) years of age and their employers: Provided, That any benefit
within three (3) years from the time the cause of action accrued. already earned by the employees under private benefit plans existing at
the time of the approval of this Act shall not be discontinued, reduced
or otherwise impaired: Provided, further, That private plans which are
XIII existing and in force at the time of compulsory coverage shall be
PORTABILITY IN SOCIAL INSURANCE integrated with the plan of the SSS in such a way where the employers
SYSTEMS contribution to his private plan is more than that required of him in
this Act, he shall pay to the SSS only the contribution required of him
and he shall continue his contribution to such private plan less his
Republic Act No. 7699
contribution to the SSS so that the employer’s total contribution to his
SECTION 1. It is hereby declared the policy of the State to
benefit plan and to the SSS shall be the same as his contribution to his
promote the welfare of our workers by recognizing their efforts in
private benefit plan before the compulsory coverage: Provided,
productive endeavors and to further improve their conditions by
further, That any changes, adjustments, modifications, eliminations or
providing benefits for their long years of contribution to the national
improvements in the benefits to be available under the remaining
economy. Towards this end, the State shall institute a scheme for
private plan, which may be necessary to adopt by reason of the reduced
totalization and portability of social security benefits with the view of
contributions thereto as a result of the integration, shall be subject to
establishing within a reasonable period a unitary social security
agreements between the employers and employees
system. 
concerned: Provided, further, That the private benefit plan which the
Sec. 2. Definition of Terms. — As used in this Act, unless the
employer shall continue for his employees shall remain under the
context indicates otherwise, the following terms shall mean:
employer‘s management and control unless there is an existing
(a) “Contributions” shall refer to the contributions paid by
agreement to the contrary: Provided, finally, That nothing in this Act
the employee or worker to either the Government Service Insurance
shall be construed as a limitation on the right of employers and
System (GSIS) or the Social Security System (SSS) on account of the
employees to agree on and adopt benefits which are over and above
worker’s membership;
those provided under this Act.
(b) “Portability” shall refer to the transfer of funds for the
(b) Spouses who devote full time to managing the household
account and benefit of a worker who transfers from one system to the
and family affairs, unless they are also engaged in other vocation or
other;
employment which is subject to mandatory coverage, may be covered
(c) “Sector” shall refer to employment either in the public or
by the SSS on a voluntary basis.
private sector;
(d) “System” shall refer to either the SSS as created under
Republic Act No. 1161, as amended or the GSIS as created under B. COMPULSORY COVERAGE OF THE SELF-
Presidential Decree No. 1146, as amended; and EMPLOYED
(e) “Totalization” shall refer to the process of adding up the
periods of creditable services or contributions under each of the
Section 9-A. Compulsory Coverage of the Self-Employed. —
Systems, for purposes of eligibility and computation of benefits.
Coverage in the SSS shall also be compulsory upon such self-employed
Sec. 3. Provisions of any general or special law or rules and
persons as may be determined by the Commission under such rules
regulations to the contrary notwithstanding, a covered worker who
and regulations as it may prescribe, including, but not limited to the
transfers employment from one sector to another or is employed in
following:
both sectors shall have his credible services or contributions in both
(a) All seif-empioyed professionals;
Systems credited to his service or contribution record in each of the
(b) Partners and single proprietors of businesses;
Systems and shall be totalized for purposes of old-age, disability,
(c) Actors and actresses, directors, scriptwriters and news
survivorship and other benefits in case the covered member does not
correspondents who do not fall within the definition of the term
qualify for such benefits in either or both Systems without totalization:
"employee" in Section 8(d) of this Act;
Provided, however, That overlapping periods of membership shall be
(d) Professional athletes, coaches, trainers and jockeys; and
credited only once for purposes of totalization.
(e) Individual farmers and fishermen.
Sec. 4. All contributions paid by such member personally,
Unless otherwise specified herein, all provisions of this Act
and those that were paid by his employers to both Systems shall be
applicable to covered employees shall also be applicable to the covered
considered in the processing of benefits which he can claim from either
self-employed persons.
or both Systems: Provided, however, That the amount of benefits to be
paid by one System shall be in proportion to the number of
contributions actually remitted to that System. C. COMPULSORY COVERAGE OF OVERSEAS
Sec. 5. Nothing in this Act shall be construed to diminish or FILIPINO WORKERS (OFWs)
reduce the benefits being enjoyed by a covered worker arising from

Page 84 of 88
 Section 9-B. Compulsory Coverage of Overseas Filipino
Workers (OFWs) -
(a) Coverage in the SSS shall be compulsory upon all sea-
based and land-based OFWs as defined under Republic Act No. 8042,
otherwise known as the Migrant Workers and Overseas Filipinos Act
of 1995. as amended by Republic Act No. 10022: Provided, That they
are not over sixty (60) years of age.
All benefit provisions under this Act shall apply to all
covered OFWs. The benefits include, among others, retirement, death,
disability, funeral, sickness and maternity.
(b) Manning agencies are agents of their principals and are
considered as employers of sea-based OFWs.
For purposes of the implementation of this Act, any law to
the contrary notwithstanding manning agencies are jointly and
severally or solidarity liable with their principals with respect to the
civil liabilities incurred for any violation of this Act.
The persons having direct control, management or direction
of the manning agencies shall be held criminally liable for any act or
omission penalized under this Act notwithstanding Section 28(f) hereof.
(c) Land-based OFWs are compulsory members of the SSS
and considered in the same manner as self-employed persons under
such rules and regulations that the Commission shall prescribe.
(d) The Department of Foreign Affairs (DFA), the
Department of Labor and Employment (DOLE) and all its agencies
involved in deploying OFWs for employment abroad are mandated to
negotiate bilateral labor agreements with the OFWs’ host countries to
ensure that the employers of land-based OFWs, similar to the
principals of sea-based OFWs, pay the required SSS contributions, in
which case these land-based OFWs shall no longer be considered in the
same manner as self-employed persons in this Act. Instead, they shall
be considered as compulsorily covered employees with employer and
employee shares in contributions that shall be provided for in the
bilateral labor agreements and their implementing administrative
agreements: Provided, That in countries which already extend social
security coverage to OFWs, the DFA through the Philippine embassies
and the DOLE shall negotiate further agreements to serve the best
interests of the OFWs.
(e) The DFA, the DOLE and, the SSS shall ensure
compulsory coverage of OFWs through bilateral social security and
labor agreements and other measures for enforcement.
(f) Upon the termination of their employment overseas,
OFWs may continue to pay contributions on a voluntary basis to
maintain their rights to full benefits.
(g) Filipino permanent migrants, including Filipino
immigrants, permanent residents and naturalized citizens of their host
countries may be covered by the SSS on a voluntary basis.
D. BENEFITS
1. Death Benefits
Section 13. Death Benefits. - Upon the death of a member
who has paid at least thirty-six (36) monthly contributions prior to the
semester of death, his primary beneficiaries shall be entitled to the
monthly pension: Provided, That if he has no primary beneficiaries, his
secondary beneficiaries shall be entitled to a lump sum benefit
equivalent to thirty-six (36) times the monthly pension. If he has not
paid the required thirty-six (36) monthly contributions, his primary or
secondary beneficiaries shall be entitled to a lump sum benefit
equivalent to the monthly pension times the number of monthly
contributions paid to the SSS or twelve (12) times the monthly pension,
whichever is higher.
2. Permanent Disability Benefits
Section 13-A. Permanent Disability Benefits. -
(a) Upon the permanent total disability of a member who
has paid at least thirty-six (36) monthly contributions prior to the
semester of disability, he shall be entitled to the monthly
pension: Provided, That if he has not paid the required thirty-six (36)
monthly contributions, he shall be entitled to a lump sum benefit
equivalent to the monthly pension times the number of monthly
Page 85 of 88
contributions paid to the SSS or twelve (12) times the monthly pension,
whichever is higher. A member who (1) has received a lump sum
benefit; and (2) is reemployed or has resumed self-employment not
earlier than one (1) year from the date of his disability shall again be
subject to compulsory coverage and shall be considered a new member.
(b) The monthly pension and dependents’ pension shall be
suspended upon the reemployment or resumption of self-employment
or the recovery of the disabled member from his permanent total
disability or his failure to present himself for examination at least once
a year upon notice by the SSS.
(c) Upon the death of the permanent total disability
pensioner, his primary beneficiaries as of the date of disability shall be
entitled to receive the monthly pension: Provided, That if he has no
primary beneficiaries and he dies within sixty (60) months from the
start of his monthly pension, his secondary beneficiaries shall be
entitled to a lump sum benefit equivalent to the total monthly pensions
corresponding to the balance of the five-year guaranteed period
excluding the dependents’ pension.
(d) The following disabilities shall be deemed permanent
total:
(1) Complete loss of sight of both eyes;
(2) Loss of two limbs at or above the ankle or wrists;
(3) Permanent complete paralysis of two limbs;
(4) Brain injury resulting to incurable imbecility or insanity;
and
(5) Such cases as determined and approved by the SSS.
(e) If the disability is permanent partial, and such disability
occurs before thirty-six (36) monthly contributions have been paid
prior to the semester of disability, the benefit shall be such percentage
of the lump sum benefit described in the preceding paragraph with due
regard to the degree of disability as the Commission may determine.
(f) If the disability is permanent partial and such disability
occurs after thirty-six (36) monthly contributions have been paid prior
to the semester of disability, the benefit shall be the monthly pension
for permanent total disability payable not longer than the period
designated in the following schedule:
xxx
(g) The percentage degree of disability which is equivalent to
the ratio that the designated number of months of compensability
bears to seventy-five (75), rounded to the next higher integer, shall not
be additive for distinct, separate and unrelated permanent partial
disabilities, but shall be additive for deteriorating and related
permanent partial disabilities, to a maximum of one hundred percent
(100%), in which case, the member shall be deemed as permanently
totally disabled.
(h) In case of permanent partial disability, the monthly
pension benefit shall be given in lump sum if it is payable for less than
twelve (12) months.
(i) For the purpose of adjudicating retirement, death and
permanent total disability pension benefits, contributions shall be
deemed paid for the months during which the member received partial
disability pension: Provided, That such contributions shall be based on
his last contribution prior to his disability.
(j) Should a member who is on partial disability pension
retire or die, his disability pension shall cease upon his retirement or
death.
3. Funeral Benefit
Section 13-B. Funeral Benefit. - A funeral grant equivalent
to Twelve thousand pesos (₱12,000.00) shall be paid, in cash or in kind,
to help defray the cost of funeral expenses upon the death of a member,
including permanently totally disabled member or retiree.
4. Sickness Benefit
Section 14. Sickness Benefit. - (a) A member who has paid at
least three (3) monthly contributions in the twelve-month period
immediately preceding the semester of sickness or injury and is
confined therefor for more than three (3) days in a hospital or
elsewhere with the approval of the SSS, shall, for each day of
compensable confinement or a fraction thereof, be paid by his
employer, or the SSS, if such person is unemployed or self-employed, a
daily sickness benefit equivalent to ninety percent (90%) of his average
daily salary credit, subject to the following conditions:
(1) In no case shall the daily sickness benefit be paid longer
than one hundred twenty (120) days in one (1) calendar year, nor shall
any unused portion of the one hundred twenty (120) days of sickness
benefit granted under this section be carried forward and added to the
total number of compensable days allowable in the subsequent year;
(2) The daily sickness benefit shall not be paid for more than
two hundred forty (240) days on account of the same confinement; and
(3) The employee member shall notify his employer of the
fact of his sickness or injury within five (5) calendar days after the start
of his confinement unless such confinement is in a hospital or the
employee became sick or was injured while working or within the
premises of the employer in which case, notification to the employer is
not necessary: Provided, That if the member is unemployed or self-
employed, he shall directly notify the SSS of his confinement within
five (5) calendar days after the start thereof unless such confinement is
in a hospital in which case notification is also not necessary: Provided,
further, That in cases where notification is necessary, the confinement
shall be deemed to have started not earlier than the fifth day
immediately preceding the date of notification.
(b) The compensable confinement shall begin on the first day
of sickness, and the payment of such allowances shall be promptly
made by the employer every regular payday or on the fifteenth and last
day of each month, and similarly in the case of direct payment by the
SSS, for as long as such allowances are due and
payable: Provided, That such allowance shall begin only after all sick
leaves of absence with full pay to the credit of the employee member
shall have been exhausted.
(c) One hundred percent (100%) of the daily benefits
provided in the preceding paragraph shall be reimbursed by the SSS to
said employer upon receipt of satisfactory proof of such payment and
legality thereof: Provided, That the employer has notified the SSS of the
confinement within five (5) calendar days after receipt of the
notification from the employee member: Provided, further, That if the
notification to the SSS is made by the employer beyond five (5)
calendar days after receipt of the notification from the employee
member, said employer shall be reimbursed only for each day of
confinement starting from the tenth calendar day immediately
preceding the date of notification to the SSS: Provided, finally, That the
SSS shall reimburse the employer or pay the unemployed member only
for confinement within the one-year period immediately preceding the
date the claim for benefit or reimbursement is received by the SSS,
except confinement in a hospital in which case the claim for benefit or
reimbursement must be filed within one (1) year from the last day of
confinement.
(d) Where the employee member has given the required
notification but the employer fails to notify the SSS of the confinement
or to file the claim for reimbursement within the period prescribed in
this section resulting in the reduction of the benefit or denial of the
claim, such employer shall have no right to recover the corresponding
daily allowance he advanced to the employee member as required in
this section.
(e) The claim of reimbursement shall be adjudicated by the
SSS within a period of two (2) months from receipt
thereof: Provided, That should no payment be received by the employer
within one (1) month after the period prescribed herein for
adjudication, the reimbursement shall thereafter earn simple interest
of one percent (1%) per month until paid.
(f) The provisions regarding the notification required of the
member and the employer as well as the period within which the claim
for benefit or reimbursement may be filed shall apply to all claims filed
with the SSS.
5. Unemployment, Insurance, or Involuntary
Separation Benefits
Section 14-B. Unemployment. Insurance or Involuntary
Separation Benefits. - A member who is not over sixty (60) years of age
who has paid at least thirty-six (36) months contributions twelve (12)
months of which should be in the eighteen-month period immediately
preceding the involuntary unemployment or separation shall be paid
benefits in the form of monthly cash payments equivalent to fifty
Page 86 of 88
percent (50%) of the average monthly salary credit for a maximum of
two (2) months: Provided, That an employee who is involuntarily
unemployed can only claim unemployment benefits once every three
(3) years: Provided, further, That in case of concurrence of two or more
compensable contingencies, only the highest benefit shall be paid,
subject to the rules and regulations that the Commission may
prescribe.
6. Non-Transferability
Section 15. Non-Transferability of Benefits. - The SSS shall
promptly pay the benefits provided in this Act to such persons as may
be entitled thereto in accordance with the provisions of this
Act: Provided, That the SSS shall pay the retirement benefits on the
day of contingency to qualified members who have submitted the
necessary documents at least six (6) months before: Provided,
further, That the beneficiary who is a national of a foreign country
which does not extend benefits to a Filipino beneficiary residing in the
Philippines, or which is not recognized by the Philippines, shall not be
entitled to receive any benefit under this Act: Provided, further, That
notwithstanding the foregoing, where the best interest of the SSS will
be served, the Commission may direct payments without regard to
nationality or country of residence: Provided, further, That if the
recipient is a minor or a person incapable of administering his own
affairs, the Commission shall appoint a representative under such
terms and conditions as it may deem proper: Provided, further, That
such appointment shall not be necessary in case the recipient is under
the custody of or living with the parents or spouse of the member in
which case the benefits shall be paid to such parents or spouse, as
representative payee of the recipient. Such benefits are not transferable
and no power of attorney or other document executed by those entitled
thereto in favor of any agent, attorney or any other person for the
collection thereof on their behalf shall be recognized, except when they
are physically unable to collect personally such
benefits: Provided, further That in case of death benefits, if no
beneficiary qualifies under this Act, said benefits shall be paid to the
legal heirs in accordance with the law of succession.
E. REMITTANCE
Section 22. Remittance of Contributions -
(a) The contribution imposed in the preceding section shall
be remitted to the SSS within the first ten (10) days of each calendar
month following the month for which they are applicable or within
such time as the Commission may prescribe. Every employer required
to deduct and to remit such contributions shall be liable for their
payment and if any contribution is not paid to the SSS as herein
prescribed, the delinquent employer shall pay besides the contribution
a penalty thereon of two percent (2%) per month from the date the
contribution falls due until paid. If deemed expedient and advisable by
the Commission, the collection and remittance of contributions shall be
made quarterly or semi-annually in advance, the contributions payable
by the employees to be advanced by their respective
employers: Provided, That upon separation of an employee, any
contribution so paid in advance but not due shall be credited or
refunded to his employer.
(b) The contributions payable under this Act in cases where
an employer refuses or neglects to pay the same shall be collected by
the SSS in the same manner as taxes are made collectible under the
National Internal Revenue Code, as amended. Failure or refusal of the
employer to pay or remit the contributions herein prescribed shall not
prejudice the right of the covered employee to the benefits of the
coverage.
The right to institute the necessary action against the
employer may be commenced within twenty (20) years from the time
the delinquency is known or the assessment is made by the SSS, or
from the time the benefit accrues, as the ease may be.
(c) Should any person, natural or juridical, defaults in any
payment of contributions, the Commission may also collect the same in
either of the following ways:
(1) By an action in court, which shall hear and dispose of the
case in preference to any other civil action; or
(2) By issuing a warrant to the Sheriff of any province or
city commanding him to levy upon and sell any real and personal
property of the debtor. The Sheriffs sale by virtue of said warrant shall
be governed by the same procedure prescribed for executions against
property upon judgments by a court of record.
(d) The last complete record of monthly contributions paid
by the employer or the average of the monthly contributions paid
during the past three (3) years as of the date of filing of the action for
collection shall be presumed to be the monthly contributions payable
by and due from the employer to the SSS for each of the unpaid month,
unless contradicted and overcome by other evidence: Provided, That
the SSS shall not be barred from determining and collecting the true
and correct contributions due the SSS even after full payment
pursuant to this paragraph, nor shall the employer be relieved of his
liability under Section Twenty-eight of this Act.
Section 22-A. Remittance of Contributions of Self-Employed
Member. - Self-employed members shall remit their monthly
contributions quarterly on such dates and schedules as the Commission
may specify through rules and regulations: Provided, That no
retroactive payment of contributions shall be allowed, except as
provided in this Section.
Should the employer misrepresent the true date of
employment of the employee member or remit to the SSS
contributions which are less than those required in this Act or fail
to remit any contribution due prior to the date of contingency,
resulting in a reduction of benefits, such employer shall pay to the
SSS damages equivalent to the difference between the amount of
benefit to which the employee member or his beneficiary is entitled
had the proper contributions been remitted to the SSS and the
amount payable on the basis of contributions actually
remitted: Provided, That if the employee member or his beneficiary
is entitled to pension benefits, the damages shall be equivalent to
the accumulated pension due as of the date of settlement of the
claim or to the five (5) years’ pension, whichever is higher,
including dependents’ pension.
In addition to the liability mentioned in the preceding
paragraphs (a) and (b) hereof, the employer shall also be liable for
the payment of the corresponding unremitted contributions and
penalties thereon.
F. EXEMPTION FROM TAXES AND LIABILITIES
Section 16. Exemption from Tax, Legal Process and Lien. -
All laws to the contrary notwithstanding, the SSS and all its assets and
properties, all contributions collected and all accruals thereto and
income or investment earnings therefrom as well as all supplies,
equipment, papers or documents shall be exempt from any tax,
assessment, fee, charge, or customs or import duty; and all benefit
payments made by the SSS shall likewise be exempt from all kinds of
taxes, fees or charges, and shall not be liable to attachments,
garnishments, levy or seizure by or under any legal or equitable
process whatsoever, either before or after receipt by the person or
persons entitled thereto, except to pay any debt of the member to the
SSS. No tax measure of whatever nature enacted shall apply to the SSS,
unless it expressly revokes the declared policy of the State in Section 2
hereof granting tax-exemption to the SSS. Any tax assessment imposed
against the SSS shall be null and void.
G. PRESCRIPTION OF ACTIONS
1. Against the Employer
Claims for SSS benefits against the employer must be
brought within 20 years from the time delinquency is known,
assessment is made by the SSS, or benefit accrues, as the case may
be.
2. Action for Disability Claim
Claims for benefits for disability claim must be brought
within 10 years from the date of disability.
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XV
THE GOVERNMENT SERVICE INSURANCE
SYSTEM ACT (R.A. 8291)
A. COMPULSORY COVERAGE
SECTION 3. Compulsory Membership. — Membership in
the GSIS shall be compulsory for all employees receiving compensation
who have not reached the compulsory retirement age, irrespective of
employment status, except members of the Armed Forces of the
Philippines and the Philippine National Police, subject to the condition
that they must settle first their financial obligation with the GSIS, and
contractuals who have no employer and employee relationship with the
agencies they serve.
Except for the members of the judiciary and constitutional
commissions who shall have life insurance only, all members of the
GSIS shall have life insurance, retirement, and all other social security
protection such as disability, survivorship, separation, and
unemployment benefits.
B. BENEFITS FOR INVOLUNTARY SEPARATION
SECTION 12. Unemployment or Involuntary Separation
Benefits. — Unemployment benefits in the form of monthly cash
payments equivalent to fifty percent (50%) of the average monthly
compensation shall be paid to a permanent employee who is
involuntarily separated from the service due to the abolition of his
office or position usually resulting from reorganization: Provided, That
he has been paying integrated contributions for at least one (1) year
prior to separation. Unemployment benefits shall be paid in
accordance with the following schedule:
“Contributions Made Benefit Duration
1 year but less than 3 years 2 months
3 or more years but less than 6 years 3 months
6 or more years but less than 9 years 4 months
9 or more years but less than 11 years 5 months
11 or more years but less than 15 years 6 months
“The first payment shall be equivalent to two (2) monthly
benefits. A seven-day (7) waiting period shall be imposed on succeeding
monthly payments.
“All accumulated unemployment benefits paid to the
employee during his entire membership with the GSIS shall be
deducted from voluntary separation benefits.
“The GSIS shall prescribe the detailed guidelines in the
operationalization of this section in the rules and regulations
implementing this Act.
C. EXEMPTION FROM TAXES AND LIABILITIES
SECTION 39. Exemption from Tax, Legal Process and Lien.
— It is hereby declared to be the policy of the State that the actuarial
solvency of the funds of the GSIS shall be preserved and maintained at
all times and that contribution rates necessary to sustain the benefits
under this Act shall be kept as low as possible in order not to burden
the members of the GSIS and their employers. Taxes imposed on the
GSIS tend to impair the actuarial solvency of its funds and increase the
contribution rate necessary to sustain the benefits of this Act.
Accordingly, notwithstanding any laws to the contrary, the GSIS, its
assets, revenues including all accruals thereto, and benefits paid, shall
be exempt from all taxes, assessments, fees, charges or duties of all
kinds. These exemptions shall continue unless expressly and specifically
revoked and any assessment against the GSIS as of the approval of this
Act are hereby considered paid. Consequently, all laws, ordinances,
regulations, issuances, opinions or jurisprudence contrary to or in
derogation of this provision are hereby deemed repealed, superseded
and rendered ineffective and without legal force and effect.
Moreover, these exemptions shall not be affected by
subsequent laws to the contrary unless this section is expressly,
specifically and categorically revoked or repealed by law and a
provision is enacted to substitute or replace the exemption referred to
herein as an essential factor to maintain or protect the solvency of the
fund, notwithstanding and independently of the guaranty of the
national government to secure such solvency or liability.
The funds and/or the properties referred to herein as well as
the benefits, sums or monies corresponding to the benefits under this
Act shall be exempt from attachment, garnishment, execution, levy or
other processes issued by the courts, quasi-judicial agencies or
administrative bodies including Commission on Audit (COA)
disallowances and from all financial obligations of the members,
including his pecuniary accountability arising from or caused or
occasioned by his exercise or performance of his official functions or
duties, or incurred relative to or in connection with his position or
work except when his monetary liability, contractual or otherwise, is in
favor of the GSIS.

D. PRESCRIPTIVE PERIOD
Claims for GSIS benefits must be brought within 4 years
from the date of contingency (except claims for life and retirement.

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