Law: PD 442 as amended by RA 6715 approved on March 21, 1989

“A DECREE INSTITUTING A LABOR CODE, THERBY REVISING AND CONSOLIDATING

LABOR AND SOCIAL LAWS TO AFFORD PROTECTION TO LABOR, PROMOTE
EMPLOYMENT AND HUMAN RESOURCES DEVELOPMENT AND ENSURE INDUSTRIAL
PEACE BASED ON SOCIAL JUSTICE.”
Article 1. This Decree shall be known as the Labor Code of the Philippines
 May 1, 1974 – PD 442 was signed into law
 Took effect Nov. 1, 1974
Article 2. This Code shall take effect Six months after its promulgation
 RA 6715 – Herrera-Veloso Law
 Sen. Blas Ople – Father of Labor Code
Significance: Before the effectivity of the labor code, there was no provision on the terms and
conditions of employment.
Significance of RA 6715:
Computation of Backwages – after RA 6715 took effect, the award of backwages from the time
compensation was withheld up to the actual reinstatement; However, Facilities should not be
included in the computation of backwages for the reason that such are given free, to be used
only for official tour of duty and not for personal use.
MODULE 1: PRELIMINARY MATTERS
I. CONCEPT OF LABOR
 Ordinary Sense: is understood as the physical toil although it does not necessarily
exclude the application of skill, thus, there is skilled and unskilled labor; work; service
 General Sense: it is the exertion of human being by his mental or physical effort
towards production of goods or services.
 Technical Sense: the working class or workingmen
Skill – the familiar knowledge of any art or science, united with readiness and dexterity in the
execution or performance of the application such art or science to practical purposes.
Work – it is broader than labor; covers all forms of physical or mental exertion or both
combined, for the attainment of some object other than recreation or amusement per se.
Worker – broader than employee; refer to self-employed people and those working in the
service and under the control of another, regardless of rank, title, or nature of work.
Employee – a salaried person working for another who controls or supervises the means,
manner, or method of doing the work
NOTE: It is the workers or the working class who exerts or labors.

II. FOUR SYSTEMS OF LABOR (Sla-Ser-Free-Wage; Slasher Free Wage; S-S-F-W)

1. Slavery
 Refers to the extraction of work or services from any person by means of enticement,
violence, intimidation or threat, use of force or coercion, including deprivation of
freedom, abuse of authority or moral ascendancy, debt bondage or deception. (DO 65-
04 S2004)
  The worker is owned by another at his free disposal
 Prohibited in the Philippines
o Section 18(2) of the Constitution: No involuntary servitude in any form shall
exist except as a punishment for a crime whereof the party shall have been duly
convicted.
o Article 272, Revised Penal Code: Slavery. — The penalty of prision mayor and
a fine of not exceeding 10,000 pesos shall be imposed upon anyone who shall
purchase, sell, kidnap or detain a human being for the purpose of enslaving him.
o Section 4(a) of RA9208: Acts of Trafficking in Persons. - It shall be unlawful for
any person, natural or juridical, to commit any of the following acts: (a) To recruit,
transport, transfer; harbor, provide, or receive a person by any means, including
those done under the pretext of domestic or overseas employment or training or
apprenticeship, for the purpose of prostitution, pornography, sexual exploitation,
forced labor, slavery, involuntary servitude or debt bondage;
2. Serfdom
 Worker, by customary right to his Lord, owes certain service
 Enforced labor of serfs on the fields of the landowners, in return for protection and the
right to work on their leased fields.
 Prohibited in the Philippines
o Article 274 of the RPC: Services rendered under compulsion in payment of
debt. — The penalty of arresto mayor in its maximum period to prision
correccional in its minimum period shall be imposed upon any person who, in
order to require or enforce the payment of a debt, shall compel the debtor to
work for him, against his will, as household servant or farm laborer.
o Section 12-D, RA7610 as amended: 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 as sale and trafficking
of children, debt bondage and serfdom and forced or compulsory labor,
including recruitment of children for use in armed conflict;
3. Free Artisan
 A free person who offers his services to others subject to nobody’s will
 The same with modern independent contractorship wherein an independent contractor is
engaged in a business separately distinct from the principal, the performed job, work or
service, and works according to his own means and methods, free from the control and
direction of the principal except as to the results thereof.
 Governed by Article 1713 of the Civil Code
4. Wage System
 A person offers his services to another under an employment contract for which such
service is paid by wages.
 The same with modern employer-employee system where there is an employee under
the control and supervision of an employer as to the means, manner or method of which
the work is to be accomplished including the result thereof and is paid for the work done
in terms of wage.
 Covered by the Labor Code
NOTE: Only the Free Artisanship and Wage System of Labor are recognized in the Philippines.
 Aim or justification: SOCIAL JUSTICE – those who have less in life should have more in
law.
 Article II, sec. 10 of the constitution
o The state shall promote social justice in all phases of national development.
o The state affirms labor as a primary social economic force. Therefore, it shall
protect the rights of workers and promote their welfare.

III. THREE FIELDS OF LABOR LAW (S-R-S)

1. Labor Standards Law –
 Sets out the minimum terms, conditions, and benefits of employment that employers
must provide or comply with and to which workers are entitled as a matter of legal right;
 The minimum requirements prescribed by existing laws, rules and regulations and other
issuances relating to wages, hours of work, cost of living allowances and other monetary
and welfare benefits, including those set by occupational safety and health hazards.
(Section 7, Rule I, Rules on the Disposition of Labor Standards Cases – September 16,
1987)
Example: wages and hours of work, on safety and health of employees, employment benefits,
overtime pay
2. Labor Relations Law –
 Defines the status, rights, duties, as well as the institutional mechanism that govern the
individual and collective interactions between employers, employees, and their
representatives
 Refers to the interactions between the employers and employees or their
representatives and the mechanism by which the employment standards are negotiated,
adjusted and enforced.
 Marquez: process the terms, benefits and conditions to improve the same through
collective bargaining or negotiation.
Example: unionization, negotiation, dispute settlements
Distinction: Labor standards Law is the material or substance of labor law; Labor Relations
Law is the mechanism or the processes on enforcing the substance.
3. Labor Legislation or Social or Welfare Legislation –
 Law governing the employer-employee relation while the latter is not at work due to the
hazard arising from employment.
 Refers to a broader category of law that protects or promotes the welfare of society or
segments of it in furtherance of social justice.
 Intended to substitute income
Example: Social Security Law, Agrarian Reform Law, Law on Migrant Workers, or more
recently, the New Tax Relief Law
Distinction between Labor Standards and Social Legislation: In LS, the employee is
actually at work; In SL, the employee is not at work or is unable to work.
 IV. BASIS OF ENACTING LABOR LAWS (P-S-P-D)
1. POLICE POWER
 Inherent power of the state to enact legislations that may interfere with personal liberty
or property in order to promote the general welfare of the people (General Welfare
Clause)
 Consists of imposition of restraint upon liberty or property and in order to foster the
common good.
 General welfare clause deemed written into the employment contract.
 Power to regulate personal liberty or property rights.
 Labor Code contains several provisions that affect life and property.
NOTE: Having a job is a property right
Example:
Article 263 LC: (g) When, in his opinion, there exists a labor dispute causing or likely to cause a
strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and
Employment may assume jurisdiction over the dispute and decide it or certify the same to the
commission for compulsory arbitration..
Reason: SOLE may compel the employer to admit the employees and the employees to return
to their work.
2. SOCIAL JUSTICE
 The promotion of the welfare of all the people, the adoption by the government of
measures calculated to insure economic stability of all the component elements of
society through the maintenance of proper economic and social equilibrium in the
interrelation of the members of the community, constitutionally through the adoption of
measures legally justifiable, or extra-constitutionally through the exercise of powers,
underlying the exercise of all governments on the time honored principle of “salus populi
est suprema lex”. (Dr. Jose P. Laurel)
 The law is geared towards the concern of labor because our legislators realize that
social and economic imbalance between the employer and employee.
 Philippines is a signatory of ILO Convention (International Labor Organization)
 UN Declaration of Human Rights
 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
Examples: Migrant worker’s act, retirement law, Art. Xix, sec. 19
3. PROTECTION TO LABOR CLAUSE
Article XIII, Section 3, 1987 Constitution. The State shall afford full protection to labor, local
and overseas, organized and unorganized, and promote full employment and equality of
employment opportunities for all.
Reason: Employer stands in a higher footing than the employee because of economic
dependence of the employee on the employer and the greater supply of labor than the demand
of it.
Example: Migrant worker’s act

4. DOCTRINE OF INCORPORATION
Article II, Section 2, Constitution: The Philippines renounces war as an instrument of
national policy, adopts the generally accepted principles of international law as part of the law of
the land, and adheres to the policy of peace, equality, justice, freedom, cooperation, and amity
with all nations.
Cite at least 5 International Labor Organization (ILO) Conventions:
1. C87 Freedom of Association and Protection of the Right to Organize to Convention (1948)
2. C99 Minimum Wage Fixing Machinery Convention (1951)
3. C105 Abolition of Forced Labor Convention (1957)
4. C17 Workmen’s Compensation (1925)
5. C149 Tripartite Consultation Convention (1976)

V. CONSTITUTIONAL PROVISIONS ON LABOR LAW

A. Sec. 18, Art. II, 1987 Constitution
Section 18. The State affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare.
One of the most neglected sectors among health professionals is the rural health
physician. They have spent a fortune and labored in their studies to pursue their degrees. Yet
while, being loyal to the Oath of Hippocrates or the Hypocratic Oath to serve the medical needs
of our people, their own well-being and their respective families are compromised because of
meager salaries they receive from the government. This is the main reason why they leave their
practice of profession in our country and seek greener pastures in other countries. As a result,
the delivery of our health system suffers and majority of our people are deprived of medical care
as the brain drain continues.
This bill seeks to avoid the further migration of rural health physicians by giving them
higher incentive in terms of salary In the long run, the rural health physicians will develop their
medical specializations for the benefit of our people. It also enjoins local government elected
officials to strictly comply with the Magna Carta for Rural Health Workers in giving the salaries
and benefits due to public health physicians.
B. Freedom of Speech, Association and Expression - Sec. 4, Art. III, 1987 Constitution
Section 4. No law shall be passed abridging the freedom of speech, of expression, or of
the press, or the right of the people peaceably to assemble and petition the government
for redress of grievances.
Freedom of the press is guaranteed by a government of free public press for its citizens
and their association, extended to members of news gathering organizations, and their
published reporting. It also extended to news gathering and processes involved in obtaining
information for public distribution.
 Freedom of press implies that all people should have the right to express themselves in
writing or in any other way of expression of personal opinion or creativity. The Universal
Declaration of Human Rights indicates: “Everyone has the right to freedom of opinion and
expression; this right includes freedom to hold opinions without interference and to seek,
receive, and impart information and ideas through any media regardless of frontiers”.
Republic Act No. 53 as amended, otherwise known as Sotto law was enacted to protect
the newspaper journalist for being compelled to name his news source but, look again the law
does not mention broadcast journalist.
The Sotto Law, Republic Act No. 53 “An Act exempt the publisher, editor or reporter of
any publication from revealing the source of published news or information obtained in
confidence” protects journalist from being compelled to reveal their news source. It is silent
about radio or TV journalist. The rule on interpreting statutes is that what is not included is
considered excluded Sotto law was named after Cebuano journalist Vicente Sotto “the father” of
Cebuano journalist, literature and language, who was jailed for months over an article he printed
in his newspaper.
This bill seeks to amend the Sotto Law to include broadcast and Internet media in the
privilege statute allowing journalist to decline from revealing his or her source except when the
court or Congress finds the revelation necessary for national security.
The amendment will give them the same protection: “the journalist cannot be compelled
to reveal the source of my news item, news report or information reported or disseminated in the
media which was related in confidence to the journalist.”
The fear of broadcast journalist and other media practitioners of being taken to court for
refusing to reveal sources of news and articles or commentaries will soon be over.
The bill will not only strengthen the confidence of journalist in broadcast, news agencies
and in the Internet sector but will recognize the important role they play, alongside print
reporters, and in nation building.
The reasons for this rule is that the identity of sources of a confidential news report or
information must be protected otherwise the spring of data for news commentary, abridge
expressions and unalloyed pleasure dries up and the mission of the press to check and balance
and expose wrongdoing is defeated.

C. Non-impairment of Obligations and Contracts - Sec. 10, Art. III, 1987 Constitution
Section 10. No law impairing the obligation of contracts shall be passed.
The non-impairment clause is limited in application to laws that derogate from prior acts
or contracts by enlarging, abridging or in any manner changing the intention of the parties.
There is impairment if a subsequent law changes the terms of a contract between the parties,
imposes new conditions, dispenses with those agreed upon or withdraws remedies for the
enforcement of the rights of the parties.
It means that the court, shall not pass a law that will impair, break or suspend a contract
or treaty made between parties involved.
D. Right to Speedy Disposition of Cases - Sec. 16, Art. III, 1987 Constitution
Section 16. All persons shall have the right to a speedy disposition of their cases before all
judicial, quasi-judicial, or administrative bodies.
E. Prohibition against involuntary servitude - Sec. 18, Art. III, 1987 Constitution
Section 18.
(1) No person shall be detained solely by reason of his political beliefs and aspirations.
(2) No involuntary servitude in any form shall exist except as a punishment for a crime whereof
the party shall have been duly convicted.

VI. LIMITATIONS IN THE ENACTMENT OF LABOR LAWS

A. NON-IMPAIRMENT CLAUSE
Article III, Section 10. No law impairing the obligation of contracts shall be passed.
 Congress could not pass laws which would impair the obligations of the parties,
however, the same can pass laws to regulate the obligations and contracts.
 May be impaired by the exercise of the state of police power.
B. EQUAL PROTECTION CLAUSE
Article III, Section 1. No person shall be deprived of life, liberty, or property without due process
of law, nor shall any person be denied the equal protection of the laws.
 Individuals similarly situated must be treated equally under the3 law.
 Equality among equals
C. PROHIBITION AGAINST INVOLUNTARY SERVITUDE
Article III, Section 18(2). No involuntary servitude in any form shall exist except as a punishment
for a crime whereof the party shall have been duly convicted. (e.g. anti-trafficking in persons
act, forced labor, slavery)
D. DUE PROCESS CLAUSE
Art. III, Sec. 1 of the 1987 Constitution
“Strike, but hear me first.”
Section 1. No person shall be deprived of life, liberty, or property without due process of
law, nor shall any person be denied the equal protection of the laws.
Employment discrimination occurs whenever an employer or its representatives
adversely single out employees or applicants on the basis of age, race, gender, sexual
orientation, disability, religion and a variety of other reasons.
Under the equal Protection Clause of the Constitution, employers can't discriminate
against a person in any aspect of employment, such as: hiring and firing; compensation;
assignment; or classification of employees; transfer; promotion; layoff; or recall; job
advertisements; recruitment; testing; use of company facilities; training and apprenticeship
programs; fringe benefits; pay; retirement plans; and disability leave.
To be considered as "illegal", such discrimination must however be in violation of a
specific law. Otherwise, no protection from discrimination may be had even how unfair or
unethical it may seem.
For example, an employer 'may be harder on a specific employee from anyone else for
no apparent reason, While it might be unethical behavior for a boss, it's not discrimination by
law, But if he or she is extra hard on the employee for a reason that's protected by law, such as
religion, age or sex, then such shall constitute illegal discrimination, especially if such employee
suffers damage such as getting passed over for a well-deserved raise or promotion. This
measure seeks to prevent certain acts of discrimination to protect employees and advocate the
equal protection clause of the Constitution.

VII. CONSTITUTIONAL AND STATUTORY RIGHTS OF LABOR AND CAPITAL

Art XIII, Sec. 3 of the 1987 Constitution
Article XIII, Section 3 of the 1987 Constitution affirms that, "The State shall afford full
protection to labor, local and overseas, organized and unorganized, and promote full
employment opportunities for all. It shall guarantee the rights of all workers to
selforganization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law. They shall be entitled to
security of tenure, humane conditions of work, and a living wage. xxx" Consistent with this
constitutional mandate, it is the duty of Congress to provide for a wage that could sustain the
basic standards of living necessary for the health, efficiency and general well-being of the
worker and his/her family.
 However, the current wages of workers in government service are hardly sufficient to
make both ends meet. The basic pay of a government worker could be as low as Five thousand
five'hundred ninety pesos (Php5, 590.00) per month. The 2006 study of the IBON Foundation
showed that the cost of living for a family of five in the National Capital Region (NCR) is around
Seventeen thousand two hundred thirty six pesos (Phpl7, 236.00) a month or around Five
hundred seventy-five pesos (Php575.00) a day. This is an appalling reality considering that the
workers in the public sector are responsible for the daily operations of the National Government.
The unabated increase in the prices of petroleum products which contribute to the
continuing escalation of prices of the basic commodities and the multiple tax liabilities the
worker has to pay have substantially diminished his purchasing power. These economic realities
have left the poor worker even more impoverished.
This bill proposes a Three Thousand Pesos (Php 3,000.00) across-the-board increase in
the monthly wage and salary rates of employees in the public sector. Although this amount
would not fully cover the increase in the cost of daily living, it would certainly augment the
income of the worker to support the basic needs of his/her family.

VIII. SOURCES OF LABOR LAWS (LABOR STANDARDS R-O-L-J)

a) The Labor Code , PD 442 as amended
b) Judicial decisions
c) Rules and regulations issued by administrative agencies
d) Omnibus Rules as amended by DO No. 09, Series of 1997 & DO No. 40-03, Series of 2003,
as amended by DO Nos. 40-A-03, 40-B-03, 40-C-05
Rules and regulations have the force and effect of law, provided they do not expand the law or
strip the law. Otherwise, under the rules on statutory construction, these will be considered void.
SOURCES OF LABOR LAWS (LABOR RELATIONS)
PRIMARY (C-S-D)
a) Constitution
b) Statutes ( NCC, RPC, Special Laws)
c) Supreme court decisions
SECONDARY (D-R-O-R)
a) Decisions of foreign courts (where our labor statutes are based or patterned after statutes in
foreign jurisdictions, decisions in the high courts in those jurisdictions construing and
interpreting should receive the careful attention of our courts in the application of our laws)
b) Reviewers in labor laws/ textbooks
c) Opinions of labor department or agencies
d) Rules and regulations issued by DOLE (department orders)
NOTE:
Labor laws do not only include PD 442 as amended but as well as decisions of the SC
interpreting and applying the laws. Included as well are rules and regulations issued by the
appropriate government agencies (e.g. DOLE)
 IX. RULES ON THE IMPLEMENTATION AND INTERPRETATION OF LABOR LAWS – ART
4, LC
Article 4, Labor Code. 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.
Reasons: Employer stands in a higher footing than the employees and the State affirms
labor as the primary social economic force.
 The policy is to apply the code to a greater number of employees to enable them to avail
of the benefits under the law, in line with the State’s desire to give a maximum aid and
protection to labor.
 It is not always correct to think that the aim of the law is always to favor labor. The
mandate under Art 4 is simply to resolve doubt, if any, in favor of labor. If there is no
doubt in implementing and interpreting the law, labor will enjoy no built-in advantage and
the law will have to be applied as it is.
 The law in protecting the rights of the laborer, authorizes neither oppression nor self
destruction of the employer.
 Court decisions adopt a liberal approach that favors the exercise of labor rights.

X. RELATION BETWEEN CAPITAL AND LABOR – ART 1700-1702, NEW CIVIL CODE
Article 1700, NCC (Relation Between Capital and Labor) The relation 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
Lawson labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor, and similar subjects.
Labor disputes also affect the state and the public at large if employees are engaged in
strike or other concerted activities.
PARTIES TO EMPLOYMENT CONTRACT
1. Employer
2. Employee
3. State
4. Public
Article 1701, NCC. Neither capital nor labor shall act oppressively against the other, or impair
the interest or convenience of the public. (PRINCIPLE OF NON-OPPRESSION)
Article 1702, NCC. In case of doubt, all labor legislations and all labor contracts shall be
construed in favor of the safety and decent living of the laborer.
LABOR AND “CHATTEL”
“Labor is not a chattel nor a commodity, but human, and must be dealt from the standpoint of
human interest.” (Asufrin vs. San Miguel Corporation, G.R. No. 156658. March 10, 2004)
 XI. PRINCIPLES OF NON-OPPRESSION
Article 1701, NCC. Neither capital nor labor shall act oppressively against the other, or impair
the interest or convenience of the public. (PRINCIPLE OF NON-OPPRESSION)
The Labor Code is not one-sided. It is not meant to protect a sector to oppress another.
All throughout the Code, the rights and responsibilities not only of employees but also of
employers are recognized. Indeed, the Labor Code has to protect the interests of both
employees and employers, for if it does not, it would be unconstitutional. The very first article of
the Constitution’s Bill of Rights refers to all persons — rich or poor, aliens or citizens, artificial or
natural — when it states: "No person shall be deprived of life, liberty, or property without due
process of law, nor shall any person be denied the equal protection of the laws." It is unjustified
to view the Labor Code as a law of and for workers only, if this term refers only to hired workers.

XII. TRIPARTISM
 Tripartism refers to the representation of workers and employers sectors in
decision and policy making bodies of the government. Through tripartism, workers
and employers on the one hand, representing their respective interests, and the
government on the other hand, representing the interest of the public, help shape labor,
social and economic policies and programs of the government.
 Tripartism is in place in government agencies like the National Labor Relations
Commission (NLRC), Employees Compensation Commission (ECC), National Wages
and Productivity Commission (NWPC), Technical Education and Skill Development
Authority (TESDA), Social Security System (SSS), Government Service Insurance
System (GSIS), Philippine Overseas Employment Administration (POEA), Overseas
Workers’ Welfare Administration (OWWA) and Pag-Ibig Home Development Funds
(Pag-Ibig).
Art. 275.Tripartism and tripartite conferences. — (a) Tripartism in labor relations is hereby
declared a State policy. Towards this end, the State shall encourage the representation of
workers and employers in policy-making bodies of the government.
(b)The Secretary of Labor or his duly authorized representatives may from time to time call a
national, regional, or industrial tripartite conference of representatives of government, workers
and employers for the consideration and adoption of voluntary codes of principles designed to
promote industrial peace based on social justice or to align labor movement relations with
established priorities in economic and social development. In calling such conference, the
Secretary of Labor may consult with accredited representatives of workers and employers.
Reason: Relations between capital and labor are not merely contractual. They are so
impressed with public interest that representations from employer and employee in decision and
policy-making bodies of the government are necessary. This is also in affirmation of the role of
the State as the guardian of the people’s rights and the constitutional provision on protection to
labor.
Examples:
 Creation of Regional Tripartite Wages and Productivity Board (RTWPB) which is
composed of government, employer and employee representatives.
 Composition of NLRC, chairman is government appointed, remaining 2 commissioners
from employer and employee sectors.

 Amendatory decree no. 850 (1975) adopted tripartism as a state policy

 Tripartism is a representation of three sectors in policy-making bodies of the government
1. public or the government
2. employees
3. workers
 Such kind of representation is not ordained, not even by the Constitution. What is
provided for, for the private sector is worker’s participation in policy and decision-making
processes directly affecting their rights, benefits, and welfare.
 MODULE 2: EMPLOYER-EMPLOYEE RELATIONSHIP
I. CONCEPT OF EMPLOYER-EMPLOYEE (LABOR RELATIONS)

Art 212e. “Employer” includes any person acting in the interest of an employer, directly or
indirectly. The term shall not include any labor organization or any of its officers or agents
except when acting as employer.

Art 212f. “Employee” includes any person in the employ of the employer. The term shall not be
limited to the employees of a particular employer, unless this code so expressly states. It
shall include any individual whose work has ceased as a result of or in connection with
any current labor dispute or because of any unfair labor practice if he has not obtained
any other substantially equivalent and regular employment. (Expanded definition)

II. DETERMINNIG THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP

a. Four-Fold Test
I. Selection and Engagement of Employees
1. Exercise of Right/Prerogative: Absolute?
Our laws recognize and respect the exercise by management of certain rights and
prerogatives.  For this reason, courts often decline to interfere in legitimate business
decisions of employers.  In fact, labor laws discourage interference in employers’
judgment concerning the conduct of their business.  (Philippine Industrial Security
Agency Corporation vs. Aguinaldo, G. R. No. 149974, June 15, 2005; Mendoza vs. Rural
Bank of Lucban, G.R. No. 155421, July 7, 2004).

An employer can regulate, generally without restraint, according to its own discretion and
judgment, every aspect of its business. (Deles, Jr. vs. NLRC, G. R. No. 121348, March
9, 2000).  chanrobles virtual law library

This privilege is inherent in the right of employers to control and manage their enterprise
effectively.  (Mendoza vs. Rural Bank of Lucban, G.R. No. 155421, 07 July 2004).
2. Management Prerogative
Needless to state, the exercise of management prerogative is not absolute.  The
exercise of management prerogative is subject to the limitations imposed by law or by
CBA, employment contract, employer policy or practice and general principles of fair
play and justice. (The Philippine American Life and General Insurance Co. vs. Gramaje,
G. R. No. 156963, Nov. 11, 2004).
3. Legal Limitations/Prohibitions prior to hiring:
A. Prohibition Against Stipulation of Marriage - Art. 134, LC

B. Minimum Employable Age - Art. 137, LC

C. Unfair Labor Practices of Employers - Art. 259[b], LC

D. Prohibiting the Employment of Children Below 15 years of Age in Public and

Private Undertakings - R.A. No. 7658
Prohibits employment of children below 15 except when employed
directly by the child's parents or legal guardian, provided that the work does not
endanger the child's health and morals, and that the child is provided with
primary and/or secondary education. Also permits children to be employed in
entertainment productions, provided a permit is secured from the Department of
Labor and Employment.
E. Sec. 14, R.A. No. 7610 - AN ACT PROVIDING FOR STRONGER
DETERRENCE AND SPECIAL PROTECTION AGAINST CHILD ABUSE,
EXPLOITATION AND DISCRIMINATION, AND FOR OTHER PURPOSES
Section 14. Prohibition on the Employment of Children in Certain
Advertisements. – No person shall employ child models in all commercials or
advertisements promoting alcoholic beverages, intoxicating drinks, tobacco and
its byproducts and violence.
F. Guidelines in Assessing and Determining Hazardous Work in the Employment
of Persons below 18 years of age - DOLE D.O. No. 149 s. 2016
G. Sec. 3, Anti-Sexual Harassment Act - R.A. No. 7877
SEC. 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.
H. Sec. 35, Philippine AIDS Prevention and Control Act of 1998 - R.A. 8504
Sec. 35. Discrimination in the workplace. – Discrimination in any form
from pre-employment to post-employment, including hiring, promotion or
assignment, based on the actual, perceived or suspected HIV status of an
individual is prohibited. Termination from work on the sole basis of actual,
perceived or suspected HIV status is deemed unlawful.
I. Sec. 55.04, General Banking Laws of 200 - R.A. no. 8791
55.4. Consistent with the provisions of Republic Act No. 1405, otherwise
known as the Banks Secrecy Law, no bank shall employ casual or non regular
personnel or too lengthy probationary personnel in the conduct of its business
involving bank deposits.
J. Sec. 23[c], Responsible Parenthood & Reproductive Health Act of 2012 - R.A.
No. 10354
(c) Any employer who shall suggest, require, unduly influence or cause any
applicant for employment or an employee to submit himself/herself to
sterilization, use any modern methods of family planning, or not use such
methods as a condition for employment, continued employment, promotion or the
provision of employment benefits. Further, pregnancy or the number of children
shall not be a ground for non-hiring or termination from employment;
K. Secs. 4-7, Anti-Age Discrimination in Employment Act - R.A. No. 10911 (see
also DOLE DO No. 170 S. 2017)

Section 4. Coverage. - The provisions of this Act shall apply to all employers,
labor contractors or subcontractors, if any, and labor organizations.

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.

Section 7. Penalty. - Any violation of this Act shall be punished with a fine of not
less than fifty thousand pesos (₱50,000.00) but not more than five hundred
thousand pesos (₱500,000.00), or imprisonment of not less than three (3)
months but not more than two (2) years, or both, at the discretion of the court. If
the offense is committed by a corporation, trust, firm, partnership or association
or other entity, the penalty shall be imposed upon the guilty officer or officers of
such corporation, trust, firm, partnership or association or entity.

II. Payment of Wages

Whether or not there is payment of wages to the employee by the employer.
III. Power of Dismissal
Whether or not employer has the power to dismiss employee.
IV. Power of Control
Whether or not the employer has the power of control over the employee.
B. Two-Tiered Test / Economic Reality Test

Q: How to determine that a person is economically dependent?

A:
1. Number of years in the company
2. Reported to SSS, good indicator of treating him as an employee.
3. Registered in the payroll
2. Identification card
3. Company uniform
 Determine the underlying economic realities of the activity or relationships.
 The determination of the relationship between employer and employee depends
upon the circumstances of the whole economic activity
1. The (broad) extent to which the services performed are an intergral part of the employer’s
business.
2. The (limited) extent of the worker’s investment in the equipment and facilities
3. The nature (close supervision) and (high) degree of control exercised by the employer
4. The workers (limited) opportunities for profit and loss
5. The (small) amount of initiative, skill, judgment or foresight required for the success of the
claimed independent enterprise
6. The (high degree of) permanency and duration of the relationship between the worker and
the employer
7. The degree of dependency of the worker upon the employer for his continued employment in
that line of business.
Note: Unlike employee, independent contractor does not solely depend on the company for
continued work as they can pursue other jobs.
 III. DISTINIGUISH EMPLOYER-EMPLOYEE RELATIONSHIP FROM;
A. Principal-Agent Relationship
Art 1868 NCC: By the contract of agency, a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or authority of the
latter.
It is the principal who selects the agent. An agent is compensated under the contract of
agency of services rendered. He is disciplined by the principal as in the case of an employee
because the agent is under the authority of the principal. The principal controls the means and
methods of the work of an agent. In this relationship, there is only one party. The agent is
merely an extension of the principal. They are regarded as one. So if there is a contractor
relationship, it is not among three parties but is between the principal/agent and the other party.
Thus, to make a distinction between a principal-agent and employer-employee, the four-
fold test will not be used because the agent is selected by the principal and is also compensated
by the principal and most oftentimes, the principal substitutes his own judgment for that of the
agent.
Note: To make a distinction between a principal-agent relationship and that of an employer-
employee relationship, the four-fold test will not be used because the 1) agent is selected by the
principal 2) compensated by the principal 3) and most oftentimes, the principal also substitutes
his own judgment for that of the agent.
B. Principal-Contractor Relationship
The principal selects the contractor. The contractor is compensated for services
rendered. The contractor is not under the discipline of the principal. The distinction says that
aside from engaging in the business separately distinct from the principal, the performed job,
work, or services is according to his own means and methods free from the control and direction
of the principal except as to the results thereof.
The definition says that aside from engaging in a business separately distinct from the
principal, to perform job, work or service, according to his own means and methods, free from
control and direction of the principal except as to the results thereof.
 Contractor may be Individual, Corporate Juridical Entity – no need of protection from
labor code because they earn better.
I. Working Conditions in the Movie & Television Industry – DOLE Advisory No. 04 s.
2016
 IV. CONTRACTING AND SUBCONTRACTING ARRANGEMENT
A. Art. 106 of the Labor Code

Art. 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 latter’s 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.

B. Trilateral Relationship

C. Legitimate Contracting/ Subcontracting v. Labor-Only Contracting

Is there a significance of knowing the difference between Job contracting and Labor-only
contracting? THERE IS.  Job contracting is valid and recognized by law while Labor-only
contracting is a prohibited act. A finding that a contractor is a labor-only contractor is equivalent
to a declaration that there is an employer-employee relationship between the principal and the
employees of the labor-only contractor. In such a case the labor-only contractor shall be
responsible to the workers in the manner and extent as if said workers were directly employed
by him.
I. DOLE Department Order No. 174, Series of 2017
D. Elements of Legitimate Job Contracting
Under the Labor Code, the State may restrict or prohibit the contracting out of labor to
protect the rights of workers. Job contracting is not absolutely prohibited. The Department of
Labor and Employment’s (DOLE) latest issuance, Department Order (DO) 174, s. 2017, sets out
parameters for permissible contracting arrangements.
The concurrence of the following is essential for a contractor to be considered as a
legitimate job contractor:

a) The contractor or subcontractor 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;
b) The contractor or subcontractor 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;
c) In performing the work farmed out, the contractor or subcontractor is free from the
control and/or direction of the principal in all matters connected with the performance of
the work except as to the result thereto; and
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.

E. Effects of Labor-Only Contracting

Labor-only contracting refers to arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job or work for a principal. There are two
variants of labor-only contracting:
1. When the contractor or subcontractor does not exercise the right to control over the
performance of the work of the employees.
2. When: (i) the contractor or subcontractor does not have substantial capital, or does
not have investments in the form of tools, equipment, machineries, supervision, work
premises, among others; and (ii) 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.
LIABILITY OF PRINCIPAL
In instances where there is a finding of labor-only contracting or illegal employment
arrangements, the principal shall be deemed the direct employer of the contractor’s or
subcontractor’s employees.
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. A finding of a “labor-only” contractor is equivalent to a finding
that an employer-employee relationship exists between the company and the labor
contractor’s employee, the relationship being such as provided by the law itself. (In
 technical terms, the principal employer is solidarily liable with the labor-only contractor
for all the rightful claims of the employees).

F. Other Illicit Forms of Employment

I. DOLE Department Order No. 174, Series of 2017