LABOR EXAM 2018
3. Cite the five grounds for disciplinary
Date of Submission: 23 July 2018
1. Discuss the types of illegal recruitment
under the Labor Code. (5%) 2007 Bar Exam
Under the Labor Code, as amended by
Republic Act No. 8042 otherwise known
as the ―Overseas Filipinos and Migrant
Workers Act of 1998, there are two types
of illegal recruitment, particularly simple
illegal recruitment and illegal
recruitment which is considered as an
offense involving economic sabotage.
Illegal recruitment as an offense
involving economic sabotage is
committed under the following qualifying
circumstances, to wit: When illegal
recruitment is committed by a syndicate,
that is when it is carried out by a group of
three (3) or more persons conspiring
and/or confederating with one another;
or When illegal recruitment is committed
in large scale that is when it is committed
against three (3) or more persons
whether individually or as a group.
2. In initiating actions against alleged illegal
recruiters, may the Secretary of Labor and
Employment issue search and arrest warrants?
(5%) 2007 Bar Exam
No, the Secretary of Labor and
Employment cannot issue search and
arrest warrants. He is only authorized to
cause the arrest of illegal recruiters
and/or to order the search of the office or
premises used in illegal recruitment
activities (Article 38 of the Labor Code, as
amended by P.D. 2018). The power to
issue search and arrest is specifically
vested only upon judges under the
constitution.
Azucena: under the Constitution, only a
judge may issue warrants of search and
arrest. The labor authorities must go
through the judicial process. The
secretary of Labor, not being a judge, may
no longer issue search of warrants. To
that extent, Article 38, par. (c), of the
Labor Code, is declared of no force and
effect.
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action by the Philippine Overseas Employment
Administration (POEA) against overseas workers.
(5%) 2007 Bar Exam
Under the Section 1(A) and (B), Rule III, Part VII
of the 2002 POEA Rules and Regulations
Governing the Recruitment and Employment of
the Land-based Overseas Workers, the
following are the grounds for disciplinary action
against overseas workers:
(A) Pre-employment Offenses:
(1) Using, providing, or submitting false
information or documents for purposes of job
application or employment;
(2) Unjustified refusal to depart for the
worksite after all employment and travel
documents have been duly approved by the
appropriate government agency/eis.
(B) Offenses during Employment
(1) Commission of a felony or a crime
punishable by Philippine Laws or by the laws of
the host country;
(2) Unjustified breach of employment
contract;
(3) Embezzlement of company funds or
monies and/or properties of a fellow worker
entrusted for delivery to kin or relatives in the
Philippines; and
(4) Violation/s sacred practice of the
host country.
4. True or false? As a general rule, direct
hiring of Overseas Filipino Workers (OFWs) is
not allowed. (2%) 2010 Bar Exam
True. Employers cannot directly hire
workers for overseas employment except
through authorized entities (article 18).
Direct hiring by members of the
diplomatic corps, international
organizations, and such other employers
as may be allowed by the Department of
Labor and Employment is exempted from
this provision.
5. When does the recruitment of workers
become an act of economic sabotage? (2%) 2015
Bar Exam
Illegal recruitment is considered
economic sabotage - when the
 commission thereof is attended by the
qualifying circumstances as follows:
a. By a syndicate - if carried out by a group
of 3 or more persons conspiring and
confederating with one another;
b. In large scale - if committed against 3
or more persons individually or as a
group.
(Article 38 of the Labor Code)
6. Rocket Corporation is a domestic
corporation registered with the SEC, with 30% of
its authorized capital stock owned by foreigners
and 70% of its authorized capital stock owned by
Filipinos. Is Rocket Corporation allowed to
engage in the recruitment and placement of
workers, locally and overseas? Briefly state the
basis for your answer. (2%) 2015 Bar Exam
No. Article 27 of the Labor Code
mandates that pertinently, for a
Corporation to validly engage in
recruitment and placement of workers,
locally and overseas, at least seventy-five
percent (75%) of its authorized and voting
capital stock must be owned and
controlled by Filipino citizens. Since only
70% of its authorized capital stock is
owned by Filipinos, it consequently
cannot validly engage in recruitment and
placement of workers, locally and
overseas.
7. The power to suspend or cancel a license
to recruit employees is vested on:
a. The Secretary of Labor and
Employment;
b. The POEA Administrator;
c. A and B ‘concurrently;
d. Neither of them.
C. A and B concurrently
TRANS ACTION OVERSEAS
CORPORATION, petitioner, vs. THE
HONORABLE SECRETARY OF LABOR
(G.R. No. 109583. September 5, 1997)
Ruling: In view of the Courts disposition
on the matter, we rule that the power to
suspend or cancel any license or authority
to recruit employees for overseas
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employment is concurrently vested with
the POEA and the Secretary of Labor.
8. The State shall allow the deployment of
overseas Filipino workers only in countries
where the rights of Filipino migrant workers are
protected. Which of the following is not a
guarantee, on the part of the receiving country,
for the protection of the rights of OFW’s?
a. It has existing labor and social laws
protecting the rights of migrant workers;
b. It promotes and facilitates re-integration
of migrants into the national mainstream;
c. It is a signatory to and/or ratifier of
multilateral conventions, declarations or
resolutions relating to the protection of migrant
workers;
d. It has concluded a bilateral agreement or
arrangement with the government on the
protection of the rights of overseas Filipino
workers.
B. It promotes and facilitates re-
integration of migrants into the national
mainstream
REPUBLIC ACT NO. 8042
Migrant Workers and Overseas Filipinos
Act of 1995
SEC. 4. Deployment of Migrant Workers -
The State shall deploy overseas Filipino
workers only in countries where the
rights of Filipino migrant workers are
protected. The government recognizes
any of the following as guarantee on the
part of the receiving country for the
protection and the rights of overseas
Filipino workers:
(a) It has existing labor and social laws
protecting the rights of migrant workers;
(b) It is a signatory to multilateral
conventions, declaration or resolutions
relating to the protection of migrant
workers;
(c) It has concluded a bilateral agreement
or arrangement with the government
protecting the rights of overseas Filipino
workers; and
 (d) It is taking positive, concrete
measures to protect the rights of migrant
workers.
It is not among those specifically
mentioned under Section 4 or the
Migrant Workers and Overseas Filipinos
Act.
9. What is the nature of the liabilities of the
local recruitment agency and its foreign
principal?
a. The local agency is jointly liable with the
foreign principal; severance of relations between
the local agent and the foreign principal
dissolves the liability of the local agent recruiter;
b. Local agency is solidarily liable with the
foreign principal; severance of relations between
the local agent and the foreign principal
dissolves the liability of the foreign principal.
only;
c. Local agency is solidarily liable with the
foreign principal; severance of relations between
the local agent and foreign principal does not
affect the liability of the foreign principal;
d. Local agency is jointly liable with the
foreign principal; severance of the relations
between the local agent and the foreign principal
does not affect the liability of the local recruiter.
c. Local agency is solidarily liable
with the foreign principal; severance of
relations between the local agent and
foreign principal does not affect the
liability of the foreign principal;
RA 8042, SEC. 10. MONEY CLAIMS. –
XXX.
The liability of the
principal/employer and the
recruitment/placement agency for any
and all claims under this section shall be
joint and several. This provisions shall be
incorporated in the contract for overseas
employment and shall be a condition
precedent for its approval. The
performance bond to be filed by the
recruitment/placement agency, as
provided by law, shall be answerable for
all money claims or damages that may be
awarded to the workers. If the
recruitment/placement agency is a
juridical being, the corporate officers and
directors and partners as the case may be,
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shall themselves be jointly and solidarily
liable with the corporation or partnership
for the aforesaid claims and damages.
Such liabilities shall continue
during the entire period or duration of the
employment contract and shall not be
affected by any substitution, amendment
or modification made locally or in a
foreign country of the said contract.
10. Which phrase is the most accurate to
complete the statement – A private employment
agency is any person or entity engaged in the
recruitment and placement of workers:
a. for a fee, which is charged directly from
the workers.
b. for a fee, which is charged directly from
employers.
c. for a fee, which is charged directly or
indirectly from workers, employers or both.
d. for a fee, which is charged from workers
or employers, which covers both local and
overseas employment.
(C) For a fee, which is charged directly or
indirectly from workers, employers or
both
Art. 13 (c), Labor Code
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.
(e) "Private employment agency" means
any person or entity engaged in the
recruitment and placement of workers for
a fee which is charged directly against the
workers or employers, or both (Section
1(e), OMNIBUS RULES
IMPLEMENTING THE LABOR CODE).
11. Who has jurisdiction over a money claim
instituted by an overseas Filipino worker?
a. Labor Arbiter;
b. National Labor Relations Commission;
c. Labor Arbiter concurrently with the
regular courts.;
d. National Labor Relations Commission
concurrently with the regular courts.
(A) Labor Arbiter
 Sec. 10, RA 8042
SEC. 10. MONEY CLAIMS. - contract, plus full reimbursement of his
Notwithstanding any provision of law to
the contrary, the Labor Arbiters of the
National Labor Relations Commission
(NLRC) shall have the original and
exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after
filing of the complaint, the claims arising
out of an employer-employee
relationship or by virtue of any law or
contract involving Filipino workers for
overseas deployment including claims for
actual, moral, exemplary and other forms
of damages.
12. Peter worked for a Norwegian cargo
vessel. He worked as a deckhand, whose primary
duty was to assist in the unloading and loading
of cargo and sometimes, assist in cleaning the
ship. He signed a five-year contract starting in
2009. In 2011, Peter’s employers began treating
him differently. He was often maltreated and his
salary was not released on time. These were
frequently protested to by Peter. Apparently
exasperated by his frequent protestations,
Peter’s employer, a once top official in China,
suddenly told him that his services would be
terminated as soon as the vessel arrived at the
next port, in Indonesia. Peter had enough money
to go back home, and immediately upon
arriving, he filed a money claim with the NLRC
against his former employer’s local agent. Will
Peter’s case prosper?
a. Yes, he is entitled to full reimbursement
of his placement fee, with’ interest at 12°/o per
annum, plus salary for the unexpired portion of
his employment contract or for three (3) months
for every year of the unexpired portion,
whichever is higher;
b. Yes, he is entitled to full reimbursement
of his placement fee, with interest at 12% per
annum, plus his salary for the unexpired portion
of his employment contract or for three (3)
months for every year of the unexpired portion,
whichever is less;
c. Yes, he is entitled to his salaries for the
unexpired portion of his employment contract,
plus full reimbursement of his placement fee
with interest at ·12°/o per annum;
d. Yes, he is entitled to his salaries for three
(3) months for every year of the unexpired
portion of his employment contract, plus full
reimbursement of his placement fee with
interest at 12°/o per annum.
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C. Yes, he is entitled to his salaries for the
unexpired portion of his employment
placement fee with interest at 12% per
annum (Serrano vs. Gallant maritime,
G.R. No. 167614, March 24, 2009)
In sum, prior to R.A. No. 8042, OFWs and
local workers with fixed-term
employment who were illegally
discharged were treated alike in terms of
the computation of their money claims:
they were uniformly entitled to their
salaries for the entire unexpired portions
of their contracts. But with the enactment
of R.A. No. 8042, specifically the
adoption of the subject clause, illegally
dismissed OFWs with an unexpired
portion of one year or more in their
employment contract have since been
differently treated in that their money
claims are subject to a 3-month cap,
whereas no such limitation is imposed on
local workers with fixed-term
employment.
The Court concludes that the subject
clause contains a suspect classification in
that, in the computation of the monetary
benefits of fixed-term employees who are
illegally discharged, it imposes a 3-month
cap on the claim of OFWs with an
unexpired portion of one year or more in
their contracts, but none on the claims of
other OFWs or local workers with fixed-
term employment. The subject clause
singles out one classification of OFWs
and burdens it with a peculiar
disadvantage.
Note: The court found the subject clause
unconstitutional (Thus, In case of
termination of overseas employment
without just, valid or authorized cause as
defined by law or contract, the workers
shall be entitled to the full
reimbursement of his placement fee with
interest of twelve percent (12%) per
annum, plus his salaries for the unexpired
portion of his employment contract or for
three (3) months for every year of the
unexpired term, whichever is less. [Sec.
10, RA 8042, 5th paragraph)
13. J refused to comply with his deployment
assignment with K, a manning agency. K filed a
complaint against him for breach of contract
before the Philippine Overseas Employment
Administration (POEA). The POEA penalized J
with one (1) year suspension from overseas
deployment. On appeal, the suspension was
reduced to six (6) months by the Secretary of
Labor. Is the remedy of appeal still available to J
and where should he file his appeal?
a. Yes, he can file an appeal before the Court
of Appeals via a Petition for Certiorari under rule
65;
b. Yes, he can file an appeal before the
Supreme Court via a Petition for Certiorari
under Rule 65;
c. Yes, he can file an appeal before the Office
of the President since this is an administrative
case;
d. Yes, he can file an appeal before the
National Labor Relations Commission because
there is an employer-employee relationship.
(A) Yes, he can file an appeal before the
court of appeals via a petition for
certiorari under Rule 65 [NFL vs
Laguesma]
NATIONAL FEDERATION OF LABOR
(NFL), petitioner, vs. HON.
BIENVENIDO E. LAGUESMA,
UNDERSECRETARY OF THE
DEPARTMENT OF LABOR AND
EMPLOYMENT, AND ALLIANCE OF
NATIONALIST GENUINE LABOR
ORGANIZATION-KILUSANG MAYO
UNO (ANGLO-KMU), respondents.
G.R. No. 123426. March 10, 1999
In fine, we find that it is procedurally
feasible as well as practicable that
petitions for certiorari under Rule 65
against the decisions of the Secretary of
Labor rendered under the Labor Code
and its implementing and related rules be
filed initially in the Court of Appeals.
Paramount consideration is strict
observance of the doctrine on the
hierarchy of courts, emphasized in St.
Martin Funeral Homes v. NLRC, on "the
judicial policy that this Court will not
entertain resort to it unless the redress
desired cannot be obtained in the
appropriate courts or where exceptional
and compelling circumstances justify
availment of a remedy within and calling
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for the exercise of our primary
jurisdiction."
While We do not wish to intrude into the
congressional sphere on the matter of the
wisdom of a law, on this score, We add the
further observations that there is a
growing number of labor cases being
elevated to this Court which, not being a
trier of fact, has at times been constrained
to remand the case to the NLRC for
resolution of unclear or ambiguous
factual findings; that the Court of Appeals
is procedurally equipped for that
purpose, aside from the increased
number of its component divisions; and
that there is undeniably an imperative
need for expeditious action on labor cases
as a major aspect of constitutional
protection to labor.
Therefore, all references in the amended
Section 9 of B.P. No. 129 to supposed
appeals from the NLRC to the Supreme
Court are interpreted and hereby
declared to mean and refer to petitions
for certiorari under Rule 65.
Consequently, all such petitions should
henceforth be initially filed in the Court of
Appeals in strict observance of the
doctrine on the hierarchy of courts as the
appropriate forum for the relief desired
(ST. MARTIN FUNERAL HOME vs
NATIONAL LABOR RELATIONS
COMMISSION G. R. No. 130866
September 16, 1998).
14. On December 12, 2008, A signed a contract to
be part of the crew of ABC Cruises, Inc. through its
Philippine manning agency XYZ. Under the
standard employment contract of the Philippine
Overseas Employment Administration (POEA),
his employment was to commence upon his actual
departure from the port in the point of hire,
Manila, from where he would take a flight to the
USA to join the cruise ship “MS Carnegie.”
However, more than three months after A secured his
exit clearance from the POEA for his supposed
departure on January 15, 2009, XYZ still had not
deployed him for no valid reason. Is A entitled to
relief? Explain. (3%) 2010 Bar Exam
YES. Even if no departure took place, the
contract of employment has already been
perfected which creates certain rights and
 obligations, the breach of which may give rise to
a cause of action against the erring party:
1. A can file a complaint for Recruitment
Violation for XYZ’s failure to deploy him within
the prescribed period without any valid reason,
a ground for the imposition of administrative
sanction against XYZ under Sec. 2, Rule I, Part V
of the 2003 POEA Rules on Employment of
Seafarers;
2. At the same time, A can file a case for illegal
recruitment under Sec. 6 (L) of R.A. 8042 (cf.
Sec.11 Rule I, Part V of the 2003 POEA Rules on
Employment of Seafarers); A may likewise file a
complaint for breach of contract, and claim
damages therefor before the NLRC, despite
absence of Er-Ee relationship. Sec. 10 of R.A.
8042 conferred jurisdiction on the Labor Arbiter
not only on claims arising out of Er-Ee
relationship, but also by virtue of any law or
contract involving Filipino workers for overseas
deployment including claims for actual, moral,
exemplary, and other forms of damages.
(Santiago v. CF Sharp Crew Management
[2007]).
Section 6, RA 8042
(l) Failure to actually deploy
without valid reason as
determined by the Department of
Labor and Employment; and
(m) Failure to reimburse
expenses incurred by the workers
in connection with his
documentation and processing for
purposes of deployment, in cases
where the deployment does not
actually take place without the
worker's fault
15. A was approached for possible overseas
deployment to Dubai by X, an interviewer of job
applicants for Alpha Personnel Services, Inc., an
overseas recruitment agency. X required A to submit
certain documents (passport, NBI clearance, medical
certificate) and to pay P25,000 as processing fee.
Upon payment of the said amount to the agency
cashier, A was advised to wait for his visa. After
five months, A visited the office of Alpha
Personnel Services, Inc. during which X told him that he
could no longer be deployed for employment
abroad. A was informed by the Philippine
Overseas Employment Administration (POEA)
that while Alpha Personnel Services, Inc. was a
licensed agency, X was not registered as its
employee, contrary to POEA Rules and
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Regulations. Under POEA Rules and Regulations, the
obligation to register personnel with the POEA
belongs to the officers of a recruitment agency.
May X be held criminally liable for illegal
recruitment? Explain. (2%) 2010 Bar Exam
NO, X performed his work with the
knowledge that he works for a licensed
recruitment agency. He is in no position
to know that the officers of said
recruitment agency failed to register him
as its personnel (People v. Chowdury
[2000]. The fault not being attributable
to him, he may be considered to have
apparent authority to represent Alpha in
recruitment for overseas employment.
Azucena: an employee who does not
control, manage or direct the business
may not be held liable for illegal
recruitment. Where it is shown that the
employee was merely acting under the
direction of his superiors and was
unaware that his acts constituted a crime,
he may not be held criminally liable for an
act done for and in behalf of his employer.
Such employee has to be acquitted even
where the employer in violation of POEA
requirement did not register such
employee, and the employee was unaware
of such violation (People vs Bulu
Chowdry, February 15, 2000).
16. Lina has been working as a steward with
a Miami, U.S.A.-based Loyal Cruise Lines for the
past 15 years. She was recruited by a local
manning agency, Macapagal Shipping, and was
made to sign a 10-month employment contract
everytime she left for Miami. Macapagal
Shipping paid for Lina’s round-trip travel
expenses from Manila to Miami. Because of a
food poisoning incident which happened during
her last cruise assignment, Lina was not re-
hired. Lina claims she has been illegally
terminated and seeks separation pay. If you were
the Labor Arbiter handling the case, how would
you decide? (4%) 2014 Bar Exam
I will dismiss Lina’s complaint. Lina is a
contractual employee and the length of
her employment is determined by the
contracts she entered into. Here, her
employment was terminated at the
expiration of the contract. (Millares, e.al
v. NLRC, 385 SCRA 306 [2002]).
17. For ten (10) separate but consecutive
yearly contracts, Cesar has been deployed as an
able-bodied seaman by Meritt Shipping, through
its local agent, Ace Maritime Services (agency),
in accordance with the 2000Philippine Overseas
Employment Administration Standard
Employment Contract (2000 POEA-SEC).
Cesar's employment was also covered by a CBA
between the union, AMOSl.JP, and Meritt
Shipping. Both the 2000 POEA-SEC and the
CBA commonly provide the same mode and
procedures for claiming disability benefits.
Cesar's last contract (for nine months) expired
on July 15, 2013.
Cesar disembarked from the vessel M/V
Seven Seas on July 16, 2013 as a seaman on
"finished contract". He immediately reported to
the agency and complained that he had been
experiencing spells of dizziness, nausea, general
weakness, and difficulty in breathing. The
agency referred him to Dr. Sales, a cardio-
pulmonary specialist, who examined and treated
him; advised him to take a complete rest for a
while; gave him medications; and declared him
fit to resume work as a seaman.
After a month, Cesar went back to the
agency to ask for re-deployment. The agency
rejected his application. Cesar responded by
demanding total disability benefits based on the
ailments that he developed and suffered while on
board Meritt Shipping vessels. The claim was
based on the certification of his physician
(internist Dr. Reyes) that he could no longer
undertake sea duties because of the
hypertension and diabetes that afflicted him
while serving on Meritt Shipping vessels in the
last 10 years. Rejected once again, Cesar filed a
complaint for illegal dismissal and the payment
of total permanent disability benefits against the
agency and its principal.
Assume that you are the Labor Arbiter
deciding the case. Identify the facts and issues
you would consider material in resolving the
illegal dismissal and disability complaint.
Explain your choices and their materiality, and
resolve the case. (8%) 2013 Bar Exam
1. Does the Labor Arbiter have
jurisdiction to decide the case?
2. Did Cesar submit to a post-
employment examination within 3 days
upon his return? – This is mandatory
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requirement; otherwise, Cesar will forfeit
his right to claim benefits.
3. Is Dr. Sales the company-
designated physician? –The company-
designated physician is the one who
initially determines compensability.
4. Was Cesar assessed by Dr. Sales
(if he is the company physician) within
120 days?
5. If the 120 days was exceeded and
no declaration was made as to Cesar’s
disability, was this extended to 240 days
because Cesar required further medical
treatment?
6. Was the 240 days exceeded and
still no final decision was reached as to
Cesar’s disability? – If so, Cesar is
deemed entitled to permanent total
disability benefits.
7. If the company’s physician and
Cesar’s physician cannot agree, was a
third physician designated to determine
the true nature and extent of the
disability. The third physician’s finding
under the law is final and conclusive.
8. In the matter of the complaint
for illegal dismissal: there is none because
Cesar disembarked on a “finished
contract”.
9. Seafarers are contractual
employees, for a fixed term, governed by
the contract they sign; an exception to
Art. 280 (now Art. 286) of the Labor
Code. Hence, the complaint for illegal
dismissal will not prosper.
As to the issue of illegal dismissal,
it should be noted that Cesar
disembarked on a “finished contract”. As
a seafarer, he is considered as a
contractual employee. His employment
was terminated at the expiration of the
contract. Thus, the complaint for illegal
dismissal will not prosper.
the seafarer shall submit himself to a
post-employment medical examination by a
company-designated physician within three
working days upon his return except when he
is physically incapacitated to do so, in which
case, a written notice to the agency within
the same period is deemed as compliance. In
the course of the treatment, the seafarer
shall also report regularly to the company-
designated physician specifically on the dates
 as prescribed by the company-designated
physician and agreed to by the seafarer.
Failure of the seafarer to comply with the
mandatory reporting requirement shall
result in his forfeiture of the right to claim the
above benefits. 11 If a doctor appointed by
the seafarer disagrees with the assessment,
a third doctor may be agreed jointly between
the Employer and the seafarer. The third
doctor’s decision shall be final and binding on
both parties.
As to his claim for the payment of
total permanent disability benefits, it
should be determined whether the
certification given by Dr. Reyes would be
binding between the parties or not.
As mentioned in the facts, the
agency-referred doctor, Dr. Sales,
actually declared him fit to resume work
as a seaman. According to Section 20 of
the 2000 Philippine Overseas
Employment Administration Standard
Employment Contract, it is the company-
designated physician is the one who
initially determines compensability.
If the seafarer disagrees with
company-designated physician’s final
medical assessment on the seafarer’s
disability grading within a period of 120
days or 240 days extended period from
the time the seafarer reported to him, the
seafarer has the right to engage the
services of a doctor of his choice.
If a doctor appointed by the
seafarer disagrees with the assessment, a
third doctor may be agreed jointly
between the Employer and the seafarer. It
is the third doctor’s decision shall be final
and binding on both parties.
The SC, in the case of Reynaldo Y.
Sunit vs. OSM Maritime Services, et al.
(G.R. No. 223035, 27), ruled that in
determining whether a disability is total
or partial, what is crucial is whether the
employee who suffered from disability
could still perform his work
notwithstanding the disability he met.
The company doctor or the appointed
third-party physician must arrive at a
definite and conclusive assessment of the
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seafarer's disability or fitness to return to
work before his or her opinion can be
valid and binding between the parties
(Section 20 of the 2000 Philippine
Overseas Employment Administration
Standard Employment Contract).
In the case at bar, Dr. Reyes was
neither the company doctor, nor was he a
third-party physician jointly agreed
between the Cesar and his employer.
18. Victor was hired by a local manning
agency as a seafarer cook on board a luxury
vessel for an eight-month cruise. While on
board, Victor complained of chronic coughing,
intermittent fever, and joint pains. He was
advised by the ship's doctor to take complete bed
rest but was not given any other medication. His
condition persisted but the degree varied from
day to day. At the end of the cruise, Victor went
home to Iloilo and there had himself examined.
The examination revealed that he had
tuberculosis.
(a) Victor sued for medical reimbursement,
damages and attorney's fees, claiming that
tuberculosis was a compensable illness. Do you
agree with Victor? Why or why not? (2%)
TB is listed under Sec. 32-A of the POEA-
SEC as a work-related disease. It was also
either contracted or aggravated during
the effectivity of Victor’s contract. Having
shown its manifestations on board, Victor
should have been medically repatriated
for further examination and treatment in
the Philippines. This obligation was
entirely omitted in bad faith by the
company when it waited for his contract
to expire on him before signing him off.
On this basis, Victor is entitled to medical
reimbursement, damages and attorney’s
fees.
Maritime Agencies, Inc. v. NLRC,45 "[i]f
the injury is the proximate cause of [the
seafarer’s] death or disability for which
compensation is sought, [his] previous
physical condition x x x is unimportant
and recovery may be had for injury
independent of any pre-existing
weakness or disease," viz.:
Compensability x x x does not depend on
whether the injury or disease was pre-
 existing at the time of the employment
but rather if the disease or injury is work-
related or aggravated his condition. It is
indeed safe to presume that, at the very
least, the arduous nature of [the
seafarer’s] employment had contributed
to the aggravation of his injury, if indeed
it was pre-existing at the time of his
employment. Therefore, it is but just that
he be duly compensated for it. It is not
necessary, in order for an employee to
recover compensation, that he must have
been in perfect condition or health at the
time he received the injury, or that he be
free from disease. Every workman brings
with him to his employment certain
infirmities, and while the employer is not
the insurer of the health of his employees,
he takes them as he finds them, and
assumes the risk of having a weakened
condition aggravated by some injury
which might not hurt or bother a perfectly
normal, healthy person. 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.
(b) Due to his prolonged illness, Victor was
unable to work for more than 120 days. Will this
entitle him to claim total permanent disability
benefits? (2%) 2015 Bar Exam
No. Victor’s TB is work-related and it
developed on board, thereby satisfying
the twin requisites of compensability.
However, despite his knowledge of his
medical condition, he failed to report to
his manning agent within three days from
his arrival as required by Sec. 20-B (3) of
the POEA-SEC. since he already felt the
manifestations of TB before his sign-off,
he should have submitted to post-
employment medical examination
(Jebsens Maritime Inc. v. Enrique Undag,
662 SCRA 670). The effect of his omission
is forfeiture by him of disability benefits
(Coastal Safeway Marine Services, Inc. v.
Elmer T. Esguerra, 655 SCRA 300). In
effect, the 120-day rule has no application
at all.
9|Page
NOTES:
 “Overseas Filipino Worker” refers to a person
who is to be engaged, is engaged or has been
engaged in a remunerated activity in a state of
which he/she is not a citizen or on board a vessel
navigating the foreign seas other than a
government ship used for military or non-
commercial purposes or on an installation
located offshore or on high seas; to be used
interchangeably with “migrant workers” (RA
8042).
 “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 (Article 13, [b]).
 The above definition enumerates 11 activities
categorized as recruitment and placement. Any
such activity done by any person WITHOUT THE
REQUIRED LICENSE from the Bureau of Local
Employment or the Philippine Overseas
Employment Administration is punishable as
illegal recruitment.
 The number of persons dealt with is not the basis
in determining whether or not an act constitutes
recruitment and placement.
 “two or more persons” merely lays down a rule
of evidence (People vs Panis).
 Article 16 – except as provided in Chapter II of
this Title, no person or entity, other than the
public employment offices shall engage in the
recruitment and placement of workers.
 As an exception to this article, Article 25 allows
the private sector to participate in the
recruitment and placement of workers either
local or overseas. A license from the Bureau of
Local Employment of the POEA is required.
 Despite the ban in Article 18, “name hires” are
recognized. This term refers o individual workers
who are able to secure contracts for overseas
employment on their own efforts and
representation without the assistance or
 participation of any recruitment agency. Their
hiring nonetheless, has to be processed thru the
POEA.
 Jurisdiction of the NLRC:
o Original and exclusive jurisdiction over all
cases, including money claims, arising out
of any law or contract involving Filipino
workers in overseas employment,
including seamen.
 Jurisdiction of the POEA:
o All cases which are administrative in
character, involving or arising out of
violations or rules and regulations
relating to licensing and registration or
recruitment and employment agencies or
entities; and
o Disciplinary action cases and other
special cases which are administrative in
character, involving employers,
principals, contracting partners and
Filipino migrant workers (sec 28, Rules
Implementing the Migrants Worker’s Act,
Feb 29, 1996).
 POEA decisions are appealable to the Secretary
of Labor (power of supervision and control).
 Disability benefit is granted if the worker suffers
an injury or illness which is WROK-RELATED and
which OCCURRED DURING TH TERM of the
seafarer’s contract.
 Article 192(c) of the Labor Code provides that
temporary total disability lasting
CONTINUOUSLY FOR MORE THAN 120 DAYS,
except as otherwise provided in the AREC
(Amended Rules on Employment
Compensation), shall be deemed total and
permanent.
 Section 54, POEA Revised Rules, 2016):
Placement fee may be charged against the OFW
equivalent to one month basic salary specified in
the POEA-approved contract, EXCEPT the
following:
a) Domestic worker
b) Workers to be deployed to countries
where the prevailing system, either by
law, policy or practice do not allow,
directly or indirectly, the charging and
collection of recruitment/placement fee.
10 | P a g e
The worker shall pay the placement fee to
the licensed recruitment agency only after
signing the POEA-approved contract.
 The persons criminally liable for illegal
recruitment are the principals, accomplices
ad accessories. In case of juridical persons,
the ones liable are the officers having
ownership, control management or direction
of their business who are responsible for the
commission of the offense, and the
responsible employees or agents (Sec. 6, RA
No. 8042).
Date of Submission: 13 August 2018
1. Matibay Shoe and RepAair Store, as
added service to its customers, devoted a portion
of its store to a shoe shine stand. The shoe shine
boys were tested for their skill before being
allowed to work and given ID cards. They were
told to be present from the opening of the store
up to closing time and were• required to follow
the company rules on cleanliness and decorum.
They bought their own shoe shine boxes, polish,
and rags. The boys were paid by their customers
for their services but the payment is coursed
through the store's cashier, who pays them
before closing time. They were not supervised in
their work by any managerial employee of the
store but for a valid complaint by a customer or
for violation of any company rule, they can be
refused admission to the store. Were the boys
employees of the store? Explain. (5%) 2016 Bar
Exam
Suggested Answer:
Yes. The elements to determine the
existence of an employment relationship
are: (a) the selection and engagement of
the employee; (b) the payment of wages;
(c) the employer's power to control the
employee's conduct; and (d) the power of
dismissal.
The first element is present, as Matibay
Shoe allowed shoe shine boys in its shoe
shine stand to render services that are
desirable in the line of business of
Matibay Shoe. In issuing ID's to the shoe
 shine boys, the same signifies that they
can represent themselves as part of the
work force of Matibay Shoe.
The second element is also present.
Requiring the customers to pay through
the Matibay Shoe's cashier signifies that
their services were not engaged by the
customers. Equally important, it was
Matibay Shoe which gave the shoe shine
boys their daily wage.
The third element is satisfied. Requiring
the shoe shine boys to be present from
store opening until store closing and to
follow company rules on cleanliness and
decorum shows that they cannot conduct
their activity anywhere else but inside the
store of Matibay Shoe, hence, their means
and methods of accomplishing the
desired services for the customers of
Matibay Shoe was controlled by it.
Lastly, the fourth element is made
apparent when Matibay Shoe barred the
shoe shine boys from continuing with
their work-related activity inside its
establishment.
Alternative Answer:
No. The elements to determine the
existence of an employment relationship
are: (a) the selection and engagement of
the employee; (b) the payment of wages;
(c) the employer's power to control the
employee's conduct; and (d) the power of
dismissal.
The first element is absent. The mere
issuance of an ID to the boys is not
conclusive of the power of selection of
Matibay Shoe. They may be given IDs
merely as a security measure for the
establishment.
Furthermore, using the control test, the
boys have exclusive power over the means
and method by which the shoe shining
activity is to be conducted.
G.R. No. 72409 December 29, 1986
MAMERTO S. BESA, doing business
under the name and style of BESA'S
CUSTOMBUILT SHOES, petitioner, vs.
11 | P a g e
THE HONORABLE CRESENCIANO B.
TRAJANO, DIRECTOR OF THE
BUREAU OF LABOR RELATIONS,
MINISTRY OF LABOR AND
EMPLOYMENT, AND KAISAHAN NG
MANGGAGAWANG PILIPINO
(KAMPIL-KATIPUNAN), respondents.
the shoe shiner is distinct from a piece worker
because while the latter is paid for work
accomplished, he does not, however,
contribute anything to the capital of the
employer other than his service. It is the
employer of the piece worker who pays his
wages, while the shoe shiner in this instance is
paid directly by his customer. The piece worker
is paid for work accomplished without regard or
concern to the profit as derived by his employer,
but in the case of the shoe shiners, the
proceeds derived from the trade are always
divided share and share alike with respondent
BESA. The shoe shiner can take his share of
the proceeds everyday if he wanted to or
weekly as is the practice of Besas The
employer of the piece worker supervises and
controls his work, but in the case of the shoe
shiner, respondent BESA does not exercise
any degree of control or supervision over their
person and their work. All these are not
obtaining in the case of a piece worker as he is
in fact an employee in contemplation of law,
distinct from the shoe shiner in this instance
who, in relation to respondent MAMERTO B.
BESA, is a partner in the trade. Consequently,
employer-employee relationship between
members of the Petitioning union and
respondent MAMERTO B. BESA being absent
the latter could not be held guilty of the unfair
tabor practice acts imputed against him. (p. 6,
Annex "B1 " of said Decision). <äre|| anº• 1
2. Gregorio was hired as an insurance
underwriter by the Guaranteed Insurance
Corporation (Guaranteed). He does not receive
any salary but solely relies on commissions
earned for every insurance policy approved by
the company. He hires and pays his own
secretary but is provided free office space in the
office of the company. He is, however, required
to meet a monthly quota of twenty (20)
insurance policies, otherwise, he may be
terminated. He was made to agree to a Code of
Conduct for underwriters and is supervised by a
Unit Manager.
[a] Is Gregorio an employee of Guaranteed?
Explain. (2.5%)
[b] Suppose Gregorio is appointed as Unit
Manager and assigned to supervise several
underwriters. He holds office in the company
premises, receives an overriding commission on
the commissions of his underwriters, as well as a
monthly allowance from the company, and is
supervised by a branch manager. He is governed
by the Code of Conduct for Unit Managers. Is he
an employee of Guaranteed? Explain. (2.5%)
2016 Bar Exam
SUGGESTED ANSWER:
A. No, Gregorio is not an employee of
Guaranteed. Control is the most
important element of employer-employee
relationship, which refers to the means
and methods by which the result is to be
accomplished (Avelino Lambo and
Vicente Belocura v. NLRC and J.C. Tailor
Shop and/or Johnny Co., 375 Phil. 855
[1999]), .citing Makati Haberdashery,
Inc. v. NLRC, 259 Phil. 52 [1989]. The
requirement of complying with quota,
company code of conduct and supervision
by unit managers do not go into the
means and methods by which Gregorio
must achieve his work. He has full
discretion on how to meet his quota
requirement, hence, there is no
employer- employee relationship
between Gregorio and Guaranteed.
No, Gregorio is not an employee of
Guaranteed. In resolving the issue of
whether an employer-employee
relationship, the four-fold test on
employment is used as a guiding, if not
governing norm, to determine, whether
such relationship exists. These four
elements are: (1) the selection and
engagement of the employee; (2) the
payment of wages; (3) the power of
dismissal; and (4) the control test. The
control test––meaning whether or not
the employer controls or has reserved the
right to control the employee not only as
to the result of the work to be done but
also the means and methods employed in
reaching that end––constitutes the most
important index of the existence of an
employer-employee relationship.
12 | P a g e
In the case at bar, the concept of control
for purposes of employment is absent.
According to the Supreme Court in
Gregorio Tongko vs. The Manufacturers
Life Insurance Co. (G.R. No. 167622 June
29, 2010), a commitment to abide by the
rules and regulations of an insurance
company does not ipso facto make the
insurance agent an employee. Neither do
guidelines somehow restrictive of the
insurance agent’s conduct necessarily
indicate "control" as this term is defined
in jurisprudence. Guidelines indicative of
labor law "control," should not merely
relate to the mutually desirable result
intended by the contractual relationship;
they must have the nature of dictating the
means or methods to be employed in
attaining the result, or of fixing the
methodology and of binding or restricting
the party hired to the use of these means.
In fact, results-wise, the employer can
impose production quotas and can
determine how many agents, ought to be
employed to achieve the company’s
objectives. These are management policy
decisions that the labor law element of
control cannot reach.
B. SUGGESTED ANSWER:
Yes, Gregorio is an employee. In fact, he
is deemed as a regular employee. As a
unit manager who was tasked to
supervise underwriters, he can be said to
be doing a task which is necessary and
desirable to the usual business of
Guaranteed. Article 295 of the Labor code
provides that "(T)he 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, x x x."
ALTERNATIVE ANSWER:
Yes. Article 219 (m) of the Labor
Code defines a Managerial employee as
 one who is vested with the powers or
prerogatives to lay down and execute
management policies and/or to hire,
transfer, suspend, lay-off, recall,
discharge, assign or discipline
employees. As Gregorio was appointed
Unit Manager, the means and methods of
accomplishing his goal come under the
guidelines laid down by Guaranteed.
Mine: no, Gregorio is still not an
employee of Guaranteed. He is not
supervising regular full-time employees
of Guaranteed but is guiding his corps of
underwriters, who are bound to
Guaranteed, all the while sharing the
formers’ commissions through his
overrides.
control over the respondents is evident.
And it is this right to control the
employee, not only as to the result of the
work to be done, but also as to the means
and methods by which the same is to be
accomplished, that constitutes the most
important index of the existence of the
employer-employee relationship.
Or With this case, it becomes apparent
that supervision and monitoring is
sufficient to establish control that is
evidence of an employer-employee
relationship. Such control would,
therefore, be even more evident in the
instant case considering that Gregorio
himself was tasked to supervise and
monitor the activities of Manulife agents.
An important point to note here is that
Tongko was not supervising regular full-
time employees of Manulife engaged in
the running of the insurance business;
Tongko was effectively guiding his corps
of sales agents, who are bound to
Manulife through the same Agreement
that he had with Manulife, all the while
sharing in these agents’ commissions
through his overrides. This is the lead
agent concept mentioned above for want
of a more appropriate term, since the title
of Branch Manager used by the parties is
really a misnomer given that what is
involved is not a specific regular branch of
the company but a corps of non-employed
13 | P a g e
agents, defined in terms of covered
territory, through which the company
sells insurance. Still another point to
consider is that Tongko was not even
setting policies in the way a regular comp
(You may want to look up the case of
Gregorio V. Tongko v. The Manufacturers
Life Insurance Co. (Phils.), Inc. and
Renato A. Vergel de Dios; G.R. No.
167622)
3. Ador is a student working on his master's
degree in horticulture. To make ends meet, he
takes on jobs to come up with flower
arrangements for friends. His neighbor, Nico, is
about to get married to Lucia and needs a floral
arranger. Ador offers his services and Nico
agrees. They shake hands on it, agreeing that
Nico will pay Ador :P20,000.00 for his services
but that Ador will take care of everything. As
Ador sets about to decorate the venue, Nico
changes all of Ador's plans and ends up
designing the arrangements himself with Ador
simply executing Nico's instructions.
Is there an employer-employee relationship
between Nico and Ador? (4%) 2015 Bar Exams
SUGGESTED ANSWER:
Yes. With Ador’s simply executing Nico’s
instruction, Nico, now has control over
Ador’s work, has become the employer of
Ador. In Royale Homes Marketing Corp.
v.Fidel Alcantara (G.R. 195190, July 28,
2014) the Supreme Court held that
control is the most important
determinant of employer-employee
relationship.
ALTERNATIVE ANSWER:
No, there is no employer-employee
relationship. The case at hand pertains to
a civil law arrangement. There is no
business undertaken by Lucia; what the
parties have is a contract for a specific
service.
 *no, there is no employer-employee
relationship between Nico and Ador.
Not every form of control has the effect of
establishing employee-employer
relationship between the parties. Rules
that merely serve as guidelines, which
only promote the result does not create an
employer-employee relationship.
4. Don Luis, a widower, lived alone in a
house with a large garden. One day, he noticed
that the plants in his garden needed trimming.
He remembered that Lando, a 17-year old out-
of-school youth, had contacted him in church the
other day looking for work. He contacted Lando
who immediately attended to Don Luis’s garden
and finished the job in three days. (4%) Is there
an employer-employee relationship between
Don Luis and Lando? 2014 Bar Exams
SUGGESTED ANSWER:
Yes. all the elements of Er-Ee relationship
are present, viz:
1. the selection and engagement of the
employee
2. the power of dismissal;
3. the payment of wages; and
4. the power to control the employee’s
conduct
There was also no showing that Lando has
his own tools, or equipment so as to
qualify him as an independent contractor.
ALTERNATIVE ANSWER:
None. Lando [who] is an independent
contractor for Don Luis does not exercise
control over Lando’s means and method
in tending to the former’s garden.
Mine: no control over the means and
method of his work to be accomplished.
G.R. No. 64948 September 27, 1994
MANILA GOLF & COUNTRY CLUB,
INC., petitioner, vs.
14 | P a g e
INTERMEDIATE APPELLATE COURT
and FERMIN LLAMAR, respondents.
(Petitioner) has no means of compelling
the presence of a caddy. A caddy is not
required to exercise his occupation in the
premises of petitioner. He may work with
any other golf club or he may seek
employment a caddy or otherwise with
any entity or individual without
restriction by petitioner. . . .
. . . In the final analysis, petitioner has no
was of compelling the presence of the
caddies as they are not required to render
a definite number of hours of work on a
single day. Even the group rotation of
caddies is not absolute because a player is
at liberty to choose a caddy of his
preference regardless of the caddy's order
in the rotation.
It can happen that a caddy who has
rendered services to a player on one day
may still find sufficient time to work
elsewhere. Under such circumstances, he
may then leave the premises of petitioner
and go to such other place of work that he
wishes (sic). Or a caddy who is on call for
a particular day may deliberately absent
himself if he has more profitable
caddying, or another, engagement in
some other place. These are things
beyond petitioner's control and for which
it imposes no direct sanctions on the
caddies. . . .
5. The following are excluded from the
coverage of Book III of the Labor Code of the
Philippines (Conditions of employment) except:
a. Field personnel;
b. Supervisors;
c. Managers;
d. Employees of government-owned and
controlled corporations. 2012 Bar Exams
SUGGESTED ANSWER: (B)
Supervisors [Art. 82, Labor Code]
ART. 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 7.
paid by results as determined by the holiday?
Secretary of Labor in appropriate
regulations. a.
As used herein, "managerial b.
employees" refer to those whose primary c.
duty consists of the management of the
establishment in which they are d.
employed or of a department or
subdivision thereof, and to other officers
or members of the managerial staff.
Under Art. 82, a supervisor is not
among the excluded employees.
6. The provisions of the Labor Code on the
Working Conditions and Rest Periods of
employees are inapplicable to the following
employees, except :
a. A supervisor in a fast food chain;
b. A family driver;
c. A laborer without any fixed salary, but
receiving a compensation depending upon the
result of his work;
d. A contractual employee. 2012 Bar Exams
ART. 82. Coverage. - The 8.
provisions of this Title shall apply to compensable as hours worked?
employees in all establishments and a.
undertakings whether for profit or not,
but not to government employees, b.
managerial employees, field personnel, c.
members of the family of the employer
who are dependent on him for support, d.
domestic helpers, persons in the personal Exams
service of another, and workers who are
paid by results as determined by the
Secretary of Labor in appropriate
regulations.
xxx
15 | P a g e
Under Art. 82, a contractual employee is
not among the excluded employees,
wherein the provisions on the Working
Conditions and Rest Periods are
inapplicable.
Which of the following is not a regular
New Year’s Eve;
Eidil Fitr;
Father’s Day;
lndependence Day. 2012 Bar Exams
Suggested Answer: C) Father‘s Day [Art.
94 (c), Labor Code]
ART. 94. Right to holiday pay.
xxx
(c) As used in this Article, "holiday"
includes: New Year’s Day, Maundy
Thursday, Good Friday, the ninth of
April, the first of May, the twelfth of June,
the fourth of July, the thirtieth of
November, the twenty-fifth and thirtieth
of December and the day designated by
law for holding a general election.
RA No. 9492 (July 25, 2007) amended by
RA 9849 (December 11, 2009) provides
for the twelve regular holiday wherein,
Father’s day is not among the enumerated
regular holiday.
Which of the following is not
Travel away from home;
Travel from home to work;
Working while on call;
Travel that is all in a day’s work. 2012 Bar
SUGGESTED ANSWER:
(A) Travel away from home. [Art. 84,
Labor Code]
(B) Travel from home to work.
 Under Article 84 of the Labor Code, 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.
Under the Implementing Rules of the
Labor Code, 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.
In letter A, travel away from home,
may be compensable but the employee
must be on an official duty or when it cuts
across the employee’s workday. In this
16 | P a g e
case, the first choice did not specifically
provide that the employee is not on an
official duty.
In the second answer, letter B,
travel from home to work is not
compensable as he is involved in an
ordinary home-to-work travel which is a
normal incident of employment. But
while the normal travel from home to
work is not worktime, when an employee
receives an emergency call outside of his
working hours and is required to travel to
his regular place of business or some
other work site all the of the time spent in
such travel is working time. In this case,
the travel from home to work is not
specifically stated that it is an emergency
that is outside the normal travel from
home. As a general rule, it is not
compensable.
9. Work may be performed beyond eight (8)
hours a day provided that:
a. Employee is paid for overtime work an
additional compensation equivalent to his
regular wage plus at least 25% thereof;
b. Employee is paid for overtime work an
additional compensation equivalent to his
regular wage plus at least 30% thereof;
c. Employee is paid for overtime work an
additional compensation equivalent to his
regular wage plus at least 20% thereof;
d. None of the above. 2012 Bar Exams
answer: (A) Employee is paid for
overtime work an additional
compensation equivalent to his regular
wage plus at least 25% thereof [Art. 87,
Labor Code]
10. The following are instances where an
employer can require an employee to work
overtime, except:
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. When the country is at war or when other
national or local emergency has been declared by
the national assembly or the chief executive;
c. When there is urgent work to be performed on
machines, installations, or equipment or some
other cause of similar nature;
d. Where the completion or contribution of the
work started before the eight hour is necessary
to prevent serious obstruction or prejudice to the
business or operations of the employer. 2012
Bar Exams
Art. 89. Emergency overtime work. Any
employee may be required by the
employer to perform overtime work in
any of the following cases:
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;
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;
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;
When the work is necessary to prevent
loss or damage to perishable goods; and
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.
17 | P a g e
11. Who among the following is not entitled to
13th month pay?
a. Stephanie, a probationary employee of a
cooperative bank who rendered six (6) months
of service during the calendar year before filing
her resignation;
b. Rafael, the secretary of a Senator;
c. Selina, a cook employed by and who lives with
an old maid and who also tends the sari-sari
store of the latter;
d. Roger, a house gardener who is required to
report to work only thrice a week. 2012 Bar
Exams
Suggested answer: (B) Rafael, the
secretary of a Senator [Section 3 (b), Dec.
22, 1975 Rules and Regulations
Implementing PD 851]
Sec. 3. Employers covered. - The Decree
shall apply to all employers except to:
(a) Distressed employers, such as (1)
those which are currently incurring
substantial losses or (2) in the case of
non-profit institutions and organizations,
where their income, whether from
donations, contributions, grants and
other earnings from any source, has
consistently declined by more than forty
(40%) percent of their normal income for
the last two (2) years, subject to the
provision of Section 7 of this issuance;
(b) 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;
(c) Employers already paying their
employees 13-month pay or more in a
calendar year or its equivalent at the time
of this issuance;
(d) Employers of household helpers and
persons in the personal service of another
in relation to such workers; and
(e) Employers of those who are paid on
purely commission, boundary, or task
basis, and those who are paid a fixed
 amount for performing a specific work,
irrespective of the time consumed in the
performance thereof, except where the
workers are paid on piece-rate basis in
which case the employer shall be covered
by this issuance insofar as such workers
are concerned.
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
paragraph c) hereof shall include
Christmas bonus, mid-year bonus, profit-
sharing payments and other cash bonuses
amounting to not less than 1/12th of the
basic salary but shall not include cash and
stock dividends, cost of living allowances
and all other allowances regularly
enjoyed by the employee, as well as non-
monetary benefits. Where an employer
pays less than 1/12th of the employees
basic salary, the employer shall pay the
difference.
12. Which type of employee is entitled to a
service incentive leave?
a. managerial employees;
b. field personnel;
c. government workers;
d. part-time workers. 2012 Bar Exams
Suggested Answer: (D) part-time
workers.
ART. 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
18 | P a g e
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.
(refer pud sa handbook)
13. May the employer and employee stipulate
that the latter’s regular or basic salary already
includes the overtime pay, such that when the
employee actually works overtime he cannot
claim overtime pay?
a. Yes, provided there is a clear written
agreement knowingly and freely entered into by
the employees;
b. Yes, provided the mathematical result shows
that the agreed legal wage rate and the overtime
pay, computed separately, are equal to or higher
than the separate amounts legally due;
c. No, the employer and employee cannot
stipulate includes the overtime pay;
d. A and B. 2012 Bar Exams
Suggested Answer: (C) No, the employer
and employee cannot stipulate that the
latter‘s regular or basic salary includes
the overtime pay; [Art. 87, Labor Code]
MAS TAMA.LOL (AZUCENA): D. A and
B.
The requisites therefore of “base pay with
integrated overtime pay” are firstly, a
clear written agreement knowingly and
freely entered into by the employee
((Damasco
vs. NLRC, et al., G.R. No. 115755,
December 4, 2000), and, secondly, the
mathematical result shows that the
agreed legal wage rate and the overtime
pay, computed separately, are equal to or
higher than the separate amounts legally
due. An illustration of this is found in the
case of PESALA where the Court, by
 simple arithmetic, debunked the
employer’s claim that the overtime pay
was already included in the basic salary
(PAL Employees Savings and Loan
Association, Inc. [PESALA], petitioner vs.
National Labor Relations Commission
and A.V. Esquejo, respondents, G.R. No.
105963, August 22, 1996 ).
14. Mam-manu Aviation Company (Mam-manu)
is a new airline company recruiting flight
attendants for its domestic flights. It requires
that the applicant be single, not more than 24
years old, attractive, and familiar with three (3)
dialects, viz: llonggo, Cebuano and
Kapampangan. lngga, 23 years old, was accepted
as she possesses all the qualifications. After
passing the probationary period, lngga disclosed
that she got married when she was 18 years old
but the marriage was already in the process of
being annulled on the ground that her husband
was afflicted with a sexually transmissible
disease at the time of the celebration of their
marriage. As a result of this revelation, lngga was
not hired as a regular flight attendant.
Consequently, she filed a complaint against
Mam-manu alleging that the pre-employment
qualifications violate relevant provisions of the
Labor Code and are against public policy. Is the
contention of lngga tenable? Why? (5%) 2012
Bar Exams
SUGGESTED ANSWER: Yes, Man-
manu‘s pre-employment requirement
cannot be justified as a ―bona fide
occupational qualification, where the
particular requirements of the job would
justify it. The said requirement is not
valid because it does not reflect an
inherent quality that is reasonably
necessary for a satisfactory job
performance. (PT&T v. NLRC, G.R. No.
118978, May 23, 1997 citing 45A Am. Jur.
2d, Job Distribution, Sec. 506, p. 486).
ALTERNATIVE ANSWER: Yes, Ingga‘s
contention is tenable considering Art. 134
[136] of the Labor Code which prohibits
discrimination against married women.
19 | P a g e
15. Benito is the owner of an eponymous clothing
brand that is a top seller. He employs a number
of male and female models who wear Benito's
clothes in promotional shoots and videos. His
deal with the models is that Benito will pay them
with 3 sets of free clothes per week. Is this
arrangement allowed? (2%) 2015 Bar Exams
SUGGESTED ANSWER:
No. Arrangement is not allowed. The
models are not Benito’s employees. As
such, their service require compensation
in legal tender (Art. 102 of Labor Code).
Three sets of clothes, regardless of value,
are in kind; hence, the former’s
compensation is not the form prescribed
by law.
ANOTHER SUGGESTED ANSWER:
Under Article 102 of the Labor Code,
wages of an employee are to be paid only
in legal tender, even when expressly
requested by the employee. Hence, no
lawful deal in this regard can be entered
into by and between Benito and his
models.
ALTERNATIVE ANSWER:
The models are not employees. Therefore,
Article 102 of the Labor Code applies. The
payment does not have to be in legal
tender. But even if they are not
employees, the wage arrangement
between Benito and the models is allowed
by Art. 97 (1) of the Labor Code which
defines wage as the remuneration or
earning paid to an employee, 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.
It includes the fair and the reasonable
value, as determined by the secretary of
Labor, of board, lodging or other facilities
customarily furnished by the employer to
the employee.

16. Z owns and operates a carinderia. His regular
employees are his wife, his two (2) children, the
family maid, a cook, two (2) waiters, a
dishwasher and a janitor. The family driver
occasionally works for him during store hours to
make deliveries. On April 09, the dishwasher did
not report for work. The employer did not give
his pay for that day. Is the employer correct?
a. No, because employees have a right to
receive their regular daily wage during regular
holidays;
b. Yes, because April 09 is not regular holidays;
c. Yes, because of the principle of “a fair day’s
wage for a fair day’s work”;
d. Yes, because he employs less than ten (10)
employees. 2012 Bar Exams
SUGGESTED ANSWER: (A) No, because
employees have a right to receive their
regular daily wage during regular
holidays [Art. 94, Labor Code, and a
carenderia is not in the category of an
excluded or service establishment]
Retail Establishment - refers to an entity
principally engaged in the sale of goods to
end users for personal or household use.
A retail establishment that regularly
engages in wholesale activities loses its
retail character.
“service establishment” : Service
Establishment– refers to an entity
principally engaged in the sale of services
to individuals for their own or household
use and is generally recognized as such.
For purposes of this Guidelines, service
establishments must be regularly
employing not more than 10 workers.
Azucena: …the exemption has reference
only to sale of services of the type
performed by establishments that are
traditionally recognized as retail service
establishments such as restaurant, sari-
sari stores, repair shops, etc.
ALTERNATIVE ANSWER: (D) Yes,
because he employs less than ten (10)
employees [i.e., is we are to consider a
20 | P a g e
carenderia as a retail or service
establishment].
17. LKG Garments Inc. makes baby clothes for
export. As part of its measures to meet its orders,
LKG requires its employees to work beyond
eight (8) hours everyday, from Monday to
Saturday. It pays its employees an additional
35% of their regular hourly wage for work
rendered in excess of eight (8) hours per day.
Because of additional orders, LKG now requires
two (2) shifts of workers with both shifts working
beyond eight (8) hours but only up to a
maximum of four ( 4) hours. Carding is an
employee who used to render up to six ( 6) hours
of overtime work before the change in schedule.
He complains that the change adversely affected
him because now he can only earn up to a
maximum of four ( 4) hours' worth of overtime
pay. Does Carding have a cause of action against
the company?(4%) 2015 Bar Exams
SUGGESTED ANSWER:
No. A change in work schedule is a
management prerogative of LKG. Thus,
Carding has no cause of action against LKG if,
as a result of its change of two (2) shifts, he can
now only expect a maximum of four (4) hours
overtime work. Besides, Art. 97 of the Labor
Code does not guarantee Carding a certain
number of hours of overtime work. In Manila
Jockey Employee’s Union v. Manila Jockey Club
(517 SCRA 707), the Supreme Court held that the
basis of overtime claim is an employee’s having
been“permitted to work”. Otherwise, as in the
case, such is not demandable.
18. The members of the administrative staff of
Zeta, a construction company, enjoy ten (10)
days of vacation leave with pay and ten (10) days
of sick leave with pay, annually. The workers'
union, Bukluran, demands that Zeta grant its
workers service incentive leave of five (5) days in
compliance with the Labor Code.
Is the union demand meritorious? (1%)
(A) Yes, because non-compliance with the law
will result in the diminution of employee
benefits.
(B) Yes, because service incentive leave is a
benefit expressly provided under and required
by the Labor Code.
(C) No, because Zeta already complies with the
law.
(D) No, because service incentive leave is a Labor
Code benefit that does not apply in the
construction industry.
(E) Yes, because Labor Code benefits are
separate from those voluntarily granted by the
company. 2013 Bar Exams
SUGGESTED ANSWER: (C), Article 95 of
the Labor Code. The employee is already
given vacation leave of 10 days. This is
deemed a compliance with the
requirement of service incentive leave
under the law.
“article 95. (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…
Notes:
 Title I, Book III of the Labor Code dealing with
hours of work, weekly rest periods, holidays,
service incentive leaves and service
charges, covers all employees in all
establishments, whether for profit or not,
except the following:
1. Government employees
2. Managerial employees
3. Officers and members of the
managerial staff
4. Field personnel
5. Members of the family of the employer
who are dependent on him for support
6. Domestic helpers
7. Persons in the personal service of
another; ad
8. Workers paid by results (Secs. 1 and
2, Rule I, Book III, Rules Implementing
the Labor Code./ Aricle 82, Labor
Code)
21 | P a g e
 The aforementioned employees are not
entitled to overtime pay, premium pay for rest
days and holidays, night shift differential pay,
holiday pay, service incentive leave and
service charges. (Poquiz, page 171).
 “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 sub-
division thereof, and to other officers or
members of the managerial staff.
 “Field personnel” refers 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. (Sec.
27, Rule II, Book III, Rules Implementing the
Labor Code.)
 They are exempted from the coverage due to
the nature of their functions which requires
performance of service away from the
principal place of business. Hence, they are
free from the personal supervision of the
employer and the latter cannot determine
with reasonable certainty the actual number
of hours of work expended for the employer's
interest. Example of these personnel are
outside sales personnel, agents on
commission basis, or insurance field agents.
(San Miguel Brewery vs Democratic Labor
Union, 8 SCRA 613).
 These two basic benefits (holiday pay &
service incentive leave) are NOT
EXTENDED to employees or retail and
service establishments regularly employing
less than 10 workers.
 In the absence of the power to control the
employee with respect to the means and
methods by which his work was to be
accomplished, there is no employer-
employee relationship between the parties.
 Not every form of control has the effect of
establishing employer-employee
relationship. A line should be drawn between:
o Rules that merely serve as guidelines,
which only promote the result;
o Rules that fix the methodology and
bind or restrict the party hired to the
use of such means or methods. These
address both the result and the means
 employed to achieve the desired
result.
The second creates EER; while the first
does not.
 Article 84 – 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 not be counted as hours worked.
 Art. 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.
 Art. 105. Direct payment of wages. Wages
shall be paid directly to the workers to whom
they are due, except:
o 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
o 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
22 | P a g e
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.
Date of Submission: 20 August 2018
1. Which of the following is not a valid wage
deduction?
a. Where the worker was insured with his
consent by the employer, and the deduction is
allowed to recompense the employer for the
amount paid by him as the premium on the
insurance;
b. When the wage is subject of execution or
attachment, but only for debts incurred for food,
shelter, clothing and medical attendance;
c. Payment for lost or damaged equipment
provided the deduction does not exceed 25 % of
the employee’s salary for a week;
d. Union dues. 2012 Bar Exams 1%
C. Payment for lost or damaged
equipment provided the deduction does
not exceed 25 % of the employee’s salary
for a week
In Implementing Rules of Book III, Rule
VIII, Section 11, it provides that the
deduction from the wages does not
exceed 20% of the employee’s wages in a
week.
2. Corporation X is owned by L’s family. L is
the President. M, L’s wife, occasionally gives
loans to employees of Corporation X. It was
customary that loan payment were paid to M by
directly deducting from the employee’s monthly
salary. Is this practice of directly deducting
payments of debts from the employee’s wages
allowed?
a. Yes, because where the employee is
indebted to the employer, it is sanctioned by the
law on compensation under Article 1706 of the
Civil Code;
b. Yes, because it has already become
customary such that no express authorization is
required;
c. No, because an employee’s payment of
obligation to a third person is deductible from
the employee’s wages if the deduction is
authorized in writing;
d. No, because Article 116 of the Labor Code
absolutely prohibits the withholding of wages
and kickbacks. Article 116 provides for no
exception. 2012 Bar Exams 1%
Suggested answer: D
Article 116 of the Labor Code provides
that 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 means whatsoever
without the worker’s consent.
Alternative answer: A
3. A wage order may be reviewed on appeal
by the National Wages and Productivity
Commission under these grounds, except:
a. grave abuse of discretion;
b. non-conformity with prescribed
procedure;
c. questions of law;
d. gross under or over-valuation. 2012 Bar
Exams 1%
NWPC Guidelines No. 01, S 2007
RULE V - Appeal
Section 2. Grounds for appeal. An appeal
may be filed on the following grounds:
23 | P a g e
a. non-conformity with prescribed
guidelines and/or procedures;
b. questions of law;
c. grave abuse of discretion.
RULES OF PROCEDURE ON MINIMUM
WAGE FIXING
Section 2. Grounds for Appeal. An appeal
may be filed on the following grounds:
a) non-conformity with prescribed
guidelines and/or procedures;
b) questions of law;
c) grave abuse of discretion.
4. K is a legitimate contractor hired by G for
six (6) months. On the third month, G remitted
to K the salaries and wages of the employees.
However, K absconded with the money leaving
the employees unpaid. The disgruntled
employees demanded from G the payment of
their salaries. Is G liable?
a. No, because G has already remitted the
employees’ salaries to K, validly excusing G from
liability;
b. Yes, because he is jointly and solidarily
liable for whatever monetary claims the
employees may have against K;
c. Yes, because of the principle of “a fair
day’s wage for a fair day’s work”;
d. B and C. 2012 Bar Exams 1%
B. Article 106 provides that 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
this 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.
5. Which is not a procedural requirement
for the correction of wage distortion in an
unorganized establishment?
a. Both employer and employee will attempt (d) Gift check worth : P2,000
to correct the distortion;
Katrina, an employee of FEB, who had gotten a
b. Settlement of the dispute through rating of "Excellent" for the last 3 quarters was
National Conciliation and Mediation Board looking forward to the bonuses plus the
(NCMB); productivity incentive bonus. After learning that
FEB had modified the bonus scheme, she
c. Settlement of the dispute through
objected. Is Katrina's objection justified?
voluntary arbitration in case of failure to resolve
Explain. (3%) 2015 Bar Exams
dispute through CBA dispute mechanism;
d. A and B. 2012 Bar Exams 1%
SUGGESTED ANSWER:
Suggested Answer: (C) Settlement of the
dispute through voluntary arbitration in Katrina’s objection is justified. Having enjoyed
case of failure to resolve dispute through the across-the-board bonuses, Katrina has
CBA dispute mechanism [Art. 124, Labor earned a vested right. Hence, none of them can
Code]. be withheld or reduced. In the problem, the
company has not proven its alleged losses to be
Article 124 of the Labor Code provides the
substantial. Permitting reduction of pay at the
procedural requirement for the
slightest indication of losses is contrary to the
correction of wage distortion in an
policy of the State to afford full protection to
unorganized establishment and
labor and promote full employment. (Linton
settlement of the dispute through
Commercial Co. v. Hellera, 535 SCRA 434).
voluntary arbitration is not among the
procedure. As to the withheld productivity-based bonus,
Katrina is deemed to have earned them because
of her excellent performance rating for three
6. Far East Bank (FEB) is one of the leading quarters. On this basis, they cannot withheld
banks in the country. Its compensation and without violating the Principle of Non-
bonus packages are top of the industry. For the Diminution of Benefits.
last 6 years, FEB had been providing the
Moreover, it is evident from the facts of the case
following bonuses across-the-board to all its
that what was withdrawn by FEB was a
employees:
productivity bonus. Protected by RA 6791 which
(a) 13th month pay; mandates that the monetary value of the
productivity improvement be shared with the
(b) 14th to 18th month pay; employees, the “productivity-based incentive”
(c) Christmas basket worth P6,000; scheme of FEB cannot just be withdrawn
without the consent of its affected employees.
(d) Gift check worth P4,000; and
(e) Productivity-based incentive ranging
from a 20o/o to 40% increase in gross monthly 7. Lito was anticipating the bonus he would
salary for all employees who would receive an receive for 2013. Aside from the 13th month pay,
evaluation of "Excellent" for 3 straight quarters the company has been awarding him and his
in the same year. other co-employees a two to three months bonus
for the last 10 years. However, because of poor
Because of its poor performance over-all, FEB over-all sales performance for the year, the
decided to cut back on the bonuses this year and company unilaterally decided to pay only a one
limited itself to the following: month bonus in 2013. Is Lito’s employer legally
(a) 13th month pay; allowed to reduce the bonus? (4%) 2014 Bar
Exams
(b) 14th month pay;
SUGGESTED ANSWER: Yes. A bonus is
(c) Christmas basket worth P4,000; and an act of generosity granted by an

24 | P a g e
 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, bonus is not a demandable and
enforceable obligation, except when it is
made part of the wage, salary or
compensation of the employee. It may,
therefore, be withdrawn, unless they have
been made a part of the wage or salary or
compensation of the employees, a matter
which is not in the facts of the case.
(American Wire and Cable Daily Rated
Employees Union v. American Wire and
Cable Co., Inc. and the Court of Appeals,
GR No. 155059 [2005]).
ALTERNATIVE ANSWER: No. Having
been enjoyed for the last 10 years, the
granting of the bonus has ripened into a
company practice or policy which can no
longer be peremptorily withdrawn. Art.
100 of the Labor Code prohibits the
diminution or elimination by the
employer of the employees’ existing
benefits.
G.R. No. 185665 February 8, 2012
EASTERN TELECOMMUNICATIONS
PHILIPPINES, INC., Petitioner, vs.
EASTERN TELECOMS EMPLOYEES
UNION, Respondent.
From a legal point of view, 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. The grant 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.
A bonus, however, becomes a
demandable or enforceable obligation
when it is made part of the wage or salary
25 | P a g e
or compensation of the employee.
Particularly instructive is the ruling of the
Court in Metro Transit Organization, Inc.
v. National Labor Relations Commission,
where it was written:
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 production or output, then it is
part of the wage. But if it is paid only if
profits are realized or if a certain level of
productivity is achieved, it cannot be
considered part of the wage. Where it is
not payable to all but only to some
employees and only when their labor
becomes more efficient or more
productive, it is only an inducement for
efficiency, a prize therefore, not a part of
the wage.
The consequential question that needs to
be settled, therefore, is whether the
subject bonuses are demandable or not.
Stated differently, can these bonuses be
considered part of the wage, salary or
compensation making them enforceable
obligations?
The Court believes so.
In the case at bench, it is indubitable that
ETPI and ETEU agreed on the inclusion
of a provision for the grant of 14th, 15th
and 16th month bonuses in the 1998-
2001 CBA Side Agreement, as well as in
the 2001-2004 CBA Side Agreement,17
which was signed on September 3, 2001.
The provision, which was similarly
worded, states:
Employment-Related Bonuses
The Company confirms that the 14th, 15th
and 16th month bonuses (other than the
13th month pay) are granted.
A reading of the above provision reveals
that the same provides for the giving of
14th, 15th and 16th month bonuses
 without qualification. The wording of the
provision does not allow any other
interpretation. There were no conditions
specified in the CBA Side Agreements for
the grant of the benefits contrary to the
claim of ETPI that the same is justified
only when there are profits earned by the
company. Terse and clear, the said
provision does not state that the subject
bonuses shall be made to depend on the
ETPI’s financial standing or that their
payment was contingent upon the
realization of profits. Neither does it state
that if the company derives no profits, no
bonuses are to be given to the employees.
In fine, the payment of these bonuses was
not related to the profitability of business
operations.
The records are also bereft of any showing
that the ETPI made it clear before or
during the execution of the Side
Agreements that the bonuses shall be
subject to any condition. Indeed, if ETPI
and ETEU intended that the subject
bonuses would be dependent on the
company earnings, such intention should
have been expressly declared in the Side
Agreements or the bonus provision
should have been deleted altogether. In
the absence of any proof that ETPI’s
consent was vitiated by fraud, mistake or
duress, it is presumed that it entered into
the Side Agreements voluntarily, that it
had full knowledge of the contents thereof
and that it was aware of its commitment
under the contract. Verily, by virtue of its
incorporation in the CBA Side
Agreements, the grant of 14th, 15th and
16th month bonuses has become more
than just an act of generosity on the part
of ETPI but a contractual obligation it has
undertaken. Moreover, the continuous
conferment of bonuses by ETPI to the
union members from 1998 to 2002 by
virtue of the Side Agreements evidently
negates its argument that the giving of the
subject bonuses is a management
prerogative.
Granting arguendo that the CBA Side
Agreement does not contractually bind
petitioner ETPI to give the subject
26 | P a g e
bonuses, nevertheless, the Court finds
that its act of granting the same has
become an established company practice
such that it has virtually become part of
the employees’ salary or wage. A bonus
may be granted on equitable
consideration when the giving of such
bonus has been the company’s long and
regular practice. In Philippine Appliance
Corporation v. Court of Appeals, it was
pronounced:
To be considered a "regular practice,"
however, the giving of the bonus should
have been done over a long period of time,
and must be shown to have been
consistent and deliberate. The test or
rationale of this rule on long practice
requires an indubitable showing that the
employer agreed to continue giving the
benefits knowing fully well that said
employees are not covered by the law
requiring payment thereof.
The records show that ETPI, aside from
complying with the regular 13th month
bonus, has been further giving its
employees 14th month bonus every April
as well as 15th and 16th month bonuses
every December of the year, without fail,
from 1975 to 2002 or for 27 years whether
it earned profits or not. The considerable
length of time ETPI has been giving the
special grants to its employees indicates a
unilateral and voluntary act on its part to
continue giving said benefits knowing
that such act was not required by law.
Accordingly, a company practice in favor
of the employees has been established
and the payments made by ETPI
pursuant thereto ripened into benefits
enjoyed by the employees.
The giving of the subject bonuses cannot
be peremptorily withdrawn by ETPI
without violating Article 100 of the Labor
Code:
Art. 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.
 (4) the diminution or discontinuance is
done unilaterally by the employer.
The rule is settled that any benefit and
supplement being enjoyed by the
employees cannot be reduced,
9. Gamma Company pays its regular
diminished, discontinued or eliminated
employees P350.00 a day, and houses them in a
by the employer. The principle of non-
dormitory inside its factory compound in
diminution of benefits is founded on the
Manila. Gamma Company also provides them
constitutional mandate to protect the
with three full meals a day.
rights of workers and to promote their
welfare and to afford labor full protection. In the course of a routine inspection, a
Department of Labor and Employment (DOLE)
8. Lolong Law Firm (LLF), which employs
Inspector noted that the workers' pay is below
around 50 lawyers and 100 regular staff,
the prescribed minimum wage of P426.00 plus
suffered losses for the first time in its history.
P30.00 allowance, and thus required Gamma
The management informed its employees that it
Company to pay wage differentials.
could no longer afford to provide them free
lunch. Consequently, it announced that a Gamma Company denies any liability,
nominal fee would henceforth be charged. Was explaining that after the market value of the
LLF justified in withdrawing this benefit which company-provided board and lodging are added
it had unilaterally been providing to its to the employees' P350 cash daily wage, the
employees? employees' effective daily rate would be way
above the minimum pay required by law. The
(A) Yes, because it is suffering losses for the
company counsel further points out that the
first time.
employees are aware that their food and lodging
(B) Yes, because this is a management form part of their salary, and have long accepted
prerogative which is not due to any legal or the arrangement. Is the company's position
contractual obligation. legally correct? (8%) 2013 Bar Exams
(C) No, because this amounts to a diminution
of benefits which is prohibited by the Labor
SUGGESTED ANSWER:
Code.
No, the company’s position is incorrect.
(D) No, because it is a fringe benefit that has
Gamma Company did not comply with
already ripened into a demandable right. 2014
legal requirements before deducting the
Bar Exams 1%
board and lodging.
Art. 100 of the Labor Code provides for
In Mabeza vs NLRC, the Court discussed
the prohibition against elimination or
that granting that the meals and lodging
diminution of benefits which says that
were provided and indeed constituted
nothing in the Labor Code shall be
facilities, such facilities could not be
construed to eliminate or in any way
deducted without the employer
diminish supplements, or other employee
complying first with certain legal
benefits being enjoyed at the time of the
requirements. Without satisfying these
promulgation of this Code.”
requirements, the employer simply
In TSPIC Corp v. TSPIC Employees cannot deduct the value from the
Union, the Supreme Court laid down the employee's wages. First, proof must be
elements of diminution of benefits: (1) the shown that such facilities are customarily
grant or benefit is founded on a policy or furnished by the trade. Second, the
has ripened into a practice over a long provision of deductible facilities must be
period; (2) the practice is consistent and voluntarily accepted in writing by the
deliberate; (3) the practice is not due to employee. Finally, facilities must be
error in the construction or application of charged at fair and reasonable value.
a doubtful or difficult question of law; and
27 | P a g e
 The fair and reasonable value must be
determined by the DOLE Secretary, 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.
In this case the above requirements were
not complied thus, Gamma Company
cannot include the board and lodging as
part of the employee’s salary.
10. Ricardo operated a successful Makati
seafood restaurant patronized by a large
clientele base for its superb cuisine and
impeccable service. Ricardo charged its clients a
10% service charge and distributed 85% of the
collection equally among its rank-and-file
employees, 10% among managerial employees,
and 5% as reserve for losses and break ages.
Because of the huge volume of sales, the
employees received sizeable shares in the
collected service charges.
As part of his business development efforts,
Ricardo opened a branch in Cebu where he
maintained the same practice in the collection
and distribution of service charges. The Cebu
branch, however, did not attract the forecasted
clientele; hence, the Cebu employees received
lesser service charge benefits than those enjoyed
by the Makati-based employees. As a result, the
Cebu branch employees demanded equalization
of benefits and filed a case with the NLRC for
discrimination when Ricardo refused their
demand.
Will the case prosper? (1%)
(A) Yes, because the employees are not
receiving equal treatment in the distribution of
service charge benefits.
(B) Yes, because the law provides that the
85% employees' share in the service charge
collection should be equally divided among all
the employees, in this case, among the Cebu and
Makati employees alike.
(C) No, because the employees in Makati are
not similarly situated as the Cebu employees
28 | P a g e
with respect to cost of living and conditions of
work.
(D) No, because the service charge benefit
attaches to the outlet where service charges are
earned and should be distributed exclusively
among the employees providing service in the
outlet.
(E) No, because the market and the clientele
the two branches are serving, are different. 2013
Bar Exams
(D) No, because the service charge
benefit attaches to the outlet where
service charges are earned and should be
distributed exclusively among the
employees providing service in the outlet.
11. In order to improve the Cebu service and
sales, Ricardo decided to assign some of its
Makati-based employees to Cebu to train Cebu
employees and expose them to the Makati
standard of service. A chef and three waiters
were assigned to Cebu for the task. While in
Cebu, the assigned personnel shared in the Cebu
service charge collection and thus received
service charge benefits lesser than what they
were receiving in Makati.
If you were the lawyer for the assigned
personnel, what would you advise them to do?
(1%)
(A) I would advise them to file a complaint for
unlawful diminution of service charge benefits
and for payment of differentials.
(B) I would advise them to file a complaint for
illegal transfer because work in Cebu is highly
prejudicial to them in terms of convenience and
service charge benefits.
(C) I would advise them to file a complaint for
discrimination in the grant of service charge
benefits.
(D) I would advise them to accept their Cebu
training assignment as an exercise of the
company's management prerogative.
(E) I would advise them to demand the
continuation of their Makati-based benefits and
to file a complaint under (B)above if the demand
is not heeded. 2013 Bar Exams
 (A) I would advise them to file a
complaint for unlawful diminution of
service charge benefits and for payment
of differentials.
Date of Submission: 3 September 2018
1. Distinguish a learner from an apprentice.
(4%) 2017 Bar Exams
Learnership and apprenticeship are
similar because they both mean training
periods for jobs requiring skills that can
be acquired through actual work
experience. And because both a learner
and an apprentice may be paid wages
25%lower than the applicable legal
minimum wage.
They differ in the focus and terms of
training. A learner trains in a semi-skilled
job or in industrial occupations that
require training for less than three
months. An apprentice, on the other
hand, trains in a skilled or highly skilled
job found only in highly technical
industry, Because it is a skilled job, the
training period exceeds three months.
For a learner, the training period is
shorter because the job is more easily
learned than that in apprenticeship. The
job, in other words, is “non-
apprenticeable” because its practical
skills can be learned in three (not six)
months. A learner is not an apprentice
but an apprentice is, conceptually also a
learner.
Because the job is more easily learnable in
learnership than in apprenticeship, the
employer is committed to hire the
learner-trainee as an employee after the
training period. No such commitment
exists in apprenticeship.
Employment of apprentices, as stated in
Article 60, is legally allowed only in highly
technical industries and only in
apprenticeable occupations approved by
DOLE.
29 | P a g e
2. Differentiate learnership from
apprenticeship with respect to the period of
training, type of work, salary and qualifications.
(5%) 2016 Bar Exams
The following are the distinctions:
a) Practical training. Both learnership
and apprenticeship involve practical
training on-the-job.
b) Training agreement. Learnership is
governed by a learnership agreement;
while apprenticeship is governed by
an apprenticeship agreement.
c) Occupation. Learnership involves
learnable occupations consisting of
semi-skilled and other industrial
occupations which are non-
apprenticeable; while apprenticeship
concerns apprenticeable occupations
or any trade, form of employment or
occupation approved for
apprenticeship by the DOLE
Secretary.
d) Theoretical instructions. Learnership
may or may not be supplemented by
related theoretical instructions; while
apprenticeship should always be
supplemented by related theoretical
instructions.
e) Ratio of theoretical instructions and
on-the-job training. For both
learnership and apprenticeship, the
normal ratio is one hundred (100)
hours of theoretical instructions for
every two thousand (2,000) hours of
practical or on-the-job training.
Theoretical instruction time for
occupations requiring less than two
thousand (2,000) hours for
proficiency should be computed on
the basis of such ratio.
f) Competency-based system. Unlike in
apprenticeship, it is required in
learnership that it be implemented
based on the TESDA-approved
competency-based system.
g) Duration of training. Learnership
involves practical training on the job
for a period not exceeding three (3)
months; while apprenticeship
requires for proficiency, more than
three (3) months but not over six (6)
 months of practical training on the
job.
h) Qualifications. The law does not
expressly mention any qualifications
for learners; while the following
qualifications are required to be met
by apprentices under Article 59 of the
Labor Code:
(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.
i) Circumstances justifying hiring of
trainees. Unlike in apprenticeship, in
learnership, the law, Article 74 of the
Labor Code, expressly prescribes the
pre-requisites before learners may be
validly employed, to wit:
(a) When no experienced workers
are available;
(b) The employment of learners is
necessary to prevent
curtailment of employment
opportunities; and
(c) The employment does not
create unfair competition in
terms of labor costs or impair
or lower working standards.
j) Limitation on the number of trainees.
In learnership, a participating
enterprise is allowed to take in
learners only up to a maximum of
twenty percent (20%) of its total
regular workforce. No similar cap is
imposed in the case of apprenticeship.
k) Option to employ. In learnership, the
enterprise is obliged to hire the
learner after the lapse of the
learnership period; while in
apprenticeship, the enterprise is given
only an “option” to hire the apprentice
as an employee.
l) Wage rate. The wage rate of a learner
or an apprentice is set at seventy-five
percent (75%) of the statutory
minimum wage.
30 | P a g e
3. Are there differences between a househelper
and a homeworker? Explain your answer. (4%)
2017 Bar Exams
Househelpers are those who minister to
the personal needs and comfort of his/her
employer in the latter’s home. A
homeworker, on the other hand, is a
person who perform in or about his own
home any processing or fabrication of
goods or materials, in whole or in part,
which have been furnished directly or
indirectly, by an employer and sold
thereafter to the latter.
Voltaire: 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 while (b)
“Industrial Homeworker” means a
worker who is engaged in industrial
homework.
4. What is not a prerequisite for a valid
apprenticeship agreement? 1% 2012 Bar Exams
a. Qualifications of an apprentice are met;
b. A duly executed and signed apprenticeship
agreement;
c. The apprenticeship program is approved by
the Secretary of Labor;
d. Included in the list of apprenticeable
occupation of TESDA.
(C) The apprenticeship program is
approved by the Secretary of Labor. [Sec.
18, RA 7796- The apprenticeship
Program of DOLE shall be transferred to
TESDA which shall implement and
administer said program].
5. Which is a characteristic of the learner? 1%
2012 Bar Exams
a. A person is hired as a trainee in an industrial
occupation;
b. Hired in a highly technical industry;
c. Three (3) months practical on-the-job training
with theoretical instruction;
d. At least 14 years old.
A) A person is hired as a trainee in an
industrial occupation. [Art. 73, Labor
Code]
Learners
1. They are persons hired as trainees in
semi-skilled and other industrial
occupations
2. Which are non-apprenticeable and
3. Which may be learned through
practical training on the job in a relatively
short period of time
4. Which shall not exceed 3 months
5. Whether or not such practical training
is supplemented by theoretical
instructions [IRR, Book II, Rule VII, Sec.
1(a)].
6. According to Article 78 of the Labor Code., a
handicapped worker is one whose earning
capacity is impaired by the following, except :
a. Age;
b. Physical Deficiency;
c. Mental Deficiency;
d. Psychological Deficiency 1% 2012 Bar Exams
d. Psychological deficiency
Article 78. handicapped workers are
those whose earning capacity is impaired
by age or physical or mental deficiency or
injury.
7. For humanitarian reasons, a bank hired
several handicapped workers to count and sort
out currencies. The handicapped workers knew
that the contract was only for a period of six-
months and the same period was provided in
their employment contracts. After six months,
the bank terminated their employment on the
ground that their contract has expired. This
31 | P a g e
prompted the workers to file with the Labor
Arbiter a complaint for illegal dismissal. Will
their action prosper? Why or why not? (5%) 2012
Bar Exams
Suggested answer: No. An employment
contract with a fixed final term
terminates by its own terms at the end of
such period. The same is valid if the
contract was entered into by the parties
on equal footing and the period specified
was not designed to circumvent the
security of tenure of the employees (Brent
School v. Zamora).
Chan: The two (2) requisites or criteria
for the validity of a fixed-term contract of
employment are as follows:
1. The fixed period of employment was
knowingly and voluntarily agreed upon
by the parties, without any force, duress
or improper pressure being brought to
bear upon the employee and absent any
other circumstances vitiating his consent;
or
2. It satisfactorily appears that the
employer and employee dealt with each
other on more or less equal terms with no
moral dominance whatever being
exercised by the former on the latter.
*look up Bernardo vs NLRC G.R. No.
122917 July 12, 1999. Naa dri ang facts sa
case. Gi grant sa SC ang ilang action and
considered them regular employees
because some of them worked more than
6 months kay gi renew sa bank ang ilang
mga contracts. Thus, dili na sila gi
consider under sa Article 80 but are
already covered under article 280.
Applicability of the Brent Ruling
Respondent bank, citing Brent School v.
Zamora in which the Court upheld the
validity of an employment contract with a
fixed term, argues that the parties entered
into the contract on equal footing. It adds
that the petitioners had in fact an
advantage, because they were backed by
then DSWD Secretary Mita Pardo de
Tavera and Representative Arturo Borjal.
 We are not persuaded. The term limit in
the contract was premised on the fact that
the petitioners were disabled, and that
the bank had to determine their fitness
for the position. Indeed, its validity is
based on Article 80 of the Labor Code.
But as noted earlier, petitioners proved
themselves to be qualified disabled
persons who, under the Magna Carta for
Disabled Persons, are entitled to terms
and conditions of employment enjoyed by
qualified able-bodied individuals; hence,
Article 80 does not apply because
petitioners are qualified for their
positions. The validation of the limit
imposed on their contracts, imposed by
reason of their disability, was a glaring
instance of the very mischief sought to be
addressed by the new law.
Moreover, it must be emphasized that a
contract of employment is impressed with
public interest. Provisions of applicable
statutes are deemed written into the
contract, and the "parties are not at
liberty to insulate themselves and their
relationships from the impact of labor
laws and regulations by simply
contracting with each other." Clearly, the
agreement of the parties regarding the
period of employment cannot prevail over
the provisions of the Magna Carta for
Disabled Persons, which mandate that
petitioners must be treated as qualified
able-bodied employees.
Private respondent argues that the
petitioners were informed from the start
that they could not become regular
employees. In fact, the bank adds, they
agreed with the stipulation in the contract
regarding this point. Still, we are not
persuaded. The well-settled rule is that
the character of employment is
determined not by stipulations in the
contract, but by the nature of the work
performed. Otherwise, no employee can
become regular by the simple expedient
of incorporating this condition in the
contract of employment.
In this light, we iterate our ruling in
Romares v. NLRC:
32 | P a g e
Art. 280 was emplaced in our statute
books to prevent the circumvention of the
employee's right to be secure in his tenure
by indiscriminately and completely ruling
out all written and oral agreements
inconsistent with the concept of regular
employment defined therein. Where an
employee has been engaged to perform
activities which are usually necessary or
desirable in the usual business of the
employer, such employee is deemed a
regular employee and is entitled to
security of tenure notwithstanding the
contrary provisions of his contract of
employment.
xxx xxx xxx
At this juncture, the leading case of Brent
School, Inc. v. Zamora proves instructive.
As reaffirmed in subsequent cases, this
Court has upheld the legality of fixed-
term employment. It ruled that the
decisive determinant in "term
employment" should not be the activities
that the employee is called upon to
perform but the day certain agreed upon
the parties for the commencement and
termination of their employment
relationship. But this Court went on to say
that where from the circumstances it is
apparent that the periods have been
imposed to preclude acquisition of
tenurial security by the employee, they
should be struck down or disregarded as
contrary to public policy and morals.
In rendering this Decision, the Court
emphasizes not only the constitutional
bias in favor of the working class, but also
the concern of the State for the plight of
the disabled. The noble objectives of
Magna Carta for Disabled Persons are not
based merely on charity or
accommodation, but on justice and the
equal treatment of qualified persons,
disabled or not. In the present case, the
handicap of petitioners (deaf-mutes) is
not a hindrance to their work. The
eloquent proof of this statement is the
repeated renewal of their employment
contracts. Why then should they be
dismissed, simply because they are
 physically impaired? The Court believes, education, i.e. “baon”, transportation,
that, after showing their fitness for the school projects and school activities.
work assigned to them, they should be
treated and granted the same rights like
any other regular employees. 10. What is the financial incentive, if any,
granted by law to SPQ Garments whose cutters
and sewers in its garments-for-export
8. In what situation is an employer permitted to operations are 80% staffed by deaf and deaf-
employ a minor? mute workers?
a. 16-year old child actor as a cast member in (A) Additional deduction from its gross income
soap opera working 8 hours a day, 6 days a equivalent to 25% of amount paid as salaries to
week; persons with disability.
b. A 17-year old in deep sea-fishing; (B) Additional deduction from its gross income
equivalent to 50% of the direct costs of the
c. A 17 -year old construction worker;
construction of facilities for the use of persons
d. A 17-year old assistant cook in a family with disability.
restaurant. 1% 2012 Bar Exams
(C) Additional deduction from its net taxable
(D) A 17-year old assistant cook in a income equivalent to 5% of its total payroll
family restaurant [Sec. 12, R.A. 7610, as
(D) Exemption from real property tax for one (1)
amended by Sec. 2, RA 9231, Dec. 19,
year of the property where facilities for persons
2003].
with disability have been constructed.
(E) The annual deduction under (A), plus a one-
9. Soledad, a widowed school teacher, takes time deduction under (B).
under her wing one of her students, Kiko, 13
1% 2013 Bar Exams
years old, who was abandoned by his parents
and has to do odd jobs in order to study. She
allows Kiko to live in her house, provides him
A) Additional deduction from its gross
with clean clothes, food, and a daily allowance of
income equivalent to 25% of amount paid
200 pesos. In exchange, Kiko does routine
as salaries to persons with disability.
housework, consisting of cleaning the house and
doing errands for Soledad. One day, a *Magna Carta for Disabled Persons
representative of the DOLE and the DSWD came
to Soledad's house and charged her with
violating the law that prohibits work by minors. 11. Distinguish Labor-Only contracting and Job-
Soledad objects and offers as a defense that she Only contracting. (5%) 2012 Bar Exams
was not requiring Kiko to work as the chores
were not hazardous. Further, she did not give Job Contracting Labor-only
him chores regularly but only intermittently as Contracting
the need may arise. Is Soledad's defense The er/principal is The er/principal is
meritorious? (4%) 2015 Bar Exams merely an indirect treated as direct
employer, by employer of the
operation of law, of contractor’s
Soledad’s defense is meritorious. Sec. 4 his contractor’s employees in all
(d) of the Kasambahay Law (RA 10361) employees. instances. (contractor
provides that the term “Domestic = agent of the
Worker” shall not include children who employer)
are under foster family arrangement, and
are provided access to education and
given an allowance incidental to

33 | P a g e
 the law creates an er- the statute creates an and extent that the principal is liable to
ee relationship for a er-ee relationship for employees directly hired by him/her, as
limited purpose. a comprehensive provided in Article 106 of the Labor Code,
purpose. as amended.
The principal The principal 4. In the former, the legitimate job
becomes solidarily becomes solidarily contractor undertakes to perform a
liable. The liability liable with the specific job for the principal; while in the
however does not contractor not only latter, the labor-only contractor merely
extend to the payment for unpaid wages but provides, supplies, recruits and places the
of backwages or also for all the rightful personnel to work for the principal.
separation pay of claims of the
employees who are employees under the
illegally dismissed. Labor Code and 12. The labor sector has been loudly agitating for
ancillary laws. the end of labor-only contracting, as
distinguished from job contracting. Explain
Allowed by law Prohibited by law
these two kinds of labor contracting, and give the
Presence of Absence of effect of a finding that one is a labor-only
substantial capital or substantial capital or contractor. Explain your answers. (4%) 2017 Bar
investment. investment. Exams
Job contracting refers to an agreement
whereby a principal agrees to farm out a
Job Contracting vs Labor-only Contracting
contractor the performance or
Chan: 1. In the former, no employer- completion of a specific job or work
employee relationship exists between the within a definite or predetermined
contractual employees of the job period, regardless of whether such job or
contractor and the principal; while in the work is to be performed of completed
latter, an employer-employee within or outside the premises of the
relationship is created by law between the principal.
principal and the contractual employees
On the other hand, labor-only contracting
supplied by the labor-only contractor.
exists where the person supplying
2. In the former, the principal is workers to an employer does not have
considered only an “indirect employer,” substantial capital or investment in the
as this term is understood under Article form of tools, equipment, machineries,
107 of the Labor Code; while in the latter, work premises, among others, and the
the principal is considered the “direct workers recruited and placed by such
employer” of the contractual employees persons are performing activities which
in accordance with the last paragraph of are directly related to the principal
Article 106 of the Labor Code. business of such employer (LC,Art. 106).

3. In the former, the joint and several A finding that a contractor is a “labor-
obligation of the principal and the only” contractor is equivalent to declaring
legitimate job contractor is only for a that there is an ER-EE relationship
limited purpose, that is, to ensure that the between the principal and the employees
employees are paid their wages. Other of the “labor-only” contractor. (San
than this obligation of paying the wages, Miguel Corp. vs. MAERC Integrated
the principal is not responsible for any Systems. G.R. No. 144672; July 10, 2003).
claim made by the contractual employees;
13. With respect to legitimate independent
while in the latter, the principal becomes
contracting, an employer or one who engages the
jointly and severally or solidarily liable
services of a bona fide independent contractor is
with the labor-only contractor to the
–
latter’s employees in the same manner
34 | P a g e
a. An indirect employer, by operation of law, of
his contractor’s employees; he becomes
solidarily liable with the contractor not only for
unpaid wages but also for all the rightful claims
of the employees under the Labor Code;
b. Treated as direct employer of his contractor’s
employees in all instances; he becomes
subsidiarily liable with the contractor only in the
event the latter fails to pay the employees’ wages
and for violation of labor standard laws;
c. An indirect employer, by operation of law, of
his contractor’s employees; he becomes
solidarily liable with the contractor only in the
event the latter fails to pay the employees’ wages
and for violation of labor standard laws;
d. Treated as direct employer of his contractor’s
employees in all instances; the principal
becomes solidarily liable with the contractor not
only for unpaid wages but also for all the rightful
claims of the employees under the Labor Code;
1% 2012 Bar Exams
(C) An indirect employer, by operation of
law, of his contractor‘s employees; he
becomes solidarily liable with the
contractor in the event the latter fails to
pay the employees‘ wages and for
violation of labor standard laws. [Arts.
107 and 109, Labor Code]
14. Is the contractor a necessary party in a case
where labor contracting is the main issue and
labor-only contracting is found to exist?
a. Yes, the contractor is necessary in the full
determination of the case as he is the purported
employer of the worker;
b. Yes, no full remedy can be granted and
executed without impleading the purported
contractor;
c. No, the contractor becomes a mere agent of
the employer-principal in labor contracting;
d. No, the contractor has no standing in a labor
contracting case. 1% 2012 Bar Exams
(A) Yes, the contractor is necessary in the
full determination of the case as he is the
porpoted employer of the worker.
35 | P a g e
(B) Yes, no full remedy can be granted
and executed without impleading the
purpoted contractor.
*article 106 – joint and several liability
*article 109
Department order 174 series of 2017 –
there exists a solidary liability on the part
of the principal and contractor for
purposes of enforcing the provisions of
the labor code…section 9.
15. Which is a characteristic of a labor-only
contractor?
a. Carries an independent business different
from the employer’s;
b. The principal’s liability extends to all rights,
duties and liabilities under labor standards laws
including the right to self-organization;
c. No employer-employee relationship;
d. Has sufficient substantial capital or
investment in machinery, tools or equipment
directly or intended to be related to the job
contracted. 1% 2012 Bar Exams
C) No employer-employee relationships
[Art. 106, Labor Code]
16. What is not an element of legitimate
contracting?
a. The contract calls for the performance of a
specific job, work or service;
b. It is stipulated that the performance of a
specific job, work or service must be within a
definite predetermined period;
c. The performance of specific job, work or
service has to be completed either within or
outside the premises of the principal;
d. The principal has control over the
performance of a specific job, work or service. 1%
2012 Bar Exams
D) The principal has control over the
performance of a specific job, work or
service. [Art. 106, Labor Code]
 DO 174, SECION 8
17. Constant Builders, an independent
contractor, was charged with illegal dismissal
and non-payment of wages and benefits of ten
dismissed employees. The complainants
impleaded as co-respondent Able Company,
Constant Builder's principal in the construction
of Able's office building. The complaint
demanded that Constant and Able be held
solidarily liable for the payment of their
backwages, separation pay, and all their unpaid
wages and benefits.
If the Labor Arbiter rules in favor of the
complainants, choose the statement that best
describes the extent of the liabilities of Constant
and Able. (1%)
(A) Constant and Able should be held solidarily
liable for the unpaid wages and benefits, as well
as backwages and separation pay, based on
Article 109 of the Labor Code which provides
that "every employer or indirect employer shall
be held responsible with his contractor or
subcontractor for any violation of any provision
of this Code."
(B) Constant and Able should be held solidarily
liable for the unpaid wages and benefits, and
should order Constant, as the workers' direct
employer, to be solely liable for the backwages
and separation pay.
(C) Constant and Able should be held solidarily
liable for the unpaid wages and benefits and the
backwages since these pertain to labor standard
benefits for which the employer and contractor
are liable under the law, while Constant alone –
as the actual employer - should be ordered to pay
the separation pay.
(D) Constant and Able should be held solidarily
liable for the unpaid wages and benefits, and
Constant should be held liable for their
backwages and separation pay unless Able is
shown to have participated with malice or bad
faith in the workers' dismissal, in which case
both should be held solidarily liable.
(E) The above statements are all inaccurate.
2013 Bar Exams
(A) Constant and Able should be held
solidarily liable for the unpaid wages and
benefits, as well as backwages and
36 | P a g e
separation pay, based on Article 109 of
the Labor Code which provides that
"every employer or indirect employer
shall be held responsible with his
contractor or subcontractor for any
violation of any provision of this Code.
18. Dr. Crisostomo entered into a retainer
agreement with AB Hotel and Resort whereby he
would provide medical services to the guests and
employees of AB Hotel and Resort, which, in
turn, would provide the clinic premises and
medical supplies. He received a monthly retainer
fee of P60,000, plus 70% share in the service
charges from AB Hotel and Resort’s guests
availing themselves of the clinic’s services. The
clinic employed nurses and allied staff, whose
salaries, SSS contributions, and other benefits
he undertook to pay. AB Hotel and Resort issued
directives giving instructions to him on the
replenishment of emergency kits and forbidding
the clinic staff from receiving cash payments
from the guests. In time, the nurses and the
clinic staff claimed entitlement to rights as
regular employees of AB Hotel and Resort, but
the latter refused on the ground that Dr.
Crisostomo, who was their employer, was an
independent contractor. Rule with reasons. (4%)
2017 Bar Exams
The test of independent contractorship
was applied in the case of Polyfoam-RGC
International Corporation v. Concepcion,
G.R. No. 172349, June 13, 2012. Thus, the
High Court ruled:
The test of independent contractorship is
“whether one claiming to be an
independent contractor has contracted to
do the work according to his own
methods and without being subject to the
control of the employer, except only as to
the results of the work.” (San Miguel
Corporation v. Aballa, G.R. No. 149011,
June 28, 2005, 461 SCRA 392, 421) In
San Miguel Corporation v. Semillano,
G.R. No. 164257, July 5, 2010, 623 SCRA
114 the Court laid down the criteria in
determining the existence of an
independent and permissible contractor
relationship, to wit:
 “x x x [W]hether or not the contractor is
carrying on an independent business; the
nature and extent of the work; the skill
required; the term and duration of the
relationship; the right to assign the
performance of a specified piece of work;
the control and supervision of the work to
another; the employer’s power with
respect to the hiring, firing and payment
of the contractor’s workers; the control of
the premises; the duty to supply the
premises, tools, appliances, materials,
and labor; and the mode, manner and
terms of payment.” (San Miguel
Corporation v. Semillano, supra, at p.
124; Sasan, Sr. v. National Labor
Relations Commission 4th Division,
supra at p. 691)
Applying the above-test, the nurses are
employees of Dr. Crisostomo. The facts
had clearly stated that Dr. Crisostomo
was the one paying the salaries of the
nurses and even reported them for SSS
coverage. The element of payment of
wages is present.
19. Mario Brothers, plumbing works contractor,
entered into an agreement with Axis Business
Corporation (Axis) for the plumbing works of its
building under construction. Mario Brothers
engaged the services of Tristan, Arthur, and Jojo
as plumber, pipe fitter, and threader,
respectively. These workers have worked for
Mario Brothers in numerous construction
projects in the past but because of their long
relationship, they were never asked to sign
contracts for each project. No reports to
government agencies were made regarding their
work in the company.
During the implementation of the works
contract, Axis suffered financial difficulties and
was not able to pay Mario Brothers its past
billings. As a result, the three (3) employees were
not paid their salaries for two (2) months and
their 13th month pay. Because Axis cannot pay,
Mario Brothers cancelled the contract and laid
off Tristan, Arthur, and Jojo. The 3 employees
sued Mario Brothers and Axis for illegal
dismissal, unpaid wages, and benefits.
37 | P a g e
[a] Mario Brothers claims the 3 workers
are project employees. It explains that the
agreement is, if the works contract is
cancelled due to the fault of the client, the
period of employment is automatically
terminated. Is the contractor correct?
Explain. (2.5%)
No. In GMA Network, Inc v. Pabriga,
(G.R. No. 176419, November 27, 2013, the
requirements to qualify an employment
as project-based was set as follows:
1) 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; and
2) the termination of the project must be
reported by the employer to the DOLE
Regional Office having jurisdiction over
the workplace within the period
prescribed, and failure to do so militates
against the employer's claim of project
employment. This is true even outside the
construction industry.
Mario Brothers failed to comply with both
requirements; hence, Tristan, Arthur and
Jojo are its regular employees. The
cancellation of its contract with Axis did
not result to the termination of
employment of Tristan, Arthur and Jojo.
[b] Can Axis be made solidarily liable with
Mario Brothers to pay the unpaid wages
and 13th month pay of Tristan, Arthur,
and Jojo? Explain. (2.5%) 2016 Bar Exam
Yes, Axis can be made solidarily liable
with Mario Brothers. Principals are
solidarily liable with their contractors for
the wages and other money benefits of
their contractors' workers.
20. XYZ Manpower Services (XYZ) was sued by
its employees together with its client, ABC
Polyester Manufacturing Company (ABC). ABC
is one of the many clients of XYZ. During the
proceedings before the Labor Arbiter, XYZ was
able to prove that it had substantial capital of
Three Million Pesos. The Labor Arbiter ruled in
favor of the employees because it deemed XYZ as
a labor only contractor. XYZ was not able to
prove that it had invested in tools, equipment,
etc.
a. Is the Labor Arbiter’s ruling valid? Explain.
(5%)
SUGGESTED ANSWER:
Yes, the presumption is that a contractor
is a labor-only contractor unless it is
shown that it has substantial capital and
substantial investment in the form of
tools, equipment, machineries, work
premises and the like (Sy, et al v. Fairland
Knitcraft Co., Inc., G.R. Nos. 182915 &
189658, December 12, 2011) besides,
what Art. 106 of the Code defines is
Labor-Only Contracting and not Job-
Contracting. In mandating that ―there is
labor-only‘ contracting where the person
supplying workers to an employment
does not have substantial capital OR
investment in the form of tools,
equipment, machineries, work premises,
among others‖, the law is therefore clear
that the presence of either handicap –
―substantial capital OR (substantial)
investment in the form of tools,
equipment, (etc.)‖ – is enough basis to
classify one as a labor-only contractor.
ALTERNATIVE ANSWER:
No, the Labor Arbiter‘s ruling is not valid.
Art. 106 of the Labor Code provides that
the contractor has ―substantial capital or
investment‖; the law did not say
substantial capital and investment.
Hence, it is in the alternative; it is
sufficiant if the contractor has one or the
other, i.e., either the substantial capital or
the investment. And under Department
Order No. 18-A, Series of 2011, the
amount of P3 million paid-up capital for
the company is substantial capital.
b. Does the performance by a contractual
employee, supplied by a legitimate contractor, of
activities directly related to the main business of
the principal make him a regular employee of the
principal? Explain. (5%) 2012 Bar Exams
38 | P a g e
Chan: (walay “supplied by a legitimate
contractor”)
Does the performance by a contractual
employee of activities directly related to
the main business of the principal makes
him a regular employee of the principal?
Yes. In the 2008 case of Mandaue Galleon
Trade, Inc. v. Andales, [G.R. No. 159668,
March 7, 2008], the Supreme Court cited
as additional basis for holding that the
contractors of petitioner are engaged in
labor-only contracting, the fact that the
respondents who were the employees
recruited, supplied and placed by the
contractors to petitioner were performing
activities which are directly related to the
main business of the petitioner.
Respondents’ work as weavers, grinders,
sanders and finishers is directly related to
petitioner's principal business of rattan
furniture manufacturing. Where the
contractual employees are tasked to
undertake activities usually necessary or
desirable in the usual business or trade of
the principal, the contractor is considered
as a labor-only contractor and such
employees are considered as regular
employees of the principal.
As in Mandaue Galleon, the same ruling
was made in the 2009 case of Coca-Cola
Bottlers Phils., Inc. v. Agito, [G.R. No.
179546, February 13, 2009], where the
contractor was held to have engaged in
labor-only contracting because the
respondent-workers supplied by it to
petitioner company worked therein as
salesmen. In the Delivery Agreement
between petitioner and the contractor, it
is stated that petitioner is engaged in the
manufacture, distribution and sale of
softdrinks and other related products.
The work of respondents, constituting
distribution and sale of Coca-Cola
products, is clearly indispensable to the
principal business of petitioner.
In finding that the contractor, San
Sebastian Allied Services, Inc. (SSASI),
was a labor-only
 contractor in the 2008 case of Almeda v.
Asahi Glass Philippines, Inc., [G.R. No.
177785, September 3, 2008], the
Supreme Court was unconvinced by
respondent’s argument that petitioners
were performing jobs that were not
directly related to respondent’s main line
of business. Respondent is engaged in
glass manufacturing. One of the
petitioners served as a quality controller,
while the rest were glass cutters. The only
excuse offered by respondent - that
petitioners’ services were required only
when there was an increase in the
market’s demand with which respondent
could not cope - only proves even more
that the services rendered by petitioners
were indeed part of the main business of
respondent. It would mean that
petitioners supplemented the regular
workforce when the latter could not
comply with the market’s demand;
necessarily, therefore, petitioners
performed the same functions as the
regular workforce. Even respondent’s
claim that petitioners’ services were
required only intermittently, depending
on the market, deserves scant credit. The
indispensability of petitioners’ services
was fortified by the length and continuity
of their performance, lasting for periods
ranging from three to 11 years.
A legitimate job contract, wherein an
employer enters into a contract with a job
contractor for the performance of the
formers work, is permitted by law. Thus,
the employer-employee relationship
between the job contractor and his
employees is maintained. In legitimate
job contracting, the law creates an
employer-employee relationship between
the employer and the contractors
employees only for a limited purpose, i.e.,
to ensure that the employees are paid
their wages. The 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 employer is not responsible
39 | P a g e
for any claim made by the contractors
employees (COCA-COLA BOTTLERS
PHILS., INC., vs ALAN M. AGITO,
REGOLO S. OCA III)
Section 7 of DEPARTMENT ORDER NO.
174, SERIES OF 2017: RULES
IMPLEMENTING ARTICLES 106 TO 109
OF THE LABOR CODE, states that a
principal is deemed the direct employer
of the contractor’s employees in the event
that the contractor is engaged in laboy-
only contracting under section 5 and
other illicit forms of employment
arrangements under section 6 of these
rules…
Section 5 of the Rules Implementing
Articles 106-109 of the Labor Code, as
amended, provides the guidelines in
determining whether labor-only
contracting .
Section 5. Prohibition against labor-only
contracting. Labor-only contracting is
hereby declared prohibited. For this
purpose, labor-only contracting shall
refer to an arrangement where the
contractor or subcontractor merely
recruits, supplies, or places workers to
perform a job, work or service for a
principal, and any of the following
elements are [is] present:
i) The contractor or
subcontractor does not have substantial
capital or investment which relates to the
job, work, or service to be performed and
the employees recruited, supplied or
placed by such contractor or
subcontractor are performing activities
which are directly related to the main
business of the principal; or
ii) The contractor does not
exercise the right to control the
performance of the work of the
contractual employee.