Labor Law I2004

LABOR LAW 1(Labor Standards & Termination of Employment )
Updated and enhanced with additional cases by ATTY. RENE CALLANTA Part I Introductory Materials
Section 1. LABOR LAW IN GENERAL

1.1 LABOR LAW DEFINED :
The law governing the rights and duties of the employer and employees (1) with respect to the terms and conditions of employment and (2) with respect to labor disputes arising from collective bargaining respecting such terms and conditions
1. Labor Legislation Consists of statutes, regulations and jurisprudence governing the

relations between capital and labor by: a. providing for certain terms and conditions of employment or b. providing a legal framework within which these terms and conditions and the employment relationships may be negotiated adjusted and administered.
2. Social Legislation Includes all laws that provide particular kinds of protection or
benefits to society or segments thereof in furtherance of social justice. In that sense, labor laws are necessarily social legislation. promote public welfare
1.2
LAW CLASSIFICATION 1. Labor Standards Law That which sets out the minimum terms, conditions and benefits
of employment that ERs must provide or comply with and to which EEs are entitled as a matter of legal right. Ex. 8-hour labor law
2. Labor Relations Law That which defines [S R D & IM]

the status, rights and duties and the institutional mechanisms that govern the individual and collective interaction of ERs and EEs or their representatives. Ex. Book V of Labor Code
3. Welfare Legislation designed to take care of contingencies which may affect workers,
e.g. where there is loss of income for research beyond the workers control. BENEFITS * Social Security Law.
1.3 1.4
HISTORY AND ORIGIN BASIS FOR ENACTMENT 1. Art. II, Sec.5, Const. : The maintenance of peace and order, the protection of life,
liberty, and property, and the promotion of general welfare are essential for the enjoyment by all the people of the blessing of democracy.
2. Art. II, Sec. 18, Const. : The State affirms labor as a primary social economic force. It
shall protect the rights of workers and promote their welfare.
3. Art. XIII, Sec. I, Const. : The Congress shall give highest priority to the enactment of
measures that protect and enhance the right of all the people to human dignity, reduce social, economic and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good. To this end, the State shall regulate the acquisition, ownership, use, and disposition of property and its increments.
Sigma Rho ( ) reviewers

Personal copy of Rene Callanta 82

Updated and enhanced with additional cases by ATTY. RENE CALLANTA
* Labor and social legislation are enacted pursuant to the police power of the State. This is its inherent power to enact wholesome and reasonable laws to promote order, safety, health, morals and general welfare of society. In its exercise the state may interfere with personal liberty, with property and with business and occupation. (Calalang vs. Williams). * No longer may the due process clause and the freedom of contract be invoked to challenge labor and social legislation. This has long been discarded since the 1937 case of West Coast Hotel vs. Parish (US) and the 1924 case of Pp. vs. Pomar (RP). * Labor relation laws enable workers to obtain from their employers more than the minimum benefits set by labor standard laws
1.5
LAW AND WORKER

The SC reaffirms its concern for the lowly worker who, often at the mercy of his ER, must look up to the law for protection. Fittingly, the law regards him with tenderness and even favor and always with hope in his capacity to help in shaping the nations future. It is an error to take him for granted. (Cebu Royal Plant vs. Deputy Minister of Labor)
1.6
MANAGEMENT FUNCTION
Recognition
Deles v. NLRC (2000) However, petitioner loses sight of the fact that the right of an employer to regulate all aspects of employment is well settled. This right, aptly called management prerogative, gives employers the freedom to regulate, according to their discretion and best judgment, all aspects of employment, including work assignment, working methods, processes to be followed, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. In general, management has the prerogative to discipline its employees and to impose appropriate penalties on erring workers, pursuant to company rules and regulations. Limitations Great Pacific Employees Union v. Great Pacific Life Assurance It bears emphasis that the employer is free to regulate all aspects of employment according to his own discretion and judgment. This prerogative flowed from the established rule that labor laws do not authorize substitution of judgment of the employer in the conduct of his business. Recall of workers clearly falls within the ambit of management prerogative. The employer can exercise this prerogative without fear of liability so long as it is done in good faith for the advancement of his interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or valid agreements. It is valid as it is not performed in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite. Pantranco North Express, Inc. v. NLRC The State affords the constitutional blanket of rendering protection to labor, but it must also protect the right of employers to exercise what are clearly management prerogatives, so long as the exercise is without abuse of discretion.


Updated and enhanced with additional cases by ATTY. RENE CALLANTA Bontia v. NLRC
The rule is well settled that labor laws discourage interference with an employer's judgment in the conduct of his business. Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives As long as the company' s exercise of the same is in good faith in order to advance its interests and not for the purpose of defeating or circumventing the rights of the employees under the law or valid agreements, such exercise will be upheld. However, management prerogatives are not absolute but are subject to legal limits, collective bargaining agreements, or general principles of fair play and justice. And, while it is the special privilege of management to dismiss or lay off an employee, the exercise of that prerogative must be made without abuse of discretion, for what is at stake is not only the employee' s position but also his means of livelihood. Courts may, therefore, look into the employer' s exercise of a management prerogative if the same is clearly shown to be tainted with grave abuse of discretion, 15 ever mindful that, under the foregoing principles and the policy of the State, doubts should be resolved in favor of the disadvantaged employee. 1.7
COMPROMISE AND WAIVER
Article 227 Any compromise settlement, including those involving labor standards law, voluntarily agreed upon by the parties with the assistance of the Bureau or the regional office of the Department of Labor, shall be FINAL and BINDING upon the parties. The National Labor relations Commission or any court shall not assume jurisdiction over issues involved therein except in case of non-compliance thereof or if there is prima facie evidence that the settlement was obtained through FRAUD, MISREPRESENTATION, OR COERCION. Rules Asian Alcohol Corp. v. NLRC It is true that this Court has generally held that quitclaims and releases are contrary to public policy and therefore, void. Nonetheless, voluntary agreements that represent a reasonable settlement are binding on the parties and should not later be disowned. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of the settlement are unconscionable, that the law will step in to bail out the employee. While it is our duty to prevent the exploitation of employees, it also behooves us to protect the sanctity of contracts that do not contravene our laws. More Maritime Agencies, Inc. v. NLRC In American Home Assurance Co. v. NLRC, this Court held: The law does not consider as valid any agreement to receive less compensation that what a worker is entitled to recover nor prevent him from demanding benefits to which he is entitled. Quitclaims executed by the employees are thus commonly frowned upon as contrary to public policy and ineffective to bar claims for the full measure of the workers legal rights, considering the economic disadvantage of the employee and the inevitable pressure upon him by financial necessity. Thus, it is never enough to assert that the parties have voluntarily entered into such a quitclaim. Golden Donuts, Inc. v. NLRC (2000) "A compromise, once approved by final orders of the court has the force of res judicata between the parties and should not be disturbed except for vices of consent or forgery." A compromise is basically a contract perfected by mere consent. "Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract." A compromise agreement is not valid when a party in the case has not signed the same or when someone signs for and in behalf of such party without authority to do so.


1.8 Updated and enhanced with additional cases by ATTY. RENE CALLANTA
SOURCES OF LAW
1 2 Labor Code and Related Special Legislation Contract Article 1305 Civil Code A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Article 1306 Civil Code The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
Collective Bargaining Agreement Plastic Town Center Corp. v. NLRC The subject for interpretation in this petition for review is not the Labor Code or its implementing rules and regulations but the provisions of the collective bargaining agreement entered into by management and the labor union. As a contract, it constitutes the law between the parties (Fegurin v. National Labor Relations Commission) and in interpreting contracts, the rules on contract must govern. Contracts which are not ambiguous are to be interpreted according to their literal meaning and should not be interpreted beyond their obvious intendment (Herrera v. Petrophil Corp.). Past Practices Davao Fruits Corporation v. Associated Labor Union From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its employees' thirteenth month pay, the payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays. The considerable length of time the questioned items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake. A company practice favorable to the employees had indeed been established and the payments made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Section 10 of the Rules and Regulations Implementing P.D. No. 851, and Article 100 of the Labor Code of the Philippines, which prohibit the diminution or elimination by the employer of the employees' existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).
Section 2. LABOR AND THE CONSTITUTION

2.1 CONSTITUTIONAL PROVISIONS
1. Art. II, Sec. 9, Const. : The State shall promote a just and dynamic social order that will
ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living, and an improved quality of life for all.
2. Art. II, Sec. 10, Const. : The State shall promote social justice in all phases of national
development.


3. Art. II, Sec. 13, Const. : The State recognized the role of the youth in nation-building
and shall promote and protect their physical, moral, spiritual, intellectual, and social wellbeing. . .
4. Art. II, Sec. 14, Const. : The State recognizes the role of women in nation-building, and
shall ensure their fundamental equality before the law of women and men.
5. Art. II, Sec. 18, Const. : The State affirms labor as a primary social economic force. It
shall protect the rights of workers and promote their welfare.
6. Art. XIII, Sec. 1, Const. : The Congress shall give highest priority to the enactment of
measures that protect and enhance the right of all the people to human dignity, reduce social, economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good. To this end, the State shall regulate the acquisition, ownership, use, and disposition of property and its increments.
7. Art. XIII, Sec. 3 (1st par), Const. : The State shall

*afford full protection to labor, local and overseas, organized and unorganized, and *promote full employment and equality of employment opportunities for all . . .
8. Art. XIII, Sec. 4, Const. : The State shall, by law, undertake an agrarian reform program
founded on the right of farmers and regular farmworkers, who are landless, to win collectively or collectively the lands they till or, in the case of other farmworkers, to receive a just share of the fruits thereof . . .
9. Art. XIII, Sec. 11, Const. : The State shall adopt an integrated and comprehensive
approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost . . . 10. The present Constitution has gone further than the 1973 Constitution in guaranteeing vital social and economic rights to marginalized groups of society, including labor. The framers of the Constitution intended to give primacy to the rights of labor and afford the sector full protection regardless of the geographical location of the workers and whether they are organized or not (Globe Mackay vs. NLRC).
2.2
PROTECTION TO LABOR 1. Art. XIII, Sec. 3, Const. : The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to 1) self organization, 2) collective bargaining and negotiations, and 3) peaceful and concerted activities including the right to strike in accordance with law. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. The State shall promote the principle of shared responsibility between workers and ERs and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce mutual compliance therewith to foster industrial peace. The State shall regulate the relations between workers and ERs, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns in investment, expansion and growth. 1935 Const. : The State shall afford protection to labor, especially to working women and minors, and shall regulate the relation between landowner and tenant, and between labor and capital in industry and in agriculture. The State may provide for compulsory arbitration.


7 Cardinal Rights of Workers SC PT HL P right to self-organization collective bargaining and negotiations peaceful concerted activities including the right to strike in accordance with law security of tenure humane conditions of work living wage participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.
Phil. Airlines, Inc. v. Santos It is a fact that the sympathy of the Court is on the side of the laboring classes, not only because the Constitution imposes such sympathy, but because of the one-sided relation between labor and capital. The purpose is to place the workingman on an equal plane with management - with all its power and influence - in negotiating for the advancement of his interests and the defense of his rights. Under the policy of social justice, the law bends over backward to accommodate the interests of the working class on the humane justification that those with less privileges in life should have more privileges in law. Phil. Geothermal, Inc. v. NLRC The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the employer. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to none). Three aggregates of power against which the individual employee needs protection 1. collective labor - Union 2. collective capital - management 3. collective bargaining relationship * The law, while protecting the rights of laborers, does not authorize the oppression or destruction of the employer LAISSEZ FAIRE 1. Laissez faire or the principle of free enterprise never found full acceptance in this jurisdiction . . . (ACCFA vs. CUGCO)
Employees Confederation of the Philippines v. NWPC (91) Apparently, ECOP is of the mistaken impression that Republic Act No. 6727 is meant to "get the Government out of the industry" and leave labor and management alone in deciding wages. The Court does not think that the law intended to deregulate the relation between labor and capital for several reasons: (1) The Constitution calls upon the State to protect the rights of workers and promote their welfare; (2) the Constitution also makes it a duty of the State "to intervene when the common goal so demands" in regulating property and property relations; (3) the Charter urges Congress to give priority to the enactment of measures, among other things, to diffuse the wealth of the nation and to regulate the use of property; (4) the Charter recognizes the "just share of labor in the fruits of production;" (5) under the Labor Code, the State shall regulate the relations between labor and management; (6) under Republic Act No. 6727 itself, the State is interested in seeing that workers receive fair and equitable wages; and (7) the Constitution is primarily a document of social justice, and although it has recognized the importance of the private sector, it has not embraced fully the concept of laissez faire or otherwise, relied on pure market forces to govern the economy; We can not give to the Act a meaning or intent that will conflict with these basic principles.
2.3
LABOR SECTOR
1. Art. II, Sec. 18, Const. : The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare.


2.4
POLICY CONSIDERATIONS SOCIAL JUSTICE
1. Art. II, Sec. 10, Const. : The State shall promote social justice in all phases of national development. Article XIII Section 1 The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce social, economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good. Article XIII, Section 2 The promotion of social justice shall include the commitment to create economic opportunities based on freedom of initiative and self-reliance. 2. What does social justice envision? It envisions [E, R, C] a. equitable diffusion of wealth and political power for the common good; b. regulation of the acquisition, ownership, use and disposition of property and its increments;
c.
and creation of economic opportunities based on freedom of initiative and selfreliance. (Art. XIII, Sec. 1 & 2, Constitution; Alcantara) Definition [H, E, P, A]
1. Social justice is neither communism nor despotism, nor atornism, nor anarchy, but the
humanization of laws and the equalization of social and economic forces so that justice in its rational and objectively secular conception may at least be approximated. It means the promotion of the welfare of the people, the adoption of measures by the government to ensure economic stability of all the competent elements of society, through the exercise of powers underlying the existence of all governments on the timehonored principle of salus populi est suprema lex. (Calalang vs. Williams) 2. What does social justice guarantee? Social justice does not champion division of property of economic status; what it guarantees are equality of opportunity, equality of political rights, equality before the law, equality between values given and received, and equitable sharing of the social and material goods on the basis of efforts exerted in their production. (Guido vs. RPA) LIMITS OF USE * The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. (PLDT vs. NLRC) Garcia v. NLRC The constitutional policy of providing full protection to labor is not intended to oppress or destroy management. The employer cannot be compelled to retain employees it no longer needs, to be paid for work unreasonably refused and not actually performed. NASECO bent over backward and exerted every effort to help the petitioners look for other work, postponed the effective date of their separation, and offered them a generous termination pay package. The unflagging commitment of this Court to the cause of labor will not prevent us from sustaining the employer when it is in the right, as in this case. Those who have less in life should have more in law Equal pay for equal wok


Phil. Geothermal Inc. v. NLRC While it is true that compassion and human consideration should guide the disposition of cases involving termination of employment since it affects one's source or means of livelihood, it should not be overlooked that the benefits accorded to labor do not include compelling an employer to retain the services of an employee who has been shown to be a gross liability to the employer. The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but a recognition of the inherent economic inequality between labor and management. The intent is to balance the scale of justice; to put the two parties on relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to none). EMPLOYER PROTECTION Asian Alcohol Corp. v. NLRC Out of its concern for those with less privilege in life, this Court has inclined towards the worker and upheld his cause in his conflicts with the employer. This favored treatment is directed by the social justice policy of the Constitution. But while titling the scales of justice in favor of workers, the fundamental law also guarantees the right of the employer to reasonable returns from his investment. Corollarily, the law allows an employer to downsize his business to meet clear and continuing economic threats. Thus, this Court has upheld reductions in the work force to forestall business losses or stop the hemorrhaging of capital. The right of management to dismiss workers during periods of business recession and to install labor saving devices to prevent losses is governed by Art. 283 of the Labor Code. Balbalec v. NLRC (95) The law recognizes the right of every business entity to reduce its workforce if the same is made necessary by compelling economic factors which would endanger its existence or stability. In spite of overwhelming support granted by the social justice provisions of our Constitution in favor of labor, the fundamental law itself guarantees, even during the process of tilting the scales of social justice towards workers and employees, "the right of enterprises to reasonable returns of investment and to expansion and growth." To hold otherwise would not only be oppressive and inhuman, but also counterproductive and ultimately subversive of the nation's thrust towards a resurgence in our economy which would ultimately benefit the majority of our people. Where appropriate and where conditions are in accord with law and jurisprudence, the Court has authorized valid reductions in the workforce to forestall business losses, the hemorrhaging of capital, or even to recognize an obvious reduction in the volume of business which has rendered certain employees redundant.
2.5
SPECIFIC LABOR RIGHTS
* Art. XIII, Sec. 3, Const. : [In the relation between workers and ERs the following rights shall be assured by the State: a. Rights to self-organization b. Right to collective bargaining c. Right to collective negotiations d. Right to peaceful and concerted Activities including the right to strike e. Right to security of Tenure f. Right to just and humane Conditions of work g. Right to a living Wage h. Right to participate in policy and Decision-making processes (WACT BOND) * Only to those that affect the rights of employees and have repercussions on their right to security of tenure.


PROTECTION TO LABOR The law must protect labor, at least to the extent of raising him to equal footing in bargaining relations with capital and to shield him from abuses brought about by the necessity for survival. It is safe to presume, therefore, that an EE or laborer who waives in advance any benefit granted him by law does so, certainly not in his interest or through generosity but under the forceful intimidation of urgent need; and hence, he could not have so acted, freely and voluntarily. (Sanchez vs. Harry Lyons)
2.6
OTHER RIGHTS 1. Art. II, Sec. 10, Const. : No law impairing the obligation of contracts shall be passed.
*** COMPASSIONATE JUSTICE - disregarding rigid rules and giving due weight to all the equities of the case - years of service without derogatory record taken into account - harshness of penalty also taken into account
2. Art. III, Sec. 16, Const. : All persons shall have the right to a speedy disposition of their
cases before all judicial, quasi-judicial or administrative bodies.
3. Art. III, Sec. 18 (2), Const. : No involuntary servitude in any form shall exist except as a
punishment for a crime whereof the party shall have been duly convicted. LABOR AS PROPERTY Phil. Movie Workers Assn. v. Premiere Productions, Inc. The right to labor is a constitutional as well as a statutory right. Every man has a natural right to the fruits of his own industry. A man who has been employed to undertake certain labor and has put into it his time and effort is entitled to be protected. The right of a person to his labor is deemed to be property within the meaning of constitutional guarantees. That is his means of livelihood. He cannot be deprived of his labor or work without due process of law (11 Am. Jur., 333, pp. 1151-1153; 11 Am. Jur., section 344, pp. 1168- 1171). Sibal v. Notre Dame of Greater Manila Thus, in the case of Callanta v. Carnation Philippines, Inc. (145 SCRA 268), this Court held that one's employment, profession, trade or calling is a "property right", and the wrongful interference therewith is an actionable wrong. The right is considered to be property within the protection of a constitutional guaranty of due process of law. DUE PROCESS REQUIREMENTS * The twin requirements of notice and hearing constitutes essential elements of due process in cases of EE dismissal: the requirement of notice is intended to inform the EE of the ERs intent to dismiss and the reason for the proposed dismissal; upon the other hand, the requirement of hearing affords the EE an opportunity to answer his ERs charges against him and accordingly to defend himself therefrom before dismissal is effected. Neither of these 2 requirements can be dispensed with without running afoul of the Constitution. (Century Textile vs. NLRC) Maneja v. NLRC The requisites of a valid dismissal are (1) the dismissal must be for any of the causes expressed in Article 282 of the Labor Code, and (2) the employee must be given an opportunity to be heard and to defend himself. The substantive and procedural laws must be strictly complied with before a worker can be dismissed from his employment because what is at stake is not only the employees position but his livelihood. XXX Well-settled is the dictum that the twin requirements of notice and hearing constitute the essential elements of due process in the dismissal of employees. It is a cardinal rule in our


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jurisdiction that the employer must furnish the employees with two written notices before the termination of employment can be effected: (a) the first apprises the employee of employers decision to dismiss him. The requirement of a hearing, on the other hand, is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted. XXX It bears stressing that a workers employment is property in the constitutional sense. He cannot be deprived of his work without due process of law. Substantive due process mandates that an employee can only be dismissed based on just or authorized causes. Procedural due process requires further that he can only be dismissed after he has been given an opportunity to be heard. The import of due process necessitates the compliance of these two aspects. LIBERTY OF CONTRACT AND STATE INTERFERENCE * Legislation appropriate to safeguard to peoples vital interests may modify or abrogate contracts already in effect. Reservation of essential attributes of sovereign power is read into contracts as a postulate of the legal order. All contracts made with reference to any matter that is subject to regulation under the police power must be understood as made in reference to the possible exercise of that power. (Abella/Had. Danao vs. NLRC) such was the case when Art. 283 of the Labor Code granted severance pay to workers who at the time of their employment were not entitled under the law to receive such pay. (Id.) Leyte Land Transportation Co. v. Leyte Farmers and Workers Union In answer to the contention of the petitioner that the doctrine laid down in the appealed decision in effect "has deprived the company of its rights to enter into contract of employment as it and the employee may agree," it is sufficient to quote the following pronouncements of the United States Supreme Court: "The fact that both parties are of full age and competent to contract does not necessarily deprive the State of the power to interfere where the parties do not stand upon an equality, or where the public health demands that one party to the contract shall be protected against himself. The State still retains an interest in his welfare, however reckless he may be. The whole is no greater than the sum of all the parts, and where the individual health, safety and welfare are sacrificed or neglected, the State must suffer." (West Coast Hotel Company vs. Parrish, quoting Holden vs. Hardy. The former, by the way, expressly overrules the case of Adkins vs. Children's Hospital) Victoriano vs. Elizalde Rope Workers Union It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute and unqualified. In spite of the constitutional prohibition, the State continues to possess authority to safeguard the vital interests of its people. Legislation appropriate to safeguarding said interests may modify or abrogate contracts already in effect. For not only are existing laws read into contracts in order to fix the obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. xxx This has special application to contracts regulating relations between capital and labor which are not merely contractual, and said labor contracts, for being impressed with public interest, must yield to the common good. Phil. National Construction Corp. v. NLRC The mandate of the law for a liberal interpretation of labor contracts in favor of the working man was applied in the case of Ditan vs. POEA Administrator 8 where We made the following pronouncement: "A strict interpretation of the cold facts before us might support the position taken by the respondents. However, we are dealing here not with an ordinary transaction but with a labor contract which deserves special treatment and a liberal interpretation in favor of the worker . . . the Constitution mandates the protection of labor and the sympathetic concern of the State for the working class conformably to the social justice policy . . . xxx xxx xxx Under the policy of social justice, the law bends over backward to accommodate the interests of the working class on the humane justification that those with less privileges in life should have more privileges in law . . "


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** Employees have a vested and demandable right over existing benefits voluntarily granted to them by their employer. MGT. Rights [C P S T] 1. Right to conduct business 2. Right to prescribe rules 3. Right to select employees 4. Right to transfer and discharge employees MANAGEMENT AND THE CONSTITUTION National Sugar Refineries Corp. v. NLRC (93) While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with less privileges in life, this Court has inclined more often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded us to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine. WAIVER AND COMPROMISE * Not all waivers and quitclaims are invalid as against public policy * It is only when there is clear proof that the waiver was wangled an unsuspecting person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking. (Sicangco vs. NLRC) Should a party fail or refuse to comply with the terms of a valid compromise or amicable settlement, the other party could either enforce the compromise by a writ of execution, or regard it as rescinded and to insist upon his original demand. (Morales vs. NLRC) - Voluntary consideration not unconscionable - Waiver of future benefits is not valid and binding - The law does not consider as valid any agreement a. to receive less compensation on what a worker is entitled to recover b. to prevent him from demanding benefits to which he is entitled * Instances when quitclaim, waiver or compromise is valid:
1. C, a national promoter salesman, with high educational attainment, tendered his

resignation after a spot audit found out that he had a tentative shortage of Php49,005.59. It is unbelievable that C, occupying a responsible position, and with high education attainment, can be rattled and confused into signing a resignation letter, on account of a mere spot audit. (Callanta vs. NLRC)
2. Bank and EEs association, entered into a CBA providing for the withdrawal of the
pending case of the association against the bank for non-payment of Php60.00 ECOLA. There is nothing in the compromise which contravenes the law, morals, good customs, public order, or public policy. (Monte de Piedad vs. MOLE)
3. During pendency of appeal before the NLRC, workers executed a voluntary affidavit
before the Labor Arbiter declaring intention to withdraw appeal in lieu of payment of severance pay. The affidavits executed voluntarily and knowingly in the presence of the Labor Arbiter has the effect and authority of res judicata. (Olaybar vs. NLRC)


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4. A number of EEs made quitclaims in exchange for the dropping of charges of

embezzlement of P25 million which the EEs allegedly embezzled. The consideration for the waiver is adequate. (PBC vs. Echiveri) Instances when quitclaim, waiver or compromise invalid:
1. A worker hospitalized for several times for work-related accidents was told by an
immediate supervisor and a personnel officer to retire and execute a quitclaim or else would be dismissed and got nothing. The retirement and quitclaim was made under threat of dismissal. (Alcantara)
2. A messenger with 5 years employment resigned and executed a quitclaim after being told
by his manager to resign or else charges will be filed against him. The threat was unjust since the messenger did not commit any unlawful act. There was intimidation, which vitiated consent. (Guatson Tours vs. NLRC)
3. A quitclaim of future benefits made by an EE at the time of employment (Alcantara) 4. After the CIR rendered a decision ordering the ER to pay wage differentials, the EEs
executed a quitclaim waiving their rights under the decision. The quitclaim contravenes public policy since after a civil action is filed in court, the cause of action may not be subject of compromise unless the same is with leave of court. ( Pampanga Sugar Devt. Vs. Sugar Workers Assn.)
5. A quitclaim executed by an OFW repatriated to the Philippines because of an illness

requiring surgical treatment in consideration of the return travel fund. There was no consideration since the EE regularly contributed to the fund. Besides, the quitclaim is negotiable and in congruous to the declared policy of the State to afford protection to labor and to assure the right of workers to security of tenure. (Cuales vs. NLRC)
6. ER appealed the decision of the POEA awarding $3,800.00 disability benefits to worker.
During pendency of appeal, the worker executed a quitclaim in exchange for Php18,000.00 since at the time the worker needed money for medical treatment. The law does not consider valid any agreement to receive less compensation than what the workers should receive. It was clear that the worker was forced to accept the payment out of necessity.(PISC vs. NLRC)
7. After the finality of judgment awarding them severance pay, the workers executed a
quitclaim before labor arbiter who had no participation in the case. Such settlements must be approved by the labor arbiter before whom the case is being heard. (St. Gothard Pub vs. NLRC) * Quitclaims are ineffective to bar recovery of the full measure of the workers rights * Dire Necessity is not an acceptable ground to annul releases unless there is showing that a. workers were forced to execute them b. the considerations for the quitclaims where unconscionably low MANAGEMENT PREROGATIVES 1. Right to select and discharge employees with valid cause 2. promulgate reasonable employment rules and regulation 3. designation of work to employees 4. transfer and promote employees 5. control company operations 6. install money-saving devices 7. re-clarify or abolish positions 8. sell or close business


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MANAGEMENT RIGHTS. Except as limited by special laws, an employer is free to regulate, according to his own discretion and judgments, all aspects of employment, including: 1. Hiring 2. Work assignments 3. Working methods 4. Time, place and manner of work 5. Tools to be used and processes to be followed 6. Supervision of workers 7. Working regulations 8. Transfer of Employees 9. Work Supervision 10. Lay-off of workers 11. Discipline, dismissal and recall of workers Courts may look into the employers exercise of a management prerogative if it is clearly shown to be tainted with grave abuse of discretion. DRUG TESTING Gen. Rule: cannot right to privacy Exception: if job or occupation involve public safety Example: bus drivers security guards PARTICIPATION IN DECISION-MAKING PROCESS Only if it affects his [R, D, W]: 1. Rights 2. Duties 3. Welfare - not management prerogatives regarding business operation - must at least be informed
The law explicitly considers it a State Policy to ensure the participation of workers in decision and policy-making processes affecting their rights, duties and welfare. However, a line must be drawn between management prerogatives regarding business operations per se and those which affect the rights of EEs. in treating the latter, management should see to it that EEs are at least properly informed of its decisions or modes of action. (PAL vs. NLRC) In this respect, a legislation providing a workers representation in the Board of Directors of corporations is not valid since the constitutional guaranty does not include the workers right to participate in the management of the enterprise. (Alcantara) May the ER be compelled to share with its EEs the prerogative of formulating a code of discipline? Is a code of discipline unilaterally formulated by the ER enforceable? Yes, the ER has the obligation to share with its EEs its prerogative of formulating a code of discipline since this will be affecting their rights and benefits. A code of discipline unilaterally formulated and promulgated by the ER would be unenforceable. (Id.)
Manila Electric Co. v. Quisumbing We do not find merit in MERALCOs contention that the above-quoted ruling of the Secretary is an intrusion into the management prerogatives of MERALCO. It is worthwhile to note that all the Union demands and what the Secretarys order granted is that the Union be allowed to participate in policy formulation and decision-making process on matters affecting the Union members rights, duties and welfare as required in Article 211 (A) (g) of the Labor Code. And this can only be done when the Union is allowed to have representatives in the Safety Committee, Uniform Committee and other committees of a similar nature. Certainly, such participation by the Union in the said committees is not in the nature of a co-management control of the business of MERALCO. What is granted by the Secretary is participation and representation. Thus, there is no impairment of management prerogatives.


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Section 3. LABOR AND THE CIVIL CODE

3. 1 ROLE OF LAW
1. Art. 1700, NCC : The relation between capital and labor are not merely contractual. They
are so impressed with public interest that labor contracts must yield to common good. Therefore, such contracts are subject to special laws on labor unions, collective bargaining, strikes, lockouts, closed shops, wages, working conditions, hours of labor and similar subjects. LABOR CONTRACTS PAL Employees Savings and Loan Assn., Inc. v. NLRC In connection with the foregoing, we should add that even if there had been a meeting of the minds in the instant case, the employment contract could not have effectively shielded petitioner from the just and valid claims of private respondent. Generally speaking, contracts are respected as the law between the contracting parties, and they may establish such stipulations, clauses, terms and conditions as they may see fit; and for as long as such agreements are not contrary to law, morals, good customs, public policy or public order, they shall have the force of law between them. However, while it is the inherent an inalienable right of every man to have the utmost liberty of contracting, and agreements voluntarily and fairly made will be held valid and enforced in the courts, the general right to contract is subject to the limitation that the agreement must not be in violation of the Constitution, the statute or some rule of law. And under the Civil Code, contracts of labor are explicitly subject to the police power of the State because they are not ordinary contracts but are impressed with public interest. Inasmuch as in this particular instance the contract in question would have been deemed in violation of pertinent labor laws, the provisions of said laws would prevail over the terms of the contract, and private respondent would still be entitled to overtime pay. Philippine Telephone and Telegraph Co., v. NLRC Petitioners policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be free from any kind of stipulation against marriage in connection with her employment, but it likewise assaults good morals and public policy, tending as it does to deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable right. Hence, while it is true that the parties to a contract may establish any agreements, terms, and conditions that they may deem convenient, the same should not be contrary to law, orals, good customs, public order, or public policy. Carried to its logical consequences, it may even be said that petitioners policy against legitimate marital bonds would encourage illicit or common-law relations and subvert the sacrament of marriage. Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the parties, that is, of capital and labor, are not merely contractual, impressed as they are with so much public interest that the same should yield to the common good. It goes on to intone that neither capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience of the public. In the final reckoning, the danger of just such a policy against marriage followed by petitioner PT&T is that it strikes at the very essence, ideals and purpose of marriage as an inviolable social institution and, ultimately, of the family as the foundation of the nation. That it must be effectively interdicted here in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the lands is not only in order but imperatively required. 3.2 ER-EE STANDARD OF CONDUCT * Art. 1701 : Neither capital nor labor shall act oppressively against the other, or impair the convenience of the public.


Updated and enhanced with additional cases by ATTY. RENE CALLANTA FAIR TREATMENT
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* The NCC states that every person must in the exercise of his rights, and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. (AHS Phils. vs. NLRC) General Bank and Trust Co., v. Court of Appeals Basically, the right of an employer to dismiss an employee differs from and should not be confused with the manner in which such right is exercised. It must not be oppressive and abusive since it affects one's person and property. (Remerco Garments Manufacturing v. MOLE) MUTUAL OBLIGATION Firestone Tire and Rubber Co. v. Lariosa The employer's obligation to give him workers just compensation and treatment carries with it the corollary right to expect from the workers adequate work, diligence and good conduct. LAW COMPLIANCE * The return-to-work order in this case not so much confers a right as it imposes a duty and while as a right it may be waived, it must be discharged as a duty even against a workers will. Thus, it does not constitute a violation of the right against involuntary servitude. (Sarmiento vs. Tuico) This is differentiated from the instance where there is a mere breach of contractual stipulation. While the EE may be held liable for damages by virtue of the breach of contract, he may not be compelled to work against his will because this will be involuntary servitude. (Alcantara) EE OBEDIENCE AND COMPLIANCE ER ORDERS * It is a recognized principle that company policies and regulations are, unless shown to be grossly oppressive or contrary to law, generally binding and valid on the parties and must be complied with until finally revised or amended unilaterally or preferable through negotiation or by a competent authority. (SMC vs. Ubaldo) Deliberate disregard or disobedience of rules, defiance of management authority by the EEs cannot be countenance. Until and unless the rules or orders imposed by the ER are declared to be illegal or improper by competent authority, the EEs ignore or disobey them at their own peril. (GTE Directories vs. Sanchez) PCIB v. Jacinto Any employee who is entrusted with responsibility by his employer should perform the task assigned to him with care and dedication. The lack of a written or formal designation should not be an excuse to disclaim any responsibility for any damage suffered by the employer due to his negligence. The measure of the responsibility of an employee is that if he performed his assigned task efficiently and according to the usual standards, then he may not be held personally liable for any damage arising therefrom. Failing in this, the employee must suffer the consequences of his negligence if not lack of due care in the performance of his duties. ER OBLIGATION * An EE must not be treated as a disdained subordinate but with respect and fairness, if not affection and gratitude due to an equal partner. (Lagniton vs. NLRC) Maneja v. NLRC An employer can terminate the services of an employee only for valid and just causes which must be supported by clear and convincing evidence. The employer has the burden of proving that the dismissal was indeed for a valid and just cause. Failure to do so results in a finding that the dismissal was unjustified.


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Section 4. THE LABOR CODE OF THE PHILIPPINES

4.1 DECREE TITLE * Art. 1 : Labor Code of the Philippines 4.2 EFFECTIVITY * Art. 2 : 6 months after its promulgation. 4. 3 APPLICABILITY
1. Art. 6 : All rights and benefits granted under this Code shall, except as many otherwise
be provided, apply alike to all workers, whether agricultural, or non-agricultural.
2. Art. 276 : The terms and conditions of employment of all government of all government
EEs, including EEs of GOCCs shall be governed by the Civil Service Law.
3. Art. IX-B, Sec. 2(1), Const. : The Civil Service embraces all branches of Government,
including GOCCs with original charters. TEST-GOCC * The rule now is that only the GOCCs with original charters come under the Civil Service Law. (Cabrera vs. NLRC) PNOC Energy Development Corp. v. NLRC Thus, under the present state of the law, the test in determining whether a governmentowned or controlled corporation is subject to the Civil Service Law are the manner of its creation, such that government corporations created by special charter are subject to its provisions while those incorporated under the General Corporation Law are not within its coverage. INTERNATIONAL AGENCIES Ebro III v. NLRC The grant of immunity is by virtue of the Convention on the Privileges and Immunities of Specialized Agencies of the U.N. adopted by the Senate on May 17, 1949. This has become part of the law of the land under the Constitution on generally accepted principles of international law. SCHOOL TEACHERS National Mines and Allied Workers Union v NLRC On the issue of whether the individual petitioners were permanent employees, it is the Manual of Regulations for Private Schools, and not the Labor Code, which is applicable. RELIGIOUS CORPORATIONS Austria v. NLRC An ecclesiastical affair is one that concerns doctrine, creed or form of worship of the church, or the adoption and enforcement within a religious association of needful laws and regulations for the government of the membership, and the power of excluding from such associations those deemed unworthy of membership. Based on this definition, an ecclesiastical affair involves the relationship between the church and its members and relate to matters of faith, religious doctrines, worship and governance of the congregation. XXX Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough to include religious corporations, such as the SDA, in its coverage. Article 278 of the Labor Code on post-employment states that the provisions of this Title shall apply to all establishments or undertakings, whether for profit or not. Obviously, the cited article does not make any exception in favor of a religious corporation. This is made more evident by


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the fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of Employment and Retirement, categorically includes religious institutions in the coverage of the law, to wit: SECTION 1. Coverage. - This Rule shall apply to all establishments and undertakings, whether operated to profit or not, including educational, medical, charitable and religious institutions and organizations, in cases of regular employment with the exception of Government and its political subdivisions including government-owned or controlled corporations. With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of separation of church and state to avoid its responsibilities as an employer under the Labor Code. 4.4 IMPLEMENTING RULES Art. 5: Implementing rules and regulations of the DOLE and other government agencies of the Code shall become effective * 15 days after announcement of their adoption in newspapers of general circulation. LIMITATION RULE MAKING POWER 1. This power is limited to the promulgation of rules and regulations to effectuate policies of the Code. Such rules and regulations must conform to the terms and standard prescribed in the statute. They cannot supplant its plain and explicit command. (Alcantara)
A rule or regulation promulgated by an administrative body, such as the DOLE, to implement a law, in excess of its rule-making authority is void. (Azucena)
2. Examples of void IRRs: IRR providing the 10-day period specified in Art. 223 refers to working days as stated in the article.
An IRR providing that EEs paid by the month shall be presumed to be paid for all days in the month, whether worked or not. In effect, will except EEs paid by the month from the enjoyment of the holiday pay benefit. (Insular Bank EE Union vs. Inciong) IRR of RA 6715 excluding security guards from those allowed to join unions. (MERALCO vs. SOLE) IRR including commission in the computation of 13th month pay. Unduly expanded the concept of basic salary. (Boie-Takeda vs. De La Serna)
The rule making power is exceeded when the implementing rule changes, wittingly or unwittingly, the content or meaning of the law which the rule aims to implement. The implementing rule must be subordinate to the laws itself An implementing rule cannot change the law 4.5 POLICY DECLARATION Art. 3: The State shall (APERA)
1. 2. 3. 4. 5.
Afford protection to labor Promote full employment Ensure equal work opportunities regardless of sex, race or creed Regulate the relations between workers and ERs. Assure the rights of workers to self-organization, collective bargaining, security of tenure, and just humane conditions of work.
4.6 LAW INTERPRETATION


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1. Art. 4 : All doubts in the implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in favor of labor.
2. Art. 1702, NCC : In case of doubt, all labor legislation and labor contracts shall be
construed in favor of the safety and decent living of the laborer. IN FAVOR LABOR-RATIONALE Abella v. NLRC In any event, it is well-settled that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman's welfare should be the primordial and paramount consideration. It is the kind of interpretation which gives meaning and substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the New Labor Code which states that `all doubts in the implementation and interpretation of the provisions of this Code including its implementing rules and regulations shall be resolved in favor of labor." The policy is to extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor. LIBERAL CONSTRUCTION Salinas v. NLRC It is basic and irrefragable rule that in carrying out and interpreting the provisions of the Labor Code and its implementing regulations, the workingmans welfare should be the primordial and paramount consideration. The interpretation herein made gives meaning and substance to the liberal and compassionate spirit of the law enunciated in Article 4 of the Labor Code that all doubts in the implementation and interpretation of the provisions of the Labor Code including its implementing rules and regulations shall be resolved in favor of labor. DOUBT * When these are 2 or more possible explanations regarding an issue affecting workers rights, that which favors the worker must be chosen. (Clemente vs. GSIS) NO DOUBT * The provision in case of doubt does not apply where the pertinent provisions of the Labor Code leave no room for doubt either in their interpretation or application. (Bonifacio vs. GSIS) SWEEPING INTERPRETATION * The Supreme Court cannot also adopt a sweeping interpretation of the law, lest it engages itself in judicial legislation. (Bravo vs. EEC) FACTUAL CONSIDERATION AND RATIONALITY * The care and solitude in the protection and vindication of the right of workingmen cannot justify disregard of relevant facts or schewal of rationality in the construction of the text of applicable rules in order to arrive at disposition in favor of an EE. (PAL vs. NLRC) EQUITY AND MORAL CONSIDERATION * Considerations of equity and social justice cannot prevail against the expressed provisions of labor laws. (Manning vs. NLRC) FAIRNESS Reliance Surety and Insurance Co. Inc v NLRC


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As a general rule, the sympathy of the Court is on the side of the laboring classes, not only because the Constitution imposes sympathy but because of the one-sided relation between labor and capital. The Court must take care, however, that in the contest between labor and capital, the results achieved are fair and in conformity with the rules. BALANCING CONFLICTING CLAIMS * The basic policy of the law is to balance or to coordinate the rights and interests of both workers and ERs. It should not be deduced that the basic policy is to favor labor to prejudice capital. (Azucena) Phil. Airlines, Inc. v. NLRC (1992) That there should be care and solicitude in the protection and vindication of the rights of workingmen cannot be gainsaid; but that care and solicitude can not justify disregard of relevant facts or eschewal of rationality in the construction of the text of applicable rules in order to arrive at a disposition in favor of an employee who is perceived as otherwise deserving of sympathy and commiseration. 4.7 ENFORCEMENT AND SANCTIONS 1. Art. 217 (a) (2), (3), (4), (6) : Jurisdiction of Labor Arbiters and the Commission The Labor Arbiters shall have exclusive and original jurisdiction, except as otherwise provided, the following cases involving all workers: (unfair labor practice)
1. Termination disputes (qualified by Art. 261 which grant voluntary arbitrators original and
exclusive jurisdiction over all unresolved grievances arising from CBAs and company personnel policies);
2. Cases involving terms and conditions of employment, if accompanied with a claim

for reinstatement (including claims of OFWs arising out of an ER-EE relationship, including claims for actual, moral and exemplary damages, as provided in Sec. 10, Migrant Workers Act); 3. Claims for actual, moral, exemplary and other damages arising from the ER-EE relations; 4. Except claims for EEs Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from the ER-EE relations; including - those of persons in domestic or household service, involving an amount exceeding Php5,000, regardless of whether of whether accompanied with a claim for reinstatement. 5. Disputes arising from Art. 264 including legality of strikes and lockouts 2. Art. 128 : Visitorial and Enforcement Power of the Secretary of Labor or his duly authorized representative. 1. Accesss to ERs records and premises at anytime of the day or night whenever work is being undertaken therein and copy thereform; 2. Question any EE; and 3. Investigate any fact, condition or matter which may be necessary to determine violations of this Code of any labor law, wage order or rules and regulations issued pursuant thereto. * In cases where the relationship of ER-EE still exists, the power to issue Compliance Orders to give effect to the labor standard provisions of this Code and other social legislation. Writs of execution to the appropriate authority shall be issued for the enforcement of the said orders, except in cases: a. where the ER contests the findings of the labor employment and enforcement officer; and b. raises issues supported by documentary profits which were not considered in the course of inspection.


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* Order Stoppage of work or suspension of operations of any unit or department of an establishment when non-compliance poses grave and imminent danger to the health and safety of workers in the workplace. Within 24 hours, a hearing shall be conducted to determine whether an order for the stoppage of work and suspension of operations shall be lifted or not. In case the violation is attributable to the fault of the ER, he shall pay EEs their EEs their salaries or wages during said period. * It shall be unlawful for any person to Obstruct, impede, delay or otherwise render ineffective the order of the Secretary of Labor. * No inferior court shall issue a temporary or permanent injunction or restraining order or otherwise assume jurisdiction over any case involving the enforcement orders in accordance with this Article. * Any government EE found guilty of violation, after appropriate administrative investigation, be subject to Summary dismissal from the service. * The Secretary of Labor may require ERs to keep and maintain Employment records as may be necessary. (AS CONES) 3. Art. 129. Recovery of wages, simple money and other benefits. * The Regional Director of the DOLE or any of the duly authorized hearing officers of the Department is empowered, through summary proceedings and after due notice, to hear and decide any matter involving the recovery of wages and other monetary claims and benefits, including legal interest owing to a person employed in domestic or household service: Provided such complain does not include claim for reinstatement aggregate money claims of each househelper does not exceed P5,000.00 * The complaint shall be resolved within 30 days from the date of the filing of the same. 4. Art. 288 : Penalties and Jurisdiction a. Except, as otherwise provided in the Code, or unless the acts complained of hinges in a question or interpretation or implementation of ambiguous provisions of an existing CBA, any violation of this Code declared to be unlawful or penal in nature shall be punished with: a fine not less than P1,000.00 nor more than P10,000.00. or imprisonment of not less than 3 months nor more than 3 years. Or both such fine and imprisonment at the discretion of the court. In addition to such penalty any alien found guilty shall be summarily deported upon completion of service of service. Any criminal offense punished under this Code shall be under the concurrent jurisdiction of the MTC and the RTC.
b.
5. Art. 289 : The penalty (of the offenses listed in the Labor Code) shall be imposed upon the guilty officer of officers of a corporation, trust, firm, partnership, association pr entity which committed said offenses. 6. Art. 290. Prescription of Offensses * Offenses penalized under this Code and the IRRs 3 years. * Unfair labor practice 1 year from accrual of such unfair labor practice. 7. Art. 291 : Prescription of Money Claims- All money claims arising from ER-EE relations accruing during the effectivity of this Code 3 years from the time the cause of action is accrued.


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8. Art. 292 : Money claims specified in Art. 291shall be filed before the appropriate entity independently of the criminal action that may be instituted in the proper courts. Pending the final determination of the merit of money claims filed with the appropriate entity, no civil action shall be filed with any court. This provision shall not apply to EEs compensation cases which shall be processed and determined strictly in accordance with the pertinent provisions of this Code.
Section 5. WORK RELATIONSHIP

5. 1 WORK RELATIONSHIP ER and EE
1. Art. 97 (a) and (b) : Person means individual, partnership, association, corporation,
business trust, legal representative, or any organized group of persons. (b) ER includes any person acting directly or indirectly in the interest of the ER in relation to an EE and shall include the Government and all its branches, subdivisions and instrumentalities, all GOCCs and institutions, as well as non-profit private institutions, or organizations.
2. Art. 167 (f) and (g) : (f) ER means any person, natural or juridical, employing the
services of the EE. (g) EE means any person compulsory covered by the GSIS . . ., including members of the AFP, and any person employed as casual, emergency, temporary, substitute or contractual, or any person compulsory covered by the SSS. . .
3. Art. 212 (e) and (f) : ER includes any person acting in the interest of the ER directly or
indirectly. The term shall not include any labor organization or any of its officers except when acting as an ER. (f) EE includes any person in the employ of an ER. The term shall not be limited to the EEs of a particular ER, unless this Code explicitly states. It shall include any individual whose work has ceased as a result or in connection with any current labor dispute or because of unfair labor practice if he has not obtained any other substantially equivalent or regular employment. EMPLOYEE United Pepsi-Cola Supervisory Union (UPSU) v. Laguesma As can be seen from this description, a distinction exists between those who have the authority to devise, implement and control strategic and operational policies (top and middle managers) and those whose task is simply to ensure that such policies are carried out by the rank-and-file employees of an organization (first-level managers/supervisors). What distinguishes them from the rank-and-file employees is that they act in the interest of the employer in supervising such rank-and-file employees. "Managerial employees" may therefore be said to fall into two distinct categories: the "managers" per se, who compose the former group described above, and the "supervisors" who form the latter group. Whether they belong to the first or the second category, managers, vis-avis employers, are, likewise, employees. CLASSIFICATION 1. casual 2. regular 3. emergency 4. temporary 5. substitute 6. contractual


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Is the purchaser of the assets of an ER corporation considered a successor ER of the latters EE? No. Labor contracts are not enforceable against a transferee of an enterprise, labor contracts being in personam, thus binding only between parties.
A. DETERMINATION In determining whether the relationship is that of ER and EE or one of independent contractor, each case must be determined on its own facts and all the features of the relationship must be considered. (Villaluga vs. NLRC) The existence of an ER-EE relationship is a question of law and cannot be made the subject of agreement The nature of ones business is not determined by self-serving appellations one attaches thereto but by the tests provided by statute and prevailing case law A decision in a certification election case regarding the existence or non-existence of ER-EE relationship does not foreclose all further disputes between the parties as to the existence or non-existence of an ER-EE relationship. B. FACTORS 1. The existence of ER-EE relationship is determined by the following elements namely: a. Selection and engagement of the EEs b. Payment of Wages c. Power of Dismissal; and d. Power to control the EEs conduct although the latter (d) is the most important element. (Rosario Brothers vs. Ople) No particular form of evidence is required to prove the existence of an ER-EE relationship. Any competent and relevant evidence to prove the relationship may be admitted (Opulencia vs. NLRC) 2. Is there an ER-EE relationship? Workers under a pakiao agreement arranged by G whom PRC considered as an independent contractor. ER gives orders to G, on where to store the copra, when to bring out, how much to load and where, and what class of copra to handle. The equipment used is owned by PRC. Yes. PRC has direct control over the handling of the copra. The control test is satisfactorily met. * Piece workers subject to specifications. Yes. The fact that the making of the basket is subject to Dys specifications indicates the existence of control. (Dy Koh Beng vs. ILMU) * Tailors, pressers, stitchers and similar workers employed by COD on a piece-work basis. The EEs are governed by the companys regulations i.e. 8-hour workday, recording of attendance etc Furthermore, a master cutter distributes job orders equally, supervises the work and sees to it that they were finished as soon as possible. Yes. The workers conduct in the performance of their work was controlled by the company (Rosario vs. Ople) * Cargadores and pahinantes recruited by SMC through a labor contractor who are governed by the regulations of the SMC whose work consisted of loading, unloading, pilling or palleting empty bottles and wooden shells from company trucks and warehouses. Yes. The evidence firmly establishes the control exercised by the SMC. (BLUM vs. Zamora) * Shoe shiners who had their own customers but shared proceeds with company. No. The company does not exercise any degree of control or supervision over his work. The shoe shiner is a partner in trade. (Besa vs. Trajano) * Vendees of cigarettes who are governed by the regulations of the vendor company i.e. definite sales territory, requirement to submit daily, weekly and monthly reports, etc. Yes. Vendor company had control over the vendee. (SSS vs. CA)


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*I. S, a prominent social figure, had an agreement with TWS to act as branch manager; The agreement provided that she would be entitled to a part of the commission on sale of tickets; and that she would share in the expenses of maintaining the office. She was also a signatory to a lease agreement covering the branchs premises, holding herself solidarily liable for the prompt payment of rentals. No. I. S was not subject to the control by TWS. The services rendered by I.S must have been done by her pursuant to a contract of agency. (Sevilla vs. CA) * A plant manager hired by a marble company which was about to close in a few months time due to business losses. The company had no control over the former, either as to hours of work or method of accomplishing the work. The former was entitled to a percentage of the net profits of the company for that period. No. Manager was merely a party to a joint venture. (CMC vs. NLRC) * Fishermen-crew of a trawl fishing vessel subject to control and supervision of the owner of the vessel i.e. conduct of fishing operations; time to report to fishing port, etc Yes. (Ruga vs. NLRC) * Tailors, seamstresses and other workers of a haberdashery who were paid on a piece-rate basis. They were directed by the proprietor of the establishment as specified by the customers. They were required to finish jobs orders in one day before due date. Yes. They did not exercise independence in their own methods, but on the contrary were subject to the control of the establishment from the beginning of their task to their completion. They also had to rely on the tools and equipment supplied by the haberdashery. (Makati Haberdashery vs. NLRC) * The power of control refers merely to the existence of the power and not the actual exercise thereof. * Caddies who are not under the control and supervision of the golf club as to working hours, manner of carrying out their services, etc. No. The club did not have the measure of control over the incidents of the caddys work and compensation that the ER would possess. (Manila vs. IAC) * College teachers. Yes. The Court takes judicial notice that a university controls the work of the members of its faculty; that it prescribes the courses or subjects that they teach and the time and place for teaching. (Feati vs. Bautista) * Jeepney drivers working under the boundary system. Yes. The driver does not have any interest in the business because he did not invest anything in the acquisition of jeeps and did not participate in the management thereof. (Citizens League of Free Workers vs. Abbas) C. CONTROL TEST There is an ER-EE relationship where the ER controls or has reserved the right to control the EE not only as the result of the work but also as to the means by which said work is to be accomplished (Paradise vs. Ng). The test merely calls for the existence of the right to control the manner of doing the work not the actual exercise of the right. (Ruga vs. NLRC) The line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired results without dictating the means or methods employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first , which aim only to promote the result, create no ER-EE relationship unlike the second, which addresses both the result and the means to achieve it. (Insular Life vs. NLRC) The control test calls merely for the existence of the right to control and manner of doing work, not the actual exercise of the right. (Dy Keh Beng) POWER OF CONTROL Refers to the existence of the power and NOT necessarily the actual exercise thereof, not is it essential for the ER to actually supervise the performance of the EE It is enough that the employer has the right to wield the power Religious of the Virgin Mary v. NLRC


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The argument has no merit. AS this Court has consistently ruled, the power of control is the most decisive factor in determining the existence of an employer - employee relationship. In Encyclopedia Britannica (Phils.), Inc. v. NLRC, we held: In determining the existence of an employer-employee relationship the following elements must be present: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) the power to control the employees conduct. Of the above, control of employees conduct is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching that end. In this case, CDSPB reserved the right to control and supervise the operations of the Girls Department. Although CDSPB actually exercised minimal supervision over petitioner, [it]could exercise substantial supervision and control as it did when [it] preterminated the Agreement. There was, therefore, no basis in finding that petitioner had a greater degree of autonomy ad independence in running the affairs of the school. The presence of the school director, whose vast powers have already been noted, negates any suggestions or semblance of autonomy. Nor is there any merit in the claim that actual and effective control was exercised by petitioner since the designation of the parish priest as director was a mere formality, as he did perform functions which are purely ministerial and figurative in nature. Time and again we have held that the control test only requires the existence of the right to control the manner of doing the work not necessarily the actual exercise of the power by him, which he can delegate. Indeed, although the letters of appointment were signed by the principal/representative of petitioner, they bore the name/letterhead of CDSPB and clearly indicated therein that the employees were hired as teachers/personnel by CDSPB, and not by RVM. Moreover, CDSPB itself admits that its name - not petitioners - appears in the employees payroll ledger cards. D. ECONOMIC TEST
1. The absence of ER-EE relationship may be determined through economic tests like the
inclusion of the EE in the payrolls, having irregular compensation and having a personal stake in the business. (Sevilla vs. NLRC) E. AGREEMENT * The existence of an ER-EE relationship is a question of law and being such, it cannot be made the subject of an agreement. (Tabas vs. CMC) Insular Life Assurance Co. Ltd. v. NLRC It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in the management contract and providing therein that the "employee" is an independent contractor when the terms of the agreement clearly show otherwise. For, the employment status of a person is defined and prescribed by law and not by what the parties say it should be. In determining the status of the management contract, the "four-fold test" on employment earlier mentioned has to be applied. EFFECT OF RELATIONSHIP Philippine Fuji Xerox Corp. v NLRC (96) It is wrong to say that if a task is not directly related to the employer's business, or it falls under what may be considered "housekeeping activities," the one performing the task is a job contractor. The determination of the existence of an employer-employee relationship is defined by law according to the facts of each case, regardless of the nature of the activities involved. NATURE/CHARACTER Dunlop Slazenger (Phils.), Inc. v. Secretary, DOLE (98)


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Determining the status of supervisory and rank-and-file employees is not a hard row to hoe in labor law. The test of supervisory status as we have repeatedly ruled is whether an employee possesses authority to act in the interest of his employer, which authority should not be merely routinary or clerical in nature but requires the use of independent judgment. Corollarily, what determines the nature of employment is not the employees title, but his job description. 5.2 INDEPENDENT CONTRACTOR AND LABOR CONTRACTOR ONLY
1. Art. 106 : Contractor or subcontractor

a) Whenever an ER enters into a contract with another person for the performance of the formers work, the EEs of the contractor and of the latters subcontractor, if any shall be paid in accordance with the provisions of this Code. In the event that the contractor or the subcontractor fails to pay the wages of his EE in accordance with this Code, the ER shall be jointly and severally liable with his contractor or subcontractor to such EEs to the extent of the work performed under the contract, in the same manner and extent that he is liable to EEs directly employed by him.
b) There labor-only [considered as agent] contracting where:

1. The person supplying workers to an ER does not have substantial capital [substantial] investment in the form of tools, equipment, machineries, work premises, among others With respect to the first requirement, the law does not require both substantial capital and investment in the form of tools, equipment, machineries, etc. This is clear from the use of the conjunction or. (Neri vs. NLRC) 2. The workers recruited and placed by such persons are performing activities which are directly related to the principal business of such ER. With respect to the second requirement, the service provided by janitors, firemen, mechanics, hired helpers and similar workers are considered directly related to the operations of a company since this is necessary to the proper maintenance of the premises and machineries as well as the protection of the company premises against fires. (Guarin vs. NLRC) In such cases, the person intermediary shall be considered merely as an agent of the ER who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
1. Sec. 9, Rule VIII, Book III, IRRs : (a) Any person who undertakes to supply workers to
an ER shall be deemed to be engaged in labor-only contracting where such person : * Does not have substantial capital [substantial] investment in the form of tools, equipment, machineries, work premises and other materials; and * The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the ER in which the workers are habitually employed. Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of the ER who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. (c) For cases not falling under this Article, the Secretary of Labor shall determine through whether or not the contracting out is permissible in the light of the circumstances of each case and after considering the operating needs of the ER and the rights of the workers involved.


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2. Art. 107 : Indirect ER The provisions of the immediately preceding Article shall likewise
apply in any person, partnership, association or corporation which, not being an ER, contracts with an independent contractor for the performance of any work, job or project.
3. Art. 109 : Every ER or indirect ER shall be held responsible with his contractor or
subcontractor for any violation of the provisions of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered direct ERs.
4. Sec. 8, Rule VIII, Book III, IRRs : Job Contracting There is job contracting permissible
under the Code if the following conditions are met: (INDEPENDENT CONTRACTOR) 1. The contractor carries on an independent business and undertakes the contract work [A R M - F] a. on his own account b. under his own responsibility c. according to his own manner and method d. free from the control and direction of his ER or principal in all matters connected with the performance of the work except as to the results thereof; and 2. The contractor has a. substantial capital or b. [substantial] investment in the form of tools, machineries, work premises, and other materials which are necessary in the conduct of his business. Where the ER-EE relationship has become ascertained, the ER becomes bound by statutory requirements pertaining, though not limited, to terms and conditions of employment, labor relations and post employment. (Phone-Poulenc vs. NLRC) Nonetheless, when a contractor fails to pay the wages of his EEs, the ER who contracted out the job to the contractor becomes jointly and severally liable with his contractor to the EEs of the latter to the extent of the work performed under the contract as if such ER were the ER of the contractors EEs. The law itself, establishes an ER-EE relationship between the ER and the job contractors EEs for a limited purpose i.e. in order to ensure that the latter get paid the wages due them. A similar situation obtains where there is a labor-only contracting. This time, however, for a comprehensive purpose: ER for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. The law in effect holds both the ER and the labor only contractor responsible to the latters EEs for more effective safeguarding of the EEs rights under the Labor Code. (PBC vs. NLRC)
INDEPENDENT CONTRACTOR National Power Corp. v. Court of Appeals (98) Job (independent) contracting is present if the following conditions are met: (a) the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except to the result thereof; and (b) the contractor has substantial capital or investments in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his business. Absent these requisites, what exists is a labor only contract under which the person acting as contractor is considered merely as an agent or intermediary of the principal who is responsible to the workers in the same manner and to the same extent as if they had been directly employed by him. MANAGEMENT FUNCTION Manila Electric Co. v. Quisumbing (99) Additionally, We recognize that contracting out is not unlimited; rather, it is a prerogative that management enjoys subject to well-defined legal limitations. As we have previously held, the company can determine in its best business judgment whether it should contract out the performance of some of its work for as long as the employer is motivated by good faith, and the contracting out must not have been resorted to circumvent the law or must not have been the result of malicious or arbitrary action. The Labor Code and its implementing rules also contain


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specific rules governing contracting out (Department or Labor Order No. 10, May 30, 1997, Sections 1-25). Factors to Determine existence of Independent Contractor Relationship: 1. whether the contractor is carrying on an independent business; 2. whether the work is part of the ERs general business; 3. the nature and extent of the work; 4. the skill required; 5. the terms and duration of the relationship; 6. the right to assign the performance of the work to another; 7. the control and supervision of the work and the ERs powers with respect to the hiring, firing and payment of salaries; 8. the duty to supply premises, tools and appliances. (Mafinco vs. Ople) REQUIREMENTS - INDEPENDENT CONTRACTOR Lim v. NLRC (99) Under DOLE Department Order No. 10 (1997), contracting shall be legitimate if the following circumstances concur: i) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility, according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof; ii)The contractor or subcontractor has substantial capital or investment; and iii)The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits. Escario v. NLRC (2000) In contrast, there is permissible job contracting when a principal agrees to put out or farm out with a contractor or a subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job or work or service is to be performed or completed within or outside the premises of the principal. In this arrangement, the following conditions must concur: (a)....The contractor carries on a distinct and independent business and undertakes the contract work on his account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of his work except as to the results thereof; and (b)....The contractor has substantial capital or investment in the form of tools, equipment, machineries (sic), work premises, and other materials which are necessary in the conduct of his business. [RULES TO IMPLEMENT THE LABOR CODE, Book III, Rule VIII, Sec. 8.] In the recent case of Alexander Vinoya vs. NLRC et al., this Court ruled that in order to be considered an independent contractor it is not enough to show substantial capitalization or investment in the form of tools, equipment, machinery and work premises. In addition, the following factors need be considered: (a) whether the contractor is carrying on an independent business; (b) the nature and extent of the work; (c) the skill required; (d) the term and duration of the relationship; (e) the right to assign the performance of specified pieces of work; (f) the control and supervision of the workers; (g) the power of the employer with respect to the hiring, firing and payment of workers of the contractor; (h) the control of the premises; (i) the duty to supply premises, tools, appliances, materials, and labor; and (j) the mode, manner and terms of payment. DESIRABLE - UNNECESSARY


Updated and enhanced with additional cases by ATTY. RENE CALLANTA Coca-Cola Bottlers Phil., Inc. v. NLRC (99)
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We perceive at the outset the disposition of the NLRC that janitorial services are necessary and desirable to the trade or business of petitioner Coca-Cola. But this is inconsistent with our pronouncement in Kimberly Independent Labor Union v. Drilon where the Court took judicial notice of the practice adopted in several government and private institutions and industries of hiring janitorial services on an independent contractor basis. In this respect, although janitorial services may be considered directly related to the principal business of an employer, as with every business, we deemed them unnecessary in the conduct of the employers principal business. JUDICIAL NOTICE Coca-Cola Bottlers Phil., Inc. v. NLRC (99) We perceive at the outset the disposition of the NLRC that janitorial services are necessary and desirable to the trade or business of petitioner Coca-Cola. But this is inconsistent with our pronouncement in Kimberly Independent Labor Union v. Drilon where the Court took judicial notice of the practice adopted in several government and private institutions and industries of hiring janitorial services on an independent contractor basis. In this respect, although janitorial services may be considered directly related to the principal business of an employer, as with every business, we deemed them unnecessary in the conduct of the employers principal business. This judicial notice, of course, rests on the assumption that the independent contractor is a legitimate job contractor so that there can be no doubt as to the existence of an employeremployee relationship between the contractor and the worker. In this situation, the only pertinent question that may arise will no longer deal with whether there exists an employment bond but whether the employee may be considered regular or casual as to deserve the application of Art. 280 of the Labor Code. EMPLOYER - EMPLOYEE Phil. Airlines, Inc. v. NLRC (98) From the foregoing disquisition, it is evident that petitioner was engaged in permissible job contracting and that the individual private respondents, for the entire duration of their employ, were employees not of petitioner but of STELLAR. In legitimate job contracting, no employeremployee relation exists between the principal and the job contractor's employees. The principal is responsible to the job contractor's employees only for the proper payment of wages. But in labor-only contracting, an employer-employee relation is created by law between the principal and the labor-only contractor's employees, such that the former is responsible to such employees, as if he or she had directly employed them. Besides, the Court has already taken judicial notice of the general practice adopted in several government and private institutions of securing janitorial services on an independent contractor basis. ** Examples of Independent Contractor: * Commission agent : IPC Company entered into agreement with registered representatives who worked on a commission basis. While the agents were subject to a set of rules and regulations governing the performance bond; the termination for certain causes, however, the agents were not required to report to work; to devote their time exclusively for the company; to account for their time nor submit a record of their activities; and that they were paid on a commission based on a certain percentage of sales. The fact that for a certain specified causes (failure to meet annual quota) the relationship may be terminated does not mean such control exists, for the causes of termination have no relation to the means and methods of work. (IPC vs. SSS) * Dealership : A contract whereby one engages to purchase and sell soft drinks on trucks supplied by the manufacturer but providing that the other party (peddler) shall have the right to employ his own workers, shall post a bond to protect the manufacturer against losses shall be responsible for damages caused to third person, shall obtain the necessary licenses and permits and bear the expenses incurred in the sale of the soft drinks. (Mafinco vs. NLRC)


29
Another dealership agreement wherein the dealer: handles the products in accordance with existing laws and regulations; sends his orders to the factory plant; is supplied by the factory with a delivery truck and all expenses for repairs are borne by the factory; receives no commission but given a discount for all sales; is responsible alone for any violation of the law, sells the product at the price agreed upon between the parties; and posts a surety bond of not less than P10,000.00. (La Suerte vs. Director of Labor Relations) * Security Agency : Shipping company entered into an agreement with a security agency wherein the security agency was responsible for the hiring and assignment of the guards, the guards were not known to the shipping company for it dealt directly with the agency, and a payment of a lump sum to the agency who in turn paid the compensation of the individual watchmen. Under the circumstances, the guards cannot be considered EEs of the shipping company. It is the security agency that recruits, hires and assigns the work of the watchmen. It is the wages to which the watchman is entitled. The powers to dismiss lies with the agency. Lastly, since the company has to deal with the agency, and not with the individual watchmen, on matters, pertaining to the contracted task, it stands to reason that the company does not exercise any power or control over the watchmens conduct. (APL vs. Clave) * Stevedoring Services : SHIPSIDE entered into a Contract for Services with La Union providing among others that the latter would furnish all labor needed for stevedoring work in piers controlled by the former. The net balance of the stevedoring charges will be divided equally among the parties. The records do not show any participation on the part of SHIPSIDE with respect to the selection and engagement of the individual stevedores. The terms and conditions of their services are matters determined not by SHIPSIDE but by La Union. It is also sufficiently established that La Union exercised supervision and control over its labor force. While SHIPSIDE occasionally issued instructions to the stevedores, such instructions, in legal contemplation are mere requests since the privity of contract lies between the workers and La Union. (SHIPSIDE vs. NLRC) * Collection Agency : Singer entered into a collection agency agreement with collectors providing among others that the collector is to be considered at all times to be an independent contactor; he was required to comply with certain rules and regulations (i.e. use of authorized receipts, monthly collection quota, cash bond, and submission of report of all collections at least once a week); and his services can be terminated in case of failure to satisfy these regulations. However, the agent was not required to observe office hours or to report to Singer except for remitting his collections. He did not have to devote his time exclusively for Singer and the manner and method of collection were left solely to the discretion of the agent, and he shouldered his transaction services. ( * Messengerial/Janitorial Services : Janitors were hired by CSI and assigned to La Union Carbide. They drew their salaries from CSI. CSI exercised control over them through a SCI EE who gave orders and instructions. Moreover, CSI had the power to assign its janitors to various clients and pull them out. CSI was a registered service contractor and did business with a number of known companies in the country. It maintains its own office and had its own office equipment. It furnishes its janitors the cleaning equipment. (Rhone-Poulene vs. NLRC) BCC, capitalized at P1 million fully subscribed and paid for provided janitorial and other services to various firms. It hired A and B and assigned them to work for FEBTC. The two reported for work wearing the prescribed uniform of the BCC; their leave of absences were filed directly with BCC; and their salaries drawn only from BCC. FEBTC however issued a job description which detailed the functions of two. Applying the control test, BCC is the ER of the two. Furthermore, it had substantial capital. The guidelines in the job description were laid down merely to ensure the desired result was achieved. It did not, however, tell how the work should be performed. (Neri vs. NLRC) * Repair and Maintenance Service : F doing business, was hired by Shell to conduct a hydropressure test. He was paid a lump sum for the work he and his men accomplished. He utilized his own tools and equipment. He accepted business from other companies. He was not controlled by Shell with regard to the manner in which he conducted the test. (Pilipinas Shell vs. CA) LABOR CONTRACTOR ONLY


PROHIBITION Maraguinot v. NLRC (98) Updated and enhanced with additional cases by ATTY. RENE CALLANTA
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As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent or intermediary of the direct employer. But even by the preceding standards, the associate producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit nor hire the workers. Vinoya v. NLRC (2000) Labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements are present: (a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility; (b) 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. REQUISITES Ponce v. NLRC (98) Sec. 9(a), Rule VIII, Book III, of the Omnibus Rules Implementing Article 106 of the Labor Code, provides, in turn, that a person who supplies workers to another shall be deemed to be merely engaged in "labor-only contracting," a disallowed act, (a) when he does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials, and (b) when the workers recruited and placed by him perform activities that relate directly to the principal business or operations of the employer in which the workers are habitually employed. Such supplier of labor is considered merely as an agent or intermediary of the employer who can correspondingly be held responsible to the workers in the same manner and extent as if the latter are directly employed by him. EFFECT OF FINDING Phil. Airlines, Inc. v. NLRC (98) Based on these findings, we sustain the conclusion of public respondent that G.C. Services Enterprises is merely a "labor-only" contractor who acted as mere supplier of manpower for petitioner at its maintenance department. As we held in Industrial Timber Corporation, et. al. vs. NLRC et. al.: Hence a finding that a contractor is a "labor-only" contractor is equivalent to a finding that there exists as employer-employee relationship between the owner of the project and the employees of the "labor-only" contractor since that relationship is defined and prescribed by law itself. Accordingly, private respondents, are considered employees of the petitioner. Further, private respondents, having performed activities which are directly related to petitioner's business, are deemed regular employees of petitioner pursuant to Article 280 of the Labor Code. And as regular employees, they must be accorded security of tenure in their employment. Verily, their services can be terminated only based on "just" and "authorized" causes under Articles 282, 283 and 284 of the Labor Code. INDEPENDENT CONTRACTING: Under DOLE Department Order No. 10 (1997), contracting shall be legitimate if the following circumstances concur: 1. The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility, according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof; 2. The contractor or subcontractor has substantial capital or investment; and 3. The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards,


31
free exercise of the right to self-organization, security of tenure, and social and welfare benefits. LABOR - ONLY CONTRACTING: 1. the person supplying workers to an employer does not have substantial capital or investment 2. in the form of tools, equipment, machineries, work premises, among others, 3. the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. Instances of Labor-Only Contracting (declared prohibited by DO#3) * Agency hiring : PBC and CESI entered into an agreement under which the latter undertook to supply the former with 11 messengers. The agreement provided that the messengers would remain EEs of CESI; PBC remitted to CESI amount equivalent to the wages of the messengers; CESI in turn paid them and their names are not included in the PBCs payroll; the bank, in cases of dismissal would request CESI, and CESI would in fact withdraw such messenger, and the messengers performed their functions within the banks premises. CESI cannot be considered a job contractor because its undertaking is not the performance of a specific job; it merely undertook to provide the bank with a certain number of persons able to carry out the work of messengers. (PBC vs. NLRC) Under the Work Contract between A and a motorshop, A undertook to supply labor and supervision in the performance of automotive body painting work. A and his men were paid lump sum, the company supplied the tools, equipment, machineries and materials and moreover, the jobs were done in the premises of the motor shop. Aside from the fact that the company exercised control and direction over the work done by A and his men, the line of workautomobile painting was directly related to, if not an integral part of the regular business of the motor shop. (Broadway Motors vs. NLRC) LS provided helpers, janitors, mechanics to NP, a corporation engaged in garment manufacturing. The agreement between the two provided that LS shall provide NP with workers, NP shall pay LS a fee based on rates fixed by the agreement, there is no ER-EE relationship between the two and LS shall have exclusive direction in the selection, engagement and discharge of its personnel and the latter shall be within is full control. LS is a labor-only contractor since it is merely an agent to procure workers for the real ER. (Guarin) * Security Guard Hiring : Hyatt and VSS entered into a contract of services wherein VSS agreed to protect the properties and premises of Hyatt by providing security guards. The security guards filled up Hyatt employment application forms and submitted the forms to the Security Department of the hotel. Their wages were paid directly by Hyatt and their assignments, promotions, supervisions and dismissal were approved by the Chief Security Officer of Hyatt. (Vallum Security vs. NLRC)
Section 6. EMPLOYMENT POLICIES, PLACEMENT OF WORKERS, AND AGENCIES

6. 1 EMPLOYMENT POLICIES
RECRUITMENT
AND
1. Art. 12 : Statement of Objectives It is the policy of the State: a. To promote and maintain a state of Full employment through improved manpower training, allocation and utilization; b. To protect every citizen desiring to work locally or overseas by securing for him the best possible terms and conditions of employment; c. To facilitate a free choice of Available employment by persons seeking work in conformity with national interest; d. To facilitate and regulate the Movement of workers in conformity with national interest; e. To regulate the employment of Aliens, including the establishment of a registration and/or work permit system;


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f. To strengthen the network of public employment offices and rationalize the participation of the private sector in the Recruitment and placement of workers, locally and overseas, to serve national development objectives; g. To issue careful selection of Filipino workers for overseas employment in order to protect the good name of the Philippines abroad. (AFP MARC) 6.2 EMPLOYMENT AGENCIES Private Sector-Agencies and Entities A. PARTIES A.1. Worker * Art. 13 (a) Worker any member of the labor force, whether employed or unemployed A.2 Agency * Art. 13 (c) : Private fee-charging employment agency any person or entity engaged in the recruitment or placement of workers for a fee which is charged directly or indirectly, from the workers or ERs or both. A.3 Entity * Art. 13 (e) : Private recruitment entity any person or association engaged in the recruitment and placement of workers, locally or overseas, without charging, directly or indirectly, any fee from the workers or the ERs or both. B. ALLOWED ENTITIES B.1 ALLOWED PRIVATE AGENCIES AND ENTITIES * Art. 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. Sec. 1, Rule III, Book I, IRRs No person or entity shall engage in the recruitment and placement of workers either for local or overseas employment except the following: [allowed agencies] 1. public employment agencies 2. POEA 3. private recruitment entities 4. private employment agencies 5. shipping or manning agents or representatives; and 6. such other persons or entities as may be authorized by the Secretary. *Art. 25 : . . . the private employment sector shall participate in the recruitment and placement of workers, locally and overseas, under such guidelines, rules and regulations as may be issued by the Secretary of Labor. B.2 PROHIBITED BUSINESS AGENCIES AND ENTITIES 1. Art. 18 : Ban on Direct Hiring No ER may hire a Filipino worker for overseas employment except through the Boards and entities authorized by the Secretary of Labor. Exceptions to the Exception: a. Direct hiring by members of the diplomatic corps; b. International organizations and such other ERs as may be; c. Allowed by the Secretary of Labor is exempted from this provision. 2. Art. 26 : Travel agencies and sales agencies of airline companies are prohibited from engaging in the business of recruitment and placement of workers for overseas employment, whether for profit or not.


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C. GOVERNMENT TECHNIQUES OF REGULATION PRIVATE RECRUITMENT AND PLACEMENT BUSINESS C.1 LICENSING, CITIZENSHIP, CAPITALIZATION, DURATION, TRANSFERABILITY AND FEES 1. Art. 27 : Citizenship Requirement: a. Only Filipino citizens or b. Only corporations, partnerships or entities at least 75% of the authorized and voting capital stock of which is owned and controlled by Filipino citizens shall be permitted to participate in the recruitment and placement of workers, locally or overseas.
2. Art. 28 : Capitalization Substantial capitalization as determined by the Secretary of

Labor. (P1 M) Sec. 1, Rule V, Book I, IRRs : Qualification of Applicants for Private employment agencies All applicants for licenses to operate private employment agencies either for local or overseas recruitment and placement shall possess the following qualifications: a. Citizenship requirement b. Capitalization c. Not disqualified
3. Art. 29 : Non-tranferability of License or Authority

* No license or authority shall be used directly or indirectly by any other person other than the one in whose favor it was issued; or * at any place other than that stated in the license of authority * nor such license or authority be transferred, conveyed or assigned to any other person or entity. * Any transfer of business address, appointment or designation of any agent or representative including the establishment of additional offices everywhere shall be subject to the prior approval of the DOLE.
4. Art. 15 (a) 2 : (a) The Bureau of Employment Services shall be primarily responsible for
developing and monitoring a comprehensive employment program. It shall have the power and duty: 2) To establish and maintain a registration and/or licensing system to regulate private sector participation in the recruitment and placement of workers, locally or overseas, and to secure the best possible terms and conditions of employment for Filipino contract workers and compliance therewith under such rules and regulations as may be issued by the Minister of Labor.
5. Distinguish authority from license? Authority means a document issued by the

Secretary of Labor and Employment authorizing a person or association to engage in recruitment and placement activities as a private recruitment entity; while a license is the document issued to a person or entity to operate a private employment agency. (Art. 13)
6. What is the duration of a license recruit? A license is valid for a period of 2 years from the
date of issuance unless sooner cancelled, revoked or suspended for violation of the Labor Code or its IRRs. * non-tranferrable C.2 BONDS
1. Art. 31 : All applicants for license or authority shall post such cash and surety bonds as
determined by the Secretary of Labor to guarantee compliance with prescribed recruitment procedures, rules and regulations, and terms and conditions of employment as appropriate.


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2. The purpose of bonds is to insure that if the rights of these overseas workers are violated by their ERs recourse would still be available to them against the local companies that recruited them for the foreign principal. (Stronghold vs. CA) C.3 WORKERS FEES * Art. 32 : Any person applying with a private fee-charging employment agency for employment assistance shall not be charged any fee until 1. he has obtained employment through its efforts; or 2. he has actually commenced employment. Such fee shall be always covered with the appropriate receipt clearly showing the amount paid. The Secretary of Labor shall promulgate the schedule of allowable fees. An agreement that changes the employees pay and benefits to make them lesser than those contained in a POEA-approved contract is void UNLESS such subsequent agreement is approved by the POEA. C.4 REPORTS SUBMISSION * Art. 33 : Whenever the public interest requires, the Secretary of Labor may direct all persons or entities within the coverage of this Title to submit a report on the status of employment, including job vacancies, details of job requisitions, separation from job, wages, other terms and conditions, and other employment data. Percentage of salary remittance 1. seaman 80% 2. construction worker 70% 3. professional workers with free board and lodging 70% 4. professional without board and lodging 50% 5. domestic helpers 50% 6. other workers 50% C.5 PROHIBITED PRACTICES [IF FAITS CHOW] 1. Art. 34 : Prohibited Practices It shall be unlawful for any individual, entity license or holder of authority: (any of these acts constitutes illegal recruitment accdg. to R.A. 8042) 1. To charge or accept; directly or indirectly, any amount greater than that specified in the schedule of allowable fees, or make a worker pay any amount greater than that actually received by him as a loan or advance; 2. To furnish or publish any false notice or information or document in relation to recruitment or employment; [includes the act of furnishing fake employment documents to a worker. (Azucena) 3. To give any false notice, testimony, information or document or commit any Act of misrepresentation for the purpose of securing a license of authority under this Code; 4. To induce or attempt to induce a worker already employed to quit his employment in order to offer him to another unless the transfer is so designed to liberate the worker from oppressive terms and conditions of employment; 5. To influence or attempt to influence any person or entity not to employ any worker who has not applied for employment through his agency; 6. To engage in the recruitment or placement of workers in jobs Harmful to public health or morality or to the dignity of the Republic of the Philippines; 7. To obstruct or attempt to obstruct inspection by the secretary of Labor or by his duly authorized representatives; 8. To Fail to file reports on the status of employment, placement vacancies, remittance of foreign exchange earnings, separation from jobs, departures and such other matters of information as may be required by the Secretary of Labor; 9. To substitute or alter employment contracts approved and verified by the DOLE from the time of actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the Secretary of Labor Unless it is to improve the terms and conditions of employment. (Vir-Jen vs. NLRC); 10. To become an officer or member of any corporation engaged in Travel agency or to be engaged directly or indirectly in the management of a travel agency;


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11. To Withhold or deny travel documents from applicant workers before departure for monetary or financial consideration other than those authorized under this Code and its implementing rules and regulations. 2. A, Filipina, was recruited by a local private employment agency for a tutoring job abroad. Upon arrival in the place of employment, she was made to work as a housemaid. What advice will you give her? I will advice the Filipina to commence a criminal action against the employment agency for violation of Art. 34 of the Labor Code. She was recruited under false pretense. (Alcantara) 3. STC, a travel agency, advertised for young women to work as domestic helpers in Hongkong. Five women who left for Hongkong were later brought to prostitution houses. Have the officers of STC committed any unlawful acts? Yes. Violation of Art. 26 and Art. 34 (d) and (f) of the Labor Code. (Alcantara) C.6 ILLEGAL RECRUITMENT
1. Art. 13 (b) : Recruitment and Placement - Act of [CEC-TUHPI]

a. b. c. d. e. f. g. h. Canvassing Enlisting Contracting Transporting Utilizing Hiring or Procuring workers and Includes referrals, contracts 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 2 or more persons shall be deemed engaged in recruitment or placement. [The number of persons dealt with is not, an essential ingredient of the act of recruitment or placement. The provision merely lays down a rule of evidence that where a fee is collected in consideration of a promise or offer of employment to 2 or more prospective workers, the individual or entity dealing with them shall be deemed to be engaged in the act of recruitment or placement. (Pp vs. Panis) [N.B. This only creates a presumption] The number of persons dealt with is not the basis in determining whether or not an act constitutes recruitment and placement, any of the acts mentioned in 13b will constitute recruitment and placement even if only one prospective worker is involved. People v. Guevarra (99) Recruitment for overseas employment is not in itself necessarily immoral or unlawful. It is the lack of the necessary license or permit, or the engagement of prohibited activities enumerated in the Labor Code that render such recruitment activities unlawful or criminal. Illegal recruitment is qualified into large scale recruitment when three or more persons are victimized. If such recruitment is carried out by a group of three (3) or more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise or scheme, it becomes one committed by a syndicate. Illegal recruitment committed by a syndicate or in large scale amounts to an offense involving economic sabotage, punishable by life imprisonment and a fine of one hundred thousand pesos (P100,000.00). Illegal termination (Sec. 10 RA 8042) > premature termination w/o lawful or valid ground full reimbursement fees + 12% OR - salaries for unexpired portion or 3 mos for every year of unexpired term whichever is lower Liability of private employment agency employment contract - joint and solidary with employer - all claims and liabilities that may arise in connection with the implementation of the contracts


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Private employment agencies are held jointly and severally liable with foreign-based employer. 2. Any recruitment activities, including the prohibited practices, enumerated under Art. 34 of this Code, to be undertaken by non-licensees or non-holders of authority shall be deemed illegal and punishable under Art. 39 of this Code. * Illegal recruitment when committed by a: syndicate or in large scale shall be considered an offense involving economic sabotage and shall be penalized in accordance with Art. 39 hereof. - non-bailable - life imprisonment Illegal recruitment by a syndicate Carried out by a group of 3 or more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise or scheme defined under the first paragraph hereof. Illegal recruitment in large scale Committed against 3 or more persons individually or as a group. People v. Reyes (95) There are, it is said, 14 other cases filed/pending in the courts against the accused for illegal recruitment. These cases cannot be taken into account for the purpose of Art. 38(b). When the Labor Code speaks of illegal recruitment "committed against three (3) or more persons individually or as a group," it must be understood as referring to the number of complainants in each case who are complainants therein, otherwise, prosecutions for single crimes of illegal recruitment can be cumulated to make out a case of large scale illegal recruitment. In other words, a conviction for large scale illegal recruitment must be based on a finding in each case of illegal recruitment of three or more persons whether individually or as a group. Moreover, even if Blanza and Garcia had been illegally recruited so as to make the number of persons illegally recruited four and make the crime that of illegal recruitment of a large scale, since this was not alleged in the information and this is the more serious offense which includes that which was charged, the appellant can only be found guilty of the less serious offense charged, pursuant to Rule 120, 4. 3. Sec. 8, Migrant Workers Act : A criminal action arising from illegal recruitment as defined herein shall be filed with the RTC of the province or city where the offense was committed or where the offended party actually resides at the time of the commission of the offense: provided, That the court where the criminal action is first filed shall acquire jurisdiction to the exclusion of other courts. 4. The crime of illegal recruitment has 2 elements: a. That the offender is a non-license or non-holder of authority to lawfully engage in the recruitment and placement of workers; and b. That the offender undertakes any of the recruitment activities defined under Art. 13 (b) of the Labor Code or any of the prohibited practices enumerated under Art. 34 of the same Code. REFERRALS People v. Meris (2000) In People v. Agustin, the Court ruled: Hence, the inevitable query is whether or not appellant Agustin merely introduced complainants to the Goce couple or her actions went beyond that. The testimonial evidence hereon show that she indeed further committed acts constitutive of illegal recruitment. All four prosecution witnesses testified that it was Agustin whom they initially approached regarding their plans of working overseas. It was from her that they learned about the fees they had to pay, as well as


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the papers that they had to submit. It was after they had talked to her that they met the accused spouses who owned the placement agency. As such, the Court concluded that appellant that appellant was an employee of the Goce spouses, as she was actually making referrals to the agency. She was therefore, engaged in recruitment activities. The same factual circumstance obtains in this case. Although accused-appellant was not an employee of the alleged illegal recruiter Julie Micua, the evidence show that she was the one who approached complainants and prodded them to seek employment abroad. It was through her that they met Julia Micua. This is clearly an act of referral. Worse, accused-appellant declared that she was capable of placing them in jobs overseas. Suffice it to say that complainants' recruitment would not have been consummated were it not for the direct participation of accused-appellant in the recruitment process. 5. G convinced F and S, that they could be employed for France for a fee. G was also able to persuade A that he could give A a working visa. Nothing happened to F, S and A. G did not have any license to recruit or authority to recruit? A may be charged and convicted of a large-scale illegal recruitment since he did not have the license or authority to recruit, and yet recruit at least 3 persons. (Pp vs. Turda) Furthermore, he can also be convicted and charged of estafa since the latter is a malum in se while the former is a malum prohibium (Id.) 6. NATO, a national union of teachers was able to find jobs abroad for its member by directly contacting other teachers organizations in foreign countries, without charging additional fees. Is this legal? No. Only persons or entities with appropriate license or authority can engage in recruitment and placement of workers. Contact services are activities that fall within the scope of recruitment and placement of workers. (Alcantara) 7. A paper manufacturing company in Cainta would like to know if it needs to obtain a license authority before it can recruit workers for its plant. No license or authority is necessary. The company is not engaged in the business of recruitment and placement of workers, it is not recruiting workers to be employed by others. It does not represent a principal. It is recruiting its own workers. (Alcantara) C.7 RULE MAKING * The Secretary of Labor and Employment has the power and authority not only to restrict and regulate the recruitment and placement activities of all agencies but also promulgate rules and regulations to carry out the objectives and implement the provisions governing said activities. (Eastern Assurance vs. Secretary of Labor) C. 8 ENFORCEMENT
1. Art. 36 : The Secretary of Labor shall have the power to restrict and regulate the
recruitment and placement activities of all agencies within the coverage of this Title and is hereby authorized to issue orders and promulgate rules and regulations to carry out the objectives and implement the provisions of this Title. Sec. 2, Rule VI, Book I, IRRs : Pending investigation of the complaint or report, the Secretary may suspend the license of the private employment agency concerned. . .
2. Art. 37 : The Secretary or his duly authorized representatives may, at any time, inspect
the premises, books of account and records of any person or entity covered by this Title, require it to submit records regularly on prescribed forms, and act on violations of any provisions of any provisions of this Title. PUBLIC SECTOR AGENCIES A. EMPLOYMENT OFFICES AND THE POEA
1. Art. 14 (a) : The Secretary of Labor shall have the power and authority: (a) To organize
and establish new employment agencies in addition to the existing employment offices under the DOLE as the need arises.


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2. Sec. 3, EO 247 : POEA functions

a. b. Regulate private sector participation in the recruitment and overseas placement of workers by setting up a licensing and registration system; Formulate and implement in coordination with appropriate entities concerned, a system for promoting and monitoring the overseas employment of Filipino workers taking into consideration their welfare and the domestic manpower requirements; Protect the rights of Filipino workers to fair and equitable recruitment and employment practices and ensure their welfare; Exercise original and exclusive jurisdiction to hear and decide all preemployment cases which are administrative in character involving or arising out of violation of recruitment laws, rules and regulations, or violation of the conditions for issuance of license or authority to recruit workers. The POEA has no jurisdiction to hear and decide a claim for enforcement of a foreign judgment. Such a claim must be brought before the regular courts. (Pacific Asia vs. NLRC)
c. d.
POEA has the power to order refund or reimbursement of fees fraudulently or illegally collected, or in excess of what is legally allowed. REPATRIATION OF WORKERS The primary responsibility to repatriate a worker, including his or her remains and personal effects, belongs to the principal or the agency that recruited or deployed the worker. The principal or agency has to advance the air transport fare and immediately repatriate the worker, as needed, without determining the cause of termination of employment. If the cause of the termination is due solely to the fault of the worker, the principal or agency my recover the cost of repatriation from the worker after return to the country. The cause of termination will be determined by the LABOR ARBITER. Such obligation of the principal/agency to advance the plane fare, and of the worker to refund the cost should be stipulated in every contract for overseas employment. If the principal or agency does not comply with its obligation, the POEA shall notify the OWWA to advance the repatriation cost with recourse to the agency or principal. POEA may also impose sanctions on the agency or principal. In no case shall an employment agency require any bond or cash deposit from the worker to guarantee performance under the contract of his/her repatriation. The mandatory repatriation bond is abolished as of June 17, 1995 pursuant to Section 36 of RA 8042. (Azucena) B. Definition of Terms Sec. 1 (j), (w), (z), (ff), and (qq), Rule II, Book I, Rules and regulations on Overseas Employment
1. Contract Worker - Any person working or who has worked overseas under a valid
employment contract.
2. Manning agency Any person or entity recruiting seamen for vessels plying
international waters and fore related maritime activities.
3. Name Hire Worker who is able to secure employment overseas on his own without
the assistance or participation of an agency.
4. Overseas employment Employment of a worker outside the Philippines, including

employment on hoard vessels plying international waters covered by a valid employment contract.
5. Placement fee Amount charged by a private employment agency from a worker for
its services in securing employment.
6. Service fee Amount charged by a license from its foreign ER as payment for actual
services rendered in relation to the recruitment and employment of workers for said principal.


6. 3 Sanctions Updated and enhanced with additional cases by ATTY. RENE CALLANTA
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1. Art. 35 : Suspension and/or Cancellation of License or Authority The Secretary of

Labor shall have the power to suspend or cancel any license or authority to recruit EEs for overseas employment for violations of rules and regulations by the DOLE, the POEA, or for violation of the provisions of this, and other applicable laws . .
2. Art. 39 : Penalties Violations of any provisions of this Tile or IRRs by license or holder
of authority : a. imprisonment of not less than 2 years nor more than 5 years b. or a fine of not less than P10,000.00 nor more than P50,000.00 c. or both such imprisonment and fine, at the discretion of the court. 3. Violation of any of the provisions thereof or its implementing rules and regulations by a non-license or non-holder of authority a. imprisonment of not less than 4 years nor more than 8 years b. or a fine of not less than P20,000.00 nor more than P100,000.00 c. or both such imprisonment and fine, at the discretion of the court. 4. If the offender is a corporation, partnership, association or entity, the penalty shall be imposed upon the officer or officers of the corporation, partnership, association or entity responsible for violation; and if such officer is an alien, he shall in addition to the penalties herein prescribed, be deported without further proceedings: Illegal recruitment: a. imprisonment of not less than 6 years and 1 day but not more than 12 years and b. fine of not less than P200,000.00 nor more than P500,000.00. > prescribes in 5 years Illegal recruitment constituting Economic Sabotage: a. life imprisonment; and b. fine of not less than P500T nor more than P1M > prescribes in 20 years * The maximum penalty shall be imposed if: a . the person illegally recruited is less than 18 years of age; or b. committed by a non-license or non-holder of authority. VENUE: RTC where committed or where offended party resides The Secretary of Labor or his duly authorized representative may order the closure of illegal recruitment establishments. A person convicted for illegal recruitment under the Labor Code can be convicted for violation of the RPC on ESTAFA provided the elements of the crime are present. 5. Art. 38 (c) of the Labor Code granting the Secretary of Labor the power to issue search or arrest warrants is declared unconstitutional and null and void. (Salazar vs. Achacoso) money claims arising from ER-EE relationship prescribes in 3 years strict rules of evidence are not applicable in claims for compensation and disability benefits
5. In case of breach of the employment contract by a foreign-based ER, may the private employment agency or recruitment entity be held liable? What is the nature of the liability of the recruitment and placement agency and its principal? Yes. The agency or entity undertakes under oath to assume full and complete responsibility for all claims and liabilities which may arise in connection with the use of the license or authority. The agency is jointly severally liable with the principal or foreign-based ER for any of the violations of recruitment agreement contract of employment. (Ambraque vs. NLRC; Pp vs. Catan)


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Section 7. ALIEN EMPLOYMENT

7. 1 TECHNIQUE OF REGULATION - EMPLOYMENT PERMIT
1. Art. 40 : Employment Permit of Non-resident Aliens Any alien seeking admission to the
Philippines for employment purposes and any domestic or foreign ER who desires to engage an alien for employment in the Philippines shall obtain an employment permit from the DOLE . . . For an enterprise registered in preferred areas of investments, said employment permit must be issued upon recommendation of the government agency charged with the supervision of the registered enterprise. Sec. 7, Rule XIV, Book I, IRRs : The employment permit shall be valid for a minimum period of 1 year.
2. Art. 41 : Prohibition Against Transfer of Employment (a) After the issuance of an

employment permit, the alien shall not transfer to another job or change his ER without prior approval of the Secretary of Labor. Art. 288 : Any alien found guilty shall be summarily deported upon completion of service of sentence.
3. May an ER in the Philippines employ a worker who is not a Filipino citizen? Yes, except
to nationalized activities such as: a. public utility to develop, exploit and utilize natural resources 60% Filipino; b. Mass media 100% owned by Filipino citizens c. Advertising 70% Filipino owned d. Retail Business 100% Filipino owned e. Financing business 60% Filipino owned
4. Are there exceptions to the prohibition against employment of aliens in entities engaged
in nationalized activities? Yes, when (a) the Secretary of Justice specifically authorizes the employment of technical personnel; or (b) where aliens are elected members of Board of Directors in proportion to their allowable participation in the capital; or (c) when allowed under certain special laws. (Alcantara) COVERAGE * A resident alien need not obtain an employment permit in order to be employed in the Philippines. (Almodiel vs. NLRC) NON-RESIDENT ALIEN Almodiel v NLRC (93) Art. 40 of the Labor Code which requires employment permit refers to non-resident aliens. The employment permit is required for entry into the country for employment purposes and is issued after determination of the non-availability of a person in the Philippines who is competent, able and willing at the time of application to perform the services for which the alien is desired. A resident alien does not fall within the ambit of the provision. General Milling Corp. v. Torres (91) The Labor Code itself specifically empowers respondent Secretary to make a determination as to the availability of the services of a "person in the Philippines who is competent, able and willing at the time of application to perform the services for which an alien is desired." In short, the Department of Labor is the agency vested with jurisdiction to determine the question of availability of local workers. The constitutional validity of legal provisions granting such jurisdiction and authority and requiring proof of non-availability of local nationals able to carry out the duties of the position involved, cannot be seriously questioned.


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EMPLOYMENT PERMIT CONDITIONS FOR GRANT
1. Art. 40 : The employment permit may be issued to a non-resident alien or to the

applicant ER after a determination of: [W A C] a. competent b. able and c. willing at the time of the application to perform the services for which the alien is desired. [The DOLE is the agency vested with jurisdiction to determine the question of availability of the local workers. (General Milling vs. Torres) 2. Sec. 5, Rule XIV, Book I, IRRs : Requirements for Employment Permit Applicants The applicant for an employment permit shall be accompanied by the following: a. Curriculum vitae signed by the applicant indicating the educational background, his work experience and other data showing that he possesses technical skills in his trade or profession. b. Contract of employment between the ER and the principal, which shall embody the following, among others: That the non-resident alien shall comply with all applicable laws and rules and regulations; That the non-resident alien worker and ER shall bind themselves to train at least 2 Filipino understudies; and A designation by the ER of at least 2 understudies which must be the most ranking regular EEs in the section or department for which the expatriates are being hired to ensure actual transfer of technology.
Section 8. DEVELOPMENT OF HUMAN RESOURCES

8.1 OBJECTIVES - DEFINITIONS
1. Art. 43 : It is the objectives of this [F E D]

a. Title to Develop human resources b. Establish training institutions, and c. Formulate such plans and programs as will ensure efficient allocation, development and utilization of the nations manpower and thereby promote employment and accelerate economic and social growth.
2. What is human resources development? Process by which the actual and potential
labor force is made systematically to acquire greater knowledge, skills and capabilities for the nations sustained economic and social growth. (Sec. 1, Rule I, Book II, IRRs)
3. Define manpower? Is the portion of the population which has actual or potential
capability to contribute to the production of goods and services. (Sec. 1 (c), Rule I, Book II, IRRs)
4. Is human resources development intended solely to train workers? No. Manpower

development also means training entrepreneurship (Art. 44 (b). for self-employment. This is known as
5. What is dual system/training? It refers to a delivery system of quality technical and

vocational education which requires training to be carried out alternatively in 2 venues: a. in school and b. in the production plant. In school, training provides the trainee the theoretical foundation. in the production plant, basic training develops his skill and proficiency in actual working conditions as it continues personal discipline and work value. (Sec. 4 (p), RA 7796) 8.2 PROGRAM INCENTIVE


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* Art. 52 : Deduction from taxable income of of the value of labor training but not to exceed 10% direct labor wage: Provided, That in the case of apprenticeship programs, the program is recognized by DOLE. 8.3 TRAINING AND EMPLOYMENT OF SPECIAL WORKERS APPRENTICES,
LEARNERS AND HANDICAPPED WORKERS

POLICY OBJECTIVES * What is the policy of the State on apprenticeship? 1. To help meet the demand of the economy for trained manpower; 2. To establish a national apprenticeship program through participation of ERs workers, and government and non-government agencies; and 3. To establish apprenticeship standards for the protection of apprentices. (Art. 57) DEFINITION
1. Art. 58 : Apprenticeship Practical training on the job supplemented by related

theoretical instruction.
2. Art. 73 : Learners Persons hired as trainees in semi-skilled and other industrial

occupations which are non-apprenticeable and which may be learned through practical training on the job in a relatively short period of time which shall not exceed 3 months.
3. Art. 78 : Handicapped workers Those whose earning capacity is impaired by age or

physical or mental deficiency or injury WHO CAN EMPLOY AND WHEN A. APPRENTICES must be approved by TESDA Art. 60 : Only ERs in highly technical industries and only in apprenticeable occupations may employ apprentices. Sec. 1, Rule IV, Book II, IRRs : Highly Technical Industries Trade, business, enterprise, industry or other activity which is engaged in the application of advanced technology. Art. 58 : Apprenticeship Occupation Requires more than 3 months of practical training supplemented by related theoretical instruction. 1 month probation prior approval by TESDA of the proposed apprenticeship program is a condition sine qua non before an apprenticeship can be validly entered into employer is not obliged to employ the apprentice after the completion of his training
Art. 70 : Apprenticeship programs shall be primarily voluntary except: a. When national security or particular requirements of economic development so demand, the President may require compulsory training where the shortage of trained manpower is deemed critical by the Secretary of Labor. b. Where services of foreign technicians are utilized by private companies in apprenticeable trades. Qualifications of an Apprentice: a. At least 15 years of age: provided, those below 18 years of age shall not work in hazardous occupations; b. Be physically fit for the occupation. c. Possess vocational aptitude and capacity. d. Possess the ability to comprehend, and follow oral and written instructions. (Sec. 11, Rule VI, Book III, IRRs)


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* A 5-star hotel would like to have an apprentice program dishwashers? No. This is not an apprenticeable program occupation because proficiency can be attained within a very short period. Besides, the hotel industry is not highly technical. (Alcantara) * After working for 1 month may an apprentice be dismissed without cause? No. After the probationary period of 1 month, the apprenticeship agreement may be terminated only for cause. Causes for termination of apprenticeship agreement BY THE APPRENTICE: a. Repeated violation by ER of agreement b. Cruel or inhuman treatment c. Personal problems which prevents a satisfactory performance (bad health) d. Substandard working conditions BY THE EMPLOYER: a. habitual absentism b. willful disobedience e.g. rules c. insubordination lawful order d. poor physical conditions apprentice e. theft or malicious destruction f. poor efficiency of performance g. engaging in violence h. gross misconduct i. bad health or continuing illness. (Sec. 25, Rule VI, Book II, IRRs) > employer must make a commitment to employ the business APPRENTICESHIP AGREEMENT period of apprenticeship shall not exceed 6 months wages shall not be lower that 75% of the legal minimum wage should be approved by TESDA If employed without a pre-approved apprenticeship program by the apprentice is not an apprentice but a regular employee. B. LEARNERS - Learnership programs must be approved by TESDA Art. 74 : Learners may be employed when: 1. no experienced worker is available 2. the employment of learners is necessary to prevent curtailment of employment opportunities 3. and the employment does not create unfair competition in terms of labor costs or impair or lower working standards.
Art. 75 : 1. Duration of the learnership period shall be 3 months; 2. Wages and salary rates begin at not less than 75% minimum wage; and 3. A commitment to employ learners if they so desire, as regular EEs upon completion of the learnership. All learners who have been allowed or suffered work during the first 2nd months to be deemed EEs training is terminated by the ER before the end of the stipulated period though no fault of the learner. Art. 76 : Learners employed in piece or incentive-rate jobs during training shall be paid in full for the work done. * J entered into a learnership agreement with employer A. Before the end of 2 months, A terminated the agreement. When J requested for a chance to let him finish the 3 months period. At the end of 3 months, A refused to hire J. Is the stand of A sustainable? No. A has a commitment under the learnership agreement to employ J as a regular worker upon the completion of the learnership.


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LEARNER
APPRENTICE
SIMILARITIES they both have training periods for jobs requiring skills that can be acquired through actual work experience they may be paid wages 25% lower than the applicable legal minimum wage DIFFERENCES trains in a semi-skilled job or in industrial occupations that require training for less than 3 months training period is shorter because the job is more easily learned employer is committed to hire the learner-trainee as an EE after the training period. Learnership agreements do not need prior approval by DOLE but are subject to DOLEs inspection
trains in a skilled or highly skilled job or in a job found only in a highly technical industry the training period exceeds 3 months (6 months) there is no such commitment employment of apprentices in Art. 60 is legally allowed ONLY in highly technical industries and only in apprenticeable occupations approved by DOLE.
C. HANDICAPPED WORKERS Art. 80 : Rates to be paid to handicapped workers shall not be less than 75% of the applicable minimum wage. Employment agreement must state the duration of the employment period and the work to be performed. Art. 81 : Handicapped workers may be hired as apprentices or learners if their handicap is not such as to effectively impede the performance of job operations in the particular occupations for which they are hired. Art. 79 : Handicapped workers may be employed when their employment2. is necessary to prevent curtailment of employment opportunities; and 3. when it does not create unfair competition in labor costs or lower working standards.
Conditions of Employment: not exceed 8 hours and allowed overtime Art. 61 : 1. Period of apprenticeship shall not exceed 6 months. 2. Wages shall not start below 75% of the minimum wage.


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3. Apprenticeship program must be duly approved by TESDA or apprentices becomes

regular EE. This must be evidenced by an apprenticeship agreement. (Nitto Enterprises vs. NLRC) Ratio of theoretical vs. on the job training > 100: 2000 - may work overtime duly credited as his training time
Art. 72 : The Secretary of Labor may authorize the: 2. Hiring of apprentices without compensation whose training on the job is required by the
school or training program curriculum as a requisite for graduation or board examination. There is no ER-EE relationship between students on one hand, and schools, where there is written agreement between them under which the former agree to work for the latter in exchange for the privilege to study free of charge. (Sec. 14, Rule X, Book III, IRRs) * A clerk in the College of Law of a University worked without pay but was allowed to take up no more than 3 units per semester free of charge. The clerk resigned and demanded payment of unpaid wages. Is the clerk entitled to unpaid wages? Yes. Sec. 14, Rule X, Book III, IRRs : only applies in instances where the students are given real opportunity, including such facilities as may be reasonably necessary to finish their chosen courses under such arrangement. In this problem, the clerk was not given any real opportunity to finish law as he was allowed to take up no more than 3 units per semester. There is therefore an ER-EE relationship between the clerk and the university. (Alcantara) The Implementing Rules provide: There is no EE-ER relationship between students on one hand, and schools, colleges or universities, on the other, where there is written agreement between them under which the former agree to work for the latter in exchange for the privileges to study free of charge, provided, the students are given real opportunities including such facilities as may be reasonable and necessary to finish their chosen courses under such agreement. (IRR of Book III, Rule X, Sec. 14.) If the student referred to in Art. 72, in the course of doing a task in behalf of the school, causes injury to a third person, the school can be held liable, the IRR provision that there is no EE-ER relation between the school and the student pertains to observance of labor regulations, such as payrolls to be kept, working conditions, or rest periods. It is not the decisive law in a civil suit for damages instituted by an injured third person. (Filamer Christian Institute vs. Hon. Intermediate Appellate Court, et al., G.R. 75112, August 17, 1992.) MAGNA CARTA FOR DISABLED PERSONS (R.A. 7277) No disabled person shall be denied access to opportunities for suitable employment A qualified disabled EE shall be subject to the same terms and conditions of employment and the same compensation, privileges, benefits, fringe benefits, incentives or allowances as a qualified able-bodied person Even an handicapped worker can acquire the status of the regular employee Bernardo v. NLRC (99) In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled employee should be given the same terms and conditions of employment as a qualified ablebodied person. Section 5 of the Magna Carta provides: Sec. 5. Equal Opportunity for Employment. - No disabled person shall be denied access to opportunities for suitable employment. A qualified disabled employee shall be subject to the same terms and conditions of employment and the same compensation, privileges, benefits, fringe benefits, incentives or allowances as a qualified able bodied person. The fact that the employees were qualified disabled persons necessarily removes the employment contracts from the ambit of Article 80. Since the Magna Carta accords them the rights of qualified able-bodied persons, they are thus covered by Article 280 of the Labor Code. XXX 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


46
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, that, after showing their fitness for the work assigned to them, they should be treated and granted the same rights like any other regular employees. ENFORCEMENT Art. 66 : Appeal to the Secretary of Labor - The decision of the authorized agency of the DOLE may be appealed to the Secretary of Labor within 5 days from receipt of the decision. The decision of the Secretary of Labor shall be final and executory. Art. 67 : Exhaustion of Administative Remedies No person shall institute any action for the enforcement of any apprenticeship agreement or damages for breach of any such agreement, unless he has exhausted all available administrative remedies.
Section 9. CONDITIONS OF EMPLOYMENT HOURS OF WORK

9. 1 HOURS REGULATION RATIONALE AND ENFORCEMENT The 8-hour labor law was designed not only to safeguard the health and welfare of the laborer but in a way to minimize unemployment by forcing ERs, in cases, where more than an 8hour operations is necessary, to utilize different shifts of laborers working only for 8 hours each. (Manila Terminal vs. CIR) 9.2 COVERAGE Art. 82 : The provisions of this Title shall apply to EEs in all establishments and undertakings whether for profit or not but NOT to [GMS- FMDP]:
1. Government EEs [whether employed by the National Government or any of its political
subdivisions, including those employed in GOCCs with original charters. (Sec. 2, Rule I, Book III, IRRs] 2. Managerial EEs [refer to those who meet all of the following conditions, namely: a. Their primary duty consists of the management of the establishment in which they are employed or of a department or sub-division thereof; b. Customarily or regularly direct the work of 2 or more EEs c. Has the authority to hire or fire other EEs of lower rank; or their suggestions and recommendations as to the hiring and firing and as to the promotion or any change of status of other EEs are given, particular weight. (d.)]
Mere designation to a position with a high-sounding title, does not make an EE a

managerial EE where the exercise of the independent judgment is not present. (Sierra vs. NLRC) 3. Other officers or members of the managerial staff if they perform the following duties and responsibilities: a. Primary duty consists of the performance of work directly related to management policies of the ER; b. Customarily and regularly, exercise discretion and independent judgment; c. Regularly directly assist a proprietor or managerial EE or execute under general supervision work along specialized or technical lines requiring special training, experience or knowledge; or execute under general supervision special assignment and tasks; and d. Do not devote more than 20% of their hours worked to activities which are not directly and closely related to the performance of the work described in the preceding paragraphs. (Id.)


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A supervisor is part of the managerial staff and therefore not entitled to overtime pay and other benefits under Art. 83 to 96.
4. Field personnel [Non-agricultural EEs who regularly perform their duties away from the
principal place of business or branch office of the ER and whose actual hours of work in the field cannot be determined with reasonable certainty. (Art. 82) EEs whose work or service hours are not or cannot be effectively monitored by the ER.
5. Members of the family of the ER who are dependent on him for support & domestic
helpers and persons in the personal service of another. Perform such service: a. In the ERs home which are usually necessary or desirable for the maintenance or enjoyment thereof; b. Or minister to the personal comfort, convenience or safety of the ER as well as the members of his ERs household. (sec. 2, Rule I, Book III, IRRs)
However, house personnel hired by a ranking company official, but paid for the
company itself, to maintain a staff house provided for the official, are not the latters domestic helpers but regular EEs of the company. (Cadiz vs. Philippine Sinter) The function of a managerial employee requires the use of discretion and independent judgment (nature of his functions) 6. And workers who are paid by results. [Including those who are paid on piece-work, takay, pakiao, or task basis if their output rates are in accordance with the standards prescribed.] Payment by result is a method or computing compensation. determining the existence or absence of EE-ER relationship. II. Give the reason for the exceptions? It is not a basis for
1. Government EEs Terms and conditions of employment are governed by the Civil
Service Law
2. Managerial EEs Employed by reason of their special training, expertise or knowledge

and for positions requiring the exercise of discretion and independent judgment. Value of work cannot be measured in terms of hours.
3. Non-agricultural field personnel These regularly perform their duties away from the
principal or branch office or place of business of the ER; they are on their own in the field and the number of hours of actual work they render cannot be reasonably ascertained.
4. Members of the family dependent upon him for support Amounts given by way of
support may far exceed the benefits to which the EEs are entitled under the laws on overtime.
5. Domestic helpers and persons in the personal service of another They minister to
the personal needs and comfort their ER and his family and terms and conditions of employment are governed in other parts of the Labor Code.
6. Workers paid by results Compensation computed on the basis of work accomplished

and not on time spent in accomplishing the work. (Alcantara) RATIONALE EXEMPTION - MANAGERIAL EMPLOYEES Natl Waterworks & Sewerage Authority v. NASA Consolidated Unions (65) The philosophy behind the exemption of managerial employees from the 8-Hour Labor Law is that such workers are not usually employed for every hour of work but their compensation


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is determined considering their special training, experience or knowledge which requires the exercise of discretion and independent judgment, or perform work related to management policies or general business operations along specialized or technical lines. For these workers it is not feasible to provide a fixed hourly rate of pay or maximum hours of labor. Salazar v. NLRC (96) Hence, although petitioner cannot strictly be classified as a managerial employee under Art. 82 of the Labor Code, and sec. 2(b), Rule I, Book III of the Omnibus Rules Implementing the Labor Code, nonetheless he is still not entitled to payment of the aforestated benefits because he falls squarely under another exempt category - "officers or members of a managerial staff" as defined under sec. 2(c) of the abovementioned implementing rules. A case in point is National Sugar Refineries Corporation v. NLRC. On the issue of "whether supervisory employees, as defined in Article 212 (m), Book V of the Labor Code, should be considered as officers or members of the managerial staff under Article 82, Book III of the same Code and hence not entitled to overtime, rest day and holiday pay," this Court ruled: A cursory perusal of the Job Value Contribution Statements of the union members will readily show that these supervisory employees are under the direct supervision of their respective department superintendents and that generally they assist the latter in planning, organizing, staffing, directing, controlling, communicating and in making decisions in attaining the company's set goals and objectives. These supervisory employees are likewise responsible for the effective and efficient operation of their respective departments. . . . From the foregoing, it is apparent that the members of respondent union discharge duties and responsibilities which ineluctably qualify them as officers or members of the managerial staff, as defined in Section 2, Rule I, Book III of the aforestated Rules to Implement the Labor Code, viz.: (1) their primary duty consists of the performance of work directly related to management policies of their employer; (2) they customarily and regularly exercise discretion and independent judgment; (3) they regularly and directly assist the managerial employee whose primary duty consists of the management of a department of the establishment in which they are employed; (4) they execute, under general supervision, work along specialized or technical lines requiring special training, experience, or knowledge; (5) they execute, under general supervision, special assignments and tasks; and (6) they do not devote more than 20% of their hours worked in a work-week to activities which are not directly and clearly related to the performance of their work hereinbefore described. Under the facts obtaining in this case, we are constrained to agree with petitioner that the union members should be considered as officers or members of the managerial staff and are, therefore, exempt from the coverage of Article 82. Perforce, they are not entitled to overtime, rest day and holiday pay. TEST - FIELD PERSONNEL Union of Filipro Employees v. Vivar (92) XXX Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another element to the Labor Code definition of field personnel. The clause "whose time and performance is unsupervised by the employer" did not amplify but merely interpreted and expounded the clause "whose actual hours of work in the field cannot be determined with reasonable certainty." The former clause is still within the scope and purview of Article 82 which defines field personnel. Hence, in deciding whether or not an employee's actual working hours in the field can be determined with reasonable certainty, query must be made as to whether or not such employee's time and performance is constantly supervised by the employer. Salazar v. NLRC (96) Actual hours work in the field is to be read in conjunction with Rule IV, Book III of the Implementing Rules. Therefore field personnel are employees whose time and performance is unsupervised by the employer.


Updated and enhanced with additional cases by ATTY. RENE CALLANTA Mercidar Fishing Corp. v NLRC (98)
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Petitioner argues essentially that since the work of private respondent is performed away from its principal of business, it has no way of verifying his actual hours of work on the vessel. It contends that private respondent and other fishermen in its employ should be classified as field personnel who have no statutory right to service incentive leave pay. In contrast, in the case at bar, during the entire course of their fishing voyage, fishermen employed by the petitioner have no choice but to remain on board its vessel. Although they perform non-agricultural work away from the petitioners business offices, the fact remains that throughout the duration of their work they are under the effective control and supervision of the petitioner through the vessels patron or master as the NLRC correctly held. RATIONALE EXEMPTION - PIECE WORKER Red v Coconut Products Ltd. (66) Furthermore, although the Eight-Hour Labor Law provides that it does not cover those workers who prefer to be paid on piece-work basis (Sec. 2, CA 444), nothing in said law precludes an agreement for the payment of overtime precludes an agreement for the payment of overtime compensation to piece-workers. And in agreeing to the provision for payment of shift differential to the petitioners-workers aforementioned, in the bargaining agreement, as well as in actually paying to them said differentials, though not in full, the company in effect freely adhered to an application and implementation of the Eight-Hour Labor Law, or its objectives, to said workers. III. Determine whether exempted EE or not?
1. Foremen, inspectors and supervisors given the power to recommend hiring and firing of
EEs but where ultimate power to hire or fire rested with personnel manager? No. Where such recommendatory powers are subject to evaluation and review, the same are not effective and not an exercise of independent judgment as required by law. (Franklin Baker Company vs. Trajano)
2. Supervisory EEs are given the following duties and functions assist the department
superintendent in various aspects of management such as in the planning of systems and procedures, recommends disciplinary action against erring subordinates or promotion of deserving personnel, train and guide subordinates; communicate and coordinate with other supervisors; recommend measures to improve work method; and other related tasks as may be assigned by his immediate superior. Yes. They discharge duties and responsibilities which qualify them as members of the managerial staff. (Alcantara)
3. Cutter in tailoring shop was assigned chore of distributing work to shops tailors when the
shops manager were absent. He saw to it that work conformed with pattern he had prepared and if not, had them redone, repaired or sewn. No. He did not participate in policy-making. It is true that in the absence of the manager and assistant manager, he distributes and assigns work to EEs but such duty though involving discretion is occasional and not regular and customary. (Villuga vs. NLRC) 9.3 NORMAL HOURS * Art. 83 : The normal of hours of work of any EE shall not exceed 8 hours a day. ** Health personnel in cities and municipalities with a population of at least 1,000,000 or in hospitals and clinics with a bed capacity of at least 100 shall hold regular office hours for 8 hours a day, for 5 days a week, exclusive of time of meals, except where the exigencies of the service require that such personnel work for 6 days or 48 hours in which case they shall be entitled to an additional compensation at least 30% of their regular wage for work on the 6th day. [Health personnel Includes resident physicians, nurses, nutritionists, dieticians, pharmacists, social workers, laboratory technicians, paramedical technicians, psychologists, midwives, attendants and all other hospital or clinic personnel]


Updated and enhanced with additional cases by ATTY. RENE CALLANTA Hospital personnel are no longer entitled to seven days pay for a 5-day work week
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* The 40-hour work week would not be applicable if there is a training agreement between the resident physician and the hospital and the training program is duly accredited or approved by appropriate government agency. (Azucena)
DISTINCTION BETWEEN THE TWO CLASSES COMMERCIAL/INDUSTRIAL Normal Work Day 8 hrs/day Normal Work Week 6 days HEALTH 8 hrs/day 5 days
9.4 HOURS WORKED Art. 84 : Hours worked shall include: A. all time during which an EE is required to be on duty to be at a prescribed workplace and B. all time during which an EE is suffered or permitted to work. > Rest periods of short duration during working hours shall be counted as hours worked. 2. Sec. 4, Rule III, Book III, IRRs : PRINCIPLES IN DETERMINING HOURS WORKED 1. All hours are hours worked which the EE is required to give to his ER regardless of whether or not such hours are spent in productive labor or involve physical or mental exertion; 2. An EE need not leave the premises of the workplace in order that his rest period shall not be counted, it being enough that a. he stops working, b. may rest completely and c. may leave his workplace, to go elsewhere, whether within or outside the premises of the workplace; 3. If the work performed was necessary or it benefited the ER or the EE could not abandon his work at the end of the normal working hours because he had no replacement, all the time spent for such work shall be considered as hours worked, if the work was with the knowledge of his ER or immediate supervisor; 4. The time during which an EE is inactive by reasons of interruptions in his work beyond his control shall be considered working time either if the imminence of the resumption of the work requires the EEs presence at the place of work or if the interval is too brief to be utilized effectively and gainfully in the EEs own interest. ENTRY TIME CARDS Prangan v. NLRC (98) In the instant petition, the NLRC, in declaring that petitioner only worked for four hours, relied solely on the supposed daily time records of the petitioner submitted by the private respondent. We, however, are of the opinion that these documents cannot be considered substantial evidence as to conclude that petitioner only worked for four hours. Private respondent hardly bothered to controvert petitioner's assertion, much less bolster its own contention. As petitioner's employer, private respondent has unlimited access to all relevant documents and records on the hours of work of the petitioner. Yet, even as it insists that petitioner only worked for four hours and not twelve, no employment contract, payroll, notice of assignment or posting, cash voucher or any other convincing evidence which may attest to the actual hours of work of the petitioner was even presented. Instead, what the private respondent


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offered as evidence was only petitioner's daily time record, which the latter categorically denied ever accomplishing, much less signing. In said alleged daily time record, it showed that petitioner started work at 10:00 p.m. and would invariably leave his post at exactly 2:00 a.m. Obviously, such unvarying recording of a daily time record is improbable and contrary to human experience. It is impossible for an employee to arrive at the workplace and leave at exactly the same time, day in day out. The very uniformity and regularity of the entries are "badges of untruthfulness and as such indices of dubiety. Nicario v. NLRC(98) This Court, in previously evaluating the evidentiary value of daily time records, especially those which show uniform entries with regard to the hours of work rendered by an employee, has ruled that "such unvarying recording of a daily time record is improbable and contrary to human experience. It is impossible for an employee to arrive at the workplace and leave at exactly the same time, day in day out. The uniformity and regularity of the entries are 'badges of untruthfulness and as such indices of dubiety.' The observations made by the Solicitor General regarding the unreliability of the daily time records would therefore seem more convincing. On the other hand, respondent company failed to present substantial evidence, other than the disputed DTRs, to prove that petitioner indeed worked for only eight hours a day. * Jose works as a janitor. He continues sweeping the floors after 5:00 p.m The manager is aware of this, but he does not stop Jose from doing work after 5:00 p.m. Is this hours of work? Yes. Although Jose was not instructed expressly to render work, he was impliedly allowed to do so by failure of the ER to warn him against rendering such work. Besides the work rendered by Jose benefited the ER. WAITING TIME Sec. 5, Rule I, Book III, IRRs : Waiting time spent by an EE shall be considered as working time if waiting is an a. integral part of his work, or b. the EE is required to engage by an ER to wait The controlling factor is whether waiting time spent in idleness is so spent predominantly for the ERs benefit or for the EEs. (Azucena) * S, a company driver has the following work schedule: 8:30 a.m. - fetches G.M.; 9:00 a.m. 12:00 noon does nothing on call for G.M. at the company premises ; 12 noon 1:00 p.m. lunch; 1:00 p.m. 5:00 p.m. drives the G.M. to conferences; 5:00 p.m. goes home. The company refuses to pay him for the 9:00 a.m. to 12:00 noon period. Is this valid? No. S is not free to make use of the period effectively and gainfully for his own purposes. He must remain in the premises as at any time he may be called to drive for the G.M. (Alcantara) * 30 minutes prior to the start of the scheduled working hours, the workers of an enterprise assembled at a designated area to answer roll call. As their houses are situated right where the farms are located, the workers can go back in their houses after roll call to do some chores. Is the assembly time working time? No. The works are not subject to the absolute control of the company during the period. The workers were not deprived of the time to attend to other personal pursuits. (Aria vs. NLRC) IDLE TIME * A laborer need not leave the premises of the factory, shop or boat in order that his period of rest shall not be counted, it being enough that he cease to work, may rest completely and leave or may leave at his will the spot where he actually stays while working, or go somewhere else, whether within or without the factory, shop or boat. (Luzon Stevedoring vs. Luzon Marine Dept. Union) * A, an accountant in the manufacturing firm, has idle time in her work schedule, waiting for company papers to work on. She dovotes this time working on papers of other firms for which she receives remuneration. Is the firm obligated to pay her for this time? Yes. Although she is working on the papers of other companies, she has no absolute control over her time.


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Her ER may at any time require her to do some work. She cannot furthermore leave the place of work during her work schedule. (Alcantara) * T, a machine operator was forced to stop operating his machine for 1 hour during a brownout. Is this working time? Yes. The interruption was not due to the fault of T. Besides 1 hour is too brief to be utilized effectively and gainfully for his own interest. National Development Co. v. CIR (62) It will be noted that, under the law, the idle time that an employee may spend for resting and during which he may leave the spot or place of work though not the premises 2 of his employer, is not counted as working time only where the work is broken or is not continuous. CONTINUOUS WORK State Marine Corporation v. Cebu Seamens Association (63) The provision of section 1 of Commonwealth Act No. 444, which states that "when the work is not continuous, the time during which the laborer is not working and can leave his working place and can rest completely shall not be counted", finds no application in the present case, where the laborer's work is continuous, and during the time that he is not working he can not leave and completely rest owing to the place and nature of his work. MEAL TIME Sec. 7, Rule I, Book III, IRRs : Every ER shall give his EEs not less than 1 hour time-off for regular meals, except in the following cases where a meal period of not less than 20 minutes may be given by the ER provided *(That such shorter meal period is credited as compensable hours worked of the EE But if it is the EE who requested for the shorter meal time, then such shortened meal period is not compensable. (Azucena): [N O P E]
1. Where work is Non-manual in nature or does not involve strenuous physical exertion; 2. Where the establishment regularly Operates less than 16 hours a day; 3. In cases of actual or impending Emergency or there is urgent work to be performed on
machineries and equipment to avoid serious loss which the ER would otherwise suffer; and
4. Where the work is necessary to Prevent serious loss of perishable goods.

Rest periods or coffee breaks running from 5 to 20 minutes shall be considered as compensable working time. * Where during the so-called meal period, the laborers are required to stand by for emergency work, or where said meal hour is not one of complete rest, such period is considered overtime. (Pan Am vs. Pan Am EEs Association) Phil. Airlines, Inc. v. NLRC (99) Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it be inferred that employees must take their meals within the company premises. Employees are not prohibited from going out of the premises as long as they return to their posts on time. Private respondent's act, therefore, of going home to take his dinner does not constitute abandonment. WORKING WHILE SLEEPING * Sleeping time may be considered working time if it is subject to serious interruption or takes place under conditions substantially less desirable than would be likely to exist at the EE home i.e. firemen permitted to sleep a portion of the time they are so on duty at the fire station. (Azucena)


ON CALL Updated and enhanced with additional cases by ATTY. RENE CALLANTA
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Sec. 5, Rule I, Book III, IRRs : An EE while he is required to remain on call in the ERs premises or so close thereto that he cannot use the time effectively and gainfully for his own purpose shall be considered as working hours while on call. An EE who is not required to leave word at his own or with company officials where he may be reached is not working while on call. * If an EE is kept within reach through a cellular phone. Is it on call? No. (Azucena) TRAVEL TIME Principles which determine whether or not time spent in travel is working time: Travel from Home to Work Normal travel from home to work is no work time but an emergency call outside of regular working hours requiring him to go to his regular place of business is working time.
Travel that is all in the days work Time spent by an EE in traveling from one job site to another, during the workday, must be counted as hours worked.
Travel away from home Travel away from home is clearly worktime when it cuts across the EEs workday, except during meal period or when EE is permitted to sleep in adequate facilities furnished by the ER. The time is not only hours worked on regular workdays but also during corresponding working hours on non-working days. Outside of these regular working hours, travel away from home is not considered working time. (Azucena) Rada v NLRC (92) The fact that he picks up employees of Philnor at certain specified points along EDSA in going to the project site and drops them off at the same points on his way back from the field office going home to Marikina, Metro Manila is not merely incidental to petitioner's job as a driver. On the contrary, said transportation arrangement had been adopted, not so much for the convenience of the employees, but primarily for the benefit of the employer, herein private respondent. Since the assigned task of fetching and delivering employees is indispensable and consequently mandatory, then the time required of and used by petitioner in going from his residence to the field office and back, that is, from 5:30 A.M. to 7:00 A.M. and from 4:00 P.M. to around 6:00 P.M., which the labor arbiter rounded off as averaging three hours each working day, should be paid as overtime work. LECTURES, MEETINGS, TRAINING PROGRAMS * Sec. 6, Rule I, Book III, IRRs : Attendance at lectures, meetings, training programs and other similar activities shall not be counted as working time if all of the following conditions are met: 1. Attendance is outside of the ERs regular working hours; 2. Attendance is in fact voluntary; and 3. The EE does not perform any productive work during such attendance. SEMESTRAL BREAK * Regular full-time teachers are entitled to salary and COLA during semestral break. (U.Pang. Faculty Union vs. U. Pang.) 9.5 OVERTIME WORK AND OFFSETTING PROHIBITION Art. 87 : Overtime Work regular work day plus 25% basic hourly rate Special days, holiday or rest day plus 30% of the regular hourly rate on said days.


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Art. 89 : Emergency Overtime Work - Any EE may be required by the ER to perform overtime work in any of the following cases: [WED-UPS] c. When the country is at war d. When any other national or local emergency has been declared e. When it is necessary to prevent loss of life or property or in case of imminent danger to the 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. f. When there is Urgent work to be performed on machines and installations in order to avoid serious loss or damage to the ER or some other cause of similar nature. g. When the work is necessary to prevent loss or damage to Perishable goods. h. Where the completion or continuation of the work started before the 8 th hour is necessary to prevent Serious obstruction or prejudice to the business operations of the ER. * The EEs refusal to obey the order of the ER constitutes insubordination for which he may be subjected to disciplinary action. (Alcantara) Art. 88 : Undertime work in any particular day shall not be offset by overtime work on another day BUT not on someday. Permission given to the EE to go on leave on some other day of the week shall not exempt the ER from paying the additional compensation required. Art. 90 : For purposes of computing overtime and other additional remuneration as required by this Chapter the regular wage of an EE shall include the cash wage only, without deduction on account of facilities provided by the ER. Caltex Regular Employees v. Caltex Phil. Inc. (95) Overtime work consists of hours worked on a given day in excess of the applicable work period, which here is eight (8) hours. It is not enough that the hours worked fall on disagreeable or inconvenient hours. In order that work may be considered as overtime work, the hours worked must be in excess of and in addition to the eight (8) hours worked during the prescribed daily work period, or the forty (40) hours worked during the regular work week Monday through Friday. * Y, corporation, as a company policy, required its EEs to render only 6 hours of work daily but pays them the minimum wage corresponding to 8 hours work. Later, the full 8-hours was required without any increase in wages. Are the EEs entitled to overtime pay? Yes. Though voluntary practice or policy, the company has fixed the normal workday at 6 hours. It now constitute part of the terms and conditions of employment and cannot be unilaterally withdrawn by the ER. (Alcantara) * Distinguish overtime pay from premium pay : Overtime pay is additional compensation for work done beyond the normal work hours on ordinary working days. Premium pay is additional compensation for work rendered by the EE on days normally he should not be working. But additional compensation for work rendered in excess of 8 hours during these days is also considered overtime pay. * A was late for work on a particular day. To offset for the time he was late, A worked on additional period equivalent to the period he was late for work. The period was offset against A undertime. Is this valid? Yes. The prohibition to offset overtime against undertime applies to undertime incurred and overtime rendered on different days. Provisions for overtime covers both profit and non-profit establishment or undertaking For purposes of computing overtime REGULAR WAGE includes the cash wage only; without deduction of facilities provided. May the right to overtime pay be waived? As a general rule, the right cannot be waived. (Cruz vs. Yes Sing) However, when the waiver is exchange for certain benefits and privileges, which may be more than what will accrue to them in overtime pay, the waiver may be permitted. (MERALCO Workers Union vs. MERALCO)


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RATIONALE OVERTIME PAY * The reasons for overtime pay is that the worker is made to work longer than what is commensurate with the agreed compensation for the statutorily fixed or voluntary agreed hours of labor he is supposed to do. When he thus spends additional time to his work, the effect upon him is multi-faceted; he puts in more effort, physical or mental; he is delayed in going home to his family to enjoy the comforts thereof; he might have no time for relaxation, amusement or sports; he might miss important pre-arranged arrangements. (PNB vs. PEMA) COMPRESSED WEEK VOLUNTARY BASIS * While as a general rule, the right to overtime pay cannot be waived under existing laws, the EEs and ER can agree to a compressed workweek of 5 days of 9 hours each with no payment of overtime if this will redound to the benefit of the workers i.e. if the original workweek is reduced from Monday Saturday to Monday Friday. (Azuzena) However, Alcantara answered in a 1984 problem differently when he answered that overtime pay should be paid. In that problem, the workers were required to render 9.5 hours of work for 5 days. (What is the answer, I really do not know, ask the reviewer) Conditions for Compressed Work Week 1. voluntary agreed upon 2. not to exceed 48 hours/ week 3. no diminution on take home pay or fringe benefits 4. waivers must be made 5. all hours exceeding 48 hours/week considered overtime 6. must submit report to DOLE NO FORMULA BASIC CONTRACT * When the contract of employment requires work for more than 8 hours at specific wages per day, without providing for a fixed hourly rate or that the daily wages include overtime pay, said wages cannot be considered as including overtime compensation. (Manila Terminal vs. CIR) BUILT-IN COMPENSATION * The employment contract may provide for a built-in overtime pay. Because of this, nonpayment of overtime pay by the ER is valid. (Engineering equipment vs. Minister of Labor) COMPUTATION Agga v. NLRC (98) The cited provisions of PD 442 simply declare that night shift differential and additional remuneration for overtime, rest day, Sunday and holiday work shall be computed on the basis of the employee's regular wage. In like fashion, the 1991 POEA Rules merely require employers to guarantee payment of wages and overtime pay. Thus, petitioners' stance is bereft of any legal support. PROOF Lagatic v. NLRC (98) Entitlement to overtime pay must first be established by proof that said overtime work was actually performed, before an employee may avail of said benefit. 9.6 NIGHT WORK Art. 86 : Every EE shall be paid night shift differential of not less than 10% of his regular wage for each hour of work performed between 10:00 p.m. and 6:00 a.m.


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Sec. 1, Rule II, Book III, IRRs : This rule shall apply to all EEs except: [G R S D M F] a. Those of the government and any of its political subdivisions, including GOCCs. b. Retail and service establishments regularly employing not more than 5 workers. c. Domestic helpers and persons in the personal service of another. d. Managerial EEs. e. Field personnel and other EEs whose time and performance is unsupervised by the ER. f. Includes task and contract basis Retail Establishment - sale of goods for personal or household use ex. grocery Service Establishment - sale of services to individuals for their own or household use ex. T.V. repair shop Exercise of a profession is neither a retail nor service * X works at a gasoline station which has only 5 EEs. Is he entitled to night shift differential? No. He works in a retail establishment employing not more than 5 workers. (Alcantara) * What if X works at Kings Minimarts, a retail store chain with 10 outlets of 2 EEs each outlet. Is he entitled to night shift differential? Yes. The total number of EEs of the ER exceeds 5. It is at least 20. (Id) The night shift differential is attached by law to every work done between 10 pm to 6 am, whether or not this period is part of the workers regular shift. If the work done between 10pm to 6am is overtime work for the EE, then the 10% night shift differential should be based on his overtime rate. RATIONALE PROHIBITION * First, there are remotely injurious effects of permanent nightwork manifested in the later years of workers life. Of the more immediate importance is the disarrangement of his social life, including the recreational activities of his leisure hours and the ordinary associations of normal family relations. From an economic point of view, it is to be discouraged because of its adverse effect upon efficiency and output. A moral argument in the case of workers is that they go to and from the factory in the darkness. (Shell vs. NLU)
Section 10 : WEEKLY REST PERIODS

* Art. 82 : The provisions of this Title shall apply to EEs in all establishments and undertakings whether for profit or not, but not to [G M S F I F D R]
1. Government EEs [whether employed by the National Government or any of its political
subdivisions, including those employed in GOCCs with original charters. (Sec. 2, Rule I, Book III, IRRs]
2. Managerial EEs [refer to those who meet all of the following conditions, namely:
a. Their primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof; b. Customarily and regularly direct the work of 2 or more EEs; c. Has the authority to hire or fire other EEs of lower rank; or their suggestions and recommendations as to the promotion or any other change of status of other EEs are given particular weight. (Id)


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> Mere designation to a position with a high-sounding title, does not make an EE a managerial EE where the exercise of independent judgment is not present. (Sierra vs. NLRC)
3. Other officers or members of the managerial staff [if they perform the following duties
and responsibilities: a. Primary duty consists of the performance of work directly related to management policies of the ER; b. Customarily and regularly exercise discretion and independent judgment; c. Regularly directly assist a proprietor or managerial EE or execute under general supervision work along specialized or technical lines requiring special training, experience or knowledge, or execute under general supervision special assignment and tasks; and d. Do not devote more than 20% of their hours worked to activities which are not directly and closely related to the performance of the work described in the preceding paragraphs. (Id)
4. Field personnel [Non-agricultural EEs who regularly perform their duties away from the
principal place of business or branch office of the ER whose actual hours of work in the field cannot be determined with reasonable certainty (Art. 82)] 5. Members of the family of the ER who are dependent on him for support
6. Domestic helpers and persons in the personal service of another. [Perform such
services: a. In the ERs home which are usually necessary or desirable for the maintenance or enjoyment thereof; b. Or minister to the personal comfort, convenience, or safety of the ER as well as the members of his ERs household (Sec. 2, Rule I, Book III, IRRs)
However, house personnel hired by a ranking company official, but paid for by the
company itself, to maintain a staff house provided for the official, are not the latters domestic helpers but regular EEs of the company. (Cadiz vs. Philippine Sinter)
7. And workers who are paid by results. [Including those who are paid on piece-work,
takay, pakiao, or task basis if their output rates are in accordance with the standards prescribed.] Sec. 1, Rule III, Book III, IRRs : This rule shall apply to all ERs whether operating for profit pr not, including public utilities operated by private persons. 10.2 SCHEDULING OF REST DAY; WHEN COMPULSORY WORK ALLOWED; AND
COMPENSATION
Art. 91 : It shall be for the duty of every ER, whether operating for profit or not, to provide EE a rest period of not less than 24 consecutive hours after every 6 consecutive normal working days. * The ER shall determine and schedule the weekly rest day of his EEs However, the ER shall respect the preference of EEs as to their weekly rest day when such preference is based on religion grounds. Sec. 4, Rule III, Book III, IRRs : Where however the choice of the EEs as to their rest day based on religious grounds will inevitably result in serious prejudice or obstruction to the operation of the undertaking, the ER may so schedule the weekday rest day of their choice at least 2 days in a month. Art. 92 : When ER may require Work on rest day [D U A - P N A] a. In case of actual or impending emergency caused by serious accident, fire, flood, typhoon, earthquake, epidemic, or other Disaster or calamity to prevent loss of life, or imminent danger to public safety. b. In case of Urgent work, to avoid serious loss which the ER would otherwise suffer;


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c. In the event of Abnormal pressure of work due to special circumstances, where the ER cannot ordinarily be expected to resort to other measures; d. To prevent or damage to Perishable goods; e. Where the Nature of work requires continuous operations and stoppage of the work may result in irreparable injury or loss to the ER; and f. Analogous (avail of favorable weather) or similar circumstances How much is a worker entitled if he works on a rest day?
Scheduled rest day additional compensation of at least 30% (premium pay) of

his regular wage. [+30% of RW]
Scheduled rest day which is a non-working holiday entitled to additional

compensation of at least 50% of his regular wage. [+50% of RW]
Scheduled rest day which is a regular holiday entitled to additional

compensation of at least 30% of his regular holiday rate of 200% based on his regular wage rate. (Sec. 4, Rule III, Book I, IRRs) [30%(200% of RW)]
Art. 93
Compensation for rest day, Sunday or holiday work a. scheduled rest day Additional compensation of at least 10 percent of regular wage. An employee shall be entitled to such additional compensation for work performed on Sunday only when it is his established rest day. Additional compensation of at least 30 percent of his regular wage for work performed on Sundays and holidays. Additional compensation of at least 30 percent of the regular wage Where such holiday work falls on the employee's scheduled rest day, he shall be entitled to an additional compensation of at least 50 percent of his regular wage. The employer shall pay such higher rate
b. nature of the work is such that he has no regular workdays and no regular rest days can be scheduled c. any special holiday
d. Where the collective bargaining agreement or other applicable employment contract stipulates the payment of a higher premium pay than that prescribed under this Article
* V works on board the M/V Starfish. Sometimes, the boat remains at sea for 2 weeks, while at other times, especially during bad weather, the vessel returns to port only after a few days. While the vessel is in port, V stays home with his family. Can V claim the additional compensation for work on rest day? Vs work is such that no regular workdays and no rest days can be scheduled. In such cases, the law provides that if he performs work on Sundays and holidays, he shall be paid an additional compensation of at least 30 % of his regular wage. [Art. 39 (b)] RATIONALE REST DAY * Ordinarily, Sundays and legal holidays are dedicated to reading and instruction so as to fill the mind with culture or some sort of advancement. On these days, the laborer spends longer hours in the company of his family. The deprivation of that opportunity to satisfy mental, moral and spiritual needs should not be ignored, and should be properly compensated. (MERALCO vs. Public Utilities EEs Association)


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Section 11 : CONDITIONS OF EMPLOYMENT - HOLIDAYS

11.1 COVERAGE 1. * Art. 94 : Every worker shall be paid his regular daily wage during holidays, except: [RSIO, G, DH, M, FP] a. in retail and service establishments regularly employing less than 10 workers; b. Those of the government and any of its political subdivisions, including GOCCs. c. Domestic helpers and persons in the personal service of another. d. Managerial EEs. e. Field personnel and other EEs whose time and performance is supervised by the ER.
Sec. 1, Rule IV, Book III, IRRs :
* If required to work on regular holidays, regular rate x 2 Mantrade/FMC Division Employees and Workers Union v. Bacungan (86) The Secretary of Labor cannot exempt Mantrade from paying holiday pay just because its employees are uniformly paid by the month irrespective of the number of working days therein. The Labor Code only exempts retail and service establishments regularly employing less than 10 workers. REGULAR HOLIDAYS 1. New Years day (Jan.1) 2. Maundy Thursday 3. Good Friday 4. Bataan Day (April 9) 5. Labor day (May 1) 6. Independence day (June 12) 7. National heroes day (last Sunday of August) 8. Bonifacio day (Nov. 30) 9. X-mas day (Dec. 25) 10. Rizal day (Dec. 30) NATIONWIDE SPECIAL HOLIDAYS 1. Nov. 1 2. Dec. 31 The dates of Muslim holidays shall be determined by the Office of the President of the President of the Philippines in accordance with the Muslim Lunar Calendar. Upon proclamation by the President of the Philippines, Muslim holidays may also be officially observed in other provinces and cities. Both Muslims and Christians working within the Muslim areas may not report for work on the days designated by law as Muslim Holidays * Monthly paid EEs are not excluded from the benefits of holiday pay. (Mantrade vs. Bacungan) * X is a manicurist in the DStyle Barbershop which has 20 barbers and manicurists. Is she entitled to holiday pay? Yes. X is an EE who is paid by results ad she works in a service establishment employing more than 10 persons. (Sec. 8, Rule IV, Book III, IRRs) 12.2 HOLIDAY PAY Art. 94 : The ER may require an EE to work on a holiday but such EE shall be paid a compensation equivalent to twice his regular rate.


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* To receive holiday pay, the EE should not have been absent without pay on the working day preceding the regular holiday. (Azucena) * A legal holiday falling on a Sunday creates no legal obligation for the ER to pay extra to the EE who does not work on that day, aside from the usual holiday pay, to its monthly-paid EEs. (Wellington vs. Trajano) * X was told by ER to work during a legal holiday which fell on a Sunday. How much is he entitled to? X will get 200% of his daily rate plus premium pay pf 30% of the holiday pay = regular daily rate * 230%. * If X works overtime during that day, how much will he earn? Holiday pay rate/8 plus overtime pay of 30% of the holiday hourly rate = holiday pay rate/8 * 130%. * R was absent without pay on December 24. Is he entitled to holiday pay for Christmas day? No. An EE may not be paid on holiday pay if he was absent on the day preceding holiday, or in the case of Maundy Thursday and Good Friday, if he was absent on the day preceding the first holiday. It would be different if the day preceding the legal holiday was the EEs rest day. Then he is entitled to holiday pay. (Alcantara) On leave with pay * Can monthly pay under employment contract already include pay for any unworked regular holiday within the month? Yes. This is management prerogative provided that the monthly pay comply with the least minimum rates prescribed under minimum wage laws. What an employer has voluntarily given cannot be unilaterally withdrawn If the employees are already paid for all non-working days, the divisor should be 365 and not 251 HOURLY-PAID TEACHERS When a special public holiday is declared, a faculty member paid by the hour is deprived of expected income. Similarly, when classes are called off or shortened on account of typhoons, floods, rallies and the like, these faculty member must likewise be paid, whether or not extensions are ordered, the school should pay the faculty members their regular hourly rate on days declared as special holidays or for some reason classes are called off or shortened for the hours they are supposed to have taught, whether extensions of class days be ordered or not; in case of extensions the faculty members shall likewise be paid their hourly rates should they teach during the extensions. (Jose Rizal College vs. NLRC, GR 65482, Dec. 1, 1987) DOUBLE HOLIDAY On a double regular holidy (e.g. April 9, 1998: Araw ng Kagitingan & Maundy Thursday), an employee who is entitled to holiday pay should receive at least 200% of his basic wage even if he did not work on that day, provided, he was present or on leave with pay on the preceding Wednesday. If he worked, he is entitled to 300% of his basic wage. The 100%, in addition to 200%, represents his basic pay for the 8-hour work. (See DOLE Explanatory Bulletin) As already explained, monthly salary may include Holiday pay. (Azucena) Vacation and sick leave must be claimed otherwise waived - cannot be converted into cash unless allowed by employer FACULTY PRIVATE SCHOOL * Regular holidays specified by law are known to both school and faculty members as no class days. Thus, hourly paid faculty members are not entitled to their pay for unworked regular holidays. On the other hand, hourly paid faculty members are however entitled to their regular hourly rate on days declared as special holidays or when classes are called off or shortened since the faculty member, although forced to take a rest, does not earn what he should earn on that day. (JRC vs. NLRC) DIVISOR AS FACTOR


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* The daily rate is a constant figure for the purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits, and this should also be the same basis for computing unpaid holidays. (Union of Filipro vs. Vivar) Transasia Phils. Emplower Assn. v. NLRC (99) Trans-Asia's inclusion of holiday pay in petitioners' monthly salary is clearly established by its consistent use of the divisor of "286" days in the computation of its employees' benefits and deductions. The use by Trans-Asia of the "286" days divisor was never disputed by petitioners. A simple application of mathematics would reveal that the ten (10) legal holidays in a year are already accounted for with the use of the said divisor. As explained by Trans-Asia, if one is to deduct the unworked 52 Sundays and 26 Saturdays (derived by dividing 52 Saturdays in half since petitioners are required to work half-day on Saturdays) from the 365 calendar days in a year, the resulting divisor would be 286 days (should actually be 287 days). Since the ten (10) legal holidays were never included in subtracting the unworked and unpaid days in a calendar year, the only logical conclusion would be that the payment for holiday pay is already incorporated into the said divisor. Thus, when viewed against this very convincing piece of evidence, the arguments put forward by petitioners to support their claim of non-payment of holiday pay, i.e., the pre-condition stated in the Employees' Manual for entitlement to holiday pay, the absence of a stipulation in the employees' appointment papers for the inclusion of holiday pay in their monthly salary, the stipulation in the CBA recognizing the entitlement of the petitioners to holiday pay with a concomitant provision for the granting of an "allegedly" very generous holiday pay rate, would appear to be merely inferences and suppositions which, in the apropos words of the labor arbiter, "paled in the face of the prevailing company practices and circumstances abovestated." The Court notes that there is a need to adjust the divisor used by Trans-Asia to 287 days, instead of only 286 days, in order to properly account for the entirety of regular holidays and special days in a year as prescribed by Executive Order No. 203 in relation to Section 6 of the Rules Implementing Republic Act 6727. SUNDAY Wellington Investment Inc v. Trajano (95) In fixing the salary, Wellington used what it calls the "314 factor;" that is to say, it simply deducted 51 Sundays from the 365 days normally comprising a year and used the difference, 314, as basis for determining the monthly salary. The monthly salary thus fixed actually covers payment for 314 days of the year, including regular and special holidays, as well as days when no work is done by reason of fortuitous cause, as above specified, or causes not attributable to the employees. There is no provision of law requiring any employer to make such adjustments in the monthly salary rate set by him to take account of legal holidays falling on Sundays in a given year, or, contrary to the legal provisions bearing on the point, otherwise to reckon a year at more than 365 days. As earlier mentioned, what the law requires of employers opting to pay by the month is to assure that "the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days divided by twelve," and to pay that salary "for all days in the month whether worked or not," and "irrespective of the number of working days therein." PROOF OF PAYMENT Building Care Corp v. NLRC (98) Indeed if petitioner wanted to prove its payment of holiday pays and salary differentials, it could have easily presented proofs of such monetary benefits. But it did not. It had failed to comply with the mandate of the law. As public respondent ruled, the burden of proof in this regard belongs to the employer, not to the employee.
Section 12. CONDITIONS OF EMPLOYMENT SERVICE INCENTIVE LEAVE


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VACATION AND SICK LEAVE - employer must still bind himself in CBA or grant it unilaterally - not granted by law 12.1 COVERAGE Coverage * 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 * Art. 95 : The provision on service incentive leave shall not apply to: 1. 2. 3. 4. 5. 6. 7. 8. Those who are already enjoying the benefit. Those enjoying vacation leave with pay of at least 5 days. Those employed in establishments regularly employing less than 10 workers Exempt establishments. Those of the government and any of its political subdivisions including GOCCs. Domestic helpers and persons in the personal services of another. Managerial EEs. Field personnel and other EEs whose performance is unsupervised by the ER including those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed amount of performing work irrespective of the time consumed in the performance thereof.
* Teachers of private schools on contract basis are entitled to service incentive leave. (Cebu Institute of Technology vs. Ople) Makati Haberdashery Inc. v. NLRC (89) On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month Pay, they are not entitled to service incentive leave pay because as piece-rate workers being paid at a fixed amount for performing work irrespective of time consumed in the performance thereof, they fall under one of the exceptions stated in Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code. For the same reason private respondents cannot also claim holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor Code). 12.2 ENTITLEMENT - Unused SIL at the end of the year should be converted to cash * Art. 95 : 5 days incentive leave with pay for at least 1 year of service. [The term at least 1 year of service shall mean service within 12 months, whether continuous or broken, reckoned from the date the EE started working, including authorized absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or that provided in the employment contract are less than 12 months, in which case said period shall be considered as 1 year. (Sec. 3, Rule V, Book III, IRRs) VACATION AND SICK LEAVE employer must still bind himself in CBA or grant it unilaterally not granted by law COMPUTATION AND LIABILITY Sentinel Security Agency, Inc. v. NLRC (98) Under Arts. 107 and 109, the indirect employer is jointly and severally liable with the contractor for the workers wages, in the same manner and extent that it is liable to its direct employees. This liability of the Client covers the payment of the service incentive leave pay of the complainants during the time they were posted at the Cebu Branch of the Client. As service had been rendered, the liability accrued, even if the complainants were eventually transferred or reassigned. The service incentive leave is expressly granted by these pertinent provisions of the Labor Code


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PATERNITY LEAVE
Reference: RA 8187 Paternity Leave Act of 1995 and Implementing Rules
Coverage: Sec. 2 Notwithstanding any law, rules, and regulations to the contrary, every MARRIED male employee in the private and public sectors shall be entitled to a paternity leave of SEVEN (7) days with full pay for the first four (4) deliveries of the LEGITIMATE spouse with whom he is cohabiting. The male employee applying for paternity leave shall notify his employer of the pregnancy of his legitimate spouse and the expected date of such delivery. For purposes of this Act, delivery shall include childbirth or any miscarriage.
MATERNITY LEAVE
Reference: Sec. 14 - A RA 8282 A female employee who has paid at least three (3) monthly contributions in the twelvemonth period immediately preceding the semester of her childbirth, or miscarriage shall be paid a daily maternity benefit equivalent to one hundred percent (100%) of her average salary credit for sixty (60) days or seventy-eight days in case of caesarean delivery subject to the following conditions: a. That the employee shall have notified her employer of her pregnancy and the probable date of her childbirth which notice shall be transmitted to the SSS in accordance with the rules and regulations it may provide. b. The full payment shall be advanced by the employer within thirty (30) days from the filing of the maternity leave application. c. That payment of daily maternity benefits shall be a bar to the recovery of sickness benefits provided by this Act for the same period for which daily maternity benefits have been received. d. That the maternity benefits provided under this section shall be paid only for the first four (4) deliveries or miscarriages. e. That the SSS shall immediately reimburse the employer of one hundred percent (100%) of the amount of maternity benefits advanced to the employee by the employer upon receipt of satisfactory proof of such payment and legality thereof; f. That if an employee should give birth or suffer miscarriage without the required contributions having been remitted for her by her employer to the SSS, or without the latter having been previously notified by the employer of time of the pregnancy, the employer shall pay to the SSS damages equivalent to the benefits which said employee member would otherwise have been entitled to. SOLO PARENTS ACT of 2000 (RA 8972) Parental Leave: 7 days a year if rendered at least 1 year of service Administrative/Criminal liability against discrimination BENEFITS: 1) Support (if below poverty line) 2) Housing 3) Educational 4) Medical
Section 13. MINIMUM WAGES AND WAGE FIXING MACHINERY

13.1 MINIMUM WAGES


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Art. 99 : The minimum wages for agricultural and non-agricultural EEs and workers in each and every region of the country shall be those prescribed by the Regional Tripartite Wages and Productivity Boards. Explain the rule a fair days wage for a fair days labor? Unless specifically required by law, contract or established policy, the ER is not bound to pay wages to a worker who has not actually rendered any service. If there is no work performed by the EE, there can be no wage or pay UNLESS the laborer was able, willing and ready to work but was prevented by management or was illegally locked out, suspended or dismissed. EQUAL PAY FOR EQUAL WORK Persons who work with substantially equal qualifications, skill, effort and responsibility, under similar conditions, should be paid similar salaries. If an ER accords Ees the same position and rank, the presumption is that these Ees perform equal work. The fact that some teachers are foreign hires and the others are local hires does not serve as a valid classification to justify the unequal salary of the two groups. The principle of equal pay for equal work which is institutionalized in this jurisdiction must be observed. (ISAE vs. Quisumbing, et al., GR No. 128845, June 1, 2000) Give 2 aspects of agriculture? The primary aspect covers cultivation and tillage of the soil, growing and harvesting of any agricultural and horticultural commodities and raising of livestock and poultry. The secondary aspect covers any practices performed by a farmer on a farm as an incident to or in conjunction with the farming operations. * Farmers employed by B cultivate the soil and plant and harvest tobacco and they also cut big trees grown on the land which they used for fencing and repair of the owners house. They claim for minimum wages for non-agricultural workers. Is the claim valid? No. They are still agricultural workers. They perform activities which fall under the primary aspect of agriculture and the cutting of trees to be used for fencing is incidental to the farming operations and falls under the secondary aspect of agriculture. COVERAGE * Art. 98 This Title shall not apply to farm tenancy or leasehold domestic services and persons working in their respective homes in needle or in any cottage industry duly registered in accordance with law. Section 3, Rule VII, Book III, IRRs : * Workers in duly registered cooperatives when so recommended by the bureau of Cooperative Development and upon approval of the Secretary of Labor . . . GOVERNMENT AGENCY Phil. Fisheries Development Authority v. NLRC (92) Notwithstanding that the petitioner is a government agency, its liabilities, which are joint and solidary with that of the contractor, are provided in Articles 106, 107 and 109 of the Labor Code. This places the petitioner's liabilities under the scope of the NLRC. Moreover, Book Three, Title II on Wages specifically provides that the term "employer" includes any person acting directly or indirectly in the interest of an employer in relation to an employee and shall include the Government and all its branches, subdivisions and instrumentalities, all government-owned or controlled corporation and institutions as well as non-profit private institutions, or organizations (Art. 97 [b], Labor Code; Eagle Security Agency, Inc. v. NLRC; Rabago v. NLRC) MINIMUM WAGE Art. 97 (1) : Wage paid to


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* The remuneration or earnings, however designated, (LEGAL TENDER) 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 ER to an EE under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered * and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging or other facilities customarily furnished by the ER to EE. [Fair and reasonable value shall not include any profit to the ER or to any person affiliated with the ER. Art. 61 : Apprentices : Wage rates shall in no case fall below 75 % of the applicable minimum wage. Art. 75 : Learners : Wage rates shall begin at not less than 75% of the applicable minimum wage. Art. 80 : Handicapped Workers : Wage rates shall not be less than 75% of the applicable minimum wage. Art. 124 : All recognized learnership and apprentice agreements shall be considered automatically modified insofar as their wage clauses are concerned to reflect the prescribed wage rates [set by the Regional tripartite and Wages Productivity Board]. The payment of minimum wages is not dependent on the ERs ability to pay. The ER cannot exempt himself from liability to pay minimum wages because of poor financial condition of the company. - Wage Orders, however, usually allow petitions for exemption from prescribed wage rates. All workers paid by result (Pakyaw or Task basis) shall receive not less than the prescribed wage rates per 8 hrs work a day or a proportion thereof for working less than 8 hrs. According to Sec. 8, Rule IV of the IRR, EEs paid by results or output are entitled to holiday pay (Art. 94). It shall not be less than his average daily earnings for the last 7 actual working days immediately preceding the regular holiday. Such holiday pay shall not be less than the applicable statutory minumum wage rate. On the basis on existing labor regulations, piece-rate EEs are entitled to the ffg minimum wage and benefits: a) The applicable statutory minimum daitly rate; b) Yearly service incetive leave of 5 days with pay c) Night shift differential pay; d) Holiday pay; e) Meal and rest periods; f) Overtime pay (conditional); g) Premium pay (conditional; h) 13th month pay; i) other benefits granted by law, individual or collective agreement or company policy or practice. FAIR DAY PAY Aklan Electronic Cooperative, Inc. v. NLRC (2000) The age-old rule governing the relation between labor and capital, or management and employee of a "fair days wage for a fair days labor" remains as the basic factor in determining employees wages. If there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, suspended or dismissed, or otherwise illegally prevented from working, a situation which we find is not present in the instant case. It would neither be fair nor just to allow private respondents to recover something they have not earned and could not have earned because they did not render services at the Kalibo office during the stated period.


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BENEFICIARIES People v. Gatchalian (59) "The establishment of the maximum wage benefits directly the low-paid employees, who now receive inadequate wages on which to support themselves and their families. It benefits all wage earners indirectly by setting a floor below which their remuneration cannot fail. It raises the standards of competition among employers, since it would protect the fair-minded employer who voluntarily pays a wage that supports the wage earner from the competition of the employer, who operates at lower cost by reasons of paying his workers a wage below subsistence. If, in fact, the employer cannot pay a subsistence wage. then he should not continue his operation unless he improves his methods and equipment so as to make the payment of the minimum wage feasible for him; otherwise the employer is wasting the toil of the worker and the material resources used in the employment. Second methods of operation, progressive and fair-minded management, and an adequate minimum wage go hand in hand." (Explanatory Note to H.B. No. 1476) EFFECT INABILITY PAY Phil. Apparel Workers Union v. NLRC (81) The stability of the economy does not depend on the employer alone, but on government economic policies concerning productivity in all areas and not only in the clothing or textile industries. There is not even an intimation that the company is losing. It is the living wage of the workers which is the basis of a stable economy. If the company cannot pay a living wage, it has no business operating at the expense of the lives of its workers from the very start. A. FACILITIES AND SUPPLEMENTS * The law guarantees the laborer a fair and just wage. The minimum wage can by no means imply only the actual minimum. Some margin or leeway must be provided, over and above the minimum, to take care of contingencies, such as increase in wants, and to provide means for a desirable improvement in his mode of living. (Atok-Big Wedge vs. Atok-Big-Wedge Mutual Benefit Association) Millares v. NLRC (99) In Songco the Court explained that both words (as well as salary) generally refer to one and the same meaning, i.e., a reward or recompense for services performed. Specifically, "wage" is defined in letter (f) as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. Stated differently, when an employer customarily furnishes his employee board, lodging or other facilities, the fair and reasonable value thereof, as determined by the Secretary of Labor and Employment, is included in "wage." In order to ascertain whether the subject allowances form part of petitioner's "wages," we divide the discussion on the following - "customarily furnished;" "board, lodging or other facilities;" and, "fair reasonable value as determined by the Secretary of Labor." "Customary" is founded on long-established and constant practice connoting regularity. The receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and forming part of salary because the nature of the grant is a factor worth considering. We agree with the observation of the Office of the Solicitor General that the subject allowances were temporarily, not regularly, received by petitioners because In the case of the housing allowance, once a vacancy occurs in the company-provided housing accommodations, the employee concerned transfers to the company premises and his housing allowance is discontinued . . . .


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On the other hand, the transportation allowance is in the form of advances for actual transportation expenses subject to liquidation . . . given only to employees who have personal cars. The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao del Norte. Once the officer is transferred outside Bislig, the allowance stops. Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term as including articles or services for the benefit of the employee or his family but excluding tools of the trade or articles or service primarily for the benefit of the employer or necessary to the conduct of the employer's business. The Staff/Manager's allowance may fall under "lodging" but the transportation and Bislig allowances are not embraced in "facilities" on the main consideration that they are granted as well as the Staff/Manager's allowance for respondent PICOP's benefit and convenience, i.e., to insure that petitioners render quality performance. In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose. That the assailed allowances were for the benefit and convenience of respondent company was supported by the circumstance that they were not subjected to withholding tax. States Marine Corporation v. Cebu Seamens Association, Inc. (63) 'Supplements', constitute extra remuneration/ special benefits given to or received by the ees over and above their ordinary earnings or wages, 'Facilities' are items of expense necessary for the laborer's and his family's existence and subsistence, so that by express provision of law they form part of the wage and when furnished by the employer are deductible therefrom, since if they are not furnished, the laborer would spend and pay for them just the same." Requisites for Deductibility or Facilities by ER 1. Proof must be shown that such facilities are customarily furnished by the trade 2. The provision of deductible facilities must be voluntarily accepted in writing by the EE. 3. Facilities must be charged at Fair & Reasonable Value The term FACILITIES does not include tools of the trade or article or services primarily for the benefit of the ER or necessary to the conduct of the ERs business. B. SUPPLEMENTAL FACILITY Distinguish between supplements and facilities? Supplements Extra remuneration or special privileges or benefits given to or received by the worker over and above his ordinary earnings or wages. - granted for the convenience of the ER Facilities Items of expense necessary for the laborers and his familys existence and subsistence. They form part of the wage and when furnished by the ER are deductible therefrom since if they are not furnished, the laborer would spend and pay for them just the same i.e. meals; housing for dwelling purposes; fuel including electricity, gas, water for the non-commercial personal use of the EE; and other articles and services given primarily for the benefit of the worker or his family. - for the benefit of the worker and his family * The criterion in determining whether an item is a supplement or facility is not so much with the kind of benefit or item given, but its purpose. (State Marine vs. Cebu Seamens Association) * CMC has 3 buses used to transport its workers, free of charge from Makati to its plat in Muntinlupa. The buses became dilapidated and the service was discontinued by the company. The EEs demanded for their replacement. Decide with reasons. The company may be compelled to continue providing the transportation free of charge. This is considered a supplement given over and above the ordinary earnings or wages of the workers. Once given, a supplement cannot be eliminated or diminished. (Alcantara)


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Test on whether or not items are facilities [C F, V A, F R] a. Are these items automatically furnished by the trade? b. Did the employee voluntarily accepted the same in writing? c. Is the value thereof fair and reasonable? If the employer fails to prove this: a. Then it is a supplement not a facility. b. Once given, a supplement cannot be eliminated or diminished. c. Grant of bonus may be unilaterally be reduced by the employer if it depends on profits acquired.
* Because he lived 50 kilometers from its work, X requested his ER if he can sleep in the company premises. The latter agreed with the condition that he will deduct P5.00 per day as board charges from X. Is the deduction legal? No. Lodging is not customarily finished by the ER to his EEs. The deduction, furthermore, is not with the written consent of X. NON DIMINUTION RULE Benefits being given to EEs cannot be taken back or reduced unilaterally by the ER because the benefits have become part of the employment contract, written or unwritten. Where the EE alleges non-payment of wages/commissions the ER has the burden to prove payments. Payment of wages through ATM is allowed. C. CASH WAGE legal tender What is basic salary? In its common, generally accepted meaning, it is the rate of pay for a standard work period, exclusive of such additional payment as bonuses and overtime. (BoicTakeda vs. Dela Serna) * Are emergency cost of living allowances considered part of regular wage? Yes. This is taken into account in determining overtime and premium pay , premium contributions, social security, maternity pay, etc. (EO 178) CASH WAGE/COMMISSIONS Songco v. NLRC (90) The words "wages" and "salary" are in essence synonymous, both words generally refer to one and the same meaning, that is, a reward or recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary" Iran v. NLRC (98) While commissions are incentives to inspire employees to put more industry on the jobs assigned to them, still these commissions are direct remuneration for services rendered. Commissions have been defined as the recompense, compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly that commissions are part of a salesman's wage or salary. WAGES AND SALARY Gaa v. Court of Appeals (85) Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what are to be exempted from attachment and execution. The term "wages" as distinguished from "salary", applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day, week, month, or season, while "salary" denotes a higher degree of employment, or a superior grade of services, and implies a position of office: by contrast, the term "wages" indicates considerable pay for a lower and less responsible character


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of employment, while "salary" is suggestive of a larger and more important service (35 Am. Jur. 496). Arms Taxi v. NLRC (93) While a salary is a fixed compensation for regular work or for continuous service rendered over a period of time (Moreno's Philippine Law Dictionary, 3rd Ed., p. 852 citing Lee Tee vs. Ching Chiong, 17518-R, January 13, 1959), a commission is a percentage or allowance made to a factor or agent for transacting business for another (Supra, p. 171 citing People vs. Sua Bok, 1 O.G. 689) Iran v. NLRC (98) There is no law mandating that commissions be paid only after the minimum wage has been paid to the employee. Verily, the establishment of a minimum wage only sets a floor below which an employees remuneration cannot fall, not that commissions are excluded from wages in determining compliance with the minimum wage law. This conclusion is bolstered by Philippine Agricultural Commercial and industrial Workers Union v. NLRC, where this Court acknowledged that drivers and conductors who are compensated purely on a commission basis are automatically entitled to the basic minimum pay mandated by law should said commissions be less than their basic minimum for eight hours work. It can, thus, be inferred that were said commissions equal to or even exceed the minimum wage, the employer need not pay, in addition, the basic minimum pay prescribed by law. It follows then that commissions are included in determining compliance with minimum wage requirements. D. EFFECT - INABILITY TO PAY * If a company cannot pay a living wage, it has no business operating at the expense of the lives of the workers. (Phil. Apparel vs. NLRC) E. GRATUITY and WAGES * Gratuity That paid to the beneficiary for past services rendered purely out of the generosity of the giver or grantor. While it may be enforced once it forms part of a contractual undertaking, the grant of such benefit is not mandatory so as to be considered a part of labor standard law. (Plastic Town vs. NLRC) F. BENEFICIARY OF THE MINIMUM WAGE LAW * The minimum wage law directly benefits the lowly paid EEs who receive inadequate wages on which they support themselves and their families. It benefits all wage earners indirectly by setting a floor below which their remuneration cannot fall. It increases the standard of competition among ERs since it would protect the fair-minded ER who operates at lower costs by reason of paying his workers a wage below subsistence. (Pp vs. Gatchalian) G. BENEFITS Art. 100 : Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other EE benefits being enjoyed at the time of promulgation of this Code. * Unless agreed otherwise, statutory benefits are apart from contractual benefits. (Meycauayan College vs. Drilon) Thus, EEs are entitled to the full amounts of both a wage increase under a CBA and an increase in living allowances prescribed by law during the period when both increases are concurrently effective, for want of an agreement between the parties to treat the increase in living allowances as applicable to the wage increases. (Filipinas Golf vs. NLRC) * The work of batillos, cargadores of fish catch, were limited to days of arrival of fishing vessels. From 1976 to 1980, operators paid them a fixed monthly emergency allowance which included non-working days. Can the operators now discontinue the practice and pay the batillos only for actual days worked, following the principle of no work, no pay? No. Benefits voluntarily given cannot be unilaterally withdrawn by the ER. Art. 100 prohibits the elimination or diminution of existing benefits.


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* Workers in a plastic manufacturing company are able to clean and inspect only 250 containers for 8 hours despite repeated appeals from management. They were paid a daily rate of P150.00. Through time and motion studies set by the DOLE, the ER was able to ascertain that an ordinary worker can clean and inspect 450 containers for 8 hours. The company then changed its mode of payment from time basis to piecework at P0.40 per container. Is this valid? Yes. The company has the right to change the basis of the payment of the wages of the workers. The workers would not suffer since it is within their capability to clean and inspect the number of containers to enable them to at least earn the rate they were receiving at the time the change was effected. They cannot however be deprived of benefits they were already enjoying at the time of such change. (Alcantara) ** While normally discretionary, the grant of a gratuity or bonus, by reason of its long and regular concession, may become part of a regular compensation. * OR employer agreed to give its regularly without any condition imposed for its payment 13.2 RATIONALE FOR WAGE RATIONALIZATION * Section 2, Wage Rationalization Act : It is hereby declared the policy of the State to rationalize the fixing of minimum wages and to promote productivity-improvement and gainsharing measures: [J A D E] 1. To ensure Decent standard of living for the workers and their families; 2. To guarantee the rights to its Just share in the fruits of production; 3. To enhance Employment generation in the countryside through industry dispersal; and 4. To Allow business and industry reasonable returns on investment, expansion and growth. 13.3 AGENCIES FOR WAGE FIXING MACHINERY Advisory agency National Wages and Productivity Commission Art. 120 : National Wages and Productivity Commission attached to the DOLE the policy and program coordination. Give at least 5 major powers and functions of the National Wages and Productivity Commission : a. To act as the national consultative and advisory body to the President and Congress on matters relating to wages, incomes and productivity. b. To formulate policies and guidelines on wages, incomes and productivity improvement at the enterprise, industry and national levels. c. To prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels. d. To review regional wage levels set by the Regional Tripartite Wages and Productivity Boards . Art. 126 : No preliminary or permanent injunction or temporary restraining order may be issued by any court, tribunal or any entity against any proceedings before the Commission or the regional Boards. WAGE FIXING AGENCY Art. 122 : Regional Tripartite Wages and Productivity Boards In all regions, including autonomous regions. Give at least 3 major powers and functions of the Regional Tripartite and Productivity Boards within their territorial jurisdiction: 1. To develop plans, programs and projects relative to wages, incomes and productivity improvement for their respective regions. 2. To determine and fix minimum wage rates applicable in their region, provinces or industries therein and to issue the corresponding wage orders, subject to guidelines by the Commission.


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3. To receive, process and act on applications for exemption from prescribed wage rates as may be provided by law or any Wage Order. [Implementation of the plans shall be through the respective offices of the DOLE but the Regional Boards shall have technical supervision over the said DOLE offices.] Art. 126 : No preliminary or permanent injunction or temporary restraining order may be issued by any court, tribunal or other entity against any proceedings before the Commission or the regional Boards. The ECOLA now forms part regular wage Employees paid by results should receive not less than the applicable wage rates provided for 8 hours workday 13.4 AREA MINIMUM WAGES AND CRITERIA * Art. 124 : Standards/Criteria for Minimum Wage Fixing Regional minimum wages shall be nearly as adequate as is economically feasible to maintain the minimum standards of living necessary for the health, efficiency and general well-being of the EEs within the framework of the national economic and social development program. In the determination of such regional minimum wages, the Regional Board shall, among other relevant factors, consider the following: 1. The demand of living wages; 2. Wage adjustment vis--vis the consumer price index; 3. The cost of living and changes and their families; 4. The need to induce industries to invest in the countryside; 5. Improvements in the standard of living 6. The prevailing wage levels 7. Fair return of the capital invested and capacity to pay of ERs 8. Effects on employment generation and family income; and 9. The equitable distribution of income and wealth along the imperatives of economic and social development. These wages shall include wages varying within industries, provinces or localities if in the judgment of the Regional Board conditions make such local differentiation proper and necessary to effectuate the purpose of this Title. 13.5 WAGE ORDER * Art. 123 : Whenever conditions in the region so warrant, the Regional Board shall investigate and study pertinent facts and, based on the standards and criteria herein prescribed, shall proceed to determine whether a Wage Order should be issued. In the performance of its wage-determining functions, the Regional Board shall conduct public hearings, consultations, giving notices to EEs and ERs groups, provincial, city and municipal officials and other interested parties. Any party aggrieved by the Wage Order issued by the Regional Board may appeal such order to the Commission within 10 calendar days from the publication of such order. It shall be mandatory for the Commission to decide such appeal within 60 calendar days from the filing thereof. A wage order issued without the required public consultation and newspaper publication is NULL and VOID. METHODS OF FIXING *The determination of wages has generally involved two methods, the floor-wage method and the salary-ceiling method. The 1st method involves the fixing of determinate amount that would be added to the prevailing statutory minimum wage. In the 2nd method, the wage adjustment is applied to EEs receiving a certain denominated salary ceiling. (ECOP vs. NWPC) WAGE DISTORTION Art. 24 : Wage Distortion - Distortion where an increase in the prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage salary rates between and among EE groups in an establishment as to effectively obliterate the distinctions


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embodied in such wage structure based on skills, length of service, or other logical bases of differentiation. * A severe contraction of the wage or salary differences is enough How is a wage distortion corrected? Any dispute arising from wage distortions shall be resolved through the grievance procedures under their CBA, and if it remains unresolved, through arbitrary arbitration. If there is no recognized labor union or there are no collective bargaining agreements, the dispute shall be settled through the National Conciliation and Mediation Board, or if unresolved after 10 days of conciliation, through the NLRC which shall decide the dispute within 20 calendar days. (Art. 24) The law recognizes the validity of negotiated wage increases to correct wage distortions. The legislative intent is to encourage the parties to seek solution to the problems of wage distortions through voluntary negotiation or arbitration, rather than strikes, lockouts, or other concerted activities of the EEs or management. (ALU-TUCP vs. NLRC) In a case where a union went on strike over a salary distortion dispute, the Court held the strike illegal. (Ilaw at Buklod ng Manggagawa vs. NLRC) For SALARY DISTORTION to exist (Art. 124), the law does not require that there be an elimination or total abrogation or quantitative wage or salary differences, a severe contraction is enough. FORMULA to correct a Salary Distortion: Minimum wage = % x Prescribed Increase = Distortion Adjustment Actual Salary Any issue involving wage distortion is not a valid ground for a Strike or Lock-out. 13. 6 WAGES AND PRODUCTIVITY MEASURES WAGE/SALARY Differentiate wages from salary? * Wages Compensation for manual labor, skilled or unskilled paid at stated times, and measured by the day, week, month, or season. It indicates considerable pay for a lower and less responsive character of employment. * Salary Denotes a higher degree of employment, or a superior grade of services, and implies a position of office; by contrast, the term wages, while salary is suggestive of a larger and more important service. (Gaa vs. CA) WAGE PAYMENT Art. 102 : Forms of Payment : No ER shall pay the wages of an EE by means of promissory notes, vouchers, coupons, tokens, tickets, chits or any object other than legal tender, even when expressly requested by the EE. [The laborers wage shall be paid in legal currency. (Art. 1705, NCC)] Payment of wages by check or money order shall be allowed when : a. such manner of payment is customary on the date of the effectivity of this Code, or b. is necessary because of special circumstances as specified in appropriate regulations to be issued by the Secretary of Labor or as stipulated in a CBA. CONDITIONS a. bank 1 km b. written consent of EE c. ER does not receive any pecuniary benefit d. EE given time to withdraw from the bank considered as compensable his work


Updated and enhanced with additional cases by ATTY. RENE CALLANTA Congson v. NLRC (59)
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Undoubtedly, petitioner's practice of paying the private respondents the minimum wage by means of legal tender combined with tuna liver and intestines runs counter to the abovecited provision of the Labor Code. The fact that said method of paying the minimum wage was not only agreed upon by both parties in the employment agreement but even expressly requested by private respondents, does not shield petitioner. Article 102 of the Labor Code is clear. Wages shall be paid only by means of legal tender. The only instance when an employer is permitted to pay wages in forms other than legal tender, that is, by checks or money order, is when the circumstances prescribed in the second paragraph of Article 102 are present. Art. 103 : Time of Payment * Generally : Once every two weeks or twice a month at intervals not exceeding 16 days. No ER shall make payment with less frequency than once a month. * Force Majeure : Immediately after the force majeure or the circumstances have ceased. * Task cannot be completed in 2 weeks in the absence of a CBA or arbitration award: a. The payments are made at intervals not exceeding 16 days, in proportion to the amount of work completed; b. That final settlement is made upon completion of work; Art. 104 : Place of Payment : Payment of wages shall be made at or near the place of undertaking, except as otherwise provided by such regulations as the Secretary of Labor may prescribe under conditions to ensure greater protection of wages. 1. deterioration of peace and order conditions 2. actual or impending emergencies calamity - ER must provide or reimburse transportation back and forth - Time spent collecting wages considered compensable his work Sec. 7, RA 6727 (Wage Rationalization Act) Upon written permission of the majority of the employees or workers concerned, all private establishments, companies, businesses and other entities with 25 or more employees and located within 1 kilometer radius to a commercial, savings or rural bank shall pay the wages and other benefits of their employees through any of the said banks and within the period of payment of wages fixed by PD 422, as amended, otherwise known as the Labor Code of the Philippines. Labor Advisory on Payment of Salaries thru Automated Teller Machine (ATM) Based on Article 104, as well as the provisions of Sec. 4, Rule VIII, Book III of the Codes Implementing Rules and considering present-day circumstances, practices and technology, employers may adopt a system of payment other than in the workplace, such as through automated teller machine (ATM) of banks, provided that the following conditions are met: 1. The ATM system of payment is with the written consent of the employees concerned. 2. The employees are given reasonable time to withdraw their wages from the bank facility which time, if done during working hours, shall be considered compensable hours worked. 3. The System shall allow workers to receive their wages within the period or frequency and in the amount prescribed under the Labor Code, as amended. 4. There is a bank or ATM facility within a radius of one kilometer to the place of work 5. Upon request of the concerned employee/s, the employer shall issue a record of payment of wages, benefits and deductions for particular period. 6. There shall be no additional expenses and no dimunition of benefits and privileges as a result of the ATM system of payment 7. The employer shall assume responsibility in case the wage protection provisions of law and regulations are not complied with under the arrangement. Art. 105 Direct Payment of Wages
* General Rule : Wages paid directly to workers. * Exceptions: 1. Force majeure rendering such payment impossible or under the special circumstances, in which case the worker may be paid through another person under written authority given by the worker for the purpose.


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2. Where the worker has died, in case the ER may pay the wages of the deceased worker to the heirs of the latter without the necessity of intestate proceedings. A. DIRECT PAYMENT Payment of wages to leader of group not violation of direct payment since the contract to perform the services was made by the leader of the group, for and in behalf of the latter, not for each and everyone of them individually. (Bermiso vs. Escano) WAGE PROHIBITION Art. 112 : Non-Interference in Disposal of Wages - No ER shall limit or otherwise interfere with the freedom of any EE to dispose of his wages. - He shall not in any manner force, compel or oblige his EEs to purchase merchandise, commodities or other property from the ER or from any other person, or otherwise make use of any store or services of such ER or any other person. * A meat processing company gives a 25% discount to EEs for purchase on credit of its product. However, said purchases on credit will be considered payment of his wages. An EE purchases 10 cans of the product but objects to the application of his purchases as part of his wages. Is the objections valid? Yes. The application of his purchases on credit as part of his wages would amount to compelling him to receive as wages the products in lieu of legal tender. (Alcantara)
May an ER make any deductions from the wages of EEs? General Rule : No. His own behalf or in behalf of any person. Exceptions: [Allowable Deductions] 1. Deductions of SSS, Medicare and Pag-ibig Premiums (Alcantara) 2. Withholding tax (NIRC) 3. Deductions for reimbursement of insurance premium advanced by the ER where the worker is insured with his consent by the former. (Art. 113) 4. Deductions for unions dues where the right to check-off has been recognized by the ER or individual EE himself. (Id) 5. Deductions made with the written authorization of the EE for payment to a 3rd person and the ER agrees to do so, provided that the latter does not receive any pecuniary benefit, directly or indirectly, from the transaction. (Alcantara) 6. Deductions for reimbursement of loss or damage to tools, materials or equipment supplied by the ER to the EE, in trades, occupations or business where the practice of making such deductions is recognized. (Art. 114) 7. Deductions as a disciplinary measure for habitual tardiness (Alcantara) 8. Agency fees under Art. 248 (e) of the Code. 9. Deductions for debts due the ER from the EE, when such debts become due and demandable. (Art. 1706, NCC) 10. In court awards, wages may be the subject of execution or attachment, but only for debts incurred for food, shelter, clothing and medical attendance. (Art. 1703) 11. Deductions for value of meals and others. (Alcantara) 12. Salary deductions of a member of a cooperative (Art. 59, RA 6938) Art. 114 : Deposits for Loss or Damage : No ER shall require his worker to make deposits from which deductions shall be made for the reimbursement for loss or damage to tools, materials or equipment supplied by the ER except: a. When the ER is engaged in such trades, occupations or business where the practice of making deductions or requiring deposits is a recognized one, or b. is necessary or desirable as determined by the Secretary of Labor in appropriate rules and regulations.


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* J works as a dishwasher in a big restaurant. At the time of his employment, he was told that it was an industry practice that the value of plates broken by him while in the performance of his work will be deducted from his wages. May management deduct the said value from Js wages? Yes, provided the following conditions are met: [PRO-F20] 1. The practice of making deductions is a recognized one or is necessary and desirable in the business of the ER. 2. J is clearly shown to be responsible 3. He is given reasonable opportunity to show cause why the deduction should not be made. 4. The amount of deductions is fair and reasonable and does not exceed the actual loss or damage. 5. The deduction does not exceed 20% of Js wages in a week. (Sec. 14, Rule VIII, Book III, IRRs) Art. 116 : Withholding of Wages and kickbacks prohibited It shall be unlawful for any person, directly or indirectly, To withhold any amount from the wages of a worker or Induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever without the workers consent. Art. 117 : Deduction to ensure employment - It shall be unlawful to make any deduction from wages of any EE for the benefit of the ER or his representative or intermediary as consideration of a promise of employment or retention in employment. Art. 222 - No attorneys fees, negotiation fees or similar charges of any kind arising from any collective bargaining negotiations or conclusions of the CBA shall be imposed on any individual member of the contracting union: Provided, however that attorneys fees may be charged against union funds in an amount agreed upon by the parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void. Art. 1708 : The laborers wages shall not be subject to execution or attachment except for debts incurred for food, shelter, clothing and medical attendance. A. WAGE DEDUCTION * An obligation arising from non-payment of stock subscriptions to a corporation cannot be offset against a money claim of an EE against an ER. (Apodaca vs. NLRC) * The wife of an EE tells the manager that her husband has not been giving her support. Taking pity, the manager instructs the cashier to deduct 1/3 of the EEs pay and give the same to the wife. Is this valid? No. The EE concerned did not give his written authorization for the deduction. (Alcantara) * Z borrowed P500.00 from his ER. When the loan became due and demandable, Z did not pay his ER. May the ER, without the written authorization of Z, deduct the loan from the latters wages? Yes. Compensation can take place under Art. 1706 of the NCC. (Alcantara) Radio Communication of the Phil., Inc. v. Sec. of Labor (89) Article 222 Labor Code requires an individual written authorization as a prerequisite to wage deductions seeks to protect the employee against unwarranted practices that would diminish his compensation without his knowledge and consent. However, for all intents and purposes, the deductions required of the petitioner and employees do not run counter to the express mandate of the law since the same are not unwarranted or without their knowledge and consent. Also, the deductions for the union service fee in question are authorized by law and do not require individual check-off authorizations. Jardin v. NLRC (2000) With regard to the amount deducted daily by private respondent from petitioners for washing of the taxi units, we view the same as not illegal in the context of the law. We note that after a tour of duty, it is incumbent upon the driver to restore the unit he has driven to the same clean condition when he took it out. Car washing after a tour of duty is indeed a practice in the


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taxi industry and is in fact dictated by fair play. Hence, the drivers are not entitled to reimbursement of washing charges. B. CHECK-OFF * An ER may be compelled to check-off union dues from the wages of his EE when the ER has been authorized to do so by the EE. This is upon the theory that it is necessary to promote the welfare and integrity of the union to which he belongs. (Manila Trading vs. Manila Trading Labor Association) C. GARNISHMENT/ATTACHMENT * Under Art. 1708 of the NCC, laborers wages shall not be subject to execution or attachment, except for debts incurred for food, shelter, clothing and medical attendance (Pacific Customs vs. Inter-Island Dockmen and Labor Union) * Art 1708 which exempts laborers wage from attachment or execution does not apply to a responsibly placed EE, supervisory or managerial EE, but only to the rank-and-file. (Gaa vs. CA) D. DEPOSIT * A marketing firm retains 5% of the weekly salary of its collectors as a deposit to answer for any shortage in their collections. These are refunded at the end of the month, if no shortages are incurred. Is the practice legal? It depends. If it is a recognized practice of ERs to require such deposits, then such is legal, since the sum retained is not excessive and is kept by the ER only for a reasonable period. (Alcantara) * A taxicab company requires its drivers to make deposits to defray boundaries and to cover car wash payments. Is this legal? Art. 114 does not permit deposits for deficiency in the remittances of drivers boundary but the requirement for deposit for car wash payments is lawfull. (5-J Taxi vs. NLRC) PROHIBITED ACTS Art. 118 : It shall be unlawful for an ER to reuse to pay or reduce the wages and benefits, discharge or in any manner discriminate against any EE who has filed any complaint or instituted any proceedings under this Title or has testified or is about to testify in such proceedings. Art. 119 : It shall be unlawful for any person to make any material false statement, report or record filed or kept pursuant to the provisions of this Code. A. RECORD KEEPING * The records shall be kept and maintained in or about the premises of workplace or in the branch where the EE is regularly assigned, the keeping of the records in any other place is prohibited. (South Motorists vs. Tosoc) 14. 7 LIABILITY OF ER AND OTHER PARTIES ER, INDEPENDENT CONTRACTING CONTRACTOR AND SUBCONTRACTOR AND LABOR-ONLY
The rules on the liability of Job contractors, Indirect ERs and Labor-only contractors are the following: General Rule : An ER who enters into a contract with a contractor to perform work for the ER, does not thereby create an ER-EE relationship between himself and the EEs of the


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contractor. Thus the EEs of the contractor remain the contractors EEs and his alone. (PBC vs. NLRC) Nonetheless : When a contractor fails to pay the wages of his EEs in accordance with the Labor Code, the ER who contracted out the job to the contractor becomes jointly and severally liable with the contractor to the EEs of the latter to the extent of the work performed under the contract as if such ER were the ER of the contractors EE. (Id) The law itself, established an ER-EE relationship between the ER and the job contractors EEs for a limited purpose i.e. in order to ensure that the latter get paid for wages due them. Indirect ER : These provisions shall likewise apply to any person, partnership , association or corporation which, not being an ER, contracts with an independent contractor for the performance of any work, task, job or project. (Art. 107) Labor-Only Contractor : The conclusion is different where there is labor-only contracting. The labor-only contractor i.e. person or intermediary, is considered merely as an agent of the ER. The statute makes the ER directly responsible to the EEs of the labor-only contractor as if such EEs had been directly employed by the ER. The statute establishes an ER-EE relationship between the ER and the EEs of the labor-only contractor, this time for a comprehensive purpose, to prevent any violation of this Code. (Broadway Motors vs. NLRC) The legitimate job contractor provides services while the labor-only contractor only provides manpower. Job contractor undertakes to perform a specific job while labor-only contractor merely provides personnel to work for the employer. Art. 108 : An ER or indirect ER may require the contractor or subcontractor to furnish a bond equal to the cost of labor under contract, on condition that the bond will answer for the wages due the EEs should the contractor or subcontractor, as the case may be fail to pay the same. * C, a former EE of ABC entered into an agreement with the company wherein C will hire person to work in the painting department and the company will reimburse him for whatever wages he will pay plus 10% of this amount. If C fails to pay the wages, can the workers claim from the company? Yes. C is merely a labor-only contractor and is considered merely an agent of the ER who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. (Alcantara) * X entered into a contract with R for the construction of Xs house. Some workers of R were not paid their wages. Is X liable? Yes. Under Art. 107, the person, though not an ER, who contracts with the independent contractor for the wages employed by the latter are indirect ERs. (Alcantara) * A entered into a verbal agreement with S wherein A would be paid a commission for milled rice she sold or palay for the farmer. A would spend her own money for the undertaking, but to enable her to carry out the agreement more effectively, she was authorized to borrow from other persons, subject to reimbursement from S and either of them may terminate the business arrangement at will, with or without cause. May A be considered an independent contractor? Yes. A was contracted to do a piece of work according to her own method and without being subject to the control of the ER except as to the result of the work. (Sara vs. Agarrado) EXTENT OF LIABILITY The direct ER and the indirect ER are jointly and severally liable to petitioners for the monetary claims. (Deferia vs. NLRC) For purposes of determining the extent of their civil liability, they shall be considered as direct ERs. (Art. 109) In legitimate job contracting, no ER-EE relationship exist between the principal and the job contractors employees. Insolvency or unwillingness to pay by the contractor or direct ER is not a prerequisite for the joint and solidary liability of the principal or indirect ER. (DBP vs. NLRC)


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* If an independent service contractor fails to pay the wages of the janitors its supplies to XYZ, is XYZ liable for the unpaid wages? Yes. According to Art. 106, the ER shall be jointly and severally liable to the EEs of the contractor or subcontractor to the extent of the work performed under the contract. (Alcantara) * Would your answer change if XYZ already paid the independent contractor the contract price? No, XYZ will still be liable for the unpaid wages of the janitor since the obligation is imposed by law. (Id) * PTS, a government agency, entered into a service agreement with ABC or the supply of janitors to PTS. ABS failed to pay the wages of the janitors. PTS refused to pay on the ground that it is a government agency. Is this claim valid? No. The janitors employed by ABC are considered indirect EEs and not to indirect EEs coming from the private sector. (Rabago vs. NLRC) Philippine Airlines v. NLRC (98) In legitimate job contracting, no employer-employee relation exists between the principal and the job contractor's employees. The principal is responsible to the job contractor's employees only for the proper payment of wages. But in labor-only contracting, an employeremployee relation is created by law between the principal and the labor-only contractor's employees, such that the former is responsible to such employees, as if he or she had directly employed them. Besides, the Court has already taken judicial notice of the general practice adopted in several government and private institutions of securing janitorial services on an independent contractor basis. Sentinel Security Agency, Inc. v. NLRC (98) Under these provisions, the indirect employer, who is the Client in the case at bar, is jointly and severally liable with the contractor for the workers' wages, in the same manner and extent that it is liable to its direct employees. This liability of the Client covers the payment of the service incentive leave pay of the complainants during the time they were posted at the Cebu branch of the Client. As service had been rendered, the liability accrued, even if the complainants were eventually transferred or reassigned. Lapanday Agricultural Development Corporation v. Court of Appeals (2000) Articles 106 and 107 of the Labor Code provides the rule governing the payment of wages of employees in the event that the contractor fails to pay such wages. It will be seen from the above provisions that the principal (petitioner) and the contractor (respondent) are jointly and severally liable to the employees for their wages. This Court held in Eagle Security, Inc. vs. NLRC and Spartan Security and Detective Agency, Inc. vs. NLRC that the joint and several liability of the contractor and the principal is mandated by the Labor Code to assure compliance with the provisions therein including the minimum wage. The contractor is made liable by virtue of his status as direct employer. The principal, on the other hand, is made the indirect employer of the contractors employees to secure payment of their wages should the contractor be unable to pay them. Even in the absence of an employer-employee relationship, the law itself establishes one between the principal and the employees of the agency for a limited purpose i.e. in order to ensure that the employees are paid the wages due them. In the above-mentioned cases, the solidary liability of the principal and contractor was held to apply to the aforementioned Wage Order Nos. 5 and 6. 14. 8 WORKER PREFERENCE-BANKRUPTCY Art. 110 : In the event of bankruptcy or liquidation of an ERs business, his workers shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government and other creditors may be paid.


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* The right or preference has to be asserted in distribution proceedings such as insolvency where all the creditors convened, their claims ascertained and inventories and the preferences determined.
Art. 1707, Civil Code The laborer's wages shall be a lien on the goods manufactured or the work done. Art. 2241, Civil Code With reference to specific movable property of the debtor, the following claims or liens shall be preferred: (6) Claims for laborers' wages, on the goods manufactured or the work done; Art. 2242, Civil Code With reference to specific immovable property and real rights of the debtor, the following claims, mortgages and liens shall be preferred, and shall constitute an encumbrance on the immovable or real right: (3) Claims of laborers, masons, mechanics and other workmen, as well as of architects, engineers and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works; Art. 2244, Civil Code With reference to other property, real and personal, of the debtor, the following claims or credits shall be preferred in the order named: (4) Compensation due the laborers or their dependents under laws providing for indemnity for damages in cases of labor accident, or illness resulting from the nature of the employment;
* A declaration of bankruptcy or a judicial liquidation must be present before the workers preference may be enforced. The said article cannot be viewed in isolation; it must always be read in relation to the provisions of the Civil Code concerning the classification, concurrence and preference of the credits. (DBP vs. Santos) The aforesaid provisions of the Civil Code, including Art. 110 requires judicial proceedings in rem in adjudication of creditors claims against the debtors assets to become operative. (Alcantara) * TUCP obtained a judgment from the NLRC in an unfair labor case. Two days before the judgment, the PCIB, mortgage creditors of the company, foreclosed all mortgages in their favor. The union sought to garnish in its favor a portion of the purchase price. Is the bank subject to the claims of the union? Yes, under Art. 110 workers enjoy first preference as regards wages owed them for services rendered during the period prior to the bankruptcy or liquidation. (PCIB vs. National Mines and Allied Union) * Atlas Textile mortgaged its assets to DBP. DBP foreclosed the asset. The EEs filed a complaint against Atlas and DBP for the wage differentials. The labor arbiter and the NLRC held that the workers preference under Art. 110 does not create a lien? Yes . Art. 110 does not create a lien in favor of the workers. (Alcantara) Art. 110 Establishes merely a rule of preference and does not create a lien in favor of the workers Workers claim for unpaid wages and other monetary benefits cannot prevail over a mortgages lien EEs What Art. 110 establishes is NOT a lien, but a PREFERENCE of Credit in favor of
Judicial liquidation is the proper venue for the enforcement of a creditors preferential right such as that established in Art. 110. Republic v. Peralta (87)


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We believe and so hold that Article 110 of the Labor Code did not sweep away the overriding preference accorded under the scheme of the Civil Code to tax claims of the government or any subdivision thereof which constitute a lien upon properties of the Insolvent. It is frequently said that taxes are the very lifeblood of government. The effective collection of taxes is a task of highest importance for the sovereign. It is critical indeed for its own survival. It follows that language of a much higher degree of specificity than that exhibited in Article 110 of the Labor Code is necessary to set aside the intent and purpose of the legislator that shines through the precisely crafted provisions of the Civil Code. It cannot be assumed simpliciter that the legislative authority, by using in Article 110 the words "first preference" and "any provision of law to the contrary notwithstanding" intended to disrupt the elaborate and symmetrical structure set up in the Civil Code. Neither can it be assumed casually that Article 110 intended to subsume the sovereign itself within the term "other creditors" in stating that "unpaid wages shall be paid in full before other creditors may establish any claim to a share in the assets of employer." Insistent considerations of public policy prevent us from giving to "other creditors" a linguistically unlimited scope that would embrace the universe of creditors save only unpaid employees. We, however, do not believe that Article 110 has had no impact at all upon the provisions of the Civil Code. Bearing in mind the overriding precedence given to taxes, duties and fees by the Civil Code and the fact that the Labor Code does not impress any lien on the property of an employer, the use of the phrase "first preference" in Article 110 indicates that what Article 110 intended to modify is the order of preference found in Article 2244, which order relates, as we have seen, to property of the Insolvent that is not burdened with the liens or encumbrances created or recognized by Articles 2241 and 2242. We have noted that Article 2244, number 2, establishes second priority for claims for wages for services rendered by employees or laborers of the Insolvent "for one year preceding the commencement of the proceedings in insolvency." Article 110 of the Labor Code establishes "first preference" for services rendered "during the period prior to the bankruptcy or liquidation," a period not limited to the year immediately prior to the bankruptcy or liquidation. Thus, very substantial effect may be given to the provisions of Article 110 without grievously distorting the framework established in the Civil Code by holding, as we so hold, that Article 110 of the Labor Code has modified Article 2244 of the Civil Code in two respects: (a) firstly, by removing the one year limitation found in Article 2244, number 2; and (b) secondly, by moving up claims for unpaid wages of laborers or workers of the Insolvent from second priority to first priority in the order of preference established by Article 2244. Phil. Export etc. v. Court of Appeals (95) A final observation On 21 March 1989, Article 110 of the Labor Code was amended by Republic Act No. 6715 so as to read: "Article 110. Worker preference in case of bankruptcy -In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the Government and other creditors may be paid." Since then, the Court has had a number of occasions to rule on the effects of the amendment. In Development Bank of the Philippines vs. National Labor Relations Commission, the Court has said: "The amendment expands worker preference to cover not only unpaid wages but also other monetary claims to which even claims of the Government must be deemed subordinate. xxx xxx xxx "Notably, the terms 'declaration' of bankruptcy or 'judicial' liquidation have been eliminated. Does this mean then that liquidation proceedings have been done away with? "We opine in the negative, upon the following considerations: "1. Because of its impact on the entire system of credit, Article 110 of the Labor Code cannot be viewed in isolation but must be read in relation to the Civil Code scheme on classification and preference of credits. "2. In the same way that the Civil Code provisions on classification of credits and the Insolvency Law have been brought into harmony, so also must the kindred provisions of the Labor Law be made to harmonize with those laws.


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"3. In the event of insolvency, a principal objective should be to effect an equitable distribution of the insolvent's property among his creditors. To accomplish this there must first be some proceeding where notice to all of the insolvent's creditors may be given and where the claims of preferred creditors may be bindingly adjudicated (De Barretto vs. Villanueva). "4. A distinction should be made between a preference of credit and a lien. A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the discharge of the funds of the judgment debtor. "6. Even if Article 110 and its Implementing Rule, as amended, should be interpreted to mean 'absolute preference,' the same should be given only prospective effect in line with the cardinal rule that laws shall have no retroactive effect, unless the contrary is provided (Article 4, Civil Code). Thereby, any infringement on the constitutional guarantee on non-impairment of the obligation of contracts (Section 10, Article III, 1987 Constitution) is also avoided. In point of fact, DBP's mortgage credit antedated by several years the amendatory law, RA No. 6715. To give Article 110 retroactive effect would be to wipe out the mortgage in DBP's favor and expose it to a risk which it sought to protect itself against by requiring a collateral in the form of real property. "In fine, the right to preference given to workers under Article 110 of the Labor Code cannot exist in any effective way prior to the time of its presentation in distribution proceedings. It will find application when, in proceedings such as insolvency such unpaid wages shall be paid in full before the claims of the Government and other creditors' may be paid. But, for an orderly settlement of a debtor's assets, all creditors must be convened, their claims ascertained and inventoried, and thereafter the preferences determined in the course of judicial proceedings which have for their object the subjection of the property of the debtor to the payment of his debts or other lawful obligations. Thereby, an orderly determination of preference of creditors' claims is assured (Philippine Savings Bank vs. Lantin); the adjudication made will be binding on all parties-in-interest, since those proceedings are proceedings in rem; and the legal scheme of classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code is preserved in harmony." RECEIVERSHIP Rubberworld (Phils.), Inc. v. NLRC (99) The law is clear: upon the creation of a management committee or the appointment of a rehabilitation receiver, all claims for actions "shall be suspended accordingly." No exception in favor of labor claims is mentioned in the law. Since the law makes no distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos distinguere debemos. Allowing labor cases to proceed clearly defeats the purpose of the automatic stays and severally encumbers the management committee's and resources. The said committee would need to defend against these suits, to the detriment of its primary and urgent duty to work towards rehabilitating the corporation and making it viable again. The rule otherwise would open the floodgates to other similarly situated claimants and forestall if not defeat the rescue efforts. Besides, even if the NLRC awards the claims of private respondents, as it did, its ruling could not be enforced as long as the petitioner is under the management committee. In Chua v. National Labor Relations Commission, we ruled that labor claims cannot proceed independently of a bankruptcy liquidation proceeding, since these claims "would spawn needless controversy, delays, and confusion." With more reason, allowing labor claims to continue in spite of a SEC suspension order in a rehabilitation case would merely lead to such results. Article 217 of the Labor Code should be construed not in isolation but in harmony with PD 902-A, according to the basic rule in statutory construction that implied repeals are not favored. Indeed, it is axiomatic that each and every statute must be construed in a way that


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would avoid conflict with existing laws. True, the NLRC has the power to hear and decide labor disputes, but such authority is deemed suspended when PD 902-A is put into effect by the Securities and Exchange Commission. The preferential right of workers and employees under Article 110 of the Labor code may be invoked only upon the institution of insolvency or judicial liquidation proceeding. Indeed, it is well-settled that "a declaration of bankruptcy or a judicial liquidation must be present before preferences over various money claims may be enforced." But debtors resort to preference of credit - giving preferred creditors the rights to have their claims paid ahead of those of other claimants - only when their assets are insufficient to pay their debts fully. The purpose of rehabilitation proceedings is precisely to enable the company to gain a new lease on life and thereby allow creditors to be paid their claims from its earnings. In insolvency proceedings, on the other hand, the company stops operating, and the claims of creditors are satisfied from the assets of the insolvent corporation. The present case involves the rehabilitation, not the liquidation, of petitioner-corporation. Hence, the preference of credit granted to workers or employees under Article 110 of the Labor Code is not applicable. 14. 9 WAGE RECOVERY AND ATTORNEYS FEES
1. Art. 217 (a) (2), (3), (4), (6) : Jurisdiction of Labor Arbiters and the Commission
The Labor Arbiters shall have exclusive and original jurisdiction, except as otherwise provided, the following cases involving all workers: a. Termination Disputes (qualified by Art. 261which grant voluntary arbitrators original and exclusive jurisdiction over all unresolved grievances arising from CBAS and company personnel policies); b. Cases involving terms and conditions and employment, if accompanied with a claim for reinstatement (including claims of an ER-EE relationship, including claims for actual, moral and exemplary damages, as provided in Sec. 10, Migrant Workers Act) c. Claims for actual, moral, exemplary and other damages arising from the ER-EE relations; d. Except claims for EEs Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from the ER- EE relations, including those of persons in domestic or household service, involving an amount exceeding P5,000.00 regardless of whether accompanied with a claim for reinstatement. Art. 111. Attorney's fees (a) In cases of unlawful withholding of wages, the culpable party may be assessed attorney's fees equivalent to 10 % of the amount of wages recovered.
(b) It shall be unlawful for any person to demand or accept, in any judicial or
administrative proceedings for the recovery of the wages, attorneys fees, which exceed 10% of the amount of wages recovered. Art. 128 : Visitorial and Enforcement Power oft the Secretary of Labor or his duly
authorized representative
Access to ERs records and premises at anytime of the day or night whenever work is being undertaken therein and copy therefrom; question any EE; and investigate any fact, condition or matter which may be necessary to determine violations of this Code and of any labor law, wage order or rules and regulations issued pursuant thereto. In cases where the relationship or ER-EE still exists, the power to issue Compliance Orders to give effect to the labor standard provisions of this Code and other social legislation. Writ of execution to the appropriate authority shall be issued for the enforcement of the said orders, except in cases where the ER contests the findings of the labor employment and enforcement officer and raises


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issues supported by documentary proofs which were not considered in the course of inspection. The Decision is appealable to the Secretary of Labor Order stoppage of work or suspension of operations of any unit of or department of an establishment when non-compliance poses grave and imminent danger to the health and safety of workers in the workplace. Within 24 hours, a hearing shall be conducted to determine whether an order for the stoppage of work or suspension of operations shall be lifted or not. In case the violation is attributable to the fault of the ER, he shall pay EEs their salaries or wages during the said period. It shall be unlawful for any person to Obstruct, impede, delay or otherwise render ineffective the order of the Secretary of Labor. * No inferior court shall issue a temporary or permanent injunction or restraining order or otherwise assume jurisdiction over any case involving the enforcement orders in accordance with this Article. Any government EE found guilty of violation, after appropriate administrative investigation, be subject to Summary dismissal from the service. The Secretary of labor may require ERs to keep and maintain employment records as may be necessary. (AS CONES) * Under what circumstances may the Regional Director be divested of his jurisdiction to issue compliance orders under Art. 128 (b)? a. ER contests the findings of the labor regulations officer and raises issue thereon; b. In order to resolve such issue, there is need to examine evidentiary matters;
c. Such matters are not verifiable in the normal course of inspection. (Red V.
Coconut vs. Leogrado)
CARDINAL REQUIREMENTS OF DUE PROCESS in the ISSUANCE of COMPLIANCE ORDERS: 1) The alleged violator (ER) must first be heard and given adequate opportunity to present evidence on his behalf 2) The evidence presented must be duly considered before any decision is reached 3) The decision should be based on substantial evidence (evidence adequate for a reasonable mind to support a conclusion) 4) The decision is based on evidence presented in the hearing or at least contained in the record and disclosed to the parties 5) The decision is that of the decision making authority and not mere views of subordinates 6) The decision should explain the issues involved and the reasons for the decision rendered Art. 129 : Recovery of wages, simple money claims and other benefits The Regional Director of the DOLE or any of the duly authorized hearing officers of the Department is empowered, through summary proceedings and after due notice, to hear and decide any monetary claims and benefits, including legal interest to a person employed in domestic or household service; Provided d. Such complaint does not include claim for reinstatement e. Aggregate money claims of each househelper does not exceed P5,000 IF NOT, LABOR ARBITER. The complaint shall be resolved within 30 days from the date of filing of the same.


Updated and enhanced with additional cases by ATTY. RENE CALLANTA Decision: Appeal within 5 days to NLRC NLRC: will resolve within 10 days from submission of last pleading
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Any amount recovered in behalf of the EE shall be held as a special fund of the DOLE, if not paid to said EE because he cannot be located after diligent search after 3 years, to be used exclusively for the amelioration and benefit of workers. Art. 111 : ATTORNEYS FEES In cases of unlawful withholding of wages the culpable party may be assessed attorneys fees equivalent to 10% of the amount of wages recovered. It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of the wages, attorneys fees, which exceed 10% of the amount of wage recovered.
Section 14: SERVICE CHARGES

14. 1 COVERAGE Section 1, Rule V, Book III, IRRs : This rule shall apply only to establishments collecting service charges such as hotels, restaurants, lodging houses, night clubs, cocktail lounge, massage clinics, bars, casinos and gambling houses, and similar enterprises, including those entities operating primarily as private subsidiaries of the Government. Section 2, Rule VI, Book III : This rule shall apply to all EEs of covered ERs except to managerial EEs. Managerial EE a. powers of prerogatives to lay down, and execute management policies and/or b. hire, transfer, suspend, lay-off, recall, discharge, assign, or discipline EEs or to effectively recommend such managerial actions. Collection of service charges is a management decision and not a requirement of law 14. 2 SERVICE CHARGES * Art. 96 : To be distributed at the rate of 85% for covered EEs [distributed equally among them] and 15% for management. The distribution should be equal and done 2x a month The 15% management share may answer for losses and breakages, and at managements discretion, it may also be distributed to managers * X a waiter at DC Diner was receiving a share in the restaurants service charges. Later, the restaurant discontinued the collection of service charges. The take-home pay of X was reduced by the value of the discontinued service charges. May X ask his ER to continue paying the service charges? Yes. In case the service charge is abolished, the share or the covered EEs shall be considered integrated in their wages. (Art. 96) The employees share in the service charges is part of the other benefits to which he is entitled, in addition to full backwages Maranaw Hotels, etc. v. NLRC (99) As regards the share of Damalerio in the service charges collected during the period of his preventive suspension, the same form part of his earnings, and his dismissal having been adjudged to be illegal, he is entitled not only to full backwages but also to other benefits,


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including a just share in the service charges, to be computed from the start of his preventive suspension until his reinstatement. Book III Rule VI Omnibus Rules Coverage only establishments collecting service charges such as hotels, restaurants, lodging houses, night clubs, cocktail lounge, massage clinics, bars, casinos and gambling houses and similar enterprises, including those entities operating primarily as private subsidiaries of the Government. Employees shall apply to all employees of covered employers REGARDLESS OF THEIR covered POSITIONS, DESIGNATIONS OR EMPLOYMENT STATUS, and IRRESPECTIVE OF THE METHOD BY WHICH THEIR WAGES ARE PAID Exception MANAGERIAL EMPLOYEES (defined as one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign, or discipline employees or to effectively recommend such managerial actions.) Distribution 85% - employees to be distributed EQUALLY 15% - management (for the disposition by management to answer for losses and breakages and distribution to managerial employees at the discretion of the management in the latter case) Frequency shall be distributed and paid to the employees not less than once every two weeks of or twice a month at intervals not exceeding 16 days Distribution Permanency In case the service charge is abolished, the share of covered employees shall be of service considered integrated in their wages. The basis of the amount to be integrated charges shall be the average monthly share of each employee for the past 12 months immediately preceding the abolition or withdrawals of such charges Relation to Nothing in this rule shall prevent the employer and his employees from entering agreements into any agreement with terms more favorable to the employees than those provided herein, or be used to diminish any benefit granted to the employees under existing laws, agreement and voluntary employer practice.
Section 15: THIRTEENTH MONTH PAY

The 13th month pay required by P.D. 851 is additional income based on wage but not part of the wage. It is 1/12 of the total basic salary earned by the EE within a calendar year. All rank-and-file EEs regardless of their designation or employment status and irrespective of the method by which their wages are paid, are entitled to this benefit, provided that they have worked for at least one month during the calendar year. If the EE worked for only a portion of the year, the 13th month pay is computed pro-rata. Even piece-rate EEs are entitled to service incentive leave as well as to night shift differential, holiday pay, premium pay and the 13th month pay. As to overtime pay they are entitled to it if their output pay rate is no shown to be in accordance with the standards prescribed under the IRR or by Secretary of Labor. (Labor Congress of the Phil., vs. NLRC GR 12393, May 21, 1998) The decree exempts ERs who are already paying their EEs a 13th month pay or its equivalent. But if the CBA does provide for a bonus in graduated amounts depending on the length of service of the EE, the intention is clear that the bonus provided in the CBA is meant to be in addition to the legally required 13th month pay. (Universal Corn Product vs. NLRC GR 60337, Aug. 21, 1987) The Supplementary Rules and Regulations Implementing PD No. 851 is emphatic in declaring that earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th month pay. An EE who has resigned or whose services were terminated at any time before the time for payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year. Thus, if he worked only from January to September, his proportionate 13th month pay should be equivalent to 1/12 of the total basis salary he earned during that period. (International school of Speech vs. NLRC, GR 1126358, March 18, 1995)


Updated and enhanced with additional cases by ATTY. RENE CALLANTA 15.1 LAW COVERAGE COVERAGE
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ALL EMPLOYERS are hereby required to pay all their rank and file employees a 13th month pay not later than December 24 of every year, provided that they have worked for at least one (1) month during a calendar year. Who are Rank and File Employees? A managerial employee is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign, or discipline employees, or to effectively recommend such managerial actions. ALL EMPLOYEES NOT FALLING WITHIN THIS DEFINITION ARE CONSIDERED RANK-AND-FILE EMPLOYEES. Section 2, Revised Guidelines on the 13th Month Pay Law : The following ERs are still not covered by PD 851: The government and any of its political subdivisions, including GOCCs, except those corporations operating essentially as private subsidiaries of the government.
ERs already paying their EEs a 13th month pay or more in a calendar year or its
equivalent at the time of this issuance.
[The term its equivalent shall include Christmas bonus, mid-year bonus, cash
bonuses and other payments but shall not include cash and stock dividends, cost of living allowances and other allowances regularly enjoyed by the EE, as well as non-monetary benefits. Where an ER pays less than required 1/12th of the EEs basic salary, the ER shall pay the differences.] ERs of household helpers and persons in the personal service of another in relation to such workers, and
ERs of those who are paid on purely commission, boundary, or task basis, and
those who are paid a fixed amount for performing 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 ER shall grant the required 13th month pay to such workers.
A distressed ER may qualify for exemption for the 13th month pay if there is prior
authorization from the DOLE. (Dentech vs. NLRC) * The CBA provides for the payment of Christmas bonuses to all regular EEs in the bargaining unit with of at least 1 year of continuous service. Is this equivalent to the 13th month pay? No. The Christmas bonuses provided in the CBA accords a reward for loyalty to certain EEs. This is evident from the stipulation granting the bonus in question to workers with at least 1 year of continuous service. The bonus therefore is to be in addition to the legal requirement. (UCP vs. NLRC) 15.2 AMOUNT AND PAYMENT DATE Sec 4 Revised Guidelines on the 13th Month Pay Law: Amount : 1/12 of the total basic salary earned by an EE within a calendar year.
The 13th month pay is to be paid only to rank-and file employees regardless of the
amount of their basic salary.
Time of Payment : Not later than December 24.

Define basic salary: For purposes of computing the 13th month pay, basic salary include remuneration or earnings paid by this ER for services rendered


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but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent or unused vacation and sick leave credits, overtime, premium, night-differential and holiday pay, and cost-of-living allowances. However, these salary-related benefits should be included as part of the basic salary in the computation of the 13 th month pay if the individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the EEs. * From 1991 to 1997, DFC included in the computation of this 13th month pay, the EEs sick, vacation and maternity leaves, In 1998, the company discontinued the inclusion of the aforementioned items in the 13th month pay. Is this valid? NO. The considerable length of time the questioned items had been included by the company indicates a unilateral and voluntary action on its part, sufficient in itself to negate any claim of mistake. A company practice favorable to the EEs had been established, and the payments made pursuant thereto ripened into benefits enjoyed by them. Any benefit and supplement being enjoyed by the EEs cannot be reduced, diminished, discontinued or eliminated by the ER. (Alcantara) BASIC WAGE * Are the sales commission of a salesman paid a guaranteed wage plus commissions included in the computation of this 13th month pay? It depends on what kind of commissions may properly be considered part of the basic salary if integral part of salary, they should be included in computing the 13th month pay. If the commission are not an integral part of the basic salary, then they should be excluded. (Azucena) Sales commissions which comprised an automatic increment to the monetary value assigned to each unit of work rendered by the salesman, or that of the wages-or sales-percentage type should be included in the 13th month pay computation. On the other hand, commission in the form of productivity bonuses which closely resembles profit-sharing payments and have no clear direct or necessary relation to the amount of work actually done by each individual EE, or the profit-sharing or bonus-type, should be excluded from the computation of the 13th month pay. (Philippine Duplicators vs. NLRC) BASIC WAGE/COMMISSIONS Boie Takeda v. Dela Serna (93) In the case of San Miguel Corp. vs. Inciong, this Court delineated the coverage of the term "basic salary" as used in P.D. 851. We said at some length: Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as the basis in the determination of his 13th month pay. Any compensations or remunerations which are deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus. Under the Rules and Regulations implementing Presidential Decree 851, the following compensations are deemed not part of the basic salary: a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instructions No. 174; b) Profit-sharing payments; c) All allowances and monetary benefits which are not considered or integrated as part of the regular basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975. Under a later set of Supplementary Rules and Regulations Implementing PD 851 issued by then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded as part of the basic salary and in the computation of the 13th month pay. The exclusion of the cost-of-living allowances under PD 525 and Letter of Instructions No. 174, and profit-sharing payments indicate the intention to strip basic salary of other payments which are properly considered as "fringe" benefits. Likewise, the catch-all exclusionary


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phrase "all allowances and monetary benefits which are not considered or integrated as part of the basic salary" shows also the intention to strip basic salary of any and all additions which may be in the form of allowances or "fringe" benefits. Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even more emphatic in declaring that earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th-month pay. While doubt may have been created by the prior Rules and Regulations Implementing Presidential Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer to an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and Regulations which categorically exclude from the definitions of basic salary earnings and other remunerations paid by an employer to an employee. A cursory perusal of the two sets of Rules indicates that what has hitherto been the subject of a broad inclusion is now a subject of broad exclusion. The Supplementary Rules and Regulations cure the seeming tendency of the former rules to include all remunerations and earnings within the definition of basic salary. The all embracing phrase "earnings and other remunerations" which are deemed not part of the basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for works performed on rest days and special holidays, pays for regular holidays and night differentials. As such they are deemed not part of the basic salary and shall not be considered in the computation of the 13th-month pay. If they were not excluded, it is hard to find any "earnings and other remunerations" expressly excluded in the computation of the 13th month pay. Then the exclusionary provision would prove to be idle and with no purpose. Quite obvious from the foregoing is that the term "basic salary" is to be understood in its common, generally-accepted meaning, i.e., as a rate of pay for a standard work period exclusive of such additional payments as bonuses and overtime. This is how the term was also understood in the case of Pless v. Franks, which held that in statutes providing that pension should not less than 50 percent of "basic salary" at the time of retirement, the quoted words meant the salary that an employee (e.g., a policeman) was receiving at the time he retired without taking into consideration any extra compensation to which he might be entitled for extra work. In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or guaranteed wage is patently the "basic salary" for this is what the employee receives for a standard work period. Commissions are given for extra efforts exerted in consummating sales or other related transactions. They are, as such, additional pay, which this Court has made clear do not form part of the "basic salary." Iran v. NLRC (98) This definition explicitly includes commissions as part of wages. While commissions are, indeed, incentives or forms of encouragement to inspire employees to put a little more industry on the jobs particularly assigned to them, still these commissions are direct remunerations for services rendered. In fact, commissions have been defined as the recompense, compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly that commissions are part of a salesman's wage or salary. SUBSTITUTE PAYMENT Benefits in the form of food or free electricity not proper substitute for the 13 th month pay. (Framanlis vs. Minister of Labor) 14TH MONTH PAY The grant of the 14th month pay is a management prerogative, gratuitous in nature and therefore it cannot be forced. (Kamaya Hotel vs. NLRC)


Updated and enhanced with additional cases by ATTY. RENE CALLANTA 15. 3 NON-INCLUSION
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Sec. 7, Revised Guidelines on the 13th Month Pay Law: The mandated 13th month pay need not be credited as part of the regular wage of EEs for purposes of determining overtime and premium pays, fringe benefits as well as contributions to the state insurance fund, Social Security, Medicare and private retirement plans. 13TH MONTH PAY FOR CERTAIN TYPE OF EMPLOYEES PAID BY RESULTS Employees who are paid on piece work basis are by law entitled to the 13th Month Pay Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay based on their total earnings during the calendar year, i.e. on both their fixed or guaranteed wage and commission. THOSE WITH MULTIPLE EMPLOYERS Government employees working part time in a private enterprise, including private educational institutions, as well as employees working in two or more private firms, whether on full or part time bases, are entitled to the required 13 th Month Pay from all their private employers regardless of their total earnings from each or all their employers. PRIVATE SCHOOL TEACHERS Private school teachers, including faculty members of universities and colleges, are entitled to the required 13th month pay, regardless of the number of months they teach or are paid within a year, if they have rendered service for at least one (1) month within a year. RESIGNED OR SEPARATED EMPLOYEE An employee who has resigned or whose services were terminated at any time before the time for payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from service. HOUSEHELPERS Ultra Villa Food House v. Geniston (99) Moreover, the specific provisions mandating these benefits are found in Book III, Title I of the Labor Code, and Article 82, which defines the scope of the application of these provisions, expressly excludes domestic helpers from its coverage. The limitations set out in the said article are echoed in Book III of the Omnibus Rules Implementing the Labor Code. Clearly then, petitioner is not obliged by law to grant private respondent any of these benefits. Employing the same line of analysis, it would seem that private respondent is not entitled to 13th month pay. The Revised Guidelines on the Implementation of the 13th Month Pay Law also excludes employers of household helpers from the coverage of Presidential Decree No. 851. Nevertheless, we deem it just to award private respondent 13th month pay in view of petitioner's practice of according private respondent such benefit. Indeed, petitioner admitted that she gave private respondent 13th month pay every December. GOVERNMENT EMPLOYEES


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Alliance of Government Workers v. NLRC (95) An analysis of the "whereases" of PD No. 851 shows that the President had in mind only workers in private employment when he issued the decree. There was no intention to cover persons working in the government service. TERMINATED EMPLOYEES Archilles Manufacturing Corp. v. NLRC (95) On the issue of the propriety of the award of a 13th month pay, paragraph 6 of the Revised Guidelines on the Implementation of the 13th Month Pay Law (P. D. 851) provides that "(a)n employee who has resigned or whose services were terminated at any time before the payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from the service . . .. The payment of the 13th month pay may be demanded by the employee upon the cessation of employer-employee relationship. This is consistent with the principle of equity that as the employer can require the employee to clear himself of all liabilities and property accountability, so can the employee demand the payment of all benefits due him upon the termination of the relationship." Furthermore, Sec. 4 of the original Implementing Rules of P. D. 851 mandates employers to pay their employees to pay their employees a 13th month pay not later than the 24th of December every year. In effect, this statutory benefit is automatically vested in the employee who has at least worked for one month during the calendar year. As correctly stated by the Solicitor General, such benefit may not be lost or forfeited even in the event of the employee's subsequent dismissal for cause without violating his property rights.
Section 16 : BONUS
16. 1 DEFINITION * A bonus is an amount granted and paid to an EE for his industry and loyalty which contributed to the success of the ERs business and made possible the realization of profits. (Azucena) NATURE - BONUS Luzon Stevedoring Corporation v. CIR (65) A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is not a demandable and enforceable obligation. It is so when it is made a part of the wage or salary or compensation. In such a case the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profits. If there be none, there would be no bonus. Marcos v. NLRC (95) A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition to what would ordinarily be given. The term "bonus" as used in employment contracts, also conveys an idea of something which is gratuitous, or which may be claimed to be gratuitous, over and above the prescribed wage which the employer agrees to pay. While there is a conflict of opinion as to the validity of an agreement to pay additional sums for the performance of that which the promisee is already under obligation to perform, so as to give the latter the right to enforce such promise after performance, the authorities hold that if one enters into a contract of employment under an agreement that he shall be paid a certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified length of time, there is no reason for refusing to enforce the promise to pay the bonus,


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if the employee has served during the stipulated time, on the ground that it was a promise of a mere gratuity. This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonus is made at the time the contract is entered into. If no time is fixed for the duration of the contract of employment, but the employee enters upon or continues in service under an offer of a bonus if he remains therein for a certain time, his service, in case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after that acceptance, the offer cannot be withdrawn, but can be enforced by the employee. Phil. National Construction Corp. v. NLRC (99) A bonus is a gift from the employer and the grant thereof is a management prerogative. Petitioner may not be compelled to award a bonus to private respondents whom it found guilty of serious misconduct. We held in Traders Royal Bank v. NLRC: A bonus is a gratuity or an act of liberality of the giver which the recipient has no right to demand as a matter of right. It is something given in addition to what is ordinarily received by or strictly due the recipient. The granting of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employees basic salaries or wages. We further held in Metro Transit Organization, Inc. v. NLRC, that a bonus becomes a demandable or enforceable obligation only when it is made part of the wage or salary or compensation of the employee, thus: The general rule is that a bonus is a gratuity or an act of liberality which the recipient has no right to demand as a matter of right. A bonus, however, is a demandable or enforceable obligation when it is made part of the wage or salary or compensation of the employee. 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 presumption is that it is not a demandable obligation from the employer and the latter may not be compelled to grant the same to undeserving employees. 16.2 WHEN DEMANDABLE * From the legal point of view, a bonus is not a demandable and enforceable obligation. But it is so when it is made part of the wage or salary or compensation. In such case, the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profit. (Azucena) Furthermore, while normally discretionary, the grant if gratuity or bonus by reason of its long and regular concession, may become regarded as part of the regular compensation. (Liberation Steamship vs. CIR) Luzon Stevedoring Corp. v. CIR (65) As a rule a bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. From the legal point of view, a bonus is not a demandable and enforceable obligation. It is so when it is made a part of the wage or salary or compensation. In such a case the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profits. If there be none, there would be no bonus.


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Philippine Duplicators Inc. v. NLRC (95) Productivity bonuses are generally tied to the productivity or profit generation of the employer corporation. Productivity bonuses are not directly dependent on the extent an individual employee exerts himself. A productivity bonus is something extra for which no specific additional services are rendered by any particular employee and hence not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent or energy of an employee's endeavors. Commissioners are paid upon the specific results achieved by a salesman-employee. It is a percentage of the sales closed by a salesman and operates as an integral part of such salesman's basic pay. Manila Electric Co. v. Quisumbing (99) As a rule, a bonus is not a demandable and enforceable obligation; it may nevertheless be granted on equitable considerations as when the giving of such bonus has been the company's long and regular practice. To be considered a "regular practice," 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. Thus we have ruled in National Sugar Refineries Corporation vs. NLRC: 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. MANAGEMENT FUNCTION Businessday Information Systems and Services, Inc. v. NLRC (93) Clearly, there was impermissible discrimination against the private respondents in the payment of their separation benefits. The law requires an employer to extend equal treatment to its employees. It may not, in the guise of exercising management prerogatives, grant greater benefits to some and less to others. Management prerogatives are not absolute prerogatives but are subject to legal limits, collective bargaining agreements, or general principles of fair play and justice (UST vs. NLRC). Article 283 of the Labor Code, as amended, protects workers whose employment is terminated because of closure of the establishment or reduction of personnel (Abella vs. NLRC). With regard to the private respondents' claim for the mid-year bonus, it is settled doctrine that the grant of a bonus is a prerogative, not an obligation, of the employer (Traders Royal Bank vs. NLRC). The matter of giving a bonus over and above the worker's lawful salaries and allowances is entirely dependent on the financial capability of the employer to give it. The fact that the company's business was no longer profitable (it was in fact moribund) plus the fact that the private respondents did not work up to the middle of the year (they were discharged in May 1988) were valid reasons for not granting them a mid-year bonus. Requiring the company to pay a mid-year bonus to them also would in effect penalize the company for its generosity to those workers who remained with the company till the end" of its days. (Traders Royal Bank vs. NLRC) The award must therefore be deleted.
PRODUCTIVITY INCENTIVES ACT OF 1990 (RA 6971)

Policy (2) To encourage higher levels of productivity, maintain industrial peace and harmony and promote the principle of shared responsibility in the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of business enterprises to reasonable returns of investments and to expansion and growth, and accordingly to provide corresponding incentives to both labor and capital for undertaking voluntary programs to ensure greater sharing by the workers in the fruits of their labor Coverage (3)


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Applies to all business enterprises with or without existing and duly recognized or certified labor organizations, including government-owned and controlled corporations performing proprietary functions It shall cover all employees and workers including casual, regular, supervisory and managerial employees. Definition (4) Business Enterprise: industrial, agricultural, or agro-industrial establishments engaged in the production manufacturing, processing, repacking, or assembly of goods, including service-oriented enterprises, duly certified as such by appropriate government agencies. Labor-management Committee: a negotiating body in a business enterprise composed of the representatives of labor and management created to establish a productivity incentives program, and to settle disputes arising therefrom in accordance with Section 9 hereof. Productivity Incentives Program: a formal agreement established by the labor-management committee containing a process that will promote gainful employment, improve working conditions and result in increased productivity, including cost savings, whereby the employees are granted salary bonuses proportionate to increases in current productivity over the average for the preceding three (3) consecutive years. The agreement shall be ratified by at least a majority of the employees who have rendered at least six (6) months of continuous service. Labor Management Committee (5) a. A business enterprise or its employees, through their authorized representatives, may initiate the formation of a labor-management committee that shall be composed of an equal number of representatives from the management and from the rank-and-file employees: Provided, That both management and labor shall have equal voting rights: Provided, further, That at the request of any party to the negotiation, the National Wages and Productivity Commission of the Department of Labor and Employment shall provide the necessary studies, technical information and assistance, and expert advice to enable the parties to conclude productivity agreements. b. In business enterprises with duly recognized or certified labor organizations, the representatives of labor shall be those designated by the collective bargaining agent(s) of the bargaining unit(s). c. In business enterprises without duly recognized or certified labor organizations, the representatives of labor shall be elected by at least a majority of all rank-and-file employees who have rendered at least six (6) months of continuous service. Productivity Incentives Program (6) a. The productivity incentives program shall contain provisions for the manner of sharing and the factors in determining productivity bonuses: Provided, That the productivity bonuses granted to labor under this program shall not be less than half of the percentage increase in the productivity of the business enterprise. b. Productivity agreements reached by the parties as provided in this Act supplement existing collective bargaining agreements. c. If, during the existence of the productivity incentives program or agreement, the employees will join or form a union, such program or agreement may, in addition to the terms and conditions agreed upon by labor and management, be integrated in the collective bargaining agreement that may be entered into between them.


Updated and enhanced with additional cases by ATTY. RENE CALLANTA Benefits and Tax Incentives (7)
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a. Subject to the provisions of Section 6 hereof, a business enterprise which adopts a productivity incentives program, duly and mutually agreed upon by the parties to the labormanagement committee, shall be granted a special deduction from gross income equivalent to 50% of the total productivity bonuses given to employees under the program over and above the total allowable ordinary and necessary business deductions for said bonuses under the National Internal Revenue Code, as amended. b. Grants for manpower training and special duties given to rank-and-file employees pursuant to a program prepared by the labor-management committee for the development of skills identified as necessary by the appropriate government agencies shall also entitle the business enterprise to a special deduction from gross income equivalent to 50% of the total grants over and above the allowable ordinary and necessary business deductions for said grants under the National Internal Revenue Code, as amended. c. Any strike or lockout arising from any violation of the productivity incentives program shall suspend the effectivity thereof pending settlement of such strike or lockout: Provided, That the business enterprise shall not be deemed to have forfeited any tax incentives accrued prior to the date of occurrence of such strike or lockout, and the workers shall not be required to reimburse the productivity bonuses already granted to them under the productivity incentives program. Likewise, bonuses which have already accrued before the strike or lockout shall be paid the workers within six (6) months from their accrual. d. Bonuses provided for under the productivity incentives program shall be given to the employees not later than every six (6) months from the start of such program over and above existing bonuses granted by the business enterprise and by law: Provided, That the said bonuses shall not be deemed as salary increases due the employees and workers. e. The special deductions from gross income provided for herein shall be allowed starting the next taxable year after the effectivity of this Act. Notification (8) A business enterprise which adopts a productivity incentives program shall submit copies of the same to the National Wages and Productivity Commission and to the Bureau of Internal Revenue for their information and record. Disputes and Grievances (9) Whenever disputes, grievances, or other matters arise from the interpretation or implementation of the productivity incentives program, the labor-management committee shall meet to resolve the dispute, and may seek assistance of the National Conciliation and Mediation Board of the Department of Labor and Employment for such purpose. Any dispute which remains unresolved within 20 days from the time of its submission to the labor-management committee shall be submitted for voluntary arbitration in line with the pertinent provisions of the Labor Code, as amended. The productivity incentives program shall include the name(s) of the voluntary arbitrator or panel of voluntary arbitrators previously chosen and agreed upon by the labor-management committee. Non-dimunition of Benefits (12) Nothing in this Act shall be construed to diminish or reduce any benefits and other privileges enjoyed by the workers under existing laws, decrees, executive orders, company policy or practice, or any agreement or contract between the employer and employees.


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Section 17. WORKING CONDITIONS FOR SPECIAL GROUPS OF WORKERS WOMEN

17.1 WOMEN AND THE CONSTITUTION Art. II, Sec. 14, Const. : The State recognizes the role of women in nation-building, and shall ensure the fundamental equality before the law of women and men. 17.2 COVERAGE Section 1, Rule XII, Book III, IRRs : This rule shall apply to all ERs except to: a. government and GOCCs and b. to ERs of household helpers and persons in their personal service insofar as such workers are concerned 17.3 PROHIBITED ACTS NIGHT WORK AND EXCEPTION Art. 130 : No woman shall be employed or permitted or suffered to work, with or without compensation: a. Industrial undertaking : Between 10:00 pm and 6:00 am of the following day. b. Commercial undertaking : Between midnight and 6:00 am of the following day. c. Agricultural undertaking : Nighttime unless she is given a period of rest of not less than 9 consecutive hours. Art. 131 : Exceptions to Nightwork prohibition [A, F, U, P M, H, M, - FA] d. In cases of actual or impending emergencies caused by a serious accident, fire, flood, earthquake, epidemic or other Disasters or calamity, to prevent loss of life or property. e. Cases of force majeure or imminent danger to public safety. f. Cases of urgent work to be performed on machineries, equipment or installation, to avoid serious loss which the ER would otherwise suffer. g. Work is necessary to prevent serious loss of perishable goods h. Woman EE holds a responsible position of managerial or technical in nature. i. Woman EE has been engaged to provide health and welfare service. j. Where the nature of the work requires the manual skill and dexterity of women workers; k. Where the women EEs are immediate members of the family operating the establishment or undertaking; and l. Analogous cases. (HUMMPS FAD) * LG, a manufacturer and exporter of jeans, has a 3-shift work schedule but maintains a policy of not assigning women in the 3rd shift from 10:00 pm to 6:00 am. Is this policy discriminatory to women? Yes. The women sewers, by reason of their sex, are denied the opportunity to earn additional pay. The nature of the work requires the manual skill and dexterity of women workers and cannot be performed with equal efficiency to male workers. This is one of the exceptions to the night work prohibition. (Art. 131) B. DISCRIMINATION Art. 135 : It shall be unlawful for any ER to discriminate against woman EE with respect to terms and conditions of employment solely on account of her sex. The following are acts of discrimination [P, F] 1. Payment of lesser compensation, as against a male EE, for work of equal value. 2. Favoring a male EE over a female EE with respect to the promotion, training opportunities, study and scholarship grants solely on account of their sexes.


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* Criminal liability for violations shall be penalized as provided in Art. 288 and 289 of this Code. The institution of any criminal action under this provision shall not bar the aggrieved EE from filing an entirely separate and distinct action for money claims, which may include claims for damages and other affirmative reliefs. The actions hereby authorized shall proceed independently of each other. * C, a 45-year old teacher was dismissed by the school after she got married to Q, her 18year old 4th year high school student. Is the dismissal lawful? No, in the absence of substantial evidence to show that C took advantage of her position to court her student. There is nothing wrong if the two fell in love despite the disparity in their ages. (Chua-Qua vs. Clave) C. MARRIAGE Art. 136 : Stipulation against marriage It shall be unlawful for an ER to : [C, S, D] a. Require as a condition of employment or continuation of employment that a woman EE shall not get married; b. c. Stipulate expressly or tacitly that upon getting married a woman shall be deemed resigned or separated; Actually dismiss, discharge, discriminate or otherwise prejudice a woman EE merely by reason of her marriage.
D. GENERAL (Prohibited Acts) Art. 137 : It shall be unlawful for any ER to : [DB, DP, RA] a. Deny any woman EE the benefits provided for in this Chapter or to discharge any woman employed by him for the purpose of preventing her from enjoying any of the benefits provided under this Code; b. Discharge such woman on account of her pregnancy, or while on leave or in confinement due to her pregnancy; c. Discharge or refuse the admission of such woman upon returning to her work for fear that she may again be pregnant. * In Ls contract of employment with Club E, it was stipulated that her employment as a dancer would cease once she gets pregnant. When L got pregnant, L was no longer allowed to dance and since there were no other work available for which her talents were suitable, her employment was terminated. Is the action legal? Yes. It is both awkward and dangerous for her to dance during her pregnancy. Of course the ER has the obligation to give her another job, but as stated in the problem there is no other work for which her talents are suited. It is not fair to require the ER to continue employing her. (Alcantara) * A pharmaceutical company rejected the applications of 5 pregnant women as sales representatives for contraceptive pills and family planning devices. Is this valid? Yes. The company has the prerogative to select its EEs. What is unlawful is for the ER to discriminate against or dismiss a woman by reason of their pregnancy. (Alcantara) A woman worker cannot be dismissed on the ground of dishonesty for having written single on the space for civil status on the application sheet, contrary to the fact the she was married. 17. 4 FACILITIES Art. 132 : The Secretary of Labor shall establish standards that will ensure the safety and health of women EEs. In appropriate cases, he shall, by regulations, require ER to: 1. Provide seats proper for women and permit them to use seats when they are free from work and during working hours, provided they can perform their duties in the position without detriment to efficiency. 2. To establish a nursery in a workplace.


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3. To determine appropriate minimum age and other standards for retirement or termination in special occupations such as those of flight attendants and the like. 4. Separate toilet for men & women and provide dressing rooms Art. 134 : (a) Establishments which are required by law to maintain clinic or infirmary shall provide free family planning services to their EEs. * Is the ER required by law to pay maternity benefits to its female workers? No. Maternity benefits are to be paid in appropriate instances by the SSS. The only obligation of the ER is to advance the benefit subject to reimbursement by the SSS. (Alcantara) 17.5 SPECIAL CLASSIFICATION SPECIAL WOMEN WORKERS * X works as a hostess in a nightclub, she is paid a percentage of the ladys drink ordered by customers. There are nights when she does not earn anything because there are no customers. Is X an EE of the nightclub? Yes. Any woman who is permitted or suffered to work, with or without compensation, in any nightclub, cocktail lounge, massage clinic, bar, or similar establishment, under the effective control or supervision of the ER for a substantial period of time as determined by the Secretary of Labor shall be considered an EE of such establishment for purposes of labor and social legislation. (Art. 138)
Section 18. WORKING CONDITIONS FOR SPECIAL GROUP OF WORKERS MINORS

18.1 MINORS AND THE CONSTITUTION Art. II, Sec. 13, Const. : The State recognized the role of the youth in nation-building and shall promote and protect their physical, moral spiritual, intellectual, and social well-being. It shall inculcate in the youth patriotism and nationalism, and encourage their involvement in public and civic affairs. 18.2 COVERAGE Section 1, Rule XII, Book III, IRRs : This Rule shall apply to all ERs except [G H] 1. to the Government and GOCCs and 2. to ERs of household helpers and persons in their personal service insofar as such workers are concerned. 18.3 EMPLOYABLE AGE Section 12, RA 7610 as amended by RA 7658 : * General rule: Children below 15 years of age shall not be employed. * Exceptions: [P, E] 1. Child works directly under the sole responsibility of his parents or legal guardian and where only members of the ER family are employed, provided: a. his employment neither endangers his life, safety, health and morals, nor impairs his normal development: b. the parent or legal guardian shall provide the said minor child with the prescribed primary and/or secondary education. 2. Child is employed in entertainment or information through cinema, theater, radio or television, provided: a) Employment contract is concluded by the childs parents or legal guardian, with the expressed agreement of the child concerned, if possible, and the approval of the DOLE. b) The ER shall ensure the protection, health, safety and morals of the child; c) The ER shall institute measures to prevent the childs exploitation or discrimination.


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d) The ER shall formulate and implement, subject to the approval and supervision of competent authorities, a continuing program for training and skills acquisition of the child. e) The ER shall first secure, a work permit from the DOLE which shall ensure observance of the above requirements. Art. 139 : Any person, between 15 and 18 may be employed in any non-hazardous work. In any hazardous work, the employable age is 18 and up. What are considered hazardous work places? [D C M P] c. Where the nature of work exposes the worker to Dangerous environmental elements, contaminations or work conditions. d. Stevedoring, construction work, logging, firefighting, mechanized farming and similar work. e. Manufacture or handling of Explosives and other pyrotechnic products. f. Where the workers are exposed to heavy or power-driven machinery or equipment or tools. * L, 10 years old, was hired as a singer in a carnival which stages shows wherever there is a town fiesta. She is paid P5,000.00 a month. L is therefore always on the road, traveling to different parts of the country. Is her employment lawful? No. Such employment will endanger her health and impair her normal development. She is also deprived of the opportunity to get primary education as she is always traveling to different parts of the country. (Alcantara) 18.4 DISCRIMINATION Art. 140 : Prohibition against child discrimination No ER shall discriminate against any person in respect to terms and conditions of employment on account of his age. * Would a company rule providing for lower wages for workers below 18 years who are inexperienced violate the prohibition? No. The payment of lower wages is by reason of the workers inexperience, not his age. There is no discrimination on account of the workers minority. (Alcantara)
Section 19. WORKING CONDITIONS FOR SPECIAL GROUP OF WORKERS HOUSEHELPERS

19.1 COVERAGE Art. 141 : This chapter shall apply to all persons rendering services in households for compensation 19.2 HOUSEHELPERS Define domestic or household service : Service in the ERs home which is usually necessary or desirable for the maintenance and enjoyment thereof and includes ministering to the personal comfort and convenience of the members of the ERs household, including services of family drivers. (Art. 141) * C was employed by A company to work as a maid in the cottages of its Baguio mining site to attend to the needs of its executives or guests who now and then visit the site. Is S a househelper or domestic servant? No. The services of a househelper is rendered exclusively for the personal comfort and enjoyment of the family of the ER and are performed in the latters home. Services rendered in an executive cottage cannot be considered domestic. S must be considered a regular EE of the mining company. (Apex Mining vs. NLRC) A househelp, laundrywoman, driver, houseboy or a gardener working in staffhouses of a company who attend to the needs of the companys guests and other persons availing of said facilities, is not a househelper or a domestic servant. He is an industrial worker who, therefore, should be paid the industrial rate.


Updated and enhanced with additional cases by ATTY. RENE CALLANTA 19.3 NON-HOUSEHOLD WORK ASSIGNMENT
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*T lives in a compound where he operates a modest candy business. Sometimes, when there is no work in his house, his maids help in the packing of the candies and his family driver delivers the candies to the outlets. How should the work rendered in connection with the candy business be compensated? For work rendered by the maids and the family driver, they should be paid at the rate prescribed by law for non-agricultural workers. (Alcantara) No household helper shall be assigned to work in a commercial industrial or agricultural enterprise at a wage or salary rates lower than that provided for agricultural or non-agricultural workers as prescribed therein. (Art. 145) 19. 4 CONDITIONS FOR EMPLOYMENT * M, 15 years old, worked as a maid in the house of L. She was paid in advance for 3 years and she agreed that she will work for L for the said period. Is there any legal infirmity in the said agreement? Yes. The period contract exceeds the maximum set by the law. Art. 142 provides that the original contract of domestic service shall not last for more than 2 years, although it may be renewed for such periods as may be agreed upon by the parties. Ms contract will therefore be good for only 2 years. (Alcantara) What are the minimum wages for househelpers? g. Metro Manila and highly urbanized cities : P800.00
h. Chartered cities and 1st class municipalities : P650.00

i. Other municipalities : P550
Househelpers receiving P1,000.00 shall be covered by the SSS. Aside from the rights to minimum wage, what other rights are enjoyed by a househelper? [E J B - I F] a. Opportunity for elementary education if a househelper is less than 18 years old (Art. 146) Cost of education shall be part of the househelpers compensation UNLESS there is a stipulation to the contrary. b. Just and human treatment (Art. 147) c. Board, lodging and medical attendance (Art. 148) d. Indemnity for unjust termination of services of 15 days plus the compensation already earned. e. Funeral benefits if the househelper has no relatives with sufficient means in the place where the head of the family lives. (Art. 1696, NCC) [F I B E J] f. If househelper is unjustly dismissed, pay wages already earned + 15 days wages (Indemnity) g. If househelper leaves without justifiable cause, forfeits any unpaid salary not exceeding 15 days * M works as a live-in labandera in the house of T somewhere in Quezon City. She works for 11 hours a day. Based on their contract, she is paid P800.00. Is she entitled to additional compensation? Yes. Although she is merely a househelper, she should not be allowed to work more than 10 hours a day. (Art. 1695, NCC) Since she worked for 11 hours daily, she should be paid an additional compensation beyond the minimum wage of P800.00 set by the law. (Alcantara)


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Art. 150 : If the duration of the household service is not determined either in the stipulation or by the nature of the service, the ER or the househelper may give notice (5 days before the intended termination of service) to put an end to the relationship of the service. If the period of household service is fixed, neither the ER nor the househelper may terminate the contract before the expiration of the term, except for a just cause.
Section 20. WORKING CONDITIONS FOR SPECIAL GROUP OF WORKERS HOMEWORKERS

20.1 ER Art. 155 : ER of homeworkers includes any person, natural or artificial, who for his account or benefit, or on behalf of any person residing outside the country, directly or indirectly or though any EE, agent, contractor, sub-contractor or any other person: a. Delivers or causes to be delivered, any goods, fabricated in or about a home and thereafter to be returned or to be disposed of or distributed in accordance with his directions; or b. Sells any goods, articles or materials to be processed or fabricated in or about a home then rebuys them after such processing or fabrication, either himself or through some other person. 20.2 ER LIABILITY Section 8, Rule XIV, Book III, IRRs : The ER shall be jointly and severally liable to the EEs or homeworkers of the contractor or sub-contractor, in the same manner as if the EEs or homeworkers were directly engaged by the ER. * S represents in the Philippines the Sears chain of department stores in the US. She sells wood and leather to housewives who makes these into wooden clogs according to the patterns and specifications of S. Is there an ER-EE relationship between S and the housewives? Yes. The housewives are considered homeweorkers and S is their ER. (Alcantara) What is the liability of Sears? Sears is jointly and severally liable if S is not able homeworkers. (Sec. 8, Rule XIV, Book III, IRRs) to pay the wages of the
* Terms and conditions of employment involving money claims of homeworker shall be heard by the Regional Director of the DOLE. Beyond that, the case falls under the jurisdiction of the Labor Arbiter. (Azucena)
Section 21. MEDICAL, DENTAL AND CONDITIONAL SAFETY

21.1 FIRST AID TREATMENT AND ER ASSISTANCE Art. 156. Every ER shall keep in his establishment such first-aid medicines and equipment as the nature and conditions of work may require, in accordance with such regulations as the DOLE shall prescribe. Section 1, Rule I, Book IV, IRRs : This rule shall apply to all ERs whether operating for profit or not, including the Government ant GOCCs, which employ in any workplace 1 or more workers. Art. 161 : It shall be the duty of an ER to provide all the necessary assistance to ensure the adequate and immediate medical and dental attendance and treatment to an injured or sick EE in cases of emergency.


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* The ER is not obliged to provide and spend for the continued or follow-up treatment of the EE unless it has bound itself to do so by contract or established practice or policy. (Alcantara) 21.2 EMERGENCY MEDICAL AND DENTAL SERVICES When and What is Required Describe briefly these free emergency medical, dental services and facilities required to be furnished by the ER? 10 to 50 workers : The services of a first-aider shall be provided who may be one of the workers in the workplace and who has immediate access to the first-aid medicines.
51 to 200 workers : Services of a full-time registered nurse shall be provided. However, if the work is non-hazardous, the services of a full-time first-aider may be provided if a nurse is not available. 201 to 300 workers : Services of a full-time registered nurse, a part-time emergency clinic shall be provided regardless of the nature of the undertaking therein. The physician and dentist engaged for such workers shall stay in the premises for at least 2 hours a day. Where the establishment has more than 1 workshift a day, the required 2 hour stay shall be devoted to the workshift which has the biggest number of workers and they shall, in addition to the requirements under this Rule, be subject to call at anytime during the other workshifts to attend to emergency cases.
301 or more workers : Services of a full-time nurse, a full-time physician, a fulltime dentist, a dental clinic, and an infirmary or emergency hospital with one bed capacity for every 100 workers shall be provided. The physician and dentist shall stay in the premises of the workplace for at least 8 hours a day.
Where the workplace has more than 1 shift per day, they shall be at the workplace during the work-shift which has the biggest number of workers and they shall be subject to call at anytime during the other workshifts to attend to emergency cases.
Where the undertaking in such workplace is non-hazardous, the ER may engage the services of a part-time physician and part-time dentist who shall have the same responsibilities ass those of the part-time physician and the part-time dentist in the preceding paragraph, and shall engage the services of a full-time nurse. In all workplaces where there are more than 1 workshift in a day, the ER shall in addition to the requirements under this rule, provide the services of a full-time first-aider for teach workshift. (Sec. 4, Rule I, Book IV, IRRs)
What are considered hazardous work places? [D C M P] Where the nature of the work exposes the worker to Dangerous environmental elements, contaminations or work conditions. Stevedoring, construction work, logging, firefighting, mechanized farming and similar work. Manufacture or handling of explosives and other pyrotechnic products Where the workers are exposed to heavy or power-driven machinery or equipment or tools. An auto repair shop has 8 EEs. What medical and dental services or facilities must be furnished by the owner of the latter? Since the establishment employs less than 10 workers, the owner is only obliged to keep in the workplace first aid medicines. WHEN NOT REQUIRED


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Art. 158 : The requirement for an emergency hospital or dental clinic shall not be applicable in case there is a hospital or dental clinic which is accessible from the ERs establishment and he makes arrangement for the reservation therein of the necessary beds and dental facilities for the use of his EEs: 5 km urban 25 mins rural 21.3 ADMINISTRATION Art. 165 : (a) The DOLE shall be solely responsible for the administration and enforcement of occupational safety and health laws, regulations and standards in all establishments and workplaces wherever they may be located. Chartered cities may be allowed to conduct industrial safety inspections of establishments within their respective jurisdictions where they have adequate facilities and competent personnel for the purpose as determined by the DOLE and subject to national standards established by the latter. (b) The Secretary of Labor may, through appropriate regulations, collect reasonable fees for the inspection of steam boilers, pressure vessels and pipings and electrical installations, the test and approval for safe use of materials, equipment and other safety devices and the approval of plans for such materials, equipment and devices. The fee so collected expended exclusively for the administration and enforcement of safety and other labor laws administered by the DOLE.
Section 22. EE CLASSIFICATION

22.1 COVERAGE Section 1, Rule I, Book VI, IRRs : This Rule shall apply to all establishments and undertakings, whether operated for profit or not, including educational, medical, charitable and religious institutions and organizations, in cases of regular employment with the exception of the Government and its political subdivisions including GOCCs. 22.2 EE CLASSIFICATION 1. Art. 280 a. Regular EEs b. Project EEs c. Casual EEs d. Seasonal EEs 2. Art. 281 Probationary EE 3. Others Contract-fixed period REGULAR EE has been engaged to perform activities which are usually necessary and desirable in the usual business or trade of the ER (Art. 280) A casual employee who has rendered at least 1 year of service, whether continuous or broken, with respect to the activity in which he is employed and his employment shall continue while such activity exists (Art. 280) A probationary employee who is allowed to work after the probationary period (Art. 281) All learners who has been allowed or suffered to work during the first 2 months shall be deemed regular employees if training is terminated by the ER before the end of the stipulated period through no fault of the learner. [Art. 75 (d)] CASUAL - if not covered by the preceding paragraph (280 LC)


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PROJECT - employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of engagement of the EE (280 LC) SEASONAL - the work or services to be performed is seasonal in nature and the employment is for the duration of the season. (280 LC) PROBATIONARY - employment shall not exceed 6 months from the date the EE started working unless covered by apprenticeship agreement stipulating a longer period (281 LC) RECOGNITION AND TYPES Philippine Federation of Credit Cooperatives, Inc v. NLRC (98) This provision of law comprehends three kinds of employees: (a) regular employees or those whose work is necessary or desirable to the usual business of the employer; (b) project employees or those whose employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season; and (c) casual employees or those who are neither regular nor project employees. With regard to contractual employees, the Court in the leading case of Brent School, Inc. v. Zamora, laid down the guidelines before a contract of employment may be held as valid, to wit: "stipulations in employment contracts providing for term employment or fixed period employment are valid when the period were agreed upon knowingly and voluntarily by the parties without force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where 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 over the latter." ER DETERMINATION * What determines whether a certain employment is regular or casual is not the will and words of the ER, much less the procedure of hiring the EE or the manner of paying his salary. It is the nature of the activities performed in relation to the particular business or trade considering all circumstances, and in some cases the length of time of its performance and its continued existence. (De Leon vs. NLRC) Violeta v. NLRC (87) Art. 280 was emplaced in our statute books to prevent the circumvention of the employees 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.
AGREEMENT Tabas v. California Manufacturing Co., Inc. v. NLRC (89) The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of agreement. Hence, the fact that the manpower supply agreement between Livi and California had specifically designated the former as the petitioners' employer and had absolved the latter from any liability as an employer, will not erase either party's obligations as an employer, if an employer-employee relation otherwise exists between the workers and either firm. At any rate, since the agreement was between Livi and California, they alone are bound by it, and the petitioners cannot be made to suffer from its adverse consequences. San Miguel Corporation v. NLRC (98)


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Article 280 reinforces the Constitutional mandate to protect the interest of labor as it sets the legal framework for ascertaining ones nature of employment, and distinguishing different kinds of employees. Its language manifests the intent to safeguard the tenurial interest of worker who may be denied the enjoyment of rights and benefits due to an employee, regardless of the nature of his employment, by virtue of lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual or contractual status for as long as it is convenient to the employer. XXX Thus, the nature of ones employment does not depend on the will or word of the employer. Nor on the procedure of hiring and the manner of designating the employee, but on the nature of the activities to be performed by the employee, considering the employers nature of business and the duration and scope of the work to be done. * Tucor Industries, a company engaged in moving and storage of foods hired packers and drivers pursuant to employment contracts which provided that the workers were employed on as-needed basis and considered daily-hired. Are they considered regular EEs? Yes. Packing and driving activities are usually necessary and desirable in Tucors usual business. They are entitled to security of tenure, the provisions of the written agreement to the contrary notwithstanding. (Tucor vs. NLRC) 22.3 REGULAR EES Who are considered regular EEs?
a. Those who have been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the ER, their employment not being fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement, or seasonal nature and the employment is for the duration of the season. (Art. 280)
b. Casual EEs who have rendered at least 1 year of service is continuous or broken;
they are considered regular EEs with respect to the activities in which they are employed; their employment shall continue while such activity exists. (Id.)
c. A probationary EE who is allowed to work after the probationary period. (Art. 281) d. Learners who have been allowed or suffered work during the first 2 months if
training is terminated by the ER before the end of the stipulated period through no fault of the learner. (Art. 75) TYPE Romares v. NLRC (98) In determining the status of petitioner as a regular employee, reference is made to Article 280 of the Labor Code, as amended. Thus, the two kinds of regular employees are (1) those who are engaged to perform activities which are necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed. Regular status arises from either the nature of work or the EE or the duration of his employment. An EE is regular because of the nature of work and length of service, NOT because of the mode or even the reason for hiring them. * H applied for employment with Holiday Inn and was accepted for On-the-job training as telephone operator for 3 weeks. After the completion of the training she was employed on a probationary basis for 6 months. Four days before the said period, she was dismissed by the hotel on the ground that she failed to meet the standards of the hotel. Is the dismissal valid? No. At the time of her dismissal, she was already a regular EE since the on-the-job


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training was already her probationary period. She was not dropped after that period. Even granting that the probation did not end with the training, there is no reason why that period should not be included in the stipulated 6-month period probation. (Holiday Inn vs. NLRC) * L was hired as a component mechanic by a manufacturing firm for a probationary period for 6 months. Management decided not to hire her after the probationary period. After a month, the company again hired L for another 6-month probationary period. After the 2 nd 6-month probationary period, she was dismissed. Is L a regular EE? Yes. The nature of her job required her to perform activities which are necessary and desirable in the usual business of her ER. She was also rehired after the probationary employment extended to her. This fact of rehiring negates any claim that she failed to qualify as a regular EE. Successive hirings and firings cannot be resorted to by the ER to avoid obligations imposed by law for the protection and benefit of probationary EEs. (Octaviano vs. NLRC) * J is employed on a probationary period for 3 months. Although the ER was not satisfied with his performance, he is allowed to work after the end of the 3-month period. Has J become a regular EE? Yes. An EE is allowed to work after a probationary period shall be considered a regular EE. (Alcantara) NATURE OF WORK What is the primary standard of determining regular employment? The primary standard to determine a regular employment is the reasonable connection between the particular activity performed by the EE in relation to the usual business or trade of the ER. (De Leon vs. NLRC) The connection can be determined by considering the nature of the work performed and its relation to the scheme of a particular business or trade in its entirety. Also, if the EE has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists. (Id.) * What determines regularity or casualness is not the employment contract, written or otherwise, but the nature of the job. If the job is usually necessary or desirable to the main business of the employer, then employment is regular. (A.M. Oreta and Co., Inc. vs. NLRC, 176 SCRA 218) * B, was hired by a Buddhist Temple as secretary and interpreter. She also attended personally to some needs of the Head Monk. Is B a regular EE or a domestic helper? B is a regular EE. Her functions were essential and important to the operation and religious function of the temple; they could not be categorized as mere domestic work. * Stevedores were employed by corporation engaged in deep-sea fishing to unload the tuna fish catch from latters vessels into refrigerated vans. Their work was intermittent depending on the arrival of fishing vessels. There were also times when the stevedores worked on vessels belonging to other companies. Are the stevedores regular EEs? Yes. They were engaged to perform activities usually necessary or desirable in the usual business or trade of their ERs. The activity of catching fish is a continuous process; it cannot be considered as a specific project or a seasonal activity. Their working on other vessels does not militate against the existence of the ER-EE relationship since it is but natural for the worker to seek other employment during the periods of temporary lay-off. (RJL Martinez vs. NLRC) * An electric cooperative only extended permanent appointments to linemen, secretaries, clerks and electricians after 6 months from the date of their hiring. May the ER treat these workers as regular EEs only from the date they were extended permanent appointments? No. Their services are usually necessary or desirable in the usual trade or business of the cooperative. (Central Negros Electric vs. NLRC) What determines REGULARITY or CASUALNESS is not the employment contract, written or otherwise, but the nature of the job. If the job is usually necessary or desirable to the main business of the ER, then employment is REGULAR.


Updated and enhanced with additional cases by ATTY. RENE CALLANTA Phil. Fruit and Vegetable Industries, Inc. v. NLRC (99)
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An employment shall be deemed regular where the employee: a) has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; or b) has rendered at least one year of service, whether such service is continuous or broken, with respect to the activity in which he is employed. XXX It should be noted that complainants' employment has not been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of their appointment or hiring. Neither is their employment seasonal in nature. While it may be true that some phases of petitioner company's processing operations is dependent on the supply of fruits for a particular season, the other equally important aspects of its business, such as manufacturing and marketing are not seasonal. The fact is that large-scale food processing companies such as petitioner company continue to operate and do business throughout the year even if the availability of fruits and vegetables is seasonal. Magante v. NLRC (90) The determining factor of the status of complainant-petitioner or any worker is the nature of the work performed by the latter and the place where he performed his assignment. Tacloban Sagkahan Rice etc. v. NLRC (90) Furthermore, the services performed or to be performed by private respondents are not seasonal in nature. While it may be true that the harvest of palay is seasonal, the milling operations which is the main business of petitioners are not seasonal. The fact is that big rice mills such as the one owned by petitioners continue to operate and do business throughout the year even if there are only two or three harvest seasons within the year. It is a common practice among farmers and rice dealers to store their palay and to have the same milled as the need arises. Thus, the milling operations have no let-up. Private respondents have justifiably argued thus: "The contention of petitioner in saying that respondents/appellees belong to petitioner's pool of casual workers who work only when there is work to be done at the mills particularly during the milling season is indeed untenable for petitioner had been engaged in the rice and corn mill business way back in 1949 whose capitalization involves millions of pesos. The work done by the palay mill for the capitalization of petitioner is so much that it keeps its employees working the whole year round by buying the palay during harvest season for milling. Rice and corn milling business is not seasonal in nature, contemplated in the Labor Code. It is the planting and harvesting of rice that is seasonal. . . ." Kimberly etc. v. Drilon (90) While the actual regularization of these employees entails the mechanical act of issuing regular appointment papers and compliance with such other operating procedures as may be adopted by the employer, it is more in keeping with the intent and spirit of the law to rule that the status of regular employment attaches to the casual worker on the day immediately after the end of his first year of service. To rule otherwise, and to instead make their regularization dependent on the happening of some contingency or the fulfillment of certain requirements, is to impose a burden on the employee which is not sanctioned by law. That the first stated position is the situation contemplated and sanctioned by law is further enhanced by the absence of a statutory limitation before regular status can be acquired by a casual employee. The law is explicit. As long as the employee has rendered at least one year of service, he becomes a regular employee with respect to the activity in which he is employed. The law does not provide the qualification that the employee must first be issued a regular appointment or must first be formally declared as such before he can acquire a regular status. Obviously, where the law does not distinguish, no distinction should be drawn. Ecal v. NLRC (91)


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Since petitioners perform tasks which are usually necessary or desirable in the main business of Hi-Line, they should be deemed regular employees of the latter 13 and as such are entitled to all the benefits and rights appurtenant to regular employment. Mercado v. NLRC (91) The first paragraph answers the question of who are regular employees. It states that, regardless of any written or oral agreement to the contrary, an employee is deemed regular where he is engaged in necessary or desirable activities in the usual business or trade of the employer, except for project employees. Datu and Co., Inc. v. NLRC (96) In De Leon vs. NLRC this Court ruled that when the activities performed by the employee are usually necessary or desirable in the usual business or trade of the employer, the employment is deemed regular notwithstanding contrary agreement. The determination of whether employment is casual or regular does not depend on the will or word of the employer, and the procedure of hiring and manner of paying, but on the nature of the activities performed by an employee, and to some extent, the length of performance, and its continued existence. International Pharmaceutical, Inc. v. NLRC (98) In Brent School, Inc. v. Zamora, although the work done under a contract is necessary and usually desirable in relation to the usual business of the employer, a contract for a fixed period may be made so long as it is entered into freely, voluntarily, and knowingly by the parties. TEST: Whether work was necessary & desirable to the main business of ER In the contract, there was no mention of any project or consultancy. The work she performed was manifestly necessary and desirable to the usual business of petitioner, considering that she is engaged in the manufacture and production of medicinal preparations. STANDARD: reasonable connection between the particular activity performed by the ER in relation to the usual business or trade of the ER. - connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety Labor Congress of the Phil. v. NLRC (98) That petitioner employees are "pakyao" or piece workers does not imply that they are not regular employees entitled to reinstatement. Private respondent Empire Food Products, Inc. is a food and fruit processing company. In Tabas v. California Manufacturing Co., Inc., this Honorable Court held that the work of merchandisers of processed food, who coordinate with grocery stores and other outlets for the sale of the processed food is necessary in the day-to-day operation[s] of the company. With more reason, the work of processed food repackers is necessary in the day-to-day operation[s] of respondent Empire Food Products.
Highway Copra Trades v. NLRC (98) Article 280 of the Labor Code describes a regular employee as one who is either (1) engaged to perform activities which are necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which he is employed. The Labor Code draws a fine line between regular and casual employees to protect the interests of labor. We ruled in Baguio Country Club Corporation vs. NLRC that "its language evidently manifests the intent to safeguard the tenurial interest of the worker who may be denied the rights and benefits due a regular employee by virtue of lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual status for as long as convenient." Thus, notwithstanding any agreements to the contrary, an employment is


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deemed regular when the activities performed by the employee are usually necessary or desirable in the usual business or trade of the employer. The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer, i.e. if the work is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. San Miguel Corp. v. NLRC (98) A regular employee is distinguished from a project employee by the fact that the latter is employed to carry out a specific project or undertaking, the duration or scope of which was specified at the time the employees were engaged. A "project" has reference to a particular job or undertaking that may or may not be within the regular or usual business of the employer. In either case, the project must be distinct, separate and identifiable from the main business of the employer, and its duration must be determined or determinable. Millares v. NLRC (2000) The primary standard to determine a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists. HIRING EXTENDED PERIOD * A company engaged in construction hired carpenters and issued them some notices of employment that they were hired for specific projects and their employment shall be deemed automatically terminated at the completion of the project. However, when the project to which they were assigned were completed, they would be immediately assigned to the next project. Considering that they have been working for a number of years, are they regular EEs? Yes. They perform activities usually necessary or desirable in the usual business of the company. They are considered non-project EEs of the construction company. (Fegurin vs. NLRC) * F, a skilled welder was hired by DM Consunji for several projects wherein he was assigned. There was also evidence that the worker was under obligations to be always available on call by the company and that he could not offer his services to other ERs. Is he a regular EE? No. F is a project EE. (Fernandez vs. NLRC)
Audio Electric Co., Inc. v. NLRC (99) We have held that where the employment of project employees is extended long after the supposed project has been finished, the employees are removed from the scope of project employees and considered regular employees. Lao Construction v. NLRC (98) The principal test in determining whether particular employees are project employees distinguished from regular employees is whether the project employees are assigned to carry out specific project or undertaking, the duration (and scope) of which are specified at the time the employees are engaged for the project. Project in the realm of business and industry refers to a particular job or undertaking that is within the regular or usual business of employer, but


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which is distinct and separate and identifiable as such from the undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. While it may be allowed that in the instant case the workers were initially hired for specific projects or undertakings of the company and hence can be classified as project employees, the repeated re-hiring and the continuing need for their services over a long span of time have undeniable made them regular employees. Thus, we held that where the employment of project employees is extended long after the supposed project has been finished, the employees are removed from the scope of project employees and are considered regular employees. While length of time may not be a controlling test for project employment, it can be a strong factor in determining whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are vital, necessary and indispensable to the usual business or trade of employer. Bernardo v. NLRC (99) As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the pernicious practice of making permanent casuals of our lowly employees by the simple expedient of extending to them probationary appointments, ad infinitum." The contract signed by petitioners is akin to a probationary employment, during which the bank determined the employees' fitness for the job. When the bank renewed the contract after the lapse of the sixmonth probationary period, the employees thereby became regular employees. No employer is allowed to determine indefinitely the fitness of its employees. CONTRACT TO CONTRACT * P was hired by a textile firm as a machine operator. Ps employment contract stipulates that the company shall make an annual assessment of his performance and his continued employment shall depend on said evaluation. Is the stipulation valid? No. It determines the security of tenure enjoyed by P who is a regular EE. His continued employment is made to depend upon the whims of the ER. (Alcantara) * M Co., is engaged in the manufacture of furniture for export. It has regular customers but also receives special orders. It hires temporary workers for special orders. These are made to sign temporary contracts. Are these workers considered regular workers? Yes. They are engaged in activities which are usually necessary of desirable in the usual business or trade of the ER. Significantly, the special orders are not seasonal but more or less regular, requiring the continuous services of the temporary workers. The temporary employment contracts have little probative value. (Mehitabel Furniture vs. NLRC) * M was employed as a carpenter by a company engaged in the concrete structural business. His work involved the making of moulds for bridges. He was never assigned to work outside the plant of the ER. Every 3 months, he was made to fill up and sign an employment contract relating to a particular phase of a work in a specific project. Is M a regular EE? Yes. He was assigned to perform tasks which are usually necessary or desirable in the usual trade or business of the ER. Despite the signing of employment contracts, the work did not end on a project to project basis. He continued to perform the same kind of work throughout his period of employment. (Magante vs. NLRC) Beta Electric Corp. v. NLRC (90) The petitioner cannot rightfully say that since the private respondent's employment hinged from contract to contract, it was ergo, "temporary", depending on the term of each agreement. Under the Labor Code, an employment may only be said to be "temporary" "where [it] has been fixed for a specific undertaking the completion of or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season." Quite to the contrary, the private respondent's work, that of "typist-clerk" is far from being "specific" or "seasonal", but rather, one, according to the Code, "where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business." And under the Code, where one performs such activities, he is a regular employee, "[t]he provisions of written agreement to the contrary notwithstanding . . .


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It is true that in Biboso v. Victorias Milling Company, Inc., we recognized the validity of contractual stipulations as to the duration of employment, we can not apply it here because clearly, the contract-to-contract arrangement given to the private respondent was but an artifice to prevent her from acquiring security of tenure and to frustrate constitutional decrees. LENGTH OF TIME Maraguinot v. NLRC (98) However, the length of time during which the employee was continuously re-hired is not controlling, but merely serves as a badge of regular employment. 22.4 PROJECT EES (TEMPORARY EES) Who are considered project EEs? A project EE is one 1- whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the EE or 2- where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. (Art. 280) DEFINED Magcalas v. NLRC (97) Regular employees cannot at the same time be project employees. Art. 280 of the Labor Code states that regular employees are those whose work is necessary or desirable to the usual business of the employer. The two exceptions following the general description of regular employees refer to either project or seasonal employees. It has been ruled in the case of ALUTUCP v. NLRC that: In the realm of business and industry, we note that project could refer to one or the other of at least two distinguishable types of activities. First, a project could refer to particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. The typical example of this type of project is a particular construction jib or project of a construction company. A construction company ordinarily carries out 2 or more discrete (should distinct) identifiable construction projects: e.g. a 25-story hotel in Makati; a residential condominium building I Baguio City; and a domestic air terminal in Iloilo City. Employees who are ired for the carrying out of 12 of these separate projects, the scope and duration of which has been determined and made known to the employees at the time of employment, are properly treated as project employees and their service may be lawfully terminated at completion of the project. The term "project" could also refer to, secondly, a particular job or undertaking that is not within the regular business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times. TEST OF PROJECT EES What is the principal test to determine whether EEs are project EEs as distinguished from regular EEs? The test is whether or not the project EEs are assigned to carry out a specific project or undertaking the duration and scope of which are specified at the time the EEs are engaged for that project. (ALU-TUCP vs. NLRC) Lao Construction v. NLRC (97)


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The principal test in determining whether particular employees are project employees distinguished from regular employees is whether the project employees are assigned to carry out specific project or undertaking, the duration (and scope) of which are specified at the time the employees are engaged for the project. Project in the realm of business and industry refers to a particular job or undertaking that is within the regular or usual business of ER, but which is distinct and separate and identifiable as such from the undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. * The predetermination of the duration or period of a project employment is important in resolving whether one is a project employee or not. On this score, the term period has been defined to be a length of existence; duration. A point of time marking a termination as of a cause or an activity; an end, a limit, a bound; a conclusion; termination. A series of years, months or days in which something is completed. A time of definite length or the period from one fixed date to another fixed date. (Violeta vs. NLRC, 280 SCRA 520.) * It has been held that the length of service of a project employee is not the controlling test of employment tenure but whether or not the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee. (See Hilario Rada vs. NLRC, 205 SCRA 69, and Sandoval Shipping, Inc. vs. NLRC, 136 SCRA 674 ) INDICATORS OF PROJECT EMPLOYMENT Section 2.2 of Department Order No. 19 states: Either one or more of the following circumstances, among others, may be considered as indicators that an employee is a project employee: (a) The duration of the specific/identified undertaking for which the worker is engaged is reasonably determinable; (b) Such duration, as well as the specific work/service to be performed is defined in an employment agreement and is made clear to the employee at the time of hiring; (c) The work/service performed by the employee is in connection with the particular project/undertaking for which he is engaged; (d) The employee, while not employed and awaiting engagement, is free to offer his services to any other employer; (e) The termination of his employment in the particular project/undertaking is reported to the Department of Labor and Employment (DOLE) Regional Office having jurisdiction over the workplace within 30 days following the date of his separation from work, using the prescribed form on employees termination/dismissal/suspension; (f) An undertaking in the employment contract by the employer to pay completion bonus to the project employer to pay completion bonus to the project employee as practiced by most construction companies. (Italics supplied) (Samson vs. NLRC and AG&P Co., 253 SCRA 112.) Members of a WORK POOL from which a construction company draws its project EEs, IF considered EE of the construction company while in the work pool, are non-project EEs or EEs for an indefinite period. If they are employed in a particular project, the completion of the project or any phase thereof will not mean severance of ER-EE relationship. Where the employment of project EEs is extended long after the supposed project has been finished, the EEs are removed from the scope of project employment and are considered REGULAR EE. PROJECT EES * PPI, a company providing construction supervision of the Manila Expressway hired R for a term of 24 months. After the expiration of the period, he was hired for another term of 10 months, and then for 19 months. All these were entered during various stages prior to the completion of the construction project. Was R a regular EE of PPI? No. He was hired in a specific project or undertaking as a driver. He was a project EE whose employment terminated upon the expiration of his employment contract or upon the completion of the project. (Rada vs. NLRC) * A company engaged in the building and repair of vessels hired welders to work in the repair of a specified vessel. Is the employment of the workers considered regular? No. They are


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project EEs whose work is co-terminus with the project for which they are hired. (Sandoval Shipyards vs. Leogardo) * Consumer Pulse hired field interviewers on specified project basis for a definite period of time. Many of the interviewers worked for several projects. Generally, the contractual employment is not continuous but intermittent, sporadic with long intervals of idle periods in between projects due to lack of work or job contracts. Are the filed interviewers considered regular EEs? No. The interviewers were hired for specific projects the completion or termination of which are determined at the start of their employment. (Manansag vs. NLRC) * A construction firm hired as project EEs several workers. Instead of being assigned solely to the job sites, they were also made to work as inventory clerk or warehouseman in the companys central shop. Are they project EEs? No. Their work did not end upon the completion of a project. they perform their jobs even after a job had been finished. Since they performed tasks vital and indispensable to the efficient administration and completion of the companys various projects, they are considered regular EEs. (Capitol Industrial vs. NLRC) Phil. Jai-Alai and Amusement Corp. v. Clave (83) Private respondents were hired for a specific project - to renovate the main building, where major repairs such as painting the main building, repair of the roof, cleaning of clogged water pipes and drains, and other necessary repairs were required. It was made known, and so understood at the start of the hiring, that their services would last until the completion of the renovation. They rendered service from February 2 to December 11, 1976, almost 11 months, but less than a year. In its Report to the Department of Labor, petitioner gave the reason for termination as "due to termination of project." It was only private respondents, out of the 32 hired for the renovation, who questioned their termination, the 30 other workers having acquiesced to their termination. Private respondents merely alleged in their letter-complaint that "kami'y inalis sa trabaho ng walang dahilan." There could be no other reason, however, than that the termination of private respondents was because their services were no longer needed and they had nothing more to do since the project for which they were hired had been completed. The fact was not that private respondents were hired as maintenance helpers, because petitioner corporation had a regular maintenance force. Private respondents, as well as the other 30 workers, were needed as additional hands for the renovation work and not for ordinary upkeep and maintenance. The erection of the fire escape and other small jobs after the renovation cannot be deemed maintenance but more of casual work. The casual or limited character of private respondents' employment, therefore, is evident. They were engaged for a specific project or undertaking and fall within the exception provided for in Article 231 of the Labor Code, supra. Not being regular employees, it cannot be justifiably said that petitioner had dismissed them without just cause. They are not entitled to reinstatement with full backwages. Magante v. NLRC (91) As aptly observed by the Solicitor-General, petitioner has established that since the very inception of his employment in 1980, he was never deployed from project to project of private respondent but had been regularly assigned to perform carpentry work under the supervision of a certain Bernardo Padaon who, since 1964 until his resignation on January 2, 1982 worked for private respondent as the supervisor of its Carpentry Department. This goes to show two things: that petitioner was assigned to perform tasks which are usually necessary or desirable in the usual business or trade of private respondent; and that said assignments did not end on a project to project basis, although the contrary was made to appear by private respondent through the signing of separate employment contracts allegedly for different projects because it is indeed obvious that petitioner continued to perform the same kind of work throughout his period of employment allegedly considered to have been done on a project to project basis. Although petitioner had only rendered almost two years of service, nevertheless this should not detract from his status of being a regular employee because as correctly stated by the labor arbiter, the determining factor of the status of complainant-petitioner or any worker is the nature of the work performed by the latter and the place where he performed his assignment. Tucor Industries, Inc. v. NLRC (91)


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The term "specific project or undertaking" under Article 280 of the Labor Code contemplates an activity which was commonly or habitually performed or such type of work which is not done on a daily basis but only for a specific duration of time or until the completion of the project. The services employed are thus necessary or desirable in the employer's usual business only for the period of time it takes to complete the project. Without the performance of such services on a regular basis, the employer's main business is not expected to grind to a halt. In the case at bar, private respondents were assigned to do carpentry work, packing and driving, activities which are usually necessary and desirable in petitioners' usual business and which thus had to be done on a regular basis. Fernandez v. NLRC (94) Inasmuch as the documentary evidence clearly showed gaps of a month or months between the hiring of petitioner in the numerous projects wherein he was assigned, the ineluctable conclusion is that petitioner has not continuously worked with private respondent but only intermittently as he was hired solely for specific projects. As such, he is governed by Policy Instruction No. 20, the pertinent portions of which read as follows: "Generally, there are two types of employees in the construction industry, namely 1) Project Employees and 2) Non-project Employees. "Project employees are those employed in connection with a particular construction project. Nonproject employees are those employed by a construction company without reference to a particular project. "Project employees are not entitled to termination pay if they are terminated as a result of the completion of the project or any phase thereof in which they are employed, regardless of the number of projects in which they have been employed by a particular construction company." XXX The proviso in the second paragraph of Article 280 of the Labor Code has recently been explained in Mercado v. NLRC, where it was held that said proviso deems as regular employees only those "casual" employees who have rendered at least one year of service regardless of the fact that such service may be continuous or broken. It is not applicable to "project" employees, who are specifically excepted therefrom. Phil. Airlines, Inc. v. NLRC (98) The position of STELLAR that individual private respondents were its project employees is totally unfounded. A regular employee is distinguished from a project employee by the fact that the latter is employed to carry out a specific project or undertaking, the duration or scope of which was specified at the time the employees were engaged. A project has reference to a particular job or undertaking that may or may not be within the regular or usual business of the employer. In either case, the project must be distinct, separate and identifiable from the main business of the employer and its duration must be determined or determinable. Phil. Fruits and Vegetables Industries, Inc. v. NLRC (99) It should be noted that complainants' employment has not been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of their appointment or hiring. Neither is their employment seasonal in nature. While it may be true that some phases of petitioner company's processing operations is dependent on the supply of fruits for a particular season, the other equally important aspects of its business, such as manufacturing and marketing are not seasonal. The fact is that large-scale food processing companies such as petitioner company continue to operate and do business throughout the year even if the availability of fruits and vegetables is seasonal. Imbuido v. NLRC (2000) We agree with the findings of the NLRC that petitioner is a project employee. The principal test for determining whether an employee is a project employee or a regular employee is whether the project employee was assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time the employee was engaged for that


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project. A project employee is one whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. In the instant case, petitioner was engaged to perform activities which were usually necessary or desirable in the usual business or trade of the employer, as admittedly, petitioner worked as a data encoder for private respondent, a corporation engaged in the business of data encoding and keypunching, and her employment was fixed for a specific project or undertaking the completion or termination of which had been determined at the time of her engagement, as may be observed from the series of employment contracts between petitioner and private respondent, all of which contained a designation of the specific job contract and a specific period of employment. RATIONALE The rationale for this rule is that if a project has already been completed, it would be unjust to require the ER to maintain them in the payroll while they are doing absolutely nothing except waiting until another program begun, if at all. In effect, these stand-by workers would be enjoying the status of a privileged retainers, collecting payments for work not done, to be disbursed by the ER from profits not earned. This is not fair by any standards and can only be lead to a coddling of labor at the expense of management. (De Ocampo vs. NLRC) EMPLOYER OBLIGATION A. M. Oreta and Co., Inc. v. NLRC (89) The law is clear to the effect that in all cases involving employees engaged on probationary' basis, the employer shall make known to the employee at the time he is hired, the standards by which he will qualify as a regular employee. Nowhere in the employment contract executed between petitioner company and respondent Grulla is there a stipulation that the latter shall undergo a probationary period for three months before he can quality as a regular employee. There is also no evidence on record showing that the respondent Grulla had been apprised of his probationary status and the requirements which he should comply in order to be a regular employee. In the absence of these requisites, there is justification in concluding that respondent Grulla was a regular employee at the time he was dismissed by petitioner. As such, he is entitled to security of tenure during his period of employment and his services cannot be terminated except for just and authorized causes enumerated under the Labor Code and under the employment contract. IMPLICATION Project EEs are not entitled to separation pay as their work was coterminous with the completion of the project. (Sandoval Shipyards vs. Leogardo) ALU-TUCP v. NLRC (94) In other words, the employment of each 'project worker' is dependent and co-terminous with the completion or termination of the specific activity or undertaking [for which] he was hired which has been pre-determined at the time of engagement. Since, there is no showing that they (13 complainants) were engaged to perform work-related activities to the business of respondent which is steel-making, there is no logical and legal sense of applying to them the proviso under the second paragraph of Article 280 of the Labor Code, as amended. xxx In the case of Mercado, Sr. vs. National Labor Relations Commission, this Court ruled that the proviso in the second paragraph of Article 280 relates only to casual employees and is not applicable to those who fall within the definition of said Article's first paragraph, i.e., project employees. The familiar grammatical rule is that a proviso is to be construed with reference to the immediately preceding part of the provision to which it is attached, and not to other sections thereof, unless the clear legislative intent is to restrict or qualify not only the phrase immediately preceding the proviso but also earlier provisions of the statute or even the statute itself as a whole. SECURITY OF TENURE


Updated and enhanced with additional cases by ATTY. RENE CALLANTA Southern Cotabato v. NLRC (87)
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It is not disputed that private respondents were project employees. As such, they were entitled to security of tenure guaranteed by the Constitution and the Labor Code for the duration of the project they were hired for, or the phases thereof to which they were assigned or in connection with which they rendered services. The length of their employment id determined by the completion of the task for which they were hired. SPECIFIED PERIOD Purefoods Corp. V. NLRC (87) In the leading case of Brent School v. Zamora, which was reaffirmed in numerous subsequent cases, the 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 by 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 moral WORKPOOL EMPLOYEES Maraguinot v. NLRC (98) A project EE or a member of a work pool may acquire the status of a regular employee when the following concur: 1. There is a continuous rehiring of project employees even after cessation of a project; 2. The tasks performed by the alleged project employee are vital, necessary, and indispensable to the usual business or trade of the employer. However, the length of time during which the EE was continuously rehired is not controlling, but merely serves as a badge of regular employment. A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment during temporary breaks in the business, provided, that the worker shall be available when called to report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the employer and employee for it prevents the unjust situation of coddling labor at the expense of capital and at the same time enables the workers to attain the status of regular employees. Aguilar Corp. v. NLRC (97) Members of a work pool from which a construction company draws its project employees, if considered employees of the construction company while in the work pool, are non-project employees, or employees for an indefinite period. If they are employed in a particular project, the completion of the project or any phase thereof will not mean severance of the employeremployee relationship. LENGTH OF SERVICE Palomares v. NLRC (97) Length of service is not the controlling determinant of the employment tenure of a project employee. It is based on whether or not the employment has been fixed for a specific project or undertaking, the completion of which has been determined at the time of the engagement of the employee. Furthermore, the 2nd paragraph of Art. 280, providing that an employee who has rendered service for at least 1 year, shall be considered a regular employee, pertains to casual employees and not to project employees such as petitioners. WHAT MAKES A PROJECT EMPLOYEE REGULAR


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It is not disputed that petitioner had been working for private respondent for approximately twenty-eight (28) years of the adjudication of his pliant by respondent NLRC, and that his project-to-project employment was renewed several times. With the successive contracts of employment wherein petitioner continued to perform virtually the same kind of work, i.e., as rigger, throughout his period of employment, it is manifest that petitioners assigned tasks were usually necessary or desirable in the usual business or trade of private respondent. The repeated re-hiring and continuing need for his services are sufficient evidence of the necessity and indispensability of such services to private respondents business or trade. Where from the circumstances it is apparent that periods have been imposed to preclude the acquisition of tenurial security by the employee, they should be struck down as contrary to public policy, morals, good customs or public order. (Samson vs. NLRC, 253 SCRA 112) Completion of Project Not Valid Reasons to Separate a Project Employee Who has Become Regular When a project employee who has gained regular status is separated from employment on the alleged ground of completion of project, such separation is for an invalid reason, hence unwarranted. Because the termination is unjustified the employee is entitled to reinstatement with back-wages, without loss of seniority rights and other benefits that may have accrued. (See Maraguinot and Enero vs. NLRC and Viva Films, 284 SCRA 539.) 22.5 CASUAL EES What is casual employment? An employment is casual when the EE is engaged to perform tasks or activities which are not usually necessary or desirable in the usual business or trade of the ER. (Art. 280) After 1 year becomes regular It is not the nature of his work but the passage of time that gives him a regular status. His regularness attaches only to the particular activity that he has been doing while still a casual. NATURE OF WORK AM Oreta & Co., Inc v. NLRC (89) What determines regularity or casualness is not the employment contract, written or otherwise, but the nature of the job. If the job is usually necessary or desirable to the main business of the employer, then employment is regular. ONE YEAR SERVICE Tabas v. California Manufacturing Co. Inc. (89) The fact that the petitioners have been hired on a "temporary or seasonal" basis merely is no argument either. As we held in Philippine Bank of Communications v. NLRC, a temporary or casual employee, under Article 218 of the Labor Code, becomes regular after service of one year, unless he has been contracted for a specific project. And we cannot say that merchandising is a specific project for the obvious reason that it is an activity related to the dayto-day operations of California. The records show that the petitioners had been given an initial six-month contract, renewed for another six months. Accordingly, under Article 281 of the Code, they had become regular employees - of California - and had acquired a secure tenure. Hence, they cannot be separated without due process of law. Phil. Geothermal, Inc. v. NLRC (90) Assuming therefore, that an employee could properly be regarded as a casual (as distinguished from a regular employee) he becomes entitled to be regarded as a regular employee of the employer as soon as he has completed one year of service. Under the


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circumstances, employers may not terminate the service of a regular employee except for a just cause or when authorized under the Labor Code. It is not difficult to see that to uphold the contractual arrangement between the employer and the employee would in effect be to permit employers to avoid the necessity of hiring regular or permanent employees indefinitely on a temporary or casual status, thus to deny them security of tenure in their jobs. Article 106 of the Labor Code is precisely designed to prevent such result. 17 Mercado v. NLRC (91) The second paragraph of Art. 280 demarcates as "casual" employees, all other employees who do not fall under the definition of the preceding paragraph. The proviso, in said second paragraph, deems as regular employees those "casual" employees who have rendered at least one year of service regardless of the fact that such service may be continuous or broken. Cebu Engineering and Development Co., v. NLRC (98) Private respondent belonged to a work pool from which CEDCO drew its employees and assigned them to different projects. He was not only hired for a specific project. He was a regular employee assigned to different projects. He was in fact a mainstay of the company. Contrary to petitioner's claim, his services were not terminated on 30 November 1992. He continued working after that. Hence, according to the law, on 1 December 1992, after a year of continuous work, he became a regular employee regardless of any contract to the contrary. It is in keeping with the intent and spirit of the law to rule that the status of regular employment attaches to the casual worker on the day immediately after the end of the first year of service. Highway Copra Traders v. NLRC (98) The Labor Code draws a fine line between regular and casual employees to protect the interests of labor. We ruled in Baguio Country Club Corporation vs. NLRC that "its language evidently manifests the intent to safeguard the tenurial interest of the worker who may be denied the rights and benefits due a regular employee by virtue of lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual status for as long as convenient." Thus, notwithstanding any agreements to the contrary, an employment is deemed regular when the activities performed by the employee are usually necessary or desirable in the usual business or trade of the employer. * Jai Alai Manila hired a mason and plumber to do renovation work on its building. The work lasted for 11 months. Are the mason and plumbers regular EEs? No. They were engaged for a specific project or undertaking. They are casual EEs and as such do not enjoy the security of tenure since they work for only 11 months. (Philippine Jai Alai vs. Clave) 22.6 SEASONAL EES * Agricultural workers were hired by the owners of a rice and sugar land to perform particular phases of agricultural work necessary in rice production, after which they were free to render services. Considering that they rendered services for many years, in their employment, though seasonal, deemed regular? No. They are considered project or seasonal EEs .their employment legally ends upon the completion of the project or the season. (Mercado vs. NLRC) Seasonal Employment Court decisions exist which consider seasonal EEs as regular EEs. A 1963 ruling said: Regular seasonal EEs are those called to work from time to time. The nature of their relationship with the ER is such that during off season they are temporarily laid off but during summer season they are reemployed, or when their services may be needed. They are not, strictly speaking, separated from the service but are merely considered as on leave of absence without pay until they are reemployed. As such those EEs can be considered as in the regular employment of the ER. (Manila Hotel Co. vs. CIR, et al., GR No. L-18875 Sept 30, 1963; Indusl Comml Agric. Workers Org. vs. CIR, et al., GR No. L-21465, March 31, 1966; Tacloban Sagkahan Rice, et. al., vs. NLRC, GR No. 73806, March 21, 1990.)


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Seasonal EEs are in regular employment because of the nature of their job and not because of the length of time they have worked. (Azucena) Phil. Tobacco etc. v. NLRC (98) The Court has previously ruled in Manila Hotel Company v. CIR that seasonal workers who are called to work from time to time and are temporarily laid off during-off season are not separated from service in said period, but are merely considered on leave until re-employed. SEASONAL PAKIAO EMPLOYEES The nature of their employment, i.e. pakiao basis, does not make petitioners independent contractors. Pakiao workers are considered employees as long as the employer exercises control over the means by which workers are to perform their work. Considering that petitioners did their work inside private respondents farm, the latter necessarily exercised control over the work performed by petitioners. Petitioners rendered services essential for the cultivation of respondents farm. While the services were continuous in the sense that they were not rendered every day throughout the year, as in the nature of farm work, petitioners had never stopped working for respondent from year to year from the time he hired them to the time he dismissed them. The seasonal nature of petitioners work does not detract from the conclusion that employeremployee relationship exists. Seasonal workers whose work is not merely for the duration of the season, but who are rehired every working season are considered regular employees. The circumstance that petitioners do not appear in respondents payroll does not destroy the employer-employee relationship between them. Omission of petitioners in the payroll was not within their control; they had no hand in the preparation of the payroll. This circumstance, even if true, cannot be taken against petitioners. (Zamudio vs. NLRC,G.R. No. 76723, March 25, 1990) 22.7 CONTRACT- FIXED PERIOD * A was engaged as athletic director by Brent School for a fixed term of 5 years. She was not rehired after that term. Is she a regular EE? No. As employment was for a fixed period, her employment ended. It does not necessarily follow that where the duties of the EEs entail activities which are usually necessary or desirable in the usual trade or business of the ER, the parties should not be forbidden to stipulate any period of time for these activities. There is nothing essentially contradictory between a definite period of employment and the nature of the EEs duties. (Brent vs. Zamora) Give the criteria under the fixed period contracts of employment cannot be said to be in circumvention of the workers security of tenure. 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 EE and absent any other circumstances vitiating his consent; or 2) It satisfactorily appears that the ER and EE dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former on the latter. (Pantranco vs. NLRC) 3) When such stipulations were not designed to circumvent the laws on security of tenure. (Brent vs. Zamora) Pretermination of Fixed-Period Employment A fixed-period employee is not regular because his job, as anticipated and agreed, will exist only for a specified period of time. In other words, it is not permanent. But he is deemed regular in two senses: (1) the nature of his work is necessary or desirable in the principal business of the employer; and (2) he enjoys security of tenure during the limited time of his employment. Before the end of the agreed period he cannot be removed without a valid cause and valid procedure. If this is done, the employer commits illegal dismissal. In fact, he commits a breach of contract. In which case, the Court has ruled, the employee is entitled to payment of his salaries corresponding to the unexpired portion of his contract. (See Vinta Maritime Co.. vs. NLRC, 284 SCRA 656; Also Tierra International Construction vs. NLRC, 256 SCRA 36.)


Updated and enhanced with additional cases by ATTY. RENE CALLANTA Cielo v. NLRC (91)
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In Brent School, Inc. vs. Zamora, the Court affirmed the general principle that "where from the circumstances it is apparent that 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, morals, etc." International Pharmaecuticals, Inc. v. NLRC (98) On the other hand the written contract in this case provided that it was subject to renewal by mutual consent of the parties at least thirty days before its expiration on March 18, 1984. There is no evidence to show that the parties mutually agreed to renew their contract. On the other hand, to sustain petitioner's contention that there was an implied extension after the expiration of the original contract would make it possible for employers like petitioner to circumvent Art. 280 of the Labor Code and thus prevent an employee from becoming regular through the simple expedient of making him sign a contract for a term and then extend to him a contract term, after term, after term. St. Theresas School v. NLRC (98) Article 280 of the Labor Code does not proscribe or prohibit an employment contract with a fixed period provided the same is entered into by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstance vitiating consent. It does not necessarily follow that where the duties of the employee consist of activities usually necessary or desirable in the usual business of the employer, the parties are forbidden from agreeing on a period of time for the performance of such activities. There is thus nothing essentially contradictory between a definite period of employment and the nature of the employee's duties. It goes without saying that contracts or employment govern the relationship of the parties. In this case, private respondent's contract provided for a fixed term of nine (9) months, from June 1, 1991 to March 31, 1992. Such stipulation, not being contrary to law, morals, good customs, public order and public policy, is valid, binding and must be respected. Servidad v. NLRC (99) The language of the contract in dispute is truly a double-bladed scheme to block the acquisition of the employee of tenurial security. Thereunder, private respondent has two options. It can terminate the employee by reason of expiration of contract, or it may use "failure to meet work standards" as the ground for the employee's dismissal. In either case, the tenor of the contract jeopardizes the right of the worker to security of tenure guaranteed by the Constitution. In the case of Brent School, Inc. vs. Zamora, et al., the Court upheld the principle that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be disregarded for being contrary to public policy. * C was engaged by a trucking company to work as a truck driver for a period of six months. It appears that all drivers of the company were hired on fixed contract basis. The company merely filled in the blanks in a mimeographed form with the corresponding drivers data. After the 6-month period, Cs services were terminated. Was this a valid termination? No. The contract for a fixed period was a clever scheme to prevent its EEs from becoming regular EEs. he should be considered a regular EE. (Cielo vs. NLRC) * 15 years after his dismissal for cause. A was re-hired as a driver for 1 month. Did such rehiring result in his reacquisition of his former regular status? No. The contract specifically provided for a fixed term. (Pantranco vs. NLRC)
22.8 PROBATIONARY EES Art. 281: Probationary employments hall not exceed six months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period.


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The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. * The provision of Article 281 that probationary employment shall not exceed six (6) months means that the probationary employee may be dismissed for cause at any time before the expiration of six (6) months after hiring. If after hiring for less than six (6) months, he is found to be unfit for the job, he can be dismissed. But if he continues to be employed longer than six (6) months, he ceases to be a probationary employee and becomes a regular or permanent employee. Six-month probation, however, is a general rule. As we will see in Bueser vs. Leogardo, infra, probation longer than six months can be justified. Art. 61, 2nd Sentence, Book VI, Rule 1, Sec. 6, Omnibus Rules There is a probationary employment where the employee upon his engagement, is made to undergo a trial period during which the employer determines his fitness to qualify for regular employment, based on reasonable standards made known to him at the time of engagement. What is a probationary employment? It is employment for a specified period generally not exceeding 6 months for the purpose of determining whether the EE can qualify for regular employment in accordance with reasonable standards prescribed by the ER. (Alcantara) In all cases involving EEs engaged in probationary basis, the ER shall make known to the EE at the time he is hired the standards by which he will qualify as a regular EE. FAILURE TO QUALIFY as a regular EE in accordance with the reasonable standards of the ER is a just cause for terminating a probationary EE. What is the probationary period for apprentices and learners? - Apprentices : The probationary period in the apprenticeship may not be under probationary employment in the company where he trained. In another company, however, the probationary period for him would be 6 months. - Learners : If the job is learnable can be learned within 3 months then the probationary period is 3 months or less. (Policy Instructions No.1) * Under Article 281 of the Labor Code, a probationary employee is considered a regular employee if he has been allowed to work after the final probationary period. The fact that her employment has been on a contract-to-contract basis cannot after the character of employment, because contracts cannot override the mandate of law. Hence, by operation of law, she has become a regular employee. (Beta Electric Corporation vs. NLRC, 182 SCRA 384) DEFINITION International Catholic Migration Commission v. NLRC (89) A probationary employee, as understood under Article 282 (now Article 281) of the Labor Code, is one who is on trial by an employer during which the employer determines whether or not he is qualified for permanent employment. A probationary appointment is made to afford the employer an opportunity to observe the fitness of a probationary employee while at work, and to ascertain whether he will become proper and efficient employee. The word probationary as used to describe the period of employment implies the purpose of the term or period, but not its length. (International Catholic Migration Commission vs. NLRC, 169 SCRA 606.)
PURPOSE Justify the rights of the ER to fix a probationary period of employment? The ER has the right to select his EEs that the ER may set or fix a probationary period within which the latter


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may test and observe the conduct of the former before hiring him permanently. (Grand Motors vs. Minister of Labor) A probationary appointment is made to afford the ER the opportunity to observe the fitness of a probationer while at work, and to ascertain whether he will become a proper and efficient EE. (International Catholic Migration Commission vs. NLRC) It is necessary for the probationary EE to undergo a period of probation to test his qualifications, skills and experience. (Grand Motors) Phil. Federation of Credit Cooperatives, Inc. v. NLRC (98) Art. 281 of the Labor Code, as amended, allows the employer to secure the services of an employee on a probationary basis which allows him to terminate the latter for just cause or upon failure to qualify in accordance with reasonable standards set forth by the employer at the time of his engagement. As defined in the case of International Catholic Migration v. NLRC, "a probationary employee is one who is on trial by an employer during which the employer determines whether or not he is qualified for permanent employment. A probationary employment is made to afford the employer an opportunity to observe the fitness of a probationer while at work, and to ascertain whether he will become a proper and efficient employee." Escorpizo v. University of Baguio (99) A probationary employee is one who, for a given period of time, is being observed and evaluated to determine whether or not he is qualified for permanent employment. A probationary appointment affords the employer an opportunity to observe the skill, competence and attitude of a probationer. The word "probationary", as used to describe the period of employment, implies the purpose of the term or period. While the employer observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer at the same time, seeks to prove to the employer that he has the qualifications to meet the reasonable standards for permanent employment. EMPLOYER RIGHT SET PERIOD/OBLIGATION Grand Motors Corp. v. MOLE (84) The employer has the right or is at liberty to choose as to who will be hired and who will be declined. It is within the exercise of this right to select his employees that the employer may set or fix a probationary period within which the latter may test and observe the conduct of the former before hiring him permanently. Orient Express Placement Philippines v. NLRC (97) Under Art. 281 of the Labor Code, the services of an employee hired on a probationary basis may be terminated when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. However, the Court cannot sustain his dismissal on this ground because petitioner failed to specify the reasonable standards by which private respondents alleged poor performance was evaluated, much less to prove that such standards were made known to him at the time of his recruitment in Manila. Due process dictates that an employee be apprised beforehand of the condition of his employment and of the terms of advancement therein. Precisely, implicit in Art. 281 of the Code is the requirement that reasonable standards be previously made known by the employer to the probationary employee at the time of his engagement as correctly suggested by the POEA. DURATION/EXCEPTION * May a company impose a longer probationary period than 6 months? Yes. Generally, the probationary period of employment is limited to 6 months. The exception to this general rule is when the parties to an employment contract may agree otherwise, such as when the same is established by company policy or when the same is required by the nature of the work to be performed by the EE i.e. where a probationary period was set for 18 months, especially where the EE must learn a particular kind of work such as selling or when the job requires certain qualifications, skills, experience or training. (Buiser or Leogardo)


Updated and enhanced with additional cases by ATTY. RENE CALLANTA Holiday Inn Manila v. NLRC (93)
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Probation is the period during which the employer may determine if the employee is qualified for possible inclusion in the regular force. In the case at bar, the period was for three weeks, during Honasan's on-the-job training. When her services were continued after this training, the petitioners in effect recognized that she had passed probation and was qualified to be a regular employee. Honasan was certainly under observation during her three-week on-the-job training. If her services proved unsatisfactory then, she could have been dropped as early as during that period. But she was not. On the contrary, her services were continued, presumably because they were acceptable, although she was formally placed this time on probation. Even if it be supposed that the probation did not end with the three-week period of onthe-job training, there is still no reason why that period should not be included in the stipulated six-month period of probation. Honasan was accepted for on-the-job training on April 15, 1991. Assuming that her probation could be extended beyond that date, it nevertheless could continue only up to October 15, 1991, after the end of six months from the earlier date. Under this more lenient approach, she had become a regular employee of Holiday Inn and acquired full security of tenure as of October 15, 1991. Bernardo v. NLRC (99) As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the pernicious practice of making permanent casuals of our lowly employees by the simple expedient of extending to them probationary appointments, ad infinitum." The contract signed by petitioners is akin to a probationary employment, during which the bank determined the employees' fitness for the job. When the bank renewed the contract after the lapse of the sixmonth probationary period, the employees thereby became regular employees. No employer is allowed to determine indefinitely the fitness of its employees. RIGHTS OF PROBATIONARY EMPLOYEES; TERMINATION ONLY FOR CAUSE Probationary employees, notwithstanding their limited tenure, are also entitled to security of tenure. Thus, except for just cause as provided by law, or under the employment contract, a probationary employee cannot be terminated. M. Oreta & Co. vs. NLRC, 176 SCRA 218 In all cases involving employees engaged on probationary basis, the employer shall make known to the employee at the time he is hired, the standards by which he will qualify as a regular employee. Nowhere in the employment contract executed by the company and Grulla is there a stipulation that the latter shall undergo a probationary period for three months before he can qualify as a regular employee. There is no evidence on record showing that Grulla had been apprised of his probationary status and the requirements he should comply with in order to be a regular employee. Absent these requisites, there is justification in concluding that Grulla was a regular employee at the time he was dismissed by the company. As such, he is entitled to security of tenure during his period of employment. His services cannot be terminated except for just and authorized causes enumerated under the Labor Code and under the employment contract. A probationary employee cannot be removed except for cause during the period of probation. Although a probationary or temporary employee has limited tenure, he still enjoys security of tenure. During his tenure of employment or before his contract expires, he cannot be removed except for causes as provided for by law.
LIMITATION TO TERMINATION OF PROBATION The employers power to terminate a probationary employment contract is subject to the limitations that: (1) It must be exercised in accordance with the specific requirements of the


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contract; (2) If a particular time is prescribed, the termination must be within such time and if formal notice is required, then that form must be used; (3) the employers dissatisfaction must be real and in good faith, not feigned so as to circumvent the contract or the law; (4) there must be no unlawful discrimination in the dismissal. (Manila Hotel Corporation vs. NLRC, 141 SCRA 169.) EXTENSION CONTRACT EFFECT EES D was hired on probation by Mariwasa. Upon expiration of the probationary period, he was informed by the ER that his work proved unsatisfactory. To give him a chance to improve his performance and to qualify for her regular employment, Mariwasa extended, with his written conformity, his probationary period for another 3 months. His performance did not improve, and his services was terminated. Did he become a regular EE? NO. By voluntary agreeing to the extension of the original probationary period, D, in effect, waived any benefit attaching to the completion of the said period. (Mariwasa vs. Leogardo) Phil. Federation, etc. v. NLRC (98) It is an elementary rule in the law on labor relations that a probationary employee who is engaged to work beyond the probationary period of 6 months, as provided under Art. 281 Labor Code, as amended, or for any length of time set forth by the employer, shall be considered as a regular employee. NO SUCCESSIVE PROBATIONS Thus, we can readily see that Line had been hired and again rehired and again and again fired. We perceive these successive hirings and firings as a ploy to avoid the obligations imposed by law on employees for the protection and benefit of probationary employees, who, more often than not, are kept in the bondage, so as to speak, of unending probationary employment without any complaint due to the serious unemployment problem besetting our country today. The Court cannot countenance this overreaching. No member of the countrys workforce must be allowed to be taken advantage of by any employer. (Octaviano vs. NLRC and General Diesel Power Corporation, 202 SCRA 332.) The Supreme Court will not work any attempt to circumvent the law by separating an employee after five months service to prevent him from becoming a regular employee, and then hiring him on probation, again without security of tenure. The court will not permit such subterfuge if it is to be true to the spirit and mandate of social justice. (Cebu Royal Plant [San Miguel Corporation] vs. Deputy Minister of Labor, 153 SCRA 38.) ABSORBED EES Private respondents could not be considered probationary EEs because they were already welltrained in their respective positions. (Cebu Stevedoring vs. Regional Director) TERMINATION AND SALARY Award to the private respondent of the salary for the unexpired 3-month portion of her 6-month probationary employment who was validly terminated during her probationary employment is unjust and oppressive to the ER. (International Catholic Immigration Commission vs. NLRC) RULE PRIVATE SCHOOL TEACHER Give the legal requisites for a private school teacher to acquire permanent employment and security of tenure? These requisites are: a. The teacher is a full time teacher. b. The teacher must have rendered 3 consecutive years of service. c. Such service must have been satisfactory. (Cagayan Capitol College vs. NLRC) St. Michael Academy v. NLRC (98)


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Clearly, probationary teachers are not entitled to the leaves specified in Section 2 of the School Manual. The probationary period for private school teachers is three years as provided in the Manual of Regulations for Private Schools. * At the time of her retirement, A has been employed as school teacher for 22 years. After 3 years from her retirement, she was rehired by the school teacher under contract which was renewable yearly. After 2 years of continuous satisfactory performance, her contract was not renewed. Was the non-renewal violative of her security of tenure? Yes. When she was rehired, she did not have to undergo a probationary employment as her teaching competence had already been tried and tested during her 22 years of service. she could not be discharged solely on account of the expiration of her 2nd annual contract. She could not only be dismissed for cause and with due process. (St. Theresitas Academy vs. NLRC) * A teacher was hired by a private school on a yearly basis. Before the expiration of the 2 nd yearly contract, the school refused to renew her contract on the ground that her teaching performance was not satisfactory. Is the refusal justified? Yes. The positions were temporary in nature and her employment was for a definite period. Even assuming that she was on probationary employment, the probationary period for teachers is 3 years. (Biboso vs. Victoria Milling)
Section 23: TERMINATION OF EMPLOYMENT

23.1 INTRODUCTION: EES SECURITY OF TENURE COVERAGE Art. 278 : The provisions of this Title shall apply to all establishments or undertakings, whether for profit or not. * Confidential and Managerial EE are also entitled to security of tenure, fair standards of employment and the protection of labor laws. (Inter-Orient Maritime vs. NLRC) Probationary and Contractual EEs enjoy security of tenure but only to a limited extent. That is, they remained secure in their employment during the period of time their respective contracts remained in effect. (Labajo vs. Alejandro) * Pakiao workers who by the nature of their work are considered regular workers enjoy security of tenure. (Dy Keh Beng vs. ILMU) However, if the circumstances indicate that they are in reality independent contractors, then they do not enjoy security of tenure. (Alcantara) SECURITY OF TENURE What is meant by the security of tenure of an EE? Security of tenure of an EE is his right against unjust and arbitrary dismissal. He cannot be deprived of his work, which is property in the constitutional sense, without a just cause and without the benefit of hearing. (Alcantara) * Is there an express constitutional guarantee of the security of tenure of an EE? Yes. Art. XIII, Sec. 3, Const. (Rance vs. NLRC) Security of Tenure means the right not to be removed from ones job except for a valid reason and through the proper procedure.
* In a host of cases, the Court has upheld the employees right to security of tenure in the face of
oppressive management behavior and management prerogative. Security of tenure is a right which may not be denied on mere speculation of any unclear and nebulous basis. (Escareal vs. NLRC, 213 SCRA 472)
COMPASSIONATE JUSTICE


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Where a penalty is less punitive would suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so severe. It is not only because of the laws concern for workingmen. There, in addition, his family to consider. Unemployment brings untold hardships and sorrows on those dependent on the wage-earner. The misery and pain attendant on the loss of jobs then could be avoided if there be acceptance of the view that under all circumstances of a case, the workers should not be deprived of their means of livelihood. Nor is this to condone what had been done by them. For all this while, since the employer considered them separated from the service, they had not been paid. From the strictly juridical standpoint, it cannot be too strongly stressed that where a decision may be made to rest on informed judgment rather than rigid rules, all the equities of the case must be accorded their weight. Labor law determinations should not only be secundum rationem but also secundum caritatem. (Almira vs. Goodrich, Phil. Inc. 58 SCRA 120 (1974). * The code itself and the court rulings do not limit security of tenure to regular employees only. For instance, terminating a probationary employee needs a valid reason and proper procedure. So also a project or seasonal employee enjoys security of tenure even only for a duration of the limited period of their employment. NATURE OF RIGHTS Termination of employment is not anymore a mere cessation or severance of contractual relationship but an economic phenomenon affecting members of the family. This explains why under the board principles of social justice the dismissal of EEs is adequately protected by the laws of the state. (Alhambra vs. NLRC) However, the workers right to security of tenure is not an absolute right for the law provides that he may be dismissed for cause. The law in protecting the rights of the laborers, authorizes neither oppression nor self-destruction of the ER. (MERALCO vs. NLRC) RATIONALE REGULATION The right of ER to freely select or discharge his EEs is regulated by the State, because the preservation of the lives of citizens is a basic duty of the State, more vital than the preservation of the corporate profit. (Llosa-Tan vs. Silahis) 23.2 MANAGEMENT RIGHTS AND THE JUST CAUSE OF TERMINATION Art. 282 : An ER may terminate an employment for any of the following causes: 1. Serious misconduct or willful disobedience by the ER of the lawful orders of his ER or representative in connection with his work; 2. Gross and habitual Neglect by the EE of his duties; 3. Fraud or willful breach by the EE of the Trust reposed in him by his ER or duly authorized representative; 4. Commission of a crime or offense by the EE against a. the person of his ER or b. any immediate member of his family or c. his duly authorized representative and 5. Analogous cases. The grounds for dismissal shall be strictly construed since a persons employment constitute a property under the context of the constitutional protection. Where a lesser penalty would suffice, dismissal should not be imposed. Art. 277(b) the Labor Code puts the burden of proof in the dismissal cases on the ER regardless of whether or not there was an admission. As part of management prerogative, the ER has the sole prerogative to adopt valid and equitable grounds as basis for terminating and transferring EEs.


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Company rules and regulations, unless shown to be oppressive to and contrary to laws, are generally binding on the parties and must be complied with until finally revised or amended. MANAGEMENT RIGHTS The following are management rights with respect to EEs:
1. Right to manage people in general : Except as limited by special laws, an ER is free to

regulate, according to his own discretion and judgment, all aspects of employment. (San Miguel vs. Ople)
2. Right to just share in the fruits of production : Every business enterprise endeavors
to increase its profits. In the process it may adopt or devise means designed toward the goal. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied. (Id.)
3. Right to discipline : The ER has the prerogative to instill discipline in his EEs and to
impose reasonable penalties, including dismissal, on erring EEs pursuant to company rules and regulations. (San Miguel vs. NLRC)
4. Right to transfer EEs : It is management prerogative to transfer an EE from one office

to another within the business establishment, provided there is no demotion in rank or diminution of his salary, benefits and other privileges. (Yuco Chemical vs. Minisrty of Labor) An EEs right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. (PTTC vs. NLRC) The managerial prerogative, however, to transfer personnel, must be exercised without grave abuse of discretion and putting to mind the basic elements of justice and fair play. It cannot be used as a subterfuge by the ER to rid himself of an undesirable worker. Nor where the real reason is to penalize an EE for his union activities and thereby defeat his right to selforganization. (Id.)
5. The right to demote : It is management prerogative to transfer, demote, discipline and

even dismiss an EE to protect its business, provided it is not tainted with unfair labor practice (Petrophil vs. NLRC)
6. Right to dismiss : The right of the company to dismiss its EEs is a measure of selfprotection. (Reyes vs. Minister of Labor) An ER cannot legally be compelled to continue with the employment of a person who admittedly was guilty of malfeasance towards his ER, and whose continuance in the service of the latter is patently inimical to his interests. (Manila Trading vs. Zulueta) LIMITS to MANAGEMENT PREROGATIVES 1) It must be exercised without abuse of discretion 2) It should be tempered with compassion and understanding 3) It must be exercised humanely 4) The penalty it must impose should be commensurate to the offense and to the degree of infraction 5) The ER should bear in mind that what is at stake is the EEs livelihood 6) The ER should consider that a penalty less punitive may suffice 7) It must be the consciousness of the policy that the state regards the workers with compassion 8) It must always be borne in mind that unemployment brings untold hardships and sorrows upon those dependent on the wage earner * So long as a companys prerogatives are exerted in good faith for the advancement of the employers interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, the Supreme Court will uphold them. (San Miguel Brewery Sales vs. Ople, 170 SCRA 25.)


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* It will be highly prejudicial to the interests of the employment to impose on him the services of an employee who has been shown to be guilty of the charges that warranted his dismissal. It will demoralize the rank-and-file if the undeserving, if not undesirable, remains in the service. (Shoemart, Inc. vs. NLRC, 176 SCRA 385.) * The law in protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer. While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its own rights, which as such are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with less privilege in life, the Supreme Court has inclined more often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and applicable law and doctrine. (Mercury Drug Corporation vs. NLRC, 177 SCRA 580.) Power to Dismiss not Absolute The power to dismiss is the normal prerogative of the employer. An employer, generally, can dismiss or lay off an employee for just and authorized causes enumerated under Article 282 and 283 of the Labor Code. However, the right of an employer to freely discharge his employees is subject to regulation by the State, basically in the exercise of its paramount police power. This is so because the preservation of the lives of the citizens is a basic duty of the State, more vital than the preservation of corporate profits. (Manila Electric Co. vs. NLRC, 175 SCRA 277.) The employer is bound to exercise caution in terminating the services of his employees especially so when it is made upon the request of a labor union pursuant to the Collective Bargaining Agreement. Dismissals must not be arbitrary and capricious. Due process must be observed in dismissing an employee because it affects not only his position but also his means of livelihood. Employers should, therefore, respect and protect the rights of their employees, which include the right to labor. (Rance, et al. vs. NLRC, 163 SCRA 279.) Seniority Rights An employee has no inherent right to seniority. He has only such rights as may be based on a contract, a statute, or am administrative regulation relative thereto. Seniority rights, which are acquired by an employee through long-time employment, are contractual and not constitutional. Hence, the discharge of such employee, thereby terminating such rights, would not violate the Constitution. (Enriquez vs. Zamora, 146 SCRA 393.)
JUST CAUSES OF TERMINATION

* May an ER dismiss an EE who enjoys security of tenure? Yes. Security of tenure does not guarantee perpetual employment. If there is a just or authorized cause the ER may terminate the services of an EE; the former cannot be legally compelled to have in its employ s person whose continued employment is patently inimical to its interest. (Alcantara) * Concededly, the employers right to freely select or discharge his employees is subject to regulation by the State basically in the exercise of its paramount police power. But the employer cannot be legally compelled to continue with the employment of a person who admittedly was guilty of misfeasance towards his employer and whose continuance in the service of the latter is patently inimical to his interest. The law in protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer. (Filipro vs. NLRC, 145 SCRA 123.) A. JUST CAUSE : SERIOUS MISCONDUCT What is serious misconduct? Misconduct is improper or wrong conduct, it is the transgression of some established and definitive rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. The misconduct to be serious must be of such a grave and aggravated character and not merely trivial or unimportant. Such misconduct, however serious, must, nevertheless, be in connection with the EEs work to constitute just cause for its separation. (Dole Manual)


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ELEMENTS of Serious Misconduct: 1) It must be serious 2) It must relate to the performance of the EEs duties 3) It must show that the EE has become unfit to continue working for the ER. * Fitness for continued employment cannot be compartmentalized into tight little cubicles or aspect of character, conduct, and ability separate and independent of each other. A series of irregularities when put together may constitute serious misconduct which, under Article 282 of the Labor Code, is a just cause for dismissal. (Piedad vs. Lanao del Norte Electric Cooperative, Inc., 153 SCRA 500.) * The employer may dismiss an employee if the former has reasonable grounds to believe, or to entertain the moral conviction, that the latter is responsible for the misconduct and the nature of his participation therein renders him absolutely unworthy of the trust and confidence demanded by his position. (Filipro vs. NLRC, 145 SCRA 123.) Examples of serious misconduct :
a. EE utters obscene, insulting or offensive words against a superior (Asian Design

vs. Deputy Minister of Labor) or challenging a superior officer to a fistfight. (Luzon Stevedoring vs. CIR) However, 2 other later cases ruled that the penalty of termination is extreme and excessive and is not commensurate with the acts committed. (Maranao Hotel vs. CA and Mary Johnston Hospital vs. NLRC) The controlling factor is the circumstances surrounding the willful misconduct. (Alcantara)
b. Serious breach of company rules by allowing 2 security guards to come inside the
Security Office, drinking and having sex with one of the guards, although both of them are married. (Stanford vs. NLRC)
c. As a general rule, immorality does not justify a discharge. But when the EE holds
a responsible position and has under him a good number of men, the EE must set a good example for his men to follow. Thus, when he got a young concubine and drove away the members of his family from the conjugal home, such dismissal is justified. (Sanchez vs. Ang Tibay)
d. Sleeping in post, gross insubordination, dereliction of duty and challenging

superior officers to a fight committed by a security guard. (Luzon Stevedoring vs. CIR)
e. Seamans assault with a knife of a member of the ships crew. (Haverton vs.
NLRC)
f. Intoxication is such a misconduct as will justify separation from employment,

where such intoxication interferes with the employment. (Azucena)
g. Sexual harassment by a managerial EE of one of his subordinates. (Villarama

vs. NLRC)
h. Authorship of a manifesto which ridiculed the officers of a school and demanded

their removal, and which disrupted the good order and decorum in the school, when such charges in the manifesto are found to be not true. (St. Marys College vs. NLRC)
i. Cheating a customer. (PLDT vs. NLRC)

* As a general rule, immorality on the part of the employee does not justify a discharge therefore unless such conduct is prejudicial or in some way detrimental to the employers interests. The test is not morality in the abstract, but whether, taking the nature of the employment into account, the immoral acts complained of were such as to render the servant incapable of performing the


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service properly or were calculated to injure the employers business. (Adams vs. Southern P. Co., 204 Cal. 63, 266, p.541, 57 ALR 1066) Immoral Conduct Defined Immoral conduct has been defined as that conduct which is so willful, flagrant, shameless as to show indifference to the opinion of good and respectable members of the community. Furthermore, such conduct must not only be immoral, but grossly immoral. That is, it must be so corrupt as to constitute a criminal act or so unprincipled as to be reprehensible to a high degree or committed under such scandalous or revolting circumstances as to shock the common sense of decency. (Narag vs. Narag, 291 SCRA 451.) What are examples of misconduct which does not warrant dismissal? 1. Fisticuffs between two EEs as a result of mere private matter between them. (Aris vs. NLRC) 2. Vending, soliciting, and engaging in usurious activities. (Pacific Products) 3. Borrowing money from a patient which the EE later paid back. (Makati Medical Center vs. NLRC) However, when there is use for a trust relationship as leverage for borrowing money, the act becomes serious misconduct. (Pearl S. Buck Foundation vs. NLRC) 4. Teacher falling in love with student provided the teacher did not take advantage of her position to court her student. (Chua-Qua vs. Clave) B. JUST CAUSE : WILLFUL DISOBEDIENCE Where an order or rule is not reasonable, in view of the terms of the contract of employment and the general rights of the parties, a refusal to obey does not constitute a just cause for the employees discharge. As to what is a reasonable order or rule will depend on the circumstances of each case. Reasonableness, however, has reference not only to the kind and character of directions and commands, but also to the manner in which they are made. The employees disobedience, in order to justify his dismissal under this provision, must relate to substantial matters, not merely to trivial or unimportant matters. Further, disobedience to be considered willful must be resorted to without regard to its consequences. (DOLE Manual, Sec. 4343.01 [2].) What are the requisites in order that willful disobedience may constitute a just cause for terminating employment? 1. The orders, regulations, instructions of the ER or his representative must be: 1) Reasonable and lawful has reference not only to the kind and character of directions, but also the manner in which they are made. 2) Sufficiently known to the EE. 3) In connection with the duties which the EE has been engaged to discharge. 2. The EEs conduct must have been willful or intentional, willfulness being characterized by a wrongful and perverse mental attitude rendering the EEs act inconsistent with proper subordination. (Azucena) * The reasonableness and lawfulness of a rule, order or instruction depend on the circumstances availing in each case. Reasonableness pertains to the kind of character of directives and commands and to the manner in which they are made. (Escobin vs. NLRC, 289 SCRA 48) * Not every case of insubordination or willful disobedience by an EE of a lawful workconnected order of the ER or its representatives is reasonably penalized with dismissal. There must be a reasonable proportionality between the offense and the penalty imposed therefor. (Gold City vs. NLRC) Past infractions, to which the EE was already meted out


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disciplinary measures cannot be used as a justification for EEs dismissal from service of the current infraction does not suffice as a ground for just termination. (Filipino vs. Ople) * M, an EE of Tritran was told by the personnel manager to see right away the president to apologize for his past misdeeds. He was dismissed because he failed to see the company president. Is the dismissal justified? No. The directive to see the company president was neither reasonable nor one connected with his duties. (Mancho vs. NLRC) Examples of willful disobedience :
1. Violation of a rule which prohibits EEs from using company vehicles for
private purposes without authority from management and stubborn refusal to attend a grievance conference to discuss the violation. (Soco vs. Mercantile Corp.)
2. Willful violation of rules and regulations designed for the safety of laborers i. e.
smoking by a painter in the painting booth. (Northern Motors vs. NLU)
3. Allowing a customer to pass thru the exit gate without paying for the work
done on his car, despite clear instructions to the contrary, (Manila Trading vs. Zulueta)
4. Act of gambling if it is penalized under company rules with dismissal.

(Dimalanta vs. Secretary of Labor)
5. Failure to comply with reportorial requirements in the sales policies. (GTE vs.
Sanchez)
6. N, driver refused to drive EEs to Makati head office to collect their profit
shares despite repeated orders made by the vehicle supervisor and the officer-in-charge. (Nuez vs. NLRC) In this case, even if he was employed for 19 years, and this was his 1st offense, no separation pay, on the basis of compassion was given to the EE. * B was employed as Chief Dietician of a hospital. She refused to follow the instructions of the Board of Trustees of the hospital to buy from a food supplier who was willing to give a discount on food purchases. Because of this, B was dismissed. Is the dismissal justified? Yes. Her acts constitute serious defiance of the lawful orders of her superiors with respect to matters involving her duties. They are also sufficient basis for her superiors to lose their trust and confidence in her. (St. Lukes vs. Minister of Labor) * D, an EE of Northwest Airlines refused a promotion. Does such refusal constitute insubordination warranting dismissal? No. There is no law which compels an EE to accept a promotion. He was exercising a right and he cannot be punished for it as quijure suo utitor neminem laedit. He who uses his own legal right injures no one. (Dosch vs. NLRC) * G, a press-helper of a printing company drank beer outside company premises after his tour of duty. He later went to the companys canteen to eat lunch. He was dismissed based on the company policy prohibiting drinking in the company premises or coming to work under the influence of alcohol. Is the dismissal justified? No. He did not drink beer in the company premises; neither did he report for work under the influence of liquor because it was not their tour of duty then. (Catalan vs. Genilo) The EEs disobedience , in order to justify his dismissal under this provision, must relate to substantial matter, not merely to trivial or unimportant matters. Disobedience, to be considered willful must be resorted to without regard to its consequences REFUSAL TO TRANSFER


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An EE should, as a rule, obey an employers order transferring him from one job assignment, or one location to another. Inconvenience to the EE does not justify disobedience to the transfer order. But this rule presupposes that the transfer order is lawful and reasonable. (Escobin, et al. vs NLRC, Peftok Integrated Services, Inc., et al., GR No. 118159 April 15, 1998) The transfer, moreover, should not result in demotion in rank or diminution in pay, benefits, or other privileges. (Leonardo vs NLRC and Reynaldos Marketing, GR No. 125303 June 16, 2002); otherwise, the transfer amounts to constructive dismissal. (Garcia vs. NLRC, GR No. 116568 February 9, 2000) Invalid Transfer Like other rights, there are limits to the managerial prerogative to transfer personnel. It must be exercised without grave abuse of discretion, putting to mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right must be exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. Nor when the real reason is to penalize an employee for his union activities and thereby defeat his right to self-organization. But the transfer can be upheld when there is no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee. (See Pocketbell Philippines, Inc. vs. NLRC and Arthur Alinas, 240 SCRA 358..) C. JUST CAUSE : NEGLECT OF DUTIES What is the rule on neglect of duties to constitute a just cause for termination? In order to constitute a just cause for EEs dismissal, the neglect of duties must not only be gross but also habitual . Gross neglect means an absence of that diligence that an ordinarily prudent man would use in his own affairs, unless the contract of employment requires a higher degree of care. It is sufficient that the gross and habitual neglect by the EE tends to prejudice the ERs interest since it would be unreasonable to require the ER to wait until he is materially injured before removing the cause of the impending evil. (DOLE Manual) * Gross negligence has been defined as the want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evidences a thoughtless disregard or consequences without exerting any effort to avoid them. (Citibank vs. Gatchalian, 240 SCRA212) Examples of gross negligence :
Failure to properly estimate the fair market value of a property to be used for a
loan by an appraiser. (Associated Bank vs. NLRC)
ABANDONMENT To constitute abandonment, 2 elements must concur:

1. The failure to report for work or absence without valid or justifiable reason, and 2. A clear intention to sever the ER-EE relationship, with the second element as the more determinative factor and being manifested by overt acts. (Labor vs. NLRC) Abandonment cannot be lightly inferred. Abandonment is a matter of intention and cannot be lightly presumed from certain equivocal acts. The ER has the burden of proof to show a deliberate and unjustified refusal on the part of the EE to resume his employment without any intention of returning. The concept of abandonment is inconsistent with the immediate filing of complaints for illegal dismissal. An employee who took steps to protect his dismissal cannot by any logic to be said to have abandoned his work.
Habitual tardiness and absenteeism (Sajonas vs. NLRC) Numerous unauthorized absences. (Cando vs. NLRC)
* Acts of insubordination, coupled with habitual tardiness, are sufficient causes for petitioners dismissal, especially considering the fact that the employees involved were not mere rank-and-


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file employees but supervisors who owed more than usual fealty to the organization and were therefore expected to adhere to its rules in an exemplary manner. (Sajonas vs. NLRC. 183 SCRA 182.) * An employee who consistently receives promotions in rank and salary must be a highly efficient worker, and therefore should be retained despite occasional lapse in punctuality and attendance. Perfection cannot after all be demanded. (Rizal Empire Insurance Group vs. NLRC, G.R. No. 73140, May 29, 1989.) * S, working as a lobby boy of a movie theater, was pursuant to standard management practice transferred from the day shift where he had been for quite some time to the night shift. He asked that the change be recalled but his request was denied. As he disliked the new assignment, he did not report for work. The company dismissed him due to abandonment. Is the dismissal jusitified? Yes. There was nothing unusual or discriminatory in his change of assignment because the rotation was standard company practice. (Castillo vs. CIR) * Due to unauthorized absences, M, employed with the company for 18 years, was transferred from the Fire Tender Section to the Pan Grinding Section. He however did not report to his new section, on the ground that the transfer was unreasonable and amounted to demotion. The company contends that his failure to work despite repeated notices constitutes abandonment and a ground for his dismissal. Is this valid? The penalty of dismissal is out of proportion to the offense committed considering the number of years of Ms employment. A 1 year suspension would be sufficient. (Meracap vs. International Ceramics) * A, met a work-connected accident. When he was completely recovered, he failed to report to work despite the certification of 5 doctors that he could resume his normal work. He was dismissed pursuant to company [policy that an EE who incurs without valid reason 6 or more absences is subject to dismissal. Is the dismissal valid? Yes. He was guilty of serious neglect of his duties. (Phil. Geothermal vs. NLRC) D. JUST CAUSE : DISHONESTY, LOSS OF CONFIDENCE What kind of FRAUD justifies as just termination? Fraud has been defined as any act, omission, or concealment which involves a breach of a legal duty, trust or confidence justly reposed and is injurious to another. To constitute a just cause for terminating the EEs services, the fraud must be committed against the ER, or representative and in connection with the EEs work. Thus, fraud committed by an EE against 3rd persons not in connection with his work and which does not in any way involve his ER not a ground for the dismissal of the EE. (DOLE, Manual) Example of Dishonesty
Falsification of time cards. (SMC vs. NLRC)
* In order for obedience to be considered as an exempting circumstance, it must be in compliance with a lawful order not opposed to a higher positive duty of the subaltern, and that the person commanding act within the scope of his authority. As a general rule, an inferior should obey his superior. But between a general law which enjoins obedience to a superior giving just orders, etc. and a prohibitive law which plainly forbids what the superior commands, the choice is not doubtful. In order to be exempted on the ground of obedience, it must be shown that both the person who gives the order and the person who executes it are acting within the limitations prescribed by law. ( SMC vs. NLRC, 174 SCRA 510) Theft of company property. (Firestone vs. Lariosa) However, the penalty must be proportional to the offense committed, i.e.: i. EE should not be dismissed for theft of used motor oil of minimal quantity if the EE has no previous record. (Gelmart vs. NLRC);


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EE should not be dismissed for theft of lead pipe to be used for personal use if the EE has no previous record. (PAL vs. PALEA); iii. president of union should not be dismissed for leading an unexpected strike which lasted for 2 days and which resulted in a loss to the company of only P3,000.00 (Sampang vs. Inciong); iv. counterclerk of PLDT should not be dismissed for tampering with a phone bill where the worth of the tampering only amounted to P30.00 and it was the first offense in 7 years (PTTC vs. NLRC). * Note that the length of time the EE is employed and the fact that it was the EEs 1 st offense is an important factor in many of these cases wherein the penalty of dismissal was deemed to harsh. Where a penalty less punitive would suffice, whatever missteps may be committed by the worker should not be visited with the supreme penalty of dismissal. (Almira vs. BF Goodrich)
ii.
Circulating fake tickets. (Ibarrientos vs. NLRC)
Since fraud implies willfulness or wrongful intent, the innocent non-disclosure of facts by the EE to the ER will not constitute a just cause for the dismissal of the EE. The failure of a division manager to detect and report the fraudulent activities in her division as well as her failure to give a satisfactory explanation for such irregularities constitute fraud or willful breach of trust reposed on her by her ER. Actual defraudation is not necessary in order that an EE may be held liable That private respondent attempted to deprive PAL of its lawful revenue is already tantamount to fraud against the company, which warrants dismissal from service. Explain loss of confidence as a ground for just termination : The basic premise for dismissal on the ground of loss of confidence is that the EE concerned holds a position of trust and confidence. (Quezon Electric vs. NLRC) Mere existence of basis for believing that the EE has breached the trust of ER is sufficient and does not require proof beyond reasonable doubt. (Kwikway vs. NLRC) However, to constitute as valid ground, it must be substantial and not arbitrary, and must be founded on clearly established facts sufficient to warrant the EEs separation from work. (Labor vs. NLRC) * While the right of an employer to freely select or discharge his employee, is subject to regulation by the State basically in the exercise of its paramount police power, nonetheless an employer cannot be compelled to continue in employment an employee guilty of acts inimical to the interest of the employer and justifying loss of confidence in him. (Tabacalera Insurance Co., Inc. vs. NLRC, 152 SCRA667; San Miguel Corp vs. NLRC, et al., 142 SCRA 376.) * More importantly, we have repeatedly held that loss of confidence should not be stimulated in order to justify what would otherwise be, under the provision of law, an illegal dismissal. It should not be used as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere afterthought to justify an earlier action taken in bad faith. (N. Mabeza vs. NLRC and Hotel Supreme, 271 SCRA 670.) * In order to constitute a just cause for dismissal, the act complained of must be related to the performance of the duties of the employee such as would show him to be thereby unfit to continue working for the employer. (Equitable Banking Corp. vs. NRLC, et al., 273 SCRA 352.) Examples of loss of confidence as ground for just termination : GM of hotel found to have anti-Filipino tendencies, who did not perform his functions properly and who requisitioned wines for personal use. (Riker vs. Ople)
Director who represented to the company that machinery brought were brandnew when in fact they were second-hand. (Pepsico vs. NLRC) Bank tellers act allowing encashment of checks over the counter without verification of drawers signature. (Allied Bank vs. Castro)


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Violation of the company sales policy of distributing its goods to as many customers as possible by a salesman who made it appear that they were sold to many customers. (Filipro vs. NLRC)
Engaging in business other than that of ER, if the activities tend to injure or endanger the business of the ER or the EE is unable to give time and attention to the discharge of his duties. (Azucena)
Competing with ERs business. (Azucena)
Repeated shortages incurred by a bill collector, although resulting in no material damage as the amounts were returned. (Piedad vs. Lanao del Norte Electric Cooperative) * 5 EEs of an electric cooperative were dismissed for loss of confidence when they were caught pilfering electric current through tampered meters in their houses. Considering that the EEs held no position involving trust and confidence, is loss of confidence a ground to dismiss them? No. The offense they committed is not work-related. The pilferage could have been effected even if they were not EEs of the cooperative. (Quezon Electric Cooperative vs. NLRC) * Compare this with the case of Flores vs. NLRC, where the same act constituted a ground of serious misconduct and breach of trust. * J, a checker, was dismissed by San Miguel for breach of trust due to possible involvement in a burglary incident. The dismissal was effected despite Js acquittal in a criminal case for the said offense. Is the dismissal lawful? No. The termination of rank and file EEs due to breach of trust requires proof of actual involvement in the acts constituting the offense. (SMC vs. NLRC) The basic premise for dismissal on the ground of loss of confidence is that the EE concerned holds a position of trust and confidence. It is the breach of this trust that results in the ERs loss of confidence in the EE. (Quezon Electric Cooperative vs. NLRC, GR. No. 7971822. April 12, 1989) If the EEs are cashiers, managers, supervisors, salesmen, or other personnel occupying positions of responsibility, the ERs loss of trust and confidence on said EEs may justify the termination of their employment. But if the EEs are ordinary rank-and file workers, such as electricians, and operators of equipment, there has to be some kind of proof that they are involved in the loss of company property. Mere accusations by the ER will not suffice. (Lamsan Trading, Inc.e vs. Leogardo Jr. GR No.73245. Sept. 30. 1986) A charge of dishonesty involves serious misconduct on the part of the EE, a breach of the trust reposed by the ER upon him. The rule that proof beyond reasonable doubt is not required to terminate an employee on the charge of loss of confidence and that it is sufficient that there is some basis for such loss of confidence is not absolute. The right of an ER to dismiss EEs on the ground that it has lost its trust and confidence in him must not be exercised arbitrarily and without just cause. For loss of trust and confidence to be a valid ground for an EEs dismissal, it must be substantial and not arbitrary, and must be founded on clearly established facts sufficient to warrant the EEs separation from work. ( Labor vs. NLRC) Guidelines for the Application of the Doctrine of Loss of Confidence 1. Loss of confidence should not be simulated 2. It should not be used for subterfuge for causes which are improper, illegal or unjustified 3. It may no be arbitrarily asserted in the face of overwhelming evidence to the contrary 4. It must be genuine, not mere afterthought to justify an earlier action taken in bad faith Guidelines Summarized


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While loss of confidence is one of the just causes for termination of an employee, the dismissal must rest on an actual breach of duty committed by the employee. The guidelines for applying the doctrine of loss of confidence are: 1. loss of confidence should not be stipulated 2. it should not be used as a subterfuge for causes which are improper, illegal, or unjustified 3. it may not be arbitrarily asserted in the face of overwhelming evidence to the contrary, and 4. it must be genuine, not a mere afterthought to justify earlier action taken in bad faith. 5. the employee involved holds a position of trust and confidence. While proof beyond reasonable doubt is required, all substantial evidence is vital and the burden rests on the employer to establish it. (Midas Touch Food Corp. vs., 259 SCRA 652.) Elements of BREACH OF TRUST & Loss of Confidence 1) The loss of trust must be base on willful breach 2) Breach is WILLFUL if its is done INTENTIONALLY, KNOWINGLY and PURPOSELY without justifiable cause 3) He must be invested with confidence such as custody, care and protection of company fund or property 4) The act that caused the loss of confidence/trust must be work-related Loss of confidence applies to cases involving EEs who: - who occupy positions of trust and confidence - is routinely charged with the care and custody of the ERs money and property To Whom Applicable; Position of Trust Explained Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check for terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given the seal of approval by this Court, could readily reduce to barren from the words of the constitutional guarantee of security of tenure. Having this in mind, loss of confidence should ideally apply only: (1) to cases involving employees occupying positions of trust and confidence; (2) to those situations where the employee is routinely charged with the care and custody of the employers money or property. To the first class belong managerial position, i.e., those vested with the powers or prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions. To the second class belong cashiers, auditors, property custodians, etc., or those who, in the normal and routine exercise of their functions, regularly handle significant amounts of money or property. An ordinary chambermaid in a hotel does not fall under either category. (N. Mabeza vs. NLRC and Hotel Supreme, 271 SCRA 670.) * If the employees are cashiers, managers, supervisors, salesman or other personnel occupying positions of responsibility, the employers loss of trust and confidence on said employees may justify the termination of their employment. But if the employees are ordinary rank-and-file workers, such as electricians and operators of equipment, there has to be some kind of proof that they are involved in the loss of company property. Mere accusations by the employer may not suffice. (Lamsan Trading, Inc. vs. Leogardo, Jr., 144 SCRA 571 ) Proof Required Loss of confidence is a valid ground for dismissing an employee and proof beyond reasonable doubt of the employees misconduct is not required. It is sufficient if there is some basis for such loss of confidence or if the employer has reasonable ground to believe or entertain the moral conviction that the employee concerned is responsible for the misconduct and that the nature of his participation therein rendered him unworthy of the trust and confidence demanded by his position (Reyes vs. Minister of Labor, 170 SCRA 134.) * Unsupported by sufficient proof, loss of confidence is without basis and may not be successfully invoked as a ground for dismissal. Loss of confidence as a ground for dismissal has


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never been intended to afford an occasion for abuse by the employer of its prerogative, as it can easily be subject to abuse because of its subjective nature. (Hernandez vs. NLRC, 176 SCRA 269.) San Miguel Corporation vs. NLRC, (180 SCRA 281) The employees fate cannot, in justice, be hinged upon conjectures and surmises. The loss of trust and confidence that the employer relied upon is unsupported by substantial evidence. The employees dismissal cannot justifiably be sustained since the findings in this case and whatever investigations may have been made by the employer fail to establish either complicity or culpability on his part. While dishonesty or disloyalty of an employee is not to be condoned, neither should a condemnation on that ground be tolerated based on suspicions spawned by a speculative inferences. Acda vs. The Minister of Labor (119 SCRA 306) Ruling: With the charges against petitioner found to be unsubstantiated, we are left with no alternative but to hold that the so-called loss of confidence is without basis and may not be successfully invoked as ground for dismissal which requires some basis therefor, such ground never having been intended to afford an occasion for abuse by the employer of its prerogative, as it can easily be subject to abuse because of its subjective nature, to dismiss employees in contravention with the protection of labor clause of the Constitution. E. JUST CAUSE : COMMISSION OF A CRIME OR OFFENSE * Another just cause of terminating an employment is the EEs commission of a crime or offense against the person of his ER or against any immediate member of the ERs family. The immediate members of the family referred to are limited to the spouse, ascendants, descendants, or legitimate, natural, or adopted brothers or sisters of the ER or of his relative by affinity in the same degrees, and those by consanguinity within the 4th degree. (Azucena) * Conviction or prosecution is not required, to warrant his dismissal by his ER and the fact that a criminal complaint against the EE has been dropped by the city fiscal as not binding and conclusive upon the tribunal. (Starlite vs. NLRC) * An employer may dismiss an employee for breach of trust in the handling of funds in spite of his having been acquitted in the course of criminal prosecution. Conviction for a crime involving the loss of such funds is not necessary before the employee may be dismissed. There is more reason for dismissal where the acts of misconduct and willful breach of trust are repeatedly committed by an employee. (Piedad vs. Lanao del Norte Electric Cooperative, Inc., 153 SCRA 500.) * An employee who has been exonerated from a criminal charge of theft of gasoline on the basis of technicality may still be dismissed from employment if the employer has ample reason to mistrust him. If acquittal from the crime charge does not negate the existence of a ground for loss of trust and confidence, with more reason should conviction for such criminal charge fortify and mistrust. (Mercury Drug Corporation vs. NLRC, 177 SCRA 580.) F. ANALOGOUS CASES * To be considered analogous to the just cases enumerated, the cause must be due to the voluntary and/or willful act or omission of the EE. (Nedura vs. Benguet Consolidated) Examples of Analogous Cases : > Unreasonable behavior and unpleasant deportment in dealing with the people she closely works with in the course of her employment, is analogous to the other just causes enumerated under the Labor Code. (Cathedral School vs. NLRC) G. OTHERS


Updated and enhanced with additional cases by ATTY. RENE CALLANTA 1. Other examples of just termination: Courtesy resignation (Batongbacal vs. Associated Bank)
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Faculty members of a school whose appointments as department heads are terminated. (La Sallette vs. NLRC)
23.3 AUTHORIZED CASES OF TERMINATION Art. 283 : The ER may also terminate the employment of the EE due to: 1. Installation of labor saving device. 2. Redundancy 3. Retrenchment to prevent losses. 4. Closing or cessation of operation of the establishment or undertaking. Art. 284: EE who has been found to be suffering from a disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his coEEs. Required Notice To effect such termination of any employee, the employer must serve a written notice on the worker and the Department of Labor at least one (1) month before the intended date thereof. The purpose of such previous notice to DOLE is to enable it to ascertain the verity of the cause of termination of employment. (International Hardware, Inc. vs. NLRC, 176 SCRA 256.) Separation Pay In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to separation pay equivalent to at least one (1) month pay to at least one (1) month pay for every year of service, whichever is higher. However, in case of retrenchment to prevent losses and in case of closure or cessation of operations of the establishment or undertakings not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. (International Hardware vs. NLRC, 176 SCRA 256.)
INTRODUCTION OF LABOR SAVING DEVICES (AUTOMATION)

AUTOMATION Reduction of the number of workers in a companys factory made necessary by the introduction of machinery in the manufacture of its products is justified. There can be no question as to the right of the manufacturer to use new labor-saving devices with a view to effecting more economy and efficiency in its method of production. (Philippine Sheet Metal Workers Union vs. CIR, 83 Phil 433) * The right to reduce personnel should, of course, not be abused. It should not be made a pretext for easing out laborers on account of their union activities. But neither should it be denied when it is shown that they are not discharging their duties in a manner consistent with good discipline and the efficient operation of an industrial enterprise. (ibid)
REDUNDANCY
Redundancy exists where the services of an EE are in excess of what is reasonably demanded by the actual requirements of the enterprise; a position is redundant when it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors such as: 1. over-hiring of workers 2. decreased volume of business or 3. dropping of a particular product line or 4. service activity previously manufactured or undertaken by the enterprise. * Redundancy in an ERs personnel force, however does not necessarily or even ordinarily refer to duplication of work. That no other person was holding the same position which the dismissed


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EE held prior to the termination of his services does not show that his position had not become redundant. (Escareal vs. NLRC)
RETRENCHMENT
* Retrenchment is one of the economic grounds to dismiss employees. It is resorted to by the employer primarily to avoid or minimize business losses. The law recognizes this under Article 283 of the Labor Code. However, the employer bears the burden to prove his allegation of economic or business reverses. The employers failure to prove it necessarily means that the employers dismissal was not justified. (Precision Electronics Corporation vs. NLRC, 178 SCRA 667.)
What are the general standards to determine whether the retrenchment is valid? The general standards are the following: 1. The losses expected should be substantial and not merely de minimis in extent. 2. The substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the ER. 3. It must be reasonably necessary and likely to prevent the expected losses. 4. The ER should have taken other measures prior or parallel to the retrenchment to forestall losses. I. e. ; cut other costs other than labor costs. 5. Alleged losses if already realized, and the expected minimum losses sought to be forestalled, must be proved by sufficient and convincing evidence. (Lopez Sugar vs. FFW) * Whether or not an employer would imminently suffer serious or substantial losses for economic reasons is essentially a question of fact for the Labor Arbiter and the NLRC to determine. Requisites of VALID RETRENCHMENT 1) It is intended to prevent losses 2) Written notices are served on the workers and the DOLE at least 1 month before the effective date of retrenchment 3) Separation pay is paid to the affected workers 1 month pay OR pay for every year of service WHICHEVER IS HIGHER 2-notice requisite is mandatory If the notice to the workers was given later than the notice sent to DOLE, the date of termination should be at least 1 month from the date of notice to the workers. * If an employee consented to his retrenchment or voluntarily applied for retrenchment with the employer due to the installation of labor-saving devices, redundancy, closure or cessation of operation or to prevent financial losses to the business of the employer, the required previous notice to the DOLE is not necessary as the employee thereby acknowledge the existence of a valid cause for termination of his employment. ( International Hardware vs. NLRC) Criteria in selecting EEs to be dismissed 1) 2) 3) less preferred status (temporary EEs) efficiency rating seniority
Distinguish redundancy from retrenchment? Redundancy means that the position of the EE has become superfluous, an excess over what is actually needed, even if the business does not suffer reduction or reverses. (Azucena) * Redundancy should carefully be distinguished from retrenchment. Their causes and effects are different. As to cause, redundancy results from the fact that the position of the employee has become superfluous, and excess over what is actually needed, even if the business has not suffered reverses. Retrenchment is linked with losses; it is a cost-cutting measure made immediately necessary by business reduction or reverses. * As to effect, the separation pay for redundancy is higher than for retrenchment.


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* Retrenchment is either permanent or temporary. Permanent retrenchment is contemplated in Article 283; temporary retrenchment is included in Article 286. When the six-month period mentioned in Article 286 is over and the employee (still willing to work) is not recalled, he is deemed separated or constructively dismissed. (Constructive dismissal is one inferred from construction or interpretation of the employers action; at first glance, it does not look like a dismissal, but upon interpretation, the action amounts anyway to dismissal. * In one case, some of the retrenched employees opposed the retrenchment by staging a strike. The retrenchment was found justified and the strike was declared illegal. Consequently, the leaders of the strike, including the retrenched employees, were declared to have lost their employment status. Should they still be paid separation pay because of the retrenchment? The Court resolved that they should be, inasmuch as the retrenchment occurred much ahead of the strike. The declaration that they had lost their employment status produced no real significance to them since their retrenchment preceded the declaration of strike. (Asionics Phil vs. NLRC, 290 SCRA 164.)
CLOSURE OF BUSINESS
Article 283 allows an employer to terminate the services of his employees in case of closure of business as a result of grave financial losses. But the employer must comply with the clearance or report required under the Labor Code. (Needle Queen Corporation vs. Nicolas, et al., 180 SCRA 568.) Note: DOLE clearance to terminate is no longer required. * The burden of proving that the termination was for a valid or authorized cause shall rest on the ER. (Indino vs. NLRC) * Is the ER required to pay separation pay for closure of business due to the serious business losses? No. The cases of State Investment House vs. CA, Mendoza vs. NLRC, and the Mindanao Terminal vs. Minister of Labor provide that the rule in Article 283 with respect to separation pay applies only to closure not due to business reverses. (Azucena) The payment of separation pay is not required if closure is due to grave financial losses. What are the requirements for a valid cessation of business not due to business reverses? a) Service of a written notice to the EEs and to the DOLE at least 1 month before the intended date thereof. b) Cessation or withdrawal from business operations must be bona fide in character. c) Payment to the EEs termination pay amounting to at least month pay, for every year of service, or 1 month pay, whichever is higher. (ALU vs. NLRC) *Fraction of a year = 1 year Carmelcraft Corporation, etc. vs. NLRC (186 SCRA 393) The determination to cease operations is a prerogative of management that is usually not interfered with by the State as no business can be required to continue operating at a loss simply to maintain the workers in employment. That would be a taking of property without due process of law which the employer has a right to resist. But where it is manifest that the closure is motivated not by a desire to avoid further losses but to discourage the workers from organizing themselves into a union for more effective negotiations with the management, the State is bound to intervene. CESSATION An employer who has to cease operation because of compulsory acquisition by the government of its land for purposes of agrarian reform is not liable to pay separation pay to its affected EEs. But relocating the business to a place to which the EEs cannot or do not want to transfer (principally because of distance) may be considered as cessation of business. It is not closure or cessation on account of serious business losses. Consequently, the ER must pay the EEs the


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separation pay required under Art. 283 at the rate of 1 months OR months pay per year of service WHICHEVER IS HIGHER. SALE IN BAD FAITH Although the purchaser of the assets or enterprise is not legally bound to absorb in its employ the EEs of the seller of such assets or enterprise, the parties are liable to the EEs if the transaction of the parties is colored or clothed with bad faith. Sale in Good Faith No law prohibits bona fide sale of a going enterprise. When that happens, the purchaser, unless he agrees to do so, has no legal obligation to continue employing the employees of the seller. The seller, a employer, is obliged to pay separation pay and other benefits founded on law, policy or contract. The transferee may give employment preference to the former employees; if hired, they may be required to pass probation. If the sale is tinged with bad faith, however, the law and rulings on unfair labor practice and the doctrine of successor employer may apply. Sundowner Development Corp. Vs. Drilon (180 SCRA 14) Unless expressly assumed, labor contracts such as employment contracts and collective bargaining agreement are not enforceable against a transferee of an enterprise, labor contracts being in personam, thus binding only between the parties. MERGER By the fact of merger, succession of employment rights and obligations occurs between the absorbing corporation and the employees of the absorbed corporation. Not only must the absorbing corporation retain the employees; it should likewise recognize the length of service in the previous employer. In merger, like in sale in bad faith, the successor employer principle applies.
AILMENT OR DISEASE
If the EE suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-EEs, the ER shall not terminate his employment unless there is a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of 6 months even with proper medical treatment. (Sec. 8, Rule 1, Book VI, IRRs) A medical certificate issued by the companys own physician, is not a competent public health authority. * The ER must bear the burden of proving disease as an authorized cause to terminate employment. * A medical certificate issued by the companys own physician, is not a certificate by competent public health authority. (Cebu Royal Plant [San Miguel Corporation vs. Deputy Minister of Labor, 153 SCRA 38.). * The employee whose services are terminated on account of sickness or absences may be granted financial assistance equivalent to separation pay of one-half (1/2) month for every year of service. 23.4 PROCEDURE TO TERMINATE EMPLOYMENT TWO FACETS OF VALID TERMINATION 1. The legality of the act of dismissal which constitutes discharge with just cause; and 2. The legality in the manner of dismissal with due process. (Shoemart vs. NLRC) The illegality of the act of dismissal constitutes discharge without just cause, while illegality in the manner of dismissal is dismissal without due process.
DUE PROCESS : Sigma Rho ( ) reviewers


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Substantive due process mandates that an employee can only be dismissed based on just or authorized causes. Procedural due process requires further that he can only be dismissed after he has been given an opportunity to be heard. The import of due process necessitates the compliance of these two aspects. (Maneja vs. NLRC, 290 SCRA 603.) * The guarantee of due process applies to all workers, including managerial employees. (Offshore Industries, Inc. vs. NLRC, 177 SCRA 50.) Standards of Due Process In all cases of termination of employment, the following standards of due process shall be substantially observed: I. For termination of employment based on just causes as defined in Article 282 of the Code; (a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said employees reasonable opportunity within which to explain his side; (b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to respond to the charge, present the evidence or rebut the evidence presented against him; and (c) A written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. In case of termination, the foregoing notices shall be served on the employees last known address. II. For termination of employment based on authorized causes defined in Article 283 of the Labor Code, the requirements of due process shall be deemed complied with upon service of a written notice to the employee and the appropriate Regional Office of the Department at least thirty (30) days before the effectivity of the termination/ specifying the ground or grounds for termination. III. If the termination is brought about by the completion of the contract or phrase thereof, no prior notice is required. If the termination is brought about by the failure of the employee to meet the standards of the employer in the case of probationary employment, it shall be sufficient that a written notice is served the employee within a reasonable time from the effective date of termination. NOTICE The law requires that the ER must furnish the worker sought to be dismissed with two written notices before termination of employment can be legally effected: 1. Notice which apprises the EE of the particular acts or omissions for which his dismissal is sought (SHOW CAUSE NOTICE); and 2. Subsequent notice which informs the EE of the ERs decision to dismiss him. Failure to comply with the requirements taints the dismissal with illegality. (Pepsi-Cola vs. NLRC) If the separation is based on the authorized causes under Art. 283-284, the law requires ER to give BOTH the worker and the DOLE, WRITTEN NOTICES 30 days ahead of projected date of separation. if the EE consented to his separation (Authorized Cause: Redundancy), required previous notice to DOLE is not necessary as the EE thereby acknowledged existence of a valid cause for termination. OPPORTUNITY TO BE HEARD * An EE must be given ample opportunity prior to his dismissal to adequately prepare for his defense. By ample opportunity is meant every kind of assistance that management must be accord to the EE to enable him to prepare adequately for his defense. Under the rules, indeed workers may be provided with a representative. (Ruffy vs. NLRC) The requirement of hearing affords the EE the opportunity to answer his ERs charges against him and accordingly to defend himself therefrom before dismissal is effected. (Salaw vs. NLRC) the the the the


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* Where the employee denies the charges against him, a hearing is necessary to thresh out all doubts. The failure of the employer to give the employee the benefits of a hearing and an investigation before the termination constitutes an infringement of his constitutional right to due process of law. (Roche [Philippines], et al., vs. NLRC, 178 SCRA 386.) * No hearing is required if the grounds for dismissal or termination of service does not relate to blameworthy act or omission on the part of the EE i.e. retrenchment or redundancy. (Witshire vs. NLRC). * The right of an employee to be informed of the charges against him and to reasonable opportunity to present his side in a controversy with either the company or his union, is not wiped away by a union security clause or a union shop clause in a CBA. An employee is entitled to be protected not only from a company which disregards his rights but also from his own union the leadership of which could yield to the temptation of swift and arbitrary expulsion from membership and, hence, dismissal from his job. (Carino vs. NLRC, 185 SCRA 177.) * W was called to the Office of the General Manager and was told that she was being charged with discourtesy and insubordination. During that time, she was also called to explain her side. As she could not give an explanation, she was dismissed. Is the dismissal valid? No. She was denied procedural due process. She was not given ample opportunity to be heard and to defend herself. * 36 conductors of a bus were dismissed after investigations conducted by the Jago and the fiscal found out that they defrauded the company. Is the dismissal violative of due process? No. For the company to conduct its own investigation is a duplication of the JAGO and the city fiscals investigation. (BLTB vs. NLRC) * D was dismissed by his ER based on the preliminary investigation of the city fiscal which relied on an affidavit of an accused-turned state witness. Is this violative of due process? Yes. As compared to the BLTB case, the findings of the city fiscal were based solely on the affidavit of the accused-turned state witness. The substantial evidence requirement is not present. (China City Restaurant vs. NLRC) * S was dismissed by his ER due to his well documented involvement in pilferage. Prior to dismissal, he was called to a meeting of all delivery personnel to discuss pilferage incidents. He denied involvement therein. Later he was dismissed. Is the dismissal violative of due process? Yes. The meeting called by the ER does not qualify as the hearing required by law. (Segismundo vs. Montalvo) RIGHT TO COUNSEL The right to counsel is a basic requirement of substantive due process. The right to counsel cannot be waived except in writing and in the presence of counsel. (Salaw vs. NLRC) BURDEN OF PROOF Art. 277 : The burden of proving that the termination was for a valid or authorized cause shall rest on the ER. The burden of proving payment of money claims rests on the ER. One who pleads payment has the burden on proving it. ER has custody of the documents that can resolve the issue of payment or nonpayment * In an unlawful dismissal case, the employer has the burden of providing the lawful cause sustaining the dismissal of the employee. Equipoise is not enough. The employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause. (Dizon vs. NLRC, 180 SCRA 52.)


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* It is not enough for an employer who wishes to dismiss an employee to charge him with theft or some other wrongdoing. The validity of the charge must be established in a manner consistent with due process. Accusation cannot take the place of proof. A suspicion or belief no matter how sincerely felt cannot substitute for factual findings carefully through an orderly procedure. (Philippine Associated Smelting and Refining vs. NLRC, 174 SCRA 550.) DEGREE OF PROOF In administrative or quasi-judicial proceedings, proof beyond reasonable doubt is not required as basis for a judgment of the legality of an ERs dismissal of an EE, nor even preponderance of evidenced, substantial evidence being sufficient. (MERALCO vs. NLRC) * Proof beyond reasonable doubt of the employees misconduct is not required, it is being sufficient that there is some basis for the same or that the employer has reasonable ground to believe that the employee is responsible for the misconduct and his participation therein renders him unworthy of the trust and confidence demanded by his position. (Riker vs. Ople, 155 SCRA 85.) CONDONATION Having condoned the misconduct of the EE and pardoned the latter, he is deemed to have lost or waived his right to insist on the ERs acts as a ground for dismissal. (Azucena) DISMISSAL FOR CAUSE BUT WITHOUT DUE PROCESS A sanction, in the form of damages, must be imposed upon the ER for failure to give a formal notice and conduct an investigation as required by law before dismissing the EE from employment. (Wenphil vs. NLRC) * It is now axiomatic that if just cause for termination of employment actually exists and is established by substantial evidence in the course of the proceedings before the labor arbiter, the fact that the employer failed, prior to such termination to accord to the discharged employee the right of formal notice of the charges against him and a right to ventilate his side with respect thereto, will not operate to eradicate said just cause so as to impose on the employer the obligation of reinstating the employee and otherwise granting him such other concomitant relief as is appropriate in the premise. (Rubberworld [Phils.], Inc. vs. NLRC, 183 SCRA 421.) > He has no right to return to his former employment. However, the employer must nevertheless be held to account for failure to extend to the employee his right to an investigation before causing his dismissal. NOTE: In Serrano vs. NLRC and Isetann Dept. Store (323 SCRA 445), the Supreme Court en banc modified the Wenpbil doctrine. For not observing due process, the employer will have to pay the employees full backwages from the time of dismissal to finality of the courts decision. The employee will not be reinstated. If the termination is grounded in any of the authorized causes, the employer will still pay the separation pay. SERRANO CASE: The ERs failure to comply with the NOTICE requirement (Art. 283) does not constitute a denial of due process BUT a mere failure to observe a procedure for the termination of employment which makes the termination of employment mere INEFFECTUAL. Prior written notice (30) days cannot be substituted with payment of 30 days salary. The PURPOSE of such 30-day NOTICE is to give the EE some time to prepare for the eventual loss of his job as well as the DOLE the opportunity to ascertain the verity of the alleged authorized cause of termination. Only if the termination of employment is not for any of the causes provided by law is it illegal and therefore the employed should be reinstated and paid back wages.


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The order to pay full back wages is a consequence of the ERs action in dismissing an EE without notice which makes the dismissal INEFFECTUAL. The EE is not considered to have been terminated from his employment UNTIL it is finally determined that his dismissal/termination of employment was for a cause and therefore he should be paid wages in the interim. SERRANO DOCTRINE The revision of Wenphil came in Serrano vs. NLRC et at (GR 117040, January, 2000). For not observing due process the ER will be required to pay, not indemnity but the EEs full back wages from the time of his dismissal to the finality of the courts decision. But the dismissal is not outright illegal since it is based on a valid reason; hence, the EE remains dismissed. The dismissal is merely defective; the court calls it ineffectual. The Wenphil-Serrano doctrine applies to all terminations whether under Art. 282 or under Arts. 283 & 284. The entitlement to separation pay as established in Arts. 283 and 284 is not affected. It has to be paid at the rates indicated in those articles. The required 30-day advance written notices cannot be shortened or substituted for by 30-days pay. (Azucena) RULES MANAGERIAL EES AND RANK AND FILE EES As a general rule, ERs are allowed a wider latitude of discretion in terminating the employment of managerial personnel or those who, while not of similar rank, perform functions which by their nature require the ERs full trust and confidence. This must be distinguished from the case of ordinary rank-and-file EEs whose termination on the basis of these same grounds require a higher proof of involvement in the events in question; mere uncorroborated assertions and accusations by the ER will not suffice. (Coca-Cola vs. NLRC) OFFER TO REINSTATE The fact that his ER latter made an offer to re-employ him did not cure the vice of his earlier arbitrary dismissal. (Ranara vs. NLRC) PRESCRIPTION A complaint founded on illegal dismissal is not an ordinary money claim but for reinstatement. The action may be brought within 4 years from dismissal pursuant to Art. 1146 of the NCC. (New Imus Lumber vs. NLRC) PREVENTIVE SUSPENSION Preventive Suspension is justified when the EEs continued employment poses a serious and imminent threat to the life or property of the ER or his co-workers. Maximum period = 30 days Beyond that the EE becomes entitled to his pay and benefits and the ER may be required to pay indemnity * By itself, preventive suspension does not signify that the company has adjudged the employee guilty of the charges she was asked to answer and explain. Such disciplinary measure is resorted to for the protection of the companys property pending investigation of any alleged malfeasance or misfeasance committed by the employee. (Soriano vs. NLRC, 155 SCRA 124.) DUE PROCESS IN AUTHORIZED CAUSES In employment terminations due to authorized causes, the due process requirement is not completely done away with. Investigation and hearing need not be done by the employer. (Wiltshire File Co. vs. NLRC, 193 SCRA 665) but the one month advance notices to the affected employee and to DOLE must be complied with, otherwise the termination is illegal. 23.5 CONSEQUENCES OF TERMINATION SEPARATION PAY


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Four Kinds of Separation Pay Under present law and jurisprudence, separation pay may be viewed in four ways of contexts: (a) separation pay as employers statutory obligation in cases of legal termination due to authorized causes under Article 283 or 284; (b) separation pay as financial assistance, as an act of social justice, even in cases of legal dismissal under Article 282; (c) separation pay in lieu of reinstatement in illegal dismissal cases where the employee is ordered reinstated but reinstatement is not feasible; (d) separation pay as an employment benefit granted in a CBA or company policy. A. General Rule If there is valid cause to terminate an employment, no separation pay need be paid. (Sec. 7, Rule I, Book VI, IRRs) Separation pay is a substitute to reinstatement when warranted When the dismissal was legal, there is no basis for reinstatement, back wages and not even financial assistance When the closure of the business is due to the implementation of the CARL, there is no obligation to pay separation pay (termination was not caused by the ER) In cases of serious financial losses, the company is not obliged to pay separation pay B. Exceptions 1. Art. 283 : f. Installation of labor saving devices and redundancy : 1 month or 1 month pay for every year of service, whichever is higher.
g. Retrenchment to prevent losses and closure or cessation of operation or

establishment or undertaking not due to serious business losses or financial reverses : 1 month pay or month pay for every year of service, which ever is higher. 2. Art. 284 : h. Disease : 1 month salary or month salary for every year of service, whichever is higher.
3. Even if an EE resigns, he shall be given a separation pay if there is a company policy to

that effect. (Philoil vs. Ministry of Labor)
4. DISCERNING COMPASSION DOCTRINE : Separation pay shall be allowed as a

measure of social justice for instances where the EE is validly dismissed for causes other than serious misconduct or those reflecting on his moral character i.e. A was found to have demanded and received money in consideration for promise to facilitate approval of telephone line application. (Nasipit Lumber vs. NLRC)
5. Antipathy and Antagonism Reinstatement is no Longer Possible : Strained relations

in order that it may justify award of separation pay in lieu of reinstatement with backwages, should be such, that they are so compelling and so serious in character, that the continued employment has become inconsistent with peace and tranquility which is an ideal atmosphere in every workplace. (Sibal vs. Notre Dame) This is particularly true when the position the EE is occupying is a position involving trust and confidence. (Alcantara) C. COMPUTATION of SEPARATION PAY It is error not to integrate the allowance with the basic salary in the computation of the separation pay. The salary base properly used in computing the separation pay should include


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not just the basic salary but also the regular allowances that an employee has been receiving. (Planters Products Inc. vs. NLRC, 169 SCRA 328) In the computation of back-wages and separation pay, account must be taken not only of the basic salary of the employee but also of the transportation (Santos vs. NLRC, 154 SCRA166.) But commissions (override commissions plus net deposit incentive) may not be included in such base figure since such commissions must be earned by actual market transactions attributable to the employee. Neither should travels equivalent (an unusual and unexplained term) and commission in trading personal clients be included in such base figure. (Soriano vs. NLRC, 155 SCRA 124.) D. EFFECT- RECEIPT EEs who received their separation pay are not barred from contesting the legality of their dismissal. The acceptance of those benefits would not amount to estoppel. (San Miguel vs. Javate) BACKWAGES * Backwages in general are granted on grounds of equity which a worker has lost due to his illegal dismissal. (Torillo vs. Leogrardo) As a general rule, an EE is entitled to backwages only where his dismissal is due to the unlawful act of the ER or to the latters bad faith. (Reyes vs. Minister of Labor) While generally an order of reinstatement carries with it an award of backwages, the court may not only mitigate, but also absolve the ER from liability fro backwages where good faith is evident. (Durabilt vs. NLRC) Differentiate backwages from separation pay? Separation pay is the amount that an EE receives at the time of his severance from the service and is designed to provide the EE with the wherewithal during the period that he is looking for another employment. (Torillo vs. Leogardo) Backwages represent compensation that should be earned but not collected because of the unjust dismissal. (Lim vs. NLRC) The basis of computing the two are different, the 1st being usually the length of the EEs service and the 2nd the actual period when he was lawfully prevented from working. (Id.) A. COMPUTATION OF BACKWAGES
Before March 21, 1989: Backwages up to 3 yrs without deduction or qualification.
After March 21, 1989: Art. 279 : An EE who is unjustly dismissed from work shall be entitled to full backwages, inclusive of allowances, and to his other benefits or their monetary equivalents computed from the time his compensation was withheld from him up to the time of his actual reinstatement.
* The effects of extraordinary inflation are not to be applied without an agreement between the parties and without an official declaration thereof by competent authorities. (Lantion vs. GAUF) REINSTATEMENT * Reinstatement is a restoration to a state which one has been removed or separated. It is the return to the position from which he was removed and assuming again the functions of the office already held. Reinstatement presupposes that the previous position from which one had been removed still exists, or that there is an unfilled position more or less of a similar nature as the one previously occupied by EE (NATU vs. Secretary of Labor) * An ER has 2 options in order for him to comply with an order of reinstatement, which is immediately executory, even pending appeal, firstly, he can admit the dismissed EE back to work under the same terms and conditions prevailing prior to his dismissal or separation or to a substantially equivalent position if the former position is already filled up. Secondly, he can reinstate the EE merely in the payroll. (Medina vs. CBS)


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* The decision of the labor arbiter reinstating a dismissed EE is immediately executory even while the case is brought up on appeal. (Art. 223) In authorizing this, the law itself has laid down a compassionate policy which once more vivifies and enhances the provisions of the Constitution. (Aria vs. NLRC) * Reinstatement is not self-executing. Payroll reinstatement or actual reinstatement needs the issuance of a writ of execution. (Maranao Hotel vs. NLRC) Reinstatement pending appeal is not only immediately executory it is selfexecuting. The decision of the Labor Arbiter reinstating a dismissed EE is immediately executory even while the case is brought up on appeal * What if reinstatement is not prayed for in the case before the labor arbiter. Is the labor arbiter allowed to grant reinstatement? No. The EE will not be reinstated if he did not pray for reinstatement. (Labor vs. NLRC) But an earlier case, (General Baptist College vs. NLRC) says that EE is entitled to reinstatement although he failed to specifically pray for the same. The Labor case is a later case. * After a finding that the dismissal of G, the manager of Dunkin Donuts violated procedural due process. G asked that he be reinstated. The company refused on the ground of loss of confidence of G. Is the refusal valid? Yes. G held a sensitive position. The case left both parties with less than full trust and faith in each other. He should be paid severance compensation in lieu of reinstatement. (Golden Donuts vs. NLRC) BACKWAGES: ILLEGAL TERMINATIONS Backwages and reintatement are 2 reliefs given to an illegally dismissed employee. They are separate and distinct from each other. However, in the event that reinstatement is no longer possible, separation pay is awarded to the employee. Thus, the award of separation pay is in lieu of reinstatement and not of backwages. In other words, an illegally dismissed employee is entitled to: a) either reinstatement, if viable, or separation pay if reinstatement is no longer viable; and b) back wages Back wages in general are granted on grounds of equity for earnings which a worker or employee has lost due to his illegal dismissal. Reinstatement on the other hand, means restoration to a state of condition from which one had been removed or separated. BUSTAMANTE DOCTRINE: Backwages to be awarded to an illegally dismissed employee should not, as a general rule, be diminished or reduced by the earning derived by him elsewhere during the period of illegal dismissal The full back wages without deductions serve as part of the price or penalty the employer must pay for illegally dismissing the employee. Although, generally, an order of reinstatement carries with it an award of backwages, the court may not only mitigate but also absolve the ER from liability for backwages where good faith is evident. REINSTATEMENT restores the employee who was unjustly dismissed to the position from which he was removed, while the grant of backwages allows the same employee to recover from the ER the wages he lost because of his dismissal. DAMAGES Moral damages are recoverable in dismissal cases only where the dismissal was attended by bad faith or fraud or constituted ac act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. Exemplary damages in dismissal cases may be awarded only if the dismissal was effected in a wanton, oppressive or malevolent manner.


Updated and enhanced with additional cases by ATTY. RENE CALLANTA STRAINED RELATIONS MAY BAR REINSTATEMENT
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Where the charge against the EE has not been substantiated, his dismissal is unwarranted and, and therefore, illegal. Considering, however, that the relationship between the EE and the ER has been severely strained by reason of their respective imputations of bad faith against each other, to order reinstatement would no longer serve any prudent purpose. In such situation, the Court would order the payment of back wages and separation pay instead of reinstatement. (Azucena) 23.6 TERMINATION BY EE AND SUSPENSION OF OPERATION TERMINATION BY EE JUST CAUSES Art. 285 : An EE may put an end to the relationship without serving any notice on the ER for any of the following just causes: 1. Serious insults by the ER and or his representative on the honor and person of the EE; 2. Human and unbearable Treatment accorded the EE by the ER or his representative; 3. Commission of a crime or offense or his representative against i. the person of the EE, or ii. any immediate members of his family, and 4. Analogous cases. WITHOUT JUST CAUSE REQUISITES Art. 285(a) : An EE may terminate without just cause the ER-EE relationship by serving a written notice on the ER at least 1 month in advance. The EE upon whom no such notice has been served may hold the ER liable for damages. A. RESIGNATION (1 mo advance notice) Resignation is a voluntary act of an EE who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service, then he has no other choice but to disassociate himself from his employment. The ER has no control over resignation and so, the notification requirement was devised in order to ensure that no disruption of work would be involved by reason of resignation. This practice has been recognized because every business enterprise endeavors to increase its profits by adopting a device or means designed towards that goal. Resignation once accepted and being the sole act of the EE may not be withdrawn without the consent of the ER. (Intertrod Maritime vs. NLRC) B. CONSTRUCTIVE DISCHARGE * A constructive discharge is a quitting because continued employment is rendered impossible, unreasonable or unlikely; as, an offer involving a demotion in rank and diminution in pay. (Philippine Japan Active Carbon vs. NLRC) This is not a case of voluntary resignation. It is in the nature of a contrivance to effect to dismissal without cause. (Rizal Memorial vs. NLRC) * Z was hired as a production recorder by a tobacco company. After 14 years of occupying the position, she was demoted to picker by reason of inefficiency due to alleged frequent mistakes in her report. Z refused to report for work and filed a complaint for illegal dismissal. Was the dismissal justified? No. The management based its action merely on communications between officers of the company. She was not notified in advance of the companys actions. The demotion done in bad faith constitute constructive dismissal. Resignation is withdrawable even if the EE has called it irrevocable If it is accepted or approved by the ER, its withdrawal needs the ERs consent An EE who resigns and executes a quitclaim is generally estopped from filing an illegal dismissal case. There can be constructive dismissal only if there was demotion in rank or diminution in pay


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FLOATING STATUS beyond 6 months, under Art. 286, may also amount to constructive dismissal SUSPENSION OF OPERATIONS Art. 286 : The bona fide suspension of the operation of a business or undertaking for a period not exceeding 6 months, or the fulfillment by the EE of a military or civic duty shall not terminate employment. In all such cases, the ER shall reinstate the EE to his former position without loss of seniority rights if he indicates his desire to resume his work not later than 1 month from the resumption of operations of his ER or from his relief from the military or civic duty. * It is settled that when the bona fide suspension of operations of a business undertaking exceed 6 months, then the workers employment shall be deemed terminated. (Lucky Textile vs. NLRC)
Section 24. RETIREMENT

Art. 287 : Any EE may be retired upon reaching the retirement age established in the CBA or other applicable employment contract. In case of retirement, the EE shall be entitled to receive such retirement benefits as he may have earned under existing laws and any CBA agreement and other agreements: Provided, however, That an EEs retirement benefits under any CBA and other agreements shall not be less than those provided therein. In the absence of a retirement plan or agreement providing for retirement benefits of EEs in the establishment, an EE upon reaching the age of 60 years or more, but not beyond 65 years which is hereby declared the compulsory retirement age, who has served at least 5 years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least month salary for every year of service, a fraction of at least 6 months being considered as 1 whole year. Unless the parties provide for broader inclusions, the term month salary shall mean 15 days plus 1/12th of the 13th month pay and the cash equivalent of not more than 5 days of service incentive leaves. Retail, service and agricultural establishments or operations employing not more than 10 EEs or workers are exempted from the coverage of this provision. Violation of this provision is hereby declared unlawful and subject to the penal provisions under Art. 288 of this Code. The retirement pay payable under Art. 287 is APART from the retirement benefit claimable by the qualified EE under the Social Security Law. Restriction in private retirement plan will not prevent the EE from retiring optionally at age 60 OBLIGATION * The law does not impose any obligation upon ERs to set up a retirement scheme for their EEs over and above that already established under existing laws. (Llora Motors vs. Drilon) * Entitlement of EEs to retirement benefits must be specifically granted under existing laws, a CBA or employment contract or an established EE policy. (GVM vs. NLRC) BENEFIT


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* Retirement benefits are intended to help the EE enjoy the remaining years of his life, lessening the burden of worrying for his financial support, and are a form of reward for his loyalty and service to the ER. (Aquino vs. NLRC) * The CBA between a university and its faculty members provided that in case of unusual circumstances, faculty members whose services are terminated shall be granted retirement benefits. Are faculty members affected by an unusual circumstance, such as phase-out, and who are given separation pay pursuant to law also entitled to retirement benefits? Yes. There is no provision in the CBA to the effect that termination benefits received under the law shall preclude the EE from receiving other benefits under the agreement. Separation pay arising from a forced termination of employment and benefits given as a contractual right due to many years of faithful service and are not necessarily antagonistic to each other. (UE vs. Minister of Labor)
PART II SOCIAL SECURITY

25. 1 SOCIAL SECURITY LAW (SSL) RA 1161 (as amended by RA 8282) Section 1, SSL : The Act shall be known as the Social Security Act of 1997. 25.2 POLICY OF THE STATE Section 2, SSL : It is a policy of the State to establish, develop, promote and perfect a sound & viable tax exempt SSS which shall: a) promote social justice and b) provide meaningful protection to members and their beneficiaries against the hazardous of disability, sickness, maternity, old age, death, and other contingencies resulting in loss of income or financial burden. * The law imposes upon ERs and EEs the obligation to become members of and make contributions to the Social Security System. Is such a legal imposition valid and constitutional? Membership in the SSS is not the result of a bilateral, consensual agreement where the rights and obligations of the parties are defined by and the subject to their will. The law requires compulsory coverage of ERs and EEs, it is designed to provide security to the working men. Membership in the SSS is, therefore, in compliance with a lawful exercise of the police power of the State, to which the principle of non-impairment of the obligation of contract is not a proper defense. (PBM vs. SSS) 25.3 DEFINITIONS Employer Section 8, SSL : ER any person, natural or juridical, domestic or foreign, who carries on in the Philippines any trade, business industry, undertaking or activity of any kind and uses the services of another person who is under his orders as regards the employment. * Self employed is both ER and EE at the same time. What ERs are exempted from the SSS Law? Government and any of its political subdivisions, branches or instrumentalities, including GOCCs controlled by the government. Employee


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Section 8, SSL : EE Any person who performs services for an ER where either mental and physical efforts are used and who receives compensation for such services and where there is an ER-EE relationship. Dependent 1. Section 8, SSL : Legal spouse entitled by law to from member to receive support. Child : 1) legitimate 2) legitimated 3) legally adopted 4) illegitimate who is unmarried, and not gainfully employed and not reached 21 or over 21 is congenitally or while still minor permanently incapacitated and incapable of selfsupport, physically or mentally. Parent : Who is receiving regular support from member. Beneficiaries A. PRIMARY 1. Sec. 8, SSL : Dependent spouse until remarriage Dependent legitimate, legitimated or legally adopted and illegitimate children provided that the illegitimate children shall be entitled to 50% of the share of the legitimate, legitimated and legally adopted children. * After 4 years of marriage, the spouses Salmonte broke up. The wife left the conjugal home. Thereafter, the husband V lived with another woman. When V died, who is entitled to his death benefits? Any legitimate children of V and illegitimate children (50% of the share of the legitimate children). The wife of V is not entitled since she does not qualify anymore as beneficiary since she is not dependent upon the husband. (Salmonte vs. Salmonte) B. SECONDARY Sec. 8 Dependent parents C. OTHERS Sec. 8 : Absent primary and secondary beneficiaries any other person designated by members as secondary beneficiary. * S, a bachelor dies. His death benefits are claimed by L, his girlfriend whom he designated as beneficiary. The claim is contested by V, S brother. Who is preferred? L, V is not among the primary and secondary beneficiaries provided under the law. Thus, L, the designated beneficiary is preferred. (Alcantara) * E, a widower, designated M as his beneficiary. The unemployed married children of E contests the payment of death benefits to M. Is the contention valid? No. Eddies legitimate children are not considered dependents since they are already married. (Alcantara) 25.4 COVERAGE A. COMPULSORY Enumerate the kinds of employment under compulsory coverage under the SSL:
1. All EEs not over 60 years of age on date of employment and ERs on 1 st day of
operation. (Sec. 9 and 10, SSL)
2. Self-employed as determined by the commission but not limited to self-employed

professionals; partners and single proprietors of businesses, actors, actresses, directors,


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scriptwriters, news correspondents who are not EEs; professional athletes, coaches, trainers, and jockeys and individual farmers and fisherman. (Sec. 9, SSL) Enumerate the kinds of employment which are excepted from compulsory coverage under the SSL? 1. Employment purely casual and not for the purpose of occupation or business of the ER. (Sec. 8, SSL) 2. Service performed on or in connection with alien vessel if EE employed when such vessel is outside of the Philippines. (Id.) 3. EEs of the Philippine government, instrumentality or agency thereof. (Id.) 4. Service performed in the employ of a foreign government, or international organizations or wholly-owned instrumentality. (Id.) 5. Services performed by temporary EEs excluded by SSS regulation. (Id.) 6. Domestic helpers who are 60 years of age and below with a monthly income of less than P1,000.00 on the date of their employment. (Sec. 9) 7. Individual farmers and fishermen under SSS rules and regulations. (Id.) * As sacristan in the Catholic Church, B cleaned the premises of the church, tolled its bells, and assisted the priests in the masses and other church services. In consideration of these services, he received 5% of the monthly income of the church. Is B subject to compulsory coverage? Yes. He is considered an EE. The Archbishop as corporation sole, to whom a share of the income or collection is sent, is considered his ER. (Bascuna vs. Roman Catholic Archbishop) B. VOLUNTARY Enumerate the kinds of employment under the SSL?
1. Filipinos recruited by foreign ERs for employment abroad. (Section 9, SSL) 2. EE separated from employment (Sec. 11, SSL) 3. Spouse who devote full time managing household and family affairs unless specifically
mandatorily covered. (Sec. 9, SSL) C. BY ARRANGEMENT When can coverage be by arrangement? Any foreign government, international organization or wholly owned instrumentality employing workers in the Philippines or employing Filipinos outside of the Philippines may enter into an agreement with the Philippines for the inclusion of such EEs in the SSS except those already covered by their respective civil service retirement system. (Sec. 8, SSL) 25.5 EFFECT OF SEPARATION FROM EMPLOYMENT OR INTERRUPTION OF
BUSINESS OF PROFESSIONAL INCOME

What are the effects of separation from employment of an EE compulsorily covered? 1. ER contribution shall cease at the end of the month of separation an EE not required to pay contributions. 2. EE credited with all contributions paid and entitled benefits according to SSL.
3. EE may continue to pay total contribution to maintain right to full benefit. (Sec. 11, SSL)
What are the effects if self-employed realizes no professional or business income?


Updated and enhanced with additional cases by ATTY. RENE CALLANTA 1. He shall not be required to pay contributions.
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2. He may be allowed to continue to pay contributions under the same rules as a separated EE. (Sec. 11, SSL) * After working for 5 years, J was fired without cause. His dismissal effected him so much that 2 months after he suffered a stroke. Is he entitled to disability benefits at the time of his stroke? Yes. Although an EE is separated from service and has ceased to pay premiums, he shall be entitled to contributions and to benefits available under the law. As J was a member of SSS, he remained an SSS member. (Alcantara) 25.6 REPORTING REQUIREMENTS
1. Sec. 24, SSL : Each ER shall immediately report EEs names, ages, civil status,
occupations, salaries and dependents.
2. Sec. 24-A : Each covered self-employed shall within 30 days from the 1st day he started
practice register and report to the SSS his name, age, civil status, occupation, average monthly net income and his dependents.
25.7 FUNDING I. What are the different sources of funding for the SSS?
1. EE s contribution : The ER shall deduct and withhold from such EEs monthly salary,
wage, compensation or earnings, the EEs contribution. (Sec. 18) [Compensation an actual remuneration as well as cash value of any remuneration paid in any medium other than cash. (Sec. 8)]
2. ERs contribution : ER shall pay, with respect to such covered EE, the ERs contribution
in accordance with the schedule indicated in Section 18 of this Act.
3. Government contributions : Appropriation of necessary sums to meet the estimated

expenses of the SSS for each ensuing year. 4. Contributions from those voluntarily covered by the SSS. II. The funds contributed to the System belong to the members who will receive benefits, as a matter of right, whenever the hazards provided by the law occur. (CMS Estate vs. SSS) EFFECTS OF NON-REMITTANCE Sec. 22, SSL : Failure of refusal of the ER to pay or remit contributions shall not prejudice the right of the covered EE to the benefits of coverage. 25. 8 BENEFITS I. What are the different types of benefits under the SSL? 1. Monthly pension. (Sec. 12, SSL) Minimum pension of P1,200.00 for members with at least 10 credited years of service and P2,400.00 for those with 20 credited years of service. 2. Dependents pension (Sec. 12-A, SSL) 3. Retirement (Sec. 12-B, SSL) paid at least 120 monthly contributions monthly pension for as long as he lives


Updated and enhanced with additional cases by ATTY. RENE CALLANTA 4. Death (Sec. 13, SSL) paid at least 36 monthly contributions lump sum of 36 monthly pensions 5. Permanent disability (Sec. 13-A, SSL) 6. Funeral (Sec. 13-B, SSL)
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7. Sickness (Sec. 14, SSL) payment of at least 3 monthly contributions in the 12-month period immediately preceding the sickness. Confinement for more than 3 days Notice to ER within 5 calendar days of sickness Exhaustion of sick leaves with full pay. 8. Maternity (Sec. 14-A, SSL) A female member who has paid at least 3 monthly contributions in the 12 -month period immediately preceding the semester of her childbirth or miscarriage shall be paid a daily maternity benefit equivalent to 100% of her average daily salary credited for 60 days or 78 in case of caesarian delivery for the 1st 4 deliveries or miscarriages. These are all tax-exempt. II. Section 2, Paternity Leave Act of 1995(RA 8187) : Notwithstanding any law, rules and regulations on the contrary, every male EE in the private and public sectors shall be entitled to a paternity leave of 7 days with a full pay for the 1st four deliveries of the legitimate spouse with whom he is cohabiting. The male EE applying for paternity leave shall notify his ER of the pregnancy of his legitimate spouse and the expected date of such delivery. Conditions to entitlement: 1The claimant, a married male employee, is employed at the time of delivery of his child. 2He is cohabiting with his spouse at the time she gives birth or suffers a miscarriage. 3He has applied for paternity leave in accordance with Sec. 4 of the laws implementing rules; and 4His wife has given birth or suffered a miscarriage. wife refers to the lawful wife which means the woman who is legally married to the male EE concerned.
Leave application should be filed with the ER within a reasonable time from the expected date of delivery by the pregnant spouse, or within the period provided by company policy. In case of miscarriage, prior application for leave is not required. * On his way home from work, R went to a movie house to watch. He is stabbed by an unknown assailant while watching. The SSS denied his claims on the ground that the injury is not workconnected. Is the denial valid? No. It is not necessary for the enjoyment of benefits that there be casual connection between the injury and the work of the EE. What is required is membership in the SSS. PRESCRIPTION PERIODS Art. 1144 : 10 years from the time the right of action accrues since this is an obligation created by law. BENEFIT PROTECTION Sec. 15, SSL : Benefits are not transferable. No power of attorney or other documents executed as beneficiary in favor of any agent, attorney or other person for the collection of their behalf shall be recognized except which beneficiary is physically unable to collect.


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Sec. 15, SSL : When Beneficiary is a national of a foreign country which does not extend benefits to Filipino beneficiary residing in the Philippines or which is not recognized by the Philippines. General Rule : He is not entitled to benefit. Exception: Social Security Commission may authorize payment where the best interest of the SSS will be served. Sec. 16, SSL : All benefit payments made by SSS shall be exempt from all kinds of taxes, fees or charges and shall not be liable to attachment, garnishments, levy or seizures by or under any legal or equitable process whatsoever, either before or after receipt except to pay any debt of member to SSS. Sec. 17, SSL : No fees shall be payable to agent, attorney, other person-in-charge of preparation, filing or pursuing any claim and any stipulation to the contrary is void. Members of the Bar who appear as counsel in any case heard by the Commission shall be entitled to attorneys fees not exceeding 10% of the amount collected, any stipulation of the contrary shall be null and void. 25.9 DISPUTE SETTLEMENT JURISDICTION AND PERIOD OF DISPUTE SETTLEMENT Sec. 5 : Disputes involving coverage, benefits, contribution, penalties and any related matter shall be decided by the Social Security Commission or duly designated member, or duly authorized hearing officers and should be decided within the mandatory period of 20 calendar days from submission. Decision shall be final 15 days after date of notification. EXECUTION OF DECISIONS Sec. 5, : The Commission motu proprio or on motion of any interest party may issue order of execution of decision after same is final and executory. APPEAL Sec. 5 : Appeal to CA on law and facts. Appeal to the SC on pure questions of law.
Section 26. WORKMENS COMPENSATION EES COMPENSATION AND STATE INSURANCE FUND (ECSIF)
26.1 LAW POLICY OBJECTIVE Art. 166 : To promote and develop a tax exempt EEs compensation program whereby EEs and their dependents, in the event of work-connected disability or death, may secure adequate income benefit, and medical or related benefit. RATIONALE The primary purpose of a workmens compensation act is to provide compensation for disability or death resulting from occupational injuries or diseases or accidental injury; the statute is a remedial one, to compensate reasonably those who are injured while in the employment of others, as part of the natural, necessary cost of production. (Azucena) NATURE OF THE STATE INSURANCE FUND * The law establishes a state insurance fund built by the contribution of ERs based on the salaries of their EEs. The injured worker does not have to litigate his right to compensation.


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The worker simply files a claim with the ECC. The payment of benefits is more prompt. The cost of administration low. (Sarmiento vs. ECC) Give the characteristics of the EEs Compensation Program 1Tax exempt 2Designed to ensure promptitude in cases of work-connected disability or death in the award of benefits. 3Funded by monthly contributions of all covered ERs. 4Compulsory on all ERs and their EEs not over 60 years of age. 5Benefits are exclusive and in place of all other liabilities of the ER to the EE. 6Has its own adjudicative machinery with original exclusive jurisdiction on any matter related thereto, independent of other tribunals except the SC. (SMC vs. NLRC) INTERPRETATION As agent charged by the law to implement social justice guaranteed and secured by the Constitution, the ECC should adopt a liberal attitude in favor of the EE in deciding claims for compensability, especially where there is some basis in the facts inferring a work connection to the accident. (Lazo vs. ECC) 26.2 DEFINITIONS ER Art. 266 : Any person, natural or juridical, employing the services of an EE. Dependent What are the dependents under the ECSIF? 1. Legitimate 2. Legitimated 3. Acknowledged natural child who is unmarried, and not gainfully employed, and not over 21 years of age, or over 21 provided he is incapable of self-support due to physical or mental defect which is congenital or acquired during minority. 4. Spouse : Legitimate and living with the EE. 5. Parents : of EE wholly dependent upon EE for regular support. (Art. 166) All questions of relationship and dependency shall be determined as of the time of death. The test of dependency is not whether the claimants could support life without contributions, BUT whether they depend on such contributions as part of their income or means of living. Beneficiaries Who are the beneficiaries under the ECSIF? 1. Primary a. Spouse dependent spouse until remarriage b. Children dependent; provided dependent acknowledged natural children shall be considered as primary beneficiary when there are no other dependent children who are not eligible and qualified for monthly income benefit. 2. Secondary a. Parents dependent subject to restrictions imposed on dependent children. b. Children illegitimate subject to restrictions imposed on dependent children c. Legitimate descendants. 26.3 COMPENSABILITY What is an injury? Harmful change in the human organism from any accident arising out of and in the course of the employment. (Art. 167)


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* If a soldier is killed by an accidental discharge of his companions rifle while an overnight pass to a rebel infested area, is the death of a soldier compensable? Yes. The death arose out of and in the course of the employment since the soldier was not on vacation leave and he had lawful permission to go to the place and the other soldier was authorized to carry a firearm. (Hinoguin vs. ECC) What are the requisites for an injury to be considered as work-related? The injury must be the result of an employment accident satisfying all of the following grounds: a. The EE must have been injured at the place where his work requires him to be. b. The EE must have been performing his official functions. c. If the injury is sustained elsewhere, the EE must have been executing an order for the ER. (Sec. 1, Rule III, Book I, IRRs) For the injury and the resulting disability or death to be compensable, the injury must be the result of accident arising out of and in the course of employment. PROXIMATE CAUSE The right to compensation extends to disability due to disease supervening upon and proximately and naturally resulting from a compensable injury. Where the primary injury is shown to have arisen in the course of employment, unless it is the result of an independent intervening cause attributable to claimants own negligence or misconduct i.e. condition of classroom floor caused Belarmino to slip and fall and suffer injury as a result, hence all medical consequences flowing from it, the premature delivery of her baby, and her death are compensable. (Belarmino vs. ECC)
GOING TO OR COMING FROM WORK RULE
1. What is the going and coming rule?

In the absence of special circumstances, an EE injured while going to or coming from his place of work is excluded from the benefits of workmens compensation acts, except: a. Where the EE is proceeding to or from his work on the premises of the ER. b. Where the EE is about to enter or about to leave the premises of his ER by way of the exclusive or customary means of ingress and egress. c. Where the EE is charged, while on his way to or from his place of employment or at his home, or during his employment with some duty or special errand connected with his employment. d. Where the ER as an incident of the employment provides the means of transportation to and from the place of employment.
2. What is the INGRESS OR EGRESS/PROXIMITY RULE?

Employment includes not only the actual doing of the work, but a reasonable margin of time and space necessary to be used in passing to and from the place where the work is to be done. As a general rule, employment may be said to begin when the EE reaches the entrance to the ERs premises where the work is to be done; but it is clear that in some cases the rule extends to include adjacent premises used by the EE as a means of ingress and egress with the express or implied consent of the ER. (Iloilo Dock vs. WCC) INCIDENTS OF EMPLOYMENT It is settled that injuries sustained in connection with acts which are reasonably incidental to the employment are deemed arising out of such employment. Generally, such incidents of work include: 1. Acts of personal ministration for the comfort and convenience of the EE i.e. answering a call of nature. 2. Acts for the personal benefit of the ER i.e. special errand rule. 3. Acts done to further the goodwill of the business.


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4. Slight deviations from work, from curiosity or otherwise. 5. Acts in emergencies i.e. death of an EE while attempting to rescue a co-EE (Azucena) LIVING, BOARDING, LODGING ON PREMISES OF ER, OR AT WORKING PLACE Compensable if living on the ERs premises or at the place of work is an express or implied requirement of the contract of hiring and when the injury results from a risk or danger which is reasonably incidental to the employment. (Azucena) WHILE TRAVELLING Compensation depends upon whether the injury results from a risk inherent in the nature of the employment, or reasonably incidental thereto, and upon whether the EE was engaged in the exercise of some functions or duties reasonably necessary or incidental in the performance of the contract of employment, or whether he was authorized or required by such contract to be. (Azucena) OUTINGS & PICNICS Recreational activities fall under the so-called Special Engagement Rule which is one of the exceptions to the direct premises rule. This exception covers incidents outside the work place, such as field trip, intramurals, outings, and picnics when initiated or sanctioned by the employer. Accidents befalling EEs on those occasions are compensable. ASSAULT If there is a causal relation between the assault and the employment, the assault is compensable. (Iloilo Dock vs. WCC) SICKNESS DEFINED; OCCUPATION OR COMPENSABLE DISEASE
1. Define sickness?
Any illness a. definitely accepted as an occupational disease listed by the Commission, or b. any illness caused by employment subject to proof that the risk of contracting the same is increased by working conditions. (Art. 167) If the illness are not occupational diseases, the claimant must present proof that he contracted them in the course of his employment. (Galanida vs. ECC)
2. What is occupational disease?

Disease due wholly to causes and conditions which are normal and constantly present and characteristic of the particular conditions which are normal and constantly present and characteristic of the particular occupation. (Menez vs. ECC) A. THEORY OF THE INCREASED RISK If an ailment is not included in the list of occupational diseases as drawn up by the Commission, the claimant has the burden of proving that the nature of the work increased the risk of contracting the disease. (Dabatian vs. GSIS) To establish compensability under the increased risk theory, the claimant must show proof of reasonable work-connection, not necessarily direct causal relation. The degree of proof is merely substantial evidence as will support a decision, or clear and convincing evidence. (Narazo vs. ECC) A.1 Specific Illnesses Give examples of diseases which are not listed as occupational diseases: 1. Peptic ulcer 2. Cancer. But in some cases, it is 3. Bangungot 4. Incomplete abortion 5. Schistomiasis


6. 7. 8. 9. Updated and enhanced with additional cases by ATTY. RENE CALLANTA Rheumatoid Arthritis Adenocarcinoma Cirrhosis of the liver Prolapsed uterus.
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26.4 COVERAGE AND LIABILITY COMPULSORY COVERAGE Art. 168 : All ERs and their EEs not over 60 years of age, provided, an EE who is over 60 and paying contribution to qualify for retirement or life insurance benefits shall be subject to compulsory coverage. Effective date of coverage: Employer first day of his operation Employee date of his employment FOREIGN EMPLOYMENT Art. 169 : The Commission shall ensure adequate coverage of Filipino EEs employed abroad. Compulsory coverage of the ER shall take effect on the 1st day of operation, and that of the EE on the date of employment. Exclusions Art. 172 : The State Insurance Fund shall be liable for compensation to the EE or his dependents, except when the disability or death was occasioned by the: a. EEs intoxication, b. Willful intention to injure or kill himself or another, c. Notorious negligence, or d. Otherwise provided under this Title. What defenses may be interposed by the ECSIF against a claim for compensation made by a covered EE? e. The injury is not work-connected or the sickness is not occupational. f. The disability or death was occasioned by the EEs intoxication, willful intention to injure or kill himself or another, or his notorious negligence. (Art. 172) g. No notice of sickness, injury or death was given to ER. (Art. 206) h. The claim was filed beyond 3 years from time of cause of action. (Art. 201) A. INTOXICATION OR DRUNKENNESS It has been held that even if it could be shown that a person drank intoxicating liquor it is incumbent upon the person invoking drunkenness as a defense to show that said person was extremely drunk. Thus, intoxication which does not incapacitate the EE from following his occupation is not sufficient to defeat the recovery of compensation, although intoxication may be a contributory cause to his injury. It must be shown that the intoxication was the proximate cause of death or injury and the burden of proof lies on him who raises drunkenness as a defense. (Nitura vs. ECC) B. SELF-INFLICTED INJURIES According to American authorities, suicide is compensable in the following cases: 1. When it results from insanity from compensable work injury or disease. 2. When it occurs during a delirium resulting from compensable disease. (NAESS Shipping vs. NLRC) C. NOTORIOUS NEGLIGENCE Notorious negligence has been defined as something more than mere or simple negligence or contributory negligence; it signifies a deliberate act of the EE to disregard his own personal


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safety. Disobedience to rules, orders, and/or prohibition does not in itself constitute notorious negligence, if no intention can be attributed to the injured to end his life. (Nitura vs. ECC) 26.5 FUNDING What are the sources of funding of the ECSIF? Contribution (1% of EEs monthly salary credit) shall be paid in their entirety by the ER and any contract or device for the deductions of any portion thereof from the wages or salaries of the EEs shall be null and void. (Art. 183) EEs do not have any contribution. The government accepts general responsibility for the solvency of the ECSIF. Any deficiency will be covered by the supplemental appropriations from the National Government. (Art. 184) EFFECTS OF NON-REMITTANCE Art. 196 : Failure or refusal of the ER to pay or remit the contributions shall not prejudice the right of the EE or dependent to benefits. 26.6 BENEFITS What are the different types of benefits under the ECSIF? 1. Medical benefits consisting of medical services and rehabilitation services. (Art. 185)
2. Disability
a. Temporary total (Art. 191)- 90% ave. daily sal. Credit (120 days) b. Temporary permanent (Art. 192)- mo income benefit+10% @dep. c. Partial permanent (Art. 193)- same as above
3. Death and Funeral minimum death benefit shall be P15, 000.00 and funeral benefit
shall be P10,000.00 (Art. 194) > amt = mo income benefit + 10% @ dep. child not to exceed 5 starting from the youngest All the benefits are tax-exempt. BENEFIT PROTECTION Art. 175 : Except as otherwise provided under this Title, no contract ,regulation or device whatsoever shall operate to deprive the EE or his dependents of any part of the income benefits and medical or related services granted under this Title. Existing medical services being provided by the ER shall be maintained and continued to be enjoyed by their EEs. PRESCRIPTIVE PERIODS Art. 201 : 3 years from the time the cause of action accrued. EXCLUSIVITY OF BENEFITS Art. 173 : Liability of the ECSIF shall be exclusive and in place of other liabilities of ER to EE, dependents or anyone otherwise entitled to receive damages on their behalf. The payment of compensation shall not bar the recovery of benefit provided in other laws i.e. payment bars recovery for damages arising from the death of the member. * As a result of a cave-in, several miners were buried alive. The heirs filed an action with the RTC for damages against the company on grounds of breach of contract. The company moved to dismiss the suit on grounds of exclusive liability of the ECSIF. Is the motion meritorious? No. The EE or his heirs has the right of selection or choice of action. He cannot however pursue both courses of action simultaneously. (Floresca vs. Philex) LIABILITY OF THIRD PARTIES Art. 174 : When disability or death is caused by circumstances creating a legal liability against a 3rd party, the system shall still pay for the benefits. However, the system shall be subrogated to the rights of the disabled EE or dependents in case of death in accordance with the general law.


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Where the system recovers damages in excess, such excess shall be delivered to the disabled EE or other persons entitled, after deducting the costs of the proceedings and expenses of the system. BENEFIT PROTECTION Art. 198 : As a general rule, no claim for compensation is transferable or liable to tax, attachment, garnishment, levy or seizure by or under any process whatsoever, either before or after receipt, except if it is to pay any debt of the EE to the system. Art. 203 : No agent, attorney, or other person pursuing or in-charge of preparation of filing any claim shall demand or charge any fee and any stipulation to the contrary shall be null and void. The retention or deduction of any amount from any benefit for the payment of such fee or such services is prohibited. 26.7 DISPUTE SETTLEMENT Art. 180 : Government service insurance system or the social security system shall have original and exclusive jurisdiction to settle any dispute with respect to coverage, entitlement of benefits, collection of contributions and penalties and other related matters. APPEAL Art. 181 : Decisions or orders shall be reviewable by the SC on question of law.
Section 27: GOVERNMENT SERVICE INSURANCE SYSTEM

27. 1 REVISED GOVERNMENT SERVICE INSURANCE ACT OF 1997 27.2 DEFINITIONS ER Sec. 2, GSIS Act of 1997 : The ER includes : 1. The national government, its political instrumentalities. 2. GOCCs. 3. Financial institutions with original charters. 4. Constitutional commissions and the judiciary. subdivisions, branches, agencies or
EE Sec. 2, GSIS Act of 1997 : EE shall include : 1. Any person receiving compensation while in the service of ER whether by election, or appointment, irrespective of the status of appointment. 2. Barangay officials. 3. Sanggunian officials. DEPENDENTS Who are considered dependents under the GSIS Law? 1. Child a. Legitimate. b. Legitimated. c. Legally adopted. d. Illegitimate. who is unmarried, not gainfully employed, and not over the age of majority, or is over the age of majority but is incapacitated and incapable of self-support due to mental or physical defect, acquired prior to age of majority. 2. Spouse legitimate and dependent for support upon member or pensioner.


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3. Parents legitimate parent dependent upon member for support. (Sec. 2, GSIS Act of 1997) BENEFICIARIES Who are the beneficiaries under the GSIS Law? 1. Primary : a. Legal dependent spouse until remarriage. b. Dependent children. 2. Secondary : a. Dependent parents. b. Legitimate descendants subject to restrictions of dependent children. 27.3 COMPULSORY COVERAGE Sec. 3, GSIS Act of 1997 : Coverage shall be compulsory for all EEs receiving compensation who have not reached compulsory retirement age, irrespective of the employment status. 27.4 Effect of Separation of Employment Sec. 4, GSIS Act of 1997 : A member separated from the service shall continue to be a member and entitled to whatever benefits he has qualified, in event of any contingency compensable under this Act. 27.5 REPORTING REQUIREMENTS Sec. 6, GSIS Act of 1997 : The ER shall report to the GSIS the names of all EEs, corresponding employment status, positions, salaries and other pertinent information. 27.6 FUNDING What are the different sources of funding of the GSIS? 1. ER and member contributions. (Sec. 5, GSIS Act of 1997) 2. Government guarantees the fulfillment of the obligations of the GSIS to members. (Sec. 8, GSIS Act of 1997) 27.7 BENEFITS What are the benefits provided by the GSIS? 1. All members a. Lifetime insurance. b. Retirement at least 60 years of age, and 15 years of service. however, EE is allowed to continue to work to complete the 15-year service requirement. (Cana vs. CSC) 2. Disability Provided : he has paid at least 36 monthly contributions within the 5-year period immediately preceding his disability, or he has paid a total of at least 180 monthly contributions prior to his disability; and his disability is not compensable under any other law. b. Survivorship - dependent spouse shall be entitled to survivorship benefits for life or until she remarries. Dependent children are entitled to benefit while still minors and unmarried. Separation Unemployment.
c. d.
3. Judiciary Life insurance only. (Sec. 3, GSIS Act of 1997)

*** All are tax exempt.


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PRESCRIPTIVE PERIOD Sec. 28, GSIS Act of 1997 : All claims, except for life and retirement benefits shall prescribed within 4 years from date of contingency. BENEFIT PROTECTION Sec. 39, GSIS Act of 1997 : 1. All benefits paid shall be exempt from taxes. 2. All benefits shall be exempt from attachment, garnishment, executions, levy or other processes, issued by courts, quasi-judicial agencies or administrative bodies including COA disallowances and all forms of financial obligations of members, including pecuniary accountability arising from or caused or occasioned by exercise of performance or official functions or duties, or incurred relative to or in connection with his position or work except when monetary liability, contractual or otherwise, is in favor of the GSIS. 27.8 DISPUTE SETTLEMENT Sec. 30, GSIS Act of 1997 : Government Service Insurance System shall have original and exclusive jurisdiction to settle any dispute arising under act or any laws administered by the GSIS. The Board may designate any member of the Board or official of the GSIS who is a lawyer as hearing officer to receive evidence, make findings of fact and submit recommendations. APPEALS Sec. 31, GSIS Act of 1997 : Appeals of decisions/awards of the Board shall be governed by Rules 43 and 45 of the 1997 Rules of Civil Procedure. Appeal shall not stay orders unless stayed by orders of the Board, CA or the SC.
Section 28. NATIONAL HEALTH INSURANCE ACT OF 1995

28.1 LAW NATIONAL HEALTH INSURANCE ACT OF 1995 RA 7875 28.2 PURPOSES/OBJECTIVES
1. Section 2, National Health Insurance Act : The State shall adopt an integrated and
comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost. (b) Universality The National Health Insurance Program shall give the highest priority to achieving coverage of the entire population with at least at a basic minimum package of health insurance benefits.
2. Section 3, National Health Insurance Act : This Act seeks to :

a. Provide all citizens of the Philippines with the mechanism to gain financial access to health services; b. Create the National Health Insurance Program, hereinafter referred to as the Program to serve as the means to help the people pay for health care services; and c. Establish the Philippine Health Insurance Corporation, that will administer the Program at central and local levels.
3. Section 5, National Health Insurance Act : There is hereby created the National Health
Insurance Program which shall provide health insurance coverage and ensure affordable, acceptable, available and accessible health care services for all the citizens of the Philippines, in accordance with the policies and specific provisions of this Act. This social insurance program shall serve as the means for the healthy to pay for the care of the sick and those who can afford medical care to subsidize those who cannot. It shall initially consist of Programs I and II of Medicare and be expanded progressively to constitute one universal health insurance program for the entire population. The Program shall include a sustainable system of the funds constitution, collection, management and disbursement


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for financing of the availment of a basic minimum package and other supplementary packages of health insurance benefits by a progressively expanding proportion of the population. 4. The Program shall be limited to: a. paying for the utilization of health services by covered beneficiaries or b. to purchasing health services in behalf of such beneficiaries. It shall be prohibited from: a) providing health care directly b) from buying and dispensing drugs and pharmaceuticals, c) from employing physicians and other professionals for the purpose of directly rendering care, and from d) owning or investing in health care facilities. 28.3 COVERAGE Section 7, National Health Insurance Act : All citizens of the Philippines shall be covered, provided, the Program shall not be made compulsory in certain provinces and cites until the Corporation shall be able to ensure the members in such localities shall have reasonable access to adequate and acceptable health care services. Who are the legal dependents of a member? a. Legitimate spouse who is not a member. b. Unmarried and unemployed legitimate, legitimated, illegitimate, acknowledged children, legally adopted or stepchildren i. below 21 years of age or 2 years old and above but suffering from congenital disability, either physical or mental, or any disability acquired that renders them totally dependent on member for support. c. Parents who are over 60 years of age whose monthly income is below an amount to be determined by the Corporation. (Sec. 4, National Health Insurance Act) 28.4 FUNDING What are the sources of funding of the NHIF? 1. Members contributions. 2. Current balance of the Health Insurance Funds of the SSS and the GSIS 3. Other appropriations earmarked by the national and local governments purposely for the implementation of the Program. 4. Subsequent appropriations. 5. Donations and grant-in-aid. 6. Accruals. 7. Contributions by LGUs for indigent members. 28.5 HEALTH CARE PROVIDERS What are the minimum accreditation requirements of health care providers 1. Human resource, equipment and physical structure in conformity with the standards of the relevant facility, as determined by the Dept. of Health. 2. Acceptance of formal program of quality assurance and utilization review. 3. Acceptance of the payment mechanisms specified in the following section. 4. Adoption of referral protocols and health resources sharing arrangements. 5. Recognition of the right of patients. 6. Acceptance of information system requirements and regular transfer of information. Give the categories of personal health services to be granted under the NHIP : 1. Inpatient hospital care i.e. room and board services of health care professionals. 2. Outpatient care i.e. diagnostic, laboratory and other medical examinations services and personal preventive services. 3. Emergency and transfer services. 4. Such other health services that the Corporation shall determine to be appropriate and cost-effective. Give the services that are excluded :


1. 2. 3. 4. 5. 6. 7. Updated and enhanced with additional cases by ATTY. RENE CALLANTA Non-prescription drugs and devices. Outpatient psychotherapy and counseling for mental disorders. Drug and alcohol abuse or dependency treatment. Cosmetic surgery. Home and rehabilitation services. Optometric Services. Normal Obstetrical delivery. (Sec. 11, National Health Insurance Act)
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28.6 GRIEVANCE AND APPEAL I. Section 40, National Health Insurance Act : The following acts shall constitute valid grounds for grievance action: 1. Violation of the rights of patients. 2. Willful Neglect of duties of program implementers that results in the loss or nonenjoyment of benefits by members or their dependents. 3. Unjustifiable delay in actions or claims. 4. Delay in the processing of claims that extends beyond the period agreed upon. 5. Any other Act or neglect that tends to undermine or defeat the purposes of this Act. (VANUD) II. Section 41, National Health Insurance Act : A member, his dependent, or a health care provider may file a complaint for grievance based on any of the above grounds, in accordance with the following procedure : 1. A complaint for grievance must be filed with the Office which shall rule on the complaint within 90 calendar days from receipt thereof. 2. Appeals from Office decisions must be filed with the Board within 30 days from receipt of notice of dismissal or disallowance by the Office. 3. The Office shall have no jurisdiction over any issue involving the suspension or revocation of accreditation, the imposition of fines, or the imposition of charges on members or their dependents in case of revocation of their entitlement. 4. All decisions by the Board as to entitlement of benefits of members or to payments of health care providers shall be considered final and executory.
Section 29. CARL, RA 6657

Give the provisions of the 1987 Constitution of agrarian reform? * The State shall promote comprehensive rural development and agrarian reform. (Sec. 21, Art. II, Const.) * The State shall by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers, who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental and equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall provide incentives of voluntary land-sharing. (Sec. 4, Art. XIII, Const.)
1. Define agrarian reform.

Agrarian reform means the redistribution of lands regardless of crops or fruits produced to farmers and regular farmworkers who are landless, irrespective of tenurial arrangement, to include the totality of factors and support services designed to life the economic status of the beneficiaries and all other arrangements alternative to the physical redistribution of lands, such as production or profit sharing, labor administration and distribution of shares of stock,


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which will allow the beneficiaries to receive a just share of the fruits of the lands they work. (Sec. 3, CARL) 2. Lands covered by the CARL. 1) All alienable and disposable lands of the public domain devoted to or suitable for agriculture. No reclassification of forest or mineral lands to agriculture lands shall be undertaken after the approval of this Act until Congress, taking into account ecological, developmental and equity considerations, shall have determined by law, the specific limits of the public domain. 2) All lands of the public domain in excess of the specific limits as determined by Congress in the preceding paragraphs. 3) agriculture; and All other lands owned by the Government devoted to or suitable for
4) All private lands devoted to or suitable for agriculture regardless of the agricultural products raised or that can be raised thereon. (Sec. 4, CARL)


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LABOR LAW 1(Labor Standards & Termination of Employment )

Section 1. LABOR LAW IN GENERAL

1. Labor Legislation Consists of statutes, regulations and jurisprudence governing the

2. Labor Relations Law That which defines [S R D & IM]

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LAW AND WORKER

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COMPROMISE AND WAIVER

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Section 2. LABOR AND THE CONSTITUTION

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7. Art. XIII, Sec. 3 (1st par), Const. : The State shall

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POLICY CONSIDERATIONS SOCIAL JUSTICE

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SPECIFIC LABOR RIGHTS

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1. C, a national promoter salesman, with high educational attainment, tendered his

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LABOR LAW 1(Labor Standards & Termination of Employment )

4. A number of EEs made quitclaims in exchange for the dropping of charges of

5. A quitclaim executed by an OFW repatriated to the Philippines because of an illness

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Section 3. LABOR AND THE CIVIL CODE

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Section 4. THE LABOR CODE OF THE PHILIPPINES

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4.6 LAW INTERPRETATION

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2. Cases involving terms and conditions of employment, if accompanied with a claim

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Section 5. WORK RELATIONSHIP

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