LABOR LAW

A. FUNDAMENTAL PRINCIPLES AND POLICIES

1. Constitutional Provisions

1.1. Art II, Secs. 9, 10, 11, 13, 14, 18, 20

Declaration of Principles and State Policies

Just understand by heart the provisions as it will be used as your bullets.
Government and Government Owned Corporations with Charter – CSC
Private Companies and Government Owned Corporations w/o own Charter –Labor Code

Section 9. 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.

Section 10. The State shall promote social justice in all phases of national
development.

Section 11. The State values the dignity of every human person and
guarantees full respect for human rights.

Section 13. The State recognizes the vital 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.

Section 14. The State recognizes the role of women in nation-building,

and shall ensure the fundamental equality before the law of women and men.

Section 18. The State affirms labor as a primary social economic force. It
shall protect the rights of workers and promote their welfare.

Section 20. The State recognizes the indispensable role of the private
sector, encourages private enterprise, and provides incentives to needed
investments.

1.2. Art III, Secs. 1, 4, 8

Bill of Rights

Section 1. No person shall be deprived of life, liberty, or property without

due process of law, nor shall any person be denied the equal protection of the laws.

Section 4. No law shall be passed abridging the freedom of speech, of

expression, or of the press, or the right of the people peaceably to assemble and
petition the government for redress of grievances.

Section 8. The right of the people, including those employed in the public
and private sectors, to form unions, associations, or societies for purposes not
contrary to law shall not be abridged.

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 1.3. Art. XIII, Secs. 1, 2, 3, 14

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.

To this end, the State shall regulate the acquisition, ownership, use, and
disposition of property and its increments.

Section 2. The promotion of social justice shall include the commitment

to create economic opportunities based on freedom of initiative and self-reliance.

Social Justice and Human Rights

N.B.:

1. it is incorrect to say that self-organization is limited in purpose to CBA.

2. it is incorrect to say that “ambulant, intermittent and itinerant workers, self-employed

people, rural workers and those without any definite employers [who “may form labor
organizations for their mutual aid and protection”] do not have the right to self-
organization. They too are covered by the injunction that “It shall be unlawful for any
person to restrain, coerce, discriminate against or unduly interfere with (said)
employees in their exercise of the right to self-organization”. (at least on concerted
activities)

------------

Self-organization is a fundamental right guaranteed by the Philippine Constitution and the Labor
Code. Employees have the right to form, join or assist labor organizations for the purpose of collective
bargaining or for their mutual aid and protection. The constitutional right to self-organization is better
understood in the context of ILO Convention No. 87 (Freedom of Association and Protection of Right to
Organize), to which the Philippines is a signatory. [UST Faculty Union v. Bitonio, Jr., G.R. No. 131235,
November 16, 1999, 318 SCRA 185, Panganiban, J.] Workers and employers, without distinction
whatsoever, shall have the right to establish and, subject only to the rules of the organization concerned, to
job organizations of their own choosing without previous authorization; [Standard Chartered Bank
Employees Union (NUBE) v. Confesor, G.R. No. 114974, June 16, 2004, 432 SCRA 308, 320-321] and
that workers' organizations shall have the right to draw up their constitution and rules and to elect their
representatives in full freedom, free from any interference from public authorities. [UST Faculty Union v.
Bitonio, Jr., supra]

Labor

Section 3. 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 self-organization, collective

bargaining and negotiations, and peaceful concerted activities, including the right
to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. 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

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 workers and employers and the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce their mutual compliance
therewith to foster industrial peace.

The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production and the
right of enterprises to reasonable returns to investments, and to expansion and
growth.

Women

Section 14. The State shall protect working women by providing safe and
healthful working conditions, taking into account their maternal functions, and
such facilities and opportunities that will enhance their welfare and enable them
to realize their full potential in the service of the nation.

2. Civil Code

Contract of Labor

Article 1700. The relations between capital and labor are not merely
contractual. They are so impressed with public interest that labor contracts must
yield to the common good. Therefore, such contracts are subject to the special laws
on labor unions, collective bargaining, strikes and lockouts, closed shop, wages,
working conditions, hours of labor and similar subjects.

3. Labor Code

3.1. Article 3

Art. 3. Declaration of basic policy. The State shall afford protection to

labor, promote full employment, ensure equal work opportunities regardless of
sex, race or creed and regulate the relations between workers and employers. The
State shall assure the rights of workers to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work.

3.2. Article 211

Art. 211. Declaration of Policy.

A. It is the policy of the State:

a. To promote and emphasize the primacy of free collective bargaining

and negotiations, including voluntary arbitration, mediation and conciliation, as
modes of settling labor or industrial disputes;
b. To promote free trade unionism as an instrument for the
enhancement of democracy and the promotion of social justice and development;
c. To foster the free and voluntary organization of a strong and united
labor movement;
d. To promote the enlightenment of workers concerning their rights
and obligations as union members and as employees;
e. To provide an adequate administrative machinery for the
expeditious settlement of labor or industrial disputes;
f. To ensure a stable but dynamic and just industrial peace; and
g. a. To ensure the participation of workers in decision and
policy-making processes affecting their rights, duties and welfare.

B. To encourage a truly democratic method of regulating the relations between

the employers and employees by means of agreements freely entered into through
collective bargaining, no court or administrative agency or official shall have the

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 power to set or fix wages, rates of pay, hours of work or other terms and conditions
of employment, except as otherwise provided under this Code. (As amended by
Section 3, Republic Act No. 6715, March 21, 1989)

3.3. Article 212

Art. 212. Definitions.

a. "Commission" means the National Labor Relations Commission
or any of its divisions, as the case may be, as provided under this Code.
b. "Bureau" means the Bureau of Labor Relations and/or the Labor
Relations Divisions in the regional offices established under Presidential Decree
No. 1, in the Department of Labor.
c. "Board" means the National Conciliation and Mediation Board
established under Executive Order No. 126.
d. "Council" means the Tripartite Voluntary Arbitration Advisory
Council established under Executive Order No. 126, as amended.
e. "Employer" includes any person acting in the interest of an
employer, directly or indirectly. The term shall not include any labor organization
or any of its officers or agents except when acting as employer.
f. "Employee" includes any person in the employ of an employer.
The term shall not be limited to the employees of a particular employer, unless the
Code so explicitly states. It shall include any individual whose work has ceased as
a result of or in connection with any current labor dispute or because of any unfair
labor practice if he has not obtained any other substantially equivalent and regular
employment.
g. "Labor organization" means any union or association of
employees which exists in whole or in part for the purpose of collective bargaining
or of dealing with employers concerning terms and conditions of employment.
h. "Legitimate labor organization" means any labor organization
duly registered with the Department of Labor and Employment, and includes any
branch or local thereof.
i. "Company union" means any labor organization whose
formation, function or administration has been assisted by any act defined as
unfair labor practice by this Code.
j. "Bargaining representative" means a legitimate labor
organization whether or not employed by the employer.
k. "Unfair labor practice" means any unfair labor practice as
expressly defined by the Code.
l. "Labor dispute" includes any controversy or matter concerning
terms and conditions of employment or the association or representation of
persons in negotiating, fixing, maintaining, changing or arranging the terms and
conditions of employment, regardless of whether the disputants stand in the
proximate relation of employer and employee.
m. "Managerial employee" is one who is vested with the powers or
prerogatives to lay down and execute management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer, effectively recommend
such managerial actions if the exercise of such authority is not merely routinary or
clerical in nature but requires the use of independent judgment. All employees not
falling within any of the above definitions are considered rank-and-file employees
for purposes of this Book.
n. "Voluntary Arbitrator" means any person accredited by the
Board as such or any person named or designated in the Collective Bargaining
Agreement by the parties to act as their Voluntary Arbitrator, or one chosen with or
without the assistance of the National Conciliation and Mediation Board, pursuant
to a selection procedure agreed upon in the Collective Bargaining Agreement, or any
official that may be authorized by the Secretary of Labor and Employment to act as
Voluntary Arbitrator upon the written request and agreement of the parties to a
labor dispute.
o. "Strike" means any temporary stoppage of work by the concerted
action of employees as a result of an industrial or labor dispute.

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 p. "Lockout" means any temporary refusal of an employer to furnish
work as a result of an industrial or labor dispute.
q. "Internal union dispute" includes all disputes or grievances
arising from any violation of or disagreement over any provision of the constitution
and by laws of a union, including any violation of the rights and conditions of union
membership provided for in this Code.
r. "Strike-breaker" means any person who obstructs, impedes, or
interferes with by force, violence, coercion, threats, or intimidation any peaceful
picketing affecting wages, hours or conditions of work or in the exercise of the right
of self-organization or collective bargaining.
s. "Strike area" means the establishment, warehouses, depots,
plants or offices, including the sites or premises used as runaway shops, of the
employer struck against, as well as the immediate vicinity actually used by
picketing strikers in moving to and fro before all points of entrance to and exit from
said establishment. (As amended by Section 4, Republic Act No. 6715, March 21,
1989)

d. Article 255

Art. 255. Exclusive bargaining representation and workers’

participation in policy and decision-making. The labor organization
designated or selected by the majority of the employees in an appropriate collective
bargaining unit shall be the exclusive representative of the employees in such unit
for the purpose of collective bargaining. However, an individual employee or group
of employees shall have the right at any time to present grievances to their
employer.

 Principle of Co-Determination [2007 BAR Examinations]

B. RECRUITMENT AND PLACEMENT

1. Recruitment of Local and Migrant Workers

1.1. Recruitment and placement; defined

Art. 13. Definitions.--xxx xxx

(b) "Recruitment and placement" refers to any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring or procuring workers, and
includes referrals, contract services, promising or advertising for employment,
locally or abroad, whether for profit or not: Provided, That any person or entity
which, in any manner, offers or promises for a fee, employment to two or more
persons shall be deemed engaged in recruitment and placement.

1.2. Illegal Recruitment, Art. 38 (Local), Sec. 6, Migrant Workers Act,

RA 8042

Labor Code

Art. 38. Illegal recruitment.

a. Any recruitment activities, including the prohibited practices
enumerated under Article 34 of this Code, to be undertaken by non-licensees or
non-holders of authority, shall be deemed illegal and punishable under Article 39
of this Code. The Department of Labor and Employment or any law enforcement
officer may initiate complaints under this Article.
b. Illegal recruitment when committed by a syndicate or in large scale
shall be considered an offense involving economic sabotage and shall be penalized

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 in accordance with Article 39 hereof.
Illegal recruitment is deemed committed by a syndicate if 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
defined under the first paragraph hereof. Illegal recruitment is deemed committed
in large scale if committed against three (3) or more persons individually or as a
group.
c. The Secretary of Labor and Employment or his duly authorized
representatives shall have the power to cause the arrest and detention of such non-
licensee or non-holder of authority if after investigation it is determined that his
activities constitute a danger to national security and public order or will lead to
further exploitation of job-seekers. The Secretary shall order the search of the
office or premises and seizure of documents, paraphernalia, properties and other
implements used in illegal recruitment activities and the closure of companies,
establishments and entities found to be engaged in the recruitment of workers for
overseas employment, without having been licensed or authorized to do so.

see: Sec. 6, RA 8042

1.2.1. License vs. Authority

Art. 13. Definitions.

xxx xxx xxx
(d) "License" means a document issued by the Department of Labor
authorizing a person or entity to operate a private employment agency.
xxx xxx xxx
(f) "Authority" means a document issued by the Department of Labor
authorizing a person or association to engage in recruitment and placement
activities as a private recruitment entity.

NOTES:

RECRUITMENT Any act of canvassing, enlisting, contracting,

AND PLACEMENT transporting, utilizing, hiring, or procuring workers,
And includes referrals, contract services, promising
or advertising for employment, locally or abroad,
whether for profit or not.

LICENSE Document issued by DOLE authorizing a

person/entity to operate a private fee-charging
agency [Art. 13(c) and (d), LC]

AUTHORITY Document authorizing a person/association to

engage in recruitment and placement activities as a
private recruitment entity, i.e., not for a fee. [Art.
13(f)]

 It should be noted that the definition of “recruitment and placement” in Art. 13(b), does
not make any of the eleven (11) acts enumerated therein illegal per se. What makes it a case of
illegal recruitment is when any of said recruitment activities are “undertaken by non-licensees or
non-holders of authority”. [Art. 38(a)] Such that an employee, who introduces an applicant to
owner-employer agency, committed an act of referral, a “recruitment activity”. There is an illegal
recruitment when one gives the impression of having the ability to send a worker abroad. [People
vs. Goce, 247 SCRA 780, 789 (1995)]

 A non-licensee means a person, corporation or entity to which the labor secretary has not
issued a valid license or authority to engage in recruitment and placement; or whose license or
authority has been suspended, revoked, or cancelled by the POEA or the labor secretary. A
licensee authorizes a person or an entity to operate a private employment agency, while authority
is given to those engaged in recruitment and placement activities. [Rodolfo vs. People, G.R. No.
146964, August 10, 2006]

 When a person or entity, in any manner, offers or promises for a fee employment to two
or more persons, that person or entity shall be deemed engaged in recruitment and placement.

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 [People vs. Laogo, G.R. No. 176264, January 10, 2011, Villarama, J.]

1.2.2. Essential elements of illegal recruitment

Essential Elements of Illegal Recruitment

(1) Offender is:

(a) a non-licensee or a non-holder of authority; or
(b) a licensee or holder of authority;

(2) (a) Non-licensee/non-holder of authority commits any of the 24 infractions (11 in

Art. 13(b), and 13 in Sec. 6, RA 8042)
(b) Licensee/holder of authority commits any of the 14 infractions under Sec. 6, RA
8042.

1.2.3. Simple illegal recruitment

 Illegal recruitment may be committed when a non-licensee or a non-holder of

authority performs any of the 11 acts of recruitment and placement under Art. 13(b) of the
Labor Code. While Art. 34 makes a distinction between:

(a) Prohibited practices – when committed by a licensee or holder of authority; and

(b) Illegal recruitment – when such prohibited practices were committed by a non-licensee
or non-holder of authority.

BUT,
RA 8042 removed this distinction and redefined illegal recruitment as follows:
(a) charging an amount greater than that specified;
(b) publishing false notice in relation to recruitment;
(c) giving away false information or any act of misrepresentation for securing a license/authority;
(d) inducing a worker to quit present work in place of another
UNLESS, to free the worker from oppressive terms and conditions;
(e) influencing any person/entity not to employ a worker who has not applied through the former’s
agency;
(f) recruiting workers in jobs that are harmful to public health or morality;
(g) obstructing inspection by the Secretary of Labor;
(h) failing to file reports as required by the Secretary;
(i) substituting or altering DOLE-approved employment contracts;
(j) becoming a Board member of a travel agency, directly or indirectly;
(k) withholding applicant worker’s travel documents for monetary considerations;
(l) failing to actually deploy a worker without a valid reason; and
(m) in case of non-deployment of worker without his fault, failing to reimburse expenses the latter
incurred.

In sum,

 a non-licensee can be guilty of 24 illegal recruitment acts:

o 11 acts under Art. 13(b)
o 13 illegal recruitment acts under Sec. 6, RA 8042

 a licensee can be liable only for 13 illegal recruitment/prohibited acts (under Sec. 6, RA 8042),
UNLESS he conspires with a non-licensee in the commission of any of the illegal acts in Art.
13(b).

1.2.4. Illegal recruitment in large scale

 Illegal recruitment is a matter of evidence. [People vs. Panis, 142 SCRA 664 (1986)]

 Illegal recruitment becomes “economic sabotage” if:

LARGE SCALE SYNDICATE

3 or more victims 3 or more conspirators

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  If only 1 victim, the burden of proof is on the accuser. But if there are 2 or more
victims, the accused is disputably presumed to have committed illegal recruitment. [Sec.
6, RA 8042, cited in People vs. Panis, supra]

1.2.5. Illegal recruitment as economic sabotage

SECTION 6. Definition. xxx xxx xxx

(m) Illegal recruitment when committed by a syndicate or in large scale
shall be considered an offense involving economic sabotage; and

1.2.6. Illegal Recruitment vs. Estafa

Art. 315. Swindling (estafa). — Any person who shall defraud another
by any of the means mentioned hereinbelow shall be punished by:
xxx the fraud be committed by any of the following means:
1. With unfaithfulness or abuse of confidence, namely:
xxx xxx xxx
(b) By misappropriating or converting, to the prejudice of another, money,
goods, or any other personal property received by the offender in trust or on
commission, or for administration, or under any other obligation involving the
duty to make delivery of or to return the same, even though such obligation be
totally or partially guaranteed by a bond; or by denying having received such
money, goods, or other
xxx xxx xxx

2. By means of any of the following false pretenses or fraudulent acts executed prior
to or simultaneously with the commission of the fraud: (a) By
using fictitious name, or falsely pretending to possess power, influence,
qualifications, property, credit, agency, business or imaginary transactions, or by
means of other similar deceits.
xxx xxx xxx

 Any recruitment activities to be undertaken by non-licensee or non-holder of contracts

shall be deemed illegal and punishable under Art. 39 of the Labor Code. [People vs. Jamilosa,
512 SCRA 340 (2007)]

 Absence of money or any valuable consideration as payment for services of the recruiter
still considers the recruitment illegal under Art. 13(b) of the Labor Code as recruitment maybe for
profit or not. [People vs. Jamilosa, supra]

1.2.7. Liabilities

SECTION 10. Money claims.

The liability of the principal/employer and the recruitment/placement
agency for any and all claims under this section shall be joint and several. This
provision shall be incorporated in the contract for overseas employment and shall
be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all
money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and solidarily
liable with the corporation or partnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the
employment contract and shall not be affected by any substitution, amendment or
modification made locally or in a foreign country of the said contract.

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 (a) local employment agency

(b) foreign employer

Theory of imputed knowledge

( The so-called theory of imputed knowledge, that is, knowledge of the agent
is knowledge of the principal. [New Life vs. CA, G.R. No. 94071 March 31, 1992]
For the liability of the agent to attach, this theory states that the agent knew of and
consented to the extension of period of employment. Otherwise, the liability of the
recruitment agency shall expire from the termination of the worker's original
contract. [SUNACE INTERNATIONAL MANAGEMENT vs. NLRC, G.R. No.
161757, January 25, 2006, Carpio Morales, J.]

1.2.8. Pre-termination of contract of migrant worker

NOTES:
Rules on Repatriation of Overseas Workers

(1) Without fault of the worker, his repatriation shall be borne by the local agency and/or
principal over the:

a. worker and his personal belongings;

b. remains of the deceased worker and his personal belongings [Sec. 15,
par. 1, RA 8042]

(2) Repatriation due to the fault of migrant worker shall be borne by the migrant worker.
[Sec. 15, par. 1, RA 8042]

(3) Repatriation in cases of war, epidemic, disasters/calamities, or other similar events

shall be borne by OWWA, without prejudice to reimbursement by the principal or local
agency. [Sec. 15, par.2, RA 8042]

(4) Repatriation of underage migrant worker shall be mandatory upon discovery, done
by the responsible officers of the foreign service where the underage migrant worker is
found. [Sec. 16, RA 8042]

(5) Repatriation of seafarer—

POEA Memo Circular No. 55-96 provides that a seaman can be repatriated without
cause if the vessel arrives at a convenient port within 3 months before the expiration
of his contract, BUT only upon payment of:
a. all his earned wages;
b. leave pay for the entire contract;
c. termination pay of 1 month basic salary, IF seaman has at least 10
months original contract. [PCL Shipping Phils. vs. NLRC, G.R. No. 153031,
December 14, 2006, Austria-Martinez, J.]

1.3. Direct hiring

Art. 18. Ban on direct-hiring. No employer may hire a Filipino worker

for overseas employment except through the Boards and entities authorized by the
Secretary of Labor. Direct-hiring by members of the diplomatic corps,
international organizations and such other employers as may be allowed by the
Secretary of Labor is exempted from this provision.

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 2. Regulation and Enforcement

Art. 16. Private recruitment. 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.

Art. 25. Private sector participation in the recruitment and

placement of workers. Pursuant to national development objectives and in
order to harness and maximize the use of private sector resources and initiative in
the development and implementation of a comprehensive employment program,
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.

Art. 26. Travel agencies prohibited to recruit. 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.

Art. 27. Citizenship requirement. Only Filipino citizens or

corporations, partnerships or entities at least seventy-five percent (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.

Art. 28. Capitalization. All applicants for authority to hire or renewal of

license to recruit are required to have such substantial capitalization as determined
by the Secretary of Labor.

Art. 29. Non-transferability of license or authority. No license or

authority shall be used directly or indirectly by any person other than the one in
whose favor it was issued or at any place other than that stated in the 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 anywhere shall be
subject to the prior approval of the Department of Labor.

Art. 30. Registration fees. The Secretary of Labor shall promulgate a

schedule of fees for the registration of all applicants for license or authority.

Art. 31. Bonds. 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 may be appropriate.

Art. 32. Fees to be paid by workers. Any person applying with a private
fee-charging employment agency for employment assistance shall not be charged
any fee until he has obtained employment through its efforts or has actually
commenced employment. Such fee shall be always covered with the appropriate
receipt clearly showing the amount paid. The Secretary of Labor shall promulgate
a schedule of allowable fees.

Art. 33. Reports on employment status. 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 jobs, wages, other terms and

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 conditions and other employment data.

2.1. Remittance of foreign exchange earnings

Art. 22. Mandatory remittance of foreign exchange earnings. It

shall be mandatory for all Filipino workers abroad to remit a portion of their
foreign exchange earnings to their families, dependents, and/or beneficiaries in
the country in accordance with rules and regulations prescribed by the Secretary
of Labor.

2.2. Prohibited activities

Art. 34. Prohibited practices. It shall be unlawful for any individual,

entity, licensee, or holder of authority:

(a) To charge or accept, directly or indirectly, any amount greater than

that specified in the schedule of allowable fees prescribed by the Secretary of
Labor, or to make a worker pay any amount greater than that actually received by
him as a loan or advance;
(b) To furnish or publish any false notice or information or document
in relation to recruitment or employment;
(c) To give any false notice, testimony, information or document or
commit any act of misrepresentation for the purpose of securing a license or
authority under this Code.
(d) To induce or attempt to induce a worker already employed to quit
his employment in order to offer him to another unless the transfer is designed to
liberate the worker from oppressive terms and conditions of employment;
(e) To influence or to attempt to influence any person or entity not to
employ any worker who has not applied for employment through his agency;
(f) To engage in the recruitment or placement of workers in jobs
harmful to public health or morality or to the dignity of the Republic of the
Philippines;
(g) To obstruct or attempt to obstruct inspection by the Secretary of
Labor or by his duly authorized representatives;
(h) To fail to file reports on the status of employment, placement
vacancies, remittance of foreign exchange earnings, separation from jobs,
departures and such other matters or information as may be required by the
Secretary of Labor.
(i) To substitute or alter employment contracts approved and verified
by the Department of Labor from the time of actual signing thereof by the parties
up to and including the periods of expiration of the same without the approval of
the Secretary of Labor;
(j) To become an officer or member of the Board of any corporation
engaged in travel agency or to be engaged directly or indirectly in the management
of a travel agency; and
(k) To withhold or deny travel documents from applicant workers
before departure for monetary or financial considerations other than those
authorized under this Code and its implementing rules and regulations.

2.3. Regulatory and visitorial powers of the Labor Secretary

Art. 14. Employment promotion. The Secretary of Labor shall have the
power and authority:

(a) To organize and establish new employment offices in addition to the

existing employment offices under the Department of Labor as the need arises;
(b) To organize and establish a nationwide job clearance and information
system to inform applicants registering with a particular employment office of job
opportunities in other parts of the country as well as job opportunities abroad;

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 (c) To develop and organize a program that will facilitate occupational,
industrial and geographical mobility of labor and provide assistance in the
relocation of workers from one area to another; and
(d) To require any person, establishment, organization or institution to
submit such employment information as may be prescribed by the Secretary of
Labor.

Art. 36. Regulatory power. 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.

Art. 37. Visitorial Power. The Secretary of Labor or his duly authorized
representatives may, at any time, inspect the premises, books of accounts and
records of any person or entity covered by this Title, require it to submit reports
regularly on prescribed forms, and act on violation of any provisions of this Title.

NOTES:
 The Supreme Court declared Art. 38, par. (c) unconstitutional and null and void, stating
that only a judge may issue warrants of search and arrest. [Hortencia Salazar vs. Tomas D.
Achacoso and Ferdie Marquez, G.R. No. 81510, March 14, 1990]

2.4. Penalties for illegal recruitment

Art. 35. Suspension and/or cancellation of license or authority.

The Minister of Labor shall have the power to suspend or cancel any license or
authority to recruit employees for overseas employment for violation of rules and
regulations issued by the Ministry of Labor, the Overseas Employment
Development Board, or for violation of the provisions of this and other applicable
laws, General Orders and Letters of Instructions.

Art. 39. Penalties.

(a) The penalty of life imprisonment and a fine of One Hundred

Thousand Pesos (P1000,000.00) shall be imposed if illegal recruitment
constitutes economic sabotage as defined herein;
(b) Any licensee or holder of authority found violating or causing
another to violate any provision of this Title or its implementing rules and
regulations shall, upon conviction thereof, suffer the penalty of imprisonment of
not less than two years nor more than five years or a fine of not less than P10,000
nor more than P50,000, or both such imprisonment and fine, at the discretion of
the court;
(c) Any person who is neither a licensee nor a holder of authority under
this Title found violating any provision thereof or its implementing rules and
regulations shall, upon conviction thereof, suffer the penalty of imprisonment of
not less than four years nor more than eight years or a fine of not less than P20,000
nor more than P100,000 or both such imprisonment and fine, at the discretion of
the court;
(d) 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;
(e) In every case, conviction shall cause and carry the automatic
revocation of the license or authority and all the permits and privileges granted to
such person or entity under this Title, and the forfeiture of the cash and surety
bonds in favor of the Overseas Employment Development Board or the National
Seamen Board, as the case may be, both of which are authorized to use the same
exclusively to promote their objectives.

Labor Law Reviewer 12

 a) Licensing of and Administrative Complaints against Recruitment Agencies

LOCAL RECRUITMENT AGENCY

Where to file: DOLE Regional Office

Who issues license: DOLE Regional Director

Who revokes/cancels license: DOLE Regional Director

BLE copy furnished of all Orders for Database

OVERSEAS RECRUITMENT AGENCY

Where to file: POEA Director of Licensing & Regulatory Office (LRO), which office is under the
wing of the Deputy Administrator for Adjudication and Employment Regulation.

Who issues license: POEA Director of LRO

Who revokes/cancels license: POEA Director of LRO

EXCEPT, in case of ILLEGAL RECRUITMENT:

1 Under the POEA Rules on Overseas Land-based Employment (2002), both the POEA
Administrator and DOLE Regional Director has the power to issue a CLOSURE ORDER
against an erring overseas recruitment and manning agency.

2 BUT, Under the new Omnibus Rules Implementing RA 10022 (amendment to RA 8042), it
is the POEA Administrator who has the authority to issue a CLOSURE ORDER upon
preliminary finding of guilt against an overseas recruitment agency. [Sec. 11]

HOWEVER,

Prior to the issuance of a CLOSURE ORDER, an investigation takes place whereby the POEA
Administrator may issue a preventive suspension upon the recommendation of the POEA
Director of LRO. [Sec. 9, Omnibus Rules implementing RA 10022]

Closure Order may be lifted upon filing a Motion before the POEA Director of LRO, which motion
shall be resolved by the POEA Administrator. [Sec. 18, Omnibus Rules Implementing RA 10022]

b) Criminal Complaints involving Migrant Workers

ILLEGAL RECRUITMENT AS ECONOMIC SABOTAGE

Categories:

1. Illegal recruitment in large scale – if committed against three or more

persons individually or as a group.

2. Illegal recruitment by a syndicate - if carried out by a group of three or more

persons conspiring and/or confederating with one another.

 When only one complainant filed individual complaints, there is no illegal recruitment in large
scale BUT the three conspiring recruiters can be held guilty of illegal recruitment by a syndicate.
[People vs. Hernandez, K. Reichl, and Y.G. de Reichl, G.R. Nos. 141221-36, March 7, 2002.]

 Where illegal recruitment is proved but the elements of “large scale” or “syndicate” are absent,
the accused can be convicted only of “simple” illegal recruitment.

 VENUE: 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.

C. LABOR_STANDARDS

1. Hours of Work

Labor Law Reviewer 13

Labor Code

Art. 84. Hours worked. Hours worked shall include (a) all time during
which an employee is required to be on duty or to be at a prescribed workplace;
and (b) all time during which an employee is suffered or permitted to work.

Rest periods of short duration during working hours shall be counted as

hours worked.

Omnibus Rules
Book III, Rule 1

Sec. 3. Hours worked.—The following shall be considered as compensable

hours worked:
(a) All time during which an employee is required to be on duty or to be
at the employer's premises or to be at a prescribed workplace; and
(b) All time during which an employee is suffered or permitted to work.

Sec. 4. Principles in Determining Hours Worked—The following

general principles shall govern in determining whether the time spent by an
employee is considered hours worked for purposes of this Rule:
(a) All hours are hours worked which the employee is required to give
to his employer, regardless of whether or not such hours are spent in productive
labor or involve physical or mental exertion;
(b) An employee need not leave the premises of the workplace in order
that his rest period shall not be counted, it being enough that he stops working,
may rest completely and may leave his workplace, to go elsewhere, whether within
or outside the premises of his workplace;
(c) If the work performed was necessary, or it benefited the employer,
or the employee could not abandon his work at the end of his normal working
hours because he had no replacement, all time spent for such work shall be
considered as hours worked, if the work was with the knowledge of his employer
or immediate supervisor;
(d) The time during which an employee is inactive by reason of
interruptions in his work beyond his control shall be considered time either if the
imminence of the resumption of work requires the employee's presence at the place
of work or if the interval is too brief to be utilized effectively and gainfully in the
employee's own interest.

Sec. 5. Waiting Time.—

(a) Waiting time spent by an employee shall be considered as working
time if waiting is an integral part of his work or the employee is required or engaged
by the employer to wait.
(b) An employee who is required to remain on call in the employer's
premises or so close thereto that he cannot use the time effectively and gainfully
for his own purpose shall be considered as working while on call. An employee
who is not required to leave word at his home or with company officials where he
may be reached is not working while on call.

Sec. 6. Lectures, Meetings, Training Programs.—Attendance at

lectures, meetings, training programs, and other similar activities shall not be
counted as working time if all of the following conditions are met:
(a) attendance is outside of the employee's regular working hours;
(b) attendance is in fact voluntary; and
(c) the employee does not perform any productive work during
such attendance.

1.1. Coverage/Exclusions

Art. 82. Coverage.—The provisions of this title shall apply to employees

in all establishments and undertakings whether for profit or not, but not to

Labor Law Reviewer 14

 government employees, managerial employees, field personnel, members of the
family of the employer who are dependent on him for support, domestic helpers,
persons in the personal service of another, and workers who are paid by results as
determined by the Secretary of Labor in appropriate regulations.

As used herein, “managerial employees” refers to those whose primary duty

consists of the management of the establishment in which they are employed or of
a department or subdivision thereof, and to other officers or members of the
managerial staff.

“Field personnel” shall refer to non-agricultural employees who regularly

perform their duties away from the principal place of business or branch office of
the employer and whose actual hours of work in the field cannot be determined
with reasonable certainty.

Omnibus Rules
Book III, Rule I

Section 2. Exemption.—The provision of this Rule shall not apply to the

following persons if they apply to the following persons if they qualify for
exemption under the conditions set forth herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following conditions,
namely:
(1) Their primary duty consists of the management of the
establishment in which they are employed or of a department or sub-
division thereof;
(2) They customarily and regularly direct the work of two
or more employees therein;
(3) They have the authority to hire or fire other
employees of lower rank; or their suggestions and recommendations as to
the hiring and firing and as to the promotion or any other change of status
of other employees are given particular weight.

(c) Officers or members of a managerial staff if they perform the

following duties and responsibilities:
(1) The primary duty consists of the performance of
work directly related to management policies of their employer;
(2) Customarily and regularly exercise discretion and
independent judgment;
(3) (i) Regularly and directly assist a proprietor or a
managerial employee whose primary duty consists of the management of
the establishment in which he is employed or subdivision thereof; or (ii)
execute under general supervision work along specialized or
technical lines requiring special training, experience, or knowledge; or (iii)
execute under general supervision special assignments and tasks;
and
(4) Who do not devote more than 20 percent of their
hours worked in a work-week to activities which are not directly and closely
related to the performance of the work described in paragraphs (1), (2), and
(3) above.

Who are covered

All employees in all establishments

Who are NOT covered

Labor Law Reviewer 15

 (1) Government employees
See: Civil Service Law
Magna Carta of Public Health Workers (R.A. 7305)

(2) Managerial employees

(a) managerial employees

(b) officers of the managerial staff
(c) members of the managerial staff

NOTES:

For purposes of the exemption, managerial employees “are those whose primary duty
consists of the management of the establishment in which they are employed or of a department
or subdivision.” [Peñaranda vs. Baganga Plywood Corp., G.R. No. 159577, May 3, 2006]

A purported “manager” whose function is simply to carry out the company’s orders, plans
and policies is not a managerial employee. If their functions, duties and responsibilities do not
bear relation with the management of the establishment, nor participate in the formulation of its
policies, nor in the hiring and firing of its employees, then they are NOT managerial employees.
[NAWASA vs. NWSA Consolidated Unions, 11 SCRA 766 (1964)]

Managerial employee is not required to report at a fixed hour or to keep fixed hours of work.
[International Pharmaceuticals, Inc. Vs. NLRC, 287 SCRA 213 (1998)]

A Vice President/Plant Manager is a managerial employee, and therefore excluded from

the coverage of Title I, Book III, of the Labor Code. [John McLeod vs. NLRC, G.R. No. 146667,
January 23, 2007]

Includes managerial staff

While not considered as managerial employees, officers and members of the

managerial staff are likewise exempted from the coverage of Article 82. Managerial staff are
those with the following duties and responsibilities:

(1) primary duty consists of the performance of work directly related to

management policies of the employer;

(2) customarily and regularly exercise discretion and independent judgment;

(3) (a) regularly and directly assist a proprietor/managerial employee, whose

primary duty consists of the management of the establishment; OR
(b) execute under general supervision work along specialized or technical
lines requiring special training, experience or knowledge; OR
(c) execute under general supervision special assignments and tasks;

(4) who do NOT devote more than 20% of their hours of work in a week to activities
which are not directly and closely related to management of the establishment.
[Peñaranda vs. Baganga Plywood Corp., supra, citing Section 2(c), Rule I,
Book III of the Omnibus Rules and Regulations]

An employee tasked to supervise the engineering section of the plant, and whose work
involved overseeing the operation of the machines and the performance of the workers in said
section, is considered part of the managerial staff. His functions require the use of discretion and
independent judgment to ensure the proper functioning of the plant. The term FOREMAN implies
that he was the representative of management over the workers, and the operation of the
department. [Peñaranda vs. Baganga Plywood Corp., supra] Likewise, an employee with
powers of supervisor/manager is part of the managerial staff. [Quebec vs. NLRC, 301 SCRA
627 (1999)]

N.B.:
Managers and members of managerial staff are NOT entitled to:
a. Overtime pay [Art. 87; Salazar vs. NLRC, supra]
b. Service incentive leave pay [Art. 95(b]; Quebec vs. NLRC, supra]
c. Holiday pay (Art. 94)

Labor Law Reviewer 16

 (3) Field Personnel

In Union of Filipro Employees vs. Vivar, Jr., [(205 SCRA 200 (1992)], it was held that the phrase
“whose actual hours of work in the field cannot be determined with reasonable certainty” must be read in
conjunction with the meaning of field personnel in Rule IV, Book III of the Implementing Rules, whereby “field
personnel and other employees whose time and performance is unsupervised by the employer.” [Mercidar
Fishing Corp. vs. NLRC, 297 SCRA 440 (1998)] The term “other employees” should NOT be understood
as a separate classification of employees who are not covered under Article 82 of the Labor Code, rather
should be regarded as an amplification of the interpretation of the definition of field personnel as those
“whose actual hours of work in the field cannot be determined with reasonable certainty.” [Auto Bus
Transport vs. Bautista, 458 SCRA 578 (2005)]

N.B.:
Field Personnel are NOT entitled to the following benefits:

a. Overtime pay; [Union Filipro Employees vs. Vivar, Jr., supra, citing San Miguel Brewery
vs. Democratic Labor Organization, 8 SCRA 613 (1963)]
b. Service incentive leave pay [Sec. 1, Rule V, Implementing Rules; Auto Bus Transport
vs. Bautista, 458 SCRA 578 (2005)]
c. 13th month pay [PD 851]

(4) Dependent Family Members

(5) Domestic Workers and Persons in the Personal Service of Another

The definition of domestic servant or househelper contemplates one who is employed in the
employer's home to minister exclusively to the personal comfort and enjoyment of the employer's
family. [Apex Mining Company vs. NLRC, 196 SCRA 251 (1991)]

VSEV: HOWEVER, a better reading of the foregoing should be

“services rendered in the employer's HOME for the personal comfort of
the members of the household,” not necessarily of the family.

Workers covered in this definition include:

(1) family drivers
(2) domestic servants
(3) laundrywomen
(4) yayas
(5) gardeners
(6) houseboys
(7) other similar househelps [Apex Mining Company vs. NLRC, supra at 254]

Househelp or laundrywomen working in staffhouses or a company, who attends to the

needs of company guests and other persons availing of said facilities should not be included in
this definition. The mere fact that the househelper or domestic servant is working within the
premises of the employer and in relation to or in connection with its business, as in its staffhouses,
warrants the conclusion that such househelper or domestic servant is and should be considered
as a regular employee. [Apex Mining Company vs. NLRC, supra at 254-255]

On the other hand, a personal driver of the owner of the company cannot claim regular
employment with the company itself absent proof of his employment relations therewith. [Ultra
Villa Food Haus vs. Geniston, 309 SCRA 17 (1999) at 23]

N.B.:
Domestic servants are NOT entitled to the following benefits:
a. Overtime pay;
b. Holiday pay;
c. Premium pay for holiday and rest days
d. Service Incentive Leave pay. [Ultra Villa Food Haus vs. Geniston, supra at 24]

Labor Law Reviewer 17

 (6) Piece Workers

Piece workers are those workers paid by results. [Art. 82]

And while the mode of compensation is on piece-rate basis, they are considered as regular
employees for as long as the nature of the tasks they perform are necessary and desirable in the
usual business of the employer, and their employment is not dependent on specific projects or
season. [Labor Congress vs. NLRC, 290 SCRA 509 (1998); in rel. Art. 280, LC; see also:
Villuga vs. NLRC, 225 SCRA 537 (1993)] As such, they are entitled to:
a. minimum wage
b. ECOLA
c. 13th month pay [Makati Haberdashery, Inc. vs. NLRC, 179 SCRA
448 (1989)]

They are NOT entitled to:

a. Overtime pay, if their output rates are in accordance with the
standards prescribed under Section 8, Rule VII, Book III; [Labor
Congress vs. NLRC, supra]
b. Service Incentive Leave pay; [Makati Haberdashery, supra]

1.2. Normal Hours of Work

Art. 83. Normal hours of work. The normal hours of work of any
employee shall not exceed eight (8) hours a day.

Health personnel in cities and municipalities with a population of at least

one million (1,000,000) or in hospitals and clinics with a bed capacity of at least
one hundred (100) shall hold regular office hours for eight (8) hours a day, for five
(5) days a week, exclusive of time for meals, except where the exigencies of the
service require that such personnel work for six (6) days or forty-eight (48) hours,
in which case, they shall be entitled to an additional compensation of at least thirty
percent (30%) of their regular wage for work on the sixth day. For purposes of this
Article, "health personnel" shall include resident physicians, nurses, nutritionists,
dietitians, pharmacists, social workers, laboratory technicians, paramedical
technicians, psychologists, midwives, attendants and all other hospital or clinic
personnel.

NOTES:

 Article 83 of the Labor Code provides that the normal hours of work shall NOT exceed
8 hours a day, which period does not include meal break. [PAL vs. NLRC, 302 SCRA 582
(1999)]

What constitutes Hours Worked?

(Mnemonic) DWSP

- when on DUTY
- when at the WORKPLACE
- when SUFFERED to work
- when PERMITTED to work [PAL vs. NLRC, 302 SCRA 582 (1999)]

Purpose of the 8-Hour Labor Law:

 to safeguard health
 minimize unemployment as employer is forced to resort to more shiftings. [NAWASA vs. NWSA
Consolidated Unions, 11 SCRA 766 (1964)]

 Services performed by an employee exceeding the normal 8-hour work period entitles

Labor Law Reviewer 18

 him to extra compensation. This extra compensation is not subject to estoppel or laches, and
allows the employee to claim such extra compensation for past overtime work so rendered.
[Manila Terminal Co. vs. CIR, G.R. No. L-4148, July 16, 1952]

BUT, shall only be applicable in industries not exempted by law to pay said additional
compensation, such as public utilities and government agencies and instrumentalities,
performing governmental functions. [NAWASA vs. NWSA Consolidated Unions, supra]

EXCEPT, when the company voluntarily agrees to pay its employees additional compensation
for work performed in excess of 8 hours. The obligation of the company is no longer by
compulsion of law, but is based on contracts. [NAWASA vs. NWSA, supra]

A provision for a 6-day work week or 48 hours/week entitles an employee working on

the 6th day additional compensation of at least 30% of his regular wage, [Art. 83, 2nd par., LC]
BUT does not entail payment to health personnel full weekly salary (7 days), with 2 days “work-
off” considered as paid. A Department Order to this effect is considered void for want of
authority. [San Juan de Dios Hospital Employees Association-AFW/MA vs. NLRC, 282
SCRA 316 (1997)]

1.2.1. Exceptions

(a) Health Personnel

Labor Code

ART. 83. Normal hours of work.—xxx

Health personnel in cities and municipalities with a population of at least
one million (1,000,000) shall hold regular office hours for eight (8) hours a day,
for five (5) days a week, exclusive of time for meals, except where the exigencies of
the service require such personnel work for six (6) days or forty-eight (48) hours,
in which case they shall be entitled to an additional compensation of at least thirty
percent (30%) of their regular wage for work on the sixth day. For purposes of
Article, “health personnel shall include: resident physicians, nurses, nutritionists,
dietitians, pharmacists, social workers, laboratory technicians, paramedical
technicians, psychologist, midwives, attendants and all other hospital or clinic
personnel.

Omnibus Rules
Rule I-A

SEC. 1. General statement on coverage.—This Rule shall apply

to:
(a) all hospitals and clinics, including those with a bed capacity of less
than one hundred (100) which are situated in cities or municipalities with a
population of 1 million or more; and
(b) all hospitals and clinics with a bed capacity of at least one hundred
(100), irrespective of the size of the population of the city or municipality where
they may be situated.

SEC. 4. Personnel covered by this Rule.—This Rule applies to

all persons employed by any private or public hospital or clinic mentioned in
Section 1 hereof, and shall include, but not limited to, resident physicians, nurses,
nutritionists, dieticians, pharmacists, social workers, laboratory technicians,
paramedical technicians, psychologists, midwives, and attendants.

SEC. 5. Regular Working Hours.—The regular working hours

of any person covered by this Rule shall not be more than eight (8) hours in any
one day nor more than forty hours in any one week.
xxx xxx xxx

SEC. 6. Regular Working Days.—The regular working days of

covered employees shall not be more than five days in a workweek. The workweek
may begin at any hour and on any day, including Saturday or Sunday, designated

Labor Law Reviewer 19

 by the employer.
Employers are not precluded from changing the time at which the workday
or workweek begins, provided that the change is not intended to evade the
requirements of this Rule.

While medical/health personnel are only required to perform work for five (5) days, this does not
mean that work performed for the week entitles them to a full weekly wage for 7 days. Full weekly wage
only arises if work performed for five (5) days amounted to 40 hours of work, consistent with the 8-hour
workday. [San Juan de Dios Hospital Employees Association-AFW/MA vs. NLRC, 282 SCRA 316
(1997)]

(b) Compressed Work Week

NOTES:

Parties are not prohibited from agreeing in a compressed workweek scheme, whereby regular
workweek is shortened but with longer work periods. For as long as employees voluntarily agree to work
for more than 8 hours a day in total in a week of which shall not exceed normal weekly hours of work. In
fact, Department Order No. 21 sanctions this kind of scheme, in consideration of the benefits that employees
may derive therefrom, i.e.,:
(1) savings on costs of transportation, meals, and energy
(2) greater efficiency of employees
(3) lower rate of employee absenteeism
(4) longer weekends is beneficial for rest, leisure, and time for the family. [Bisig
Manggagawa sa Tryco, et al. vs. NLRC, G.R. No. 151309, October 15, 2008]

Conditions for Implementation (DO 21-90)

The ff. concurring conditions should be met:
(1) The employees voluntarily agree to work for more than 8 hours/day, the
total in a week should not exceed their normal weekly hours prior to adoption of
compressed workweek (CWW) scheme.
(2) There will NOT be any diminution in the weekly/monthly take-home pay
and fringe benefits of the employees.
(3) If an employee is permitted or required to work in excess of his normal
weekly hours of work prior to the adoption of the CWW scheme, all such excess
hours shall be considered overtime work, and compensated accordingly.
(4) Appropriate waivers with respect to overtime premium pay for work
performed in excess of 8 hours/day may be devised by the parties to the
agreement.
(5) Effectivity and implementation of the new working time arrangement
shall be by agreement of the parties.

See: DOLE Advisory No. 02-04

DOLE Advisory No. 2, s.2009

1.3. Work interruption due to brownouts

 Brownouts is not included in “Hours worked” (20 mins still paid)

1.4. Meal Break

Art. 85. Meal Periods.—Subject to such regulations as the Secretary of

Labor may prescribe, it shall be the duty of every employer to give his employees
not less than sixty (60) minutes time-off for their regular meals.

Omnibus Rules
Book III, Rule 1

Labor Law Reviewer 20

 Sec. 7. Meal and Rest Periods.—Every employer shall give his employees,
regardless of sex, not less than one (1) hour time-off for regular meals, except in
the following cases when a meal period of not less than twenty (20) minutes may
be given by the employer provided that such shorter meal period is credited as
compensable hours worked of the employee:
(a) Where the work is non-manual work in nature or does not involve
strenuous physical exertion;
(b) Where the establishment regularly operates not less than sixteen
(16) hours a day;
(c) In cases of actual or impending emergencies or there is urgent work
to be performed on machineries, equipment or installations to avoid serious loss
which the employer would otherwise suffer; and
(d) Where the work is necessary to prevent serious loss of perishable
goods.

xxx xxx xxx

As a General Rule:

The 8-hour work period does not include the meal break. Nowhere in the law may it be inferred that
employees must take their meals within company premises. Employees are not prohibited from going out
of the premises as long as they return to their posts on time. [PAL v. NLRC, 302 SCRA 582 (1999)]

EXCEPT,
When employees are required to standby for emergency work during their 1-hour meal period and
their unavailability results in disciplinary action, their meal break should be considered as part of hours
worked. [Pan-American Airways, 1 SCRA 527 (1961)]

1.5. Idle time, waiting time, commuting time, travel time,

whether part of hours of work or not

There are special circumstances where employees, who although considered to be on “forced leave”
during the semestral break, such as full-time professors in a university, are still entitled to compensation.
Professors and teachers, during this period of time, are nevertheless burdened with correcting papers,
evaluating students, meeting deadlines, and submitting grading reports within a given period, such that the
semestral break could not be used effectively for the teacher's own purposes, and thus, should be
considered as compensable “hours worked”. [University of Pangasinan Faculty Union vs. University of
Pangasinan, 127 SCRA 691, 699 (1984)]

On another note, the meaning and scope of the term “workplace” determine whether the time spent
within work premises is considered “hours worked”.

(a) A worker confined within the premises of a boat or a factory shop need not leave said
premises in order to enjoy his “rest period”, it being enough that he (1) cease to work, (2) may
rest completely, and (3) leave or may leave, at his will, the spot where he actually stays while
working, or to go somewhere else. In such cases, the period of rest shall not be counted as
hours worked. [Luzon Stevedoring vs. Luzon Marine Department Union, G.R. No. L-9265,
April 29, 1957]

(b) A worker who continues to report for work at the employer's previous workplace may
not be compensated, if he is aware that the employer's workplace has been transferred to
another area. [Aklan Electric Cooperative vs. NLRC, 323 SCRA 258 (2000)]

(c) A worker who is required to assemble at a designated area at least 30 minutes prior to
the start of their scheduled working hours is not compensated when he is not subject to the
absolute control of the employer during this 30-minute assembly time. [Arica vs. NLRC, 170
SCRA 776 (1989)]

BUT,
A driver who is also required to pick up other employees at certain specified points on
his way to the workplace, and likewise drops them off on his way home is entitled to overtime
compensation, since the assigned task of fetching and delivering employees to the worksite is
primarily for the benefit of the employer. [Rada vs. NLRC, 205 SCRA 69 (1992)]

Labor Law Reviewer 21

See: RA 10028, (approved on March 16, 2010)

1.6. Overtime work

Art. 87. Overtime Work.—Work may be performed beyond eight (8) hours
a day provided that the employee is paid for the overtime work an additional
compensation equivalent to his regular wage plus at least twenty-five (25%)
percent thereof. Work performed beyond eight hours on a holiday or rest day shall
be paid an additional compensation equivalent to the rate for the first eight hours
on a holiday or rest day plus at least thirty (30%) percent thereof.

Overtime Work

Overtime work is actually the lengthening of hours developed to the interests of the employer and
the requirements of his enterprise. It follows that the wage or salary to be received must likewise be
increased, and a special additional amount must be added to serve either as encouragement or inducement.
Wage, on the other hand, is the remuneration or earnings, however designated, capable of being
expressed in terms of money, which is payable by an employer to an employee for work done.
Thus, for purposes of computing overtime compensation, regular wage includes all payments which
the parties have agreed shall be received during the work week. Extra, temporary and contingent
compensation unrelated to work done or service rendered should not be part of the computation. [PNB vs.
PEMA, G.R. No. L-30279, July 30, 1982]

1.6.1 Undertime not offset by overtime

Art. 88. Undertime not Offset by Overtime.—Undertime work on any

particular day shall not be offset by overtime work on any other day. Permission
given to the employee to go on leave on some other day of the week shall not
exempt the employer from paying the additional compensation required in this
Chapter.

NOTE:

 If a worker should incur in undertime during his regular daily work, it should not be
set off by his overtime, for that would place the schedule of working hours dependent on
the employee. [NAWASA vs. NWSA Consolidated Unions, supra]

VSEV: Just as undertime work cannot be offset by overtime work,

“such undertime” cannot be charged against the “accrued leave” of
the employee.

1.6.2 Waiver of overtime pay

 For instance, the generally observed workweek of 6 days is shortened to 5 days,
but prolonging the working hours from Monday-Friday without the employer being obliged
to pay overtime premium compensation for work performed in excess of 8 hours on
weekdays, in exchange for the benefits that will accrue to employees. [Bisig
Manggagawa, supra]

1.7. Night Work

Art. 86. Night Shift Differential.—Every employee shall be paid a night

Labor Law Reviewer 22

 shift differential of not less than ten percent (10%) of his regular wage for each
hour of work performed between ten o’clock in the evening and six o’clock in the
morning.

 Night-shift work is more onerous and burdensome, and thus deserves more
remuneration than their day time counterparts. There is no dispute that ordinary and regular
normal work is performed in the daytime, and that night work is exceptional and is only
justified in unavoidable circumstances necessary for the business of the employer. [Shell
Company vs. NLU, 81 Phil. 315 (1948)]

1.8. CBA provision vis-à-vis overtime work

Rule on Computation of Overtime Pay

1. Basis for computation

Law Based on regular wage [Bisig ng Manggagawa sa PRC, supra]

CBA As provided therein [PNB vs. PEMA, supra]
If CBA is Apply the law again [PNB vs. PEMA, supra]
silent,

- Cash Wage is the regular wage used in computing night shift and
overtime work [the only premium standards in Chapter I, Title I, Book III
of the Labor Code] [limited only to night shift and OT (Arts. 86 & 90)

- By “cash wage”, “facilities provided by the employer” shall not be included,

meaning only cash wage shall be used in computing OT and NSDP
[unlike Art. 97 (f) where wage “includes fair and reasonable value xxx of
board and lodging, or other facilities customarily furnished by the employer
to the employee”.

- Longevity pay is not included in the computation of overtime pay [PNB vs.
PEMA, supra]. It is not part of regular wages, but a form of gratuity.

2. Work Hour is 8:00 A.M. To 4:00 P.M.

OT has to be computed on a 24-hour work day schedule

3. The basis of OT claim is “permitted to work”, otherwise not demandable. [Manila

Jockey, supra]

2. Wages

Wage - remuneration, regardless of how designated

- capable of being expressed in terms of money
- regardless of how fixed or ascertained
- payable for services rendered/to be rendered
- inclusive of facilities [fair and reasonable] exclusive of profit to
Employer

2.1. “No work no pay” principle

 The general “no work, no pay” rule should prevail with respect to employees’ wages
during the suspension period, subject to existing CBA terms on leave credits and similar benefits
of employees. The suspension was due to environmental causes that can affect the health and

Labor Law Reviewer 23

 safety of those within the vicinity of Marcopper, particularly its employees. [National Mines and
Allied Workers Union (NAMAWU) vs. Marcopper Mining Corporation, G.R. No. 174641,
November 11, 2008]

2.2. Coverage/Exclusions

The rule on wages applies to all workers

EXCEPT:
a) farm tenancy/leasehold;
b) domestic servants;
c) homeworkers engaged in needle work / cottage industry

 Employees are entitled to be paid the minimum wage regardless whether they are
regular or non-regular employees, except for those employees enumerated in Section 3, Rule
VII of the Omnibus Rules implementing the Labor Code. [SLL International Cables
Specialist, et al. vs. NLRC, et al., G.R. No. 172161, March 2, 2011, Mendoza, J.]

Cooperatives Still Exempted from Minimum Wage Law

 In view of the foregoing, we hold that cooperatives may still be exempted from the
statutory minimum wage. [Benguet Electric Cooperative v. Ferrer-Calleja, G.R. No. 79025,
December 29, 1989]

2.3. Facilities vs supplements

The term “facilities”, says the Implementing Rule, shall include articles or services for the benefit
of the employee or his family but shall not include:
 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.
(Book III, Rule VII, Sec. 5)

The benefit or privilege given to the employee which constitutes an extra remuneration above and
over his basic or ordinary earning or wage is supplement; [State Marine Corp. vs. Cebu Seamen's
Association, Inc., 7 SCRA 294 (1963); (1988 Bar, XIIb)] and when said benefit or privilege is part of the
laborers' basic wages, it is a facility. The distinction lies not so much in the kind of benefit or item given,
but in the purpose for which it is given. [SLL International Cables Specialist, et al. vs. NLRC, et al., G.R.
No. 172161, March 2, 2011, Mendoza, J.] So, if they are not so furnished, the laborer would spend and pay
for them just the same. [Atok-Big Wedge Assn. vs. Atok-Big Wedge Co., (97 Phil. 294)]

 An employer cannot simply deduct from the employee's wages the value of the board
and lodging without satisfying the ff. requisites: (1) proof that such facilities are
customarily furnished by the trade/business of the employer; (2) voluntary acceptance
in writing by the employees of the deductible facilities; and (3) proof of the fair and
reasonable value of the facilities charged. [S.I.P. Food House, supra; SLL
International, supra]

CASE:
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. [States Marine Corporation vs. Cebu Seamen's Association, Inc., No. L-12444, 28 February
1963, 7 SCRA 294] 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. [Liduvino
M. Millares, et al. vs. NLRC, et al., G.R. No. 122827, March 29, 1999, 2nd Division, Bellosillo, J.]

Labor Law Reviewer 24

 2.4. Wages vs. salaries

Art. 97. Definitions.

(f) “Wage” paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to be done,
or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of the board, lodging, or other
facilities customarily furnished by the employer to the employee. “Fair and
reasonable value” shall not include any profit to the employer or to any person
affiliated with the employer.

NOTES:

 Wages are defined as “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 service
rendered or to be rendered.” [Chavez v. NLRC, G.R. No. 146530, January 17, 2005]

 The distinction between salary and wage in Gaa was for the purpose of Article 1708 of the
Civil Code which mandates that, “[t]he laborer’s wage shall not be subject to execution or
attachment, except for debts incurred for food, shelter, clothing and medical attendance.” In
labor law, however, the distinction appears to be merely semantics. Paramount and Evangelista
may have involved wage earners, but the petitioner in Espejo was a General Manager with a
monthly salary of P9,000.00 plus privileges. That wage and salary are synonymous has been
settled in Songco v. NLRC. [Equitable Banking Corp v. Ricardo Sapac, 490 SCRA 381 (2006)]

2.5. Wage distortion

 The concept of wage distortion assumes an existing grouping or classification of

employees which establishes distinctions among such employees on some relevant or
legitimate basis. This classification is reflected in a differing wage rate for each of the existing
classes of employees”. While Art. 124 provides for Grievance Machinery which ends up in
Voluntary Arbitration, (organized establishments) and NCMB conciliations which eventually
maybe referred to Compulsory Arbitration by Labor Arbiter, such are not the only valid ways
with which a wage distortion may be corrected. A CBA increase which re-establishes the wage
gap, or a unilateral grant by the employer which also restores said gap are valid wage distortion
correction schemes. [National Federation of Labor vs. NLRC, 234 SCRA 311, 322-323]

Four elements of wage distortion:

1) an existing hierarchy of positions with corresponding salary rates.

2) a significant change in the salary rate of a lower pay class without a concomitant increase in the
salary rate of a higher one;

3) The elimination of the distinction between the two levels; and

4) The existence of the distortion in the same region of the country [Bankard Employees Union-
Workers Alliance Trade Unions vs. NLRC, and Bankard, Inc., G.R. No. 140689, February 17,
2004, Third Division, Carpio, Morales, J.]

2.6. CBA vis-à-vis Wage Orders – CBA creditability

CASE:

P.I. Manufacturing, Incorporated vs.

P.I. Manufacturing Supervisors and Foreman Association and the National Labor Union,
G.R. No. 167217, February 4, 2008.

Labor Law Reviewer 25

 There is wage distortion based on the prevailing rates of the supervisors and foremen (before the
increase in wages based on the CBA). If RA 6640 would be implemented, the gaps existing between and
among the wage rates of all the employees of petitioner would have been substantially altered and reduced.

In the present case, only three (3) of the union members are receiving wages below P100.00, thus
entitled to the increase. To direct petitioner to grant an across-the-board increase to all of them would be
harsh and unfair to the employer.

However, due to the CBA provision, providing for increased monthly salaries of supervisors and
foremen, such has re-established and broadened the gap, and significantly doubled the P100.00 increase
under RA 6640, which in effect substantially complied with the wage increase under RA 6640. The union is
estopped from claiming wage increase under RA 6640 when it forged the CBA with petitioner after the law
took effect.

xxx xxx xxx

xxx [W]age distortion means the disappearance or virtual disappearance of pay differentials between
lower and higher positions in an enterprise because of compliance with a wage order.

The apparent intention of the law is only to upgrade the salaries or wages of the employees specified
therein. (Manila Mandarin Employees Union v. NLRC, G.R. No. 108556, November 19, 1996, 264 SCRA
320)

2.7. Non-diminution of benefits

Art. 100. Prohibition against elimination or diminution of

benefits. Nothing in this Book shall be construed to eliminate or in any way
diminish supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.

NOTES:

 Diminution of Benefits, defined. Diminution of benefits is the unilateral

withdrawal by the employer of benefits already enjoyed by the employees. [TSPIC
Corporation vs. TSPIC Employees Union (FFW), G.R. 163419, Feb. 13, 2008]

Diminution of Benefits; Negative Definition

 Since under the CBA, “overtime pay was not given to each employee consistently, deliberately and
unconditionally, but as compensation for additional services rendered”, the employer's change of
schedule which is not prohibited by the CBA, resulting in lesser overtime work, does not constitute
a diminution of benefits under Art. 100 of the Labor Code [Manila Jockey Club Employees Labor
Union-PTGWO vs. Manila Jockey Club, Inc., 517 SCRA 707, 712-713, March 7, 2007]

There is diminution of benefits when it is shown that:

(a) The grant or benefits is founded on a policy or has ripened into a practice over a long period;

(b) The practice is consistent and deliberate;

(c) The practice is not due to error in the construction or application of a doubtful or difficult
question of law; and

(d) The discontinuance is done unilaterally by the employer.

Rationale for Art. 100

 Employees are protected by law from unwarranted practices that diminish an employee's
compensation without his knowledge and consent [Pacific Banking Corporation vs. Clave,
128 SCRA 112]

2.8. Worker’s preference in case of bankruptcy

Art. 110. Worker preference in case of bankruptcy. In the

Labor Law Reviewer 26

 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. (As amended by Section 1, Republic Act No. 6715, March 21,
1989)

NOTES:

Worker Preference (in case of Bankruptcy)

* For unpaid wages and other monetary claims, even against gov't. claims. (See Folder of
Jurisprudence)

* Cf. with PD 902-A, Secs. 5 & 6 on Rehabilitation. [Rubberworld Phils. vs. NLRC, April
14, 1999]

* Rehabilitation suspends automatically proceedings at NLRC.

* Receiver – takes hold of assets for the benefit of creditors with possibility of
continued operation.
* Liquidator – takes hold of assets to dispose according to priorities. Operations stop.
Both receivership/liquidation – personality of corp. continues [PVB v. NLRC, Oct. 26, 1999]

 Worker’s claims for unpaid wages and monetary benefits cannot be paid outside of a bankruptcy
or judicial liquidation proceedings against the employer. [Barayoga vs. Asset Privatization
Trust, 473 SCRA 690]

2.9. Labor Code provisions for wage protection

Art. 112. Non-interference in disposal of wages. No

employer shall limit or otherwise interfere with the freedom of any employee to
dispose of his wages. He shall not in any manner force, compel, or oblige his
employees to purchase merchandise, commodities or other property from any
other person, or otherwise make use of any store or services of such employer or
any other person.

Art. 114. Deposits for loss or damage. No employer shall

require his worker to make deposits from which deductions shall be made for the
reimbursement of loss of or damage to tools, materials, or equipment supplied by
the employer, except when the employer is engaged in such trades, occupations or
business where the practice of making deductions or requiring deposits is a
recognized one, or is necessary or desirable as determined by the Secretary of
Labor and Employment in appropriate rules and regulations.

Art. 115. Limitations. No deduction from the deposits of an

employee for the actual amount of the loss or damage shall be made unless the
employee has been heard thereon, and his responsibility has been clearly shown.

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 worker’s consent.

Art. 117. Deduction to ensure employment. It shall be

unlawful to make any deduction from the wages of any employee for the benefit of
the employer or his representative or intermediary as consideration of a promise
of employment or retention in employment.

Art. 118. Retaliatory measures. It shall be unlawful for an employer to

refuse to pay or reduce the wages and benefits, discharge or in any manner
discriminate against any employee who has filed any complaint or instituted any

Labor Law Reviewer 27

 proceeding under this Title or has testified or is about to testify in such
proceedings.

Art. 119. False reporting. It shall be unlawful for any person to make
any statement, report, or record filed or kept pursuant to the provisions of this
Code knowing such statement, report or record to be false in any material respect

CASE:
Special Steel Products, Inc. vs. Lutgardo Villareal, et al.,
G.R. No. 143304, July 8, 2004

Petitioner contends that as a guarantor, it could legally withhold respondent Villareal’s monetary
benefits as a preliminary remedy pursuant to Article 2071 of the Civil Code, as amended. As to respondent
So, petitioner, citing Article 113 of the Labor Code, as amended, in relation to Article 1706 of the Civil Code,
as amended, maintains that it could withhold his monetary benefits being authorized by the memorandum
he signed.

Article 116 of the Labor Code, as amended, provides:

“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 (and benefits) of a worker or induce him
to give up any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever
without the worker’s consent.”

The above provision is clear and needs no further elucidation. Indeed, petitioner has no legal
authority to withhold respondents’ 13th month pay and other benefits. What an employee has worked for,
his employer must pay. Thus, an employer cannot simply refuse to pay the wages or benefits of its employee
because he has either defaulted in paying a loan guaranteed by his employer; or violated their memorandum
of agreement; or failed to render an accounting of his employer’s property.

2.10. Allowable deductions without employee’s consent

Art. 113. Wage deduction. No employer, in his own behalf or in

behalf of any person, shall make any deduction from the wages of his employees,
except:
a. In cases where the worker is insured with his consent by the
employer, and the deduction is to recompense the employer for the amount paid
by him as premium on the insurance;
b. For union dues, in cases where the right of the worker or his union
to check-off has been recognized by the employer or authorized in writing by the
individual worker concerned; and
c. In cases where the employer is authorized by law or regulations
issued by the Secretary of Labor and Employment.

NOTES:

Wage Deduction

– Employer cannot deduct from wages

Except:
a) Insurance Premium
b) Union dues – 241 [o]; 248 [e]
c) Authorized by law.
- Check-off authorized by Employer requires written authorization from employee.

2.11. Attorney’s fees and union service fee in labor cases

Art. 111. Attorney’s fees.

(a) In cases of unlawful withholding of wages, the culpable party may
be assessed attorney’s fees equivalent to ten percent of the amount of wages
recovered.

Labor Law Reviewer 28

 (b) It shall be unlawful for any person to demand or accept, in any
judicial or administrative proceedings for the recovery of wages, attorney’s fees
which exceed ten percent of the amount of wages recovered.

NOTES:

Attorney's Fees

a) Extraordinary concept – awarded by court;

- 10% against culpable party for unlawful w/holding of wages;

* Art. 111(a) is extraordinary attorney's fees. It does not require proof that the employer
acted with malice or bad faith in withholding the wage. Proof that lawful wages were not paid
is enough [PAL Shipping Phils., Inc., et al. vs. NLRC, et al. [G.R. 153031, Dec. 14, 2006]

b) Ordinary concept – paid by client to a lawyer as reasonable compensation;

- 10% for lawyer in recovery of wages cases.

* The award of attorney's fees, though not prayed for, is sanctioned by law and must be
upheld [Marivel Trading, Inc. vs. NLRC, 525 SCRA 708, 733 (2007).

Rules:

(1) In actions for (1) recovery of wages or (2) where an employee was forced to litigate
and thus incurred expenses to protect his rights and interests, a maximum award of ten percent
(10%) of the monetary award by way of attorney's fees is legally and morally justifiable under Art.
111 of the Labor Code. Xxx

Forced to litigate recovery of wages – basics of attorney’s fees [Rutaquio vs. NLRC, (Oct. 19,
1999); Marsaman Manning Agency vs. NRLC, (Aug. 25, 1999)

(2) No attorney’s fees when complaint is represented by PAO – Lambo vs. NLRC, G.R.
No. 111042, Oct. 26, 1999, 317 SCRA 420.

(3) Non-Lawyers Not Entitled to Attorney's Fees

2.12. Criteria/Factors for Wage Setting

Art. 124. Standards/Criteria for minimum wage fixing. The regional

minimum wages to be established by the Regional Board shall be as nearly
adequate as is economically feasible to maintain the minimum standards of living
necessary for the health, efficiency and general well-being of the employees within
the framework of the national economic and social development program. In the
determination of such regional minimum wages, the Regional Board shall, among
other relevant factors, consider the following:

(a) The demand for living wages;

(b) Wage adjustment vis-à-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of employers
(i) Effects on employment generation and family income; and
(j) The equitable distribution of income and wealth along the

Labor Law Reviewer 29

 imperatives of economic and social development.

 Pendency of disputes shall not delay applicability of wage order.

 Those paid by Result – Distortion – elimination or severe contraction of intentional

wage quantitative differences resulting in effectively obliteration of distinctions in
wage structure based on skills, length of service, other logical bases of differentiation.

- guaranteed wages
- standard for 8 hours work recognized learnership
(Apprenticeship adjusted)

3. Rest Day

Art. 91. Right to weekly rest day.

(a) It shall be the duty of every employer, whether operating for profit
or not, to provide each of his employees a rest period of not less than twenty-four
(24) consecutive hours after every six (6) consecutive normal work days.
(b) The employer shall determine and schedule the weekly rest day of
his employees subject to collective bargaining agreement and to such rules and
regulations as the Secretary of Labor and Employment may provide. However, the
employer shall respect the preference of employees as to their weekly rest day when
such preference is based on religious grounds.

3.1. Right to weekly rest day

NOTES:

Weekly Rest Periods

 It shall be the employer's duty to give an employee rest period:

(a) Weekly rest period of not less than 24 hours after every 6 consecutive normal work days.

(b) Employer to fix schedule of rest day subject to:

1) CBA
2) Workers preference based on religious grounds,
respected

(c) Worked:
Regular Holiday + Rest day = 230%
[Arts. 93(a) & 94(b)]
Special day = 130% [Art. 94(c)]
Special day + Rest day = 150%
[Art. 93(c), where
“such” refers to special day]

For work on Sundays and legal holidays, the employer must pay:

1. a Daily-Rate Employee (125% of daily wage):

a) regular remuneration, or 100% of his daily wage; and

b) an additional sum of at least 25% of the regular remuneration,
which shall be regarded as the “premium pay”

2. a Monthly-Paid Employee:

a) IF the remuneration is included in his salary, only the 25%

premium pay can be claimed; and

b) IF not so included in the monthly salary,

Labor Law Reviewer 30

 (1) the first 100% of the 125%, which stands as the regular
remuneration; and
(2) the 25% premium pay [De Leon vs. Pampanga Sugar Development Co.,
Inc., G.R. No. L-26844, September 30, 1969, 29 SCRA 628]

N.B.:
The premium payments for Sundays, legal holidays, and rest days are based on the rule enunciated
in De Leon.

3.2. Preference of the employee

 Workers preference based on religious grounds, respected

3.3. When work on rest day authorized

Art. 92. When employer may require work on a rest day. The
employer may require his employees to work on any day:
(a) In case of actual or impending emergencies caused by serious
accident, fire, flood, typhoon, earthquake, epidemic or other disaster or
calamity to prevent loss of life and property, or imminent danger to public safety;
(b) In cases of urgent work to be performed on the machinery,
equipment, or installation, to avoid serious loss which the employer would
otherwise suffer;
(c) In the event of abnormal pressure of work due to special
circumstances, where the employer cannot ordinarily be expected to resort to other
measures;
(d) To prevent loss or damage to perishable goods;
(e) Where the nature of the work requires continuous operations and
the stoppage of work may result in irreparable injury or loss to the employer; and
(f) Under other circumstances analogous or similar to the foregoing as
determined by the Secretary of Labor and Employment.

NOTES:

Grounds for compulsory rest day work (6 grounds)

(a) impending emergency (fortuitous event)
(b) urgent work on machinery, etc.
(c) abnormal pressure of work due to special circumstances
– the employer cannot resort to other incomes
(d) prevent loss or damage to perishable goods
(e) nature of work requires continuous operations (irreparable loss)
(f) analogous circumstances as determined by SOLE

 [OT may be required when the country is at war/local or national emergency declared
by Congress/President (difference between rest day and OT)]

4. Holidays

NOTE:

Regular Holiday Pay

Holiday pay

a) regular daily wage

b) 200% if worker is required to work during holidays

Exception:
In retail/service establishments regularly employing less than ten (10) employees

Labor Law Reviewer 31

IMPORTANT:

Legal holiday falling on a Sunday creates no legal obligation on the part of the employer to pay extra
pay.Wellington Investment and Manufacturing Corporation vs. Trajano, G.R. No. 114698, July 3, 1995.

Note: This ruling is no longer applicable in light of RA 9492, which moved holidays falling on a Sunday to
the next Monday.

Note also the ruling in Producers Bank vs. NLRC:

“Apparently, the divisor of 314 is arrived at by subtracting all Sundays from the
total number of calendar days in a year, since Saturdays are considered paid rest
days, as stated in the inter-office memorandum. Thus, the use of 314 as a divisor
leads to the inevitable conclusion that the ten legal holidays are already included
therein.” [Producers Bank of the Philippines vs. NLRC, et al., G.R. No. 100701,
March 28, 2001, Third Division, Gonzaga-Reyes, J.]

The foregoing seems to follow Sec. 2, Rule IV, Book III of Implementing Rules that “Employees who
are uniformly paid by the month irrespective of number of working days therein (but) with a salary not less
than minimum wage (worked or not) shall be presumed to be paid their holiday pay”. But in IBAA
Employees Union vs. Inciong, 132 SCRA 663, the Supreme Court held that such rule is void. [In Villuga
vs. NLRC, 225 SCRA 537 and Union of Filipro Employees vs. Vivar, 205 SCRA 200, the Court held that
this IBAA ruling is prospective in application following the “Operative Fact” doctrine.

Closer to this case is the Chartered Bank Employees Association vs. Hon. Ople (G.R. L-44717, August 28,
1985) where the Court held that if all nonworking days are paid – the divisor is 365. Thus, if divisor is 251
[365 – 52 Sundays = 313 – 52 Sat. = 261] 10 regular holidays is not paid otherwise 261 – 10 is 251. But if
261 is divisor, then regular holidays are considered paid [251 + 10 R.H. = 261].

* This erroneous ruling in Producers Bank was followed, worsely, by SMC vs. Del Rosario (Dec.
13, 2005) where the Court held that “a monthly paid regular employee”, is not entitled “to holiday pay”
pursuant to Sec. 2, Rule IV, Book III of the Omnibus Rules Implementing the Labor Code.

Holidays are:
Note changes made in RA 9492

4.1. Right to holiday pay

Art. 94. Right to Holiday Pay.

(a) Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than
ten (10) workers;
(b) The employer may require an employee to work on any holiday but
such employee shall be paid a compensation equivalent to twice his regular rate;
and
(c) As used in this Article, “holiday” includes: New Year's Day, Maundy
Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the
fourth of July, the thirtieth of November, the twenty-fifth of December and the day
designated by law for holding a general election.

 holiday pay is a statutory benefit demandable under the law. Since a worker is entitled
to the enjoyment of ten paid regular holidays, the fact that two holidays fall on the same
date should not operate to reduce to nine the ten holiday pay benefits a worker is entitled
to receive. [Asian Transmission Corporation vs. Court of Appeals, G.R. No. 144664,
March 15, 2004]

4.1.1. In case of absences

 on leave of absence with pay the day before – with pay

 on leave of absence without pay – without pay

Labor Law Reviewer 32

  day before holiday is non-working day – apply (a) & (b)

AZUCENA:

Regular Holidays
1) IF Holiday is the employee's Regular Workday, and
▪ unworked – 100%
▪ If worked:
 1st 8 hours – 200% (the given hourly rate)
 excess of 8 hours – plus 30% of hourly rate

2) IF Holiday is employee's Rest Day, and

▪ unworked – 100%
▪ If worked:
 1st 8 hours – plus 30% of 200% (the given hourly rate)
 excess of 8 hours – plus 30% of hourly rate for the day

Special Day
1) IF unworked, no pay shall accrue unless otherwise provided in
a CBA, or established company practice to grant wages on this given day
2) IF worked:
 1st 8 hours – plus 30% of the daily rate (100%)
 excess of 8 hours – plus 30% of hourly rate on that day
3) IF it falls on employee's Rest Day, and worked
 1st 8 hours – plus 50% of the daily rate of 100%
 excess of 8 hours – plus 30% of hourly rate on that day

Special Working Holiday: The employee is entitled only to his basic

rate, if worked. No premium pay accrues on this day, but considered as ordinary
working day.

4.1.2. In case of temporary cessation of work

 temporary periodic closure – with pay

 closure due to business reverses – WITHOUT PAY

4.1.3. Of teachers, piece workers, seafarers, seasonal workers, etc.

On the issue of holiday pay, however, two (2) contradictory views exist in jurisprudence:

(1) In Labor Congress vs. NLRC, (290 SCRA 509) the Supreme Court held that piecerate
workers are granted holiday pay based on Section 8(b), Rule IV, Book III. The argument is that the
Omnibus Rules implementing the Labor Code exclude certain employees from receiving benefits such as
night differential pay, holiday pay, service incentive leave pay, and 13th month pay, i.e., “field personnel and
other employees whose time and performance is unsupervised by the employer, including those who are
engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for
performing work irrespective of time consumed in the performance thereof.” BUT that piece-rate workers
do not fall under this group.

(2) In Makati Haberdashery, Inc. vs. NRLC, (179 SCRA 448) on the other hand, piece-rate
workers are NOT entitled to holiday pay, pursuant to Section 1(e), Rule IV, Book III.

4.1.2. In case of temporary cessation of work

 temporary periodic closure – with pay

 closure due to business reverses – WITHOUT PAY

4.1.3. Of teachers, piece workers, seafarers, seasonal workers, etc.

Labor Law Reviewer 33

 On the issue of holiday pay, however, two (2) contradictory views exist in jurisprudence:

(1) In Labor Congress vs. NLRC, (290 SCRA 509) the Supreme Court held that piecerate
workers are granted holiday pay based on Section 8(b), Rule IV, Book III. The argument is that the
Omnibus Rules implementing the Labor Code exclude certain employees from receiving benefits such as
night differential pay, holiday pay, service incentive leave pay, and 13th month pay, i.e., “field personnel and
other employees whose time and performance is unsupervised by the employer, including those who are
engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for
performing work irrespective of time consumed in the performance thereof.” BUT that piece-rate workers
do not fall under this group.

(2) In Makati Haberdashery, Inc. vs. NRLC, (179 SCRA 448) on the other hand, piece-rate
workers are NOT entitled to holiday pay, pursuant to Section 1(e), Rule IV, Book III.

 The Supreme Court in said case reasoned that since piece-rate workers are not entitled
to service incentive leave pay, because they fall under one of the exceptions in Section 1(d),
Rule V, Book III of the Implementing Rules, they being “paid at a fixed amount for performing
work irrespective of time consumed,” for this same reason, thus, they are not entitled to
holiday pay as well.

HOWEVER,
In the case of Lambo vs. NLRC, [317 SCRA 421 (1999)] the Supreme Court recognized
that there are two categories of employees paid by results:
(1) those whose time and performance are supervised by the employer – where
an element of control and supervision over the manner work is to be performed, especially if
worker performs his work in the company premises; and
(2) those whose time and performance are unsupervised – the employer's control
is over the result of the work only.

. Both classes of workers are paid per unit accomplished. Piece-rate payment
is generally practiced in garment factories where work is done in the company premises, while
payment on pakyao and takay basis is commonly observed in the agricultural industry, such as
in sugar plantations where the work is performed in bulk or in volumes difficult to quantify.
[Lambo vs. NLRC, supra at 426]

“Petitioners Lambo, et. al. belong to the first category, i.e., supervised employees.”
However, the Court further held – “The awards for overtime pay, holiday pay and 13th month
pay are in accordance with our finding that petitioners are regular employees” [ibid., at 431-
433] forgetting that Art. 82 excluded “workers who are paid by results” from the coverage of
Title I, Book III of the Labor Code – which includes “overtime work” (Art. 87) and “holiday pay”
(Art. 94).

In short, what the S.C. should have held is – Lambo, et. al. are employees, their work
being supervised (control); but they are not entitled to overtime pay and holiday pay due to Art.
82, Labor Code.

4.2. Exclusions from coverage

 Government employees, including those in chartered corporation.

 Rental/Service establishments with less than 10 employees.
 Those exempted from coverage of title (Domestic, etc.)

b) not applied against employers –

(1) with less than 10 workers regardless of nature of business;
(2) may be exempted by DOLE Sec. on account of viability/financial
condition.

c) Grant of leave benefits in excess of what is provided here “shall NOT be subject of arbitration
or any court action”.

Labor Law Reviewer 34

 VSEV:
« Computation of 1 year includes holidays “authorized
absences [Secs. 2 & 3, Rule V, Book III] I think even
those on AWOL – as this subjects him to separate penalty.

 It is here where absence is considered served.

[Sunripe Coconut Products vs. NLU, 97 Phil. 691]

 Convertible to cash.

d) V/L (as SIL) – are among those incomes intended as replacements for regular income that
depend on days worked. [Davao Integrated Port Stevedoring Services vs. Abarquez, 220
SCRA 197] The vacation leave privilege was not intended to serve as additional salary, but as
a non-monetary benefit. To give the employees the option not to consume it with the aim of
converting it into cash at the end of the year would defeat the very purpose of the vacation
leave. [PNCC Skyway, supra]

VSEV: This rule is proof that SIL does not have to depend on
authorized absences for an employee to be entitled
thereto.

e) Grant of V/L and S/L – is not a standard of law, but a prerogative of management. [Virginia
Sugue vs. Triumph Int’l. Phils., Inc., G.R. No. 164804, Jan. 30, 2009]

5.2. Maternity Leave: RA 8282 (SSS Law)

5.2.1. Coverage

SEC. 14-A. Maternity Leave Benefit. – A female member who has

paid at least three (3) monthly contributions in the twelve-month
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 daily salary credit for sixty (60)
days or seventy-eight (78) days in case of caesarian delivery, xxx xxx

5.2.2. Conditions to entitlement

SEC. 14-A. Maternity Leave Benefit. – xxx, 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; and
(f) That if an employee member 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
the time of the pregnancy, the employer shall pay to the SSS damages equivalent

Labor Law Reviewer 35

 to the benefits which said employee member would otherwise have been entitled
to.

5.2.3. Availment

 The maternity benefits provided under this section shall be
 paid only for the first
four (4) deliveries or miscarriages;

5.3. Paternity Leave: RA 8187

RA 8187 grants paternity leave of 7 days with full pay to all married male employees in the private
and public sectors. Paternity leave is available only for the first four deliveries of the legitimate spouse with
whom the husband is cohabiting. The purpose of paternity leave is to enable the husband to lend support
to his wife during the period of recovery and/or in the nursing of the newly-born child.

5.3.1. Coverage

SECTION 2. xxx 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.

5.3.2. Conditions to entitlement

Paternity Leave Benefits

1. Married male employee in private or public sector

2. An employee at the time of delivery
3. Cohabiting with his spouse at the time of delivery (includes childbirth, miscarriage or
abortion)
4. Has applied for paternity leave within a reasonable period from expected delivery
5. His wife gave birth or suffered a miscarriage. [Sec. 3, Revised Implementing Rules of RA
8187]

5.3.3. Availment

5.4. Parental Leave

Parental Leave (for Solo Parents)

RA 8972 grants a solo parent employee parental leave of not more than 7 working days every year.

5.4.1. Coverage

considered Solo Parent:

 You are a parent left alone with the responsibility of parenthood because of the
death of your spouse.
 You are a parent left alone with the responsibility of parenthood because of any
physical and/or mental incapacity of your spouse as certified by a public medical practitioner.
 You are a parent left alone with the responsibility of parenthood because you have
legally separated from your spouse or because you have been separated for at least one
year and your child is in your custody.
 You are a parent left alone with the responsibility of parenthood because your
marriage was annulled by a court or a church decree, and your child is in your custody.
 You are a parent left solo or alone with the responsibility of parenthood because
your spouse abandoned you for at least one year.

Labor Law Reviewer 36

  You are a parent left solo or alone with the responsibility of parenthood because
your spouse is detained or is serving sentence for a crime for at least one year.
 You are an unmarried mom or dad who has preferred to keep and rear your child
yourself, instead of having others care for them or give them up to a welfare institution.
 You solely provide parental care and support to a child or children.
 You assume the responsibility of head of the family as a result of the death,
abandonment, disappearance or prolonged absence of the children's parents or solo parent.
 You are a victim of rape and/or other crimes against chastity, have given birth to a
child as a result and have decided to keep and raise your child.

5.4.2. Conditions to entitlement

Conditions for Availment

1. Solo parent has rendered at least 1 year of service (continuous or broken)

2. has notified employer of the availment within a reasonable time; and
3. has presented a Solo Parent Identification Card to the employer.

5.4.3. Availment
 Unused parental leave is not convertible to cash unless otherwise
provided in CBA.

Sec. 8. Parental Leave. - In addition to leave privileges under existing

laws, parental leave of not more than seven (7) working days every year shall be
granted to any solo parent employee who has rendered service of at least one (1)
year.

5.5. Leaves for victims of violence against women: RA 9262

5.5.1. Coverage
 Leave available to an Employee (not only for women) who are victims of violence, either
physical, sexual or psychological.

5.5.2. Conditions to entitlement

 A requirement to apply for the battered woman leave is a certification obtained from the Barangay
Captain or Kagawad or prosecutor or the clerk of court that an action based on R. A. 9262 has been
filed and is pending.
 The use of the ten-day leave is at the option of the employee.
 It shall be used for the days that she need to attend to medical and legal concerns.
 Leaves not availed of are non-cumulative and not convertible to cash. Indeed, the battered woman
leave is useful for victims of violence. Lastly, this law is only applicable in the Philippines.

5.5.3. Availment

 Leave of up to ten days in addition to other paid leaves under the Labor Code, or other
laws.

6. Service Charges

Art. 96. Service Charges. All service charges collected by hotels,

restaurants and similar establishments shall be distributed at the rate of eighty-
five percent (85%) for all covered employees and fifteen percent (15%) for
management. The share of the employees shall be equally distributed among
them. In case the service charge is abolished, the share of the covered employees
shall be considered integrated in their wages.

6.1. Coverage

Labor Law Reviewer 37

 Article 96 and its implementing rule (Rule VI, Book III), apply only to establishments collecting
service charges, such as hotels, restaurants, lodging houses, night clubs, cocktail lounges, massage
clinics, bars, casinos, and gambling houses, and similar enterprises, including those entities operating
primarily as private subsidiaries of the government. [Sec. 1, Rule VI, Book III]

6.2. Exclusion
NOTES:

 Tip, not normally part of salary, it being paid by customer [Ace Navigation Co.,
Inc. vs. Court of Appeals, 338 SCRA 70]

6.3. Distribution

 All service charges collected by Hotels, restaurants and similar establishments
shall be distributed at the rate of:

85% - for all covered employees

15% - for management [Managerial employee under
Art. 212(M), as implied in Sec. 2, Rule VI, Bk, III]

 Supervisors – are considered as rank-and-file per Sec. 2, Rule VI, as they are not
managerial in Art. 212(M)


 In case the service charge is abolished, the share of the covered employee shall be
considered integrated in their wages

6.4. Integration

AZUCENA:

TIPS are handled similarly as service charges.

If a restaurant or similar establishment does not collect service charges, but

has a practice or policy of monitoring and pooling the tips given by customers, the
pooled tips should be accounted for and distributed in the same manner as the
service charges. In many restaurants, a waiter must drop in a tip box the tips he
received; otherwise, he commits “tip pocketing”, a serious offense of dishonesty
that may cost him his job.

7. Thirteenth (13th) Month Pay and other bonuses

Concept:

 Benefit – a 13th month pay for employees whose salary was “not more than P1,000”.

 Exemption, Sec. 2 – those already paying equivalent.

 Implementing Rules dated December 22, 1975 provided for who are covered vs. whose who
are not covered, issued by then Sec. Blas Ople.

* August 13, 1986, President Corazon C. Aquino issued Memorandum Order 28

* Drilon guideline, issued on November 16, 1987

 Basic Feature – removed of ceiling (P1,000)

When payment is made --

a) before opening of regular school year;

b) on or before December 24

Labor Law Reviewer 38

 7.1. Coverage

(1) “all rank and file employees”

(2) regardless of their designation or employment status; and
(3) irrespective of the method by which their wages are paid, provided they have worked
“for at least 1 month during a calendar year”, became covered employees. (1 mo. is qualifying
requirement. Include regular benefits only after one has qualified). 1 month here is not
necessarily 30 worked days. I should be calendar month, so that those who worked only for 20
days, for being daily paid employee, is entitled. Otherwise, the 1 year would be short of 48 days
(if 6 working days) on short of 96 days (if 5 working days a year).

Who are covered --

a) Commission paid employees?

1) Purely commission – NO
2) Guaranteed wage + commission – YES
[PACIWU (TUCP) vs. NLRC, 247 SCRA 256, 260 (1995)]

b) Gov't. employees on part time

Private employment – YES

c) Private school teachers – YES, regardless of months taught - Provided taught at least 1 month

7.2. Exclusion/Exemptions from coverage

 Managerial employees are not entitled to 13th month pay as per Memorandum Order No. 88, “13th
month pay has mandatory effect only on all rank and file employees” [Serafin Quebec, Jr. vs. NLRC,
et al., G.R. No. 123184, January 22, 1999

7.3. Nature of 13th month pay

 Notwithstanding therefore the absence of any contractual agreement, the payment of a

thirteenth-month pay being a statutory grant, compliance with the same is mandatory and is
deemed incorporated in the CBA. [Philippine Airlines, Inc. vs. NLRC and Airline Pilots
Association of the Philippines, etc., G.R. No. 114280, July 26, 1996]

 Food, etc., Not Substitute for 13th Month Pay

“Where an employer pays less than 1/12 of the employee's basic salary, the employer shall pay the
difference. [Framanlis Farms, Inc. vs. Minister of Labor, G.R. Nos. 72616-17, March 8, 1989]

 Proportionate 13th Month Pay

“Thus, if he worked only from January up to September, his proportionate 13 th month pay should be
equivalent to 1/12 of the total basic salary he earned during that period. [International School of Speech vs.
NLRC and M.C. Mamuyac, G.R. No. 112658, March 18, 1995]

 13th month pay is a Nonstrikeable Issue

“Difference on how to compute the 13th month pay does not justify a strike; in other words, it is a nonstrikeable
issue and a strike held on that ground is an illegal strike.

7.4. Commissions vis-à-vis 13th month pay

 “If the commissions may properly be considered part of the basic salary, they should be included
in computing the 13th month pay. If the commissions are not integral part of the basic salary,
then they should be excluded. What commissions are part of the salary and what commissions
are not, are illustrated respectively in the Philippine Duplicators' and the Boie-Takeda's types of

Labor Law Reviewer 39

 commission. That of Philippine Duplicators is wage or sales percentage type which should be
included in the 13th month pay computation, while that of Boie-Takeda is profit-sharing or bonus
type which may be excluded.”

- vs -

 the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed minimum
wage in case their commissions be less than the statutory minimum, and commission only in case
where the same is over and above the statutory minimum, must be equivalent to one-twelfth (1/12)
of their total earnings during the calendar year. [Phil. Agricultural Commercial and Industrial Workers
Union (PACIWU)-TUCP vs. NLRC and Vallacar Transit, Inc., G.R. No. 107994, August 14, 1995)]

7.5. CBA vis-à-vis 13th month pay

 But if the CBA did provide for a bonus in graduated amounts depending on the length of service of
the employee, the intention is clear that the bonus provided in the CBA was meant to be in addition
to the legal requirement. [Universal Corn Products vs. NLRC, G.R. No. 60337, August 21, 1987]

 Ruling: The bonus under the CBA is an obligation by the contract between the management and
workers while the 13th month pay is mandated by law.

 Under the circumstances, the 7-day bonus is in addition to the legal requirement.

 But as it is, the provision for the continued payment of a year-end bonus was incorporated in the
CBA without any qualification, from which the only logical conclusion that could be derived is that
PAL intended to give the members of ALPAP a year-end bonus in addition to its obligation to grant
a thirteenth-month pay.” [Philippine Airlines, Inc. (PAL) vs. NLRC & Airline Pilots Association of the
Philippines (ALPAP), etc., G.R. No. 114280, July 26, 1996]

Rules:
 Managerial employees are not entitled to 13th month pay as per Memorandum Order No. 88,
“13th month pay” has mandatory effect only on all rank and file employees”. [Serafin Quebec, Jr.
vs. NLRC, et al., G.R. No. 123184, January 22, 1999]

 Piece rate workers are entitled to 13th month pay [Mark Roche International and/or Edmundo
Dayot vs. NLRC, et al., G.R. No. 123825, August 31, 1999].

 Christmas gift is not christmas bonus, milling bonus, amelioration bonus, year-end productivity
bonus. It cannot therefore be considered as equivalent of 13 th month pay. [UST Faculty Union
vs. NLRC, 190 SCRA 215, Oct. 2, 1990]

 13th month pay and other similar benefits is an exclusion from the gross income,
provided it must not be more than P30,000.00. The Secrtary of Finance, however, may
increase the ceiling of P30,000.00, upon recommendation of the Commissioner, after
considering, among others, the effect or the same of the inflation rate at the end of the
taxable year. [Sec. 32(7), NIRC]

 An employee who has been separated from service 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 separation. [Basay vs. Hacienda Consolacion, G.R. No.
175532, April 19, 2010, Del Castillo, J.]

8. Women Workers

8.1. Discrimination (Art. 135, LC)

Art. 135. Discrimination prohibited. It shall be unlawful for any

employer to discriminate against any woman employee with respect to terms and
conditions of employment solely on account of her sex.
The following are acts of discrimination:
(a) Payment of a lesser compensation, including wage, salary or other
form of remuneration and fringe benefits, to a female employees as against a male
employee, for work of equal value; and

Labor Law Reviewer 40

 (b) Favoring a male employee over a female employee with respect to
promotion, training opportunities, study and scholarship grants solely on account
of their sexes.

Criminal liability for the willful commission of any unlawful act as provided
in this Article or any violation of the rules and regulations issued pursuant to
Section 2 hereof shall be penalized as provided in Articles 288 and 289 of this
Code: Provided, That the institution of any criminal action under this provision
shall not bar the aggrieved employee from filing an entirely separate and distinct
action for money claims, which may include claims for damages and other
affirmative reliefs. The actions hereby authorized shall proceed independently of
each other. (As amended by Republic Act No. 6725, May 12, 1989)

b. Stipulation against marriage (Art. 136, LC)

Art. 136. Stipulation against marriage. It shall be unlawful for an

employer to require as a condition of employment or continuation of employment
that a woman employee shall not get married, or to stipulate expressly or tacitly
that upon getting married, a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a
woman employee merely by reason of her marriage.

c. Prohibited Acts (Art. 137, LC)

Art. 137. Prohibited acts.

(a) It shall be unlawful for any employer:

(1) To deny any woman employee the benefits provided for in

this Chapter or to discharge any woman employed by him
for the purpose of preventing her from enjoying any of the
benefits provided under this Code.
(2) To discharge such woman on account of her pregnancy, or
while on leave or in confinement due to her pregnancy;
(3) To discharge or refuse the admission of such woman upon
returning to her work for fear that she may again be
pregnant.

d. Classification of certain women workers (Art. 138, LC)

e. Anti-Sexual Harassment Act (RA 7877)

1. Sexual harassment is an imposition of misplaced superiority which is enough to dampen

an employee's spirit in her capacity for advancement. It affects her sense of judgment, it changes her life.
If for this alone, private respondent should be adequately compensated [Phil. Aeolus, Infra]

The gravamen of the offense in sexual harassment is not the violation of the employee's sexually
but the abuse of power by the employer. Any employee, male or female, may rightfully cry “foul” provided
the claim is well substantiated. Strictly speaking, there is no time period within which he or she is
expected to complain through the proper channels. The time to do so may vary depending upon the
needs, circumstances, and more importantly, the emotional threshold of the employee [Philippine Aeolus
Automotive United Corp., et al. vs. NLRC, et al., G.R. No. 124617, April 28, 2000, Second Division,
Bellosillo, J.]

2. Persons who may be liable for sexual harassment

Any person who directs or induces another to commit any act of sexual harassment
as defined in the law, or who cooperates in the commission thereof by another without
which it would not have been committed, shall also be held liable under the law.

Labor Law Reviewer 41

 [Section 3, Republic Act No. 7877]

3. Sexual Harassment in a Work-Related or Employment Environment

committed when:

(1) the sexual favor is made as a condition in the hiring, or in the employment, re-employment or
continued employment of said individual or in granting said individual favorable compensation,
terms, conditions, promotions, or privileges; or the refusal to grant the sexual favor results in limiting,
segregating or classifying the employee which in any way would discriminate, deprive or diminish
employment opportunities or otherwise adversely affect said employee.

(2) the above acts would impair the employee's rights or privileges under existing labor laws; or

(3) the above acts would result in an intimidating, hostile, or offensive environment for the
employee. [Section 3 (a), Republic Act No. 7877]

9. Minor Workers (RA 7678, RA 9231)

Sec. 2. Employment of Children - Children below fifteen (15) years of

age shall not be employed except:
1) When a child works directly under the sole responsibility of his/her
parents or legal guardian and where only members of his/her family are employed:
Provided, however, That his/her employment neither endangers his/her life,
safety, health, and morals, nor impairs his/her normal development: Provided,
further, That the parent or legal guardian shall provide the said child with the
prescribed primary and/or secondary education; or
2) Where a child's employment or participation in public entertainment or
information through cinema, theater, radio, television or other forms of media is
essential: Provided, That the employment contract is concluded by the child's
parents or legal guardian, with the express agreement of the child concerned, if
possible, and the approval of the Department of Labor and Employment: Provided,
further, That the following requirements in all instances are strictly complied with:

(a) The employer shall ensure the protection, health, safety, morals and
normal development of the child;

(b) The employer shall institute measures to prevent the child's exploitation
or discrimination taking into account the system and level of remuneration, and
the duration and arrangement of working time; and

(c) The employer shall formulate and implement, subject to the approval
and supervision of competent authorities, a continuing program for training and
skills acquisition of the child.

In the above-exceptional cases where any such child may be employed, the
employer shall first secure, before engaging such child, a work permit from the
Department of Labor and Employment which shall ensure observance of the above
requirements.

For purposes of this Article, the term "child" shall apply to all persons
under eighteen (18) years of age."

9.1. Regulation of working hours of a child

Sec. 2-A. Hours of Work of a Working Child. - Under the exceptions

provided in Section 12 of this Act, as amended:
(1) A child below fifteen (15) years of age may be allowed to work for not
more than twenty (20) hours a week: Provided, That the work shall not be more
than four (4) hours at any given day;

Labor Law Reviewer 42

 (2) A child fifteen (15) years of age but below eighteen (18) shall not be
allowed to work for more than eight (8) hours a day, and in no case beyond forty
(40) hours a week;

(3) No child below fifteen (15) years of age shall be allowed to work between
eight o'clock in the evening and six o'clock in the morning of the following day and
no child fifteen (15) years of age but below eighteen (18) shall be allowed to work
between ten o'clock in the evening and six o'clock in the morning of the following
day."

9.2. Employment of the child in public entertainment

Sec. 2. Employment of Children - Children below fifteen (15) years of

age shall not be employed except:
xxx xxx xxx
2) Where a child's employment or participation in public entertainment or
information through cinema, theater, radio, television or other forms of media is
essential: Provided, That the employment contract is concluded by the child's
parents or legal guardian, with the express agreement of the child concerned, if
possible, and the approval of the Department of Labor and Employment: Provided,
further, That the following requirements in all instances are strictly complied with:

(a) The employer shall ensure the protection, health, safety, morals and
normal development of the child;

(b) The employer shall institute measures to prevent the child's exploitation
or discrimination taking into account the system and level of remuneration, and
the duration and arrangement of working time; and

(c) The employer shall formulate and implement, subject to the approval
and supervision of competent authorities, a continuing program for training and
skills acquisition of the child.

9.3. Prohibition of employing minors in certain undertakings and in certain

advertisements

Sec. 14. Prohibition on the Employment of Children in Certain

Advertisements. - No child shall be employed as a model in any advertisement
directly or indirectly promoting alcoholic beverages, intoxicating drinks, tobacco
and its byproducts, gambling or any form of violence or pornography.

10. Employment of Househelpers

Art. 141. Coverage. This Chapter shall apply to all persons rendering
services in households for compensation.

xxx xxx xxx

10.1. Definition

"Domestic or household service" shall mean service in the employer’s

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 employer’s household, including services of family drivers.

Labor Law Reviewer 43

 10.2. Benefits accorded househelpers

Art. 143. Minimum wage.

(a) Househelpers shall be paid the following minimum wage rates:

(b) Eight hundred pesos (P800.00) a month for househelpers in
Manila, Quezon, Pasay, and Caloocan cities and municipalities of Makati, San
Juan, Mandaluyong, Muntinlupa, Navotas, Malabon, Parañaque, Las Piñas, Pasig,
Marikina, Valenzuela, Taguig and Pateros in Metro Manila and in highly urbanized
cities;
(c) Six hundred fifty pesos (P650.00) a month for those in other
chartered cities and first-class municipalities; and
(d) Five hundred fifty pesos (P550.00) a month for those in other
municipalities.

Provided, That the employers shall review the employment contracts of

their househelpers every three (3) years with the end in view of improving the
terms and conditions thereof.
Provided, further, That those househelpers who are receiving at least One
thousand pesos (P1,000.00) shall be covered by the Social Security System (SSS)
and be entitled to all the benefits provided thereunder. (As amended by Republic
Act No. 7655, August 19, 1993)

10.3. Termination

Art. 150. Service of termination notice. If the duration of the

household service is not determined either in stipulation or by the nature of the
service, the employer or the househelper may give notice to put an end to the
relationship five (5) days before the intended termination of the service.

10.4. Reliefs for unjust termination

Art. 149. Indemnity for unjust termination of services. If the

period of household service is fixed, neither the employer nor the househelper may
terminate the contract before the expiration of the term, except for a just cause.
If the househelper is unjustly dismissed, he or she shall be paid the
compensation already earned plus that for fifteen (15) days by way of indemnity.
If the househelper leaves without justifiable reason, he or she shall forfeit
any unpaid salary due him or her not exceeding fifteen (15) days.

11. Employment of Homeworkers

Labor Code

ART. 153. Regulation of Industrial Homeworkers.—The

employment of industrial homeworkers and field personnel shall be regulated by
the Government through appropriate regulations issued by the Secretary of Labor
to ensure the general welfare and protection of homeworkers and field personnel
the industries employing them.

a. Definition

DO No. 5
Regulations on Employment of Homeworkers

SEC. 2. Definitions.—
(a) “Industrial Homework” is a system of production under which
work for an employer or contractor is carried out by a homeworker at his/her

Labor Law Reviewer 44

 home. Materials may or may not be furnished by the employer or contractor.

It differs from regular factory production principally in that, it is a

decentralized form of production where there is ordinarily very little supervision
or regulation of methods of work.

(b) “Industrial Homeworker” means a worker who is engaged in

industrial homework.

b. Rights and benefits accorded homeworkers

SEC. 6. Payment for homework.—Immediately upon receipt of

the finished goods or articles, the employer shall pay the homeworker or the
contractor or subcontractor, as the case may be, for the work performed less
corresponding homeworkers’ share of SSS, MEDICARE and ECC premium
contributions which shall be remitted by the contractor/subcontractor or employer
to the SSS with the employers’ share. However, where payment is made to a
contractor or subcontractor, the homeworker shall likewise be paid immediately
after the goods or articles have been collected from the workers.

c. Conditions for deduction from homeworker’s earnings

SEC. 8. Deductions.—No employer, contractor, or subcontractor

shall make any deduction from the homeworker’s earnings for the value of
materials which have been lost, destroyed, soiled or otherwise damaged unless the
following conditions are met:
(a) the homeworker concerned is clearly shown to be responsible for
the loss or damage;
(b) the homeworker is given reasonable opportunity to show cause why
deductions should not be made;
(c) the amount of such deduction is fair and reasonable and shall not
exceed the actual loss or damage; and
(d) the deduction is made at such rate that the amount deducted does
not exceed 20% of the homeworker’s earnings in a week.

12. Apprentices and Learners

RA 7796
TESDA

SEC. 4. Definition of Terms.—As used in this Act:

xxx xxx xxx
(j) “Apprenticeship” training within employment with compulsory
related theoretical instructions involving a contract between an apprentice and an
employer an established period assured by an apprenticeable occupation;
(k) “Apprentice” is a person undergoing for an approved
apprenticeable occupation during an established period assured by an
apprenticeship agreement;
(l) “Apprenticeship Agreement” is a contract wherein a
prospective employer binds himself to train the apprentice who in turn accepts the
terms of training for a recognized apprenticeable occupation emphasizing the

Labor Law Reviewer 45

 rights, duties and responsibilities of each party;
(m) “Apprenticeable Occupation” is an occupation officially
endorsed by a tripartite body and approved for apprenticeship by the Authority;
(n) “Learners” refer to persons hired as trainees in semi-skilled and
other industrial occupation which are non-apprenticeable. Learnership programs
must be approved by the Authority [TESDA].
(p) “Dual system/Training” refers to a delivery system of quality
technical and vocational education which requires training to be carried out
alternately in two venues: In school and in the production plant. In-school training
provides the trainee the theoretical foundation, basic training, guidance and
human formation, while in-plant training develops his skills and proficiency in
actual work conditions as it continue to inculcate personal discipline and work
values;

a) Apprentice A person undergoing an approved

apprenticeable occupation within a particular
period provided for in the apprenticeship
agreement. [Sec. 4(k), ibid.]

Apprenticeable Occupation an occupation officially endorsed by a tripartite

body and approved by the Authority. [Sec. 4(m),
ibid.]

Apprenticeship Agreement a contract wherein a prospective employer binds

himself to train the terms of training for a
recognized apprenticeable occupation
emphasizing the rights, duties and
responsibilities of each party. [Sec. 4(l), ibid.]

b) Trainee (w/ or w/o pay) a participant in a vocational, administrative, or

technical training program – established for the
purpose of acquiring and developing job-related
skills. [Sec. 4(i), ibid.]

c) Learner a person hired as a trainee in semi-skilled and

other industrial occupation which are non-
apprenticeable. [Sec. 4(n), ibid.] BUT,
learnership program must be approved by the
Authority. [ibid.]

CASES:

The Labor Code defines an apprentice as a worker who is covered by a written apprenticeship
agreement with an employer. One of the objectives of Title II (Training and Employment of Special Workers)
of the Labor Code is to establish apprenticeship standards for the protection of apprentices. [Century
Canning Corporation v. Court of Appeals, G.R. No. 152894, August 17, 2007]
HOWEVER,
In order to be an apprentice, the apprenticeship program the worker agreed to undergo should first
be approved by the DOLE (now transferred to TESDA) before he can be hired as an apprentice. Otherwise,
the person hired will be considered a regular employee. [Century Canning Corporation v. Court of
Appeals, supra]

BUT,
A prior approval obtained from DOLE (now transferred to TESDA) is a preliminary step towards its
final approval. Thus, pending final approval of the apprenticeship program upon a person’s assumption of
work does not instantaneously give rise to employer-employee relationship. [Century Canning Corporation
v. Court of Appeals, supra]

 Republic Act No. 7796, which created TESDA, has transferred the authority over
apprenticeship of the DOLE to the TESDA. RA 7796 emphasizes TESDA’s approval of
the apprenticeship program as a pre-requisite for the hiring of apprentices. [Century
Canning Corporation v. Court of Appeals, supra]

The requisite TESDA approval of the apprenticeship program prior to the hiring of apprentices was
further emphasized by the DOLE with the issuance of Department Order No. 68-04 on 18 August 2004 xxx,
which provides the guidelines in the implementation of the Apprenticeship and Employment Program of the
government, [and which] specifically states that no enterprise shall be allowed to hire apprentices unless its

Labor Law Reviewer 46

apprenticeship program is registered and approved by TESDA. [Century Canning Corporation v. Court
of Appeals, supra]

There is no valid apprenticeship if:

(1) the agreement submitted to TESDA was made long after the workers started
undergoing apprenticeship;
(2) the work performed by the apprentice was different from those allegedly approved
by TESDA;
(3) the workers undergoing apprenticeship are already skilled workers; or
(4) the workers were required to continue undergoing apprenticeship beyond six
months. [Atlanta Industries, Inc., et al. vs. Sebolino, et al., G.R. No. 187320,
January 26, 2011, Brion, J.]

 While the employer may argue that there is a need to train its employees through
apprenticeship, this phase should not be more than six months, and upon expiration of the
agreement, the retention of the employees for all intents and purposes, makes them regular
employees. A second apprenticeship for a second skill not mentioned in the apprenticeship
agreement is a violation of the Labor Code. [Atlanta Industries, supra]

12.1. Distinctions between Learnership and Apprenticeship

ART. 58. Definition of Terms. —As used in this Title:

(a) An “apprentice” is a worker who is covered by a written
apprenticeship agreement with an individual employer or any of the entities
recognized under this Chapter [Ch.1, Title II]

ART. 73. Learners defined.—Learners are persons hired as

trainees in semi-skilled and other industrial occupations which are non-
apprenticeable and which may be learned through practical training on the job in
a relatively short period of time which shall not exceed three (3) months.

ART. 74. When learners may be hired.—Learners may be

employed when no experienced worker, are available, the employment of learners
is necessary to prevent curtailment of employment opportunities, and the
employment does not create unfair competition in terms of labor costs or impair
or lower working standards.

APPRENTICESHIP LEARNERSHIP
Period of training not to exceed six months [Art. 61, Not to exceed three (3) months
LC] [Art. 75, LC]
Type of Work Highly technical work in an Industry Semi-skilled and other Industrial
[Art. 60, LC] work [Art. 73, LC]
Qualifications At least 14 years of age with When no experienced worker is
vocational aptitude and capacity, and available in the industry [Art. 74,
ability to comprehend and follow oral LC]
and written instructions [Art. 59, LC]
Salary Not less than 75% of applicable Not less than 75% of applicable
minimum wage, [Art. 61, LC] minimum wage, [Art. 75, LC]
EXCEPT if training is required by the EXCEPT for learners in piecework,
school or training program, or where salary shall be paid in
requisite for graduation or board according to the minimum wage
examination. [Art. 72, LC] imposed. [Art. 76, LC]

13. Handicapped Workers (RA 7277)

Sec. 4. Definition of Terms. — For purposes of this Act, these terms are
defined as follows:
(a) Disabled persons are those suffering from restriction or different
abilities, as a result of a mental, physical or sensory impairment, to perform an
activity in the manner or within the range considered normal for a human being;

Labor Law Reviewer 47

 13.1. Definition of “handicapped workers”

Sec. 4. Definition of Terms. — For purposes of this Act, these terms are
defined as follows:

(d) Handicap refers to a disadvantage for a given individual, resulting from

an impairment or a disability, that limits or prevents the function or activity, that
is considered normal given the age and sex of the individual;

13.2. Rights of disabled workers

Sec. 5. Equal Opportunity for Employment. — No disable 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.
Five percent (5%) of all casual emergency and contractual positions in the
Departments of Social Welfare and Development; Health; Education, Culture and
Sports; and other government agencies, offices or corporations engaged in social
development shall be reserved for disabled persons.

Sec. 6. Sheltered Employment — If suitable employment for disabled

persons cannot be found through open employment as provided in the
immediately preceding Section, the State shall endeavor to provide it by means of
sheltered employment. In the placement of disabled persons in sheltered
employment, it shall accord due regard to the individual qualities, vocational goals
and inclinations to ensure a good working atmosphere and efficient production.

Sec. 7. Apprenticeship. — Subject to the provisions of the Labor Code

as amended, disabled persons shall be eligible as apprentices or learners: Provided,
That their handicap is not as much as to effectively impede the performance of job
operations in the particular occupation for which they are hired; Provided, further,
That after the lapse of the period of apprenticeship, if found satisfactory in the job
performance, they shall be eligible for employment.

13.3. Prohibitions on discrimination against disable persons

Sec. 32. Discrimination on Employment. — No entity, whether

public or private, shall discriminate against a qualified disabled person by reason
of disability in regard to job application procedures, the hiring, promotion, or
discharge of employees, employee compensation, job training, and other terms,
conditions, and privileges of employment. The following constitute acts of
discrimination:

(a) Limiting, segregating or classifying a disabled job applicant in such a

manner that adversely affects his work opportunities;
(b) Using qualification standards, employment tests or other selection
criteria that screen out or tend to screen out a disabled person unless such
standards, tests or other selection criteria are shown to be job-related for the
position in question and are consistent with business necessity;
(c) Utilizing standards, criteria, or methods of administration that:
(1) have the effect of discrimination on the basis of disability; or
(2) perpetuate the discrimination of others who are subject to
common administrative control.
(d) Providing less compensation, such as salary, wage or other forms of
remuneration and fringe benefits, to a qualified disabled employee, by reason of
his disability, than the amount to which a non-disabled person performing the
same work is entitled;
(e) Favoring a non-disabled employee over a qualified disabled employee

Labor Law Reviewer 48

 with respect to promotion, training opportunities, study and scholarship grants,
solely on account of the latter's disability;
(f) Re-assigning or transferring a disabled employee to a job or position he
cannot perform by reason of his disability;
(g) Dismissing or terminating the services of a disabled employee by reason
of his disability unless the employer can prove that he impairs the satisfactory
performance of the work involved to the prejudice of the business entity: Provided,
however, That the employer first sought to provide reasonable accommodations
for disabled persons;
(h) Failing to select or administer in the most effective manner employment
tests which accurately reflect the skills, aptitude or other factor of the disabled
applicant or employee that such tests purports to measure, rather than the
impaired sensory, manual or speaking skills of such applicant or employee, if any;
and
(i) Excluding disabled persons from membership in labor unions or similar
organizations.

13.4. Incentives for employers

Sec. 8. Incentives for Employers. — (a) To encourage the active

participation of the private sector in promoting the welfare of disabled persons and
to ensure gainful employment for qualified disabled persons, adequate incentives
shall be provided to private entities which employ disabled persons.

NOTES;

 Where a disabled is qualified to do the work of an able-bodied, Art. 280 applies. In

such case, security of tenure is NOT subject to Art. 80(c) of the Labor Code where “(c) the
duration of employment period” should be agreed upon by the parties, NOR to Art. 80(b)
thereof where her salary rate “shall not be less than 75% of the applicable legal minimum
wage”. She will be treated as if she is able-bodied guaranteed by Arts. 280, 281, 282, 283,
286, 277(b), 279 of the Code. [Maritess Bernardo vs. NRLC, July 12, 1999, and cited
laws]

Labor Law Reviewer 49

D. TERMINATION OF EMPLOYMENT

1. Employer-Employee Relationship

EMPLOYER
Art. 212(e), LC Includes any persons acting in the interest of an employer,
directly or indirectly.
Excludes “labor organization” or any of its officers or agents
Except,
when acting as an employer.

Art. 97(b) Includes any person acting directly or indirectly in the interest
of an employer in relation to an employee. [cf. Art. 106, LC]
Includes the government and all its branches, subdivision and
instrumentalities, all GOCCs, as well as non-profit private
institutions, or organizations.

Since a corporation is an artificial person, it is the officer

(manager) who is presumed to be 'the employer as he acts
in the interest of the employer. In dismissal cases, the officer
is solidarily liable with the corporation. [NYK International
Knitwear Corporation vs. NLRC, 397 SCRA 607]

EMPLOYEE
Art. 212(f) Includes any person in the employ of an employer.
Includes any individual whose work has ceased as a result or
in connection with any current labor dispute or because of any
ULP if he has not obtained any other substantially equivalent
and regular employment.

Art. 97(c) Includes any individual employed by an employer.

 EER is basically a question of fact. [127 SCRA 454 (1984); Traders Royal
Bank vs. NLRC, 321 SCRA 467 (1999); Mandaue Galleon Trade, Inc. vs. Andales,
G.R. No. 159668, March 7, 2008; TAPE, Inc. vs. Servaña, G.R. No. 167648, January
28, 2008]

EXCEPT in,
(1) Article 106 - labor-only contracting [Filsystems vs. NLRC,
418 SCRA 404 (2003)];
(2) Article 138 - Massage/GRO;
(3) Article 155 - Homeworkers

1.1. Four-fold Test

Primary Tests: 4-Fold Rule

The elements to determine the existence of an employment relationship are:

(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power of dismissal; and
(4) the power to control the employee's conduct.
[Pedro Chaves vs. NLRC, G.R. No. 146530, January 17, 2005; Sally Miguel vs. JCT Group,
Inc., G.R. No. 157752, March 16, 2005; Philippine Global Communications, Inc. vs. de Vera,
G.R. No. 157214, June 7, 2005; Dealco Farms vs. NLRC, G.R. No. 153192, January 30, 2009;
Pacific Consultants International Asia vs. Schonfeld, supra]

Selection/Hiring

Labor Law Reviewer 50

  Hiring has not presented so much question.

Payment of Wages

 A person paid by result is NOT an employee. [Continental Marble

Corporation vs. NLRC, 161 SCRA 151, 158]

 A bus driver paid on commission basis is an employee. Commission is

part of wage as defined in Art. 97(f), LC. [R. Transport vs. Ejandra, May
20, 2004]

BUT,
 A salesman who is paid 3% commission of his gross sales is not an
employee, even if commission is part of wage under Art. 97(f). Commission
as a form of remuneration, may be availed of by both an employee or non-
employee. [Abante vs. La Madrid Bearing Parts Corp., May 28, 2004]

 Likewise, one who receives 4% commission from proceeds solicited out of

their principal-agency relationship is NOT an employee. [Sevilla vs. Court
of Appeals, 160 SCRA 171]

 An insurance agent who is paid on purely commission basis is NOT an

employee. [Grepalife vs. Judico, December 21, 1989]

BUT,
 An insurance agent who is paid with salary plus commission is an
employee. [Grepalife vs. Judico, December 21, 1989]

BUT,
 An insurance agent who does not have any license to work as an insurance
agent is NOT an employee. [Grepalife vs. NLRC, 150 SCRA 601, 608
(1987)]

STILL,
 absence of license should not be considered a legal obstacle as what applies
here is the Labor Code, and not the Insurance Code. [Grepalife vs. NLRC,
187 SCRA 694 (1990)]

Dismissal

 The allegation that a person was legally dismissed for abandonment admits
of a fact that said person was an employee. [R. Transport vs. Ejandra,
supra] Likewise, an allegation that the employee's position was found
redundant to justify his dismissal, notwithstanding the employer allegation
of a valid job contracting. [Fulache, supra]

 On the other hand, direct application for employment to the principal upon
the termination of the service contract between the alleged employer and
the principal, clearly shows that employment relationship exists between the
employees and the job contractor. [S.I.P. Food House, et al. vs. Batolina,
et al., G.R. No. 192473, October 11, 2010, Brion, J.]

Control

 Among the 4 principal tests used in the determination of an EER, the so-
called control test is commonly regarded as the most crucial and
determinative indicator. Such element is present where the person for
whom the services are performed reserves the right to control not only the
end achieved, but also the manner and means to be used in reaching
that end. [Abante vs. La Madrid, supra]

BUT,
 Not every form of control that the hiring party reserves to himself over the
conduct of the party hire in relation to the services rendered maybe
accorded the effect of establishing an EER.
 Company rules designed to promote the result create no EER

Labor Law Reviewer 51

  Only those rules that are intended to address both the result and the
means used to achieve it establish EER. [Insular Life Assurance vs.
NLRC, 179 SCRA 459, 464-65 (1989), citing Mafinco Trading Corp. vs.
Ople, 70 SCRA 139; Investment Planning Corp. vs. SSS, 21 SCRA 924;
Sara vs. NLRC, 166 SCRA 625, 630; Tongko vs. Manulife, 570 SCRA 503,
518, November 7, 2008, citing Insular Life Assurance Co., Ltd vs. NLRC,
431 SCRA 583, 604 (2004); Manila Electric Company vs. Benamira, G.R.
No. 145271, July 14, 2005; Arsenio T. Mendiola vs. Court of Appeals,
G.R. No. 159333, July 31, 2006]

 There are built-in elements of control specific to an insurance agency, which

do not amount to the elements of control that characterize an employment
relationship governed by the Labor Code. [Tongko vs. The Manufacturers
Life Insurance Co. (Phils.), Inc., et al., G.R. No. 167622, January 25,
2011, Brion, J.] The concept of control in an insurance agency must be
understood outside the context of an employer-employee relationship, since
the kind of control wielded is only as to the desired results and according to
Insurance Code norms. [Tongko vs. The Manufacturers Life Insurance
Co. (Phils.), Inc., G.R. No. 167622, June 29, 2010, Brion, J.]

NOTE:
 The Grepalife case wherein the agent brothers appointed as zone supervisor and
district manager were considered as “employees” of Grepalife, because of the presence of
the element of control in their contract of engagement, a fact which is not attendant in the
Tongko case. The Insular Life case is neither in point, since in the Tongko case no other
contract was presented apart from the “Agency Agreement” executed at the beginning of
engagement, and was never superseded by any other agreement even when the
complainant became an area manager of Manulife. [Tongko, June 2010, supra]

COMMENT: I likewise disagree with the ponencia in Tongko.

Work performed and required of the alleged insurance agent as concurrent

branch/unit manager, which is beyond the provisions of the “Agency Agreement” he
previously executed with the insurance company give rise to work that establishes
employer-employee relationship.

In Justice Velasco's dissenting opinion, he opined thus: “the mere fact that no
management contract (as in Insular Life case) was reduced into writing does not make
the duties and undertaking performed by a branch manager still within the sphere of
the 'Agency Agreement'.”

Secondary Tests:

 SSS registration as employee. [Flores vs. Funeraria Nuestro, 160 SCRA 568; Bautista
vs. Inciong, 158 SCRA 665; Corporal vs. NLRC, 341 SCRA 658 (2000)].

“A company physician who billed professional fees every month, who never complained “since
1981” that he was not covered by SSS, who was subjected to 10% withholding tax not as
employee but as “professional fee”, whose relationship is terminable at will by either parties, and
who was not subjected to control of company – is NOT an employee.” [Phil. Global
Communications, Inc. vs. Ricardo de Vera, G.R. No. 157214, June 7, 2005]

 Withholding Tax (W-2)

 Payment of ECC (State Insurance Fund) under Arts. 168, Labor Code, which is
“compulsory upon all employers and their employees not over sixty (60) years of age” [also,
Art. 183(a), L.C.; in fact 183 (c) of L.C. Requires the employer to pay the employee
contribution].

 Pag-Ibig Fund

 Employment Contract

 Under the Omnibus Rules Implementing the Labor Code, one of the
requirements for the issuance of an employment permit is an employment
contract. (Section 5, Rule XIV) [Pacific Consultants International Asia, Inc. vs.

Labor Law Reviewer 52

 Schonfeld, G.R. No. 166920, February 19, 2007]

Not Proof of EER

 ID cards, even with “employee's name”, if used on to obtain entrance. [Lopez vs.
Bodega City, 532 SCRA 56 (2007)]

 A solitary petty cash voucher.

 A public corporation's ownership of stocks in a private corporation does not create

employer-employee relationship between the public corporation and the employees of
the private corporation. [Hugo, et al. vs. Light Rail Transit Authority, G.R. No.
181866, March 18, 2010, Carpio Morales, J.]

CASES:

If the parties themselves practically agreed on every terms and conditions of the worker’s
services in the company, it negates the element of control in their relationship, and thereby
negating the existence of EER. [Philippine Global Communications, Inc. vs. de Vera, G.R.
No. 157214, June 7, 2005, Garcia, J.]

Article 157 of the Labor Code clearly and unequivocally allows employers in non-
hazardous establishments to engage ‘on retained basis’ the service of a dentist or physician.
Nowhere does the law provide that the physician or dentist so engaged thereby becomes a
regular employee. The very phrase that they may be engaged ‘on retained basis’, revolts
against the idea that this engagement gives rise to an employer-employee relationship.
[Philippine Global Communications, Inc. vs. de Vera, G.R. No. 157214, June 7, 2005,
Garcia, J.]

It is a standard stipulation in security service agreements that the client may request the
replacement of the guards to it. Service-oriented enterprises [Manila Electric Company vs.
Benamira, et al., G.R. No. 145271, July 14, 2005, Austria-Martinez, J.]

An employee occupies no office and generally is employed not by the action of the
directors or stockholders but by the managing officer of the corporation who also determines
the compensation to be paid to such employee. [Easycall Communications Phils., Inc. vs.
King, G.R. No. 145901, December 15, 2005, Corona, J.]

Where a person who works for another performs his job more or less at his own pleasure,
in the manner he sees fit, not subject to definite hours or conditions of work, and is
compensated according to the result of his efforts and not the amount thereof, no employer-
employee relationship exists. In our jurisdiction, the benchmark of economic reality in
analyzing possible employment relationships for purposes of applying the Labor Code ought
to be the economic dependence of the worker on his employer. [Wilhelmina S. Orozco vs.
The Honorable Court of Appeals, Philippine Daily Inquirer, and Leticia Jimenez
Magsanoc, G.R. No. 155207, August 13, 2008]

Under the boundary-hulog scheme incorporated in the Kasunduan, a dual juridical

relationship was created between petitioner and respondent: that of employer-employee and
vendor-vendee. The Kasunduan did not extinguish the employer-employee relationship of the
parties extant before the execution of said deed. [Villarama, Jr. vs. Court of Appeals, G.R.
No. 165881, April 19, 2006, Callejo, Sr., J.]

An owner-member of a cooperative can be its own employee. [Republic of the

Philippines, represented by Social Security System and Social Security Commission vs.
Asiapro Cooperative, G.R. No. 172107, November 23, 2007]

Concept of “Whole Economic Activity”

 The determination of the relationship between employer and employee

depends upon the circumstances of the whole economic activity, such as: (1)
the extent to which the services performed are an integral part of the
employer’s business; (2) the extent of the worker’s investment in equipment
and facilities; (3) the nature and degree of control exercised by the employer;
(4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent
enterprise; (6) the permanency and duration of the relationship between the

Labor Law Reviewer 53

 worker and the employer; and (7) the degree of dependency of the worker upon
the employer for his continued employment in that line of business. (Angelina
Francisco v. NLRC, G..R No. 170087, August 31, 2006)

 The presumption is that when the work is done is an integral part of

the regular business of the employer and when the worker, relative to the
employer, does not furnish an independent business or professional service,
such work is a regular employment of such employee and not an independent
contractor. The Court will peruse beyond any such agreement to examine the
facts that typify the parties’ actual relationship. (ABS-CBN Broadcasting
Corporation v. Nazareno, G.R. No. 164156, September 26, 2006)

Doctrine of Apparent Authority

 In general, a hospital is not liable for the negligence of an independent

contractor-physician. There is, however, an exception to this principle. The
hospital may be liable if the physician is the “ostensible” agent of the hospital.
This exception is also known as the “doctrine of apparent authority”. [Rogelio
P. Nograles v. Capitol Medical Center, G.R. No. 142625, December 19,
2006; Professional Services, Inc. vs. CA, G.R. Nos. 126297, 126467, and
127590, February 2, 2010, Corona, J.]

 The doctrine of apparent authority is a species of the doctrine of

estoppel. Estoppel rests on the rule: “Whenever a party has, by his own
declaration, act, or omission, intentionally and deliberately led another to
believe a particular thing true, and to act upon such belief, he cannot, in any
litigation arising out of such declaration, act or omission, be permitted to falsify
it.” [Rogelio P. Nograles v. Capitol Medical Center, supra]

1.2. Probationary Employment

Art. 281. Probationary employment. Probationary employment shall

not exceed six (6) months from the date the employee started working, unless it is
covered by an apprenticeship agreement stipulating a longer period. The services
of an employee who has been engaged on a probationary basis may be terminated
for a just cause or when he fails to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at the time of
his engagement. An employee who is allowed to work after a probationary period
shall be considered a regular employee.

Definition

PROBATIONARY Refers to one who, for a given period of time, is being observed
EMPLOYEE and evaluated to determine whether he is qualified for permanent
employment. [Woodridge School vs. Pe Benito, 570 SCRA 164,
October 29, 2008]

PROBATIONARY A phase in employment where the employer is afforded the

EMPLOYMENT opportunity to observe the fitness of a probationary employee while
at work, and to ascertain whether he will become an efficient and
productive employee. [Magis Young Achievers' Learning
Center vs. Manalo, G.R. No. 178835, February 13, 2009;
Philippine Daily Inquirer, Inc. vs. Magtibay, Jr., G.R. No.
164532, July 27, 2007]

Rules

Period of Probation

 While there is no statutory cap on the minimum term of probation, the law sets a
maximum “trial period” during which the employer may test the fitness and efficiency of

Labor Law Reviewer 54

 the employee. [Magis Young Achievers' vs. Manalo, supra]

 The computation of probationary period is made on a calendar date basis to be

reckoned from the date of appointment, NOT on a 30-days per month basis as
provided for in Art. 13, Civil Code. [Alcira vs. NLRC, 431 SCRA 508 (June 9, 2004)
citing CALS Poultry Supply vs. Roco, 385 SCRA 479, 488 (2002)]
BUT,
 An employer, under exceptional circumstances, can extend a probationary period of
employment, such as when the same is established by company policy, or when it is
required by the nature of the work, provided such extension was agreed upon by the
parties, and exercised before the expiration of the original period of probation. [San
Miguel Corporation vs. Caroline C. Del Rosario, 477 SCRA 604 (December 13,
2005), citing Buiser vs. Leogardo, 216 Phil. 144, 150 (1984)] In fact, length of time is
immaterial in determining the correlative rights of both parties in dealing with each other
during probationary period. [Philippine Daily Inquirer vs. Magtibay, Jr., supra]

 It is important that the contract of probationary employment specify the period or term
of its effectivity. The failure to stipulate its precise duration could lead to the inference
that the contract is binding for the full three-year probationary period. [Magis Young
Achievers' vs. Manalo, supra]

Nature of Probation

 The provision on employment on probationary status under the Labor Code is a

primary example of the fine balancing of interests between labor and management.
Employment on probationary status affords management the chance to fully scrutinize
the true worth of hired personnel before the full force of the security of tenure
guarantee comes into play. Management is given the opportunity to reject during the
probationary period hirees who fail to meet its own adopted but reasonable standards.
[Mercado vs. AMA Computer College, supra]

 The employee knows from the very start that he will be under close observation and
his performance of his assigned duties and functions would be under continuous
scrutiny by his superiors. [Philippine Daily Inquirer vs. Magtibay, Jr., supra]
Standards under which a probationary employee will qualify as a regular employee
shall be made known to him “at the time of engagement”. Otherwise, he shall be
deemed a regular employee. [Clarion Printing House, Inc. vs. NLRC, 461 SCRA
272, 298-95 (2005)]

 Evaluation is made before expiration of the probationary period. [Alcira vs. NLRC,
supra] In the absence of any evaluation, one cannot conclude that the employee
failed to meet the standards for probationary employment. [Dusit Hotel Nikko vs.
Gatbonton, 489 SCRA 671, 677 (2006)] And when he is allowed to work after a
probationary period, he shall be considered regular. [Art. 281, LC cited in Philippine
National Bank vs. Cabansag, 460 SCRA 514 (2005)]

 A probationary employee enjoys security of tenure while on probation. He can be

dismissed only for a just cause OR when he fails to qualify for regular employment.
[Athenna International Manpower Services, Inc. vs. Villanos, 456 SCRA 355
(2004)]
BUT,
 A probationary employee does not enjoy a permanent status. Probationary
employees enjoy temporary employment status. This means that they are terminable
anytime. The employer could well decide if he no longer needed the probationary's
service or his performance fell short of expectations. [Espina vs. CA, 519 SCRA 327,
350 (2007); Jennifer Fabello Pasamba vs. NLRC, G.R. No. 168421, June 8, 2007]

HOWEVER,
 In the case of PAL vs. Pascua, regularization is NOT a management prerogative. The
employer cannot just put its employees in part-time regularization instead of full-time
regularization, especially if only full-time regular employees are covered by CBA and
entitled to its benefits. [PAL vs. Pascua, G.R. No. 143258, August 15, 2003,
Quisumbing, J.]

 A regular employee cannot be subjected to a new probationary employment by a sister

company of the employer. [A' Prime Security Services, Inc. vs. NLRC, G.R. No.
107320, January 19, 2000]

Labor Law Reviewer 55

 1.3. Kinds of Employment

Art. 280. Regular and casual employment. The provisions of

written agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the
employee or where the work or service to be performed is seasonal in nature and
the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the

preceding paragraph: Provided, That any employee who has rendered at least one
year of service, whether such service is continuous or broken, shall be considered
a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists.

NOTES:

3 Categories of Employees under Art. 280

(1) regular employees or those whose work is necessary or desirable to the usual
business of the employer;

(2) 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

(3) casual employees or those who are neither regular nor project employees. [Rowell
Industrial Corporation vs. Court of Appeals, 517 SCRA 691, March 7, 2007, citing
Pangilinan vs. General Milling Corporation, G.R. No. 149329, 12 July 2004, 434 SCRA
159, 169; Pedy Caseres, et al. vs. Universal Robina Sugar Milling Corp., et al.,
G.R. No. 159343, September 28, 2007; Glory Philippines, Inc. vs.
Buenaventura B. Vergara, G.R. No. 176627, August 24, 2007]

1.3.1. Regular employment

Regular Employment

Regular employees may be classified into: (1) regular employees by nature of work;
and (2) regular employees by years of service. [Rowell Industrial Corporation vs. CA, supra]

By years of service:

A casual employee who has rendered at least one (1) year of service,
whether continuous or broken is a regular employee. The status of regular
employment under this category attaches to the casual worker on the day
immediately after the end of his first year of service as such casual employee. [Kay
Products, Inc. vs. Court of Appeals, 464 SCRA 544 (July 28, 2005)] He shall
be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such activity exists. [Kasapian
ng Malayang Manggagawa sa Coca-Cola (Kasamma-CCO)-CFW Local 245
vs. Court of Appeals, 487 SCRA 487, 508 (2006)]

 Article 281 of the Labor Code also considers a regular employee as one who is allowed
to work after a probationary period. [Pier 8 Arrastre & Stevedoring Services, Inc., et al.
versus Jeff B. Boclot, G.R. No. 173849, September 28, 2007]

 If the employee has been performing the job for at least a year, even if the performance
is not continuous and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity to the

Labor Law Reviewer 56

 business. [Thelma Dumpit-Murillo versus Court of Appeals, et al., G.R. No. 164652, June
8, 2007] And the signing of a “contract of temporary employment” at the time when the
employee already attained or is about to attain regular employment status under the CBA is an
indication of an employer's illegal intent. [Philex Mining Corp. vs. NLRC, 312 SCRA 119
(1999)]

Example:

(a) janitorial and messengerial services in an aquaculture

business, only after rendering 1 year of service. [SMC vs. Aballa, 461 SCRA
392 (June 28, 2005)]

 Length of service provides a fair yardstick for determining when an employee initially
hired on a temporary basis becomes a permanent one, entitled to security and benefits
of regularization. [William Uy Construction Corp. vs. Trinidad, G.R. No. 183250,
March 10, 2010, Abad, J.]

By nature of work

 Employee performs work that is usually necessary and desirable in the usual
business or trade of the employer. [Caparoso vs. CA, 516 SCRA 30 (February
15, 2007)] 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. [Pier 8 Arrastre & Stevedoring Services, Inc., et al. versus Jeff
B. Boclot, G.R. No. 173849, September 28, 2007]

 A continuing need for respondents' services is sufficient evidence of the necessity

and indispensability of their services to petitioner's business. [Glory Philippines,
Inc. vs. Vergara, G.R. No. 176627, August 24, 2007] Necessity or desirability is
tied up to employer's “usual business”. [Magsalin vs. NOWM, G.R. No. 148492,
May 9, 2003]

 What determines whether a certain employment is regular or otherwise is not the

will or word of the employer, but the business, taking into account all the
circumstances, and in some cases the length of time of its performance and its
continued existence. [ABS-CBN Broadcasting Corporation v. Nazareno, G.R.
No. 164156, September 26, 2006]

Examples:

(a) “production assistants” of ABS-CBN [ABS-CBN Broadcasting Corp.

vs. Nazareno, 503 SCRA 204, 229 (2006)]

(b) worker in the shrimp processing of the aquaculture business of SMC

[SMC vs. Aballa, supra]

(c) piece-rate workers when:

(1) their work as tailors was necessary or desirable in the usual

business of private respondent, which is engaged in the
tailoring business;
(2) they worked throughout the year, their employment not being
dependent on a specific project or season; and
(3) they have worked for more than one year. [Avelino Lambo, et
al. vs. NLRC, G.R. No. 111042, October 26, 1999]

 Issuance of a regular appointment is not necessary. [Efren Paguio vs. NRLC, G.R.
No. 147816, May 9, 2003]

 Article 280 should not be interpreted as a way as to deprive employers of the right and
prerogative to choose their own workers if they have sufficient basis to refuse an
employee a regular status. Management has rights which should also be protected.
[Rowell Industrial Corporation vs. Court of Appeals, 517 SCRA 691 (March 7,
2007)]

 Where a disabled is qualified to do the work of an able-bodied, Art. 280 applies. In

such case, security of tenure is NOT subject to Art. 80(c) of the Labor Code where “(c)
the duration of employment period” should be agreed upon by the parties, NOR to Art.

Labor Law Reviewer 57

 80(b) thereof where her salary rate “shall not be less than 75% of the applicable
legal minimum wage”. She will be treated as if she is able-bodied guaranteed by Arts.
280, 281, 282, 283, 286, 277(b), 279 of the Code. [Maritess Bernardo vs. NRLC,
July 12, 1999, and cited laws]

(a) Reasonable connection rule

 The primary standard, therefore, of determining a regular employment is the reasonable

connection between the particular activity performed by the employee in relation to the usual
business or trade of the employer. The test is whether the former is usually necessary or
desirable in the usual business or trade of the employer. The connection can be determined by
considering the nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety. Also, if the employee has been performing the job for at least
one year, even if the performance is not continuous or merely intermittent, the law deems the
repeated and continuing need for its performance as sufficient evidence of the necessity if not
indispensability of that activity to the business. Hence, the employment is also considered
regular, but only with respect to such activity and while such activity exists. [De Leon vs. NLRC,
G.R. No. 70705, August 21, 1989]

 Employee performs work that is usually necessary and desirable in the usual business
or trade of the employer. [Caparoso vs. CA, 516 SCRA 30 (February 15, 2007)] 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. [Pier 8 Arrastre
& Stevedoring Services, Inc., et al. versus Jeff B. Boclot, G.R. No. 173849,
September 28, 2007]

 A continuing need for respondents' services is sufficient evidence of the necessity and
indispensability of their services to petitioner's business. [Glory Philippines, Inc. vs.
Vergara, G.R. No. 176627, August 24, 2007] Necessity or desirability is tied up to
employer's “usual business”. [Magsalin vs. NOWM, G.R. No. 148492, May 9, 2003]

 What determines whether a certain employment is regular or otherwise is not the will
or word of the employer, but the business, taking into account all the circumstances,
and in some cases the length of time of its performance and its continued existence.
[ABS-CBN Broadcasting Corporation v. Nazareno, G.R. No. 164156, September
26, 2006]

1.3.2 Project employment

PROJECT  refers to a job/undertaking within the regular or usual

business of the employer, but which is distinct and separate
and identifiable from the undertakings of the company. Such
job/undertaking begins and ends at determined or
determinable times. [Integrated Contractors & Plumbing
Works, Inc. vs. NLRC, 466 SCRA 265 (August 9, 2005);
Dacuital, et al. vs. LM. Camus Engineering Corporation,
et al., G.R. No. 176748, September 1, 2010, Nachura, J.]

(a) Indicators of project employment

Principal Test for Project Employment

(a) Whether one is assigned to carry out a specific project or undertaking, the duration and
scope of which are specified at the time of engagement for a project.
(b) Duration of work to be performed must be defined in the employment contract, and
(c) Terms and conditions of employment must be made clear to the employee at the time
of hiring. [Abesco Construction and Development Corp. vs. Alberto Ramirez, April
10, 2006; Dacuital, et al., supra; Leyte Geothermal Power Progressive Employees
Union-ALU-TUCP vs. PNOC-EDC, G.R. No. 170351, March 30, 2011, Nachura, J.]

Points to consider in Project Employment

(1) Employees drawn from a “work pool” are not necessarily employees “by

Labor Law Reviewer 58

 reason of that fact alone” for “members of a work pool can either be project
or regular employees. [Abesco, supra, citing Raycor Aircontrol Systems,
Inc. vs. NLRC, 330 Phil. 306 (1996); ALU-TUCP vs. NLRC, 234 SCRA 678
(1994)]

(2) Manual services or those for special skills like those of carpenters or
masons, are, as a rule, unschooled. But this fact alone is not a valid
reason for bestowing special treatment on them or for invalidating a
contract of employment. [Villa vs. NLRC, 284 SCRA 105, (1998)]

(3) Employees who are hired for carrying out a separate job, distinct from the
other undertakings of the company, the scope and duration of which has
been determined and made known to the employees at the time of the
employment, are properly treated as project employees. [Hanjin Heavy
Industries and Construction Co., Ltd., Hak Kon Kim and/or Jhunie
Adahar versus Felicito Ibañez, et al., G.R. No. 170181, June 26, 2008]

(4) 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. [PNOC-
Energy Development Corporation versus NLRC, et al., G.R. No.
169353, April 13, 2007]

(5) A "day" as used herein, is understood to be that which must necessarily

come, although it may not be known exactly when. This means that where
the final completion of a project or phase thereof is in fact determinable
and the expected completion is made known to the employee. [Hanjin
Heavy Industries and Construction Co. Ltd., Hak Kon Kim and/or
Jhunie Adajar vs. Felicito Ibañez, et al., G.R. No. 170181, June 26,
2008]

(6) The absence of a written contract does not by itself grant regular status
to respondents, but is evidence that respondents were informed of the
duration and scope of their work and their status as project employees.
[Hanjin Heavy Industries and Construction Co., Ltd., vs. Felicito
Ibañez, et al., supra]

(7) When a project employee is dismissed, such dismissal must still comply
with the substantive and procedural requirements of due process.
Employers who hire project employees are mandated to state and prove
the actual basis for the employee's dismissal once its veracity is
challenged. [Gregorio S. Saberola vs. Ronald Suarez and Raymundo
Lirasan, Jr., G.R. No. 151227, July 14, 2008]

1.3.3. Seasonal employment

[2010 Bar Exam Question]

 In the case of Mercado, Sr. v. NLRC, the farm workers, after performing their
designated task in the farm or at the end of the season for which they were hired,
their employment relationship with the company is considered severed, and are
free to look for work from other farms, are considered as seasonal workers under
Art. 280 of the Labor Code. [HIND SUGAR CO., INC. vs. HON. COURT OF
INDUSTRIAL RELATIONS, ET AL., G.R. No. L-13364 July 26, 1960, 108 Phil
1026]

 And if the employer give preference to its former employees and laborers in hiring
workers every season, as in workers in a “work pool”, they should be considered
as “regular seasonal workers” insofar as the effect of temporary cessation of
work is concerned. These workers, however, “do not receive salaries and are free
to seek other employment during temporary breaks in the business. [Integrated
Contractors & Plumbing Works, Inc. vs. NLRC, August 9, 2005]
BUT,
 In a case where the employer failed to prove that its farm workers worked only for
the duration of one particular season, but have been serving the employer for
several years already, these farm workers should be regarded as regular — not
seasonal — employees. [Hacienda Fatima, et al. vs. National Federation of

Labor Law Reviewer 59

 Sugarcane Workers-Food and General Trade, G.R. No. 149440, January 28,
2003]

1.3.4. Casual employment

Art. 280. Regular and casual employment. The provisions of

written agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the
employee or where the work or service to be performed is seasonal in nature and
the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the

preceding paragraph: Provided, That any employee who has rendered at least one
year of service, whether such service is continuous or broken, shall be considered
a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists.

 casual employees or those who are neither regular nor project employees.
[Pangilinan vs. General Milling Corporation, G.R. No. 149329, 12 July 2004, 434
SCRA 159, 169]

1.3.5. Fixed term employment

Fixed-Term Employment

 Some workers perform tasks which are necessary or desirable “without being hired as
an employee” (such as an independent contractor) [Philippine Global
Communications, Inc. vs. De Vera, supra] In fact, Article 280 does not proscribe or
prohibit an employment contract with a fixed period, [Rowell Industrial Corp. vs.
Court of Appeals, 517 SCRA 691 (March 7, 2007)] provided it is not intended to
circumvent the employee's security of tenure. [Labayog vs. M.Y. San Biscuits, Inc.,
494 SCRA 486, 491 (2006); Caparoso vs. Court of Appeals, 516 SCRA 30 (2007)]

 It is an accepted maritime industry practice that the employment of seafarers is for a

fixed period only. Seafarers cannot stay for a long and indefinite period of time at sea
as limited access to shore activity during their employment has been shown to
adversely affect them. [Dante D. Dela Cruz vs. Maersk Filipinas Crewing, Inc., et
al., G.R. No. 172038, April 14, 2008]

(a) Requisites for validity

Guidelines for Fixed-Term Employment

(1) that the fixed period of employment was knowingly and voluntarily
agreed upon by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstances vitiating
his consent; [E. Ganzon, Inc. vs. NLRC, et al., G.R. No. 123769, December 22,
1999]

(2) it satisfactorily appears that the employer and employee dealt with each
other on more or less equal terms with no moral dominance whatever being
exercised by the former on the latter. [Rowell Industrial Corporation vs. Court
of Appeals, 517 SCRA 691 (March 7, 2007), citing PNOC-EDC vs. NLRC, G.R.
No. 97747, 31 March 1993, 220 SCRA 695, 699; Caparoso vs. Court of Appeals,
516 SCRA 30 (February 15, 2007)]

(3) Stipulations, clauses, terms, and conditions should not be contrary to law,

Labor Law Reviewer 60

 morals, good customs, public order, or public policy. [Alberto P. Oxales vs.
United Laboratories, Inc., G.R. No. 152991, July 21, 2008]

1.4. Job contracting and Labor-only contracting

NOTE:

The presumption is that a contractor is a labor-only contractor unless such contractor overcomes
the burden of proving that it has substantial capital, investment, tools and the like. [7k Corporation v.
NLRC, G.R. No. 148490, November 22, 2006; Coca-Cola Bottlers Phils., Inc. vs. Alan M. Agito, et al.,
G.R. No. 179546, February 13, 2009]

1.4.1. When is there “job contracting”?

Art. 106. Contractor or subcontractor. Whenever an employer enters

into a contract with another person for the performance of the former’s work, the
employees of the contractor and of the latter’s subcontractor, if any, shall be paid
in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations,

restrict or prohibit the contracting-out of labor to protect the rights of workers
established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as
well as differentiations within these types of contracting and determine who
among the parties involved shall be considered the employer for purposes of this
Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an

employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to
the workers in the same manner and extent as if the latter were directly employed
by him.

Permissible Job Contracting

 Permissible job contracting or subcontracting refers to an arrangement whereby a

principal agrees to put out or farm out with the contractor or subcontractor the
performance or completion of a specific job, work or service within a definite or
predetermined period regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the principal.
[Purefoods Corporation (now San Miguel Purefoods Company, Inc.) vs.
NLRC and Lolita Neri, G.R. No. 172241, November 20, 2008; Randy Almeda
vs. Asahi Glass Philippines, Inc., G.R. No. 177785, September 3, 2008]

 In legitimate job contracting, the law creates an employer-employee relationship

between the employer and the contractor’s employees only for a limited purpose,
i.e., to ensure that the employees are paid their wages. The employer becomes
jointly and severally liable with the job contractor only for the payment of the
employees’ wages whenever the contractor fails to pay the same. [Coca-Cola
Bottlers Phils., Inc. vs. Alan M. Agito, et al., G.R. No. 179546, February 13,
2009; 7k Corporation vs. NLRC, G.R. No. 148490, November 22, 2006]

 “Substantial capital or investment” refers to capital stocks and subscribed

capitalization in the case of corporations, tools, equipments [sic], implements,
machineries and work premises, actually and directly used by the contractor or

Labor Law Reviewer 61

 subcontractor in the performance or completion of the job, work or service
contracted out. [Manaya v. Alabang Country Club, Inc., G.R. No. 168988, June
19, 2007]

1.4.2. When is there “labor-only contracting”?

Art. 106. Contractor or subcontractor. Whenever an employer

enters into a contract with another person for the performance of the former’s
work, the employees of the contractor and of the latter’s subcontractor, if any,
shall be paid in accordance with the provisions of this Code.
xxx xxx xxx

There is "labor-only" contracting where the person supplying workers to

an employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were directly
employed by him.

 Labor-only contracting is an arrangement wherein the contractor merely acts as

an agent in recruiting and supplying the principal employer with workers for the
purpose of circumventing labor law provisions setting down the rights of
employees. It is not condoned by law. [Coca-Cola Bottlers Phils., Inc. vs. Alan
M. Agito, et al., G.R. No. 179546, February 13, 2009; Almeda vs. Asahi Glass,
supra] Where labor-only contracting exists, the Labor Code itself
establishes an employer-employee relationship between the employer and the
employees of the 'labor-only' contractor in order to prevent a circumvention of labor
laws. Here, the contractor is considered merely an agent of the principal employer.
[Aliviado, et al. vs. Procter & Gamble Phils., Inc., G.R. No. 160506, March 9,
2010, Del Castillo, J.]

1.4.3. Conditions that must concur in

legitimate job contracting

 The existence of an independent and permissible contractor relationship is

generally established by considering the following determinants: whether the
contractor is carrying on an independent business; the nature and extent of the
work; the skill required; the term and duration of the relationship; the right to assign
the performance of a specified piece of work; the control and supervision
of the work to another; the employer’s power with respect to the hiring, firing and
payment of the contractor’s workers; the control of the premises; the duty to supply
the premises, tools, appliances, materials and labor; and the mode,
manner and terms of payment. [Jeromie D. Escasinas and Evan Rigor Singco
vs. Shangri-La’s Mactan Island Resort, G.R. No. 172199, February 27, 2009;
Purefoods Corporation (now San Miguel Purefoods Company, Inc.) vs. NLRC
and Lolita Neri, G.R. No. 172241, November 20, 2008; Lakas sa Industriya ng
Kapatirang Haligi ng Alyansang-Pinagbuklod ng Manggagawang Promo sa
Burlingame vs. Burlingame Corporation, G.R. No. 162833, June 15, 2007]

1.4.4. Effects of finding that there is labor-only contracting

 Labor-only contracting would give rise to: (1) the creation of an employer-employee
relationship between the principal and the employees of the contractor or sub-
contractor; and (2) the solidary liability of the principal and the contractor to the
employees in the event of any violation of the Labor Code. [Coca-Cola Bottlers
Phils., Inc. vs. Alan M. Agito, et al., supra]

2. Termination of Employment

Labor Law Reviewer 62

 DISMISSAL connotes permanent severance or complete separation of the
worker from the service on the initiative of the employer
regardless of the reasons therefor. [Industrial & Transport
Equipment, Inc. vs. Tomas Tugade, et al., G.R. No. 158539,
January 15, 2009]

SUSPENSION is a disciplinary measure that is imposed for violation by the

employee of a reasonable rule of conduct prescribed by the
employer and made known to the employee. [Anonas
Construction and Industrial Supply Corporation vs. NLRC,
G.R. No. 164052, October 17, 2008]

2.1. Substantive Due Process

Labor Code

Art. 279. Security of tenure. In cases of regular employment, the

employer shall not terminate the services of an employee except for a just cause or
when authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement. (As amended by
Section 34, Republic Act No. 6715, March 21, 1989)

NOTES:

 Security of tenure is a paramount right of every employee that is held sacred by the
constitutional guarantees as an act of social justice. The right of every employee to security of
tenure is all the more secured by the Labor Code by providing that the employer shall not terminate
the services of an employee, except for a just cause or when authorized by law. [Julito Sagales vs.
Rustan’s Commercial Corporation, G.R. No. 166554, November 27, 2008] However, in the case
of private school teachers, their entitlement to security of tenure is governed by the Manual of
Regulations for Private Schools and not the Labor Code. [Aklan College Incorporated vs. Rodolfo
P. Guarino, G.R. No. 152949, August 14, 2007]

Transfer of Ownership; Simulated sale

 In transfer of ownership, the sale or disposition must be motivated by good faith as

a condition for exemption from liability. A change of ownership done in bad faith,
or used to defeat the rights of labor, apart from making the successor-employer
liable for the transgressions of its predecessor-employer, the displaced employees
shall be deemed absorbed. [Peñafrancia Tours and Travel Transport, Inc. vs.
Joselito P. Sarmiento, et al., G.R. No. 178397, October 20, 2010, Nachura, J.]

 More, if there is a charge of simulated sale, transfer of ownership shall be deemed

void, as if no sale transpired, and no closure of business that will operate as cause
for the dismissal of the displaced employees. [Peñafrancia Tours and Travel
Transport, Inc. vs. Joselito P. Sarmiento, et al., G.R. No. 178397, October 20,
2010, Nachura, J.]

2.1.1. Just Causes

Labor Code

Art. 282. Termination by employer. An employer may terminate an

employment for any of the following causes:

a. Serious misconduct or willful disobedience by the employee of the

lawful orders of his employer or representative in connection with his work;
b. Gross and habitual neglect by the employee of his duties;
c. Fraud or willful breach by the employee of the trust reposed in him

Labor Law Reviewer 63

 by his employer or duly authorized representative;
d. Commission of a crime or offense by the employee against the
person of his employer or any immediate member of his family or his duly
authorized representatives; and
e. Other causes analogous to the foregoing.

(a) Serious misconduct or willful disobedience

Art. 282. Termination by employer. An employer may

terminate an employment for any of the following causes:

a. Serious misconduct or willful disobedience by the employee of the

lawful orders of his employer or representative in connection with his work;
xxx xxx xxx

SERIOUS An improper and wrong conduct;

MISCONDUCT
A transgression of some established and definite rule
of action, a forbidden act, a dereliction of duty, willful
in character, and implies wrongful intent and not mere
error in judgment.

For misconduct to be considered serious, it must be

of such grave and aggravated character and not
merely trivial or unimportant. [Austria vs. NLRC,
August 16, 1999; Premiere Development Bank vs.
Mantal, 485 SCRA 234, 239-40 (2006); Echeveria
vs. Venutek Medika, Inc., 516 SCRA 72 (2007); The
Peninsula Manila vs. Alipio, infra]

DISHONESTY A form of serious misconduct and fraud, or breach of

trust. [Lansangan vs. Amkor Technology
Philippines, Inc., G.R. No. 177026, January 30,
2009]

WILLFUL
DISOBEDIENCE

i. Requisites

Elements of Serious Misconduct

For serious misconduct be a just cause for dismissal:

(1) it must be serious;

(2) it must relate to the performance of the employee’s duties; and

(3) it must show that the employee has become unfit to continue working for the
employer. [Philippine Aeolus Automotive United Corp. vs. NLRC, G.R. No.
124617, April 28, 2000; Premiere Development vs. Mantal, supra; Solid
Development Corporation Workers Association vs. Solid Development
Corporation, G.R. No. 165995, August 14, 2007]

 Insubordination, as a just cause for the dismissal of an employee, requires the

concurrence of at least two requisites: (1) the employee's assailed conduct must
have been willful, that is, characterized by a wrongful and perverse attitude; and
92) the order violated must have been reasonable, lawful, made known to the
employee, and must pertain to the duties which he had been engaged to discharge.
[Grandteq Industrial Steel Products, Inc., et al. vs. Annaliza M. Estrella, G.R.
No. 192416, March 23, 2011, Nachura, J.]

Elements of Willful Disobedience

Labor Law Reviewer 64

 Disobedience to be a just cause for dismissal envisages the concurrence of at least two
requisites:
(a) the employee’s assailed conduct must have been willful or intentional, the willfulness
being characterized by a wrongful and perverse attitude; and

(b) the order violated must have been reasonable and lawful, made known to the employee,
and must pertain to the duties which he has been engaged to discharge. [Westin Philippine Plaza
Hotel vs. NLRC, G.R. No. 121621, May 3, 1999, Quisumbing, J.; Cosmos Bottling Corporation
vs. Nagrama, Jr., G.R. No. 164403, March 4, 2008]

(b) Gross and habitual neglect of duties

Art. 282. Termination by employer. An employer may

terminate an employment for any of the following causes:
xxx xxx xxx
(b) Gross and habitual neglect by the employee of his duties;
xxx xxx xxx

ABANDONMENT the deliberate and unjustified refusal of an employee to resume

his employment, without any intention of returning. It is a form
of neglect of duty. [Sugue vs. Triumph International (Phils.),
Inc., infra]

GROSS The want or absence of even slight care or diligence amounting

NEGLIGENCE to a reckless disregard of the safety of a person or property. In
evinces a thoughtless disregard of consequences without
exerting any effort to avoid them. [Metro Transit Organization,
Inc. vs. NLRC, October 17, 1996; Philippine Aeolus United
Corporation vs. NLRC, supra]

HABITUAL The repeated failure to perform one’s duties for a period of time.
NEGLECT [Chua vs. NLRC, G.R. No. 146780, March 11, 2005 citing JEB
& Associates vs. NLRC, 254 SCRA 457 (1996)]

TARDINESS/ Habitual tardiness and absenteeism are forms of neglect of

ABSENTEEISM duty. Lack of initiative, diligence, and discipline to come to work
on time everyday exhibit the employee’s deportment towards
work, which is inimical to the general productivity and business
of the employer. [R.B. Michael Press vs. Galit, G.R. No.
153510, February 13, 2008]

i. Requisites
Habitual Neglect

 Under Article 282 of the Labor Code, gross and habitual neglect by the employee of
his duties is a sufficient and legal ground to terminate employment. Gross negligence
connotes want of care in the performance of one's duties. Habitual neglect implies repeated
failure to perform one's duties for a period of time, depending upon the circumstances.
[Carlos V. Valenzuela vs. Caltex Philippines, Inc., G.R. Nos. 169965-66, December 15,
2010, Villarama, Jr., J.] In dismissing an employee for gross and habitual neglect of duties,
the employer must be able to identify what specific duties the employee violated and whether
the violations were gross and habitual. [Benjamin vs. Amellar Corporation, G.R. No.
183383, April 5, 2010, Carpio Morales, J.]

 An allegation of failure of an employee to conduct monthly physical inventory of the

outlet's merchandise is not gross neglect, if inventory preparation does not fall within the
employee's tasks who is merely tasked to assist the clerk. [Kulas Ideas & Creations, et al.
vs. Alcoseba and Arao-Arao, G.R. No. 180123, February 18, 2010, Carpio Morales, J.]

Absenteeism

Labor Law Reviewer 65

  Even assuming that respondent's absenteeism constitutes willful disobedience, such
offense does not warrant respondent's dismissal. Not every case of insubordination or willful
disobedience by an employee reasonably deserves the penalty of dismissal. There must be
a reasonable proportionality between the offense and the penalty. [Philippine Long
Distance Telephone Company vs. Joey B. Teves, G.R. No. 143511, November 15, 2010,
Peralta, J.]

 While management has the prerogative to discipline its employees and to impose
appropriate penalties on erring workers, pursuant to company rules and regulations, however,
such management prerogatives must be exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating or circumventing the rights of the
employees under special laws and valid agreements. Nevertheless, it may terminate an
employee only for a just cause, his prerogative to dismiss must be exercised without abuse
of discretion. Its implementation should be tempered with compassion and understanding.
[Philippine Long Distance Telephone Company vs. Joey B. Teves, G.R. No. 143511,
November 15, 2010, Peralta, J.]

(c) Fraud or willful breach of trust (loss of trust and

confidence)

Art. 282. Termination by employer. An employer may

terminate an employment for any of the following causes:
xxx xxx xxx
(c) Fraud or willful breach by the employee of the trust reposed in him
by his employer or duly authorized representative;
xxx xxx xxx

LOSS OF When the employer has reasonable ground to believe the

CONFIDENCE employee is responsible for the misconduct, and the nature of his
participation renders him unworthy of the trust and confidence
demanded by his position. [Cañete, Jr. vs. NLRC, G.R. No.
130425, September 30, 1999; Tolentino vs. PLDT, G.R. No.
160404, June 8, 2005]
Applies only to an employee who holds a position of responsibility
or trust and confidence, or a person invested with confidence on
delicate matters. [Sanchez vs. NLRC, G.R. No. 124348, August
1999; Cruz vs. Coca-Cola Bottlers Phils., Inc., G.R. No

BREACH OF A willful violation of the trust.

TRUST A breach is willful if it is done intentionally, knowingly, and
purposely without justifiable excuse, as distinguished from an act
done carelessly, thoughtlessly, heedlessly, or inadvertently.
[Pastor Dionisio Austria vs. NLRC, G.R. No. 124382, August
16, 1999; PNCC vs. Mandagan, G.R. No. 160965, July 21, 2008]

BUT,
Loss of trust and confidence can be based on gross
negligence [School of the Holy Spirit of Quezon City vs.
Taguiam, G.R. No. 165565, July 14, 2008]

Rationale

 The basic premise for dismissal on this ground is that the employee concerned holds
a position of trust. [Cañeda vs. PAL, G.R. No. 152232, February 26, 2007] An employer
cannot be compelled to continue the employment of an employee who is guilty of acts inimical
to the interest of the employer and which justifies the loss of confidence in the employee.
[Philippine Military Veterans Security and Investigation Agency vs. CA, G.R. No.
139159, January 31, 2006; Divine Word College of San Jose vs. Aurelio, G.R. No.
163706, March 29, 2007]

 Loss of trust and confidence is premised on the fact that an employee concerned
holds a position where greater trust is placed by management and from whom greater fidelity
to duty is correspondingly expected. This includes managerial personnel entrusted with
confidence on delicate matters, such as custody, handling or care and protection of the
employer's property. The betrayal of this trust is the essence of the offense for which an

Labor Law Reviewer 66

 employee is penalized. [Lima Land, Inc. vs. Cuevas, G.R. No. 169523, June 16, 2010,
Peralta, J.]

 In the absence of any malicious intent or fraud, an employee's negligence or

carelessness is not a justifiable ground for the employer's loss of trust and confidence, for the
breach conceived of here should be founded on a dishonest, deceitful or fraudulent act. [Lima
Land, Inc. vs. Cuevas, supra]

i. Requisites

Guidelines for Dismissal

(1) There must be an actual breach; [Salas vs. Aboitiz One, Inc, G.R. NO.
178236, June 27, 2008]

(2) The loss of confidence must not be simulated;

(3) It should not be used as a subterfuge for causes which are illegal,
improper, or unjustified;

(4) It may not be arbitrarily asserted in the face of overwhelming evidence to

the contrary

(5) It must be genuine, not a mere afterthought to justify earlier action taken
in bad faith; [Tolentino vs. PLDT, G.R. No. 160404, June 8, 2005; Weh
Yueh Restaurant vs. Jayona, G.R. No. 159448, December 16, 2005;
Perez vs. PT&T, G.R. No. 152048, April 7, 2009]

(6) The employee involved holds a position of trust and confidence [Molina
vs. Pacific Plans, Inc., G.R. No. 165476, March 10, 2006, 484 SCRA
498]

(7) proof beyond reasonable doubt need not be established to prove loss of
trust and confidence, as reasonable ground is enough. [P.J. Lhuillier, Inc.
vs. NLRC, G.R. No. 158758, April 29, 2005; Norsk Hydro (Phils.), Inc.
vs. Rosales, Jr., G.R. No. 162871, January 31, 2007]

(8) must be grounded on facts clearly and convincingly established by the

employer proving the facts and incidents upon which the loss of confidence
was based [Philippine Aeolus Automotive United Corporation vs.
NLRC, 311 SCRA 237, 247 (2000)] mere uncorroborated assertions and
accusations will not be sufficient; [Uniwide Sales Warehouse
Club vs. NLRC, G.R. No. 154503, February 29, 2008; Metro Eye
Security, Inc. vs. Salsona, G.R. No. 167637, September 28, 2007] and

(9) breach of trust and confidence as ground for dismissal must be related to
the performance of the duties of the employee such as would show
unfitness to continue working for the employer. [Blue Dairy Corp. vs.
NLRC, G.R. No. 129843, September 14, 1999; Rentokil (Initial)
Philippines vs. Sanchez, G.R. No. 176219, December 23, 2008]

(d) Abandonment of employment; Elements that

must concur

Elements of Abandonment

1. failure to report for work or absence without valid or justifiable reason;

2. clear intention to sever the employer-employee relationship [Sugue vs. Triumph

International (Phils.), Inc., G.R. No. 164804, January 30, 2009; Fe La Rosa vs.
Ambassador Hotel, G.R. No. 177059, March 13, 2009]

3. employer should have reported such fact to the nearest Regional Office of DOLE in
accordance with Rule XXIII, Section 7, Book V, DO 9-97 [R. Transport Corporation vs.
Ejandra, G.R. No. 155264, May 6, 2005] The operative act that will ultimately put an end
to this relationship is the dismissal of the employee after complying with the procedure

Labor Law Reviewer 67

 prescribed by law. [Kams International, Inc. vs. NLRC, G.R. No. 128806, September
28, 1999; Floren Hotel vs. NLRC, G.R. o. 155264, May 6, 2005]

 Presumption: A complaint for illegal dismissal negates allegation of

abandonment. [Big AA Manufacturer vs. Antonio, G.R. No. 160854, March 3,
2006, 484 SCRA 33] Mere failure to report for work is not enough to amount to
abandonment of work. Abandonment is the deliberate and unjustified refusal of
an employee to resume his employment. [Exodus Intentional Construction
Corporation, et al. vs. Guillermo Biscocho, et al., G.R. No. 166109, February
23, 2011, Del Castillo, J.]

BUT,
 If employer alleges that employee was never even dismissed, the presumption
does not hold. [Abad vs. Roselle Cinema, 485 SCRA 262, 272 (2006)]

BECAUSE,
 Sometimes the complaint for illegal dismissal is only made as leverage to gain
monetary benefits. [Arc-Men Food Industries Corp. vs. NLRC, May 7, 1997]

THUS,
 The rule is that an employee must positively prove first that he was indeed
dismissed before the burden of the employer under Article 277(b) applies.

(e) Termination of employment pursuant to a

Union Security Clause

 Another cause for termination is dismissal from employment due to the enforcement of the
union security clause in the CBA. [Alabang Country Club, Inc., vs. NLRC, G.R. No.
170287, February 14, 2008]

 Termination of employment by virtue of a union security clause embodied in a CBA

is recognized and accepted in our jurisdiction. This practice strengthens the union and
prevents disunity in the bargaining unit within the duration of the CBA. By preventing
member disaffiliation with the threat of expulsion from the union and the consequent
termination of employment, the authorized bargaining representative gains more numbers
and strengthens its position as against other unions which may want to claim majority
representation. [Alabang Country Club, Inc., vs. NLRC, G.R. No. 170287, February 14,
2008] Dismissal of an employee by the company pursuant to a labor union's demand in
accordance with a union security agreement does not constitute unfair labor practice.
[NUWHRAIN-Manila Pavilion Hotel Chapter vs. NLRC, et al., G.R. No. 179402,
September 30, 2008]


 The rights 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
own union are not wiped away by a union security clause or a union shop clause in a
collective bargaining agreement. 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. [General Milling Corporation vs. Casio, et al. and Pino, et al.,
G.R. No. 149552, March 10, 2010, Leonardo-de Castro, J.]

(f) Totality of infractions doctrine

 The totality of infractions or the number of violations committed during the period
of employment shall be considered in determining the penalty to be imposed upon an erring
employee. The offenses committed by petitioner should not be taken singly and separately.
Fitness for continued employment cannot be compartmentalized into tight little cubicles of
aspects of character, conduct and ability separate and independent of each other. While
it may be true that petitioner was penalized for his previous infractions, this does not and
should not mean that his employment record would be wiped clean of his infractions. After
all, the record of an employee is a relevant consideration in determining the penalty that
should be meted out since an employee's past misconduct and present behavior must be
taken together in determining the proper imposable penalty. Despite the sanctions

Labor Law Reviewer 68

 imposed upon petitioner, he continued to commit misconduct and exhibit undesirable
behavior on board. [Brendo D. Merin vs. National Labor Relations Commission, et al.,
G.R. No. 171790, October 17, 2008]

2.1.2. Authorized Causes

Art. 283. Closure of establishment and reduction of personnel.

The employer may also terminate the employment of any employee due to the
installation of labor-saving devices, redundancy, retrenchment to prevent losses
or the closing or cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the provisions of this Title,
by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor-saving devices or redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent to at least
his one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment or undertaking 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. A fraction of at least six (6) months shall be
considered one (1) whole year.

Definitions

INSTALLATION OF Streamlining of personnel structure through the installation

LABOR-SAVING of machineries and equipment, or introduction of new
DEVICE methods for purposes of achieving maximum profitability of
employer’s business. [Agustilo vs. CA, G.R. No. 142875,
September 7, 2001]

REDUNDANCY Exists where the services of an employee are in excess of

what is reasonably demanded by the actual requirements of
the enterprise.

A position is redundant where it is superfluous, and

superfluity of a position/s may be the outcome of a number
of facts, such as over hiring of employees, decreased
volume of business, or dropping of a particular product line
or service activity previously manufactured or undertaken by
the enterprise. [Coats Manila Bay, Inc. vs. Ortega, G.R.
No. 172628, February 13, 2009]

RETRENCHMENT One of the ways of terminating employment to preserve the

viability of the business. [Eastridge Golf Club, Inc. vs.
Eastridge Golf Club, Inc., Labor Union-SUPER, G.R. No.
166760, August 22, 2008]

Termination of employment initiated by the employer through

no fault of the employees, and without prejudice to the latter,
resorted to by management during periods of business
recession, industrial depression, or seasonal fluctuations or
during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production
program or the introduction of new methods or more efficient
machinery, or of automation. [Mobilia Products, Inc. vs.
Demecillo, G.R. No. 170669, February 4, 2009; AMA
Computer College vs. Garcia, infra]

It is a means of last resort, and justified only when all other

less drastic means have been tried and found insufficient.
[FASAP vs. PAL, infra]

CLOSURE Complete or partial cessation of the operations and/or

shutdown of the establishment of the employer. It is carried
out to either stave off the financial ruin or promote the

Labor Law Reviewer 69

 business interest of the employer. [Eastridge Golf Club,
Inc. vs. Eastridge Golf Club, Inc., Labor Union-SUPER,
G.R. No. 166760, August 22, 2008]

(a) Redundancy, Retrenchment and Closure

 Redundancy exists where the services of an employee are in excess of what is

reasonably demanded by the actual requirements of the enterprise. A position is
redundant if it is superfluous. [Coca-Cola Bottlers Philippines, Inc. vs. Angel U.
Del Villar, G.R. No. 163091, October 6, 2010, Leonardo-de Castro, J.]

Two (2) Types of Closure:

(1) Due to business losses or reverses; and NOT due to losses [JAT General Services
vs. NLRC, G.R. No. 148340, January 26, 2004, Quisumbing, J.]

(2) Closure or cessation of business operations is allowed even if the business is not
undergoing economic losses. Just as no law forces anyone to go into business, no
law can compel anybody to continue in it. It would be stretching the intent and spirit
of the law if we were to unjustly interfere with the management’s prerogative to close
or cease its business operations, just because said business operations are not
suffering any loss or simply to provide the worker’s continued employment. [Manatad
vs. PT&T, supra; Espina vs. CA, G.R. No. 164582, March 28, 2007]

i. Procedural steps required

Art. 283. Closure of establishment and reduction of personnel.

The employer may also terminate the employment of any employee due to the
installation of labor-saving devices, redundancy, retrenchment to prevent losses or
the closing or cessation of operation of the establishment or undertaking
xxx, by serving a written notice on the workers and the Ministry of
Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month
pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment
or undertaking 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. A
fraction of at least six (6) months shall be considered one (1) whole year.

NOTES:

1-Month Notice Rule

 If an employee consented to his retrenchment or voluntarily applied for retrenchment,

the required previous notice to the DOLE is not necessary as the employee thereby
acknowledged the existence of a valid cause for termination of his employment. [Mobilia
Products, Inc. vs. Demecillo, supra]

 Mere failure to comply with the notice requirement of labor laws on company closure
does not amount to a patently unlawful act. [Carag vs. NLRC, 520 SCRA 25 (2007)] A
written notice that is short of the 30 days prior to notice rule will constitute substantial
compliance if the period not covered is compensated even if unworked. [Kasapian ng
Malayang Manggagawa sa Coca-Cola vs. CA, 487 SCRA 487, 510-11 (2006), citing
Serrano vs. NLRC, 331 SCRA 331 (2000)]

 In fact, the 1-Month Notice Rule is NOT required when:

(1) retrenchment due to financial reverses was already known to the

Labor Law Reviewer 70

 employees during voluntary arbitration. [Revidad vs. NLRC, June 27,
1995]
(2) employee consented to the retrenchment [Ismael Santos vs. CA, July 5,
2001, citing Wiltshire vs. NLRC (1991)]
(3) voluntary retrenchment [International Hardware, Inc. vs. NLRC, August
10, 1989]
(4) no notice due to consented termination rule applies not only to
retrenchment, but also to ILS, redundancy and closure. [DOLE Phils., Inc.
vs. NLRC, September 13, 2001]

 There is no law or rule that requires an employer to furnish an employee to be

retrenched copies of documents on evaluating employees. The law only requires that the
employer serve a written notice of the retrenchment on the employee concerned and the
DOLE at least one month before the intended date of retrenchment. [Mendros, Jr. vs.
Mitsubishi, supra]

 Where retrenchment undertaken by the employer is bona fide, the same will not be
invalidated for its failure to serve prior notice on the employees and the DOLE. The employer
shall only be liable to pay nominal damages at a reasonable rate of P50,000.00 for each
employee. [Eastridge Golf Club, Inc., supra]

Payment of Separation Pay under Article 283

 The amount of separation pay must be computed from the time the employee
commenced employment until the cessation of operations of the employer’s business.
[JAT General Services vs. NLRC, supra]

 Computation of separation pay is:

Salary + Regular Allowances = Separation Pay

[Millares vs. NLRC, 305 SCRA 500-512 (1999)]

 Under Sec. 10, Rule I, Book VI, Omnibus Rules, the computation of termination pay
of an employee under Art. 283 shall be based on his latest salary rate, unless the
same was reduced by the employer to defeat the intention of the Code, in which case,
the basis of computation shall be the rate before its deduction.

BUT,
 Car and insurance benefits should not be included in the computation of separation
pay as they are benefits granted only during the course of employment. [Dr. Pedrito
F. Reyes vs. CA, G.R. No. 154448, August 15, 2003, Ynares-Santiago, J.]

ii. Requirements for valid retrenchment/redundancy

Requisites for Valid Redundancy Program

(1) good faith on the part of the employer in abolishing the redundant position; and
fair and reasonable criteria in ascertaining what positions are to be declared
redundant, and accordingly abolished. [AMA Computer College vs. Garcia, G.R.
No. 166703, April 14, 2008]

Requisites for Valid Retrenchment

(a) the retrenchment is necessary to prevent losses and such losses are proven;

(b) written notice to the employees and to DOLE at least one (1) month prior to the
intended date of retrenchment;

(c) payment of separation pay equivalent to one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is higher. [AMA Computer
College, Inc. vs. Garcia, supra; Manatad vs. PT&T, G.R. No. 172363, March 7,
2008; TPI Philippines Cement Corp vs. Cajucom VIII, 483 SCRA 494, 502-03
(2006)]

(d) the employer exercised its prerogative to retrench in good faith; and

Labor Law Reviewer 71

 (e) it uses fair and reasonable criteria ascertaining who would be retrenched or
retained. [Mendros, Jr. vs. Mitsubishi Motors Phils. Corporation (MMPC), G.R.
No. 169780, February 16, 2009]

(f) the employer must first exhaust all other means to avoid further losses without
retrenching its employees. [FASAP vs. PAL, G.R. No. 178083, July 22, 2008]

Requisites for Valid Closure

(a) the closure/cessation of business is bona fide – its purpose is to advance the
interest of the employer and not to defeat or circumvent the rights of employees
under the law or a valid agreement;
(b) a written notice was served on the employees and the DOLE at least one month
before the intended date of closure/cessation of business; and
(c) IN CASE OF CLOSURE NOT DUE TO FINANCIAL LOSSES, that the employees
affected have been give separation pay equivalent to ½ month pay for every year
of service or one month pay, whichever is higher. [Eastridge Golf Club, Inc.,
supra]

iii. Criteria in selecting employees for dismissal

Redundancy

 The ground of redundancy does not require the exhibition of proof of losses or
imminent losses. [Coats Manila Bay, Inc. vs. Ortega, supra]

iv. Standards to be followed

 The wisdom or soundness of abolishing a position for being redundant is not

subject to the discretionary review of the labor arbiter and the NLRC, provided
there is no violation of the law and no showing that it was prompted by an
arbitrary or malicious act [AMA Computer College vs. Garcia, supra]
because it is an exercise of business judgment on the part of the employer.
[Smart Communications, Inc. vs. Astorga, G.R. Nos. 148132, 151079,
151372, January 28, 2008; Nelson A. Culili vs. Eastern
Telecommunications Philippines, Inc., et al., G.R. No. 165381, February 9,
2011, Leonardo-de Castro, J.]

Rule on Proof of Losses

 Adequate, credible and persuasive evidence of dire financial straits from drastic
business losses must be presented by the employer. [Filipinas (Pre-Fabricated
Bldg.) Systems “Filsystems”, Inc. vs. Gatlabayan, 487 SCRA 673 (2006)]

(1) Losses incurred must be substantial and not de minimis;

(2) Losses are actual or reasonably imminent;
(3) The retrenchment is reasonably necessary and is likely to be effective in
preventing the expected losses; and
(4) The alleged losses, if already incurred, or the expected imminent losses
sought to be forestalled, are proven by sufficient and convincing evidence.
[AMA Computer College, Inc. vs. Garcia, supra; Andrada vs. NLRC, G.R.
No. 173231, December 28, 2007]

 Although when the law uses the phrase “retrenchment to prevent losses”, it simply
means that the employer may retrench “before the losses anticipated are actually
sustained or realized. [TPI Philippines Cement Corp. vs. Cajucom VII, supra]
BUT,

Labor Law Reviewer 72

 If alleged losses are already realized, and the expected imminent losses sought to
be forestalled, the employer must prove by sufficient and convincing evidence that
retrenchment is the most viable solution. Any less exacting standard of proof would
render too easy the abuse of this ground for termination of services of employees, as
scheming employers might be merely feigning business losses or reverses to ease
out employees. [FASAP vs. PAL, supra; Mendros, Jr. vs. Mitsubishi Motors Phils.
Corp., supra]

 Financial statements that will show the financial condition of the company are pieces
of evidence that may justify, among others, the enforcement of its retrenchment
program. [Bernadeth Londonio, et al. vs. Bio Research, Inc., et al.,G.R. No.
191459, January 17, 2011, Carpio Morales, J.] Financial statements must be
prepared and signed by independent auditors, otherwise, they may be assailed as
self-serving. [FASAP vs. PAL, supra]

(b) Disease or illness

Art. 284. Disease as ground for termination. An employer may

terminate the services of an employee who has been found to be suffering from any
disease and whose continued employment is prohibited by law or is prejudicial to
his health as well as to the health of his co-employees: Provided, That he is paid
separation pay equivalent to at least one (1) month salary or to one-half (1/2)
month salary for every year of service, whichever is greater, a fraction of at least
six (6) months being considered as one (1) whole year.

i. Requisites

Requisites for Valid Dismissal under Art. 284

The employer must adduce:

(a) That the employee is suffering from a disease that is:
(1) prohibited by law;
(2) prejudicial to his health; or
(3) prejudicial to his co-employees

(b) A certification from a competent public authority that the disease of the employee
is incurable within a period of 6 months even with proper treatment. [Duterte vs.
Kingswood Trading Co., Inc., G.R. No. 160325, October 4, 2007]

(c) Payment of separation pay of one (1) month salary or one-half (1/2) month salary
for every year of service, whichever is higher, and a fraction of at least 6 months
is considered as one (1) year. [Crayons Processing, Inc. vs. Pula, G.R. No.
167727, July 30, 2007]

2.2. Procedural Due Process

Art. 277. Miscellaneous provisions.

xxx xxx xxx

(b) Subject to the constitutional right of workers to security of tenure

and their right to be protected against dismissal except for a just and authorized
cause and without prejudice to the requirement of notice under Article 283 of this
Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample opportunity to
be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and
regulations promulgated pursuant to guidelines set by the Department of Labor
and Employment. Any decision taken by the employer shall be without prejudice
to the right of the worker to contest the validity or legality of his dismissal by filing
a complaint with the regional branch of the National Labor Relations Commission.
The burden of proving that the termination was for a valid or authorized cause

Labor Law Reviewer 73

 shall rest on the employer. The Secretary of the Department of Labor and
Employment may suspend the effects of the termination pending resolution of the
dispute in the event of a prima facie finding by the appropriate official of the
Department of Labor and Employment before whom such dispute is pending that
the termination may cause a serious labor dispute or is in implementation of a
mass lay-off. (As amended by Section 33, Republic Act No. 6715, March 21, 1989)

2.2.1. Procedure to be observed in termination cases

 The law mandates that the burden of proving the validity of the termination of
employment rests with the employer. Failure to discharge this evidentiary burden would
necessarily mean that the dismissal was not justified and, therefore, illegal.
Unsubstantiated suspicions, accusations, and conclusions of employers do not provide for
legal justification for dismissing employees. [Century Canning Corporation, et al. vs.
Vicente Randy R. Ramil, G.R. No. 171630, August 8, 2010, Peralta, J.]

 The employer is bound to furnish the employee concerned with two (2) written
notices before termination of employment can be legally effected. One is the notice
apprising the employee of the particular acts or omissions for which his dismissal is sought
– and this may loosely be considered as the proper charge. The other is the notice
informing the employee of the management's decision to sever his employment. However,
the decision must come only after the employee is given a reasonable period from receipt
of the first notice within which to answer the charge. The requirement of notice is not a
mere technicality but a requirement of due process to which every employee is entitled.
[Erector Advertising Sign Group, Inc. vs. NLRC, G.R. No. 167218, July 2, 2010,
Peralta, J.]

 This rule applies also to seafarers on board a vessel. However, under paragraph
D, Section 17 of the Revised Standard Employment Terms and Conditions Governing the
Employment of Filipino Seafarers on Board Ocean-Going Vessels, the Ship Master is
excused from furnishing a seafarer with the required notice of dismissal if doing so
will prejudice the safety of the crew and the vessel, as in cases of mutiny. BUT just
the same, a complete report should be sent to the manning agency, supported by
substantial evidence of the findings. [NFD International Manning Agents vs. NLRC,
G.R. No. 165389, October 17, 2008]

REMEMBER,
Article 277(b) recognizes the right to due process of all workers, without distinction
as to the cause of their termination, thus, none should be construed. [Suico vs. NLRC,
G.R. Nos. 146762, 153584, 163793, January 30, 2007]

 Under Article 264, union officers, while terminable for knowingly participating in an
illegal strike are, “as in other termination cases”, entitled to the due process protection
under Art. 277(b) of the Labor Code. Nothing in Art. 264 authorizes an immediate dismissal
of a union officer for participating in an illegal strike. The act of dismissal is not intended
to happen ipso facto, but rather as an option that can be exercised by the employer and
after compliance with the notice requirements for terminating an employee. [Stanford
Marketing Corp. vs. Julian, G.R. No. 145496, February 24, 2004]

BUT,
In Biflex vs. Filflex Industrial, the Supreme Court held that dismissals under
Article 264 can be immediately resorted to, as an exercise of management prerogative.
[Biflex vs. Filflex Industrial, G.R. No. 155679, December 19, 2006]

2.2.2. Guiding Principles in connection with the hearing

requirements in dismissal cases

 The essence of due process is an opportunity to be heard, or as applied to

administrative proceedings, an opportunity to explain one's side. A formal or trial
type hearing is not at all times and in all instances essential to due process, the
requirements of which are satisfied where the parties are afforded fair and
reasonable opportunity to explain their side of the controversy. Neither is it
necessary that the witnesses be cross-examined by counsel for the adverse party.
[Philippine Long Distance Telephone Company vs. Eusebio M.
Honrado, G.R. No. 189366, December 8, 2010, Del Castillo, J.]

Labor Law Reviewer 74

  An employee is not deprived of procedural due process if he chose not to present
his side at the administrative hearing, and in fact avoided the investigation into the
charges against him by filing his illegal dismissal complaint ahead of the scheduled
hearing, as he was given the opportunity to be heard. [Technol Eight Philippines
Corporation vs. NLRC, G.R. No. 187605, April 13, 2010, Brion, J.]

 “Reasonable opportunity” under the Omnibus Rules means every kind of

assistance that management must accord to the employees to enable them to
prepare adequately for their defense. This should be construed as a period of at
least five (5) calendar days from receipt of the notice to give the employees an
opportunity to study the accusation against them, consult a union official or lawyer,
gather data and evidence, and decide on the defenses they will raise
against the complaint. The notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees.
A general description of the charge will not suffice. [Lima Land, Inc. vs. Cuevas,
G.R. No. 169523, June 16, 2010, Peralta, J.]

BUT,
 It is not enough for an employer to allege in the first written notice to the employee
“acts of non-compliance” without any specificity, as such allegation is too general
and can encompass just about any malfeasance. The employer must make a
detailed narration of the facts and circumstances that would serve as bases to
terminate the employee which in turn will allow the latter to explain his side and
why he should not be dismissed. [Benjamin vs. Amellar Corporation, G.R. No.
183383, April 5, 2010, Carpio Morales, J.]

ALSO,
 The mere fact that the notices were sent to respondents after the filing of the labor
complaint does not, by itself, establish that the same was a mere afterthought. The
surrounding circumstances of this case adequately explain why the requirements
of procedural due process were satisfied only after the filing of the labor
complaint. [New Puerto Commercial, et al. vs. Rodel Lopez, et al., G.R.
No. 169999, July 26, 2010, Del Castillo, J.]

(a) Agabon doctrine

Effect of Non-compliance with Due Process Requirement

 Where the dismissal is for a just cause, the lack of procedural due process should
not nullify the dismissal, or render it illegal or ineffectual. The employer should, however,
indemnify the employee for the violation of his statutory rights, such as when the
management did not follow or exhaust the grievance procedure under the employment
contract prior to dismissal. [DMA Shipping Philippines, Inc. vs. Henry Cabillor, G.R. No.
155389, February 28, 2005; Philemploy Serices and Resources vs. Rodriguez, 486
SCRA 302, 317 (2006)] The indemnity to be imposed should be stiffer to discourage the
abhorrent practice of “dismiss now, pay later” scheme, and should depend on the facts of
each case, taking into special consideration the gravity of the due process violation of the
employer. [Agabon, vs. NLRC, 442 SCRA 573, 616-17 (2004); LBC Domestic Franchise
Co. vs. Florido, G.R. No. 162577, August 17, 2007]

 The indemnity shall be in the form of nominal damages, which the Supreme Court
fixed at a rate of P30,000.00 per employee. [Agabon vs. NLRC, supra]

BUT,
Where the dismissal is based on an authorized cause, the sanction should be stiff
as the dismissal process was initiated by the employer’s exercise of his management
prerogative. Several factors are taken into account:
(1) the authorized cause invoked, whether it was a retrenchment or a closure or
cessation of operation of the establishment due to serious business losses or financial
reverses or otherwise;
(2) the number of employees to be awarded;
(3) the capacity of the employers to satisfy the awards, taken into account their
prevailing financial status as borne by the records; and
(4) whether there was a bona fide attempt to comply with the notice requirements as
opposed to giving no notice at all. [Talam vs. NLRC, G.R. No. 175040, April 6, 2010,
Brion, J., citing Jaka Food Processing]

Labor Law Reviewer 75

 STILL,
If the execution of a decision becomes impossible, unjust or too burdensome,
modification of the decision is necessary in order to harmonize the disposition with the
prevailing circumstances. [Industrial Timber Corporation vs. Ababon, 480 SCRA 171,
187 (2006)]

2.3. Reliefs for illegal dismissal

Art. 279. Security of tenure. In cases of regular employment, the

employer shall not terminate the services of an employee except for a just cause or
when authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement. (As amended by
Section 34, Republic Act No. 6715, March 21, 1989)

RIGHT TO REINSTATEMENT AND FULL BACKWAGES

 An illegally dismissed employee is entitled to twin reliefs: backwages and

reinstatement. The two reliefs provided are separate and distinct. [Macasero vs.
Southern Industrial Gases Philippines, G.R. No. 178524, January 30, 2009; Bahia
Shipping Services, Inc. vs. Chua, G.R. No. 162195, April 8, 2008] The relief granted
under Art. 279 is inclusive of allowances, and his other benefits or the monetary
equivalent thereof to be computed from the time his compensation was withheld from
him up to the time of his actual reinstatement. [De Guzman vs. NLRC, G.R. No.
167701, December 12, 2007; Carlos vs. CA, G.R. No. 168096, August 28, 2007]

2.3.1. Reinstatement aspect

 Reinstatement means restoration to a state or condition from which one had been
removed or separated. The person reinstated assumes the position he had
occupied prior to his dismissal. It presupposes that the previous position form
which one had been removed still exists, or that there is an unfilled position which
is substantially equivalent or of similar nature as the one previously occupied by
the employee. [Pfizer, Inc., et al. vs. Geraldine Velasco, G.R. No. 177467,
March 9, 2011, Leonardo-de Castro, J.]

(a) Immediately executory

 An order of reinstatement is immediately self-executory without the need for the

issuance of a writ of execution. [Pfizer, Inc., et al. vs. Geraldine Velasco, G.R. No.
177467, March 9, 2011, Leonardo-de Castro, J.]

BUT,
 An alien seeking relief from an illegal dismissal is entitled to reinstatement and
backwages only if he has an employment permit before he may be allowed to resume his
employment in the Philippines. [WPP Marketing Communications, Inc. vs. Galera, G.R.
Nos. 169207 and 169239, March 29, 2010, Carpio, J.]

i. Actual reinstatement

 Actual reinstatement is restoration of an illegally dismissed employee the position

s/he had occupied prior to the illegal dismissal. In order that s/he may be actually
reinstated to his former position, said position from which one had been removed
must still exist, or that there is an unfilled position which is substantially equivalent
or of similar nature as the one previously occupied by the employee. [inferred from:
Pfizer, Inc., supra]

ii. Payroll reinstatement

 In cases where the employer opted to choose payroll reinstatement in compliance

with the decision of the labor arbiter, the employee reinstated in the employer's

Labor Law Reviewer 76

 payroll is equally entitled to receive all the benefits given to a regular employee
under the CBA. [Antonio A. Aboc vs. Metropolitan Bank and Trust Company,
G.R. Nos. 170542-43 & 176460, December 13, 2010, Mendoza, J.]

 Even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is

obligatory on the part of the employer to reinstate and pay the wages of the
dismissed employee during the period of appeal until reversal by the higher court
or tribunal. The Labor Arbiter's order of reinstatement is immediately executory
and the employer has to either re-admit them to work under the same terms and
conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and
that failing to exercise the options in the alternative, employer must pay the
employee's salaries. [Islriz Trading/Victor Hugo Lu vs. Efren Capada, et al.,
G.R. No. 168501, January 31, 2011, Del Castillo, J.]

 After the Labor Arbiter's decision is reversed by a higher tribunal, the employee
may be barred from collecting the accrued wages, if it is shown that the delay in
enforcing the reinstatement pending appeal was without fault on the part of the
employer, provided: (1) there must be an actual delay; and (2) the delay must not
be due to the employer's unjustified act or omission. Otherwise, the employer may
still be required to pay the salaries notwithstanding the reversal of the Labor
Arbiter's decision. [Islriz Trading/Victor Hugo Lu vs. Efren Capada, et al., G.R.
No. 168501, January 31, 2011, Del Castillo, J.]

Refund Doctrine

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for
dismissal is valid, then the employer has the right to require the dismissed employee on payroll reinstatement
to refund the salaries s/he received while the case was pending appeal, or it can be deducted from the
accrued benefits that the dismissed employee was entitled to receive from his/her employer under existing
laws, collective bargaining agreement provisions, and company practices. However, if the employee was
reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation
received for actual services rendered without need of refund. [Marilou S. Genuino versus NLRC and
Citibank, N.A., et al. versus NLRC, G.R. No. 142732-33, December 4, 2007]

BUT,
Prior to Genuino v. NLRC, there had been no known similar case containing a dispositive portion
where the employee was required to refund the salaries received on payroll reinstatement. In fact, in a
catena of cases, the Court did not order the refund of salaries garnished or received by payroll-reinstated
employees despite a subsequent reversal of the reinstatement order. [Garcia v. Philippine Airlines, Inc.,
G.R. No. 164856, January 20, 2009, Carpio Morales, J.]

The Labor Arbiter's order of reinstatement is immediately executory and the employer has to either
re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate
them in the payroll, and that failing to exercise the options in the alternative, employer must pay the
employee's salaries. [Garcia v. Philippine Airlines, Inc., supra]

After the labor arbiter's decision is reversed by a higher tribunal, the employee may be barred from
collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal was
without fault on the part of the employer – that is: (1) there must be actual delay; (2) the delay must not be
due to the employer's unjustified act or omission – otherwise, the employer may still be required to pay the
salaries notwithstanding the reversal of the Labor Arbiter's decision. [Garcia v. Philippine Airlines, Inc.,
supra]

2.3.2 Separation pay in lieu of Reinstatement

(a) Strained Relation rule

Where reinstatement is not feasible, expedient or practical, as where reinstatement would only
exacerbate the tension and strained relations between the parties, or where the relationship between the
employer and employee has been unduly strained by reason of their irreconcilable differences, particularly
where the illegally dismissed employee held a managerial or key position in the company, it would be
more prudent to order payment of separation pay instead of reinstatement. [Johnson & Johnson (Phils.),
Inc., et al. vs. Johnson Office & Sales Union-Federation of Free Workers (FFW), et al., G.R. No.
172799, July 6, 2007]

BUT,
 The principle of “strained relations” cannot be applied indiscriminately. Otherwise,

Labor Law Reviewer 77

reinstatement can never be possible simply because some hostility is invariably engendered between the
parties as a result of litigation. That is human nature. [Gabriel vs. Bilon, G.R. No. 146989, February 7,
2007] Strained Relations, to warrant separation pay in lieu of reinstatement, “must be demonstrated as a
matter of fact” [Tower Industrial Sales vs. Court of Appeals, G.R. No. 165727, April 19, 2006]

(b) Other Instances where Separation pay is awarded

 if reinstatement is no longer feasible

Payment of separation pay as a substitute for reinstatement is allowed only under exceptional
circumstances, viz.: (1) when reasons exist which are not attributable to the fault or are beyond the control
of the employer, such as when employer closes business; (2) when he illegally dismissed employee has
contracted a disease and his reinstatement will endanger the safety of his co-employees; or (3) where a
strained relationship exists between the employer and the dismissed employee. [Composite Enterprises,
Inc. vs. Caparoso, G.R. No. 159919, August 8, 2007]

 as financial assistance (in cases of valid dismissal)

Although by way of exception, the grant of separation pay or some other financial assistance may
be allowed to an employee dismissed for just causes on the basis of equity as a measure of social justice
only in those instances where the employee is validly dismissed for causes other than serious misconduct
or those reflecting on his moral character. The policy of social justice is not intended to countenance
wrongdoing simply because it is committed by the underprivileged. [Tirazona vs. Philippine EDS Techno-
Service Inc. (PET Inc.), G.R. No. 169712, January 20, 2009; Yrasuegui vs. PAL, G.R. No. 168081,
October 17, 2008]

(c) Computation
 Separation pay in lieu of reinstatement is computed “up to the finality of (the)
decision” [Phil. Military Veterans Security & Investigation Agency vs. Court of
Appeals, G.R. No. 139159, January 31, 2006]

2.3.3. Backwages

(a) Components of the amount of backwages

 An unjustly dismissed employee is entitled to full backwages, inclusive of allowances,

and to his other benefits or their monetary equivalent, computed from the time his
compensation was withheld from him up to the time of his actual reinstatement. [Siemens
Philippines, Inc. vs. Domingo, G.R. No. 150488, July 28, 2008] As a rule, backwages shall
be computed from the time of illegal dismissal up to the finality of the decision. [Philippine
Journalists, Inc. vs. Mosqueda, G.R. No. 141430, May 7, 2004]

HOWEVER,
 If the dismissal was due to cessation of business operations, backwages is not to be
computed beyond the closure of operations, as it is confiscatory. [Retuya vs. Dumarpa, G.R.
No. 148848, August 5, 2003] Likewise, an employer cannot be compelled to continuously pay
an employee who can no longer perform the tasks for which he was hired. Otherwise, it would
be the height of injustice to still require the employer to pay the employee full backwages from
the time of his termination until finality of the decision. [Victory Liner, Inc. vs. Race, G.R. No.
164820, December 8, 2008]

AND,
 An employee who was dismissed on the ground of AWOL due to incarceration, is
entitled to reinstatement, and under the principle of “no work, no pay”, his full backwages shall
only commence from the time he is refused work after acquittal. [Standard Electric
Manufacturing Corporation vs. Standard Electric Employees Union-NAFLU-KMU, G.R.
No. 166111, August 25, 2005]

 The computation of backwages should be based on the salary the employee was
receiving at the time of his dismissal. [Palmeria, Sr. vs. NLRC, 247 SCRA 57, 63 (1995)]
Annual general increases in basic salary are NOT included in the computation of full backwages
as they are neither allowance nor benefit. Allowances and benefits are granted to the employee
apart from, and in addition to, the wage or salary. [Equitable Banking Corp. vs. Sadac, 490
SCRA 380, 409 (2006); Davao Free Worker Front vs. CIR, 67 SCRA 418; Capital Garments
Corp. vs. Ople, 117 SCRA 473; Durabuilt Recapping Plant & Company vs. NLRC, 152

Labor Law Reviewer 78

 SCRA 328]

Yardsticks in the computation of the final amount of liability in Illegal Dismissal Cases

(1) Employees who have been re-employed without loss of seniority rights shall be
paid backwages but only up to actual reinstatement;
(2) Employees who have been re-employed as new hires shall be restored their
seniority and other preferential rights. However, their backwages shall be
computed only to date of actual re-hiring;
(3) Employees who have reached compulsory age of retirement shall receive
backwages up to their only. The same is true as regards the heirs of those who
have passed away;
(4) Employees who have not been re-employed, plus those who have executed
quitclaims and received separation pay or financial assistance, shall be reinstated
without loss of seniority rights, and paid full backwages, after deduction of whatever
amounts already received; and
(5) Employees who had obtained substantially equivalent or even more lucrative
employment elsewhere in 1998 or thereafter are deemed to have severed their
employment with their previous employer, and shall be entitled to full backwages
from the date of their retrenchment only up to the date they found gainful
employment elsewhere. [Flight Attendants and Stewards Association of the
Philippines (FASAP) v. Philippine Airlines, Inc., G.R. No. 178083, October 2,
2009, Ynares-Santiago, J.]

2.3.4. Constructive dismissal

Art. 286. When employment not deemed terminated. The bona-

fide suspension of the operation of a business or undertaking for a period not
exceeding six (6) months, or the fulfillment by the employee of a military or civic
duty shall not terminate employment. In all such cases, the employer shall
reinstate the employee to his former position without loss of seniority rights if he
indicates his desire to resume his work not later than one (1) month from the
resumption of operations of his employer or from his relief from the military or
civic duty.

NOTES:

CONSTRUCTIVE Termination by reason of a bonafide suspension of operation

DISMISSAL of a business or undertaking that exceeds six months.
Otherwise stated, if the employee was forced to remain
without work or assignment for a period exceeding six
months, then he is in effect constructively dismissed.

INVERSELY,
A bona fide suspension of the employer’s operation of a business or undertaking
for a period not exceeding six (6) months does not amount to termination of employment,
but only a temporary displacement of employees. The paramount consideration should be
the dire exigency of the business of the employer that compels it to put some of its
employees temporarily out of work. [Pido vs. NLRC, G.R. No. 169812, February 23, 2007]

BUT,
If the operation of the business is resumed within six months, it shall be the duty of
the employer to reinstate his employees to their former positions without loss of seniority
rights. [Lagonoy Bus Co., Inc. vs. CA, G.R. No. 165598, August 14, 2007]

PROVIDED,
That the employee should indicate his desire to resume his work not later than one
(1) month from resumption of operation/undertaking; or relief from military or civic duty.
[Eagle Star Security Services, Inc. vs. Bonifacio L. Mirando, G.R. No. 179512, July 30,
2009]

 Constructive dismissal occurs when there is cessation of work because continued

employment is rendered impossible, unreasonable, or unlikely as when there is a
demotion in rank or diminution in pay or when a clear discrimination, insensibility, or

Labor Law Reviewer 79

 disdain by an employer becomes unbearable to the employee leaving the latter with no
other option but to quit. [The University of the Immaculate Conception, et al. vs.
NLRC, et al., G.R. No. 181146, January 26, 2011, Carpio, J.]

 A complaint for constructive dismissal filed prior to the employee's resumption of work
has no basis, and must be dismissed for want of cause of action. [The University of
the Immaculate Conception, et al. vs. NLRC, et al., G.R. No. 181146, January 26,
2011, Carpio, J.]

When Off-detailing becomes Constructive Dismissal

 Temporary “off-detail” or “floating status” is the period of time when security guards are
in between assignments or when they are made to wait after being relieved from a previous
post until they are transferred to a new one. It takes place when the security agency's clients
decide not to renew their contracts with the agency, resulting in a situation where the
available posts under its existing contracts are less than the number of guards in its
roster. It also happens in instances where contracts for security services stipulate that the
client may request the agency for the replacement of the guards assigned to it even for
want of cause. [Bebina G. Salvaloza vs. NLRC, et al., G.R. No. 182086, November 24, 2010,
Nachura, J.]

HOWEVER,
 An employee who was placed on temporary “off-detail” on the ground of poor
performance and inefficiency, allegations of which were never made known to him, and
instead was given to various assignments amounts to constructive dismissal.
Assignment to different posts despite repeated errors and poor performance is
considered condonation, which the employer cannot invoke to justify placing the
employee on temporary “off-detail”. [Bebina G. Salvaloza vs. NLRC, et al., G.R. No.
182086, November 24, 2010, Nachura, J.]

2.3.5. Preventive Suspension

 Preventive suspension is imposed on an employee under investigation if he poses

a serious threat to the life and property of the employer and of his co-workers. [Gatbonton
vs. NLRC, G.R. No. 146779, January 23, 2006, 479 SCRA 416] The rule on preventive
suspension is found in Secs. 8 and 9, Rule XXIII, DO 19, June 21, 1997.

 As a general rule, the employee is not entitled to wages during the period of a valid
preventive suspension. However, if preventive suspension is found to be without basis,
the employer is required to pay the illegally suspended employee his backwages for the
period of his suspension. [Maricalum Mining vs. Decorion, infra]

REMEMBER that

 Preventive suspension pending investigation is not a penalty.

 It is a measure intended to enable the disciplining authority to investigate charges

against respondent by preventing the latter from intimidating or in any way
influencing witnesses against him. [Mandapat vs. Add Force Personnel
Services, Inc., G.R. No. 180285, July 6, 2010, Perez, J.]
 If the investigation is not finished and a decision is not rendered within that period,
the suspension will be lifted and the respondent will automatically be reinstated.
[The Board of Trustees of the Government Service Insurance System, et al.
vs. Albert M. Velasco, et al., G.R. No. 170463, February 2, 2011, Carpio, J.]

 Preventive suspension lasts only for a period of 30 days, and beyond this period, such
suspension may amount to constructive dismissal. [Maricalum Mining Corp. vs.
Decorion, 487 SCRA 182 (2006)]

HOWEVER,
 There are cases where a violation of the 30-day suspension period may entail
payment of indemnity of P1,000.00 [JRS Business Corp. vs. NLRC, G.R. No.
108891, July 17, 1995] or P3,000.00 [Pepsi-Cola Distributors vs. NLRC, G.R.
No. 106831, May 6, 1997]

 While another view is that the period exceeding 30 days shall be compensable,

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 [Carlos V. Valenzuela vs. Caltex Philippines, Inc., G.R. Nos. 169965-66,
December 15, 2010, Villarama, Jr., J.] thus, the extension will not give rise to
constructive dismissal. The preventive suspension beyond 30 days shall be
upheld provided the employee's wages and benefits are paid in the interim.
[Genesis Transport Service, Inc. vs. Unyon ng Malayang Manggagawa ng
Genesis Transport, G.R. No. 182114, April 5, 2010, Carpio Morales, J.]

 An employee who was preventively suspended pending an investigation is treated like an

employee on approved vacation leave without pay. The period of preventive suspension
shall effectively interrupt the continuity of his government service. [The Board of Trustees
of the Government Service Insurance System, et al. vs. Albert M. Velasco, et al., G.R.
No. 170463, February 2, 2011, Carpio, J.]

 Imposition of preventive suspension does not amount to termination of employment.

Preventive suspension is justified where the employee's continued employment poses a
serious and imminent threat to life or property or of the employee's co-workers, and does
not amount to illegal dismissal. [Jose P. Artificio vs. NLRC, et al., G.R. No. 172988, July
26, 2010, Perez, J.]

2.3.6. Quitclaims

Quitclaims executed by employees are given effect when:

(1) the employee voluntarily executes the quitclaim;
(2) no fraud or deceit on the part of the parties;
(3) the consideration is credible and reasonable; and
(4) contract in not contrary to law, morals, public policy or good customs. [Goodrich
Manufacturing Corporation vs. Ativo, et al, G.R. No. 188002, February 1, 2010, Villarama, J.]

Consideration received in a quitclaim is credible and reasonable if the amount is not grossly
inadequate vis-a-vis what the employee should receive in full. [Goodrich Manufacturing Corporation vs.
Ativo, et al, G.R. No. 188002, February 1, 2010, Villarama, J.]

[2010 Bar Question]

2.3.7. Termination of employment by employee

Art. 285. Termination by employee.

(a) An employee may terminate without just cause the employee-

employer relationship by serving a written notice on the employer at least one (1)
month in advance. The employer upon whom no such notice was served may hold
the employee liable for damages.

(b) An employee may put an end to the relationship without serving any
notice on the employer for any of the following just causes:

1. Serious insult by the employer or his representative on the honor

and person of the employee;
2. Inhuman and unbearable treatment accorded the employee by the
employer or his representative;
3. Commission of a crime or offense by the employer or his
representative against the person of the employee or any of the immediate
members of his family; and
4. Other causes analogous to any of the foregoing.

3. Retirement Pay Law

Labor Law Reviewer 81

 Art. 287. Retirement. Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or other
applicable employment contract.

In case of retirement, the employee shall be entitled to receive such

retirement benefits as he may have earned under existing laws and any collective
bargaining agreement and other agreements: Provided, however, That an
employee’s retirement benefits under any collective bargaining 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 employees in the establishment, an employee upon reaching the age of
sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in
the said establishment, may retire and shall be entitled to retirement pay
equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.

Unless the parties provide for broader inclusions, the term ‘one-half (1/2)
month salary’ shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month
pay and the cash equivalent of not more than five (5) days of service incentive
leaves.

Retail, service and agricultural establishments or operations employing not

more than ten (10) employees 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 Article 288 of this Code.

 Retirement is the result of a bilateral act of the parties, a voluntary agreement between
the employer and the employee whereby the latter, after reaching a certain age, agrees to
sever his or her employment with the former. RA 7641 pegs the age for compulsory retirement
at 65 years, while the minimum age for optional retirement is set at 60 years. An employer is,
however, free to impose a retirement age earlier than the foregoing mandates. [Lourdes A.
Cercado vs. Uniprom, Inc., G.R. No. 188154, October 13, 2010, Nachura, J.]

Retirement (as amended by RA 7641, Dec. 9. 1992)

a) Retire under existing CBA; in absence thereof

b) Retire under law -

a. rendered at least 5 yrs. Service, and

b. age 60 yrs. old – optional
c. age 65 yrs. old – compulsory

c) Benefits

1. for those paid on “boundary” basis of computation is “average daily income” [R & E Transport, Inc.] – ½
mo./yr. of service, a fraction of 6 mos. = 1 yr.

2. unless more beneficially agreed upon by the parties -1/2 month shall mean/include:

a) 15 days/year
b) 1/12 of 13th mo. pay
c) Cash equivalent of not more than 5 days SIL

 A retirement plan giving the employer the option to retire its employees below the
ages provided by law must be assented to and accepted by the latter, without
which, the exercise of such option will amount to deprivation of property without
due process of law. [Lourdes A. Cercado vs. Uniprom, Inc., supra]

 Implied knowledge of the existence of the retirement plan does not amount to

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 voluntary acceptance of all the provisions set forth therein. The law demands more
than a passive acquiescence on the part of the employees, considering that an
employer's early retirement age option involves a concession of the former's
constitutional right to security of tenure. [Lourdes A. Cercado vs. Uniprom, Inc.,
supra]

 It must be explicit, voluntary, free, and uncompelled.

 While an employer may unilaterally retire an employee earlier than the legally
permissible ages under the Labor Code, this prerogative must be exercised
pursuant to a mutually instituted early retirement plan. Otherwise stated, only the
implementation and execution of the option may be unilateral, but certainly not the
adoption and institution of the retirement plan containing such option. Without the
voluntary and explicit assent of at least the majority of its employees, the option to
unilaterally retire an employee is not valid. [Lourdes A. Cercado vs. Uniprom,
Inc., G.R. No. 188154, October 13, 2010, Nachura, J.]

 An employee's claim under the Early Retirement Program of a corporation is mooted

when he avails of the optional retirement under Article 287 of the Labor Code, and accepted
the benefits. Acceptance of said benefits means that the employee opted to retire under Article
287. [Korean Air Co., Ltd vs. Yuson, G.R. No. 170369, June 16, 2010, Carpio, J.]

3.1. Coverage
 RA 7641 or the Retirement Pay Law shall apply to all employees in the private
sector, regardless of their position, designation or status and irrespective of the
method by which their wages are paid. They shall include part-time employees,
employees of service and other job contractors and domestic helpers or persons
in the personal service of another. [Labor Advisory on Retirement Pay Law,
October 24, 1996]

Compulsory retirement age

The retirement age is primarily determined by the existing agreement or employment contract.
Absent an agreement, retirement age shall be fixed by law at the age of 65 years, while the minimum age
for optional retirement is set at 60 years. Article 287 of the Labor Code applies only to a situation where (1)
there is no CBA or other applicable employment contract providing for retirement benefits; or there is a CBA
or other applicable employment contract providing for retirement benefits, but it is below the requirement set
by law. The rationale is to prevent the absurd situation where an employee is denied retirement benefits
through the nefarious scheme of employers to deprive employees of the benefits due them under existing
labor laws. [Amelia R. Obusan vs. Philippine National Bank, G.R. No. 181178, July 26, 2010, Nachura,
J.]

However, the company retirement plans must not only comply with the standards set by existing
labor laws, but they should also be accepted by the employees to be commensurate to their faithful service
to the employer within the requisite period. Due process only requires that notice of the employer's decision
to retire an employee be given to the employee. [Amelia R. Obusan vs. Philippine National Bank, G.R.
No. 181178, July 26, 2010, Nachura, J.]

Unlike in the case of Jaculbe, the retirement plan of PNB was solely and exclusively funded by PNB,
and no financial burden is imposed on the employees for their retirement benefits. [Amelia R. Obusan vs.
Philippine National Bank, G.R. No. 181178, July 26, 2010, Nachura, J.]

Retirement pay, on the other hand, presupposes that the employee entitled to it has reached the
compulsory retirement age or has rendered the required number of years as provided for in the collective
bargaining agreement (CBA), the employment contract or company policy, or in the absence thereof, in
Republic Act No. 7641 or the Retirement Law. [Motorola Philippines, Inc. vs. Ambrosio, G.R. No. 173279,
March 30, 2009]

The receipt of retirement benefits does not bar the retiree from receiving separation pay. Separation
pay is a statutory right designed to provide the employee with the wherewithal during the period that he/she
is looking for another employment. On the other hand, retirement benefits are intended to help the employee
enjoy the remaining years of his life, lessening the burden of worrying about his financial support, and are a
form of reward for his loyalty and service to the employer. [Santos vs. Servier Philippines, Inc., G.R. No.
166377, November 28, 2008]

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EXCEPT,
When the Retirement Plan of the employer bars the employee from claiming additional benefits on
top of that provided for in the Plan. [Santos vs. Servier Philippines, Inc., supra]

The Retirement Pay Law only applies in a situation where:

(1) there is no collective bargaining agreement or other applicable employment contract; or
(2) there is a CBA or other applicable employment contract, but it is below the requirements set for by
law. [Oxales vs. United Laboratories, G.R. No. 152991, July 21, 2008]

There are two (2) essential requisites in order that R.A. 7641 may be given retroactive effect:
(1) the claimant for retirement benefits was still in the employ of the employer at the time the statute took
effect; and
(2) the claimant had complied with the requirements for eligibility for such retirement benefits under the
statute. [Universal Robina Sugar Milling Corporation (URSUMCO) vs. Caballeda, G.R. No. 156644,
July 28, 2008]

An employer is free to impose a retirement age less than 65 for as long as it has the employees’
consent. [Alpha C. Jaculbe vs. Silliman University, G.R. No. 156934, March 16, 2007]

An employee who has rendered at least 20 years of service may retire under RA 1616, and receive
a retirement gratuity of 1 month salary for every year of service. MC No. 26-96, on the other hand, provides
for the computation of the separation benefit applicable to permanent officials who are not qualified to retire
under any existing law and those who are qualified to retire. Those who are not qualified, as long as they
served for more than a year, may avail of the gratuity corresponding to their length of service. As for those
employees who are qualified to retire, they may only receive a separation pay equivalent to the difference
between the incentive package and the retirement benefit under any existing law. [Metropolitan
Waterworks and Sewerage System vs. Gabriel Advincula, et al., G.R. No. 179217, February 2, 2011,
Carpio, J.]

When PNB was privatized, its personality as a government-owned corporation ceased, and all the
employees therein are deemed retired. The separated employees are entitled to all the benefits accruing to
them, after PNB cleared them of any accountability, absent PNB's findings of pending administrative case
against them. [Ang vs. Philippine National Bank, G.R. No. 178762, June 16, 2010, Abad, J.]

BUT,
Employees who were offered appointments and absorbed by the private concessionaires after
privatization are never separated from service by virtue of the reorganization pursuant to RA 8041.
[Metropolitan Waterworks and Sewerage System vs. Advincula, et al., G.R. No. 179217, February 2,
2011, Carpio, J.]

COMMENT: In both cases, some employees were absorbed by the company after privatization took
effect. However, these two cases treated the subsequent appointment of the employees concerned
differently, in that, one considered the absorbed employees as retired from government service and entitled
to retirement benefits, whereas the other treated the absorbed employees as never separated, their service
uninterrupted.

3.2. Exclusions from Coverage

The law does not cover employees of retail, service and agricultural establishments or operations
employing not more than (10) employees or workers and employees of the National Government and its
political subdivisions, including Government-owned and/or –controlled corporations, if they are covered by
the Civil Service Law and its regulations. [Labor Advisory on Retirement Pay Law, supra; Sec. 2, Rules
Implementing the New Retirement Law]

3.3. Components of retirement pay

Rules Implementing the

New Retirement Law

SEC. 5. Retirement Benefits.

5.1. In the absence of an applicable agreement or retirement plan, an
employee who retires pursuant to the Act shall be entitled to retirement pay
equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.

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 5.2. Components of One-half (1/2) Month Salary.—For the purpose of
determining the minimum retirement pay due an employee under this Rule, the
term “one-half month salary” shall include all the following:
(a) Fifteen (15) days salary of the employee based on his latest salary
rate. As used herein, the term “salary” includes all remunerations paid by an
employer to his employees for services rendered during normal working days and
hours, whether such payments are fixed or ascertained on a time, task, piece or
commission basis, or other method of calculating the same, and includes the fair
and reasonable value, as determined by the Secretary of Labor and Employment,
of food, lodging or other facilities customarily furnished by the employer to his
employees. The term does not include cost of living allowances, profit-sharing
payments and other monetary benefits which are not considered as part of or
integrated into the regular salary of the employees;
(b) The cash equivalent of not more than five (5) days of service
incentive leave;
(c) One twelfth of the 13th month pay due the employee;
(d) All other benefits that the employer and employee may agree upon
that should be included in the compensation of the employee’s retirement pay.
5.3. One-half month salary of employees who are paid by results.—For
covered workers who are paid by results and do not have a fixed monthly rate, the
basis for determination of the salary for fifteen days shall be their average daily
salary (ADS), subject to the provisions of Rule VII-A, Book III of the Rules
Implementing the Labor code on the payment of wages of workers whoa re paid by
results. The ADS is the average salary for the last twelve (12) months reckoned
from the date of their retirement, divided by the number of actual working days in
that particular period.

 Republic Act No. 7641 amended Article 287 of the Labor Code by providing for
retirement pay to qualified private sector employees in the absence of any retirement plan
in the establishment. Even a bus conductor paid on commission basis falls within the
coverage of RA 7641 if no retirement scheme was adopted in the establishment he is
working. Thus, his retirement pay should include the cash equivalent of the 5-day service
incentive leave and 1/12 of the 13th month pay. [Rodolfo J. Serrano vs. Severino
Santos Transit, et al., G.R. No. 187698, August 9, 2010, Carpio Morales, J.]

Rules on Retirement vs. Separation Pay

under Art. 283

1. If there is no prohibition in the CBA/retirement plan against double recovery of both the retirement
pay and separation pay under the law - the employee can get both. [Aquino vs. NLRC, 206 SCRA
118 (1992)]

2. Otherwise, the employee can only get either. [Carlos F. Solomon, et al. vs. Associate of
International Shipping Lines, Inc., G.R. No. 156317, April 26, 2005; Ma. Isabel T. Santos vs.
Servier Phils., Inc., G.R. No. 166377, November 28, 2008]

3.4. Retirement pay under RA 7641 vis-à-vis

retirement benefits under SSS and GSIS laws

Labor Code

Art. 287. Retirement. Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or other
applicable employment contract.

In case of retirement, the employee shall be entitled to receive such

retirement benefits as he may have earned under existing laws and any collective
bargaining agreement and other agreements: Provided, however, That an

Labor Law Reviewer 85

 employee’s retirement benefits under any collective bargaining 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 employees in the establishment, an employee upon reaching the age of
sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in
the said establishment, may retire and shall be entitled to retirement pay
equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.

Unless the parties provide for broader inclusions, the term ‘one-half (1/2)
month salary’ shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month
pay and the cash equivalent of not more than five (5) days of service incentive
leaves.

Retail, service and agricultural establishments or operations employing not

more than ten (10) employees 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 Article 288 of this Code.

SSS Law

SEC. 12-B. Retirement Benefits.—

(a) A member who has paid at least one hundred twenty (120) monthly
contributions prior to the semester of retirement; and who (1) has reached the age
of sixty (60) years and is already separated from employment or has ceased to be
self-employed (2) has reached the age of sixty (65) years, shall be entitled for as
long as he lives to the monthly pension: Provided, That he shall have the option
to receive his first eighteen (18) monthly pensions in lump sum discounted at the
preferential rate of interest to be determined by the SSS.
(b) A covered member who is sixty (60) years old at retirement and who
does not qualify for pension benefits under paragraph (a) above, shall be entitled
to a lump sum benefit equal to the total contributions paid by him and on his
behalf: Provided, That he is separated from employment and is not continuing
payment of contributions to the SSS on his own.
(c) The monthly pension shall be suspended upon the re-employment
or resumption of self-employment of a retired employee who is less than sixty-five
(65) years old. He shall again be subject to Section Eighteen and his employer to
Section Nineteen of this Act.
(d) Upon the death of the retired member, his primary beneficiaries as
of the date of his retirement shall be entitled to receive the monthly pension:
Provided, That if he has no primary beneficiaries and he dies within sixty (60)
months from the start of his monthly pension, his secondary beneficiaries shall be
entitled to a lump sum benefit equivalent to the total monthly pensions
corresponding to the balance of the five-year-guaranteed period, excluding the
dependents’ pension.
(e) The monthly pension of a member who retires after reaching sixty
(60) shall be the higher of either: (1) the monthly pension computed at the earliest
time he could have retired had he been separated from employment or ceased to
be self-employed plus all adjustments thereto; or (2) the monthly pension
computed at the time when he actually retires.

GSIS Law

SEC. 13. Retirement Benefits.—

(a) Retirement benefits shall be:
(1) the lump sum payment as defined in this Act payable at the
time of retirement plus an old-age pension benefit equal to the basic monthly
pension payable monthly for life, starting upon expiration of the five-year (5)

Labor Law Reviewer 86

 guaranteed period covered by the lump sum; or
(2) cash payment equivalent to eighteen (18) months of his basic
monthly pension plus monthly pension for life payable immediately with no five-
year (5) guarantee.
(b) Unless the service is extended by appropriate authorities,
retirement shall be compulsory for an employee at sixty-five (65) years of age with
at least fifteen (15) years of service: Provided, That if he has less than fifteen (15)
years of service, he may be allowed to continue in the service in accordance with
existing civil service rules and regulations.

SEC. 13-A. Conditions for Entitlement.—A member who retires from the
service shall be entitled to the retirement benefits enumerated in paragraph (a) of
Section 13 hereof: Provided, That:
(1) he has rendered at least fifteen (15) years of service;
(2) he is at least sixty (60) years of age at the time of retirement; and
(3) he is not receiving a monthly pension benefit from permanent total
disability.

 The provision “as of the date of his retirement” which qualifies the term “primary
beneficiaries” was nullified by the Supreme Court for violating the due process and
equal protection clauses of the Constitution. [Dycaico vs. SSS, G.R. No. 161357,
November 30, 2005]

CASE:

Government Service Insurance System vs. Fernando P. De Leon,

G.R. No. 186560, November 17, 2010, Nachura, J.

The inflexible rule in our jurisdiction is that social legislation must be liberally construed in favor of
the beneficiaries. Retirement laws should be liberally construed in favor of the retiree, because their
objective is to provide for the retiree's sustenance and even comfort when he no longer has the capability to
earn a livelihood. All doubts must be resolved in favor of the retiree to achieve their humanitarian purpose.

Retirement benefits are a form of reward for an employee's loyalty and service to the employer, and
are intended to help the employee enjoy the remaining years of his life, lessening the burden of having to
worry about his financial support or upkeep. A pension partakes of the nature of “retained wages” of the
retiree for a dual purpose: (1) to entice competent people to enter the government service; and (2) to permit
them to retire from service with relative security, not only for those who have retained their vigor, but more
so for those who have been incapacitated by illness or accident.

A retiree, after receiving retirement benefits under one law, but later on was discovered not qualified
thereunder is not all throughout disqualified to receive retirement benefits under any other existing retirement
law. This does not amount to double retirement nor does it amount to conversion of retirement mode.

The conversion under the law is one that is voluntary choice made by the retiree. On the other hand,
in a case where retiree was later on discovered to be disqualified to receive retirement benefits under one
law, his receipt of retirement benefits based on another retirement law is not conversion, because it is not a
voluntary choice of the retiree, but a consequence of his disqualification.

In this case, retired prosecutors of the National Prosecution Service, pursuant to RA 10071, is not
entitled to receive the benefits granted to all those who retired prior to the effectivity thereof.

Rules On Double Recovery

1) If CBA/Retirement Plan prohibits double recovery of separation pay and retirement benefit –
then grant only one benefit, whichever is greater.

2) If CBA/Retirement Plan contains no prohibition, grant both. [Aquino vs. NLRC, 206 SCRA 118,
122-123 (1992)]

3) Same is true with retirement plan vs. CBA. [Aquino, supra, citing BLTB Co. vs. CA, 71 SCRA
470; see also Salomon vs. Association of International Shipping Lines, Inc., 457 SCRA
254, 262 (2005)]

Labor Law Reviewer 87

 4) If CBA does not require payment of retirement pay “in addition” to retrenchment pay, then no
double recovery.

 Retirement under the CBA is subject to judicial review and nullification. A CBA, as a labor contract,
is not merely contractual in nature but impressed with public interest. It can be nullified for being contrary to
law, public morals, or public policy. [Cainta Catholic School vs. Cainta Catholic School Employees
Union, 489 SCRA 468, 485 (2006)]

 Retirement laws are liberally construed in favor of the persons intended to be benefited.

HOWEVER,
 When the employer’s retirement plan precludes employees, whose services were terminated for
cause, from availing retirement benefits, such cannot be granted for lack of consensual and statutory basis
for the grant of retirement benefits. [Divina S. Lopez vs. National Steel Corporation, G.R. No. 149674,
Feb. 16, 2004 (423 SCRA 109)]

Voucher records – indicates the amounts disbursed

Clearance – is a certification clearing an employee of any accountability. [Tiu vs. Pasaol,
April 30, 2003, Quisumbing, J.]

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