LMTs for the 2024 Bar Examination: Labor Law

 Paulino Ungos III

 2024 September 09
 Labor Law, Social Legislation
1) Employer-employee relationship
Four-fold test of employment relationship:
 selection and engagement of the employee or the power to hire;
 payment of wages;
 the power to dismiss; and
 the power to control the employee
(Salazar v. Simbajon, G.R. No. 202374, 30 June 2021)
Power of Control
The most important element is the employer’s control of the employee’s
conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it. However, the power of control refers
merely to the existence of the power, and not to the actual exercise thereof.
No particular form of evidence is required to prove the existence of
an employer-employee relationship. Any competent and relevant evidence to
prove the relationship may be admitted. However, a finding that such
relationship exists must still rest on some substantial evidence.
(Dusol v. Lazo, G.R. No. 200555, 20 January 2021)
2) Independent Contractor
It is the burden of the employer to prove that a person whose services it pays
for is an independent contractor rather than a regular employee with or without
a fixed term.
(Fuji Television Network, Inc. v. Espiritu, G.R. Nos. 204944-45, December
3, 2014)
3) Contracting Arrangements
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. (ARTICLE 106, Labor
Code of the Philippines)
The following must be considered in determining whether an entity is a
legitimate job contractor or is engaged in labor-only contracting:
 registration with the proper government agencies;
 existence of substantial capital or investment;
 service agreement that ensures compliance with all the rights
and benefits under labor laws;
 nature of the activities performed by the employees, i.e., if they are
usually necessary or desirable to the operation of the principal’s
company or directly related to the main business of the principal within a
definite predetermined period; and
 the exercise of the right to control the performance of the employees’
work.
The true nature of the relationship between the principal, contractor, and
employee cannot be dictated by mere expedience of a unilateral declaration in
a contract.
Previous declarations that a company is an independent job contractor cannot
validly be the basis in concluding its status as such in another case involving a
different employee. The totality of the facts and surrounding circumstances,
distinct in every case, must be assessed in determining whether an entity is a
legitimate job contractor or a labor-only contractor.
In labor-only contracting, the statute creates an employer-employee
relationship for a comprehensive purpose: to prevent a circumvention of labor
laws. The contractor is considered merely an agent of the principal employer
and the latter is responsible to the employees of the labor-only contractor as if
such employees had been directly employed by the principal employer. The
principal employer therefore becomes solidarily liable with the labor-only
contractor for all the rightful claims of the employees.
(Conjusta v. PPI Holdings, Inc., G.R. No. 252720, 22 August 2022)
4) Illegal Recruitment, Contract Substitution
The substitution or alteration of employment contracts is listed as a prohibited
practice under Article 34 (i) of the Labor Code of the Philippines. To substitute
or alter to the prejudice of the worker, employment contracts approved and
verified by the Department of Labor and Employment from the time of actual
signing thereof by the parties up to and including the period of the expiration
of the same without the approval of the Department of Labor and
Employment” — is considered an act of “illegal recruitment” under Section 6 (i)
of Migrant Workers and Overseas Filipinos Act of 1995.
Mere intention to commit contract substitution should not be left unpunished.
(Fil-Expat Placement Agency, Inc. v. Lee, G.R. No. 250439, 22 September
2020)
5) Regular 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 x x x. (ARTICLE 295, Labor Code of the Philippines)
What determines regular employment is not the employment contract, written
or otherwise, but the nature of the job. The applicable test is the reasonable
connection between the particular activity performed by the employee in
relation to the usual business of the employer. (Laurente v. Helenar
Construction, G.R. No. 243812, 07 July 2021)
6) Fixed Term Employment
Contracts of employment for a fixed term are not unlawful unless it is apparent
from the circumstances that the periods have been imposed to circumvent the
laws on security of tenure. The Supreme Court has laid down the criteria of a
valid fixed-term employment, to wit:
 The fixed period of employment was knowingly and voluntarily agreed
upon by the parties without any force, duress, or improper pressure
being brought to bear upon the employee and absent any other
circumstances vitiating his consent; or
 It satisfactorily appears that the employer and the employee dealt with
each other on more or less equal terms with no moral dominance
exercised by the former or the latter.
Contracts of employment for a fixed period terminate on their own at the end
of such period. (Tuppil, Jr. v. LBP Service Corp., G.R. No. 228407, 10 June
2020)
7) Money Claims, Burden of Proving Payment
In determining the employee’s entitlement to monetary claims, the burden of
proof is shifted from the employer or the employee, depending on the
monetary claim sought.
In claims for payment of salary differential, service incentive leave,
holiday pay, and 13th month pay, the burden rests on the employer to prove
payment. This standard follows the basic rule that in all illegal dismissal cases
the burden rests on the defendant-employer to prove payment rather than on
the plaintiff-employee to prove non-payment. This likewise stems from the fact
that all pertinent personnel files, payrolls, records, remittances and other
similar documents — which show that the differentials, service incentive leave
and other claims of workers have been paid — are not in the possession of
the worker but are in the custody and control of the employer.
On the other hand, for overtime pay, premium pays for holidays and rest days,
the burden is shifted on the employee, as these monetary claims are not
incurred in the normal course of business. It is thus incumbent upon the
employee to first prove that he actually rendered service in excess of the
regular eight working hours a day, and that he in fact worked on holidays and
rest days
(Zonio v. 1st Quantum Leap Security Agency, Inc., G.R. No. 224944, 05
May 2021)
8) Wage Distortion
Concept
Wage distortion is a situation where an increase in the minimum wages
prescribed by law or wage order results in the elimination or severe
contraction of intentional quantitative differences in wage or salary rates
between and among employee groups in the same establishment within the
region thereby effectively obliterating the distinctions embodied in the wage
structure based on skills, length of service, or other logical bases of
differentiation.
Elements of Wage Distortion
Wage distortion can exist only when the following elements are
present:
 The establishment has an existing hierarchy of positions with
corresponding salary rates, i.e., wage structure. In a problem
dealing with wage distortion, the basic assumption is that there exists a
grouping or classification of employees which establishes distinctions
among such employees on some relevant or legitimate basis. The
formulation of a wage structure through the classification of employees
is a matter of management judgment and discretion. The employees
cannot create their own independent classification of employees and
use it as a basis to demand an across-the-board increase in salary.
Neither can the NLRC, under the guise of rectifying a wage distortion,
 unilaterally impose upon an employer a new scheme of classification of
employees where none has been previously established.
 The Regional Wage Board (or Congress) has issued a minimum
wage order (or law). For wage distortion to exist, the wage increase
must come from implementation of a law or wage order. Article 124 of
the Labor Code does not contemplate wage increase brought about by
implementation of a collective bargaining agreement. Neither does it
contemplate wage adjustment brought about by merit increase.
 The new minimum wage resulted in significant increase in the
salary rate of the lower pay class (in the existing hierarchy of
positions) without a concomitant increase in the salary rate of a
higher one, to the point that the significant increase in salary rate
has eliminated or severely contracted the distinction between the
two levels. The quantitative wage distinction need not be obliterated. It
is enough that the quantitative wage distinction was severely
contracted.
 The resulting distortion must affect employees in the same
establishment within the region. This means that the grant of higher
wages in the same establishment in one region than in the same
establishment in another region is not wage distortion. The difference in
wages between employees in the same pay scale in different regions is
not the mischief sought to be banished by law.
Procedure for Correction of Wage Distortion in Unionized
Establishments
 The employer and the union shall negotiate to correct the distortions.
 If the negotiations fail, the matter shall be brought to the grievance
machinery under their collective bargaining agreement.
 If the grievance machinery fails to settle the dispute, the matter shall be
threshed out through voluntary arbitration.
Procedure for Correction of Wage Distortion in Non-Unionized
Establishments
 The employers and workers shall negotiate to correct such distortions.
 If negotiations fail, the matter shall be brought to the NCMB for
conciliation.
 If the NCMB fails to settle the dispute, the matter shall be referred to the
NLRC for compulsory arbitration.
(ARTICLE 124, Labor Code of the Philippines)
9) Non-Diminution Rule
Generally, employees have a vested right over existing benefits that the
employer voluntarily granted them. These benefits cannot be reduced,
diminished, discontinued or eliminated consistent with the constitutional
mandate to protect the rights of workers and promote their welfare.
The non-diminution rule applies only if the benefit is based on an express
policy, a written contract, or has ripened into a practice. (Home Credit Mutual
Building and Loan Association v. Prudente, G.R. No. 200010, 27 August
2020)
10) Seafarers
POEA-SEC, Concealment
Section 20, paragraph E of the POEA-SEC clearly provides that
a seafarer who knowingly conceals a pre-existing illness or condition in the
Pre-Employment Medical Examination (PEME) shall be liable for
misrepresentation and shall be disqualified from any compensation and
benefits.
The rule seeks to penalize seafarers who conceal information to pass the pre-
employment medical examination. It even makes such concealment a just
cause for termination.
There is a “pre-existing illness or condition” if prior to the processing of the
POEA contract, any of the following is present:
 the advice of a medical doctor on treatment was given for such
continuing illness or condition; or
 the seafarer has been diagnosed and has knowledge of such illness or
condition but failed to disclose it during the pre-employment medical
examination, and such cannot be diagnosed during such examination.
(Trans-Global Maritime Agency, Inc. v. Utanes, G.R. No. 236498, 16
September 2020)
POEA-SEC, Establishing Compensability, Conditions
To be entitled to disability benefits for an occupation illness listed under
Section 32-A of the POEA-SEC, a seafarer must show compliance with the
following conditions:
 The seafarer’s work must involve the risk described therein;
 The disease was contracted as a result of the seafarer’s exposure to
the described risks;
  The disease was contracted within a period of exposure and under such
other factors necessary to contract it; and
 There was no notorious negligence on the part of the seafarer.
(Trans-Global Maritime Agency, Inc. v. Utanes, G.R. No. 236498, 16
September 2020)
11) SSS
Dependents
The dependents shall be the following:
 The legal spouse entitled by law to receive support from the member;
 The legitimate, legitimated or legally adopted, and illegitimate child who
is unmarried, not gainfully employed, and has not reached twenty-one
(21) years of age, or if over twenty-one (21) years of age, he is
congenitally or while still a minor has been permanently incapacitated
and incapable of self-support, physically or mentally; and
 The parent who is receiving regular support from the member.
(Section 8 (e), Social Security Act of 2018.)
Beneficiaries
The dependent spouse until he or she remarries, the dependent legitimate,
legitimated or legally adopted, and illegitimate children, who shall be the
primary beneficiaries of the member: Provided, That the dependent illegitimate
children shall be entitled to fifty percent (50%) of the share of the legitimate,
legitimated or legally adopted children: Provided, further, That in the absence
of the dependent legitimate, legitimated or legally adopted children of the
member, his/her dependent illegitimate children shall be entitled to one
hundred percent (100%) of the benefits. In their absence, the dependent
parents who shall be the secondary beneficiaries of the member. In the
absence of all the foregoing, any other person designated by the member as
his/her secondary beneficiary.
(Section 8 (k), Social Security Act of 2018)
12) Management Prerogatives
Promulgation of Policies, Rules and Regulations
An employer enjoys a wide latitude of discretion in the promulgation of
policies, rules and regulations on work-related activities of the employees so
long as they are 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 or under valid agreements. Company policies
and regulations are generally valid and binding on the parties and must be
complied with until finally revised or amended, unilaterally or preferably
through negotiation, by competent authority. (Bicol Isarog Transport
System, Inc. v. Relucio, G.R. No. 234725, 16 September 2020)
Dismissal of Employees
Indeed, the power to dismiss is a formal prerogative of the employer, but this
is not without limitations. The employer is bound to exercise caution in
terminating the services of his employees and dismissals must not be arbitrary
and capricious. Due process must be observed and employers should respect
and protect the rights of their employees. To effect a valid dismissal, the law
requires not only that there be just and valid cause; it must also be supported
by evidence. There must be a reasonable proportionality between the offense
and the penalty. Dismissal, without doubt, is the ultimate penalty that can be
meted to an employee. Hence, where a penalty less punitive would suffice,
whatever missteps may be committed by labor ought not to visited with a
consequence so severe. (Verizon Communications Philippines, Inc. v.
Margin, G.R. No. 216599, 16 September 2020)
13) Just Causes for Terminating Employment
An employer may terminate an employment for any of the following causes:
 Serious misconduct or willful disobedience by the employee of the
lawful orders of his employer or representative in connection with his
work;
 Gross and habitual neglect by the employee of his duties;
 Fraud or willful breach by the employee of the trust reposed in him by
his employer or duly authorized representative;
 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
 Other causes analogous to the foregoing.
(ARTICLE 297, Labor Code of the Philippines)
The burden of proving that the termination of an employee was for a just or
authorized cause lies with the employer. If the employer fails to meet this
burden, the conclusion would be that the dismissal was unjustified and
therefore, illegal. (Bicol Isarog Transport System, Inc. v. Relucio, G.R. No.
234725, 16 September 2020)
Serious Misconduct, Elements:
  the misconduct must be serious;
 it must relate to the performance of the employee’s duties showing that
the employee has become unfit to continue working for the employer;
and
 it must have been performed with wrongful intent.
(Mariano v. G.V. Florida Transport, G.R. No. 240882, 16 September 2020)
Willful Disobedience/Insubordination, Elements
 the employee’s assailed conduct must have been willful, that is,
characterized by a wrongful and perverse attitude; and
 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.
(Bicol Isarog Transport System, Inc. v. Relucio, G.R. No. 234725, 16
September 2020)
Loss of Trust and Confidence
To justify a valid dismissal based on loss of trust and confidence, the
concurrence of two (2) conditions must be satisfied:
 the employee concerned must be holding a position of trust and
confidence; and
 there must be an act that would justify the loss of trust and confidence.
(Bicol Isarog Transport System, Inc. v. Relucio, G.R. No. 234725, 16
September 2020)
Requirements of Procedural Due Process in Termination of Employment
for Just Causes
To effect a valid dismissal on the ground of a just cause, the employer must
substantially comply with the following standards of due process:
 a first written notice — containing the specific cause or grounds for
termination under Article 297 of the Labor Code, and company policies,
if any; detailed narration of the facts and circumstances that will serve
as basis for the charge; and a directive to submit a written explanation
within a reasonable period;
 after serving the first notice, the employer should afford the employee
ample opportunity to be heard and to defend himself; and
  after determining that termination of employment is justified, the
employer shall serve the employee a written notice of termination
indicating that all circumstances involving the charge against the
employee have been considered; and the grounds have been
established to justify the severance of his employment.
(Bicol Isarog Transport System, Inc. v. Relucio, G.R. No. 234725, 16
September 2020)
Belated Due Process
Where the dismissal is for a just cause, the lack of statutory due process will
not nullify the dismissal, or render it illegal or ineffectual. The employer will not
be required to pay the employee back wages. However, the employer should
indemnify the employee for the violation of his statutory right in the form
of nominal damages. (Mariano v. G.V. Florida Transport, G.R. No. 240882,
16 September 2020)
Reinstatement without Backwages
Even though it is basic in labor law that an illegally dismissed employee is
entitled to reinstatement, or separation pay if reinstatement is not viable, and
payment of full backwages, in some instances, the Court has carved out
exceptions where the reinstatement of an employee was ordered without an
award of backwages. This is on account of:
 the fact that dismissal of the employee would be too harsh of a penalty;
and
 that the employer was in good faith in terminating the employment.
(Verizon Communications Philippines, Inc. v. Margin, G.R. No. 216599, 16
September 2020)
14) Constructive Dismissal
The law recognizes situations wherein the employee must leave his or her
work to protect one’s rights from the coercive acts of the employer. The
employee is considered to have been illegally terminated because he or she is
forced to relinquish the job due to the employer’s unfair or unreasonable
treatment. The test of constructive dismissal is whether a reasonable person
in the employee’s position would have felt compelled to give up his position
under the circumstances.
(Fil-Expat Placement Agency, Inc. v. Lee, G.R. No. 250439, 22 September
2020)
15) Authorized Causes for Terminating Employment
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 x x x. (ARTICLE 298, Labor Code of the Philippines)
Closure
Article 298 of the Labor Code of the Philippines considers closure of business
as an authorized cause for the dismissal of employees, whether or not the
closure is due to serious business losses. However, if the closure is not due to
serious business losses, the employer is required to pay its employees
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. (Dusol v. Lazo, G.R.
No. 200555, 20 January 2021)
16) Liability of Corporate Officers
Company officials cannot be held solidarily liable with the corporation for the
termination of the employee’s employment absent any showing that the
dismissal was attended with malice or bad faith. (Mariano v. G.V. Florida
Transport, G.R. No. 240882, 16 September 2020)
17) Collective Bargaining Agreement, Negotiations, GOCCs
The parties in a collective bargaining agreement may establish such
stipulations, clauses, terms and conditions as they may deem convenient
provided these are not contrary to law, morals, good customs, public order, or
public policy. (Social Housing Employees Association, Inc. v. Social
Housing Finance Corp., G.R. No. 237729, 14 October 2020)
The right of government employees to self-organization is not as extensive as
in the right of private employees. Likewise, the right of government employees
to collective bargaining and negotiation is subject to limitations. Only the terms
and conditions of government employment not fixed by law can be negotiated.
(Clark Development Corp. v. Association of CDC Supervisory Personnel
Union, G.R. No. 207853, 30 March 2022)
Officers and employees of government-owned or controlled corporations
without original charters are covered by the Labor Code, not the Civil Service
Law. However, non-chartered government-owned or controlled corporations
are limited by law in negotiating economic terms with their employees. This is
because the law has provided the Compensation and Position Classification
System, which applies to all government-owned or controlled corporations,
chartered or non-chartered. (GSIS Family Bank Employees Union v.
Villanueva, G.R. No. 210773, 23 January 2019)
18) Strikes
The Labor Code of the Philippines and its implementing rules limit the grounds
for a valid strike to:
 a bargaining deadlock in the course of collective bargaining, or
 the conduct of unfair labor practices by the employer.
Only a certified or duly recognized bargaining representative may declare a
strike in case of a bargaining deadlock. However, in cases of unfair labor
practices, the strike may be declared by any legitimate labor organization.
(Bigg’s, Inc. v. Boncacas, G.R. Nos. 200487 & 200636, March 6, 2019.)
19) National Interest Disputes
Once the Secretary of Labor assumes jurisdiction over a labor dispute, a
strike, whether actual or intended, is automatically enjoined.
If a strike has been declared, the strikers must return to work even if they filed
a motion for reconsideration of the assumption order.
The moment a striker defies a return-to-work order, he is deemed to have
abandoned his job. It is already in itself knowingly participating in an illegal
act.
Considering that an illegal act was committed, all strikers, whether union
officers or plain members, may be declared to have lost their employment
status.
(Rodriguez v. Philippine Airlines, Inc., G.R. Nos. 178501 & 178510,
January 11, 2016.)
20) Jurisdiction of the Labor Arbiter vis-a-vis POEA (now Department of
Migrant Workers)
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995, as
amended by Republic Act (RA) No. 10022, provides that the Labor
Arbiter shall have original and exclusive jurisdiction to hear and decide the
claims arising out of an employer-employee relationship or by virtue of any law
or contract involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary, and other forms of damage.
Rule X of the Implementing Rules and Regulations of RA No. 10022 provides
that the POEA exercises administrative jurisdiction arising out of violations of
rules and regulations and administrative disciplinary jurisdiction over
employers, principals, contracting partners, and overseas Filipino workers.
(U R Employed International Corp. v. Pinmiliw, G.R. No. 225263, 16 March
2022)
21) Reinstatement Pending Appeal
x x x In any event, the decision of the Labor Arbiter reinstating a dismissed or
separated employee, insofar as the reinstatement aspect is concerned, shall
immediately be executory, even pending appeal. x x x (ARTICLE 229, Labor
Code of the Philippines)
The obligation to reinstate pending appeal exists only when the decision of the
Labor Arbiter expressly orders reinstatement. (Filflex Industrial &
Manufacturing Corp. v. National Labor Relations Commission, G.R. No.
115395, 12 February 1998)
Therefore, if the decision of the Labor Arbiter did not order reinstatement
(despite the finding that the employee was illegally dismissed), the NLRC, in
resolving the appeal, cannot order payment of reinstatement salaries. For
example, if the Decision of the Labor Arbiter declared the dismissal to be
illegal but merely awarded separation pay in lieu of reinstatement, the NLRC
(on appeal) cannot award reinstatement salaries if it reverses the Labor
Arbiter’s Decision.
22) Appeal to the NLRC
Decisions, awards, or orders of the Labor Arbiter are final and executory
unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt of such decisions, awards, or orders. (ARTICLE
229, Labor Code of the Philippines)
The only remedy which the losing party can avail of from the decision of the
Labor Arbiter is to appeal to NLRC. (Egypt Air Local Employees
Association v. National Labor Relations Commission, G.R. No. 98933, 01
March 1993)
The 2011 NLRC Rules of Procedure, as amended, do not allow a party to file
a motion for reconsideration from a decision of the Labor Arbiter. Neither can a
party file a motion for new trial nor can it file a petition for relief from judgment.
These are prohibited pleadings under the rules. (See Section 5 (f), Rule V,
2011 NLRC Rules of Procedure, as amended)
The right to appeal is a mere statutory privilege exercised only in the manner
and in accordance with the requirements of the law. In Labor Cases, Article
229 of the Labor Code of the Philippines set forth the Rules on Appeal to the
NLRC from the Decisions, Awards or Orders of the Labor Arbiter. The rules
specifically provide that in case of a judgment involving a monetary award, an
appeal by the employer may be perfected only upon the posting of a cash or
surety bond issued by a reputable bonding company duly accredited by the
Commission in the amount equivalent to the monetary award in the judgment
appealed from.
(Salazar v. Simbajon, G.R. No. 202374, 30 June 2021)
In order to stop the running of the period to perfect an appeal, a motion to
reduce bond must comply with two conditions:
 that the motion to reduce bond shall be based on meritorious grounds;
and
 a reasonable amount of bond in relation to the monetary award is
posted by the appellant.
(Manrique v. Delta Earthmoving, Inc., G.R. No. 229429, 09 November
2020)
23) Decisions of Voluntary Arbitrators
Under the Labor Code, the award or decision of Voluntary Arbitrator shall be
final and executory after 10 calendar days from notice. On the other hand,
Rule 43 of the Rules of Court provides that an appeal from the judgment or
final orders of voluntary arbitrators must be made within 15 days from notice.
In Guagua National Colleges v. Court of Appeals, the Supreme Court clarified
that the 10-day period in Article 276 should be understood as the time within
which the adverse party may move for a reconsideration from the decision or
award of the voluntary arbitrators. Thereafter, the aggrieved party may appeal
to the Court of Appeals within 15 days from notice pursuant to Rule 43 of the
Rules of Court.
(Social Housing Employees Association, Inc. v. Social Housing Finance
Corp., G.R. No. 237729, 14 October 2020)
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