LABOR EXAM 2018

3. Cite the five grounds for disciplinary

action by the Philippine Overseas Employment
Date of Submission: 23 July 2018 Administration (POEA) against overseas workers.
(5%) 2007 Bar Exam
1. Discuss the types of illegal recruitment
under the Labor Code. (5%) 2007 Bar Exam Under the Section 1(A) and (B), Rule III, Part VII
of the 2002 POEA Rules and Regulations
Under the Labor Code, as amended by Governing the Recruitment and Employment of
Republic Act No. 8042 otherwise known the Land-based Overseas Workers, the
as the ―Overseas Filipinos and Migrant following are the grounds for disciplinary action
Workers Act of 1998, there are two types against overseas workers:
of illegal recruitment, particularly simple
illegal recruitment and illegal (A) Pre-employment Offenses:
recruitment which is considered as an (1) Using, providing, or submitting false
offense involving economic sabotage. information or documents for purposes of job
application or employment;
Illegal recruitment as an offense (2) Unjustified refusal to depart for the
involving economic sabotage is worksite after all employment and travel
committed under the following qualifying documents have been duly approved by the
circumstances, to wit: When illegal appropriate government agency/eis.
recruitment is committed by a syndicate,
that is when it is carried out by a group of (B) Offenses during Employment
three (3) or more persons conspiring (1) Commission of a felony or a crime
and/or confederating with one another; punishable by Philippine Laws or by the laws of
or When illegal recruitment is committed the host country;
in large scale that is when it is committed (2) Unjustified breach of employment
against three (3) or more persons contract;
whether individually or as a group. (3) Embezzlement of company funds or
monies and/or properties of a fellow worker
2. In initiating actions against alleged illegal entrusted for delivery to kin or relatives in the
recruiters, may the Secretary of Labor and Philippines; and
Employment issue search and arrest warrants? (4) Violation/s sacred practice of the
(5%) 2007 Bar Exam host country.

No, the Secretary of Labor and 4. True or false? As a general rule, direct
Employment cannot issue search and hiring of Overseas Filipino Workers (OFWs) is
arrest warrants. He is only authorized to not allowed. (2%) 2010 Bar Exam
cause the arrest of illegal recruiters
and/or to order the search of the office or True. Employers cannot directly hire
premises used in illegal recruitment workers for overseas employment except
activities (Article 38 of the Labor Code, as through authorized entities (article 18).
amended by P.D. 2018). The power to Direct hiring by members of the
issue search and arrest is specifically diplomatic corps, international
vested only upon judges under the organizations, and such other employers
constitution. as may be allowed by the Department of
Labor and Employment is exempted from
Azucena: under the Constitution, only a this provision.
judge may issue warrants of search and
arrest. The labor authorities must go 5. When does the recruitment of workers
through the judicial process. The become an act of economic sabotage? (2%) 2015
secretary of Labor, not being a judge, may Bar Exam
no longer issue search of warrants. To
that extent, Article 38, par. (c), of the Illegal recruitment is considered
Labor Code, is declared of no force and economic sabotage - when the
effect.

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 commission thereof is attended by the employment is concurrently vested with
qualifying circumstances as follows: the POEA and the Secretary of Labor.

a. By a syndicate - if carried out by a group 8. The State shall allow the deployment of
of 3 or more persons conspiring and overseas Filipino workers only in countries
confederating with one another; where the rights of Filipino migrant workers are
protected. Which of the following is not a
b. In large scale - if committed against 3 guarantee, on the part of the receiving country,
or more persons individually or as a for the protection of the rights of OFW’s?
group. a. It has existing labor and social laws
(Article 38 of the Labor Code) protecting the rights of migrant workers;
b. It promotes and facilitates re-integration
6. Rocket Corporation is a domestic of migrants into the national mainstream;
corporation registered with the SEC, with 30% of c. It is a signatory to and/or ratifier of
its authorized capital stock owned by foreigners multilateral conventions, declarations or
and 70% of its authorized capital stock owned by resolutions relating to the protection of migrant
Filipinos. Is Rocket Corporation allowed to workers;
engage in the recruitment and placement of d. It has concluded a bilateral agreement or
workers, locally and overseas? Briefly state the arrangement with the government on the
basis for your answer. (2%) 2015 Bar Exam protection of the rights of overseas Filipino
workers.
No. Article 27 of the Labor Code
mandates that pertinently, for a B. It promotes and facilitates re-
Corporation to validly engage in integration of migrants into the national
recruitment and placement of workers, mainstream
locally and overseas, at least seventy-five
percent (75%) of its authorized and voting REPUBLIC ACT NO. 8042
capital stock must be owned and
controlled by Filipino citizens. Since only Migrant Workers and Overseas Filipinos
70% of its authorized capital stock is Act of 1995
owned by Filipinos, it consequently
cannot validly engage in recruitment and SEC. 4. Deployment of Migrant Workers -
placement of workers, locally and The State shall deploy overseas Filipino
overseas. workers only in countries where the
rights of Filipino migrant workers are
protected. The government recognizes
7. The power to suspend or cancel a license any of the following as guarantee on the
to recruit employees is vested on: part of the receiving country for the
protection and the rights of overseas
a. The Secretary of Labor and Filipino workers:
Employment;
b. The POEA Administrator; (a) It has existing labor and social laws
c. A and B ‘concurrently; protecting the rights of migrant workers;
d. Neither of them.
(b) It is a signatory to multilateral
C. A and B concurrently conventions, declaration or resolutions
relating to the protection of migrant
TRANS ACTION OVERSEAS workers;
CORPORATION, petitioner, vs. THE
HONORABLE SECRETARY OF LABOR (c) It has concluded a bilateral agreement
(G.R. No. 109583. September 5, 1997) or arrangement with the government
protecting the rights of overseas Filipino
Ruling: In view of the Courts disposition workers; and
on the matter, we rule that the power to
suspend or cancel any license or authority
to recruit employees for overseas

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 (d) It is taking positive, concrete shall themselves be jointly and solidarily
measures to protect the rights of migrant liable with the corporation or partnership
workers. for the aforesaid claims and damages.

It is not among those specifically Such liabilities shall continue

mentioned under Section 4 or the during the entire period or duration of the
Migrant Workers and Overseas Filipinos employment contract and shall not be
Act. affected by any substitution, amendment
or modification made locally or in a
9. What is the nature of the liabilities of the foreign country of the said contract.
local recruitment agency and its foreign
principal? 10. Which phrase is the most accurate to
a. The local agency is jointly liable with the complete the statement – A private employment
foreign principal; severance of relations between agency is any person or entity engaged in the
the local agent and the foreign principal recruitment and placement of workers:
dissolves the liability of the local agent recruiter; a. for a fee, which is charged directly from
b. Local agency is solidarily liable with the the workers.
foreign principal; severance of relations between b. for a fee, which is charged directly from
the local agent and the foreign principal employers.
dissolves the liability of the foreign principal. c. for a fee, which is charged directly or
only; indirectly from workers, employers or both.
c. Local agency is solidarily liable with the d. for a fee, which is charged from workers
foreign principal; severance of relations between or employers, which covers both local and
the local agent and foreign principal does not overseas employment.
affect the liability of the foreign principal;
d. Local agency is jointly liable with the (C) For a fee, which is charged directly or
foreign principal; severance of the relations indirectly from workers, employers or
between the local agent and the foreign principal both
does not affect the liability of the local recruiter.
Art. 13 (c), Labor Code
c. Local agency is solidarily liable
with the foreign principal; severance of c) "Private fee-charging employment
relations between the local agent and agency" means any person or entity
foreign principal does not affect the engaged in recruitment and placement of
liability of the foreign principal; workers for a fee which is charged,
directly or indirectly, from the workers or
RA 8042, SEC. 10. MONEY CLAIMS. – employers or both.

XXX. (e) "Private employment agency" means

any person or entity engaged in the
The liability of the recruitment and placement of workers for
principal/employer and the a fee which is charged directly against the
recruitment/placement agency for any workers or employers, or both (Section
and all claims under this section shall be 1(e), OMNIBUS RULES
joint and several. This provisions shall be IMPLEMENTING THE LABOR CODE).
incorporated in the contract for overseas
employment and shall be a condition 11. Who has jurisdiction over a money claim
precedent for its approval. The instituted by an overseas Filipino worker?
performance bond to be filed by the a. Labor Arbiter;
recruitment/placement agency, as b. National Labor Relations Commission;
provided by law, shall be answerable for c. Labor Arbiter concurrently with the
all money claims or damages that may be regular courts.;
awarded to the workers. If the d. National Labor Relations Commission
recruitment/placement agency is a concurrently with the regular courts.
juridical being, the corporate officers and
directors and partners as the case may be, (A) Labor Arbiter

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 Sec. 10, RA 8042 C. Yes, he is entitled to his salaries for the
unexpired portion of his employment
SEC. 10. MONEY CLAIMS. - contract, plus full reimbursement of his
Notwithstanding any provision of law to placement fee with interest at 12% per
the contrary, the Labor Arbiters of the annum (Serrano vs. Gallant maritime,
National Labor Relations Commission G.R. No. 167614, March 24, 2009)
(NLRC) shall have the original and
exclusive jurisdiction to hear and decide, In sum, prior to R.A. No. 8042, OFWs and
within ninety (90) calendar days after local workers with fixed-term
filing of the complaint, the claims arising employment who were illegally
out of an employer-employee discharged were treated alike in terms of
relationship or by virtue of any law or the computation of their money claims:
contract involving Filipino workers for they were uniformly entitled to their
overseas deployment including claims for salaries for the entire unexpired portions
actual, moral, exemplary and other forms of their contracts. But with the enactment
of damages. of R.A. No. 8042, specifically the
adoption of the subject clause, illegally
12. Peter worked for a Norwegian cargo dismissed OFWs with an unexpired
vessel. He worked as a deckhand, whose primary portion of one year or more in their
duty was to assist in the unloading and loading employment contract have since been
of cargo and sometimes, assist in cleaning the differently treated in that their money
ship. He signed a five-year contract starting in claims are subject to a 3-month cap,
2009. In 2011, Peter’s employers began treating whereas no such limitation is imposed on
him differently. He was often maltreated and his local workers with fixed-term
salary was not released on time. These were employment.
frequently protested to by Peter. Apparently
exasperated by his frequent protestations, The Court concludes that the subject
Peter’s employer, a once top official in China, clause contains a suspect classification in
suddenly told him that his services would be that, in the computation of the monetary
terminated as soon as the vessel arrived at the benefits of fixed-term employees who are
next port, in Indonesia. Peter had enough money illegally discharged, it imposes a 3-month
to go back home, and immediately upon cap on the claim of OFWs with an
arriving, he filed a money claim with the NLRC unexpired portion of one year or more in
against his former employer’s local agent. Will their contracts, but none on the claims of
Peter’s case prosper? other OFWs or local workers with fixed-
a. Yes, he is entitled to full reimbursement term employment. The subject clause
of his placement fee, with’ interest at 12°/o per singles out one classification of OFWs
annum, plus salary for the unexpired portion of and burdens it with a peculiar
his employment contract or for three (3) months disadvantage.
for every year of the unexpired portion,
whichever is higher; Note: The court found the subject clause
b. Yes, he is entitled to full reimbursement unconstitutional (Thus, In case of
of his placement fee, with interest at 12% per termination of overseas employment
annum, plus his salary for the unexpired portion without just, valid or authorized cause as
of his employment contract or for three (3) defined by law or contract, the workers
months for every year of the unexpired portion, shall be entitled to the full
whichever is less; reimbursement of his placement fee with
c. Yes, he is entitled to his salaries for the interest of twelve percent (12%) per
unexpired portion of his employment contract, annum, plus his salaries for the unexpired
plus full reimbursement of his placement fee portion of his employment contract or for
with interest at ·12°/o per annum; three (3) months for every year of the
d. Yes, he is entitled to his salaries for three unexpired term, whichever is less. [Sec.
(3) months for every year of the unexpired 10, RA 8042, 5th paragraph)
portion of his employment contract, plus full
reimbursement of his placement fee with 13. J refused to comply with his deployment
interest at 12°/o per annum. assignment with K, a manning agency. K filed a

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complaint against him for breach of contract for the exercise of our primary
before the Philippine Overseas Employment jurisdiction."
Administration (POEA). The POEA penalized J
with one (1) year suspension from overseas While We do not wish to intrude into the
deployment. On appeal, the suspension was congressional sphere on the matter of the
reduced to six (6) months by the Secretary of wisdom of a law, on this score, We add the
Labor. Is the remedy of appeal still available to J further observations that there is a
and where should he file his appeal? growing number of labor cases being
a. Yes, he can file an appeal before the Court elevated to this Court which, not being a
of Appeals via a Petition for Certiorari under rule trier of fact, has at times been constrained
65; to remand the case to the NLRC for
b. Yes, he can file an appeal before the resolution of unclear or ambiguous
Supreme Court via a Petition for Certiorari factual findings; that the Court of Appeals
under Rule 65; is procedurally equipped for that
c. Yes, he can file an appeal before the Office purpose, aside from the increased
of the President since this is an administrative number of its component divisions; and
case; that there is undeniably an imperative
d. Yes, he can file an appeal before the need for expeditious action on labor cases
National Labor Relations Commission because as a major aspect of constitutional
there is an employer-employee relationship. protection to labor.

(A) Yes, he can file an appeal before the Therefore, all references in the amended
court of appeals via a petition for Section 9 of B.P. No. 129 to supposed
certiorari under Rule 65 [NFL vs appeals from the NLRC to the Supreme
Laguesma] Court are interpreted and hereby
declared to mean and refer to petitions
NATIONAL FEDERATION OF LABOR for certiorari under Rule 65.
(NFL), petitioner, vs. HON. Consequently, all such petitions should
BIENVENIDO E. LAGUESMA, henceforth be initially filed in the Court of
UNDERSECRETARY OF THE Appeals in strict observance of the
DEPARTMENT OF LABOR AND doctrine on the hierarchy of courts as the
EMPLOYMENT, AND ALLIANCE OF appropriate forum for the relief desired
NATIONALIST GENUINE LABOR (ST. MARTIN FUNERAL HOME vs
ORGANIZATION-KILUSANG MAYO NATIONAL LABOR RELATIONS
UNO (ANGLO-KMU), respondents. COMMISSION G. R. No. 130866
September 16, 1998).
G.R. No. 123426. March 10, 1999

In fine, we find that it is procedurally 14. On December 12, 2008, A signed a contract to
feasible as well as practicable that be part of the crew of ABC Cruises, Inc. through its
petitions for certiorari under Rule 65 Philippine manning agency XYZ. Under the
against the decisions of the Secretary of standard employment contract of the Philippine
Labor rendered under the Labor Code Overseas Employment Administration (POEA),
and its implementing and related rules be his employment was to commence upon his actual
filed initially in the Court of Appeals. departure from the port in the point of hire,
Paramount consideration is strict Manila, from where he would take a flight to the
observance of the doctrine on the USA to join the cruise ship “MS Carnegie.”
hierarchy of courts, emphasized in St. However, more than three months after A secured his
Martin Funeral Homes v. NLRC, on "the exit clearance from the POEA for his supposed
judicial policy that this Court will not departure on January 15, 2009, XYZ still had not
entertain resort to it unless the redress deployed him for no valid reason. Is A entitled to
desired cannot be obtained in the relief? Explain. (3%) 2010 Bar Exam
appropriate courts or where exceptional
and compelling circumstances justify YES. Even if no departure took place, the
availment of a remedy within and calling contract of employment has already been
perfected which creates certain rights and

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 obligations, the breach of which may give rise to Regulations. Under POEA Rules and Regulations, the
a cause of action against the erring party: obligation to register personnel with the POEA
1. A can file a complaint for Recruitment belongs to the officers of a recruitment agency.
Violation for XYZ’s failure to deploy him within May X be held criminally liable for illegal
the prescribed period without any valid reason, recruitment? Explain. (2%) 2010 Bar Exam
a ground for the imposition of administrative
sanction against XYZ under Sec. 2, Rule I, Part V NO, X performed his work with the
of the 2003 POEA Rules on Employment of knowledge that he works for a licensed
Seafarers; recruitment agency. He is in no position
2. At the same time, A can file a case for illegal to know that the officers of said
recruitment under Sec. 6 (L) of R.A. 8042 (cf. recruitment agency failed to register him
Sec.11 Rule I, Part V of the 2003 POEA Rules on as its personnel (People v. Chowdury
Employment of Seafarers); A may likewise file a [2000]. The fault not being attributable
complaint for breach of contract, and claim to him, he may be considered to have
damages therefor before the NLRC, despite apparent authority to represent Alpha in
absence of Er-Ee relationship. Sec. 10 of R.A. recruitment for overseas employment.
8042 conferred jurisdiction on the Labor Arbiter
not only on claims arising out of Er-Ee Azucena: an employee who does not
relationship, but also by virtue of any law or control, manage or direct the business
contract involving Filipino workers for overseas may not be held liable for illegal
deployment including claims for actual, moral, recruitment. Where it is shown that the
exemplary, and other forms of damages. employee was merely acting under the
(Santiago v. CF Sharp Crew Management direction of his superiors and was
[2007]). unaware that his acts constituted a crime,
he may not be held criminally liable for an
Section 6, RA 8042 act done for and in behalf of his employer.
(l) Failure to actually deploy Such employee has to be acquitted even
without valid reason as where the employer in violation of POEA
determined by the Department of requirement did not register such
Labor and Employment; and employee, and the employee was unaware
of such violation (People vs Bulu
(m) Failure to reimburse Chowdry, February 15, 2000).
expenses incurred by the workers
in connection with his 16. Lina has been working as a steward with
documentation and processing for a Miami, U.S.A.-based Loyal Cruise Lines for the
purposes of deployment, in cases past 15 years. She was recruited by a local
where the deployment does not manning agency, Macapagal Shipping, and was
actually take place without the made to sign a 10-month employment contract
worker's fault everytime she left for Miami. Macapagal
Shipping paid for Lina’s round-trip travel
15. A was approached for possible overseas expenses from Manila to Miami. Because of a
deployment to Dubai by X, an interviewer of job food poisoning incident which happened during
applicants for Alpha Personnel Services, Inc., an her last cruise assignment, Lina was not re-
overseas recruitment agency. X required A to submit hired. Lina claims she has been illegally
certain documents (passport, NBI clearance, medical terminated and seeks separation pay. If you were
certificate) and to pay P25,000 as processing fee. the Labor Arbiter handling the case, how would
Upon payment of the said amount to the agency you decide? (4%) 2014 Bar Exam
cashier, A was advised to wait for his visa. After
five months, A visited the office of Alpha I will dismiss Lina’s complaint. Lina is a
Personnel Services, Inc. during which X told him that he contractual employee and the length of
could no longer be deployed for employment her employment is determined by the
abroad. A was informed by the Philippine contracts she entered into. Here, her
Overseas Employment Administration (POEA) employment was terminated at the
that while Alpha Personnel Services, Inc. was a expiration of the contract. (Millares, e.al
licensed agency, X was not registered as its v. NLRC, 385 SCRA 306 [2002]).
employee, contrary to POEA Rules and

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17. For ten (10) separate but consecutive requirement; otherwise, Cesar will forfeit
yearly contracts, Cesar has been deployed as an his right to claim benefits.
able-bodied seaman by Meritt Shipping, through 3. Is Dr. Sales the company-
its local agent, Ace Maritime Services (agency), designated physician? –The company-
in accordance with the 2000Philippine Overseas designated physician is the one who
Employment Administration Standard initially determines compensability.
Employment Contract (2000 POEA-SEC). 4. Was Cesar assessed by Dr. Sales
Cesar's employment was also covered by a CBA (if he is the company physician) within
between the union, AMOSl.JP, and Meritt 120 days?
Shipping. Both the 2000 POEA-SEC and the 5. If the 120 days was exceeded and
CBA commonly provide the same mode and no declaration was made as to Cesar’s
procedures for claiming disability benefits. disability, was this extended to 240 days
Cesar's last contract (for nine months) expired because Cesar required further medical
on July 15, 2013. treatment?
6. Was the 240 days exceeded and
Cesar disembarked from the vessel M/V still no final decision was reached as to
Seven Seas on July 16, 2013 as a seaman on Cesar’s disability? – If so, Cesar is
"finished contract". He immediately reported to deemed entitled to permanent total
the agency and complained that he had been disability benefits.
experiencing spells of dizziness, nausea, general 7. If the company’s physician and
weakness, and difficulty in breathing. The Cesar’s physician cannot agree, was a
agency referred him to Dr. Sales, a cardio- third physician designated to determine
pulmonary specialist, who examined and treated the true nature and extent of the
him; advised him to take a complete rest for a disability. The third physician’s finding
while; gave him medications; and declared him under the law is final and conclusive.
fit to resume work as a seaman. 8. In the matter of the complaint
for illegal dismissal: there is none because
After a month, Cesar went back to the Cesar disembarked on a “finished
agency to ask for re-deployment. The agency contract”.
rejected his application. Cesar responded by 9. Seafarers are contractual
demanding total disability benefits based on the employees, for a fixed term, governed by
ailments that he developed and suffered while on the contract they sign; an exception to
board Meritt Shipping vessels. The claim was Art. 280 (now Art. 286) of the Labor
based on the certification of his physician Code. Hence, the complaint for illegal
(internist Dr. Reyes) that he could no longer dismissal will not prosper.
undertake sea duties because of the
hypertension and diabetes that afflicted him As to the issue of illegal dismissal,
while serving on Meritt Shipping vessels in the it should be noted that Cesar
last 10 years. Rejected once again, Cesar filed a disembarked on a “finished contract”. As
complaint for illegal dismissal and the payment a seafarer, he is considered as a
of total permanent disability benefits against the contractual employee. His employment
agency and its principal. was terminated at the expiration of the
contract. Thus, the complaint for illegal
Assume that you are the Labor Arbiter dismissal will not prosper.
deciding the case. Identify the facts and issues
you would consider material in resolving the the seafarer shall submit himself to a
illegal dismissal and disability complaint. post-employment medical examination by a
Explain your choices and their materiality, and company-designated physician within three
resolve the case. (8%) 2013 Bar Exam working days upon his return except when he
is physically incapacitated to do so, in which
1. Does the Labor Arbiter have case, a written notice to the agency within
jurisdiction to decide the case? the same period is deemed as compliance. In
2. Did Cesar submit to a post-
the course of the treatment, the seafarer
employment examination within 3 days
shall also report regularly to the company-
upon his return? – This is mandatory
designated physician specifically on the dates

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 as prescribed by the company-designated seafarer's disability or fitness to return to
physician and agreed to by the seafarer. work before his or her opinion can be
Failure of the seafarer to comply with the valid and binding between the parties
mandatory reporting requirement shall (Section 20 of the 2000 Philippine
result in his forfeiture of the right to claim the Overseas Employment Administration
above benefits. 11 If a doctor appointed by Standard Employment Contract).
In the case at bar, Dr. Reyes was
the seafarer disagrees with the assessment,
neither the company doctor, nor was he a
a third doctor may be agreed jointly between
third-party physician jointly agreed
the Employer and the seafarer. The third between the Cesar and his employer.
doctor’s decision shall be final and binding on
both parties. 18. Victor was hired by a local manning
agency as a seafarer cook on board a luxury
As to his claim for the payment of vessel for an eight-month cruise. While on
total permanent disability benefits, it board, Victor complained of chronic coughing,
should be determined whether the intermittent fever, and joint pains. He was
certification given by Dr. Reyes would be advised by the ship's doctor to take complete bed
binding between the parties or not. rest but was not given any other medication. His
condition persisted but the degree varied from
As mentioned in the facts, the day to day. At the end of the cruise, Victor went
agency-referred doctor, Dr. Sales, home to Iloilo and there had himself examined.
actually declared him fit to resume work The examination revealed that he had
as a seaman. According to Section 20 of tuberculosis.
the 2000 Philippine Overseas
Employment Administration Standard (a) Victor sued for medical reimbursement,
Employment Contract, it is the company- damages and attorney's fees, claiming that
designated physician is the one who tuberculosis was a compensable illness. Do you
initially determines compensability. agree with Victor? Why or why not? (2%)

If the seafarer disagrees with TB is listed under Sec. 32-A of the POEA-
company-designated physician’s final SEC as a work-related disease. It was also
medical assessment on the seafarer’s either contracted or aggravated during
disability grading within a period of 120 the effectivity of Victor’s contract. Having
days or 240 days extended period from shown its manifestations on board, Victor
the time the seafarer reported to him, the should have been medically repatriated
seafarer has the right to engage the for further examination and treatment in
services of a doctor of his choice. the Philippines. This obligation was
If a doctor appointed by the entirely omitted in bad faith by the
seafarer disagrees with the assessment, a company when it waited for his contract
third doctor may be agreed jointly to expire on him before signing him off.
between the Employer and the seafarer. It On this basis, Victor is entitled to medical
is the third doctor’s decision shall be final reimbursement, damages and attorney’s
and binding on both parties. fees.

The SC, in the case of Reynaldo Y. Maritime Agencies, Inc. v. NLRC,45 "[i]f
Sunit vs. OSM Maritime Services, et al. the injury is the proximate cause of [the
(G.R. No. 223035, 27), ruled that in seafarer’s] death or disability for which
determining whether a disability is total compensation is sought, [his] previous
or partial, what is crucial is whether the physical condition x x x is unimportant
employee who suffered from disability and recovery may be had for injury
could still perform his work independent of any pre-existing
notwithstanding the disability he met. weakness or disease," viz.:
The company doctor or the appointed
third-party physician must arrive at a Compensability x x x does not depend on
definite and conclusive assessment of the whether the injury or disease was pre-

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 existing at the time of the employment NOTES:
but rather if the disease or injury is work-
related or aggravated his condition. It is  “Overseas Filipino Worker” refers to a person
indeed safe to presume that, at the very who is to be engaged, is engaged or has been
least, the arduous nature of [the engaged in a remunerated activity in a state of
seafarer’s] employment had contributed which he/she is not a citizen or on board a vessel
to the aggravation of his injury, if indeed
navigating the foreign seas other than a
it was pre-existing at the time of his
employment. Therefore, it is but just that government ship used for military or non-
he be duly compensated for it. It is not commercial purposes or on an installation
necessary, in order for an employee to located offshore or on high seas; to be used
recover compensation, that he must have interchangeably with “migrant workers” (RA
been in perfect condition or health at the 8042).
time he received the injury, or that he be
 “Recruitment and placement” refers to any act of
free from disease. Every workman brings
with him to his employment certain canvassing, enlisting, contracting, transporting,
infirmities, and while the employer is not utilizing, hiring, or procuring workers, and
the insurer of the health of his employees, includes referrals, contract services, promising or
he takes them as he finds them, and advertising for employment, locally or abroad,
assumes the risk of having a weakened whether for profit or not: Provided, that any
condition aggravated by some injury person or entity which, in any manner offers or
which might not hurt or bother a perfectly
normal, healthy person. If the injury is promises for a fee employment to two or more
the proximate cause of his death or persons shall be deemed engaged in recruitment
disability for which compensation is and placement (Article 13, [b]).
sought, the previous physical condition of  The above definition enumerates 11 activities
the employee is unimportant and categorized as recruitment and placement. Any
recovery may be had for injury such activity done by any person WITHOUT THE
independent of any pre-existing
weakness or disease. REQUIRED LICENSE from the Bureau of Local
Employment or the Philippine Overseas
(b) Due to his prolonged illness, Victor was Employment Administration is punishable as
unable to work for more than 120 days. Will this illegal recruitment.
entitle him to claim total permanent disability  The number of persons dealt with is not the basis
benefits? (2%) 2015 Bar Exam in determining whether or not an act constitutes
recruitment and placement.
No. Victor’s TB is work-related and it  “two or more persons” merely lays down a rule
developed on board, thereby satisfying of evidence (People vs Panis).
the twin requisites of compensability.  Article 16 – except as provided in Chapter II of
However, despite his knowledge of his this Title, no person or entity, other than the
medical condition, he failed to report to public employment offices shall engage in the
his manning agent within three days from
his arrival as required by Sec. 20-B (3) of recruitment and placement of workers.
the POEA-SEC. since he already felt the  As an exception to this article, Article 25 allows
manifestations of TB before his sign-off, the private sector to participate in the
he should have submitted to post- recruitment and placement of workers either
employment medical examination local or overseas. A license from the Bureau of
(Jebsens Maritime Inc. v. Enrique Undag,
Local Employment of the POEA is required.
662 SCRA 670). The effect of his omission
is forfeiture by him of disability benefits  Despite the ban in Article 18, “name hires” are
(Coastal Safeway Marine Services, Inc. v. recognized. This term refers o individual workers
Elmer T. Esguerra, 655 SCRA 300). In who are able to secure contracts for overseas
effect, the 120-day rule has no application employment on their own efforts and
at all. representation without the assistance or

9|Page
 participation of any recruitment agency. Their The worker shall pay the placement fee to
hiring nonetheless, has to be processed thru the the licensed recruitment agency only after
POEA. signing the POEA-approved contract.
 Jurisdiction of the NLRC:
 The persons criminally liable for illegal
o Original and exclusive jurisdiction over all
recruitment are the principals, accomplices
cases, including money claims, arising out
ad accessories. In case of juridical persons,
of any law or contract involving Filipino
the ones liable are the officers having
workers in overseas employment,
ownership, control management or direction
including seamen.
of their business who are responsible for the
 Jurisdiction of the POEA:
commission of the offense, and the
o All cases which are administrative in
responsible employees or agents (Sec. 6, RA
character, involving or arising out of
No. 8042).
violations or rules and regulations
relating to licensing and registration or
recruitment and employment agencies or
entities; and
o Disciplinary action cases and other Date of Submission: 13 August 2018
special cases which are administrative in 1. Matibay Shoe and RepAair Store, as
character, involving employers, added service to its customers, devoted a portion
principals, contracting partners and of its store to a shoe shine stand. The shoe shine
Filipino migrant workers (sec 28, Rules boys were tested for their skill before being
Implementing the Migrants Worker’s Act, allowed to work and given ID cards. They were
Feb 29, 1996). told to be present from the opening of the store
 POEA decisions are appealable to the Secretary up to closing time and were• required to follow
of Labor (power of supervision and control). the company rules on cleanliness and decorum.
 Disability benefit is granted if the worker suffers They bought their own shoe shine boxes, polish,
an injury or illness which is WROK-RELATED and and rags. The boys were paid by their customers
for their services but the payment is coursed
which OCCURRED DURING TH TERM of the
through the store's cashier, who pays them
seafarer’s contract.
before closing time. They were not supervised in
 Article 192(c) of the Labor Code provides that their work by any managerial employee of the
temporary total disability lasting store but for a valid complaint by a customer or
CONTINUOUSLY FOR MORE THAN 120 DAYS, for violation of any company rule, they can be
except as otherwise provided in the AREC refused admission to the store. Were the boys
(Amended Rules on Employment employees of the store? Explain. (5%) 2016 Bar
Compensation), shall be deemed total and Exam
permanent.
Suggested Answer:
 Section 54, POEA Revised Rules, 2016):
Placement fee may be charged against the OFW Yes. The elements to determine the
equivalent to one month basic salary specified in existence of an employment relationship
the POEA-approved contract, EXCEPT the are: (a) the selection and engagement of
the employee; (b) the payment of wages;
following:
(c) the employer's power to control the
a) Domestic worker
employee's conduct; and (d) the power of
b) Workers to be deployed to countries dismissal.
where the prevailing system, either by
law, policy or practice do not allow, The first element is present, as Matibay
directly or indirectly, the charging and Shoe allowed shoe shine boys in its shoe
collection of recruitment/placement fee. shine stand to render services that are
desirable in the line of business of
Matibay Shoe. In issuing ID's to the shoe
10 | P a g e
 shine boys, the same signifies that they THE HONORABLE CRESENCIANO B.
can represent themselves as part of the TRAJANO, DIRECTOR OF THE
work force of Matibay Shoe. BUREAU OF LABOR RELATIONS,
MINISTRY OF LABOR AND
The second element is also present.
EMPLOYMENT, AND KAISAHAN NG
Requiring the customers to pay through
MANGGAGAWANG PILIPINO
the Matibay Shoe's cashier signifies that
(KAMPIL-KATIPUNAN), respondents.
their services were not engaged by the
customers. Equally important, it was the shoe shiner is distinct from a piece worker
Matibay Shoe which gave the shoe shine because while the latter is paid for work
boys their daily wage. accomplished, he does not, however,
contribute anything to the capital of the
The third element is satisfied. Requiring employer other than his service. It is the
the shoe shine boys to be present from employer of the piece worker who pays his
store opening until store closing and to wages, while the shoe shiner in this instance is
paid directly by his customer. The piece worker
follow company rules on cleanliness and
is paid for work accomplished without regard or
decorum shows that they cannot conduct concern to the profit as derived by his employer,
their activity anywhere else but inside the but in the case of the shoe shiners, the
store of Matibay Shoe, hence, their means proceeds derived from the trade are always
and methods of accomplishing the divided share and share alike with respondent
desired services for the customers of BESA. The shoe shiner can take his share of
Matibay Shoe was controlled by it. the proceeds everyday if he wanted to or
weekly as is the practice of Besas The
Lastly, the fourth element is made employer of the piece worker supervises and
apparent when Matibay Shoe barred the controls his work, but in the case of the shoe
shoe shine boys from continuing with shiner, respondent BESA does not exercise
their work-related activity inside its any degree of control or supervision over their
person and their work. All these are not
establishment.
obtaining in the case of a piece worker as he is
Alternative Answer: in fact an employee in contemplation of law,
distinct from the shoe shiner in this instance
No. The elements to determine the who, in relation to respondent MAMERTO B.
existence of an employment relationship BESA, is a partner in the trade. Consequently,
are: (a) the selection and engagement of employer-employee relationship between
the employee; (b) the payment of wages; members of the Petitioning union and
respondent MAMERTO B. BESA being absent
(c) the employer's power to control the
the latter could not be held guilty of the unfair
employee's conduct; and (d) the power of tabor practice acts imputed against him. (p. 6,
dismissal. Annex "B1 " of said Decision). <äre|| anº• 1

The first element is absent. The mere 2. Gregorio was hired as an insurance
issuance of an ID to the boys is not underwriter by the Guaranteed Insurance
conclusive of the power of selection of Corporation (Guaranteed). He does not receive
Matibay Shoe. They may be given IDs any salary but solely relies on commissions
merely as a security measure for the earned for every insurance policy approved by
establishment. the company. He hires and pays his own
Furthermore, using the control test, the secretary but is provided free office space in the
boys have exclusive power over the means office of the company. He is, however, required
and method by which the shoe shining to meet a monthly quota of twenty (20)
activity is to be conducted. insurance policies, otherwise, he may be
terminated. He was made to agree to a Code of
G.R. No. 72409 December 29, 1986 Conduct for underwriters and is supervised by a
Unit Manager.
MAMERTO S. BESA, doing business
under the name and style of BESA'S [a] Is Gregorio an employee of Guaranteed?
CUSTOMBUILT SHOES, petitioner, vs. Explain. (2.5%)

11 | P a g e
[b] Suppose Gregorio is appointed as Unit In the case at bar, the concept of control
Manager and assigned to supervise several for purposes of employment is absent.
underwriters. He holds office in the company According to the Supreme Court in
premises, receives an overriding commission on Gregorio Tongko vs. The Manufacturers
the commissions of his underwriters, as well as a Life Insurance Co. (G.R. No. 167622 June
monthly allowance from the company, and is 29, 2010), a commitment to abide by the
supervised by a branch manager. He is governed rules and regulations of an insurance
by the Code of Conduct for Unit Managers. Is he company does not ipso facto make the
an employee of Guaranteed? Explain. (2.5%) insurance agent an employee. Neither do
2016 Bar Exam guidelines somehow restrictive of the
insurance agent’s conduct necessarily
SUGGESTED ANSWER:
indicate "control" as this term is defined
A. No, Gregorio is not an employee of in jurisprudence. Guidelines indicative of
Guaranteed. Control is the most labor law "control," should not merely
important element of employer-employee relate to the mutually desirable result
relationship, which refers to the means intended by the contractual relationship;
and methods by which the result is to be they must have the nature of dictating the
accomplished (Avelino Lambo and means or methods to be employed in
Vicente Belocura v. NLRC and J.C. Tailor attaining the result, or of fixing the
Shop and/or Johnny Co., 375 Phil. 855 methodology and of binding or restricting
[1999]), .citing Makati Haberdashery, the party hired to the use of these means.
Inc. v. NLRC, 259 Phil. 52 [1989]. The In fact, results-wise, the employer can
requirement of complying with quota, impose production quotas and can
company code of conduct and supervision determine how many agents, ought to be
by unit managers do not go into the employed to achieve the company’s
means and methods by which Gregorio objectives. These are management policy
must achieve his work. He has full decisions that the labor law element of
discretion on how to meet his quota control cannot reach.
requirement, hence, there is no
employer- employee relationship
between Gregorio and Guaranteed. B. SUGGESTED ANSWER:
No, Gregorio is not an employee of Yes, Gregorio is an employee. In fact, he
Guaranteed. In resolving the issue of is deemed as a regular employee. As a
whether an employer-employee unit manager who was tasked to
relationship, the four-fold test on supervise underwriters, he can be said to
employment is used as a guiding, if not be doing a task which is necessary and
governing norm, to determine, whether desirable to the usual business of
such relationship exists. These four Guaranteed. Article 295 of the Labor code
elements are: (1) the selection and provides that "(T)he provisions of written
engagement of the employee; (2) the agreement to the contrary
payment of wages; (3) the power of notwithstanding and regardless of the
dismissal; and (4) the control test. The oral agreement of the parties, an
control test––meaning whether or not employment shall be deemed to be
the employer controls or has reserved the regular where the employee has been
right to control the employee not only as engaged to perform activities which are
to the result of the work to be done but usually necessary or desirable in the usual
also the means and methods employed in business or trade of the employer, x x x."
reaching that end––constitutes the most
ALTERNATIVE ANSWER:
important index of the existence of an
employer-employee relationship. Yes. Article 219 (m) of the Labor
Code defines a Managerial employee as

12 | P a g e
 one who is vested with the powers or agents, defined in terms of covered
prerogatives to lay down and execute territory, through which the company
management policies and/or to hire, sells insurance. Still another point to
transfer, suspend, lay-off, recall, consider is that Tongko was not even
discharge, assign or discipline setting policies in the way a regular comp
employees. As Gregorio was appointed
(You may want to look up the case of
Unit Manager, the means and methods of
Gregorio V. Tongko v. The Manufacturers
accomplishing his goal come under the
Life Insurance Co. (Phils.), Inc. and
guidelines laid down by Guaranteed.
Renato A. Vergel de Dios; G.R. No.
Mine: no, Gregorio is still not an 167622)
employee of Guaranteed. He is not
supervising regular full-time employees
of Guaranteed but is guiding his corps of 3. Ador is a student working on his master's
underwriters, who are bound to degree in horticulture. To make ends meet, he
Guaranteed, all the while sharing the takes on jobs to come up with flower
formers’ commissions through his arrangements for friends. His neighbor, Nico, is
overrides. about to get married to Lucia and needs a floral
arranger. Ador offers his services and Nico
control over the respondents is evident.
agrees. They shake hands on it, agreeing that
And it is this right to control the
Nico will pay Ador :P20,000.00 for his services
employee, not only as to the result of the
but that Ador will take care of everything. As
work to be done, but also as to the means
Ador sets about to decorate the venue, Nico
and methods by which the same is to be
changes all of Ador's plans and ends up
accomplished, that constitutes the most
designing the arrangements himself with Ador
important index of the existence of the
simply executing Nico's instructions.
employer-employee relationship.
Is there an employer-employee relationship
Or With this case, it becomes apparent
between Nico and Ador? (4%) 2015 Bar Exams
that supervision and monitoring is
sufficient to establish control that is
evidence of an employer-employee
relationship. Such control would, SUGGESTED ANSWER:
therefore, be even more evident in the Yes. With Ador’s simply executing Nico’s
instant case considering that Gregorio instruction, Nico, now has control over
himself was tasked to supervise and Ador’s work, has become the employer of
monitor the activities of Manulife agents. Ador. In Royale Homes Marketing Corp.
An important point to note here is that v.Fidel Alcantara (G.R. 195190, July 28,
Tongko was not supervising regular full- 2014) the Supreme Court held that
time employees of Manulife engaged in control is the most important
the running of the insurance business; determinant of employer-employee
Tongko was effectively guiding his corps relationship.
of sales agents, who are bound to ALTERNATIVE ANSWER:
Manulife through the same Agreement
that he had with Manulife, all the while No, there is no employer-employee
sharing in these agents’ commissions relationship. The case at hand pertains to
through his overrides. This is the lead a civil law arrangement. There is no
agent concept mentioned above for want business undertaken by Lucia; what the
of a more appropriate term, since the title parties have is a contract for a specific
of Branch Manager used by the parties is service.
really a misnomer given that what is
involved is not a specific regular branch of
the company but a corps of non-employed

13 | P a g e
 *no, there is no employer-employee INTERMEDIATE APPELLATE COURT
relationship between Nico and Ador. and FERMIN LLAMAR, respondents.
Not every form of control has the effect of (Petitioner) has no means of compelling
establishing employee-employer the presence of a caddy. A caddy is not
relationship between the parties. Rules required to exercise his occupation in the
that merely serve as guidelines, which premises of petitioner. He may work with
only promote the result does not create an any other golf club or he may seek
employer-employee relationship. employment a caddy or otherwise with
any entity or individual without
restriction by petitioner. . . .
4. Don Luis, a widower, lived alone in a
. . . In the final analysis, petitioner has no
house with a large garden. One day, he noticed
was of compelling the presence of the
that the plants in his garden needed trimming.
caddies as they are not required to render
He remembered that Lando, a 17-year old out-
a definite number of hours of work on a
of-school youth, had contacted him in church the
single day. Even the group rotation of
other day looking for work. He contacted Lando
caddies is not absolute because a player is
who immediately attended to Don Luis’s garden
at liberty to choose a caddy of his
and finished the job in three days. (4%) Is there
preference regardless of the caddy's order
an employer-employee relationship between
in the rotation.
Don Luis and Lando? 2014 Bar Exams
It can happen that a caddy who has
SUGGESTED ANSWER:
rendered services to a player on one day
Yes. all the elements of Er-Ee relationship may still find sufficient time to work
are present, viz: elsewhere. Under such circumstances, he
may then leave the premises of petitioner
1. the selection and engagement of the and go to such other place of work that he
employee wishes (sic). Or a caddy who is on call for
2. the power of dismissal; a particular day may deliberately absent
himself if he has more profitable
3. the payment of wages; and caddying, or another, engagement in
4. the power to control the employee’s some other place. These are things
conduct beyond petitioner's control and for which
it imposes no direct sanctions on the
There was also no showing that Lando has caddies. . . .
his own tools, or equipment so as to
qualify him as an independent contractor.
5. The following are excluded from the
coverage of Book III of the Labor Code of the
ALTERNATIVE ANSWER: Philippines (Conditions of employment) except:
None. Lando [who] is an independent a. Field personnel;
contractor for Don Luis does not exercise
control over Lando’s means and method b. Supervisors;
in tending to the former’s garden. c. Managers;
d. Employees of government-owned and
Mine: no control over the means and controlled corporations. 2012 Bar Exams
method of his work to be accomplished. SUGGESTED ANSWER: (B)
G.R. No. 64948 September 27, 1994 Supervisors [Art. 82, Labor Code]

MANILA GOLF & COUNTRY CLUB, ART. 82. Coverage. - The

INC., petitioner, vs. provisions of this Title shall apply to

14 | P a g e
 employees in all establishments and Under Art. 82, a contractual employee is
undertakings whether for profit or not, not among the excluded employees,
but not to government employees, wherein the provisions on the Working
managerial employees, field personnel, Conditions and Rest Periods are
members of the family of the employer inapplicable.
who are dependent on him for support,
domestic helpers, persons in the personal
service of another, and workers who are 7. Which of the following is not a regular
paid by results as determined by the holiday?
Secretary of Labor in appropriate
regulations. a. New Year’s Eve;

As used herein, "managerial b. Eidil Fitr;

employees" refer to those whose primary c. Father’s Day;
duty consists of the management of the
establishment in which they are d. lndependence Day. 2012 Bar Exams
employed or of a department or Suggested Answer: C) Father‘s Day [Art.
subdivision thereof, and to other officers 94 (c), Labor Code]
or members of the managerial staff.
ART. 94. Right to holiday pay.
Under Art. 82, a supervisor is not
among the excluded employees. xxx
(c) As used in this Article, "holiday"
includes: New Year’s Day, Maundy
6. The provisions of the Labor Code on the Thursday, Good Friday, the ninth of
Working Conditions and Rest Periods of April, the first of May, the twelfth of June,
employees are inapplicable to the following the fourth of July, the thirtieth of
employees, except : November, the twenty-fifth and thirtieth
a. A supervisor in a fast food chain; of December and the day designated by
law for holding a general election.
b. A family driver;
RA No. 9492 (July 25, 2007) amended by
c. A laborer without any fixed salary, but RA 9849 (December 11, 2009) provides
receiving a compensation depending upon the for the twelve regular holiday wherein,
result of his work; Father’s day is not among the enumerated
d. A contractual employee. 2012 Bar Exams regular holiday.

ART. 82. Coverage. - The 8. Which of the following is not

provisions of this Title shall apply to compensable as hours worked?
employees in all establishments and a. Travel away from home;
undertakings whether for profit or not,
but not to government employees, b. Travel from home to work;
managerial employees, field personnel, c. Working while on call;
members of the family of the employer
who are dependent on him for support, d. Travel that is all in a day’s work. 2012 Bar
domestic helpers, persons in the personal Exams
service of another, and workers who are
paid by results as determined by the
Secretary of Labor in appropriate SUGGESTED ANSWER:
regulations.
(A) Travel away from home. [Art. 84,
xxx Labor Code]
(B) Travel from home to work.

15 | P a g e
 Under Article 84 of the Labor Code, hours case, the first choice did not specifically
worked shall include (a) all time during provide that the employee is not on an
which an employee is required to be on official duty.
duty or to be at a prescribed workplace;
In the second answer, letter B,
and (b) all time during which an
travel from home to work is not
employee is suffered or permitted to
compensable as he is involved in an
work. Rest periods of short duration
ordinary home-to-work travel which is a
during working hours shall be counted as
normal incident of employment. But
hours worked.
while the normal travel from home to
Under the Implementing Rules of the work is not worktime, when an employee
Labor Code, the following general receives an emergency call outside of his
principles shall govern in determining working hours and is required to travel to
whether the time spent by an employee is his regular place of business or some
considered hours worked for purposes of other work site all the of the time spent in
this Rule: such travel is working time. In this case,
the travel from home to work is not
(a) All hours are hours worked which the
specifically stated that it is an emergency
employee is required to give his employer,
that is outside the normal travel from
regardless of whether or not such hours
home. As a general rule, it is not
are spent in productive labor or involve
compensable.
physical or mental exertion.
(b) An employee need not leave the
premises of the work place in order that 9. Work may be performed beyond eight (8)
his rest period shall not be counted, it hours a day provided that:
being enough that he stops working, may
a. Employee is paid for overtime work an
rest completely and may leave his work
additional compensation equivalent to his
place, to go elsewhere, whether within or
regular wage plus at least 25% thereof;
outside the premises of his work place.
b. Employee is paid for overtime work an
(c) If the work performed was necessary,
additional compensation equivalent to his
or it benefited the employer, or the
regular wage plus at least 30% thereof;
employee could not abandon his work at
the end of his normal working hours c. Employee is paid for overtime work an
because he had no replacement, all time additional compensation equivalent to his
spent for such work shall be considered as regular wage plus at least 20% thereof;
hours worked, if the work was with the
knowledge of his employer or immediate d. None of the above. 2012 Bar Exams
supervisor. answer: (A) Employee is paid for
(d) The time during which an employee is overtime work an additional
inactive by reason of interruptions in his compensation equivalent to his regular
work beyond his control shall be wage plus at least 25% thereof [Art. 87,
considered working time either if the Labor Code]
imminence of the resumption of work
requires the employee’s presence at the
place of work or if the interval is too brief 10. The following are instances where an
to be utilized effectively and gainfully in employer can require an employee to work
the employee’s own interest. overtime, except:

In letter A, travel away from home, a. In case of actual or impending emergencies

may be compensable but the employee caused by serious accident, fire, flood, typhoon,
must be on an official duty or when it cuts earthquake, epidemic or other disaster or
across the employee’s workday. In this

16 | P a g e
calamity to prevent loss of life and property, or 11. Who among the following is not entitled to
imminent danger to public safety; 13th month pay?
b. When the country is at war or when other a. Stephanie, a probationary employee of a
national or local emergency has been declared by cooperative bank who rendered six (6) months
the national assembly or the chief executive; of service during the calendar year before filing
her resignation;
c. When there is urgent work to be performed on
machines, installations, or equipment or some b. Rafael, the secretary of a Senator;
other cause of similar nature;
c. Selina, a cook employed by and who lives with
d. Where the completion or contribution of the an old maid and who also tends the sari-sari
work started before the eight hour is necessary store of the latter;
to prevent serious obstruction or prejudice to the
d. Roger, a house gardener who is required to
business or operations of the employer. 2012
report to work only thrice a week. 2012 Bar
Bar Exams
Exams
Art. 89. Emergency overtime work. Any
Suggested answer: (B) Rafael, the
employee may be required by the
secretary of a Senator [Section 3 (b), Dec.
employer to perform overtime work in
22, 1975 Rules and Regulations
any of the following cases:
Implementing PD 851]
When the country is at war or when any
Sec. 3. Employers covered. - The Decree
other national or local emergency has
shall apply to all employers except to:
been declared by the National Assembly
or the Chief Executive; (a) Distressed employers, such as (1)
those which are currently incurring
When it is necessary to prevent loss of life
substantial losses or (2) in the case of
or property or in case of imminent danger
non-profit institutions and organizations,
to public safety due to an actual or
where their income, whether from
impending emergency in the locality
donations, contributions, grants and
caused by serious accidents, fire, flood,
other earnings from any source, has
typhoon, earthquake, epidemic, or other
consistently declined by more than forty
disaster or calamity;
(40%) percent of their normal income for
When there is urgent work to be the last two (2) years, subject to the
performed on machines, installations, or provision of Section 7 of this issuance;
equipment, in order to avoid serious loss
(b) The Government and any of its
or damage to the employer or some other
political subdivisions, including
cause of similar nature;
government-owned and controlled
When the work is necessary to prevent corporations, except those corporations
loss or damage to perishable goods; and operating essentially as private
subsidiaries of the Government;
Where the completion or continuation of
the work started before the eighth hour is (c) Employers already paying their
necessary to prevent serious obstruction employees 13-month pay or more in a
or prejudice to the business or operations calendar year or its equivalent at the time
of the employer. of this issuance;
Any employee required to render (d) Employers of household helpers and
overtime work under this Article shall be persons in the personal service of another
paid the additional compensation in relation to such workers; and
required in this Chapter.
(e) Employers of those who are paid on
purely commission, boundary, or task
basis, and those who are paid a fixed

17 | P a g e
 amount for performing a specific work, employees or in establishments exempted
irrespective of the time consumed in the from granting this benefit by the
performance thereof, except where the Secretary of Labor and Employment after
workers are paid on piece-rate basis in considering the viability or financial
which case the employer shall be covered condition of such establishment.
by this issuance insofar as such workers
(c) The grant of benefit in excess of that
are concerned.
provided herein shall not be made a
As used herein, workers paid on piece- subject of arbitration or any court or
rate basis shall refer to those who are paid administrative action.
a standard amount for every piece or unit
(refer pud sa handbook)
of work produced that is more or less
regularly replicated, without regard to the
time spent in producing the same.
13. May the employer and employee stipulate
The term "its equivalent" as used in that the latter’s regular or basic salary already
paragraph c) hereof shall include includes the overtime pay, such that when the
Christmas bonus, mid-year bonus, profit- employee actually works overtime he cannot
sharing payments and other cash bonuses claim overtime pay?
amounting to not less than 1/12th of the
basic salary but shall not include cash and a. Yes, provided there is a clear written
stock dividends, cost of living allowances agreement knowingly and freely entered into by
and all other allowances regularly the employees;
enjoyed by the employee, as well as non- b. Yes, provided the mathematical result shows
monetary benefits. Where an employer that the agreed legal wage rate and the overtime
pays less than 1/12th of the employees pay, computed separately, are equal to or higher
basic salary, the employer shall pay the than the separate amounts legally due;
difference.
c. No, the employer and employee cannot
stipulate includes the overtime pay;
12. Which type of employee is entitled to a d. A and B. 2012 Bar Exams
service incentive leave?
Suggested Answer: (C) No, the employer
a. managerial employees; and employee cannot stipulate that the
b. field personnel; latter‘s regular or basic salary includes
the overtime pay; [Art. 87, Labor Code]
c. government workers;
MAS TAMA.LOL (AZUCENA): D. A and
d. part-time workers. 2012 Bar Exams B.
Suggested Answer: (D) part-time The requisites therefore of “base pay with
workers. integrated overtime pay” are firstly, a
clear written agreement knowingly and
ART. 95. Right to service incentive leave.
freely entered into by the employee
- (a) Every employee who has rendered at
((Damasco
least one year of service shall be entitled
to a yearly service incentive leave of five vs. NLRC, et al., G.R. No. 115755,
days with pay. December 4, 2000), and, secondly, the
mathematical result shows that the
(b) This provision shall not apply to those
agreed legal wage rate and the overtime
who are already enjoying the benefit
pay, computed separately, are equal to or
herein provided, those enjoying vacation
higher than the separate amounts legally
leave with pay of at least five days and
due. An illustration of this is found in the
those employed in establishments
case of PESALA where the Court, by
regularly employing less than ten

18 | P a g e
 simple arithmetic, debunked the 15. Benito is the owner of an eponymous clothing
employer’s claim that the overtime pay brand that is a top seller. He employs a number
was already included in the basic salary of male and female models who wear Benito's
(PAL Employees Savings and Loan clothes in promotional shoots and videos. His
Association, Inc. [PESALA], petitioner vs. deal with the models is that Benito will pay them
National Labor Relations Commission with 3 sets of free clothes per week. Is this
and A.V. Esquejo, respondents, G.R. No. arrangement allowed? (2%) 2015 Bar Exams
105963, August 22, 1996 ).
SUGGESTED ANSWER:
No. Arrangement is not allowed. The
14. Mam-manu Aviation Company (Mam-manu) models are not Benito’s employees. As
is a new airline company recruiting flight such, their service require compensation
attendants for its domestic flights. It requires in legal tender (Art. 102 of Labor Code).
that the applicant be single, not more than 24 Three sets of clothes, regardless of value,
years old, attractive, and familiar with three (3) are in kind; hence, the former’s
dialects, viz: llonggo, Cebuano and compensation is not the form prescribed
Kapampangan. lngga, 23 years old, was accepted by law.
as she possesses all the qualifications. After
ANOTHER SUGGESTED ANSWER:
passing the probationary period, lngga disclosed
that she got married when she was 18 years old Under Article 102 of the Labor Code,
but the marriage was already in the process of wages of an employee are to be paid only
being annulled on the ground that her husband in legal tender, even when expressly
was afflicted with a sexually transmissible requested by the employee. Hence, no
disease at the time of the celebration of their lawful deal in this regard can be entered
marriage. As a result of this revelation, lngga was into by and between Benito and his
not hired as a regular flight attendant. models.
Consequently, she filed a complaint against
Mam-manu alleging that the pre-employment ALTERNATIVE ANSWER:
qualifications violate relevant provisions of the The models are not employees. Therefore,
Labor Code and are against public policy. Is the Article 102 of the Labor Code applies. The
contention of lngga tenable? Why? (5%) 2012 payment does not have to be in legal
Bar Exams tender. But even if they are not
employees, the wage arrangement
between Benito and the models is allowed
SUGGESTED ANSWER: Yes, Man- by Art. 97 (1) of the Labor Code which
manu‘s pre-employment requirement defines wage as the remuneration or
cannot be justified as a ―bona fide earning paid to an employee, however
occupational qualification, where the designated, capable of being expressed in
particular requirements of the job would terms of money, whether fixed or
justify it. The said requirement is not ascertained on a time, task, piece, or
valid because it does not reflect an commission basis, or other method of
inherent quality that is reasonably calculating the same, which is payable by
necessary for a satisfactory job an employer to an employee under a
performance. (PT&T v. NLRC, G.R. No. written or unwritten contract of
118978, May 23, 1997 citing 45A Am. Jur. employment for work done or to be done,
2d, Job Distribution, Sec. 506, p. 486). or for services rendered or to be rendered.
It includes the fair and the reasonable
ALTERNATIVE ANSWER: Yes, Ingga‘s
value, as determined by the secretary of
contention is tenable considering Art. 134
Labor, of board, lodging or other facilities
[136] of the Labor Code which prohibits
customarily furnished by the employer to
discrimination against married women.
the employee.

19 | P a g e
 carenderia as a retail or service
establishment].
16. Z owns and operates a carinderia. His regular
employees are his wife, his two (2) children, the
family maid, a cook, two (2) waiters, a
17. LKG Garments Inc. makes baby clothes for
dishwasher and a janitor. The family driver
export. As part of its measures to meet its orders,
occasionally works for him during store hours to
LKG requires its employees to work beyond
make deliveries. On April 09, the dishwasher did
eight (8) hours everyday, from Monday to
not report for work. The employer did not give
Saturday. It pays its employees an additional
his pay for that day. Is the employer correct?
35% of their regular hourly wage for work
a. No, because employees have a right to rendered in excess of eight (8) hours per day.
receive their regular daily wage during regular Because of additional orders, LKG now requires
holidays; two (2) shifts of workers with both shifts working
beyond eight (8) hours but only up to a
b. Yes, because April 09 is not regular holidays;
maximum of four ( 4) hours. Carding is an
c. Yes, because of the principle of “a fair day’s employee who used to render up to six ( 6) hours
wage for a fair day’s work”; of overtime work before the change in schedule.
He complains that the change adversely affected
d. Yes, because he employs less than ten (10) him because now he can only earn up to a
employees. 2012 Bar Exams maximum of four ( 4) hours' worth of overtime
SUGGESTED ANSWER: (A) No, because pay. Does Carding have a cause of action against
employees have a right to receive their the company?(4%) 2015 Bar Exams
regular daily wage during regular
holidays [Art. 94, Labor Code, and a
carenderia is not in the category of an SUGGESTED ANSWER:
excluded or service establishment]
No. A change in work schedule is a
Retail Establishment - refers to an entity management prerogative of LKG. Thus,
principally engaged in the sale of goods to Carding has no cause of action against LKG if,
end users for personal or household use. as a result of its change of two (2) shifts, he can
A retail establishment that regularly now only expect a maximum of four (4) hours
engages in wholesale activities loses its overtime work. Besides, Art. 97 of the Labor
retail character. Code does not guarantee Carding a certain
number of hours of overtime work. In Manila
“service establishment” : Service Jockey Employee’s Union v. Manila Jockey Club
Establishment– refers to an entity (517 SCRA 707), the Supreme Court held that the
principally engaged in the sale of services
to individuals for their own or household basis of overtime claim is an employee’s having
use and is generally recognized as such. been“permitted to work”. Otherwise, as in the
For purposes of this Guidelines, service
case, such is not demandable.
establishments must be regularly
employing not more than 10 workers.
Azucena: …the exemption has reference 18. The members of the administrative staff of
only to sale of services of the type Zeta, a construction company, enjoy ten (10)
performed by establishments that are days of vacation leave with pay and ten (10) days
traditionally recognized as retail service of sick leave with pay, annually. The workers'
establishments such as restaurant, sari- union, Bukluran, demands that Zeta grant its
sari stores, repair shops, etc. workers service incentive leave of five (5) days in
compliance with the Labor Code.
ALTERNATIVE ANSWER: (D) Yes,
because he employs less than ten (10) Is the union demand meritorious? (1%)
employees [i.e., is we are to consider a

20 | P a g e
(A) Yes, because non-compliance with the law  The aforementioned employees are not
will result in the diminution of employee entitled to overtime pay, premium pay for rest
benefits. days and holidays, night shift differential pay,
holiday pay, service incentive leave and
(B) Yes, because service incentive leave is a
service charges. (Poquiz, page 171).
benefit expressly provided under and required
by the Labor Code.  “managerial employees” refer to those
whose primary duty consists of the
(C) No, because Zeta already complies with the management of the establishment in which
law. they are employed or of a department or sub-
(D) No, because service incentive leave is a Labor division thereof, and to other officers or
Code benefit that does not apply in the members of the managerial staff.
construction industry.  “Field personnel” refers to non-agricultural
employees who regularly perform their duties
(E) Yes, because Labor Code benefits are away from the principal place of business or
separate from those voluntarily granted by the branch office of the employer and whose
company. 2013 Bar Exams actual hours of work in the field cannot be
SUGGESTED ANSWER: (C), Article 95 of determined with reasonable certainty. (Sec.
the Labor Code. The employee is already 27, Rule II, Book III, Rules Implementing the
given vacation leave of 10 days. This is Labor Code.)
deemed a compliance with the  They are exempted from the coverage due to
requirement of service incentive leave the nature of their functions which requires
under the law. performance of service away from the
principal place of business. Hence, they are
“article 95. (b). this provision shall not free from the personal supervision of the
apply to those who are already enjoying employer and the latter cannot determine
the benefit herein provided, those with reasonable certainty the actual number
enjoying vacation leave with pay of at of hours of work expended for the employer's
least five days… interest. Example of these personnel are
outside sales personnel, agents on
commission basis, or insurance field agents.
Notes: (San Miguel Brewery vs Democratic Labor
 Title I, Book III of the Labor Code dealing with Union, 8 SCRA 613).
hours of work, weekly rest periods, holidays,  These two basic benefits (holiday pay &
service incentive leaves and service service incentive leave) are NOT
charges, covers all employees in all EXTENDED to employees or retail and
establishments, whether for profit or not, service establishments regularly employing
except the following: less than 10 workers.
1. Government employees  In the absence of the power to control the
2. Managerial employees employee with respect to the means and
3. Officers and members of the methods by which his work was to be
managerial staff accomplished, there is no employer-
4. Field personnel employee relationship between the parties.
5. Members of the family of the employer  Not every form of control has the effect of
who are dependent on him for support establishing employer-employee
6. Domestic helpers relationship. A line should be drawn between:
7. Persons in the personal service of o Rules that merely serve as guidelines,
another; ad which only promote the result;
8. Workers paid by results (Secs. 1 and o Rules that fix the methodology and
2, Rule I, Book III, Rules Implementing bind or restrict the party hired to the
the Labor Code./ Aricle 82, Labor use of such means or methods. These
Code) address both the result and the means

21 | P a g e
 employed to achieve the desired natural guardian or next-of-kin. The
result. affidavit shall be presented to the
employer who shall make payment
The second creates EER; while the first through the Secretary of Labor and
does not. Employment or his representative.
The representative of the Secretary
 Article 84 – hours worked shall include (a) all
of Labor and Employment shall act as
time during which an employee is required to referee in dividing the amount paid
be on duty or to be at a prescribed workplace, among the heirs. The payment of
and (b) all time during which an employee is wages under this Article shall absolve
suffered or permitted to work. the employer of any further liability
Rest periods of short duration during working with respect to the amount paid.
hours shall not be counted as hours worked.
 Art. 102. Forms of payment. No employer
shall pay the wages of an employee by
means of promissory notes, vouchers, Date of Submission: 20 August 2018
coupons, tokens, tickets, chits, or any object
1. Which of the following is not a valid wage
other than legal tender, even when expressly
deduction?
requested by the employee.
a. Where the worker was insured with his
Payment of wages by check or money order consent by the employer, and the deduction is
shall be allowed when such manner of allowed to recompense the employer for the
payment is customary on the date of amount paid by him as the premium on the
effectivity of this Code, or is necessary insurance;
because of special circumstances as
b. When the wage is subject of execution or
specified in appropriate regulations to be
attachment, but only for debts incurred for food,
issued by the Secretary of Labor and
shelter, clothing and medical attendance;
Employment or as stipulated in a collective
bargaining agreement. c. Payment for lost or damaged equipment
 Art. 105. Direct payment of wages. Wages provided the deduction does not exceed 25 % of
shall be paid directly to the workers to whom the employee’s salary for a week;
they are due, except:
o In cases of force majeure rendering d. Union dues. 2012 Bar Exams 1%
such payment impossible or under C. Payment for lost or damaged
other special circumstances to be equipment provided the deduction does
determined by the Secretary of Labor not exceed 25 % of the employee’s salary
and Employment in appropriate
for a week
regulations, in which case, the worker
may be paid through another person In Implementing Rules of Book III, Rule
under written authority given by the VIII, Section 11, it provides that the
worker for the purpose; or deduction from the wages does not
exceed 20% of the employee’s wages in a
o Where the worker has died, in which week.
case, the employer may pay the
wages of the deceased worker to the 2. Corporation X is owned by L’s family. L is
heirs of the latter without the the President. M, L’s wife, occasionally gives
necessity of intestate proceedings. loans to employees of Corporation X. It was
The claimants, if they are all of age, customary that loan payment were paid to M by
shall execute an affidavit attesting to directly deducting from the employee’s monthly
their relationship to the deceased and salary. Is this practice of directly deducting
the fact that they are his heirs, to the
payments of debts from the employee’s wages
exclusion of all other persons. If any
allowed?
of the heirs is a minor, the affidavit
shall be executed on his behalf by his

22 | P a g e
a. Yes, because where the employee is a. non-conformity with prescribed
indebted to the employer, it is sanctioned by the guidelines and/or procedures;
law on compensation under Article 1706 of the
b. questions of law;
Civil Code;
c. grave abuse of discretion.
b. Yes, because it has already become
customary such that no express authorization is RULES OF PROCEDURE ON MINIMUM
required; WAGE FIXING
c. No, because an employee’s payment of Section 2. Grounds for Appeal. An appeal
obligation to a third person is deductible from may be filed on the following grounds:
the employee’s wages if the deduction is
authorized in writing; a) non-conformity with prescribed
guidelines and/or procedures;
d. No, because Article 116 of the Labor Code
absolutely prohibits the withholding of wages b) questions of law;
and kickbacks. Article 116 provides for no c) grave abuse of discretion.
exception. 2012 Bar Exams 1%

4. K is a legitimate contractor hired by G for

Suggested answer: D six (6) months. On the third month, G remitted
Article 116 of the Labor Code provides to K the salaries and wages of the employees.
that it shall be unlawful for any person, However, K absconded with the money leaving
directly or indirectly, to withhold any the employees unpaid. The disgruntled
amount from the wages of a worker or employees demanded from G the payment of
induce him to give up any part of his their salaries. Is G liable?
wages by force, stealth, intimidation, a. No, because G has already remitted the
threat or by any other means whatsoever employees’ salaries to K, validly excusing G from
without the worker’s consent. liability;
Alternative answer: A b. Yes, because he is jointly and solidarily
liable for whatever monetary claims the
employees may have against K;
3. A wage order may be reviewed on appeal
by the National Wages and Productivity c. Yes, because of the principle of “a fair
Commission under these grounds, except: day’s wage for a fair day’s work”;

a. grave abuse of discretion; d. B and C. 2012 Bar Exams 1%

b. non-conformity with prescribed B. Article 106 provides that in the event

procedure; that the contractor or subcontractor fails
to pay the wages of his employees in
c. questions of law; accordance with this Code, the employer
shall be jointly and severally liable with
d. gross under or over-valuation. 2012 Bar
this contractor or subcontractor to such
Exams 1%
employees to the extent of the work
performed under the contract, in the
same manner and extent that he is liable
NWPC Guidelines No. 01, S 2007
to employees directly employed by him.
RULE V - Appeal
Section 2. Grounds for appeal. An appeal
5. Which is not a procedural requirement
may be filed on the following grounds:
for the correction of wage distortion in an
unorganized establishment?

23 | P a g e
a. Both employer and employee will attempt (d) Gift check worth : P2,000
to correct the distortion;
Katrina, an employee of FEB, who had gotten a
b. Settlement of the dispute through rating of "Excellent" for the last 3 quarters was
National Conciliation and Mediation Board looking forward to the bonuses plus the
(NCMB); productivity incentive bonus. After learning that
FEB had modified the bonus scheme, she
c. Settlement of the dispute through
objected. Is Katrina's objection justified?
voluntary arbitration in case of failure to resolve
Explain. (3%) 2015 Bar Exams
dispute through CBA dispute mechanism;
d. A and B. 2012 Bar Exams 1%
SUGGESTED ANSWER:
Suggested Answer: (C) Settlement of the
dispute through voluntary arbitration in Katrina’s objection is justified. Having enjoyed
case of failure to resolve dispute through the across-the-board bonuses, Katrina has
CBA dispute mechanism [Art. 124, Labor earned a vested right. Hence, none of them can
Code]. be withheld or reduced. In the problem, the
company has not proven its alleged losses to be
Article 124 of the Labor Code provides the
substantial. Permitting reduction of pay at the
procedural requirement for the
slightest indication of losses is contrary to the
correction of wage distortion in an
policy of the State to afford full protection to
unorganized establishment and
labor and promote full employment. (Linton
settlement of the dispute through
Commercial Co. v. Hellera, 535 SCRA 434).
voluntary arbitration is not among the
procedure. As to the withheld productivity-based bonus,
Katrina is deemed to have earned them because
of her excellent performance rating for three
6. Far East Bank (FEB) is one of the leading quarters. On this basis, they cannot withheld
banks in the country. Its compensation and without violating the Principle of Non-
bonus packages are top of the industry. For the Diminution of Benefits.
last 6 years, FEB had been providing the
Moreover, it is evident from the facts of the case
following bonuses across-the-board to all its
that what was withdrawn by FEB was a
employees:
productivity bonus. Protected by RA 6791 which
(a) 13th month pay; mandates that the monetary value of the
productivity improvement be shared with the
(b) 14th to 18th month pay; employees, the “productivity-based incentive”
(c) Christmas basket worth P6,000; scheme of FEB cannot just be withdrawn
without the consent of its affected employees.
(d) Gift check worth P4,000; and
(e) Productivity-based incentive ranging
from a 20o/o to 40% increase in gross monthly 7. Lito was anticipating the bonus he would
salary for all employees who would receive an receive for 2013. Aside from the 13th month pay,
evaluation of "Excellent" for 3 straight quarters the company has been awarding him and his
in the same year. other co-employees a two to three months bonus
for the last 10 years. However, because of poor
Because of its poor performance over-all, FEB over-all sales performance for the year, the
decided to cut back on the bonuses this year and company unilaterally decided to pay only a one
limited itself to the following: month bonus in 2013. Is Lito’s employer legally
(a) 13th month pay; allowed to reduce the bonus? (4%) 2014 Bar
Exams
(b) 14th month pay;
SUGGESTED ANSWER: Yes. A bonus is
(c) Christmas basket worth P4,000; and an act of generosity granted by an

24 | P a g e
 enlightened employer to spur the or compensation of the employee.
employee to greater efforts for the success Particularly instructive is the ruling of the
of the business and realization of bigger Court in Metro Transit Organization, Inc.
profits. The granting of a bonus is a v. National Labor Relations Commission,
management prerogative, something where it was written:
given in addition to what is ordinarily
Whether or not a bonus forms part of
received by or strictly due the recipient.
wages depends upon the circumstances
Thus, bonus is not a demandable and
and conditions for its payment. If it is
enforceable obligation, except when it is
additional compensation which the
made part of the wage, salary or
employer promised and agreed to give
compensation of the employee. It may,
without any conditions imposed for its
therefore, be withdrawn, unless they have
payment, such as success of business or
been made a part of the wage or salary or
greater production or output, then it is
compensation of the employees, a matter
part of the wage. But if it is paid only if
which is not in the facts of the case.
profits are realized or if a certain level of
(American Wire and Cable Daily Rated
productivity is achieved, it cannot be
Employees Union v. American Wire and
considered part of the wage. Where it is
Cable Co., Inc. and the Court of Appeals,
not payable to all but only to some
GR No. 155059 [2005]).
employees and only when their labor
becomes more efficient or more
productive, it is only an inducement for
ALTERNATIVE ANSWER: No. Having
efficiency, a prize therefore, not a part of
been enjoyed for the last 10 years, the
the wage.
granting of the bonus has ripened into a
company practice or policy which can no The consequential question that needs to
longer be peremptorily withdrawn. Art. be settled, therefore, is whether the
100 of the Labor Code prohibits the subject bonuses are demandable or not.
diminution or elimination by the Stated differently, can these bonuses be
employer of the employees’ existing considered part of the wage, salary or
benefits. compensation making them enforceable
obligations?
The Court believes so.
G.R. No. 185665 February 8, 2012
In the case at bench, it is indubitable that
EASTERN TELECOMMUNICATIONS
ETPI and ETEU agreed on the inclusion
PHILIPPINES, INC., Petitioner, vs.
of a provision for the grant of 14th, 15th
EASTERN TELECOMS EMPLOYEES
and 16th month bonuses in the 1998-
UNION, Respondent.
2001 CBA Side Agreement, as well as in
From a legal point of view, a bonus is a the 2001-2004 CBA Side Agreement,17
gratuity or act of liberality of the giver which was signed on September 3, 2001.
which the recipient has no right to The provision, which was similarly
demand as a matter of right. The grant of worded, states:
a bonus is basically a management
prerogative which cannot be forced upon
the employer who may not be obliged to Employment-Related Bonuses
assume the onerous burden of granting
The Company confirms that the 14th, 15th
bonuses or other benefits aside from the
and 16th month bonuses (other than the
employee’s basic salaries or wages.
13th month pay) are granted.
A bonus, however, becomes a
A reading of the above provision reveals
demandable or enforceable obligation
that the same provides for the giving of
when it is made part of the wage or salary
14th, 15th and 16th month bonuses
25 | P a g e
 without qualification. The wording of the bonuses, nevertheless, the Court finds
provision does not allow any other that its act of granting the same has
interpretation. There were no conditions become an established company practice
specified in the CBA Side Agreements for such that it has virtually become part of
the grant of the benefits contrary to the the employees’ salary or wage. A bonus
claim of ETPI that the same is justified may be granted on equitable
only when there are profits earned by the consideration when the giving of such
company. Terse and clear, the said bonus has been the company’s long and
provision does not state that the subject regular practice. In Philippine Appliance
bonuses shall be made to depend on the Corporation v. Court of Appeals, it was
ETPI’s financial standing or that their pronounced:
payment was contingent upon the
To be considered a "regular practice,"
realization of profits. Neither does it state
however, the giving of the bonus should
that if the company derives no profits, no
have been done over a long period of time,
bonuses are to be given to the employees.
and must be shown to have been
In fine, the payment of these bonuses was
consistent and deliberate. The test or
not related to the profitability of business
rationale of this rule on long practice
operations.
requires an indubitable showing that the
The records are also bereft of any showing employer agreed to continue giving the
that the ETPI made it clear before or benefits knowing fully well that said
during the execution of the Side employees are not covered by the law
Agreements that the bonuses shall be requiring payment thereof.
subject to any condition. Indeed, if ETPI
The records show that ETPI, aside from
and ETEU intended that the subject
complying with the regular 13th month
bonuses would be dependent on the
bonus, has been further giving its
company earnings, such intention should
employees 14th month bonus every April
have been expressly declared in the Side
as well as 15th and 16th month bonuses
Agreements or the bonus provision
every December of the year, without fail,
should have been deleted altogether. In
from 1975 to 2002 or for 27 years whether
the absence of any proof that ETPI’s
it earned profits or not. The considerable
consent was vitiated by fraud, mistake or
length of time ETPI has been giving the
duress, it is presumed that it entered into
special grants to its employees indicates a
the Side Agreements voluntarily, that it
unilateral and voluntary act on its part to
had full knowledge of the contents thereof
continue giving said benefits knowing
and that it was aware of its commitment
that such act was not required by law.
under the contract. Verily, by virtue of its
Accordingly, a company practice in favor
incorporation in the CBA Side
of the employees has been established
Agreements, the grant of 14th, 15th and
and the payments made by ETPI
16th month bonuses has become more
pursuant thereto ripened into benefits
than just an act of generosity on the part
enjoyed by the employees.
of ETPI but a contractual obligation it has
undertaken. Moreover, the continuous The giving of the subject bonuses cannot
conferment of bonuses by ETPI to the be peremptorily withdrawn by ETPI
union members from 1998 to 2002 by without violating Article 100 of the Labor
virtue of the Side Agreements evidently Code:
negates its argument that the giving of the
subject bonuses is a management Art. 100. Prohibition against elimination
prerogative. or diminution of benefits. – Nothing in
this Book shall be construed to eliminate
Granting arguendo that the CBA Side or in any way diminish supplements, or
Agreement does not contractually bind other employee benefits being enjoyed at
petitioner ETPI to give the subject the time of promulgation of this Code.

26 | P a g e
 (4) the diminution or discontinuance is
done unilaterally by the employer.
The rule is settled that any benefit and
supplement being enjoyed by the
employees cannot be reduced,
9. Gamma Company pays its regular
diminished, discontinued or eliminated
employees P350.00 a day, and houses them in a
by the employer. The principle of non-
dormitory inside its factory compound in
diminution of benefits is founded on the
Manila. Gamma Company also provides them
constitutional mandate to protect the
with three full meals a day.
rights of workers and to promote their
welfare and to afford labor full protection. In the course of a routine inspection, a
Department of Labor and Employment (DOLE)
8. Lolong Law Firm (LLF), which employs
Inspector noted that the workers' pay is below
around 50 lawyers and 100 regular staff,
the prescribed minimum wage of P426.00 plus
suffered losses for the first time in its history.
P30.00 allowance, and thus required Gamma
The management informed its employees that it
Company to pay wage differentials.
could no longer afford to provide them free
lunch. Consequently, it announced that a Gamma Company denies any liability,
nominal fee would henceforth be charged. Was explaining that after the market value of the
LLF justified in withdrawing this benefit which company-provided board and lodging are added
it had unilaterally been providing to its to the employees' P350 cash daily wage, the
employees? employees' effective daily rate would be way
above the minimum pay required by law. The
(A) Yes, because it is suffering losses for the
company counsel further points out that the
first time.
employees are aware that their food and lodging
(B) Yes, because this is a management form part of their salary, and have long accepted
prerogative which is not due to any legal or the arrangement. Is the company's position
contractual obligation. legally correct? (8%) 2013 Bar Exams
(C) No, because this amounts to a diminution
of benefits which is prohibited by the Labor
SUGGESTED ANSWER:
Code.
No, the company’s position is incorrect.
(D) No, because it is a fringe benefit that has
Gamma Company did not comply with
already ripened into a demandable right. 2014
legal requirements before deducting the
Bar Exams 1%
board and lodging.
Art. 100 of the Labor Code provides for
In Mabeza vs NLRC, the Court discussed
the prohibition against elimination or
that granting that the meals and lodging
diminution of benefits which says that
were provided and indeed constituted
nothing in the Labor Code shall be
facilities, such facilities could not be
construed to eliminate or in any way
deducted without the employer
diminish supplements, or other employee
complying first with certain legal
benefits being enjoyed at the time of the
requirements. Without satisfying these
promulgation of this Code.”
requirements, the employer simply
In TSPIC Corp v. TSPIC Employees cannot deduct the value from the
Union, the Supreme Court laid down the employee's wages. First, proof must be
elements of diminution of benefits: (1) the shown that such facilities are customarily
grant or benefit is founded on a policy or furnished by the trade. Second, the
has ripened into a practice over a long provision of deductible facilities must be
period; (2) the practice is consistent and voluntarily accepted in writing by the
deliberate; (3) the practice is not due to employee. Finally, facilities must be
error in the construction or application of charged at fair and reasonable value.
a doubtful or difficult question of law; and
27 | P a g e
 The fair and reasonable value must be with respect to cost of living and conditions of
determined by the DOLE Secretary, of work.
board, lodging, or other facilities
(D) No, because the service charge benefit
customarily furnished by the employer to
attaches to the outlet where service charges are
the employee. “Fair and reasonable
earned and should be distributed exclusively
value” shall not include any profit to the
among the employees providing service in the
employer or to any person affiliated with
outlet.
the employer.
(E) No, because the market and the clientele
In this case the above requirements were
the two branches are serving, are different. 2013
not complied thus, Gamma Company
Bar Exams
cannot include the board and lodging as
part of the employee’s salary. (D) No, because the service charge
benefit attaches to the outlet where
service charges are earned and should be
10. Ricardo operated a successful Makati distributed exclusively among the
seafood restaurant patronized by a large employees providing service in the outlet.
clientele base for its superb cuisine and
impeccable service. Ricardo charged its clients a
10% service charge and distributed 85% of the 11. In order to improve the Cebu service and
collection equally among its rank-and-file sales, Ricardo decided to assign some of its
employees, 10% among managerial employees, Makati-based employees to Cebu to train Cebu
and 5% as reserve for losses and break ages. employees and expose them to the Makati
Because of the huge volume of sales, the standard of service. A chef and three waiters
employees received sizeable shares in the were assigned to Cebu for the task. While in
collected service charges. Cebu, the assigned personnel shared in the Cebu
service charge collection and thus received
As part of his business development efforts,
service charge benefits lesser than what they
Ricardo opened a branch in Cebu where he
were receiving in Makati.
maintained the same practice in the collection
and distribution of service charges. The Cebu If you were the lawyer for the assigned
branch, however, did not attract the forecasted personnel, what would you advise them to do?
clientele; hence, the Cebu employees received (1%)
lesser service charge benefits than those enjoyed
by the Makati-based employees. As a result, the (A) I would advise them to file a complaint for
Cebu branch employees demanded equalization unlawful diminution of service charge benefits
of benefits and filed a case with the NLRC for and for payment of differentials.
discrimination when Ricardo refused their (B) I would advise them to file a complaint for
demand. illegal transfer because work in Cebu is highly
Will the case prosper? (1%) prejudicial to them in terms of convenience and
service charge benefits.
(A) Yes, because the employees are not
receiving equal treatment in the distribution of (C) I would advise them to file a complaint for
service charge benefits. discrimination in the grant of service charge
benefits.
(B) Yes, because the law provides that the
85% employees' share in the service charge (D) I would advise them to accept their Cebu
collection should be equally divided among all training assignment as an exercise of the
the employees, in this case, among the Cebu and company's management prerogative.
Makati employees alike. (E) I would advise them to demand the
(C) No, because the employees in Makati are continuation of their Makati-based benefits and
not similarly situated as the Cebu employees to file a complaint under (B)above if the demand
is not heeded. 2013 Bar Exams

28 | P a g e
 (A) I would advise them to file a 2. Differentiate learnership from
complaint for unlawful diminution of apprenticeship with respect to the period of
service charge benefits and for payment training, type of work, salary and qualifications.
of differentials. (5%) 2016 Bar Exams
The following are the distinctions:
a) Practical training. Both learnership
Date of Submission: 3 September 2018
and apprenticeship involve practical
1. Distinguish a learner from an apprentice. training on-the-job.
(4%) 2017 Bar Exams b) Training agreement. Learnership is
governed by a learnership agreement;
Learnership and apprenticeship are while apprenticeship is governed by
similar because they both mean training an apprenticeship agreement.
periods for jobs requiring skills that can c) Occupation. Learnership involves
be acquired through actual work learnable occupations consisting of
experience. And because both a learner semi-skilled and other industrial
and an apprentice may be paid wages occupations which are non-
25%lower than the applicable legal apprenticeable; while apprenticeship
minimum wage. concerns apprenticeable occupations
They differ in the focus and terms of or any trade, form of employment or
training. A learner trains in a semi-skilled occupation approved for
job or in industrial occupations that apprenticeship by the DOLE
require training for less than three Secretary.
months. An apprentice, on the other d) Theoretical instructions. Learnership
hand, trains in a skilled or highly skilled may or may not be supplemented by
job found only in highly technical related theoretical instructions; while
industry, Because it is a skilled job, the apprenticeship should always be
training period exceeds three months. supplemented by related theoretical
instructions.
For a learner, the training period is e) Ratio of theoretical instructions and
shorter because the job is more easily on-the-job training. For both
learned than that in apprenticeship. The learnership and apprenticeship, the
job, in other words, is “non- normal ratio is one hundred (100)
apprenticeable” because its practical hours of theoretical instructions for
skills can be learned in three (not six) every two thousand (2,000) hours of
months. A learner is not an apprentice practical or on-the-job training.
but an apprentice is, conceptually also a Theoretical instruction time for
learner. occupations requiring less than two
Because the job is more easily learnable in thousand (2,000) hours for
learnership than in apprenticeship, the proficiency should be computed on
employer is committed to hire the the basis of such ratio.
learner-trainee as an employee after the f) Competency-based system. Unlike in
training period. No such commitment apprenticeship, it is required in
exists in apprenticeship. learnership that it be implemented
based on the TESDA-approved
Employment of apprentices, as stated in competency-based system.
Article 60, is legally allowed only in highly g) Duration of training. Learnership
technical industries and only in involves practical training on the job
apprenticeable occupations approved by for a period not exceeding three (3)
DOLE. months; while apprenticeship
requires for proficiency, more than
three (3) months but not over six (6)

29 | P a g e
 months of practical training on the 3. Are there differences between a househelper
job. and a homeworker? Explain your answer. (4%)
h) Qualifications. The law does not 2017 Bar Exams
expressly mention any qualifications
Househelpers are those who minister to
for learners; while the following
the personal needs and comfort of his/her
qualifications are required to be met
employer in the latter’s home. A
by apprentices under Article 59 of the
homeworker, on the other hand, is a
Labor Code:
person who perform in or about his own
(a) Be at least fourteen (14) years
home any processing or fabrication of
of age;
goods or materials, in whole or in part,
(b) Possess vocational aptitude
which have been furnished directly or
and capacity for appropriate
indirectly, by an employer and sold
tests; and
thereafter to the latter.
(c) Possess the ability to
comprehend and follow oral Voltaire: Domestic worker or
and written instructions. “Kasambahay” refers to any person
engaged in domestic work within an
i) Circumstances justifying hiring of employment relationship such as, but not
trainees. Unlike in apprenticeship, in limited to, the following: general
learnership, the law, Article 74 of the househelp, nursemaid or “yaya”, cook,
Labor Code, expressly prescribes the gardener, or laundry person while (b)
pre-requisites before learners may be “Industrial Homeworker” means a
validly employed, to wit: worker who is engaged in industrial
(a) When no experienced workers homework.
are available;
(b) The employment of learners is
necessary to prevent 4. What is not a prerequisite for a valid
curtailment of employment apprenticeship agreement? 1% 2012 Bar Exams
opportunities; and
(c) The employment does not a. Qualifications of an apprentice are met;
create unfair competition in b. A duly executed and signed apprenticeship
terms of labor costs or impair agreement;
or lower working standards.
j) Limitation on the number of trainees. c. The apprenticeship program is approved by
In learnership, a participating the Secretary of Labor;
enterprise is allowed to take in d. Included in the list of apprenticeable
learners only up to a maximum of occupation of TESDA.
twenty percent (20%) of its total
regular workforce. No similar cap is (C) The apprenticeship program is
imposed in the case of apprenticeship. approved by the Secretary of Labor. [Sec.
k) Option to employ. In learnership, the 18, RA 7796- The apprenticeship
enterprise is obliged to hire the Program of DOLE shall be transferred to
learner after the lapse of the TESDA which shall implement and
learnership period; while in administer said program].
apprenticeship, the enterprise is given
5. Which is a characteristic of the learner? 1%
only an “option” to hire the apprentice
2012 Bar Exams
as an employee.
l) Wage rate. The wage rate of a learner a. A person is hired as a trainee in an industrial
or an apprentice is set at seventy-five occupation;
percent (75%) of the statutory
b. Hired in a highly technical industry;
minimum wage.

30 | P a g e
c. Three (3) months practical on-the-job training prompted the workers to file with the Labor
with theoretical instruction; Arbiter a complaint for illegal dismissal. Will
their action prosper? Why or why not? (5%) 2012
d. At least 14 years old.
Bar Exams

A) A person is hired as a trainee in an

Suggested answer: No. An employment
industrial occupation. [Art. 73, Labor
contract with a fixed final term
Code]
terminates by its own terms at the end of
Learners such period. The same is valid if the
contract was entered into by the parties
1. They are persons hired as trainees in on equal footing and the period specified
semi-skilled and other industrial was not designed to circumvent the
occupations security of tenure of the employees (Brent
2. Which are non-apprenticeable and School v. Zamora).

3. Which may be learned through Chan: The two (2) requisites or criteria
practical training on the job in a relatively for the validity of a fixed-term contract of
short period of time employment are as follows:

4. Which shall not exceed 3 months 1. The fixed period of employment was
knowingly and voluntarily agreed upon
5. Whether or not such practical training by the parties, without any force, duress
is supplemented by theoretical or improper pressure being brought to
instructions [IRR, Book II, Rule VII, Sec. bear upon the employee and absent any
1(a)]. other circumstances vitiating his consent;
or

6. According to Article 78 of the Labor Code., a 2. It satisfactorily appears that the

handicapped worker is one whose earning employer and employee dealt with each
capacity is impaired by the following, except : other on more or less equal terms with no
moral dominance whatever being
a. Age; exercised by the former on the latter.
b. Physical Deficiency; *look up Bernardo vs NLRC G.R. No.
c. Mental Deficiency; 122917 July 12, 1999. Naa dri ang facts sa
case. Gi grant sa SC ang ilang action and
d. Psychological Deficiency 1% 2012 Bar Exams considered them regular employees
because some of them worked more than
d. Psychological deficiency
6 months kay gi renew sa bank ang ilang
Article 78. handicapped workers are mga contracts. Thus, dili na sila gi
those whose earning capacity is impaired consider under sa Article 80 but are
by age or physical or mental deficiency or already covered under article 280.
injury.
Applicability of the Brent Ruling
Respondent bank, citing Brent School v.
7. For humanitarian reasons, a bank hired Zamora in which the Court upheld the
several handicapped workers to count and sort validity of an employment contract with a
out currencies. The handicapped workers knew fixed term, argues that the parties entered
that the contract was only for a period of six- into the contract on equal footing. It adds
months and the same period was provided in that the petitioners had in fact an
their employment contracts. After six months, advantage, because they were backed by
the bank terminated their employment on the then DSWD Secretary Mita Pardo de
ground that their contract has expired. This Tavera and Representative Arturo Borjal.
31 | P a g e
 We are not persuaded. The term limit in Art. 280 was emplaced in our statute
the contract was premised on the fact that books to prevent the circumvention of the
the petitioners were disabled, and that employee's right to be secure in his tenure
the bank had to determine their fitness by indiscriminately and completely ruling
for the position. Indeed, its validity is out all written and oral agreements
based on Article 80 of the Labor Code. inconsistent with the concept of regular
But as noted earlier, petitioners proved employment defined therein. Where an
themselves to be qualified disabled employee has been engaged to perform
persons who, under the Magna Carta for activities which are usually necessary or
Disabled Persons, are entitled to terms desirable in the usual business of the
and conditions of employment enjoyed by employer, such employee is deemed a
qualified able-bodied individuals; hence, regular employee and is entitled to
Article 80 does not apply because security of tenure notwithstanding the
petitioners are qualified for their contrary provisions of his contract of
positions. The validation of the limit employment.
imposed on their contracts, imposed by
xxx xxx xxx
reason of their disability, was a glaring
instance of the very mischief sought to be At this juncture, the leading case of Brent
addressed by the new law. School, Inc. v. Zamora proves instructive.
As reaffirmed in subsequent cases, this
Moreover, it must be emphasized that a
Court has upheld the legality of fixed-
contract of employment is impressed with
term employment. It ruled that the
public interest. Provisions of applicable
decisive determinant in "term
statutes are deemed written into the
employment" should not be the activities
contract, and the "parties are not at
that the employee is called upon to
liberty to insulate themselves and their
perform but the day certain agreed upon
relationships from the impact of labor
the parties for the commencement and
laws and regulations by simply
termination of their employment
contracting with each other." Clearly, the
relationship. But this Court went on to say
agreement of the parties regarding the
that where from the circumstances it is
period of employment cannot prevail over
apparent that the periods have been
the provisions of the Magna Carta for
imposed to preclude acquisition of
Disabled Persons, which mandate that
tenurial security by the employee, they
petitioners must be treated as qualified
should be struck down or disregarded as
able-bodied employees.
contrary to public policy and morals.
Private respondent argues that the
In rendering this Decision, the Court
petitioners were informed from the start
emphasizes not only the constitutional
that they could not become regular
bias in favor of the working class, but also
employees. In fact, the bank adds, they
the concern of the State for the plight of
agreed with the stipulation in the contract
the disabled. The noble objectives of
regarding this point. Still, we are not
Magna Carta for Disabled Persons are not
persuaded. The well-settled rule is that
based merely on charity or
the character of employment is
accommodation, but on justice and the
determined not by stipulations in the
equal treatment of qualified persons,
contract, but by the nature of the work
disabled or not. In the present case, the
performed. Otherwise, no employee can
handicap of petitioners (deaf-mutes) is
become regular by the simple expedient
not a hindrance to their work. The
of incorporating this condition in the
eloquent proof of this statement is the
contract of employment.
repeated renewal of their employment
In this light, we iterate our ruling in contracts. Why then should they be
Romares v. NLRC: dismissed, simply because they are

32 | P a g e
 physically impaired? The Court believes, education, i.e. “baon”, transportation,
that, after showing their fitness for the school projects and school activities.
work assigned to them, they should be
treated and granted the same rights like
any other regular employees. 10. What is the financial incentive, if any,
granted by law to SPQ Garments whose cutters
and sewers in its garments-for-export
8. In what situation is an employer permitted to operations are 80% staffed by deaf and deaf-
employ a minor? mute workers?
a. 16-year old child actor as a cast member in (A) Additional deduction from its gross income
soap opera working 8 hours a day, 6 days a equivalent to 25% of amount paid as salaries to
week; persons with disability.
b. A 17-year old in deep sea-fishing; (B) Additional deduction from its gross income
equivalent to 50% of the direct costs of the
c. A 17 -year old construction worker;
construction of facilities for the use of persons
d. A 17-year old assistant cook in a family with disability.
restaurant. 1% 2012 Bar Exams
(C) Additional deduction from its net taxable
(D) A 17-year old assistant cook in a income equivalent to 5% of its total payroll
family restaurant [Sec. 12, R.A. 7610, as
(D) Exemption from real property tax for one (1)
amended by Sec. 2, RA 9231, Dec. 19,
year of the property where facilities for persons
2003].
with disability have been constructed.
(E) The annual deduction under (A), plus a one-
9. Soledad, a widowed school teacher, takes time deduction under (B).
under her wing one of her students, Kiko, 13
1% 2013 Bar Exams
years old, who was abandoned by his parents
and has to do odd jobs in order to study. She
allows Kiko to live in her house, provides him
A) Additional deduction from its gross
with clean clothes, food, and a daily allowance of
income equivalent to 25% of amount paid
200 pesos. In exchange, Kiko does routine
as salaries to persons with disability.
housework, consisting of cleaning the house and
doing errands for Soledad. One day, a *Magna Carta for Disabled Persons
representative of the DOLE and the DSWD came
to Soledad's house and charged her with
violating the law that prohibits work by minors. 11. Distinguish Labor-Only contracting and Job-
Soledad objects and offers as a defense that she Only contracting. (5%) 2012 Bar Exams
was not requiring Kiko to work as the chores
were not hazardous. Further, she did not give Job Contracting Labor-only
him chores regularly but only intermittently as Contracting
the need may arise. Is Soledad's defense The er/principal is The er/principal is
meritorious? (4%) 2015 Bar Exams merely an indirect treated as direct
employer, by employer of the
operation of law, of contractor’s
Soledad’s defense is meritorious. Sec. 4 his contractor’s employees in all
(d) of the Kasambahay Law (RA 10361) employees. instances. (contractor
provides that the term “Domestic = agent of the
Worker” shall not include children who employer)
are under foster family arrangement, and
are provided access to education and
given an allowance incidental to

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

3. In the former, the joint and several A finding that a contractor is a “labor-
obligation of the principal and the only” contractor is equivalent to declaring
legitimate job contractor is only for a that there is an ER-EE relationship
limited purpose, that is, to ensure that the between the principal and the employees
employees are paid their wages. Other of the “labor-only” contractor. (San
than this obligation of paying the wages, Miguel Corp. vs. MAERC Integrated
the principal is not responsible for any Systems. G.R. No. 144672; July 10, 2003).
claim made by the contractual employees;
13. With respect to legitimate independent
while in the latter, the principal becomes
contracting, an employer or one who engages the
jointly and severally or solidarily liable
services of a bona fide independent contractor is
with the labor-only contractor to the
–
latter’s employees in the same manner
34 | P a g e
a. An indirect employer, by operation of law, of (B) Yes, no full remedy can be granted
his contractor’s employees; he becomes and executed without impleading the
solidarily liable with the contractor not only for purpoted contractor.
unpaid wages but also for all the rightful claims
*article 106 – joint and several liability
of the employees under the Labor Code;
*article 109
b. Treated as direct employer of his contractor’s
employees in all instances; he becomes Department order 174 series of 2017 –
subsidiarily liable with the contractor only in the there exists a solidary liability on the part
event the latter fails to pay the employees’ wages of the principal and contractor for
and for violation of labor standard laws; purposes of enforcing the provisions of
the labor code…section 9.
c. An indirect employer, by operation of law, of
his contractor’s employees; he becomes
solidarily liable with the contractor only in the
event the latter fails to pay the employees’ wages 15. Which is a characteristic of a labor-only
and for violation of labor standard laws; contractor?

d. Treated as direct employer of his contractor’s a. Carries an independent business different

employees in all instances; the principal from the employer’s;
becomes solidarily liable with the contractor not b. The principal’s liability extends to all rights,
only for unpaid wages but also for all the rightful duties and liabilities under labor standards laws
claims of the employees under the Labor Code; including the right to self-organization;
1% 2012 Bar Exams
c. No employer-employee relationship;
(C) An indirect employer, by operation of
law, of his contractor‘s employees; he d. Has sufficient substantial capital or
becomes solidarily liable with the investment in machinery, tools or equipment
contractor in the event the latter fails to directly or intended to be related to the job
pay the employees‘ wages and for contracted. 1% 2012 Bar Exams
violation of labor standard laws. [Arts. C) No employer-employee relationships
107 and 109, Labor Code] [Art. 106, Labor Code]

14. Is the contractor a necessary party in a case 16. What is not an element of legitimate
where labor contracting is the main issue and contracting?
labor-only contracting is found to exist?
a. The contract calls for the performance of a
a. Yes, the contractor is necessary in the full specific job, work or service;
determination of the case as he is the purported
employer of the worker; b. It is stipulated that the performance of a
specific job, work or service must be within a
b. Yes, no full remedy can be granted and definite predetermined period;
executed without impleading the purported
contractor; c. The performance of specific job, work or
service has to be completed either within or
c. No, the contractor becomes a mere agent of outside the premises of the principal;
the employer-principal in labor contracting;
d. The principal has control over the
d. No, the contractor has no standing in a labor performance of a specific job, work or service. 1%
contracting case. 1% 2012 Bar Exams 2012 Bar Exams
(A) Yes, the contractor is necessary in the D) The principal has control over the
full determination of the case as he is the performance of a specific job, work or
porpoted employer of the worker. service. [Art. 106, Labor Code]

35 | P a g e
 DO 174, SECION 8 separation pay, based on Article 109 of
the Labor Code which provides that
17. Constant Builders, an independent
"every employer or indirect employer
contractor, was charged with illegal dismissal
shall be held responsible with his
and non-payment of wages and benefits of ten
contractor or subcontractor for any
dismissed employees. The complainants
violation of any provision of this Code.
impleaded as co-respondent Able Company,
Constant Builder's principal in the construction
of Able's office building. The complaint
18. Dr. Crisostomo entered into a retainer
demanded that Constant and Able be held
agreement with AB Hotel and Resort whereby he
solidarily liable for the payment of their
would provide medical services to the guests and
backwages, separation pay, and all their unpaid
employees of AB Hotel and Resort, which, in
wages and benefits.
turn, would provide the clinic premises and
If the Labor Arbiter rules in favor of the medical supplies. He received a monthly retainer
complainants, choose the statement that best fee of P60,000, plus 70% share in the service
describes the extent of the liabilities of Constant charges from AB Hotel and Resort’s guests
and Able. (1%) availing themselves of the clinic’s services. The
clinic employed nurses and allied staff, whose
(A) Constant and Able should be held solidarily
salaries, SSS contributions, and other benefits
liable for the unpaid wages and benefits, as well
he undertook to pay. AB Hotel and Resort issued
as backwages and separation pay, based on
directives giving instructions to him on the
Article 109 of the Labor Code which provides
replenishment of emergency kits and forbidding
that "every employer or indirect employer shall
the clinic staff from receiving cash payments
be held responsible with his contractor or
from the guests. In time, the nurses and the
subcontractor for any violation of any provision
clinic staff claimed entitlement to rights as
of this Code."
regular employees of AB Hotel and Resort, but
(B) Constant and Able should be held solidarily the latter refused on the ground that Dr.
liable for the unpaid wages and benefits, and Crisostomo, who was their employer, was an
should order Constant, as the workers' direct independent contractor. Rule with reasons. (4%)
employer, to be solely liable for the backwages 2017 Bar Exams
and separation pay.
The test of independent contractorship
(C) Constant and Able should be held solidarily was applied in the case of Polyfoam-RGC
liable for the unpaid wages and benefits and the International Corporation v. Concepcion,
backwages since these pertain to labor standard G.R. No. 172349, June 13, 2012. Thus, the
benefits for which the employer and contractor High Court ruled:
are liable under the law, while Constant alone –
The test of independent contractorship is
as the actual employer - should be ordered to pay
“whether one claiming to be an
the separation pay.
independent contractor has contracted to
(D) Constant and Able should be held solidarily do the work according to his own
liable for the unpaid wages and benefits, and methods and without being subject to the
Constant should be held liable for their control of the employer, except only as to
backwages and separation pay unless Able is the results of the work.” (San Miguel
shown to have participated with malice or bad Corporation v. Aballa, G.R. No. 149011,
faith in the workers' dismissal, in which case June 28, 2005, 461 SCRA 392, 421) In
both should be held solidarily liable. San Miguel Corporation v. Semillano,
G.R. No. 164257, July 5, 2010, 623 SCRA
(E) The above statements are all inaccurate. 114 the Court laid down the criteria in
2013 Bar Exams determining the existence of an
(A) Constant and Able should be held independent and permissible contractor
solidarily liable for the unpaid wages and relationship, to wit:
benefits, as well as backwages and
36 | P a g e
 “x x x [W]hether or not the contractor is [a] Mario Brothers claims the 3 workers
carrying on an independent business; the are project employees. It explains that the
nature and extent of the work; the skill agreement is, if the works contract is
required; the term and duration of the cancelled due to the fault of the client, the
relationship; the right to assign the period of employment is automatically
performance of a specified piece of work; terminated. Is the contractor correct?
the control and supervision of the work to Explain. (2.5%)
another; the employer’s power with
No. In GMA Network, Inc v. Pabriga,
respect to the hiring, firing and payment
(G.R. No. 176419, November 27, 2013, the
of the contractor’s workers; the control of
requirements to qualify an employment
the premises; the duty to supply the
as project-based was set as follows:
premises, tools, appliances, materials,
and labor; and the mode, manner and 1) employers claiming that their workers
terms of payment.” (San Miguel are project employees should not only
Corporation v. Semillano, supra, at p. prove that the duration and scope of the
124; Sasan, Sr. v. National Labor employment was specified at the time
Relations Commission 4th Division, they were engaged, but also that there was
supra at p. 691) indeed a project; and
Applying the above-test, the nurses are 2) the termination of the project must be
employees of Dr. Crisostomo. The facts reported by the employer to the DOLE
had clearly stated that Dr. Crisostomo Regional Office having jurisdiction over
was the one paying the salaries of the the workplace within the period
nurses and even reported them for SSS prescribed, and failure to do so militates
coverage. The element of payment of against the employer's claim of project
wages is present. employment. This is true even outside the
construction industry.
Mario Brothers failed to comply with both
19. Mario Brothers, plumbing works contractor,
requirements; hence, Tristan, Arthur and
entered into an agreement with Axis Business
Jojo are its regular employees. The
Corporation (Axis) for the plumbing works of its
cancellation of its contract with Axis did
building under construction. Mario Brothers
not result to the termination of
engaged the services of Tristan, Arthur, and Jojo
employment of Tristan, Arthur and Jojo.
as plumber, pipe fitter, and threader,
respectively. These workers have worked for
Mario Brothers in numerous construction
projects in the past but because of their long [b] Can Axis be made solidarily liable with
relationship, they were never asked to sign Mario Brothers to pay the unpaid wages
contracts for each project. No reports to and 13th month pay of Tristan, Arthur,
government agencies were made regarding their and Jojo? Explain. (2.5%) 2016 Bar Exam
work in the company. Yes, Axis can be made solidarily liable
During the implementation of the works with Mario Brothers. Principals are
contract, Axis suffered financial difficulties and solidarily liable with their contractors for
was not able to pay Mario Brothers its past the wages and other money benefits of
billings. As a result, the three (3) employees were their contractors' workers.
not paid their salaries for two (2) months and
their 13th month pay. Because Axis cannot pay,
Mario Brothers cancelled the contract and laid 20. XYZ Manpower Services (XYZ) was sued by
off Tristan, Arthur, and Jojo. The 3 employees its employees together with its client, ABC
sued Mario Brothers and Axis for illegal Polyester Manufacturing Company (ABC). ABC
dismissal, unpaid wages, and benefits. is one of the many clients of XYZ. During the
proceedings before the Labor Arbiter, XYZ was

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able to prove that it had substantial capital of Chan: (walay “supplied by a legitimate
Three Million Pesos. The Labor Arbiter ruled in contractor”)
favor of the employees because it deemed XYZ as
Does the performance by a contractual
a labor only contractor. XYZ was not able to
employee of activities directly related to
prove that it had invested in tools, equipment,
the main business of the principal makes
etc.
him a regular employee of the principal?
a. Is the Labor Arbiter’s ruling valid? Explain.
Yes. In the 2008 case of Mandaue Galleon
(5%)
Trade, Inc. v. Andales, [G.R. No. 159668,
SUGGESTED ANSWER: March 7, 2008], the Supreme Court cited
as additional basis for holding that the
Yes, the presumption is that a contractor
contractors of petitioner are engaged in
is a labor-only contractor unless it is
labor-only contracting, the fact that the
shown that it has substantial capital and
respondents who were the employees
substantial investment in the form of
recruited, supplied and placed by the
tools, equipment, machineries, work
contractors to petitioner were performing
premises and the like (Sy, et al v. Fairland
activities which are directly related to the
Knitcraft Co., Inc., G.R. Nos. 182915 &
main business of the petitioner.
189658, December 12, 2011) besides,
Respondents’ work as weavers, grinders,
what Art. 106 of the Code defines is
sanders and finishers is directly related to
Labor-Only Contracting and not Job-
petitioner's principal business of rattan
Contracting. In mandating that ―there is
furniture manufacturing. Where the
labor-only‘ contracting where the person
contractual employees are tasked to
supplying workers to an employment
undertake activities usually necessary or
does not have substantial capital OR
desirable in the usual business or trade of
investment in the form of tools,
the principal, the contractor is considered
equipment, machineries, work premises,
as a labor-only contractor and such
among others‖, the law is therefore clear
employees are considered as regular
that the presence of either handicap –
employees of the principal.
―substantial capital OR (substantial)
investment in the form of tools, As in Mandaue Galleon, the same ruling
equipment, (etc.)‖ – is enough basis to was made in the 2009 case of Coca-Cola
classify one as a labor-only contractor. Bottlers Phils., Inc. v. Agito, [G.R. No.
179546, February 13, 2009], where the
ALTERNATIVE ANSWER:
contractor was held to have engaged in
No, the Labor Arbiter‘s ruling is not valid. labor-only contracting because the
Art. 106 of the Labor Code provides that respondent-workers supplied by it to
the contractor has ―substantial capital or petitioner company worked therein as
investment‖; the law did not say salesmen. In the Delivery Agreement
substantial capital and investment. between petitioner and the contractor, it
Hence, it is in the alternative; it is is stated that petitioner is engaged in the
sufficiant if the contractor has one or the manufacture, distribution and sale of
other, i.e., either the substantial capital or softdrinks and other related products.
the investment. And under Department The work of respondents, constituting
Order No. 18-A, Series of 2011, the distribution and sale of Coca-Cola
amount of P3 million paid-up capital for products, is clearly indispensable to the
the company is substantial capital. principal business of petitioner.

b. Does the performance by a contractual In finding that the contractor, San

employee, supplied by a legitimate contractor, of Sebastian Allied Services, Inc. (SSASI),
activities directly related to the main business of was a labor-only
the principal make him a regular employee of the
principal? Explain. (5%) 2012 Bar Exams
38 | P a g e
 contractor in the 2008 case of Almeda v. for any claim made by the contractors
Asahi Glass Philippines, Inc., [G.R. No. employees (COCA-COLA BOTTLERS
177785, September 3, 2008], the PHILS., INC., vs ALAN M. AGITO,
Supreme Court was unconvinced by REGOLO S. OCA III)
respondent’s argument that petitioners
were performing jobs that were not
directly related to respondent’s main line Section 7 of DEPARTMENT ORDER NO.
of business. Respondent is engaged in 174, SERIES OF 2017: RULES
glass manufacturing. One of the IMPLEMENTING ARTICLES 106 TO 109
petitioners served as a quality controller, OF THE LABOR CODE, states that a
while the rest were glass cutters. The only principal is deemed the direct employer
excuse offered by respondent - that of the contractor’s employees in the event
petitioners’ services were required only that the contractor is engaged in laboy-
when there was an increase in the only contracting under section 5 and
market’s demand with which respondent other illicit forms of employment
could not cope - only proves even more arrangements under section 6 of these
that the services rendered by petitioners rules…
were indeed part of the main business of
respondent. It would mean that Section 5 of the Rules Implementing
petitioners supplemented the regular Articles 106-109 of the Labor Code, as
workforce when the latter could not amended, provides the guidelines in
comply with the market’s demand; determining whether labor-only
necessarily, therefore, petitioners contracting .
performed the same functions as the Section 5. Prohibition against labor-only
regular workforce. Even respondent’s contracting. Labor-only contracting is
claim that petitioners’ services were hereby declared prohibited. For this
required only intermittently, depending purpose, labor-only contracting shall
on the market, deserves scant credit. The refer to an arrangement where the
indispensability of petitioners’ services contractor or subcontractor merely
was fortified by the length and continuity recruits, supplies, or places workers to
of their performance, lasting for periods perform a job, work or service for a
ranging from three to 11 years. principal, and any of the following
elements are [is] present:

A legitimate job contract, wherein an i) The contractor or

employer enters into a contract with a job subcontractor does not have substantial
contractor for the performance of the capital or investment which relates to the
formers work, is permitted by law. Thus, job, work, or service to be performed and
the employer-employee relationship the employees recruited, supplied or
between the job contractor and his placed by such contractor or
employees is maintained. In legitimate subcontractor are performing activities
job contracting, the law creates an which are directly related to the main
employer-employee relationship between business of the principal; or
the employer and the contractors ii) The contractor does not
employees only for a limited purpose, i.e., exercise the right to control the
to ensure that the employees are paid performance of the work of the
their wages. The employer becomes contractual employee.
jointly and severally liable with the job
contractor only for the payment of the
employees wages whenever the
contractor fails to pay the same. Other
than that, the employer is not responsible

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