Sie sind auf Seite 1von 138

has general, In

working work
gives
the of the in wanting
decision [a] that bodies
and work,
management workers.
assignment, including
employers prerogative, management
Del es v. NLRC (2000)
observance
quasi-judicial
Ani no v. NLRC (98)
Cebu Royal Plant v. Deputy Minister of Labor
( 8 7 )
ownership, acquisition,
Ar t XI I I Sec 1
Ar t I I Sec 18
1987 Consti tuti on
Ar t I I Sec 5
Employment
is loss of
allowance, cost-of-living
Materni ty Childrens Hospital v. Sec. of
Labor ( 89)
Labor Standards
Provide minimum terms
the are Labor standards
use,
property and its increments.

Part I : Introductory Materials
Labor Standards
SECTION 1 LABOR LAW IN GENERAL
1. 01 LABOR LAW DEFI NED
social, economic, and political inequalities, and
remove cultural inequities by equitably diffusing
wealth and political power for the common good.
To this end, the State shall regulate the
The law governing the rights and duties of the
employer and employees
(1) with respect to the terms and conditions of
employment and
(2) with respect to labor disputes arising from
collective bargaining respecting such terms
and conditions
1. 02 LAW CLASSI FI CATI ON
and conditions of
employment, below which it cannot be allowed
to fall.
Terms and conditions society deem necessary to
maintain health, safety, and decent living of
workers
Books 1, 2, 3, 5 & 6
Must be observed in the entirety
minimum
requirements prescribed by existing laws, rules
and regulations relating to wages, hours of
other
monetary and welfare benefits, including
occupational safety, and health standards.
Labor Relations
Regulates the institutional relationship between
the workers organized into a union and the
employers
Book V Right to Self Organization and Right
to bargain collectively
disposition
1. 04 LAW AND WORKER
The SC reaffirmed its concern for the lowly
worker who, often at the mercy of his employer
must look up to the law for his protection. Fittingly,
the law regards him with tenderness and even favor
and always with faith and hope in his capacity to
help in shaping the nations future.
1. 05 CASE DECI SI ON
The Court finds occasion to remind courts and
should
faithfully comply with Section 14, Article VIII of the
Constitution which provides that no decision shall be
rendered by any court [or quasi-judicial body]
without expressing therein clearly and distinctly the
facts of the case and the law on which it is based.
xxx It is a requirement of due process and fair play
that the parties to a litigation be informed of how it
was decided, with an explanation of the factual and
legal reasons that led to the conclusions of the court
[or quasi-judicial body]. A decision that does not
clearly and distinctly state the facts and the law on
which it is based leaves the parties in the dark as to
how it was reached and is especially prejudicial to
the losing party, who is unable to pinpoint the
possible errors of the court [or quasi-judicial body]
for review by a higher tribunal.
In the present case, the NLRC was definitely
Welfare Laws
Designed to take care of the contingencies
which may affect the workers, e.g. where there
income for reasons beyond control,
i.e. sickness, death, accident, etc.
Social Security Act of 1997, RA 8282
Government Service Insurance System of
1997, RA 8291
aforesaid
constitutional requirement. Its assailed five-page
decision consisted of about three pages of quotation
from the labor arbiters decision, including the
dispositive portion, and barely a page (two short
paragraphs of two sentences each) of its own
discussion of its reasons for reversing the arbiters
findings.
Compensation
Insurance Fund
1. 06 MANAGEMENT FUNCTI ON
National Health Insurance Act of 1995, RA
7875
RECOGNI TI ON
1.03 BASIS OF ENACTMENT
However, petitioner loses sight of the fact that
the right of an employer to regulate all aspects of
employment is well settled. This right, aptly called
The maintenance of peace and order, the protection
of life, liberty, and property, and the promotion of
the general welfare are essential for the enjoyment
by all the people of the blessings of democracy.
The State affirms labor as a primary social economic
force. It shall protect the rights of workers and
promote their welfare.
the
freedom to regulate, according to their discretion
and best judgment, all aspects of employment,
methods,
processes to be followed, working regulations,
transfer of employees, work supervision, lay-off of
workers and the discipline, dismissal and recall of
the
prerogative to discipline its employees and to impose
appropriate penalties on erring workers, pursuant to
company rules and regulations.
The Congress shall give highest priority to the
enactment of measures that protect and enhance
the right of all the people to human dignity, reduce
LI MI TATI ONS
UP LAW BAROPS 2007
ONE UP
1 of 132

1.
2.
3.
and State
and of
may
A the to
legal workers the of measure full
void. and
be should doubts
labor
exercise can The

Pl asti c Town Center Corp. v. NLRC (89)
establish
Arti cl e 1306 Ci vi l Code
Arti cl e 1305 Ci vi l Code
contract." constitute
Gol den Donuts, I nc. v. NLRC (2000)
More Mari ti me Agenci es, I nc. v. NLRC (99)
Nonetheless, therefore,
Asian Al cohol Corp. v. NLRC (99)
through
Labor, shall be FI NAL and BI NDI NG upon the
including settlement,
Arti cl e 227
interference discourage
laws
employer's
Bonti a v. NLRC (96)
Pantranco North Express, I nc. v. NLRC (99)
employer prerogative.
not authorize substitution
Great Paci fic Employees Union v. Great Pacifi c
Li fe Assurance (99)
parties The
Any
that
an
contracting
In American Home Assurance Co. v. NLRC, this
Court held:
compromise
valid as consider not does law The
MISREPRESENTATI ON,

Part I : Introductory Materials
Labor Standards
It bears emphasis that the employer is free to
regulate all aspects of employment according to his
own discretion and judgment. This prerogative
flowed from the established rule that labor laws do
of judgment of the
employer in the conduct of his business. Recall f
workers clearly falls within the ambit of management
this
prerogative without fear of liability so long as it is
done in good faith for the advancement of his
interest and not for the purpose of defeating or
circumventing the rights of the employees under
special laws or valid agreements. It is valid as it is
not performed in a malicious, harsh, oppressive,
vindictive or wanton manner or out of malice or
spite.
It is true that this Court has generally held that
quitclaims and releases are contrary to public policy
voluntary
agreements that represent a reasonable settlement
are binding on the parties and should not later be
disowned. It is only where there is clear proof that
the waiver was wangled from an unsuspecting or
gullible person, or the terms of the settlement are
unconscionable, that the law will step in to bail out
the employee. While it is our duty to prevent the
exploitation of employees, it also behooves us to
protect the sanctity of contracts that do not
contravene our laws.
The State affords the constitutional blanket of
rendering protection to labor, but it must also
protect the right of employers to exercise what are
clearly management prerogatives, so long as the
exercise is without abuse of discretion.
any
agreement to receive less compensation that
what a worker is entitled to recover nor prevent
him from demanding benefits to which he is
entitled. Quitclaims executed by the employees
are thus commonly frowned upon as contrary to
public policy and ineffective to bar claims for the
with
judgment in the conduct of his business. Even as the
law is solicitous of the welfare of employees, it must
also protect the right of an employer to exercise
what are clearly management prerogatives As long
as the company' s exercise of the same is in good
faith in order to advance its interests and not for the
purpose of defeating or circumventing the rights of
the employees under the law or valid agreements,
such exercise will be upheld.
However, management prerogatives are not
absolute but are subject to legal limits, collective
bargaining agreements, or general principles of fair
play and justice. And, while it is the special privilege
of management to dismiss or lay off an employee,
the exercise of that prerogative must be made
without abuse of discretion, for what is at stake is
not only the employee' s position but also his means
of livelihood. Courts may, therefore, look into the
employer' s exercise of a management prerogative if
the same is clearly shown to be tainted with grave
abuse of discretion, 15 ever mindful that, under the
foregoing principles and the policy of the State,
resolved
disadvantaged employee.
rights,
considering the economic disadvantage of the
employee and the inevitable pressure upon him
by financial necessity.
Thus, it is never enough to assert that the parties
have voluntarily entered into such a quitclaim.
A compromise, once approved by final orders of
the court has the force of res judicata between the
parties and should not be disturbed except for vices
of consent or forgery." A compromise is basically a
contract perfected by mere consent. "Consent is
manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are
compromise
agreement is not valid when a party in the case has
not signed the same or when someone signs for and
in behalf of such party without authority to do so.
1.08 SOURCES OF LAW
LABOR CODE AND RELATED SPECI AL LEGISLATION
A contract is a meeting of the minds between two
persons whereby one binds himself, with respect to
the other, to give something or to render some
service.
1. 07 COMPROMI SE AND WAI VER
those
involving labor standards law, voluntarily agreed
upon by the parties with the assistance of the
Bureau or the regional office of the Department of
such
stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not
contrary to law, morals, good customs, public order,
or public policy.
parties. The National Labor relations Commission or
CONTRACT
any court shall not assume juri sdi cti on over
i ssues i nvol ved therei n except i n case of non-
compl i ance thereof or i f t her e is pr i ma faci e
evi dence t hat t he set tl ement was obtai ned
FRAUD,
COERCION.
Collective Bargaining Agreement
The subject for interpretation in this petition for
review is not the Labor Code or its implementing
rules and regulations but the provisions of the
collective bargaining agreement entered into by
management and the labor union. As a contract,
UP LAW BAROPS 2007
ONE UP
2 of 132
The rule is well settled
in favor of the
OR
Rul es
their
and policy in also
full
through secured be to ago years
through society of
of and political
by or the prohibit
by or
into ripened thereto, made
in and
and Labor National
mutual
industrial peace.
participate
bargaining self-organization,
promote
Ar ti cl e XI I I , Sec. 3
Arti cl e I I Secti on 18
The State affirms l abor as a pri mar y social
economi c force. It shall protect the rights of
Phi l . Geothermal , I nc. v. NLRC (94)
Phi l . Ai rl i nes, I nc. v. Santos (93)
elements component
aphorism philosophical
Antamoc Gol dfi el ds Mining Co. v. CI R (40)
elimination diminution
eliminated discontinued diminished,
pursuant
included continuously voluntarily
Davao Fruits Corporation v. Associ ated Labor
Uni on ( 93)
Commission) Relations
of rights the in law The
collective
negotiations, and peaceful
protecting
compliance

Part I : Introductory Materials
Labor Standards
it constitutes the law between the parties (Fegurin v.
in
interpreting contracts, the rules on contract must
govern.
Contracts which are not ambiguous are to be
interpreted according to their literal meaning and
should not be interpreted beyond their obvious
intendment (Herrera v. Petrophil Corp.).
PAST PRACTICES
From 1975 to 1981, petitioner had freely,
the
computation of its employees' thirteenth month pay,
the payments for sick, vacation and maternity
leaves, premiums for work done on rest days and
special holidays, and pay for regular holidays. The
considerable length of time the questioned items had
been included by petitioner indicates a unilateral and
voluntary act on its part, sufficient in itself to negate
any claim of mistake.
A company practice favorable to the employees
had indeed been established and the payments
opportunities which should be regulated, if not
controlled, by the State or placed, as it were, in
custodia societatis.
2. 02 NATURE OF PROVI SI ON
It is a fact that the sympathy of the Court is on
the side of the laboring classes, not only because the
Constitution imposes such sympathy, but because of
the one-sided relation between labor and capital.
The purpose is to place the workingman on an equal
plane with management with all its power and
influence in negotiating for the advancement of
his interests and the defense of his rights. Under the
policy of social justice, the law bends over backward
to accommodate the interests of the working class
on the humane justification that those with less
privileges in life should have more privileges in law.
the
employees authorizes neither oppression nor self-
destruction of the employer. There may be cases
where the circumstances warrant favoring labor over
the interests of management but never should the
scale be so tilted if the result is an injustice to the
employer. Justitia nemini neganda est (Justice is to
be denied to none).
benefits
enjoyed by them. And any benefit and supplement
being enjoyed by the employees cannot be reduced,
2. 03 1987 CONSTI TUTI ON
the
employer, by virtue of Section 10 of the Rules and
Regulations Implementing P.D. No. 851, and Article
100 of the Labor Code of the Philippines, which
LABOR SECTOR - CHARACTERIZED
the
employer of the employees' existing benefits
(Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).
workers and promote their welfare.
PROTECTION OF LABOR GUARANTEES
The State shall afford full protection to labor,
local and overseas, organized and unorganized, and
2. 01 HI STORI CAL BACKGROUND/ RATI ONALE
employment
employment opportunities for all.
It shall guarantee the rights of all workers to
It should be observed at the outset that our
Constitution was adopted in the midst of surging
unrest and dissatisfaction resulting from economic
and social distress which was threatening the
stability of governments the world over. Alive to the
social and economic forces at work, the framers of
our Constitution boldly met the problems and
difficulties which faced them and endeavored to
crystallize, with more or less fidelity, the political,
social and economic propositions of their age, and
this they did, with the consciousness that the
their
generation will, in the language of a great jurist, 'be
doubted by the next and perhaps entirely discarded
by the third.' Embodying the spirit of the present
epoch, general provisions were inserted in the
Constitution which are intended to bring about the
needed social and economic equilibrium between
and
concerted activities,
including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane
conditions of work, and a living wage. They shall
decision-making
processes affecting their rights and benefits as may
be provided by law.
The State shall promote the principle of shared
responsibility between workers and employers and
the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce
therewith
7 Cardinal Ri ghts of Workers
the
application of what may be termed as the justitia
communis advocated by Grotius and Leibnits many
the
counterbalancing of economic and social forces and
UP LAW BAROPS 2007
ONE UP
3 of 132

SECTION 2 - LABOR AND THE
CONSTI TUTI ON

and equality of
to foster
of
should former the which
Social
act saving that since
subject is his freely
the by As
shared of the
equality and full
h
l
c
property, concern for the protection
freedom components necessary
declaration, with
Gui do v. Rural Progress Adm. (49)
Cal al ang v. Wi l l i ams (40)
Ar ti cl e XI I I , Secti on 2
Ar ti cl e XI I I Secti on 1
Arti cl e I I , Secti on 10
employee separated
employees discharge
contended considerations.
responsibility principle
employment promote
Ari s (Phi l . ) I nc. v. NLRC (91)
iving wage
p
right to s
"neither is justice
of
Constitution distinctly recognizes
communism,
ollective bargaining and negotiations
p
needs and the giving of it

Part I : Introductory Materials
Labor Standards
elf-organization
eaceful concerted activities including
the right to strike in accordance with
law
security of t
preservation of corporate profits. Then, by and
pursuant to the same power, the State may
authorize an immediate implementation, pending
appeal, of a decision reinstating a dismissed or
is
designed to stop, although temporarily since the
appeal may be decided in favor of the appellant, a
continuing threat or danger to the survival or even
articipate in policy and decision-making
processes affecting their rights and
benefits as may be provided by law.
the life of the dismissed or separated employee and
his family.
SOCIAL JUSTICE
These provisions are the quintessence of the
aspirations of the workingman for recognition of his
role in the social and economic life of the nation, for
the protection of his rights, and the promotion of his
welfare. Thus, in the Article on Social Justice and
Human Rights of the Constitution, which principally
directs Congress to give highest priority to the
enactment of measures that protect and enhance
the right of all people to human dignity, reduce
social, economic, and political inequalities, and
remove cultural inequities by equitably diffusing
wealth and political power for the common good, the
State is mandated to afford full protection to labor,
local and overseas, organized and unorganized, and
of
employment opportunities for all; to guarantee the
rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance
with law, security of tenure, human conditions of
work, and a living wage, to participate in policy and
decision-making processes affecting their rights and
benefits as may be provided by law; and to promote
between
workers and employers and the preferential use of
voluntary modes in settling disputes. Incidentally, a
study of the Constitutions of various nations readily
reveals that it is only our Constitution which devotes
a separate article on Social Justice and Human
Rights. Thus, by no less than its fundamental law,
the Philippines has laid down the strong foundations
of a truly just and humane society. This Article
addresses itself to specified areas of concernlabor,
agrarian and natural resources reform, urban land
reform and housing, health, working women, and
people's organizationsand reaches out to the
underprivileged sector of society, for which reason
the President of the Constitutional Commission of
1986, former Associate Justice of this Court Cecilia
Muoz-Palma, aptly describes this Article as the
"heart of the new Charter."
These duties and responsibilities of the State
are imposed not so much to express sympathy for
the workingman as to forcefully and meaningfully
underscore labor as a primary social and economic
force, which the Constitution also expressly affirms
with equal intensity. Labor is an indispensable
partner for the nation's progress and stability.
XXX The validity of the questioned law is not
only supported and sustained by the foregoing
The State shall promote social justice in all phases of
national development.
The Congress shall give highest priority to the
enactment of measures that protect and enhance
the right of all the people to human dignity, reduce
social, economic, and political inequalities, and
remove cultural inequities by equitably diffusing
wealth and political power for the common good.
The promotion of social justice shall include the
commitment to create economic opportunities based
on freedom of initiative and self-reliance.
DEFI NI TI ON
nor
despotism, nor atomism, nor anarchy," but the
humanization of laws and the equalization of social
and economic forces by the State so that justice in
its rational and objectively secular conception may
at least be approximated.
LI MI TS OF USE
Hand in hand with the announced principle,
herein invoked, that "the promotion of social justice
to insure the well-being and economic security of all
the people should be the concern of the state," is a
be
reconciled, that "the Philippines is a Republican
state" created to secure to the Filipino people "the
blessings of independence under a regime of justice,
liberty and democracy." Democracy, as a way of life
enshrined in the Constitution, embraces as its
conscience,
freedom of expression, and freedom in the pursuit of
happiness. Along with these freedoms are included
economic freedom and freedom of enterprise within
reasonable bounds and under proper control. In
paving the way for the breaking up of existing large
estates, trusts in perpetuity, feudalism, and their
concomitant evils, the Constitution did not propose
to destroy or undermine property rights, or to
advocate equal distribution of wealth, or to authorize
the taking of what is in excess of one's personal
Solicitor
General, it is a valid exercise of the police power of
the State. Certainly, if the right of an employer to
to
regulation by the State, basically in the exercise of
its permanent police power on the theory that the
preservation of the lives of the citizens is a basic
duty of the State, that is more vital than the
to another. Evincing much
the
the preferred
position which real estate has occupied in law for
ages. Property is bound up with every aspect of
social life in a democracy as democracy is
conceived in the Constitution. The Constitution
realizes the indispensable role which property,
UP LAW BAROPS 2007
ONE UP
umane conditions of work
4 of 132

S
C
P
T
H
L
P
enure
of the within
to the in valid
of nor neither
The
it because simply
and in owned

Centur y Texti l e Mi ll s, I nc. v. NLRC (89)
Si bal v. Notre Dame of Greater Mani l a (90)
meaning property
Phi l. Movi e Workers Assn. v. Premi ere
Producti ons, I nc. (53)
workforce reductions
Bal bal ec v. NLRC (95)
during periods of business
Asi an Al cohol Corp. v. NLRC (99)
self-destruction oppression
Phi l . Geothermal I nc. v. NLRC (94)
providing
Garci a v. NLRC (94)
wrongdoing countenance
Phil. Long Distance Tel ephone Co. v. NLRC (88)
quantities reasonable
of policy constitutional
law also fundamental

Part I : Introductory Materials
Labor Standards
used
legitimately, plays in the stimulation to economic
effort and the formation and growth of a solid social
middle class that is said to be the bulwark of
democracy and the backbone of every progressive
and happy country.
guarantees the right of the
employer to reasonable returns from his investment.
Corollarily, the law allows an employer to downsize
his business to meet clear and continuing economic
threats. Thus, this Court has upheld reductions in
the work force to forestall business losses or stop
the hemorrhaging of capital.
The right of management to dismiss workers
The policy of social justice is not intended to
is
committed by the underprivileged. At best it may
mitigate the penalty but it certainly will not condone
the offense. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an
impediment to the punishment of the guilty. Those
who invoke social justice may do so only if their
hands are clean and their motives blameless and not
simply because they happen to be poor. This great
policy of our Constitution is not meant for the
protection of those who have proved they are not
worthy of it, like the workers who have tainted the
cause of labor with the blemishes of their own
character.
full
protection to labor is not intended to oppress or
destroy management. The employer cannot be
compelled to retain employees it no longer needs, to
be paid for work unreasonably refused and not
actually performed. NASECO bent over backward
and exerted every effort to help the petitioners look
for other work, postponed the effective date of their
separation, and offered them a generous termination
pay package. The unflagging commitment of this
Court to the cause of labor will not prevent us from
sustaining the employer when it is in the right, as in
this case.
recession and to install
labor saving devices to prevent losses is governed
by Art. 283 of the Labor Code, as amended.
The law recognizes the right of every business
entity to reduce its workforce if the same is made
necessary by compelling economic factors which
would endanger its existence or stability. In spite of
overwhelming support granted by the social justice
provisions of our Constitution in favor of labor, the
fundamental law itself guarantees, even during the
process of tilting the scales of social justice towards
workers and employees, "the right of enterprises to
reasonable returns of investment and to expansion
and growth." To hold otherwise would not only be
oppressive and inhuman, but also counterproductive
and ultimately subversive of the nation's thrust
towards a resurgence in our economy which would
ultimately benefit the majority of our people. Where
appropriate and where conditions are in accord with
law and jurisprudence, the Court has authorized
forestall
business losses, the hemorrhaging of capital, or
even to recognize an obvious reduction in the
volume of business which has rendered certain
employees redundant.
2. 04 CONSTI TUTI ONAL RI GHTS AND LABOR
While it is true that compassion and human
consideration should guide the disposition of cases
involving termination of employment since it affects
one's source or means of livelihood, it should not be
overlooked that the benefits accorded to labor do
not include compelling an employer to retain the
services of an employee who has been shown to be
a gross liability to the employer. The law in
protecting the rights of the employees authorizes
LABOR AS PROPERTY
The right to labor is a constitutional as well as a
statutory right. Every man has a natural right to the
fruits of his own industry. A man who has been
employed to undertake certain labor and has put
into it his time and effort is entitled to be protected.
The right of a person to his labor is deemed to be
the
employer. It should be made clear that when the law
tilts the scale of justice in favor of labor, it is but a
recognition of the inherent economic inequality
between labor and management. The intent is to
balance the scale of justice; to put the two parties
on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over
the interests of management but never should the
scale be so tilted if the result is an injustice to the
employer. Justitia nemini neganda est (Justice is to
be denied to none).
EMPLOYER PROTECTION
constitutional
guarantees. That is his means of livelihood. He
cannot be deprived of his labor or work without due
process of law (11 Am. Jur., 333, pp. 1151-1153; 11
Am. Jur., section 344, pp. 1168- 1171).
Thus, in the case of Callanta v. Carnation
Philippines, Inc. (145 SCRA 268), this Court held
that one's employment, profession, trade or calling
is a "property right", and the wrongful interference
therewith is an actionable wrong. The right is
considered to be property within the protection of a
constitutional guaranty of due process of law.
DUE PROCESS REQUIREMENT
Out of its concern for those with less privilege in
life, this Court has inclined towards the worker and
upheld his cause in his conflicts with the employer.
This favored treatment is directed by the social
justice policy of the Constitution. But while titling
the scales of justice in favor of workers, the
The twin requirements of notice and hearing
constitute essential elements of due process in
cases of employee dismissal: the requirement of
notice is intended to inform the employee
UP LAW BAROPS 2007
ONE UP
5 of 132
LAW
contract should it whether
by taken position the support might
to special has
welfare and safety health, the
a that bears It XXX
two

judgment
Mani l a El ectri c Company v. Qui sumbi ng (99)
Nati onal Sugar Refineri es Corp. v. NLRC (93)
Phi l. National Constructi on Corp. v. NLRC (93)
contracts application
Victori ano vs. Elizalde Rope
( 7 4 )
individual
Leyte Land Transportation Co. v. Leyte Farmers
and Workers Uni on (48)
stressing
Manej a v. NLRC (98)
a for law the of The mandate

Part I : Introductory Materials
Labor Standards
concerned of the employer's intent to dismiss and
the reason for the proposed dismissal; upon the
other hand, the requirement of hearing affords the
employee an opportunity to answer his employer's
charges against him and accordingly to defend
himself therefrom before dismissal is effected.
Neither of these two requirements can be dispensed
with without running afoul of the due process
requirement of the 1987 Constitution.
The requisites of a valid dismissal are (1) the
dismissal must be for any of the causes expressed in
Article 282 of the Labor Code, and (2) the employee
must be given an opportunity to be heard and to
defend himself. The substantive and procedural
laws must be strictly complied with before a worker
can be dismissed from his employment because
what is at stake is not only the employees position
but his livelihood.
XXX Well-settled is the dictum that the twin
requirements of notice and hearing constitute the
essential elements of due process in the dismissal of
employees. It is a cardinal rule in our jurisdiction
that the employer must furnish the employees with
written notices before the termination of
employment can be effected: (a) the first apprises
the employee of employers decision to dismiss him.
The requirement of a hearing, on the other hand, is
complied with as long as there was an opportunity to
be heard, and not necessarily that an actual hearing
was conducted.
workers
employment is property in the constitutional sense.
He cannot be deprived of his work without due
process of law. Substantive due process mandates
that an employee can only be dismissed based on
just or authorized causes. Procedural due process
requires further that he can only be dismissed after
he has been given an opportunity to be heard. The
import of due process necessitates the compliance of
these two aspects.
Workers Uni on
It should not be overlooked, however, that the
prohibition to impair the obligation of contracts is
not absolute and unqualified. In spite of the
constitutional prohibition, the State continues to
possess authority to safeguard the vital interests of
its people. Legislation appropriate to safeguarding
said interests may modify or abrogate contracts
already in effect. For not only are existing laws read
into contracts in order to fix the obligations as
between the parties, but the reservation of essential
attributes of sovereign power is also read into
contracts as a postulate of the legal order. xxx This
regulating
relations between capital and labor which are not
merely contractual, and said labor contracts, for
being impressed with public interest, must yield to
the common good.
liberal
interpretation of labor contracts in favor of the
working man was applied in the case of Ditan vs.
POEA Administrator 8 where We made the following
pronouncement:
the
respondents. However, we are dealing here not
with an ordinary transaction but with a labor
contract which deserves special treatment and a
liberal interpretation in favor of the worker . . .
the Constitution mandates the protection of labor
and the sympathetic concern of the State for the
working class conformably to the social justice
policy . . .
xxx xxx xxx
Under the policy of social justice, the law bends
over backward to accommodate the interests of
the working class on the humane justification
that those with less privileges in life should have
more privileges in law . . ."
LI ABILI TY OF CONTRACT AND STATE INTERFERENCE
MANAGEMENT AND THE CONSTI TUTI ON
In answer to the contention of the petitioner
that the doctrine laid down in the appealed decision
in effect "has deprived the company of its rights to
enter into contract of employment as it and the
employee may agree," it is sufficient to quote the
following pronouncements of the United States
Supreme Court: "The fact that both parties are of
full age and competent to contract does not
necessarily deprive the State of the power to
interfere where the parties do not stand upon an
equality, or where the public health demands that
one party to the contract shall be protected against
himself. The State still retains an interest in his
welfare, however reckless he may be. The whole is
no greater than the sum of all the parts, and where
While the Constitution is committed to the policy
of social justice and the protection of the working
class, it should not be supposed that every labor
dispute will be automatically decided in favor of
labor. Management also has its own rights which, as
such, are entitled to respect and enforcement in the
interest of simple fair play. Out of its concern for
those with less privileges in life, this Court has
inclined more often than not toward the worker and
upheld his cause in his conflicts with the employer.
Such favoritism, however, has not blinded us to the
rule that justice is in every case for the deserving, to
be dispensed in the light of the established facts and
the applicable law and doctrine.
are
sacrificed or neglected, the State must suffer."
(West Coast Hotel Company vs. Parrish, quoting
Holden vs. Hardy. The former, by the way, expressly
overrules the case of Adkins vs. Children's Hospital)
Additionally, we recognize that contracting out
is not unlimited; rather, it is a prerogative that
management enjoys subject to well-defined legal
limitations. As we have previously held, the
company can determine in its best business
out
performance of some of its work for as long as
UP LAW BAROPS 2007
ONE UP
"A strict interpretation of the cold facts before us
6 of 132
closed and strikes
as rights their workers
of the was Code
and in
in full found never
still was
the
rule
the to
and defined legally
PAL Employees Savings and Loan Assn., Inc.
v. NLRC (96)
lockouts, bargaining,
The New Ci vi l Code Art. 1700
Mani la El ectri c Co. v. Qui sumbing (99)
concerning
attainment formulated,
already declared a
Phi lippi ne Ai rl i nes, Inc. v. NLRC (93)
property regulating demands"
Employees Confederation of the Philippines v.
NWPC ( 91)
acceptance principle
Philippines
Agri cultural Credit & Cooperative Financing
Admi n. v. Confederati on of Uni ons (69)
relations regulate authority
Al al ayan v. Nati onal Power Corporati on (68)
protected
exerted The influence by
constitutional doctrines unavoidable when
American

Part I : Introductory Materials
Labor Standards
the employer is motivated by good faith, and the
contracting out must not have been resorted to
circumvent the law or must not have been the result
of malicious or arbitrary action. The Labor Code and
its implementing rules also contain specific rules
governing contracting out.
Given these realities, we recognize that a
balance already exists in the parties relationship
with respect to contracting out; MERALCO has its
PARTI CI PATI ON I N DECI SI ON MAKI NG PROCESS
Indeed, industrial peace cannot be achieved if
the employees are denied their just participation in
the discussion of matters affecting their rights. Thus,
even before Article 211 of the Labor Code (P.D. 442)
was amended by Republic Act No. 6715, it was
management
prerogatives while workers are guaranteed their own
protection through specific labor provisions and the
recognition of limits to the exercise of management
prerogatives.
WELFARE STATE
policy of the State: "(d) To
promote the enlightenment of workers concerning
their rights and obligations . . .as employees." This
was, of course, amplified by Republic Act No. 6715
when it decreed the "participation of workers in
decision and policy making processes affecting their
rights, duties and welfare." PAL's position that it
cannot be saddled with the "obligation" of sharing
management prerogatives as during the formulation
The welfare state concept is not alien to the
philosophy of our Constitution. It is implicit in quite a
few of its provisions. There is the clause on the
promotion of social justice to ensure the well-being
and economic security of all the people, as well as
the pledge of protection to labor with specific
of the Code, Republic Act No. 6715 had not yet been
enacted, cannot thus be sustained. While such
"obligation" was not yet founded in law when the
a
harmonious labor-management relationship and the
then already existing state policy of enlightening
between
landowners and tenants and between labor and
capital.
employees
demand no less than the observance of transparency
in managerial moves affecting employees' rights.
LAI SSEZ-FAI RE
We do not find merit in MERALCOs contention
that the above-quoted ruling of the Secretary is an
intrusion into the management prerogatives of
American
under
notwithstanding, an influence that has not altogether
vanished even after independence, the laissez faire
MERALCO. It is worthwhile to note that all the Union
demands and what the Secretarys order granted is
that the Union be allowed to participate in policy
formulation and decision-making process on matters
affecting the Union members rights, duties and
this
jurisdiction, even during the period of its flowering in
the United States.
welfare as required in Article 211 (A) (g) of the
Labor Code. And this can only be done when the
Union is allowed to have representatives in the
Safety Committee, Uniform Committee and other
committees of a similar nature. Certainly, such
participation by the Union in the said committees is
Apparently, ECOP is of the mistaken
impression
that Republic Act No.
6727 is meant to
"get the
Government out of the industry" and leave labor and
management alone in
deciding wages. The
Court
does not think that the law intended to deregulate
the relation between labor and capital for
several
reasons: (1) The Constitution calls upon the State to
protect the rights of workers and
promote their
welfare; (2) the Constitution also makes it a duty of
the State "to intervene when the common goal so
not in the nature of a co-management control of the
business of MERALCO. What is granted by the
Secretary is participation and representation. Thus,
there is no impairment of management prerogatives.
SECTI ON 3 - LABOR AND THE CIVIL CODE
property
relations; (3) the Charter urges Congress to give
priority to the enactment of measures, among other
things, to diffuse the wealth of the nation and to
regulate the use of property; (4) the Charter
recognizes the "just share of labor in the fruits of
production;" (5) under the Labor Code, the State
shall regulate the relations between labor and
management; (6) under Republic Act No. 6727
itself, the State is interested in seeing that workers
receive fair and equitable wages; and (7) the
Constitution is primarily a document of social justice,
and although it has recognized the importance of the
private sector, it has not embraced fully the concept
of laissez faire or otherwise, relied on pure market
forces to govern the economy; We can not give to
the Act a meaning or intent that will conflict with
these basic principles.
3.01 ROLE OF LAW
The relations between capital and labor are not
merely contractual. They are so impressed with
public interest that labor contracts must yield to the
common good. Therefore, such contracts are subject
to the special laws on labor unions, collective
shop,
wages, working conditions, hours of labor and
similar subjects.
LABOR CONTRACTS
In connection with the foregoing, we should
add that even if there had been a meeting of the
7 of 132

UP LAW BAROPS 2007
ONE UP
illegal, is order or rule
Any
other, the against
terms, any may
in inheres all by that
of in be not must
unreasonable,
San Mi guel Corp. v. Ubal do (93)
GTE Di rectori es Corp. v. Sanchez (91)
PCI B v. Jaci nto (91)
EMPLOYEES
Sarmi ento v. Tui co (88)
just compensation and treatment carries with it
Fi restone Ti re and Rubber Co. v. Lari osa (87)
General Bank and Trust Co. , v. Court of Appeals
( 8 5 )
Ar t . 1701
agreements, establish
accounts privilege
Philippine Tel ephone and Telegraph Co. v.
NLRC ( 97)
violation agreement
or To
is who
Quoting the words of this Court in a recent
case:
disobedience disregard sanction
entrusted employee
"To sanction disregard or disobedience
OBEDIENCE
EMPLOYERS ORDERS
employee is that if
EMPLOYER-EMPLOYEE

Part I : Introductory Materials
Labor Standards
minds in the instant case, the employment contract
could not have effectively shielded petitioner from
the just and valid claims of private respondent.
Generally speaking, contracts are respected as the
law between the contracting parties, and they may
establish such stipulations, clauses, terms and
conditions as they may see fit; and for as long as
such agreements are not contrary to law, morals,
good customs, public policy or public order, they
shall have the force of law between them. However,
while it is the inherent an inalienable right of
every man to have the utmost liberty of contracting,
and agreements voluntarily and fairly made will be
held valid and enforced in the courts, the general
right to contract is subject to the limitation that the
FAI R TREATMENT
Basically, the right of an employer to dismiss an
employee differs from and should not be confused
with the manner in which such right is exercised. It
must not be oppressive and abusive since it affects
one's person and property. (Remerco Garments
Manufacturing v. MOLE)
MUTUAL OBLI GATI ON
The employer's obligation to give him workers
the
Constitution, the statute or some rule of law. And
under the Civil Code, contracts of labor are explicitly
subject to the police power of the State because
they are not ordinary contracts but are impressed
with public interest. Inasmuch as in this particular
instance the contract in question would have been
deemed in violation of pertinent labor laws, the
provisions of said laws would prevail over the terms
of the contract, and private respondent would still be
entitled to overtime pay.
the
corollary right to expect from the workers adequate
work, diligence and good conduct.
LAW COMPLI ANCE
It is also important to emphasize that the
return-to-work order not so much confers a right as
it imposes a duty; and while as a right it may be
waived, it must be discharged as a duty even
against the worker's will.
Petitioners policy is not only in derogation of
the provisions of Article 136 of the Labor Code on
the right of a woman to be free from any kind of
stipulation against marriage in connection with her
employment, but it likewise assaults good morals
and public policy, tending as it does to deprive a
woman of the freedom to choose her status, a
the
individual as an intangible and inalienable right.
Hence, while it is true that the parties to a contract
COMPLI ANCE
with
responsibility by his employer should perform the
task assigned to him with care and dedication. The
lack of a written or formal designation should not be
an excuse to disclaim any responsibility for any
damage suffered by the employer due to his
negligence. The measure of the responsibility of an
and
conditions that they may deem convenient, the
same should not be contrary to law, orals, good
customs, public order, or public policy. Carried to its
logical consequences, it may even be said that
petitioners policy against legitimate marital bonds
would encourage illicit or common-law relations and
subvert the sacrament of marriage.
Parenthetically, the Civil Code provisions on the
contract of labor state that the relations between the
parties, that is, of capital and labor, are not merely
contractual, impressed as they are with so much
public interest that the same should yield to the
common good. It goes on to intone that neither
capital nor labor should visit acts of oppression
against the other, nor impair the interest or
convenience of the public. In the final reckoning,
the danger of just such a policy against marriage
followed by petitioner PT&T is that it strikes at the
very essence, ideals and purpose of marriage as an
inviolable social institution and, ultimately, of the
family as the foundation of the nation. That it must
be effectively interdicted here in all its indirect,
disguised or dissembled forms as discriminatory
conduct derogatory of the laws of the lands is not
only in order but imperatively required.
he performed his assigned task
efficiently and according to the usual standards, then
he may not be held personally liable for any damage
arising therefrom. Failing in this, the employee must
suffer the consequences of his negligence if not lack
of due care in the performance of his duties.
STANDARD
CONDUCT
by
employees of a rule or order laid down by
management, on the pleaded theory that the rule or
order is unreasonable, illegal, or otherwise irregular
for one reason or another, would be disastrous to
the discipline and order that it is in the interest of
both the employer and his employees to preserve
and maintain in the working establishment and
without which no meaningful operation and progress
is possible.
by
employees of a rule or order laid down by
management, on the pleaded theory that the
Neither capital nor labor shall act oppressively
or
convenience of the public.
or
otherwise irregular for one reason or another,
would be disastrous to the discipline and order that
it is in the interest of both employer and his
employees to preserve and maintain in the working
establishment and without which no meaningful
UP LAW BAROPS 2007
ONE UP
8 of 132

impair the interest or
AND TO
3. 02 OF
unequal to eyes its
work equal "ensure shall State
the to not are
and capital,
has its through
Rights, Human of
and social, reduce dignity,
and
today, The era.
behind the maybe
the bar, at case the In

opportunities, closes
restricted conditions
inequality
Constitution,
Declaration Universal
economic,
International School Al liance of Educators v.
Qui sumbi ng ( 2000)
Recommendati ons Conventions
Manej a v. NLRC (98)
employee enlightened
Lagni ton v. NLRC (93)
justification Whatever
eventually
authority.
abhors policy public That

Part I : Introductory Materials
Labor Standards
operation and progress is possible. Deliberate
disregard or disobedience of rules, defiance of
management authority cannot be countenanced.
This is not to say that the employees have no
remedy against rules or orders they regard as
unjust or illegal. They may object thereto, ask to
negotiate thereon, bring proceedings for redress
against the employer before the Ministry of
Labor. But until and unless the rules or orders
are declared to be illegal or improper by
competent authority, the employees ignore or
disobey them at their peril."
With a view of maintaining the viability of a
business enterprise, the employees are expected to
recognize the rules or orders which have not been
declared to be illegal or improper by competent
I nt ernat i onal Covenant on Civil and Political
Ri ghts Part I I , Art. 8
i f
I nternati onal Labor Organi zati on (I LO)
INTERNATI ONAL CONVENTI ONS
inequality
private
respondents committed acts contrary to the rules
and regulations set out by the company, which
caused
establishment.
It is a recognized principle that company policies
and regulations are, unless shown to be grossly
oppressive or contrary to law, generally binding and
valid on the parties and must be complied with until
finally revised or amended unilaterally or preferably
through negotiation or by competent authority.
XXX Deliberate disregard or disobedience of
rules by the employees cannot be countenanced.
the
violations is immaterial at this point, because the
fact still remains that an infraction of the company
rules has been committed.
EMPLOYER OBLIGATION
The days are gone when the employee was at
the mercy of his employer and could be dismissed
for the flimsiest reasons or for no reason at all. The
tyrannical employer is an anachronism in this
once
defenseless and often oppressed, has found new
strength in the protection of the law and the proud
realization that he performs a symbiotic role with the
employer in their common enterprise. As such, he
must be treated not as a disdained subordinate but
with the respect and fairness, if not affection and
gratitude, that is due to an equal partner.
An employer can terminate the services of an
employee only for valid and just causes which must
be supported by clear and convincing evidence. The
employer has the burden of proving that the
dismissal was indeed for a valid and just cause.
Failure to do so results in a finding that the
dismissal was unjustified.
political
inequalities." The very broad Article 19 of the Civil
Code requires every person, "in the exercise of his
rights and in the performance of his duties, [to] act
with justice, give everyone his due, and observe
honesty and good faith."
International law, which springs from general
principles of law, likewise proscribes discrimination.
General principles of law include principles of equity,
i.e., the general principles of fairness and justice,
based on the test of what is reasonable. The
the
International Covenant on Economic, Social, and
Cultural Rights, the International Convention on the
Elimination of All Forms of Racial Discrimination, the
Convention against Discrimination in Education, the
Convention (No. 111) Concerning Discrimination in
Respect of Employment and Occupation - all embody
the general principle against discrimination, the very
antithesis of fairness and justice. The Philippines,
incorporated
principle as part of its national laws.
In the workplace, where the relations between
capital and labor are often skewed in favor of
discrimination
employer are all the more reprehensible.
The Constitution specifically provides that labor
is entitled to "humane conditions of work." These
physical
workplace - the factory, the office or the field - but
include as well the manner by which employers treat
their employees.
The Constitution also directs the State to
promote "equality of employment opportunities for
all." Similarly, the Labor Code provides that the
opportunities
regardless of sex, race or creed." It would be an
affront to both the spirit and letter of these
provisions if the State, in spite of its primordial
obligation to promote and ensure equal employment
Uni versal Decl arati on of Human Ri ghts Ar ts.
3, 7, 17, 22, 23, 24, 25
I nt ernat i onal Covenant on Economic, Social
and Cul tural Ri ghts Part I I I , Arts. 6, 7, 9,
1 1
and
discriminatory terms and conditions of employment.
Discrimination, particularly in terms of wages, is
frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes the payment of
lesser compensation to a female employee as
against a male employee for work of equal value.
Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order
to encourage or discourage membership in any labor
organization.
Notably,
Economic, Social, and Cultural Rights, supra, in
Article 7 thereof, provides:
UP LAW BAROPS 2007
ONE UP
and
discrimination is beyond contention. Our Constitution
and laws reflect the policy against these evils. The
Constitution in the Article on Social Justice and
Human Rights exhorts Congress to "give highest
priority to the enactment of measures that protect
and enhance the right of all people to human
International Covenant
9 of 132
serious damage to the
SECTI ON 4 - LABOR AND I NTERNATI ONAL
COVENANTS

t he
this
by the
the on
and
under been having
TEST
of
full labor, to
Ar t. 3
Ar t. 2
Ar t. 1
under and effort skill,
The
women in kind, any
Agencies International
APPLICATION OF THE LABOR CODE
Not of universal application
Labor Code, PD 442 as amended
Applicability Art. 6
All workers agricultural and non-agricultural
GOCC organized under general laws in
corporation Corporation Code
Wages (97b) government, all branches,
subdivision & instrumentalities, GOCC, profit or
non profit organizations
ECSIF all private and government employees
(167 f)
Offspring of GOCC test: HOW ORGANIZED
Labor code NOT APPLICABLE
organized NASECO
Cabrera v. NLRC (91)
PNOC Energy Devel opment Corp. v. NLRC (91)
including
Art I X, B, Sec 2(1), 1987 Consti tuti on:
employment
Ar t . 276
Applicability
promote protection
responsibility,
provisions foregoing
particular
a.....Remuneration
employees Government
jurisdiction
Commission.
RESOURCES
INDUSTRIAL
JUSTICE.
GOVERNMENT
CORPORATI ONS
government-owned
corporations with original charters.
which
workers, as a minimum, with:

Part I : Introductory Materials
Labor Standards
The States Parties to the present Covenant
recognize the right of everyone to the enjoyment of
just and favourable conditions of work, which
ensure, in particular:
provides
i.....Fair wages and equal remuneration for
work of equal value without distinction of
controlled corporations, shall be governed by the
Civil Service Law, rules and regulations. Their
salaries shall be standardized by the National
Assembly as provided for in the new constitution.
However, there shall be no reduction of existing
wages, benefits and other terms and conditions of
employment being enjoyed by them at the time of
the adoption of this Code.
being
guaranteed conditions of work not inferior
to those enjoyed by men,
for equal work;
The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,
impregnably
institutionalize in this jurisdiction the long honored
legal truism of "equal pay for equal work." Persons
who work with substantially equal qualifications,
similar
conditions, should be paid similar salaries. This rule
applies to the School, its "international character"
notwithstanding.
5.01 DECREE TI TLE
controlled
AND CONTROLLED
Thus, under the present state of the law, the
test in determining whether a government-owned or
controlled corporation is subject to the Civil Service
Law are the manner of its creation, such that
government corporations created by special charter
are subject to its provisions while those incorporated
under the General Corporation Law are not within its
coverage.
A DECREE INSTITUTING A LABOR CODE, THEREBY
REVISING AND CONSOLIDATING LABOR AND
SOCIAL LAWS TO AFFORD PROTECTION TO
LABOR, PROMOTE EMPLOYMENT AND HUMAN
DEVELOPMENT
Name of Decree - This Decree shall be known as the
"Labor Code of the Philippines," 10/02/1999
Our finding is that the respondent NLRC erred in
dismissing the petitioners' complaint for lack of
jurisdiction because the rule now is that only
government-owned or controlled corporations with
original charters come under the Civil Service. The
the
Corporation Law and not by virtue of a special
legislative charter, its relations with its personnel are
governed by the Labor Code and come under the
Relations
5. 02 EFFECTI VI TY
Date of effectivity - This Code shall take effect six
months after its promulgation.
5. 03 POLI CY DECLARATI ON
Declaration of Basic Policy The State shall afford
employment,
ensure equal work, opportunities regardless of sex,
race or creed, and regulate the relations between
workers and employers. The State shall assure the
rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane
conditions of work.
5. 04 APPLI CABI LI TY
- All rights and benefits granted to
workers under this Code shall, except as may
otherwise be provided herein, apply alike to all
workers, whether agricultural or non-agricultural.

applicable? Civil Service and EO 180
GOCC with original charter Art. 9 B,
Sec. 2(1) of the Constitution
specialized
agencies or UN treaty or international
conventions
grant of immunity from suit ex. IRRI,
ICMC
by specific treaty grant of immunity
if injustice is created due to exemption
from suit, REMEDY: withdraw the grant
of immunity from suit.
Government employees - The terms and conditions
of
including employees
government employees,
government-owned
I nternati onal Agenci es
UP LAW BAROPS 2007
ONE UP
10 of 132

all
with equal pay
SECTION 5 - THE LABOR CODE OF THE
PHI LI PPI NES

AND
ON
ENSURE
SOCIAL PEACE BASED
Ar t. 6
all
of and
or
OWNED
of the National Labor
whats


the
For Labor. of the by power
k
and rules Labor
avoid to state and church of
and
and of
a of favor in any make
of
to
governs

Sal i nas v. NLRC (99)
Art. 170, Ci vil Code
Art. 4, Labor Code
Omnibus promulgated Employment
Secretary
Pagpal ai n Haul ers, I nc. v. Traj ano (99)
paragraph the inclusion of
Department's
Kapi sanan ng mga Manggagawang Pi nagyakap
v. NLRC (87)
separation
subdivisions
organizations, in cases of regular
undertakings, all establishments
Employment Termination
exception
employees, dismissal
enough
the
comprehensive
Austri a v. NLRC (99)
Nati onal Mines and Al l i ed Workers Uni on v
NLRC ( 98)
Ebr o I I I v. NLRC ( 96)
the whether of issue the On
Retirement,
categorically includes religious institutions in the
coverage of the law, to wit:
is
religious
SECTION 1.

Part I : Introductory Materials
Labor Standards
The grant of immunity is by virtue of the
Convention on the Privileges and Immunities of
Specialized Agencies of the U.N. adopted by the
Senate on May 17, 1949. This has become part of
the law of the land under the Constitution on
generally accepted principles of international law.
SCHOOL TEACHERS
void by this Court in Philippine Apparel Workers
Union vs. National Labor Relations Commission,
ruling that: ". . ., it must be pointed out that the
Secretary of Labor has exceeded his authority when
he included paragraph (k) in Section 1 of the Rules
Implementing P.D. 1123. "By virtue of such rule-
making authority, the Secretary of Labor issued on
May 1, 1977 a set of rules which exempts not only
distressed employers but also 'those who have
granted in addition to the allowance under P.D. 525,
at least P60.00 monthly wage increase on or after
January 1, 1977, provided that those who paid less
than this amount shall pay the difference.' "Clearly,
individual
petitioners were permanent employees, it is the
Manual of Regulations for Private Schools, and not
the Labor Code, which is applicable.
contravenes the
statutory authority granted to the Secretary of
Labor, and the same is therefore void, as ruled by
this Court in a long line of cases, . . ."
RELIGI OUS CORPORATI ONS
Neither can Pagpalain contend that Department
Order No. 9 is an invalid exercise of rule-making
An ecclesiastical affair is one that concerns
doctrine, creed or form of worship of the church, or
the adoption and enforcement within a religious
association of needful laws and regulations for the
government of the membership, and the power of
excluding from such associations those deemed
unworthy of membership. Based on this definition,
an ecclesiastical affair involves the relationship
between the church and its members and relate to
matters of faith, religious doctrines, worship and
governance of the congregation.
XXX Under the Labor Code, the provision which
include
corporations, such as the SDA, in its coverage.
Article 278 of the Labor Code on post-employment
states that the provisions of this Title shall apply to
all establishments or undertakings, whether for
profit or not. Obviously, the cited article does not
religious
corporation. This is made more evident by the fact
that the Rules Implementing the Labor Code,
particularly, Section 1, Rule 1, Book VI on the
Coverage. This Rule shall apply to
whether
operated to profit or not, including educational,
medical, charitable and religious institutions and
an
administrative order to be valid, it must 1) be issued
on the authority of law and 2) it must not be
contrary to the law and the Constitution.
Department Order No. 9 has been issued on
authority of law. Under the law, the Secretary is
authorized to promulgate rules and regulations to
implement the Labor Code. Specifically, Article 5 of
the Labor Code provides that [t]he Department of
Labor and other government agencies charged with
the administration and enforcement of this Code or
any of its parts shall promulgate the necessary
implementing rules and regulations. Consonant
with this article, the Secretary of Labor and
Rules
Implementing the Labor Code. By virtue of this self-
same authority, the Secretary amended the above-
mentioned omnibus rules by issuing Department
Order No. 9, Series of 1997.
Moreover, Pagpalain has failed to show that
Department Order No. 9 is contrary to the law or the
Constitution. At the risk of being repetitious, the
Labor Code does not require a local or chapter to
submit books of account in order for it to be
registered as a legitimate labor organization. There
is, thus, no inconsistency between the Labor Code
and Department order No. 9. Neither has Pagpalain
shown that said order contravenes any provision of
the Constitution.
employment
with the exception of Government and its political
5. 06 LAW I NTERPRETATI ON
including
controlled corporations.
government-owned
With this clear mandate, the SDA cannot hide
behind the mantle of protection of the doctrine of
its
responsibilities as an employer under the Labor
Code.
Construction in favor of labor - All doubts in the
implementation and interpretation of the provisions
of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor.
5. 05 RULE MAKI NG POWER
LI MI TATI ON RULE MAKI NG POWER
In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety
and decent living for the laborer.
LIBERAL CONSTRUCTION
The labor arbiter in rendering the questioned
decision relied primarily on Section 1 (k) of the
regulations
implementing Presidential Decree No. 1123. This
exemption paragraph (k) was, however, declared
It is basic and irrefragable rule that in carrying
out and interpreting the provisions of the Labor
Code and its implementing regulations, the
workingmans welfare should be the primordial
UP LAW BAROPS 2007
ONE UP
11 of 132
or
as
rights the of and
as
rights the of and
the of spirit and liberal
Art. 97 Defi ni ti on
(a) "Person" means an individual, partnership,
vindication protection
Phi l . Ai rl i nes, I nc. v. NLRC (1992)
Rel i ance Surety and Insurance Co. I nc v NLRC
( 9 1 )
vindication protection
Phi lippi ne Ai rl i nes I nc v NLRC (91)
Boni faci o v. GSI S (86)
Cl emente v. GSI S (87)
compassionate
deserving otherwise
commiseration.
deserving sympathy

Part I : Introductory Materials
Labor Standards
and paramount consideration. The interpretation
herein made gives meaning and substance to the
law
enunciated in Article 4 of the Labor Code that all
doubts in the implementation and interpretation of
the provisions of the Labor Code including its
implementing rules and regulations shall be resolved
in favor of labor.
solicitude can not justify disregard of relevant facts
or eschewal of rationality in the construction of the
text of applicable rules in order to arrive at a
disposition in favor of an employee who is perceived
otherwise
commiseration.
IN FAVOR OF LABOR RATI ONALE EQUI TY AND MORAL CONSI DERATI ON
Abel l a v. NLRC (87) Manni ng I nternati onal Corp. v. NLRC (91)
In any event, it is well-settled that in the
implementation and interpretation of the provisions
of the Labor Code and its implementing regulations,
the workingman's welfare should be the primordial
and paramount consideration. It is the kind of
interpretation which gives meaning and substance to
the liberal and compassionate spirit of the law as
provided for in Article 4 of the New Labor Code
which states that `all doubts in the implementation
and interpretation of the provisions of this Code
including its implementing rules and regulations shall
be resolved in favor of labor." The policy is to extend
the applicability of the decree to a greater number of
employees who can avail of the benefits under the
law, which is in consonance with the avowed policy
of the State to give maximum aid and protection to
labor.
There is another reason to strike down the
NLRC's "new judgment" of April 15, 1988, and that
is, that in disregard of the relevant provisions of the
law, it is made to rest on "considerations of equity
and social justice." This is impermissible. As this
Court held in the analogous situation of an employee
whom the NLRC found had been dismissed by her
employer for cause (dishonesty) but whom it
nonetheless awarded separation pay on equitable
and compassionate grounds:
"The rule embodied in the Labor Code is that a
person dismissed for cause as defined therein is not
entitled to separation pay. The cases above cited
constitute the exception, based upon considerations
of equity. Equity has been defined as justice outside
law, being ethical rather than jural and belonging to
the sphere of morals than of law. It is grounded on
the precepts of conscience and not on any sanction
This Court has held in appropriate cases that the
conservative posture of the respondents is not
consistent with the liberal interpretation of the Labor
Code and the social justice guarantee embodied in
the Constitution in favor of the workers. It clashes
with the injunction in the Labor Code (Article 4, New
Labor Code) that, as a rule, doubts should be
resolved in favor of the claimant-employee.
NO DOUBT
of positive law. Hence, it cannot prevail against the
expressed provision of the labor laws allowing
dismissal of employees for cause and without any
provision for separation pay."
FAI RNESS
As a general rule, the sympathy of the Court is
on the side of the laboring classes, not only because
the Constitution imposes sympathy but because of
the one-sided relation between labor and capital.
The Court must take care, however, that in the
contest between labor and capital, the results
While we do not dispute petitioner's contention
that under the law, in case of doubt in the
implementation and interpretation of the provisions
of the Labor Code, including its implementing rules
and regulations, the doubt shall be resolved in favor
of the laborer, we find that the same has no
application in this case since the pertinent provisions
of the Labor Code leave no room for doubt either in
their interpretation or application.
SWEEPI NG INTERPRETATI ON
achieved are fair and in conformity with the rules.
BALANCI NG CONFLI CTI NG CLAI MS
That there should be care and solicitude in the
of
workingmen cannot be gainsaid; but that care and
solicitude can not justify disregard of relevant facts
or eschewal of rationality in the construction of the
text of applicable rules in order to arrive at a
disposition in favor of an employee who is perceived
Bravo v. ECC (86)
We are aware of the mandate that social
legislation should be applied in consonance with the
principles of social justice and protection to labor.
However, we cannot adopt a sweeping interpretation
of the law in favor of labor lest we engage in judicial
legislation.
sympathy
SECTI ON 6 - WORK RELATI ONSHI P
FACTUAL CONSI DERATI ONS AND RATI ONALI TY
6. 01 WORK RELATI ONSHI P
DEFI NI TI ONS
That there should be care and solicitude in the
of
workingmen cannot be gainsaid; but that care and
association, corporation, business trust, legal
UP LAW BAROPS 2007
ONE UP
12 of 132

DOUBT
of and
of and
hired were the that therein
by signed were of letters
and purely are which
over minimal
the of the
test, control the Under
by
The
has Court this
of
by out policies
any include not shall term The
as

employees
appointment
figurative ministerial
petitioner, supervision
operations and supervise
relationship.
employer employee relationship. In Encyclopedia
Britannica (Phils.), Inc. v. NLRC, we held:
Rel igious of the Vi rgi n Mary v. NLRC (99)
Li m v. NLRC (99)
relation, employee
rank-and-file
(first-level
the
organization
are
employees
Uni ted Pepsi -Col a Supervi sory Uni on (UPSU) v.
Laguesma ( 98)
labor
organization or any of its officers or agents
except when acting as employer.
(f) "Employee" includes any person in the employ
Art. 212 Defi ni ti ons
(e) "Employer" includes any person acting in the
substitute temporary, emergency,
(g) "Employee" means any person compulsorily
Art. 167 Defi ni ti on of Terms
(f) "Employer" means any person, natural or
"Employee" includes any individual employed
(b) "Employer" includes any person acting directly

of
As
The argument has no merit.
existence
can be seen from
an
relationship is principally determined
representative
person.
second category, managers, vis-a-vis
are, likewise, employees.
employing

Part I : Introductory Materials
Labor Standards
organized
or indirectly in the interest of an employer in
relation to an employee and shall include the
Government and all its branches, subdivisions
and instrumentalities, all government-owned or
controlled corporations and institutions, as well
To determine the existence of an employer-
consistently
applied the four-fold test which has the following
elements: (1) the power to hire, (2) the payment of
wages, (3) the power to dismiss, and (4) the power
to control the last being the most important
element.
non-profit
organizations.
institutions
employer-employee
by an employer.
juridical,
employee.
the
following indicia: (1) selection and engagement of
the employee; (2) payment of wages; (3) power of
dismissal; and (4) employers power to control the
employee with respect to the result to be done and
to the means and methods by which the work is to
be accomplished.
covered by the GSIS under Commonwealth Act
numbered one hundred eighty-six, as amended,
including members of the Armed Forces of the
Philippines, and any person employed as casual,
CONTROL TEST
or
contractual; or any person compulsorily covered
by the SSS under Republic Act numbered eleven
hundred sixty-one, as amended.
AS this Court has
consistently ruled, the power of control is the most
decisive factor in determining the existence of an
interest of an employer, directly or indirectly.
In determining the existence of an employer-
employee relationship the following elements
must be present: (1) selection and engagement
of the employee; (2) payment of wages; (3)
power of dismissal; and (4) the power to control
the employees conduct. Of the above, control of
employees conduct is commonly regarded as the
of an employer. The term shall not be limited to
the employees of a particular employer, unless
this Code so explicitly states. It shall include any
individual whose work has ceased as a result of
or in connection with any current labor dispute
or because of any unfair labor practice if he has
not obtained any other substantially equivalent
and regular employment.
EMPLOYEE
most crucial and determinative indicator of the
presence or absence of an employer-employee
an
employer-employee relationship exists where the
person for whom the services are performed
reserves the right to control not only the end to
be achieved, but also the manner and means to
be used in reaching that end.
In this case, CDSPB reserved the right to control
Girls
Department. Although CDSPB actually exercised
[it]could
exercise substantial supervision and control as it did
this description, a
distinction exists between those who have the
authority to devise, implement and control strategic
and operational policies (top and middle managers)
and those whose task is simply to ensure that such
an
managers/supervisors). What distinguishes them
from the rank-and-file employees is that they act in
the interest of the employer in supervising such
rank-and-file employees.
"Managerial employees" may therefore be said
to fall into two distinct categories: the "managers"
per se, who compose the former group described
above, and the "supervisors" who form the latter
group. Whether they belong to the first or the
employers,
when [it] preterminated the Agreement. There
was, therefore, no basis in finding that petitioner
had a greater degree of autonomy ad independence
in running the affairs of the school. The presence
of the school director, whose vast powers have
already been noted, negates any suggestions or
semblance of autonomy.
Nor is there any merit in the claim that actual
and effective control was exercised by petitioner
since the designation of the parish priest as director
was a mere formality, as he did perform functions
in
nature. Time and again we have held that the
control test only requires the existence of the right
to control the manner of doing the work not
necessarily the actual exercise of the power by him,
which he can delegate. Indeed, although the
the
principal/representative of petitioner, they bore the
name/letterhead of CDSPB and clearly indicated
EMPLOYER-EMPLOYEE RELATI ONSHIP
FACTORS
Chavez vs. NLRC (2005); Caurdanetaan Pi ece
Workers Uni on v. Laguesma (98)
as
teachers/personnel by CDSPB, and not by RVM.
Moreover, CDSPB itself admits that its name not
petitioners appears in the employees payroll
ledger cards.
UP LAW BAROPS 2007
ONE UP
13 of 132
or any group of
private or
the services of the
carried
PROOF
In Code. this under workers
of pay fails to
-
control and the under worked
that shroud the
status the In should
For, show clearly
that It
Art. 107, Labor Code
established
the wages
Whenever
Art. 106, Labor Code
supervision
protective
Pampl ona Pl antati on Co. , I nc v. Ti nghi l (2005)
Dunl op Sl azenger (Phi l s. ), I nc. v. Secretar y,
DOLE ( 98)
Phi lippi ne Fuji Xerox Corp. v NLRC (96)
determining be.
management
otherwise. agreement
I nsul ar Li fe Assurance Co. Ltd. v. NLRC (98)
Tabas v. Cali forni a Manufacturing Co. (90)
Sevi l l a v. CA(88)
Domasi g v NLRC (96)
of the that is It
an of The
long
and
or sub-contractor Contractor
existence axiomatic
existence
established has
administrative
in
proceedings,

Part I : Introductory Materials
Labor Standards
The principle requiring the piercing of the
corporate veil mandates the courts to see through
quasi-judicial
substantial evidence is sufficient as a basis for
judgment on the existence of employer-employee
relationship. No particular form of evidence is
required to prove the existence of such.
distinguishes
corporation from seemingly separate one. xxx
In the present case, the corporations have basically
the same incorporators and directors and are headed
by the same official. Both use only on office and one
payroll and are under one management. In their
individual affidavits, respondents allege that they
ECONOMI C TEST
We have considered, in addition to the standard
of right-of-control, the existing economic conditions
prevailing between the parties, like the inclusion of
the employee in the payrolls, in determining the
existence of an employer-employee relationship.
AGREEMENT
of
petitioner Bondocthe common managing director
of both the petitioner-company and the leisure
corporation. Some of the laborers of the plantation
also work in the golf course. Thus, the attempt to
make the two corporations appear as two separate
entities, insofar as the workers are concerned,
should be viewed as a devious but obvious mens o
defeat the ends of the law. Such a ploy should not
be permitted to cloud the truth and perpetrate
injustice.
employer-employees
relation is a question of law and being such, it
cannot be made the subject of agreement.
6. 02 I NDEPENDENT CONTRACTOR AND LABOR
CONTRACTOR ONLY
REFERENCE
an
employer-employee relationship cannot be negated
by expressly repudiating it in the management
contract and providing therein that the "employee" is
an independent contractor when the terms of the
the
employment status of a person is defined and
prescribed by law and not by what the parties say it
an
employer enters into a contract with another person
for the performance of the former's work, the
employees of the contractor and of the latter's sub-
contractor, if any, shall be paid in accordance with
the provisions of this Code.
of
contract, the "four-fold test"
employment earlier mentioned has to be applied.
EFFECT OF RELATIONSHIP
It is wrong to say that if a task is not directly
related to the employer's business, or it falls under
what may be considered "housekeeping activities,"
the one performing the task is a job contractor. The
determination of the existence of an employer-
employee relationship is defined by law according to
the facts of each case, regardless of the nature of
the activities involved.
NATURE/CHARACTER
Determining the status of supervisory and rank-
and-file employees is not a hard row to hoe in labor
law. The test of supervisory status as we have
repeatedly ruled is whether an employee possesses
authority to act in the interest of his employer,
which authority should not be merely routinary or
clerical in nature but requires the use of independent
judgment. Corollarily, what determines the nature
of employment is not the employees title, but his
job description.
PIERCING THE CORPORATE VEIL
In the event that the contractor or sub-contractor
his employees in
accordance with this Code, the employer shall be
jointly and severally liable with his contractor or sub-
contractor to such employees to the extent of the
work performed under the contract, in the same
manner and extent that he is liable to employees
directly employed by him.
The Secretary of Labor and Employment may, by
appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of
so
prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting as well
as differentiations within these types of contracting,
and determine who among the parties involved shall
be considered the employer for purposes of this
Code, to prevent any violation or circumvention of
any provision of this Code.
There is "labor-only" contracting where the person
supplying workers to an employer does not have
substantial capital or investment in the form of tools,
equipment, machineries, work premises, among
others, and the workers recruited and placed by
such person are performing activities which are
directly related to the principal business of such
employer. In such cases, the person or intermediary
shall be considered merely as an agent of the
employer who shall be responsible to the workers in
the same manner and extent as if the latter were
directly employed by him.
The legal fiction of separate corporate entities
cannot be invoked to further an end subversive of
justice.
Indirect employer - The provisions of the
immediately preceding Article shall likewise apply
UP LAW BAROPS 2007
ONE UP
14 of 132

been
the
on
one
is this
in
Cola.
need factors the In
and business
or The
and distinct
out contract
held, we
of form the in or capital
person, any to
Coca-Col a Bottlers Phil. , Inc. v. NLRC (99)
inconsistent But
pronouncement
Coca-Col a Bottlers Phil. , Inc. v. NLRC (99)
following addition,
undertakes independent
premises of the principal. In this arrangement, the
following conditions must concur:
Escari o v. NLRC (2000)
contractor
business independent
Li m v. NLRC (99)
whether it should
previously limitations.
company
judgment
Mani la El ectri c Co. v. Qui sumbing (99)
investments
Nati onal Power Corp. v. Court of Appeal s (98)
Art. 109, Labor Code
association partnership,
with
Kimberly Independent
and welfare
the
in its best business

Part I : Introductory Materials
Labor Standards
or
corporation which, not being an employer, contracts
with an independent contractor for the performance
of any work, task, job or project.
The agreement between the principal and
contractor or subcontractor assures the
contractual employees entitlement to all
labor and occupational safety and health
standards, free exercise of the right to self-
organization, security of tenure, and social
Solidary liability - The provisions of existing laws to
the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his
contractor or subcontractor for any violation of any
provision of this Code. For purposes of determining
the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
INDEPENDENT CONTRACTOR
benefits.
In contrast, there is permissible job contracting
when a principal agrees to put out or farm out with a
contractor or a subcontractor the performance or
completion of a specific job, work or service within a
definite or predetermined period, regardless of
whether such job or work or service is to be
performed or completed within or outside the
Job (independent) contracting is present if the
following conditions are met: (a) the contractor
carries on an independent business and undertakes
the contract work on his own account under his own
responsibility according to his own manner and
method, free from the control and direction of his
employer or principal in all matters connected with
the performance of the work except to the result
thereof; and (b) the contractor has substantial
tools,
equipment, machineries, work premises and other
materials which are necessary in the conduct of his
business. Absent these requisites, what exists is a
labor only contract under which the person acting
as contractor is considered merely as an agent or
intermediary of the principal who is responsible to
the workers in the same manner and to the same
extent as if they had been directly employed by him.
(a)....The contractor carries on a distinct and
the
contract work on his account under his own
responsibility according to his own manner and
method, free from the control and direction of his
employer or principal in all matters connected
with the performance of his work except as to
the results thereof; and
(b)....The contractor has substantial capital or
investment in the form of tools, equipment,
machineries (sic), work premises, and other
materials which are necessary in the conduct of
his business. [RULES TO IMPLEMENT THE LABOR
CODE, Book III, Rule VIII, Sec. 8.]
In the recent case of Alexander Vinoya vs. NLRC
et al., this Court ruled that in order to be considered
an independent contractor it is not enough to show
substantial capitalization or investment in the form
of tools, equipment, machinery and work premises.
MANAGEMENT FUNCTI ON
Additionally, We recognize that contracting out
is not unlimited; rather, it is a prerogative that
management enjoys subject to well-defined legal
have
determine
the
performance of some of its work for as long as the
employer is motivated by good faith, and the
contracting out must not have been resorted to
circumvent the law or must not have been the result
of malicious or arbitrary action. The Labor Code and
its implementing rules also contain specific rules
governing contracting out (Department or Labor
Order No. 10, May 30, 1997, Sections 1-25).
REQUI REMENTS INDEPENDENT CONTRACTOR
Under DOLE Department Order No. 10 (1997),
contracting shall be legitimate if the following
circumstances concur:
The contractor or subcontractor carries on a
and
undertakes to perform the job, work or
service on its own account and under its
own responsibility, according to its own
manner and method, and free from the
control and direction of the principal in all
matters connected with the performance of
the work except as to the results thereof;
be
considered: (a) whether the contractor is carrying on
an independent business; (b) the nature and extent
of the work; (c) the skill required; (d) the term and
duration of the relationship; (e) the right to assign
the performance of specified pieces of work; (f) the
control and supervision of the workers; (g) the
power of the employer with respect to the hiring,
firing and payment of workers of the contractor; (h)
the control of the premises; (i) the duty to supply
premises, tools, appliances, materials, and labor;
and (j) the mode, manner and terms of payment.
Desirable Unnecessary
We perceive at the outset the disposition of the
NLRC that janitorial services are necessary and
desirable to the trade or business of petitioner Coca-
our
Labor
Union v. Drilon where the Court took judicial notice
of the practice adopted in several government and
private institutions and industries of hiring janitorial
services on an independent contractor basis. In
this respect, although janitorial services may be
considered directly related to the principal business
of an employer, as with every business, we deemed
them unnecessary in the conduct of the employers
principal business.
Judicial Notice
subcontractor
substantial capital or investment; and
We perceive at the outset the disposition of
the NLRC that janitorial services are necessary
UP LAW BAROPS 2007
ONE UP
15 of 132

As
can
i)
ii) has
iii)
of regular deemed are
private
who the of
tools, of form the in
or such
(b)
by
by created is relation
the that and
whether but bond an exists
in
Lanzadares v. Amethyst Securi ty (2003)
employees
respondents, Accordingly,
Phi l. Ai rl i nes, Inc. v. NLRC (98)
employer intermediary
investment
Ponce v. NLRC (98)
subcontractor contractor
Vi noya v. NLRC (2000)
Maragui not v. NLRC (98)
securing
employer-employee
individual contracting
Phi l. Ai rl i nes, Inc. v. NLRC (98)
employment
Independent Kimberly pronouncement
sustain we these on Based findings,
Labor-only contracting, a prohibited act, is an
arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to
perform a job, work or service for a principal. In
labor-only contracting, the following elements are
present:
(a)
janitorial
contractor basis.

Part I : Introductory Materials
Labor Standards
and desirable to the trade or business of petitioner
Coca-Cola. But this is inconsistent with our
Labor
Union v. Drilon where the Court took judicial notice
of the practice adopted in several government and
private institutions and industries of hiring janitorial
services on an independent contractor basis. In
this respect, although janitorial services may be
considered directly related to the principal business
of an employer, as with every business, we deemed
them unnecessary in the conduct of the employers
principal business.
This judicial notice, of course, rests on the
assumption that the independent contractor is a
legitimate job contractor so that there can be no
doubt as to the existence of an employer-employee
relationship between the contractor and the worker.
In this situation, the only pertinent question that
may arise will no longer deal with whether there
the
employee may be considered regular or casual as to
deserve the application of Art. 280 of the Labor
Code.
Employer Employee
The employees recruited, supplied or placed
are
performing activities which are directly related to
the main business of the principal.
Requisites
Sec. 9(a), Rule VIII, Book III, of the Omnibus
Rules Implementing Article 106 of the Labor Code,
provides, in turn, that a person who supplies
workers to another shall be deemed to be merely
engaged in "labor-only contracting," a disallowed
act, (a) when he does not have substantial capital or
equipment,
machineries, work premises and other materials,
and (b) when the workers recruited and placed by
him perform activities that relate directly to the
principal business or operations of the employer in
which the workers are habitually employed. Such
supplier of labor is considered merely as an agent or
can
correspondingly be held responsible to the workers
in the same manner and extent as if the latter are
directly employed by him.
Effect of Finding
From the foregoing disquisition, it is evident
that petitioner was engaged in permissible job
private
respondents, for the entire duration of their employ,
were employees not of petitioner but of STELLAR. In
legitimate job contracting, no employer-employee
relation exists between the principal and the job
contractor's employees. The principal is responsible
to the job contractor's employees only for the proper
payment of wages. But in labor-only contracting, an
law
between the principal and the labor-only contractor's
employees, such that the former is responsible to
such employees, as if he or she had directly
employed them. Besides, the Court has already
taken judicial notice of the general practice adopted
in several government and private institutions of
independent
LABOR ONLY CONTRACTOR
Prohibition
the
conclusion of public respondent that G.C. Services
Enterprises is merely a "labor-only" contractor who
acted as mere supplier of manpower for petitioner at
its maintenance department. As we held in Industrial
Timber Corporation, et. al. vs. NLRC et. al.:
Hence a finding that a contractor is a "labor-
only" contractor is equivalent to a finding that
there exists as employer-employee relationship
between the owner of the project and the
employees of the "labor-only" contractor since
that relationship is defined and prescribed by law
itself.
are
considered employees of the petitioner. Further,
private respondents, having performed activities
which are directly related to petitioner's business,
petitioner
pursuant to Article 280 of the Labor Code. And as
regular employees, they must be accorded security
of tenure in their employment. Verily, their services
can be terminated only based on "just" and
"authorized" causes under Articles 282, 283 and 284
of the Labor Code.
As labor-only contracting is prohibited, the law
considers the person or entity engaged in the same
a mere agent or intermediary of the direct employer.
But even by the preceding standards, the associate
producers of VIVA cannot be considered labor-only
contractors as they did not supply, recruit nor hire
the workers.
Liability of indirect Employer
The only time the indirect employer may be
made solidarily liable with the contractor is when the
contractor fails to pay his employees their wages
and other benefits claimed.
The contractor or subcontractor does not
have substantial capital or investment to actually
perform the job, work or service under its own
account and responsibility;
UP LAW BAROPS 2007
ONE UP
16 of 132

services on an
law the
by covered
the in
or The

overrides Precisely, procedure.
De Leon v. NLRC (89)
Philippine Federation of Credit Cooperati ves,
I nc v. NLRC ( 98)
apprenticeship
Probati onar y
Seasonal
Proj ect
Casual
Regul ar
contractor
form
machineries,
others,

Part I : Introductory Materials
Labor Standards
INDEPENDENT CONTRACTING:
Under DOLE Department Order No. 10
(1997), contracting shall be legitimate if the
following circumstances concur:
The contractor or subcontractor carries on
a distinct and independent business and
undertakes to perform the job, work or
service on its own account and under its
own responsibility, according to its own
manner and method, and free from the
control and direction of the principal in all
matters connected with the performance of
the work except as to the results thereof;
subcontractor
substantial capital or investment; and
A probationary employee who is allowed to
work after the probationary period (Art.
281)
All learners who has been allowed or
suffered to work during the first 2 months
shall be deemed regular employees if
training is terminated by the ER before the
end of the stipulated period through no
fault of the learner. [Art. 75 (d)]
If not covered by the preceding paragraph
(280 LC)
Employment has been fixed for a specific
project or undertaking the completion or
termination of which has been determined
at the time of engagement of the EE (280
LC)
The agreement between the principal and
contractor or subcontractor assures the
contractual employees entitlement to all
labor and occupational safety and health
standards, free exercise of the right to self-
organization, security of tenure, and social
and welfare benefits.
The work or services to be performed is
seasonal in nature and the employment is
for the duration of the season. (280 LC)
Employment shall not exceed 6 months
from the date the EE started working unless
LABOR ONLY CONTRACTING:
agreement
stipulating a longer period (281 LC)
supplying
employer does not have
capital or investment
substanti al
RECOGNI TI ON AND TYPES
equipment,
premises,
the workers recruited and placed by such
person are performi ng activi ti es whi ch
ar e di rectl y rel ated t o t he principal
business of such employer.
SECTI ON 7 - EMPLOYEE CLASSIFICATION
7.01 COVERAGE
The provisions of this Title shall apply to all
establishments or undertakings whether for profit or
not. (278 LC)
7. 02 EMPLOYEE CLASSI FI CATI ON
This provision of law comprehends three kinds
of employees: (a) regular employees or those whose
work is necessary or desirable to the usual business
of the employer; (b) project employees or those
whose employment has been fixed for a specific
project or undertaking the completion or termination
of which has been determined at the time of the
engagement of the employee or where the work or
services to be performed is seasonal in nature and
the employment is for the duration of the season;
and (c) casual employees or those who are neither
regular nor project employees. With regard to
contractual employees, the Court in the leading case
of Brent School, Inc. v. Zamora, laid down the
guidelines before a contract of employment may be
held as valid, to wit: "stipulations in employment
contracts providing for term employment or fixed
period employment are valid when the period were
agreed upon knowi ngly and vol untarily by the
parties without force, duress or improper pressure
being brought to bear upon the employee and
absent any other circumstances vitiating his consent,
or where it satisfactorily appears that the employer
and employee dealt with each other on more or less
equal terms with no moral dominance whatever
being exercised by the former over the latter."
EE has been engaged to perform activities
which are usually necessary and desirable
in the usual business or trade of the ER
(Art. 280)
A casual employee who has rendered at
least 1 year of service, whether continuous
or broken, with respect to the activity in
which he is employed and his employment
shall continue while such activity exists
(Art. 280)
EMPLOYER DETERMINATI ON
It is of no moment that petitioner was told when
he was hired that his employment would only be
casual, that he was paid through cash vouchers, and
that he did not comply with regular employment
such
conditions which are prejudicial to the interest of the
worker whose weak bargaining position needs
the support of the State. What determines
whether a certain employment is regular or
UP LAW BAROPS 2007
ONE UP
17 of 132
1.
2. has
3.
1. the person workers to an
2. of
work
tools,
among
3.








need and the
equally other the season,
of phases
are which perform to
the by be to
who the
had and Livi
became work to allowed
the
continuing repeated
performance
De Leon v. NLRC (89); E. Ganzon, Inc. v. NLRC
(99); Haci enda Fati ma v. Nati onal Federati on
of Sugarcane Workers (2003)
particular
company's petitioner
NATURE OF WORK

Phi l . Frui t and Vegetabl e I ndustri es, I nc. v.
NLRC ( 99)
necessary activities
Romares v. NLRC (98)
performed activities
employer powerful economically
San Miguel Corporati on v. NLRC (98)
California between
Tabas v. Cali forni a Manufacturing Co., I nc. v.
NLRC ( 89)
thereafter,
Phi l Feder ati on of Cr edi t Cooper ati ves, I nc. v.
NLRC ( 98)
notwithstanding
Vi ol eta v. NLRC (97); Romares v. NLRC (98)
the 280 Article
an of The
reinforces
existence
contrary
contract of employment.

Part I : Introductory Materials
Labor Standards
casual is not the will and word of the employer, to
which the desperate worker often accedes, much
less the procedure of hiring the employee or the
manner of paying his salary. It is the nature of the
activities performed in relation to the particular
business or trade considering all circumstances, and
in some cases the length of time of its performance
and its continued existence.
XXX Thus, the nature of ones employment does
not depend on the will or word of the employer. Nor
on the procedure of hiring and the manner of
designating the employee, but on the nature of the
employee,
considering the employers nature of business and
the duration and scope of the work to be done.
7.03 REGULAR EMPLOYEES
Art. 280 was emplaced in our statute books to
prevent the circumvention of the employees right to
be secure in his tenure by indiscriminately and
completely ruling out all written and oral agreements
inconsistent with the concept of regular employment
defined therein. Where an employee has been
engaged to perform activities which are usually
necessary or desirable in the usual business of the
employer, such employee is deemed a regular
employee and is entitled to security of tenure
provisions
In determining the status of petitioner as a
regular employee, reference is made to Article 280
of the Labor Code, as amended. Thus, the two kinds
of regular employees are (1) those who are engaged
or
desirable in the usual business or trade of the
employer; and (2) those casual employees who have
rendered at least one year of service, whether
continuous or broken, with respect to the activity in
which they are employed.
Regardless of the designation that an employer
may have conferred upon a workers employment
status, it is, however, uncontroverted that the latter,
having completed the probationary period and
regular
employee who may be dismissed only for just or
authorized causes of the Labor Code. Therefore, the
dismissal, premised on the alleged expiration of the
contract, is illegal an entitles the worker to the
reliefs prayed for.
AGREEMENT
employer-employees
relation is a question of law and being such, it
cannot be made the subject of agreement. Hence,
the fact that the manpower supply agreement
specifically
designated the former as the petitioners' employer
and had absolved the latter from any liability as an
employer, will not erase either party's obligations as
an employer, if an employer-employee relation
otherwise exists between the workers and either
firm. At any rate, since the agreement was between
Livi and California, they alone are bound by it, and
the petitioners cannot be made to suffer from its
adverse consequences.
An employment shall be deemed regular where
the employee: a) has been engaged to perform
activities which are usually necessary or desirable in
the usual business or trade of the employer; or b)
has rendered at least one year of service, whether
such service is continuous or broken, with respect to
the activity in which he is employed.
XXX It should be noted that complainants'
employment has not been fixed for a specific project
or undertaking the completion or termination of
which has been determined at the time of their
appointment or hiring. Neither is their employment
seasonal in nature. While it may be true that some
processing
operations is dependent on the supply of fruits for a
important
aspects of its business, such as manufacturing and
marketing are not seasonal. The fact is that large-
scale food processing companies such as petitioner
company continue to operate and do business
throughout the year even if the availability of fruits
and vegetables is seasonal.
Constitutional
mandate to protect the interest of labor as it sets
the legal framework for ascertaining ones nature of
employment, and distinguishing different kinds of
employees. Its language manifests the intent to
safeguard the tenurial interest of worker who may
be denied the enjoyment of rights and benefits due
to an employee, regardless of the nature of his
employment, by virtue of lopsided agreements with
can
maneuver to keep an employee on a casual or
contractual status for as long as it is convenient to
the employer.
The primary standard, therefore, of determining
a regular employment is the reasonable connection
between the particular activity performed by the
employee in relation to the usual business or trade
of the employer. The test is whether the former is
usually necessary or desirable in the usual business
or trade of the employer. The connection can be
determined by considering the nature of the work
performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if
the employee has been performing the job for at
least one year, even if the performance is not
continuous or merely intermittent, the law deems
for
as sufficient evidence of the
necessity if not indispensability of that activity to
the business. Hence the employment is also
UP LAW BAROPS 2007
ONE UP
18 of 132

of his
TYPE
its
which perform to
the in
to entitled
TEST:
the in or
deemed be should they Hi-Line, of
which Since
of While
1949 in back way business mill
status The

activities engaged
Hi ghway Copra Trades v. NLRC (98)
necessary
reinstatement. employees
Labor Congress of the Phil. v. NLRC (98)
Whether work was necessary & desirable
work done under a
I nternati onal Pharmaceuti cal , I nc. v. NLRC
( 9 8 )
agreement. contrary notwithstanding
Datu and Co. , I nc. v. NLRC (96)
activities desirable necessary
Mercado v. NLRC (91)
Ecal v. NLRC (91)
requirements, is to impose
Ki mberl y etc. v. Dri l on (90)
Tacl oban Sagkahan Ri ce etc. v. NLRC (90)
Magante v. NLRC (90)
tasks perform
actual the
the of factor
to the main business of ER
petitioners
regularization
Furthermore, the services performed or to be
performed by private respondents are not seasonal
in nature. While it may be true that the harvest of
palay is seasonal, the milling operations which is the
main business of petitioners are not seasonal. The
fact is that big rice mills such as the one owned by
petitioners continue to operate and do business
throughout the year even if there are only two or
three harvest seasons within the year. It is a
common practice among farmers and rice dealers to
store their palay and to have the same milled as the
need arises. Thus, the milling operations have no
let-up.
Private respondents have justifiably argued
thus:
determining
day-to-day
respondent Empire Food Products.

Part I : Introductory Materials
Labor Standards
considered regular, but only with respect to such
activity and while such activity exists.
regular
employees of the latter 13 and as such are entitled
to all the benefits and rights appurtenant to regular
employment.
of
complainant-petitioner or any worker is the nature of
the work performed by the latter and the place
where he performed his assignment.
The first paragraph answers the question of who
are regular employees. It states that, regardless of
any written or oral agreement to the contrary, an
employee is deemed regular where he is engaged in
usual
business or trade of the employer, except for project
employees.
In De Leon vs. NLRC this Court ruled that when
the activities performed by the employee are usually
necessary or desirable in the usual business or trade
of the employer, the employment is deemed regular
"The contention of petitioner in saying that
respondents/appellees belong to petitioner's pool
of casual workers who work only when there is
work to be done at the mills particularly during
the milling season is indeed untenable for
petitioner had been engaged in the rice and corn
whose
capitalization involves millions of pesos. The
work done by the palay mill for the capitalization
of petitioner is so much that it keeps its
employees working the whole year round by
buying the palay during harvest season for
mi l li ng. Ri ce and corn mi ll i ng busi ness i s not
seasonal in nature, contemplated in the Labor
Code. It is the planting and harvesting of rice
that is seasonal. . . ."
these
employees entails the mechanical act of issuing
regular appointment papers and compliance with
such other operating procedures as may be adopted
by the employer, it is more in keeping with the
intent and spirit of the law to rule that the status of
regular employment attaches to the casual worker
on the day immediately after the end of his first year
of service. To rule otherwise, and to instead make
their regularization dependent on the happening of
some contingency or the fulfillment of certain
The
determination of whether employment is casual or
regular does not depend on the will or word of the
employer, and the procedure of hiring and manner
of paying, but on the nature of the activities
performed by an employee, and to some extent, the
length of performance, and its continued existence.
In Brent School, Inc. v. Zamora, although the
contract is necessary and usually
desirable in relation to the usual business of the
employer, a contract for a fixed period may be made
so long as it is entered into freely, voluntarily, and
knowingly by the parties.
In the contract, there was no mention of any
project or consultancy. The work she performed was
manifestly necessary and desirable to the usual
business of petitioner, considering that she is
engaged in the manufacture and production of
medicinal preparations.
STANDARD: reasonable connection between the
a burden
employee which is not sanctioned by law.
That petitioner employees are "pakyao" or piece
workers does not imply that they are not regular
That the first stated position is the situation
contemplated and sanctioned by law is further
enhanced by the absence of a statutory limitation
before regular status can be acquired by a casual
employee. The law is explicit. As long as the
employee has rendered at least one year of service,
he becomes a regular employee with respect to the
activity in which he is employed. The law does not
provide the qualification that the employee must
first be issued a regular appointment or must first be
formally declared as such before he can acquire a
regular status. Obviously, where the law does not
distinguish, no distinction should be drawn.
Private
respondent Empire Food Products, Inc. is a food and
fruit processing company. In Tabas v. California
Manufacturing Co., Inc., this Honorable Court held
that the work of merchandisers of processed food,
who coordinate with grocery stores and other outlets
for the sale of the processed food is necessary in the
day-to-day operation[s] of the company. With more
reason, the work of processed food repackers is
operation[s]
Article 280 of the Labor Code describes a
regular employee as one who is either (1)
are
usually necessary or desirable in the main business
are
necessary or desirable in the usual business or
UP LAW BAROPS 2007
ONE UP
particular activity performed by the ER in relation to
the usual business or trade of the ER.
- connection can be determined by considering the
nature of the work performed and its relation to the
scheme of the particular business or trade in its
entirety
19 of 132
on the
of
the period,
While it
long
or not is
be can The
its and
project specific a out carry to
protect to casual and regular

Beta El ectri c Corp. v. NLRC (90)
CONTRACT
CONTRACT)
probationary six-month
is akin to
appointments, probationary
Bernardo v. NLRC (99)
may be allowed that in the instant
Lao Constructi on v. NLRC (98)
is extended project employees
Audi o El ectri c Co. , I nc. v. NLRC (99)
continuous performance
determined connection
Mi l l ares v. NLRC (2000)
employed
San Miguel Corp. v. NLRC (98)
employer.
employees
ad
contract signed by petitioners
determining principal The
particular
test
employees
in
are
duration
determinable.

Part I : Introductory Materials
Labor Standards
trade of the employer; and (2) those casual
employees who have rendered at least one year of
service, whether continuous or broken, with respect
to the activity in which he is employed.
The Labor Code draws a fine line between
the
interests of labor. We ruled in Baguio Country Club
Corporation vs. NLRC that "its language evidently
manifests the intent to safeguard the tenurial
interest of the worker who may be denied the rights
and benefits due a regular employee by virtue of
lopsided agreements with the economically powerful
employer who can maneuver to keep an employee
on a casual status for as long as convenient." Thus,
notwithstanding any agreements to the contrary, an
employment is deemed regular when the activities
performed by the employee are usually necessary or
desirable in the usual business or trade of the
are removed from the scope of project employees
and considered regular employees.
whether
project employees
distinguished from regular employees is whether
the project employees are assigned to carry out
specific project or undertaking, the duration (and
scope) of which are specified at the time the
employees are engaged for the project. Project in
the realm of business and industry refers to a
particular job or undertaking that is within the
regular or usual business of employer, but which is
distinct and separate and identifiable as such from
the undertakings of the company. Such job or
undertaking begins and ends at determined or
determinable times.
The primary standard, therefore, of
determining a regular employment is the reasonable
connection between the particular activity performed
by the employee in relation to the usual business or
trade of the employer, i.e. if the work is usually
necessary or desirable in the usual business or trade
of the employer. The connection can be determined
by considering the nature of the work performed and
its relation to the scheme of the particular business
or trade in its entirety.
case
the workers were initially hired for specific projects
or undertakings of the company and hence can be
classified as project employees, the repeated re-
hiring and the continuing need for their services over
a long span of time have undeniable made them
regular employees. Thus, we held that where the
employment of project employees is extended long
after the supposed project has been finished, the
employees are removed from the scope of project
employees and are considered regular employees.
While length of time may not be a controlling
A regular employee is distinguished from a
project employee by the fact that the latter is
test for project employment, it can be a strong
factor in determining whether the employee was
or
undertaking, the duration or scope of which was
specified at the time the employees were engaged. A
"project" has reference to a particular job or
undertaking that may or may not be within the
regular or usual business of the employer. In either
case, the project must be distinct, separate and
identifiable from the main business of the employer,
determined
hired for a specific undertaking or in fact tasked to
perform functions which are vital, necessary and
indispensable to the usual business or trade of
employer.
As held by the Court, "Articles 280 and 281 of
the Labor Code put an end to the pernicious practice
of making permanent casuals of our lowly employees
by the simple expedient of extending to them
infinitum."
The primary standard to determine a regular
employment is the reasonable connection between
the particular activity performed by the employee in
relation to the usual business or trade of the
employer. The test is whether the former is usually
necessary or desirable in the usual business or trade
of the employer.
a
probationary employment, during which the bank
determined the employees' fitness for the job. When
the bank renewed the contract after the lapse of the
employees
thereby became regular employees. No employer is
allowed to determine indefinitely the fitness of its
employees.
by
considering the nature of the work performed and its
relation to the scheme of the particular business or
trade in its entirety. Also, if the employee has been
performing the job for at least one year, even if the
TO CONTRACT (REPEATED RENEWAL
merely
intermittent, the law deems the repeated and
continuing need for its performance as sufficient
evidence of the necessity if not indispensability of
that activity to the business. Hence, the employment
is also considered regular, but only with respect to
such activity and while such activity exists.
The petitioner cannot rightfully say that since
the private respondent's employment hinged from
contract to contract, it was ergo, "temporary",
depending on the term of each agreement. Under
the Labor Code, an employment may only be said to
be "temporary" "where [it] has been fixed for a
specific undertaking the completion of or termination
of which has been determined at the time of the
HI RI NG PERI OD EXTENDED engagement of the employee or where the work or
services to be performed is seasonal in nature and
the employment is for the duration of the season."
We have held that where the employment of
after the
supposed project has been finished, the employees
Quite to the contrary, the private respondent's work,
that of "typist-clerk" is far from being "specific"
or "seasonal", but rather, one, according to the
Code, "where the employee has been engaged to
UP LAW BAROPS 2007
ONE UP
20 of 132
must be or
The
OF
specific
as "project
for test principal The
job Such the of
a of project or jib
least at of other the or one to refer
is re-hired was
the to as
of "[t]he regular
Phil. Jai -Al ai and Amusement Corp. v. Clave
( 8 3 )
distinguished employees,"
determining
Ki amco v. NLRC (99)
ALU TUCP v. NLRC (94)
company. undertakings
Lao Constructi on v. NLRC (97)
construction
Magcal as v. NLRC (97)
continuously employee
Maragui not v. NLRC (98)
duration contractual stipulations
provisions employee,
determining principal The
particular
test
employees
in
are
recognized the validity of

Part I : Introductory Materials
Labor Standards
perform activities which are usually necessary or
desirable in the usual business." And under the
Code, where one performs such activities, he is a
also begins and ends at determined or determinable
times.
written
agreement to the contrary notwithstanding . . .
It is true that in Biboso v. Victorias Milling
Company, Inc., we
of
employment, we can not apply it here because
clearly, the contract-to-contract arrangement given
to the private respondent was but an artifice to
prevent her from acquiring security of tenure and to
frustrate constitutional decrees.
LENGTH OF TI ME
However, the length of time during which the
whether
project employees
distinguished from regular employees is whether the
project employees are assigned to carry out
specific project or undertaking, the duration (and
scope) of which are specified at the time the
employees are engaged for the project. Project in
the realm of business and industry refers to a
particular job or undertaking that is within the
regular or usual business of ER, but which is distinct
and separate and identifiable as such from the
or
undertaking begins and ends at determined or
determinable times.
not
controlling, but merely serves as a badge of regular
employment.
7.04 PROJECT EMPLOYEES
PROJECT EMPLOYEES whose employment has been
fixed for a specific project or undertaking the
completion or termination of which has been
determined at the time of engagement of the
employee [Art. 280 (1)]
DEFI NED
Regular employees cannot at the same time be
project employees. Art. 280 of the Labor Code
states that regular employees are those whose work
is necessary or desirable to the usual business of the
employer. The two exceptions following the general
description of regular employees refer to either
project or seasonal employees. It has been ruled in
the case of ALU-TUCP v. NLRC that: In the realm of
business and industry, we note that project could
In the realm of business and industry, we note
that "project" could refer to one or the other of at
least 2 distinguishable types of activities. Firstly, a
project could refer to a particular job or undertaking
that is within the regular or usual business of the ER
company, but which is distinct and separate, and
identifiable as such, from the other undertakings of
the company. Such job or undertaking begins and
ends at determined or determinable times.
The term "project" could also refer to, secondly,
a particular job or undertaking that is not within the
regular business of the corporation. Such a job or
undertaking must also be identifiably separate and
distinct from the ordinary or regular business
operations of the employer. The job or undertaking
also begins and ends at determined or determinable
times.
Whichever type of project employment is found
in a particular case, a common basic requisite is that
the designation of named employees as "project
employees" and their assignment to a specific
project, are effected and implemented in good faith,
two
distinguishable types of activities. First, a project
could refer to particular job or undertaking that is
within the regular or usual business of the employer
company, but which is distinct and separate, and
identifiable as such, from the other undertakings of
the company. Such job or undertaking begins and
ends at determined or determinable times. The
typical example of this type of project is a particular
construction
company. A construction company ordinarily carries
out 2 or more discrete (should distinct) identifiable
construction projects: e.g. a 25-story hotel in
Makati; a residential condominium building I Baguio
City; and a domestic air terminal in Iloilo City.
Employees who are ired for the carrying out of 12 of
these separate projects, the scope and duration of
which has been determined and made known to the
employees at the time of employment, are properly
treated as project employees and their service
may be lawfully terminated at completion of the
project.
The term "project" could also refer to, secondly,
a particular job or undertaking that is not within the
regular business of the corporation. Such a job or
undertaking must also be identifiably separate and
distinct from the ordinary or regular business
operations of the employer. The job or undertaking
and not merely as a means of evading otherwise
applicable requirements of labor laws.
In Violeta v. NLRC we held
whether
particular employees are properly characterized as
from
"regular employees," is whether or not the "project
employees" were assigned to carry out a "specific
project or undertaking," the duration (and scope)
of which were specified at the time the employees
were engaged for that project. As defined, project
employees are those workers hired (1) for a
project or undertaking, and (2) the
completion or termination of such project or
undertaking has been determined at the time of
engagement of the employee.
Under Policy Instruction No. 20 of the Secretary
of Labor, project employees are those employed in
connection with a particular project. Non-project or
regular employees are those employed without
reference to any particular project.
PROJECT EMPLOYEES
Private respondents were hired for a specific
project to renovate the main building, where
UP LAW BAROPS 2007
ONE UP
21 of 132

goods,
a Private
Hence, of Project
its at projects other
assigned are they which
actually would jobs their
or was which activity
that obvious indeed is it because
of project to project from
hired. were they which for project
a had because
that not was fact The

consumer commercial
Mamansag v. NLRC (93)
company. respondent
discretion.
individually
respective
employee is hired for more than one project. A non-
project employee, vis-a-vis a project employee, is
best exemplified in the case of Fegurin, et al. vs.
National Labor Relations Commission, et al. wherein
four of the petitioners had been working with the
company for nine years, one for eight years, another
for six years, the shortest term being three years. In
holding that petitioners are regular employees, this
Court therein explained:
Rada v. NLRC (92)
performance of such services on a
commonly
Tucor I ndustri es, I nc. v. NLRC (91)
deployed
Magante v. NLRC (91)
Sandoval Shi pyards, I nc. v. NLRC (85)
a specific They were engaged for
corporation petitioner
completed.
is
work the of nature the
company respondent
"Considering
corporations, consisting

Part I : Introductory Materials
Labor Standards
major repairs such as painting the main building,
repair of the roof, cleaning of clogged water pipes
and drains, and other necessary repairs were
required. It was made known, and so understood at
the start of the hiring, that their services would last
until the completion of the renovation. They
rendered service from February 2 to December 11,
1976, almost 11 months, but less than a year. In its
Report to the Department of Labor, petitioner gave
the reason for termination as "due to termination of
project." It was only private respondents, out of the
32 hired for the renovation, who questioned their
termination, the 30 other workers having acquiesced
to their termination. Private respondents merely
alleged in their letter-complaint that "kami'y inalis sa
trabaho ng walang dahilan." There could be no other
reason, however, than that the termination of
private respondents was because their services were
no longer needed and they had nothing more to do
since the project for which they were hired had been
private
respondents were hired as maintenance helpers,
throughout his period of employment allegedly
considered to have been done on a project to project
basis.
Although petitioner had only rendered almost
two years of service, nevertheless this should not
detract from his status of being a regular employee
because as correctly stated by the labor arbiter, the
determining factor of the status of complainant-
petitioner or any worker is the nature of the work
performed by the latter and the place where he
performed his assignment.
The term "specific project or undertaking" under
Article 280 of the Labor Code contemplates an
habitually
performed or such type of work which is not done on
a daily basis but only for a specific duration of time
or until the completion of the project. The services
employed are thus necessary or desirable in the
employer's usual business only for the period of time
it takes to complete the project. Without the
regular
maintenance force. Private respondents, as well as
the other 30 workers, were needed as additional
hands for the renovation work and not for ordinary
upkeep and maintenance. The erection of the fire
escape and other small jobs after the renovation
cannot be deemed maintenance but more of casual
work.
The casual or limited character of private
respondents' employment, therefore, is evident.
regular basis, the
employer's main business is not expected to grind to
a halt.
In the case at bar, private respondents were
assigned to do carpentry work, packing and driving,
activities which are usually necessary and desirable
in petitioners' usual business and which thus had to
be done on a regular basis.
project or
undertaking and fall within the exception provided
for in Article 231 of the Labor Code, supra. Not being
regular employees, it cannot be justifiably said that
petitioner had dismissed them without just cause.
They are not entitled to reinstatement with full
backwages.
non-project employee is different in that the
We hold that private respondents were project
employees whose work was coterminous with the
Project
employees, as distinguished from regular or non-
project employees, are mentioned in Art. 281 LC as
those "where the employment has been fixed for a
specific project or undertaking the completion or
termination of which has been determined at the
time of the engagement of the EE."
of
petitioners, that of carpenter, laborer or mason,
be
continuous and on-going. When a project to
is
completed, they would be assigned to the next
project or a phase thereof. In other words, they
belonged to a work pool' from which the
company would draw workers for assignment to
They
therefore, actually 'non-project employees.'"
As aptly observed by the Solicitor-General,
petitioner has established that since the very
inception of his employment in 1980, he was never
private
respondent but had been regularly assigned to
perform carpentry work under the supervision of a
certain Bernardo Padaon who, since 1964 until his
resignation on January 2, 1982 worked for private
respondent as the supervisor of its Carpentry
Department. This goes to show two things: that
petitioner was assigned to perform tasks which are
usually necessary or desirable in the usual business
or trade of private respondent; and that said
assignments did not end on a project to project
basis, although the contrary was made to appear by
private respondent through the signing of separate
employment contracts allegedly for different projects
petitioner
continued to perform the same kind of work
From the foregoing, it is clear that petitioner is a
project employee considering that he does not
belong to a "work pool" from which the company
would draw workers for assignment to other projects
at its discretion. It is likewise apparent from the
facts obtaining herein that petitioner was utilized
only for one particular project, the MNEE Stage 2
the
termination of herein petitioner is valid by reason of
the completion of the project and the expiration of
his employment contract.
market
research group that conducts public surveys about
products,
merchandises and/or services of its clients. Said
market researches and surveys are dependent
upon the contracts it can secure from its clients
organizations,
UP LAW BAROPS 2007
ONE UP
22 of 132
A
are,
of
equally other the season,
of phases
of
its and
project specific a out carry to
to
entitled not are "Project
those are "Project
fact The paid. are they payrolls whose
thereby

particular
company's petitioner
Phi l. Frui ts and Vegetabl es Industri es, I nc. v.
NLRC ( 99)
employment termination
construction
indiscriminate
Vi l l a v. NLRC (98)
employed
Phi l. Ai rl i nes, Inc. v. NLRC (98)
Uy v. NLRC (96)
"project" applicable
employees
employed employees
Fernandez v. NLRC (94)
expenses unnecessary avoiding
that noted be should It
determined

Part I : Introductory Materials
Labor Standards
government and individuals. Because of the very
nature of its business, private respondent company
had to resort to engaging the services of contractual
workers, such as petitioners, to conduct interviews
on specific project basis for a definite short period of
time. Generally, said contractual employment is not
continuous but intermittent, sporadic with long
intervals of idle periods in between projects due to
lack of work or job contracts. To require a market
research and survey firm to indefinitely maintain in
its payroll petitioners, despite the absence of
contracted projects, would be counterproductive and
lead to the bankruptcy of said firm.
Private respondent company, in entering into
specific and limited contracts with petitioners, was
only exercising its management prerogative to
conduct its business in the most efficient manner
those "casual" employees who have rendered at
least one year of service regardless of the fact that
such service may be continuous or broken. It is not
employees,
specifically excepted therefrom.
PROJECT EEs - workers hired : for a specific
project or undertaking; completion/termination of
project has been determined at time of engagement
of EE
The position of STELLAR that individual private
respondents were its project employees is totally
unfounded. A regular employee is distinguished
from a project employee by the fact that the latter is
and
maximizing profitability without, however, defeating
or circumventing the rights of its employees.
An examination of the petitioners' contract of
employment showed that they were hired by private
respondent company for a specific project and the
completion or termination of said project was
determined at the start of their employment.
Petitioners cannot be hired for an indefinite period of
time and carried on the company's payroll even
without projects to work, with without respondent
company incurring financial losses.
As field interviewers of private respondent
company, the latter depends for its business on the
contract it is able to obtain from its clients.
Necessarily, the duration of the employment of its
employees is not permanent but co-terminus with
the projects to which they are assigned and from
that
petitioners worked for several projects of private
respondent company is no basis to consider them as
regular employees. By the very nature of their
employer's business, they will always remain project
employees regardless of the number of projects in
which they have worked.
or
undertaking, the duration or scope of which was
specified at the time the employees were engaged.
A project has reference to a particular job or
undertaking that may or may not be within the
regular or usual business of the employer. In either
case, the project must be distinct, separate and
identifiable from the main business of the employer
duration
determinable.
A project employment terminates as soon as the
project is completed. Thus an employer is allowed
by law to reduce the work force into a number suited
for the remaining work to be done upon the
completion or proximate accomplishment of the
project. However, the law requires that, upon
completion of the project, the employer must
present proof of termination of the services of the
project employees at the nearest public employment
office. This is specially provided for as regards
obviously
in
derogation of the workers right to security of
tenure. After the termination of the project, an
employer may wind up its operations only to
Inasmuch as the documentary evidence clearly
showed gaps of a month or months between the
hiring of petitioner in the numerous projects wherein
he was assigned, the ineluctable conclusion is that
petitioner has not continuously worked with private
respondent but only intermittently as he was hired
solely for specific projects. As such, he is governed
by Policy Instruction No. 20, the pertinent portions
of which read as follows:
complete the project. In such a case, the remaining
employees do not necessarily lose their status as
project employees. However, if the employees
services are extended long after the supposed
project had been completed, the employees are
removed from the scope of project employees and
they shall be considered regular employees.
in
connection with a particular construction project.
Non-project employees are those employed by a
construction company without reference to a
particular project.
to
termination pay if they are terminated as a result
of the completion of the project or any phase
thereof in which they are employed, regardless
of the number of projects in which they have
been employed by a particular construction
company."
XXX The proviso in the second paragraph of
Article 280 of the Labor Code has recently been
explained in Mercado v. NLRC, where it was held
that said proviso deems as regular employees only
complainants'
employment has not been fixed for a specific project
or undertaking the completion or termination of
which has been determined at the time of their
appointment or hiring. Neither is their employment
seasonal in nature. While it may be true that some
processing
operations is dependent on the supply of fruits for a
important
aspects of its business, such as manufacturing and
marketing are not seasonal. The fact is that large-
scale food processing companies such as petitioner
company continue to operate and do business
throughout the year even if the availability of fruits
and vegetables is seasonal.
I mbui do v. NLRC ( 2000)
UP LAW BAROPS 2007
ONE UP
"Generally, there are two types of employees in
the construction industry, namely 1) Project
Employees and 2) Non-project Employees.
23 of 132
who are
must be or
workers to obviate
only
is and casual to
and status his
not are workers contract
its and
project specific a out carry to
vital, are tasks these (2)
a private for encoder
immediately preceding the phrase
employees relates only
ALU-TUCP v. NLRC (94)
probationary apprised
A. M. Oreta and Co. , I nc. v. NLRC (89)
considered
employed
Phi l. Ai rl i nes, Inc. v. NLRC (98)
necessary
Maragui not v. NLRC (98)
respondent,
duration
determinable.
of
requirements

Part I : Introductory Materials
Labor Standards
We agree with the findings of the NLRC that
petitioner is a project employee. The principal test
for determining whether an employee is a project
employee or a regular employee is whether the
project employee was assigned to carry out a
specific project or undertaking, the duration and
scope of which were specified at the time the
employee was engaged for that project. A project
employee is one whose employment has been fixed
for a specific project or undertaking, the completion
or termination of which has been determined at the
time of the engagement of the employee or where
the work or service to be performed is seasonal in
nature and the employment is for the duration of the
season. In the instant case, petitioner was engaged
to perform activities which were usually necessary or
desirable in the usual business or trade of the
employer, as admittedly, petitioner worked as a data
corporation
engaged in the business of data encoding and
keypunching, and her employment was fixed for a
specific project or undertaking the completion or
termination of which had been determined at the
time of her engagement, as may be observed from
the series of employment contracts between
petitioner and private respondent, all of which
contained a designation of the specific job contract
and a specific period of employment.
Coming now to the last question, we stress the
rule in Cartagenas v. Romago Electric Co., that
regular
employees, their services being needed only when
there are projects to be undertaken. The rationale of
this rule is that if a project has already been
completed, it would be unjust to require the
employer to maintain them in the payroll while they
are doing absolutely nothing except waiting until
another project is begun, if at all. In effect, these
stand-by workers would be enjoying the status of
privileged retainers, collecting payment for work not
done, to be disbursed by the employer from profits
not earned. This is not fair by any standard and can
only lead to a coddling of labor at the expense of
management.
EMPLOYER OBLIGATION
The law is clear to the effect that in all cases
involving employees engaged on probationary' basis,
the employer shall make known to the employee at
the time he is hired, the standards by which he will
qualify as a regular employee. Nowhere in the
employment contract executed between petitioner
company and respondent Grulla is there a stipulation
that the latter shall undergo a probationary period
for three months before he can quality as a regular
RATI ONALE employee. There is also no evidence on record
showing that the respondent Grulla had been
The Courts ruling is meant to give life to the
institutional policy of strengthening the labor sector,
but, we stress, not at the expense of management.
Lest it be misunderstood, this ruling does not mean
that simply because an employee is a project or
work pool employee has been: (1) continuously, as
opposed to intermittently, re-hired by the same
employer, for the same tasks or nature of tasks; and
and
indispensable to the usual business or trade of the
employer, then the employee must be deemed a
regular employee, pursuant to Art. 280 of the Labor
Code and jurisprudence. To rule otherwise would
allow circumvention of labor laws in industries not
falling within the ambit of Policy Instruction No. 20/
Department Order No. 19, hence allowing the
prevention of acquisition of tenurial security by
project or work pool employees who have already
gained the status of regular employees by the
employers conduct.
the
which he should comply in order to be
a regular employee. In the absence of these
requisites, there is justification in concluding that
respondent Grulla was a regular employee at the
time he was dismissed by petitioner. As such, he is
entitled to security of tenure during his period of
employment and his services cannot be terminated
except for just and authorized causes enumerated
under the Labor Code and under the employment
contract.
I MPLI CATI ON
In other words, the employment of each 'project
worker' is dependent and co-terminous with the
completion or termination of the specific activity or
undertaking [for which] he was hired which has been
pre-determined at the time of engagement. Since,
there is no showing that they (13 complainants)
were engaged to perform work-related activities to
the business of respondent which is steel-making,
The position of STELLAR that individual private
respondents were its project employees is totally
unfounded. A regular employee is distinguished
from a project employee by the fact that the latter is
or
undertaking, the duration or scope of which was
specified at the time the employees were engaged.
A project has reference to a particular job or
undertaking that may or may not be within the
regular or usual business of the employer. In either
case, the project must be distinct, separate and
identifiable from the main business of the employer
determined
there is no logical and legal sense of applying to
them the proviso under the second paragraph of
Article 280 of the Labor Code, as amended.
xxx In the case of Mercado, Sr. vs. National
Labor Relations Commission, this Court ruled that
the proviso in the second paragraph of Article 280
not
applicable to those who fall within the definition of
said Article's first paragraph, i.e., project employees.
The familiar grammatical rule is that a proviso is to
be construed with reference to the immediately
preceding part of the provision to which it is
attached, and not to other sections thereof, unless
the clear legislative intent is to restrict or qualify not
De Ocampo v. NLRC (90)
the
proviso but also earlier provisions of the statute
or even the statute itself as a whole.
UP LAW BAROPS 2007
ONE UP
24 of 132

must be or
a
which
shall worker the that
the by tasks The
down struck be should they
casual
employee)
regarded properly
Phi l . Geothermal , I nc. v. NLRC (90)
Tabas v. Cal i forni a Manufacturi ng Co. I nc. (89)
AM Oreta & Co. , I nc v. NLRC (89)
Ar t . 281, 2
Vi l l a v. NLRC (98)
employee. Furthermore, the 2
Agui l ar Corp. v. NLRC (97)
provided, business,
performed
Maragui not v. NLRC (98)
employee,
Purefoods Corp. V. NLRC (87)
Southern Cotabato v. NLRC (87)
nd
nd
from pool work a of
as
from a regular
be
distinguished
paragraph
Members
A project EE or a member of a work pool may
acquire the status of a regular employee when the
following concur:
employees even
project; and

Part I : Introductory Materials
Labor Standards
LENGTH OF SERVICE
SECURITY OF TENURE
Pal omares v. NLRC (97)
controlling
It is not disputed that private respondents were
project employees. As such, they were entitled to
security of tenure guaranteed by the Constitution
and the Labor Code for the duration of the project
they were hired for, or the phases thereof to which
they were assigned or in connection with which they
rendered services. The length of their employment
id determined by the completion of the task for
which they were hired.
SPECI FI ED PERI OD
determinant of the employment tenure of a project
employee. It is based on whether or not the
employment has been fixed for a specific project or
undertaking, the completion of which has been
determined at the time of the engagement of the
paragraph of Art.
280, providing that an employee who has rendered
service for at least 1 year, shall be considered a
regular employee, pertains to casual employees and
not to project employees such as petitioners.
In the leading case of Brent School v. Zamora,
which was reaffirmed in numerous subsequent
cases, the Court has upheld the legality of fixed-
term employment. It ruled that the decisive
determinant in term employment should not be the
activities that the employee is called upon to
perform but the day certain agreed upon by the
parties for the commencement and termination of
their employment relationship. But, this Court went
on to say that where from the circumstances it is
apparent that the periods have been imposed to
preclude acquisition of tenurial security by the
or
disregarded as contrary to public policy and morals.
WORKPOOL EMPLOYEES
Thus, the fact that petitioners worked for NSC
under different project employment contracts for
several years cannot be made basis to consider
them a regular employees, for they remain project
employees regardless of the number of projects in
which they have worked.
7.05 CASUAL EMPLOYEES
An employment shall be deemed casual if it is not
covered by the preceding paragraph: Provided,
that, any employee who has rendered at least one
year of service, whether such service is continuous
or broken, shall be considered a regular employee
with respect to the activity in which he is employed
and his employment shall continue while such
activity exists.
NATURE OF WORK
There is a continuous rehiring of project
cessation of a
alleged
project employee are vital, necessary,
and indispensable to the usual business or
trade of the employer.
What determines regularity or casualness is not
the employment contract, written or otherwise, but
the nature of the job. If the job is usually necessary
or desirable to the main business of the employer,
then employment is regular.
However, the length of time during which the EE
was continuously rehired is not controlling, but
merely serves as a badge of regular employment.
A work pool may exist although the workers in
the pool do not receive salaries and are free to seek
other employment during temporary breaks in the
be
available when called to report for a project.
Although primarily applicable to regular seasonal
workers, this set-up can likewise be applied to
project workers insofar as the effect of temporary
cessation of work is concerned. This is beneficial to
both the employer and employee for it prevents the
unjust situation of coddling labor at the expense of
capital and at the same time enables the workers to
attain the status of regular employees.
a
construction company draws its project employees,
if considered employees of the construction company
while in the work pool, are non-project employees,
or employees for an indefinite period. If they are
employed in a particular project, the completion of
the project or any phase thereof will not mean
severance of the employer-employee relationship.
ONE YEAR SERVICE
The fact that the petitioners have been hired on
a "temporary or seasonal" basis merely is no
argument either. As we held in Philippine Bank of
Communications v. NLRC, a temporary or casual
employee, under Article 218 of the Labor Code,
becomes regular after service of one year, unless he
has been contracted for a specific project. And we
cannot say that merchandising is a specific project
for the obvious reason that it is an activity related to
the day-to-day operations of California.
The records show that the petitioners had been
given an initial six-month contract, renewed for
another six months. Accordingly, under Article 281
of the Code, they had become regular employees
of California and had acquired a secure tenure.
Hence, they cannot be separated without due
process of law.
Assuming therefore, that an employee could
(as
he
becomes entitled to be regarded as a regular
employee of the employer as soon as he has
UP LAW BAROPS 2007
ONE UP
25 of 132

1.
after
2.
Length of service is not the
thus
a
There
of consist the of
protect to casual and regular
of status the that rule to law the
those regular as deems
and the
Under service. of year one
definite period
activities.
activities employee
St. Theresa s School v. NLRC (98)
I nternati onal Pharmaecuti cal s, I nc. v. NLRC
( 9 8 )
Ci el o v. NLRC (91)
Brent School v. Zamora (90)
employees
Hi ghway Copra Traders v. NLRC (98)
Cebu Engi neering and Devel opment Co. , v.
NLRC ( 98)
I nternati onal Pharmaceuti cal , I nc. v. NLRC
( 9 8 )
employees
Mercado v. NLRC (91)
employer between arrangement
completed
is
contradictory between

Part I : Introductory Materials
Labor Standards
the
circumstances, employers may not terminate the
service of a regular employee except for a just cause
or when authorized under the Labor Code. It is not
difficult to see that to uphold the contractual
the
employee would in effect be to permit employers to
avoid the necessity of hiring regular or permanent
employees indefinitely on a temporary or casual
status, thus to deny them security of tenure in their
jobs. Article 106 of the Labor Code is precisely
designed to prevent such result. 17
The second paragraph of Art. 280 demarcates
as "casual" employees, all other employees who do
not fall under the definition of the preceding
paragraph. The proviso, in said second paragraph,
"casual"
employees who have rendered at least one year of
service regardless of the fact that such service may
be continuous or broken.
Quintia became a regular employee of petitioner
after two years after her contract expired and her
services were continued for more than two years in
the usual trade or business of the employer.
Accordingly, and since the entire purpose
behind
the development of
legislation culminating in
the
present Article 280 of
the Labor Code
clearly
appears to have been,
as already observed,
to
prevent circumvention of the employee's right to be
secure in his tenure, the clause
in said article
indiscriminately and completely ruling out all written
or oral agreements conflicting with the concept of
regular employment as defined
therein should be
construed to refer to the substantive evil that the
Code itself has singled out: agreements entered into
precisely to circumvent security of tenure. It should
have no application to instances where a fixed period
of employment was agreed upon knowingly and
voluntarily by the parties, without any force, duress
or improper pressure being brought to bear upon the
employee and absent any other circumstances
vitiating his consent, or where it satisfactorily
appears that the employer and employee dealt with
each other on more or less equal terms with no
moral dominance whatever being exercised by the
former over the latter. Unless thus limited in its
purview, the law would be made to apply to
purposes other than those explicitly stated by its
framers; it thus becomes pointless and arbitrary,
unjust in its effects and apt to lead to absurd and
unintended consequences.
Private respondent
belonged to a
work pool
from which CEDCO drew its employees and assigned
them to different projects. He was not only hired for
a specific project. He was
a regular
employee
assigned to different
projects. He was
in fact a
mainstay of the company. Contrary to
petitioner's
claim, his services were
not terminated on 30
November 1992. He continued working after that.
Hence, according to the law, on 1 December 1992,
after a year of continuous
work, he became a
regular employee regardless of any contract to the
contrary. It is in keeping with the intent and spirit of
regular
employment attaches to the casual worker on the
day immediately after the end of the first year of
service.
The Labor Code draws a fine line between
the
interests of labor. We ruled in Baguio Country Club
Corporation vs. NLRC that "its language evidently
manifests the intent to safeguard the tenurial
interest of the worker who may be denied the rights
and benefits due a regular employee by virtue of
lopsided agreements with the economically powerful
employer who can maneuver to keep an employee
on a casual status for as long as convenient." Thus,
notwithstanding any agreements to the contrary, an
employment is deemed regular when the activities
performed by the employee are usually necessary or
desirable in the usual business or trade of the
employer.
7. 06 CONTRACT FI XED PERI OD
In Brent School, Inc. vs. Zamora, the Court
affirmed the general principle that "where from the
circumstances it is apparent that periods have been
imposed to preclude acquisition of tenurial security
by the employee, they should be struck down or
disregarded as contrary to public policy, morals,
etc."
On the other hand the written contract in this
case provided that it was subject to renewal by
mutual consent of the parties at least thirty days
before its expiration on March 18, 1984. There is no
evidence to show that the parties mutually agreed to
renew their contract. On the other hand, to sustain
petitioner's contention that there was an implied
extension after the expiration of the original contract
would make it possible for employers like petitioner
to circumvent Art. 280 of the Labor Code and thus
prevent an employee from becoming regular through
the simple expedient of making him sign a contract
for a term and then extend to him a contract term,
after term, after term.
Article 280 of the Labor Code does not proscribe
or prohibit an employment contract with a fixed
period provided the same is entered into by the
parties, without any force, duress or improper
pressure being brought to bear upon the employee
and absent any other circumstance vitiating consent.
It does not necessarily follow that where the duties
usually
necessary or desirable in the usual business of the
employer, the parties are forbidden from agreeing
on a period of time for the performance of such
essentially
26 of 132

nothing
TESTS VALI DI TY of
employment and the nature of the employee's
duties.
UP LAW BAROPS 2007
ONE UP
by right of equality an thus
Co., & Barnes Warner,
exceed
or more is which of the
they the by security
that saying without goes It

I nternational Catholi c Mi grati on Commi ssi on v.
NLRC ( 89)
guaranteed
Moreover,
Grand Motors Corp. v. MOLE (84)
I nternational Catholi c Mi grati on Commi ssi on v.
NLRC (89); De l a Cruz, Jr. v. NLRC (2003)
Ar t . 61, 2
employments hall not
Ar t . 281
termination
San Miguel Corp. v. NLRC (98)
Phi l. Tobacco etc. v. NLRC (98)
employee,
Servi dad v. NLRC (99)
contracts
nd
Sentence, Book VI , Rul e 1, Sec. 6,
Omnibus Rul es
Probationary

Part I : Introductory Materials
Labor Standards
or
employment govern the relationship of the parties.
In this case, private respondent's contract provided
for a fixed term of nine (9) months, from June 1,
1991 to March 31, 1992. Such stipulation, not being
contrary to law, morals, good customs, public order
and public policy, is valid, binding and must be
respected.
with reasonable standards made known by the
employer to the employee at the time of his
engagement. An employee who is allowed to work
after a probationary period shall be considered a
regular employee.
The language of the contract in dispute is truly a
double-bladed scheme to block the acquisition of the
employee of tenurial security. Thereunder, private
respondent has two options. It can terminate the
employee by reason of expiration of contract, or it
may use "failure to meet work standards" as the
ground for the employee's dismissal. In either case,
the tenor of the contract jeopardizes the right of the
worker to security of tenure guaranteed by the
Constitution.
In the case of Brent School, Inc. vs. Zamora, et
al., the Court upheld the principle that where from
the circumstances it is apparent that periods have
been imposed to preclude acquisition of tenurial
should
disregarded for being contrary to public policy.
There is a probationary employment where the
employee upon his engagement, is made to undergo
a trial period during which the employer determines
his fitness to qualify for regular employment, based
on reasonable standards made known to him at the
time of engagement.
DEFI NI TI ON
A probationary employee, as understood under
Article 282 (now Article 281) of the Labor Code, is
one who is on trial by an employer during which the
employer determines whether or not he is qualified
for permanent employment.
PURPOSE
SEASONAL EMPLOYEES
The Court has previously ruled in Manila Hotel
Company v. CIR that seasonal workers who are
called to work from time to time and are temporarily
laid off during-off season are not separated from
service in said period, but are merely considered on
leave until re-employed.
Thus, under Article 280 of the Labor Code, an
employment is deemed regular when the activities
performed by the employee are usually necessary or
desirable in the usual business or trade of the
employer even if the parties enter into an agreement
tating otherwise. But considered not regular under
said Article (1) the so-called "project employment"
less
determinable at the time of employment, such as
those connected, which by its nature is only for one
season of the year and the employment is limited for
the duration of that season, such as the Christmas
holiday season. Nevertheless, an exception to this
exception is made: any employee who has rendered
at least one (1) year of service, whether continuous
or intermitent, with respect to the activity he
performed and while such activity actually exists,
must be deemed regular.
We find merit in the contention of the petitioner
that "private respondent had not been hired as
manager of any firm before his employment with
petitioner. The highest previous position he attained
was that of Finance Officer. His position with
petitioner's Iloilo Branch was his first as Manager.
private
respondent's previous employer, and petitioner are
engaged in different kinds of business. Managing
petitioner's Iloilo Branch was an entirely new
experience for private respondent. It was, therefore,
necessary for private respondent to undergo a
period of probation to test his qualifications, skill and
experience." Indeed, the employer has the right or is
at liberty to choose as to who will be hired and who
will be declined. It is within the exercise of this right
to select his employees that the employer may set
or fix a probationary period within which the latter
may test and observe the conduct of the former
before hiring him permanently. "The right of a
laborer to sell his labor to such persons as he may
choose is, in its essence, the same as the right of an
employer to purchase labor from any person whom
it chooses. The employer and the employee have
the
Constitution. 'If the employer can compel the
employee to work against the latter's will, this is
servitude. If the employee can compel the employer
to give him work against the employer's will, this is
oppression.'"
SECTI ON 8 Probati onary Employees
8.01 PROBATI ONARY EMPLOYEES
six
months from the date the employee started working,
unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an
employee who has been engaged on a probationary
basis may be terminated for a just cause or when he
fails to qualify as a regular employee in accordance
A probationary appointment is made to afford
the employer an opportunity to observe the fitness
of a probationer while at work, and to ascertain
whether he will become a proper and efficient
employee. The word "probationary", as used to
describe the period of employment, implies the
purpose of the term or period, but not its length.
Being in the nature of a "trial period" the
essence of a probationary period of employment
fundamentally lies in the purpose or objective
UP LAW BAROPS 2007
ONE UP
27 of 132
be
selection. a make
but period, general
job the when or selling, as
where 1981
period longer a in
period
time the at
that the
of the of
alleged private which by
ground this on his sustain
( 8 4 )
their
by attained be to
A
"a NLRC, v. Catholic
of time the at the by forth
employee meaningful
probationary
Policy Instruction No. 11 of the Minister of Labor
and Employment has clarified any and all doubts on
the period of probationary employment. It states as
follows:
especially inclusive, October,
requiring prerogatives
Busi er v. Leogardo (84)
employee probationary
engagement
standards reasonable requirement
condition beforehand apprised
respondents
dismissal
Orient Express Placement Philippines v. NLRC
( 9 7 )
Corp. v. MOLE Grand Motors
employment, permanent
objective sought
Cebu Mari ne Beach Resort v. NLRC (2003)
employment. permanent
Escorpi zo v. Uni versi ty of Bagui o (99)
Migration
employer
Phi l. Federati on of Credi t Cooperati ves, I nc. v.
NLRC ( 98)
the probationary Generally,

Part I : Introductory Materials
Labor Standards
sought to be attained by both the employer and the
employee during said period. The length of time is
immaterial in determining the correlative rights of
both in dealing with each other during said period.
While the employer, as stated earlier, observes the
fitness, propriety and efficiency of a probationer to
ascertain whether he is qualified for permanent
employment, the probationer, on the other, seeks to
prove to the employer, that he has the qualifications
to meet the reasonable standards for permanent
employment.
The employer has the right or is at liberty to
choose as to who will be hired and who will be
declined. It is within the exercise of this right to
select his employees that the employer may set or
fix a probationary period within which the latter may
test and observe the conduct of the former before
hiring him permanently.
Under Art. 281 of the Labor Code, the services
Art. 281 of the Labor Code, as amended, allows
the employer to secure the services of an employee
on a probationary basis which allows him to
terminate the latter for just cause or upon failure to
qualify in accordance with reasonable standards set
of an employee hired on a probationary basis may
be terminated when he fails to qualify as a regular
employee in accordance with reasonable standards
made known by the employer to the employee at the
time of his engagement. However, the Court cannot
because
petitioner failed to specify the reasonable standards
his
engagement. As defined in the case of International
probationary
employee is one who is on trial by an employer
during which the employer determines whether or
not he is qualified for permanent employment. A
probationary employment is made to afford the
employer an opportunity to observe the fitness of a
probationer while at work, and to ascertain whether
he will become a proper and efficient employee."
poor
performance was evaluated, much less to prove that
such standards were made known to him at the time
of his recruitment in Manila.
Due process dictates that an employee be
his
employment and of the terms of advancement
therein. Precisely, implicit in Art. 281 of the Code is
be
previously made known by the employer to the
of
as correctly suggested by the POEA.
A probationary employee is one who, for a given
period of time, is being observed and evaluated to
determine whether or not he is qualified for
DURATI ON/ EXCEPTI ON
probationary
appointment affords the employer an opportunity to
observe the skill, competence and attitude of a
probationer. The word "probationary", as used to
describe the period of employment, implies the
purpose of the term or period. While the employer
observes the fitness, propriety and efficiency of a
probationer to ascertain whether he is qualified for
permanent employment, the probationer at the
same time, seeks to prove to the employer that be
has the qualifications to meet the reasonable
standards for permanent employment.
of
employment is limited to six (6) months. The
exception to this general rule is when the parties to
an employment contract may agree otherwise, such
as when the same is established by company policy
or when the same is required by the nature of work
to be performed by the employee. In the latter case,
there is recognition of the exercise of managerial
of
probationary employment, such as in the present
case where the probationary period was set for
eighteen (18) months, i.e. from May, 1980 to
That the workers failed to qualify for their
positions, suffice it to state that at the time they
were dismissed, they were still in a trial period or
probationary period. Being in the nature of a trial
period, the essence of a probationary period of
employment fundamentally lies in the purpose or
the
employee must learn a particular kind of work such
requires
qualifications, skills, experience or training.
both the
employer and the employee during the period.
While the employer observes the fitness, propriety
and efficiency of a probationer to ascertain whether
he is qualified for permanent employment, the
probationer, on the other hand seeks to prove to the
employer that he has the qualifications to meet the
reasonable standards for permanent employment
which were obviously made known to him.
To reiterate, in this case, far from allowing the
respondents to prove that they possessed the
qualifications to meet the reasonable standards for
petitioners
peremptorily dismissed them from the service.
"Probationary Employment has been the
subject of misunderstanding in some quarter.
Some people believe six (6) months is the
probationary period in all cases. On the other
hand, employees who have already served the
probationary period are sometimes required to
serve again on probation.
Under the Labor Code, six (6) months is the
the
probationary period is actually the period needed
to determine fitness for the job. This period, for
lack of a better measurement is deemed to be
the period needed to learn the job.
The purpose of this policy is to protect the
worker at the same time enable the employer to
EMPLOYER RI GHT SET PERI OD/OBLI GATI ON
This
purpose should be kept in mind in enforcing this
provision of the Code. This issuance shall take
effect immediately."
UP LAW BAROPS 2007
ONE UP
28 of 132

his
certain
by which,
would
or services the
only A
A
the period,
conduct

Phi l. Federati on, etc. v. NLRC (98)
agreements voluntary
Mari wasa Manufacturi ng I nc v. Leogardo (89)
employees probationary
De l a Cruz, Jr. v. NLRC (2003)
A Pri me Securi t y Servi ces, I nc. v. NLRC (2000)
employment. permanent
probationary six-month
contract signed by petitioners is akin to
Bernardo v. NLRC (99)
Hol i day I nn Mani l a v. NLRC (93)
I nternational Catholi c Mi grati on Commi ssi on v.
NLRC ( 89)
enjoys
which during period the is
It is an elementary
employee probationary
Probation
appointments, probationary
defect
probationary.
meaning the term

Part I : Introductory Materials
Labor Standards
A probationary employee is one who, for a given
period of time, is being observed and evaluated to
determine whether or not he is qualified for
It is well settled that the employer has the right
or is at liberty to choose who will be hired and who
will be denied employment. In that sense, it is within
the exercise of the right to select his employees that
the employer may set or fix a probationary period
within which the latter may test and observe the
of
permanently.
probationary
appointment affords the employer an opportunity to
observe the skill, competence and attitude of a
probationer. The word "probationary", as used to
describe the period of employment, implies the
purpose of the term or period. While the employer
observes the fitness, propriety and efficiency of a
probationer to ascertain whether he is qualified for
XXX There is nothing under Article 281 of the
Labor Code that would preclude the employer from
extending a regular or a permanent appointment to
an employee once the employer finds that the
employee is qualified for regular employment even
before the expiration of the probationary period.
Conversely, if the purpose sought by the employer is
neither attained nor attainable within the said
period, Article 281 of the Labor Code does not
likewise preclude the employer from terminating the
probationary employment on justifiable causes as in
the instant case.
permanent employment, the probationer at the
same time, seeks to prove to the employer that be
has the qualifications to meet the reasonable
standards for permanent employment.
There is no basis for subjecting an employee to
a new probationary or temporary employment where
he had already become a regular employee when he
was absorbed by a sister company.
the
employer may determine if the employee is qualified
for possible inclusion in the regular force. In the case
at bar, the period was for three weeks, during
Honasan's on-the-job training. When her services
were continued after this training, the petitioners in
effect recognized that she had passed probation and
was qualified to be a regular employee.
Honasan was certainly under observation during
her three-week on-the-job training. If her services
proved unsatisfactory then, she could have been
dropped as early as during that period. But she was
not. On the contrary, her services were continued,
presumably because they were acceptable, although
she was formally placed this time on probation.
Even if it be supposed that the probation did not
end with the three-week period of on-the-job
training, there is still no reason why that period
should not be included in the stipulated six-month
period of probation. Honasan was accepted for on-
the-job training on April 15, 1991. Assuming that
her probation could be extended beyond that date, it
nevertheless could continue only up to October 15,
1991, after the end of six months from the earlier
date. Under this more lenient approach, she had
become a regular employee of Holiday Inn and
acquired full security of tenure as of October 15,
1991.
a
temporary employment status. This means that he
is terminable at any time, permanent employment
not having been attained in the meantime. The
employer could well decided he no longer needed
his
performance fell short of expectations, etc. As long
as the termination was made before the termination
of the six-month probationary period, the employer
was well within his rights to sever the employer-
employee relationship. A contrary interpretation
the clear
EXTENSI ON CONTRACT
For aught that appears of record, the extension
of Dequila's probation was ex gratia, an act of
liberality on the part of his employer affording him a
second chance to make good after having initially
failed to prove his worth as an employee. Such an
act cannot now unjustly be turned against said
employer's account to compel it to keep on its
payroll one who could not perform according to its
work standards. The law, surely, was never meant to
produce such an inequitable result.
By voluntarily agreeing to an extension of the
probationary period, Dequila in effect waived any
benefit attaching to the completion of said period if
he still failed to make the grade during the period of
extension. The Court finds nothing in the law which
As held by the Court, "Articles 280 and 281 of
the Labor Code put an end to the pernicious practice
of making permanent casuals of our lowly employees
by the simple expedient of extending to them
ad infinitum."
by any fair interpretation prohibits such a waiver.
And no public policy protecting the employee and
the security of his tenure is served by proscribing
reasonably
extending the period of probation, actually improve
a
probationary employment, during which the bank
determined the employees' fitness for the job. When
the bank renewed the contract after the lapse of the
and further a probationary employee's prospects of
demonstrating his fitness for regular employment.
employees
thereby became regular employees. No employer is
allowed to determine indefinitely the fitness of its
employees.
rule in the law on labor
relations that a probationary employee who is
engaged to work beyond the probationary period of
6 months, as provided under Art. 281 Labor Code,
as amended, or for any length of time set forth
Escorpi zo v. Uni versi ty of Bagui o (99) by the employer, shall be considered as a regular
employee.
UP LAW BAROPS 2007
ONE UP
29 of 132
the former before hiring him
The
of
of purpose the for
must
was alleged
by known made be
in
alleged private which by
ground this on his sustain
herein of case the in as
find We
from
Director the of order said that Minister
St. Mi chael Academy v. NLRC (98)
determining evaluated
complete satisfactorily member
Escorpi zo v. Uni versi ty of Bagui o (99)
performance unsatisfactory
previously standards
employer
respondent's
recruitment
respondent's
dismissal
Orient Express Placement Philippines v. NLRC
( 9 7 )
probation,
therefore, unmeritorious,
terminating employer
I nternational Catholi c Mi grati on Commi ssi on v.
NLRC ( 89)
Cebu Stevedoring Co. Inc v. Regional Di rector
( 8 8 )
Manila.
Agency-Worker Agreement
the
employment on justifiable causes.

Part I : Introductory Materials
Labor Standards
ABSORBED EMPLOYEES
work-site and to terminate at the end of one (1)
year. No other condition was laid out except that he
was to be on probation for three (3) months.
As aforesaid, no standard whatsoever by which
We agree with the Regional Director that private
respondents could not be considered probationary
employees because they were already well-trained in
their respective functions. This conclusion is further
bolstered by the factual findings of the Labor
such probationary period could be hurdled was
specified and made known to him. Due process
dictates that an employee be apprised beforehand of
the condition of his employment and of the terms of
advancement therein. Precisely, implicit in Art. 281
of the Code is the requirement that reasonable
was
supported by substantial evidence. As stressed by
the Solicitor General, while private respondents were
still with the CCAS they were already clerks.
Respondent Gelig had been a clerk for CCAS for
more than ten (10) years, while respondent Quijano
had slightly less than ten (10) years of service. They
were, therefore, not novices in their jobs but
experienced workers.
the
to the probationary employee at the time
of his engagement, as correctly suggested by the
POEA. Obviously, such an essential requirement was
not met by petitioner, even assuming that Flores'
true.
Besides, unsatisfactory performance is not one of
the just causes for dismissal under the Labor Code.
RULE PRIVATE SCHOOL TEACHERS
TERMI NATI ON AND SALARY
Under the University Memorandum Circular No.
1, series of 1988, the following conditions must
If the purpose sought by the employer is neither
attained nor attainable within the said period, Article
281 of the Labor Code does not preclude the
probationary
concur in order that a probationary teacher may be
extended a regular appointment; (1) the faculty
the
probationary period of four semesters or two years,
within which his performance shall be observed and
public
respondent's argument that the security of tenure of
probationary employees within the period of their
private
respondent, justified the award of salary for the
unexpired portion of her probationary employment.
The termination of private respondent predicated on
a just cause negates the application in this case of
the pronouncement in the case of Biboso v. Victorias
Milling Co., Inc., on the right of security of tenure of
probationary employees.
his
competency and fitness to be extended permanent
status; and (2) the faculty member must pass the
PBET or an equivalent civil service examination.
Clearly, probationary teachers are not entitled
to the leaves specified in Section 2 of the School
Manual. The probationary period for private school
teachers is three years as provided in the Manual of
Regulations for Private Schools.
Under Art. 281 of the Labor Code, the services
of an employee hired on a probationary basis may
be terminated when he fails to qualify as a regular
employee in accordance with reasonable standards
made known by the employer to the employee at the
time of his engagement. However, the Court cannot
because
petitioner failed to specify the reasonable standards
poor
performance was evaluated, much less to prove that
such standards were made known to him at the time
with
ORIENT EXPRESS nor his Employment Contract with
NADRICO ever mentioned that he must first take
and pass a Crane Operators' License Examination in
Saudi Arabia before he would be allowed to even
touch a crane. Neither did he know that he would be
assigned as floorman pending release of the results
of the examination or in the event that he failed;
more importantly, that he would be subjected to a
performance evaluation by his superior one (1)
month after his hiring to determine whether the
company was amenable to continuing with his
employment. Hence, respondent Flores could not be
faulted for precisely harboring the impression that
he was hired as crane operator for a definite period
of one (1) year to commence upon his arrival at the
UP LAW BAROPS 2007
ONE UP
30 of 132

of his Neither private
the
the For -
For -
date from
2.
3.
(1) One
to services or
and Project
of
TIME
prohibits
employee
demonstrate to the employer his skills
Restrictive
of the law (even if there is no appointment
[Kimberly Clark v. Drilon]
Purpose:
months
the
unless
the
working,
PROBATIONARY EMPLOYMENT
year
continuous or broken
With respect to activity
CASUAL EMPLOYMENT
SEASONAL EMPLOYMENT
informed
OF
EMPLOYEE
employer
REGULAR EMPLOYMENT
Test
2.
Parties may agree for a longer period if
company policy requires or the nature of
work requires
Direct rationale connection: unduly long
employee
covered
Work
Must have been forewarned of
the name of the project and
the duration of the project
Whether or not the project has
before
stipulated period.
agreement written
notwithstanding
to relation direct a
unfair to the worker
by
apprenticeship agreement stipulating
longer period
Termination of Employment
to
and regardless
Nothing
of
agreement of parties provided by law

Part I : Introductory Materials
Labor Standards
EMPLOYEE
STRUCTURE
CLASSI FI CATI ON the exception
Period duration not exceed 6 months
contrary
Employee engaged to perform activities
which are usually necessary or desirable to
the usual business or trade of employer
Other Regular Employees
Just causes
Fail to qualify as regular employee in
accordance with reasonable standards
made known by the employer to the
employee at the time of engagement
Learner allowed or suffered to work
during the first 2 months of learner
period, if training is terminated by the Observance Period
Not synonymous to permanent employment
(no such thing as permanent employment
since he can be terminated for cause)
EXCEPT:
the employer
whether employee is qualified
ENGAGEMENT
employer
abbreviate or shorten the period
the
business of the employer, not
important, BUT:
Employee MUST be
the
name and duration
of the project
the
Principal business of
employer are two
separate things
No attempt to deny
Security of Tenure
to worker
be
performed seasonal in nature,
employment is for the duration
of the season
No continuing need for worker
When not regular, project, or seasonal
Requirement
Employees
employed
Employment shall continue while such
activity exists (Regular in a limited
sense)
** Project, Seasonal and Casual Employees
may be doing a function that is by definition
regular but are not regular because they fall in
UP LAW BAROPS 2007
ONE UP
Casual Employment after 1 year of
service whether continuous or broken
(conditions Art. 280)
Probationary Employee
PROJECT EMPLOYMENT
Employment fixed on a specific
Effect of Work beyond 6
If agreed to extend for the benefit of worker
project or
allowed to
work even after the completion of the
probationary period (Art. 281)
undertaking,
completion or termination of
which is DETERMINED AT THE
deemed
Regular employee by automatic application
Ex gratia
No obligation to pay the unfinished portion
31 of 132

LAW

oral
1.
2.
3.
the end of the
1.
OF
a.
b.
c.
2.

and Effect = Regular
1. service whether

started
an
a
1.
2.
1.
to know
to
to
any entity":
only if even and
a for or offers any
choice free a
by
through
Ar t . 13 ( f )
Authority:
recrui t ment
Ar t . 13( e)
Ar t . 13 ( d)
License:
Ar t . 13( c)
"Private employment agency": any person or entity
canvassing,
enlisting,
contracting,
transporting,
utilizing,
hiring or
procuring workers,
includes:
referrals,
contract services,
Acts accompanied by a promise or
advertising for employment locally or
abroad

or not
placement recruitment
Peopl e v. Pani s (88)
Ar t . 13( a)
"Workers": any member of the labor force, whether
promises manner,
Ar t . 13( b)
"Recruitment and placement" refers to any act of
To FACILITATE
employment
employment
Art. 12 Empl oyment Poli ci es of the State:
"Private
of state
contracting, enlisting, canvassing,
full
manpower
PROMOTE

Part II : Labor Standards Law
Labor Standards
SECTI ON 9 EMPLOYMENT POLICY
9.01 PRE-EMPLOYMENT POLICY
STRUCTURE OF THE LAW:
maintain
improved
training, allocation and utilization;
To PROTECT every citizen desiring to work locally or
overseas by securing for him the best possible
terms and conditions of employment;
1. Main Part Basic Rule
ACTS:
of
persons seeking
conformity with the national interest;
available
To FACILITATE and regulate the movement of
workers in conformity with the national interest;
To REGULATE the employment of aliens, including
the establishment of a registration and/or work
permit system;
To STRENGTHEN the network of public employment
offices and rationalize the participation of the
private sector in the recruitment and placement
of workers, locally and overseas, to serve
national development objectives;
To INSURE careful selection of Filipino workers for
overseas employment in order to protect the
good name of the Philippines abroad.
Consideration whether for profit
2. Proviso
actor person or entity
act offers, promises employment
3. Consideration for a fee
no. of workers 2 or more
effect deemed engaged in recruitment
or placement
RECRUI TMENT
WORKERS
PLACEMENT BASIC RULE
NO.
WORKERS
0
OF CONSIDE
RATION
none
DEFI NI TI ONS
PROVISO
10. 02 EMPLOYMENT AGENCY - ENTI TY
transporting,
utilizing, hiring or procuring workers, and includes
referrals, contract services, promising or advertising
for employment, locally or abroad, whether for profit
or not: Provided, That any person or entity which, in
engaged in the recruitment and placement of
workers for a fee which is charged, directly or
indirectly, from the workers or employers or both.
free
employment to two or more persons shall be
deemed engaged in recruitment and placement.
a document issued by the Department
of Labor authorizing a person or entity to operate a
private employment agency
employed or unemployed.
DEFI NI TI ON - RELATI ONSHI P
The number of persons dealt with is not an
essential ingredient of the act of recruitment and
placement of workers. Any of the acts mentioned in
the basic rule in Article 13(b) will constitute
one
prospective worker is involved. The proviso merely
lays down a rule of evidence that where a fee is
collected in consideration of a promise or offer of
employment to two or more prospective workers,
the individual or entity dealing with them shall be
deemed to be engaged in the act of recruitment and
placement. The words "shall be deemed" create that
presumption.
person
association engaged in the recruitment
placement of workers, locally or overseas, without
charging, directly or indirectly, any fee from the
workers or employers.
a document issued by the Department
of Labor authorizing a person or association to
engage in recruitment and placement activities as a
private recruitment entity.
10. 03 ALLOWED ENTI TI ES
GENERAL RULE
UP LAW BAROPS 2007
ONE UP
32 of 132

To and a
work in
SECTI ON 10 RECRUI TMENT AND
PLACEMENT OF WORKERS

10. 01 AND OF
2 fee
or
and
Ar t . 16
or agent nay
the in from
rules such under
in shall sector

the in from
by allowed be may as other
offices and
shall
any entity":
by allowed be may as other
offices and
shall
including representative
Ar t . 29.
Ar t . 28.
Ar t . 27.
Citizenship Requirement - Only Filipino Citizens or
business engaging prohibited
Ar t . 26
Travel agencies prohi bited t o recrui t
guidelines, overseas,
participate employment
Placement of Workers -
Ar t . 25.
Pri vat e Sect or Part i ci pat i on i n t he Recrui t ment and
CI TI ZENSHI P, LI CENSI NG
business engaging prohibited
Ar t . 26
Travel agencies prohi bited t o recrui t
employers
Ar t . 18
Ban on di rect hi ri ng
employment, overseas
Ar t . 16
Private recruitment - Except as provided in Chapter
Ar t . 14 ( g)
Ar t . 12 ( f )
recrui t ment
Ar t . 13 ( e)
Ar t . 13 ( c)
"Private employment agency": any person or entity
Ar t . 12 ( f )
Ar t . 25
Pri vat e sect or part i ci pat i on i n t he recrui t ment and
pl acement of workers - the private employment
employers
Ar t . 18
Ban on di rect hi ri ng
employment, overseas
Private recruitment - Except as provided in Chapter
to
"Private
Pursuant

Part II : Labor Standards Law
Labor Standards
employment
II of this Title, no person or entity, other than the
employment
engage
recruitment and placement of workers.
engage
recruitment and placement of workers.
- No employer may hire a
Filipino worker for overseas employment except
through the Boards and entities authorized by the
Department of Labor and Employment. Direct hiring
by members of the diplomatic service, officials and
employees of international organizations and such
- No employer may hire a
Filipino worker for overseas employment except
through the Boards and entities authorized by the
Department of Labor and Employment. Direct hiring
by members of the diplomatic service, officials and
employees of international organizations and such
the
Department and Labor and Employment is exempt
from this provision.
the
Department and Labor and Employment is exempt
from this provision. Travel
agencies and sales agencies of airline companies are
of
recruitment and placement of workers for overseas
employment whether for profit or not.
sector shall participate in the recruitment and
placement of workers, locally and overseas, under
such guidelines, rules and regulations, as may be
issued by the Secretary of Labor and Employment.
CAPI TALI ZATI ON,
DURATI ON, TRANSFERABI LI TY AND FEES
To strengthen the network of public employment
offices and rationalize the participation of the private
sector in the recruitment and placement of workers,
locally and overseas, to serve national development
objectives.
national
development objectives and in order to harness and
maximize the use of private sector resources and
initiative in the development and implementation of
a comprehensive employment program, the private
ALLOWED ENTI TI ES
1. Private
the
recruitment and placement of workers, locally and
and
regulations, as may be issued by the Secretary of
Labor and Employment.
engaged in the recruitment and placement of
workers for a fee which is charged, directly or
indirectly, from the workers or employers or both.
Travel
agencies and sales agencies of airline companies are
of
recruitment and placement of workers for overseas
employment whether for profit or not.
person
association engaged in the recruitment
placement of workers, locally or overseas, without
charging, directly or indirectly, any fee from the
workers or employers.
2. Public
corporations, partnership or entities at least 75 % of
the authorized and voting capital stock of which is
owned and controlled by Filipino citizens shall be
permitted to participate in the recruitment and
placement of workers, locally or overseas.
To strengthen the network of public employment
offices and rationalize the participation of the private
sector in the recruitment and placement of workers,
locally and overseas, to serve national development
objectives.
Capitalization All applicants for authority to hire or
renewal of license to recruit are required to have
such substantial capitalization as determined by the
Secretary of Labor.
Employment promotion The Secretary of Labor
shall have the power and authority To organize
and establish new employment offices in addition to
existing employment offices under the Department
of Labor as the need arises.
10. 4 PROHI BI TED ENTI TY
Non-transferability of license or authority No
license or authority shall be used directly or
indirectly by any person other than the one in whose
favor it was issued or at any place other than that
stated in the license or authority, nor may such
license or authority be transferred, conveyed, or
assigned to any other person or entity. Any transfer
of business address, appointment or designation of
the
establishment of additional offices anywhere shall
II of this Title, no person or entity, other than the
UP LAW BAROPS 2007
ONE UP
33 of 132

public the OEDB for
the in
or
and
public the OEDB for
the in
notice, false any GIVE c. To
or
and
of further
power the
scale large in deemed
illegal or any out
be shall and
shall scale large in or
License of and/or
of status the on
terms and

oppressive
information
Ar t . 34
Prohi bi ted practices - It shall be unlawful for any
i ndivi dual, ent i ty, licensee or holder of aut hori t y:
(CFGI-IEOF-SBW)
Salazar v. Achacoso
properties
or premises
paraphernalia,
job-seekers. exploitation
shall have representative
committed
unlawful
sabotage
syndicate
including activities,
Ar t . 38
Illegal Recruitment
cancellation
Ar t . 35.
including employment,
Ar t . 33
Reports on empl oyment status
Ar t . 32.
procedures, prescribed
regulations,
Ar t . 31.
Ar t . 30.
Any recruitment
Suspension

Part II : Labor Standards Law
Labor Standards
b subject to the prior approval of the Department of
Labor.
Registration Fees The Secretary of Labor shall
promulgate a schedule of fees for the registration of
all applicants for license or authority.
34 of this Code, to be undertaken by non-
licensees or non-holders of authority shall be
deemed illegal and punishable under Article
39 of this Code. The Secretary of Labor and
Employment or any law enforcement officer
may initiate complaints under this Article.
(b) Illegal recruitment when committed by a
be
considered an offense involving economic
penalized
accordance with Article 39 hereof.
10. 05 TECHNIQUES OF REGULATI ON
Illegal recruitment is deemed committed
by a SYNDICATE if carried out by a group of
three (3) or more persons conspiring and/or
confederating with one another in carrying
transaction,
enterprise or scheme defined under the first
paragraph hereof. Illegal recruitment is
Bonds All applicants for license or authority shall
post such cash and surety bonds as determined by
the Secretary of Labor to guarantee compliance with
if
committed against three (3) or more persons
individually or as a group.
(c) The Secretary of Labor or his duly authorized
recruitment
and
employment as may be appropriate.
WORKERS FEES
rules
conditions
to
recommend the arrest and detention of such
non-licensee or non-holder of authority if
after investigation it is determined that his
activities constitute a danger to national
security and public order or will lead to
Fees to be paid by workers Any person applying
with a private fee-charging employment agency for
employment assistance shall not be charged any fee
until he has obtained employment through its efforts
or has actually commenced employment. Such fee
shall be always covered with the appropriate receipt
clearly showing the amount paid. The Secretary of
Labor shall promulgate a schedule of allowable fees.
The
Secretary shall order the search of the office
and seizure of documents,
other
implements used in illegal recruitment
activities and the closure of companies,
establishments and entities found to be
engaged in the recruitment of workers for
overseas employment, without having been
licensed or authorized to do so.
REPORTS SUBMI SSI ON
- Whenever the
public interest so requires, the Secretary of Labor
and Employment may direct all persons or entities
within the coverage of this Title to submit a report
job
vacancies; details of job requisitions, separation
from jobs, wages, other terms and conditions, and
other employment data.
We reiterate that the Secretary of Labor, not
being a judge, may no longer issue search or arrest
warrants. Hence, the authorities must go through
the judicial process. To that extent, we declare
Article 38, paragraph (c), of the Labor Code,
unconstitutional and of no force and effect.
SUSPENSI ON AND/ OR CANCELLATION OF LICENSE OR
AUTHORI TY
or
Authority The Secretary of Labor shall have the
power to suspend or cancel any license or authority
to recruit employees for overseas employment for
violation of rules and regulations issued by the
Department of Labor, the Overseas Employment
Development Board, and the National Seamen
Board, or for violation of the provisions of this and
other applicable laws, General Orders and Letters of
Instructions.
10. 06 ILLEGAL RECRUI TMENT
a. To CHARGE or accept directly or indirectly any
amount greater than that specified in the
schedule of allowable fees prescribed by the
Secretary of Labor and Employment, or to
make a worker pay any amount greater than
that actually received by him as a loan or
advance;
b. To FURNISH or publish any false notice or
document
recruitment or employment;
testimony,
information or document or commit any act or
misrepresentation for the purpose of securing
a license or authority under this Code;
d. To INDUCE or attempt to induce a worker
already employed to quit his employment in
order to offer him another unless the transfer
is designed to liberate a worker from
the
prohibited practices enumerated under Article
terms
employment;
conditions
UP LAW BAROPS 2007
ONE UP
34 of 132
BONDS
an
of
(a)
in
in relation to
and of
be shall
Illegal fault.
with in worker the
before workers
be
to attempt or g. To
a is
notice, false any GIVE c. To
or
of or
Sec. 6
8042 RA
before workers
or directly be
be may as
to attempt or g. To

recruitment worker's
connection
departure applicant
verified by the Department
information as may
h. To FAIL to submit
Employment
OBSTRUCT
person or entity not to employ
information
non-holder non-licensee
departure applicant
engaged
information
Employment
OBSTRUCT
designed
oppressive
employment;
considered
economic sabotage.
jobs, departures
or
representative;
or
representatives;
license or authority under the

Part II : Labor Standards Law
Labor Standards
e. To INFLUENCE or attempt to influence any
person or entity not to employ any worker who
has not applied for employment through his
agency;
f. To ENGAGE in the recruitment or placement of
workers in jobs harmful to public health or
morality or to the dignity of the Republic of the
Philippines;
that actually received by him as a
advance;
b. To FURNISH or publish any false notice or
document
recruitment or employment;
testimony,
information or document or commit any act of
misrepresentation for the purpose of securing
obstruct
inspection by the Secretary of Labor and
authorized
Labor Code;
d. To INDUCE or attempt to induce a worker
already employed to quit his employment in
order to offer him another unless the transfer
h. To FAIL to file reports on the status of
employment, placement vacancies, remittance
of foreign exchange earnings, separation from
jobs, departures and such other matters or
worker
conditions
e. To INFLUENCE or attempt to influence any
required
Secretary of Labor and Employment;
i. To SUBSTITUTE or alter employment contracts
approved and verified by the Department of
Labor and Employment from the time of actual
signing thereof by the parties up to and
including the period of expiration of the same
without the approval of the Department of
Labor and Employment.
j. To BECOME officer or member of the Board of
any corporation engaged in travel agency or to
any worker who
has not applied for employment through his
agency;
f. To ENGAGE in the recruitment or placement of
workers in jobs harmful to public health or
morality or to the dignity of the Republic of the
Philippines;
obstruct
inspection by the Secretary of Labor and
authorized
indirectly
management of a travel agency; and
k. To WITHHOLD or deny travel documents from
reports on the status of
employment, placement vacancies, remittance
of foreign exchange earnings, separation from
for
monetary or financial considerations other
than those authorized under this Code and its
implementing rules and regulations.
and such other matters or
required
Secretary of Labor and Employment;
i. To SUBSTITUTE or alter to the prejudice of the
worker, employment contracts approved and
MI GRANT
FI LI PI NOS ACT OF 1995
WORKERS OVERSEAS of Labor and
Employment from the time of actual signing
thereof by the parties up to and including the
period of the expiration of the same without
For purposes of this Act, ILLEGAL RECRUITMENT
shall mean any act of:
canvassing,
enlisting,
contracting,
transporting,
utilizing,
hiring, or
procuring workers
and includes:
referring,
contract services,
promising or advertising for employment
abroad,
whether for profit or not, when undertaken by a
the approval of the Department of Labor and
Employment;
j. For an OFFICER or agent of a recruitment or
placement agency to become an officer or
member of the Board of any corporation
engaged in travel agency or to be engaged
directly or indirectly in the management of a
travel agency;
k. To WITHHOLD or deny travel documents from
for
monetary or financial considerations other
than those authorized under the Labor Code
and its implementing rules and regulations;
l. FAILURE to actually deploy without valid
reason as determined by the Department of
authority
contemplated under Article 13(f) of Presidential
Decree No. 442, as amended, otherwise known as
the Labor Code of the Philippines:
Provided, That any such non-licensee or non-
holder who, in any manner, offers or promises for a
fee employment abroad to two or more persons shall
be deemed so engaged.
It shall likewise include the following acts,
whether committed by any person, whether a non-
licensee, non-holder, licensee or holder of authority:
a. To CHARGE or accept directly or indirectly any
amount greater than that specified in the
schedule of allowable fees prescribed by the
Secretary of Labor and Employment, or to
make a worker pay any amount greater than
Labor and Employment; and
m. FAILURE to reimburse expenses incurred by
his
documentation and processing for purposes of
deployment, in cases where the deployment
does not actually take place without the
when
committed by a syndicate or in large scale
involving
Illegal recruitment is deemed committed by a
SYNDICATE if carried out by a group of three (3) or
more persons conspiring or confederating with one
another. It is deemed committed in large scale if
committed against three (3) or more persons
individually or as a group.
UP LAW BAROPS 2007
ONE UP
35 of 132
by his duly
by the
in the
AND
loan or
in relation to
a
to liberate from
of terms and
by his duly
by the
an offense
other There
or permit, or license the of
shall persons more
hiring
Under
penalty the suffer thereof,
or thereof any
the out carry
the are
Peopl e v. Reyes (95)
Peopl e v. Ordoo (2000)
necessary
utilizing, transporting, contracting,
Peopl e v. Guevarra (99)
conviction
provision violating
Ar t . 39
Penalties
Ar t . 37
Visitorial power - The Secretary or his duly
Ar t . 36
Regulatory power - The Secretary shall have the
accomplices principals, offenses
14 said, is it are,
Code, Labor the recruitment
engaged

Part II : Labor Standards Law
Labor Standards
The persons CRIMINALLY LIABLE for the above
and
accessories. In case of juridical persons, the officers
having control, management or direction of their
business shall be liable.
ELEMENTS OF CRIME
and
placement refer to "any act of canvassing, enlisting,
10. 07 ENFORCEMENT AND SANCTI ONS
or
procuring workers, and includes referrals, contract
services, promising or advertising for employment,
locally or abroad, whether for profit or not: Provided,
[t]hat any person or entity which, in any manner,
power to restrict and regulate the recruitment and
placement activities of all agencies is authorized to
issue orders and promulgate rules and regulations to
offers or promises for a fee employment to two or
be
recruitment and placement.
objectives
provisions of this Title.
implement Recruitment for overseas employment is not in
itself necessarily immoral or unlawful. It is the lack
the
engagement of prohibited activities enumerated in
the Labor Code that such recruitment
authorized representatives may at any time inspect
the premises, books of accounts and records of any
person or entity covered by this Title, require it to
submit reports regularly on prescribed forms, and
act on violations of any provision of this Title.
activities unlawful or criminal. Illegal recruitment is
qualified into large scale recruitment when three or
more persons are victimized. If such recruitment is
carried out by a group of three (3) or more persons
conspiring and/or confederating with one another in
carrying out any unlawful or illegal transaction,
enterprise or scheme, it becomes one committed by
a syndicate. Illegal recruitment committed by a
syndicate or in large scale amounts to an offense
involving economic sabotage, punishable by life
a. The penalty of life imprisonment and a fine of
One Hundred thousand Pesos (P100,000) shall
be imposed if illegal recruitment constitutes
economic sabotage as defined herein:
b. Any license or holder of authority found
violating or causing another to violate any
provision of this Title or its implementing rules
and regulations shall, upon conviction thereof,
suffer the penalty of imprisonment of not less
than two years nor more than five years or a
fine of not less than P10,000 nor more than
P50,000 or both such imprisonment and fine,
at the discretion of the court;
c. Any person who is neither a license nor a
holder of authority under this Title found
imprisonment and a fine of one hundred thousand
pesos (P100,000.00).
Illegal recruitment is committed when two
elements concur, namely: (1) the offender has no
valid license or authority required by law to enable
one to lawfully engage in recruitment and placement
of workers; and (2) he undertakes either any activity
within the meaning of recruitment and placement
defined under Art. 13 (b), or any of the prohibited
practices enumerated under Art. 34 of the Labor
Code.
LARGE SCALE
its
implementing rules and regulations shall, upon
of
imprisonment of not less than four years nor
more than eight years or a fine of not less
than P20,000 nor more than P100,000 or both
such imprisonment and fine, at the discretion
of the court;
d. If the offender is a corporation, partnership,
association or entity, the penalty shall be
imposed upon the officer or officers of the
corporation, partnership, association or entity
responsible for violation; and if such officer is
an alien, he shall, in addition to the penalties
herein prescribed, be deported without further
proceedings;
e. In every case, conviction shall cause and carry
the automatic revocation of the license or
authority and all the permits and privileges
granted to such person or entity under this
Title, and the forfeiture of the cash and surety
bonds in favor of the Overseas Employment
Development Board or the National Seamen
Board, as the case may be, both of which are
authorized to use the same exclusively to
promote their objectives.
cases
filed/pending in the courts against the accused for
illegal recruitment. These cases cannot be taken into
account for the purpose of Art. 38(b). When the
Labor Code speaks of illegal recruitment "committed
against three (3) or more persons individually or as
a group," it must be understood as referring to the
number of complainants in each case who are
complainants therein, otherwise, prosecutions for
single crimes of illegal recruitment can be cumulated
to make out a case of large scale illegal recruitment.
In other words, a conviction for large scale illegal
recruitment must be based on a finding in each case
of illegal recruitment of three or more persons
whether individually or as a group.
Moreover, even if Blanza and Garcia had been
illegally recruited so as to make the number of
persons illegally recruited four and make the crime
that of illegal recruitment of a large scale, since this
was not alleged in the information and this is the
more serious offense which includes that which was
charged, the appellant can only be found guilty of
the less serious offense charged, pursuant to Rule
120, 4.
Peopl e v. Sanchez (98)
UP LAW BAROPS 2007
ONE UP
36 of 132

and the
deemed in
render
rules its and Title
agency the of
-
not was case.
whom Agustin
it that testified
initially
merely Agustin appellant
against
deemed be shall persons more
hiring
Ar t . 42
Submission of list - Any employer employing non-
implementing
Ar t . 41
Prohibiti on agai nst transfer of empl oyment
government
Ar t . 40
Empl oyment permit of non-resi dent ali ens
Al modi el v NLRC (93)
accused-appellant Although
was
approached
Peopl e v. Meri s (2000)
In People v. Agustin, the Court ruled:
infraction
Peopl e v. Meri s (2000)
engaged
utilizing, transporting, contracting,
TECHNI QUE
prosecution
introduced
complainants to the Goce couple or her actions
went beyond that. The testimonial evidence
hereon show that she indeed further committed
acts constitutive of illegal recruitment. All four
three
individually or as a group.

Part II : Labor Standards Law
Labor Standards
Art. 13(b) of the Labor Code defines recruitment
and placement as "any act of canvassing, enlisting,
or
procuring workers, and includes referrals, contract
services, promising or advertising for employment,
locally or abroad, whether for profit or not: Provided,
SECTI ON 11 - ALIEN EMPLOYMENT
11.01 COVERAGE
NON-RESI DENT ALI EN
in
recruitment and placement." The essential elements
then of the crime of illegal recruitment in large scale
are that: (1) the accused engages in acts of
recruitment and placement of workers defined under
Article 13(b) or in any prohibited activities under
Article 34 of the Labor Code; (2) the accused has
not complied with the guidelines issued by the
Secretary of Labor and Employment, particularly
with respect to the securing of a license an authority
to recruit and deploy workers, either locally or
overseas, and (3) the accused commits the unlawful
acts against three or more persons, individually or
as a group.
Illegal recruitment is conducted in a large scale
if perpetrated against three (3) or more persons
individually or as a group. This crime requires proof
that the accused: (1) engaged in the recruitment
and placement of workers defined under Article 13
or in any of the prohibited activities under Article 34
of the Labor Code; (2) does not have a license or
authority to lawfully engage in the recruitment or
and placement of workers; and (3) committed the
persons,
Art. 40 of the Labor Code which requires
employment permit refers to non-resident aliens.
The employment permit is required for entry into the
country for employment purposes and is issued after
determination of the non-availability of a person in
the Philippines who is competent, able and willing at
the time of application to perform the services for
which the alien is desired. A resident alien does not
fall within the ambit of the provision.
Any
alien seeking admission to the Philippines for
employment purposes and any domestic or foreign
employer who desires to engage an alien for
employment in the Philippines shall obtain an
employment permit from the Department of Labor.
The employment permit may be issued to a
non-resident alien or to the applicant employer after
a determination of the non-availability of a person in
the Philippines who is competent, able and willing at
the time of application to perform the services for
which the alien is desired.
For an enterprise registered in preferred areas
of investment, may be issued upon recommendation
charged
supervision of said registered enterprise.
REFERRALS
Hence, the inevitable query is whether or not
witnesses
they
regarding their plans of working overseas. It was
from her that they learned about the fees they
had to pay, as well as the papers that they had
to submit. It was after they had talked to her
that they met the accused spouses who owned
the placement agency.
a. After the issuance of an employment permit,
the alien shall not transfer to another job or
change his employer without prior approval of
Secretary of Labor and Employment.
b. Any non-resident alien who shall take up
employment in violation of the provision of this
and
regulations shall be punished in accordance
with the provisions of Articles 289 and 290 of
the Labor Code.
In addition, the alien worker shall be subject to
deportation after service of his sentence.
As such, the Court concluded that appellant that
appellant was an employee of the Goce spouses, as
she was actually making referrals to the agency. She
was therefore, engaged in recruitment activities.
The same factual circumstance obtains in this
an
employee of the alleged illegal recruiter Julie Micua,
the evidence show that she was the one who
approached complainants and prodded them to seek
employment abroad. It was through her that they
met Julia Micua. This is clearly an act of referral.
Worse, accused-appellant declared that she was
capable of placing them in jobs overseas. Suffice it
to say that complainants' recruitment would not
have been consummated were it not for the direct
participation of accused-appellant in the recruitment
process.
resident foreign nationals on the effective date of
this Code shall submit a list of such nationals to the
Secretary of Labor and Employment within 30 days
after such date indicating their names, citizenship,
foreign and local addresses, nature of employment
and status of stay in the country. The Secretary of
Labor and Employment shall then determine if they
are entitled to an employment permit.
REGULATI ON
EMPLOYMENT PERMIT
Ar t XI I Sec 12
The State shall promote the preferential use of
Filipino labor, domestic materials and locally
produced goods, and adopt measures that help
them competitive.
UP LAW BAROPS 2007
ONE UP
That any person or entity which, in any manner,
offers or promises for a fee employment to two or
37 of 132

or more,
with the
11. 02 OF
six exceed not shall
shall c. The
childs
taking
prevent
or and public
an is
an during
through values
and the
meeting or
and
in being
sectors,
direct
Filipino quality high
of validity The

apprenticeship
Ni tto Enterpri ses v. NLRC (95)
the Department of Labor permit from
formulate employer
exploitation the
discrimination
entertainment
Sec. 12 (RA 7610, as amended by RA 7658)
Sec. 4 ( m) ( RA7796)
desirable e. Inculcate
scientific disseminating
development
skills
changing
Sec. 3, RA 7796
enterprises,
particularly
participants
middle-level
Sec. 2, RA 7796
constitutional workers.
General Mi lli ng Corp. v. Torres (91)
of apprenticeship Contents
Occupation: Apprenticeable
technical

Part II : Labor Standards Law
Labor Standards
AUTHORI TY EMPLOYMENT PERMI T ISSUANCE
Apprenticeship training within employment with
compulsory related theoretical instructions involving
a contract between an apprentice and an employer
The Labor Code itself specifically empowers
respondent Secretary to make a determination as to
the availability of the services of a "person in the
Philippines who is competent, able and willing at the
time of application to perform the services for which
an alien is desired." In short, the Department of
Labor is the agency vested with jurisdiction to
determine the question of availability of local
established
apprenticeable occupation.
APPRENTICEABLE OCCUPATION
occupation
officially endorsed by a tripartite body and approved
for apprenticeship by the Authority
legal
provisions granting such jurisdiction and authority
and requiring proof of non-availability of local
nationals able to carry out the duties of the position
involved, cannot be seriously questioned.
12. 01 POLI CY OBJECTIVES
Declaration of Policy It is hereby declared the
policy of the State to provide relevant, accessible,
high quality and efficient technical education and
skills development in support of the development of
manpower
responsive to and in accordance with Philippine
development goals and priorities.
The state shall encourage active participation of
concerned
an
immediate beneficiaries of a trained and skilled
workforce, in providing technical education and skills
development opportunities.
QUALI FI CATI ON
Employment of Children Children below fifteen
(15) years of age shall not be employed except:
1. When a child works directly under the sole
responsibility of his parents or legal guardian
and where only members of the employers
family are employed: Provided, however, That
his employment neither endangers his life,
safety, health and morals, nor impairs his
normal development: Provided, further, That
the parent or legal guardian shall provide the
said minor child with the prescribed primary
and/or secondary education; or
2. When a childs employment or participation in
information
through cinema, theater, radio or television is
essential: Provided, the employment contract
is concluded by the childs parents or guardian,
with the express agreement of the child
concerned, if possible, and the approval of the
Department of Labor and Employment: and
Provided, That the following requirements in
all instances are strictly complied with:
a. The employer shall ensure the protection,
health, safety and morals of the child
b. The employer shall institute measures to
Statement of Goals and Objectives It is the goal
and objective of this Act to:
a. Promote and strengthen the quality of technical
education and skills development programs to
attain international competitiveness
education
the
demands for quality middle-level manpower
c. Encourage critical and creative thinking by
technical
knowledge base of middle-level manpower
development programs
d. Recognize and encourage the complementary
roles of public and private institutions in
technical education and skills development and
training systems;
the
development of moral character with emphasis
on work ethic, self-discipline, self reliance, and
nationalism.
or
into account the
system and level of remuneration, and the
duration and arrangement of working time
and
implement, subject to the approval and
supervision of competent authorities, a
continuing program for training and skills
acquisition of the child.
In the above exceptional cases where any
such child may be employed, the employer shall
first secure, before engaging such child, a work
and
Employment which shall ensure observance of
the above requirements.
ALLOWED EMPLOYMENT
Program Approval
A. APPRENTICE
12. 02 APPRENTI CE
DEFI NED
Sec. 4 ( j ) ( RA 7796)
agreement.
Apprenticeship agreements, including the main rates
of apprentices, shall conform to the rules issued by
the Minister of Labor and Employment. The period of
months.
Apprenticeship agreements providing for wage rates
below the legal minimum wage, which in no case
shall start below 75% per cent of the applicable
minimum wage, may be entered into only in
UP LAW BAROPS 2007
ONE UP
38 of 132
SECTI ON 12 - EMPLOYMENT OF
APPRENTICE, LEARNERS AND
HANDICAPPED WORKERS

various private
b. Focus
period assured by an
regular as desire, so
create not does the
this
training labor
the
value
An - of
with
six exceed not shall
of
with
Law :
Persons
employees
Ar t . 75
Learnership agreement Any employer desiring to
employment
Ar t . 74
When Learners may be hi red Learners may be
Exhaustion of administrative remedi es
Ar t . 66
Appeal to the Secretary of Labor and Employment
Ar t . 65
Investi gati on
agreement
incentive
expenses of
developing
trai ni ng costs
Ar t . 71
Deducti bi lity
Ar t . 72
Apprentices without compensation
program apprenticeship accordance
apprenticeship
agreement. apprenticeship
Ar t . 61
Contents
program apprenticeship accordance
incurred
productivity and efficiency
vi ol ation
should
minimum wages.
agreement

Part II : Labor Standards Law
Labor Standards
duly
approved by the Minister of Labor and Employment.
The Ministry shall develop standard model programs
of apprenticeship.
before instituting any action for the enforcement of
any apprenticeship agreement, or damages for
breach of any such agreement
TERMS AND CONDI TI ONS OF EMPLOYMENT
B. Learners

Apprenticeship agreements, including the main rates
of apprentices, shall conform to the rules issued by
the Minister of Labor and Employment. The period of
months.
Apprenticeship agreements providing for wage rates
below the legal minimum wage, which in no case
shall start below 75% per cent of the applicable
minimum wage, may be entered into only in
12. 03 LEARNERS
DEFI NED
Sec. 4 (n), RA 7796
Learners refer to persons hired as trainees in semi-
skilled and other industrial occupation which are
non-apprenticeable. Learnership programs must be
approved by the Authority.
duly
approved by the Minister of Labor and Employment.
The Ministry shall develop standard model programs
of apprenticeship.
ALLOWED EMPLOYMENT
The Secretary of Labor may authorize the hiring of
apprentices without compensation whose training on
the job is required by the school or training program
curriculum or as a requisite for graduation or board
examination.
employed
when no experienced workers are available
the employment of learners is necessary to
prevent curtailment of employment opportunities,
and
unfair
competition in terms of labor costs or impair or
lower working standards.
TERMS AND CONDI TI ONS OF EMPLOYMENT
additional
deduction from taxable income of one-half of the
for
of
apprentices shall be granted to the person or
enterprise organizing an apprenticeship program
provided such program is duly recognized by the
Department of Labor and Employment; provided
further that such deduction shall not exceed 10
percent of direct labor wage; and provided finally
that the person or enterprise who wish to avail of
apprentices
ENFORCEMENT
apprenticeship
Upon complaint of any interested person or upon its
own initiative,
the appropriate agency of the Department of Labor
and Employment or its authorized representative
shall investigate any violation of any apprenticeship
agreement
employer learners shall enter into a learnership
agreement
include:
a. The NAMES and addresses of the learners;
b. The DURATION of the learnership period, which
shall not exceed three months;
c. The WAGES or salary rates of the learners
which shall begin at not less than 75 percent
of the applicable minimum wage; and
d. A COMMITMENT to employ the learners, if they
upon
completion of the learnership. All learners who
have been allowed or suffered to work during
the first two months shall be deemed regular
employees if training is terminated by the
employer before the end of the stipulated
period through no fault of the learner.
The learnership agreement shall be subject to
inspection by the Secretary or his duly authorized
representatives.
Ar t . 76
Learners in piecework Learners employed in piece
or incentive rate jobs during the training period shall
be paid in full for the work done.
The decision of the authorized agency of the
Department
by any aggrieved person
to the Secretary of Labor and Employment
within five days from receipt of the decision.
The decision of the Secretary shall be final and
executory.
C. Handi capped Workers
12. 04 HANDI CAPPED WORKER
RA 7277 Magna Disabled
UP LAW BAROPS 2007
ONE UP
39 of 132

COSTS
pay his the
of of
Ar t . 67
with them, which shall
Carta for
POLI CY
ensure to and persons
that or
ensure to and
in or offices
health, and Welfare
being


one
those -
respect and for
shall and persons
ensure will that based
the
shall
a attain to their foster
the of concern the
policies adopt State
total the of

disabled
Provided, learners: apprentices
inclinations
engaged corporations
Development;
regarded
impairment [4(c)]
Handicap
suffering Disabled Persons
encourage advocate
disabled
programs,
rehabilitation persons,
benefits
capacity
everyone
ensuring shall
rehabilitation,
well-being improvement

Part II : Labor Standards Law
Labor Standards
Declaration of Policy The grant of the rights and
privileges for disabled persons shall be guided by the
following principles: (2)
a. Disabled persons are part of Philippine society,
thus the State shall give full support to the
of
disabled persons and their integration into the
mainstream of society. Toward this end, the
a record of such an impairment; or
- refers to a disadvantage for a given
individual, resulting from an impairment or a
disability, that limits or prevents the function or
activity, that is considered normal given the
age and sex of the individual [4(d)]
the
self-development and self-
reliance of disabled persons. It shall develop
their skills and potentials to enable them to
compete favorably for available opportunities.
b. Disabled persons have the same rights as
other people to take their proper place in
society. They should be able to live freely and
as independently as possible. This must be
family,
community and all government and non-
government organizations. Disabled persons
rights must never be perceived as welfare
services by the Government.
c. The rehabilitation of the disabled persons shall
be the concern of the Government in order to
more
meaningful, productive and satisfying life. To
reach out to greater number of disabled
RIGHTS AND PRIVILEGES OF DISABLED PERSONS
Equal Opportunity for Employment (5)
No disable person shall be denied access to
opportunities for suitable employment. A qualified
disabled employee shall be subject to the same
terms and conditions of employment and the same
compensation, privileges, benefits, fringe benefits,
incentives or allowances as a qualified able-bodied
person
Five percent (5%) of all casual, emergency and
contractual positions in the Departments of Social
Education,
Culture and Sports; and other government agencies,
social
development shall be reserved for disabled persons.
services
be expected beyond Sheltered Employment (6)
full
participation of different sectors as supported
by national and local government agencies.
d. The State also recognizes the role of the
private sector in promoting the welfare of
encourage
partnership in programs that address their
needs and concerns.
e. To facilitate integration of disabled persons
into the mainstream of society, the State shall
If suitable employment for disabled persons
cannot be found through open employment as
provided in the immediately preceding Section, the
State shall endeavor to provide it by means of
sheltered employment. In the placement of disabled
persons in sheltered employment, it shall accord due
regard to the individual qualities, vocational goals
a
atmosphere and efficient production.
for
disabled persons. The State shall exert all
efforts to remove all social, cultural, economic,
environmental and attitudinal barriers that are
prejudicial to disabled persons.
COVERAGE
shall cover all disabled persons and, to the extent
herein provided, departments, officers and agencies
of the National Government or non-government
organizations involved in the attainment of the
objectives of this Act. (3)
Apprenticeship (7)
Subject to the provisions of the Labor Code as
amended, disabled persons shall be eligible as
their
handicap s not as much as to effectively impede the
performance of job operations in the particular
occupation for which they are hired; provided,
further, That after the lapse of the period of
apprenticeship, if found satisfactory in the job
performance, they shall be eligible for employment.
Incentives for Employers (8)
DEFI NED a. To encourage the active participation of the
private sector in promoting the welfare of
from
restriction or different abilities, as a result of a
mental, physical or sensory impairment, to
perform an activity in the manner or within the
range considered normal for a human being
[4(a)]
Impairment
gainful
employment for qualified disabled persons,
adequate incentives shall be provided to
private
persons.
b. Private entities that employ disabled persons
who meet the required skills or qualifications,
either ad regular employee, apprentice or
learner, shall be entitled to an additional
deduction, from their gross income, equivalent
to 25% of the total amount paid as salaries
and wages to disabled persons: Provided,
however, That such entities present proof
as certified by the Department of Labor and
UP LAW BAROPS 2007
ONE UP
- any loss, dimunition or aberration
of psychological, physiological, or anatomical
structure or function [4(b)]
Disability
a physical
substantially
mental
limits
that
more
and
the
traditional urban-based centers to community
- shall mean
impairment
or
psychological, physiological or anatomical
function of an individual or activities of such
individual;
40 of 132
or
as having such an
good working
entities which employ disabled
special their
those
results by paid are who workers
Ar t . 82
persons
access denied be shall person disabled
provide
disabled
to
for
in facilities

Sal azar v. NLRC (96)
considering determined
Natl Waterworks & Sewerage Authori t y v.
NASA Consolidated Uni ons (65)
EMPLOYEES: MANAGERIAL
Mani l a Termi nal Co. I nc v CI R (52)
treatment of qualified persons, disabled or not. In
removes necessarily disabled
employment as a qualified able-bodied person.
Persons mandates that a qualified disabled employee
Bernardo v. NLRC (99)
order
accommodation
the behind The exemption

Part II : Labor Standards Law
Labor Standards
Employment and the Department f Health as
to his disability, skills, and qualifications.
c. Private entities that improve or modify their
unemployment by forcing employers, in cases where
more than 8-hour operation is necessary, to utilize
different shifts of laborers or employees working
only for eight hours each.
reasonable
persons shall also be entitled to an additional
deduction from their net taxable income,
equivalent to 50% of the direct costs of the
improvements or modifications. This Section,
however, does not apply to improvements or
modifications or facilities required under Batas
Pambansa Bilang 344.
REGULAR WORKERS
In this light, the Magna Carta for Disabled
should be given the same terms and conditions of
13.02 COVERAGE
Coverage
COVERED: employees in all establishments and
undertakings, whether for profit or not
NOT COVERED:
government employees
managerial employees
field personnel
members of the family of the employer who
are dependent on him for support
domestic helpers
persons in the personal service of another
and
Section 5 of the Magna Carta provides:
Sec. 5. Equal Opportuni ty for Empl oyment . No
to
opportunities for suitable employment. A qualified
disabled employee shall be subject to the same
terms and conditions of employment and the same
compensation, privileges, benefits, fringe benefits,
incentives or allowances as a qualified able bodied
person.
The fact that the employees were qualified
the
employment contracts from the ambit of Article 80.
Since the Magna Carta accords them the rights of
qualified able-bodied persons, they are thus covered
by Article 280 of the Labor Code.
XXX The noble objectives of Magna Carta for
Disabled Persons are not based merely on charity or
accommodation, but on justice and the equal
as
determined by the Secretary of Labor and
Employment in appropriate regulations.
whose
primary duty consists of the management of
the establishment in which they are employed
or of a department or subdivision thereof, and
to other officers or members of the managerial
staff.
FIELD PERSONNEL: non-agricultural employees
who regularly perform their duties away from
the principal place of business or branch office
of the employer and whose actual hours of
work in the field cannot be determined with
reasonable certainty.
RATIONALE EXEMPTION MANAGERI AL EMPLOYEES
the present case, the handicap of petitioners (deaf-
mutes) is not a hindrance to their work. The
eloquent proof of this statement is the repeated
renewal of their employment contracts. Why then
should they be dismissed, simply because they are
physically impaired? The Court believes, that, after
showing their fitness for the work assigned to them,
they should be treated and granted the same rights
like any other regular employees.
philosophy
training,
experience or knowledge which requires the exercise
of discretion and independent judgment, or perform
work related to management policies or general
business operations along specialized or technical
lines. For these workers it is not feasible to provide a
fixed hourly rate of pay or maximum hours of labor.
13. 01 HOURS REGULATON
Hence, although petitioner cannot strictly be
classified as a managerial employee under Art. 82 of
the Labor Code, and sec. 2(b), Rule I, Book III of
the Omnibus Rules Implementing the Labor Code,
nonetheless he is still not entitled to payment of the
aforestated benefits because he falls squarely under
another exempt category "officers or members of
a managerial staff" as defined under sec. 2(c) of the
abovementioned implementing rules.
A case in point is Nati onal Sugar Refineries
Corporati on v. NLRC. On the issue of "whether
RATIONALE AND ENFORCEMENT
The Eight-Hour Labor Law was designed not
only to safeguard the health and welfare of the
laborer or employee, but in a way to minimize
UP LAW BAROPS 2007
ONE UP
supervisory employees, as defined in Article 212
(m), Book V of the Labor Code, should be considered
as officers or members of the managerial staff under
Article 82, Book III of the same Code and hence not
entitled to overtime, rest day and holiday pay,"
this Court ruled:
A cursory perusal of the Job
of
managerial employees from the 8-Hour Labor Law is
that such workers are not usually employed for
every hour of work but their compensation is
Value
Contribution Statements of the union members will
41 of 132
physical
SECTI ON 13 CONDI TI ONS
OF EMPLOYMENT HOURS OF WORK








an to adhered freely effect
the in workers
that remains fact the offices,
time whose
of III Book IV, Rule with
time such not
is
whether
time "whose clause The field
as
for
goals
paramedical technicians, laboratory
Art. 83 Normal hours of work
application
aforementioned,
Red V Coconut Products Ltd. v. CI R (66)
throughout
Merci dar Fi shing Corp. v NLRC (98)
employees
conjunction
Sal azar v. NLRC (96)
employee's
personnel.
Union of Fi li pro Employees v. Vi var (92)
members should be considered
From the foregoing, it is apparent that the
members of respondent union discharge duties and
responsibilities which ineluctably qualify them as
officers or members of the managerial staff, as
defined in Section 2, Rule I, Book III of the
aforestated Rules to Implement the Labor Code,
viz.:
are likewise responsible
and
employees
consists duty primary their (1) of
performance of work directly related
and
constantly supervised by the
COMMERCI AL/ I NDU
STRI AL
Nor mal
Wor k Day
Nor mal
Wor k Week
objectives.
the
effective and efficient operation of their respective
departments. . . .
by the petitioner
performance
described.

Part II : Labor Standards Law
Labor Standards
readily show that these supervisory employees are
under the direct supervision of their respective
department superintendents and that generally
they assist the latter in planning, organizing,
staffing, directing, controlling, communicating and
in making decisions in attaining the company's set
supervisory
private respondent and other fishermen in its
employ should be classified as field personnel who
have no statutory right to service incentive leave
pay.
In contrast, in the case at bar, during the entire
course of their fishing voyage, fishermen employed
have no choice but to remain on
board its vessel. Although they perform non-
agricultural work away from the petitioners business
the
duration of their work they are under the effective
control and supervision of the petitioner through the
vessels patron or master as the NLRC correctly held.
RATI ONALE EXEMPTI ON PIECE WORKER
the
to
management policies of their employer; (2) they
customarily and regularly exercise discretion and
independent judgment; (3) they regularly and
directly assist the managerial employee whose
primary duty consists of the management of a
department of the establishment in which they
are employed; (4) they execute, under general
supervision, work along specialized or technical
lines requiring special training, experience, or
knowledge; (5) they execute, under general
supervision, special assignments and tasks; and
(6) they do not devote more than 20% of their
hours worked in a work-week to activities which
are not directly and clearly related to the
hereinbefore
Furthermore, although the Eight-Hour Labor
Law provides that it does not cover those workers
who prefer to be paid on piece-work basis (Sec. 2,
CA 444), nothing in said law precludes an agreement
for the payment of overtime precludes an agreement
for the payment of overtime compensation to piece-
workers. And in agreeing to the provision for
payment of shift differential to the petitioners-
bargaining
agreement, as well as in actually paying to them
said differentials, though not in full, the company in
and
implementation of the Eight-Hour Labor Law, or its
objectives, to said workers.
Under the facts obtaining in this case, we are
constrained to agree with petitioner that the union
13. 03 NORMAL HOURS OF WORK
officers or
members of the managerial staff and are, therefore,
exempt from the coverage of Article 82. Perforce,
they are not entitled to overtime, rest day and
holiday pay.
TEST FIELD PERSONNEL
XXX Contrary to the contention of the petitioner,
the Court finds that the aforementioned rule did not
add another element to the Labor Code definition of


and
performance is unsupervised by the employer" did
not amplify but merely interpreted and expounded
the clause "whose actual hours of work in the field
cannot be determined with
reasonable certainty."
The former clause is still within
the scope and
purview of Article 82 which defines field personnel.
Hence, in deciding whether or not an employee's
actual working hours in the field can be determined
with reasonable certainty, query must be made as to
or
performance
employer.
Actual hours work in the field is to be read in
the
Implementing Rules. Therefore field personnel are
The normal hours of work of any employee shall
not exceed eight hours a day.
Health personnel in cities or municipalities with
a population of at least one million or in hospitals or
clinics with a bed capacity of at least one hundred
shall hold regular office hours for eight hours a day,
for five days a week, or a total of forty hours a
week, exclusive of time for meals, except where the
exigencies of the service require that such personnel
work for six days, forty-eight hours, in which case
they shall be entitled to an additional compensation
of at least 30 percent of their regular wage for work
on the sixth day.
HEALTH PERSONNEL: resident physicians, nurses,
nutritionists, dieticians, pharmacists, social workers,
technicians,
psychologists, midwives, attendants and all other
hospital or clinic personnel.
DISTINCTION BETWEEN THE TWO CLASSES
HEALTH
8 hrs/day
and
unsupervised by the employer.
performance
13. 04 HOURS WORKED
Petitioner argues essentially that since the work
of private respondent is performed away from its
principal of business, it has no way of verifying his
actual hours of work on the vessel. It contends that
Ar t . 84
Hours worked - shall include
UP LAW BAROPS 2007
ONE UP
42 of 132

These
of their work
is
8
hrs/day
6 days 5 days
Rada v
of practice a
This
are entries the of
to and is record
twelve, not and hours four for worked
hardly Private
Ar t . 85
Meal periods - Subject to such regulations as the
NLRC (92)
routinary deeply-rooted,
Ari ca v. NLRC (89)
State Mari ne Corporati on v. Cebu Seamen s
Associ ati on (63)
Luzon Stevedoring Co. v. Luzon Marine
Depar t ment Uni on ( 57)
counted as working
Nati onal Devel opment Co. v. CI R (62)
Ni cari o v. NLRC (98)
regularity
contrary improbable
bothered respondent
Prangan v. NLRC (98)
in Court, evaluating previously

Part II : Labor Standards Law
Labor Standards
a. All time during which an employee is required
to be on duty or to be at a prescribed
workplace, and
b. All time during which an employee is suffered
or permitted to work.
Rest periods of short duration during working
hours shall be counted as hours worked.
time only where the work is
broken or is not continuous.
A laborer need not leave the premises of the
factory, shop or boat in order that his period of rest
shall not be counted, it being enough that he "cease
ENTRY TIME CARDS to work", may rest completely and leave or may
leave at his will the spot where he actually stays
while working, to go somewhere else, whether
In the instant petition, the NLRC, in declaring
that petitioner only worked for four hours, relied
solely on the supposed daily time records of the
petitioner submitted by the private respondent. We,
however, are of the opinion that these documents
cannot be considered substantial evidence as to
conclude that petitioner only worked for four hours.
within or outside the premises of said factory, shop
or boat. If these requisites are complied with, the
period of such rest shall not be counted.
CONTI NUOUS WORK
to
controvert petitioner's assertion, much less bolster
its own contention. As petitioner's employer, private
respondent has unlimited access to all relevant
documents and records on the hours of work of the
petitioner. Yet, even as it insists that petitioner only
no
employment contract, payroll, notice of assignment
or posting, cash voucher or any other convincing
evidence which may attest to the actual hours of
work of the petitioner was even presented. Instead,
what the private respondent offered as evidence was
only petitioner's daily time record, which the latter
categorically denied ever accomplishing, much less
signing.
In said alleged daily time record, it showed that
petitioner started work at 10:00 p.m. and would
invariably leave his post at exactly 2:00 a.m.
Obviously, such unvarying recording of a daily time
human
experience. It is impossible for an employee to
arrive at the workplace and leave at exactly the
same time, day in day out. The very uniformity and
The provision of section 1 of Commonwealth Act
No. 444, which states that "when the work is not
continuous, the time during which the laborer is not
working and can leave his working place and can
rest completely shall not be counted", finds no
application in the present case, where the laborer's
work is continuous, and during the time that he is
not working he can not leave and completely rest
owing to the place and nature of his work.
WAI TI NG TI ME
Furthermore, the thirty (30)-minute assembly is
the
employees, and the proceedings attendant thereto
are not infected with complexities as to deprive the
workers the time to attend to other personal
pursuits.
TRAVEL TI ME
"badges
untruthfulness and as such indices of dubiety.
the
evidentiary value of daily time records, especially
those which show uniform entries with regard to the
hours of work rendered by an employee, has ruled
that "such unvarying recording of a daily time record
is improbable and contrary to human experience. It
is impossible for an employee to arrive at the
workplace and leave at exactly the same time, day
in day out. The uniformity and regularity of the
entries are 'badges of untruthfulness and as such
indices of dubiety.' The observations made by the
Solicitor General regarding the unreliability of the
daily time records would therefore seem more
convincing. On the other hand, respondent company
failed to present substantial evidence, other than the
disputed DTRs, to prove that petitioner indeed
worked for only eight hours a day.
The fact that he picks up employees of Philnor
at certain specified points along EDSA in going to the
project site and drops them off at the same points
on his way back from the field office going home to
Marikina, Metro Manila is not merely incidental to
petitioner's job as a driver. On the contrary, said
transportation arrangement had been adopted, not
so much for the convenience of the employees, but
primarily for the benefit of the employer, herein
private respondent. Since the assigned task of
fetching and delivering employees is indispensable
and consequently mandatory, then the time required
of and used by petitioner in going from his residence
to the field office and back, that is, from 5:30 A.M.
to 7:00 A.M. and from 4:00 P.M. to around 6:00
P.M., which the labor arbiter rounded off as
averaging three hours each working day, should be
paid as overtime work.
13. 05 MEAL PERI OD
I DLE TI ME
It will be noted that, under the law, the idle
time that an employee may spend for resting and
during which he may leave the spot or place of work
though not the premises 2 of his employer, is not
Secretary may prescribe, it shall be the duty of
every employer to give his employees not less than
sixty minutes time-off for their regular meals.
UP LAW BAROPS 2007
ONE UP
43 of 132

of
and shift night that
on fall worked hours the
entitled work
this
of
in
hours
called

time. on posts their to return they

differential
Agga v. NLRC (98)
Engi neeri ng Equi pment I nc v. MOLE (85)
Mani l a Termi nal Co. I nc v. CI R (52)
disagreeable
Cal tex Regul ar Empl oyees v. Cal tex Phi l. Inc.
( 9 5 )
to
enlightened
the regular
compensation
Philippine National Bank v. PNB Employees
Associ ati on (82)
compensation additional Computati on of
Ar t . 89
Emergency overtime work - Any employee may be
Ar t . 88
Underti me not offset by overtime - Undertime work
Ar t . 87
Overtime work Work may be performed beyond
Phi l. Ai rl i nes, Inc. v. NLRC (99)
Pan- Ameri can Ai rways v Pan- Ameri can
Empl oyees Associ ati on (61)
OVERTI ME

Part II : Labor Standards Law
Labor Standards
MEAL TI ME FREE TIME
Where during the so-called meal period, the
laborers are required to stand by for emergency
work, or where said meals hour is not one of
complete rest, such period is considered overtime.
For
purposes of computing overtime and other additional
remuneration as required by this Chapter, the
"regular wage" of an employee shall include the cash
wage only, without deduction on account of facilities
provided by the employer.
RATI ONALE OVERTI ME PAY
Thus, the eight-hour work period does not
include the meal break. Nowhere in the law may it
be inferred that employees must take their meals
within the company premises. Employees are not
prohibited from going out of the premises as long as
Private
respondent's act, therefore, of going home to take
his dinner does not constitute abandonment.
OFFSETTING
PROHI BI TI ON
Why is a laborer or employee who works beyond
extra
time,
overtime pay? Verily, there can be no other reason
than that he is made to work longer than what is
commensurate with his agreed compensation for the
statutorily fixed or voluntarily agreed hours of labor
he is supposed to do. It is thus the additional work,
labor or service employed and the adverse effects of
his longer stay in his place of work that justify and is
the real reason for the extra compensation that is
called overtime pay.
Overtime work is actually the lengthening of
hours devoted to the interests of the employer and
eight hours a day provided that the employee is paid
for the overtime work an additional compensation
equivalent to his regular wage plus at least twenty-
five percent thereof. Work performed beyond eight
hours on a holiday or rest day shall be paid an
additional compensation equivalent to the rate for
the first eight hours on a holiday or rest day plus at
least 30 percent thereof.
the requirements of his enterprise.
Overtime work consists of hours worked on a
given day in excess of the applicable work period,
which here is eight (8) hours. It is not enough that
or
inconvenient hours. In order that work may be
considered as overtime work, the hours worked
must be in excess of and in addition to the eight (8)
on any particular day shall not be offset by overtime
work on any other day. Permission given to the
employee to go on leave on some other day of the
week shall not exempt the employer from paying the
additional compensation required in this Chapter.
hours worked during the prescribed daily work
period, or the forty (40) hours worked during the
regular work week Monday through Friday.
NO FORMULA BASIC CONTRACT
A contract of employment, which provides for a
required by the employer to perform overtime work
in any of the following cases:
a. When the country is at WAR or when any other
national or local emergency has been declared
by Congress or the Chief Executive;
b. When it is necessary to prevent LOSS of life or
property or in case of imminent danger to
public safety due to an actual or impending
emergency in the locality caused by serious
accidents, fire, flood, typhoon, earthquake,
epidemic or other disaster or calamity;
c. When there is URGENT work to be performed
on machines, installation or equipment, in
order to avoid serious loss or damage to the
employer or some other cause of similar
nature;
d. When the work is necessary to prevent loss or
damage to PERISHABLE goods;
e. Where the completion or continuation of the
work started before the 8th hour is necessary
to prevent SERIOUS obstruction or prejudice
to the business or operations of the employer.
Any employee required to render overtime work
under this Article shall be paid the ADDITIONAL
compensation required in this Chapter.
weekly wage for a specified number of hours,
sufficient to cover both the statutory minimum wage
and overtime compensation, if computed on the
basis of the statutory minimum, and which makes no
provision for a fixed hourly rate or that the weekly
wage includes overtime compensation, does not
meet the requirements of the Act.
BUI LT-I N COMPENSATI ON
Written contracts with a "built-in" overtime pay
in the ten-hour working day and that their basic
monthly pay was adjusted to reflect the higher
amount covering the guaranteed two-hour extra
time whether worked or unworked are valid.
COMPUTATI ON
The cited provisions of PD 442 simply declare
additional
remuneration for overtime, rest day, Sunday and
holiday work shall be computed on the basis of the
employee's regular wage. In like fashion, the
1991 POEA Rules merely require employers to
guarantee payment of wages and overtime pay.
UP LAW BAROPS 2007
ONE UP
44 of 132
13. 06 WORK AND
Ar t . 90
higher
pay
d.
the on
c.
least
for
The
effects the are there
Ar t . 92
When empl oyer may require work on a rest day
Ar t . 91 ( b)
Ar t . 91
Ri ght to weekly rest day
Manila Electric Company v. Public Utilities
Empl oyees Associ ati on (47)
Where
collective
bargaining
agreement
work is such that
he has no regular
workdays and no
compensation
prohibition immediate
extraordinary
emergencies.
injurious remotely
Shell Oil Co. Ltd v. Nati onal Labor Uni on (48)
Ar t . 86
Night shift differential - not less than ten percent of
Lagati c v. NLRC (98)

Part II : Labor Standards Law
Labor Standards
Thus, petitioners' stance is bereft of any legal
support. for
performed on Sundays and
regular rest days holidays.
can be scheduled
Entitlement to overtime pay must first be
established by proof that said overtime work was
actually performed, before an employee may avail of
said benefit.
13. 07 NI GHT WORK
any
holiday
Additional compensation of at
least 30 percent of the
regular wage
Where such holiday work falls
employee's
scheduled rest day, he
shall be entitled to an
additional compensation
of at least 50 percent of
his regular wage.
his regular wage for each hour of work performed
between ten o'clock in the evening and six o'clock in
the morning.
the The employer shall pay such
higher rate
RATI ONALE PROHI BI TI ON
or
applicable
"Nightwork cannot be regarded as desirable,
either from the point of view of the employer or of
the wage earner. It is uneconomical unless overhead
costs are unusually heavy. Frequently the scale of
wages is higher as an inducement to employees to
accept employment on the night shift, and the rate
of production is generally lower."
"The case against nightwork, then, may be said
to rest upon several grounds. In the first place,
of
permanent nightwork manifested in the later years
of the worker's life. Of more immediate importance
to the average worker is the disarrangement of his
social life, including the recreational activities of his
leisure hours and the ordinary associations of normal
family relations. From an economic point of view,
nightwork is to be discouraged because of its
adverse effect upon efficiency and output. A moral
argument against nightwork in the case of women is
that the night shift forces the workers to go to and
from the factory in darkness. Recent experiences of
industrial nations have added much to the evidence
against the continuation of nightwork, except in
premium
than
prescribed
this Article
Perfecto, J. dissenting - Furthermore, it is a fact
that Sundays and legal holidays are set aside by law
as days of rest. The life, existence, and happiness of
a person do not depend only on the satisfaction of
his physical needs. There are moral, intellectual and
spiritual needs as imperative as the physical ones
The deprivation of that opportunity to satisfy mental,
moral, and spiritual needs should not be ignored,
and should be properly compensated.
14.02 COVERAGE
Ar t . 82
Coverage - SUPRA
circumstances unavoidable
of
nightwork for all laborers is hardly practicable; its
discontinuance in the case of women employees is
unquestionably desirable. 'The night was made for
rest and sleep and not for work' is a common saying
among wage-earning people, and many of them
dream of an industrial order in which there will be no
night shift."
a. It shall be the duty of every employer, whether
operating for profit or not, to provide a rest
period of not less than twenty-four consecutive
hours after every six consecutive normal work
days.
14.03 SCHEDULI NG OF REST DAY
14. 01 RATI ONALE
a. scheduled rest
day
Additional compensation of at
least 10 percent of regular
wage. An employee shall be
entitled to such additional
The employer shall determine and schedule the
weekly rest day of his employees subject to
collective bargaining agreement and to such rules
and regulations as the Secretary of Labor may
provide. However, the employer shall respect the
preference of employees as to their weekly rest day
when such preference is based on religious grounds.
COMPULSORY
COMPENSATI ON
work
performed on Sunday only
when it is his established rest
day.
b. nature of the Additional compensation of at
The employer may require his employees to work
on any day:
UP LAW BAROPS 2007
ONE UP
30
regular
other
employment
contract stipulates
the payment of a
45 of 132

PROOF
and
SECTI ON 14 CONDITI ON OF EMPLOYMENT
WEEKLY REST PERIOD

percent of his
work wage
special
that
under
14. 04 WORK AND
the holiday public special
Sec. 2.
order law, by Unless
pay. and wages of
and shift night that
work the of nature the
where special to due
fire, serious by caused
Union of Fi li pro Employees v. Vi va (91)
is declared,
Jose Rizal College v. NLRC (87)
Ar t 94( b)
modified otherwise
EXECUTIVE ORDER NO. 203
Mantrade/ FMC Di vi si on Empl oyees and
Workers Uni on v. Bacungan (86)
Ar t . 94
Right to holiday pay - (a) Every worker shall be paid
overtime payment
differential
Agga v. NLRC (98)
e. Where
circumstances,
accidents,
that It stressed must be

Part II : Labor Standards Law
Labor Standards
a. In case of actual or impending EMERGENCIES
flood,
typhoon, earthquake, epidemic or other
disaster or calamity to prevent loss of life and
property or imminent danger to public safety;
b. In case of URGENT work to be performed on
the machinery, equipment or installation to
avoid serious loss which the employer would
otherwise suffer;
c. In the event of ABNORMAL pressure of work
the
employer cannot ordinarily be expected to
resort to other measures;
d. To prevent loss or damage to PERISHABLE
goods;
requires
CONTINUOUS operations and the stoppage of
work may result in irreparable injury or loss to
the employer; and
f. Under other circumstances ANALOGOUS or
similar to the foregoing as determined by the
Secretary of Labor and Employment.
COMPUTATI ON
or
proclamation, the following regular holidays and
special days shall be observed in this country:
A. Regular Holidays
New Year's Day - January 1
Maundy Thursday - Movable date
Good Friday - Movable date
Araw ng Kagitingan (Bataan and Corregidor
Day) - April 9
Labor Day - May 1
Independence Day - June 12
National Heroes Day - Last Sunday of August
Bonifacio Day - November 30
Christmas Day - December 25
Rizal Day - December 30
B. Nationwide Special Days
All Saints Day - November 1
Last Day of the Year - December 31
Henceforth, the terms "legal or regular holiday"
and "special holiday", as used in laws, orders, rules
and regulations or other issuances shall now be
referred to as "regular holiday" and "special day",
respectively.
The cited provisions of PD 442 simply declare
additional
remuneration for overtime, rest day, Sunday and
holiday work shall be computed on the basis of the
employee's regular wage. In like fashion, the 1991
POEA Rules merely require employers to guarantee
15. 03 HOLI DAY PAY
The employer may require an employee to work on
any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate;
Thus,
petitioners' stance is bereft of any legal support. FACULTY PRIVATE SCHOOL
Ar t . 93
Compensation for rest day, Sunday or holi day work
15.01 COVERAGE
It is readily apparent that the declared purpose
of the holiday pay which is the prevention of
diminution of the monthly income of the employees
on account of work interruptions is defeated when a
regular class day is cancelled on account of a special
public holiday and class hours are held on another
working day to make up for time lost in the school
calendar. Otherwise stated, the faculty member,
although forced to take a rest, does not earn what
he should earn on that day. Be it noted that when a
his regular daily wage during regular holidays,
except in retail and service establishment regularly
employing less than ten workers;
COVERAGE EMPLOYEES
The Secretary of Labor cannot exempt Mantrade
from paying holiday pay just because its employees
are uniformly paid by the month irrespective of the
number of working days therein. The Labor Code
only exempts retail and service establishments
regularly employing less than 10 workers.
15. 02 HOLI DAYS
PROVIDING A LIST OF REGULAR HOLIDAYS AND
SPECIAL DAYS TO BE OBSERVED THROUGHOUT THE
PHILIPPINES AND FOR OTHER PURPOSES
faculty
member paid by the hour is deprived of expected
income, and it does not matter that the school
calendar is extended in view of the days or hours
lost, for their income that could be earned from
other sources is lost during the extended days.
Similarly, when classes are called off or shortened
on account of typhoons, floods, rallies, and the like,
these faculty members must likewise be paid,
whether or not extensions are ordered.
DI VISOR AS FACTOR
the daily rate,
assuming there are no intervening salary increases,
is a constant figure for the purpose of computing
overtime and night differential pay and commutation
of sick and vacation leave credits. Necessarily, the
daily rate should also be the same basis for
computing the 10 unpaid holidays.
Transasia Phils. Emplower Assn. v. NLRC
( 9 9 )
UP LAW BAROPS 2007
ONE UP
46 of 132

SECTI ON 15 - CONDI TI ON
OF EMPLOYMENT HOLIDAYS

Sec. 1.
Ar t 95.
those and days five
Ar t 95.
pay. and wages of
and shift night that
the in the salary, monthly
piece very this against viewed
pay holiday the that
never were holidays legal (10)
benefits its of
pay holiday of

Makati Haberdashery I nc. v. NLRC (89)
employed
burden of proof
Buil di ng Care Corp v. NLRC (98)
As earlier mentioned, what the law requires
overtime payment
differential
Agga v. NLRC (98)
stipulation
pay, i.e., the pre-condition stated in the Employees'
convincing
payment for
included
employees' computation
inclusion Trans-Asia's
Indeed if
holidays falling on Sundays in a

Part II : Labor Standards Law
Labor Standards
in
petitioners' monthly salary is clearly established by
its consistent use of the divisor of "286" days in the
given year, or,
contrary to the legal provisions bearing on the point,
otherwise to reckon a year at more than 365 days.
and
deductions. The use by Trans-Asia of the "286" days
divisor was never disputed by petitioners. A simple
application of mathematics would reveal that the ten
(10) legal holidays in a year are already accounted
for with the use of the said divisor. As explained by
Trans-Asia, if one is to deduct the unworked 52
Sundays and 26 Saturdays (derived by dividing 52
Saturdays in half since petitioners are required to
work half-day on Saturdays) from the 365 calendar
days in a year, the resulting divisor would be 286
days (should actually be 287 days). Since the ten
of
employers opting to pay by the month is to assure
that "the monthly minimum wage shall not be less
than the statutory minimum wage multiplied by 365
days divided by twelve," and to pay that salary "for
all days in the month whether worked or not," and
"irrespective
therein."
PROOF OF PAYMENT
in
subtracting the unworked and unpaid days in a
calendar year, the only logical conclusion would be
petitioner wanted to prove its payment
of holiday pays and salary differentials, it could have
easily presented proofs of such monetary benefits.
is already
incorporated into the said divisor. Thus, when
did not. It had failed to comply with the
mandate of the law. As public respondent ruled, the
of
evidence, the arguments put forward by petitioners
to support their claim of non-payment of holiday
in this regard belongs to the
employer, not to the employee.
Manual for entitlement to holiday pay, the absence
of a stipulation in the employees' appointment
papers for the inclusion of holiday pay in their
CBA
recognizing the entitlement of the petitioners to
holiday pay with a concomitant provision for the
granting of an "allegedly" very generous holiday pay
rate, would appear to be merely inferences and
suppositions which, in the apropos words of the
labor arbiter, "paled in the face of the prevailing
company practices and circumstances abovestated."
The Court notes that there is a need to adjust
the divisor used by Trans-Asia to 287 days, instead
of only 286 days, in order to properly account for the
entirety of regular holidays and special days in a
year as prescribed by Executive Order No. 203 in
relation to Section 6 of the Rules Implementing
Republic Act 6727.
A. Servi ce Incenti ve Leave
16.01 COVERAGE
Right to Service Incentive Leave
a. Every employee who has rendered at least one
year of service shall be entitled to a yearly
service incentive leave of five days with pay
b. This provision shall not apply to those who are
already enjoying the benefit herein provided,
those enjoying vacation leave with pay at least
COMPUTATI ON
The cited provisions of PD 442 simply declare
additional
remuneration for overtime, rest day, Sunday and
holiday work shall be computed on the basis of the
employee's regular wage. In like fashion, the 1991
POEA Rules merely require employers to guarantee
Thus,
petitioners' stance is bereft of any legal support.
Wel l i ngton I nvestment I nc v. Traj ano (95)
In fixing the salary, Wellington used what it calls
the "314 factor;" that is to say, it simply deducted
51 Sundays from the 365 days normally comprising
a year and used the difference, 314, as basis for
determining the monthly salary. The monthly salary
thus fixed actually covers payment for 314 days of
the year, including regular and special holidays, as
well as days when no work is done by reason of
fortuitous cause, as above specified, or causes not
attributable to the employees.
There is no provision of law requiring any
employer to make such adjustments in the monthly
salary rate set by him to take account of legal
in
establishments regularly employing less than
ten employees or in establishments exempted
from granting this benefit by the Secretary of
Labor after considering the viability or financial
condition of such establishment.
On the other hand, while private respondents
are entitled to Minimum Wage, COLA and 13th
Month Pay, they are not entitled to service incentive
leave pay because as piece-rate workers being paid
at a fixed amount for performing work irrespective of
time consumed in the performance thereof, they fall
under one of the exceptions stated in Section 1(d),
Rule V, Implementing Regulations, Book III, Labor
Code. For the same reason private respondents
cannot also claim holiday pay (Section 1(e), Rule IV,
Implementing Regulations, Book III, Labor Code).
16. 02 ENTI TLEMENT AND ARBI TRATI ON
Right to Service Incentive Leave
a. Every employee who has rendered at least one
year of service shall be entitled to a yearly
service incentive leave of five days with
pay
UP LAW BAROPS 2007
ONE UP
47 of 132
SUNDAY
of the number of working days
But it
SECTI ON 16 - CONDI TI ON
OF EMPLOYMENT SERVICE I NCENTIVE
LEAVE

and all
its all and the
Ar t . 97
subject a made be herein

Phil. Fisheri es Development Authority v. NLRC
( 9 2 )
Application of Title Art. 98:
This Title shall not apply to:
non-profit
Government-owned
Government
St. Michael Academy v. NLRC
Reference: Sec. 14 A RA 8282
the LEGI TI MATE spouse
and regulations to the contrary, every MARRI ED
mal e employee in the private and public sectors
Senti nel Securi t y Agency, I nc. v. NLRC (98)
shall not
is the that petitioner Notwithstanding
wi t h whom he is
cohabiting. The male employee applying for
private
organizations.

Part II : Labor Standards Law
Labor Standards
c. The grant of benefit in excess of that provided
of
arbitration or any court or administrative
action.
COMPUTATI ON AND LI ABI LI TY
Under Arts. 107 and 109, the indirect employer
is jointly and severally liable with the contractor for
the workers wages, in the same manner and extent
that it is liable to its direct employees. This liability
of the Client covers the payment of the service
incentive leave pay of the complainants during the
time they were posted at the Cebu Branch of the
Client. As service had been rendered, the liability
accrued, even if the complainants were eventually
transferred or reassigned. The service incentive
leave is expressly granted by these pertinent
provisions of the Labor Code
satisfactory proof of such payment and legality
thereof;
f. That if an employee should give birth or suffer
miscarriage without the required contributions
having been remitted for her by her employer
to the SSS, or without the latter having been
previously notified by the employer of time of
the pregnancy, the employer shall pay to the
SSS damages equivalent to the benefits which
said employee member would otherwise have
been entitled to.
D. Vacati on and Si ck Leave
The payment of vacation and sick leave is
governed by the policy of the employer or the
agreement between the employer and employee.
B. Paterni ty Leave
Reference: RA 8187 Paternity Leave Act of 1995 and
Implementing Rules
Coverage: Sec. 2 Notwithstanding any law, rules,
SECTI ON 17 - WAGES
A. Wages I n General
shall be entitled to a paternity leave of SEVEN (7)
days with full pay for the first four (4) deliveries of 17.01 COVERAGE
paternity leave shall notify his employer of the
pregnancy of his legitimate spouse and the expected
date of such delivery.
For purposes of this Act, delivery shall include
childbirth or any miscarriage.
Definitions - As used in this Title:
(b) "Employer" includes
any person
acting directly or indirectly in the interest of
an employer in relation to an employee
and shall include
C. Materni t y Leave
branches,
subdivisions and instrumentalities
A female employee who has paid at least three
(3) monthly contributions in the twelve-month
period immediately preceding the semester of her
childbirth, or miscarriage shall be paid a daily
maternity benefit equivalent to one hundred percent
(100%) of her average salary credit for sixty (60)
days or seventy-eight days in case of caesarean
delivery subject to the following conditions:
a. That the employee shall have notified her
employer of her pregnancy and the probable
date of her childbirth which notice shall be
transmitted to the SSS in accordance with the
rules and regulations it may provide.
b. The full payment shall be advanced by the
employer within thirty (30) days from the filing
of the maternity leave application.
c. That payment of daily maternity benefits shall
be a bar to the recovery of sickness benefits
provided by this Act for the same period for
which daily maternity benefits have been
received.
d. That the maternity benefits provided under
this section shall be paid only for the first four
(4) deliveries or miscarriages.
e. That the SSS shall immediately reimburse the
employer of one hundred percent (100%) of
the amount of maternity benefits advanced to
the employee by the employer upon receipt of
controlled
corporations and institutions, as well as
institutions
(c) "Employee" includes any individual employed
by an employer.
(e) "Employ" means to suffer or permit to work.
farm tenancy or leasehold
domestic service
persons working in their respective homes in
needlework or in any cottage industry duly
registered in accordance with law.
GOVERNMENT AGENCY
a
government agency, its liabilities, which are joint
and solidary with that of the contractor, are provided
in Articles 106, 107 and 109 of the Labor Code. This
places the petitioner's liabilities under the scope of
the NLRC. Moreover, Book Three, Title II on Wages
specifically provides that the term "employer"
includes any person acting directly or indirectly in
the interest of an employer in relation to an
UP LAW BAROPS 2007
ONE UP
48 of 132
16. 03
POLI CY
or
to given is Bislig The
the
an
other or lodging board, of Labor,

'Facilities'
States Marine Corporati on v. Cebu Seamen s
Associ ati on, I nc. (63)
PICOP's benefit and convenience, i.e., to insure that
allowance
employee accommodations,
by petitioners because
value as determined by the Secretary of Labor."
"Customary" is founded on long-established and
constant practice connoting regularity. The receipt of
an allowance on a monthly basis does not ipso facto
the empl oyer
rendered and includes the fair and reasonable value,
as det ermi ned by t he Secretary of Labor, of board,
l odgi ng, or ot her f aci l i t i es customari l y f urni shed by
Mil l ares v. NLRC (99)
Atok Big Wedge Mining Co. Inc. v. Atok Big
Wedge Mutual Benefi t Assoc. (53)
Aklan Electronic Cooperati ve, Inc. v. NLRC
( 2 0 0 0 )
"Fair and reasonabl e value" shall not include any
remuneration or earnings,
Ar t . 97( f )
quality render
Stated
his as needs A
'Supplements',
performance. petitioners
to the employee.
In Songco the Court explained that both words
(as well as salary) generally refer to one and the
same meaning, i.e., a reward or recompense for
increase person's
when
constitute extra remuneration/
special benefits given to or received by the EEs over
and above their ordinary earnings or wages,
differently,
allowance respondent
laborer's and

Part II : Labor Standards Law
Labor Standards
employee and shall include the Government and all
its branches, subdivisions and instrumentalities, all
government-owned or controlled corporation and
institutions as well as non-profit private institutions,
or organizations (Art. 97 [b], Labor Code; Eagle
Security Agency, Inc. v. NLRC; Rabago v. NLRC)
designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of
calculating the same, which is payable by an
employer to an employee under a written or
unwritten contract of employment for work done or
to be done, or for services rendered or to be
17. 02 WAGE
Wage paid to any employee shall mean the
however designated,
capable of being expressed in terms of money,
whether fixed on a time, task, piece, commission
basis, or other method of calculating the same,
which is payable by an employer to an employee
under a written or unwritten contract of employment
for work done or to be done or for services rendered
or to be rendered and includes the fair and
reasonable value, as determined by the Secretary of
employer
customarily furnishes his employee board, lodging or
other facilities, the fair and reasonable value thereof,
as determined by the Secretary of Labor and
Employment, is included in "wage." In order to
ascertain whether the subject allowances form part
of petitioner's "wages," we divide the discussion on
the following "customarily furnished;" "board,
lodging or other facilities;" and, "fair reasonable
facilities
customarily furnished by the employer to the
employee.
characterize it as regular and forming part of salary
profit to the employer or to any person affiliated
with the employer.
because the nature of the grant is a factor worth
considering. We agree with the observation of the
Office of the Solicitor General that the subject
allowances were temporarily, not regularly, received
FAI R DAY PAY
In the case of the housing allowance, once a
vacancy occurs in the company-provided housing
The age-old rule governing the relation between
labor and capital, or management and employee of a
"fair days wage for a fair days labor" remains as
the basic factor in determining employees wages. If
there is no work performed by the employee there
can be no wage or pay unless, of course, the laborer
was able, willing and ready to work but was illegally
locked out, suspended or dismissed, or otherwise
illegally prevented from working, a situation which
we find is not present in the instant case. It would
neither be fair nor just to allow private respondents
to recover something they have not earned and
could not have earned because they did not render
services at the Kalibo office during the stated period.
FACILI TIES AND SUPPLEMENTS
means
increase. This is true not only as to food but as to
everything else - education, clothing, entertainment,
etc. The law guarantees the laborer a fair and just
wage. The minimum must be fair and just. The
"minimum wage" can by no means imply only the
actual minimum. Some margin or leeway must be
provided, over and above the minimum, to take care
of contingencies, such as increase of prices of
commodities and increase in wants, and to provide
means for a desirable improvement in his mode of
living.
concerned
transfers to the company premises and his
housing allowance is discontinued . . . .
On the other hand, the transportation allowance
is in the form of advances for actual transportation
expenses subject to liquidation . . . given only to
employees who have personal cars.
Division
Managers and corporate officers assigned in Bislig,
Surigao del Norte. Once the officer is transferred
outside Bislig, the allowance stops.
Although it is quite easy to comprehend "board"
and "lodging," it is not so with "facilities." Thus Sec.
5, Rule VII, Book III, of the Rules Implementing the
Labor Code gives meaning to the term as including
articles or services for the benefit of the employee or
his family but excluding tools of the trade or articles
or service primarily for the benefit of the employer
or necessary to the conduct of the employer's
business. The Staff/Manager's allowance may fall
under "lodging" but the transportation and Bislig
allowances are not embraced in "facilities" on the
main consideration that they are granted as well as
Staff/Manager's
In
determining whether a privilege is a facility, the
criterion is not so much its kind but its purpose. That
the assailed allowances were for the benefit and
convenience of respondent company was supported
by the circumstance that they were not subjected to
withholding tax.
services performed. Specifically, "wage" is defined in
letter (f) as the remuneration or earnings, however
are items of expense necessary for the
existence
UP LAW BAROPS 2007
ONE UP
49 of 132
the for
his family's and
notes
and
are
that
in
cannot fall,
from
not
wages
of the Verily, the
"salary" while of

Congson v. NLRC (59)
Ar t . 102.
Forms of payment - No employer shall pay the
Pl asti c Town Center Corp. v. NLRC (89)
the basic minimum pay mandated by law should
industrial Commercial Agricultural
commissions
establishment employee.
I r an v. NLRC (98)
Arms Taxi v. NLRC (93)
employment, character
Gaa v. Court of Appeal s (85)
I r an v. NLRC (98)
Songco v. NLRC (90)
compliance determining
requirements.
employees
collective bargaining
wages of an employee by means of:

Part II : Labor Standards Law
Labor Standards
subsistence, so that by express provision of law
they form part of the wage and when furnished by
the employer are deductible therefrom, since if they
are not furnished, the laborer would spend and pay
for them just the same."
CASH WAGE/ COMMI SSI ONS
said
commissions be less than their basic minimum for
eight hours work. It can, thus, be inferred that were
said commissions equal to or
even exceed the
minimum wage, the employer
need not pay, in
addition, the basic minimum pay prescribed by law.
It follows then that
commissions are included
in
minimum
The words "wages" and "salary" are in essence
synonymous, both words generally refer to one and
the same meaning, that is, a reward or recompense
for services performed. Likewise, "pay" is the
synonym of "wages" and "salary"
GRATUI TY AND WAGES
From the foregoing, gratuity pay is therefore,
not intended to pay a worker for actual services
While commissions are incentives to inspire
employees to put more industry on the jobs
assigned to them, still these commissions are direct
remuneration for services rendered. Commissions
have been defined as the recompense, compensation
or reward of an agent, salesman, executor, trustee,
receiver, factor, broker or bailee, when the same is
calculated as a percentage on the amount of his
transactions or on the profit to the principal. The
nature of the work of a salesman and the reason for
such type of remuneration for services rendered
demonstrate clearly that commissions are part of a
salesman's wage or salary.
rendered. It is a money benefit given to the workers
whose purpose is "to reward employees or laborers,
who have rendered satisfactory and efficient service
to the company." (Sec. 2, CBA) While it may be
enforced once it forms part of a contractual
undertaking, the grant of such benefit is not
mandatory so as to be considered a part of labor
standard law unlike the salary, cost of living
allowances, holiday pay, leave benefits, etc., which
are covered by the Labor Code. Nowhere has it ever
been stated that gratuity pay should be based on the
actual number of days worked over the period of
years forming its basis.
WAGES AND SALARY
B. Payment of Wages
17. 03 FORM
Article 1708 used the word "wages" and not
"salary" in relation to "laborer" when it declared
what are to be exempted from attachment and
execution. The term "wages" as distinguished from
"salary", applies to the compensation for manual
labor, skilled or unskilled, paid at stated times, and
measured by the day, week, month, or season, while
"salary" denotes a higher degree of employment, or
a superior grade of services, and implies a position
of office: by contrast, the term "wages" indicates
considerable pay for a lower and less responsible
promissory
vouchers
coupons
tokens
tickets
chits
or any object other than legal tender
even when expressly requested by the employee.
is
suggestive of a larger and more important service
(35 Am. Jur. 496).
While a salary is a fixed compensation for
regular work or for continuous service rendered over
a period of time (Moreno's Philippine Law Dictionary,
3rd Ed., p. 852 citing Lee Tee vs. Ching Chiong,
17518-R, January 13, 1959), a commission is a
percentage or allowance made to a factor or agent
for transacting business for another (Supra, p. 171
citing People vs. Sua Bok, 1 O.G. 689)
Payment of wages by check or money order shall be
allowed when:
such manner is customary on the date of
effectivity of this Code; or
is necessary because of special circumstances
as specified in appropriate regulations to be
issued by the SOLE; or
stipulated
agreement.
CASH WAGE
There is no law mandating that commissions be
paid only after the minimum wage has been paid to
a
minimum wage only sets a floor below which an
remuneration
excluded
determining compliance with the minimum wage
law. This conclusion is bolstered by Philippine
Workers
Union v. NLRC, where this Court acknowledged that
drivers and conductors who are compensated purely
on a commission basis are automatically entitled to
Undoubtedly, petitioner's practice of paying the
private respondents the minimum wage by means of
legal tender combined with tuna liver and intestines
runs counter to the abovecited provision of the Labor
Code. The fact that said method of paying the
minimum wage was not only agreed upon by both
parties in the employment agreement but even
expressly requested by private respondents, does
not shield petitioner. Article 102 of the Labor Code is
clear. Wages shall be paid only by means of legal
tender. The only instance when an employer is
permitted to pay wages in forms other than legal
tender, that is, by checks or money order, is
UP LAW BAROPS 2007
ONE UP
50 of 132
with wage
as in a
by be to
except :
written
as such the in than
and
as 422, PD by fixed wages of
the beyond

Ar t . 106.
Contractor or sub-contractor
If any of the heirs is a minor: the affidavit
Procedure: Claimants, if all of age, shall execute an
determined circumstances
Ar t . 105
Di rect payment of wages - Wages shall be paid
workplace,
practices circumstances,
Ar t . 104
Place of payment - Payment of wages shall be made
The payment of wages of empl oyees engaged to
perf orm a t ask whi ch cannot be compl eted i n 2
weeks shall be subject to the following conditions in
employer's circumstances
Ar t . 103
Time of payment - Wage shall be paid at least once
that they are his heirs, to the
other persons.
consent
concerned.

Part II : Labor Standards Law
Labor Standards
when the circumstances prescribed in the second
paragraph of Article 102 are present.
17. 04 TI ME OF PAYMENT
every 2 weeks or twice a month at intervals not
exceeding 16 days. If on account of force majeure or
control,
payment of wages on or within the time herein
provided cannot be made, the employer shall pay
the wages immediately after such force majeure or
circumstances have ceased. No employer shall make
payment with less frequency that once a month.
3. The System shall allow workers to receive
their wages within the period or frequency
and in the amount prescribed under the
Labor Code, as amended.
4. There is a bank or ATM facility within a
radius of one kilometer to the place of work
5. Upon request of the concerned employee/s,
the employer shall issue a record of
payment of wages, benefits and deductions
for particular period.
6. There shall be no additional expenses and
no dimunition of benefits and privileges as
a result of the ATM system of payment
7. The employer shall assume responsibility in
case the wage protection provisions of law
and regulations are not complied with
under the arrangement.
the absence of a collective bargaining agreement or
arbitration award:
1. That payments are made at intervals not
exceeding 16 days, in proportion to the
amount of work completed; and
2. That final settlement is made upon completion
of the work.
17. 06 DI RECT PAYMENT
directly to the workers to whom they are due
a. In cases of force majeure rendering such
payments impossible or under other special
17.05 PLACE OF PAYMENT
at or near the place of undertaking, except as
otherwise provided by such regulations as the
Secretary of Labor may prescribe under conditions to
ensure greater protection of wages.
Sec. 7, RA 6727 (Wage Rati onal i zati on Act)
the
Secretary of Labor in appropriate regulations,
in which case the worker may be paid through
another person under written authority given
by the worker for the purpose; or
b. Where the worker has died, the employer may
pay the wages of the deceased worker to the
heirs of the latter without the necessity of
intestate proceedings.
Upon written permission of the majority of the
employees or workers concerned, all private
establishments, companies, businesses and other
entities with 25 or more employees and located
within 1 kilometer radius to a commercial,
savings or rural bank shall pay the wages and
other benefits of their employees through any of
the said banks and within the period of payment
affidavit attesting to their
relationship to the deceased and the fact
exclusion of all
shall be executed on his
behalf by his natural guardian or next of
amended,
otherwise known as the Labor Code of the
Philippines.
Labor Advi sor y on Payment of Sal ari es thru
Automated Tel l er Machi ne ( ATM)
The affidavit shall be presented to the
employer who shall make payment through the
Secretary of Labor or his representative. The
representative of the Secretary of Labor shall act as
referee in dividing the amount paid among the heirs.
The payment of wages under this Article shall
absolve the employer of any further liability with
respect to the amount paid.
Based on Article 104, as well as the provisions of
Sec. 4, Rule VIII, Book III of the Codes
Implementing Rules and considering present-day
17.07 CONTRACTOR - SUBCONTRACTOR
technology,
employers may adopt a system of payment other
through
automated teller machine (ATM) of banks,
provided that the following conditions are met:
1. The ATM system of payment is with the
employees
2. The employees are given reasonable time
to withdraw their wages from the bank
facility which time, if done during working
hours, shall be considered compensable
hours worked.
Whenever an employer enters into a contract with
another person for the performance of the formers
work, the employees of the contractor and of the
latters subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or sub-
contractor fails to pay wages of employees in
accordance with this Code, the employer shall be
JOINTLY AND SEVERALLY liable with his contractor
or sub-contractor to such employees to the
extent of the work performed under the contract,
UP LAW BAROPS 2007
ONE UP
51 of 132
of the
kin.
(c)
(b)
(a)
and intents all for
would that
a of
should the due wages the
of The -
work tools,
context of the law. We note that after a
Jardi n v. NLRC (2000)
Apodaca v. NLRC (89)
purposes, However,
diminish unwarranted practices
Radio Communi cati on of the Phi l. , I nc. v. Sec.
of Labor ( 89)
Ar t . 117
Deduction to ensure employment (Art. 117) - It shall
be unlawful to make any deduction from the wages
Wage deduction - No employer, in his own behalf or
Ar t . 109.
Solidary liability The provisions of existing laws to
employees
Ar t . 108
Posting of bond - An employer or indirect employer
provisions
Ar t . 107
I ndi rect empl oyer
machineries, equipment,
There is "labor-onl y" contracting where the
In cases where the worker is insured with his
consent by the employer, and the deduction is to
recompense the employer for the amount paid by
him as premium on the insurance;
employment/ retention

Part II : Labor Standards Law
Labor Standards
in the same manner and extent that he is liable to
employees directly employed by him.
The Secretary of Labor may, by appropriate
regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-
only contracting and job contracting as well as
differentiations within these types of contracting,
and determine who among the parties involved shall
be considered the employer for purposes of this
Code, to prevent any violation or circumvention of
any provision of this Code.
person supplying workers to an employer does not
have substantial capital or investment in the form of
in behalf of any person, shall make any deduction
from the wages of his employees, except:
1. In cases where the worker is insured with his
consent by the employer, and the deduction is
to recompense the employer for the amount
paid by him as premium on the insurance;
2. For union dues, in cases where the right of the
worker or his union to check off has been
recognized by the employer or authorized in
writing by the individual worker concerned;
and
3. In cases where the employer is authorized by
law or regulations issued by the Secretary of
Labor.
premises,
among others, and the workers recruited and placed
by such person are performing activities which are
directly related to the principal business of such
employer. In such cases, the person or intermediary
shall be considered merely as an agent of the
employer who shall be responsible to the workers in
the same manner an extent as if the latter were
directly employed by him.
of any employee for the benefit of the employer or
his representative or intermediary as consideration
promise
employment.
WAGE DEDUCTI ON
the
immediately preceding article shall likewise apply to
any person, partnership, association or corporation
which, not being an employer, contracts with an
independent contractor for the performance of any
work, task, job or project.
Article 222 Labor Code requires an individual
written authorization as a prerequisite to wage
deductions seeks to protect the employee against
his
compensation without his knowledge and consent.
may require the contractor or sub-contractor to
furnish a bond equal to the cost of labor under
contract, on condition that the bond will answer for
the
contractor/sub-contractor, as the case may be, fail
to pay the same.
the
deductions required of the petitioner and employees
do not run counter to the express mandate of the
law since the same are not unwarranted or without
their knowledge and consent. Also, the deductions
for the union service fee in question are authorized
by law and do not require individual check-off
authorizations.
the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his
contractor/subcontractor for any violation of any
provision of this Code. For purposes of determining
the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
Lastly, assuming further that there was a call
for payment of the unpaid subscription, the NLRC
cannot validly set it off against the wages and other
benefits due petitioner. Article 113 of the Labor Code
allows such a deduction from the wages of the
employees by the employer, only in three instances,
to wit:
C. Prohi bi tion regarding Wages
17. 08 NON-I NTERFERENCE DISPOSAL WAGES
Ar t . 112
Non-interference in disposal of wages - No employer
shall limit or otherwise interfere with the freedom of
any employee to dispose of his wages. He shall not
in any manner force, compel or oblige his employees
to purchase merchandise, commodities or other
property from the employer or from any other
person or otherwise make use of any store or
services of such employer or any other person.
17. 09 WAGE DEDUCTI ON
For union dues, in cases where the right of
the worker or his union to check-off has been
recognized by the employer or authorized in
writing by the individual worker concerned; and
In cases where the employer is authorized by
law or regulations issued by the Secretary of
Labor."
With regard to the amount deducted daily by
private respondent from petitioners for washing of
the taxi units, we view the same as not illegal in the
Ar t . 113
tour of
duty, it is incumbent upon the driver to restore
the unit he has driven to the same clean
UP LAW BAROPS 2007
ONE UP
"ART. 113. Wage Deduction. No employer,
in his own behalf or in behalf of any person, shall
make any deduction from the wages of his
employees, except:
52 of 132

of in
or office
upon
or
the that think not do XXX We
"salary" while of
moneys all include to while

( 53)
establishment, branch
depending
South Motori st Enterpri ses v. Tosoc (90)
employment, character
Gaa v. Court of Appeal s (85)
purporting
Paci fi c Customs Brokerage, I nc. v. I nter -I sl and
Dockmen and Labor Uni on (51)
Ar t . 116
Wi thhol di ng of wages and ki ckbacks prohi bi ted - It
shall be unl awful for any person, directly or
Fi ve J Taxi v. NLRC (94)
Dentech Manufacturi ng Corp. v. NLRC (89)
Ar t . 115
Limitations - No deduction from the deposits of an
Excepti on:
Ar t . 114
Deposits for loss or damage
Trading Labor Association
ART. 113
if
where the employees
It failed to present employment records giving
as an excuse that they were sent to the main office
in Manila, in violation of Section 11 of Rule X, Book
II of the Omnibus Rules Implementing the Labor
Code providing that:

Part II : Labor Standards Law
Labor Standards
condition when he took it out. Car washing after a
tour of duty is indeed a practice in the taxi industry
and is in fact dictated by fair play. Hence, the drivers
are not entitled to reimbursement of washing
charges.
CHECK OFF
indirectly, to withhold any amount from the wages of
a worker or induce him to give up any part of his
wages by force, stealth, intimidation, threat or
dismissal or by any other means whatsoever without
the worker's consent.
Wage Deduction. No employer, in his own behalf
or in behalf of any person, shall make any deduction
from the wages of his employees, except:
b. For union dues, in cases where the right of the
worker or his union to check-off has been
recognized by the employer or authorized in
writing by the individual worker concerned;
and
GARNI SHMENT/ ATTACHMENT
Art 1708 NCC: "laborers' wages shall not be
subject to execution or attachment, except for debts
incurred for food, shelter, clothing and medical
attendance". Writ of garnishment issued by CFI,
Manila Trading and Suppl y Co. v. Manila
An employer may be compelled to "check-off"
union dues from the wages of his employee when it
has been authorized to do so by the employee. This
is upon the theory that it is necessary to promote
the welfare and integrity of the union to which he
belongs. It is a forward step to promote social
justice as envisaged by our Constitution.
17. 10 DEPOSI T
- No employer shall
require his worker to make deposits from which
deduction shall be made, for the reimbursement of
loss of or damage to tools, materials or equipment
supplied by the employer
and
properties of the employing company, cannot affect
what the co. has in its possession to pay the wages
of its laborers pursuant to its contract w/ them or
their labor union w/o contravening the letter and
spirit of article 1708.
Article 1708 used the word "wages" and not
"salary" in relation to "laborer" when it declared
what are to be exempted from attachment and
execution. The term "wages" as distinguished from
"salary", applies to the compensation for manual
labor, skilled or unskilled, paid at stated times, and
measured by the day, week, month, or season, while
"salary" denotes a higher degree of employment, or
a superior grade of services, and implies a position
of office: by contrast, the term "wages" indicates
considerable pay for a lower and less responsible
when the employer is engaged in such trades,
occupations or businesses where the practice of
making deductions or requiring deposits is a
recognized one; or
is necessary or desirable as determined by the
Secretary of Labor in appropriate rules and
regulations
employee for the actual amount of the loss or
damage shall be made unless the employee has
been heard thereon, and his responsibility has been
clearly shown.
is
suggestive of a larger and more important service
(35 Am. Jur. 496).
legislature
intended the exemption in Article 1708 of the New
Civil Code to operate in favor of any but those who
are laboring men or women in the sense that their
work is manual. Persons belonging to this class
usually look to the reward of a day's labor for
immediate or present support, and such persons are
more in need of the exemption than any others.
RECORD KEEPING
Article 114 of the Labor Code prohibits an
employer from requiring his employees to file a cash
bond or to make deposits, subject to certain
exceptions.
The article providing the rule on deposits for
loss or damage to tools, materials or equipment
supplied by the employer does not apply to or
permit deposits to defray any deficiency which the
taxi driver may incur in the remittance of his
"boundary." And when worker stops working for
employer, the alleged purpose for the unauthorized
deposits no longer exists. In other case, any balance
due to private respondents after proper accounting
must be returned to them with legal interest.
"All employment records of the employees of an
employer shall be kept and maintained in or about
the premises of the workplace. The premises of a
workplace shall be understood to mean the main
any,
are
regularly assigned. The keeping of the employee's
records in another place is prohibited."
D. Other Forms of Remunerati on
17.12 SERVI CE CHARGES
17. 11 WI THHOLDI NG OF WAGES
UP LAW BAROPS 2007
ONE UP
53 of 132

Ar t . 96
c
13
except
THIS WITHIN
the 13
th
for
to amount the of basis
to and
- 15%
- 85%
THEIR OF
private
Workers paid on a piece rate basis:
3. Employers of h
2. Employers a
corporations, controlled
Exempted EMPLOYERS
1. The G
FALLING
suspend, lay-off, recall, discharge, assign,
Who are Rank and File Employees?
rank and file employees a 13
Removal of t he Sal ary Ceiling (Aug 13, 86, Pres.
preceding
the
immediately
Frequency
of
Di stri butio
n
Permanen
distribution
management
MANAGERIAL
clinics,
gambling
enterprises,
Book I I I Rul e VI Omni bus Rul es
Maranaw Hotel s, etc. v. NLRC (99)
Service Charges -All service charges collected by
th
th
only
month pay or more in a calendar year or
its equivalent at the time of this issuance;
ITS EQUIVALENT
the
abolition or withdrawals of such
charges
Rel ati on to Nothing in this rule shall prevent
shall be distributed and paid to
the employees not less than once
every two weeks or twice a month
at intervals not exceeding 16 days
In case the service charge is
of abolished, the share of covered
bars,
houses
establishments
: includes
management

Part II : Labor Standards Law
Labor Standards
hotels, restaurants and similar establishments shall
be distributed at the rate of 85% for all covered
employees and 15% management. The share of the
employees shall be EQUALLY DISTRIBUTED among
them. In case the service charge is abolished, the
share of covered employees shall be considered
integrated in their wages.
from entering into any agreement
with terms more favorable to the
employees than those provided
herein, or be used to diminish any
benefit granted to the employees
under existing laws, agreement
and voluntary employer practice.
17. 13 THI RTEENTH MONTH PAY
As regards the share of Damalerio in the service
charges collected during the period of his preventive
suspension, the same form part of his earnings, and
his dismissal having been adjudged to be illegal, he
is entitled not only to full backwages but also to
other benefits, including a just share in the service
charges, to be computed from the start of his
preventive suspension until his reinstatement.
COVERAGE
Revi sed Guidelines on the i mpl ementati on of
Month pay
Aquino's Memo Order No. 28)
ALL EMPLOYERS are hereby required to pay all their
Coverage collecting
service charges such as hotels,
restaurants, lodging houses, night
clubs, cocktail lounge, massage
month pay not later
than December 24 of every year, provided that they
have worked for at least one (1) month during a
calendar year.
Empl oyees
covered
Excepti on
Di stri butio
n
casinos
and
including
entities operating primarily
subsidiaries
Government.
shall apply to all employees of
covered employers REGARDLESS
POSITIONS,
DESIGNATIONS OR EMPLOYMENT
STATUS, and IRRESPECTIVE OF
THE METHOD BY WHICH THEIR
WAGES ARE PAID
EMPLOYEES
(defined as one who is vested
with powers or prerogatives to lay
down and execute management
policies and/or to hire, transfer,
suspend, lay-off, recall, discharge,
assign, or discipline employees or
to effectively recommend such
managerial actions.)
employees
distributed EQUALLY
(for
disposition by management
answer for losses and breakages
managerial
employees at the discretion of the
management in the latter case)
A managerial employee is one who is vested
with powers or prerogatives to lay down and execute
transfer,
or
discipline employees, or to effectively recommend
such managerial actions. ALL EMPLOYEES NOT
DEFINITION
CONSIDERED RANK-AND-FILE EMPLOYEES.
overnment and any of its political
subdivisions, including government-owned and
those
corporations operating essentially as private
subsidiaries of the Government;
lready paying their employees a
Christmas
bonus, mid-year bonus, cash bonuses and
other payments amounting to not less than
1/12 of the basic salary but shall NOT
INCLUDE cash and stock dividends, cost of
living allowances and all other allowances
regularly enjoyed by the employee as well a
non-monetary benefits.
ousehold helpers and persons in
the personal service of another relation to such
workers and;
4. Employers of those who are paid on purely
cy
servi ce
charges
employees shall be considered
integrated in their wages. The
be
integrated shall be the average
monthly share of each employee
ommission, boundary or task basis and those
who are paid a fixed amount for performing
specific work, except where the workers are
paid on piece-rate basis in which case the
employer shall grant the required 13
pay to such workers.
those
who are paid a standard amount for every piece
or unit of work produced that is more or less
regularly replicated, without regard to the time
spent in producing the same.
agr eement the employer and his employees
AMOUNT AND PAYMENT DATE
UP LAW BAROPS 2007
ONE UP
54 of 132

and
similar
those
as
the of
to be
the
to
past 12 months
s
policies and/or to hire,
ARE
th
month
private
private of practice
on Revised The pay. month
their of benefit
28, No. Order
school Private
1 3
TH
13t

cessation upon the employee
Archi ll es Manufacturi ng Corp. v. NLRC (95)
Al l i ance of Government Workers v. NLRC (95)
respondent according
Guidelines
Ul tra Vil l a Food House v. Geni ston (99)
designation regardless
provides Memorandum
time for payment of the 13
the required 13
including teachers,
bases, are entitled to the required 13
mandated 13
by law entitled to the 13
before the 24
of the required 13
The required 13
Basic salary = for the purpose of computing the
the year 1987, the computation of the 13
The minimum 13
th
th
th
th
th
th
th
th
h
th
th

Part II : Labor Standards Law
Labor Standards
Mi ni mum Amount
month pay required by law
shall not be less than 1/12 of the total basic salary
earned by an employee within a calendar year for
month
pay shall include the cost of living allowances (COLA)
integrated into the basic salary of a covered
employee pursuant to EO 178.
An employee who has resigned or whose
services were terminated at any time before the
month pay is entitled
to this monetary benefit in proportion to the length
of time he worked during the year, reckoned from
the time he started working during the calendar year
up to the time of his resignation or termination from
service.
MANNER OF WAGE PAYMENT
month pay shall include all remunerations or
earning paid by this employer for services rendered
but does not include allowances and monetary
benefits which are not considered or integrated as
part of the regular or basic salary, such as the cash
equivalent of unused vacation and sick leave credits,
overtime, premium, night differential and holiday
pay and cost-of-living allowances. However, these
salary-related benefits should be included as part of
the basic salary in the computation of the 13
month pay if by individual or collective agreement,
company practice or policy, the same are treated as
part of the basic salary of the employees.
Ti me of payment
Month Pay shall be paid not
later than December 24 of each year. An employer,
however, may give to his employees one-half (1/2)
Month Pay before the opening
of the regular school year and the other half on or
of December every year. The
frequency of payment of this monetary benefit may
be the subject of agreement between the employer
and the recognized collective bargaining agent of the
employees.
MONTH PAY FOR CERTAIN TYPE OF EMPLOYEES
Jackson Buil di ng v. NLRC (95)
Presidential Degree No. 851, as amended by
that
employees are entitled to the thirteenth-month pay
and
irrespective of the method by which their wages are
paid.
HOUSEHELPERS
Moreover, the specific provisions mandating
these benefits are found in Book III, Title I of the
Labor Code, and Article 82, which defines the scope
of the application of these provisions, expressly
excludes domestic helpers from its coverage. The
limitations set out in the said article are echoed in
Book III of the Omnibus Rules Implementing the
Labor Code. Clearly then, petitioner is not obliged by
law to grant private respondent any of these
benefits.
Employing the same line of analysis, it would
seem that private respondent is not entitled to 13th
the
Implementation of the 13th Month Pay Law also
excludes employers of household helpers from the
coverage of Presidential Decree No. 851.
Nevertheless, we deem it just to award private
respondent 13th month pay in view of petitioner's
Paid by Results
such
benefit. Indeed, petitioner admitted that she gave
Employees who are paid on piece work basis are
Month Pay
Employees who are paid a fixed or guaranteed
wage plus commission are also entitled to the
respondent
December.
GOVERNMENT EMPLOYEES
month pay based on their total
earnings during the calendar year, i.e. on both their
fixed or guaranteed wage and commission.
Those with Multiple Employers
Government employees working part time in a
private enterprise, including private educational
institutions, as well as employees working in two or
more private firms, whether on full or part time
An analysis of the "whereases" of PD No. 851
shows that the President had in mind only workers in
private employment when he issued the decree.
There was no intention to cover persons working in
the government service.
TERMINATED EMPLOYEES
Month Pay
from all their private employers regardless of their
total earnings from each or all their employers.
Private School Teachers
faculty
members of universities and colleges, are entitled to
month pay, regardless of the
number of months they teach or are paid within a
year, if they have rendered service for at least one
(1) month within a year.
Resigned or Separated Employee
On the issue of the propriety of the award of a
13th month pay, paragraph 6 of the Revised
Guidelines on the Implementation of the 13th Month
Pay Law (P. D. 851) provides that "(a)n employee
who has resigned or whose services were terminated
at any time before the payment of the 13th month
pay is entitled to this monetary benefit in proportion
to the length of time he worked during the year,
reckoned from the time he started working during
the calendar year up to the time of his resignation or
termination from the service . . .. The payment of
the 13th month pay may be demanded by the
of employer-
employee relationship. This is consistent with the
UP LAW BAROPS 2007
ONE UP
55 of 132
th
13th month pay every
Rules more
Rules the
the 851, Decree
and 851 Decree Under
Inciong, vs.
to equal extend to
the can so

earnings definitions of basic salary
Supplementary controlling
Supplementary Moreover,
Presidential
Presidential
Presidential
In the case of San Miguel Corp.
treatment employer
Busi nessday I nformati on Systems and
Servi ces, I nc. v. NLRC (93)
accountability, property

Part II : Labor Standards Law
Labor Standards
principle of equity that as the employer can require
the employee to clear himself of all liabilities and
this
Court delineated the coverage of the term "basic
employee
demand the payment of all benefits due him upon
the termination of the relationship." Furthermore,
Sec. 4 of the original Implementing Rules of P. D.
851 mandates employers to pay their employees to
pay their employees a 13th month pay not later than
the 24th of December every year. In effect, this
statutory benefit is automatically vested in the
employee who has at least worked for one month
during the calendar year. As correctly stated by the
Solicitor General, such benefit may not be lost or
forfeited even in the event of the employee's
subsequent dismissal for cause without violating his
property rights.
salary" as used in P.D. 851. We said at some length:
its
implementing rules, the basic salary of an employee
is used as the basis in the determination of his 13th
month pay. Any compensations or remunerations
which are deemed not part of the basic pay is
excluded as basis in the computation of the
mandatory bonus.
Under the Rules and Regulations implementing
following
compensations are deemed not part of the basic
salary:
a) cost-of-living allowances granted pursuant to
Decree
Instructions No. 174;
RATI ONALE
Whereas Clauses and Limitations - PD NO. 851
It is necessary to further protect the level of
real wages from the ravage of world-wide
inflation;
There has been no increase in the legal
minimum wage rates since 1970;
The Christmas season is an opportune time for
society to show its concern for the plight of the
working masses so they may properly celebrate
Christmas and New Year.
b) Profit-sharing payments;
c) All allowances and monetary benefits which
are not considered or integrated as part of the
regular basic salary of the employee at the
time of the promulgation of the Decree on
December 16, 1975.
Under a later set of Supplementary Rules and
Regulations Implementing PD 851 issued by then
Labor Secretary Blas Ople, overtime pay, earnings
and other remunerations are excluded as part of the
basic salary and in the computation of the 13th
month pay.
The exclusion of the cost-of-living allowances
MANAGEMENT FUNCTI ON under PD 525 and Letter of Instructions No. 174,
and profit-sharing payments indicate the intention to
strip basic salary of other payments which are
properly considered as "fringe" benefits. Likewise,
Clearly, there was impermissible discrimination
against the private respondents in the payment of
their separation benefits. The law requires an
its
employees. It may not, in the guise of exercising
management prerogatives, grant greater benefits to
some and less to others. Management prerogatives
are not absolute prerogatives but are subject to
legal limits, collective bargaining agreements, or
general principles of fair play and justice (UST vs.
NLRC). Article 283 of the Labor Code, as amended,
protects workers whose employment is terminated
because of closure of the establishment or reduction
of personnel (Abella vs. NLRC).
With regard to the private respondents' claim
for the mid-year bonus, it is settled doctrine that the
grant of a bonus is a prerogative, not an obligation,
of the employer (Traders Royal Bank vs. NLRC). The
matter of giving a bonus over and above the
worker's lawful salaries and allowances is entirely
dependent on the financial capability of the employer
to give it. The fact that the company's business was
no longer profitable (it was in fact moribund) plus
the fact that the private respondents did not work up
to the middle of the year (they were discharged in
May 1988) were valid reasons for not granting them
a mid-year bonus. Requiring the company to pay a
mid-year bonus to them also would in effect penalize
the company for its generosity to those workers who
remained with the company till the end" of its days.
(Traders Royal Bank vs. NLRC) The award must
therefore be deleted.
the catch-all exclusionary phrase "all allowances and
monetary benefits which are not considered or
integrated as part of the basic salary" shows also the
intention to strip basic salary of any and all additions
which may be in the form of allowances or "fringe"
benefits.
and
Regulations Implementing Presidential Decree 851 is
even more emphatic in declaring that earnings and
other remunerations which are not part of the basic
salary shall not be included in the computation of
the 13th-month pay.
While doubt may have been created by the prior
Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all
remunerations or earnings paid by an employer to
an employee, this cloud is dissipated in the later and
and
Regulations which categorically exclude from the
and other
remunerations paid by an employer to an employee.
A cursory perusal of the two sets of Rules indicates
that what has hitherto been the subject of a broad
inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the
seeming tendency of the former rules to include all
remunerations and earnings within the definition of
basic salary.
The all embracing phrase "earnings and other
remunerations" which are deemed not part of the
basic salary includes within its meaning payments
for sick, vacation, or maternity leaves, premium for
works performed on rest days and special holidays,
BASI C WAGE/ COMMI SSI ONS
Boi e Takeda v. Del a Serna (93)
pays for regular holidays and night differentials. As
such they are deemed not part of the basic salary
and shall not be considered in the computation of
the 13th-month pay. If they were not excluded, it
UP LAW BAROPS 2007
ONE UP
56 of 132
525 and Letter of
pay, month 13th the of form the
this by covered not are
1 4
TH
shall herein that: 851
still them, to
are medical notice,
for or the to
as these
simply
salary portion
any into taking without
other
the
find hard is
Busi nessday I nformati on Systems and
Servi ces, I nc. v. NLRC (93)
equivalent
Kamaya Port Hotel v. NLRC (89)
"Nothing provides
the form of food or free electricity, assuming
Framanl i s Farms, I nc. v. MOLE (89)
assigned particularly
I r an v. NLRC (98)
representatives
commissions. Medical representatives are not
its medical representatives could not have been
capacity productivity,
payments characterized
In Boie-Takeda the so-called commissions "paid
overtime payments, nor profit-sharing payments nor
structure
comprised
of
commissions
Phi lippi ne Dupli cators Inc v. NLRC (95)
consideration
excluded
any
expressly
to
remunerations"
was there Clearly,
same in "sales
an
for sales The
commissions"
little more industry on the jobs
as "productivity bonuses."

Part II : Labor Standards Law
Labor Standards
"earnings
in
computation of the 13th month pay. Then the
exclusionary provision would prove to be idle and
with no purpose.
Quite obvious from the foregoing is that the
term "basic salary" is to be understood in its
common, generally-accepted meaning, i.e., as a rate
the
Philippine Duplicators paid
salesmen; they do not effect any sale of any article
at all. In common commercial practice, in the
Philippines and elsewhere, of which we take judicial
employees
engaged in the promotion of pharmaceutical
products or medical devices manufactured by their
employer.
Pless v. Franks, which held that in statutes providing
that pension should not less than 50 percent of
"basic salary" at the time of retirement, the quoted
words meant the salary that an employee (e.g., a
policeman) was receiving at the time he retired
This definition explicitly includes commissions as
part of wages. While commissions are, indeed,
incentives or forms of encouragement to inspire
extra
compensation to which he might be entitled for extra
work.
In remunerative schemes consisting of a fixed
or guaranteed wage plus commission, the fixed or
guaranteed wage is patently the "basic salary" for
this is what the employee receives for a standard
work period. Commissions are given for extra efforts
exerted in consummating sales or other related
transactions. They are, as such, additional pay,
which this Court has made clear do not form part of
the "basic salary."
employees to put a
these
commissions are direct remunerations for services
rendered. In fact, commissions have been defined as
the recompense, compensation or reward of an
agent, salesman, executor, trustee, receiver, factor,
broker or bailee, when the same is calculated as a
percentage on the amount of his transactions or on
the profit to the principal. The nature of the work of
a salesman and the reason for such type of
remuneration for services rendered demonstrate
clearly that commissions are part of a salesman's
wage or salary.
commissions received SUBSTI TUTE PAYMENT
Under Section 3 of PD No. 851, such benefits in
representing
automatic
increment to the monetary value initially assigned to
each unit of work rendered by a salesman.
The sales commissions were an integral part of
the basic salary structure of Philippine Duplicators'
employees salesmen. These commissions are not
any other fringe benefit. Thus, the salesmen's
commissions, comprising a pre-determined percent
of the selling price of the goods sold by each
salesman, were properly included in the term "basic
salary" for purposes of computing their 13th month
pay.
they
were given, were not a proper substitute for the
13th month pay required by law. Neither may year-
end rewards for loyalty and service be considered in
lieu of 13th month pay. Section 10 of the Rules and
Regulations Implementing Presidential Decree No.
be
construed to authorize any employer to eliminate or
diminish in any way supplements or other employee
benefits or favorable practice being enjoyed by the
employee at the time of promulgation of this
issuance."
MONTH PAY
to or received by medical representatives of Boie-
Takeda Chemicals or by the rank and file employees
of Philippine Fuji Xerox Co.," were excluded from the
term "basic salary" because these were paid to the
medical representatives and rank-and-file employees
The Second Division
additional
monetary benefits not properly included in the term
"basic salary" in computing their 13th month pay.
We note that productivity bonuses are generally tied
revenue
production, of a corporation; such bonuses closely
resemble profit-sharing payments and have no clear
director necessary relation to the amount of work
actually done by each individual employee. More
generally, a bonus is an amount granted and paid ex
gratia to the employee; its payment constitutes an
There is no law that mandates the payment of
the 14th month pay. This is emphasized in the grant
of exemption under Presidential Decree 851 (13th
Month Pay Law) which states: "Employers already
paying their employees a 13th month pay or its
Decree."
Necessarily then, only the 13th month pay is
mandated. Having enjoyed the additional income in
private
respondents' insistence on the 14th month pay for
1982 is already an unwarranted expansion of the
liberality of the law.
17. 14 BONUS
MANAGEMENT FUNCTI ON
impermissible
discrimination against the private respondents in
UP LAW BAROPS 2007
ONE UP
of pay for a standard work period exclusive of such
additional payments as bonuses and overtime. This
is how the term was also understood in the case of
every
duplicating machine sold constituted part of the
basic compensation or remuneration of the salesmen
of Philippine Duplicators for doing their job. The
act of enlightened generosity and self-interest on the
part of the employer, rather than as a demandable
or enforceable obligation.
It is also important to note that the purported
"commissions" paid by the Boie-Takeda Company to
sense
its salesmen
57 of 132

and
the
that
Sales
upon one a be
the of success the to
which is it If
or not a
or is however,
benefits other or bonuses
a is thereof grant
loyalty and
of
for
dependent contingent
contributed
Luzon Stevedori ng Corp. v. CI R (65)
compensation additional
demandable
We further held in Metro Transit Organization,
Inc. v. NLRC, that a bonus becomes a demandable
or enforceable obligation only when it is made part
of the wage or salary or compensation of the
employee, thus:
management
Phi l. National Constructi on Corp. v. NLRC (99)
the duration of the contract of employment,
Marcos v. NLRC (95)
industry
success
employee
Luzon Stevedori ng Corporati on v. CI R (65)
prerogative.
Petitioner may not be compelled to award a bonus to
private respondents whom it found guilty of serious
misconduct.
We held in Traders Royal Bank v. NLRC:
his
contributed to the
enforceable
is made part of the wage or

Part II : Labor Standards Law
Labor Standards
the payment of their separation benefits. The law
requires an employer to extend equal treatment to
its employees. It may not, in the guise of exercising
management prerogatives, grant greater benefits to
some and less to others. Management prerogatives
are not absolute prerogatives but are subject to
legal limits, collective bargaining agreements, or
general principles of fair play and justice (UST vs.
NLRC). Article 283 of the Labor Code, as amended,
protects workers whose employment is terminated
because of closure of the establishment or reduction
of personnel (Abella vs. NLRC).
With regard to the private respondents' claim
for the mid-year bonus, it is settled doctrine that the
grant of a bonus is a prerogative, not an obligation,
of the employer (Traders Royal Bank vs. NLRC). The
matter of giving a bonus over and above the
worker's lawful salaries and allowances is entirely
dependent on the financial capability of the employer
to give it. The fact that the company's business was
no longer profitable (it was in fact moribund) plus
the fact that the private respondents did not work up
to the middle of the year (they were discharged in
May 1988) were valid reasons for not granting them
a mid-year bonus. Requiring the company to pay a
mid-year bonus to them also would in effect penalize
the company for its generosity to those workers who
remained with the company till the end" of its days.
(Traders Royal Bank vs. NLRC) The award must
therefore be deleted.
NATURE BONUS
but the
employee enters upon or continues in service under
an offer of a bonus if he remains therein for a
certain time, his service, in case he remains for the
required time, constitutes an acceptance of the offer
of the employer to pay the bonus and, after that
acceptance, the offer cannot be withdrawn, but can
be enforced by the employee.
A bonus is a gift from the employer and the
A bonus is a gratuity or an act of liberality of the
giver which the recipient has no right to demand
as a matter of right. It is something given in
addition to what is ordinarily received by or strictly
due the recipient. The granting of a bonus is
basically a management prerogative which cannot
be forced upon the employer who may not be
obliged to assume the onerous burden of granting
aside
employees basic salaries or wages.
The general rule is that a bonus is a gratuity or
an act of liberality which the recipient has no right
to demand as a matter of right. A bonus,
A bonus is an amount granted and paid to an
which
the employer's
business and made possible the realization of profits.
It is not a demandable and enforceable obligation. It
is so when it is made a part of the wage or salary or
compensation. In such a case the latter would be a
fixed amount and the former would be a contingent
one dependent upon the realization of profits. If
there be none, there would be no bonus.
A bonus is not a gift or gratuity, but is paid for
some services or consideration and is in addition to
what would ordinarily be given. The term "bonus" as
used in employment contracts, also conveys an idea
of something which is gratuitous, or which may be
claimed to be gratuitous, over and above the
prescribed wage which the employer agrees to pay.
While there is a conflict of opinion as to the
validity of an agreement to pay additional sums for
the performance of that which the promisee is
already under obligation to perform, so as to give
the latter the right to enforce such promise after
performance, the authorities hold that if one enters
into a contract of employment under an agreement
that he shall be paid a certain salary by the week or
some other stated period and, in addition, a bonus,
in case he serves for a specified length of time,
there is no reason for refusing to enforce the
promise to pay the bonus, if the employee has
served during the stipulated time, on the ground
that it was a promise of a mere gratuity.
This is true if the contract contemplates a
continuance of the employment for a definite term,
and the promise of the bonus is made at the time
the contract is entered into. If no time is fixed for
a
obligation when it
salary or compensation of the employee. Whether
bonus forms part of wages depends upon
the circumstances and conditions for its payment.
the
employer promised and agreed to give without
any conditions imposed for its payment, such as
success of business or greater production or
output, then it is part of the wage. But if it is paid
only if profits are realized or if a certain level of
productivity is achieved, it cannot be considered
part of the wage. Where it is not payable to all
but only to some employees and only when their
labor becomes more efficient or more productive,
it is only an inducement for efficiency, a prize
therefore not a part of the wage.
The presumption is that it is not a demandable
obligation from the employer and the latter may not
be compelled to grant the same to undeserving
employees.
WHEN DEMANDABLE
As a rule a bonus is an amount granted and paid
to an employee for his industry and loyalty which
employer's
business and made possible the realization of profits.
It is an act of generosity for which the employee
ought to be thankful and grateful. It is also granted
by an enlightened employer to spur the employee to
greater efforts for the success of the business and
realization of bigger profits. From the legal point of
view, a bonus is not a demandable and enforceable
obligation. It is so when it is made a part of the
wage or salary or compensation. In such a case the
latter would be a fixed amount and the former would
the
realization of profits. If there be none, there
would be no bonus.
UP LAW BAROPS 2007
ONE UP
58 of 132

from the
under labor to granted
without c. In
the by
labor certified
studies, the provide
of and
from number
its
over current in
that
by
settle to and
and labor of
in
is It a by
a absent legally

bonuses
PRODUCTI VI TY I NCENTI VES PROGRAM (6)
enterprises business
designated
organizations,
necessary
Commission Productivity
representatives of
management
LABOR MANAGEMENT COMMI TTEE (5)
productivity increases
the
containing
established
committee
disputes program,
representatives
engaged industrial
production
DEFI NI TI ON ( 4)
government-owned and controlled corporations
performing proprietary functions
It shall cover all employees and workers
recognized
COVERAGE (3)
POLI CY (2)
have ruled in National Sugar Refineries Corporation
vs. NLRC:
Mani la El ectri c Co. v. Qui sumbing (99)
salesman-employee. achieved
demandable,
Phi lippi ne Dupli cators Inc. v. NLRC (95)
Li berati on Steamshi p Co. I nc. v. CI R (68)
a. The
or a. A
casual,
program incentives productivity
enterprise business
a process
the
processing,
including
organizations,
collective
agent(s) of the bargaining unit(s).
PRODUCTI VI TY
regular,
managerial employees.

Part II : Labor Standards Law
Labor Standards
While normally discretionary, the grant of a
gratuity or bonus by reason of its long and regular
concession may become regarded as part of regular
compensation. (Phil. Education Co., Inc., vs. CIR).
For this reason, where there is a resale of the
vessels to another party during the pendency of the
motion for reconsideration, the court may order the
reopening of the case insofar as the demands for
gratuity are concerned, in order to determine
whether aforecited conditions operated in the instant
case.
supervisory
Business Enterprise: industrial, agricultural, or agro-
establishments
manufacturing,
repacking, or assembly of goods, including
service-oriented enterprises, duly certified as
such by appropriate government agencies.
Productivity bonuses are generally tied to the
productivity or profit generation of the employer
corporation. Productivity bonuses are not directly
dependent on the extent an individual employee
exerts himself. A productivity bonus is something
extra for which no specific additional services are
rendered by any particular employee and hence not
Labor-management Committee: a negotiating body
in a business enterprise composed of the
management
created to establish a productivity incentives
arising
therefrom in accordance with Section 9 hereof.
Productivity Incentives Program: a formal agreement
contractual
undertaking to pay it. Sales commissions, on the
other hand, such as those paid in Duplicators, are
intimately related to or directly proportional to the
extent or energy of an employee's endeavors.
Commissioners are paid upon the specific results
labor-management
will
promote gainful employment, improve working
conditions and result in increased productivity,
including cost savings, whereby the employees
are granted salary bonuses proportionate to
a
percentage of the sales closed by a salesman and
operates as an integral part of such salesman's basic
pay.
the
average for the preceding three (3) consecutive
years. The agreement shall be ratified by at
least a majority of the employees who have
rendered at least six (6) months of continuous
service.
As a rule, a bonus is not a demandable and
enforceable obligation; it may nevertheless be
granted on equitable considerations as when the
giving of such bonus has been the company's long
and regular practice. To be considered a "regular
practice," the giving of the bonus should have been
done over a long period of time, and must be shown
to have been consistent and deliberate. Thus we
The test or rationale of this rule on long practice
requires an indubitable showing that the employer
agreed to continue giving the benefits knowing
fully well that said employees are not covered by
the law requiring payment thereof.
I NCENTI VES
1990 ( RA 6971)
employees,
through their authorized representatives, may
initiate the formation of a labor-management
committee that shall be composed of an equal
the
and from the rank-and-file
employees: Provided, That both management
and labor shall have equal voting rights:
Provided, further, That at the request of any
party to the negotiation, the National Wages
the
Department of Labor and Employment shall
technical
information and assistance, and expert advice
to enable the parties to conclude productivity
agreements.
b. In business enterprises with duly recognized or
To encourage higher levels of productivity,
maintain industrial peace and harmony and
promote the principle of shared responsibility in
the relations between workers and employers,
recognizing the right of labor to its just share in
the fruits of production and the right of
business enterprises to reasonable returns of
investments and to expansion and growth, and
accordingly to provide corresponding incentives
to both labor and capital for undertaking
voluntary programs to ensure greater sharing
by the workers in the fruits of their labor
Applies to all business enterprises with or
or
including
the
representatives of labor shall be those
bargaining
duly
recognized or certified labor organizations, the
representatives of labor shall be elected by at
least a majority of all rank-and-file employees
who have rendered at least six (6) months of
continuous service.
shall
contain provisions for the manner of sharing
and the factors in determining productivity
bonuses: Provided, That the productivity
this
program shall not be less than half of the
UP LAW BAROPS 2007
ONE UP
59 of 132
17. 15 ACT OF


without
certified
existing
labor
and duly
and
his with liable
The
may and dispute, the resolve to meet
the matters
adopts which
thereof the
by as skills of
to given duties
under to given
shall
adopts which
in be and
or
by reached

There is "labor-onl y" contracting where
contractor SEVERALLY
Ar t . 106.
Contractor or sub-contractor
Independent Employer,
executive orders, company policy
enjoyed
decrees,
NON-DI MUNI TI ON OF BENEFI TS (12)
program incentives productivity
interpretation
DI SPUTES AND GRI EVANCES (9)
enterprise
NOTI FI CATI ON ( 8)
deemed as shall not be bonuses
effectivity suspend
necessary identified
rank-and-file
employees bonuses
committee, labor-management
enterprise business
BENEFI TS AND TAX I NCENTI VES (7)
integrated management,
agreement, program incentives
agreements b. Productivity
A
disputes,
from
business
employer
Whenever
or
the productivity incentives

Part II : Labor Standards Law
Labor Standards
percentage increase in the productivity of the
business enterprise.
Commission and to the Bureau of Internal Revenue
for their information and record.
the
parties as provided in this Act supplement
existing collective bargaining agreements.
c. If, during the existence of the productivity
the
employees will join or form a union, such
program or agreement may, in addition to the
terms and conditions agreed upon by labor
the
collective bargaining agreement that may be
entered into between them.
a. Subject to the provisions of Section 6 hereof, a
a
productivity incentives program, duly and
mutually agreed upon by the parties to the
be
granted a special deduction from gross income
equivalent to 50% of the total productivity
grievances,
arise
implementation of
program, the labor-management committee shall
seek
assistance of the National Conciliation and Mediation
Board of the Department of Labor and Employment
for such purpose. Any dispute which remains
unresolved within 20 days from the time of its
submission to the labor-management committee
shall be submitted for voluntary arbitration in line
with the pertinent provisions of the Labor Code, as
amended.
shall
include the name(s) of the voluntary arbitrator or
panel of voluntary arbitrators previously chosen and
agreed upon by the labor-management committee.
the
program over and above the total allowable
ordinary and necessary business deductions
for said bonuses under the National Internal
Revenue Code, as amended.
b. Grants for manpower training and special
Nothing in this Act shall be construed to
diminish or reduce any benefits and other privileges
or
practice, or any agreement or contract between the
employees
pursuant to a program prepared by the labor-
management committee for the development
and employees.
the
appropriate government agencies shall also
entitle the business enterprise to a special
deduction from gross income equivalent to
50% of the total grants over and above the
allowable ordinary and necessary business
deductions for said grants under the National
Internal Revenue Code, as amended.
c. Any strike or lockout arising from any violation
of the productivity incentives program shall
E. Wage Recovery, Li abil i ties, and Worker
17. 16 LI ABI LI TY OF EMPLOYER AND OTHER
PARTI ES
Contractor
Contractor and Labor-Only Contracting
pending
settlement of such strike or lockout: Provided,
That the business enterprise shall not be
deemed to have forfeited any tax incentives
accrued prior to the date of occurrence of such
strike or lockout, and the workers shall not be
required to reimburse the productivity bonuses
already granted to them under the productivity
incentives program. Likewise, bonuses which
have already accrued before the strike or
lockout shall be paid the workers within six (6)
months from their accrual.
d. Bonuses provided for under the productivity
incentives program shall be given to the
employees not later than every six (6) months
from the start of such program over and above
existing bonuses granted by the business
enterprise and by law: Provided, That the said
salary
increases due the employees and workers.
e. The special deductions from gross income
provided for herein shall be allowed starting
the next taxable year after the effectivity of
this Act.
a
productivity incentives program shall submit copies
of the same to the National Wages and Productivity
Whenever an employer enters into a contract with
another person for the performance of the formers
work, the employees of the contractor and of the
latters subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or sub-contractor
fails to pay wages of employees in accordance with
this Code, the employer shall be JOINTLY AND
or sub-
contractor to such employees to the extent of the
work performed under the contract, in the same
manner and extent that he is liable to employees
directly employed by him.
The Secretary of Labor may, by appropriate
regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-
only contracting and job contracting as well as
differentiations within these types of contracting,
and determine who among the parties involved shall
be considered the employer for purposes of this
Code, to prevent any violation or circumvention of
any provision of this Code.
the person supplying workers to an employer
does not have substantial capital or investment in
UP LAW BAROPS 2007
ONE UP
60 of 132
or other
by the workers under existing laws,

Preference

and Sub-
and wages their regards as
all for is It
of indirect the made is hand,
the and
and several in adopted
relation an
should the due wages the
of The -

Art. 2242, Ci vi l Code
Wi t h ref erence t o speci f i c i mmovabl e propert y
and real ri ght s of t he debt or, t he f ol l owi ng cl ai ms,
mort gages and liens shall be preferred, and shall
constitute an encumbrance on the i mmovable or real
right:
Art. 2241, Ci vi l Code
Wi t h ref erence t o speci f i c movabl e propert y of
t he debt or, t he fol lowi ng cl ai ms or liens shall be
preferred:
Art. 1707, Ci vi l Code
preference
Art. 110 Labor Code
government imperative
Li m v. NLRC (99)
employer
(petitioner) the principal
Lapanday Agri cul tural Devel opment
Corporati on v. Court of Appeal s (2000)
Senti nel Securi t y Agency, I nc. v. NLRC (98)
government
employer-employee contracting,
Phi lippi ne Ai rl i nes v. NLRC (98)
Ar t . 109.
Solidary liability The provisions of existing laws to
employees
Ar t . 108
Posting of bond - An employer or indirect employer
provisions
Ar t . 107
I ndi rect empl oyer

Part II : Labor Standards Law
Labor Standards
the form of tools, equipment, machineries, work
premises, among others, and the workers recruited
and placed by such person are performing activities
which are directly related to the principal business of
such employer. In such cases, the person or
intermediary shall be considered merely as an agent
of the employer who shall be responsible to the
workers in the same manner an extent as if the
latter were directly employed by him.
employees in the event that the contractor fails to
pay such wages.
It will be seen from the above provisions that
contractor
(respondent) are jointly and severally liable to the
employees for their wages. This Court held in Eagle
Securi t y, I nc. vs. NLRC and Spartan Securi ty and
Detective Agency, Inc. vs. NLRC that the joint and
the
immediately preceding article shall likewise apply to
any person, partnership, association or corporation
which, not being an employer, contracts with an
independent contractor for the performance of any
work, task, job or project.
status as direct employer. The principal, on the other
the
contractors employees to secure payment of their
wages should the contractor be unable to pay them.
Even in the absence of an employer-employee
relationship, the law itself establishes one between
the principal and the employees of the agency for a
may require the contractor or sub-contractor to
furnish a bond equal to the cost of labor under
contract, on condition that the bond will answer for
limited purpose i.e. in order to ensure that the
employees are paid the wages due them. In the
above-mentioned cases, the solidary liability of the
principal and contractor was held to apply to the
the
contractor/sub-contractor, as the case may be, fail
to pay the same.
aforementioned Wage Order Nos. 5 and 6.
the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his
contractor/subcontractor for any violation of any
provision of this Code. For purposes of determining
the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
The scourge of exploitation of labor, as shown
by numerous petitions before us, remains pervasive.
agencies
concerned to exert all-out efforts to prevent any
further violation or circumvention of the provisions
of the Labor Code through deceptive devices and
malpractices. Unscrupulous employers could not be
LI ABI LI TI ES allowed to hide behind labor-only contracting in
order to escape the just claims of their workers and
other employees.
In legitimate job contracting, no employer-
employee relation exists between the principal and
the job contractor's employees. The principal is
responsible to the job contractor's employees only
for the proper payment of wages. But in labor-only
is
created by law between the principal and the labor-
only contractor's employees, such that the former is
responsible to such employees, as if he or she had
directly employed them. Besides, the Court has
already taken judicial notice of the general practice
private
institutions of securing janitorial services on an
independent contractor basis.
17.17 WORKER PREFERENCE - BANKRUPTCY
In the event of bankruptcy or liquidation of an
employer's business, his workers shall enjoy first
other
monetary claims, any provision of law to the
contrary notwithstanding.
Such unpaid wages and monetary claims shall
be paid in full before the claims of the Government
and other creditors may be paid. (As amended by R.
A. 6715)
Under these provisions, the indirect employer,
who is the Client in the case at bar, is jointly and
severally liable with the contractor for the workers'
wages, in the same manner and extent that it is
liable to its direct employees. This liability of the
Client covers the payment of the service incentive
leave pay of the complainants during the time they
were posted at the Cebu branch of the Client. As
service had been rendered, the liability accrued,
even if the complainants were eventually transferred
or reassigned.
The laborer's wages shall be a lien on the goods
manufactured or the work done.
6. Claims for laborers' wages, on the goods
manufactured or the work done;
Articles 106 and 107 of the Labor Code provides
the rule governing the payment of wages of 3. Claims of laborers, masons, mechanics and
other workmen, as well as of architects,
UP LAW BAROPS 2007
ONE UP
several liability of the contractor and the principal is
mandated by the Labor Code to assure compliance
with the provisions therein including the minimum
wage. The contractor is made liable by virtue of his
61 of 132
BASI S
event
brought been have Law
Civil the that way same the "2. In
in
the without
the mind in Bearing Code. Civil
illness
repair or
of insolvency, "3. In the
Insolvency
Since then, the Court has had a number of
occasions to rule on the effects of the amendment.
In Development Bank of the Philippines vs. National
Labor Relations Commission, the Court has said:
preference
No. 6715 so as to read:
Phi l. Export etc. v. Court of Appeal s (95)
distorting grievously
Republ i c v. Peral ta (87)
Art. 2244, Ci vi l Code
Wi t h reference t o ot her property, real and
personal , of t he debt or, t he fol lowi ng cl ai ms or
credi ts shal l be preferred i n the order named:
reconstruction construction,
Worker case
-In the event of bankruptcy
"Article 110.
bankruptcy
the year

Part II : Labor Standards Law
Labor Standards
engineers and contractors, engaged in the bankruptcy or liquidation. Thus, very substantial
of
buildings, canals or other works, upon said
buildings, canals or other works;
effect may be given to the provisions of Article 110
framework
established in the Civil Code by holding, as we so
hold, that Article 110 of the Labor Code has modified
Article 2244 of the Civil Code in two respects: (a)
4. Compensation due the laborers or their
dependents under laws providing for indemnity
for damages in cases of labor accident, or
firstly, by removing the one year limitation found in
Article 2244, number 2; and (b) secondly, by
moving up claims for unpaid wages of laborers or
workers of the Insolvent from second priority to first
priority in the order of preference established by
Article 2244.
resulting
employment;
(Pls. See compl ete t ext s of Arts. 2241, 2242, &
2244)
CIVIL CODE LABOR CODE
We believe and so hold that Article 110 of the
Labor Code did not sweep away the overriding
preference accorded under the scheme of the Civil
Code to tax claims of the government or any
subdivision thereof which constitute a lien upon
properties of the Insolvent. It is frequently said that
taxes are the very lifeblood of government. The
effective collection of taxes is a task of highest
importance for the sovereign. It is critical indeed for
its own survival. It follows that language of a much
higher degree of specificity than that exhibited in
Article 110 of the Labor Code is necessary to set
aside the intent and purpose of the legislator that
shines through the precisely crafted provisions of the
Civil Code. It cannot be assumed simpliciter that the
legislative authority, by using in Article 110 the
words "first preference" and "any provision of law to
the contrary notwithstanding" intended to disrupt
the elaborate and symmetrical structure set up in
the Civil Code. Neither can it be assumed casually
that Article 110 intended to subsume the sovereign
itself within the term "other creditors" in stating that
"unpaid wages shall be paid in full before other
creditors may establish any claim to a share in the
assets of employer." Insistent considerations of
public policy prevent us from giving to "other
creditors" a linguistically unlimited scope that would
embrace the universe of creditors save only unpaid
employees.
We, however, do not believe that Article 110
has had no impact at all upon the provisions of the
overriding
precedence given to taxes, duties and fees by the
Civil Code and the fact that the Labor Code does not
impress any lien on the property of an employer, the
use of the phrase "first preference" in Article 110
indicates that what Article 110 intended to modify is
the order of preference found in Article 2244, which
order relates, as we have seen, to property of the
Insolvent that is not burdened with the liens or
encumbrances created or recognized by Articles
2241 and 2242. We have noted that Article 2244,
number 2, establishes second priority for claims for
wages for services rendered by employees or
laborers of the Insolvent "for one year preceding the
commencement of the proceedings in insolvency."
Article 110 of the Labor Code establishes "first
preference" for services rendered "during the period
prior to the bankruptcy or liquidation," a period not
immediately prior
A final observation On 21 March 1989, Article
110 of the Labor Code was amended by Republic Act
of
or
liquidation of an employer's business, his workers
shall enjoy first preference as regards their wages
and other monetary claims, any provisions of law
to the contrary notwithstanding. Such unpaid
wages and monetary claims shall be paid in full
before claims of the Government and other
creditors may be paid."
"The amendment expands worker preference to
cover not only unpaid wages but also other
monetary claims to which even claims of the
Government must be deemed subordinate.
xxx
"Notably, the terms 'declaration' of bankruptcy
or 'judicial' liquidation have been eliminated.
Does this mean then that liquidation proceedings
have been done away with?
"We opine in the negative, upon the following
considerations:
"1. Because of its impact on the entire system of
credit, Article 110 of the Labor Code cannot be
viewed in isolation but must be read in relation
to the Civil Code scheme on classification and
preference of credits.
Code
provisions on classification of credits and the
into
harmony, so also must the kindred provisions of
the Labor Law be made to harmonize with those
laws.
a principal
objective should be to effect an equitable
distribution of the insolvent's property among his
creditors. To accomplish this there must first be
some proceeding where notice to all of the
insolvent's creditors may be given and where the
claims of preferred creditors may be bindingly
adjudicated (De Barretto vs. Villanueva).
"4. A distinction should be made between a
preference of credit and a lien. A preference
applies only to claims which do not attach to
specific properties. A lien creates a charge on a
particular property. The right of first preference
as regards unpaid wages recognized by Article
110 does not constitute a lien on the property of
the insolvent debtor in favor of workers. It is but
a preference of credit in their favor, a preference
in application. It is a method adopted to
determine and specify the order in which credits
should be paid in the final distribution of the
proceeds of the insolvent's assets. It is a
UP LAW BAROPS 2007
ONE UP
62 of 132

from the nature of the
limited to to the
right to
full
"would claims these since
Labor National v. Chua
work to duty urgent and primary
the and
bargaining collective self-organization,
promote
Ar t XI I I Sec 3, 1987 Consti tuti on
b. It shall be unlawful for any person to demand
Ar t . 111.
Attorney' s fees
Ar t . 128.
insolvent corporation. The present
proceeding,
Relations
this Court. Ubi lex non distinguit nec nos distinguere
debemos. Allowing labor cases to proceed clearly
Rubberworl d (Phi l s. ), I nc. v. NLRC (99)
thereafter inventoried,

Part II : Labor Standards Law
Labor Standards
a first preference in the discharge of the funds of
the judgment debtor.
"6. Even if Article 110 and its Implementing
Rule, as amended, should be interpreted to
mean 'absolute preference,' the same should be
given only prospective effect in line with the
cardinal rule that laws shall have no retroactive
effect, unless the contrary is provided (Article 4,
Civil Code). Thereby, any infringement on the
constitutional guarantee on non-impairment of
the obligation of contracts (Section 10, Article
III, 1987 Constitution) is also avoided. In point
of fact, DBP's mortgage credit antedated by
several years the amendatory law, RA No. 6715.
To give Article 110 retroactive effect would be to
wipe out the mortgage in DBP's favor and
expose it to a risk which it sought to protect
itself against by requiring a collateral in the form
of real property.
"In fine, the right to preference given to workers
under Article 110 of the Labor Code cannot exist
in any effective way prior to the time of its
presentation in distribution proceedings. It will
find application when, in proceedings such as
insolvency such unpaid wages shall be paid in
full before the claims of the Government and
other creditors' may be paid. But, for an orderly
settlement of a debtor's assets, all creditors
must be convened, their claims ascertained and
preferences
determined in the course of judicial proceedings
which have for their object the subjection of the
property of the debtor to the payment of his
debts or other lawful obligations. Thereby, an
orderly determination of preference of creditors'
claims is assured (Philippine Savings Bank vs.
Lantin); the adjudication made will be binding on
all parties-in-interest, since those proceedings
are proceedings in rem; and the legal scheme of
classification, concurrence and preference of
credits in the Civil Code, the Insolvency Law,
and the Labor Code is preserved in harmony."
RECEIVERSHIP
Article 217 of the Labor Code should be
construed not in isolation but in harmony with PD
902-A, according to the basic rule in statutory
construction that implied repeals are not favored.
Indeed, it is axiomatic that each and every statute
must be construed in a way that would avoid conflict
with existing laws. True, the NLRC has the power to
hear and decide labor disputes, but such authority is
deemed suspended when PD 902-A is put into effect
by the Securities and Exchange Commission.
The preferential right of workers and employees
under Article 110 of the Labor code may be invoked
only upon the institution of insolvency or judicial
liquidation proceeding. Indeed, it is well-settled that
"a declaration of bankruptcy or a judicial liquidation
must be present before preferences over various
money claims may be enforced." But debtors resort
to preference of credit giving preferred creditors
the rights to have their claims paid ahead of those of
other claimants only when their assets are
insufficient to pay their debts fully. The purpose of
rehabilitation proceedings is precisely to enable the
company to gain a new lease on life and thereby
allow creditors to be paid their claims from its
earnings. In insolvency proceedings, on the other
hand, the company stops operating, and the claims
of creditors are satisfied from the assets of the
case involves the
rehabilitation, not the liquidation, of petitioner-
corporation. Hence, the preference of credit granted
to workers or employees under Article 110 of the
Labor Code is not applicable.
17.18 WAGE RECOVERY AND ATTORNEYS FEES
Visitorial and enforcement powers
Ar t . 129.
Recovery of wages, si mpl e money cl ai ms and ot her
benefits In connection with Art. 217.
Jurisdiction of Labor Arbiters and the Commission
The law is clear: upon the creation of a
management committee or the appointment of a
rehabilitation receiver, all claims for actions "shall be
suspended accordingly." No exception in favor of
labor claims is mentioned in the law. Since the law
makes no distinction or exemptions, neither should
a. In cases of unlawful withholding of wages, the
culpable party may be assessed attorney's
fees equivalent to 10 % of the amount of
wages recovered.
defeats the purpose of the automatic stays and
severally encumbers the management committee's
and resources. The said committee would need to
defend against these suits, to the detriment of its
or accept, in any judicial or administrative
proceedings for the recovery of the wages,
attorneys fees, which exceed 10% of the
amount of wages recovered.
towards
rehabilitating the corporation and making it viable
again. The rule otherwise would open the floodgates
to other similarly situated claimants and forestall if
not defeat the rescue efforts. Besides, even if the
NLRC awards the claims of private respondents, as it
did, its ruling could not be enforced as long as the
petitioner is under the management committee.
SECTI ON 18 MI NI MUM WAGES
18. 01 WAGES AND THE CONSTI TUTI ON
Commission, we ruled that labor claims cannot
The State shall afford full protection to labor,
local and overseas, organized and unorganized, and
spawn
needless controversy, delays, and confusion." With
more reason, allowing labor claims to continue in
spite of a SEC suspension order in a rehabilitation
case would merely lead to such results.
employment
employment opportunities for all.
It shall guarantee the rights of all workers to
and
negotiations, and peaceful concerted activities,
including the right to strike in accordance with
law. They shall be entitled to security of tenure,
UP LAW BAROPS 2007
ONE UP
proceed independently of a bankruptcy liquidation
63 of 132

In
and equality of
- head)
Note

and exercise g. To
with
their

Prohibition against Injunction (Art. 126)
Secretariat composed of
Secretariat
Composition of the Commission:
technical
employment,
prescribed
Powers and Functions of the Commission (Art. 121)
Created thru Art. 120
Phi l . Apparel Workers Uni on v. NLRC (81)
Peopl e v. Gatchal i an (59)
mutual
industrial peace.
national as the
body
a. To
Director(as 1. Executive
consultative act
advisory
compliance

Part II : Labor Standards Law
Labor Standards
humane conditions of work, and a living wage. They
shall also participate in policy and decision-making
processes affecting their rights and benefits as may
be provided by law.
The State shall promote the principle of shared
responsibility between workers and employers and
the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce
therewith
b. To formulate policies and guidelines on wages,
incomes and productivity improvement at the
enterprise, industry and national levels;
c. To prescribe rules and guidelines for the
determination of appropriate minimum wage
and productivity measures at the regional,
provincial or industry levels;
d. To review regional wage levels set by the
Regional Tripartite Wages and Productivity
Boards to determine if these are in accordance
BENEFI CI ARI ES
guidelines
development plans;
"The establishment of the maximum wage
benefits directly the low-paid employees, who now
receive inadequate wages on which to support
themselves and their families. It benefits all wage
earners indirectly by setting a floor below which their
remuneration cannot fail. It raises the standards of
competition among employers, since it would protect
the fair-minded employer who voluntarily pays a
wage that supports the wage earner from the
competition of the employer, who operates at lower
cost by reasons of paying his workers a wage below
subsistence. If, in fact, the employer cannot pay a
subsistence wage. then he should not continue his
operation unless he improves his methods and
equipment so as to make the payment of the
minimum wage feasible for him; otherwise the
employer is wasting the toil of the worker and the
material resources used in the employment. Second
methods of operation, progressive and fair-minded
management, and an adequate minimum wage go
hand in hand." (Explanatory Note to H.B. No. 1476)
e. To undertake studies, researches and surveys
necessary for the attainment of its functions
and objectives, and to collect and compile data
and periodically disseminate information on
wages and productivity and other related
information, including, but not limited to,
cost-of-living,
investments and returns;
f. To review plans and programs of the Regional
Tripartite Wages and Productivity Boards to
determine whether these are consistent with
national development plans;
administrative
supervision over the Regional Tripartite Wages
and Productivity Boards;
h. To call, from time to time, a national tripartite
conference of representatives of government,
workers, and employers for the consideration
of measures to promote wage rationalization
and productivity; and
i. To exercise such powers and functions as may
be necessary to implement this Act.
EFFECT INABI LI TY PAY
The stability of the economy does not depend
on the employer alone, but on government economic
policies concerning productivity in all areas and not
only in the clothing or textile industries. There is not
even an intimation that the company is losing. It is
the living wage of the workers which is the basis of a
stable economy. If the company cannot pay a living
wage, it has no business operating at the expense of
the lives of its workers from the very start.
Secretary of Labor and Employment as ex-
officio chairman
Director-General of the NEDA as ex-officio vice-
chairman
2 members each from workers and employer
sectors who shall be appointed by the President
upon recommendation of the Secretary of
Labor
to be made on the basis of the list of
nominees submitted by the workers &
employers sectors, respectively, and
who shall serve for a term of 5 years.
: members of the Commission representing
labor and management shall have the same rank,
emoluments & other benefits as those prescribed
by law for labor and mgt reps in the ECC
The Executive Director of the Commission
AGENCIES
MACHI NERY
shall
Commission.
Commission
member
NATI ONAL WAGES AND PRODUCTI VI TY COMMI SSI ON
attached to the DOLE for policy and program
coordination.
same
rank/salary/benefits as a Dept Asst. Secretary
2. Deputy Directors, appointed by the Pres. upon
recom. of the SOLE - same rank, salary,
benefits and other emoluments as that of a
Bureau Director.
and
to the President of the
Philippines and Congress on matters relating
to wages, incomes and productivity;
No preliminary or permanent injunction or
temporary restraining order may be issued by any
COURT, TRIBUNAL OR OTHER ENTITY against
any proceedings before the Commission or the
Regional Boards.
UP LAW BAROPS 2007
ONE UP
64 of 132
to foster
18. 02 FOR WAGE FI XI NG

and national
labor costs,


also be a of the
The shall be assisted by a
the
level, the
person, Any
of cost c. The
the of
and workers the by


orders, wage
their in
have shall Boards
shall The
employment
including managerial
corporation company,
by the Regional Board shall be as nearl y
adequat e as is economi cal l y feasi bl e t o
mai ntai n the mi ni mum standards of l i vi ng
necessary f or t he heal th, effici ency and
general well -being of the employees wi thi n
STANDARDS/ CRI TERI A FOR MI NI MUM WAGE FI XI NG
( ART. 124):
subject to gui deli nes issued by the Commissi on." In
minimum prescribed coverage
Nasi pi t Lumber Co. v. NLRC(98)
employers
corresponding
respective applicable
Regional
Powers and Functions in their respective territorial
jurisdiction (Art. 122)
determine
the respective
determining Factors
wages:
living
increases therein;

Part II : Labor Standards Law
Labor Standards
REGI ONAL TRI PARTI TE WAGES
BOARD
Created thru Art. 122
AND PRODUCTI VI TY
under Article 122 (b) of the Labor Code, such orders
are subject to the guidelines prescribed by the
NWPC. One of these guidelines is the "Rules on
Minimum Wage Fixing," which was issued on June 4,
1990. Rule IV, Section 2 thereof, allows the RTWPB
to issue wage orders exempting enterprises from the
referred to as Regional Boards in all regions,
including autonomous regions as may be
established by law.
Commission
offices/headquarters
Regional Boards.
wages.
However, the NWPC has the power not only to
prescribe guidelines to govern wage orders, but also
to issue exemptions therefrom, as the said rule
provides that "[w]henever a wage order provides for
exemption, applications thereto shall be filed with
the appropriate Board which shall process the same,
a. To develop plans, programs and projects
relative to wages, incomes and productivity
improvement for their respective regions;
to be implemented thru the respective
regional offices of the DOLE within their
territorial jurisdiction
short, the NWPC lays down the guidelines which the
RTWPB implements.
18. 03 AREA MI NI MUM WAGES AND CRI TERI A
technical
supervision over the regional office of the
DOLE with respect to the implementation of
said plans, programs and projects.
b. To determine and fix minimum wage rates
The regional minimum wage to be established
regions,
provinces or industries therein and to issue the
subject
guidelines issued by the Commission;
c. To undertake studies, researches, and surveys
necessary for the attainment of their functions,
objectives and programs and to collect and
compile data on wages, incomes, productivity
and other related information and periodically
disseminate the same;
d. To coordinate with the other Regional Boards
as may be necessary to attain the policy and
intention of this Code;
e. To receive, process and act on applications for
exemption from prescribed wage rates as may
be provided by law or any Wage Order; and
f. To exercise such other powers and functions
as may be necessary to carry out their
mandate under this Code.
Composition of each Regional Board :
Regional Director of DOLE as chairman
Regional Directors of NEDA & DTI as vice-
chairman
2 members each from workers and employers
sectors who shall be appointed by the President
upon recommendation of the SOLE to be made
on the basis of the list of nominees submitted
sectors,
respectively, and who shall serve for a term of
5 years.
Each Regional Board to be headed by its
chairman shall be assisted by a Secretariat. (As
amended by RA 6727)
FUNCTI ONS
The Labor Code, as amended by RA 6727 grants
the NWPC, not the RTWPB, the power to "prescribe
the rules and guidelines" for the determination of
minimum wage and productivity measures. While
the RTWPB has the power to issue wage orders
the framework of the national economic and
social development program.
minimum
a. The demand for living wages;
b. Wage adjustment vis-a-vis the consumer
price index;
changes
d. The needs of workers and their families;
e. The need to induce industries to invest in
the countryside;
f. Improvements in standards of living;
g. The prevailing wage levels;
h. Fair return of the capital invested and
capacity to pay of employers;
i. Effects in employment
generation and
family income; and
j. The equitable distribution of
income and
wealth along the
imperatives of economic
and social development.
The wages prescribed in accordance with the
provisions of this Title shall be the standard
prevailing minimum wages in every region.
These wages shall include wages varying with
industries, provinces or localities if in the
judgment of the Regional Board conditions
make such local differentiation proper and
necessary to effectuate the purpose of this
Title.
,
partnership or any other entity engaged in
business shall file and register annually with
the appropriate Regional Board, Commission
and the National Statistics Office an itemized
listing of their labor component specifying the
names of their workers and employees below
learners,
apprentices and disabled/handicapped workers
who were hired under the terms prescribed in
contracts,
corresponding salaries and wages.
WAGE DISTORTION
UP LAW BAROPS 2007
ONE UP
65 of 132



of
to

in regional
and or
and their

from days 10 within

the
the
and rates salary or
Commission
warrant, conditions so
Ar t . 123
obliterate effectively
between
Wage di storti on -
The pendency of a dispute arising from a
wage distortion shall not del ay the
Whenever

Part II : Labor Standards Law
Labor Standards
Where the application of any prescribed
wage increase by virtue of a law or wage
order issued by any regional board results
in distortions of wage structure within an
establishment, the employer and the union
shall negotiate to correct the distortions.
Any dispute arising from wage distortions
shall be resolved through the grievance
procedure under their collective bargaining
agreement and, if it remains unresolved,
through voluntary arbitration.
Unless otherwise agreed by the parties
in writing, such dispute shall be decided
by the voluntary arbitrator or panel of
voluntary arbitrators within 10 calendar
days from the time said dispute was
referred to voluntary arbitration.
In cases where there are no collective
bargaining agreements or recognized labor
unions, the employers and workers shall
endeavor to correct such distortions.
Any dispute arising therefrom shall be
settled through the National Conciliation
and Mediation Board and, if it remains
unresolved after 10 calendar days of
conciliation, shall be referred to the
appropriate branch of the National Labor
Relations Commission (NLRC).
It shall be mandatory for the NLRC to
conduct continuous hearings and decide
the dispute within 20 calendar days
from the time said dispute is submitted
for compulsory arbitration
Any such wage order shall take effect after 15
days from its complete publication in at least 1
newspaper of general circulation in the region.
In the performance of its wage-determination
functions, the Regional Board shall conduct
public hearings/consultations, giving notices to
employees & employers' groups, provincial,
city and municipal officials and other interested
parties.
Any party aggrieved by the Wage Order issued
by the Regional Board may appeal to the
the
publication of such order. It shall be mandatory
for the Commission to decide such appeal
within 60 days from the filing thereof.
The filing of appeal does not stay the order
unless the person appealing shall file with the
Commission, an undertaking with a surety or
sureties for the payment to the employees
affected by the order of the corresponding
increase, in the event such order is affirmed.
(As amended by RA 6727)
applicability of any increase in prescribed
wage rates pursuant to provisions of law or
wage order.
a situation where an
increase in prescribed wage rates results in
the elimination or severe contraction of
intentional quantitative differences in wage
among
employee groups in an establishment as to
distinctions
embodied in such wage structure based on
skills, length of service, or other logical
bases of differentiation.
All workers paid by result, including those who
are paid on piecework, takay, pakyaw, or task
basis, shall receive not less than the prescribed
wage rates per eight 8 hours of work a day, or
a proportion thereof for working less than 8
hrs.
All recognized learnership and apprenticeship
agreements shall be considered automatically
modified insofar as their wage clauses are
concerned to reflect the prescribed wage rates.
18. 04 WAGE ORDER
the
Regional Board shall investigate and study all
pertinent facts; and based on the standard and
criteria herein prescribed, shall proceed to
determine whether a Wage Order should be
issued.
UP LAW BAROPS 2007
ONE UP
66 of 132









rates wage
at arrived those or studies, motion and
bar, it
and Board
( 91) NWPC
least at in
public
wage the
for rules,

Lambo v. NLRC (99)
prescribed minimum ordinary
Pul p and Paper, I nc. v. NLRC (97)
general circulation in the region. It is a
the Labor Code also provides that in
capacity of employers to pay are, among
petitioner deprived Regional
RO2-02-A In passing
Cagayan Sugar Milling Co. v. Secretary of Labor
( 9 8 )
publication complete
Conduct
NOTES:
Composition
corresponding b. Issue
c. REMEMBER,
Agencies:
1. NWPC
a. Prescribe

Part II : Labor Standards Law
Labor Standards
MI NI MUM WAGE FI XI NG categorical terms for an increase in statutory
minimum wage of workers in the region. Hence, the
guidelines
determination of appropriate
the
minimum
subsequent passage of RO2-02-A providing instead
for an across the board increase in wages did not
clarify the earlier Order but amended the same. In
truth, it changed the essence of the original Order.
wage and what factors should
considered
without going through the
process of public consultation and hearings, the
b. Review Regular wage levels set by RTWPB
if they are in accordance to prescribed
guidelines
NWPC
minimum wage.
RTWPB
other
employers of due process as they were not given the
opportunity to ventilate their positions regarding the
proposed wage increase. In wage-fixing, factors
such as fair return of capital invested, the need to
induce industries to invest in the countryside and the
Determine and fix the minimum wage
rates applicable to the region, provinces,
industries
order
subject to guidelines issued by the NWPC
others,
taken into consideration. Hence, our legislators
provide for the creation of Regional Tripartite Boards
composed of representatives from the government,
the workers and the employers to determine the
appropriate wage rates per region to ensure that all
sides are heard. For the same reason, Article
TRIPARTITE:
employee and government
Functions are delineated
Employer, the
performance of their wage-determining functions,
the Regional Board shall conduct public hearings and
consultations, giving notices to interested parties.
Procedure: Moreover, it mandates that the Wage Order shall
take effect only after publication in a newspaper of
RTWPB
When conditions warrant, investigate and
study pertinent facts, based criteria (Art.
124)
fundamental
rule, borne out of a sense of fairness, that the public
is first notified of a law or wage order-before it can
be held liable for violation thereof. In the case at
hearings/consultations,
notice to employer and employees groups,
provinces, city, municipal officials and
other interested parties
Decide to ISSUE or NOT TO ISSUE a wage
order
If it decides to ISSUE a wage order, the
wage order takes effect after 15 days from
is indisputable that there was no public
consultation or hearing conducted prior to the
passage of RO2-02-A. Neither was it published in a
newspaper of general circulation as attested in the
February 3, 1995 minutes of the meeting of the
Regional Wage Board that the non-publication was
by consensus of all the board members. Hence,
RO2-02-A must be struck down for violation of
1
newspaper of general circulation in the
region
Appeal wage order to NWPC within 10
calendar days; mandatory for the NWPC to
decide within 60 calendar days from filing
Filing of an appeal DOES NOT STAY order
unless appellant filed an undertaking with
surety, sureties, guarantees payment of
employees if the wage order is affirmed
METHODS OF FI XI NG
Employers Confederation of the Philippines v.
Article 123 of the Labor
PIECE WORKER
In the absence of wage rates based on time and
motion studies determined by the labor secretary or
submitted by the employer to the labor secretary for
his approval, wage rates of piece-rate workers must
be based on the applicable daily minimum wage
determined by the Regional Tripartite Wages and
Productivity Commission. To ensure the payment of
fair and reasonable wage rates, Article 101 of the
Labor Code provides that the Secretary of Labor
shall regulate the payment of wages by results,
including pakyao, piecework, and other noontime
It is the Court's thinking, reached after the
Court's own study of the Act, that the Act is meant
to rationalize wages, that is, by having permanent
boards to decide wages rather than leaving wage
determination to Congress year after year and law
after law. The Court is not of course saying that the
Act is an effort of Congress to pass the buck, or
worse, to abdicate its duty, but simply, to leave the
question of wages to the expertise of experts.
work. The same statutory provision also states that
the wage rates should be based, preferably, on time
in
consultation with representatives of workers' and
employers' organizations. In the absence of such
prescribed wage rates for piece-rate workers, the
by
Regional Tripartite Wages and Productivity Board
should apply.
VALI DI TY
There is no dispute that petitioners were
There was no ambiguity in the provision of
Wage Order RO2-02 as it provided in clear and
employees of private respondents although they
were paid not on the case of time spent on the
job but according to the quantity and the quality
of work produced by them. There are two
UP LAW BAROPS 2007
ONE UP
67 of 132
be
does not set the
2.
a.
123 of
Code.
One levels. various at
"Wage ruled: Court
among which
to as an in groups
a declare
severe OR

visualizes positions
presupposes distortion
Prubankers Assn. v. Prudential Bank and Co.
( 9 9 )
distinctions establishes
establishment
Nati onal Federati on of Labor v. NLRC (94)
Associ ated Labor Uni on v. NLRC (94)
Employee lock-out;
contraction
Cause: implementation of a wage order
increase prescribe minimum wage rate
Result: 2.
Elimination
2. Neither
weapons

Part II : Labor Standards Law
Labor Standards
categories of employees paid by results: 91) those
whose time and performance are supervised by the
employer. (Here there is an element of control and
supervision over the manner as to how the work is
to be performed. A piece-rate worker belongs to
this category especially if he performs his work in
the company premises.); and (2) those whose time
and performance are unsupervised. (Here, the
employers control is over the result of the work.
Workers on pakyao and takay basis belong to this
group.) Both classes of workers are paid per unit
accomplished. Piece-rate payment is generally
practices in garment factories where work is done in
the company premises, while payment on pakyao
and takay basis is commonly observed in the
agricultural industry, such as in sugar plantations
where the work is performed in bulk or in volumes
difficult to quantify.
XXX The term wage is broadly defined in Art.
97 of the Labor Code as remuneration or earnings,
capable of being expressed in terms of money
whether fixed or ascertained on a time, task, piece
or commission basis.
strikes, lockouts, or other concerted activities of the
employees or management.
A statutory definition of "wage distortion" is now
found in Article 124 of the Labor Code as amended
by Republic Act No. 6727.
xxx As used herein, a wage distortion shall
mean a situation where an increase in prescribed
wage rates results in the elimination or severe
contraction of intentional quantitative differences in
wage or salary rates between and among employee
effectively
obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other
logical bases of differentiation."
From the above quoted material, it will be seen
that the concept of wage distortion assumes an
existing grouping or classification of employees
such
employees on some relevant or legitimate basis.
This classification is reflected in a differing wage rate
for each of the existing classes of employees. The
wage distortion anticipated in Wage Orders Nos. 3,
WAGE DI STORTI ON
Wage Distortion
4, 5 and 6 was a "distortion" (or "compression")
which ensued from the impact of those Wage Orders
upon the different wage rates of the several classes
of employees. Thus distortion ensued where the
result of implementation of one or another of the
of
intentional quantitative wages/salary rates
between or among employees
Effectively obliterates distinctions on wage
structure which was based on skills, length
of service or other logical differences.
Procedure for Settlement
a. Organized Establishment
1. CBA Grievance Procedure
2. Voluntary Arbitration
b. Unorganized Establishment
1. Employer and employee, with aid of
National Conciliation Mediation Board
(NCMB) settles conciliation mediation
2. NLRC Compulsory Arbitration
NOTES:
Both the employer and employee cannot
use economic weapons (Employer cannot
several Wage Orders was the total elimination or the
severe reduction of the differential or gap existing
between the wage rates of the differing classes of
employees. 10
It is important to note that the remedy
contemplated in the Wage Orders, and now in Article
124 of the Labor Code, for a wage distortion
consisted of negotiations between employer and
employees for the rectification of the distortion by
re-adjusting the wage rates of the differing classes
of employees. As a practical matter, this ordinarily
meant a wage increase for one or more of the
affected classes of employees so that some gap or
differential would be re-established. There was no
legal requirement that the historical gap which
existed before the implementation of the Wage
Orders be restored in precisely the same form or
amount.
cannot
declare a strike) because the law has
provided for a procedure for settling
Cases say that:
1. Parties are encouraged to settle the
dispute voluntarily
economic
3. Original decree of differential need not
be restored
4. NLRC has no authority to impose
directly or indirectly under guise of
rectifying a wage distortion upon the
The statutory definition of wage distortion is
found in Article 124 of the Labor Code, as amended
by Republic Act No. 6727,
Elaborating on this statutory definition, this
a
classification of positions and ranking of these
a
hierarchy of positions with corresponding ranks
basically in terms of wages and other emoluments.
Where a significant change occurs at the lowest level
of positions in terms of basic wage without a
corresponding change in the other level in the
employer
classification
hierarchy of positions, negating as a result thereof
the distinction between one level of position from
the next higher level, and resulting in a parity
The law recognizes the validity of negotiated
wage increases to correct wage distortions. The
legislative intent is to encourage the parties to seek
solution to the problem of wage distortions through
voluntary negotiation or arbitration, rather than
between the lowest level and the next higher level or
rank, between new entrants and old hires, there
exists a wage distortion. . . . . The concept of a
wage distortion assumes an existing grouping or
classification of employees which establishes
distinctions among such employees on some
UP LAW BAROPS 2007
ONE UP
68 of 132
1.
3.
party can use
a new scheme of
or
to
of
labor to
and
full
single that event, any
by or the prohibit
by or
into ripened thereto, made
law. by as wage
holding
agricultural, between 12mn & 6am
between 10pm & 6am
Ar t . 130.
Ni ght work prohi bition. - No woman, regardless of
Book I I I , Rul e XI I I , Sec. 1, Omni bus Rul es
promote and
equality
protection
employment
Philippine Tel egraph and Telephone Co. v.
NLRC ( 97)
Art II Sec 14, 1987 Consti tuti on
Prubankers Assn. v. Prudential Bank and Co.
( 9 9 )
elimination diminution
eliminated discontinued diminished,
pursuant
Davao Fruits Corporation v. Associ ated Labor
Uni ons ( 93)
Ar t . 100
Prohibition agai nst el i mi nati on or di mi nuti on of
benefits
parity in the salary rates of different pay classes
wage parity between employees in different rungs of
contemplated distortion
employees between in wages
b. In any commercial

Part II : Labor Standards Law
Labor Standards
relevant or legitimate basis. This classification is
reflected in a differing wage rate for each of the
existing classes of employees"
Wage distortion involves four elements:
1. An existing hierarchy of positions with
corresponding salary rates
2. A significant change in the salary rate of a
lower pay class without a concomitant
increase in the salary rate of a higher one
3. The elimination of the distinction between
the two levels
4. The existence of the distortion in the same
region of the country
Contrary to petitioner's postulation, a disparity
SECTI ON 19 - WOMEN WORKERS
19. 01 WOMEN AND THE CONSTI TUTI ON
The State recognizes the role of women in nation-
building, and shall ensure the fundamental equality
before the law of women and men.
similar
positions but in different regions does not constitute
WOMEN WORKERS
As
previously enunciated, it is the hierarchy of positions
and the disparity of their corresponding wages and
other emoluments that are sought to be preserved
by the concept of wage distortion. Put differently, a
wage distortion arises when a wage order engenders
the organizational ladder of the same establishment.
It bears emphasis that wage distortion involves a
which, as a result, eliminates the distinction between
the different ranks in the same region.
18.05 EFFECT OF BENEFITS
The Constitution, cognizant of the disparity in
rights between men and women in almost all phases
of social and political life, provides a gamut of
protective provisions. To cite a few of the primordial
ones, Section 14, Article II on the Declaration of
Principles and State Policies, expressly recognizes
the role of women in nation-building and commands
the State to ensure, at all times, the fundamental
equality before the law of women and men. Corollary
thereto, Section 3 of Article XIII (the progenitor
whereof dates back to both the 1935 and 1973
Constitution) pointedly requires the State to afford
Nothing in this Book shall be construed to
eliminate or in any way diminish supplements or
other employee benefits being enjoyed at the time
of the promulgation of this Code.
full
employment
opportunities for all, including an assurance of
entitlement to tenurial security of all workers.
Similarly, Section 14 of Article XIII mandates that
the State shall protect working women through
provisions for opportunities that would enable them
to reach their full potential.
19.02 COVERAGE
A company practice favorable to the employees
had indeed been established and the payments
benefits
enjoyed by them. And any benefit and supplement
being enjoyed by the employees cannot be reduced,
This Rule shall apply to all employers, whether
operating for profit or not, including educational,
religious and charitable institutions,
the
employer, by virtue of Section 10 of the Rules and
Regulations Implementing P.D. No. 851, and Article
100 of the Labor Code of the Philippines, which
the
employer of the employees' existing benefits
(Tiangco v. Leogardo, Jr. ).
EXCEPT:
Government
Government-owned or controlled corporations
and
Employers of household helpers and persons in
their personal service insofar as such workers
are concerned.
18. 03 PROHI BI TED ACTS
Petitioner also insists that the Bank has adopted
a uniform wage policy, which has attained the status
of an established management practice; thus, it is
estopped from implementing a wage order for a
specific region only. We are not persuaded. Said
nationwide uniform wage policy of the Bank had
been adopted prior to the enactment of RA 6727.
After the passage of said law, the Bank was
mandated to regionalize its wage structure. Although
the Bank implemented Wage Order Nos. NCR-01 and
NCR-02 nationwide instead of regionally even after
the effectivity of RA 6727, the Bank at the time was
still uncertain about how to follow the new law. In
instance
constitutive of "management practice."
NI GHT WORK AND EXCEPTI ON
age, shall be employed or permitted or suffered to
work, with or without compensation:
a. In any industrial undertaking or branch thereof
of the following day
non-industrial
undertaking or branch thereof, other than
following day.
c. In any agricultural undertaking at night
time unless she is given a period of rest of
not less than 9 consecutive hours
UP LAW BAROPS 2007
ONE UP
69 of 132

cannot be
of the
.
or bar clinic, lounge,
among
and develop shall
age
actually to or or
a as requi re
claims include may which claims, money
Labor
m
r
massage
Ar t . 138.
Classification of certain women workers. - Any
planning
Employment
Ar t . 134.
Fami ly pl anni ng
planning.
minimum appropriate 4. Determine
Ar t . 132.
Facilities for women. - The Secretary of Labor and
Ar t . 137.
Prohibited acts. - (a) It shall be unlawful for any
separated resigned
conditi on
Ar t . 136.
Stipulation against marriage- It shall be unlawful for
Ar t . 135.
Discrimination prohibited It shall be unlawful for
g. Under other a
members of the f
c. Where the work is n
b. In case of u
Ar t . 131.
Exceptions
amily
an employer t o
Secretary of
a. In cases of actual or impending e
of
empl oyment or conti nuati on of empl oyment
caused by serious accident, fire,
services; incentives
and
appropriate regulations.
d. Where

Part II : Labor Standards Law
Labor Standards
dismiss,
discharge, discriminate or otherwise prejudice a
woman employee merely by reason of her marriage.
mergencies
flood,
typhoon, earthquake, epidemic or other
disasters or calamity, to prevent loss of life or
property or in cases of force majeure or
imminent danger to public safety;
rgent work to be performed on
machineries, equipment or installation, to
avoid serious loss which the employer would
otherwise suffer;
ecessary to prevent
serious loss of perishable goods;
employee
esponsible position of managerial or technical
nature, or where the woman employee has
been engaged to provide health and welfare
services;
e. Where the nature of the work requires the
GENERAL
employer:
1. To deny any woman employee the benefits
provided for in this Chapter or to discharge
any woman employed by him for the purpose
of preventing her from enjoying any of the
benefits provided under this Code;
2. To discharge such woman on account of her
pregnancy, while on leave or in confinement
due to her pregnancy; or
3. To discharge or refuse the admission of such
woman upon returning to her work for fear
that she may again be pregnant.
anual skill and dexterity of woman worker
and the same cannot be performed with equal
efficiency by male worker;
f. Where the women employees are immediate
FACI LI TI ES
operating
establishment or undertaking; and
nalogous cases exempted by the
Employment
DI SCRI MI NATI ON
any employer to discriminate against any woman
employee with respect to terms and conditions of
employment solely on account of her sex.
Employment shall establish standards that will
ensure the safety and health of women employees.
In appropriate cases, he shall by regulations require
any employer to:
1. Provide seats proper for women and permit
them to use such seats when they are free
from work and during working hours, provided
they can perform their duties in this position
without detriment to efficiency;
2. Establish separate toilet rooms and lavatories
for men and women and provide at least a
dressing room for women;
3. Establish a nursery in a workplace for the
benefit of the woman employees therein; and
The following are acts of discrimination:
1. Payment of a lesser compensation, including
wage, salary or other form of remuneration
and fringe benefits, to a female employee as
against a male employee, for work of equal
value; and
2. Favoring a male employee over a female
employee with respect to promotion, training
opportunities, study and scholarship grant
solely on account of their sexes.
Criminal liability for the willful commission of
any unlawful acts as provided in this article or any
violation of the rules and regulations issued pursuant
to Sec. 2 hereof shall be penalized as provided in
Articles 288 and 289 of this Code: Provided, That
the institution of any criminal action under this
provision shall not bar the aggrieved employee from
filing an entirely separate and distinct action for
for
damages and other affirmative reliefs. The action
hereby authorized shall proceed independently of
each other.
and
other standards for retirement or termination
in special occupations such as those of flight
attendants and the like.
f or f ami l y
a. Establishments which are required by law to
maintain a clinic or infirmary shall provide free
family planning services to their employees
which shall include, but not limited to, the
application or use of contraceptive pills and
intra-uterine devices.
b. In coordination with other agencies of the
government engaged in the promotion of
family planning, the Department of Labor and
prescribe
incentive bonus schemes to encourage family
female
establishment or enterprise.
SPECI AL CLASSI FI CATI ON, SPECI AL
MARRI AGE WOMEN WORKERS
woman who is permitted or suffered to work with or
without compensation in any night club, cocktail
that a woman employee shall not get married, or to
stipulate expressly or tacitly that upon getting
married a woman employee shall be deemed
similar
establishment, under the effective control or
supervision of the employer for a substantial
UP LAW BAROPS 2007
ONE UP
70 of 132

the woman holds a
the
in
19. 04
workers in any
19. 05
or hostile
in acts c. The
would acts
rights
b. The
way any
or
which
an by
or for
POLI CY
HE WHOM WI TH
Sec. 2:
of the
intimidating,
would
hostile,
above
intimidating,
above
employees
would
diminish
in
deprive
employee, employer,
students employment, applicants
undergoing
SPOUSE LEGI TI MATE
to the contrary, every MARRIED male employee in
semester preceding immediately
Sec. 14 A RA 8282
EDUCATI ON TRAI NI NG

Part II : Labor Standards Law
Labor Standards
period of time as determined by the Secretary of
Labor and Employment, shall be considered as an
employee of such establishments for purposes of
labor and social legislation.
those
training, instruction or education.
Towards this end, all forms of sexual harassment in
the employment, education or training environment
are hereby declared unlawful.
19. 06 MATERNI TY LEAVE
Work, Education
Harassment Defined
or Training-related Sexual
A female employee who has paid at least three (3)
monthly contributions in the twelve-month period
Work, education or training-related sexual
harassment is committed
her
childbirth, or miscarriage shall be paid a daily
maternity benefit equivalent to one hundred percent
(100%) of her average salary credit for sixty (60)
days or seventy-eight days in case of caesarean
delivery subject to the following conditions:
d. That the employee shall have notified her
employer of her pregnancy and the probable
date of her childbirth which notice shall be
transmitted to the SSS in accordance with the
rules and regulations it may provide.
e. The full payment shall be advanced by the
employer within thirty (30) days from the filing
of the maternity leave application.
f. That payment of daily maternity
benefits shall
be a bar to the recovery
of sickness benefits
provided by this Act for
the same period for
which daily maternity benefits have been
received.
g. That the maternity benefits provided under
this section shall be paid only for the first four
(4) deliveries or miscarriages.
h. That the SSS shall immediately reimburse the
employer of one hundred percent (100%) of
the amount of maternity benefits advanced to
the employee by the employer upon receipt of
satisfactory proof of such payment and legality
thereof;
i. That if an employee should give
birth or suffer
miscarriage without the
required contributions
having been remitted for
her by her employer
to the SSS, or without the
latter having been
previously notified by the
employer of time of
the pregnancy, the
employer shall pay to the
SSS damages equivalent
to the benefits which
said employee member
would otherwise have
been entitled to.
Paterni t y Leave Act of 1996 (RA 8187)
Notwithstanding any law, rules and regulations
the private and public sectors shall be entitled to a
paterni t y l eave of seven (7) days wi t h f ul l pay
FOR THE FI RST FOUR (4) DELI VERI ES OF THE
I S
COHABI TI NG. The male employee applying for
paternity leave shall notify his employer of the
pregnancy of his legitimate spouse and the expected
date of such delivery.
For the purposes of this Act, delivery shall
include childbirth or any miscarriage.
19.07 SEXUAL HARASSMENT
manager,
supervisor, agent of the employer, teacher,
instructor, professor, coach, trainor or any
other person who, HAVING AUTHORITY,
INFLUENCE OR MORAL ASCENDANCY OVER
ANOTHER
IN A WORK OR TRAINING OR EDUCATION
ENVIRONMENT,
demands requests or otherwise requires
any sexual favor from other,
regardless of whether the demand, request
for requirement for submission is accepted
by the object of said act.
In a work-related or employment environment,
sexual harassment is committed when:
a. The sexual favor is made as a condition in
the hiring or in the employment, re-
employment or continued employment of
said individual or in granting said individual
favorable compensation, terms, conditions,
promotions, or privileges, or the refusal to
grant the sexual favor results in limiting,
segregating or classifying the employee
discrimnate,
employment
opportunities or otherwise adversely affect
said employee;
impair
or privileges
existing labor laws; or
result
or
environment for the employee.
In an education or training environment, sexual
harassment is committed:
a. Against one who is under the care, custody
or supervision of the offender
b. Against one whose education, training,
apprenticeship or tutorship is entrusted to
the offender;
c. When the sexual favor is made a condition
to the giving of a passing grade, or the
granting of honors and scholarships, or the
payment of a stipend, allowance or other
benefits, privileges, or considerations; or
d. When the sexual advances result in an
offensive
environment for the result, trainee or
apprentice.
Any person who directs or induces another to
commit any act of sexual harassment as herein
defined, or who cooperates in the commission
thereof by another without which it would not
have been committed, shall also be held liable
under this Act.
an
offensive
71 of 132






the
under
OR
The State shall value the dignity of every
individual, enhance the development of its human
resources, guarantee full respect for human rights,
and uphold the dignity of workers, employees,
DUTY OF THE EMPLOYER OR HEAD OF OFFICE IN A
WORK-RELATED,
ENVIRONMENT
UP LAW BAROPS 2007
ONE UP
be upon
of head or The
the
least at of be
from the any, if
of case the In
alleged
and
of
for the
for the provide 2. to

Ar t I I Sec 13, 1987 Consti tuti on
Phil. Aelous Automoti ve United Corp. v. NLRC
( 2 0 0 0 )
Li bres v. NLRC (99)
penalized conviction, Act shall,
independent
OF THE EMPLOYER, LI ABI LI TY
employer
teachers, trainors,
composed
employees
teachers, employees,
investigation
decorum committee
procedure prescribing
the employees or students or
procedures
in offense the of The
and
sexual
on
cases
gravamen
training-related
cases
harassment.
emotional importantly,
employee. HEAD
EDUCATI ONAL OR TRAI NI NG I NSTI TUTI ON

Part II : Labor Standards Law
Labor Standards
It shall be the duty of the employer or the head
of the work-related, educational or training
environment or institution,
1. to prevent or deter the commission of acts
of sexual harassment and
action
affirmative relief.
PENALTI ES
damages
the
resolution, settlement or prosecution of acts
of sexual harassment.
Towards this end, the employer or head of
office shall:
a. Promulgate appropriate rules and regulations
in consultation with and jointly approved by
Any person who violates the provisions of this
by
imprisonment of not less than 1 month nor more
than 6 months, or a fine or not less than P10,0000
nor more than P20,000.00, or both such fine and
imprisonment at the discretion of the court.
Any action arising from the violations of the
trainees,
through their duly designated representatives
provisions of this Act shall prescribe in 3 years.
the
investigation of sexual harassment cases and
the administrative sanctions therefore.
The said rules and regulations issued
pursuant to this subsections (a) shall
include, among others, guidelines on
proper decorum in the workplace and
educational or training institutions
b. Create
Republic Act No. 7877 was not yet in effect at
the time of the occurrence of the act complained of.
It was still being deliberated upon in Congress when
petitioners case was decided by the Labor Arbiter.
As a rule, laws shall have no retroactive effect unless
otherwise provided, or except in a criminal case
when their application will favor the accused.
Hence, the Labor Arbiter have to rely on the MEC
on
harassment. The Committee shall conduct
meetings, as the case may be, with officers
instructors,
professors, coaches, trainors and students
or trainees to increase understanding and
prevent incidents of sexual harassment. It
shall also conduct the investigation of
report and the common connotation of sexual
harassment as it is generally understood by the
public.
The disparity in the periods of filing the
complaints in the two cases did not in any way
reduce this case into insignificance. On the
contrary, it even invited the attention of the Court to
focus on sexual harassment as a just and valid cause
constituting
work-related
environment, the committee shall be
composed of at least 1 representative
each from the management, the union,
the
supervisory rank, and from the rank and
file employees.
for termination. xxx As a managerial employee,
petitioner is bound by more exacting work ethics.
He failed to live up to his higher standard of
responsibility when he succumbed to his moral
perversity. And when such moral perversity is
perpetuated against his subordinate, he provides a
justifiable ground for his dismissal for lack of trust
and confidence. It is the right, nay the duty of every
employer to protect its employees from oversexed
superiors.
In the case of the educational or
training institution, the committee shall
1
representative from the administration,
instructors,
professors or coaches and students or
trainees, as the case may be.
office,
educational or training institution shall
disseminate or post a copy of this Act
for the information of all concerned.
OF OFFI CE,
sexual
harassment is not the violation of the employee's
sexuality but the abuse of power by the employer.
Any employee, male or female, may rightfully cry
"foul" provided the claim is well substantiated.
Strictly speaking, there is no time period within
which he or she is expected to complain through the
proper channels. The time to do so may vary
depending upon the needs, circumstances, and more
threshold
The employer or head of office, educational or
training institution shall be SOLIDARILY LIABLE for
damages arising from the acts of sexual harassment
committed in the employment, education or training
environment if the employer or head of office,
educational or training institution is informed of such
acts by the offended party and no immediate action
is taken thereon.
INDEPENDENT ACTI ON FOR DAMAGES
Nothing in this Act shall preclude the victim of
education
SECTI ON 20 - MI NORS
20. 01 MI NORS AND THE CONSTI TUTI ON
The State recognizes the vital role of the youth
in nation-building and shall promote and protect
their physical, moral, spiritual, intellectual, and
social well-being. It shall inculcate in the youth
patriotism and nationalism, and encourage their
involvement in public and civic affairs.
harassment from instituting a separate
20. 02 LAW
UP LAW BAROPS 2007
ONE UP
72 of 132

a
sexual
work, or sexual
and
for and other
the of the
shall c. The
childs the prevent
or and public
or lacks and/or
and/or
or a or parents of
whi ch
in child injured an to
cruelty,
and survival their affect will
a
of
carry
and and
POLI CY
formulate employer
exploitation
entertainment
Comprehensi ve program agai nst chi l d abuse,
expl oi tati on and discrimination refers to the
underdeveloped
community
guardian
safety and
t hr eat en gravel y Circumstances
resulting
Child Abuse maltreatment, whether habitual or
Children - persons below 18 years of age or those
them, whether undertaken
normal
development and over which they have no
control.
The best interests of children shall be the
and crisis intervention
out
deterrence
discrimination, exploitation
program for

Part II : Labor Standards Law
Labor Standards
b. Working under conditions hazardous to life,
RA 7610 Special Protection of Children Against Child
Abuse, Exploitation and Discrimination Act
morals which unduly interfere with
their normal development
c. Living in or fending for themselves in the
streets of urban or rural areas without the care
It is hereby declared to be the policy of the
State to provide special protection to children
from all forms of abuse, neglect, cruelty,
any
supervision needed for their welfare.
d. Being a member of an indigenous cultural
other
conditions prejudicial to their development;
provide sanctions for their commission and
prevention
living under conditions of
extreme poverty or in an area which is
has
inadequate access to basic services needed for
in
situations of child abuse, exploitation and
discrimination. The State shall intervene on
behalf of the child with the parent, guardian,
teacher or person having care or custody of the
child fails or is unable to protect the child
against abuse, exploitation and discrimination
or when such acts agai nst the child are
committed b the said parent, guardian, teacher
or person having care and custody of the same.
It shall be the policy of the State to protect and
good quality of life;
e. Being a victim of a man-made or natural
disaster or calamity; or
f. Circumstances analogous to those abovestated
which endanger the life, safety or normal
development of children.
coordinated program of services and facilities to
protect children against:
a. Child prostitution and other sexual abuse;
b. Child trafficking;
c. Obscene publications and indecent shows;
d. Other acts of abuse; and
e. Circumstances which threaten or endanger the
survival and normal development of children.
paramount
concerning
consideration
WORKI NG CHI LDREN
DEFI NI TI ON OF TERMS
over but are unable to fully take care of themselves
or protect themselves from abuse, neglect, cruelty,
exploitation or discrimination because of a physical
or mental disability or condition
Sec. 12 (RA 7610, as amended by RA 7658)
Employment of Children Children below fifteen
(15) years of age shall not be employed except:
3. When a child works directly under the sole
responsibility of his parents or legal guardian
and where only members of the employers
family are employed: Provided, however, That
his employment neither endangers his life,
safety, health and morals, nor impairs his
normal development: Provided, further, That
the parent or legal guardian shall provide the
said minor child with the prescribed primary
and/or secondary education; or
4. When a childs employment or participation in
information
through cinema, theater, radio or television is
not, of the child which includes any of the following:
1. Psychological and physical abuse, neglect,
essential: Provided, the employment contract
is concluded by the childs parents or guardian,
with the express agreement of the child
sexual
maltreatment;
emotional concerned, if possible, and the approval of the
Department of Labor and Employment: and
2. Any act by deeds or words which debases,
degrades or demeans the intrinsic worth and
dignity of a child as a human being;
3. Unreasonable deprivation of his basic needs
for survival, such as food and shelter; or
4. Failure to immediately give medical treatment
serious
impairment of his growth and development or
in his permanent incapacity or death.
Provided, That the following requirements in
all instances are strictly complied with:
a. The employer shall ensure the protection,
health, safety and morals of the child
b. The employer shall institute measures to
or
discrimination taking into account the
system and level of remuneration, and the
duration and arrangement of working time
or
endanger the survi val and normal devel opment
of children, include, but are not limited to, the
and
implement, subject to the approval and
supervision of competent authorities, a
continuing program for training and skills
acquisition of the child.
In the above exceptional cases where any
such child may be employed, the employer shall
first secure, before engaging such child, a work
UP LAW BAROPS 2007
ONE UP
rehabilitate children gravely threatened or
endangered by circumstances which affect or
by
public or private social welfare institutions,
courts of law, administrative authorities, and
legislative bodies, consistent with the principle
of First Call for Children as enunciated I the
United Nations Convention on the Rights of the
Child. Every effort shall be exerted to promote
the welfare of children and enhance their
opportunities for a useful and happy life.
following:
a. Being in a community where there is armed
conflict or being affected by armed conflict-
related activities;
73 of 132


and
of all actions
abuse and
adult
a
- work. t o
and the for
with liaison as acted visitors; foreign


- agai nst
Labor of the from permit
non-househol d
Ar t . 145.
Assi gnment
Ar t . 144
Mi ni mum Cash Wage The minimum wage rates
Ar t . 142.
Contract of domestic service. - original contract shall
maintenance desirable
Apex Mining Co. v. NLRC
Barcenas v. NLRC(90)
Ar t . 145.
Ar t . 141
Ar t . 141
chil d discri minati on.
Ar t . 140
Prohibition
Arti cl e 109, PD 603
Arti cl e 108, PD 603
promoting advertisements commercial
Department

Part II : Labor Standards Law
Labor Standards
and
Employment which shall ensure observance of the
above requirements.
21.02 HOUSEHELPERS
NON-FORMAL EDUCATI ON FOR WORKI NG CHI LDREN
(SEC. 13)
The Department of Education, Culture and
Sports shall promulgate a course design under its
non-formal education program aimed at promoting
the intellectual, moral and vocational efficiency of
working children who have not undergone or finished
elementary or secondary education. Such course
design shall integrate the learning process deemed
most effective under given circumstances.
all persons rendering services in households for
compensation.
"Domestic or household services" shall mean service
in the employer's home, which is usually necessary
or desirable for the maintenance and enjoyment
thereof and includes ministering to the personal
comfort and convenience of the members of the
employer's household, including services of family
drivers.
21. 03 NON-HOUSEHOLD WORK ASSI GNMENT
PROHI BI TI ON ON THE EMPLOYMENT OF CHI LDREN I N
CERTAI N ADVERTI SEMENTS (SEC. 14)
No person shall employ child models in all
alcoholic
beverages, intoxicating drinks, tobacco and its
byproducts, and violence.
No househelper shall be assigned to work in a
commercial, industrial or agricultural enterprise at a
wage or salary rate lower than that provided for
agricultural or non-agricultural worker as prescribed
herein
DUTY OF EMPLOYER (SEC. 15)
Every employer shall comply with the duties
provided for in Articles 108 and 109 of PD 603.
Duty of Employer to Submit Report
Moreover, the work that petitioner performed in
the temple could not be categorized as mere
domestic work. Thus, We find that petitioner, being
proficient in the Chinese language, attended to the
visitors, mostly Chinese, who came to pray or seek
advice before Buddha for personal or business
problems; arranged meetings between these visitors
and Su and supervised the preparation of the food
for the temple visitors; acted as tourist guide of
Register of Children
PENALTI ES (SEC. 16)
Any person who shall violate any provision of
this Article shall suffer the penalty of a fine of not
less than P1,000.00 but not more than P10,000.00
or imprisonment of not less than 3 months but not
more than 3 years, or both at the discretion of the
court, Provided, that in case of repeated violations of
the provisions of this Article, the offenders license to
operate shall be revoked.
some
government offices; and made the payment for the
temple's Meralco, MWSS and PLDT bills. Indeed,
these tasks may not be deemed activities of a
household helper. They were essential and important
to the operation and religious functions of the
temple.
The term `househelper' as used herein is
synonymous to the term `domestic servant' and
shall refer to any person, whether male or female,
who renders services in and about the employer's
home and which services are usually necessary or
20. 03 DI SCRI MI NATI ON enjoyment
thereof, and ministers exclusively to the personal
comfort and enjoyment of the employer's family.
No
employer shall discriminate against any person in
respect to terms and conditions of employment on
account of his age.
21. 04 CONDI TI ONS OF EMPLOYMENT
SECTION 21 HOUSEHELPERS
not last for more than two years but it may be
renewed for such periods as may be agreed upon by
the parties.
21.01 COVERAGE
Ar t . 143
Mi ni mum Wage
all persons rendering services in households for
compensation.
"Domestic or household services" shall mean service
in the employer's home, which is usually necessary
or desirable for the maintenance and enjoyment
thereof and includes ministering to the personal
comfort and convenience of the members of the
employer's household, including services of family
drivers.
prescribed under this Chapter shall be the basic cash
wages which shall be paid to the househelpers in
addition to lodging, food and medical attendance.
No
househelper shall be assigned to work in a
commercial, industrial or agricultural enterprise
UP LAW BAROPS 2007
ONE UP
74 of 132

by issued through
- of
shall service" or Domestic

Ar t . 155.
Di stri buti on of homework. - For purposes of this
Coverage:
Ar t . 154.
Regulations of Secretary of Labor and Employment. -
regulations appropriate
homework. i ndustrial
Ar t . 153.
Regulations
household
Accordingly, the terms and conditions of private
respondent's employment are governed by Chapter
III, Title III, Book III of the Labor Code as well as by
the pertinent provisions of the Civil Code. Thus,
Article 141 of the Labor Code provides:
Ar t . 152.
Employment records. - The employer may keep such
Ar t . 151.
Employment certification. - Upon the severance of
Ar t . 150.
Service of termination notice. - If the duration of the
Ar t . 149.
Indemnity for unjust termination of services. - If the
Ar t . 148.
Board, lodging and medical attendance. - ER furnish
Ar t . 147.
Treat ment of househelpers.
least elementary education. The cost
Ar t . 146.
Opport uni ty f or educati on.
or through some other
signature
employer.

Part II : Labor Standards Law
Labor Standards
at a wage or salary rate lower than that provided for
agricultural or non-agricultural worker as prescribed
herein
Chapter III, Title III, Book III, however, is silent
on the grant of overtime pay, holiday pay, premium
pay and service incentive leave to those engaged in
the domestic or household service.
Moreover, the specific provisions mandating
- If below 18 the
employer shall give him or her an opportunity for at
these benefits are found in Book III, Title I of the
Labor Code, and Article 82, which defines the scope
of such
education shall be part of the househelper's
compensation, unless there is a stipulation to the
contrary.
of the application of these provisions, expressly
excludes domestic helpers from its coverage:
- just and humane
manner. In no case shall physical violence be used
upon the househelper.
SECTI ON 22 HOMEWORKERS
22.01 COVERAGE AND REGULATI ON
free of charge suitable and sanitary living quarters
as well as adequate food and medical attendance.
period of household if period of service fixed = no
termination by either party except for just
unjust dismissal = compensation already earned
plus that of 15 days by way of indemnity.
leaves w/o justifiable reason = any unpaid salary
due him or her not exceeding 15 days.
The
employment of industrial homeworkers and field
personnel shall be regulated by the Government
the
Secretary of Labor and Employment to ensure the
general welfare and protection of homeworkers and
field personnel and the industries employing them.
The regulations or orders to be issued pursuant to
this Chapter shall be designed to assure the average
employee of an undertaking the minimum terms and
conditions of employment applicable to the industrial
homeworkers or field personnel involved.
household service is not determined either by
stipulation or by the nature of the service, the
employer or the househelper may give notice to put
an end to the relationship five days before the
intended termination of the service.
Department Order No. 005 92
This Rule shall apply to any person who
performs industrial homework for an employer,
contractor or sub-contractor. (1)
the household service relation, the employer shall
give the househelper a written statement of the
nature and duration of the service and his or her
efficiency and conduct as househelper.
Industrial Homework: A system of production under
which work for an employer or contractor is carried
out by a homework at his/her home. Materials may
or may not be furnished by the employer or
contractor. (2a)
records as he may deem necessary to reflect the
actual terms and conditions of employment of his
househelper which the latter shall authenticate by
22. 02 EMPLOYER
thumbmark upon request of the
SEE ALSO ARTICLES 1689 1699 OF THE CIVIL
CODE
Ul tra Vil l a Food Haus v. Geni ston (99)
Art. 141. Coverage. This Chapter shall apply to
all persons rendering services in households for
compensation.
mean
services in the employers home which is usually
necessary or desirable for the maintenance and
enjoyment thereof and includes ministering to the
personal comfort and convenience of the members
of the employers household, including services of
fami l y dri vers.
Chapter, the "employer" of homeworkers includes
any person, natural or artificial, who for his account
or benefit or on behalf of any person residing outside
the country, directly or indirectly, or through any
employee, agent, contractor, sub-contractor or any
other person:
1. Delivers, or causes to be delivered, any goods,
articles or materials to be processed or
fabricated in or about a home and thereafter
to be returned or to be disposed of or
distributed in accordance with his directions;
or
2. Sells any goods, articles or materials for the
purpose of having the same processed or
fabricated in or about a home and then rebuys
them after such processing or fabrication,
either himself
person.
UP LAW BAROPS 2007
ONE UP
75 of 132
or
an given be
right his of illegally
tenure, of security labor's protect To
the the
as or
of or mere
duly or his by him in
specific given is it
receive to entitled was she
their
and policy in also
full
overarching
employee dismissed
employer between relationship
practical, expedient feasible,
Qui jano v. Mercur y Drug Corp. (98)
severance cessation
Al hambra I ndustri es, I nc. v. NLRC (94)
employer
Manila Electric Co., v. NLRC (91)
recognition Precisely,
reinstated,
Ci ty Trust Banking Corp. v. NLRC (96)
mutual
industrial peace.
participate
bargaining self-organization,
promote
Ar t. XI I I , Sec. 3, 1987 Consti tuti on
Ar t . 279
just longer no is TODAY employment
collective
negotiations, and peaceful

Part II : Labor Standards Law
Labor Standards
Security of tenure is a right of paramount value.
A. General Concepts
23. 01 SECURI TY OF TENURE OR TENURI AL
and
guarantee by the Constitution no less. The State
shall afford protection to labor and "shall assure the
rights of workers to .. security of tenure", so runs
the Constitutional mandate. (Art. II, Sec. 9.) It
stands to reason that a right so highly ranked as
security of tenure should not lightly be denied on so
nebulous a basis as mere speculation.
SECURI TY
Security of Tenure
In cases of regular employment, the employer shall
not terminate the services of an employee except for
a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time
his compensation was withheld from him up to the
time of his actual reinstatement.
The State shall afford full protection to labor, local
and overseas, organized and unorganized, and
employment
employment opportunities for all.
Such an offense is obviously of so serious a
character as to merit the penalty of dismissal from
employment. The Labor Code pronounces "fraud or
willful breach by the employee of the trust reposed
authorized
representative," or "serious misconduct" on the part
of the employee to be lawful ground to terminate
employment. And this Court has held that the
"dismissal of a dishonest employee is as much in the
interests of labor as it is of management. The labor
force in any company is protected and the workers'
security of tenure strengthened when pilferage of
equipment, goods and products which endangers the
viability of an employer and, therefore, the workers'
continued employment is minimized or eliminated
and consequently labor-management relations based
on mutual trust and confidence are promoted."
It shall guarantee the rights of all workers to
and
concerted activities,
including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane
conditions of work, and a living wage. They shall
decision-making
processes affecting their rights and benefits as may
be provided by law.
The State shall promote the principle of shared
responsibility between workers and employers and
the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce
an
ordinary human activity. For most families the main
source of their livelihood, employment has now
leveled off with property rights which no one may be
deprived of without due process of law.
Termination of employment is not anymore a
contractual
relationship but an economic phenomenon affecting
members of the family. This explains why under the
broad principles of social justice the dismissal of
employees is adequately protected by the laws of
the state.
compliance therewith
POLICY STATEMENT
Well-entrenched is the rule that an illegally
dismissed employee is entitled to reinstatement as a
matter of right. Over the years, however, the case
law developed that where reinstatement is not
Backwages are for earnings which a worker has
lost due to his illegal dismissal. After she was
the
differential between the salary of internal auditor
and manager of the Auditing Department for the
position was not a substantial equivalent to that of
internal auditor.
This petition is the fourth filed with this Court.
It has no doubt, prolonged the granting of complete
relief to private respondent. Litigation must come to
an end. In labor cases, the cause of an illegally
dismissed employee must always be a concern of
everyone if we ae to give effect to the constitutional
policy of protecting labor and the duty of this Court
to see to it that justice is served not only fairly but
also swiftly.
where
reinstatement would only exacerbate the tension
and strained relations between the parties, or where
and
employee has been unduly strained by reason of
their irreconcilable differences, particularly where
the illegally dismissed employee held a managerial
or key position in the company, it would be more
prudent to order payment of separation pay instead
of reinstatement. Some unscrupulous employers,
however, have taken advantage of the overgrowth of
this doctrine of "strained relations" by using it as a
cover to get rid of its employees and thus defeat
their right to job security.
we
emphasize that the doctrine of "strained relations"
should be strictly applied so as not to deprive an
NATURE OF SECURITY OF TENURE
TERMI NAL SECURI TY RI GHT
City Service Corp. Workers Union v. City
Servi ce Corp. (85)
to
reinstatement. Every labor dispute almost always
results in "strained relations", and the phrase cannot
interpretation,
otherwise, an unjustly dismissed employee can
never be reinstated.
UP LAW BAROPS 2007
ONE UP
76 of 132

SECTI ON 23 - TERMI NATI ON OF
EMPLOYMENT

and equality of
to foster
tenure his During tenure. of security
those renew to under
of security That effect. in
abuse without done be must
v. an
change to its of
I nter Ori ent Mari ti me Enterpri ses, I nc. v. NLRC
( 9 4 )
Lopez v. Javi er (1996)
Ski l lworl d Management and Marketi ng Corp. v.
NLRC ( 90)
contracts obligation
temporary
Labaj o v. Al ej andro (88)
Ar t . 278
nevertheless
(Callanta arbitrarily employee
Ll osa-Tan v. Si l ahi s I nternati onal Hotel (90)
Gonzal es v. NLRC (99)
prerogative company
Lanzadares v. Amethyst Securi ty (2003)
Condo Sui te Cl ub Travel , I nc. v. NLRC (2000)
a merely not is
While it may be true that Manuel was a
probationary employee at the time of his dismissal
he may not be dismissed without cause. This is
settled in the cases of Manila Hotel Corporation v.
NLRC and in the case of Alga Moher International
Placement Services v. Hon. D. Atienza, where We
held:
Employment

Part II : Labor Standards Law
Labor Standards
The fundamental guarantee of security of tenure
dictates that no worker shall be dismissed except for
just and authorized cause provided by law, and after
de process.
The provisions of this Title shall apply to ALL
establishments or undertakings, whether for profit or
not.
CONTRACT EMPLOYEE
As probationary and contractual employees,
Security of tenure, although provided in the
Constitution does not give an employee an absolute
vested right in a position as would deprive the
private respondents enjoyed security of tenure, but
only to a limited extent i. e., they remained
secure in their employment during the period of time
their
assignment or transfer them where they will be most
useful. When a transfer is not unreasonable, nor
inconvenient, nor prejudicial to an employee; and it
does not involve a demotion in rank or diminution of
his pay, benefits, and other privileges, the employee
may not complain that it amounts to constructive
dismissal
IMPORTANCE OF EMPLOYMENT
their respective contracts of employment remained
tenure,
however, ended the moment their employment
contracts expired on 31 March 1985 and petitioners
declined to renew the same for the next succeeding
school year. Consequently, as petitioners were not
of
employment, the separation of private respondents
in this case cannot be said to have been without
justifiable cause, much less illegal.
EMPLOYMENT PROBATIONARY EMPLOYEE
contractual
relationship; it has assumed the nature of property
right. It may spell the difference whether or not a
family will have food on their table, roof over their
heads and education for their children. It is for this
reason that the State has taken up measures to
protect employees from unjustified dismissals. It is
also because of this that the right to security of
tenure is not only a statutory right but, more so, a
constitutional right.
STATE REGULATION RATIONALE
It is well settled that dismissal based on loss of
trust and confidence arising from alleged misconduct
of employee, is not to be used as a shield to dismiss
"There is no dispute that as a probationary
employee, private respondent had but a limited
tenure. Although on probationary basis, however,
Cruz still enjoys the constitutional protection on
of
employment therefore, or before his contract
expires, respondent Cruz cannot be removed
except for cause as provided for by law."
Carnation
Philippines, Inc.). Although the power to dismiss is a
normal prerogative of the employer, the same is not
without limitations (Rance v. NLRC). The right of the
employer must not be exercised arbitrarily and
without just cause. Otherwise, the constitutional
guarantee of security of tenure of the workers would
be rendered nugatory. While dismissing or laying off
of an employee is a management's prerogative, it
of
discretion (Atlas Consolidated Mining Corp. v. NLRC).
Furthermore, the right of employer to freely select or
discharge his employees is regulated by the State,
because the preservation of the lives of the citizens
is a basic duty of the State, more vital than the
preservation of the corporate profit (Euro-Linea,
Phils., Inc. v. NLRC). In addition, security of tenure
is a right of paramount value guaranteed by the
Constitution and should not be denied on mere
speculation (Tolentino v. NLRC). Protection to labor
and social justice provisions of the Constitution and
the labor laws and rules and regulations are
interpreted in favor of the exercise of labor rights
(Euro-Linea, Phils., Inc. v. NLRC)
While probationary employees do not enjoy
permanent status, they are, nonetheless, accorded
the constitutional protection of security of tenure.
Article XIII, Section 3 of the Constitution which
provides that the State shall guarantee the rights of
all workers to.security of tenure does not
distinguish as to the kind of worker who is entitled to
be protected in this right.
Furthermore, in Manila Hotel Corp. v. NLRC, et.
al. various limitations on the power of an employer
to terminate a probationary employment contract
were laid down, thus: First, it must be exercised in
accordance with the specific requirements of the
contract. If a particular time is prescribed, the
termination must be done within such time. Should
the contract require a written notice, then such form
should be used. Secondly, the dissatisfaction of he
employer must be real and in good faith, not feigned
so as to circumvent the contract or the law; and
thirdly, there must be no unlawful discrimination in
the dismissal.
MANAGERI AL EMPLOYEE
COVERAGE
Coverage
It is well settled in this jurisdiction that
confidential and managerial employees cannot be
arbitrarily dismissed at any time, and without
UP LAW BAROPS 2007
ONE UP
77 of 132


should he that Loyalty loyalty. of lack
require nature their by which
of the in
as insofar for
Citing is
when the
of exercise the guide to only
own its to
of on
San Garcia). vs. Co. Refining Phil.
Phil. LVN; vs. Pictures
a as long So goal.
Every 44.) p. Ed., 1985
and workers of lay-off work
work hiring,
of exercise valid a is

functions
employment terminating
infractions, penalties
jurisprudence,[49] miniscule.[48]
Etcuban, Jr. v. Sulpi ci o Lines, Inc. (2005)
penalties, corresponding
criterion
discretion according business
St. Mi chael s I nsti tute v. Santos (2001)
activities work-related regulations
VH Manufacturi ng, I nc. v. NLRC (2000)
Farrol v. Court of Appeal s (2000)
Workers
company's
business
supervision,
assignments, including
the CDS
San Mi guel Brewer y, etc. v. Opl e (89)
that the Finally, theorizes petitioner

Part II : Labor Standards Law
Labor Standards
cause as reasonably established in an appropriate
investigation. Such employees, too, are entitled to
security of tenure, fair standards of employment and
the protection of labor laws.
being held liable for first time, after nine (9) long
years of unblemished service, for an alleged offense
which caused no prejudice to the employer, aside
from absence of substantiation of the alleged
offense.
MANAGEMENT RIGHTS AND SECURI TY OF TENURE
The employers right to conduct the affairs of his
Public respondent was correct in holding that
management
prerogatives: "Except as limited by special laws, an
employer is free to regulate, according to his own
discretion and judgment, all aspects of employment,
working
methods, time, place and manner of work, tools to
be used, processes to be followed, supervision of
workers, working regulations, transfer of employees,
and
judgment, is well-recognized. An employer has a
free reign and enjoys wide latitude of discretion to
regulate all aspects of employment, including the
prerogative to instill discipline in its employees and
to impose penalties, including dismissal, upon erring
employees. This is a management prerogative,
where the free will of the management to conduct its
own affairs to achieve its purpose takes form. The
the
discipline, dismissal and recall of work. . . . (NLU vs.
Insular La Yebana Co.; Republic Savings Bank vs.
CIR)" (Perfecto V. Hernandez, Labor Relations Law,
its
management prerogative is that the policies, rules
and regulations on work-related activities of the
employees must always be fair anf reasonable and
enterprise
endeavors to increase its profits. In the process, it
may adopt or devise means designed towards that
prescribed,
commensurate to the offense involved and o the
degree of the infraction.
management
prerogatives are exercised in good faith for the
advancement of the employer's interest and not for
the purpose of defeating or circumventing the rights
of the employees under special laws or under valid
agreements, this Court will uphold them (LVN
American
Embroideries vs. Embroidery and Garment Workers;
Miguel
Corporation's offer to compensate the members of
its sales force who will be adversely affected by the
implementation of the CDS, by paying them a so-
called "back adjustment commission" to make up for
the commissions they might lose as a result of the
CDS, proves the company's good faith and lack of
intention to bust their union.
even
assuming that there was evidence to support the
charges against him, his dismissal from the service
is unwarranted, harsh and is not commensurate to
his misdeeds, considering the following: first, his 16
long years of service with the company; second, no
loss or damages was suffered by the company since
the tickets were unissued; third, he had no previous
derogatory record; and, lastly, the amount involved
he
appeals for compassion and requests that he be
merely suspended, or at the very least, given
separation pay for his length of service.[50]
We find no merit in the petitioners contention.
We are not unmindful of the foregoing doctrine,
GUI DELI NES ON IMPOSI TI ON OF PENALTI ES
Assuming further that there was breach of trust
and confidence, it appears that this is the first
infraction committed by petitioner. Although the
employer has the prerogative to discipline or dismiss
its employee, such prerogative cannot be exercised
wantonly, but must be controlled by substantive due
process and tempered by the fundamental policy of
protection to labor enshrined in the Constitution.
Infractions committed by an employee should merit
only the corresponding sanction demanded by the
circumstances. The penalty must be commensurate
with the act, conduct or omission imputed to the
employee and imposed in connection with the
employers disciplinary authority.
but after a careful scrutiny of the cited cases, the
Court is convinced that the petitioners reliance
thereon is misplaced. It must be stressed that in all
of the cases cited, the employees involved were all
rank-and-file or ordinary workers. As pointed out
earlier, the rules on termination of employment,
fiduciary
employees are concerned, are not necessarily the
same as those applicable to the termination of
employment of ordinary employees. Employers,
generally, are allowed a wider latitude of discretion
managerial
personnel or those of similar rank performing
the
employers trust and confidence, than in the case of
ordinary rank-and-file employees.
The fact that the petitioner has worked with the
respondent for more than 16 years, if it is to be
While an employer enjoys a wide latitude of
discretion in the promulgation of policies, rules and
considered at all, should be taken against him. The
infraction that he committed, vis-a-vis his long years
of service with the company, reflects a regrettable
the
employees, those directives, however, must always
be fair and reasonable, and the corresponding
penalties, when prescribed, must be commensurate
to the offense involved and to the degree of the
infraction. In the case at bar, the dismissal meted
out on private respondent for allegedly sleeping on
the job, under the attendant circumstances, appears
to be too harsh a penalty, considering that he was
have
strengthened instead of betrayed. If an employees
length of service is to be regarded as a justification
for moderating the penalty of dismissal, it will
actually become a prize for disloyalty, perverting the
meaning of social justice and undermining the
efforts of labor to cleanse its ranks of all
undesirables.[52]
UP LAW BAROPS 2007
ONE UP
78 of 132
it cause to as
hardly can himself
of private
whose earners wage mere
rules of
that to right
neither
was the which in

irreparable company
characterized be
abandonment, much less a
dismissal respondents'
Di mabayao v. NLRC (99)
Philippine Long Distance Telephone Co., Inc. v.
NLRC ( 99)
dismissal
company employees confidential
including discipline, inherent
Associ ate Labor Uni on v. NLRC (99)
involved, petitioner
unfaithful employee who is holding

Part II : Labor Standards Law
Labor Standards
The argument that the petitioner was not guilty
of anything because the tickets were never issued or
that he had received nothing from the passengers
that he could short-change the company would not
mitigate his liability, nor efface the respondents loss
of trust and confidence in him. Whether or not the
respondent was financially prejudiced is immaterial.
Also, what matters is not the amount involved, be it
paltry or gargantuan; rather the fraudulent scheme
which
constitutes a clear betrayal of trust and confidence.
In fact, there are indications that this fraudulent act
had been done before, and probably would have
continued had it not been discovered.
Moreover, the records show that the petitioner
is not as blameless as he claimed to be. In 1979 and
1980, he was suspended by the respondent for
several company infractions, which the petitioner did
not deny. It must also be stressed that when an
employee accepts a promotion to a managerial
position or to an office requiring full trust and
confidence, he gives up some of the rigid guaranties
available to an ordinary worker. Infractions which, if
committed by others, would be overlooked or
condoned or penalties mitigated may be visited with
more serious disciplinary action.
It cannot be over emphasized that there is no
substitute for honesty for sensitive positions which
call for utmost trust. Fairness dictates that the
respondent should not be allowed to continue with
the employment of the petitioner who has breached
the confidence reposed on him.[55] Unlike other just
causes for dismissal, trust in an employee, once lost,
is difficult, if not impossible, to regain.[56] There
can be no doubt that the petitioners continuance in
the extremely sensitive fiduciary position of Chief
Purser would be patently inimical to the respondents
interests. It would be oppressive and unjust to order
the respondent to take him back, for the law, in
protecting the rights of the employee, authorizes
position of trust
and confidence in a company poses a greater danger
to its security than a mere clerk or machine operator
like petitioner.
There is another reason why violations by non-
and
regulations such as that involved in this case are
considered minor. Such employees are generally
from
employment can have severe financial consequences
on their families especially at a time like the present
when unemployment is quite high. Consequently,
whatever missteps may have been committed by
them ought not to be visited with a consequence so
severe as dismissal.
Likewise, it must be noted that willful defiance
of company rules must be characterized by perverse
attitude that would be considered as inimical to the
interest of his employer. Even when an employee is
found to have transgressed the employer's rules, in
the actual imposition of penalties upon the erring
employee, due consideration must still be given to
his length of service and the number of violations
committed during his employ.
Dismissal is the ultimate penalty that can be
meted to an employee. Where a penalty less
punitive would suffice, whatever missteps may have
been committed by the worker ought not to be
visited with a consequence so severe such as
dismissal from employment. For the Constitution
guarantees the right of workers to "security of
tenure." The misery and pain attendant to the loss of
jobs then could be avoided if there be acceptance of
the view that under certain circumstances of the
case the workers should not be deprived of their
means of livelihood.
oppression
employer.
self-destruction
In light of our ruling in Gold City Integrated Port
Services we cannot sustain the NLRC for upholding
FACTORS petitioner.
Petitioner's act of leaving his work place to relieve
There is no question that the employer has the
of
dismissing its employees for just causes. This right
is, however, subject to reasonable regulation by the
State in the exercise of its police power. The finding
of the NLRC that an employee violated the company
rules and regulations is subject to scrutiny by the
Court to determine if the dismissal is justified and, if
so, whether the penalty imposed is commensurate
to the gravity of his offense.
In this case, we agree with the Labor Arbiter
that dismissal would be proportionate to the gravity
of the offense committed by petitioner considering
the value of the articles he pilfered and the fact that
he had no previous derogatory record during his two
(2) years of employment in the company. The Labor
Arbiter is certainly mistaken in regarding the articles
taken to be mere scraps and hence without value to
the company. They were of some value but not
enough to warrant dismissal.
Moreover, it should also be taken into account
that petitioner is not a managerial or confidential
employee in whom greater trust is placed by
management and from whom greater fidelity to duty
is correspondingly expected. It is easy to see why an
as
willful or intentional
disobedience of company rules since he was merely
answering the call of nature over which he had no
control. Restraining one's bowel movement can
result in great discomfort and affect adversely the
efficiency, and even the health, of the worker.
Petitioner's disobedience to his employer's orders
can easily be categorized as trivial and unimportant,
and as such, does not merit a penalty as harsh as
dismissal.
Likewise, there was no gross and habitual
neglect of his duties by petitioner since he merely
relieved himself which, as already adverted to, could
not have constituted abandonment of work. Neither
could it have disrupted the operations of the
damage.
Witnesses testified during the hearing before the
Arbitration Branch of the NLRC that petitioner was
absent from his work station only for a few minutes
and that on 20 October 1992 he even took the
initiative of asking his co-worker to take over his
post before proceeding to the latrine. The violation
of petitioner, if at all it was, could not be that
serious as to warrant his dismissal from the
service.
UP LAW BAROPS 2007
ONE UP
79 of 132
nor of the
a
and 2.
of nature the and
care or the as such
cause just a as of Loss
duly his or his by him
the to regard due without

Habana v. NLRC (98)
unbearable Inhuman
representative on the honor and person of
Ar t . 285.
misconduct, purported
handling, custody,
confidence
employer
Caoi l e v. NLRC (98)
Li bres v. NLRC (99)
pertinent
Golden Thread Kni tti ng Industri es, Inc. v. NLRC
( 9 9 )

Part II : Labor Standards Law
Labor Standards
DI SMI SSAL AS PENALTY
show the employee concerned to be unfit to continue
working for the employer.
Now it must be noted that recent decisions of
this Court has distinguished the treatment of
managerial employees from that of rank-and-file
personnel, insofar as the application of the doctrine
of loss of trust and confidence is concerned. Thus,
Dismissal is the ultimate penalty that can be
meted to an employee. It must therefore be based
on a clear and not on an ambiguous or ambivalent
ground. From our assessment of the records, we find
that petitioners exercised their authority to dismiss
exacting
provisions of the Labor Code. The right to terminate
should be utilized with extreme caution because its
immediate effect is to put an end to an employee's
present means of livelihood while its distant effect,
upon a subsequent finding of illegal dismissal, is just
as pernicious to the employer who will most likely be
required to reinstate the subject employee and grant
him full back wages and other benefits.
with respect to rank-and-file personnel, loss of trust
and confidence as ground for valid dismissal requires
proof of involvement in the alleged events in
question, and that mere uncorroborated assertions
and accusations by the employer will not be
sufficient. But, as regards a managerial employee,
mere existence of a basis for believing that such
employee has breached the trust of his employer
would suffice for his dismissal. Hence, in the case of
managerial employees, proof beyond reasonable
doubt is not required, it being sufficient that there is
some basis for such loss of confidence, such as when
the employer has reasonable ground to believe that
the employee concerned is responsible for the
his
participation therein renders him unworthy of the
trust and confidence demanded by his position.
RULES MANAGERI AL AND RANK AND FILE EMPLOYEES
B. Termi nati on of Empl oyment by Empl oyee
The disparity in the periods of filing the
complaints in the two cases did not in any way
reduce this case into insignificance. On the
contrary, it even invited the attention of the Court to
focus on sexual harassment as a just and valid cause
for termination. Whereas petitioner Libres was only
meted a 30-day suspension by t he NLRC, Villarama
in the other case was penalized with termination. As
Mister Justice Puno elucidated, As a managerial
employee, petitioner is bound by more exacting
work ethics. He failed to live up to his higher
standard of responsibility when he succumbed to his
moral perversity. And when such moral perversity is
perpetuated against his subordinate, he provides a
justifiable ground for his dismissal for lack of trust
and confidence. It is the right, nay the duty of every
employer to protect its employees from oversexed
superiors.
Law and jurisprudence have long recognized the
right of employers to dismiss employees by reason
of loss of trust and confidence. As provided for in the
Labor Code, "Art. 282. An employer may terminate
an employment for any of the following causes: . . .
(c) Fraud or willful breach of the trust reposed in
authorized
representative. . . ." In the case of supervisors or
personnel occupying positions of responsibility, this
Court has repeatedly held that loss of trust and
confidence justifies termination. Obviously, as a just
cause provided by law, this ground for terminating
employment, springs from the voluntary or willful
act of the employee, or "by reason of some
blameworthy act or omission on the part of the
employee".
23. 02 CAUSES
JUST CAUSES
Termination by employee
(b) An employee may an end to the relationship
WITHOUT serving any notice on the employer
for any of the following just causes:
1. Serious insult by the employer or his
the employee;
treatment
accorded the employee by the employer or
his representative
3. Commission of a crime or offense by the
employer or his representative against the
person of the employee or any of the
immediate members of his family; and
4. Other causes analogous to any of the
foregoing.
WITHOUT JUST CAUSE
REQUI SI TES
Ar t . 285 ( a)
An employee may terminate without just cause the
employee-employer relationship by serving a written
notice n the employer at least one (1) month in
advance. The employer upon whom no such notice
was served may hold the employee liable for
damages.
for
termination of employment is premised from the fact
that an employee concerned holds a position of trust
and confidence. This situation holds where a person
is entrusted with confidence on delicate matters,
RESI GNATI ON
DEFI NI TI ON
and
protection of the employer's property. But, in order
to constitute a just cause for dismissal, the act
complained of must be "work-related" such as would
Voluntary resignation is defined as the voluntary
act of an employee who "finds himself in a
situation where he believes that personal reasons
cannot be sacrificed in favor of the exigency of
UP LAW BAROPS 2007
ONE UP
80 of 132
AZCOR back went he
by disdain or
to
illegal for
of act an with
not hence, liking, their
not does jobs, their from
by a of
with left was he when singular
petitioner to
recuperating from
unconditional and with the intent to operate as such.
There must be an intention to relinquish a portion of
NLRC ( 99) Azcor Manufacturi ng I nc. v.
relinquishing the office, accompanied with an act of
Pascua v. NLRC (98)
insensibility discrimination,
resignation an involuntary
Phi l . Wi rel ess I nc. v. NLRC (98)
Admi ral Real t y Co. , I nc. v. NLRC (99)
Resignation dismissal. complaint
accompanied
construable own
resignation.
resigned
Cheni ver Deco Pri nt Technics Corporation v.
NLRC ( 2000)
Wi l l i Hahn Enterpri ses v. Maghuyop (2004)
tendered resignation Acceptance
Reyes v. CA (2003)
moment
Metro Transi t Organi zati on, I nc. v. NLRC (98)
unconditional and with the intent to operate as such.
There must be an intention to relinquish a portion of
Azcor Manufacturi ng, I nc. v. NLRC (99)
resorted
continued employment is rendered
voluntary
resignation,

Part II : Labor Standards Law
Labor Standards
the service and he has no other choice but to
disassociate himself from his employment.
Indeed, it would have been illogical for private
respondents herein to resign and then file a
REQUI SI TES
is
inconsistent with the filing of the said complaint.
[Valdez vs. NLRC, 286 SCRA 87, 94 (1998).]
constitute resignation,
Respondent claims that she was constructively
dismissed from her office as its location was
the term of office accompanied by an act of
relinquishment. In the instant case, the fact that
Capulso signified his desire to resume his work when
he went back to petitioner AZCOR after recuperating
from his illness, and actively pursued his case for
illegal dismissal before the labor courts when he was
refused admission by his employer, negated any
intention on his part to relinquish his job at AZCOR.
transferred from under the steps of the stairs to the
kitchen. Such transfer caused her mental torture
which forced her to resign. However, it was not
shown that her transfer was prompted by ill will of
management. Indeed, the manager of the hotel
swore that the transfer affected not only the Cost
Control office but also other offices.
The transfer involved only a change in location
of the office. It does not involve a change in
petitioner's position. Even a transfer in position is
There is no valid resignation where it was made
without proper discernment, such as when an
employees writing and handing in of his resignation
letter to his employer was only triggered by that
no
alternative but to accede, having been literally
forced into it by being presented with the more
unpleasant fate of being terminated.
valid when based on sound judgment, unattended by
demotion in rank or diminution of pay or bad faith.
With respect to the memorandum requiring the
private respondent to explain why disciplinary action
should not be taken against her for violations of
hotel rules, we find that the memorandum was not
unreasonable nor an act of harassment that left
petitioner with no choice but to resign.
There is no showing that petitioner was coerced
into resigning from the company. On the contrary,
While it is true that petitioner tendered his
resignation letter to respondents requesting that he
be given the same benefits granted by the company
to resigned/retrenched employees, there is no
showing that respondents accepted his resignation.
an
employee is necessary to make the resignation
effective.[24] No such acceptance, however, was
shown in the instant case. What appears in the
record is a letter terminating the services of
petitioner due to retrenchment effective January 20,
1998. Verily, said letter should be interpreted as a
non-acceptance of petitioners resignation effective
December 31, 1997. As correctly pointed out by the
Labor Arbiter, if respondents considered petitioner
resigned as of December 31, 1997, then there would
be no need to retrench him.
The rule that the filing of a complaint for illegal
dismissal is inconsistent with resignation is not
applicable to the instant case. The filing of an illegal
dismissal case by respondent was evidently a mere
afterthought. It was filed not because she wanted to
return to wok but to claim separation pay and back
wages.
respondent resigned without any element of coercion
attending her option. She voluntarily resigned from
employment and signed the quitclaim and waiver
after receiving all the benefits for her separation. To
allow respondent to repudiate the same will be to
countenance unjust enrichment on her part. "The
Court will not permit such a situation."
The Court has held that constructive dismissal is
when
impossible,
unreasonable, or unlikely; when there is a demotion
in rank and/or a dimunition in pay; or when a clear
an
employer becomes unbearable to the employee. In
this particular case, respondent voluntarily resigned
from his employment. He was not pressured into
resigning.
Voluntary resignation is defined as the act of an
employee who finds himself in a situation where he
believes that personal reasons cannot be sacrificed
in favor of the exigency of the service and he has no
other choice but to disassociate himself from his
employment.
VOLUNTARY RESI GNATI ON Basic is the doctrine that resignation must be
intention
relinquishment.
Petitioners contention that private respondents
appear
convincing. As public respondent observed, the
subsequent transfer of petitioner to another place
hardly accessible to its workers resulted in the
latters untimely separation from the service not to
as
Resignation must be voluntary and
made with the intention of relinquishing the office,
relinquishment.8
[Pascua vs. NLRC, 287 SCRA 554, 567 (1998).]
constitute
the term of office accompanied by an act of
relinquishment. In the instant case, the fact that
Capulso signified his desire to resume his work when
after
his illness, and actively
pursued his case for illegal dismissal before the
UP LAW BAROPS 2007
ONE UP
81 of 132

To a it must be
and made with the of
To a it must be
a is his
six

a
because been has practice
from himself to but choice
the at look closer a
Resignation employment.
exceeding
when the bona fide suspension of the operation of a
Val dez v. NLRC (98)
Under Article 286 of the Labor Code, the bona
fide suspension of the operation of a business or
Mani la Broadcasting Co. v. NLRC (98)
recognized
disassociate
I ntertrod Mari ti me I nc. v. NLRC (91)
Moreover,
employment. shall not terminate

Part II : Labor Standards Law
Labor Standards
labor courts when he was refused admission by his
employer, negated any intention on his part to
relinquish his job at AZCOR.
subject
resignation letters readily reveals the following: (a)
the resignation letter allegedly tendered by Capulso
to Filipinas Paso was identically worded with that
supposedly addressed by him to AZCOR; (b) both
were pre-drafted with blank spaces filled up with the
purported dates of effectivity of his resignation; and,
(c) it was written in English, a language which
Capulso was not conversant with considering his low
level of education. No other plausible explanation
can be drawn from these circumstances than that
the subject letters of resignation were prepared by a
person or persons other than Capulso. And the fact
that he categorically disowned the signatures therein
and denied having executed them clearly indicates
that the resignation letters were drafted, without his
consent and participation.
Even assuming for the sake of argument that
the signatures were, genuine, we still cannot give
credence to those letters in the absence of any
showing that Capulso was aware that what he was
signing then were in fact resignation letters or that
he fully understood the contents thereof. Having
introduced those resignation letters in evidence, it
was incumbent upon petitioners to prove clearly and
convincingly their genuineness and due execution,
especially considering the serious doubts an their
authenticity. Petitioners miserably failed in this
respect.
Resignation is the voluntary act of an employee
who "finds himself in a situation where he believes
that personal reasons cannot be sacrificed in favor of
the exigency of the service, then he has no other
his
employment." The employer has no control over
resignations and so, the notification requirement was
devised in order to ensure that no disruption of work
would be involved by reason of the resignation. This
certificate of candidacy for any elective or local
office as resigned from the company. Although 11
(b) of R.A. No. 6646 does not require mass media
commentators and announcers such as private
respondent to resign from their radio or TV stations
but only to go on leave for the duration of the
campaign period, we think that the company may
nevertheless validly require them to resign as a
matter of policy. In this case, the policy is justified
on the following grounds:
Working for the government and the company
at the same time is clearly disadvantageous
and prejudicial to the rights and interest not
only of the company but the public as well. In
the event an employee wins in an election, he
cannot fully serve, as he is expected to do, the
interest of his employer. The employee has to
serve two (2) employers, obviously detrimental
to the interest of both the government and the
private employer.
In the event the employee loses in the election,
the impartiality and cold neutrality of an
employee as broadcast personality is suspect,
thus readily eroding and adversely affecting the
confidence and trust of the listening public to
employer's station.
XXX As important a rule as one which considers
an employee who runs for public office resigned
must be written and published so as to lend
certainty to its existence and definiteness to its
scope. Otherwise, the impression may be fostered
that the enforcement of the policy is discretionary on
the part of the heads of the various offices and units
of the company. Moreover, such an unwritten rule is
susceptible of misinterpretation and is not likely to
be taken seriously by those to whom it is addressed.
CONSTRUCTI VE DI SMI SSAL
undertaking for a period not exceeding six months
"every
business enterprise endeavors to increase its profits
by adopting a device or means designed towards
that goal."
Resignations, once accepted and being the sole
act of the employee, may not be withdrawn without
the consent of the employer.
Once an employee resigns and his resignation is
accepted, he no longer has any right to the job. If
the employee later changes his mind, he must ask
for approval of the withdrawal of his resignation
from his employer, as if he were re-applying for the
job. It will then be up to the employer to determine
whether or not his service would be continued. If the
employer accepts said withdrawal, the employee
retains his job. If the employer does not, as in this
case, the employee cannot claim illegal dismissal for
the employer has the right to determine who his
employees will be. To say that an employee who has
resigned is illegally dismissed, is to encroach upon
the right of employers to hire persons who will be of
service to them.
Consequently,
business or undertaking exceeds six months, then
the employment of the employee shall be deemed
terminated. By the same token and applying said
rule by analogy, if the employee was forced to
remain without work or assignment for a period
months,
constructively dismissed.
XXX It would have been illogical for herein
petitioner to resign and then file a complaint for
illegal dismissal. Resignation is inconsistent with the
filing of the said complaint.
Resignation is defined as the voluntary act of an
employee who finds himself in a situation where he
believes that personal reasons cannot be sacrificed
in favor of the exigency of the service, and, that he
has no other choice but to disassociate himself from
formal
pronouncement of relinquishment of an office. It
must be made with the intention of relinquishing the
office accompanied by an act of relinquishment.
VALI DI TY OF POLI CY 23. 03 NO TERMI NATI ON PERFORMANCE OF
MI LI TARY OR CI VI C DUTY
What is involved in this case is an unwritten
company policy considering any employee who files
Ar t . 286
When Empl oyment NOT Deemed Terminated
UP LAW BAROPS 2007
ONE UP
82 of 132

then he is in effect
unless or
also may The
of sphere the within made was order
while More the
master, his and laborer a between

undertaking establishment
employer
ARTI CLE 283.
Ar t . 282.
importantly, employer.
Makati Haberdashery, I nc. v. NLRC (89)
Mani la Tradi ng and Suppl y Co., I nc. v. Zul ueta
( 4 0 )
Under the circumstances, it is evident that there
is no illegal dismissal of said employees. Thus, We
have ruled that:

Part II : Labor Standards Law
Labor Standards
a. The bona fide suspension of the operation of a
business or undertaking for a period not
exceeding six months, or
b. The fulfillment by the employee of a military or
civic duty shall not terminate employment.
In all such cases, the employer shall reinstate
the employee, to his former position without loss of
seniority rights if he indicates his desire to resume
his work not later than 1 month from the resumption
of operations of his employer or from his relief from
the military or civic duty.
class, is meet and proper. That in controversies
doubts
reasonably arising from the evidence, or in the
interpretation of agreements and writings should
be resolved in the former's favor, is not an
unreasonable or unfair rule. But that disregard of
the employer's own rights and interests can be
justified by that concern and solicitude is unjust
and unacceptable." (Stanford Microsystems, Inc.
v. NLRC).
The law is protecting the rights of the laborer
authorizes neither oppression nor self-destruction of
the
Constitution is committed to the policy of social
justice and the protection of the working class, it
should not be supposed that every labor dispute will
automatically be decided in favor of labor.
Finally, it has been established that the right to
dismiss or otherwise impose disciplinary sanctions
upon an employee for just and valid cause, pertains
in the first place to the employer, as well as the
authority to determine the existence of said cause in
accordance with the norms of due process.
C. Termi nati on of Empl oyment by Empl oyer
PRELIMINARY MATTERS
Ocean East Agency Corp. v. NLRC (1998)
Respondents defiance of a lawful order posed
serious and considerable prejudice to the business of
the employer. This Court finds that petitioners
23. 04 BASI S OF RIGHT AND REQUI REMENTS
The whole controversy is centered around the
right of the Court of Industrial Relations to order the
readmission of a laborer who, it is admitted, had
been found derelict in the performance of his duties
towards his employer. We concede that the right of
an employer to freely select or discharge his
employees, is subject to regulation by the State
basically in the exercise of its paramount police
power. (Commonwealth Acts Nos. 103 and 213.) But
much as we should expand beyond economic
orthodoxy, we hold that an employer cannot legally
be compelled to continue with the employment of a
person who admittedly was guilty of misfeasance or
malfeasance towards his employer, and whose
continuance in the service of the latter is patently
inimical to his interests. The law, in protecting the
rights of the laborer, authorizes neither oppression
nor self-destruction of the employer. There may, of
course, be cases where the suspension or dismissal
of an employee is whimsical or unjustified or
otherwise illegal in which case he will be protected.
Each case will be scrutinized carefully and the proper
authorities will go to the core of the controversy and
not close their eyes to the real situation. This is not
however the case here.
its
management prerogative. The exercise of an
employer to regulate all aspects of employment
must be in keeping with good faith and not to be
used as a pretext for defeating the rights of
employees under the laws and applicable contracts.
A perusal of the records shows a clear, valid and
legal cause for the termination of respondents
employment.
REQUI REMENTS
Termination by employer. An employer may
terminate an employment for any of the following
causes:
a. Serious misconduct or willful disobedience by
the employee of the lawful orders of his
employer or representative in connection with
his work;
b. Gross and habitual neglect by the employee of
his duties:
c. Fraud or willful breach by the employee of the
trust reposed in him by his employer or duly
authorized representative;
d. Commission of a crime or offense by the
employee against the person of his employer
or any immediate member of his family or his
duly authorize representative; and
e. Other causes analogous to the foregoing.
Closure of establishment and reduction of personnel.
"No employer may rationally be expected to
continue in employment a person whose lack of
morals, respect and loyalty to his employer,
regard for his employer's rules, and appreciation
of the dignity and responsibility of his office, has
so plainly and completely been bared.
"That there should be concern, sympathy, and
solicitude for the rights and welfare of the working
terminate
employment of any employee due to the:
a. Installation of labor saving devices,
b. Redundancy,
c. Retrenchment to prevent losses or
d. Closing or cessation of operation of the
the
closing is for the purpose of circumventing the
provisions of this Title,
by serving a written notice on the workers and
the Ministry of Labor and Employment at least
one (1) month before the intended date thereof.
UP LAW BAROPS 2007
ONE UP
83 of 132
BASI S
the
the of services the
afoul running without
his answer to
not can an of
Under
of the with himself defend
notice written a with
of effects the suspend may
and rules
notice written a be
employee, terminate
employee must be afforded due process, i.e., he
Arbol eda v. NLRC (99)
employer's opportunity
employee dismissal
Sal aw v. NLRC (91)
assistance
containing employee
legality of the act of dismissal, i.e., the dismissal
Orl ando Farms Growers v. NLRC (98)
Employment
regulations company
containing terminated
Ar t . 277 ( b)
Ar t . 284.
as Code, Labor the amended,

Part II : Labor Standards Law
Labor Standards
In case of termination due to the installation of
labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service,
whichever is higher.
In case of retrenchment to prevent losses and in
cases of closures or cessation of operations of
establishment or undertaking not due to serious
business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of
service, whichever is higher
A fraction of at least six (6) months shall be
considered one (1) whole year.
facets of valid termination of employment; (a) the
must be under any of the just causes provided under
Art. 282 of the Labor Code; and (b) the legality of
the manner of dismissal, which means that there
must be observance of the requirements of due
process, otherwise known as the two-notice rule.
Thus, "the employer is required to furnish the
a
statement of the cause for termination and to afford
said employee ample opportunity to be heard and to
his
representative, if he so desires. The employer is also
required to notify the worker in writing of the
decision to dismiss him, stating clearly the reasons
therefore."
Disease as a ground for termination. An employer
may terminate the services of an employee who has
been found to be suffering from any disease and
whose continued employment is prohibited by law or
is prejudicial to his health as well as to the health of
his co-employees: Provided, That he is paid
separation pay equivalent to at least one (1) month
salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at
least six (6) months being considered as one (1)
whole year.
the
requirements for the lawful dismissal of an employee
by his employer are two-fold: the substantive and
the procedural. Not only must the dismissal be for a
valid or authorized cause as provided by law
(Articles 279, 281, 282-284, New Labor Code), but
the rudimentary requirements of due process -
notice and hearing - must also be observed before
an employee may be dismissed. One does not
suffice; without their concurrence, the termination
would, in the eyes of the law, be illegal.
The inviolability of notice and hearing for a valid
Subject to the constitutional right of workers to
security of tenure and their right to be protected
against dismissal except for just and authorized
cause and without prejudice to the requirement of
notice under Art. 283 of this Code the employer shall
furnish the worker whose employment is sought to
a
statement of the causes for termination and shall
afford the latter ample opportunity to be heard and
to be defend himself with the assistance of his
representative if he so desires in accordance with
be over-
emphasized. Those twin requirements constitute
essential elements of due process in cases of
employee dismissal. The requirement of notice is
intended to inform the employee concerned of the
employer's intent to dismiss him and the reason for
the proposed dismissal; on the other hand, the
requirement of hearing affords the employee the
charges
against him and accordingly to defend himself
therefrom before dismissal is effected. Neither one
promulgated
pursuant to guidelines set by the Department of
Labor and Employment. Any decision taken by the
employer shall be without prejudice to the right of
the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional
branch of the National Labor Relations Commission.
The burden of proving that the termination was for a
valid or authorized cause shall rest on the employer.
The Secretary of the Department of Labor and
the
termination pending resolution of the dispute in the
event of a prima facie finding by the appropriate
official of the Department of Labor and Employment
before whom such dispute is pending that the
termination may cause a serious labor dispute or is
in implementation of a mass lay-off.
of these two requirements can be dispensed with
of
requirement of the Constitution.
The main issue being the legality of petitioner's
dismissal, it may be worth to look into the requisites
for the validity of a dismissal, namely, (a) the
must be given an opportunity to be heard and
defend himself, and (b) the dismissal must be for a
valid cause as provided in Art. 282 of the Labor
Code.
The essence of due process in administrative
proceedings is an opportunity to explain one's side
or an opportunity to seek reconsideration of the
action or ruling complained of. Before an employee
can be validly dismissed, the Labor code requires the
SUBSTANTIVE AND PROCEDURAL DUE PROCESS
It is settled that in termination disputes, the
employer bears the burden of proving that the
dismissal is for just cause, failing which it would
mean that the dismissal is not justified and the
employer is entitled to reinstatement. The dismissal
of employees must be made within the parameters
of the law and pursuant to the basic tenets of equity,
employer to furnish the employee with two (2)
written notices: (a) a written notice containing a
statement of the cause for termination to afford the
employee ample opportunity to be heard and defend
himself with the assistance of his representative, if
he so desires; and, (b) if the employer decides to
the
employer must notify him in writing of the decision
to dismiss him, stating clearly the reasons therefor.
justice and fair play. In Brahm Indust ri es, Inc. v.
NLRC, the Court explained that there are two (2)
UP LAW BAROPS 2007
ONE UP
84 of 132

the due process
act private
serious, Such
and terms

of Closing,






constituted respondents
PNCC v. NLRC (99)
however misconduct,
Samson v. NLRC (2000)
Same
Other Causes = 283
COMPLIANCE PROCEDURAL DUE PROCESS
cessation
Other analogous cases
Authorized Causes = 279
Authorized Causes = 283
COMPLI ANCE SUBSTANTIVE DUE PROCESS
PRESCRI PTI ON
FRAMEWORK ANALYSIS
PROPER FORUM?
Notice
employer
family
person
member
representative
Employee

Part II : Labor Standards Law
Labor Standards
withheld up to actual reinstatement.
Labor Arbiter = 217 (a) (2)
Voluntary Arbitrator = 260 261
Regular Courts
APPEAL PROCEDURE
SUPREME COURT
COMPLAI NT
I LLEGAL DI SMISSAL COURT OF APPEALS
Art. 1141, NCC = injury rights plaintiff 4yrs
from date of dismissal
Just Cause = Art. 279
Just Causes = 282 LABOR ARBITER / VOLUNTYARY ARBITRATOR
Serious misconduct, willful disobedience of
lawful order
Gross and habitual neglect of duties
Fraud, willful breach of trust reposed by
employer
Commission of creime, offense against
immediate
authorized
GROUNDS FOR TERMI NATI ON SUBSTANTI VE
DUE PROCESS
23.05 JUST CAUSES
Article 282 of the Labor Code, as amended, the
following are deemed just causes to terminate an
employee:
Installation of labor saving device
Redundancy
Retrenchment to prevent losses
business,
purpose circumvention of law
Disease = 284
PROPER FORUM
CAUSE OF ACTION NOT PRESCRIBED
a. Serious misconduct or willful disobedience by
the employee of the lawful orders of his
employer or representative in connection with
his work;
b. Gross and habitual neglect by the employee of
his duties:
c. Fraud or willful breach by the employee of the
trust reposed in him by his employer or duly
authorized representative;
d. Commission of a crime or offense by the
employee against the person of his employer
or any immediate member of his family or his
duly authorize representative; and
e. Other causes analogous to the foregoing.
Just causes
OLD RULE = on just cause and authorized
cause
Art. 277 (b) = notice and hearing and
notice
NEW RULE = Serrano v. NLRC, GR No.
117040, May 4, 2000
served
Secretary
Disease = 284
A. SERI OUS MISCONDUCT
Definition and Acts
Misconduct is improper or wrong conduct. It is
the transgression of some established and definite
rule of action, a forbidden act, a dereliction of duty,
willful in character, and implies wrongful intent and
not mere error in judgment. The misconduct to be
serious must be of such grave and aggravated
character and not merely trivial and unimportant.
I f termi nation i s VALI D = END OF CASE
must,
nevertheless, be in connection with the employees
work to constitute just cause for his separation.
I f Termi nati on i s I NVALI D
Remedi es/ Sancti ons:
279 = Reinstatement without loss of seniority
rights and other privileges
223 =
Reinstatement immediately executory
even pending appeal
Employer option physical or payroll
reinstatement
conditions
employment prior to dismissal
Bond cannot stay execution order
In the case at bar, private respondents were
caught in the act of accepting bribe in the form of
cash and a dog from a motorist who was suspected
of illegally transporting dogs. As tollway guards,
private respondents had the duty to maintain peace
and order at the North Luzon Expressway and to
ensure that all tollway rules and regulations are
followed. But private respondents did the contrary
by yielding to bribery. They were the first to violate
the rules they were tasked to enforce. Undoubtedly,
serious
misconduct which warranted their dismissal from
the service. It is for this reason that we find
equivalent compensation respondents undeserving
UP LAW BAROPS 2007
ONE UP
Backwages, inclusive 279 = Full
Nature of disease and treatment
of
allowances, other benefits, or other monetary
85 of 132










orf
of
or
or
not



and DOLE



of
from date was


NLRC

private of the
and done
negate Kun Mr. check
and officer the
any about brought which
serious
For from as such
a
was
of the
really
cannot Buhat, Pastor
the who
the of the to

knowingly intentionally,
unauthorized
implication
Cebu Fi l veneer Corp. v. NLRC (98)
asserting approving
circumstances
Nagui t, Jr. vs. NLRC (2003)
dismissal of warranting misconduct
Philippine Aeolus Automoti ve United Corp. v.
NLRC ( 2000)
employment. dismissal
employer's
committed
improper, although
Austri a v. NLRC (99)
affidavit. supporting supplied
Manager addressed
Golden Thread Kni tti ng Industri al Inc. v. NLRC
( 9 9 )
unable that We
by
that she
defaulted in reporting
Indeed, she reported
upon
representatives
petitioners find
substantiate
were
the charge of serious
employment.
The omission of the private

Part II : Labor Standards Law
Labor Standards
compassion accorded by the law to workers who are
bound to join the ranks of the unemployed.
While the Constitution does condone
wrongdoing by the employee, it nevertheless urges a
moderation of the sanctions that may be applied to
him in light of the many disadvantages that weigh
heavily on him like an albatross on his neck. Where
to
misconduct
against Macaspac and Albasin. The incident report of
the two (2) security guards was on its face
categorical on the culpability of subject respondents,
yet it is perplexing that the report was not utilized as
supporting evidence in the criminal proceedings.
As previously stated, the incident report was
penalty less punitive would suffice, whatever
missteps may have been committed by the worker
ought not be visited with a consequence so severe
the
foregoing reasons, we believe that the minor
infraction committed by petitioner does not merit the
ultimate penalty of dismissal.
company.
Considering that it was the Manager who instructed
petitioner Bico to lodge the criminal complaint, and if
the report was submitted after the incident, then
there was no reason for it not to form part of the
evidence in the criminal proceedings. As it is, we can
gather from the narration of petitioner Bico that the
person who revealed to him the identities of the
culprits was not one of the security guards but Mejia
These
circumstances inevitably lead us to the conclusion
that the incident report was merely concocted by
petitioners in view of the filing of the labor cases
against them.
Often, misdeeds are committed either in the
presence of an ally, if nobody is around to blow the
whistle, or when darkness has adequately shrouded
the surroundings. Moreover, it has not been shown
that Macaspac and Albasin were such feckless
individuals who would resort to destruction of
company properties in total disregard of its dire
consequences. On the contrary, they were union
members fighting for their rights as employees.
Even the reason advanced by Mejia for their
misconduct banks on speculation. Further still, it
does not appear that the criminal case filed by
petitioner Bico primarily on the strength of the
affidavit of Mejia ever prospered at the prosecutor's
level.
The Supreme Court, in a litany of decisions on
an
employee, has ruled that for misconduct or improper
behavior to be a just cause for dismissal (a) it must
be serious; (b) must relate to the performance of
the employees duties; and, (c) must show that the
employee has become unfit to continue working for
the employer. The act of private respondent in
throwing a stapler and uttering abusive language
upon the person of the plant manager may be
considered, from a lay man's perspective, as a
serious misconduct. However, in order to consider it
a serious misconduct that would justify dismissal
under the law, it must have been done in relation to
the performance of her duties as would show her to
be unfit to continue working for her employer. The
acts complained of, under the circumstances they
were done, did not in any way pertain to her duties
as a nurse. Her employment identification card
discloses the nature of her employment as a nurse
and no other.
Petitioners attempt at exoneration deserves
scant consideration. As custodian of the petty cash
fund, he had the duty to ascertain that the
claim
therefrom were in order. He cannot now shirk from
the responsibility by indirectly pinning the blame on
Misconduct has been defined as improper or
wrong conduct. It is the transgression of some
established and definite rule of action, a forbidden
act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error in
judgment. For misconduct to be considered serious it
must be of such grave and aggravated character and
not merely trivial or unimportant. Based on this
standard, we believe that the act of petitioner in
banging the attach case on the table, throwing the
telephone and scattering the books in the office of
that
transgression was the result of mere advertence.
Petitioner thus committed dishonesty and breached
Meralcos trust, which dishonesty calls for reprimand
to dismissal under MERALCOs rules.
WI LLFUL DI SOBEDI ENCE
DEFI NI TI ON AND REQUI SI TES
be
considered as grave enough to be considered as
serious misconduct. After all, as correctly observed
by the Labor Arbiter, though petitioner committed
damage to property, he did not physically assault
Pastor Buhat or any other pastor present during the
incident of 16 October 1991. In fact, the alleged
never
established or proven by private respondents.
Hence, there is no basis for the allegation that
petitioner's act constituted serious misconduct or
that the same was an offense against the person of
the employer's duly authorized representative. As
such, the cited actuation of petitioner does not
justify the ultimate penalty of dismissal from
respondent can
hardly be described as "willful" to justify her
dismissal. For one, the omission did not last for long.
For another, the subsequent actions of the private
respondent upon learning of the encashment of the
any
willfully or intentionally
to prejudice petitioners.
the matter to petitioner
Cordaro and wrote to the PNB MEPZ Branch to
retrieve the encashed check. A breach is willful if it is
purposely.
Petitioners merely proved the omission of the private
respondent but there is no evidence whatsoever
that it was done intentionally.
UP LAW BAROPS 2007
ONE UP
86 of 132
offense the person
the
that any never was there
on depend or
orders, the his
service the in
cannot them of one on injuries physical
the to the deliver to i.e.,
the or willful
the or willful
to (3) and to
be hardly can himself
of private
may an
agreement
instruction regulation,
regulations, employment,
PNOC-EDC v. Abel l a (2005)
continuance petitioners
merchandise
Rosari o v. Vi ctor y Ri ce mi l l (2003)
willfulness intentional,
Vi tari ch Corp. v. NLRC (99); Rosario v. Vi ctory
Ri ce mi l l ( 2003)
willfulness intentional,
their supervisor; apologize
Ti erra I nternati onal Producti on Corp. v. NLRC
( 9 6 )
characterized
dismissal respondents'
Di mabayao v. NLRC (99)
terminate amended,
Westi n Phi l . Pl aza Hotel v. NLRC (99)
employer
employment for serious

Part II : Labor Standards Law
Labor Standards
Under Article 282 (a) of the Labor Code, as
an
misconduct or willful
disobedience by the employee of the lawful orders of
his employer or representative in connection with his
work. But disobedience to be a just cause for
dismissal envisages the concurrence of at least two
(2) requisites: (a) the employee's assailed conduct
must have been willful or intentional, the willfulness
being characterized by a wrongful and perverse
attitude; and, (b) the order violated must have been
reasonable, lawful, made known to the employee
and must pertain to the duties which he has been
engaged to discharge.
as a just cause for dismissal of an employee,
envisages the concurrence of at least two (2)
requisites: the employees assailed conduct must be
being
characterized by a wrongful and perverse attitude;
and the order violated must have been reasonable,
lawful, made known to the employee and must
pertain to the duties which he had been engaged to
discharge.
In this case, the order to petitioner was simple,
Felix
Hardware. It was clearly reasonable, lawful, made
known to petitioner and pertained to his duty as
driver of respondent. Petitioner did not even proffer
a justifiable explanation for his disobedience thereto.
In light of our ruling in Gold City Integrated Port
Services we cannot sustain the NLRC for upholding
petitioner.
Petitioner's act of leaving his work place to relieve
as
abandonment, much less a willful or intentional
disobedience of company rules since he was merely
answering the call of nature over which he had no
control. Restraining one's bowel movement can
result in great discomfort and affect adversely the
efficiency, and even the health, of the worker.
Petitioner's disobedience to his employer's orders
can easily be categorized as trivial and unimportant,
and as such, does not merit a penalty as harsh as
dismissal.
Every employee is charged with the implicit duty of
caring for the employers property. Petitioners
conduct showed that he could not even be trusted
with this task. Further, his hostile attitude towards
his co-workers which eventually led him to inflict
be
countenanced. As correctly put by the NLRC,
of
respondent company is partly inimical not only to its
interests but also to the interest of its other
employees.
Insubordination or willful disobedience by an
employee, to constitute a just cause for terminating
or
instructions of the employer or representative must
be:
1. reasonable and lawful;
According to the report of the company' s Site
Administration Officer, private respondents were
given three "options:" (1) to go back to work; (2) to
be
repatriated. What private respondents were given
were not really "options." They were given the
choice of apologizing for their refusal to work and
then resume working as ordered, or, else, resign and
be sent back home. Under the circumstances they
really had no choice but to resign. It was not pride
or arrogance which made them refuse to work as
ordered, but the assertion of their right not to be
made to work outside of what they had been hired
to do. For asserting their right, private respondents
should not be punished. We, therefore, hold that
private respondents' dismissal was illegal and that
for this reason they are entitled to be paid their
salaries corresponding to the unexpired portion of
their employment contract, in addition to their
unpaid salaries prior to their dismissal, as found by
both the POEA and the NLRC.
2. sufficiently known to the employee; and
3. in connection with the duties which the
employee has been engaged to discharge.
There is no doubt in this case that the assailed
transfer orders fulfill the second and third elements
above-stated. Private respondent Abella was well
informed of the orders of transfer and said orders
were well in connection with the security functions of
the private respondent. It is only the issue of
reasonableness and lawfulness of said orders that
have to be elucidated on.
The reasonableness and lawfulness of an order,
the
circumstances availing in each case. Reasonableness
pertains to the kind or character of directives and
commands and to the manner in which they are
made.
The petitioners aver that the orders were well
within their managerial prerogative to make and that
private
respondent Abella had to be posted in a fixed place.
The appellate court, on the other hand, stated
Legahi v. NLRC (99)
For willful disobedience to be considered as just
cause for dismissal, the employee's conduct must be
being
characterized by a wrongful and perverse attitude
and the order violated must have been reasonable,
lawful, made known to the employee and must
pertain to the duties which he has been engaged to
discharge.
that its finding that the private respondent was not
guilty of insubordination and abandonment was
based on the fact that the dismissal of private
respondent Abella was effected with bad faith, as it
was intended to punish him for refusal to heed his
employers unreasonable orders.
The records of the present case fail to show any
hint of truth to the declaration of the appellate court.
A thorough review of the records of the case
shows that there is a valid reason behind the
transfer of the private respondent to MIGP in
In AHS/Philippines, Inc. v. CA, we explained -
willful disobedience of the employers lawful orders,
Kidapawan, North Cotabato. As stated in the
telegraphic message received by the private
respondent,
UP LAW BAROPS 2007
ONE UP
87 of 132

by search body
funds. National
even were private that
of
to a with
is Gross
habi tual and
of
to Order Delivery Sugar Refined
Order. Delivery and Quedan
acts alleged his is of Notice
ground that noted be should
to known made lawful, been
or willful been has conduct

petitioner thorough
Bookstores petitioner
respondents
consequences disregard thoughtless
Nati onal Bookstore, I nc. v. CA (2002)
indifference conscious
negligence employee.
Tres Reyes v. Maxi m s Tea House (2003)
PLDT v. NLRC (99)
We affirm the finding of the NLRC that "Article
282 (b) of the Labor Code requires that . . . such
neglect must not only be gross, it should be 'Gross
disregard thoughtless
Judy Phili ppines Inc. v. NLRC (98)
Nati onal Sugar refineri es Corp. v. NLRC (98)
Termination
Acesites
reasonable,
intentional,
Acesi te Coprorati on v. NLRC (2005)
neglect'

Part II : Labor Standards Law
Labor Standards
excuse the latter as she was very much aware that
her acts would be greatly prejudicial to NASUREFCO.
Willful disobedience entails the concurrence of
at least two (2) requisites: the employees assailed
the
willfulness being characterized by a wrongful and
perverse attitude; and the order violated must have
the
employee and must pertain to the duties which he
had been engaged to discharge.
In Gonzales case, his assailed conduct has not
been shown to have been characterized by a
perverse attitude, hence, the first requisite is
wanting. His receipt of the telegram disapproving
his application for emergency leave starting April 30,
1998 has not been shown. And it cannot be said
that he disobeyed the May 5, 1998 telegram since
he received it only on May 7, 1998. On the
contrary, that he immediately hired back to Manila
upon receipt thereof negates a perverse attitude.
As to Gonzales alleged concealment of his
candidacy (for provincial board member) as a
ground for Acesites loss of trust and confidence in
him, the same is not impressed with merit. It
for
terminating the services of Gonzales as stated in the
of
insubordination/disobedience. The concealment of
candidacy angle harped upon by Acesite can only
thus be considered as mere afterthought to further
justify his illegal dismissal.
With regards to Gonzales perceived feigning of
illness, the same is purely speculatory.
If there is anything that Gonzales can be faulted
for, it is his being too presumptuous that his
application for leave would be approved.
Petitioner anchors its right to terminate the
employment of Virginia Antiola on the ground of
"gross neglect of duties," under Article 282 (b) of
the Labor Code. Gross negligence implies a want or
absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a
consequences
exerting any effort to avoid them.
character."
pronounced by the NLRC, "the penalty of dismissal is
qui t e severe here" noting that the labor arbiter
Likewise, it must be noted that willful defiance
of company rules must be characterized by perverse
attitude that would be considered as inimical to the
interest of his employer. Even when an employee is
found to have transgressed the employer's rules, in
the actual imposition of penalties upon the erring
employee, due consideration must still be given to
his length of service and the number of violations
committed during his employ.
GROSS NEGLIGENCE DEFINED
B. GROSS AND HABI TUAL NEGLECT OF DUTIES
Requisites
Under the Labor Code, gross negligence is a
valid ground for an employer to terminate an

characterized
negligence
by want of even slight care, acting or
Neglect of duty, to be a ground for dismissal,
must be both gross and habitual.[4] In the instant
case, Pabionas neglect of duty was gross. As her
position related to money matters, she was expected
and required to be extra vigilant in the
performance of her job as it involved the
financial interest of the company. She was also
habitually remiss in her duties. She issued a Refined
Sugar Delivery Order to Shantung Commercial
without first examining the corresponding Raw Sugar
Consequently,
Shantung Commercial was able to withdraw a larger
quantity of refined sugar than what was allowable to
it. In another instance, Pabiona again issued a
Shantung
Commercial without the corresponding Raw Sugar
Quedan. Thus, NASUREFCO was not able to collect
raw sugar from Shantung Commercial equivalent to
the refined sugar it had withdrawn. Thirdly, Pabiona
made it appear that in 1989 Dacongcogon Producers
endorsed more than 200,000 piculs of raw sugar to
NASUREFCO thereby allowing it to qualify in the
Volume Incentive Program under which NASUREFCO
would pay P1.00 per picul of raw sugar to every
planter that endorsed 200,000 piculs or more of raw
sugar to NASUREFCO. The fact that NASUREFCO
did not suffer losses from the anomalies committed
by Pabiona because of timely discovery does not
omitting to act in a situation where there is a duty to
ac, not inadvertently but willfully and intentionally
consequences
insofar as other persons may be affected. In this
case, however, there is no substantial basis to
support a finding that petitioner committed gross
negligence.
Gross negligence has been defined as the want
or absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a
without
exerting any effort to avoid them.[19] A perusal of
the records of the case does not in any way show
remotely
negligent of their duties so as to cause the loss of
Private
respondents were able to illustrate with candor and
sincerity the procedure they took prior to the loss
which was witnessed by an employee of petitioner
National Bookstore. They were in fact subjected to a
National
Bookstores lady guard before leaving their place of
work on the date in issue, a claim not controverted
by petitioners. Moreover, it was not even shown that
they had access to the vault where the money
was kept.
UP LAW BAROPS 2007
ONE UP
himself admits that she committed the infraction for
the first time.
88 of 132
without
in As aptly
breach alleged the how and
of
the for is
the when as such
the show would as such related"
labor the of the
been not has who
cannot private of
held
"no was there that found
on founded be must his by
Verily,

petitioner
Farrol v. Court of Appeal s (2000)
a 'position with a definition of
Panday v. NLRC (92)
responsible concerned
employer confidence,
Jardi ne Davi es, I nc. v. NLRC (99)
Paguio Transport Corp. v. NLRC (98)
satisfaction
accorded respondent,
respondent
"gross and habitual."
negligence
considered
private respondent was
categorically
reveals that private respondent was in fact acquitted
RDS Trucking v. NLRC (98)
Ci ti bank N. A. v. Gatchal i an (95)
Cebu Fi l veneer Corp. v. NLRC (98)
employer"
Philippine Aeolus Automoti ve United Corp. v.
NLRC ( 2000)
arguendo assuming employee.[20]

Part II : Labor Standards Law
Labor Standards
Significantly, in order to constitute a just cause
for the employees dismissal, the neglect of duties
must not only be gross but also habitual. Thus, the
single or isolated act of negligence does not
constitute a just cause for the dismissal of the
that
private respondents were negligent, although we
find otherwise, it could only be a single or an
isolated act that cannot be categorized as habitual,
hence, not a just cause for their dismissal.
arbiter,
respondent NLRC, and finally, this Court.
Private respondent's admission that he was
involved in the November 4, 1993 accident did not
give petitioner a just cause to dismiss him. Mere
involvement in an accident, absent any showing of
fault or recklessness on the part of an employee, is
not a valid ground for dismissal.
C. FRAUD WILLFUL BREACH OF TRUST
Gross negligence implies a want or absence of
or failure to exercise slight care or diligence, or the
entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any
effort to avoid them. The negligence, to warrant
removal from service, should not merely be gross
but also habitual. Likewise, the ground "willful
facts
established by the employer who must clearly and
convincingly prove by substantial evidence the facts
and incidents upon which loss of confidence in the
employee may fairly be made to rest. All these
requirements prescribed by law and jurisprudence
are wanting in the case at bar.
Gross negligence implies a want or absence of
or failure to exercise slight care or diligence or the
entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any
effort to avoid them.
Loss of Confidence Requisites
It is settled that loss of confidence as a just
cause for terminating employment must be premised
on the fact that an employee concerned holds a
position of trust and confidence. This situation
obtains where a person is entrusted with confidence
on delicate matters, such as care and protection,
handling or custody of the employer's property, as in
this case. But, in order to constitute a just cause for
dismissal, the act complained of must be "work-
employee
concerned to be unfit to continue working for the
employer. Likewise, it must be noted that proof
beyond reasonable doubt is not required to dismiss
an employee on the ground of loss of confidence. It
is sufficient that there is some basis for such loss of
has
reasonable ground to believe that the employee
purported
misconduct, and the nature of his participation
therein renders him unworthy of the trust and
confidence demanded of his position.
Gross negligence implies a want or absence of
or failure to exercise slight care or diligence, or the
entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any
effort to avoid them.
Simple Negligence
POSI TI ON OF TRUST AND CONFIDENCE
Our findings and conclusion in this labor case
are not affected by the outcome of that criminal
case. A mere reading of the MeTC decision clearly
of the charge of malicious mischief. The trial court
direct
evidence to show that the accused deliberately
caused damage" to the truck of petitioners. Although
The case of Lepanto Consolidated Mining Co. v.
Court of Appeals, 1 SCRA 125 [1961], provides us
trust and
confidence'. It one where a person is 'entrusted with
confidence on delicate matters, or with the custody,
handling, or care and protection of the employer's
property . . ..'
liable for simple
imprudence resulting in damage to property from
the mere fact that he was not able to satisfactorily
explain the cause of damage to the truck, such is
not sufficient to validate his illegal dismissal. Under
the Labor Code simple negligence is not a ground for
the dismissal of an employee. Article 282 (b)
explicitly provides that negligence must not only be
gross but must be both "gross and habitual" in
character to justify depriving an employee of his
means of livelihood. In this case, the alleged
be
As already
discussed the infractions imputed against private
any
semblance of due process prior to his termination,
have not been substantially proven by petitioners to
A perusal of RCPIs dismissal notice reveals that
it merely stated a conclusion to the effect that the
withholding was deliberately done to hide alleged
malversation or misappropriation without, however,
stating the facts and circumstances in support
thereof. It further mentioned that the position of
cashier requires utmost trust and confidence but
failed to allege the breach of trust on the part of
was
committed. On the assumption that there was
indeed a breach, there is no evidence that petitioner
was a managerial employee of respondent RCPI. It
should be noted that the term "trust and confidence"
is restricted to managerial employees. It may not
even be presumed that when there is a shortage,
there is also a corresponding breach of trust.
Cash shortages in a cashiers work may happen,
UP LAW BAROPS 2007
ONE UP
breach by the employee of the trust reposed in him
89 of 132
public
find we Indeed,
trust the of her act
to contrary
safety
of pieces (4) four stealing
warrant

Vi tari ch v. NLRC (99)
faith. 8 Petitioner contended that respondent's
Greenhill s Products, I nc. v. NLRC (98)
substantial
Obviously, her position is a Operations.
unworthy rendered
petitioners
first
property.
Likewise,
basketball
petitioners truck. As found by the CA:
Sul pi ci o Li nes, I nc. v. Gul de (2002)
the that gleaned be ca [I]t
ground
respondent's loss of confidence in petitioner.
employees the
employment."
company for

Part II : Labor Standards Law
Labor Standards
and when there is no proof that the same was
deliberately done for a fraudulent or wrongful
purpose, it cannot constitute breach of trust so as to
render the dismissal from work invalid.
termination of employment by an employer.[26] This
ground should be duly established.[27] Substantial
evidence is sufficient as long as such loss of
confidence is well-founded or if the employer has
reasonable ground to believe that the employee
concerned is responsible for the misconduct and her
The basic requisite for dismissal on the ground
of loss of trust and confidence is that the employee
concerned must be one holding a position of trust
and confidence. However, loss of confidence must
not be indiscriminately used as a shield by the
employer against a claim that the dismissal of an
employee was arbitrary. Loss of confidence as a just
cause for termination of employment is premised on
the fact that the employee concerned holds a
position of responsibility or trust and confidence. He
must be invested with confidence on delicate
matters, such as custody handling or care and
protection of the property and assets of the
employer. And, in order to constitute a just cause for
dismissal, the act complained of must be work-
related and shows that the employee concerned is
unfit to continue to work for the employer.
Further, well-settled is the rule that "for loss of
trust and confidence to be a valid ground for
dismissal of an employee, it must be substantial and
founded on clearly established facts sufficient to
separation
and
confidence demanded of her position.[28] It must be
shown, though, that the employee concerned holds a
position of trust.[29] The betrayal of this trust is the
essence of the offense for which an employee is
penalized.[30]
Petitioner argues that her position as Finance
Director of respondent's Beer Division is not one of
trust but one that is merely functional and advisory
in nature. She possesses no administrative control
over the plants and region finance officers, including
cashiers. She reports to two superiors.
Petitioner's argument is misplaced. As Finance
Director, she is in charge of the custody, handling,
care and protection of respondent's funds. The
encashment of her personal checks and her private
use of such funds, albeit for short periods of time,
are contrary to the fiduciary nature of her duties.
Moreover, petitioner has functional control over
all the plant and region finance officers, including
cashiers, within the Luzon Operations Area. In fact,
she is the highest ranking managerial employee for
the finance section of the Luzon Beer Division
In this case, contrary to the allegations of
petitioner, there is no sufficient evidence to show
that respondent conspired with the thieves in
evidence
presented in the case did not clearly prove that
petitioner willfully breach his duty. It was not
proven the indeed he connived with the thieves.
The same was even commented upon by the
NLRC when it said that the allegations that
petitioner (respondent herein) knew the thieves
were not even found in the police report. (p. 29.
Rollo) Additionally, the reason given by the truck
helper as to his inaction in preventing the
thieves from taking the basketballs is not
incredible. His reaction given the situation is not
beyond human reaction to similar circumstances.
It is a natural reaction to think about ones
before the
factor in
abetting the encashment of her personal checks.
for
She
does not deny encashing her personal checks at
respondent's sales offices and diverting for her own
private use the latter's resources. The audit
investigation accounted for all the checks she
encashed, some of which were dishonored for
insufficiency of funds. The Investigating Panel
concluded that petitioner not only encashed her
personal checks at respondent's sales offices, but
also used company funds to temporarily satisfy her
insufficient accounts. This Court has held that
misappropriation of company funds, although the
shortages had been fully restituted, is a valid ground
to terminate the services of an employee of the
loss of trust and confidence.
claim,
respondent did not stop the truck to allow the
looters to disembark. Rather, respondent made
a brief stop at the house of a co-employee in
Calao Street near the Agusan Institute of
Technology to deliver his medicines.In fact, as
testified by Manapat, respondents companion,
respondent was not aware that the two pilferers
boarded the truck and he learned about the theft
only when Manapat told him about it.
In fine, petitioner failed to present sufficient
evidence to show that respondent committed acts
that would warrant his dismissal for loss of trust and
confidence. It is significant to note that respondent
had been in petitioners employ for thirteen (13)
years and it has not been shown that during this
period he had been guilty of any infraction against
petitioner. It is difficult to believe that he would
deliberately jeopardize his job for something as
worthless as basketballs.
Santos v. San Mi guel Corporati on (2003)
Article 282(c) of the same Code provides that
"willful breach by the employee of the trust reposed
in him by his employer" is a cause for the
GUI DELI NES
The guidelines for the doctrine of loss of
confidence to apply are: (1) loss of confidence
should not be simulated; (2) it should not be used as
a subterfuge for causes which are improper, illegal,
or unjustified; (3) it may not be arbitrarily asserted
in the face of overwhelming evidence to the
contrary; and (4) it must be genuine, not a mere
afterthought to justify an earlier action taken in bad
dismissal was for a valid cause arguing that the
latter stole company properties and, thereafter,
disposed of them for a consideration in favor of
Roberto Caramelo.
Being a mere afterthought to justify its earlier
action of terminating Recodo, the allegations of
policy violations do not constitute just causes of
dismissal on account of the lack of confidence
contemplated in Midas Touch Food Corporation v.
UP LAW BAROPS 2007
ONE UP
90 of 132
from
from
safety of anothers
private after that, is
not was and laborer as position
hand, other the On
serious of the

the
or
not on
caprices
grounds and
whims,

Li m v. NLRC (96)
investigation,
Oani a v. NLRC (95)
function. employee's
I nternati onal Ri ce Research I nsti tute v. NLRC
( 9 3 )
misconduct proportion
"quarrelsome, character disagreeable
Cathedral School of Technology v. NLRC (92)
employer's
Atl as Consol idated Mining and Devel opment
Corp. v. NLRC (98); Fel i x v. NLRC (2004)
San Antoni o v. NLRC (95)
The Court is not prepared to conclude that
petitioner has been guilty of willful disobedience in
failing to comply posthaste with the transfer order.
In Gold City Integrated Port Services, Inc. v. NLRC,
the Court, on the subject "willful disobedience," has
explained:

Part II : Labor Standards Law
Labor Standards
NLRC under which the guidelines for the application
of the doctrine of loss of confidence are: (a) loss of
confidence which should not be simulated; (b) it
should not be used as a subterfuge for causes which
are improper, illegal or unjustified; (c) it should not
be arbitrarily asserted in the face of overwhelming
evidence to the contrary; and (d) it must be
genuine, not a mere afterthought to justify earlier
action taken in bad faith.
disrespect and defiance of authority and assumes
or
insubordination, any of which constitutes just cause
for dismissal from employment.
CONVI CTI ON MORAL TURPI TUDE
ATTI TUDE
"Willful disobedience of the employer's lawful
orders', as a just cause for the dismissal of an
employee, envisages the concurrence of at least
two (2) requisites: the employee's assailed
conduct must have been willful or intentional,
the wilfulness being characterized by a 'wrongful
and perverse attitude'; and the order violated
must have been reasonable, lawful, made known
to the employee and must pertain to the duties
which he had been engaged to discharged."
Willful Breach
Settled is the rule that under Article 283 (c) of
the Labor Code, the breach of trust must be willful.
A breach is willful if it is done intentionally,
knowingly and purposely, without justifiable excuse,
as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently. It must
substantial
arbitrariness,
suspicion; otherwise, the employee would eternally
remain at the mercy of the employer. It should be
genuine and not simulated; nor should it appear as a
mere afterthought to justify earlier action taken in
bad faith or a subterfuge for causes which are
improper, illegal or unjustified. It has never been
intended to afford an occasion for abuse because of
its subjective nature.
There must therefore be an actual breach of
duty committed by the employee which must be
established by substantial evidence.
D. COMMI SSI ON OF CRI ME; 282 (D)
E. ANALOGOUS CASES; 282 (E)
QUARRELSOME BOSSY
Article 282 of the Labor Code enumerates the
just causes wherein an employer may terminate an
employment. Verily, conviction of a crime involving
moral turpitude is not one of these justifiable
causes. Neither may said ground be justified under
Article 282 (c) nor under 282 (d) by analogy. Fraud
or willful breach by the employees of the trust
reposed in him by his employer or duly authorized
representative under Article 282 (c) refers to any
fault or culpability on the part of the employee in the
discharge of his duty rendering him absolutely
unworthy of the trust and confidence demanded by
his position. It cannot be gainsaid that the breach of
trust must be related to the performance of the
the
commission of a crime by the employee under Article
282 (d) refers to an offense against the person of his
employer or any immediate member of his family or
his duly authorized representative. Analogous causes
must have an element similar to those found in the
specific just cause enumerated under Article 282.
Clearly lacking in the ground invoked by petitioner is
its relation to his work or to his employer.
In the case at bar, the commission of the crime
of homicide was outside the perimeter of the IRRI
complex, having been committed in a restaurant
after office hours and against a non-IRRI employee.
Thus, the conviction of Micosa for homicide was not
work-related, his misdeed having no relation to his
directed
committed against IRRI or its authorized agent.
XXX As to what crime involves moral turpitude,
is for the Supreme Court to determine. Thus, the
precipitate conclusion of IRRI that conviction of the
crime of homicide involves moral turpitude is
unwarranted considering that the said crime which
resulted from an act of incomplete self-defense from
an unlawful aggression by the victim has not been
so classified as involving moral turpitude.
Violation of a company rule prohibiting the
infliction of harm or physical injury against any
person under the particular circumstances provided
for in the same rule may be deemed analogous to
"serious misconduct" stated in Art. 282 (a) above.
To repeat, however, there is no substantial evidence
definitely pointing to petitioners as the perpetrators
of the mauling of Malong. What is an established fact
The reason for which private respondent's
services were terminated, namely, her unreasonable
behavior and unpleasant department in dealing with
the people she closely works with in the course of
her employment, is analogous to the other "just
causes" enumerated under the Labor Code, as
amended.
Petitioners' averments on private respondent's
bossy,
unreasonable and very difficult to deal with" are
supported by the various testimonies of several co-
employees and students of the school. The conduct
she exhibited on that occasion smacks of sheer
respondent
dismissed them and, thereafter, a criminal complaint
was filed against petitioners. Likewise, it is of record
that Malong desisted from suing the perpetrators
before the regular courts.
Gross inefficiency falls within the purview of
:other causes analogous to the foregoing, and
constitutes just cause to terminate an employee
under Art. 282, labor Code. One is analogous to
another if it is susceptible of comparison with the
latter either in general or in some specific detail,
UP LAW BAROPS 2007
ONE UP
91 of 132
rest on
or
NLRC. We
time. on posts their to return they
of illegal
to the of part the
the means job one's
with totally is
No
We
valid without absence or work for report
was

Mendoza v. NLRC (99)
CMP Federal Securi ty Agency, I nc v. NLRC (99)
include the meal break. Nowhere in the law may
Phi l. Ai rl i nes, Inc. v. NLRC (99)
Abandonment dismissal.
employee
Abandoning
Premi ere Devel opment Bank v. NLRC (98)
reason. As quoted by the Court in Judric Canning
Corporation v. Inciong, "To get a job is difficult; to
inconsistent abandonment
Haci enda Dapdap v. NLRC (98)
relationship. employer-employee
Leonardo v. NLRC (2000) and Fuerte v. Aqui no
( 2 0 0 0 )
Metro Transi t Corp. , I nc. v. NLRC (99)
presented
Escobin v. NLRC (98)
the with concur cannot
of abuse grave such discretion
following:

Part II : Labor Standards Law
Labor Standards
or has a close relationship with the latter. Gross
inefficiency is closely related to gross neglect for
both involve specific acts of omission on the part of
the employee resulting in damage to the employer
or to his business.
F. OTHERS JUST CAUSES CLAIMED BY EMPLOYER
alleges, coincides with the date of the original
complaint strongly indicates that such employment
was only meant to help respondent and his family
survive during the pendency of his case. It has been
said that abandonment of position cannot be lightly
inferred, much less legally presumed from certain
equivocal acts such as an interim employment.
1. ABANDONMENT SPECIFIC ACTS
DEFI NED
This contention is untenable. Abandonment, as
a just and valid cause for dismissal, requires a
deliberate, unjustified refusal of an employee to
resume his work, coupled with a clear absence of
any intention of returning to his work. No evidence
We agree with both the NLRC and the Solicitor
General that respondent did not abandon her job. To
constitute abandonment, two elements must concur:
(1) the failure to report for work or absence without
valid or justifiable reason, and (2) a clear intention
to sever the employer-employee relationship, with
the second element as the more determinative
to
relinquished their jobs.
establish petitioners factor and being manifested by some overt acts.
deliberate,
unjustified refusal of the employee to resume his
REQUI SI TES employment and the burden of proof is on the
employer to show a clear and deliberate intent on
Indeed, for abandonment of work to be a just
and valid ground for dismissal, there must be a
deliberate and unjustified refusal on the part of an
employee to resume his employment. The burden of
proof is on the employer to show an unequivocal
intent on the part of the employee to discontinue
employment. To warrant a finding of abandonment,
there must be evidence not only of the failure of an
employee to report for work or his absence without
valid or justifiable reason, but also of his intention to
sever the employer-employee relationship. The
second element is the more determinative factor,
being manifested by overt acts.
discontinue
employment. The law, however, does not enumerate
what specific overt acts can be considered as strong
evidence of the intention to sever the employee-
employer relationship. An employee who merely
took steps to protest her indefinite suspension and
to subsequently file an action for damages, cannot
be said to have abandoned her work nor is it
indicative of an intention to sever the employer-
employee relationship. Her failure to report for work
was due to her indefinite suspension. Petitioner's
allegation of abandonment is further belied by the
fact that private respondent filed a complaint for
work
inconsistent with the filing of said complaint.
Neither can we say that FUERTEs actions are
indicative of abandonment. To constitute such a
ground for dismissal, there must be (1) failure to
NO ABANDONMENT
Thus, the eight-hour work period does not
or
justifiable reason; and (2) a clear intention, as
manifested by some overt acts, to sever the
have
accordingly held that the filing of a complaint for
illegal dismissal, as in this case, is inconsistent with
a charge of abandonment.
it
be inferred that employees must take their meals
within the company premises. Employees are not
prohibited from going out of the premises as long as
Private
respondent's act, therefore, of going home to take
his dinner does not constitute abandonment.
INFERENCE PRESCRI PTI ON
Contrariwise, when Caranto was relieved from
his post on 6 May 1994 he immediately pursued his
was
committed by the NLRC as it correctly applied the
consistent ruling in labor cases that a charge of
claim against CMP by amending his complaint six (6)
days after to include illegal dismissal among his
charges. This can hardly be expected from one who
the
immediate filing of a complaint for illegal dismissal.
It is indeed inconceivable that an employee like
herein respondent who has been working at Hda.
Dapdap I since 1977 and cultivating a substantial
portion of a 6-hectare lot therein for himself would
just abandon his work in 1992 for no apparent
has voluntarily "abandoned" his job, as claimed by
CMP. The immediate filing of a complaint for illegal
dismissal against the employer is a clear indication
that the employee has not given up on his work.
The
unflinching rule in illegal dismissal cases is that the
run from it is foolhardy." Nor could intent to
abandon be presumed from private respondent's
subsequent employment with another employer as
petitioner alleges. The fact that the start of such
employment, i.e., after 1 March 1992 as petitioner
employer bears the burden of proof. To establish a
case of abandonment, the employer must prove the
employee's deliberate and unjustified refusal to
resume employment without any intention of
returning. Specifically, the employer has to show
concurrence
UP LAW BAROPS 2007
ONE UP
92 of 132
that
is
the of the (1) the
illegal Such
2.
of period fixed The 1.
was
is (the "Reyes'
of the that
be should It do.
period a within
that proof is of notice
dismissal dismissal.
Medeni l l a v. Phi l . Veterans Bank (2000)
employment
Romares v. NLRC (98)
The Brent ruling also laid down the criteria
contractual probationary, employment
argument teacher's)
Brent School v. Zamora (90)
Meralcos maintenance
Manila Electric Co. v. NLRC (96)
emphasized voluntarily
Batongbacal v. Associ ated Bank (88)
Pearl S. Buck Foundati on, Inc. v. NRLC (90)
reasonable dismissal
termination
the that said be may it While

Part II : Labor Standards Law
Labor Standards
employee's intention to abandon employment and
(2) overt acts from which such intention may be
inferred as when the employee shows no desire to
resume works. The private respondent failed to
establish any of these.
The employer herein argues that the lack of a
Habitual absenteeism should not and cannot be
tolerated by petitioner herein which is a public utility
company engaged in the business of distributing and
selling electric energy within its franchise areas and
petitioner
abandoned her job. We disagree. Mere absence from
work, especially where the employee has been
verbally told not to report, cannot by itself constitute
abandonment. To repeat, the employer has the
burden of proving overt acts on the employee's part
which demonstrate a desire or an intention to
abandon her work. It failed to discharge this burden.
Furthermore, the filing of a complaint for illegal
negates
abandonment. In the present case, the Complaint
was filed about two weeks after petitioner has been
dismissed or had been deemed resigned.
distribution
facilities (electric lines) by responding to customers
complaints is of paramount importance to the
consuming public.
An employees habitual absenteeism without
leave, which violated company rules and regulations
is sufficient cause to justify termination from service.
TERM EMPLOYMENT
Such interpretation puts the seal on Bibiso upon
the effect of the expiry of an agreed period of
employment as still good rule a rule reaffirmed in
the recent case of Escudero vs. Office of the
President where, in the fairly analogous case of a
BORROWI NG MONEY teacher being served by her school a notice of
termination following the expiration of the last of
Borrowing money is neither dishonest, nor
immoral, nor illegal, much less criminal. (Medical
Doctors, Inc. [Makati Medical Center] v. NLRC)
However, said act becomes a serious misconduct
that may justly be asserted as a ground for dismissal
when reprehensible behavior such as the use of a
trust relationship as a leverage for borrowing money
is involved. A recipient of largesse may be so
grateful that out of a sense of "utang na loob" she
may lend money to an employee or relative of a
benefactor believing that the loan would be paid
anyway. In this case, the fact that Aliarte has
retracted her complaint is of no moment. She loaned
money to the respondent, not once but twice and
there can be no other assumption where the money
came from except from the trust funds intended for
the ward.
three successive fixed-term employment contracts,
the Court held:
not
persuasive. It loses sight of the fact that her
in
nature, and one with a definitive period. At the
expiration of the period stipulated in the contract,
her appointment was deemed terminated and the
letter informing her of the non-renewal of her
contract is not a condition sine qua non before Reyes
may be deemed to have ceased in the employ of
petitioner UST. The notice is a mere reminder that
Reyes' contract of employment was due to expire
and that the contract would no longer be renewed. It
is not a letter of termination. The interpretation that
the notice is only a reminder is consistent with the
court's finding in Labajo, supra. . . ."
COURTESY RESIGNATION
under which "term employment" cannot be said to
be in circumvention of the law on security of tenure:
private
respondent's call for courtesy resignations was
prompted by its determination to survive, we cannot
lend legality to the manner by which it pursued its
goal. By directing its employees to submit letters of
courtesy resignation, the bank in effect forced upon
its employees an act which they themselves should
that
resignation per se means voluntary relinquishment
of a position or office. Adding the word "courtesy"
did not change the essence of resignation. That
courtesy resignations were utilized in government
reorganization did not give private respondent the
right to use it as well in its own reorganization and
rehabilitation plan. There is no guarantee that all
employers will not use it to rid themselves arbitrarily
of employees they do not like, in the guise of
"streamlining" its organization. On the other hand,
employees would be unduly exposed to outright
termination of employment which is anathema to the
constitutional mandate of security of tenure.
was
knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper
pressure being brought to bear upon the employee
and absent any other circumstances vitiating his
consent; or
It satisfactorily appears that the employer
and the employee dealt with each other on more or
less equal terms with no moral dominance exercised
by the former or the latter.
None of these requisites were complied with.
Since findings by the Labor Arbiter are binding
on this Court if supported by substantial evidence,
the Court rules that there was illegal dismissal
absent just cause, which is one of the facets of a
warrants
reinstatement and payment of backwages. However,
since petitioners reinstatement is now considered
impractical because the new Philippine Veterans
Bank has been rehabilitated by virtue of RA 7169,
WORK ATTI TUDE the Court limits the relief to be granted to the
petitioners to the unpaid wages during the
ABSENCES remaining period of their employment contract.
UP LAW BAROPS 2007
ONE UP
93 of 132

2. LOANS
3.
4.
5.
basis. school
unique quite
a never is medical
due ground. that on
rules, its Under Jardine.
with charged was
as used so be may
entitled 7169, RA of
case the In the

would have no teachers
Chua-Qua v. Cl ave (90)
behavior amounts to
students.
Santos v. NLRC (98)
as
post-graduate
residency movement from This upward
permanent specialty
Fel i x v. Buenaseda (95)
behavior amounts to
students.
Santos v. NLRC (98)
However, petitioner
company
falsification petitioner
Ramoran v. Jardine CMG Life Insurance Co.,
I nc. ( 2000)
offenses previous
La Carlota Pl anters Assn. v. NLRC (98)
effectivity
contract. employment
undergoing
fellowships are concerned.
situation

Part II : Labor Standards Law
Labor Standards
As held by this Court, if the contract is for a
fixed term and the employee is dismissed without
just cause, he is entitled to the payment of his
salaries corresponding to the unexpired portion of
under
scrutiny, the unpaid wages should be reckoned on
February 18, 1991 to January 1, 1992. January 1,
1992 is considered the date of expiration of the
period of liquidation since January 2, 1992 was the
immorality, justifying his
termination from employment.
PROFESSI ONAL TRAI NI NG
RESI DENCY TRAI NI NG
A residency or resident physician position in a
"An
Rehabilitate the Philippine Veterans Bank".
one.
Residency connotes training and temporary status.
It is the step taken by a physician right after post-
PAST INFRACTI ONS graduate internship (and after hurdling the Medical
Licensure Examinations) prior to his recognition as a
PAST OFFENSES specialist or sub-specialist in a given field.
to
specialist rank, institutionalized in the residency
The correct rule has always been that such
valid
justification for dismissal from work only if the
infractions are related to the subsequent offense
upon which basis the termination of employment is
decreed. The previous infraction, in other words,
may be used if it has a bearing to the proximate
offense warranting dismissal.
training process, guarantees minimum standards
and skills and ensures that the physician claiming to
be a specialist will not be set loose on the
community without the basic knowledge and skills of
his specialty. Because acceptance and promotion
requirements are stringent, competitive, and based
on merit, acceptance to a first year residency
program is no guaranty that the physician will
complete the program. Attrition rates are high.
Finally, there is no basis to mitigate petitioners
liability inasmuch as this is not the first time that
by
respondent Jardine. She had in fact earlier served a
five (5)-day suspension from November 8-13, 1993
for admittedly tampering with the entries in Official
Receipt No. 1013 issued by Limited Vision Center on
July 7, 1993, in support of her application for the
optical loan she had obtained from respondent
Some programs are pyramidal. Promotion to the
next post-graduate year is based on merit and
performance determined by periodic evaluations and
examinations of knowledge, skills and bedside
manner. Under this system, residents, specially
those in university teaching hospitals 18 enjoy their
right to security of tenure only to the extent that
they periodically make the grade, making the
physicians
residencies
respondent
Jardine was, strictly speaking, entitled to dismiss
to
petitioners voluntary admission of the offense and
for humanitarian reasons, she was only given a five
(5)-day suspension. In a memorandum, respondent
Jardine warned the petitioner that "any future
violation of the same nature, irrespective of the time
frame [sic] that it is repeated or committed, would
result in the imposition of the maximum penalty of
dismissal." As aptly remarked by the appellate court
"the seeds of mistrust had been sown, awaiting only
the proper occasion for it to grow and fester."
Petitioner, thus, had only herself to blame when she
was finally dismissed, for cause, by respondent
Jardine for the reason that she falsified her subject
overtime authorization slips dated December 6 and
14, 1993 in violation of the Company Rules and
Regulations.
LOVE AND MORALS
I MMORALI TY
Accordingly, teachers must abide by a standard
of personal conduct which not only proscribes the
commission of immoral acts, but also prohibits
behavior creating a suspicion of immorality because
of the harmful impression it might have on the
Likewise, they must observe a high
standard of integrity and honesty.
From the foregoing, it seems obvious that when
a teacher engages in extra-marital relationship,
especially when the parties are both married, such
immorality, justifying his
termination from employment.
ANI MOSI TY
With the finding that there is no substantial
Accordingly, teachers must abide by a standard
of personal conduct which not only proscribes the
commission of immoral acts, but also prohibits
behavior creating a suspicion of immorality because
of the harmful impression it might have on the
Likewise, they must observe a high
standard of integrity and honesty.
From the foregoing, it seems obvious that when
a teacher engages in extra-marital relationship,
especially when the parties are both married, such
evidence of the imputed immoral acts, it follows that
the alleged violation of the Code of Ethics governing
Private
respondent utterly failed to show that petitioner took
advantage of her position to court her student. If the
two eventually fell in love, despite the disparity in
their ages and academic levels, this only lends
substance to the truism that the heart has reasons
of its own which reason does not know. But,
definitely, yielding to this gentle and universal
emotion is not to be so casually equated with
UP LAW BAROPS 2007
ONE UP
94 of 132
Act to
6.
7.
8.
far as
and
9.
LOVE
for is
not is doubt beyond
[Manila an for
for the
granted it when errors patent these
a is it due denied
the or willful
or his of orders
of purpose the for not and
a upheld has Court
or or revised
damage the
The

responsible concerned employee
required reasonable
employee dismissing
Starl i te etc. v. NLRC (89)
qualified complaint dismisses
fiscal considers
Lacorte v. I nci ong (88)
Sampagui ta Garments Corp. v. NLRC (94)
Similarly, process.
Ramos v. NLRC (98)
willfulness intentional,
representative employer
defeating
companys
unilaterally amended,
Nonetheless,
Aparente Sr. v. NLRC (2000)
justified is
caused
respondent amounted to more than P
dismissal petitioners
identical.

Part II : Labor Standards Law
Labor Standards
immorality. The deviation of the circumstances of
their marriage from the usual societal pattern cannot
be considered as a defiance of contemporary social
mores.
It would seem quite obvious that the avowed
policy of the school in rearing and educating children
is being unnecessarily bannered to justify the
dismissal of petitioner. This policy, however, is not
at odds with and should not be capitalized on to
defeat the security of tenure granted by the
Constitution to labor. In termination cases, the
burden of proving just and valid cause for dismissing
an employee rests on the employer and his failure to
do so would result in a finding that the dismissal is
unjustified.
evidence, particularly, for lack of proof that the
USECO was damaged by the acts attributed to
petitioner.
These are patent errors. Petitioner was not
well
established ruled that the dismissal of the criminal
case against an employee shall not necessarily be a
bar to his dismissal from employment on the ground
of loss of trust and confidence. The NLRC corrected
private
respondents second motion for reconsideration.
CONVI CTI ON
10. VI OLATI ON OF COMPANY RULES
by
Company rules and regulations. It is true that his
violation of company rules is his first offense.
5,000.00, thus,
the penalty of discharge is properly imposable as
provided by Section 12 of Rule 005-85 of CCBPIs
Code of Disciplinary Rules and Regulations.
It is recognized that company policies and
regulations, unless shown to be grossly oppressive
or contrary to law, are generally valid and binding on
the parties and must be complied with until finally
preferably
through negotiation, by competent authority. The
The private respondent's conviction of the crime
of theft of property belonging to the petitioner has
affirmed the existence of a valid ground for her
dismissal and thus removed the justification for the
administrative decision ordering her reinstatement
with back wages. Nevertheless, the petitioner is still
subject to sanction for its failure to accord the
private respondent the right to an administrative
investigation in conformity with the procedural
requirements of due process.
DI SMI SSAL CRI MI NAL CASE
The purpose of the proceedings before the fiscal
is to determine if there is sufficient evidence to
warrant the prosecution and conviction of the
accused. In assessing the evidence before him, the
management
prerogatives so long as they are exercised in good
faith for the advancement of the employers interest
or
circumventing the rights of the employees under
special laws or under valid agreements.
Article 282 (a) of the Labor Code of the
Philippines sanctions termination by the employer of
the employees services for serious misconduct or
willful disobedience by the employee of the lawful
the basic rule that to successfully
convict the accused the evidence must be beyond
reasonable doubt and not merely substantial. On the
other hand, to support findings and conclusion of
administrative bodies only substantial evidence is
required. It does not follow that once the fiscal
theft,
respondent officials should also have decided in
favor of petitioner. For one, the evidence presented
before the two bodies may not be necessarily
in
connection with his work. In the instant case,
petitioner Aparente was terminated from service
after having been found guilty of driving without a
valid drivers license, which is a clear violation of the
companys rules and regulations.
In order that an employer may dismiss an
employee on the ground of willful disobedience,
there must be concurrence of at least two requisites:
The employees assailed conduct must have been
Secondly, the appreciation of the facts and
evidence presented is an exercise of discretion on
the part of administrative officials over which one
cannot impose his conclusion on the other. As we
have already ruled, "the conviction of an employee
in a criminal case is not indispensable to warrant his
dismissal, and the fact that a criminal complaint
against the employee has been dropped by the fiscal
is not binding and conclusive upon a labor tribunal.
being
characterized by a wrongful and perverse attitude;
and the order violated must have been reasonable,
lawful, made known to the employee and must
pertain to the duties which he had been engaged to
discharge. We have found these requisites to be
present in the case at bar.
There is no dispute that loss of confidence,
when adequately proven, constitutes a valid ground
Midtown
Commercial Corporation v. Nuwhrain] and proof
to
terminate him on this charge [Gatmaitan v. MRR]. It
is sufficient that there is some basis for such loss of
11. CRI MI NAL CASE
EFFECT OF ACQUITTAL
confidence [Galsim v. PNB; Central Textile Mills v.
NLRC] and that the employer has reasonable ground
to believe or entertain the moral conviction that the
the
misconduct and that the nature of his participation
The NLRC initially reversed the ruling of the
labor arbiter on the grounds that: (1) petitioner was
denied procedural due process and (2) the criminal
case for estafa filed against her has been dismissed
by the Manila Prosecutors office for insufficiency of
therein would render him absolutely unworthy of the
trust and confidence demanded of his position
[Nevans v. CIR]. The doctrine goes on further to
include the basic rule that the conviction of an
employee in a criminal case is not indispensable
UP LAW BAROPS 2007
ONE UP
95 of 132
to private
abuse grave without faith, good in done
to
is
transfer a
the course, Of
with
place and working
in as
the with agree We
its of
manage and control to right
and benefits salary, his of
proof of the satisfy to
of Bottling Cola Pepsi In

Philippine Japan Active Carbon Corp. v. NLRC
( 8 9 )
amounts
when the transfer
However,
dismissal
OSS Security and Allied Services, Inc. v. NLRC
( 2 0 0 0 )
prerogative managerial
interference discourage
methods, assignment,
inherent prerogative management
dismissed.
aptitudes qualifications, employee's
employer's
diminution
Westi n Phi l . Pl aza Hotel v. NLRC (99)
San Miguel Corp. v. NLRC (99)
requirement
Qui ambao v. NLRC (96)
Company
Chua-Qua v. Cl ave (90)
A constructive
an
judgment in the conduct of his business.

Part II : Labor Standards Law
Labor Standards
to warrant his dismissal by his employer and that
the fact that a criminal complaint against the
employee has been dropped by the city fiscal is not
binding and conclusive upon a labor tribunal [Sea
Land Service Inc. v. NLRC].
and
competence, to move him around in the various
areas of its business operations in order to ascertain
where the employee will function with utmost
efficiency and maximum productivity or benefit to
the company. An employee's right to security of
GUILT OR INNOCENCE
While the criminal complaint where petitioner
was included as one of the accused was dismissed
for insufficiency of evidence, the Court considers
that the dismissal of the criminal complaint did not
preclude a finding by the competent administrative
authorities, that petitioner had indeed committed
acts inimical to the interest of his employer.
tenure does not give him such a vested right in his
position as would deprive the company of its
prerogative to change his assignment or transfer
him where he will be most useful.
Casti llo v. NLRC (99)
Petitioner claims that she was constructively
respondent
Commission's finding rejecting the same. Well-
settled is the rule that it is the prerogative of the
the
Philippines v. Guanzon, we held that: "Private
respondent's guilt or innocence in the criminal case
is not determinative of the existence of a just or
authorized cause for his dismissal". This doctrine
follows from the principle that the quantum and
weight of evidence necessary to sustain conviction in
criminal cases are quite different from the quantum
of evidence necessary for affirmance of a decision of
the Labor Arbiter and of the NLRC.
This case is to be distinguished from those cases
in which it was held that the acquittal of the
employee in the criminal case was not a bar to his
dismissal on the ground of loss of confidence. The
rulings in those cases were based on findings that
the evidence in the criminal case was not sufficient
employer to transfer and reassign employees for
valid reasons and according to the requirement of its
business. An owner of a business enterprise is given
considerable leeway in managing his business. Our
law recognizes certain rights collectively called
the
management of business enterprises. One of the
prerogatives of management is the right to transfer
employees in their work station. This Court has
consistently recognized and upheld the prerogative
of management to transfer an employee from one
office to another within the business establishment,
provided that there is no demotion in rank or a
diminution
privileges.
The Court, as a rule, will not interfere with an
employer's prerogative to regulate all aspects of
employment which includes among others, work
beyond
reasonable doubt but otherwise adequate to support
a finding that there was substantial evidence that
the employee was guilty. In contrast, in the case at
bar, there is entire want of evidence to justify the
dismissal of the petitioner. The NLRC merely relied
on the fact that the Ministry of Justice found
petitioner probably guilty of estafa. In fact, the NLRC
found that the charges against him had not been
substantiated.
and
manner of work. The rule well-settled that labor laws
employer's
to
transfer personnel must be exercised without grave
abuse of discretion, putting to mind the basic
elements of justice and fair play. It cannot be used
as a subterfuge by the employer to rid himself of an
undesirable worker.
12. ABOLI TI ON OF POSI TI ON
Abolition of departments or positions in the
company is one of the recognized management
prerogatives. Noteworthy is the fact that the private
respondent does not question the validity of the
business move of petitioner. In the absence of proof
that the act of petitioner was ill-motivated, it is
presumed that petitioner San Miguel Corporation
acted in good faith.
Thus, the transfer of an employee ordinarily lies
within the ambit of management prerogatives.
constructive
unreasonable,
inconvenient, or prejudicial to the employee, and it
involves a demotion in rank or diminution of salaries,
benefits and other privileges. In the case at bench,
nowhere in the record does it show that that the
transfer of private respondent was anything but
TRANSFERS DISCHARGE AND SUSPENSION
of
discretion, and in the best interest of the business
enterprise.
On the issue of legality and reasonableness of
the order of transfer, it must be emphasized that
this Court has recognized and upheld the prerogative
of management to transfer an employee from one
office to another within the business establishment,
provided that there is no demotion in rank or a
13. CONSTRUCTI VE DI SCHARGE
DEFI NED
other
privileges. This is a privilege inherent in the
its
enterprise effectively. Besides, it is the employer's
prerogative, based on its assessment and perception
discharge is defined as: "A
quitting because continued employment is rendered
impossible, unreasonable or unlikely; as, an offer
involving a demotion in rank and a diminution in
pay." (Moreno's Philippine Law Dictionary, 2nd
UP LAW BAROPS 2007
ONE UP
96 of 132
of his salary, benefits and other
also may The
of
any of pending
1992, October 27 on election
by disdain or
to
accept
mind in fact in had the
employer
Ar t . 283
Engi neeri ng Works v. NLRC (91) Kwi kway
malfeasance
employee.
alleged
by the
any
committed
investigation
misfeasance
Phi l. Ai rl i nes v. NLRC (98)
investigation property
Globe-Mackay Cable and Radio Corp. v. NLRC
( 9 2 )
Mark Roche I nternati onal v. NLRC (99)
insensibility discrimination,
resignation an involuntary
Phi l . Wi rel ess, I nc. v. NLRC (99)
petitioner
Hagonoy Rural Bank, I nc. v. NLRC (98)
the Further,
such
was
a or
suspension preventive
the proper remedial
Under
suspension
available
dismissal Constructive
resorted
continued employment is rendered
them
respondents
circumstances,
employment continued

Part II : Labor Standards Law
Labor Standards
Ed., p. 129, citing the case of Alia vs. Salani Una
Transportation Co. )
XXX It is the employer's prerogative, based on
its assessment and perception of its employees'
qualifications, aptitudes, and competence, to move
them around in the various areas of its business
operations in order to ascertain where they will
function with maximum benefit to the company. An
employee's right to security of tenure does not give
him such a vested right in his position as would
deprive the company of its prerogative to change his
assignment or transfer him where he will be most
useful. When his transfer is not unreasonable, nor
inconvenient, nor prejudicial to him, and it does not
involve a demotion in rank or a diminution of his
salaries, benefits, and other privileges, the employee
may not complain that it amounts to a constructive
dismissal.
unreasonable or unlikely, as an offer involving a
demotion in rank and; a diminution in pay. In the
instant case, private respondents were not demoted
in rank nor their pay diminished considerably. They
were simply told without prior warning or notice that
there was no more work for them. After receiving
the notice of hearing of the petition for certification
petitioners
immediately told private respondents that they were
no longer employed. Evidently it was the filing of the
petition for certification election and organization of
a union within the company which led petitioners to
dismiss private respondents and not petitioners'
allegations of absence or abandonment by private
respondents. The formation of a labor union has
never been a ground for valid termination, and
where there is an absence of clear, valid and legal
cause, the law considers the termination illegal.
The next issue that needs be addressed is
whether the first nine private respondents were
illegally dismissed. We agree with the Labor Arbiter
and the NLRC in holding the affirmative view. While
it may be true that the private respondents had
chosen to go on leave for one month effective 16
October 1992, the choice was not of their complete
free will because the other alternative given by the
petitioner was suspension. The threat of suspension
thus became the proximate cause of the "leave." It
was a coerced option imposed by the petitioner. That
PREVENTIVE SUSPENSION - REMOVAL
preventive
recourse
to the company pending Salazar's
investigation. By itself, preventive suspension does
not signify that the company has adjudged the
employee guilty of the charges she was asked to
answer and explain. Such disciplinary measure is
resorted to for the protection of the company's
private
respondents' suspension was finally made evident by
its refusal to take them back after the expiration of
the leave. The petitioner extended their leave for
another month with a promise to pay them salaries.
After the expiration of the "extended" leave, the
petitioner
Ineluctably,
constructively dismissed from 16 October 1992.
alleged
malfeasance or misfeasance committed by the
employee.
Preventive suspension is a disciplinary measure
for the protection of the company's property pending
or
The
employer may place the worker concerned under
preventive suspension if his continued employment
The Court has held that constructive dismissal is poses a serious and imminent threat to the life or
when
impossible,
unreasonable, or unlikely; when there is a demotion
in rank and/or a dimunition in pay; or when a clear
property of the employer or of his co-workers.
RATI ONALE
an
employer becomes unbearable to the employee. In
this particular case, respondent voluntarily resigned
from his employment. He was not pressured into
resigning.
Voluntary resignation is defined as the act of an
employee who finds himself in a situation where he
believes that personal reasons cannot be sacrificed
in favor of the exigency of the service and he has no
other choice but to disassociate himself from his
employment.
Respondent considered his transfer/promotion
as a demotion due to the fact that he had no support
staff to assist him in his work and whom he could
supervise. There is no demotion where there is no
reduction in position, rank or salary as a result of
such transfer.
of
respondent Vargas for an indefinite period amounted
to a dismissal and is violative of Section 4, Rule XIV
of the Implementing Rules of the Labor Code which
limits the preventive suspension to thirty (30) days.
The said rule also provides that "the employer shall
thereafter reinstate the worker in his former or in a
substantially equivalent position or the employer
may extend the period of suspension provided that
during the period of extension, he pays the wages
and other benefits due to the worker." (Pacific
Cement Company Inc. v. NLRC).
OTHER CAUSES BUSINESS RELATED CAUSES
23. 06 OTHER CAUSES- BUSI NESS RELATED
CAUSES
CONSTRUCTI VE DI SCHARGE AND ILLEGAL DI SMISSAL
Closure of establishment and reduction of personnel.
constructive
discharge has been defined as a quitting because
rendered impossible,
terminate
employment of any employee due to the:
UP LAW BAROPS 2007
ONE UP
97 of 132

still refused to
private
back.
were the
is
the
said Court this legal, as
a in position
such
the
of
part the
or
or made is
month
month
least at
of
Saving
Devices
is closing the unless

termination
Al modi el v. NLRC (93)
officer or a particular
prerogative However, employees.
relationship employment terminating
of
soundness
judgment business
company.
Wil tshi re Fi l e Co., Inc. v. NLRC (91)
or mitigate expenses. In Caffco International Limited
compelled necessary measure
Edge Apparel , I nc. v. NLRC (98)
and
(twin
requirements)
SEPARATI ON
PAY
PROCEDURAL
REQUI REMENT
on
The wisdom
vs. Office of t he Minister-Mi nistry of Labor and
Employment, the Court has aptly observed that
1 month advance at

Part II : Labor Standards Law
Labor Standards
Installation of labor saving devices,
Redundancy,
Retrenchment to prevent losses or
Closing or cessation of operation of
the establishment or undertaking
by
economic factors that would otherwise endanger its
stability or existence. In exercising its right to
retrench employees, the firm may choose to close
all, or a part of, its business to avoid further losses
for
purpose of circumventing
provisions of this Title,
by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1)
month before the intended date thereof.
In case of termination due to the installation of
labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service,
whichever is higher.
In case of retrenchment to prevent losses and in
cases of closures or cessation of operations of
establishment or undertaking not due to serious
business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of
service, whichever is higher
A fraction of at least six (6) months shall be
considered one (1) whole year.
Business enterprises today are faced with the
pressures of economic recession, stiff competition,
and labor unrest. Thus, businessmen are always
pressured to adopt certain changes and programs in
order to enhance their profits and protect their
investments. Such changes may take various forms.
Management may even choose to close a branch, a
department, a plant, or a shop (Phil. Engineering
Corp. vs. CIR).
INSTALLATI ON OF LABOR SAVI NG DEVI CES
REDUNDANCY
BUSINESS JUDGMENT
CAUSES
Installation
Labor notice to DOLE month pay or 1
The characterization of private respondent's
services as no longer necessary or sustainable, and
Employee month pay for therefore properly terminable, was an exercise of
Redundancy
every
service
whichever
higher
1
month pay or 1
month pay for
petitioner
such
characterization or decision was not subject to
discretionary review on the part of the Labor Arbiter
nor of the NLRC so long, of course, as violation of
law or merely arbitrary and malicious action is not
shown. It should also be noted that the position held
every
service
whichever
higher
by private respondent, Sales Manager, was clearly
managerial in character. In D.M. Consunji, Inc. v.
National Labor Relations Commission, the Court
held:
Retrenchme month pay or "An employer has a much wider discretion in
pay
for every year
of
managerial personnel as compared to rank and file
Closing,
Cessation of
Operation
(unless
whichever
higher
1 month pay or
pay
for every year
whichever
higher
of
management to dismiss or lay off an employee must
be made without abuse of discretion, for what is at
stake is not only the private respondent's position
but also his means of livelihood . ."
The determination of the continuing necessity of
business
corporation is management's prerogative, and the
courts will not interfere with the exercise of such so
circumvent long as no abuse of discretion or merely arbitrary or
malicious action on the part of management is
shown.
guarantee)
not due to
serious
business
losses
financial
reverses.
A survey of existing case law will disclose that in
Wiltshire File Co., Inc. v. NLRC, the position of Sales
Manager was abolished on the ground of redundancy
as the duties previously discharged by the Sales
Manager simply added to the duties of the General
Manager to whom the Sales Manager to whom the
RECOGNI TI ON OF RIGHT BUSI NESS RELATED CAUSES
The law acknowledges the right of every
business entity to reduce its work force if such
Sales Manager used to report. In adjudging said
that
redundancy, for purposes of our Labor Code,
exists where the services of an employee are in
excess of what is reasonably demanded by the
UP LAW BAROPS 2007
ONE UP
98 of 132
e.
f.
g.
h.
the
the
least 1
year of
is
SAME
year of
is
nt
Prevent
Losses
to
SAME 1
of service
is
purpose
to
is
Security
Tenure
of
or
SAME
of service
is
A.
B.
his
Private losses.
for grounds the of one
Both from"
be cannot same the law;
ground the on the of services
an in the
these In shop. closing
the of actual
employees to prevent losses in
Caffco I nternati onal Ltd. v. Offi ce MOLE (92)
business minimize
economic
retrenchment." "redundancy"
AG & P Uni ted Rank and File Assn. v. NLRC (96)
therefore
Escareal v. NLRC (92)
is suffering from business losses
employee
Redundancy enterprise.
Escareal v. NLRC (92)
determining
Asian Al cohol Corp. v. NLRC (99)
enterprise. requirements
right to retrench

Part II : Labor Standards Law
Labor Standards
The
characterization of an employee's services as no
longer necessary or sustainable, and therefore,
properly terminable, was an exercise of business
judgment on the part of the employer. The wisdom
or soundness of such characterization or decision
was not subject to discretionary review on the part
of the Labor Arbiter nor of the NLRC so long, of
course, as violation of law or merely arbitrary and
malicious action is not shown.
XXX Indeed, an employer has no legal obligation
to keep more employees than are necessary for the
operation of its business.
merely provides
stronger justification for the termination.
LAW REQUI RED POSI TI ON
Private respondent PRC had no valid and
acceptable basis to declare the position of Pollution
Control and Safety Manager redundant as the same
may not be considered as superfluous; by the
express mandate of the provisions earlier cited, said
positions are required by law. Thus, it cannot be
gainsaid that the services of the petitioner are in
excess of what is reasonably required by the
enterprise. Otherwise, PRC would not have allowed
The right of management to dismiss workers
during periods of business recession and to install
labor saving devices to prevent losses is governed
by Art. 283 of the labor Code, as amended.
Under the foregoing provision, retrenchment
and redundancy are just causes for the employer to
terminate the services of workers to preserve the
viability of the business. In exercising its right,
however, management must faithfully comply with
the substantive and procedural requirements laid
down law and jurisprudence.
Not one of the private respondents refuted the
foregoing facts. They only contend that the new
management should have followed the policy of "first
in, last out" in choosing which positions to declare as
redundant or whom to retrench to prevent further
business losses. No law mandates such a policy. And
the reason is simple enough. A host of relevant
factors come into play in determining cost efficient
measures and in choosing the employees who will be
retained or separated to save the company from
ten (10) long years to pass before opening its eyes
to that fact; neither would it have increased the
petitioner's salary to P23,100.00 a month effective 1
April 1988. The latter by itself is an unequivocal
admission of the specific and special need for the
position and an open recognition of the valuable
services rendered by the petitioner. Such admission
and recognition are inconsistent with the proposition
that petitioner's positions are redundant. If based on
the ground of redundancy, a substitution of the
petitioner by Miguelito S. Navarro would be invalid
as the creation of said position is mandated by the
declared
redundant. If the change was effected to consolidate
the functions of the pollution control and safety
officer with the duties of the Industrial Engineering
Manager, as private respondent postulates, such
substitution was done in bad faith for as had already
been pointed out, Miguelito S. Navarro was hardly
qualified for the position.
issues,
management has to enjoy a pre-eminent role. The
characterization of positions as redundant is an
exercise of business judgment on the part of the
employers. It will be upheld as long as it passes the
test of arbitrariness.
REDUNDANCY/RETRENCHMENT
At this point, it is necessary to distinguish
are
mentioned in Art. 283 of the Labor Code as just
causes for the closing of establishments or reduction
FI NANCI AL LOSS of personnel. "Redundancy" exists when the services
of an employee are in excess of what is required by
an enterprise. "Retrenchment," on the other hand, is
In Wiltshire File Co., Inc. vs. NLRC, this Court
held that redundancy, for purposes of the Labor
Code, exists where the services of an employee are
in excess of what is reasonably demanded by the
actual requirements of the enterprise; a position is
redundant when it is superfluous, and superfluity of
a position or positions may be the outcome of a
number of factors, such as the overhiring of
workers, a decreased volume of business or the
dropping of a particular product line or service
activity previously manufactured or undertaken by
dismissing
employees and is resorted to primarily to avoid or
respondent's
"redundancy program," while denominated as such,
is more precisely termed "retrenchment" because it
is primarily intended to prevent serious business
losses.
When an employer decides to reduce the
number of its personnel in order to prevent further
employer's
personnel force, however, does not necessarily or
even ordinarily refer to duplication of work. That no
other person was holding the same position which
the dismissed employee held prior to the termination
of his services does not show that his position had
not become redundant.
While concededly, Article 283 of the Labor Code
does not require that the employer should be
suffering financial losses before he can terminate the
of
redundancy, it does not mean either that a company
which is doing well can effect such a dismissal
whimsically or capriciously. The fact that a company
losses, he is exercising his
business
operations. On the other hand, where for purposes
of economy, a company decides to reorganize its
departments by imposing on employees of one
department the duties performed by the employees
of the other department, thus rendering unnecessary
the job of the latter, the services of the employees
whose functions are now being performed by the
others, may be validly terminated on the ground of
redundancy.
Sebuguero v. NLRC (95)
UP LAW BAROPS 2007
ONE UP
99 of 132

clearly is which that for and
of actual the
activity service
volume of
activity service or line product
of actual the
activity service
volume of
of actual the

judgment
Ti erra I nternati onal Construction Corp. v. NLTC
( 9 2 )
requirements demanded by
Edge Apparel , I nc. v. NLRC (98)
redundant when it
Escareal v. NLRC (92)
decreased workers, overhiring
Ti erra I nternati onal Construction Corp. v. NLRC
( 9 2 )
requirements demanded by
Wil tshi re Fi l e Co., Inc. v. NLRC (91)
decreased workers, overhiring
requirements demanded by
previously
undertaken by the enterprise.
Redundancy enterprise.
dropping of a

Part II : Labor Standards Law
Labor Standards
Redundancy exists where the services of an
employee are in excess of what is reasonably
in excess of what is reasonably demanded by the
actual requirements of the enterprise; a position is
the
enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as
is superfluous, and superfluity of
a position or positions may be the outcome of a
number of factors, such as the overhiring of
workers, a decreased volume of business or the
of
business, or dropping of a particular product line or
particular product line or service
activity previously manufactured or undertaken by
manufactured
Retrenchment, on the other hand, is used
interchangeably with the term "lay-off." It is the
termination of employment initiated by the employer
through no fault of the employees and without
prejudice to the latter, resorted to by management
during periods of business recession, industrial
depression, or seasonal fluctuations, or during lulls
occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production
program or the introduction of new methods or more
efficient machinery, or of automation. Simply put, it
is an act of the employer of dismissing employees
because of losses in the operation of a business, lack
of work, and considerable reduction on the volume
of his business, a right consistently recognized and
affirmed by this Court.
employer's
personnel force, however, does not necessarily or
even ordinarily refer to duplication of work. That no
other person was holding the same position which
the dismissed employee held prior to the termination
of his services does not show that his position had
not become redundant.
Redundancy exists where the services of an
employee are in excess of what would reasonably be
the
enterprise. A position is redundant when it is
superfluous, and superfluity of a position or positions
could be the result of a number of factors, such as
the overhiring of workers, a decrease in the volume
of business or the dropping of a particular line or
service previously manufactured or undertaken by
the enterprise. An employer has no legal obligation
to keep on the payroll employees more than the
number needed for the operation of the business.
WHEN REDUNDANCY
We believe that redundancy, for purposes of our
Labor Code, exists where the services of an
employee are in excess of what is reasonably
CRITERI A SELECTION OF EMPLOYEE
the
enterprise. Succinctly put, a position is redundant
where it is superfluous, and superfluity of a position
or positions may be the outcome of a number of
factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular
previously
manufactured or undertaken by the enterprise. 4
The employer has no legal obligation to keep in its
payroll more employees than are necessary for the
operation of its business.
We agree with the petitioner that the law does
not make any distinction between a technical and a
non-technical position for purposes of determining
the validity of termination due to redundancy.
Neither does the law nor the stipulations of the
employment contract here involved require that
junior employees should first be terminated. In
redundancy, what is looked into is the position itself,
the nature of the services performed by the
employee and the necessity of such position. As held
in Wiltshire File Co., Inc. vs. NLRC:
"The determination of the continuing necessity
Termination of an employee's services because
of a reduction of work force due to a decrease in the
scope or volume of work of the employer is
synonymous to, or a shade of termination because
of redundancy under Article 283 (formerly 284) of
the Labor Code. Redundancy exists where the
services of an employee are in excess of what is
reasonably demanded by the actual requirements of
the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as
of
business, or dropping of a particular product line or
of a particular officer or position in a business
corporation is management's prerogative, and the
courts will not interfere with the exercise of such so
long as no abuse of discretion or merely arbitrary or
malicious action on the part of management is
shown."
Al modi el v. NLRC (93)
In the case at bar, since petitioner does not
allege that Ang Tan Chai does not qualify for the
position, the Court cannot substitute its discretion
and
exclusively management prerogative. To do so would
take away from the employer what rightly belongs to
previously
undertaken by the enterprise.
manufactured him as aptly explained in National
Labor Unions v. NLRC:
Federation of
"It is a well-settled rule that labor laws do not
In Wiltshire File Co., Inc. vs. NLRC, this Court
held that redundancy, for purposes of the Labor
Code, exists where the services of an employee are
authorize interference with the employer's judgment
in the conduct of his business. The determination
of the qualification and fitness of workers for
hiring and firing, promotion or reassignment are
UP LAW BAROPS 2007
ONE UP
100 of 132
or
or
the in an
grounds the of one
Both from"
private case, instant the In
be would, such
economic
retrenchment." "redundancy"
AG & P Uni ted Rank and File Assn. v. NLRC (96)
respondent
however, controversion
Wil tshi re Fi l e Co., Inc. v. NLRC (91)
Wil tshi re Fi l e Co., Inc. v. NLRC (91)
Asian Al cohol Corp. v. NLRC (99)
basis to interfere with the bona fi de decision of
Asian Al cohol Corp. v. NLRC (99)
Golden Thread Kni tti ng Industri es, Inc. v. NLRC
( 9 9 )
Panl i l i o v. NLRC (97)
a of the For
for
employees and is resorted to primarily
implementation

Part II : Labor Standards Law
Labor Standards
exclusive prerogatives of management. The Labor
Code and its implementing Rules do not vest in the
Labor Arbiters nor in the different Divisions of the
NLRC (nor in the courts) managerial authority. The
employer is free to determine, using his own
discretion and business judgment, all elements of
employment, "from hiring to firing" except in cases
of unlawful discrimination or those which may be
provided by law. There is none in the instant case."
separation pay equivalent to at least one month pay
or at least one month pay for every year of service,
whichever is higher; (3) good faith in abolishing the
redundant positions; and (4) fair and reasonable
criteria in ascertaining what positions are to be
declared redundant and accordingly abolished.
HEARI NG
We have held that it is important for a company
to have fair and reasonable criteria in implementing
its redundancy program, such as but not limited to,
(a) preferred status, (b) efficiency and (c) seniority.
Unfortunately for FPS, such appraisal was not done
in the instant case.
Where, as in the instant case, the ground for
dismissal or termination of services does not relate
to a blameworthy act or omission on the part of the
employee, there appears
to us no need
for an
investigation and hearing
to be conducted by
the
employer who does not, to begin with, allege any
malfeasance or non-feasance
on the part
of the
employee. In such case, there
are no allegations
which the employee should refute and defend
himself from. Thus, to require petitioner Wiltshire to
The characterization of an employee's services
as no longer necessary or sustainable, and therefore
properly terminable, is an exercise of business
judgment on the part of the employer. The wisdom
or soundness of such characterization or decision is
not subject to discretionary review on the part of the
Labor Arbiter nor the NLRC provided, of course, that
violation of law or arbitrary or malicious action is not
shown. In the instant case, we question petitioners'
exercise of management prerogative because it was
not shown that Rivera and Macaspac's positions
were indeed unnecessary, much less was petitioners'
claim supported by any evidence. It is not enough
for a company to merely declare that it has become
overmanned. It must produce adequate proof that
such is the actual situation in order to justify the
dismissal of the affected employees for redundancy.
hold a hearing, at which private respondent would
have had the right to be present, on the business
and financial circumstances compelling retrenchment
and resulting in redundancy, would be to impose
upon the employer an unnecessary and inutile
hearing as a condition for legality of termination.
VENUE OF COMPLAINT
This is not to say that the employee may not
contest the reality or good faith character of the
retrenchment or redundancy asserted as grounds for
termination of services. The appropriate forum for
the
Department of Labor and Employment and not an
investigation or hearing to be held by the employer
itself It is precisely for this reason that an employer
seeking to terminate services of an employee or
employees because of "closure of establishment and
EMPLOYMENT OF INDEPENDENT CONTRACTOR EFFECT reduction of personnel", is legally required to give a
written notice not only to the employee but also to
the Department of Labor and Employment at least
In any event, we have held that an employer's
good faith in implementing a redundancy program is
not necessarily destroyed by availment of the
services of an independent contractor to replace the
services of the terminated employees. We have
previously ruled that the reduction of the number of
workers in a company made necessary by the
introduction of an independent contractor is justified
when the latter is undertaken in order to effectuate
more economic and efficient methods of production.
In the case at bar, private respondents failed to
proffer any proof that the management acted in a
malicious or arbitrary manner in engaging the
services of an independent contractor to operate the
Laura wells. Absent such proof, the Court has no
one month before effectivity date of the termination.
did
controvert before the appropriate labor authorities
the grounds for termination of services set out in
petitioner's letter to him dated 17 June 1985.
RETRENCHMENT TO PREVENT LOSSES
DI STI NCTI ON REDUNDANCY AND RETRENCHMENT
At this point, it is necessary to distinguish
are
mentioned in Art. 283 of the Labor Code as just
causes for the closing of establishments or reduction
of personnel. "Redundancy" exists when the services
management to effect more economic and efficient
methods of production.
of an employee are in excess of what is required by
an enterprise. "Retrenchment," on the other hand, is
PROCEDURE REQUIREMENT
redundancy
program to be valid, the employer must comply with
the following requisites: (1) written notice served on
both the employees and the Department of Labor
and Employment at least one month prior to the
intended date of retrenchment; (2) payment of
dismissing
to avoid or
minimize business losses. Private respondent's
"redundancy program," while denominated as such,
is more precisely termed "retrenchment" because it
is primarily intended to prevent serious business
losses.
TEMPORARY RETRENCHMENT
101 of 132

PROOF
C.
UP LAW BAROPS 2007
ONE UP
the that (4) higher;
is the that (1) are:
both
and
means
and
losses. the prevent
of laid-off. or retired
with drastic a all after
must loss the
or work
of the thereby
forever cannot These
for and lay-off or

Lopez Sugar Corporation v. Federation of Free
Wor ker s ( 90)
discretion on the part of the
Complex Electronics Employees Assn. v. NLRC
( 9 9 )
among the employees, such as status (i.e., whether
exercises employer
which, if already incurred, are not merely de
minimis, but substantial, serious, actual and real, or
retrenchment
Asian Al cohol Corp. v. NLRC (99)
Guerrero v. NLRC (96)
management
reduction
expected effectively
Because otherwise
recourse
apprehended substantial
Lopez Sugar Corporation v. Federation of Free
Wor ker s ( 90)
following retrenched permanently
employment suspending
employees therefor.
provides retrenchment
Sebuguero v. NLRC (95)
case, instant the In notwithstanding
of
bonuses
employees),

Part II : Labor Standards Law
Labor Standards
Article 283 of the Labor Code, however, speaks
of a permanent retrenchment as opposed to a
temporary lay-off as is the case here. There is no
specific provision of law which treats of a temporary
reason for requiring this quantum of proof is readily
apparent: any less exacting standard of proof would
render too easy the abuse of this ground for
termination of services of employees.
the
requisites in effecting it or a period or duration
be
temporarily laid-off. To remedy this situation or fill
the hiatus, Article 286 may be applied but only by
analogy to set a specific period that employees may
remain temporarily laid-off or in floating status. Six
months is the period set by law that the operation of
a business or undertaking may be suspended
the
employees concerned. The temporary lay-off
wherein the employees likewise cease to work
should also not last longer than six months. After six
months, the employees should either be recalled to
The requisites for valid retrenchment under the
foregoing provision are:
necessity of the retrenchment to prevent
losses and proof of such losses;
written notice to the employees and to the
Department of Labor and Employment at
least one month prior to the intended date
of retrenchment; and
payment of separation pay equivalent to
one month pay or at least 1/2 month pay
for every year of service, whichever is
higher.
the
requirements of the law, and that failing to comply
with this would be tantamount to dismissing the
employees and the employer would thus be liable for
such dismissal.
The requirements for valid retrenchment which
must be proved by clear and convincing evidence
reasonably
necessary and likely to prevent business losses,
REQUI REMENTS STANDARDS
We consider it may be useful to sketch the
general standards in terms of which the acts of
petitioner employer must be appraised. Firstly, the
losses expected should be substantial and not
merely de minimis in extent. If the loss purportedly
sought to be forestalled by retrenchment is clearly
shown to be insubstantial and inconsequential in
character, the bonafide nature of the retrenchment
would appear to be seriously in question. Secondly,
if only expected, are reasonably imminent as
perceived objectively and in good faith by the
employer; (2) that the employer served written
notice both to the employees and to the Department
of Labor and Employment at least one month prior
to the intend date of retrenchment; (3) that the
employer pays the retrenched employees separation
pay equivalent to one month pay or at least 1/2
month pay for every year of service, whichever is
its
prerogative to retrench employees in good faith for
be
reasonably imminent, as such imminence can be
perceived objectively and in good faith by the
employer. There should, in other words, be a certain
degree of urgency for the retrenchment, which is
the advancement of its interest of its interest and
not to defeat or circumvent the employees' right to
security of tenure; and (5) that the employer used
fair and reasonable criteria in ascertaining who
would be dismissed and who would be retained
serious
consequences for the livelihood of the employees they are temporary, casual, regular or managerial
the
consequential nature of retrenchment, it must,
thirdly, be reasonably necessary and likely to
efficiency, seniority, physical fitness,
age, and financial hardship for certain workers.
The
employer should have taken other measures prior or
parallel to retrenchment to forestall losses, i.e., cut
other costs than labor costs. An employer who, for
instance, lays off substantial numbers of workers
while continuing to dispense fat executive bonuses
and perquisites or so-called "golden parachutes",
can scarcely claim to be retrenching in good faith to
avoid losses. To impart operational meaning to the
constitutional policy of providing "full protection" to
labor, the employer's prerogative to bring down
labor costs by retrenching must be exercised
essentially as a measure of last resort, after less
the
financial losses suffered by Complex, such was,
however, not the main reason for its closure.
Complex admitted in its petition that the main
reason for the cessation of the operations was the
pull-out of the materials, equipment and machinery
from the premises of the corporation as dictated by
its customers. It was actually still capable of
continuing the business but opted to close down to
prevent further losses. Under the facts and
circumstances of the case, we find no grave abuse of
rank-and-file
salaries, going on reduced time, improving
manufacturing efficiencies, trimming of marketing
and advertising costs, etc. have been tried and
found wanting.
Lastly, but certainly not the least important,
alleged losses if already realized, and the expected
imminent losses sought to be forestalled, must be
proved by sufficient and convincing evidence. The
public respondent in
awarding the employees one (1) month pay for
every year of service as termination pay.
NATURE OF LOSS
We consider it may be useful to sketch the
general standards in terms of which the acts of
UP LAW BAROPS 2007
ONE UP
102 of 132
drastic e.g.,
1.
2.
3.
the avoid to
the and already if losses,
within losses serious less much
Servi ce
to sought losses the
be to sought losses
that the by faith good in
and
is
will the by be to
the
be
both
must
The
likely and
as be
with losses or
with drastic a all after
must loss the
condition of petitioner corporation during
Lopez Sugar Corporation v. Federation of Free
Wor ker s ( 90)
other end of the spectrum, it
in order retrench
have also held that adverse
incurred,
should be substantial and not merely de minimis in
business
v. NLRC (96) San Miguel Jeepney
imminent expected
deminimis: (2) the losses are actual or reasonably
Bogo-Medellin Sugar Can Planters Assn., Inc. v.
NLRC ( 98)
forestalled imminent
employer;
the retrenchment to be valid i.e., that the losses
expected are substantial and not merely de minimis
economic reverses business
Retrenchment operations. business
employer incurred
losses,
forthcoming,
necessary
imminent, reasonably
business economic
Bal bal ec v. NLRC (95)
Revi dad v. NLRC (95)
recourse
apprehended substantial
is the (3)
As petitioners themselves admitted, what they
suffered were "sliding incomes", in other words,
decreasing gross revenues. What the law speaks of
retrenchment imminent;
statements
declining
nature of things, the possibility

Part II : Labor Standards Law
Labor Standards
petitioner employer must be appraised. Firstly, the
losses expected should be substantial and not
merely de minimis in extent. If the loss purportedly
sought to be forestalled by retrenchment is clearly
shown to be insubstantial and inconsequential in
character, the bonafide nature of the retrenchment
would appear to be seriously in question. Secondly,
be
reasonably imminent, as such imminence can be
perceived objectively and in good faith by the
employer. There should, in other words, be a certain
degree of urgency for the retrenchment, which is
The general standards or elements needed for
in extent; that the expected losses are reasonably
imminent such as can be perceived objectively and
the
retrenchment is reasonably necessary and likely to
effectively prevent the expected losses; and that the
are
substantiated were adequately shown in the
present case.
serious
consequences for the livelihood of the employees
retired or otherwise laid-off. In a number of cases, the Court has laid down
the following requisites of a valid retrenchment: (1)
incurred substantial
At the other end of the spectrum, it seems
equally clear that not every asserted possibility of
loss is sufficient legal warrant for the reduction of
personnel. In the nature of things, the possibility of
incurring the losses is constantly present, in greater
or lesser degree, in the carrying on of business
operations, since some, indeed many, of the factors
which impact upon the profitability outside the
control of the employer.
reasonably
necessary and is likely to be effective in preventing
be
forestalled, are proven by sufficient and convincing
evidence. In the present case, petitioners miserably
failed to prove (1) substantial losses and (2) the
reasonable necessity of the retrenchment.
SLI DI NG I NCOME
The above-quoted article not only contemplates
the termination of employment of workers or
employees to minimize established business losses
but also to prevent impending losses, for the law's
phraseology explicitly uses the phrase "retrenchment
to prevent losses." However, retrenchment strikes at
the very core of an individual's employment and the
burden clearly falls upon the employer to prove
appropriate
supporting evidence. After all, not every asserted
potential loss is sufficient legal warrant for a
reduction of personnel and the evidence adduced in
support of a claim of actual or potential business
losses should satisfy certain established standards,
to wit:
is serious business losses or financial reverses.
Clearly, sliding incomes are not necessarily losses,
the
meaning of the law. In this connection, we are
reminded of our previous ruling that "the requisites
of a valid retrenchment are: (a) the losses expected
extent; (b) the substantial losses apprehended must
be reasonably imminent; (c) the retrenchment must
be reasonably necessary and likely to effectively
prevent the expected losses; and (d) the alleged
The losses expected and sought to be
avoided must be substantial and not
merely de minimis;
The apprehended substantial losses must
such
imminence can be perceived objectively
and in good faith by the employer;
expected
imminent losses sought to be forestalled, must be
proved by sufficient and convincing evidence." We
business conditions
justify the exercise of management prerogative to
not-so-remote
possibility of closure of the entire business. At the
The retrenchment should reasonably be
to
effectively the expected losses;
seems equally clear
that not every asserted possibility of loss is sufficient
legal warrant for reduction of personnel. In the
past
proven
sufficient and convincing evidence.
of incurring losses is
constantly present, in greater or lesser degree, in
the carrying on of business operations, since some,
indeed many, of the factors which impact upon the
Edge Apparel , I nc. v. NLRC (98)
In order to be justified, the termination of
employment by reason of retrenchment must be due
to business losses or reverses which are serious,
actual and real. Not every loss incurred or expected
profitability or viability of such operations may be
substantially outside the control of the employer.
PROOF OF LOSS
justify
retrenchment, since, in the nature of things, the
possibility of incurring losses is constantly present,
in greater or lesser degree, in carrying on the
The principal difficulty with petitioner's case as
above presented was that no proof of actual
normally
resorted to by management during periods of
gross and net revenues was submitted. No
audited financial statements showing the financial
difficulties
occasioned by such events as recession, industrial
depression, or seasonal fluctuations.
the
above mentioned crop years were submitted.
financial
UP LAW BAROPS 2007
ONE UP
103 of 132

4.
5.
6.
prevent
7. and
by
the losses are and not
Since audited by
that means losses" prevent
a legal is
with losses
usual the with
through its to failed
not does itself, by 1992,
its and
should
showing audited No
in decline the
the 1984 in
Lopez Sugar Corporation v. Federation of Free
Wor ker s ( 90)
warrant for sufficient
appropriate business
Bal bal ec v. NLRC (95)
Revi dad v. NLRC (95)
Besides, requirement.
exemption establish
Bogo-Medellin Sugar Can Planters Assn., Inc. v.
NLRC ( 98)
incurred,
sufficiently
allegation convincingly sufficiently
statements financial
petitioner's illustrating
Central Azucarera de l a Carl ota v. NLRC (95)
considering alarming
Catati sta v. NLRC (95)
Revi dad v. NLRC (95)
revenue of A statement comparative
have
statements.
indicating thereby
improving condition.

Part II : Labor Standards Law
Labor Standards
independent external auditors constitute the normal
method of proof of the profit and loss performance
of a company, it is not easy to understand why
petitioner should have failed to submit such financial
statements.
These, however, fall far short of the stringent
requirement of the law that the employer prove
of
substantial losses. The failure of petitioner to show
its income or loss for the immediately preceding
years or to prove that it expected no abatement of
such losses in the coming years bespeaks the
The voluntary arbitrator's conclusions were
premised upon and substantiated by the audited
financial statements and the auditor's reports of AG
& P for the years 1987 to 1991. These, financial
statements audited by independent external auditors
constitute the normal and reliable method of proof of
the profit and loss performance of a company.
Contrary to petitioner's asseverations, proof of
actual financial losses incurred by the company is
not a condition sine qua non for retrenchment.
Retrenchment is one of the economic grounds to
dismiss employees, which is resorted to by an
employer primarily to avoid or minimize business
losses.
weakness of its cause. The financial statement for
prove
petitioner's allegation that it "already suffered actual
serious losses," because it does not show whether its
losses increased or decreased. Although petitioner
posted a loss for 1992, it is also possible that such
loss was considerably less than those previously
company's
and
expenses for two years, by itself, is not conclusive
proof of serious business losses. The Court has
previously ruled that financial statements audited by
We see no grave abuse of discretion on the part
of NLRC when it found that "company haciendas
including Hacienda Binanlutan incurred huge losses
from years 1982 to 1983." Private respondent
showed that Hacienda Binanlutan itself suffered a
net loss of P22,624.88. It is significant to note that
petitioners failed to dispute these submissions of
private respondent which more than satisfy the first
and fourth requirements for a valid retrenchment.
The losses incurred are clearly substantial and
sufficiently proven by means of an income statement
of Hacienda Binanlutan and the financial statement
of the company haciendas. Said losses are not only
imminent but had, in fact, already been incurred by
private respondent since 1982. This was even more
independent external auditors constitute the normal
method of proof of the profit and loss performance
of a company. While Petitioner Corporation avers
that it was not required to file audited financial
statements under. Section 232 of the Tax Code, it
any
evidence showing that its quarterly gross revenues
did not exceed P25,000. Thus, its claim that it did
not need to have its financial statements certified by
a certified public accountant is without basis in fact
and in law and does not excuse it from complying
the
requirement of the Tax Code is one thing, and the
requirement of the Labor Code is quite another.
Moreover, the financial statement of Petitioner
worldwide
economic situation, as well as the low sugar prices
during that year, events which were obviously
beyond the control of private respondent.
Corporation for two crop years is insufficient proof of
serious business losses that would justify the
retrenchment of private respondents.
BURDEN OF PROOF
We give little consideration to the certification
issued by the Sugar Regulatory Administration
sugar
production. A similar allegation was made by Lopez
Sugar Corporation against the Federation of Free
Workers and we answered in this wise:
The principal difficulty with petitioner's case as
above presented was that no proof of actual
declining gross and net revenues were submitted.
the
financial condition of petitioner corporation during
the above mentioned crop years were submitted.
Since financial statements audited by independent
external auditors constitute the normal method of
proof of the profit and loss performance of a
company, it is not easy to understand why petitioner
financial
On the bases of these consideration, it follows
that the employer bears the burden to prove his
allegation of economic or business reverses with
clear and satisfactory evidence, it being in the
nature of an affirmative defense.
However, retrenchment strikes at the very core
of an individual's employment and the burden clearly
falls upon the employer to prove economic or
supporting
evidence. After all, not every asserted potential loss
reduction of
personnel and the evidence adduced in support of a
claim of actual or potential business losses should
satisfy certain established standards.
Petitioner, in the case at bench, even admitted
that it did not present evidence to prove its business
losses. Its rationale that "because of the timely
retrenchments to prevent losses, these losses were
avoided and therefore cannot be proven to have
been incurred" is simply absurd.
WHEN EFFECTED
In its ordinary connotation, the phrase "to
retrenchment
termination of the services of some employees is
Somervil l e Stainl ess Steel Corp. v. NLRC (98) authorized to be undertaken by the employer
sometime before the losses anticipated are
UP LAW BAROPS 2007
ONE UP
104 of 132

failed to submit such
the
or
to apply adopt validly may
Labor of the and
may the that alia,
before had the that opinion
must that means phrase
that means losses" prevent
employer
least one month prior to the
Department concerned
Sebuguero v. NLRC (95)
terminate employer
Catati sta v. NLRC (95)
proceedings
Revi dad v. NLRC (95)
retrenchment
Asian Al cohol Corp. v. NLRC (99)
retrenchment
Revi dad v. NLRC (95)

Part II : Labor Standards Law
Labor Standards
actually sustained or realized. It is not, in other
words, the intention of the lawmaker to compel the
employer to stay his hand and keep all his
employees until sometime after losses shall have in
fact materialized; if such an intent were expressly
written into the law, that law may well be vulnerable
to constitutional attack as taking property from one
man to give to another. This is simple enough.
Article 283 of the Labor Code provides, inter
the
employment of his employees to prevent losses. For
an employer to validly terminate the service of his
employees under this ground, he has to comply with
two requirements, namely: (a) serving a written
notice on the workers and the Department of Labor
and Employment at least one month before the
taking effect of the closure, and (b) payment of
In its ordinary connotation, the phrase "to separation pay equivalent to one month pay or at
or
termination of the services of some employees is
authorized to be undertaken by the employer
sometime before the anticipated losses are actually
sustained or realized. It is not, in other words, the
intention of the lawmaker to compel the employer to
stay his hand and keep all his employees until after
losses shall have in fact materialized. If such an
intent were expressly written into the law, that law
may well be vulnerable to constitutional attack as
unduly taking property from one man to be given to
another.
It should be observed that Article 283 of the
Labor Code uses the phrase "retrenchment to
prevent losses". In its ordinary connotation, this
be
undertaken by the employer before losses are
actually sustained. We have, however, interpreted
the law to mean that the employer need not keep all
his employees until after his losses shall have
materialized. Otherwise, the law could be vulnerable
of attack as undue taking of property for the benefit
of another.
least one-half (l/2) month pay for every year of
service, whichever is higher, with a fraction of at
least six months to be considered one whole year.
Under the aforequoted Article 283 of the Labor
Code, there are three basic requisites for a valid
retrenchment:
the retrenchment is necessary to prevent
losses and such losses are proven;
written notice to the employees and to the
Department of Labor and Employment at
least one month prior to the intended date
of retrenchment; and
payment of separation pay equivalent to
one month pay or at least 1/2 month pay
for every year of service, whichever is
higher.
The requirement of notice to both the employees

and
Employment (DOLE) is and must
be written and
given at least one month before the intended date of
retrenchment. In this case, it is undisputed that the
petitioners were given notice of the temporary lay-
off. There is, however, no evidence that any written
notice to permanently retrench them was given at
PROCEDURE
REDUNDANCY)
RETRENCHMENT date of the intended
retrenchment. The NLRC found that GTI conveyed to
the petitioners the impossibility of recalling them
due to the continued unavailability of work. But what
The circular is more than sufficient notice to AG
& P employees, as well as herein petitioners, of the
then impending decision of the company to carry out
its retrenchment program for the reasons therein
stated.
Anent the mandatory written notice to be filed
with the labor department one month before the
date of retrenchment, we are of the considered
the
voluntary arbitrator, where both parties were given
the opportunity to be heard and present evidence in
their favor, constitute substantial compliance with
the requirement of the law. The purpose of this
notice is to enable the proper authorities to ascertain
whether the closure of the business is being done in
good faith and is not just a pretext for evading
compliance with the just obligations of the employer
to the affected employees. In fact, the voluntary
arbitration proceedings more than satisfied the
intendment of the law considering that the parties
were accorded the benefit of a hearing, in addition to
the right to present their respective position papers
and documentary evidence.
For that matter, hearing and investigation by
the employer, where the reason for termination is
retrenchment due to financial reverses and not to an
act attributable to the employee, is not even
required because it is considered a surplusage under
existing jurisprudence.
the law requires is a written notice to the employees
concerned and that requirement is mandatory. The
notice must also be given at least one month in
advance of the intended date of retrenchment to
enable the employees to look for other means of
employment an therefore to ease the impact of the
loss of their jobs and the corresponding income.
That they were already on temporary lay-off at the
time notice should have been given to them is not
an excuse to forego the one-month written notice
because by this time, their lay-off is to become
permanent and they were definitely losing their
employment.
NON-STOCK NON-PROFI T ORGANI ZATI ON
Phi l. Tubercul osi s Soci ety, Inc. v. NLRC (98)
Although petitioner is a non-stock and non-
profit organization, retrenchment as a measure
adopted to stave off threats to its existence is
available to it. Article 278 of the Labor Code states
that the fiscal measures recognized therein which an
"all
establishments or undertakings, whether for profit or
not."
RURAL BANK
Bal bal ec v. NLRC (95)
UP LAW BAROPS 2007
ONE UP
105 of 132

(FOR BOTH AND
1.
2.
3.
Clearly, 6 private of
of The
a being section, a of
rights the or of
labor that
an
of
Gavino
deny to we Were of
respondent.
Catati sta v. NLRC (95)
Caffco I nternati onal Ltd. v. Offi ce MOLE (92)
usefulness
circumventing defeating
interference discourage
laws
employer's
Catati sta v. NLRC (95)
imminence
Atlantic Gulf and Pacific Co. of Manila v. NLRC
( 9 9 )
replaced Negapatan
Bogo-Medell in Sugar Cane Pl anters Assn. , Inc
v. NLRC (98)
P500,000.00.
of
the that contend
employment termination
Petitioners
their length of
said business

Part II : Labor Standards Law
Labor Standards
It should be noted, moreover, that unlike huge
commercial banks with large capitalization, the bank
involved in the case at bench is a small rural bank
barely afloat and surviving on a measly capitalization
service. It would, indeed, be
stretching the intent and spirit of the law, if we were
to unjustly interfere in management's prerogative to
close or cease its business operations just because
private
respondent's urgent request to streamline its work
force to enable it to maintain stability and modest
profitability, we would be sending a small financial
institution teetering on the verge of financial ruin
tumbling down on the road to bankruptcy.
It need not be overemphasized that the State
recognizes the pivotal role of small rural banks, such
as the respondent bank, in the development of the
countryside through its loan portfolios and other
services to the rural folk. While courts must be
constantly vigilant in validating claims of business
losses to prevent unscrupulous employers from
feigning such losses in order to dismiss their
personnel, we are satisfied that respondent bank
undertook the drastic act of cutting down its
workforce in order to prevent imminent substantial
loss to its business.
APPOINTMENT OF REPLACEMENTS EFFECT
operation or undertaking is not
suffering from any loss. This Court, in the case of
Maya Farms Employees Organization, et al. v. NLRC,
et al., held that:
well-settled
with
judgment in the conduct of his business. Even as the
law is solicitous of the welfare of employees, it must
also protect the right of an employer to exercise
what are clearly management prerogatives. As long
as the company's exercise of the same is in good
faith to advance its interest and not for the purpose
of
employees under the laws or valid agreements, such
exercise will be upheld."
In Dangan v. NLRC, this Court had occasion to
reiterate management's prerogative to close or
abolish a department or section of the employer's
establishment for economic reasons. We reasoned
out that since the greater right to close the entire
establishment and cease operations due to adverse
economic conditions is granted an employer, the
Petitioner Corporation also failed to rebut the
allegation that new employees were hired to replace
the private respondents after the latter had been
retrenched. The executive labor arbiter found that
closure of a part thereof to minimize expenses and
reduce capitalization should similarly be recognized.
Likewise, this Court held in the case of Special
Events & Central Shipping Office Workers Union v.
San Miguel Corp. that the determination of the
Private Respondent
Montilla, while Reynaldo Parilla and Godofredo
Florita replaced the other private respondents who
had worked as sugar checkers or samplers. The
employment of these replacements clearly belies
petitioners' contention that the retrenchment was
necessary to prevent or offset the expected losses
effectively.
company
prerogative, the closure may not be questioned,
specially in this case where it is impelled by
economic reasons due to the continuous losses
sustained in its operation, coupled with the lack of
demand for the service of such section.
REQUI REMENTS
APPOI NTMENT OF REPLACEMENTS RE-HIRING EFFECT
Under Article 283 of the Labor Code, three (3)
redundancy
program was actually a union-busting scheme of
management, aimed at removing union officers who
had declared a strike. This contention cannot stand
in the face of evidence of substantial losses suffered
by the company. Moreover, while it is true that the
company rehired or re-employed some of the
dismissed workers, it has been shown that such
action was made only as company projects became
available and that it was done in pursuance of the
companys policy of giving preference to its former
workers in the rehiring of project employees. The
rehiring or re-employment does not negate the
requirements are necessary for a valid cessation of
business operations, namely: (a) service of a written
notice to the employees and to the MOLE at least
one (1) month before the bona fide in character; and
(c) payment to the employees of termination pay
amounting to at least one-half (1/2) month pay for
every year of service, or one (1) month pay,
whichever is higher (Mobil Employees Association et
al vs. NLRC et al.)
EXTENT OF CLOSURE
PARTIAL CLOSURE
losses,
respondents to retrench.
CLOSI NG OF BUSINESS
prompted the
employees of Hacienda Binanlutan brought about by
the closure is to be considered as retrenchment as
Hacienda Binanlutan is only one of the six haciendas
private
respondent's purpose in converting said hacienda
into an ipil-ipil plantation and terminating the service
In any case, Article 283 of the Labor Code is
clear that an employer may close or cease his
business operations or undertaking even if he is not
suffering from serious business losses or financial
reverses, as long as he pays his employees their
termination pay in the amount corresponding to
of petitioners is to cut down on losses which it had
adequately shown to have suffered through an
income statement for the fiscal year which ended
August 31, 1984.
UP LAW BAROPS 2007
ONE UP
106 of 132

which private
D.
RI GHT
"The rule is
six
of services the
of services the
could
more for union a into
its of exercise
exceeding
when the bona fide suspension of the operation of a
Val dez v. NLRC (98)
Under Article 286 of the Labor Code, the bona
fide suspension of the operation of a business or
terminating contemplate
San Pedro Hospital of Digos v. Sec. of Labor
( 9 6 )
terminating contemplate
have been reflected therein.
have at least party
suspension is bona fide falls upon the employer. In
themselves
motivated not by a
San Pedro Hospital of Digos v. Sec. of Labor
( 9 6 )
Cheni ver Deco Pri nt Technics Corporation v.
NLRC( 2000)
prerogatives. management
undertaking," this Court previously ruled in Coca-
Cola Bottlers (Phil.), Inc. v. NLRC that said statutory
Phil. Tobacco Flue Curing, etc. v. NLRC (98)
of operations suspension Temporary
Broadly speaking, there appears no complete
dissolution of petitioners business undertaking but
the relocation of petitioners plant to Batangas, in
our view, amounts to cessation of petitioners
business operations in Makati. It must be stressed
that the phrase "closure or cessation of operation of
an establishment or undertaking not due to serious
business losses or reverses" under Article 283 of the
Labor Code includes both the complete cessation of
all business operations and the cessation of only part
of a companys business. In Philippine Tobacco Flue-
Curing & Redryi ng Corp. vs. NLRC, a company
plant tobacco its processing transferred

Part II : Labor Standards Law
Labor Standards
to resist. But where it is shown that the closure is
It must be noted that the present case involves
the closure of merely a unit or division, not the
whole business of an otherwise viable enterprise.
Although Article 283 uses the phrase "closure or
cessation of operation of an establishment or
desire to prevent further losses,
but to discourage the workers from organizing
effective
negotiation with management, the State is bound to
intervene.
The burden of proving that such a temporary
provision applies in cases of both complete and
partial cessation of the business operation:
. . . Ordinarily, the closing of a warehouse
facility and the termination of the services of
employees there assigned is a matter that is left to
the determination of the employer in the good faith
this instance, petitioner had to establish the fact of
its precarious financial health, that its cessation of
operation was really necessitated by its financial
condition, and that said condition would probably be
alleviated or improved, or its losses abated, by
undertaking such suspension of operation. Petitioner
The
applicable law in such a case is Article 283 of the
Labor Code which permits "closure or cessation of
operation of an establishment or undertaking not
due to serious business losses or financial reverses,"
which, in our reading, includes both the complete
cessation of operations and the cessation of only
part of a company's business.
met the foregoing
requirements by submitting its financial statements
or records as proof of its financial crisis, since the
purported financial hemorrhage would definitely
Thus, petitioner's
unexplained and continued failure to submit its
financial statements could not but raise grave doubts
as to the truth of the claimed financial crisis and the
real purpose of the suspension of operations. It is
not enough to merely raise this issue nor to discuss
it only in passing. The precarious financial condition
must be established by evidence, e.g., balance
sheets and income statements, and the figures
therein must be interpreted and discussed at length.
It is a hornbook rule that employers who
in
Balintawak, Quezon City to Candon, Ilocos Sur. The
company therein did not actually close its entire
business but merely relocated its tobacco processing
and redrying operations to another place. Yet, this
Court considered the transfer as closure not due to
serious business losses for which the workers are
entitled to separation pay.
There is no doubt that petitioner has legitimate
reason to relocate its plant because of the expiration
of the lease contract on the premises it occupied.
That is its prerogative. But even though the transfer
was due to a reason beyond its control, petitioner
has to accord its employees some relief in the form
of severance pay.
their
workers must base their decisions on more than just
flimsy excuses, considering that the dismissal of an
employee from work involves not only the loss of his
position but, what is more important, his means of
livelihood. The same principle applies in temporary
suspension of operations, as in this case, considering
that it involves laying off employees for a period of
six months.
EFFECT ON EMPLOYER-EMPLOYEE RELATIONSHIP
It is a hornbook rule that employers who
their
workers must base their decisions on more than just
flimsy excuses, considering that the dismissal of an
employee from work involves not only the loss of his
position but, what is more important, his means of
livelihood. The same principle applies in temporary
suspension of operations, as in this case, considering
that it involves laying off employees for a period of
six months.
TEMPORARY CESSATION OF OPERATION
undertaking for a period not exceeding six months
shall not terminate employment. Consequently,
is
recognized as a valid exercise of management
prerogative provided it is not carried out in order to
circumvent the provisions of the Labor Code or to
defeat the rights of the employees under the Code.
The determination to case or suspend operations is a
prerogative of management that the State usually
does not interfere with, as no business can be
required to continue operating at a loss simply to
maintain the workers in employment. Such an act
would be tantamount to a taking of property without
due process of law, which the employer has a right
business or undertaking exceeds six months, then
the employment of the employee shall be deemed
terminated. By the same token and applying said
rule by analogy, if the employee was forced to
remain without work or assignment for a period
months,
constructively dismissed.
SPECIAL CASE OF BUSINESS TRANSFERS
NATURE OF LABOR CONTRACT
UP LAW BAROPS 2007
ONE UP
107 of 132

BASI S
then he is in effect
E.
the notice written two
the
just the
person "Any
person any to 1987 the
the of services the
F.
as such

termination
Manej a v. NLRC (98)
hel d i n Farmanl i s Farms, I nc. v. Mi ni st er of Labor,
Serrano v. NLRC (2000)
Complex Electronics Employees Assn. v. NLRC
( 9 9 )
obtained in violation of this or the preceding
provides: specifically
Constitution
Sal aw v. NLRC (91)
employee, terminate
Arbol eda v. NLRC (99)
contracts employment contracts
Sundowner Devel opment Corp. v. Dri l on (89)
that dictum the is Well-settled
of
(a) the first apprises
employees. It is a
employer

Part II : Labor Standards Law
Labor Standards
provision, the third paragraph of the same section
explicitly states that, "any confession or admission
The rule is that unless expressly assumed, labor
and
collective bargaining agreements are not enforceable
against a transferee of an enterprise, labor contracts
being in personam, thus binding only between the
parties. A labor contract merely creates an action in
personam and does not create any real right which
should be respected by third parties. This conclusion
draws its force from the right of an employer to
select his employees and to decide when to engage
them as protected under our Constitution, and the
same can only be restricted by law through the
exercise of the police power.
As a general rule, there is no law requiring a
bona fide purchaser of assets of an on-going concern
to absorb in its employ the employees of the latter.
However, although the purchase of the assets or
enterprise is not legally bound to absorb in its
employ the employees of the seller of such assets or
enterprise, the parties are liable to the employees if
the transaction between the parties is colored or
clothed with bad faith.
section
shall be inadmissible in evidence against him."
The purpose of the notice requirement is to
enable the proper authorities to determine after
gearing whether such closure is being done in good
faith, i.e., for bona fide business reasons, or
whether, to the contrary, the closure is being
resorted to as a means of evading compliance with
obligations
employees affected.
PROCEDURAL
REQUI REMENTS
PROCESS
Nothing in the law gives private respondent the
option to substitute the required prior written notice
with payment of thirty (30) days salary. It is not for
private respondent to make substitutions for a right
REQUI REMENTS that a worker is legally entitled to. For instance, as
IN GENERAL
ESSENCE OF DUE PROCESS
under the law, benefits in the form of food or free
electricity, assuming they were given, were not a
proper substitute for the 13th month pay required
by law.
The essence of due process in administrative
proceedings is an opportunity to explain one's side
or an opportunity to seek reconsideration of the
action or ruling complained of. Before an employee
can be validly dismissed, the Labor code requires the
employer to furnish the employee with two (2)
written notices: (a) a written notice containing a
statement of the cause for termination to afford the
employee ample opportunity to be heard and defend
himself with the assistance of his representative, if
he so desires; and, (b) if the employer decides to
the
employer must notify him in writing of the decision
to dismiss him, stating clearly the reasons therefor.
RIGHT TO COUNSEL
Indeed, a job is more than the salary that it
carries. Payment of thirty (30) days salary cannot
compensate for the psychological effect or the
stigma of immediately finding ones self laid off from
work. It cannot be a fully effective substitute for the
thirty (30) days written notice required by law
especially when, as in this case, the fact is that no
notice was given to the Department of Labor and
Employment (DOLE).
Besides, as we held in our decision in this case,
the purpose of such previous notice is to give the
employee some time to prepare for the eventual loss
of his job as well as the DOLE the opportunity to
ascertain the verity of the alleged authorized cause
of termination. Such purpose would not be served by
the simple expedient of paying thirty (30) days
salary in lieu of notice of an employees impending
dismissal, as by then the loss of employment would
It is true that administrative and quasi-judicial
bodies are not bound by the technical rules of
procedure in the adjudication of cases. However, the
right to counsel, a very basic requirement of
substantive due process, has to be observed.
Indeed, the rights to counsel and to due process of
law are two of the fundamental rights guaranteed by
have been a fait accompli.
TWO NOTI CE RULE
twin
requirements of notice and hearing constitute the
essential elements of due process in the dismissal of
under
investigation, be the proceeding administrative, civil,
or criminal. Thus, Section 12(1), Article III thereof
under
investigation for the commission of an offense shall
have the right to . . . have competent and
independent counsel preferably of his own choice. If
the person cannot afford the service of counsel, he
must be provided with one. These rights cannot be
waived except in writing and in the presence of
counsel." To underscore the inviolability of this
rule in our jurisdiction
that the employer must furnish the employee with
before
employment can be effected:
the employee of the particular acts or omissions for
which his dismissal is sought; and, (b) the second
informs the employee of the employer's decision to
dismiss him. The requirement of a hearing, on the
other hand, is complied with as long as there was
an opportunity to be heard, and not necessarily
that an actual hearing was conducted.
UP LAW BAROPS 2007
ONE UP
108 of 132
DUE NATURE AND
A.
NOTI CE
of the to the
cardinal
to applied
these Given
his
as or
an
be
was hearing
proceedings, administrative
Li bres v. NLRC (99)
petitioner circumstances,
present during the clarificatory hearing on 19 July
Consoli dated Rural Bank, Inc. v. NLRC (99)
following dismissed, summarily
La Carlota Pl anters Assn. , I nc. v. NLRC (98)
In Balayan Colleges vs. NLRC, the Court has
observed that ampl e opportuni ty in due process
applied
opportunity
heard,
proceedings,
opportunity
Nati onal Semi -Conductor (HK) Di stri buti on Ltd.
v. NLRC
Caurdenetaan Pi ece Workers Uni on v.
Laguesma ( 98)
to due process, in Bernardo v. NLRC we did hold that
conducted no formal
Magos v. NLRC (98)
Farrol v. Court of Appeal s (2000)
to
administrative

Part II : Labor Standards Law
Labor Standards
representation." Here, private respondent has been
As set forth in the foregoing procedures, the
employer must comply with the twin requirements of
two notices and hearing. The first notice is that
which apprises the employee of the particular acts or
omissions for which his dismissal is sought, and after
affording the employee an opportunity to be heard,
a subsequent notice informing the latter of the
employers decision to dismiss him from work.
suspension,
without being accorded an opportunity to confront
the "witness" (Rene Baylon) against him and to
thereafter adduce evidence in his defense.
HEARI NG
Petitioner's avowal of denial of procedural due
process must fail, and so with its prayer for a
remand. The fact that counsel for petitioner was not
HEARI NG NOT REQUI RED
Both the NLC and the Labor Arbiter found that
1994, hence, unable to rebut the testimony given by
private respondent could hardly be attributed to
anybody else's fault but its own. Records show that
notice was given to the parties with warning that
regarding
petitioner's dismissal. Although a hearing is essential
failure to attend would be construed as a waiver of
the opportunity to be heard. However while counsel
respondent Manifestation
no formal hearing was necessary when the petitioner
had already admitted his responsibility for the act he
was accused of.
Even though petitioner in this case never
admitted the accusations of dishonesty against him,
he impliedly acknowledged his insubordination as
shown in his petition.
begging off from the hearing on ground of a prior
engagement, counsel for petitioner on the other
hand simply chose not to appear on the assumption
that the hearing would be postponed on account of
opposing counsel's absence thus negligently and
completely overlooking the assurance in the very
same Manifestation that private respondent would
nevertheless appear on her own. Hence, the fact
that the Labor Arbiter proceeded with the hearing as
Due process is not violated where a person is
given the opportunity to be heard, but chooses not
to give his side of the case.
scheduled could not be branded as an arbitrary act
depriving petitioner of its right to present evidence.
Petitioner lost this additional opportunity entirely
through its own fault and negligence.
Similarly, the decision of the Labor Arbiter not
to schedule the case for another hearing could not
be considered as a grave abuse of discretion. First of
The essence of due process is simply an all, it is well-settled that the holding of a hearing is
to
to
explain one's side. In the instant case, petitioner
furnished private respondent notice as to the
particular acts which constituted the ground for his
dismissal. By requiring him to submit a written
explanation within 48 hours from receipt of the
notice, the company gave him the opportunity to be
heard in his defense. Private respondent availed of
this chance by submitting a written explanation.
Furthermore, investigations on the incident were
actually conducted on 9 January 1993 and 11
January 1993. Thus, it is clear the minimum
requirements of due process have been fulfilled by
petitioner.
That the investigations conducted by petitioner
may not be considered formal or recorded hearings
or investigations is immaterial. A formal or trial type
hearing is not all times and in all instances essential
to due process, the requirements of which are
satisfied where the parties are afforded fair and
reasonable opportunity to explain their side of the
controversy. It is deemed sufficient for the employer
to follow the natural sequence of notice, hearing and
judgment.
AMPLE OPPORTUNI TY
discretionary with the Labor Arbiter and is something
which the parties cannot demand as a matter of
right. It is entirely within the bounds of the Labor
Arbiter's authority to decide a case based on mere
position papers and supporting documents without a
formal trial or hearing as is sanctioned by the New
Rules Procedure of the National Labor Relations
Commission. Thus we have consistently held that
the requirements of due process are satisfied when
the parties are given the opportunity to submit
position papers wherein they are supposed to attach
all the documents that would prove their claim in
case it be decided that no hearing should be
conducted or was necessary. Secondly, we note that
petitioner and private respondent themselves agreed
during the hearing of 3 March 1994 to forego with a
formal trial and opted instead to file only their
respective replies to each other's position paper.
certainly
cannot now be heard to have been deprived of due
process.
Due process as a constitutional precept does not
always and in all situations require a trial type
proceeding. Due process is satisfied when a person
is notified of the charge against him and given an
opportunity to explain or defend himself. The
essence of due process is simply to be heard, or as
an
opportunity to explain ones side, or an opportunity
means that "kind of assistance that management
must accord the employee to enable him to prepare
to seek a reconsideration of the action or ruling
complained of.
adequately including
UP LAW BAROPS 2007
ONE UP
109 of 132

for his defense legal
for private filed his
legal not are by
is a
legally
who
be
guilt,
said makes which
of the for case, this
not does due
notice that process due
and papers position

Mani la El ectri c Co., Inc. v. NLRC (91)
justification employers
(Damalerio),
cannot
he
employee,
Maranaw Hotel and Resort Corp. v. NLRC (99)
Gothong Li nes I nc. v. NLRC (99)
ineffectual. dismissal
payment providing
Serrano v. NLRC (2000)
process, procedural
Al hambra I ndustri es, I nc. v. NLRC (94)
mandates
Pepsi -Col a Products Phi l s., I nc. v. NLRC (98)
St. Mi chael Academy v. NLRC (98)
evidence

Part II : Labor Standards Law
Labor Standards
LACK OF VERI FICATI ON employment for any of the authorized causes
mentioned in Arts. 283-284. The order to pay full
While the procedure adopted by the private
respondents failed to comply strictly with Rule III
(Pleadings) and Rule V (Proceedings Before Labor
Arbiters) of the New Rules of Procedure of the NLRC,
we are constrained to heed the underlying policy of
the Labor Code relaxing the application of technical
rules of procedure in labor cases to help secure and
not defeat justice. To be sure, petitioners cannot
maintain that they were denied due process. The
essence of due process in administrative proceedings
is simply an opportunity to explain one's side or an
opportunity to seek a reconsideration of action or
ruling complained of. In labor cases, submission of
backwages is a consequence of the employer's
action in dismissing an employee without notice
The
employee is considered not to have been terminated
from his employment until it is finally determined
that his dismissal/termination of employment was
for cause and, therefore, he should be paid his
salaries in the interim. This eliminates guesswork in
determining the degree of prejudice suffered by an
employee dismissed with cause but without notice
since the penalty is measured by the salary he failed
to earn on account of his dismissal/termination of
employment.
memoranda
requirements of due process.
Petitioners' stance with respect to the lack of
verification of private respondents' position paper
deserves scant consideration. The defect is a formal,
rather than a substantial one and which further loses
significance in light of the exhaustive proceedings
undertaken by public respondent to resolve the
parties' dispute on the merits.
OTHER PROCEDURAL MATTERS
BURDEN AND DEGREE OF PROOF
FAI LURE TO FURNI SH
At all events, a plea of denial of procedural due
process, where the defect consists in the failure to
furnish an opponent with a copy of a party's position
paper, cannot be entertained when he who makes
the plea is effectively given the opportunity to be
heard in a Memorandum of Appeal. Even if a party
has not been heard at the stage of mediation and
fact-finding, he still can take that opportunity to
present his side when the Memorandum of Appeal is
given due course, as it has so been given in this
instance, by the NLRC. Thus, the fundamental rule of
The constitutional guarantee of protection to
labor and security of tenure requires that an
employer terminate the services of an employee only
for valid and just causes which must be supported
by substantial evidence. The burden of proving that
the termination of an employee is for a valid or
authorized cause rests on the employer. In any
event, the employer must comply with due process
requirements before any termination is done.
and
opportunity to be heard has here been amply met.
Albeit petitioner may have reasons to doubt the
honesty and trustworthiness of Damalerio, as a
result of what happened, absent sufficient proof of
FAILURE OF DUE PROCESS
EFFECT OF FAILURE SUBSTANTIVE PROCEDURAL
rank-and-file
dismissed.
Unsubstantiated suspicions and baseless conclusions
for
dismissing employees. The burden of proving the
A termination without just cause entitles a
worker to reinstatement regardless of whether he
was accorded due process. On the other hand,
termination of a worker for cause, even without
warrant
reinstatement, but the employer incurs liability for
damages.
existence of a valid and authorized cause of
termination is on the employer. Any doubt should be
resolved in favor of the employee, in keeping with
the principle of social justice enshrined in the
Constitution.
It is contended that private respondent's non-
observance of the notice requirement should not be
visited with a severe consequence in accordance
with Art. III, 19(1) of the Constitution. The
contention is without merit. In the first place, Art.
III, 19(1) of the Constitution, prohibiting the
imposition of excessive fines, applies only to criminal
prosecutions. In the second place, the decision in
full
backwages for failure of an employer to give notice,
seeks to vindicate the employee's right to notice
before he is dismissed or laid off, while recognizing
the right of the employer to dismiss for any of the
just causes enumerated in Art. 282 or to terminate
And this Court has ruled that the ground for an
employer's dismissal of an employee need be
established only by substantial evidence, it not being
required that the former's evidence "be of such
degree as is required in criminal cases, i.e., proof
beyond reasonable doubt." 16 It is absolutely of no
consequence that the misconduct with which an
employee may be charged also constitutes a criminal
offense: theft, embezzlement, assault on another
employee or company officer, arson, malicious
mischief, etc. The proceedings being administrative,
the quantum of proof is governed by the
substantial
UP LAW BAROPS 2007
ONE UP
110 of 132
fulfills the
an
B.
BURDEN
DEGREE
rule and not, as the
time the from
unjustly is who
exists there and
sake the for even Besides
and before cases
is which
of findings Factual
computed equivalent
dismissed employee
therefore, compensated
Phi l. Ai rl i nes, Inc. v. NLRC (98)
Val dez v. NLRC (98)
Ranara v. NLRC (92)
assuming
Coca-col a Bottl ers Phil s. , Inc. v. Roque (99)
Azcor Manufacturi ng I nc. v. NLRC (99)
administrative
evidence, Substantial evidence.
Reno Foods, I nc. v. NLRC (95)
discussion.
Phi l. Savings Bank v. NLRC (96)
arbitrary dismissal. The wrong

Part II : Labor Standards Law
Labor Standards
respondent Commission seems to imagine, by the
rule governing judgments in criminal actions.
illegal dismissal, when Roque filed his complaint for
damages with the Regional Trial Court.
In affirming the Labor Arbiter, the NLRC found
the evidence supporting the Labor Arbiter's factual
findings to be substantial and for this reason
apparently found it unnecessary to make a separate
OFFER TO REINSTATE
The fact that his employer later made an offer
to re-employ him did not cure the vice of his earlier
administrative
agencies are generally accorded respect and even
finality in this Court if they are supported by
substantial evidence.
Loss of trust and confidence is a cause for
dismissing an employee who is entrusted with
fiducial matters, or with the custody, handling or
care and protection of the employer's property.
There is no dispute about this. But the employer
must clearly and convincingly establish the facts and
incidents upon which its loss of confidence in the
employee may be fairly made to rest otherwise, the
dismissal will be rendered illegal.
had been committed
and the harm done. Notably, it was only after the
complaint had been filed that it occurred to Chang,
in belated gesture of good will, to invite Ranara back
to work in his store. Chang's sincerity is suspect. We
doubt if his offer would have been made if Ranara
had not complained against him. At any rate, sincere
or not, the offer of reinstatement could not correct
the earlier illegal dismissal of the petitioner. The
private Civil Case s incurred liability under the Labor
Code from the Ranara was illegally dismissed, and
the liability did not abate as a result of Chang's
repentance.
Findings of facts of quasi-judicial agencies like
the NLRC which have acquired expertise in the
specific matters entrusted to their jurisdiction are
accorded by this Court not only with respect but
even finality if they are supported by substantial
the
quantum of evidence required to establish a fact in
quasi-judicial
bodies, is that amount of relevant evidence which a
reasonable mind might accept as adequate to justify
a conclusion.
SANCTI ONS AND REMEDI ES
23.08 GENERAL RULE
TWI N REMEDI ES
PRESCRI PTI ON PERI OD
In addition, an action for reinstatement by
reason of illegal dismissal is one based on an injury
which may be brought within four (4) years from the
time of dismissal pursuant to Art. 1146 of the Civil
Code. Hence, Capulso's case which was filed after a
measly delay of four (4) months should not be
treated with skepticism or cynicism. By law and
settled jurisprudence, he has four (4) years to file
his complaint for illegal dismissal. A delay of merely
four (4) months in instituting an illegal dismissal
case is more than sufficient compliance with the
prescriptive period. It may betray an unlettered
man's lack of awareness of his rights as a lowly
worker but, certainly, he must not be penalized for
his tarrying.
Under Article 279 of the Labor Code, as
amended, an employee who is unjustly dismissed
from work shall be entitled to reinstatement without
loss of seniority rights and other privileges and to his
full back wages, inclusive of allowances, and to other
benefits or their monetary equivalent computed from
the time his compensation was withheld from him up
to the time of his actual reinstatement.
Thus, it being clearly established that herein
petitioner was constructively dismissed, the decision
of the Labor Arbiter awarding him back wages and
separation pay in lieu of reinstatement, plus the
refund of his cash bond and tire deposit, is definitely
in order.
Davide, C. J., dissenting
Pursuant to Article 291 of the Labor Code, as
amended, the complaint should have been filed
within three (3) years for the accrual of Roques
cause of action (his dismissal in 1982) otherwise, his
claim shall be forever bared.
of
argument that the regular courts have jurisdiction
over his claim for damages because of his illegal
dismissal, such claims necessarily arose upon an
injury to his (as plaintiff) rights. Under Article 1146
of the Civil Code, an action arising from injury to
plaintiffs rights prescribe in four (4) years from the
accrual of the cause of action. It was only in 1 June
1989, or after the lapse of seven (7) years after his
In the case at bar, the alleged injury which
private respondents stand to suffer by reason of
their alleged illegal dismissal can be adequately
no
"irreparable injury," as defined above which would
necessitate the issuance of the injunction sought for.
Article 279 of the Labor Code provides that an
from
employment shall be entitled to reinstatement,
without loss of seniority rights and other privileges,
and to the payment of full backwages, inclusive of
allowances, and to other benefits or their monetary
his
compensation was withheld from him up to the time
of his actual reinstatement.
Judy Phili ppines, I nc. v. NLRC (98)
UP LAW BAROPS 2007
ONE UP
111 of 132

G.
of the
being order the and for
of the and,
if
lieu in is pay of award the
entitled shall work from
who
be
stating notices written errant
the of release
of her of
in any
l onger no is
i f pay
time the from his
entitled be shall work from
distinct
Note, unjustly
De Guzman v. NLRC (99)
reinstatement
Fil fl ex I ndustri al and Manufacturing Corp. v.
NLRC ( 98)
payment secondly,
separation
dismissed
Tori l l o v. Leogardo (91)
employees
expeditious
and the nature the existence
Mendoza v. NLRC (99)
agreement bargaining collective
rei nstatement
reinstatement if viable or separati on
computed backwages
dismissed
Bongan v. NLRC (98)
however, dismissed.
and viable,
279) of the Labor Code
award
pendency of
declared and

Part II : Labor Standards Law
Labor Standards
Under the law, an employee is entitled to
reinstatement and to his full backwages when he is
exercise her right by asking
copies of the letters.
the management for
that
reinstatement and backwages are separate and
reliefs
employee.
dismissed Article 280 (now Article
provides that "an employee
Reinstatement means restoration to a state or
condition from which one had been removed or
separated. One who is reinstated assumes the
position he had occupied prior to the dismissal and
is, as an ordinary rule, entitled only to the last salary
in that position.
Backwages, on the other hand, is a form of
relief that restores the income that was lost by
reason of unlawful dismissal.
to
reinstatement without loss of seniority rights and
other privileges and to his full backwages . . ."
Backwages in general are granted on grounds of
equity for earnings which a worker or employee has
lost due to his illegal dismissal. Reinstatement, on
the other hand, means restoration to a state of
condition from which one had been removed or
separated.
Backwages and reinstatement are two reliefs
In view thereof, "an employee who is unjustly
given to an illegally dismissed employee. They are
separate and distinct from each other. However, in
to
reinstatement without loss of seniority rights and to
the event that reinstatement is no longer possible,
separation pay is awarded to the employee. Thus,
his
compensation was withheld from him up to the time
of his reinstatement." This apparently unqualified
rule, however, admits of an exception. Thus, an
illegally dismissed employee is entitled to: (1) either
of
reinstatement and not of backwages. In other
words, an illegally dismissed employee is entitled to
(1) either reinstatement, if viable, or separation pay
reinstatement
backwages.
(2)
backwages. Jurisprudence abound to the effect that
the grant of separation pay can substitute if
reinstatement is not feasible, such as in the case of
a strained employer-employee relationship or when
the work or position formerly held by the dismissed
employee no longer exists. To these specified
circumstances, we add another. In the instant case,
while in the course of the prosecution of his claim,
petitioner was already in the twilight years of his
employment. In Reyes v. Philippine Duplicators Inc. ,
The distinction between separation pay and
backwages has been exhaustively discussed by this
Court in Santos vs. NLRC, et. al., wherein we held:
The normal consequences of a finding that an
employee has been illegally dismissed are, firstly,
that the employee becomes entitled to reinstatement
to his former position without loss of seniority rights
backwages
corresponding to the period from his illegal dismissal
up to actual reinstatement. The statutory intent on
this matter is clearly discernible. Reinstatement
restored the employee who was unjustly dismissed
to the position from which he was removed, that is,
to his status quo ante dismissal, while the grant of
backwages allows the same employee to recover
from the employer that which he had lost by way of
wages as a result of his dismissal. These twin
remedies-reinstatement and payment of backwages
make the dismissed employee whole who can
the
workplace or, in the absence thereof, as provided in
Section 14, Book VI of the Implementing Rules of
the Labor Code.
then look forward to continued employment. Thus do
these two remedies give meaning and substance to
the constitutional right of labor to security of tenure.
The two forms of relief are distinct and separate, one
from the other. Though the grant of reinstatement
The notices served on her sufficiently apprised
commonly carries with it an award of backwages,
the inappropriateness or non-availability of one does
the
accusations against her. The company president's
letter of June 2, 1995 informed her that there was a
complaint from Amado Roa and the other division
heads of the Sales Department for her "alleged
deliberate withholding or delaying of the release and
payment of the commissions . . ., unless and until
given a certain amount in consideration [of] the
not carry with it the inappropriateness or non-
availability of the other."
NATURE OF REMEDI ES
An order for reinstatement must be specifically
said commissions."
Celeridad's letter of June 24, 1995 reiterated the
same gripe. That she did not receive a copy of these
Complaints does not show that they were mere
fabrications of the private respondent. Procedural
due process only requires employers to furnish their
the
particular acts or omissions constituting the grounds
for their dismissal, and to hear their side of the
story. Obviously, the employer complied with these.
It was, therefore, incumbent upon petitioner to
cannot be presumed; like back wages,
it is a separate and distinct relief given to an illegally
dismissed employee. There being no specific order
for
complainant's separation, there can be no basis for
salaries/back
appeal.
The general rule is that where there is a
finding of illegal dismissal, an employee is
UP LAW BAROPS 2007
ONE UP
the Court held that a company should exercise
caution and care in dealing with its employees to
prevent suspicion that its dismissal of an employee
is only a scheme to evade its responsibility of
granting retirement benefits. Thus, for having been
illegally dismissed, petitioner shall be entitled, not
only to separation pay and full backwages, but
additionally, to his retirement benefits pursuant to
112 of 132

given to an illegally
is unjustly
is no longer viable and (2)
wages during the
that law case the
entitled is illegally
and for
J.H. v. N.L.R.B. Inc.; Clark,
wit:
be to only not right, every had
without ordered be may wages
is of
of grant the Though
These to forward
twin These his of
restores clearly
back of the and,

which he personally prepared
General Bapti st Bi bl e Coll ege v. NLRC (93)
developed however,
employee dismissed
Qui jano v. Mercur y Drug Corp. (98)
immediate substitute
Escobin v. NLRC (98)
dismissed from work shall be entitled
Union of Supervi sors, etc. v. Secretary of Labor
( 8 4 )
Gl obe Mackay v. NLRC (92)
Reinstatement the other. availability
separate.
employment. continued
remedies dismissal.
from which he was removed, i.e., to his status quo
ante dismissal, while the grant of back wages allows
Reinstatement obvious.
payment secondly,
"Art. 280. An

Part II : Labor Standards Law
Labor Standards
entitled to reinstatement and to receive back wages
from the date of his dismissal up to the time of his
reinstatement.
The normal consequences of a finding that an
employee has been illegally dismissed are, firstly,
that the employee becomes entitled to reinstatement
to his former position without loss of seniority rights
wages
corresponding to the period from his illegal dismissal
up to actual reinstatement. The rationale therefor is
the
employee who was unjustly dismissed to the position
compensation was withheld from him up to the
time of his reinstatement."
is aimed to restore the situation as nearly as
possible to status quo ante the unfair labor practice.
This requires that those deprived of a recognized
and protected interest by violations of the law should
be made whole so as to prevent the violator from
profiting from his misdeeds (N.L.R.B. v. Coats and
Rutter-Rex
Manufacturing Co.). Yet the reinstatement remedy
must always be adapted to economic-business
conditions (N.L.R.B. v. R.C. Can Co.; N.L.R.B. v.
American Aggregate Co.).
the same employee to recover from the employer
that which he had lost by way of wages as a result
RATI ONALE
of
reinstatement and payment of back wages make
whole the dismissed employee, who can then look
two
remedies give meaning and substance to the
constitutional right of labor to security of tenure.
However, the two remedies are distinct and
reinstatement
commonly carries with it an award of back wages,
the inappropriateness or non-availability of one does
not carry with it the inappropriateness or non-
a
restoration to a state from which one has been
removed or separated. On the other hand, the
payment of backwages is a form of relief that
restores the income that was lost by reason of the
unlawful dismissal. The award of one is not a
condition precedent to an award of another. Back
ordering
reinstatement; conversely, reinstatement may be
payment ordered without of back wages.
RATIONALE FOR REMEDIES
To go back to the instant case, there being no
evidence to show an authorized, much less a legal,
cause for the dismissal of private respondent, she
entitled
reinstatement, but as well, to full backwages.
The intendment of the law in prescribing the
twin remedies of reinstatement and payment of
backwages is, in the former, to restore the dismissed
employee to her status before she lost her job, for
the dictionary meaning of the word "reinstate" is "to
restore to a state, condition, position, etc. from
which one had been removed" and in the latter, to
give her back the income lost during the period of
unemployment. Both remedies, looking to the past,
would perforce make her "whole."
23. 09 REI NSTATEMENT
DEFI NED
The Labor Code provision on reinstatement, to
The normal consequences of illegal dismissal are
reinstatement and payment of back wages. These
remedies give life to the workers' constitutional right
to security of tenure.
Separation pay is generally not awarded except
in instances where reinstatement is no longer
feasible or appropriate, as in this case. As a
continued
reemployment, separation pay is meant to provide
the employee the "wherewithal during the period
that he is looking for another employment."
EMPLOYEE RIGHT
We disagree. Well-entrenched is the rule that an
to
reinstatement as a matter of right. Over the years,
where
reinstatement is not feasible, expedient or practical,
as where reinstatement would only exacerbate the
tension and strained relations between the parties,
or where the relationship between the employer and
employee has been unduly strained by reason of
their irreconcilable differences, particularly where
the illegally dismissed employee held a managerial
or key position in the company, it would be more
prudent to order payment of separation pay instead
of reinstatement. Some unscrupulous employers,
however, have taken advantage of the overgrowth of
this doctrine of "strained relations" by using it as a
cover to get rid of its employees and thus defeat
their right to job security.
EFFECT OF FAILURE TO ASK RELIEF
Having been illegally dismissed from his position
as Academic Dean, Basa is entitled to reinstatement
to his former position without loss of seniority rights
and to payment of backwages from the time of his
illegal dismissal up to his actual reinstatement. In
resolving whether or not the relief of reinstatement
may be granted to Basa notwithstanding his failure
to pray for the same in his complaint, We rule in the
affirmative. We are for the granting of the relief he is
entitled to under the law, although he failed to
specifically pray for the same in his complaint.
We hereby note that Basa's failure to specifically
pray for the relief of reinstatement in a complaint
employee
to
reinstatement without loss of seniority rights and
to his backwages computed from the time his
and signed using a
standard form prepared by the NLRC Regional
Arbitration, Branch No. XI, Davao City, is a
procedural lapse which cannot put to naught a
right which he is entitled under a substantive
UP LAW BAROPS 2007
ONE UP
113 of 132
to
who is unjustly
be should Mrs. that
are illegal an of
second his of time
(60) sixty of age the upon
policy or
J.H. v. N.L.R.B. Inc.; Clark,
wit:
with in

reinstated Querimit
Pearl S. Buck Foundati on, Inc. v. NLRC (90)
dismissal consequences
Ki amco v. NLRC (99)
complaint
reaching
management agreement
Espejo v. NLRC (96)
Union of Supervi sors, etc. v. Sec. of Labor (84)
Al hambra I ndustri es, I nc. v. NLRC (94)
conformity reinstatement,
I ri ga Tel ephone Co. , I nc. v. NLRC (98)
A is error The
with
backwages. A close scrutiny of the record reveals
that after filing her complaint for illegal dismissal,
Mrs. Querimit executed an affidavit which states:
consequential.
In sum, the labor arbiter ruled that, while
Praxides was at fault for desisting from working for
ITELCO, the former could not be totally blamed for
doing so because of the maltreatment he suffered at
the hands of Atty. Ortega. He tried to restore the
status quo by decreeing Praxides' reinstatement
"Art. 280. An

Part II : Labor Standards Law
Labor Standards
law. Technicalities have no room in labor cases,
where the Rules of Court are applicable only in order
to effectuate the objectives of the Labor Code and
not to defeat them. The pertinent provisions of the
Revised Rules of Court of the Philippines and
prevailing jurisprudence may be applied by analogy
or in a suppletory character to effect an expeditious
resolution of labor controversies in a practical and
convenient manner. We are inclined to overlook a
procedural defect if only to promote substantial
justice.
RULES ON REINSTATEMENT
NOT AN EMPLOYER OPTION
reinstatement without loss of seniority rights and
to his backwages computed from the time his
compensation was withheld from him up to the
time of his reinstatement."
is aimed to restore the situation as nearly as
possible to status quo ante the unfair labor practice.
This requires that those deprived of a recognized
and protected interest by violations of the law should
be made whole so as to prevent the violator from
profiting from his misdeeds (N.L.R.B. v. Coats and
Rutter-Rex
Manufacturing Co.). Yet the reinstatement remedy
must always be adapted to economic-business
conditions (N.L.R.B. v. R.C. Can Co.; N.L.R.B. v.
American Aggregate Co.].
The law recognizes as valid any retirement plan,
without loss of seniority rights but without back
wages. The filing by Praxides of a criminal complaint
against ITELCO's president and general manager
has, however, strained the relations between them,
moving the NLRC to award separation pay in lieu of
applicable
jurisprudence on the matter. Certainly, this act does
not constitute abuse of discretion, much less grave
abuse, on the part of the NLRC. Finally, as to the
amount of the monetary award, this Court has ruled
that where reinstatement is no longer an option, a
separation pay equivalent to one month's salary for
every year of service is awarded as an alternative.
regarding
retirement at an earlier or older age. In the case of
petitioner, CISP did not have any retirement plan for
its employees. In such situation, Sec. 13, Book IV,
of the Omnibus Rules Implementing the Labor Code
provides that in the absence of a retirement plan,
agreement or policy an employee may be retired
years.
Construing this provision, we held that an employee
may retire, or may be retired by his employer, upon
reaching sixty (60). Thus, an employee held to be
illegally dismissed cannot be reinstated if he had
already reached the age of sixty (60) years at the
(pressing
reinstatement) before the Labor Arbiter's Office.
STATUS OF EMPLOYMENT
DUE PROCESS
termination
without just cause entitles a worker to reinstatement
regardless of whether he was accorded due process.
On the other hand, termination of a worker for
cause, even without procedural due process, does
not warrant reinstatement, but the employer incurs
liability for damages.
Since the Labor Arbiter found a valid ground for
dismissal, taking into consideration the controverting
evidence of the parties, which finding was not set
aside by NLRC, the latter was in grave error when it
directed reinstatement. Where, on the basis of the
evidence of the opposing parties the validity of the
dismissal is determinable at the level of the Labor
Arbiter, the latter should resolve that issue. And if
the Labor Arbiter finds just cause in the termination,
reinstatement would no longer serve any purpose.
After all, a finding by the Labor Arbiter as to the
validity of the ground for dismissal is much more
impartial and trustworthy than a determination by
the employer who assumes the role of accuser and
judge at the same time.
The argument of private respondents that
reinstatement and payment of back wages could not
be made since Kiamco was not a regular employee is
apparently misplaced. As quoted above, the normal
the
reinstatement of the aggrieved employee and the
grant of back wages. These rights of an employee do
not depend on the status of his employment prior to
his dismissal but rather to the legality and validity of
his termination. The fact that an employee is not a
regular employee does not mean that he can be
dismissed any time, even illegally, by his employer.
STRAI NED RELATI ONS
RATI ONALE
There is likewise no basis for the NLRC ruling
"That since I am not interested to be reinstated
to my employment by reason of the prejudicial
and strained relations now existing between
myself and the management of Pearl S. Buck
EXCEPTIONS
BUSI NESS CONDI TI ONS
Foundation, Inc., I am claiming separation pay
for being illegally dismissed from employment to
be computed from the date I was employed up
to the date I was illegally dismissed; . . ."
The Labor Code provision on reinstatement, to
employee
dismissed from work shall be entitled
Said statement should have cautioned both the
labor arbiter and the NLRC. The parties to a case
should not be forced into a situation where a
peaceful relationship is not feasible. As the
petitioner appears to have lost its trust in private
UP LAW BAROPS 2007
ONE UP
114 of 132
who is unjustly
to
for
award an be would
mention to not private and
private the of
is an of
his to as nature
NLRC, v. Mills Textile
the
he time the at
the of the was Caparas
lieu in award, the nature: same the
render case this of
not is turn in who
disposition equitable
respondent,
reinstatement
Jardi ne Davi es, I nc. v. NLRC (99)
employee employment continued
Si bal v. Notre Dame of Greater mani l a (90)
expressing
any employee similarly prejudiced had
preclude
hostility was not demonstrated in Divine Word High
School v. NLRC, the teacher's separation was
In Century
advisable because of
(EMAPALICO) Company
President
Employees Association of the Philippine
Ameri can Li fe Assurance Co. v. NLRC (91)
Sentinel Securi ty Agency, I nc. v. NLRC
inappropriate
Commerci al Motors Corp. v. NLRC (90)
respondent,
reinstatement.
unsigned probationary appointment to a
the
reinstatement of the employee was not allowed
because he had tried to poison some of his co-
workers and would have continued, if retained, to
pose a threat to their lives. In Flores v. Nuestro

Part II : Labor Standards Law
Labor Standards
seeking
reinstatement, it would be an act of oppression to
compel them to return to the status quo ante.
It is readily noticeable in the case at bar that
the differences of Caparas with Philamlife are neither
personal nor physical nor are they of so serious a
It would seem, however, that the circumstances
The
lower
position that was offered him was an irritant that
Umlas'
reinstatement to his former position, as an item of
relief. A more equitable disposition is that which this
Court has more than once made in other cases of
reason to
question. It bears emphasis that not only was
Caparas reacting merely as an individual employee
to the conditions laid down by Philamlife; he was
of
reinstatement, of separation pay at the rate of one
month's salary for every year of service, "so that . . .
(the employee) can be spared the agony of having
to work anew with . . . (the employer) under an
atmosphere of antipathy and antagonism, and the . .
. (latter) does not have to endure the continued
service of . . . (the former) in whom it has lost
confidence."
the official position and opposition of the
EMAPALICO of which he was the President. In this
capacity, he had a right and a duty as well to protest
the acts of Philamlife insofar as they affected not
only him but also his co-workers.
NO STRAI NED RELATI ONS
Strained relations in order that it may justify the
I NDI CATORS award of separation pay in lieu of reinstatement with
backwages, should be such, that they are so
compelling & so serious in character, that the
The only logical conclusion from the foregoing
discussion is that the Agency illegally dismissed the
complainants. Hence, as a necessary consequence,
the complainants are entitled to reinstatement and
back wages. However, reinstatement is no longer
feasible in this case. The Agency cannot reassign
them to the Client, as the former has recruited new
security guards; the complainants, on the other
hand, refuse to accept other assignment. Verily,
complainants do not pray for reinstatement;