2.

Basic principles

 Constitutional rights of workers in general

Constitutional Basis: Article XIII, Section 3, par. 1

THE STATE SHALL AFFORD FULL PROTECTION TO LABOR, LOCAL AND OVERSEAS, ORGANIZED
AND UNORGANIZED, AND PROMOTE FULL EMPLOYMENT AND EQUALITY OF EMPLOYMENT
OPPORTUNITIES FOR ALL.

 Constitutional rights of workers in relation to labor standards

1. right to work under humane conditions (right to have a non-hazardous workplace)

Article XIII, Section 3, par. 2
IT SHALL GUARANTEE THE RIGHTS OF ALL WORKERS TO SELF-ORGANIZATION, COLLECTIVE
BARGAINING AND NEGOTIATIONS, AND PEACEFUL CONCERTED ACTIVITIES, INCLUDING THE
RIGHT TO STRIKE IN ACCORDANCE WITH LAW. THEY SHALL BE ENTITLED TO SECURITY OF
TENURE, HUMANE CONDITIONS OF WORK, AND A LIVING WAGE. THEY SHALL ALSO PARTICIPATE
IN POLICY AND DECISION-MAKING PROCESSES AFFECTING THEIR RIGHTS AND BENEFITS AS MAY
BE PROVIDED BY LAW.

2. right to receive a living wage

Article XIII, Section 3, par. 2 (supra)

3. right to a just share in the fruits of production

Article XIII, Section 3, par. 4
THE STATE SHALL REGULATE THE RELATIONS BETWEEN WORKERS AND EMPLOYERS
RECOGNIZING THE RIGHT OF LABOR TO ITS JUST SHARE IN THE FRUITS OF PRODUCTION AND
THE RIGHT OF ENTERPRISES TO REASONABLE RETURNS ON INVESTMENTS, AND TO EXPANSION
AND GROWTH.

 Constitutional rights of workers in relation to labor relations (Art. XIII, Section 3, par. 2, supra)

1. right to self-organization (to join or not to join an organization)

2. right to conduct collective bargaining or negotiation with management (right to demand better
terms and conditions of employment)

3. right to engage in peaceful concerted activities including strike, in accordance with law (right to
picket, boycott)

4. right to enjoy security of tenure (right to continue one’s employment until such is severed for
just or authorized causes as provided for by law)

5. right to participate in policy and decision-making processes affecting workers’ rights and
benefits as may be provided by law
 Specific Rights of Workers

 Security of tenure
 Workers cannot be dismissed without just and authorized causes
 Workers shall be made regular after 6 months probation unless a different period is
agreed upon by the worker and the employer

 Hours of work
 Normal working hours of eight hours a day
 Meal and rest period: meal break of less than one hour shall be considered
compensable working time

 Wage and wage related benefits

a. minimum wage
b. holiday pay – one day for every regular holiday even if unworked subject to certain
conditions
c. premium pay for work within 8 hours on:

 special rest day: 30% of the basic daily rate

 rest day falling on a special day: plus 50%
 rest day falling on a regular holiday: plus 30% of 200% of the basic daily
rate

 Overtime pay
 Ordinary days: 25% of the basic hourly rate
 Special/rest/holiday: 30% of the regular hourly rate on said days

 Night shift differential pay

 10% of the basic or regular rate between 10pm and 6am

 Service incentive leave

 5 days with pay per year after one year of service

 Service charges
 85 % (distribution to rank and file employees); 15% (losses, breakages, distribution to
managerial employees)

 Separation pay
 ½ month pay for every year of service for authorized causes of separation

 13th month pay

 1/12 of the total basic salary earned within the calendar year

 Payment of wages
 Shall be paid in cash, legal tender, at or near the place of work
 May be made through a bank upon written petition of majority of the workers in
establishments with 25 or more employees and within one kilometer radius to a bank
 Shall be made direct to the employees
  Shall be given not less than once every 2 weeks or twice within a month at intervals not
exceeding 16 days
 Labor-only contracting is prohibited and the person acting as contractor is merely an
agent of the employer
 Preference of workers’ money claims over government and other creditors in case of
bankruptcy or liquidation of business

 Safe and healthful conditions of work and welfare services

 Proper illumination and ventilation, fire exits and extinguishers, occupational health
personnel services, family welfare or family planning services at the workplace

 Employment of Young Workers

 Minimum employable age is 15
 A worker below 15 should be directly under the sole responsibility of parents or
guardians; work does not interfere with child’s schooling and normal development
 No person below eighteen can be employed in hazardous or deleterious undertaking

 Employment of women
 Nightwork prohibition unless allowed by the rules:
o Industrial undertaking – from 10 pm to 6 am
o Commercial – from 12 mn to 6 am
o Agricultural – at nighttime unless given not less than 9 consecutive hours of
rest
 Welfare facilities must be provided in the workplace
 Prohibition against discrimination with respect to pay, promotion, training
opportunities, study, and scholarship grants

 Self-organization and collective bargaining

 Employees can form organizations such as union and welfare committees
 An employee can join a union on the very first day of his employment
 Collective Bargaining – a contract between workers and employers on terms and
conditions of employment which are OVER and ABOVE those mandated by law

 Labor education through seminars, dialogues, and information, education and communication
materials

 Peaceful concerted activities in accordance with law

 Participation in policy and decision-making processes affecting their rights and benefits

 Free access to the courts and quasi-judicial bodies and speedy disposition of their cases

 Employees’ Compensation Commission (ECC) benefits for work-related contingencies

 medical benefits for sickness and injuries
 disability benefits
 rehabilitation
 death and funeral
  SSS Benefits
 maternity
 sickness
 disability
 retirement
 death

 ASPECTS of Labor Standards

 Meliorative Labor Standard

Intended to expand the flow of income or benefits to workingman that are required for a decent
living.
 overtime pay
 nightshift differential pay
 premium pay
 Protective Labor Standard
Intended to protect harsh and oppressive conditions of work that is inimical to the health, safety
and well-being of the workers.
 Prescribed hours of work

CONSEQUENCES OF MELIORATIVE AND PROTECTIVE LABOR STANDARDS

A. Social
Enjoying better living conditions, humane conditions, high salary, greater quality of life
B. Political
Relationship of people and government would be better because people are enjoying healthy living
conditions
C. Economic
More money, more demands because there will be an increase in basic production of commodities

 PURPOSE

 Remedial and humanitarian

 SOURCES of Labor Standards

1. Employment Contract –
Reason: LS are terms and conditions fixed by law and the contract is the law between the parties.
Ex: Employer hires an employee and gives a high salary, in effect the former provides the latter a labor
standard plus car, allowances and other benefits
2. Company Policies - as a company policy, e.g. provision of a sack of rice, it is meliorative.
Declarations or statements in written form fixing employment benefits usually found in
company manual.
Ex. Resignation benefit, retirement benefit other than the one mandated by law.
3. Company Practices –Practices could be unwritten, deliberately granted by employer for a long
period of time, although it is not a policy but consistently and deliberately provided to workers.
Customary mode of employer’s conduct, usually nonverbal, fixing employment benefits over a
period of time through repetitive employer behavior.
Ex. vacation with pay, birthday leave
4. Administrative orders of DOLE - Also prescribes the terms and conditions of employment.
 Ex. Compressed workweek
5. Compulsory or Voluntary Arbitration – the award given to the party, it is another source of a
labor standard
6. Collective Bargaining Agreement or CBA – can also be a source of Labor Standards because it
provides terms and conditions of employment prescribed by law.
7. Statutes REASON: Principle of Non-diminution of benefits.

 CONCEPT OF EMPLOYER-EMPLOYEE (Labor Standards)

 Article 97(b)

EMPLOYER – includes any person directly or indirectly in the interest of an employer in relation to an
employee and shall include the Government and all the branches, subdivisions, and instrumentalities, all
GOCC’s and institutions as well as non-profit private institutions and organizations.

 Article 97 (c)

EMPLOYEE – includes any individual employed by an employer

 CONCEPT OF EMPLOYER-EMPLOYEE (Labor Relations)

 Article 212(e)

EMPLOYER – includes any person acting in the interest of an employer directly or indirectly. The term
shall not include any labor organization or any of its officers or agents except when acting as an
employer.

 Article 212 (f)

EMPLOYEE – includes any person in the employ of an employer. The term shall not be limited to the
employees of a particular employer, unless this code so expressly 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
other substantially equivalent and regular employment.

 Employer may be:

1. natural
2. juridical – a corporation

 Employee – only natural persons may qualify as an employee. It could be Filipino citizens
or foreigners.

Hiring of employees

 Foreigners – Art. 40-42, PD 442 applies

 Filipino - The Constitution and the Labor Code encourage the employment of Filipinos.

Foreign Investment Code

 Of those corporations owned by foreigners, if they want to employ aliens as their employees,
the following requirements must be complied with:

1. Such domestic or foreign companies should obtain a permit from the DOLE (Alien
Employment Permit) at the nearest regional office
2. There must be 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.

 The purpose of the law is to protect the Filipinos.

Example: Dumon Sari-sari Store (single proprietorship).

Who is considered the employer?
Wilbert Dumon will be the employer, because the sari-sari store does not have a separate juridical
personality. So, if Dumon is made a defendant in a labor case, the caption will be - “Employee vs.
Wilbert Dumon, doing business under the name and style of Dumon Sari-sari Store.”

The Government is an employer within the meaning of the Labor Code in Labor Standards.

So, a government agency with an original charter contracts with a security agency to supply security
guards, and this security agency is unable to pay the wages of its guards.

Q: Is the principal government agency considered jointly and severally liable with the security agency?
Will Article 106-109, LC apply to them? Can the guards file a labor complaint with the nearest arbitration
branch of the NLRC and sue both the security and government agency?

A: YES, the Labor Code will govern. The government agency cannot move for the dismissal of the
complaint for lack of jurisdiction on the part of the Labor Arbiter and say that they are governed by the
Civil Service Law Rules and Regulations. The government agency contracted the services of an
independent contractor, so they are considered principals. Therefore the LC will govern regarding the
monetary gains of the security guards.

A motion to dismiss filed by the government agency in the above-cited example will not prosper on the
ground that the Labor Arbiter has no jurisdiction, because the term “Employer” includes government
agencies. It does not make any qualifications whether it is one with or without original charter.

Employer-Employee Relationship
 it is in personam, involves the rendition of personal service by the employee, and partakes of
master and servant relationship.
 contractual in character, it arises from the agreement of the parties.

Three tests to determine employer-employee relationship

There are three tests commonly used to determine the existence of employer-employee relationship,
viz.:
1. Four-fold test
2. Economic reality test
3. Two-tiered test (or Multi-factor test)

 FOUR-FOLD TEST

1. Selection and engagement of employees

2. Payment of wages
3. Power of dismissal
4. Power of control over employee’s results and over the means and methods by which the
work is to be accomplished

Control Test (4th)

 the most important element
 that is, whether the employer controls or has reserved the right to control the employee not
only as to the result of the work to be done but also as to the means and methods by which the
same is to be accomplished [investment planning corp v. sss 11/18/67]

The control test initially found application in the case of Viaña vs. Al-Lagadan and Piga, where the court
held that there is an employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the manner and means used
to achieve that end.
In applying this test, it is the existence of the right, and not the actual exercise thereof, that is important.
Tabas vs. California Mfg Co.
“The existence or absence of employer-employee relationship is A QUESTION OF LAW AND A QUESTION
OF FACT, each in its defined sense.

The character of relationship between the parties is not what they call it in their contract but what the
law calls it after examination of the facts. The characterization by law prevails over that in the contract.
In this case the existence of employer-employee relationship is not a matter of stipulation; it is a
QUESTION OF LAW.

But the conclusion that an employer-employee relationship exists depends upon the facts of each case.
In one case an employer-employee relationship may be found to be present, but in another case with
different facts, it may be absent. In this sense, the existence of an employer-employee relationship is a
QUESTION OF FACT.”

Philippine Fuji Xerox Corp vs. NLRC

GR 111501, 05/05/96

CORE OR NON-CORE JOBS

“Depending on the applicability of the tests of employment, an employer-employee relationship may

exist regardless of the nature of the activities involved. In other words, the kind of work is not the
definitive test of whether the worker is an employee or not”
Sevilla vs. CA

GR 44182-3, 04/15/88

TITLE AS WEAK INDICATORS

“The fact that one had been designated “branch manager” does not make such person an employee.
Titles are weak indicators”

Encyclopedia Britanica vs. NLRC

GR 87098, 11/04/96

“Where a person who works for another does so more or less at his own pleasure and is not subject to
definite hours or conditions of work and in turn is compensated according to the result of his efforts and
not the amount thereof, we should not find that the relationship of employer-employee exists.”

Dy Keh Beng vs. ILMUP

GR 100665, 02/13/95

MERE EXISTENCE, NOT ACTUAL EXERCISE

“But it should be borne in mind that the control test calls MERELY FOR THE EXISTENCE of the right to
control the manner of doing the work, NOT THE ACTUAL EXERCISE of the right.”

Insular Assurance Co. vs. NLRC

GR 119930, 03/12/98

“Exclusivity of service to the company, control of assignments and removal of agents, collection of
premiums, furnishing of facilities and materials as well as capital described as unit development fund are
HALLMARKS OF A MANAGEMENT SYSTEM where there can be no escaping the conclusion that one is an
employee of the insurance company.”

Domasig vs. NLRC

GR 118101 09/16/96

EVIDENCE OF EMPLOYMENT; ID, VOUCHERS, SSS REGISTRATION, MEMORANDUM

“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 relationship.”

Flores vs. Nuestra

GR 66890 04/15/88
“That the respondent registered the petitioners with SSS is proof that the latter is the former’s
employees. The coverage of SSS Law is predicated on the existence of an employer-employee
relationship”

“In a business establishment, an identification card is usually provided not only as a security measure
but mainly to identify the holder thereof as a bona fide of the firm that issues it. Together with the cash
vouchers covering the petitioner’s salaries for the months stated therein, these matters constitute
substantial evidence adequate to support a conclusion that the petitioner was indeed the employee of
the respondent.”

Philippine FUJI XEROX CORP vs. NLRC

GR111501 03/05/96

“Appointment letters or employment contracts, payrolls, organization charts, personnel lists, as well as
testimony of co-employees, may also serve as evidence of employee status.”

Opulencia Ice Plant vs. NLRC

GR 98368 12/1593

ABSENCE OF NAME IN THE PAYROLL; TESTIMONIAL EVIDENCE

“If only documentary evidence would be required to show that relationship, no scheming employer
would ever be brought before the bar of justice, as no employer would wish to come out with any trace
of the illegality he has authored considering that it should take much weightier proof to invalidate a
written instrument. Thus, as in this case where the employer-employee relationship between
petitioners and Esita was sufficiently proved by testimonial evidence, the absence of time sheet, time
record or payroll has become inconsequential.”

Labor Congress of the Philippines vs. NLRC

GR 123938 05/21/98

MODE OF COMPENSATION NOT A TEST OF EMPLOYMENT STATUS.

“The presence or absence of employer-employee relationship is not determined by the basis of the
employee’s compensation. Indeed, employment relationship is one thing, pay determination is another.
The existence of employment relationship depends on whether the four-fold test is present or not.”

Zamudio vs. NLRC

GR 76723 03/25/90

ON “PAKIAO” BASIS
“The nature of their employment i.e “pakiao” basis, does not make petitioners independent contractors.
Pakiao workers are considered employees as long as the employer exercises control over the means by
which such workers are to perform their work. Considering that the petitioners did their work inside
private respondent’s farm, the latter necessarily exercised control over the work performed by
petitioners.

The seasonal nature of petitioner’s work does not detract from the conclusion that employer-employee
relationship exists. Seasonal workers whose work is not merely for the duration of the season, but who
are rehired every working season are considered regular employees.”

 ECONOMIC REALITY TEST

 Determine the underlying economic realities of the activity or relationships.
 The determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity
1. The (broad) extent to which the services performed are an integral part of the employer’s
business.
2. The (limited) extent of the worker’s investment in the equipment and facilities
3. The nature (close supervision) and (high) degree of control exercised by the employer
4. The worker’s (limited) opportunities for profit and loss
5. The (small) amount of initiative, skill, judgment or foresight required for the success of the
claimed independent enterprise
6. The (high degree of) permanency and duration of the relationship between the worker and
the employer
7. The (high degree of) dependency of the worker upon the employer for his continued
employment in that line of business.
Note: Unlike employee, independent contractor does not solely depend on the company for continued
work as they can pursue other jobs.

In view of today’s highly specialized workforce, the courts are often faced with situations where the
right-of-control-test alone can no longer adequately determine the existence of employer-employee
relationship. Subsequently, another test has been devised to fill the gap, known as the economic reality
test.
In Sevilla v. Court of Appeals, the Court observed the need to consider the existing economic conditions
prevailing between the parties, in addition to the standard of right-of-control, to give a clearer picture in
determining the existence of an employer-employee relationship based on an analysis of the totality of
economic circumstances of the worker.
Economic realities of the employment relations help provide a comprehensive analysis of the true
classification of the individual, whether as employee, independent contractor, corporate officer or some
other capacity.
Under the economic reality test, the benchmark in analyzing whether employment relation exists
between the parties is the economic dependence of the worker on his employer. That is, whether the
worker is dependent on the alleged employer for his continued employment in the latter’s line of
business.
Applying this test, if the putative employee is economically dependent on putative employer for his
continued employment in the latter’s line of business, there is employer-employee relationship between
them. Otherwise, there is none.
Two-tiered test (or Multi-factor test)
The economic reality test is not meant to replace the right of control test. Rather, these two tests are
often used in conjunction with each other to determine the existence of employment relation between
the parties. This is known as the two-tiered test, or multi-factor test. This is used if there is no written
employment contract.

Francisco vs. NLRC, G.R. No. 170087 August 31, 2006

The better approach would therefore be to adopt a two-tiered test involving: (1) control test - the
putative employer’s power to control the employee with respect to the means and methods by which
the work is to be accomplished; and (2) economic reality test - the underlying economic realities of the
activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would take into consideration
the totality of circumstances surrounding the true relationship between the parties.

This is especially APPROPRIATE in this case where there is no written agreement or terms of reference to
base the relationship on; and due to the complexities of the relationship based on the various positions
and responsibilities given to the worker over the period of the latter’s employment.

The determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity. The PROPER STANDARD OF ECONOMIC DEPENDENCE is
whether the worker is dependent on the alleged employer for his continued employment in that line of
business.

Under the broader ECONOMIC REALITY TEST, the petitioner can likewise be said to be an employee of
respondent corporation because she had served the company for six years before her dismissal,
receiving check vouchers indicating her salaries/benefits, 13th month pay, bonuses and allowances as
well as deductions and SSS contributions. It is therefore apparent that petitioner is economically
dependent on respondent for her continued employment in the latter’s line of business.

Q: How to determine that a person is economically dependent?

A:

1. Number of years in the company

2. Reported to SSS, good indicator of treating him as an employee
3. Registered in the payroll
4. Identification card
5. Company uniform
6. Being provided with a pay slip
Q: Why is it important to determine whether the relationship between the parties is that of employer
and employee or that of principal and independent contractor or of principal-agent?
A: To determine what laws will govern the rights and liabilities of the parties, and what tribunal or court
will have jurisdiction over their disputes.

Relationship, Governing Laws, Tribunal

1. Employer-Employee, Labor laws, Labor tribunal
2. Principal-Independent Contractor, Obligations and Contracts [CC], Regular courts
3. Principal-Agent, Civil Code, Regular courts

 EMPLOYER-EMPLOYEE VS. PRINCIPAL-AGENT

ER-EE – governed by the Labor Code

Principal-Agent – Civil Code

AGENT (Art. 1868, NCC). By the contract of agency, a person binds himself to render some
service or to do something in representation or on behalf of another with the consent or
authority of the latter.

 PRINCIPAL-AGENT RELATIONSHIP
 It is the principal who selects the agent
 An agent is compensated under the contract of agency for services rendered.
 An agent is disciplined by the principal because the former is under the authority of the latter.
 The principal controls the means and methods of the work of an agent.
In this relationship, there is only one party. The agent is merely an extension of the principal. They are
regarded as one. So if there is a contractor relationship, it is not among three parties but is between the
principal/agent and the other party.

Distinctions:

1. Number of parties
2. Applicable/governing law

Ex: insurance agent

 EMPLOYER-EMPLOYEE VS. PRINCIPAL-CONTRACTOR

Carries 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.

 PRINCIPAL-INDEPENDENT CONTRACTOR RELATIONSHIP

 principal selects the contractor
 contractor is compensated for services rendered.
 The contractor is not under the discipline of the principal.
 the contractor is not under the control of the principal. The definition says that aside from engaging
in a business separately distinct from the principal, to perform job, work or service, according to his
 own means and methods, free from control and direction of the principal except as to the results
thereof.
 This relationship exists also in situations under art 106-109 LC.
Contractor may be Individual or Corporate Juridical Entity.
 ARTICLE 1713, NCC

By contract for a piece of work, the contractor binds himself to execute a piece of work for the
employer, in consideration of a certain price or consideration. The contractor may either employ
only his labor, skill, or also furnishes the materials.

 CHIEF CHARACTERISTICS OF AN EMPLOYEE

 Economic Dependence by the Worker

 Employee cannot bargain on the terms and conditions of employment.
 Medical doctors, lawyers, dentists, engineers in the exercise of their profession offer special
services, the person engaging their services cannot exercise control over the means and
methods of accomplishing the work except the results thereof. They are considered as
independent contractors not needing protection from the Labor Code.

 Subordination in Work Relationship

 Employer exercises control not only the means and methods but also the results thereof.