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LAW 125-A SAMSON REVIEWER

Chapter 1: General Principles of the Labor Code

Article 1: Name of Decree: This Decree shall be known as the “Labor Code of the Philippines.”

Article 2: Date of Effectivity: This Code shall take effect 6 months after its declaration (Nov. 1,
1974).

Article 5: Rules and Regulations: The Dept. of Labor and Employment (DOLE) and other gov’t
agencies charge w/ the administration and enforcement of this code shall promulgate the necessary
implementing rules and regulations. They shall become effective 15 days after announcement of
their adoption is made in newspapers of general circulation.

I. Maximum Aid and Protection to Labor

Article 3: Declaration of Basic Policy: The State shall afford protection to labor, promote full
employment, ensure equal work opportunities regardless of sex, race or creed and regulate
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.

Self-organization: overall order arising from local interactions between parts of an initially
disordered system

Collective bargaining: negotiations of wages and other conditions of employment by an organized

body of employees.

Security of tenure: constitutional or legal guarantee that an employee cannot be removed from
work except in exceptional and specified circumstances.

A. Extension of Applicability of Law to Protect Labor: Stipulations not contrary to statutes, public
policy, public order, or morals have the force of law between contracting parties. Controversies
arising from laborer and his master shall be resolved in favor of labor to extend the rule to a greater
number of employees who can avail of the benefits under the law.

B. Protection of Labor Not Meant as a Sword to Oppress Employers: Although the Constitution is
committed to the policy of social justice and protection of the working class, every dispute will not
be automatically decided in favor of labor. The employer also has rights entitled to respect and
enforcement in the interest of simple fair play. The commitment of the Court to the cause of the
labor does not prevent the Court from sustaining the employer when it is in the right.

II. A Liberal Interpretation of the Labor Code and Its Implementing Rules

A. Construction in Favor of Labor: All doubts in the implementation and interpretation in the
provisions of this Code, including the implementation of its rules and regulations, shall be resolved
in favor of labor.

Under the policy of social justice, the law accommodates the interests of the working class
on the humane justification that those with less privileges in life should have more privileges in law.
When conflicting interests of labor and capital are weighed on the scales of social justice, the
heavier influence of the employer should be counter-balanced by the law.

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B. Where the Law is Clear, the Law is to be Applied to the Facts of the Case: Where the law is clear,
it should be applied to the facts of the case. Otherwise, it will contravene the purpose for which the
law was enacted and will defeat the ends which it seeks to attain.

The doctrine of liberal interpretation cannot be applied if it would render useless the very
purpose for which it was adopted. To disregard the employer’s right and interest solely on the basis
of concern and solitude for labor is unjust and unacceptable. Justice is not done by sustaining the
contention of the poor just because he is poor. Justice is done by properly applying the law,
regardless of the station in life of the contending parties.

III. Principle of Non-Diminution of Benefits

Article 100: Prohibition against Elimination or Diminution of Benefits: Nothing 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.

Employees have a vested right over existing benefits granted to them by their employers.
These benefits or supplements cannot be reduced, diminished, discontinued or eliminated.

A. Meaning of Supplement or Benefits: Special privileges given to or received by employees over

and above their ordinary earnings.

Examples:

1. Pay for vacation and special holidays not worked

2. Paid sick leave
3. Overtime rate in excess of what is required by law
4. Profit-sharing (direct share of the company’s profits)
5. Family allowances (grant added in addition to regular salary and graded according to
occupation and number of dependent children
6. Christmas and cost-of-living bonuses (periodic increase in wage to compensate for loss in
purchasing power of money due to inflation)
7. Bonuses paid as a reward for extra output or time spent on the job
8. Funeral or bereavement aid
9. Any other benefit stipulated in a CBA (collective bargaining agreement)

Collective bargaining agreement: negotiated contract between a labor organization and employer
regarding wages, hours of work and other terms and conditions of employment. Parties in a CBA
may establish stipulations, clauses, terms, and conditions they deem convenient, provided they are
not contrary to laws, morals, good customs, public order or public policy.

B. Indicators that Benefits Have Ripened into Company Practice: The employee must prove by
substantial evidence that the giving of the benefit is done by the company over a long period of
time for the action to be considered as a company practice. (Characterized by regularity). The
jurisprudence has not laid down a definite time in order to constitute the action to be a voluntary
employer practice, but the common denominator appears to be the regularity and deliberateness of
the grant of benefit over a significant period of time.

The following indicators are considered to determine the benefits to have ripened into company
practice:

1. Employer’s knowledge that he is not required to extend such benefit

2. Granting of the benefits is consistent and deliberate

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3. Employer continues to grant employees the benefit for several years

C. Requisites for Diminution of Benefits: There is diminution of benefits when the ff. requisites are
present:

1. Benefit is founded on a policy or has ripened into a practice over a long period of time
2. The practice is consistent and deliberate
3. The practice is not due error in the construction or application of a doubtful or difficult
question of law
4. Diminution or discontinuance is done unilaterally by the employer

IV. Management Prerogatives: Free will of the employer to conduct his own business affairs to
achieve his purpose

The exercise of management prerogative is not absolute and is subject to limitations imposed by
law, CBAs, and general principles of fair play and justice.

Employer is free to regulate according to his own discretion:

1. Hiring
2. Work assignments
3. Working methods
4. Time, place, and manner of work
5. Tools to be used
6. Processes to be followed
7. Supervision of employees
8. Working regulations
9. Transfer of employees
10. Work supervision
11. Lay off of employees
12. Discipline, dismissal, and recall of work

Management prerogative may be availed of without fear of any liability so long as the following
conditions are met:

1. Exercised in good faith for the advancement of the employer’s interest and not for the
purpose of defeating or circumventing the right of employees under special laws or a valid
agreement
2. Not exercised in a malicious, harsh, oppressive, vindictive, or wanton manner or out of
malice or spite

A. Hiring and Firing of Employees: Limitations to this is embodied in the constitutional requirement
for the protection of labor and promotion of justice

An employee’s job is considered a property right and therefore within the constitutional mantle of
protection that “No person shall be deprived of life, liberty, or property without due process of law;
nor shall any person be denied the equal protection of the laws”

B. Discipline of Employees: Justified only if the disciplinary action is dictated by legitimate business
reasons and not oppressive

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C. Transfer of Personnel: It is the employer’s prerogative, based on his assessment of his employee’s
qualifications, aptitudes and competence, to move the employees around in the various areas of his
business operations so that they will function with maximum benefit to the company.

Security of tenure does not give him right that would deny employer’s right to change his
assignment or transfer him where he is most useful.

Employee may not complain that the transfer amounts to a constructive dismissal if it does not
involve a demotion in rank, diminution of salaries and benefits and if it is not unreasonable,
inconvenient, or prejudicial.

D. Productivity Standards: Failure to meet work quota, either by failing to complete within allotted
reasonable period or producing unsatisfactory results, constitutes a just cause of dismissal,
regardless or permanent or probationary status of employment.

E. Granting of Bonus: Despite being a general practice, bonuses are not part of labor standards in
the same class as salaries, cost-of-living allowance, holiday pay, and leave benefits, which are
provided by the Labor code.

Decrease in midyear and year-end bonuses or even outright elimination, would not constitute a
diminution of the employees’ salaries

F. Change of Working Hours: This exercise is not absolute and must be done in good faith and with
due regard to the rights of labor, with the principles of fair play at heart and justice in mind.

G. Rules on Marriage

1. Prohibition on Marriage to Employees of Competitor Companies

a. Valid exercise of management prerogative where relationships of this nature might
compromise interests of the company
2. Prohibition on Marriage to Co-Employees (No-Spouse Employment Policy)
a. Depends on the reasonableness of the business necessity

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Case 12: Unicorn Safe Glass Inc. v. Basarte et al

Facts:

 Basarte and Union officers regular employees of Unicorn Safety Glass Inc.
o Engaged in glass manufacturing
o Usual working hours: 6x/week (Mon to Sat)
 March 2, 1998: Unicorn General Manager Hilario issued a memorandum
o Effective April 13, 1998 stating workdays shall be reduced due to economic
considerations
 Decrease in sales, increase in cost of production, devaluation of peso,
increase in minimum wage
 Protested against by Union officers dated March 12, 1998
 Reason: Getting back at them for forming a union and only union
officers were affected
 April 6, 1998: Issued another memorandum
o Take effect from April 13 to 30, 1998 reducing Union officer’s workdays to merely 3
days/week
 Protested again by Union by them showing lack of willingness to address the
Union’s concerns
 Consequently told it was management prerogative

Decision:

 Management retains the prerogative

o Whenever exigence (emergency) of the services so require
o Not absolute since it has to be exercised in good faith and with due regards to the
rights of labor
 Not used to circumvent laws and oppress employees
 Refusal to look for other options indicate bad faith
 Manner by which Unicorn exercised management prerogative appears to be underhanded
circumvention
o Factors were too general
o Unbending on implementation of rotation plan
o Singled out Union officers

Case 13: Duncan Association of Detailman-PTGWO and Tecson v. Glaxo Wellcome Philippines

Facts:

 Pedro hired by Glaxo as Med. Rep

o Signed an employee contract
 Abide by existing company rules
 Disclose to management any existing or future relationship by consanguinity
(blood related) or affinity (liking for someone) with co-employees or
employees of competing drug companies
 Resignation shall be in due course if such relationship poses a
possible conflict

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 If conflict of interest is found between such relationship and employee’s

employment, possibility of transfer to another department in a non-
counterchecking position for employment outside the company after 6
months
 Pedro assigned to market Glaxo’s products in Cam Sur and Cam Norte sales area
o Entered a romantic relationship with Bettsy (employee of Astra, competitor)
o Received reminders regarding conflict of interest which the relationship might
engender
 Love prevailed, Pedro married Bettsy September 1998
 January 1999, Pedro’s superiors informed marriage gave rise to conflict of interest
o One should resign, but they wanted as much as possible to retain Pedro due to good
performance
 November 1999, Glaxo transferred Pedro to Butuan City-Surigao City-Agusan del Sur sales
area
o Requested by Pedro to reconsider
 Request was denied
o Pedro defied the transfer order contending it violates equal protection clause
 Restricts employees’ right to marry
 Glaxo argues it is a valid exercise of management prerogative
o Genuine interest in ensuring employees avoid any activity that may conflict w/ their
responsibilities to the company
o May influence actions and decision which may consequently deprive Glaxo of profits
 May give access to secrets, procedures and policies
o Does not prohibit marriage per se but only proscribes existing or future relationships
w/ employees of competitor companies

Decision:

 Considered a valid exercise of management prerogative

o Glaxo has right to guard trade secrets since Astra is a rival company in a highly
competitive area
 Personal or marital relationships might compromise interest of the company
 Since Astra’s products were in direct competition with 67% of Glaxo’s
 Although laws endeavor to give life to constitutional policy on social justice and protection
of labor, does not mean every dispute will favor workers since management also has rights

Case 14: Star Paper Corporation et al v. Simbol et al

Facts:

 Star Paper is a corporation engaged in trading paper products

o Josephine (manager) hired three workers: Ronaldo, Wilfreda, and Lorna (regular
employees)
 Company Policy regarding marriage to co-workers
o New applicants will not be allowed to be hired if he/she has a relative, up to a 3rd
degree of relationship (extended family or first cousins, great-grandparents, or
great-grandchildren) already employed by the company

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o In case of two single employees developing a relationship and deciding to get

married, one should resign to preserve 1st policy
 Ronaldo
o Employed on October 27,1993, met Alma (co-employee), and married her on June
27, 1998
o Was advised that one should resign once they get married pursuant to a company
policy promulgated in 1995.
o Resigned June 20, 1998
 Wilfreda
o Employed on February 5, 1996, met Howard (co-employee), and married him on
June 1, 2000
o Reminded of the company policy
o Resigned June 30, 2000
 Lorna
o Employed on July 29, 1994, met Luisito (co-employee and already married), got
pregnant by Luisito and opted to resign on December 21, 1999 instead of being
terminated due to immorality
o Severed here relationship with Luisito and was dismissed after returning after 21
days of recuperation
 Ronaldo and Wilfreda
o Alleged that they did not resign voluntarily, but were compelled due to an illegal
company policy
 Ronaldo, Wilfreda, and Lorna
o Filed a complaint for constructive dismissal averring that the company policy is
illegal and contravenes Article 134 of Labor Code
 Star Paper
o Does not require the woman to resign and they give the couple a right to choose
o It is not the marital status per se that is being discriminated
 Intended to carry out the no-employment-for-relatives-within-the-3rd-
degree-policy which is within its management prerogative

Decision:

 For a no-spouse employment policy to be valid, employer must present evidence that
spouses in same workplace can adversely affect the business
o Absence of such bona fide occupational qualification invalidates a rule denying
employment to one spouse
 Employee may not discriminate against an employee based on identity of employee’s
spouse
 There must be two factors to justify a bona fide occupational qualification
o Reasonably related to the essential operation of the job involved
o Factual basis that all or substantially all persons meeting the qualification would be
unable to properly perform the duties of the job
 Ronaldo, Wilfreda and Lorna were hired after they were found fit for the job, Star Paper
failed to show that the relationships mentioned could be detrimental to its business
operations
 Therefore concluded to be an invalid exercise of management prerogative and is prejudice
to employee’s right to security of tenure

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Chapter 2: Employment Relationship v. Independent Contractorship

I. When an Employment Relationship is Present

Employee: person who performs services for an employer in which either or both mental or
physical efforts are used and who receives compensation for such services, where there is
employer-employee relationship

A. The Fourfold Test: To determine existence of employer-employee relationship, the ff. must be
present:

1. Selection and engagement of the employee

2. Payment of wages
3. Power of dismissal
4. Power to control employee’s conduct

Case 15: Legend Hotel (Manila) and/or Napud v. Realuyo

Facts:

 Hernani was hired as a Pianist at Legend Hotel’s Tanglaw Restaurant on September 1, 1992
o Rate of P400/night, increased to P750/night given after each night’s performance
o Time is fixed from 7PM to 10PM, 3 to 6 times/week
 Notified his services would no longer be required due to cost cutting measures effective July
30, 1996 after working for 7 years
 Filed a complaint for illegal dismissal claiming that Legend Hotel had been lucratively
(producing a great deal of profit) operating as of the filing of the complaint
 Legend Hotel denied the existence of an employer-employee relationship insisting he was
simply a talent engaged to provide live music at Legend Hotel’s Madison Coffee Shop

Decision:

 Selection and engagement of the employee

o Evidenced by express written recommendation for increase of Hernani’s
remuneration
o Not restricted to those fixed in the written contract
 Payment of wages
o P400 per 3 hrs -> P750 per 3 hrs and was included in the term wage in the sense and
context of Article 97(f)
 Xxx wage paid to any employee shall mean the remuneration or earnings
however designated payable to an employee under a written or unwritten
contract of employment
 Power to dismiss
o As shown by the memorandum informing him of the discontinuance of his service
because of its present financial condition
 Power of employer to control the work of the employee
o Hernani could not choose the time of his performance (7PM-10PM)
o Hernani could not choose the place of his performance (Legend Hotel’s Madison
Coffee Shop)

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o Restaurant Manager required Hernani at certain times to perform Tagalog only

songs or wear a barong tagalog
o Hernani was subject to the rules on employees’ representation check and chits

B. The Right-of-Control Test: Power to control the employee’s conduct “where the person for whom
the services are performed reserves a right to control not only the ends to be achieved, but also the
means to be used in reaching such end” assumes primacy in the overall consideration of whether
an employer-employee relationship exists between the parties

Deemed to be such an important factor that the other requirements can be disregarded

Case 16: Calamba Medical Center, Inc. v. NLRC et al

Facts:

 Calamba Medical Center engaged the services of Dr. Ronaldo and Dr. Merceditha in March
1992 and August 1995 as Resident Physicians
o Worked 24-hr shifts for twice a week and paid a monthly retainer (pay in advance
for work to be specified later)
 Dr. Meluz overheard telephone conversation of Dr. Ronaldo with fellow employee,
Diosdado, about low admission of patients.
o Dr. Ronaldo was given a memorandum why no disciplinary actions should be taken
against him for committing acts inimical to the interests of the hospital
 Was taken out of context, said Dr. Ronaldo
 Preventively suspended
 Dr. Merceditha was not given any assignments after that and later informed this was due to
cost-cutting measures
 March 20, 1998, Dr. Ronaldo filed a complaint for illegal suspension and Dr. Merceditha filed
a complaint for illegal dismissal.
o Dr. Ronaldo was later terminated and subsequently filed an action for illegal
dismissal

Decision:

 Under control test, employment relationship exists if hospital controls both means and
details of process by which the physician is to accomplish his task
o When one works for his own pleasure, not subject to definite hours or conditions of
work and compensated according to the results of his work and not the amount,
there is not element of control
 Maintained specific work schedules of 2 24-hour shifts totaling 48 hours each week
 Dr. Ronaldo and Dr. Merceditha are monitored through nursing supervisors, charge nurses
and orderlies and without approval of CMC or its medical director, no operations can be
undertake in those areas
 It is enough that the employer has the right to wield the power
 Unless there is training agreement, they are employees of CMC

1. Sufficiency of the Mere Existence of the Power to Control: Refers to existence of the power to
control employee’s conduct and not the actual exercise of that power.

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2. The Relationship Between Jeepney Owners/Operators and Jeepney Drivers under the Boundary
Systems is That of Employer-Employee and Not of Lessor-Lessee: Drivers do not receive fixed wages
but only get the amount in excess of the so-called “boundary” that they pay to the owner/operator
is not sufficient to negate the relationship between them as employer and employee

Case 17: National Labor Union v. Dinglasan

Facts:

 Benedicto is the owner/operator of TPU jeepneys plying between Espana-Quiapo-Pier and

vice versa
o Had verbal contracts w/ jeepney drivers for use of his jeepney upon payment of
P7.50 for 10hrs of use (boundary system)
 Do not receive salaries until their day’s earning were in excess of P7.50
 Contends that there exists an employer-employee relationship between them

Decision:

 Jeepney drivers did not invest a single centavo in the business of jeeps
o Benedicto, as owner thereof, exercise supervision over the drivers
 Seeing to it that route is followed prescribed by PSC
 Check on water tank, oil and tire pressure once it passes by Benedicto’s
gasoline station
 Features that would make the relationship that of a lessor and lessee but are not sufficient
to withdraw from it being employer-employee
o Benedicto does not pay them any fixed wage
o Gasoline burned by jeeps is for the account of jeepney drivers
 Relationship between a lessor and lessee cannot be sustained since they did not invest
anything
o Unlike lease of chattels where lessor loses complete control over chattel leased
 In this case, there is supervision and sort of control and therefore employer-employee
relationship

Case 18: Caong, Jr. et al v. Regualos

Facts:

 Caong, Tresquio, and Daluyon (Jeepney Drivers) were employed by Avelino under boundary
agreement
o Jeepney drivers filed complaints for illegal dismissal because Avelino barred them
from renting his vehicles due to deficiency in their boundary payments
 Allegedly due to scarcity of passengers
 Avelino alleges that Jeepney Drivers were lessees of his vehicles
o They were not fully paying their rentals of jeepneys and discovered that they
contracted loans w/ 3rd parties and used income of jeepneys in paying the loans
 November 4, 2001, Avelino held a mandatory conference informing that those who fail to
pay the daily rental, they would not be allowed to rent a jeepney
o He was paying the monthly amortizations (spreading payments over multiple
periods) through the lease income
 Jeepney Drivers were again short of the required boundary fee

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Decision:

 Employer-employee relationship and not lessor-lessee in a boundary system

o Not receiving fixed wages is not sufficient to negate the relationship
 Jeepney Drivers were not dismissed but only suspended and suspension cannot be
categorized as dismissal
o Jeepney Drivers could put an end to their suspension if only they pay their recent
arrears
 Suspension was reasonable since on a day where there are many passengers, the drivers
would benefit and it would be unfair that when passengers are scarce, the owner/operator
will suffer by not getting the full amount of the boundary

C. An Express Provision in the Contract That an Employee is An Independent Contractor Cannot

Negate An Employment Relationship: The existence of an employer-employee relationship cannot
be negated by expressly repudiating (refusing to accept) it in the contract and stipulating that the
employee is an independent contractor, when the terms of the contract clearly indicate that the
relationship is in reality one of employment.

Employment status is prescribed by the law and not by what the parties say it is. The fourfold test
of employment shall be employed including the right-of-control test.

D. Evidence to Prove Existence of Employer-Employee Relationship: A finding that the relationship

exist must rest on substantial evidence although there is no particular form of evidence required to
prove is prescribed by the law

Findings of Labor Arbiter and NLRC (National Labor Relations Commission) shall be accorded w/
respect and finality if supported by substantial evidence that there exists the relationship of an
employer-employee

II. No Employment Relationship: Independent Contractorship

There are cases when an independent contractorship exists and not an employee relationship
between the parties

Independent Contractor: One who has contracted to do the work according to his own methods and
without being subject to the control of the employer, except as to the result of the work

A. Test of An Independent Contractorship: Each case must be determined on its own facts and all
the features of the relationship considered

The significant factor is the presence or absence of a supervisory power to control the method and
detail of performance of the service, and the degree to which the person for whom the services are
performed may intervene to exercise such control.

Presence of power of control (control both end and manners and means to achieve) = Employment
relationship

Absence of power of control (control only the result of the work) = Independent contractorship

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Case 19: Sonza v. ABS-CBN Broadcasting Corporation

Facts:

 May 1994, ABS-CBN signed an agreement with Mel and Jay Management and Development
Corporation (MJMDC) represented by Jay as President and General Manager and Mel as EVP
and Treasurer
o Provide Jay’s services exclusively to ABS-CBN as Talent for radio (8AM-10AM Mon-
Fri) and television (5:30PM-7PM Sun).
 Monthly talent of P310,000 for 1st yr and P317,000 for 2nd and 3rd yr
 1996, Jay resigned from ABS-CBN
o April 1, 1996, MJMDC wrote a letter to ABS-CBN as a notice of rescission of
agreement
 April 30, 1996, Jay filed a complaint against ABS-CBN
o Payment of salaries, separation pay, service incentive leave pay, 13th month pay,
signing bonus, travel allowance, and amount due under Employees’ Stock Option
Plan (ESOP)
 ABS-CBN contends that no employer-employee relationship exists between the parties and
ABS-CBN continues to remit Jay’s talent fees to Jay’s bank account

Decision:

 Control test will be used to determine status of a talent of a television and radio station
 Jay maintains all essential elements of employer-employee relationship present in this case
o ABS-CBN had the power not to broadcast his shows
o ABS-CBN had control by supplying all equipment and crew
o ABS-CBN subjected Jay to its rules and standards
o “Exclusivity clause” preventing jay from offering his service to other radio and
television stations
 Applying the control test, Jay is not an employee, but an independent contractor
o ABS-CBN engaged Jay’s services specifically to co-hos Mel & Jay programs and to
perform his work, Jay only needed his skills and talents
 Delivery of lines, appearance on television, sound on radio were outside of
ABS-CBN’s control as it could not dictate Jay’s script
 Only involved in the finished product
 ABS-CBN merely reserved the right to modify the program format
and airtime for more effective programming
 ABS-CBN’s sole concern was the quality of the shows and their
standing in the ratings and not the means and methods of Jay’s
performance
o Prevailing practice of ABS-CBN to treat talents like Jay as independent contractors,
but Jay argues it is void for violating the right of labor to security of tenure
 Security of tenure only guaranteed if there is an employer-employee
relationship
o Individual w/ special skills, expertise or talent have the freedom to offer their
services as independent contracts

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Case 20: Angeles Jardin, et al. vs. NLRC and PHILJAMA INTERNATIONAL, INC

Facts:

Petitioners were drivers of private respondent’s taxicabs under the boundary system whose earnings
were regularly deducted washing fee for the taxi units. Petitioners decided to form a labor union to
protect their rights and interests on the belief that the deductions made were illegal. Upon learning,
respondent refused to let petitioners drive their taxicabs when they reported for work. Aggrieved,
petitioners filed a complaint for illegal dismissal with the Labor Arbiter but the latter dismissed said
complaint. On appeal, the NLRC tribunal declared that petitioners are employees of private
respondent. On reconsideration however, the decision was reversed by the NLRC tribunal and held
that no employer-employee relationship between the parties exists.

Issue:

Whether or not petitioner taxi drivers are employees of respondent company.

Decision: YES

In a number of cases decided by this Court, we ruled that the relationship between jeepney
owners/operators on one hand and jeepney drivers on the other under the boundary system is that
of employer-employee and not of lessor-lessee. In the case of jeepney owners/operators and
jeepney drivers, the former exercise supervision and control over the latter. The management of the
business is in the owner’s hands. The owner as holder of the certificate of public convenience must
see to it that the driver follows the route prescribed by the franchising authority and the rules
promulgated as regards its operation. Now, the fact that the drivers do not receive fixed wages but
get only that in excess of the so-called “boundary” they pay to the owner/operator is not sufficient
to withdraw the relationship between them from that of employer and employee. We have applied
by analogy the doctrine to the relationships between bus owner/operator and bus conductor, auto-
calesa owner/operator and driver, and recently between taxi owners/operators and taxi drivers.
Hence, petitioners are undoubtedly employees of private respondent because as taxi drivers they
perform activities which are usually necessary or desirable in the usual business or trade of their
employer.

Case 21: BERNARD TENAZAS v. R. VILLEGAS TAXI TRANSPORT

Facts:

 Bernard Tenazas, Jaime Francisco, and Isidro Endraca filed a complaint for illegal dismissal
against R. Villegas Taxi Transport, and/or Romualdo Villegas and Andy Villegas.
Petitioner’s Claim R. Villegas Taxi’s Claim
Tenazas Taxi unit was sideswiped by Company admits that Tenazas
another vehicle (damage = is an employee (regular driver)
P500); fired after reporting AND Tenazas was never
the incident, even terminated; he failed to report
threatened w/ physical back to work after being told
harm if he was seen on to wait for the release of his
company premises taxi (overhauled due to
mechanical defects)
Francisco Dismissed because of the Company denies that
unfounded suspicion that Francisco is an employee

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he was organizing a labor

union
Endraca Dismissed after falling short
of the required boundary
for his taxi unit; fell short
because of P700 spent on
an urgent repair
Company admits that Endraca
is an employee (spare driver)
AND Endraca could not have
been terminated in March
2006 because he stopped
reporting for work in July 2003
(but willing to accommodate
him again as he was never
really dismissed)

Tenazas, Francisco, and Endraca also filed a Motion to Admit Additional Evidence: (a) Joint
Affidavit of the petitioners; (b) Affidavit of Good Faith of Aloney Rivera (co-driver); (c)
pictures of the petitioners wearing company shirts; (d) Tenazas’ Certification/Record of
Social Security System (SSS) contributions.

 LA: No illegal dismissal because no proof of an overt act of dismissal committed by R.

Villegas Taxi; Francisco failed to prove he was an employee

 NLRC: Reversed LA; the additional evidence sufficiently established the existence of
employer-employee relationship and illegal dismissal (for all three)

 CA: Tenazas and Endraca were indeed employees and were illegally dismissed, but Francisco
failed to establish his relationship with the company

Issue: WON there was an employer-employee relationship (re: Francisco)

Decision: NO

 The burden of proof rests upon the party who asserts the affirmative of an issue. As
Francisco was claiming to be an employee of R. Villegas Taxi, it is incumbent upon him to
proffer evidence to prove the existence of the relationship.
 There is no hard and fast rule to establish the elements of employer-employee relationship.
Any competent and relevant evidence may be admitted, e.g., identification cards, cash
vouchers, social security registration, appointment letters or employment contracts,
payrolls, organization charts, personnel lists
 Francisco failed to present substantial evidence to establish the relationship. No
documentary evidence submitted, like an attendance logbook, payroll, SSS record, or any
personnel file that depicts his status as an employee. He could also have at least presented
his social security records stating his contributions, name and address of employer (which
Tenazas presented). Another taxi operator, Emmanuel Villegas, also claimed to be his
employer – a fact not denied or questioned by Francisco in any of his pleadings.
 Petition DENIED. SC agreed with CA’s order of reinstatement instead of separation pay.
(*Strained relations must be demonstrated as a fact. In this case, no facts demonstrated that
the relations were so strained as to make reinstatement no longer a feasible option.)

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Case 22: Bernarte v. Philippine Basketball Association et al.

Facts:

 Jose invited to join PBA as Referee

o Leadership of Commissioner Bernardino, signed contracts on year-to-year basis
o Term of Commissioner Eala, not asked to sign during 1st Conference of the All-
Filipino Cup, and during the 2nd Conference, was made to only sign a 1 ½ month
contract for period of July 1, 2003 – August 5, 2003.
 January 15, 2004, Jose received letter from Commissioner that his contract would not be
renewed due to unsatisfactory performance
 Jose claims he was illegally dismissed
o PBA avers that Jose was not an employee rather enters a retainer contract (work for
hire contract: paid in advance for work to be specified later) that was not renewed

Decision:

 Control test is to be used

o Jose claims that he is an employee because PBA exercised control over the
performance of his work as shown by stipulations
 PBA classifies or rates a referee
 Requires all referee to attend all basketball games organized at least 1 hr
before the start of the game
 PBA assigns Jose to officiate ball games or act as alternate referee
 Referee agrees to observe or comply w/ all requirements of PBA governing
conduct of referees in and out of court
 Referee agrees:
 Be in good physical, mental, and emotional condition during life of
contract
 Best effort, service, and loyalty to PBA and not officiate in any
basketball games outside of PBA w/o prior written consent of
Commissioner
 Conduct himself in and out of court according to highest standard of
honesty and morality
 Imposition of various sanctions for violation of terms and
conditions
 Stipulations hardly demonstrate PBA’s control over means and methods
o Do not pertain to how and when Jose will blow whistle or make the calls
o Merely served as rules of conduct to maintain integrity of professional basketball
league
o “How could a skilled referee perform his job without blowing a whistle and making
calls?”
 Once in the court, referees exercise their own independent judgement
o Decide whether an infraction was committed
o PBA cannot overrule them
o Only absolute, and final authority
o Such calls and whistles exclusively belongs to referees
 Jose is an independent contractor and not an employee

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B. Not Every Form of Control will Establish An Employment Relationship: A line is drawn
somewhere, if the recognized distinction between an employee and an individual contractor is not
to vanish altogether.

1. There is no control when guidelines do not dictate the methods to achieve the desired results:
Without dictating means or methods to be employed in attaining desired results = only promotes
results and no employer-employee relationship is made; Control methodology or bind or restrict
party hired to use such means = addresses both result and means to achieve it

Acquires particular relevance in case of enterprise that affect public interest. Guidelines:

 Rules which prescribe qualifications of persons who may be insured

 Subjecting insurance applications to processing and approval by the company
 Reserving to the company determination of premiums to be paid and schedules to be paid

No control is present in above-enumerated guidelines as long as agent’s contractual prerogative to

adopt his own selling methods or to sell insurance at his own time and convenience is not invaded

Case 23: Insular Life Assurance Co., Ltd. V. NLRC and Basiao

Facts:

 July 2, 1968, Insular Life and Melecio entered into a contract

o Melecio (Agent) authorized to solicit w/in Philippines applications for insurance
policies and annuities in accordance w/ existing rules and regulations
o Melecio would receive compensation in form of commissions provided in Schedule
of Commissions of Insular Life
o Rules in Insular Life’s Rate Book and its Agent’s Manual may be promulgated by it
o Agent is free to exercise his own judgement as to time, place, and means of
soliciting insurance
o Nothing shall be construed to create an employer-employee relationship between
Agent and Company
 Agent will still conform all rules and regulations that company prescribes
o Agent is prohibited from committing acts prohibited by Agent’s Manual and
circulars of Office of the Insurance Commissioners
o Company may terminate the contract at will without any previous notice
o Either party may terminate the contract by giving to the other notice in writing to
that effect. Ipso facto (by the very fact or act, direct consequence) cancelled if
Insurance Commissioner should revoke certificate of authority previously issued or
agent fails to renew
 Insular Life terminated Melecio’s engagement in 1979 and he thereafter filed with then
Ministry of Labor complaint
o Insular Life claims there was no employer-employee relationship
 Made Melecio master of his own time, and selling methods
 Left to his judgement the time, place, and means of soliciting insurance
 No accomplishment quotas
 Compensated with his results as basis
 Not bound to observe any schedule of working hours
 Could report to any regular station, seek and work on his own
prospects
 Free to adopt own selling methods

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o Melecio claims he was an employee as he was obliged to observe and conform to all
rules and regulations
 Insular Life prescribed qualifications of applications, processed their
applications, and determined amounts of insurance coverage

Decision:

 Control test, but not every form of control may be accorded the effect of establishing an
employer-employee relationship
 A line shall be drawn between rules that merely serve as guidance and those that control or
fix the methodology of achieving a result
 None of what Melecio mentioned invades Melecio’s contractual prerogative to adopt his
own selling methods or to sell insurance at his own time
 There was No employer-employee relationship

Case 24: Orozco v. The 5th Division of the Honorable CA et al.

Facts:

 March 1990, PDI engaged services of Wilhelmina to write a weekly column for its Lifestyle
Section
o Submitted articles ever week and received compensation of P250 which was later
increased to P300 for every column published
 June 1991, PDI editor-in-chief met w/ Lifestyle Section Editor to discuss improvement to said
Section
o Cut down number of columnists to only those w/ high quality results and receive
regular feedback
o Wilhelmina’s work failed to meet standards and was terminated
 Filed complaint for illegal dismissal

Decision:

 Whether or not a columnist is an employee of newspaper which publishes the column or not
 Presence or absence of supervisory authority to control method and degree to which
principal may intervene to exercise such control
 Wilhelmina argues there was control
o PDI insured contents were hewed closely to objectives of Lifestyle Section
 Wanted to write about death in relation to All Souls Day, was advised not to
o Observe deadlines
o Submit 2-3 pages of article for column “Feminist Reflections” and anything beyond
would be chopped-off and published the next week
o PDI had a say whether what was written was relevant and was asked to discuss
topics 2 days before publication
 Not all rules imposed hiring party on hired party that the latter is an employee of the form
o Rules that serve as general guidelines are not indicative of control
 Main determinant is whether the rules set by employer are meant to control not just the
results, but also means and methods
 Factors enumerated were inherent conditions in running a newspaper
o So-called control are dictated by the very nature of the business itself

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o Subscribe to the standards set by it

o Not unusual for PDI to control what would be published and what is important is
only the end result
 Articles done by Wilhelmina herself are without intervention by PDI
 There were no restraints to Wilhelmina’s creativity and was free to write according to the
writing style she was accustomed to
o The only apparent limitation that she had to write only about subjects that befitted
the Lifestyle Sections did not translate to control
 Approval and rejection cannot be the control contemplated in the control test
 Important factor is control over how the work is done
 Wilhelmina was not an employee, but an independent contractor

2. The Dealer is an Independent Contractor: Person engaged to sell soft drinks for principal, using
truck supplied by the principal, but with the right to employ his own workers, to sell according to
his own methods, subject only to prearrange routes, observing no work hours fixed by principal,
and obliged to secure own license and defray his own selling expenses, all in consideration of a
peddler’s discount given by principal for at least 250 cases of soft drinks sold daily is not an
employee, but an independent contractor.

III. JOB CONTRACTING AND SUBCONTRACTING

A. Contracting and Subcontracting under the Labor Code: Articles 106 to 109 of Labor Code governs
relationship between contractors, subcontractors and contractual employees

Article 106. Contractor or Subcontractor: Whenever employer enters into a contract with another
person for the performance of the former’s work, employees of contractor and latter’s
subcontractor, if any, shall be paid in accordance with the provisions of this code.

Employer shall be jointly and severally liable with his contractor or subcontractor to such employees
if he fails to pay the wages of his employees to the extent of the work performed under the contract

Secretary of Labor and Employment may restrict or prohibit contracting-out of labor to protect rights
of workers established in this Code. May make appropriate distinctions between labor-only
contracting and job contracting

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

Article 107: Indirect Employer. Apply to any person, partnership, association or corporation which,
not being an employer, contracts with an independent contract for the performance of any work,
task, job or project.

Article 108: Posting of Bond. Employer or indirect employer may require contractor or
subcontractor to furnish a bond equal to cost of labor under contract, on condition that bond will
answer for the wages due the employees should the contractor or subcontractor fail to pay the same

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Article 109: Solidary Liability. Every employer or indirect employer shall be held responsible with his
contractor or subcontract for any violation of any provision of this Code. They shall be considered as
direct employers for purposes of determining the extent of their civil liability.

B. Contracting or Subcontracting Arrangement under DO 18-A

1. Definitions

1.1 Contracting or Subcontracting: refers to an arrangement whereby a principal 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 premises of the
principal

1.2 Trilateral Relationship in Contracting Agreements

 Principal: decides to farm out a job, work or service to a contractor

 Contractor: capacity to independently undertake the performance of a job, work, or service
 Contractual Workers: workers engaged by the contractor to accomplish the job, work or
service
 Contracting and subcontracting arrangement: Service Agreement (refers to contract
between principal and contractor containing terms and conditions governing performance
or completion of specific job, work, or service being farmed out for a definite or
predetermined period
 Contractor and workers: Contract of employment

1.3 Service Agreement: provisions on Net Financial Contracting Capacity which must be equal to
total cost and provision of a bond renewable every year. Must conform to DOLE Standard
Computations and Standard Service Agreement

1.4 Net Financial Contracting Capacity: refers to formula to determine financial capacity of
contractor to carry out the job, work, or services sought out to be undertaken under the Service
Agreement

NFCC= [(Current Assets – Current Liabilities) x K] – Value of All Outstanding/Ongoing Projects

including Contracts to be Started; where K as contract duration = 10 for 1 yr or less, 15 for 1-2 yrs,
20 for more than 2 yrs.

1.5 Substantial Capital: Refers to paid-up capital stocks (combination of common and preferred
stocks) of at least P 3 million in case of corporations, partnerships and cooperatives. In case of single
proprietorships, refers to net worth of at least P 3 million.

1.6 Bond: Refers to bond in article 108 that principal may acquire from contractor to be posted
equal to the cost of labor under the contract. May also refer to security or guarantee posted by
principal for the payment of services of the contractors under the Service Agreement

2. Legitimate Contracting or Subcontracting under DO 18-A. There is legitimate contracting or

subcontracting if all of the ff. circumstances concur:

a. Contractor must be registered in accordance with DO 18-A and carries on a distinct and
independent business, and undertakes to perform the job, work, or service on his own responsibility,

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according to his own manner and method, and free from control and direction of his principal in all
matters connected with the performance of the work, except as to the results of the work

b. Contractors has substantial capital and/or investment

c. Service Agreement ensures compliance with all rights and benefits of the contractor’s employee
under Labor Laws

3. Registration Requirements

 Filed at DOLE Regional Office in region where it principally seeks to operate and is supported
by:
o Certified true copy of a certificate of registration of firm or business name from SEC,
DTI, CDA, or from DOLE if applicant is a labor organization
o Certified true copy of license or business permit issued by local government unit
(LGU) where the contractor operates
o Certified listing, with proof of ownership or lease contract, of facilities, tools,
equipment, premises, implements, machineries and work premises, that are
actually and directly used by the contractor in the performance or completion of the
job, work or service contracted out, as well as photo of the office building and
premises where it holds office.
o Copy of audited financial statements if applicant is a corporation, partnership,
cooperative, or labor organization; or copy of latest income tax returns if applicant
is a sole proprietorship
o Sworn disclosure that registrant, officers, owners or principal stockholders has not
been operating or previously operating as a contractor under a different business
name or entity with pending cases of violation of labor laws, rules, and standards,
or with a cancelled registration
o Shall include a DOLE certification of attendance to an orientation seminar on DO18-
A and undertaking that contractor shall abide by all applicable labor laws

4. Rights and Benefits of Contractor’s Employees. All contractor’s employees whether a reliever,
seasonal worker, week-ender, temporary, or promo jobbers, shall be entitled to all rights and
privileges under the Labor Code

 Safe and healthful working conditions

 Labor standards
o Service incentive leave
o Rest day
o Overtime pay
o Holiday pay
o 13th month pay
o Separation pay
 Retirement benefits under SSS or retirement plans
 Social security and welfare benefits
 Self-organization, collective bargaining, peaceful concerted activities
 Security of tenure

5. Labor-Only Contracting under DO 18-A. Labor contracting is prohibited

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Labor-Only contracting refers to an arrangement where:

 Contractor does not have substantial capital or investments; or

 Contractor does not exercise right of control over the performance of the work of the
employee

6. Other Prohibitions under DO 18-A

 Contracting out of jobs, works or services when not done in good faith and not justified by
exigencies of the business:
o Contracting that will result to termination or reduction of regular employees,
reduction of work hours, reduction or splitting of bargaining unit
o Cabo, group of people supplying workers to employer w/o monetary or other
consideration
o Taking advantage of lack of bargaining strength of contractor’s employees
 Requiring to perform functions that are currently being performed
 Requiring, as a precondition to employment, to sign antedated resignation
letter, blank payroll, quitclaim releasing principal contractor from future
liabilities
o Contracting through in-house agency
o Contracting due to a strike or lockout
o Contracting to interfere w/ union members that will coerce employees in the
exercise of their rights to self-organization
o Repeated hiring under employment contract of short duration which circumvents
Security of Tenure
o Requiring employees under subcontracting agreement to fixing a period of
employment shorter than in term of Service Agreement
o Refusal to provide copy of Service Agreement

7. Effects of Finding of Labor-Only Contracting and/or Violation of DO 18-A on other Prohibitions,

Rights of Contractor’s Employees, and Required Contracts (Employment Contract and Service
Agreement): Shall render principal jointly and severally liable with the contractor to the latter’s
employees to the same manner that principal is liable to his own employees

Solidary Liability: refers to liability of principal as direct employer together with the contractor for
any violations

C. Distinction between A Job Contractor and A Labor-Only Contractor. Job contractor provides
services while Labor-Only Contractor provides only manpower. Job contractor performs a specific
job for principal while Labor-Only contractor only provides the personnel

Case 25: Aliviado v. Procter and Gamble, Phils., Inc and Promm-Gem, Inc.

Facts:

 P&G entered contracts with Promm-Gem and SAPS for promotion and merchandising
 Merchandisers individually signed employment contracts with Promm-gem and SAPS for
period around 5 months
o Assigned at different outlets, supermarkets and stores where they handle products
of P&G (1982-1991)

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o Receive wages from Promm-Gem and SAPS

o Promm-Gem and SAPS imposed disciplinary measures
 Merchandisers filed a complaint against P&G for regularization, service incentive leave pay
and other benefits w/ damages.
o Later amended to include matter of subsequent dismissal
 Merchandisers assert that Promm-Gem and SAPS are labor-only contractors providing only
manpower since they; 1) neither substantial capital; 2) Engaged to perform activities
necessary or desirable in the usual business and therefore are regular employees
 P&G argues there is no employment relationship with Merchandisers since Promm-Gem and
SAPS
o Selected merchandisers
o Paid their salaries
o Wielded power of dismissal
o Power of control
 P&G also argues that Labor Code neither defines nor limits which services or activities may
validly outsourced
o Management prerogative

Decision:

 Management prerogative to farm out any activities, but current labor laws expressly prohibit
labor-only contracting
o Does not have substantial capital and employees recruited perform activities directly
related to main business of the principal
o Contractor has no right of control
 Promm-Gem
o Authorized Capital Stock of 1million
o Paid-in capital of P500k
o Long term assets P432,895.28
o Current assets P719,042.32
o Warehouse and office space 870 sq meters
o Three registered vehicles
o Promm-Gem is a legitimate independent contractor -> Employees of Promm-Gem
 SAPS
o Paid-in capital of P31,250 = not enough for 1 month payroll of P44,561
o No substantial capital
o SAPS is a labor-only contractor -> Employees of P&G

1. Extent of Liability of Principals of Job Contractors and Labor-Only Contractors. Principal is

considered as indirect employer of contractual employees, contractor is direct employer

In labor-only contracting, principal is considered as direct employer of contractual employees.

Contractor is merely an agent of principal

2. Principal of Job Contractor Is an Indirect Employer. In legitimate job contracting, no employer-

employee relationship exists between principal and contractual employees. When job contractor
fails to pay wages of contractual employees, principal becomes solidarily liable w/ contractor

“Jointly and severally liable” = Principal and job contractor may be held liable for full amount

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Case 26: Rosewood Processing, Inc. v. NLRC et al

Facts:

 Mamon, Gazzingan, Velasco, Ballon, and Aldeza (Security Guards) employed by Veterans
Philippine Scout Security Agency (Security Agency) (1987-1991)
 May 13,1991, Security Guards filed complaint for illegal dismissal, underpayment of wages,
overtime pay, legal holiday pay, premium pay for holiday and rest day, 13th month pay, cash
bond deposit, unpaid wages and damages against Security Agency
 Security Agency impleaded RPI because Security Agency assigned some of the Security
guards to RPI
o Claims dismissal was due to RPI’s noncompliance w/ obligation and claims RPI is
liable for claims of Security of Guards
 RPI argues it is not liable because it fully paid Security Agency the service fees in service
agreement
o Although the Security Guards were assigned to RPI, RPI had requested for their
replacement and they were placed to its other clients

Decision:

 Principal is solidarily liable for wages due to Security Guards for period of time they were
assigned to principal
o Absence of proof that principal committed acts constitutive to illegal dismissal,
principal shall not be liable for backwages and/or separation pay arising from
consequence of such unlawful termination
 RPI’s contention that principal is not liable due to it paying the employees in accordance
with the contract is untenable (not be able to be maintained/defended)
o Not unduly burdensome to principal, it can recover whatever amount it had paid
from contractor in accordance w/ terms of service contract
 Principal should not be held responsible for wage differentials while Security Guards were
assigned to other companies
o Only to extent of work performed under the contract
o Assignment to another principal necessarily ends the responsibility
 RPI is solidarily liable with Security Agency for wages and wage differentials during time
they were assigned to RPI.
 RPI cannot be held liable for backwages and separation pay as they were not working for
RPI the time they were dismissed

3. Rationale for the Solidary Liability of the Job Contractor and the Principal. Enacted to ensure
compliance with provisions of Labor Code, principally those on statutory minimum wage. Job
contractor by virtue of his status of direct employer, and the principal is liable as indirect employer.
1987 Constitution mandates employees be given ample protection, and this solidary liability ensures
payment of employees’ compensation

Not unduly bothersome to principal because he can protect himself from irresponsible job
contractors by withholding the sum and paying them directly to contractual employees, or by
requiring a bond from job contractor

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4. Right of Reimbursement from the Job Contractor. Principal has right of reimbursement from job
contractor in case he pays the obligation to the contractual employees

5. The Principal of the Labor-only Contractor Is a Direct Employer. In Labor-only contracting,

employer-employee relationship between principal and contractual employees. Labor-only
contractor is merely an agent of principal

Case 27: San Miguel Corporation v. Semillano et al

Facts:

 AMPCO hired services of Workers (1991-1994) and were assigned to work at SMC to
perform tasks
o Segregating bottles
o Removing dirt therefrom
o Filing them in designated places
o Loading and unloading to and from delivery trucks
 Required to work within premise of SMC using SMC’s equipment for more than 6 months
 SMC entered into a Contract of Services with AMPCO designating AMPCO as employer of
Workers.
o Workers failed to claim rights and benefits accorded to regular employee of SMC
 June 6, 1995, Workers were not allowed to enter SMC’s premises and AMPCO’s project
manager told them to wait for further instructions from SMC’s supervisor
o Workers never heard from SMC
 Workers filed a complaint for illegal dismissal, benefits due to employees and 13th month
pay against SMC
 SMC claims it is not the employer as their employer is AMPCO, an independent contractor
o AMPCO directly paid the Workers and service contract state that AMPCO shall have
exclusive discretion in selection, engagement, and discharge of its
employees/personnel as well as determination of wages

Decision:

 Whether AMPCO is a legitimate job contractor

o Work according to own methods and w/o being subject to control of employer
except only to the results
 Established by following criteria
o Contractor is carrying independent business
o Nature and extent of work
o Skill required
o Duration of relationship
o Right to assign performance of a work
o Control and supervision of work of another
o Power w/ respect to hiring, firing, and payment of contractor’s workers
o Control of premises
o Duty to supply tools, appliances, materials, labor
o Mode, manner, terms of payment
 Although there are indications that there is an independent contractor arrangement
between SMC and AMPCO, the most determinant factors which indicate that AMPCO is a
labor-only contractor are the ff:

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o Does not have substantial capital

o All substantial capital are invested and nothing in AMPCO’s list of fixed assets could
have been used for completion of job
o There were no other clients other than SMC which shows AMPCO is not an
independent business
o AMPCO did not wield exclusive discretion as shown by AMPCO’s project manager
needing SMC’s supervisor’s permission
 Despite stipulations that state it is an independent contractorship, they do not make it
legally so.
o Should be determined by criteria set by statute and cannot be declared by contract
what type of arrangement it would be
 Cannot rely on AMPCO’s certificate of registration as independent contractor
o Only prevent legal presumption of being a mere labor-only
o Totality of facts and circumstance of case should be considered
 AMPCO is a labor-only contractor, SMC is solidarily liable w/ AMPCO. AMPCO is merely an
agent and SMC is liable as if it directly hired the employees

6. Rationale for the Liability of Principals of Labor-Only Contractors.

Case 28: Benigno Vigilla, et al. v Philippine College of Criminology, Inc. GR No. 200094, June 10,
2013

Law Principle:

Anything favorable to the labor-only contractor redounds to the benefit of the employer under the
principle of solidary liability

Facts:

The petitioners work for the Philippine College of Criminology Inc. (PCCr) as janitors, janitress and
supervisor in its maintenance department. The petitioners were made to understand by the
respondent PCCr that they are under the Metropolitan Building Services, Inc. (MBMSI) which is a
corporation engaged in providing janitorial services. PCCr terminated the services of MBMSI on 2009
which resulted in the dismissal of the petitioners. An illegal dismissal complaint was then filed
against PCCr by the petitioners contending that it is their real employer and not MBMSI.
Subsequently, the PCCr submitted to the Labor Arbiter waivers, releases and quitclaims that were
executed by the petitioners in favor to MBMSI.

The Labor Arbiter and NLRC ruled in favor of the petitioner, however upon filing the petition for
review on certiorari before the Court of Appeals, the CA ruled that the quitclaims, releases and
waivers executed by the petitioners in favor to MBMSI redounds to the benefit of PCCr by virtue of
solidary liability under Article 1217 of the New Civil Code. The petitioners contend that under Article
106 of the Labor Code a labor-only contractor's liability is not solidary as it is the employer who
should be directly responsible to the supplied worker.

Issue

Whether or not the quitclaims, releases and waivers executed by the petitioners in favor to MBMSI
redounds to the benefit of PCCr?

Held

Yes.

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The Supreme Court held that the basis of the solidary liability of the principal with those engaged in
labor-only contracting is the last paragraph of Article 106 of the Labor Code that provides, "In such
cases of labor-only contracting, 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."

It also pointed out D.O. No. 18-A, s. 2011 section 27 providing for the effects of labor-only
contracting "where upon the finding by competent authority of labor-only contracting shall render
the principal jointly and severally liable with the contractor to the latter's employees, in the same
manner and extent that the principal is liable to employees directly hired by him/her, as provided in
Article 106 of the Labor Code."

Hence, the PCCr's solidary liability was already expunged by virtue of the releases, waivers and
quitclaims executed by the petitioners in favor of MBMSI by virtue of Article 1217 of the Civil Code
providing that "payment made by one of the solidary debtors extinguishes the obligation.”

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Chapter 7: Classification of Employees

Policy of State: Assure workers to security of tenure (Act of social justice). When person has no
property, job may be the only possession or means of livelihood. -> Should be protected against
unjust deprivation of his job

Construed security of tenure to refer to regular employees and that the employer shall not
terminate services of employee w/o just cause or when authorized by Labor Code.

For regular employees, only valid grounds for termination are the just or authorized causes under
Labor Code.

For other types of employees, just cause under Labor Code or other grounds based on the nature of
their employment. -> Necessity to distinguish different types of employees based on validity of the
termination of their employment.

Classifications of Employees:

1. Regular of Permanent Employees

2. Casual Employees
3. Fixed-period or Term Employees
4. Project Employees
5. Seasonal Employees
6. Probationary Employees

I. Regular Employees

2 Kinds of Regular employees

1. Engaged to perform activities which are necessary or desirable in usual course of business or
trade of employer, except when employment is fixed for a specific term or seasonal in nature

2. Casual employees that rendered at least 1 year of service, whether continuous or broken, w/
respect to the activity for which they are employed.

Employees are deemed regular when they fall under the one of the two kinds stated above, despite
agreements stating that the employee is not a regular employee. -> To prevent circumvention of
employee’s right to security of tenure, as employee may be denied his rights due a regular
employee by virtue of lopsided agreements.

A. Standards in Determining Regular Employment

1. Activities Performed Necessary or Desirable in Usual Course of Business of Employer: Considers

nature of the work to be performed and relation to scheme of particular business or trade in its
entirety

Case 29: De Leon v. NLRC and La Tondena, Inc.

Facts:

 Moises employed by La Tondena on December 11,1981

o Maintenance Section of Engineering Dept.
 Painting company building, equipment, and other jobs related to
maintenance
o Paid on a daily basis through petty cash vouchers

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 January 1983, after serving for more than 1 year

o Requested that Moises be part of payroll of regular workers, instead of petty cash
vouchers
 Response was to terminate Moises
o Filed a complaint for illegal dismissal, reinstatement, payment of backwages
 Moises alleged that he was dismissed right after his request of being treated as a regular
employee
o Work consisting of maintenance chores and assisting Emiliano, regular maintenance
man
o Weeks after dismissal, rehired by La Tondena through Vitas Magsaysay Village
Livelihood Council, labor agency of La Tondena for same tasks
 Emiliano corroborated with Moises’ avermennts
 La Tondena claimed Moses was not a regular employee, but a casual worker hired only to
paint a certain building, whose job was terminated upon completion of the painting job

Decision:

 Article 286 of Labor Code

o Defines regular and casual employment
 Reinforces Constitutional mandate to protect interest of labor and safeguard
tenurial interest of workers denied rights due a regular employee due to a
lopsided agreement
o Contrary agreements notwithstanding, employee is regular when:
 Activities performed are necessary or desirable in usual course of business
 Rendered at least 1 yr of service whether continuous or intermittent
o Not considered regular are project employment
 Termination is determined at time of employment (i.e. completion of
particular project, seasonal employment, or by its nature, for a limited
period of time)
 Primary standard is determining the reasonable connection between a particular activity
performed by employee in relation to usual course of business of employer
o Law also deems the repeated and continuing need for its performance as sufficient
evidence of necessity
 Case of La Tondena
o Claims Moises was contracted on casual basis specifically to paint a certain company
building and that its completion rendered Moises’ employment terminated
 True at the beginning since Moises’ activity was exclusively limited to
painting the building
 However, tasks assigned to him included not only painting of
company buildings, equipment, and tools,
o But also cleaning and oiling machines, operating drilling
machine, and other odd jobs which had no painting job
o Law demands nature and entirety of activities performed by employee be
considered
 Painting and maintenance work manifest a treatment consisted with a
maintenance man and not just a painter
o Untenable to argue that painting and maintenance work of Moises’ are not
necessary in La Tondena’s business of manufacturing liquors and wines

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 Otherwise, there would be no need for the regular Maintenance Section of

the Engineering Dept. manned by regular employees like Emiliano, whom
Moises worked with
 Law overrides conditions that are prejudicial to the interest of the worker whose weak
bargaining position needs the support of the State
o Ex: Agreement of Casual, payment through vouchers, non-compliance with regular
employment procedure
 What determines is not the will and word of employer, but the nature of the activities
performed in relation to particular business and in some cases, the length of time of its
performance and continued existence

2. Length of Performance of the Activity Performed: Length of performance of activity and its
continued existence are also determinative whether employment is regular or casual

If employee is performing activity for at least 1 year, law deems repeated and continuing need for its
performance as sufficient evidence of the necessity of that activity to the business of employer.

B. Termination of Regular Employees: Only terminated for just or authorized causes under law and
after compliance with the requirements of due process

II. Casual Employees

Casual Employees: engaged to work on an activity which is not necessary or desirable in usual
business or trade of employer. (Merely incidental to business of employer and only for a definite
period made know to employee at time of engagement)

A. When A Casual Employee Acquires the Status of A Regular Employee: As soon as he has
completed 1 year of service and employment shall continue while such activity exists

Status of Regular Employee attaches to a casual after end of his 1st year of service, with respect to
activity in which he is employed, even if no appointment papers were signed by the employee

Case 30: Baguio Country Club Corporation v. NLRC et al.

Facts:

 Country Club
o Recreational establishment
o Employed Jimmy on a day-to-day basis in various capacities as Laborer and
Dishwasher for 10 months (Oct. 1, 1979 – July 24, 1980)
 Hired on September 1, 1980- October 1, 1980 as a Gardener and rehired as such on
November 15, 1980 – January 4, 1981 when he was dismissed by the company
o Filed action for ULP (unfair labor practice), illegal dismissal, and non-payment of 13th
month pay for 1979 and 1980
 Country Club maintains Jimmy was a contractual employee whose employment was for a
specific period as set forth and evidenced by contracts of employment
o State that Jimmy may be terminated anytime and employment shall be on a day-to-
day basis for temporary period

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 Solicitor General argues that Jimmy, having rendered services as laborer, gardener and
dishwasher for more than 1 year, was a regular employee at the time his employment was
terminated
o Nature of employment pertains to regular employee due to its necessity and
desirability in the usual course of business of employer

Decision

 Despite contrary agreements, employment is deemed regular when activities performed by

employee are usually necessary or desirable in the usual business or trade of employer or
has rendered 1 year of service, whether continuous or intermittent
 Country Club claims that Jimmy was contracted for a specific, fixed period.
o Records shows that Jimmy was repeatedly re-hired to perform tasks ranging from
dishwashing and gardening, aside from performing maintenance work
 Sufficient evidence of necessity and indispensability of service
 Law demands nature and entirety of activities performed by employee be considered
o Untenable to argue that tasks of Jimmy are unnecessary to company’s business
 Otherwise, there would be no need for regular maintenance section of the
company
 Furthermore, Jimmy performed said tasks for more than 1 year
o Entitled by law to be considered a regular employee
 Status of regular employment attaches to the casual employee on the day immediately after
the end of his 1st year of service

B. Termination of Casual Employees: Not protected by security of tenure, hence may be removed
from service at any time

III. Fixed-Period or Term Employees

Term Employees: employee for whom a day certain is agreed upon by employer and employee for
the commencement and termination of employment relationship

A. Standard in Determining Fixed-Period or Term Employment: Decisive determinant in term

employment is day certain agreed upon by parties for commencement and termination of their
employment relationship.

Day certain: must necessarily come although it may be unknown when (i.e. teacher engaged to
teach until end of semester because it is a day certain, although the exact date may not be known by
the parties yet)

B. A Fixed-Period Employee May Perform Work Necessary or Desirable in the Usual Business of the
Employer: Nothing essentially contradictory between definite period of employment contract and
nature of employee’s duties set down in contract, as being necessary for usual business or trade of
employer. The determining factor of fixed-period employment is not the activities, but the day
agreed upon by parties for commencement and termination of employer-employee relationship

C. When a Fixed-Period or Term Employee Acquires Status of A Regular Employee: Both employer
and employee have a right to stipulate on duration of engagement of employee. However, when
agreement entered into by party fixes a period to circumvent security of tenure of employee, period
should be struck down or disregarded as contrary to public policy, morals, law and the employee is
considered a regular employee.

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Case 31: Pure Foods Corporation v. NLRC et al

Facts:

 906 Employees were hired by Pure Foods for fixed period of 5 months at its tune canner
plant in Gen San
o After expiration of respective contracts in June and July 1991, services were
terminated and executed a “Release and Quitclaim” stating they had no claim
whatsoever against Pure Foods
 Subsequently, employees filed a complaint for illegal dismissal
 Purefood claims that Employees are now estopped (precludes person from asserting
something contrary to what is implied by a previous action) from questioning their
separation in view of their express conformity w/ the 5-month duration of their employment
contracts
o As fixed-period employees, they fell within exception of Article 286 of Labor Code on
regular employees.
o Claims employees were employed for period of 5 months and fell sort of 1 year
service to attain regular status
 Employees argue that contracts w/ specific period of employment may only be given legal
effect when they do not circumvent constitutional guarantee of security of tenure.
o Purefoods’ practice of hiring workers for a fixed duration of 5 months, only to
replace them with other workers of same employment of duration was to prevent
regularization of so-call “casuals” which is a clear circumvention of the law on
security of tenures.

Decision:

 Two kinds of regular employees

o Those engaged to perform activities necessary or desirable in usual business of
employer
o Casual employees that have rendered at least 1 year of service, whether continuous
or broken.
 Employees activities consisted of receiving, skinning, loining, packing, and casing-up of tuna
fish which are then exported
o Necessary and desirable activities
o Contrary to Pure Food’s submission, employees could not be regarded as having
been hired for a specific project or undertaking
 Refers to activity which is not commonly or habitually performed or not
done in a daily basis, but for only a specific duration of time or until
completion
o Fact that Pure Foods repeatedly and continuously hired workers to do the same kind
of work negates Pure Food’s contention that workers were hired for a specific
project or undertaking only
 On validity of Employees’ 5-month contract, SC upheld legality of fixed-term employment,
but from circumstances that it is apparent that periods have been imposed to preclude
acquisition of an employee’s tenurial security, they should be struck down
 Pure Foods does not deny Employee’s avertments that
o Main bulk of workfore consisted of so-called casual employees
o As of July 1991, Casual : 1,835 ; Regular: 263

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o
Company hired casual employees every month for duration of 5 months after which
their services were terminated and replaced by other casual employees with same
5-month duration
o Employees were doing work necessary and desirable in Pure Food’s usual business
o Cannery workers are often never on equal terms with their employers
 Freedom to contract is empty and hollow because theirs is the freedom to
starve if they refuse to work
 Scheme was apparently designed to prevent Employees from attaining regular status
o Clear circumvention of employees’ right to security to tenure
o To uphold contractual arrangement, permit Pure Foods to avoid hiring permanent or
regular employees by simply hiring them in a casual basis

D. When Fixed Contracts of Employment Are Not In Circumvention of the Security of Tenure:

2 Criterias:

 Fixed-period was knowingly and voluntarily agreed upon by parties, without any force,
duress or improper pressure being brought to bear upon the employee
 Satisfactorily appears that the employer and employee dealt with each other on no more or
less equal terms, with no moral dominancy whatever being exercised by the employer or
employee

Appointments to positions of Dean, Assistant Dean, College Secretary, Principal and other admin
offices in educational institutions which by practice or tradition, rotated among faculty members are
usually for a fixed period. Same goes for company officials like President, Executive Vice-President
which have been elected for fixed periods and at the expiration of which they would have to step
down.

Case 32: Brent School, Inc. and Rev. Dimache v. Zamora, et al.

Facts:

 Doroteo engaged as athletic director by Brent School

o Yearly compensation: P20,000
o 5 years (July 18, 1971 – July 17, 1976)
 3 months before expiration (April 20, 1976), Doroteo was given copy of report advising his
termination effective July 16, 1976.
o Stated ground for termination was completion of contract/expiration of definite
period of employment
 Doroteo protested that although contract ends at July 17, 1976, he services were necessary
and that his employment lasted 5 years and therefore, he has acquired status of regular
employee and cannot be removed except for a valid cause

Decision:

 Civil code recognizes validity of contracts and obligations w/ a fixed or definite period as
long it is not contrary to law, morals, good customs, public order or public policy
 Article 280 made to prevent circumvention of employees’ right to security of tenure
o Have no application to instances where a fixed period of employment was agreed
upon knowingly and voluntarily by parties and that employer and employee dealt
with each other on more or less equal terms

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 Doroteo’s employment was terminated upon expiration of contract with Brent School on
July 16, 19767 w/o necessity of notice.
 The advance written advice by DOLE was merely a reminder that the
contract is about to expire.

E. Termination of Fixed-Period or Term Employees: Tenured status of employment co-exists and is

co-terminus only w/ the definite term fixed in the contract of employment. Contract with definite
term fixed terminates on its own force at the end of such period. No benefits could be reaped by
employee even if employer fails to terminate employee.

IV. Project Employees

Project employees: employees whose work is coterminous with the project for which they were
hired.

Two Types of Projects:

1. Particular job or undertaking that is within the regular or usual business of employer, but which is
distinct and separate from the other undertakings of the company. Refers to employees in the
construction industry.

2. Particular job or undertaking that is not within the regular or usual business of employer, but
which is distinct and separate from the other undertakings of the company. Refers to fixed-period
and seasonal employees

Case 33: William Uy Construction Corp. and/or Uy v. Trinidad

Facts:

 August 1, 2006, Jorge filed case illegal dismissal and unpaid benefits against WUCC.
o Jorge has been working for WUCC for 16 years since 1988 as Driver of its service
vehicle, dump truck, and transit mixer.
o Signed several employment contracts w/ Company that identified him as project
employee although he has been assigned to work on one project after another w/
some intervals
 WUCC terminated because it shut down operations because of lack of projects, but it
actually opened a project in Batangas and it did not hire him back
 Company stated that it was in the construction business and due to the nature of its
business, it hires project construction workers whose employment is co-terminous with the
completion of the specific company projects and that every after project, Company had to
execute an employment contract with Jorge called appointment as Project Worker
o The gaps/intervals were inherent in the construction business. Consequently, after
the Boni Serrano-Katipunan Interchange Project in December 2004, Jorge’s work
ended as well

Decision:

 The question is whether the Company’s repeated rehiring of Jorge entitled him to the status
of a regular employee
 Test is whether he has been assigned to carry out a specific project or undertaking w/ the
duration and scope of his engagement specified at the time his service was contracted

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o Jorge remained a project employee regardless of number of years and various

projects he worked for the company
 Supreme Court held that repeated and successive rehiring of project
employees do not qualify them as regular employees as length of service is
not the controlling determinant, but whether the employment has been
fixed for a specific period at the time of the engagement of the employee
 Jorge’s series of employments with WUCC were co-terminus with its projects. When the
Boni Serrano- Katipunan Interchange Project was finished, Jorge’s employment ended with
it. His intervals were actually separate contracts from each other.

B. Employees in the Construction Industry: DO 19-93 issued on April 1, 1993. Issued in the interest
of stabilizing and promoting harmonious employer-employee relations in the construction industry.

C. When a Project Employee Acquires the Status of a Regular Employee: Aggregate period of
continuous employment in a construction company is at least 1 year shall be considered regular
employees, in the absence of a “day certain” agreed upon by the parties for the termination of their
relationship.

Mere fact that a project employee has been working on a project for at least 1 year does not
entitle him to the status of a regular employee. -> Refers only to casual employees and not to
project employees

Only when a project employee has been engaged for at least 1 year and no date has been
agreed upon that he can be entitled to the status of a regular employee.

D. Indicators of Project Employment:

1. Duration of specific/identified undertaking is reasonably determinable

2. Such duration is defined in an employment agreement and made clear to the employee at
the time of hiring
3. Work/service is in connection with particular project/undertaking for which he is engaged
4. Employee, while not employed and awaiting engagement, is free to offer his services to
other employers
5. Termination is reported to DOLE Regional Office w/ 30 days following date of his separation
from work using prescribed form on employees’ terminations/dismissals/suspensions
6. Undertaking in employment contract to pay a completion bonus to project employee as
practiced by most construction companies

E. Rehiring of Project Employees upon Completion of the Project: Completion of a phase of the
project considered the completion of the project for an employee employed in such phase. Upon
completion of project, worker may rehired provided that such rehiring conforms to provisions of law
and DO 19-93. In such a case, last day of service w/ the employer in the preceding project should be
indicated in employment contract.

F. Non-Project Employees in the Construction Industry: Employed without reference to any

particular construction project or phase of a project

1. Probationary Employees: Upon completion of probationary period, entitle to regularization.

Should be informed of reasonable standards under which they would qualify as regular
employees

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2. Regular Employees: 1) Appointed as such; 2) Completed probationary period; 3) Appointed

to fill up regular positions due to death, retirement, resignation, or termination of
employment of regular holders thereof
3. Casual Employees: Employed to perform work not related to main line of business.
Employed at least 1 year -> Considered a regular employee

G. Termination of Project Employees: If termination is brought about by completion of the contract

or phase of the contract, no prior notice is required. In case of dismissal, employer shall include the
same in its Monthly report on Employees’ Terminations/Dismissals/Suspensions submitted to DOLE
Regional Office

If project employee is terminated before completion of project and without just or authorized cause,
he is entitled to reinstatement with backwages to his former position or to a substantially equivalent
position. If reinstatement is no longer possible, employee is entitled to salaries of unexpired portion
of agreement

V. Seasonal Employees

Seasonal Employees: perform work or service that is seasonal in nature or whose employment is for
the duration of the season.

Example is harvest of palay, but if employer is mainly into milling operations, employees engaged
are not seasonal, but regular employees. It is a fact that big rice mills continue to operate and do
business throughout the year even if there are only 2 or 3 harvest seasons per year. It is also a
common practice for farmers and rice dealers to store their palay and have them milled as the need
arises.

A. When a Seasonal Employee Acquires Status of A Regular Employee: When seasonal employees
are repeatedly re-employed by employer every season, they are considered regular seasonal
employees. During off-seasons, they are not considered as separated from service, but rather on a
leave of absence w/o pay until they are re-employed

Employment relationship, during off-seasons, is not terminated, but only suspended. During
temporary lay-off, employees are considered free to seek other employment.

B. Termination of Seasonal Employees: Hired only for the duration of the season. Hence, their
services are terminated at the end of the season.

VI. Probationary Employees

Probationary Employees: Those who are on trial by an employer during which the employer
determines whether they are qualified for regular employment.

Probationary Period: trial period where employer observes fitness, propriety and efficiency of a
probationary employee to ascertain whether he is qualified for regular employment in accordance
with standards made known by employer to employee at the time of his engagement.

For probationary employee’s part, he seeks to prove to the employer that he has the qualifications
to meet reasonable standards for regular employment

A. Period of Probationary Employment: Labor Code authorizes different probationary periods based
on requirements of the particular job. Probationary Period is period required to learn a skill, trade,
occupation or profession. After expiration, probationary earns the status of a regular employee.

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B. General Probationary Period: General probationary period of 6 months, but actually, it is the
period needed to determine the employee’s fitness for the job (period needed to learn the job)

Case 34: International Catholic Migration Commission v. NLRC and Galang

Facts:

 ICMC= non-profit organization dedicated to refugee service.

o Engaged service of Bernadette on January 24, 1983 as probationary Cultural
Orientation Teacher w/ monthly salary of P2,000.
 After 3 months (April 22, 1983), Bernadette was informed that her service were being
terminated for failure to meet prescribed standards of ICMC reflected in performance
evaluation of her supervisors.
o Despite this, Bernadette did not leave ICMC refugee camp, but instead stayed for a
few days before leaving for Manila
 ICMC allegedly observed Bernadette to be acting strangely
 July 24, 1983, Bernadette returned to Bataan on board service bus of ICMC
o To accomplish clearance requirements.
o In the evening, found at Freedom Park, wet and shivering from the rain and acting
strangely
 Taken to ICMC’s hospital to be taken care of
o 2 days later, taken to her residence in Manila aboard ICMC’s service bus
 Father expressed appreciation through letter to ICMC for taking care of his daughter
o Father also received proportionate amount of Bernadette’s 13th month pay and
equivalent of her two week pay.
o Bernadette filed complaint for illegal dismissal and unpaid wages
 LA dismissed complaint for illegal dismissal, but ordered ICMC to pay Bernadette sum of
P6,000 represent last 3 months of agreed employment period
o ICMC countered Bernadette is not entitled to award of salary of unexpired 3-month
portion of probationary period since services were terminated during such period
for not meeting requirements of ICMC to qualify as a regular employee
o Unjust enrichment would occur

Decision:

 Bernadette was terminated during probationary period for failure to qualify as regular
member of ICMC’s teaching staff in accordance w/ reasonable standards.
 Probationary employee, according to Article 281 of Labor Code, is on trial by employer and is
made to afford employer an opportunity to observe fitness of a probationer.
o Used to describe period of employment, but not its length.
 Gives ample authority to employer to terminate a probationary employee for a just cause for
when he fails to qualify as a regular employee.
o Nothing in Article 281 that would preclude employer from extending regular or
permanent appointment to employee once employer finds that he is qualified for a
regular employment even before end of such probationary period
o Likewise, terminate employee before end of such probationary period
 There was no showing that there was circumvention of rights of Bernadette
o Dismissal was not arbitrary, fanciful, whimsical
o Duly notified, orally and in writing that her services were terminated
o A legitimate exercise of its prerogative to select whom to hire or refuse employment

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o Bernadette failed to show that there was unlawful discrimination

 Grave abuse of discretion to order ICMC to pay Bernadette her salary for unexpired 3-month
portion when she was validly terminated during her probationary employment

C. Probationary Period of an Apprecinteable and Learnable Job: If job is apprenticeable,

Probationary period is the apprenticeship period which may be 6>x>6, depending on nature of job.
Upon graduation, apprentice may not be put under probationary employment in company where he
trained. In another company, another six months is allowed to allow employer to test his working
habits.

If job is learnable, if it can be learned within 3 months or less, the learner, upon completion of
learning period, must be considered a regular employee.

D. Probationary Period of Professors, Instructors, and Teachers: For private school, period of
probation is 3 consecutive years of satisfactory service.

E. Extension of General Probationary Period: Occurs when parties to an employment contract agree
to a longer probationary period. May occur in two instances:

1. Stipulation in original contract of employment

2. Extension agreed upon at or prior to the expiration of the 6-month period

1. Stipulation in original contract of employment: Parties may agree to a probationary period longer
than 6 months, when same is established by company policy or is require by nature of work to be
performed by employee (learning a particular kind of work or skill)

Case 35: Buiser et al. v Hon. Leogardo and General Telephone Directory, Co.

Facts:

 Sales Representatives employed by GTDC

o Solicit advertisements for inclusion in telephone directory
o Entered employment contracts (on probationary status) w/ GTDC
 Provision that employee employed as telephone representative on
probationary status for period of 18 months
o GTDC also prescribed sales quotas to be accomplished by Sales Representatives
 Failure to meet = Dismissal
 Sales Representatives were dismissed and subsequently filed complaint for illegal dismissal
o Under Labor Code, for having served GTDC continuously for 6 months, they have
automatically become regular employees notwithstanding an agreement to the
contrary
o Only exception being apprenticeship and learnership agreements

Decision:

 Generally, probationary period of employment is 6 months.

o Exception is when parties to an employment contract agree otherwise, such as when
same is established in company policy or when same is required by nature of work
performed by employee
o Latter case, exercise of management prerogative in requiring a longer period of
probationary employment
 Probationary period is actually the period needed to determine fitness for the job

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o Used to protect worker and at the same time, allow employer make meaningful
employee selection
 In the case at bar, shows GTDC needs at least 18 months to determine character and selling
capabilities of Sales Representatives. Publication of solicited ads are only made a year after
the sales has been made and only then will the company be able to evaluate efficiency of
sales representatives.

2. Extension agreed upon at or prior to the Expiration of the 6-month period: When employee fails
to qualify as a regular employee during the expiration of the 6-month period, he may terminate his
services or he may jointly agree with employee to extend period of probation (second chance)

Must be done at or prior to expiration of 6-month probationary period. Otherwise, employee will
automatically become a regular employee by operation of law. If still fail to meet standards of
employer during extension, cannot claim to have acquired status of regular employment on account
of his continued employment after 6-month probationary period

Case 36: Mariwasa Manufacturing, Inc. and Dazo v. Hon Leogardo and Dequila

Facts:

 Joaquin hired on probation by Mariwasa

o General Utility Worker on January 10, 1979.
 Upon expiration, Joaquin was informed that his work proved unsatisfactory and failed to
meet required standards
o Mariwasa, instead of dispensing with Joaquin’s services, extended his period with his
written consent for another 3 months from July 10, 1979 – October 9, 1979.
o Performance did not improve and Joaquin was terminated at end of extended
period
o Filed action for illegal dismissal

Decision:

 Generally, probationary period of employment is limited to 6 months except when parties

agree otherwise in employment contract, established in company policy or required by
nature of work to be performed by employee
 Extension of Joaquin’s probation was ex gratia (act of liberality on part of employer to afford
him a 2nd chance)
o Cannot be unjustly turned against employer’s account to compel it to keep on its
payroll one who could not perform according to its work standards
 By voluntarily agreeing to extension of probationary period, Joaquin waived any benefit
attaching to completion of said period if he still failed to make grade during period of
extension

F. When a Probationary Employee Acquires Status as a Regular Employee: Generally, probationary

period shall not exceed 6 months. Means that employee on probationary period may be dismissed

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for cause anytime before expiration of 6 months after hiring. If he continues to be employed for
longer than 6 months, cease to be probationary employee and becomes a regular employee.

When no standards for regular employment were made at the time of his engagement, he shall be
deemed a regular employee

G. Acquisition of Regular Status Before the Expiration of the 6-Month Probationary Period: It is not
employment for a definite period of time. Therefore, employer not bound to allow probationary
employee to work until termination of probationary status before granting regular status. Hence, he
may extend regular status even before expiration. If purpose sought by employer is neither attained
nor attainable with said period, law does not likewise preclude employer from terminating the
probationary employment on justified causes.

H. Termination of Probationary Employees: Sufficient that a written notice is served the employee
within a reasonable time from the effective date of termination

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Case 38 BERNARDINO LABAYOG, et al.v.M.Y. SAN BISCUITS INC., MEW WAH LIM

FACTS:

 On various dates in 1992, petitioners entered into contracts of employment for respondent
as mixers, packers and machine operators for a fixed period. Upon the expiration of these
contracts, their services were terminated. Each executed a quitclaim
 In April 1993, they filed complaints for illegal dismissal, underpayment of wages,
nonpayment of overtime, night differential, 13thmonth pay, damages and attorney’s fees.-
 The LA ruled their dismissal as illegal on the ground that they had become regular
employees who performed duties necessary to the business. Reinstatement with backwages,
13thmonth pay and incentive leave pay were granted.
 NLRC set aside the decision of the LA on the ground that they knew that their employment
was only for a fixed period. MR was denied.
 The CA reinstated the decision of the LA, but upon MR, the CA reversed itself on the ground
that, while the services were necessary to the business, the contracts providing a term were
valid and were dealt by the respondent in good faith.

ISSUES: W/N petitioners had become regular employees despite the fixed period in the contracts.

RULING:
 The petition is DENIED for lack of merit.
 Where the duties of an employee consist of activities necessary to the usual business, the
parties are not prohibited from agreeing on the duration. Art. 280 which defines regular and
casual employment does not prohibit an employment contract with a fixed period, provided
it is not intended to circumvent security of tenure.
 Two criteria validate a contract of employment with a fixed period (1) the period was
knowingly and voluntarily agreed upon by the parties (no force, duress, improper pressure)
OR (2) it satisfactorily appears that the parties dealt with each other on equal terms (no
moral dominance). Using these criteria, the contracts in this case are VALID. Petitioners
knew from the beginning of the fixed date. By expressing their acceptance, they bound
themselves to the terms of the contract.

Case 39: Dumpit-Murillo vs. CA

Facts:

 Murillo was hired under a talent contract, as a newscaster and co-anchor for ABC’s early
evening news program. The contract was for a period of three months. It was renewed
fifteen times within four years. Upon the expiration of her last talent contract, she informed
ABC of her desire to renew. Not having received a reply, she considered the company’s
inaction as constructive dismissal of her services.

Held:

 Murillo was not a fixed term employee.

 An employer-employee relationship was created when the private respondents started to
merely renew the contracts repeatedly fifteen times or for four consecutive years.
 Petitioner was a regular employee.

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o The practice of having fixed-term contracts in the industry does not automatically
make all talent contracts valid and compliant with labor law.
o In the case at bar, it does not appear that the employer and employee dealt with
each other on equal terms.
 Being one of the numerous newscasters/broadcasters of ABC and desiring to
keep her job as a broadcasting practitioner, petitioner was left with no
choice but to affix her signature of conformity on each renewal of her
contract as already prepared by private respondents; otherwise, private
respondents would have simply refused to renew her contract.
 Patently, the petitioner occupied a position of weakness vis-à-vis the
employer.
o Moreover, private respondents’ practice of repeatedly extending petitioner’s 3-
month contract for four years is a circumvention of the acquisition of regular status.
 Hence, there was no valid fixed-term employment between petitioner and private
respondents.
 Murillo was a regular employee
o The assertion that a talent contract exists does not necessarily prevent a regular
employment status.
 Petitioner’s work was necessary or desirable in the usual business or trade of the employer
which includes, as a pre-condition for its enfranchisement, its participation in the
government’s news and public information dissemination.
 In addition, her work was continuous for a period of four years. This repeated engagement
under contract of hire is indicative of the necessity and desirability of the petitioner’s work
in private respondent ABC’s business.

Chapter 3: Conditions of Employment and Leave Benefits under Special Laws

I. Scope of Title

Article 82. Coverage: Provision of this title shall apply to employees in all establishments (profit &
non-profit), but not to government employees, managerial employees, field personnel, members
of the family of employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by Secretary of
Labor in appropriate regulations

Managerial employees: primary duty consists of management of 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

Title I. Working Conditions and Rest Periods (Art. 82-96) refers to ff. employment benefits:

1. Normal hours of work

2. Meal periods
3. Rest periods
4. Night-shift differential
5. Overtime pay
6. Weekly rest day

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7. Holiday pay
8. Service incentive leave
9. Service charges

A. Excluded Employees:

1. Government employees
2. Managerial employees
3. Officers and members of the managerial staff
4. Field personnel
5. Employer’s family members
6. Domestic helpers and persons in the personal service of another
7. Workers paid by results

1. Additional Excluded Employees for Night-Shift Differential. Employees of retail and service
establishment regularly employing not more than 5 workers are not entitled to night-shift
differential

Retail Establishment: principally engaged in the sale of goods to end-users for personal or
household use

Service Establishment: primarily engaged in the sale of service to individuals for their own use or for
household use

2. Additional Excluded Employees for Holiday Pay. Employees of retail and service establishments
regularly employing less than 10 workers are not entitled to regular holiday pay

3. Additional Excluded Employees for Service Incentive Leave.

1. Employees who are already enjoying benefit of 5 days service incentive leave with pay
2. Employees enjoying vacation leave with pay of at least 5 days
3. Employees of retail and service establishments regularly employing less than 10 workers
4. Employees in establishments exempted from granting service incentive leave by the
Secretary of Labor and Employment (Labor Secretary) after considering the viability and
financial condition of establishment not entitled to service incentive leave

B. Definitions

1. Government Employees: those employed by the National Government or any of its political
subdivisions (including government-owned and controlled corporations)

2. Managerial Employees: primary duty consists of management of establishment, or a department

or subdivision of establishment in which they are employed, including other officers or members of
the managerial staff

Must meet the ff. conditions:

1. Primary duty consists of management of establishment in which they are employed or of a

department or subdivision of the establishment
2. Customarily and regularly direct the work of 2 or more employees in the establishment, or a
department or subdivision of the establishment
3. Have authority to hire and fire employees of lower rank; or their suggestions and
recommendations as to hiring and firing, or the promotion or any other change of status of
other employees, is given particular weight

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Case 39: Clientlogic Philippines (now SITEL) et al. v. Castro

Facts:

 Benedict employed by SITEL as Call Center Agent

o After 6 months, promoted to “Mentor” position, thereafter to “Coach” position
 October 11, 2006, received notice to why he should not be penalized
o Violating company policy when he accessed customer’s online account for direct
deposit
o Abusing discretion when requesting for medical records of team members
o Justified actions by saying that customer begged him to do so (no computer or
Internet access), merely requested for patient tracker, not medical records
 January 22, 2007, SITEL posted notice of vacancy for Benedict’s position and terminated him
o Filed complaint for illegal dismissal, non-payment of overtime pay, rest day pay,
holiday pay and service incentive leave pay

Decision:

 No illegal dismissal, issue is whether as Team Supervisor, Benedict was a member of the
managerial staff, and hence exempt from claims
 Labor Code defines managerial employee as “one who is vested w/ 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 recommend such actions
o Benedict’s duties do not fall under any of the categories
 Main duty is to deal with customer complaints
 Test of “supervisory” or “managerial status” depends on whether person possesses
authority to act in interest of employer and such authority is not merely routinary or clerical
in nature, but requires use of independent judgement
 Benedict failed to hurdle this test and there was no showing that he was actually exercising
the duties attributable to a member of the managerial staff
 Benedict IS entitled to his claims

3. Officers or Members of the Managerial Staff: refers to those who perform

 Their primary duty consists of performance of work directly related to management policies
of their employer
 Regularly exercise discretion and independent judgement
 Regularly and directly assist a proprietor or a managerial employee, Execute under general
supervision work along specialized lines requiring special training, experience or knowledge,
Execute, under general supervision, special assignments and task
 Do not devote more than 20% of hours worked in work week to activities not directly or
closely related to performance of work in paragraphs (I),(II),(III)

Case 40: National Sugar Refineries Corporation v. NLRC

Facts:

 NASURFECO (gov’t owned and controlled) operates 3 sugar refineries (Bukidnon, Iloilo,
Batangas)
 NSBR Supervisory Union represents 20 former supervisors (Union Members)

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 NASURFECO implemented Job Evaluation program which resulted in re-evaluation of

positions, salary adjustments, benefit increases to Union Members
o Re-classified under S-5 to S-8 which are considered managerial staff
 Earning 50% increase in basic pay
 Two years after implementation of JE program, Union Members filed a complainant for non-
payment of overtime, rest day, holiday pay

Decision:

 Issue is whether supervisory employees should be considers as officers or members of

managerial staff
 Not disputed that Union Members are supervisory employees (recommend managerial
actions, not merely routinary or clerical and requires independent judgement)
 NASURFECO posits they should be considered as officers r members of managerial staff
o They are under direct supervision of respective respective department
superintendents
o Assist in planning, organizing, staffing, directing, controlling, communicating, and
making decisions to attain company’ set gals and objective
 Duties include
o Training and guiding subordinate
o Conduction semi-annual performance evaluation
o Represent superintendent
o Communicating with other supervisors
o Recommending disciplinary actions/promotions
o Recommending measures to improve work methods, performance
o Supervising activities of all personnel under them
 They are members of managerial staff and ARE exempt from claims

4. Field Personnel: non-agricultural employees that regularly perform duties away from principal
place of business or branch office of employer and actual hours of work in the field cannot be
determined with reasonable certainty

Case 41: Auto Bus Transport Systems, Inc. v. Bautista

Facts:

 Antonio employed by Autobus

 On January 3, 2000, bus accidently bumped rear portion of Autobus No. 124
o Latter vehicle stopped at a sharp curve w/o giving warning
 Antonio averred accident happened because compelled by Autobus to drive back to Isabela,
although he had not slept for 24 hours
 Alleged that he was not allowed to work until he fully paid amount of P75,551.50
representing 30% of the cost of repair
 Management ignored his pleas for reconsideration and terminated him
o Filed complaint for illegal dismissal, with money claims for nonpayment of 13th
month pay and service incentive leave
 Illegal dismissal was dismissed due to Antonio’s employment was full of
offenses involving reckless imprudence, gross negligence, and dishonesty
 Autobus was ordered to pay him service incentive leave

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Decision:

 Whether Antonio was entitled to service incentive leave pay

 Field personnel refers to non-agricultural employees who regularly perform their duties
away from principal place of business and actual hours cannot be determined
o If required to be in specific places at specific times, cannot be said to be field
personnel despite performing work away from principal office
o Should not be supervised by employer
 Necessary to see if actual hours of work can be determined with reasonable certainty by
employer and whether time and performance are supervised
 In bus transport industry, inspectors assigned at strategic place who board the bus, inspect
passengers, punch tickets and conduct reports
 Once-a-week car barn or shop day
o Bus is checked for its mechanical, electrical, and hydraulic aspects
 Every depot, there is dispatcher whose function to see that bus and its crew leave premises
at specific times and arrived at estimated proper time
 Antonio was under constant supervision and cannot be considered as field personnel
o Entitled to grant or service incentive leave

5. Employer’s Family Members: refers to family of employer dependent of employer for support

6. Domestic Helpers and Persons in the Personal Service: refers to those who perform services in
employer’s home which are usually necessary or desirable for maintenance and enjoyment of home,
minister to personal comfort, safety of employer and members of his household

Case 42: Ultra Villa Food Haus and/or Tio v. Geniston

Facts:

 Renato alleged he was employed as do-it-all guy in Ultra Villa which was owned by Rosie
 During 1992 May elections, Renato acted as Poll watcher
o Counting of votes lasted from 3PM until next day
 Renato did not report for work on both days and Rosie was forced to hire another driver to
replace him
 Renato prayed for overtime pay, premium pay, holiday pay, service incentive leave pay,
salary differential, 13th month pay as well as reinstatement plus backwages after realizing he
has been dismissed
 Rosie maintained Renato was personal driver and not employee of Ultra Villa
o Required to report for work at 7AM to drive her to Mandaue City where she worked
o Given free meals, as well as 13th month pay
 Renato denied he was employed as Rosie’s personal driver and he drove for Ultra Villa’s
manager and Rosie on top of his other duties, which were necessary and desirable to Ultra
Villa’s business

Decision:

 Whether Renato was an employee of Ultra Villa or Rosie’s personal driver

 Renato was indeed Rosie’s personal driver
o Renato’s own admission during mandatory conference that he was a personal driver

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o Copies of Ultra Villa’s payroll which do not contain Renato’s name

o Affidavits of Ultra Villa Food Haus employees attesting Renate was never an
employee
 Domestic or household service shall mean services in the employer’s home which are usually
necessary for maintenance and enjoyment thereof, includes ministering to personal comfort
and convenience of members of employer’s household, including services of family drivers
 Rosie is not obliged by law to grant Renato any of these benefits

7. Workers Paid By Result: Refers to those paid on piece-work, takay, pakyaw or task basis and
other non-timed work

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II. Hours of Work

Article 83. Normal Hours of Work: Normal hours of work of any employee shall not exceed 8 hours
a day

Article 84. Hours Worked. Hours shall include:

1. All time during which an employee is required to be on duty or to be at a prescribed

workplace
2. All time during which an employee is suffered or permitted to work

A. What Hours Worked Include. Ff. are considered as compensable hours worked: See Article 84

B. How to Determine Hours Worked. Ff. general principles shall govern in determining whether time
spent by employee is considered hours worked:

1. Hours which employee is required to give his employer, regardless of whether such hours
are spent in productive labor or involve physical or mental exertion
2. Need not leave premises of work place in order that his rest period shall not be counted. It
is enough that he stops working, rest completely, and leave his work place to go elsewhere
(inside or outside of premises of work place)
3. If work is necessary or benefitted the employer or employee could not abandon his work at
the end of his normal working hours because he had no replacement, all time spent shall be
considered as hours worked, if work was with knowledge of employer or supervisor.
4. When employee is inactive by reason of interruptions in his work beyond his control,
considered as working time either if resumption of work requires employee’s presence at
place of work or if interval is too brief to be utilized effectively in employee’s own interest

C. Broken Shifts. Employer and employee may agree on schedule of working hours of employee.
(8am-12nn and 4pm-8pm; 12nn-4pm not counted as working time as he is not required in prescribed
workplace during this 4-hour period)

D. Waiting Time. Considered as working time in ff. instances:

1. Waiting is integral part of work

2. Employee is required or engaged by employer to wait (School bus, hired driver)

E. On-Call Time. When employee is required to remain on-call in employer’s premises or so close to
the premises that he cannot use the time effectively for his own purpose, considered as working on-
call. Employee is not working while on-call when he is not required to leave word at his home or
company officials where he may be reached.

Case 43: San Pedro Hospital Employees Union-FFW v. San Pedro Hospital, Inc.

Facts:

 Union represents 8 employees (Technicians)

o Assignments are at X-ray and Operating Room Departments of San Pedro Hospital
 March 1990, for Ops Room Technicians and May 1990, for X-ray Technicians, duties were
automatically extended to include night duty (11pm-7am shift).
o On top of usual 3pm-11pm shift
o Were required to be on duty for 16 hours straight

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 Required to be at work station to wait for any emergency X-ray and operation during night
shift
o Make themselves on-call by management from 11pm-7am
o Could not use the waiting time gainfully for their own purpose
o Not paid compensation for extended duty of 8 hours
o Filed complaint for money claims
 Technicians argue that on-call duty is working time because they are subjected to
disciplinary measures when they are not at their working stations while in on-call duty.
(Neglect of duty or leaving post w/o permission)
o Technician Roland Banjao was given staff warning for neglect of duty when he took a
snack outside of the hospital’s premises
 Hospital contends that extension of duty was resorted to by management after taking into
consideration unique character of their jobs as technicians and that most of the time, no X-
rays are done from 11pm-7am.
o Further argued that employees, even on-call, are not actually made to work for
entire shift and are not suffered to be awake for the 8 hours

Decision:

 Court rules that the extended duty of 8 hours is considered working time.
o Hours worked are those which requires the employee to give to employer regardless
whether said hours were spent productively or involved physical or mental exertion
o Required to be on-call whether they have work or not and whether there are
hospital patients for X-ray
 Hospital’s contention that Technicians are not made to work for entire shift cannot be
sustained
o Technicians do not actually stop working, being at the Hospital’s beck-and-call
should there be any X-ray case or surgical operation
 Enables them to rest, but not completely because they can be jolted into the
reality of work anytime
o They can’t leave their work station to go elsewhere or risk disciplinary measures
 16 hours are indeed working time as the 11pm-7am shift is necessary and beneficial to the
Hospital

F. Attendance in Lectures, Meetings, or Training Programs. Shall not be counted as working time if
ff. conditions are met:

1. Attendance is outside of employee’s regular working hours

2. Attendance is voluntary
3. Employee does not perform any productive work during such attendance

Meetings conducted by employees to organize themselves to form a union is not working time.
Outing and training is not working time as well

III. Meal Period

Article 85. Meal Periods. Duty of employer to give employees not less than 60 minutes time-off for
regular meals

Meal period or meal break: period consisting of 60 minutes (1hr) time-off given by employers to
employee for their regular meals. 1hr break is not considered breaking time

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A. When Meal Period is Compensable. Meal period of not less than 20 minutes may be given by
employer in ff. cases provided that such shorter meal period is credited as compensable hours
worked.

1. Work is non-manual work in nature or does not involve strenuous physical exertion
2. Establishment operates not less than 16 hours per day
3. Emergencies/urgent work to be performed on machineries, equipment to avoid serious loss
4. Work is necessary to prevent serious loss of perishable goods

B. Where Meals May Be Taken. Employees are not prohibited from leaving the premises as long as
they return to their posts on time

Case 44: Philippine Airlines, Inc v. NLRC

Facts:

 Dr. Herminio employed as Flight Surgeon at PAL.

o PAL Medical Clinic at Nichols from 4pm-12mn
 Feb. 17, 1994, at around 7pm, Dr. Herminio left clinic to have dinner at his residence (5-
minute drive away)
o Few minutes later, clinic received emergency call from PAL Cargo Services
 Employee Manuel had a heart attack
o Nurse on duty called Dr. Herminio at home to inform of emergency and Manuel
arrived at the clinic 7:50pm and nurse rushed him to the hospital
o Dr. Herminio reached the clinic at around 7:51pm, nurse already left with Manuel
who died the following day.
 PAL Medical Director ordered an investigation
o Dr. Herminio asserted he was entitled to 30-minute meal break and that he
immediately left his residence upon being informed about the emergency
o Nurse panicked and brought Manuel to hospital w/o waiting for him
 PAL charged Dr. Herminio with abandonment of post and suspended him for 3 months
o Dr. Herminio filed complaint for illegal suspension.
o PAL argues that being a full-time employee, Dr. Herminio is required to stay in the
company premises for not less than 8 hours even during breaks

Decision:

 Labor Code states normal hours of work shall not exceed 8 hours of work a day and shall
give employees not less than 60 minutes time-off for regular meals
o Does not include meal break
 Nowhere in the law states that employees must take their meals within company premises
o Dr. Herminio’s act of going home does not constitute abandonment of post while on
duty

IV. Rest Periods

Article 84. Hours Worked. Rest periods of short duration during working shall be counted as hours
worked

Rest periods or coffee breaks are periods of short duration (5-20 minutes) during working hours are
considered as compensable working time

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V. Night Shift Differential

Article 86. Night-Shift Differential. Every employee shall be paid a night-shift differential of not less
than 10% of regular wage for each hour of work performed between 10pm-6am

NIGHT SHIFT DIFFERENTIAL PAY: Regularly Hour Rate x 110%

B. Rationale for Night-Shift Differential. Paid for work done during the graveyard shift because
employee must contend with night work inconveniences and disadvantages (disarrangement of
social life, loss of recreation or activities for leisure, ordinary association of normal family relations,
work time’s adverse effect upon efficiency and output, injurious effect on his health) consonant w/
common saying among wage-earning people that night was made for rest and sleep, and not for
work.

VI. Overtime Pay

Article 87. Overtime Work. Work may be performed beyond 8 hours a day provided that employee
is paid for overtime work. (RHR x 125%) or for work performed beyond 8 hours a day on a
holiday/rest day (HRR/H x 130%)

Article 88. Undertime Not Offset by Overtime. Undertime shall not be compensated by an overtime
on another day. Permission given to employee to go on leave shall not exempt employer from
paying additional compensation

Article 89. Emergency Overtime Work. Any employee may be required by the employer to perform
overtime work in any of the ff. cases

1. Country is at war and national and local emergency has been declared by National
Assembly or the Chief Executive
2. Necessary to prevent loss of life or property or in case of imminent danger to public safety
(accidents, fire, flood, and other disaster or calamity)
3. Urgent work on machines, installations in order to avoid serious loss
4. Work is necessary to prevent loss or damage to perishable goods
5. Completion or continuation of work started before eight hours is necessary to prevent
obstruction or prejudice to the business or operations of employer
6. Any employee required to render overtime work under the Article shall be paid additional
compensation

Article 90. Computation of Additional Compensation. Regular wage of employee shall include the
cash wage only, w/o deduction on account of facilities provided by employer

1. Overtime on Regular Working Day

a. RHR x 125%
2. Overtime on Rest Day/Holiday
a. HRR/H x 130%
3. Overtime with Night-Shift Differential
a. RHR x 137.5%

B. Undertime Not Offset by Overtime. Applies only to undertime incurred and overtime work
rendered in different days because employer would be deprived of additional pay for overtime work
rendered. (Ex. Employee late for 30 minute on regular working day and rendered work until 7pm on
same day is entitled only to 1 and ½ hours of overtime pay.

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C. Compulsory Overtime Work. Employee is required for overtime work when:

1. When country is at war

2. Necessary to prevent loss of life or property or danger to public safety
3. Urgent work performed on machines, installations, and equipment
4. Necessary to prevent loss or damage to perishable goods
5. Prevent serious obstruction to business or operations of employer
6. Necessary to avail favorable weather or environment conditions, where performance or
quality of work is dependent thereon

D. Rationale of Overtime Pay. Employee who works beyond regular working hours is entitled to
overtime pay because effect on him is multi-faceted: more effort, physical and/or mental, delayed
in going home and enjoy comforts thereof; no time for relaxation; miss important pre-arranged
arrangements

Added amount serves as either encouragement or inducement to make up for things that employee
loses or adverse effects of his longer stay in the workplace

E. When Meal Period Is Considered Overtime. When during meal period, employee is required to
stand by for emergency work on it is not one of complete rest, considered as overtime

1. Employee required to stand by for emergency work and if unavailable, reprimanded by

supervisor
2. Employee is called from meals or told to hurry eating to perform work during meal period

Case 45: Pan American World Airways System (Philippines) v. Pan American Employees
Association

Facts:

 Pan American appeals decision of Court

o Ordered overtime compensation due to 14 aircraft mechanics and 2 employees form
Communication Department.
o Claims that 1-hour meal period should not be considered as overtime work (after
deducting 15 minutes as time allotted for eating) because employees could rest
completely and were not under the control of company during meal period

Decision:

 Court determined that during the so-called meal period, mechanics were required to stand
by for emergency work
o If they were unavailable, they were reprimanded by the leadman
 On many occasions, mechanics had been called from their meals or told to hurry up eating
to perform work during this period
 Meal period was not one of complete rest. Hence, employees are entitled to overtime pay

VII. Weekly Rest Period

Article 91. Right to Weekly Rest Day

1. Duty of employer, whether operating for profit or not, to provide employees rest period of
not less than 24 consecutive hours after 6 consecutive normal work days

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2. Employer shall determine and schedule weekly rest day of employees subject to CBA and
rules as the Secretary of Labor and Employment may provide. Employee shall respect
preference of employees as to their weekly rest day when such preference is based on
religious grounds

Article 92. When Employer May Require Work on a Rest Day.

1. Impending emergencies to prevent loss of life, property or danger to public safety

2. Urgent work performed on machineries, installations, equipment to prevent serious loss
3. Abnormal pressure of work due to special circumstances, employer cannot ordinarily be
expected to resort to other measures
4. Prevent loss or damage to perishable goods
5. Nature of work requires continuous operations and stoppage of work may result in
irreparable injury or loss to employer
6. Circumstances analogous or similar to foregoing determined by Secretary of Labor and
Employment

Article 93. Compensation for Rest Day, Sunday or Holiday Work

1. Paid additional 30% of his Regular wage. Such compensation applies to Sunday when it is his
established rest day
2. When nature of work of employee is such that he has no regular workdays and no regular
rest days, paid additional 30% of regular wage performed on Sundays and Holidays
3. Special holiday -> 30% of regular wage. When holiday falls on employee’s rest day -> 50% of
regular wage
4. Where CBA stipulates payment of higher premium pay than that prescribe under this article,
employer shall pay such higher rate

Weekly Rest Period or Rest Day: Period not less than 24 consecutive hours or 1 day after every 6
consecutive normal work days

Determination of Weekly Rest Day and Preference of Employee. Employee shall make known his
rest day to employer in writing at least 7 days from desired effectivity of initial rest day preferred. In
case of rest day based on religious ground and will result in serious prejudice or obstruction to
employer, may schedule weekly rest day chosen by employee for at least 2 days a month

Example: INC request Thursday be his rest day. Employer follows employee’s preferred rest day for 2
weeks and employee follows employer’s preferred rest day for 2 weeks

C. Compulsory Work on a Rest Day. See article 92 + work is necessary to avail of favorable weather
and performance or quality of work is dependent thereon

When employee volunteers to work on rest day in circumstances other than those mentioned above
for compulsory work, express desire in writing and given additional compensation for work done in
rest day

D. Rest Day Pay Rates

1. Rest Day Pay: RDR x 130%

2. Overtime on Rest Day: RHR x 169% or (130% + 30% of 130%)
3. Overtime on Rest Day on Graveyard Shift (10pm-6am): RHR x 185.9% or (169%+10% of
169%)

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E. Exception to the 48-Hour Workweek. Normal workweek is 48 hours. However, establishment

may have a 40-hour workweek in ff. cases

1. Agreement between employer and employee

a. Saturday is not usually a rest day, but may agree upon a Monday-Friday workweek.
b. Under this agreement, employee is entitled to overtime work when working on a
Saturday
2. Health personnel are involved

Article 83. Normal Hours of Work. Health personnel in cities and municipalities w/ population of at
least 1,000,000 or in hospitals with bed capacity of 100 shall hold regular office hours of 8 hours a
day for 5 days a week, exclusive of time for meals, except where exigencies of service require that
such personnel work for 6 days or 48 hours, in which case, they are entitled to additional
compensation 30%. (Includes resident physicians, nurses, nutritionists, dieticians, pharmacists, social
workers, lab technicians, paramedical technicians, psychologists, midwives, attendants and all other
hospital or clinic personnel.

Compared to other employees, health clinic personnel are overworked despite the fact that their
duties are more delicate in nature.

Case 46: San Juan de Dios Hospital Employees Association v. NLRC and San Juan de Dios Hospital

Facts:

 Rank-and-file employees-union officers and members of San Juan De Dios Hospital

Employees Association sent to San Juan de Dios Hospital
o Letter dated July 8, 1991 requesting for expeditious implementation and payment
by the Hospital of “40-Hour/5-Day Workweek” under RA 5901 entitled “An Act
Prescribing Forty Hours a Week of Labor for Government and Private Hospitals or
Clinic Personnel”
 PI 54 dated April 12, 1988: Entitled to full weekly wage for 7 days if they
completed 40-hour/5-day workweek.
 Hospital maintains PI 54 proceeds from wrong interpretation of RA 5901 and
Article 83 of Labor Code

Decision:

 Article 83 provides that regular office hours of health personnel is 8 hours a day, 5 days a
week.
o Where exigencies of service require health personnel to work for 6 days or 48 hrs,
such personnel is entitled to an additional compensation of at least 30% of regular
wage for work on the 6th day
o Nothing in Article 83 that supports assertion that health personnel are entitled to
full weekly wage for 7 days if they completed 40-hour/5-day work-week in any given
work week
 Purpose of RA 5901 is to shorten working hours of health personnel and not to dole out 2
days off with pay.
o Making them work longer than necessary may endanger, rather than protect, the
health of their patients

F. Compressed Workweek. Compressed Workweek Scheme (CWW) is arrangement between

employer and employees whereby normal workweek is reduced to less than 6 days, but total

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number of hours per week is still 48 hours. Normal workday increased to more than 8 hours w/o
corresponding overtime premium.

1. Objectives: 1) Promote business competitiveness and productivity, lower operating costs

and reduce work-related expenses of employees; 2) Give employers and workers flexibility in
working hours compatible with business requirements and employees’ need for a balanced
work life; 3) Ensure safety and health of employees at workplace
2. Conditions: 1) CWW is undertaken as result of express and voluntary agreement of majority
of covered employees; 2) In firms using substances, there must be a certification from an
accredited health and safety organization or practitioner or from the firm’s safety
committee that work beyond 8 hours is within threshold limits or tolerable levels of
exposure as set in the Occupation Safety and Health Standards; 3) Employer shall notify
DOLE of the adoption of the CWW scheme
3. Effects: 1) Unless there is a more favorable existing practice in the firm, work beyond 8
hours will not be compensable by overtime premium, provided total work hours per day
does not exceed 12 hours; 2) Entitled to meal periods not less than 60 minutes; 3) Shall not
result in diminution of existing benefits. Reversion is allowable provided that employers give
employees reasonable prior notice of such reversin

VII. Regular Holiday Pay

Article 94: Right to Holiday Pay

1. Every worker shall be paid in his regular daily wage during regular holidays, except in retail
and service establishments regularly employing less than 10 workers
2. Employer may require employee to work on any holiday, but such employee shall be paid a
compensation equivalent to twice his regular rate
3. “Holiday” includes: New Year, Maundy Thursday, Good Friday, April 9 (Araw ng Kagitingan),
May 1 (Labor Day), June 12 (Independence Day), July 4 , November 30 (Bonifacio Day),
December 25 (Christmas Day) and 30 (Rizal Day), and day designated by law for holding a
general election

A. Compensation During Regular Holiday: Entitled to holiday pay during regular holidays even if he
does not work on these regular holidays

1. Effect of Absence of an Employee the Day Before the Regular Holiday.

 All covered employees shall be entitled to regular holiday pay if he is on leave of absence
with pay.
 Employee on leave of absence with pay the day before the regular holiday is not entitled to
regular holiday pay if he does not work during the regular holiday.
 When the day before the regular holiday is a non-working day in the establishment or is the
scheduled rest day of the employee, he shall not be considered as being on leave of absence
on that day.
 He shall be entitled to holiday pay, if he works on the day immediately preceding the non-
working day or rest day.

2. Effect of Absence of An Employee Before Successive Regular Holidays

 Where there are 2 successive regular holidays (Holy Thursday and Good Friday), an
employee may not be paid for both holidays if he absents himself from work on the day
immediately preceding the 1st holiday.

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 However, if the employee works on the 1st holiday, he is entitled to his holiday pay on the
2nd holiday

3. Effect of Temporary or Periodic Shutdown and the Temporary Cessation of Work.

 In cases of such as these (yearly inventory, repair, or cleaning of machineries and equipment
is undertaken), regular holidays falling within the period shall be compensated.
 However, the regular holidays during the cessation of operation of an enterprise due to
business reverses as authorized by the Labor Secretary may not be paid by the employer

B. Holiday Pay of Certain Employees

1. Private school teachers, including faculty members of colleges and universities, may not be
paid for regular holidays during semestral vacations. However, they shall be paid for the
regular holidays during Christmas vacation
2. Covered employee paid by results (payment on piece work), holiday pay shall not be less
than his average daily earnings for the last 7 actual working days preceding the regular
holiday provided that holiday pay is at least the applicable statutory minimum wage rate
3. Seasonal workers may not be paid holiday during off-season when they are not at work
4. Workers who have no regular working day shall be entitled to benefits provided under the
Omnibus Rules

C. Regular Holiday Falling on Rest Days or Sundays

1. Regular holiday falling on rest day shall be compensated accordingly

2. Regular holiday falls on Sunday, following day shall be considered a special holiday for
purposes of the Labor Code, unless said day is also a regular holiday. If the following day is
considered a special holiday and the employee works on that day, he shall be entitled to
payment for work done on a special holiday

D. Regular Holiday Pay Rates

1. Unworked Regular Holiday: RDR x 100%

2. Worked Regular Holiday: RDR x 200%
3. Overtime Work on a Regular Holiday: RHR x 260% (200%+30% of 200%)
4. Overtime on a Regular Holiday Rendered between 10pm to 6am: RHR x 286%

E. Worked Regular Holiday-Rest Day Rates

1. Regular Holiday-Rest Day Pay (Employee who works on regular holiday + rest day): RHR x
260% (HRRH 200%+30% of 200%)
2. Overtime Work on a Regular Holiday-Rest Day: RHR x 338% (HRRH 260%+ 30% of 260%)
3. Rate for Overtime Work Rendered between 10pm to 6am: RHR x 371.8% (338% +10% of
338%)

F. Double Holiday Rates: 2 regular holidays fall on the same day

1. Unworked Double Holiday: RDR x 200%

2. Worked Double Holiday: RDR x 300%
3. Overtime Work on a Double Holiday RHR x 390% (300% + 30% of 300%)
4. Overtime Work on a Double Holiday Rendered between 10pm to 6am: RHR x 429% (390% +
10% of 390%)

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G. Double Holiday-Rest Day Rate

1. Double Regular Holiday-Rest Day Pay: RDR x 390% (Double Holiday Rate of 300%+ 30% of
300%)
2. Overtime Work on a Double Holiday-Rest Day: RHR x 507% (Hourly Rate on Double-Holiday
Rest Day of 390% + 30% of 390%)
3. Overtime Work Rendered between 10pm to 6am on a Double Holiday-Rest Day: RHR x
557.7% (507% + 10% of 507%)

IX. Special Holiday Pay

Article 93. Compensation for Rest Day, Sunday or Holiday Work. Work performed on any special
holiday shall be paid an additional compensation of at least 30% of the regular wage of the
employee. Where such holiday work falls on employee’s scheduled rest day, he shall be entitled to
an additional compensation of at least 50% of his regular wage

Special Holidays are: All Saint’s Day (November 1), Last day of the Year (December 31); and Ninoy
Aquino Day (August 21

A. Compensation during Special Holidays: No work, no pay applies to special holidays.

B. Special Holiday Pay Rates

1. Special Holiday Pay: RDR x 130%

2. Overtime Work on A Special Holiday: RHR x 169% (130% + 30% of 130%)

3. Overtime Work on A Special Holiday Rendered between 10pm to 6am: RHR x 185.9% (169% + 10%
of 169%)

C. Special Holiday-Rest Day Rates

1. Special Holiday-Rest Day Pay: RDR x 150%

2. Overtime Work on Special Holiday-Rest Day: RHR x 195% (150% + 30% of 150%)

3. Overtime Work on Special Holiday-Rest Day Rendered between 10pm to 6am: RHR x 214.5%
(195% + 10% of 195%)

Regular Working Day 100%

Nigh Shift Differential 110%
Overtime Regular 125%
Night Shift 137.5%
Rest Day Regular 130%
OT 169%
OT+ Night Shift 185.9%
Regular Holiday Unworked 100%
Worked 200%
OT 260%
OT+ Night Shift 286%
Regular Holiday-Rest Day Normal 260%
OT 338%
OT+ Night Shift 371.8%
Double Holiday Unworked 200%
Worked 300%

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OT 390%
OT+ Night Shift 429%
Double Holiday-Rest Day Normal 390%
OT 507%
OT+ Night Shift 557.7%
Special Holiday Normal 130%
OT 169%
OT+ Night Shift 185.9%
Special Holiday-Rest Day Normal 150%
OT 195%
OT+ Night Shift 214.5%

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X. Service Incentive Leave

Article 95. Rights to Service Incentive Leave

 Employee that rendered 1 year of service is entitled to yearly service incentive leave of 5
days w/pay
 Does not apply to those already enjoying benefit herein provided, those enjoying vacation
leave w/ pay of at least 5 days & those employed in establishments regularly employing
less than 10 employees or in establishments exempted from granting this benefit by
Secretary of Labor & Employment after considering viability or financial condition of such
establishment
 Grant of benefit in excess -> NOT subject of arbitration in any court or administrative actions

Service Incentive Leave: 5-days leave w/pay granted to employees that rendered at least 1 year of
service

A. Meaning of One (1) Year of Service. Service for not less than 12 months, whether continuous or
broken reckoned from date the employee started working (includes authorized absences, paid
regular holidays) unless working days as a matter of practice or policy or provided in employment
contract is less than 12 months, in which case, period = 1 year

 Does not provide pro-rata (proportional) application for those that rendered less than 1
year
o Serving 6 months =/= 2 ½ days of Service Incentive Leave

B. Rationale for Service Incentive Leave. Afford laborer chance to get much needed rest to
replenish worn-out energies & acquire new vitality to effectively perform duties. Also applicable to
vacation leave

C. Commutation of Service Incentive Leave to its Cash Equivalent. Commutable to cash equivalent
if not used or exhausted at the end of the year

D. Vacation Leave & Sick Leave Benefits. NO LAW granting vacation leave & sick leave benefits.
Instead, these are granted by employer through employment contract or CBA. If establish as
company practice, cannot be diminished or withdrawn based on principle of non-diminution of
benefits.

XI. Service Charges

Article 96. Service Charges. All Service Charges collected by hotel, restaurant, & similar
establishments are distributed at rate of 85% for all covered employees & 15% for management.
85% -> equally distributed. In case SC is abolished, share of covered employees integrated in wages.

All employees, except managerial (vested with power 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), of establishments collecting SC
(hotel, restaurant, lodging houses, etc.) including those operating primarily as private subsidiaries
of government shall be entitled to Service Charges.

A. Distribution of Service Charge. Employee -> 85%, Management -> 15% (Answer for losses &
breakages & can be distributed to managerial employees at discretion of management)

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B. Integration of Service Charges. In case SC are abolished, share of covered employees considered
integrated in their wages. Amount to be integrated shall be average monthly share of each
employee for past 12 months immediately preceding the abolition or withdrawal of SC’s.

XII. Leave Benefits Under Special Laws

A. Maternity Leave (RA 1161, as amended by RA 8282)

B. Paternity Leave (RA 8187)

Paternity Leave Act of 1996 enacted to enable husband to effectively render support, care and
assistance to his wife in her period of recovery and/or in the nursing of the newly born child.
Recognition of vital role of the husband in assisting the wife during post-delivery condition

 RA 8187. “Act Granting Paternity Leave of 7 Days with Full Pay to All Married Male
Employees in the Private and Public Sectors for the First Four Deliveries of the Legitimate
Spouse with Whom He is Cohabiting and for Other Purposes” (Paternity Leave Act of 1996)
promulgated on June 11, 1996 and took effect on July 5, 1996
 The Implementing Rules and Regulations of RA 8187 for the Private Sector was promulgated
on August 5, 1996, retroactive to July 5, 1996
 The Revised Implementing Rules and Regulations of RA 8187 for the Private Sector (“Revised
IRR”) was promulgated on March 13, 1997, also retroactive to July 5, 1996
 The rules on paternity leave of employees in the public sector shall be in accordance with
the rules promulgated by the Civil Service Commission

1. Conditions for Entitlement to Paternity Leave Benefit. Married male employee in private sector
entitled to paternity leave benefits of 7 days with full pay for the first 4 deliveries by his lawful
spouse.

 Employee at the time of delivery of his child

 Cohabiting with spouse at the time she gives birth or suffers a miscarriage
 Applied for paternity leave with his employer within a reasonable period of time from
expected date of delivery by the pregnant spouse, or with the period provided by the
company rules and regulations or by the CBA
o In case of miscarriage, prior application for leave shall not be required
 Wife has given birth or has suffered a miscarriage

2. Availment of Paternity Leave Benefit. Granted to qualified employee after his wife’s delivery.
Employer may allow employee to avail of benefit before or during the delivery, provided that the
total number of days shall not exceed 7 days for each delivery.

3. Paternity Benefit Not Commutable to Cash. Employee is entitled to full pay, consisting of a basic
salary, for 7 days during which he is not allowed to report for work, provided his pay is at least the
mandated minimum wage. In the even employee does not avail of the paternity leave benefit,
leave shall not be convertible to cash.

4. Non-Diminution of Benefits. Paternity benefits provided by the Paternity Leave Act are minimum
benefits and cannot be construed to reduce or replace existing benefits of any kind that are
granted under existing laws, decrees, EO’s or any contract, agreement, or policy between the
employer and employee.

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If employee is already enjoying paternity leave benefits by reason of contract, company policy, or
CBA, ff. rules shall apply:

1. If existing paternity leave benefit is greater than the benefit provided by the Paternity Leave
Act, greater benefit shall prevail
2. If existing paternity leave benefit is less than that provided in the Paternity Leave Act, the
existing benefit shall be adjusted to the extent of the difference
a. However, where contract, company policy, or CBA provides for an emergency or
contingency leave w/o specific provision on paternity leave, paternity under
Paternity Leave Act shall apply in full

5. Penalty for Violation. Penalized by a fine not exceeding P25,000 or by imprisonment of not less
than 30 days nor more than 6 months. If committed by corporation, trust or firm, partnership,
association or any other entity, penalty of imprisonment shall be impose on entity’s responsible
officers, including but not limited to, president, vice president, CEO, general manager, managing
director, or partner directly responsible therefore.

C. Paternity Leave for Solo Parents

RA 8972, “The Solo Parents’ Welfare Act of 2000,” which was approved on November 7, 2000 was
enacted because of the recognition of the State that solo parents singly bear parental burden and
that they have special needs that must be addressed by the State. General welfare of solo parents is
addressed by providing them benefits.

1. Definition of Solo Parent. Individual who falls under any of the ff. categories:

1. Woman who gives birth as a result of rape and other crimes against chastity w/o a final
conviction of the offender; provided mother keeps and raises the child
2. Parent left solo or alone w/ responsibility of parenthood due to death of the spouse
3. Parent left solo or alone w/ responsibility of parenthood while spouse is detained or serving
sentence for criminal conviction for at least 1 year
4. Parent left solo or alone w/ responsibility of parenthood due to physical and/or mental
incapacity of spouse as certified by a public medical practitioner
5. Parent left solo or alone w/ responsibility of parenthood due to legal separation or de facto
separation from spouse for at least 1 year, as long as parent is entrusted with the custody
of the children
6. Parent left solo or alone w/ responsibility of parenthood due to declaration of nullity or
annulment of marriage as decreed by a court, or by a church, as long as parent is entrusted
with the custody of the children
7. Parent left solo or alone w/ responsibility of parenthood due to abandonment of the spouse
for at least 1 year
8. Unmarried mother/father who has preferred to keep and rear her/his child/children
instead of having others care for them or give them up to a welfare institution
9. Any other person who solely provides parental care and support to a child or children
10. Any family member who assumes responsibility of head of family as a result of death,
abandonment, disappearance or prolonged absence of the parents or solo parent.

2. Flexible Work Schedule. Employer shall provide for a flexible working schedule for solo parents,
provided same shall not affect individuals and company productivity that employer may request
exemption from the above requirements from DOLE on certain meritorious grounds.

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3. Work Discrimination. One of the benefits provided to solo parents under RA 8972 is the
prohibition against discrimination against a solo parent w/ respect to terms and conditions of
employment on account of his/her status.

Case 47: Dela Cueva v. Omaga

Facts:

 Julie legal wife of P/Supt. Nestor

o Married 1984, and bore 3 children
 Couple separated in 1994 due to Nestor’s philandering ways
o Filed annulment in May 2007
 Prompted Julie to file administrative complaint against him and Selima
(Court Stenographer of the Municipal Trial Court in Calauan)
 Selina averred that she first met Nest in 1995, when he was assigned
by PNP as Chief of Police in Calauan, Laguna
 Relationship started in March 1995 and continued until she received
notice of bigamy and concubinage case filed against her by Julie
 Only then that she discovered that he was married.
o Despite having 3 children with Nestor, they did not live
together and he only visited her from time to time
 Docketed as a regular administrative matter, recommended that Selima be absolved from
any administrative liability because of ff. facts:
o Selima and Nestor began relationship after he was already separated in fact from
Julie
o Selima and Nestor never lived together in one house
o No evidence to contradict Selima’s claim that during their relationship she did not
know Nestor was married
o Selima’s performance as Court Stenographer was not adversely affected by her
situation
o Selima has properly reared her children and conducted herself in public
appropriately

Issue: Whether Selima is guilty of immoral conduct

Decision:

 Well-established principle that public office is a public trust

o Employees of judiciary are subject to a higher standard than most other civil
servants
 Conduct must be free from any whiff of impropriety, not only with respect
to their duties in the judicial branch, but also as private individuals
 Court held that act of having sexual relations w/ a married persons, or of married persons
having sexual relations outside their marriage is considered disgraceful and immoral conduct
o Manifest deliberate disregard by the actor of the marital vows protected by the
Constitution and our laws.
o Especially egregious if committed by judicial personnel
 Persons specifically tasked w/ administration of justice and laws of the land
o Malevolent intent is not present of employee is unaware that his/her sexual partner
is married

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 Selima claims that she had no knowledge that Nestor was married
o Ended relationship as soon as she was made aware of his true civil status
 Julie did not refute this defense
 In absence of clear and convincing evidence, insensitive to condemn Selima for simply being
an unmarried mother of three.
o No showing she has lived her life in a scandalous and disgraceful manner
o Speculate that she did would be tantamount to committing a discrimination against
a solo parent, prohibited under Section 7 of RA 8972, the Solo Parent’s Welfare Act
of 2000

4. Parental Leave. In addition to leave privileges under existing laws, parental leave of not more
than 7 working days every year shall be granted to any solo parent employee who has rendered
service of at least 1 year.

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Chapter 4: Wages, Benefits, and Bonuses

I. Wages

Article 97. Definitions. As used in this Title

1. Person: individual, partnership, association, corporation, business trust, legal

representatives, or any organized group of persons.
2. Employer: any person acting directly 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
as non-profit private institutions, or organizations
3. Employee: includes any individual employed by an employer
4. Agriculture: farming in all its branches and among other things (cultivation, tillage of soil,
dairying, production, cultivation, growing, and harvesting of any agricultural and
horticultural commodities, raising of livestock or poultry, and any practices performed by a
farmer on a farm as an incident to or in conjunction with such farming operations, but does
not include the manufacturing or processing of sugar, coconuts, abaca, tobacco, pineapples
or other farm products.
5. Employ: includes to suffer or permit to work
6. Wage: paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered and includes the fair and
reasonable value, as determined by the Secretary of Labor and Employment, of board,
lodging, or other facilities customarily furnished by the employer to the employee.

Article 98. Application of Title: This Title shall not apply to farm tenancy or leasehold, domestic
service and persons working in their respective homes in needle work or in any cottage industry duly
registered in accordance with law.

A. Coverage. Rules on wages shall not apply to the ff.

1. Tenants of a farm tenancy or leasehold

2. Domestic helpers and persons in the personal service of another, including family drivers
3. Persons working in their respective homes in needle work (handicrafts) or in any cottage
industry duly registered in accordance with law
4. Employees engaged in any establishment duly registered with the National Cottage
Industries and Development Authority (NACIDA)
5. Employees of any duly registered cooperative when recommended by the Bureau of
Cooperative Development and approved by the Labor Secretary

B. Definition of Wage. Refers remuneration payable by an employer for services rendered or to be

rendered by an employee. May be fixed or paid on basis of results or time expended on the work.
Payment by result is a method of compensation and not a basis for determining the existence or
absence of employer-employee relationship. One acquires an employment status if the elements of
an employer-employee relationship are present.

C. Wage Includes Facilities But Not Supplements. Facilities include articles or services for the benefit
of the employee or his family. Shall not include tools of trade or articles or services primarily for the

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benefit of the employer or necessary to the conduct of the employer’s business. Value of facilities
can be deducted from wage to be paid to employee. However, employer should not gain profit from
the deduction of the value of the facilities provided to the employee.

1. Requirements for the Deduction of the Cost of Facilities from Wages. Employer should comply
with the ff.

1. Proof must be shown that such facilities are customarily furnished by the trade
2. Provision of deductible facilities must be voluntarily accepted in writing by the employee
3. Facilities must be charged at fair and reasonable values

2. Supplement Distinguished from Facility. Supplement is a benefit or privilege given to employee

which constitutes extra remuneration over and above his basic earnings. However, if benefit or
privilege forms part of the employee’s basic wage, then it is a facility. Does not refer to kind of
benefit or item, but its purpose.

Benefit or privilege granted to an employee for the employer’s convenience is not a facility. Food
and lodging, electricity and water consumed by hotel workers that are required to work at different
shifts and are expected to be available at various odd hours are not facilities but supplements.

Importance of making a distinction: Cost of facilities can be deducted from employee’s wage,
supplement is extra remuneration and cannot be deducted from employee’s wage.

Case 48: SLL International Cables Specialist and Lagon v. NLRC et al.

Facts:

 Cable/Linemen hired by Sonny as Apprentices/Trainees and paid full minimum wage and
other benefits
o After training, engaged as project employees by SLL and Sonny 4 more times starting
on March 15, 1997.
 4th project was in Caloocan City with Furukawa Corporation as the general
contractor
o Hired on May 21, 1999 and expired on February 28, 2000 (period of completion of
project)
 From May 21, 1997 – December 1999, Cable/Linemen received daily wage of
P145. (Minimum wage for Manila was P198)
 From January to February 28, 2000, Cable/Linemen received daily wage of
P165. Existing rate at the time was P213.
 For reasons of delay on delivery of imported materials from Furukawa Corporation, project
was not completed on scheduled date of completion
o Sonny was constrained to cut down the overtime work of its workers, including
Cable/Linemen.
 Filed complaint for illegal dismissal and money claims, including payment of
wages
 Employers claimed they were only project employees as their services were merely engaged
for a specific project or undertaking and the same were covered by contracts duly signed by
them.
o Further added that the food allowance of P63 per day, as well as Cable/Linemen’s
allowance for lodging, transportation, electricity, water, and snacks should be added
to their basic pay.

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 W/ these facilities, value of which should be included in the computation of

wages received by Cable/Linemen, they received a higher wage rate than
that prescribed in Rizal and Manila.

Decision:

 DOLE Memorandum Circular No. 2 provides

o Employer may provide subsidized meals and snacks to employees provided that
subsidy is not less than 30% of fair and reasonable values of such facilities. In such
cases, employer may deduct from the wages of the employees not more than 70%
of the value of the meals and snacks enjoyed by the latter, provided that such
deduction is with the written authorization of the employees concerned
 Before value of facilities can be deducted
o Such facilities are customarily furnished by the trade
o Voluntarily accepted in writing by the employee
o Charged at reasonable value
 Mere availment is not sufficient to allow deductions from employee’s wages
o SLL failed to present any company policy showing provisions for meals and lodging
were part of the employee’s salaries.
o Failed to provide proof of employees’ written authorization and how they arrived at
their valuations

D. Bonus. Amount paid to an employee for his industry and loyalty which contributed to the success
of employer’s business and made possible realization of profits. Act of generosity of employer for
which the employee should be thankful and grateful. Granted by enlightened employer to spur the
employee too greater efforts for the success of the business and realization of bigger profits.

Recipient cannot demand as matter of right as a bonus is something given in addition to what is
ordinarily received by or strictly due the recipient

1. Bonus Is A Management Prerogative. Cannot be forced upon the employer who may not obliged
to assume the onerous burden of granting bonuses. Not demandable and enforceable obligation
however, where the bonus is made part of the wage, demandable.

Case 49: Protacio v. Laya Mananghaya & Co. and/or Mananghaya

Facts:

 KPMG is general professional partnership duly organized under laws of the Philippines.
o Hired Zayber as Tax Manager on April 1, 1996.
 Promoted to position of Senior Tax Manager, and again promoted to the
position of Tax Principal on October 1, 1997
 August 30, 1999, Zayber tendered his resignation effective September 30, 1999.
o Fled complaint for non-payment of monetary benefits, including lump sum pay for
fiscal year 1999 in the amount of P674, 756.70.
 When he was promoted to position of Tax Principal, compensation package
included lump sum payment for the year 1997 in the amount of P270,000
that was paid to him on February 8, 1998.
 On April 12, 1999, Zayber received the lump sum amount of P573,000 for
fiscal year ending 1998.

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 Labor Arbiter and NLRC ruled that Zayber was entitled to a year-end payment of P573,000
on the basis of company policy of granting yearly lump sum payments to him during all the
years of service, and that KPMG failed to give Zayber the same benefit for the year 1999 w/o
any explanation.
 CA reversed this and held that while the lump sum payment was in the nature of a
proportionate share in KPMG’s annual income to which Zayber was entitled, the payment
thereof was contingent upon KPMG’s financial position

Decision:

 Aside from basic monthly compensation, Zaybe received a yearly lump sum amount, which
was referred to as his “share in the incentive compensation program” during the first 2 years
of his employment, with the payments made to him after KPMG’s annual net incomes had
been determined
o Amounts varied and were dependent on KPMG’s cash position and financial
performance
 Although amount was drawn from KPMG’s annual net income, distribution was not a profit-
sharing arrangement between Zayber and KPMG.
o Discretionary on the part of the Chairman and Managing Partner
 Considered as year-end bonus or incentive
 Zayber’s claim that year-end lump sum represented the balance of his total compensation
package was incorrect
o Fact that amounts paid to him on 2 occasions varied and dependent upon KPMG’s
financial position
 Settled that bonus is paid only if profits are realized or certain amount of
productivity is achieved.
 Bonus does not accrue when desired goal of production is not obtained
o Bonus only becomes part of wage when employer promises and agrees to give
bonus w/o any conditions imposed for its payment

2. When Bonus May Be Considered Part of the Wage. Considered as part of wage in ff. instances:

1. Additional compensation which the employer promised and agreed to give w/o any
conditions imposed for its payment
2. When granting of bonus becomes company policy by reason of its long and regular
concession (non-diminution of benefits)

When 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, and therefore not part of wage.

Case 50: Eastern Telecommunication Philippines, Inc. v. Eastern Telecoms Employees Union

Facts:

 ETPI engaged in business of providing telecom facilities, leasing international date lines or
circuits, regular landlines, internet and data services.
o Union is certified exclusive bargaining agent of company’s rank-and-file employees
 Has existing CBA w/ ETPI to expire in year 2004, w/ side agreement
confirming payment of 14th, 15th, and 16th month pay (Subject bonuses),
signed on September 3, 2001
 ETPI planned to defer payment of 2003 subject bonuses sometime in April 2004

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o Subject to availability of funds

 Due to continuing deterioration of financial position which started in year
2000.
 Union opposed deferred payment of bonuses
o ETPI consistently gives out bonuses from 1975-2002, even if it did not realize any net
profits.
 Ripened into company practice
 Confirmed in side agreements of 1998-2001 and 2001-2004 CBA’s which
provided continuous grant w/o conditions.
 Not only a company practice, but also a contractual obligation of
ETPI under CBA
 ETPI averred that subject bonuses were not part of legally demandable wage
o Act of gratuity and generosity on its part and depends on financial performance
o Requiring company to pay subject bonuses penalizes company for its past generosity
 ETPI argued that bonus provision of 2001-2004 CBA only a “one-time” grant which
employees may demand only during the year when the Side Agreement was executed.
o Not intended to cover entire term of CBA

Decision:

 Bonus
o Gratuity or act of liberality of giver which the recipient has no right to demand as a
matter of right
o Becomes demandable when made part of wage or salary or compensation of
employee
 Considered as part of wage when
o Promised to give w/o any conditions
o When paid only if profits are realized, cannot be considered as part of wage
o When payable not to all but some employees, inducement for efficiency, and not
part of wage
 Reading of Side Agreement
o No conditions specified for grant of benefits contrary to claim of ETPI
o Does not state: No profits, no bonuses are to be given
o Becomes a contractual obligation
 ETPI aware of its deteriorating financial condition when it entered 2001-2004 CBA
o Suffering losses from 2000-2002, business losses for 2003 was not unexpected
 Giving of bonus established as company practice
o Gave employees subject bonuses from 1975-2002
 Considerable length of time indicates unilateral and voluntary act on its part
o Ripened into benefits enjoyed by the employees

E. 13th Month Pay

1. 13th Month Pay Law

 13th Month Pay Law enacted on December 16, 1975

o Employers required to pay all their employees receiving a basic salary of not more
than P1000 a month, regardless of nature of employment
o Not later than December 24 of every year.
 Modified by MO 28 issued on August 13, 1986

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o Removed P1000 salary ceiling

o Required to pay all rank-and-file employees 13th month pay provided they worked
for at least 1 month during calendar year

2. Employees Entitled to 13th Month Pay.

 Rank and file employee vs Managerial employee

o Vested w/ powers and prerogatives to lay down and execute management policies,
hire, transfer, suspend, lay-off, recall, discharge, assign, or discipline employees or
whose recommendation is given particular weight

3. Non-Diminution of Benefits. If managerial employees enjoy the 13th month pay either by
agreement or established company practice, benefit may not be eliminated.

When 13th month pay equivalent to more than what is required, cannot be reduced.

Case 51: Central Azucarera de Tarlac v. Central Azucarera de Tarlac Labor

Facts:

 CAT engaged in business of sugar manufacturing

o Union serves exclusive bargaining representative of CAT’s rank-and-file employees
 Controversy stems from interpretation of “basic pay”, essential in computation of 13th
month pay
 CAT, in compliance w/ PD 851, granting 13th month pay since 1975
o Total Basic Salary / 12
o Total Basic Annual Salary: Basic monthly salary; first 8 hours overtime pay on Sunday
and legal/special holiday; night premium pay; and vacation and sick leaves for each
year.
o Used this computation until 2006
 December 2006, CAT gave employees 13th month pay based on employee’s total earnings
during the year / 12
o Union objected as CAT did not adhere to usual computation of 13th month pay
o Did not observe company practice of giving employees guaranteed amount
equivalent to their 1 month pay when 13th month pay was less than their basic
monthly pay
 CAT explained this was due to rectify an error in computation
o Concept of basic pay should have included only basic monthly pay of employees
o Discovered by Management only when Union raised a question concerning
computation of employees’ 13th month pay for 2006

Decision:

 13th month pay represents additional incomes based on wage, but not part of wage
o 1/12 of total basic salary earned by employee w/in a calendar year
o PD 851 defines basic salary as: including all earnings paid by employer to employee
for services rendered but may not include cost-of-living allowance, profit-sharing
payments, and all allowances and monetary benefits which are not considered as
part of basic salary of employee
 November 16, 1987, Revised Guidelines on Implementation of 13th Month Pay Law was
issued

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o Minimum 13th month pay not less than 1/12 of total basic salary earned by
employee within a calendar year
 Basic salary includes all remuneration paid by employer for services
rendered but not include allowances and monetary benefits which are not
integrated as part of basic salary
 CAT’s practice of giving 13th month pay based on employee’s gross annual earnings (basic
monthly salary, premium pay for work on rest days and special holidays, NSD pay, holiday
pay) continued for 30 years
o Ripened into company practice and cannot be unilaterally withdrawn
 Cannot use argument of suffering from financial losses
o Must have been authorized by Labor Secretary

4. Exempt Employers. Ff. employers are exempt from payment of 13th month pay:

1. Government-owned and controlled corporations, except those corporations operating

essential as private subsidiaries of government
2. Employers already paying employees 13th month pay or more in calendar year or its
equivalent at the time of the issuance of the 13th month pay law
3. Employers of household helpers and persons in the personal service of another in relation to
such employee
4. Employees paid purely on commission boundary or task basis, or those who are paid a fixed
amount for performing specific work, irrespective of time consumed in performance of the
work
a. When employees are paid on a fixed-rate basis, they are entitled to 13th month pay

4.1 The Equivalent of 13th month pay: May be in the following forms:

1. Christmas bonus
2. Midyear bonus
3. Cash bonuses
4. Other payments amounting to not less than 1/12 of basic salary

Does not include cash and stock dividends, cost-of-living-allowances, and all other allowances
regularly enjoyed by employees as well as non-monetary benefits. When employer pays less than
1/12 of employee’s basic salary, employer pays the difference

4.2 Rationale for the Exemption of Employers Giving the Equivalent of 13th Month Pay

 Uniformly provide low-paid employees additional income because salary for 12 months
were grossly inadequate to meet expenses for day-to-day subsistence
 Wants to avoid double burden upon employer who already pays equivalent of 13th month
pay

5. Amount for 13th Month Pay. Not less than 1/12 of total basic monthly salary earned by employee
within a calendar year

Basic salary shall include: all remunerations paid by employer for services rendered. Does not
include allowance and monetary benefits not considered part of nor integrated w/ basic salary such
as cash equivalent of unused vacation and sick leaves, overtime, premium, NSD and holiday pay, and
COLA’s. If these are treated as basic salary because of agreement or company practice, included in
computation of 13th month pay

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6. Time of Payment of 13th Month Pay. Not later than December 24 of each year. May give ½ of 13th
month pay before opening of regular school year and other ½ on or before December 24 of each
year. Frequency may be subject of an agreement between employer and recognized bargaining
agent of employees.

7. The 13th Month Pay of A Resigned of Terminated Employee. Employee who resigned or was
terminated before time of payment of 13th month pay is entitled to his monetary benefit in
proportion to length of time that he worked during the calendar year, computed from the time he
started working during the calendar year – time of his resignation/termination

May be demanded upon termination. Consistence w/ equity principle that as employer can require
employee to clear himself of all the liabilities and property accountability.

II. Payment of Wages

A. Forms of Payment

Article 102. Forms of Payment. No employer shall pay the wages of an employee by means of
promissory notes, vouchers, coupons, tokens, tickets, chits, or any object other than legal tender,
even when expressly requested by the employee.

Payment of wages by check or money order shall be allowed when such manner of payment 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 Secretary of Labor and Employment or as
stipulated in CBA.

1. Payment of Wages by Checks. Bank checks, postal checks, or money orders are allowed where
such manner of wage payment is customary on date of effectivity of Labor Code, stipulated in CBA,
or where all ff. conditions are met:

1. There is a bank or other facility for encashment w/in a radius of one kilometer from the
workplace
2. Employer of any of his agents or representatives does not receive any pecuniary benefit
directly or indirectly from the arrangement
3. Employees are given reasonable time during banking hours to withdraw their wages from
the bank, which time, if done during working hours, shall be considered as compensable
hours worked
4. Payment of check is with the written consent of the employees concerned, if there is no CBA
authorizing the payment of wages by bank checks.

2. Payment of Wages by ATM. Employer may adopt system of payment other than in workplace
such as through Automated Teller Machine (ATM) of banks provided ff. conditions are met:

1. ATM system of payment is with written consent of all employees concerned

2. Employees are given reasonable time to withdraw their wages from the bank facility, which
time, if done during working hours, shall be considered as compensable hours worked
3. System shall allow employees to receive their wage at least once every two weeks
4. There is a bank or ATM facility within a radius of one kilometer from the place of work
5. Upon request of concerned employee, employer shall issue record of payment of wages,
benefits, or deductions for a particular period
6. No additional expenses and no diminution of benefits and privileges as a result of the ATM
system of payment

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7. Employer shall assume responsibility in case wage protection provisions of the law and
regulations are not complied with under the agreement.

B. Time of Payment. Wages shall be paid at least once every 2 weeks or 2x a month at intervals not
exceeding 16 days. If on account of force majeure (unforeseeable circumstance that would prevent
completion of obligation), payment of wages on or within the time herein provided cannot be made,
the employer shall pay wages immediately after such force majeure or circumstances have ceased.
No employer shall make payment w/ less frequency than once a month.

Payment of wages of employees engaged to perform a task which cannot be completed in 2 weeks
shall be subject to the ff. conditions when CBA is absent:

1. Payment are made at intervals not exceeding 16 days, in proportion to amount of work
completed
2. Final settlement is made upon completion of work

Article 110. Worker Preference in Case of Bankruptcy. In the event of bankruptcy or liquidation of
an employer’s business, his workers shall enjoy first preference as regards their wages and other
monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before claims of the government and other creditors may be
paid.

C. Payment of Wages for Task Worker. Cannot be completed in 2 weeks paid intervals not
exceeding 16 days, in proportion to amount of work completed. Final settlement is made upon
completion of work.

D. Place of Payment

Article 104. Place of Payment. Payment of wages shall be made at or near the place of undertaking,
except as otherwise provided by such regulations as the Secretary of Labor and Employment may
prescribe under conditions to ensure greater protection of wages.

Payment in a place other than workplace shall be permissible under the ff. circumstances:

1. When payment cannot be effected at or near the place of work by reason of the
deterioration of peace and order conditions, or by reason of actual or impending
emergencies caused by fire, floods, epidemic, or other calamity rendering payment at the
workplace impossible.
2. Where employer provides free transportation to employees, to and from place of payment
of wages
3. Under any analogous circumstances.

Time spent of employee collecting their wages shall be considered as compensable hours worked.

E. Prohibition against the Payment of Wages in Bars and Nightclubs. No employer shall pay his
employees in any bar, night or day club, drinking establishment, massage clinic, dance hall, or other
similar places, or on places where games are played with money or items representing money at
stake, except in case of persons employed in said places.

F. Direct Payment of Wages to Employees

Article 105. Direct Payment of Wages. Wages shall be paid directly to workers to whom they are
due, except:

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1. In cases of force majeure rendering such payment impossible or under other special
circumstances to be determined by the Secretary of Labor and Employment in appropriate
regulations, in which case, the worker may be paid through another person under written
authority given by the worker for the purpose
2. Where the worker has died, employer pay wages of deceased worker to the heirs of the
latter w/o necessity of intestate proceedings. Claimants, if they are all of age, shall execute
an affidavit attesting to their relationship to the deceased and the fact that they are his
heirs, to the exclusion of all other persons. If any of the heirs is a minor, the affidavit shall be
executed on his behalf by his natural guardian or next-of-kin.

Affidavit shall be presented to employer who shall make payment through the Secretary of
labor and Employment or his representative. The representative of the Secretary of Labor and
Employment shall act as referee in dividing the amount paid among the heirs. Payment of wages
under this Article shall absolve the employer of any further liability w/ respect to the amount paid

Paid directly to employees to whom they are due, except in the ff. circumstances:

1. Employer is authorized in writing by the employee to pay his wages to a member of the
family
2. Payment to another person of any part of employee’s wages is authorized by existing law
(including payments for insurance premiums of employee and union dues where the right to
check-off has been recognized by the employer in accordance w/ a collective agreement or
authorized in writing by the individual employees concerned)
3. Employee has died, employer may pay wages of deceased workers to the heirs of the
employee w/o the necessity of intestate proceedings

G. Prohibitions regarding Wages

Article 112. Non-Interference in Disposal of Wages. No employer shall limit or otherwise interfere
w/ the freedom of any employee to dispose of his wages. He shall not in any manner force, compel,
or oblige his employees to purchase merchandise, commodities or other property from any other
person, or otherwise make use of any store or services of such employer or any other person

Article 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:

1. Cases where worker insured w/ 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
3. In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor and Employment

Article 114. Deposits for Loss or Damage. No employer shall require his worker to make deposits
from which deductions shall be made for the reimbursement of loss of or damage to tools,
materials, or equipment supplied by the employer, except when the employer is engaged in such
trades, occupations or business where the practice of making deductions or requiring deposits is a
recognized one, or is necessary or desirable as determined by the Secretary of Labor and
Employment in appropriate rules and regulations.

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Article 115. Limitations. No deduction from the deposits of an employee for the actual amount of
the loss or damage shall be made unless the employee has been heard thereon, and his
responsibility has been clearly shown.

Article 116. Withholding of Wages and Kickbacks Prohibited. It shall be unlawful for any person,
directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up
any part of his wages by force, stealth, intimidation, threat, or by any other means whatsoever w/o
the worker’s consent.

Article 117. Deduction to Ensure Employment. Unlawful to make any deduction from wages of any
employee for the benefit of employer or his representative or intermediary as consideration of a
promise of employment or retention in employment.

Article 118. Retaliatory Measures. Unlawful for employer to refuse to pay or reduce wages and
benefits, discharge or in any manner discriminate against any employee who has filed any complaint
or instituted any proceeding under this Title or has testified or is about to testify in such
proceedings.

Article 119. False Reporting. Unlawful for any person to make any statement, report, or record filed
or kept pursuant to the provisions of this Code knowing such statement, report, or record to be false
in any material respect.

Prohibited Acts of Employers:

1. Interference in the disposal of wages

2. Wage deduction
3. Demanding deposits for future potential loss or damage
4. Withholding wages and kickbacks
5. Effecting deductions to ensure employment
6. Inflicting retaliatory measures
7. False reporting

1. Interference in the Disposal of Wages. Cannot limit or interfere w/ the freedom of any employee
to dispose of his wages. Employer cannot force, compel, or oblige employees to purchase
merchandise, commodities or other property from him or to patronize any store or avail of any
services offered by any person.

2. Wage Deduction. Employer cannot, in his own behalf or in behalf of any other person, make any
deduction from wages of his employee except in the ff. circumstances:

1. When employee is insured by employer w/ consent of employee and deduction is to

reimburse employer for the amount paid by him as a premium on the insurance
2. For union dues, when right of employee or his union to check-off has been recognized by the
employer, or the individual employee concerned has made an authorization in writing
3. When the deductions are w/ the written authorization of the employees for payment to a 3rd
person and employer agrees to do so. However, employer should not receive any pecuniary
benefit from the transaction
4. When deductions are for a demandable debt due the employer

3. Making Deposits for Loss or Damage. Employer cannot required his employees to make deposits
from which deductions shall be made for the reimbursement of loss or damage to tools, materials or
equipment supplied by the employer. However when the employer is engaged in a trade, occupation

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or business where the practice of making deductions or requiring deposits is recognized to answer
for the reimbursement of loss or damage to tools, materials, and equipment supplied by the
employer to the employee, employer may effect wage deductions or require the employees to make
deposits from which deductions shall be made, subject to the ff. conditions.

1. Employee concerned is clearly shown to be responsible for the loss or damage

2. Employee is given reasonable opportunity to show cause why a deduction should not be
made
3. Amount of such deduction is fair and reasonable, and shall not exceed the actual cost of
damage
4. Deduction from the wages of the employee does not exceed 20% of the employee’s wage in
a week

Case 52: Nina Jewelry Manufacturing of Metal Arts, Inc. and Abella v. Montecillo and Trinidad

Facts:

 Madeline and Liza were employed as Goldsmiths by Nina Jewelry in 1996 and 1994,
respectively.
o Madeline’s weekly rate was P1500, Liza was P2500
 Incidents of theft involving its goldsmiths, Nina Jewelry imposed a policy requiring to post
cash bonds or deposits not exceeding 15% of the goldsmith’s salaries/ week
o Intended to answer for any loss or damage Nina Jewelry may sustain by reason of
the goldsmith’s fault or negligence in handling the gold entrusted to them, and shall
be returned upon completion of goldsmith’s work and after an accounting of the
gold received
o Given the option to not post deposits, but to sign authorizations allowing Nina
Jewelry to deduct from their salaries amounts not exceeding 15% of their take home
pay should they lose the gold entrusted to them
 Madeline and Liza refused
o Filed an action for constructive dismissal
 Salary deductions made prior to the occurrence of loss or damage are illegal
and constitute undue interference in worker’s disposal of their wages
 Nina Jewelry contends that the requirement of posting a deposit for loss or damage under
Articles 114 and 115 of Labor Code is a valid exercise of management prerogative
o Does not defined circumstances when the making of deposits is deemed recognized,
necessary or desirable.
o Argues that the intention of the law is for the courts to determine on a case-to-case
basis what should be regarded as recognized, necessary or desirable and to test an
employer’s policy of requiring deposit on the basis of reasonableness and necessity.

Decision:

 Article 113 of the Labor Code is clear

o 3 exceptions to general rule that no deductions from the employees’ salaries can be
made
 Authorized by law or regulations issued by Labor Secretary to effect the
deductions (applicable exception to this case)
 Generally, deposits for loss is not allowed excepts in cases where employer
is engages in such trades, occupations or business where practice of making

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deposits is a recognized on, or is necessary or desirable as determined by

Labor of Secretary in appropriate rules or regulations
 While employers should be generally be given leeway in their exercise of management
prerogative
o Nina Jewelry failed to prove that their imposition of the new policy upon the
goldsmiths falls under the exceptions
o A statutory construction of the aforecited provision is uncalled for
 Clear as the exceptions
o If interpreted, construed against employer because it imposes additional burden
upon employees.
 Should be first established that making of deductions from the salaries is authorized by the
law, or regulations issued by the Labor Secretary
o Should be proven as a recognized practice in the jewelry manufacturing business.
 Alternative could be that Nina Jewelry could seek determination of Labor Secretary that the
policy is necessary or desirable in the conduct of business

4. Withholding of Wages and Kickbacks. Unlawful for person, directly or indirectly, to withhold any
amount from the wages of employee or induce him to give up any part of his wages by force, stealth,
intimidation, threat, or by any other means without the employee’s consent.

5. Deduction to Ensure Employment. Unlawful for person to make deduction from wages for benefit
of employer, his representative or intermediary, as a consideration of a promise of employment or
retention in employment.

6. Retaliatory Measures. Unlawful for employer to refuse to pay or to reduce wages and benefits,
discharge or discriminate against any employee who has filed any complaint or instituted any
proceedings for payment of wages, or has testified or is about to testify in such proceedings.

7. False Reporting. Unlawful for any person to make any statement, report or record files pursuant
to the provisions of the Labor Code, such as payrolls and time records, knowing that such statement,
report or record is false in any material respect.

H. Effect of Unlawful Withholding of Wages.

Article 111. Attorney’s Fees

1. In cases of unlawful withholding of wages, culpable (deserving blame) party may be assessed
attorney’s fees equivalent to 10% of the amount of wages recovered
2. Unlawful for any person to demand or accept, in any judicial or administrative proceedings
for the recovery of wages, attorney’s fees which exceed 10% of the amount of wages
recovered.

Fees may be deducted from the total amount due the winning party.

Case 53: Baron Republic Theatrical et al. v. Peralta and Aguilar

Facts:

 Normita hired by Baron in 1983 as Ticket Seller

o Promoted as General Manager, salary of P4000/month
 March 14,1993, informed by Baron that services was terminated

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o Not given a reason and filed a case for illegal dismissal w/ claim of reinstatement,
payment of backwages, unpaid salary, 13th month pay, SIL, damages and attorney’s
fees
 Edilberto hired as Electrician/Air-Conditioner Operator at Major in January 1983, salary of
P97/day which was not increased even after statutory minimum salary was increased
o 1997, informed by Major that his employment was terminated
 No explanation and filed a case for illegal dismissal, payment of wage
differential, overtime pay, holiday and rest day pay and SIL pay
 Labor Arbiter awarded attorney’s fees to Edilberto and Normita
o Deleted by NLRC
o CA reinstated award of attorney’s fees holding that Edilberto and Normita were both
forced to litigate in order to protect their rights and interests
 Baron and Major argued that attorney’s fees are due only in cases where complainant is
compelled to litigate and that there must be finding to this effect.
o Totality of evidence does not support claims of Edilberto and Normita that they
were compelled to litigate

Decision:

 In actions for recovery of wages, or when employee is illegally dismissed in bad faith, or
employee was forced to litigate and incur expenses to protect his rights and interest by
reason of unjustified acts of his employer
o Awarded attorney’s fees
 In cases of recover of wages, need not to show that employer acted maliciously when it
withheld wages
o Only show that lawful wages were not paid accordingly
 Normita was denied her 13th month pay and unceremoniously dismissed from employment
w/o due process
o Seek representation for enforcement of her rights and therefore entitled to award of
attorney’s fees.
 Edilberto was illegally terminated from employment and his wages and other benefits were
withheld from him w/o any valid or legal basis
o Compelled to file action for illegal dismissal for recover of lawful wages and incurred
expenses -> Granted award of attorney’s fees.

I. Employer Records

1. Payrolls. Every employer shall pay his employees by means of a payroll where ff. info and data
shall be individually shown:

1. Length of time to be paid

2. Rate of pay/month, week, day, hour or piece
3. Amount due for regular work
4. Amount due for overtime work
5. Deductions made from the wages of employee
6. Amount actually paid

Every employee in payroll shall sign or place his thumbmark at the end of the line opposite his name.
His signature shall be made in ink or his thumbmark placed w/ the use of the regular stamping ink
and pad.

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2. Time Records. Employer shall keep individual time record for all employees, w/ signature or
thumbmark of employee for each daily entry by means of the ff. methods:

1. Through use of bundy clock where employee can punch in his individual card the time of
arrival and departure from work
2. Employment of a time-keeper whose duty is to record employees’ arrivals and departures in
a record book
3. Furnishing employees individually w/ a daily time record form in which they can note the
time of their respective arrivals and departures from work.

3. Entries in the Filling of Time Records. All entries in time books and daily time records shall be
accomplished in ink. All filled-up bundy clock cards, timekeeper’s books and daily time record forms
kept on file in chronological order by the employer, in or about the premises where employee is
employed and open to inspection and verification by the DOLE

4. Time Record of Executives. Managerial employees, officers or members of the managerial staff,
as well as non-agricultural field personnel, are not required to keep individual time records. Record
of daily attendance should be kept and maintained by employer

5. Place of Records. Kept and maintained by employer in or about the premises of the work place.
Main or branch office of the establishment, depending where employees are regularly assigned,
constitutes premises of the workplace.

6. Preservation of Records. Required to keep and maintain for at least 3 years from date of last
entry in records.

III. Minimum Wage and Wage Determination

A. Regional Board and Commission

Article 120. Creation of National Wages and Productivity Commission. There is hereby created a
National Wages and Productivity Commission, hereinafter referred to as the Commission, which
shall be attached to DOLE for policy and program coordination.

Article 121. Powers and Functions of the Commission. Commission shall have the ff. powers and
functions:

1. Act as national consultative and advisory body of the President of the Philippines and
Congress on matters relating to wages, incomes and productivity
2. Formulate policies and guidelines on wages, incomes and productivity improvement at the
enterprise, industry and national levels
3. Prescribe rules and guidelines for determination of appropriate minimum wage and
productivity measures at the regional, provincial, or industry levels
4. Review regional wage levels set by Regional Tripartite Wages and Productivity Boards to
determine if these are in accordance w/ prescribed guidelines and national development
plans
5. Undertake studies, researches and surveys necessary for the attainment of its function and
objectives, and to collect and compile date and periodically disseminate information on
wages and productivity and other related information, including, but not limited to,
employment, cost-of-living, labor costs, investments and returns
6. Review plans and programs of the Regional Tripartite Wages and Productivity Boards to
determine whether these are consistent w/ national development plans

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7. Exercise technical and administrative supervision over the Regional Tripartite Wages and
Productivity Boards
8. To call, from time to time, a national tripartite conference of representatives of government
workers and employers for consideration of measures to promote wage rationalization and
productivity
9. Exercise such powers and functions as may be necessary to implement this Act.

Article 122. Creation of Regional Tripartite Wages and Productivity Boards. There is hereby created
Regional Tripartite Wages and Productivity Boards, hereinafter referred to as Regional Boards, in all
regions, including autonomous regions as may be established by law. The Commission shall
determine the offices/headquarters of the respective Regional Boards.

The Regional Boards shall have the ff. powers and functions in their respective territorial
jurisdictions:

1. To develop plans, programs and projects relative to wages, incomes and productivity
improvement for their respective regions
2. Determine and fix minimum wage rates applicable in their regions, provinces or industries
therein and to issue the corresponding wage orders, subject to guidelines issued by the
Commission
3. 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
4. Coordinate w/ other Regional Boards as may be necessary to attain the policy and intention
of this Code
5. Receive, process and act on applications for exemption from prescribed wage rates as may
be provided by the law or any Wage Order
6. Exercise such other powers and functions as may be necessary to carry out their mandate
under this Code

Case 53: Nasipit Integrated Arrastre and Stevedoring Services, Inc. (NIASSI) v. NASIPIT Employees
Labor Union (NELU)-ALU-TUCP

Facts:

 NIASSI domestic corporation w/ office at Talisay, Nasipit, Agusan del Norte.

o Union is a local chapter of the Associated Labor Union
 October 1999, Regional Board of Caraga Region issued Wage Order
o Granted additional P12/day COLA to minimum wage earners
 Union filed complaint for NIASSI’s failure to implement Wage Order before DOLE for
inspection of NIASSI’s records and enforcement of Wage Order
o DOLE inspection Team dispatched to NIASSI
 Reported that Wage Order was not applicable to NIASSI’s employees since
they were already receiving wage rate higher than prescribed minimum
wage
 NIASSI argues that its employees enjoy a daily wage level higher than minimum wage
mandated by Wage Order, thus Wage Order is not applicable
o Contends that Regional Board did not envision a wage order w/ “across-the-board”
wage increase effect. Hence, Wage Order could be made to only apply to minimum
wage earners

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Decision:

 Issue is whether Wage Order may be made to apply and cover NIASSI’s employees who, at
the time of issuance and effectivity of Wage Order, were already receiving wage rate higher
than prevailing minimum wage.
 Express mention of one person, thing, act, or consequence excludes all others
o Specific enough to cover only minimum wage earners
 Only possible way they can be included is through the correction of wage distortions
 Highly irregular for Regional Board to issue across-the-board wage increase
o Limited to determining and fixing minimum wage rates within its area of concern
o Commits ultra vires and unreasonable act when, instead of setting minimum wage
rate, prescribes a wage increase cutting across all levels of employment and wage
brackets.
 Only employees receiving salaries below prescribed minimum wage are entitled to wage
increase set forth under the Wage Order.
 NIASSI is not legally obliged to grant them a wage increase

B. Minimum Wage

Article 99. Regional Minimum Wage. Minimum wage rates for agricultural and non-agricultural
employees and workers in each and every region of the country shall be those prescribed by the
Regional Tripartite Wages and Productivity Boards

Article 100. Prohibition Against Elimination or Diminution of Benefits. Nothing in this book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code

Article 101. Payment by Results. Secretary of Labor and Employment shall regulate payment of
wages by results, including pakyao, piecework, and other non-time work, in order to ensure the
payment of fair and reasonable wage rates, preferable through time and motion studies or in
consultation with representatives of workers’ and employer’s organizations

Article 124. Standards/Criteria for Minimum Wage Fixing. All workers paid by results (pakyaw,
takay, piecework or task basis) shall receive not less than prescribed wage rates per 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.

Term “minimum wages” promte productivity-improvement and gain-sharing measures to ensure

decent standard living for workers and their families; guarantee rights of labor to its just share in the
fruits of the production; enhance employment generation in the countryside through industry
dispersal; allow business and industry reasonable returns on investment, expansion and growth as
labor is “a primary social economic force”

Case 54: C. Planas Commercial and/or Cohu v. NLRC et al

Facts:

 September 14, 1993, Helpers/Laborers filed complaint for underpayment of wages,

nonpayment of overtime pay, holiday pay, SIL leave pay and premium pay for holiday and
rest day and NSD against C. Planas and its owner, Marcial (employers)

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 Helpers/laborers alleged that C. Planas is engaged in wholesale of plastic products and fruits
w/ more than 24 employees.
o Hired on different dates in 1990 and 1991 and paid below minimum wage law for
past 3 years
o Required to work for more than 8 hrs a day w/o overtime pay and did not even have
a rest day despite working 7 days a week.
o Not paid holiday pay or SIL pay although they had been working for more than a
year
o One helper/laborer asked for NSD as they had been working from 8PM-8AM for
more than 1 year

Decision:

 Issue is whether Helper/Laborers are entitled to money claims

 C. Planas claims that it is a retail establishment w/ less than 10 employees
o Exempt from application of Minimum Wage Law
 Claims that since Helpers/Laborers alleged that it employed 24 workers, incumbent upon
them to prove such allegation, which they failed to do
 Employers contend they could not present records of their workers and respective wages
because by the very nature of their business, system of management is very loose and
informal
 Salaries and wages are paid by merely handing the money to worker w/o latter being
required to sign anything as proof of receipt
o Unreasonable to insist upon Employers to present documents that they do not have
 According to Section 4 of Wage Rationalization Act
o Exempted are household or domestic helpers and persons employed in personal
service of another
o Retail/service establishment regularly employing not more than 10 workers are
exempted upon application with and as determined by appropriate Regional Board
 Employers have not shown any evidence that it had applied for such exemption and that the
same was granted
o Persistently raised matter of their exemption from any liability for underpayment
w/o substantiating it by showing compliance with the law
 As employer, it ought to be the keeper of employment records of all its workers
o Was well within the employer’s means to refute any monetary claim alleged to be
unpaid
 Employer’s inability to produce payrolls from files w/o satisfactory explanation can be
interpreted no less as suppression of vital evidence adverse to C. Planas.

1. Basic Cash Wage. Minimum wage shall consist of basic cash wage from which benefits,
supplements or allowances, which the employees enjoy free of charge aside from basic pay, are not
deducted.

Employer may provide subsidized meals and snacks provided that subsidy is not less than 30% of fair
and reasonable value of such facilities. In such case, employee may deduct wages of employees not
more than 70% of value of meals and snacks enjoyed by the employee, provided that such deduction
is with the written authorization of employees concerned.

2. Wages of Workers Paid by Results. Receive at least applicable statutory minimum wage per 8 hrs
of work a day or proportionate thereof, for working less than 8 hrs.

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3. Wages of Special Groups of Workers. Wages of apprentices, learners, and handicapped workers
shall be at least 75% of applicable statutory minimum wage rates

4. Wages of Mobile and Branch Workers. Statutory minimum wage rates of employees who by
nature of their work have to travel shall be those applicable in employer’s domicile or head office.
Minimum wage rates of employees working in branches or agencies of establishments in or outside
NCR shall be those applicable in place where they are stationed.

5. Wages of Employees Transferred to Other Areas. Transfer of employee to areas outside of NCR
shall not be a valid ground for reduction of wage rates being enjoyed by employee prior to transfer.
Entitled to minimum wage rates applicable in NCR

6. Monthly-Paid Employees Distinguished from Daily-Paid Employees.

Monthly paid employee: monthly salary includes payments for every day of the month, even though
he does not regularly work on his rest days or Sundays, nor on regular or special holidays

Monthly minimum wage = statutory minimum wage x 365 days / 12

Daily-paid employee = one who is paid on days he actually worked, except on unworked regular
holidays, he is paid basic wage if he is present or on leave w/ pay on working day before regular
holiday. (No work, no pay)

Fact that daily rate of daily-paid employee is translated to monthly equivalent and he is regularly
paid a fixed monthly rate does not mean he is a monthly-paid employee. In case of absence, his
salary for the period of his absence may be deducted.

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C. Wage Order

Article 123. Wage Order. Whenever the conditions in the region so warrant, the Regional Board
shall investigate and study all pertinent facts and based on standards and criteria herein prescribed,
shall proceed to determine whether a Wage Order should be issued.

Shall take effect 15 days from its complete publication in at least 1 newspaper of general circulation
in the region.

Regional Board shall conduct public hearings/consultations, giving notices to employees’ and
employers’ groups, provincial city and municipal officials and other interested parties.

Any party aggrieved by Wage Order by Regional Board may appeal such order to the Commission
within 10 calendar days from the publications of such order. It shall be mandatory for the
Commission to decide such appeal within 60 calendar days from the filing thereof.

Filing of the appeal does not stay the order unless person appealing file undertaking with a surety
or sureties satisfactory to Commission for payment of employees affected by the order of the
corresponding increase, in the event such order is affirmed.

Article 124. Standards/Criteria for Minimum Wage Fixing. The regional minimum wages to be
established by the Regional Board shall be as nearly adequate as is economically feasible to maintain
minimum standards of living necessary for the health, efficiency and general well-being of the
employees within the framework of the national economic and social development program.

In the determination of such regional minimum wages, the Regional Board shall, among other
relevant factors, consider the following:

1. Demand for living wages

2. Wage adjustment vis-à-vis the consumer price index (changes in price level of market basket
of consumer goods)
3. Cost of living and changes or increases therein
4. Needs of workers and families
5. Need to induce industries to invest in the countryside
6. Improvement in standards of living
7. Prevailing wage levels
8. Fair return of capital invested and capacity to pay of employer
9. Effects on employment generation and family income
10. Equitable distribution of income and wealth along the imperatives of economic and social
development

These wages shall include wages varying with industries, provinces or localities if in the judgement
of the Regional Board, conditions make such local differentiation proper and necessary to
effectuate the purpose of this Title.

Any person, company, corporation, partnership or any other entity engaged in business shall file and
register annually with the appropriate Regional Board, Commission and the National Statistics Office
(NSO), an itemized listing of their labor component, specifying names of workers and employees
below managerial level, including learners, apprentices and disabled/handicapped workers hired
under terms prescribe in the employment contracts, and their corresponding salaries and wages.

Article 125. Freedom to Bargain. No wage order shall be construed to prevent workers in particular
firms or enterprises or industries from bargaining for higher wages with their respective employers.

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Article 126. Prohibition Against Injunction. No preliminary or permanent injunction (warning) or

temporary restraining order (TRO) may be issued by any court, tribunal or other entity against any
proceedings before the Commission or Regional Boards.

Article 127. Non-Diminution of Benefits. No wage order issued by any regional board shall provide
for wage rates lower than the statutory minimum wage prescribed by Congress.

Wage Order may either prescribe a wage increase or grant COLA to employees.

1. Hearings and Notices to Employees’ and Employers’ Groups. See above

2. Remedy of Persons Aggrieved by the Wage Order. See above

3. Exemption from Wage Order. May be granted exemption from compliance with wage increases
and COLA to:

1. Assist establishments experiencing temporary difficulties due to losses to maintain the

financial stability of their businesses and the continued employment of their workers
2. Encourage the establishment of new businesses and the creation of more jobs, particularly
in the areas outside NCR and Export Processing Zones, in line with the policy on industrial
dispersal
3. Ease the burden of micro establishments, particularly in retail and service sector, that have a
limited capacity to pay

4. Action on Application for Exemption from Wage Order. Regional Board shall take ff. steps.

1. Notify DOLE Regional Office w/ jurisdiction over workplace of pendency of application

requesting action on any complaint for non-compliance with the Wage Order be deferred,
pending resolution of the application by the Regional Board
2. Request DOLE Regional Office to conduct ocular inspection, if necessary, of establishments
applying for exemption in order to verify the number of workers, the nature of business and
other relevant information.
3. Act and decide on the application for exemption with complete documents, as much as
practicable, within 45 days from date of filing. In case of contested application, Regional
Board may conduct conciliation or call hearings on the application.
4. Transmit decision of Regional Board to the applicant establishment, the employees, and the
Commission, for their information; and to the DOLE Regional Office concerned, for its
implementation and enforcement.

5. Effect of A Disapproved Application for Exemption from Wage Order. Covered employees shall
be paid the mandated wage increase or allowance under the Wage Order retroactive to the date of
effectivity of the Wage Order + simple 1% interest per month.

D. Wage Distortion

Article 124. Standards/Criteria for minimum wage fixing.

When application of prescribe wage increase results to distortion, employer and union shall
negotiate to correct distortions.

Any dispute arising from wage distortions shall be resolved through grievance procedure under CBA,
and if remains unsolved, voluntary arbitration. Unless otherwise agreed, such dispute shall be
decided by voluntary arbitrator within 10 calendar days from time said dispute was referred to
voluntary arbitration.

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In cases where no CBA or recognized labor unions, employers and workers shall endeavor to correct
such distortions.

If remains unsolved after 10 calendar days of conciliation with National Conciliation and Mediation
Board, referred to National Labor Relations Commission (NLRC). Mandatory for NLRC to conduct
continuous hearings and decide dispute within 20 calendar days from time said dispute is
submitted for compulsory arbitration.

Pendency of a dispute arising from a wage distortion shall not delay applicability of any increase in
prescribed wage rates pursuant to provisions of law or wage order.

Wage distortion shall mean a situation where an increase in prescribed wage results in elimination
or severe contraction of intentional quantitative differences in wage or salary rates between and
among employee groups in an establishment as to effectively obliterate the distinctions embodied
in such wage structure based on skills, length of service, or other logical bases of differentiation.

1. Wage Distortion when Distinction between A Lower and the Next Higher-Level Position is
Negated. Wage distortion presupposes a classification of positions and the ranking of these
positions at various levels. There is a hierarchy of positions with corresponding ranks, basically in
terms of wages and other emoluments.

Wage distortion when there is significant change that occurs in salary rate of a lower pay class,
w/o concominant increase in salary rate of a higher one. -> Negates distinction between 2 levels or
between lowest and next higher level or rank. (Ex: New entrants and old hires)

Classification is reflect in differing wage rates for each existing classes or employees.

Case 55: Bankard Employees Union-Workers Alliance Trade Unions v. NLRC and Bankard, Inc.

Facts:

 Bankard classifies employees Level I, Level II, Level III, Level IV, Level V
 May 28, 1993
o Board of Directors approved new salary scale retroactive to April 1, 1993
 Making its hiring rate competitive in industry’s labor market
 Increases hiring rate of new employees: Level I and Level V by P1000 and
Levels II, III, IV by P900.
 Salaries of employees who fell below new minimum rates were adjusted to
reach such rates
 Bankards moved Union to press for increase of its old, regular employees
o Bankard posited that there was no obligation on part of management to grant its
employees same increase in an across-the-board manner

Decision:

 Issue is whether unilateral adoption of upgraded salary scale that increased hiring rates of
new employees w/o increasing salary rates of old employees resulted in wage distortion
 Wage distortion: increase in prescribed wage rates results in elimination or severe
contraction of intentional quantitative differences in wage or salary rates between and
among employee groups -> obliterate distinctions embodied in such wage structure
 4 elements of Wage Distortion:
o Existing hierarchy of positions with corresponding salary rates

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o Significant change in salary rate of a lower pay class w/o increase in salary rate of a
higher one
o Elimination of distinction between two levels
o Existence of distortion in same region of the country
 Normally, company has wage structure
o There exists grouping or classification of employees that establishes distinctions
between among them
 Degree of responsibility
 Skills and knowledge required
 Complexity of job
 Logical basis of differentiation
o Reflected by differing wage rate
 Union CANNOT LEGALLY OBLIGATE Bankard to correct wage distortion
o NOT DUE TO A PRESCRIBED LAW or WAGE ORDER
 If applied voluntarily and unilaterally by employer in fixing hiring rates
o Management prerogative
 Done because of reasons such as:
 Re-evaluation of high productivity of a particular group
 Increase competitiveness of Bankard’s hiring rate

2. Manner of Correcting Wage Distortion. If wage increase resulting from Wage Order issued by any
Board results to wage distortion, corrected in ff. manner:

 Non-unionized establishments or no CBA or no recognized labor union, employer and

workers shall endeavor to correct such distortion through negotiations.
o Failure, settled through NCMB
o Remains unsolved after 10 calendar days, referred to Labor Arbiter
 Mandatory to decide disputed within 20 calendar days from time dispute is
submitted for compulsory arbitration
 Unionized establishments or w/ CBA or w/ recognized labor union, employer and union
negotiate wage distortion using grievance procedure under CBA
o Unresolved within 10 calendar days, decided through voluntary arbitration
 Pendency shall not delay application of any increase in prescribed wage rats pursuant to
provisions of law or Wage Order

3. Correction of A Wage Distortion by Reestablishing A Significant Gap. No legal requirement that

in rectification of distortion by readjustment of wage rates of differing requirements that the gap
which had previously existed be restored in precisely the same amount

Can be done by reestablishing a substantial or significant gap, as distinguished from a historical gap,
between wage rates of differing classes of employees

4. Penalty for Violation. Fails to pay prescribed increases, fine of not less than P25,000 nor more
than P100,000 or by imprisonment of not less than 2 years nor more than 4 years or both to be
determined by court

Employer concerned ordered to pay amount = to double of unpaid benefits owing to employees.
Payment of indemnity shall not absolve employer of criminal liability

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Chapter 8: Termination of Employment

I. Two Aspects of Termination From Employment

1. Legality of act of dismissal per se, constitutes substantive due process

2. Legality of manner of dismissal, constitutes procedural due process

Substantive due process: just cause or authorized cause

Procedural due process: termination after complying w/ the notice requirements provided by law

II. Substantive Due Process in Termination: Just and Authorized Causes

Article 288 [282]. Termination by Employer. An employer may terminate an employment for any of
the ff. causes:

1. Serious misconduct or willful disobedience by employee of lawful orders of employer or

representative in connection with his work
2. Gross and habitual neglect by employee of his duties
3. Fraud of willful breach of employee of trust reposed in him by his employer or duly
authorized representative
4. Commission of a crime or offense by employee against the person of his employer or any
immediate member of his family or his duly authorized representative
5. Other causes analogous to foregoing

Just Causes: 1) Serious misconduct; 2) Willful disobedience or insubordination; 3) Gross and habitual
neglect of duties; 4) Fraud or loss of trust and confidence; 5) Commission of a crime or offense; 6)
Other causes for analogous to the foregoing: gross inefficiency, violation of company rules,
abandonment of work

Employer cannot be legally obligated to continue w/ employment of person who admitted was guilty
of an infraction or offense toward his employer and whose continuance in service of the employer is
patently inimical to his interest.

1. Serious Misconduct. Transgression of some established and definite rule of action, forbidden act,
dereliction of duty, willful in character, implies wrongful intent and not mere error in judgement

 Must be in connect w/ employee’s work to constitute just cause for his termination
 Must be such a grave and aggravated character and not merely trivial or unimportant

Case 56: Samson v. NLRC et al.

Facts:

 During Sales and Marketing gathering of Schering-Plough

o Rufino made utterances of obscene, insulting and offensive words directed against
Schering-Plough’s Management Committee in the presence of several co-
employees.
o Also directed to EDT (Schering-Plough’s President and General Manager)
o Threated to disrupt or create violence during forthcoming National Sales Conference
o Repeated threats to co-employees
 Schering-Plough gave letter to Rufino
o Why no disciplinary action including termination should be taken against him
 Denied what happened

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 Made in reference to decision taken by management committee on

Cua Lim case and not to any particular person
o Later dismissed from Schering-Plough
 NLRC: There was just cause for dismissal (gross misconduct)
o “Si EDIT, bullshit yan”, while making dirty finger

Decision:

 Misconduct: improper or wrong conduct, transgression of established and definite rule of

action, must be serious and not merely trivial
 In this case, Rufino’s alleged misconduct was not of such serious and grave character as to
warrant his dismissal
o Made during informal Christmas gathering
 Tounges are more often than not loosened by liquor
o Employees should be allowed wider latitude to freely express their sentiments
beyond disciplinary authority of employer
 Rufino’s outburst was in reaction to decision of management in Cua Lim case
o Use of words and gestures not intended to malign EDT

Case 57: Chua-Qua v. Hon. Clave and Tay Tung High School, Inc.

Facts:

 Tay Tung in Bacolod City employed Evelyn as teacher since 1963

o Class adviser in 6th grade of Bobby
 In course remedial instructions extended by Bobby to Evelyn, couple fell in love and married
in a civil ceremony on December 24, 1975
o Evelyn (30 years old), Bobby (16 years old)
 Consent and advice was given by his mother and marriage was ratified in accordance w/
rites of their religion in a charge wedding in January 10, 1976
 February 4, 1976, Tay Tung filed with DOLE application for clearance to terminate Evelyn’s
employment
o Abusive and unethical conduct unbecoming of a dignified school teacher.
o Continuance of employment -> downgrade high moral values of school
 Evelyn defied all standards of decency
 Using position to lure grade 6 boy into an amorous relationship
 Stayed alone w/ Bobby
 Evelyn argued that it is not a conduct unbecoming of dignified school teacher
 LA favored Tay Tung
o Although no direct evidence
 Enough for sane & credible mind to conclude what transpired

Decision:

 Issue: Whether there is substantial evidence to prove facts which culminated in marriage
between Evelyn and Bobby constitute immorality and/or grave misconduct
 To constitute immorality, circumstances must be holistically considered and evaluated in
light of prevailing norms
o No one directly saw -> No direct evidence

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 No basis
 Failed to show Evelyn took advantage of position to court Bobby
o Love not evaluated to immorality despite disparity in age & academic levels
 Deviation from usual societal pattern cannot be considered as defiance
 Policy unnecessarily bannered to justify Evelyn’s dismissal
o Burden to provide just and valid cause rests on employer
 Dismissal declared illegal

2. Willful Disobedience or Insubordination. One of the duties of the employee is to yield obedience
to the lawful orders of his employer. To be validly dismissed on ground of willful disobedience
requires concurrence of at least two requisite:

 Employee’s assailed conduct must have been willful or intentional, willfulness being
characterized by a wrongful and perverse attitude
 Order violated must have been reasonable, lawful, made known to employee, and must
pertain to duties which he had been engaged to discharge

Case 63: Guevarra v. Eala

Facts: On March 4, 2002 a complaint of disbarment was filed before the Integrated Bar of the
Philippines Committee on Bar Discipline against Atty. Jose Emmanuel M. Eala a.k.a. Noli Eala for
grossly immoral conduct and unmitigated violation of the lawyer’s oath. In the Complaint, Guevarra
first met the respondent in January 2000 when his then fiancée Irene Moje introduced respondent
to him as her friend who was married to Marianne Tantoco with whom he had three children.

After his marriage to Irene on October 7, 2000, Complainant noticed that from January to March
2001, Irene had been receiving from respondent Cellphone calls, as well as messages some which
read “I love you,” “I miss you,” or “Meet you at Megamall.” He also noticed that Irene habitually
went home very late at night or early in the morning of the following day, and sometimes did not go
home from work. When he asked her whereabouts, she replied that she slept at her parent’s house
in Binangonan, Rizal or she was busy with her work.

In February or March 2001, complainant saw Irene and Respondent together on two occasions. On
the second occasion, he confronted them following which Irene abandoned the conjugal house. On
April 22, 2001 complainant went uninvited to Irene’s birthday celebration at which he saw her and
the respondent celebrating with her family and friends. Out of embarrassment, anger and
humiliation, he left the venue immediately. Following that incident, Irene went to the conjugal
house and hauled off all her personal belongings. Complainant later found a handwritten letter
dated October 7, 2007, the day of his wedding to Irene, Complainant soon saw respondent’s car and
that of Irene constantly parked at No. 71-B11 Street, New Manila where as he was later learn
sometime in April 2001, Irene was already residing. He also learned still later that when his friends
saw Irene on about January 18, 2002 together with respondent during a concert, she was pregnant.

Issue: Whether Concubinage or Adulterous relationship, be the reason for the disbarment of Atty.
Jose Emmanuel Eala.

Held: Lawyer’s oath stated that a lawyer should support the Constitution and obey the laws,
Meaning he shall not make use of deceit, malpractice, or other gross misconduct, grossly immoral
conduct, or be convicted in any crime involving moral turpitude. In the case at bar Atty. Eala was
accused of Concubinage, under ART. 334 of the Revised Penal Code, “ Any husband who shall keep a
mistress in a conjugal dwelling, or, shall have sexual intercourse, under scandalous circumstances,

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with a woman who is not his wife, or shall cohabit with her in any other place, shall be punished by
prision correccional in its minimum and medium period. Section 2 of ART. XV states that “Marriage,
as an inviolable social institution, is the foundation of the family and shall be protected by the state.
Respondent’s grossly immoral conduct runs afoul of the constitution and the laws, that he as a
lawyer has sworn to uphold. Hence the court declared Atty. Jose Emmanul M. Eala DISBARRED for
grossly immoral conduct, violation of his oath of office, and violation of canon 1, Rule 1.01 and
Canon 7, Rule 7.03 of the Code of Professional Responsibility.

Case 58: Realda v. New Age Graphics, Inc. and Mirasol, Jr.

Facts:

 Billy, machine operator of New Age, printing press business

o Workers are sometimes asked to render overtime work in order to meet production
deadlines
o When Billy was asked, refused to do so despite the “rush” orders of customers and
New Age’s need to meet deadlines
 Refusal to render overtime work contributed to losses by New Age from late penalties
imposed by clients for every day of delay

Decision:

 For willful disobedience to be a valid cause for dismissal:

o Willful, characterized by wrongful and perverse attitude
o Order violated was lawful and reasonable and pertain to his duties
 Issue: Whether Billy’s refusal to render overtime work was willful – such refusal was
characterized by wrongful and perverse attitude
 Willfulness: characterized by wrongful perverse attitude rendering employee’s act
inconsistent w/ proper subordination
 Fact the Billy refused to render overtime work despite knowledge that there was production
deadline and w/o him as machine operator, no further printing can be had
o Shows wrongful and perverse mental attitude
o Shows not only willfulness, but also bad faith
 Billy’s dismissal on the grounds of willful disobedience is valid

3. Gross and Habitual Neglect of Duties. Includes gross inefficiency, negligence, carelessness, as well
as unauthorized absences. Habitual Neglect implies repeated failure to perform one’s duties for a
period of time.

Repeated acts of absences w/o leave and frequent tardiness reflect employee’s indifferent attitude
to and lack of motivation in work. -> Constitute gross misconduct

Single or isolated act of negligence cannot constitute as just cause for dismissal. -> Must be both
gross and habitual

Case 59: Jumuad v. Hi-Flyer Food Inc. and Montemayor

Facts:

 Pamela began employment with Hi-Flyer, licensed to operate KFC restaurants in Philippines

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o Pamela received several promotions until she became Area Manager for entire
Visayas-Mindanao region
 Pamela’s task
o Highly visible in restaurants under her jurisdiction
o Monitor and support day-to-day operations
o Ensure all facilities and equipment at the restaurants were properly maintained and
serviced
o Restaurants were Cebu KFC branches: KFC-Gaisano, KFC-Cocomall, KFC-Bohol (Bohol
KFC branch)
 When Hi-Flyer conducted food safety, service and sanitation audit at KFC-Gaisano
o Discovered several sanitation violations
 Presence of rodents
 Use of defective chiller for storage of food
o Asked to explain
 Pamela had already taken steps to prevent the further infestation of the
branch
 Pamela faulted management’s decision to terminate service of branch’s
pest control program and rely solely on pest control program of mall
 Explained the defective chiller was under repair at time of audit
o Was closed down
 Hi-Flyer audited accounts of KFC-Bohol due to reports that certain employees were covering
up cash shortages
o Ff. irregularities:
 Cash shortage amounting to P62,290.85
 Delay in deposits of cash sales by average of 3 days
 Presence of two sealed cash-for-deposit envelopes containing paper cut-
outs instead of cash
 Falsified entries in deposit logbook
 Lapses in inventory control
 Material product spoilage
o Pamela disclaimed any fault in incident
 She was the one responsible for the discovery of the irregularities
 Hi-Flyer conducted another audit at KFC-Cocomall branch
o Problems:
 Grout and leaks at branch’s kitchen wall
 Dried up spills from marinator
 Live rat under postmix
o Pamela was busy conducting management team meetings at other KFC branches
 No scheduled visit at KFC-Cocomall branch
 Hi-Flyer sought to hold Pamela accountable for irregularities uncovered in branches under
her supervision
o Held an administrative hearing where Pamela appeared with counsel
o Not satisfied w/ her explanations
 Served a notice of dismissal for both loss of trust and confidence, and
neglect of duty.
 Filed complaint for illegal dismissal

Decision:

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 Gross negligence connotes want or absence of or failure to exercise slight care or diligence,
or entire absence of care
o Thoughtless disregard of consequences w/o exerting any effort to avoid them
 Habitual neglect implies repeated failure to perform one’s duties for a period of time
o Single or isolated act cannot constitute a just cause for dismissal
 Over a year had lapsed between incidents at KFC-Gaisano and KFC-Bohol, nature of
anomalies were each of different nature
o Pamela’s acts or lack of action not born of habit
 Cannot be dismissed base on gross and habitual neglect of duty

4. Fraud or Willful Breach of Trust and Confidence. Two requisites must be present:

1. Employee concerned must be holding a position of trust and confidence

2. Act that would justify the loss of trust and confidence

Must be based on willful breach of trust and founded on clearly established facts. Must be clearly
and convincingly established, but proof beyond doubts is not necessary.

Must be work related and employee concerned must be shown to be unfit to continue work for
employer.

Case 60: Jumuad v. Hi-Flyer Food Inc. and Montemayor

Facts: Above case

Decision:

 Finding of innocence in a charge of gross and habitual neglect does not preclude finding of
guilt in a charge of breach of trust and confidence
 Each charge must be treated separately
 While Pamela cannot be dismissed on ground of gross and habitual neglect of duty
o There is an issue of whether she could be terminated based on breach of trust and
confidence
 Pamela willfully breached duties as to be unworthy of trust and confidence of Hi-Flyer
o Managerial employee who executed management policies and had power to
discipline
 Pamela’s dismissal on basis of loss of trust and confidence is justified.
 On principle of respondeat superior (let the master answer)
o Pamela may be held liable for negligence in performance of her managerial duties
 May not be directly involved in causing cash shortages in KFC-Bohol
o Negligence in monitoring and supporting day-to-day operations of branches could
have prevented whole debacle from ever occurring
 Instead of taking proactive steps, merely effected remedial measures
o Reasonable basis for Hi-Flyer to withdraw trust from her and dismissing
o Resulted to:
 Poor sanitation of KFC-Cocomall
 Closure of KFC-Gaisano
 Cash shortages in KFC-Bohol

4.1 Employee Should Hold Position of Trust and Confidence. Two classes of positions of trust:

1. Managerial employees

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2. Fiduciary rank-and-file employees: cashiers, auditors, property custodians, or those who

regularly handle significant amounts of money or property

Must be done willingly, intentionally, knowingly, and purposely w/o justifiable excuse as
distinguished from act done carelessly, thoughtlessly, heedlessly or inadvertently

Must be based on substantial evidence and not on employer’s whims

4.2 Application of Doctrine of Loss of Confidence between Managerial and Rank-and-File

Employees

If Rank-and-file employee, must require proof of involvement in alleged events in question. Mere
uncorroborated assertions and accusations by employer will not be sufficient.

If Managerial, mere existence of basis for believing that employee has breached trust of employer
would suffice for his dismissal. Proof beyond reasonable doubt is not required.

4.3 Guidelines for the Application of the Doctrine of Loss of Trust and Confidence

As a safeguard against employers who indiscriminately use loss of trust and confidence to justify
arbitrary dismissal of employees:

1. Loss of confidence must not be simulated

2. Not used as subterfuge for causes which are improper, illegal, or unjustified
3. May not be arbitrarily asserted in the face of overwhelming evidence to contrary
4. Must be genuine and not a mere afterthought to justify earlier action taken in bad faith

5. Commission of A Crime or Offense. Refers to offense against any of the following:

1. Person of his employer

2. Immediate member of the employer’s family
3. Employer’s duly authorized representative

6. Analogous Causes. Must have an element similar to those found in the specific just causes
provided by the law.

6.1 Gross Inefficiency. Closely related to gross neglect, for both involve acts of omission on the part
of the employee resulting in damage to employer or to his business. Failure to observe prescribe
standards of work, or to fulfill reasonable work assignments due to inefficiency may constitute just
cause for dismissal

6.2 Violation of Company Rules and Regulations. Closely related to willful disobedience. Recognized
that company policies and regulations, unless shown to be oppressive or contrary to law, are valid
and binding upon parties and must be complied with.

Case 61: Autobus Workers’ Union and Escanlar v. NLRC and Ong

Facts:

 Ricardo worked with Autobus as Cutting Machine Operator.

 January 29, 1993, Ricardo said “Gago ka” twice against supervisor Reynaldo who was
accused of playing favorites in choosing employees for overtime work

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o Upon being approached, “Bakit, anong gusto mo, tang ina mo” when asked to see
what the problem is when Ricardo was not doing work
 When Reynaldo was on his way to the canteen, threatened by Ricardo
o “Panapanahon lang iyan, panahon mo ngayon” when not told about contents of
Reynaldo’s report to management concerning incident that transpired between
them.
 Ricardo threatened Reynaldo at canteen: “Patunayan mong minura kita at kung hindi,
tandaan mo iyan.”
 Autobus required Ricardo to explain why no disciplinary action should be taken against him
pursuant to company’s Code of Discipline.
o After administrative investigation, Ricardo was served a Notice of Termination for
uttering unsavory remarks and threatening his supervisor w/ physical harm
 Filed complaint for illegal dismissal

Decision:

 Evidence on record that Ricardo violated Sec. 6 of Rule No. 28 of the Code of Discipline of
Autobus
o ASAL AT KILOS – Pag-insult o panghihiya, pagbanta at pananakit o pagpakita ng
anumang sinasadyang di paggalang sa isang superbisor o sino mang opisyal ng
kumpanya
 Takdang parusa: Suspensiyon hanggang sa pagtitiwalag, ayon sa bigat ng
pagkakasala
 Repeated utterances by Ricard of obscene, insulting, or offensive words against supervisor
was not only destructive of morale of his co-employees, but were also a violation of
company rules and regulation.
o Employee may be validly dismissed for violation of a reasonable company rule or
regulation adopted for conduct of company’s business

6.3 Abandonment of Work. Closely related to gross and habitual neglect of duties. Employer must
have burden of proof to show employee’s deliberate and unjustified refusal to resume his
employment w/o any intention of returning. Mere absence is not sufficient. There must be an
equivocal intent on the part of employee to discontinue his employment

1. Employee must have failed to report for work or must have been absent w/o valid or
justifiable reason
2. Must have been clear intention to sever the employer-employee relationship, manifested by
some overt acts

6.3.1 Complaint for Illegal dismissal Inconsistent with abandonment. When employee loses no time
in filing a complaint for illegal dismissal upon learning about his termination, cannot be considered
as having abandoned his job. Rather, implies continued interest to stay employed, especially if he
follows up on his status after being told not to report for work.

Claiming separation pay or reinstatement does not reflect his intention to leave his job. Employee is
merely exercising option to either reinstatement and backwages or payment of separation pay in the
event of illegal dismissal.

6.3.2 Abandonment of work does not per se sever employer-employee relationship. Operative act
the will ultimately sever relationship is dismissal of employee after complying w/ procedure
prescribed by law. If employer does not follow this procedure, there is illegal dismissal.

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B. Penalty Less Harsh than Dismissal May Be Imposed by the Employer; Suspension. Even if
employee committed offense or infraction against employer, suspension w/o pay would be
sufficient. All circumstance must be considered, including length of service of employee and gravity
of offense. Law considers family of laborer.

Case 62: Yrasuegi v.PAL

FACTS:

THIS case portrays the peculiar story of an international flight steward who was dismissed because
of his failure to adhere to the weight standards of the airline company.

The proper weight for a man of his height and body structure is from 147 to 166 pounds, the ideal
weight being 166 pounds, as mandated by the Cabin and Crew Administration Manual of PAL.

In 1984, the weight problem started, which prompted PAL to send him to an extended vacation until
November 1985. He was allowed to return to work once he lost all the excess weight. But the
problem recurred. He again went on leave without pay from October 17, 1988 to February 1989.

Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner remained
overweight. On January 3, 1990, he was informed of the PAL decision for him to remain grounded
until such time that he satisfactorily complies with the weight standards. Again, he was directed to
report every two weeks for weight checks, which he failed to comply with.

On April 17, 1990, petitioner was formally warned that a repeated refusal to report for weight check
would be dealt with accordingly. He was given another set of weight check dates, which he did not
report to.

On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for violation
of company standards on weight requirements. Petitioner insists that he is being discriminated as
those similarly situated were not treated the same.

On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his ideal
weight, “and considering the utmost leniency” extended to him “which spanned a period covering a
total of almost five (5) years,” his services were considered terminated “effective immediately.”

LABOR ARBITER: held that the weight standards of PAL are reasonable in view of the nature of the
job of petitioner. However, the weight standards need not be complied with under pain of dismissal
since his weight did not hamper the performance of his duties.

NLRC affirmed.

CA: the weight standards of PAL are reasonable. Thus, petitioner was legally dismissed because he
repeatedly failed to meet the prescribed weight standards. It is obvious that the issue of
discrimination was only invoked by petitioner for purposes of escaping the result of his dismissal for
being overweight.

ISSUE: WON he was validly dismissed.

HELD: YES

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A reading of the weight standards of PAL would lead to no other conclusion than that they constitute
a continuing qualification of an employee in order to keep the job. The dismissal of the employee
would thus fall under Article 282(e) of the Labor Code.

In the case at bar, the evidence on record militates against petitioner’s claims that obesity is a
disease. That he was able to reduce his weight from 1984 to 1992 clearly shows that it is possible for
him to lose weight given the proper attitude, determination, and self-discipline. Indeed, during the
clarificatory hearing on December 8, 1992, petitioner himself claimed that “[t]he issue is could I
bring my weight down to ideal weight which is 172, then the answer is yes. I can do it now.”

Petitioner has only himself to blame. He could have easily availed the assistance of the company
physician, per the advice of PAL.

In fine, We hold that the obesity of petitioner, when placed in the context of his work as flight
attendant, becomes an analogous cause under Article 282(e) of the Labor Code that justifies his
dismissal from the service. His obesity may not be unintended, but is nonetheless voluntary. As the
CA correctly puts it, “[v]oluntariness basically means that the just cause is solely attributable to the
employee without any external force influencing or controlling his actions. This element runs
through all just causes under Article 282, whether they be in the nature of a wrongful action or
omission. Gross and habitual neglect, a recognized just cause, is considered voluntary although it
lacks the element of intent found in Article 282(a), (c), and (d)

Case 64:

FOR QUIZ:

Just Causes:

1. Serious misconduct
2. Willful disobedience/ Insubordination
3. Gross and habitual neglect of duties
4. Fraud or loss of trust and confidence
5. Commission of a crime or offense
6. Causes analogous to the foregoing

Authorized Causes:

1. Installation of labor-saving devices

2. Redundancy
3. Retrenchment to prevent losses (reduction of costs in response to economic difficulties)
4. Closing or cessation of operation

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Case 63: Fuji Television Network, Inc. v. Arlene S. Espiritu

Facts:

 Arlene engaged by Fuji as news correspondent/producer tasked to report Philippine news to

Fuji through its Manila Bureau field office
o Employment initially 1 year, but successively renewed on a yearly basis w/ salary
adjustment upon every renewal
 January 2009, Arlene diagnosed with lung cancer
o Informed Fuji about her condition and was told that there is a problem with renewing
her contract given her condition
o Arlene insisted that she was fit to work as certified by attending physician
 Arlene and Fuji signed a non-renewal contract
o In consideration:
 Arlene acknowledged receipt of total amount of salary from March-May
2009, year-end bonus, mid-year bonus, and separation pay
o Arlene executed the non-renewal contract under protest
 Arlene filed complaint for illegal dismissal
o Alleges that she was forced to sign the non-renewal contract
o Alleges that Fuji withheld her salaries and other benefits when she refused to sign
and was left with no recourse but to sign to get her salaries

Issue:

1. Was Arlene an independent contractor?

2. Was Arlene a regular employee?
3. Was Arlene illegally dismissed?
4. Did COA correctly awarded reinstatement, damages, and attorney’s fees?

Case History:

 Labor Arbiter: dismissed complaint and held that Arlene was not a regular employee but an
independent contractor
 NLRC: reversed LA’s decision and ruled that Arlene was a regular employee since she
continued to render services that were necessary and desirable to Fuji’s business
 COA: affirmed NLRC’s ruling w/ modifications
o Fuji should reinstate Arlene to position, paid backwages and other emoluments
withheld
o Case of Sonza does not apply because Arlene was not contracted for a special skill or
talent
o Arlene was illegally dismissed because Fuji failed w/ requirements of substantive and
procedural due process and she signed non-renewal contract under protest

Ruling:

1. Arlene was not an independent contractor

a. Arlene hired as news producer, and no evidence to say that she was hired for special
skills that would distinguish her from ordinary employee
b. Monthly salary is a substantial sum
c. Fuji had power to dismiss Arlene
d. Fuji had control over her work (required to report 8 hours from M-F)

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e. Fuji gave instructions on what to report and also mode of transportation

2. Arlene was a regular employee w/ fixed-term contract
a. Successive renewals indicate necessity and desirability of work to usual course of
Fuji’s business
b. Arlene’s contract indicating she was fixed-term does not mean she could never be a
regular employee
3. Arlene was illegally dismissed
a. Can only be dismissed when there is due process and for just and authorized causes
b. Expiration of contract does not negate finding of illegal dismissal
i. Manner of sending non-renewal a month after informed about sickness is
tantamount to constructive dismissal
ii. Was not given chance to present medical certificates
4. COA correctly awarded reinstatement
a. Separation pay in lieu of reinstatement is allowed if: 1) Employer ceased operations;
2) Employee’s position is no longer available; 3) Strained (enemies) relations; 4)
Substantial period has lapsed from date of filing to date of finality
b. No evidence to prove reinstatement is no longer feasible
c. Moral damages awarded if dismissal is bad faith or act oppressive to labor
i. Information of non-renewal caused Arlene to suffer anguish, anxiety, and
wounded feelings
d. Attorney’s fees when unlawful withholding of wages

C. Suspension v. Preventive Suspension. Suspension as penalty for administrative offense should be

distinguished from preventive suspension as a remedial measure.

Suspension: penalty lighter than dismissal which can be imposed when employee is found to have
committed an infraction against employer; can only be meted at the termination of the investigation
or final disposition of the case

Preventive Suspension: imposed during pendency (undecided) of administrative investigation; not a

penalty in itself, but a measure of precaution may be separated from scene of alleged misfeasance

1. When Preventive Suspension May Be Imposed. If continued employment poses a threat to the life
or property of employer or of his co-workers

Case 64: Artificio v. NLRC et al.

Facts:

 Jose employed as security guard by Agency

 Had a heated argument w/ fellow security guard
o Requested that Jose be investigated for maliciously machinating former’s hasty relief
from his post and for leaving post during night shift to see girlfriend at nearby
beerhouse
o When Jose learned that no salary would be given that day, bad-mouthed employees
of Agency and threated to arson their office
 Jose place under preventive suspension
o Pending investigation for conduct unbecoming of a security guard (abandonment of
post, light threats, irregularities in observance of proper relieving time)
o Directed Jose to report to office to submit written answer upon receipt of
memorandum

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 Jose filed complaint for illegal dismissal and illegal suspension without waiting for hearing
o Illegally suspended since preventive suspension was for indefinite period and imposed
w/o investigation
 Agency counters that Jose was merely place under preventive suspension pending
investigation of charges

Decision:

 Preventive suspension is justified where employee’s continued employment poses a serious

and imminent threat to life or property of employer or co-workers.
o W/o this, preventive suspension is not proper
 Preventive suspension was justified
o Employed as a security guard tasked precisely to safeguard Agency’s client
o Poses a threat to Agency, its employees and client in light of serious allegation of
conduct unbecoming of security guard
 Preventive suspension can ripen into constructive dismissal when exceed 30-day maximum
period
o Not applicable in this case because Jose filed a complaint before labor tribunal before
his scheduled hearing

2. Period of Preventive Suspension. Shall not exceed 30 days. After this period, employee must be
reinstated to former position or substantially equivalent position. If suspension is extended,
employee entitled to salaries and benefits accrue to him during period of extension of suspension. If
after the completion of hearing, employer decides to dismiss employee, employee has no obligation
to reimburse amount paid to him during extension of suspension.

Case 65: Philippine Airlines, Inc. v. NLRC et al.

Facts:

 Edilberto hired as manifesting clerk by PAL

 Together w/ co-employee, apprehended by gov’t authorities while about to board flight to
Hong Kong
o Possession of P39,850 and P6,000
 Violation of CB Circular 265
 PAL required Edilberto to explain within 24 hours why he should not be charged
administratively
o Placed on preventive suspension effective March 27, 1984 for grave misconduct
when he failed to do so
 May 28, 1984, investigation was conducted
o Edilberto admitted ownership of confiscated sum of money, but denied knowledge
of CB Circular 265
 August 13, 1985, Edilberto, through PALEA, sought not only for dismissal of case, but also for
reinstatement
 September 18, 1987 (3 years and 6 months after suspension), PAL issued resolution finding
Edilberto guilty
 Reinstated Edilberto
 Explained that period he was out was enough penalty
 Edilberto filed claim against PAL for backwages and salary increases granted
under CBA covering period of suspension

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 Denied

Decision:

 Undisputed that period of suspension of Edilberto laster for 3 yrs and 6 months.
o PAL committed a serious transgression where it delayed determination of his
culpability in offense charge
o Stated that delay was due to numerous administrative cases pending at that time
 Rules clearly provide that preventive suspension should not last for more than 30 days ->
Reinstated right after
o Otherwise, employee is entitled to salaries and other benefits that may accrue to him
during period of such suspension

D. Authorized Causes for Termination of Employment

Article 289. Closure of Establishment and Reduction of Personnel. Employer may terminate any
employee due to installation of labor saving devices, redundancy, retrenchment to prevent losses
or closing or cessation of operation (unless closed for purpose of circumventing provisions of this
Title) by serving a written notice on workers and Ministry of Labor and Employment at least 1 month
before intended date thereof.

In cases of termination due to installation of labor-saving devices or redundancy, worker affected shall
be entitled to separation pay = 1 month pay or at least 1 month pay for every year of service
whichever is higher.

In case of retrenchment to prevent losses and in cases of closure or cessation of operations not due
to serious business losses or financial reverses, separation pay = 1 month pay or at least ½ month pay
for every year of service whichever is higher.

Fraction of at least 6 months shall be considered 1 whole year.

Authorized Causes for Termination of Employment

1. Installation of labor-saving devices

2. Redundancy
3. Retrenchment to prevent losses
4. Closing or cessation of operation, unless closing is for purpose of circumventing law

1. Installation of Labor-Saving Devices. Installation of machinery to effect economy and efficiency in

employer’s method of production. When resorted to not merely effect greater efficiency but
principally because of serious business reverses and to avert further losses, devices could be
considered retrenchment.

Installation is management prerogative, and courts will not interfere w/ its exercise in absences of
abuse of discretion, arbitrariness, or maliciousness on part of management.

Requirements:

1. Employer exercises prerogative to install labor-saving device in good faith for advancement
of interest and not to defeat or circumvent employee’s right to security of tenure
2. Employer serves a written notice both to employees and DOLE at least 30 days prior to
intended date of termination

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3. Employer pays employees terminated at least 1 month pay or 1 month pay for every year of
service whichever is higher; 6 months = 1 whole year

2. Redundancy. Service capability of workforce is in excess of what is reasonably needed to meet

demands of enterprise. Factors are: 1). Overhiring of workers; 2) Decreased volume of business; 3)
Dropping of a particular product line previous manufactured by the company; 4) Phasing out of a
service activity previously undertaken by the business

2.1 Requirements for Redundancy. Employer must comply with ff. requirements:

1. Written notice served on both employees and DOLE for at least 1 month prior to intended
date of termination
2. Payment of separation pay = at least 1 month pay or 1 month pay for every year of service,
whichever is higher; 6 months = 1 whole year
3. Good faith in abolishing redundant positions
4. Fair and reasonable criteria in ascertaining what positions are to be declared redundant and
accordingly abolished

2.2 Criteria for Redundancy Programs and Duplication of Work. Court requires company to have fair
and reasonable criteria in implementing redundancy program. 1) Preferred status; 2) Efficiency; 3)
Seniority. Redundancy does not mean duplication of work. Fact that no person was holding same
position prior to termination of employee’s services does not show redundancy. In a well-organized
business, surprising to find duplication of work and 2 or more people doing work of one person.

Ground of redundancy does not require exhibition of proof of losses or imminent losses. It is only
retrenchment that requires proof of losses or possible losses as justification of termination of
employment.

Case 66: Coats Manila Bay, Inc. v. Ortega and Montero

Facts:

 Coats Manila engaged in business of thread production

o Clerk Analysts employed in Industrial Engineering Department
 April 27, 2000, Coats Manila issued memorandum announcing redundancy plan
o Necessary to prevent further losses
o Assured that redundancy plan would give employees more benefit than
retrenchment program
 135 employees were terminated including Clerk Analysts
o Advised on May 9, 2000 that they would be dismissed effective June 15, 2000.
o May 10, 2000, Coats Manila filed w/ 135 employees on ground of redundancy
 May 31, 2000, Coats Manila and union held labor management meeting to discuss fate of
employees
 June 1, 2000, Clerk Analysts received respective separation pay and executed release waivers
and quitclaims in favor of company
 11 terminated employees were rehired to different positions, but lower salaries
 June 8, 2000, Clerk Analysts filed complaint for illegal dismissal
o Asserted despite their dismissal due to redundancy, their functions were assigned to
other workers.
o Coats Manila cannot invoke redundancy since no showing that their functions were
duplicitous or superfluous.

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o Coats Manila failed to show suffering from downturn in business that would warrant
redundancy.
 Coats Manila countered it was management prerogative and that they were notified of
redundancy

Decision:

 Coats Manila found that it was more cost-efficient to maintain only 1 employee to handle
computation of incentives of production employees.
 Clerk Analysts’ positions were abolished because there was duplicity of functions of clerk
analysts in Industrial Engineering Section.
o Even union agreed of its redundancy
 Coats Manila employed reasonable criteria in choosing which positions to declare redundant
 As early as April 22, 2000, management upfront w/ plans to implement redundancy program
as evidenced by memorandum about serious business downturn
o Mentioned the criteria to be made redundant
 Performance
 Absenteeism
 Record of disciplinary action
 Efficiency
 Work attitude
o Basis will be seniority
 Redundancy program was fair, well thought of, and made in good faith

2.3 Abolition of Position is a Management Prerogative. In redundancy, what is looked into is the
position itself, nature of the service performed, and necessity of such position. Position may be
properly abolished by employer due to redundancy. Characterization of employee’s service as no
longer necessary or sustainable is an exercise of business judgement (management prerogative).
Courts will not interfere as long as there was not abuse of discretion, arbitrary, or malicious action

Not relevant that financial troubles were not in employee’s making. Cannot insist on retention on
grounds that he has not contributed to financial problems of the company. Not required for employer
to be suffering financial losses to terminate on grounds of redundancy.

2.4 Redundancy Due to Hiring of Independent Contractors. Justified when engagement of

independent contractors is undertaken to effectuate more economic and efficient methods of
production. Employer cannot be denied the faculty of promoting efficiency and attaining economy
by a study of what units are essential for its operation. Determination of whether services be
performed by its personnel or contracted to outside agencies belong to employer. In absence of
proof that management acted w/ malicious intent, court will not interfere.

3. Retrenchment to Prevent Losses. Termination of employment initiated by employer through no

fault of employee w/o prejudice to latter, resorted by management of during periods of business
recession, industrial depression or seasonal fluctuations or during lulls over shortage of material.
Reduction in manpower and measure utilized by employer to minimize business losses.

3.1 Requirements for Retrenchment. 1) Due to serious, actual and real business losses; 2) Written
notice to both employees and DOLE 1 month before intended date of retrenchment; 3) Separation
pay = 1 month pay or at least one-half month pay for every year of service, whichever is higher,
fraction of 6 months=1 year; 4) Done in good faith for advancement of company’s interest and not to
circumvent employee’s right to security of tenure; 5) Fair and reasonable criteria to ascertain who

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would be dismissed and who would be retained (status, efficiency, seniority, physical fitness, age,
financial hardship)

3.2 Retrenchment Must be Due to Serious, Actual and Real Business Losses. Not all losses incurred
or expected to be incurred justify retrenchment. Only the ff. are jurisprudential standards for losses:

1. Losses expected should be substantial and not merely de minimis in extent.

2. Losses apprehended must be reasonably imminent, as such imminence can be perceived
objectively and in good faith by employer. There must be a certain degree of urgency as it
means serious consequences for livelihood of employees
3. Reasonably necessary and likely to effectively prevent expected losses. Employer should have
taken measures prior or parallel to retrenchment to forestall losses. (Cut other costs other
than labor costs)
4. Alleged losses if already realized and expected imminent losses sought to be forestalled must
be proved with sufficient and convincing evidence. Would be too easy to abuse this ground
for termination w/o this

Employers who lay off substantial amount of workers while continuing to dispense fat bonuses (golden
parachutes) can scarcely claim good faith to avoid losses. It must be done as a last resort, after less
drastic means (reduction of both managerial and rank-and-file bonuses and salaries, reduced time,
improving manufacturing efficiencies, trimming of costs for marketing etc.)

Case 67: Pepsi-Cola Products Philippines, Inc. v. Molon et al.

Facts:

 Pepsi operates plant all over Philippines, one is located in Tanauan, Leyte
o Employees are members of Union
 1999, Pepsi adopted company-wide retrenchment program
o Sent notice to DOLE and individual notices to affected employees
o Pepsi notified DOLE of initial batch of 47 workers to be retrenched
 Employees filed separate complaints for illegal dismissal
o Pepsi’s hiring of new employees as replacements after retrenching negated Pepsi’s
claim of financial losses.
o Evidence was inadequate to prove Pepsi did suffer from any economic or financial loss
 Pepsi claims that its losses were sufficiently substantiated by audited financial statements
o Controversy was not about validity of retrenchment program but regarding selection
of employees to be retrenched

Decision:

 Retrenchment: termination through no fault of employee due to financial losses, industrial

depression, etc.; must be done as last resort and must prove with evidence
 Requirements: 1) Not merely de minimis; 2) Written notice to both DOLE and employees; 3) 1
month pay or ½ month pay for every year of service, whichever is higher; 4) In good faith; 5)
Fair and reasonable criteria
 All requirements met by Pepsi
o Financial statements were substantial evidence viewed in light of financial crisis that
hit the country
o Notice requirement 1 month prior
 Pepsi’s management exerted conscious effort to review criteria on selection of employees

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o Allegation that retrenchment was subterfuge to dismiss employees cannot be given

credence for lack of sufficient evidence
 Dismissal was in accordance with law.

3.3. Business Losses Shown by Audited Financial Statements. Shows financial documents (yearly
balance sheets, profit and loss statements and annual income tax returns); Prepared and signed by
independent auditors or otherwise can be assailed as self-serving documents; Financial statements
for past years must also be shown to indicated trend

4. Closure/Cessation of Business. Complete cessation of operations and/or shutdown of

establishment of employer. Carried out to either stave financial ruin or promote business interest of
employer. Need not depend for validity on evidence of actual or imminent reversal of employer’s
fortune. Can be done anytime regardless of underlying reasons and motivations.

4.1 Requirements for Closure/Cessation of Business. Management prerogative exclusive to employer

and no court can meddle with except if employer fails to comply with ff.:

1. Closure and cessation is bona fide. Burden of proving termination was for serious losses or
financial reverses rests on employer
2. Closure of entire establishment and not merely a division or department of establishment
3. Written notice served to employees and DOLE at least 1 month before intended date of
closure
4. Separation pay = 1 month pay or ½ month pay for every year of service whichever is higher
(When closure not due to financial losses)

Case 68: Marc II Marketing, Inc. and Joson v. Joson

Facts:

 Marc II engaged in buying, marketing, selling and distributing in retail or wholesale for export
or import household appliances.
 Alfredo, general manager, incorporator, director and stockholder of Marc II
 June 30, 1997, Marc II decided to stop and cease operations
o Evidenced by Affidavit of Non-Operation dated August 31, 1998 due to poor sales
collection aggravated by inefficient management of its affairs
o Formally informed Alfredo that cessation of business apprised him of termination of
services
 Alfredo filed complaint for reinstatement and money claims against Marc II

Decision:

 Issue is whether or not Alfredo’s dismissal from employment is illegal based on ground of
cessation of business operations of Marc II
 Closure or cessation of business may either be due to serious business losses or otherwise
o If due to business losses, upon employer to prove the same
o If otherwise, employer can lawfully close shop as long as it was bona fide in character
and not impelled by a motive to defeat tenurial rights of employees and employees
were paid separation pay
 Mere poor sales collection, coupled with mismanagement, does not amount to serious
business losses

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o Nonetheless, Marc II can still cease business operations as long as it was not done for
purpose of circumventing provisions of termination of employment
 Alfredo entitled to payment of separation pay = 1 month pay or ½ month pay whichever is
higher.
o Demandable right unless because of serious business loses

4.2. Closure of Business Not Due to Serious Business Losses. Employees are always given separation
pay. Computed from time employees commenced employment until time employer ceased
operations. Employer has burden of showing that dismissal was for authorized cause.

4.3. Closure of A Particular Division or Department Due to Serious Business Reverses Constitutes
Retrenchment. Constitutes retrenchment and not closure of business.

Case 69: Waterfront Cebu City Hotel v. Jimenez et al.

Facts:

 Casino Employees hired for The Club

o The Club is division under Waterfront which catered to foreign stakes gamblers
 May 12, 2003, Casino Employees received letters of termination from Waterfront
o 45 Employees were notified of closure of Club
o Took effect on June 15, 2003
 Filed complaint for illegal dismissal
o Refused to believe The Club was suffering losses
 Knew exactly number of arrivals as well as junket clients of The Club
 Presented documents to show arrival of foreign guests
o They should have been allowed to work in other departments of the hotel
 Waterfront averred the since April 2002, it has been incurring losses
o Temporarily ceased operations effective June 15, 2003
o Presented financial statements of Waterfront Promotion, Ltd

Decision:

 Waterfront argues that retrenchment to prevent losses was undertaken to justify dismissal
o Likened closure of The Bar to retrenchment
o Acting on same premise that Club is a division of Waterfront, Casino Employees
demanded to be transferred to another department of Waterfront
 Cannot be accommodated in other departments of Waterfront
o Duties and functions peculiar to positions they hold in The Club
 In case of retrenchment, proof of financial losses is determining factor
o Waterfront presented financial statements
 Showed that relationship is so intertwined that The Club is practically
considered a department/division of Waterfront Promotion Ltd.
o Losses were reflected in presented financial statements
 Closure of division/department constitutes retrenchment and not closure of company
o Waterfront has not totally ceased operations, but merely closed down a department

5. Analogous Cause: Sale of Business. Management prerogative of employer to merge or consolidate

its business w/ another, or sell or dispose of substantially all of its assets and properties which may
bring about termination of employees in the process. Motivated by good faith in order to justify non-
absorption dismissal of employees; entitled to separation pay.

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5.1 Transferee Has No Liability to Continue Employing Employees of Transferor. Innocent transferee
has no liability to the employees of transferor to continue employing them when such transfer of
ownership is in good faith. The most that transferee can do, for reasons of public policy and social
justice, is give preference to qualified separate employees in filling of vacancies in facilities of
purchaser.

5.2 Transferee Has No Liability for Past ULP of Transferor. Transferee not liable for past ULP of
previous owner except:

1. Liability therefore is assumed by new employer under contract of sale

2. Liability arises because of new owner’s participation in thwarting or defeating rights of
employees

III. Procedural Due Process in Termination

Termination of employees for just or authorized causes (substantive due process) in termination of
employees, must be accompanied by the procedural due process requirements.

A. Termination Based on Just Causes Provided by Law

1. Notice and Hearing Requirements. Relates to some blameworthy act or omission on part of
employee. Following are procedural requirements:

A. A written notice served to employee specifying grounds for terminations and giving
reasonable opportunity for employee to explain his side
B. Hearing or conference during which employee is given opportunity to respond to charge,
present evidence, or rebut evidence; may be assisted by counsel
C. Written notice of termination indicating after due consideration of all circumstances, grounds
have been established to justify termination

TL;DR: Twin requirements of notice & hearing: 2 written notice to employee before termination,
inform employee of particular acts for which dismissal is sought, informing employee of employer’s
decision to dismiss him

Not limited to formal hearing only; any meaningful opportunity to controvert charges against and
employee

2. Rationale behind Employee’s Right to Due Process. Right to labor is constitutional and statutory
right. Every man has natural right to fruits of own industry. Person who has been employed to
undertake certain labor and has put time and effort, is entitled to be protected. Also deemed to be a
property right w/in meaning of constitutional guarantees because that is his means of livelihood

Worker cannot be deprived of his job, a property right, w/o satisfying requirements of due process.

B. Termination Based on Authorized Causes Provided by Law

1. Notice Requirements.

A. Written notice to employee

B. Written notice to DOLE 30 days before effectivity specifying grounds for termination

2. No Hearing Required. Do not relate to blameworthy acts or omissions on part of employee, but
rather to financial and business circumstances of employer.

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3. Rationale for Notice to DOLE. Absence of hearing requirement does not mean that employee may
not contest reality or good-faith character of authorized cause asserted by employer as grounds for
termination. Appropriate forum for dispute is DOLE and not an investigation or hearing to be held by
employee. Give DOLE opportunity to ascertain verity of alleged authorized cause of termination.

4. Separation Pay Necessary in Case of Termination Due to Authorized Causes. Aside from 3-day
notice required, employer liable for separation pay. Designed to provide employee w/ financial means
during the period he is looking for another employment.

5. Computation of Separation Pay.

5.1 Installation of Labor Saving Device: At least 1 month pay or 1 month pay for every year of service;
whichever is higher

5.2 Retrenchment to Prevent Losses or Closure/Cessation of Business Not Due to Serious Business
Losses: At least 1 month pay or ½ month pay for every year of service; whichever is higher.

5.3 Closure/Cessation of Business Due to Serious Business Losses: No Separation Pay.

6. Basis of Separation Pay. Latest salary rate of employee; rate before deduction by employer

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