Labor Reviewer

Labor 1 - FLJ Joachim Dompor D2017
Updated by MATSUMURA 松村 C2020
I. EMPLOYER EMPLOYEE RELATIONSHIP Power to dismiss

Need not be exercised
• EMPLOYER As long as it exists and can be exercised at the option of the
Employs the service of another employer
One for whom employees work and who pays their wages and salaries Power of control not only to the end to be achieved but also the means
to be used in reaching such end (Control test)
• EMPLOYEE Most important
Engaged in the services of another Must be present
Performs services for another Calls only for its existence, not the actual exercise
Works for salaries or wages where the work is subject to the control of This is the most important because the first three may also exist
the employer in independent contractors.
T/F, there is no power to control in an independent contractor
a. Elements of Employer-Employee Relationship relationship? False. There is still control, but only as to the
results.
• DETERMINATION OF ITS EXISTENCE IS A MIXED QUESTION OF In an EER, there is control as to the means and the method not
LAW AND FACT just the results. Meanwhile for an independent contractor there is
Question of law only control as to the results.
Characterization by the law prevails over that provided in the What if a worker follows the company’s rules and regulations,
contract does it mean there’s always an EER? No. Depends on the kind
Question of fact of rules. Analyse whether the rules will affect the means and
Depends upon the facts of each case methods of the individual working.
• FOUR-FOLD TEST FOR THE EXISTENCE OF EMPLOYER- • TWO-TIERED TEST

EMPLOYEE RELATIONSHIP (EER) When used? Applies in cases where there is a genuine confusion as to
Power to select or engage the employee the existence of an employment contract or contracting arrangement
Payment of wages Where the control test is not sufficient in such cases
Pertains to the POWER to pay wages. It does not necessarily When there is no written agreement between the parties
mean that the wages have to be actually paid before complying When the worker has multiple positions under the employer
with this requisite otherwise employers would just not pay their Control test
workers and claim that no EER exists. Economic Dependency Test/Economic Reality Test
Wages need not be fixed Is the alleged employee dependent on the job as a means of
Need not be remunerated in a single particular way livelihood? If YES, he is an employee
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Applies in cases where there is a genuine confusion as to the No particular form of evidence is required to prove the existence of an
existence of an employment contract or contracting employer-employee relationship
arrangement. Where the control test is not sufficient in such Any competent and relevant evidence to prove it may be
cases admitted
Is the alleged employee dependent on the job as a means of
livelihood? If YES, he is an employee • CASES
In cases where the economic dependency test is applied, the Reyes v. Glaucoma Research Foundation
control test/four fold test must also first be applied The economic reality test: This is especially appropriate when, as
In order to be considered an employee under these in this case, there is no written agreement or contract on which
situations, the alleged employee must pass the Control to base the relationship.
Test and the Economic Dependency Test “Two-tiered Petron case v. Chevron case
test” If the SC looked at the contract in both cases, they seem to be
Again, the economic dependency test is resorted to only the same. So how come the court had different ruling (no EER
in cases where there is a “blur” in Chevron, existence of EER in Petron)? In Petron, there was
contrary evidence.
• WHY IS IT IMPORTANT TO DETERMINE WHETHER THE Chevron case: No EER because:
ARRANGEMENT IS AN EMPLOYER-EMPLOYEE RELATIONSHIP Selection and engagement: It was SJS (independent
OR NOT contractor) which assigned him to work at Chevron's
It determines what law applies Pandacan depot.
If it is an EER, then Labor Law applies Wages: Employee failed to present evidence that Chevron
If it is not an EER, the contract or other laws govern was the one actually paying his wages. Moreover, SJS paid
It determines the proper jurisdiction in case a conflict arises for his SS, PhilHeath, and Pag-IBIG premiums
If it is an EER, jurisdiction is with the NLRC Dismissal: he was dismissed because Chevron and SJS
If it is not an EER, jurisdiction is with the regular courts ended their contract and SJS later on ceased to operate
SJS was an independent contractor and exercised control
• OTHER NOTES ABOUT EER over the employee.
It is essentially a consensual contract Petron case: EER
Kind of work performed is not the definitive test of whether the worker Petron failed to prove that ABC was not a labor only
is an employee or not contract. A finding that a contractor is a ‘labor-only’
Passage of time or length of service is not an element of an employer- contractor is equivalent to declaring that there is an EER
employee relationship between the principal and the employees.
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Employee’s functions such as maintenance and utility • BOUNDARY- HULOG SCHEME

works were directly related to PETRON’s main business Dual juridical relationship
(LPG fillers and maintenance crew, LPG operator Employer-employee
supervisor, warehouseman and utility worker, tanker Vendor-vendee
receiving crew and utitlity workers) Employer still has control and supervision over the driver
Summary of corporate officer v. employee (Matling Industrial v. Coros;
Cosare v. Broadcom Asia; and Real v. Sangu Phils) • DOCTOR ENGAGED ON RETAINERSHIP BASIS
For an officer to be considered a corporate officer (hence within No element of control
the ambit of the SEC), he must be a corporate officer expressly Not an employee
stated by the law/by-laws AND elected by the board or Independent contractor
stockholders (Sec. 25 of the Corporation Code)
A stipulation in the by-laws which says “the Board may create • INSURANCE AGENTS
appointive positions other than the positions of corporate The fact that they are to abide by the rules of the company with regard
Officers,” are not considered as corporate officers within the to certain practices do not make them employees
meaning of Section 25 These rules refer only to the result, not the method
If the dispute relates to a persons’s rights and obligations as a
regular officer, instead of as a stockholder of the corporation, II. SIX CLASSES OF EMPLOYEES
the controversy cannot be deemed intra-corporate.
In Matling, respondent was not appointed as Vice Note: It must have already been proven that there’s an employer-employee
President for Finance and Administration because of his relationship
being a stockholder or Director of Matling but because
of his years of service a. Classes of employees
In Cosari, the dispute was Cosare’s rights and obligations
as a regular officer of Broadcom • REGULAR
In Real, the reasons given by Sangu Phils for dismissing FLJ: Default class
Real have something to do with his being a Manager of In reality there are two types of regular employees
Sangu Phil corporation and nothing with his being a By nature
director or stockholder. Engaged to perform activities usually necessary or
desirable to the usual trade or business of the employer
b. Determination of the existence of an EER in certain industries according Determined by the nature of the work and its relation to
to jurisprudence the business
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Reasonable connection between the (1) particular activity specific project, and
performed and (2) the nature of the usual business or specified duration (“ a day certain”)
trade NOTE: these elements must be stated in the written project
Without reference to the length of service employment contract
By length of service/period Fixed project or undertaking must be specific; employee must be
From casual to regular after one year of work as a casual informed of such assignment
employee, whether continuous or broken. Completion or termination of which is determined at the time of
Regular employment with regard to the activity in which engagement
he is employed while such activity exists “A day certain” a day that will definitely come
If X worked 1 year of the same incidental work, can you Employment is coterminous with each project
be considered a regular employee? Yes. X can argue that Length of service is not the controlling test
he was a casual employer and since he has worked for a Indicators of project employment
year, that he is now a regular employee. Duration is reasonably determined
Such duration and specific work is defined in an employment
• CASUAL agreement and made clear at the time of hiring
Incidental work to the usual trade or business of the employer, Work performed is in connection with a particular project/
regardless if such service is continuous or broken undertaking for which he is engaged
BUT if the employee has been rendering work for more than a year, Employee is free to offer services to others while not employed
whether continuous or broken, he is considered a regular employee with and waiting engagement
respect to the activity in which he is employed while such activity exists Termination is reported to DOLE within 30 days after separation
(as aforementioned) Undertaking to pay completion bonus
Once regularized, the salary should not be reduced Can a project employee perform work that is necessary and desirable to
If casual attains regular status, the casual employee becomes entitled to the business of the employer? YES.
the benefits attached to regular employment. If employer fails to inform the government of the termination of the
With respect to security of tenure, the casual employee attains equal project, the employee automatically becomes a regular employee? (i.e.,
status as regular employee? because to be a project employee, it is indispensable that the employer
Not necessarily. The casual employee only becomes regular as informs the government)
regards the work that s/he was already performing prior to NO. Failure to inform the government of the termination of the
regularization. project is only a BADGE/INDICATION of regular
employment.
• PROJECT If the employee is not a project employee, what is he?
Elements:
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If his work is usually necessary and desirable to the main trade or EXCEPTION: when the nature of the work entails a
business: regular employee longer probationary period such as Apprenticeship
If his work is incidental to the main trade or business: casual agreement providing for a longer period, and those
employee pertaining to teachers (see below for further discussion)
Requires a reasonable standard for regular employment, which is
• SEASONAL made known by the employer to the employee at the time of
Even if the work is necessary and desirable to the business of the engagement (Knowledge, skill, and attitude)
employer, if (1) the work is seasonal in nature, and (2) the employee is GR: provide the reasonable standards
hired for only that season, then employment/work or service is seasonal EXC:
in nature and the employment is for the duration of the season for only 1. When work is self-descriptive so long as the
one season employer has proved that he extended reasonable
EXCEPTION: There is such a thing as seasonal-regular employees (i.e. efforts in informing the standard. Sometimes the
re-hired to work the same season in another year) Implication of this is job title is enough, sometimes job description will
that the employer will be compelled to hire them when the same season be needed. (Abbott 2011 and Abbot 2014)
comes again. 2. when the infraction is, according to basic
EXCEPTION TO EXCEPTION: even if rehired, the seasonal knowledge, patently wrong then such standard
worker will not attain regular status if (1) the employee is hired need not be expressly conveyed at the time of
on/off for a single phase and (2) the area is comparatively small engagement. (Carvajal v. Luzon Development
(Mercado case) Bank)
Can one be considered a regular seasonal employee for industrial seasons Employee may be dismissed for just and authorized causes or for
(e.g. Christmas season)? Yes, but it must be proven that there’s a change failure to qualify as a regular employee according to the
in demand for that season. reasonable standard
Dissatisfaction of the employer must be real and in good
• PROBATIONARY faith
This is the prerogative of the employer. There must be proof to show that performance was
Probationary refers to the purpose of the term, not its length unsatisfactory
Essential features If a particular time is prescribed, termination must be
Not more than six months from the day he starts working within such time if formal notice is required, that form
entitled to security of tenure for the short period/limited tenure must be used
Six months is deemed to be 180 days (see: Mitsubishi; No unlawful discrimination
based on Civil Code) If service is rendered by the employee after the probationary
period
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He is considered a regular employee • FIXED-TERM

The trial period is for the employer to see if the employee is “hirable” Project employment is a fixed-term employment but not all fixed-term
for regular employment and for the employee to show that he is employment is project or seasonal
qualified for regular employment Period of employment is fixed
Probationary employment is not mandatory Requisites
Management prerogative Fixed-term agreed upon
Failure of employer to have the standards for regular employment made Entitled to security of tenure during the fixed-term
known at the time of engagement to the employees makes the employee Contract was knowingly and voluntarily entered into OR
regular from the day of hiring not probationary. Contract was more or less negotiated at arms-length or on equal
Employee is not entitled to the entire length of the probationary period footing/bargaining position. It must be shown through evidence
If found unfit for regular employment before the end of the that the employee can bargain.
period, he may be validly dismissed Example: email trail that the employer showed the
BUT this presupposes that the standards for regular employment employee the terms of employment and asked for his
were made known to the employee at the time of engagement input.
Conversely, once the employer finds the employee qualified, the Work that is usually necessary or desirable to the usual trade or business
employer can offer regular employment even before the end of of the employer may be covered by fixed-term employment
probationary period Renewal of the fixed-term employment several times exceeding one year
Successive probations are prohibited establishes regular employment
EXCEPTION: There is only one instance when an employer can The requisites are strictly construed against the employer
extend an already stipulated six month probationary period No undue pressure on employee
1. Act of compassion on the part of the employer (i.e. No moral dominance over employee
employer gives additional time for employee to prove his Acid test for the validity of fixed-term employment
worth) Was it resorted to for the circumvention of the security of tenure
If job is technical in nature, the parties can agree from the onset for a of employees? If YES, then it is not valid
probationary period longer than six months When employee continues to render the same services as he rendered
Reinstatement is a possible remedy in cases of illegal dismissal of during the term after the term expires without explicitly entering into a
probationary employees new agreement
Carvajal case: the chronic tardiness can also equate to just cause for There is a prima facie presumption that he is serving under a new
dismissal because of misconduct. contract with the same terms and conditions
Employee becomes regular by nature and not subject to a
term
Can the fixed-term employee be considered regular?
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YES, when the fixed-term employment was continuously If the employer shows compliance with the requisites of those
extended or renewed the same position, with the same duties and types of employment, the necessity of the work to the business
remained in the employ without any interruption (Fuji case), becomes immaterial
EXCEPT if the the employer can prove the requisites of a valid Thus, not deemed regular employees
fixed-term employment.
Q: In determining whether or not successive employment of a fixed- • SEASONAL VIS-À-VIS REGULAR
term employee was done in a regular manner, what is the question that Employment is seasonal if he is employed for only one season for the
the SC always ask? duration of season
Whether or not it was done to circumvent the rule on If the employee is regularly hired over the years when the season comes,
regularization. they are considered regular seasonal employees
FLJ: It is not enough to comply with the two requisites of fixed- Deemed to be on leave only when working for others during the
term employment!!! off season
But the “no work, no pay” principle applies — Also for regular
• FURTHER NOTES ON PROJECT VIS-A-VIS SEASONAL EMPLOYEES project employees
They are also entitled to security of tenure at least for the duration of BUT regular seasonal employees constitute a different bargaining unit
the project or season from regular employees
Difference from regular employees is NOT in the nature of the work Mercado vs NLRC
but in the duration of its existence The workers were not hired regularly and repeatedly for the same
phases of agricultural work, but on and off for any single phase
NOTE: The first five classes are provided for in the Labor Code, while the last thereof.
(Fixed-term) is jurisprudential and is developed from a civil law concept Workers were able to work with other haciendas even during the
season
• DATE OF HIRING Also, the size of the hacienda was small (7 1/2 hectares of ace
Starting point for the counting of the one year period for purposes of land and 10 hectares of sugar land)
regular employment by length of service Thus, they were not deemed regular seasonal employees
Regular after the first day following the one year period As compared to Bino v. Cuenca wherein the land area was big
Starting point of regular employment by nature (235 hectares), hence it simply does not allow for respondent
workers to render work only for a definite period. That and the
• FIXED-TERM VIS-À-VIS PROJECT VIS-À-VIS SEASONAL failure to prove that they were hired for only one season made
The distinguishing factor between the three is not that the work is them regular seasonal employees
usually necessary or desirable to the usual trade or business
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• REGULAR PROJECT EMPLOYEES Universal Robina v. Acibo

Continuous rehiring of employees after cessation of the project Respondents were considered regular seasonal employees
Work was necessary or desirable to the business of the employer because: (1) they were tasked to perform duties regularly and
BUT why is this not applicable to project employees in the habitually needed in URSUMCO’s operations during the milling
construction industry (see: Filsystems) season; (2) they were regularly and repeatedly hired to perform
The persisting need for their services is sufficient evidence of the the same tasks year after year.
necessity and indispensability of services to the business However, regular seasonal employees should not be confused
Also for regular seasonal employees and fixed-term employee with the regular employees of the sugar mill such as the
administrative or office personnel who perform their tasks for
b. Cases on classes of employees the entire year regardless of the season. Regular Seasonal
employees cannot automatically be governed by the CBA
• CONDITIONAL EMPLOYEES Paz v. Northern Tobacco Redrying Co. Inc
Enrique Sagun v. ANZ Upon failure to present a copy of a CBA on the alleged
While there was a perfected contract of employment, the retirement policy, Art. 287, as amended by RA 7641, applies
employment contract required a satisfactory completion of which states that the retirement age is 65.
petitioner's background check before he may be deemed an A regular seasonal employees is one who performs services
employee of ANZ (suspensive condition). Thus, until and unless necessary and indispensable to the business. If the employee has
petitioner complied with the satisfactory background check, there been performing the job for at least a year, even if the
exists no obligation on the part of ANZ to recognize and fully performance is not continuous and merely intermittent, the law
accord him the rights under the employment contract. deems repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of that
• SEASONAL activity to the business.
Gapayao v. Fulo In this case, Paz, a seasonal sorter for 28 years was a regular
Regular seasonal employees are those called to work from time to seasonal employee
time. The nature of their relationship with the employer is such
that during the off season, they are temporarily laid off; but • PROJECT EMPLOYEES
reemployed during the summer season or when their services Pasos v. PNCC
may be needed. They are in regular employment because of the While for first three months, Roy can be considered a project
nature of their job, and not because of the length of time they employee of PNCC, when his services were extended without
have worked. any specification of as to the duration this made him a regular
In this case, his employment was continuous in the sense that it employee of PNCC.
was done for more than one harvesting season.
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Moreover, failure of an employer to file termination reports after employment is coterminous with each project or phase of
every project completion proves that an employee is not a project the project to which they are assigned
employee Non-project employees – those employed without
In this case he was initially hired as “Clerk II (Accountant)” and reference to any particular construction project or phase
was assigned to the “NAIA-II Project”. Then he was rehired as of a project
an Accounting Clerk (Reliever)” and assigned to the “PCSO-Q.I. Skykes
Project Call centre agents can be considered project employees if their
Leyte Geothermal Power Progressive Employees Union v. PNOC employment is dependent on a third party.
When the project employment contract stipulates a probationary In this case, it was dependent on the contract between Sykes and
period, when an employer renews a contract of employment Alltel wherein Sykes will render services to accommodate the
after the lapse of the six-month probationary period, the needs and demands of Alltel clients for its postpaid and prepaid
employee thereby becomes a regular employee. services
Even assuming that they were project employees, the petitioners San Miguel v. NLRC1
could only be considered as regular employees because: (1) they X was hired to repair the furnace needed to manufacture glass.
were continuously rehired by the same employer for the same San Miguel isn not engaged in preparing furnaces. Although the
position as extruder operators; and (2) these tasks are vital, activity was necessary to enable petitioner to continue
necessary and indispensable to the usual business or trade of the manufacturing glass, the necessity for such repairs arose only
employer when a particular furnace reached the end of its life or operating
DM Consunji v. Gobres cycle. X was validly considered a project employee.
Once a project is completed, no prior notice is required, but if a NOT PROJECT BUT REGULAR
project employee is to be terminated before the completion of Malicdem v. Marulas Industrial Corp
the project, there must be just or authorized cause + notice. A project employee who is (1) continuously rehired for
Gadia the same tasks, and (2) the tasks are vital, necessary and
“co-terminous with the project” is considered as a determinable indispensable to the usual business or trade is deemed a sa
time regular employee
Exodus v. Biscocho PLDT v. Ylagan2
There are two types of employees in the construction industry: Accounting duties are not shown as distinct, separate, and
Project employees – those employed in connection with a identifiable from the usual undertakings of PLDT
particular construction project or phase thereof and such because it maintains its own accounting department.
1 Found in Chan-Robles Bar Reviewer
2 Found in Chan-Robles Bar Reviewer
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Punctuality is a reasonable standard imposed on every employee -

• PROBATIONARY whether government or private. (meaning that even if it’s not
Tamson’s Enterprise v. CA stated in the standards per se, it is basic knowledge)
Where no standards are made known to the employee at the time
of engagement, he shall be deemed a regular employee. • FIXED-TERM
Abbott v. Alcaraz (2011): Jamias v. NLRC
An exception to the rule that the reasonable standard must be The necessity and desirability of the work performed by the
conveyed is when the job is self-descriptive. Here, the employees are not the determinants in term employment, but
conveyance of her duties and responsibilities as a managerial rather the "day certain" voluntarily agreed upon by the parties.
employee were necessary enough because “adequate In this case, there is no indication that the employees were made
performance of one’s duties is, by and of itself, an inherent and to sign the contracts against their will. Hence, the employees
implied standard for a probationary employee to be regularized; knowingly agreed to the terms of and voluntarily signed their
such is a regularization standard which need not be literally respective contracts.
spelled out or mapped into technical indicators in every case.” Fuji gave her instructions on what to report and even her mode of
The court also delved into other examples of self-descriptive transportation in carrying out her functions was controlled. (Fuji v.
work namely: cooks, drivers, and maids Espiritu)
Abbott v. Alcaraz MR (2014) Note: although assigned under Independent Contractors, the
Same decision, but the court mentioned a new set of examples court held that Arlene was a fixed-term employee.
of self-descriptive jobs namely: lawyers, artists, and journalists.
UE v. Pepenio • PROBATIONARY VIS A VIS FIXED TERM EMPLOYMENT FOR
CBAs must be read in conjunction with statutory and TEACHERS
administrative regulations governing faculty qualifications. Under Rule on employment on probationary status of teachers is governed by
the 1992 Manual of Regulations for Private School, it requires at the Manual of Regulations for Private Schools (Labor code as
least a master’s degree before one can be a regular university supplementary only)
teacher). Maximum Probationary Period under the Manual
Herrera-Manaois v. St. Scholastica College Elementary and secondary levels - Max 3 consecutive years
A master’s degree is necessary to be a permanent full-time faculty Tertiary level
member in territary schools. Failure to acquire this, or other Semestral term: max 6 consecutive regular semesters
necessary requirements, would make such person a part-time. A Trimestral: max 9 consecutive trimesters
part-time faculty does not enjoy permanence of employment/ The reasonable standards must be known by the employer to
security of tenure. the employee at the time of his engagement (Art. 281 Labor
Carvajal v. Luzon Development Bank Code) —start of the semester
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Other requirements under the Manual the workplace parties really intended to limit the period of their
Full-time faculty must possess at least the minimum relationship to any fixed term and to finish this relationship at
qualifications prescribed by the Manual. Otherwise, they are the end of that term. If we pierce the veil of the fixed-term
considered part-time. employment contracts, we see a fixed-term contract conveniently
For territory level, the teacher must have obtained at least a used by the school to define and regulate its relations with its
master’s degree teachers during their probationary period.
This minimum requirement is neither subject to the prerogative of the Given the clear constitutional and statutory intents, we conclude
school nor to the agreement between the parties. For all intents and that in a situation where the probationary status overlaps with a
purposes, this qualification must be deemed impliedly written in the fixed-term contract not specifically used for the fixed term it
employment contracts between private educational institutions and offers, Article 281 should assume primacy and the fixed-period
prospective faculty members. Those who are seeking to be educators are character of the contract must give way.
presumed to know these mandated qualifications. The minimum requirement under the is neither subject to the
At the end of the school year, the employer has the option not to renew prerogative of the school nor to the agreement between the parties. For
the contract. If the contract is not renewed, the employment all intents and purposes, this qualification must be deemed impliedly
relationship terminates. If the contract is renewed,, the probationary written in the employment contracts between private educational
employment continues. institutions and prospective faculty members.
However mere rendition of service for three consecutive years does not Teachers, however, can still be hired on a fixed-term basis such as when
automatically ripen into a permanent appointment. they are hired to substitute for a regular professor. In these instances, the
The employer must: teacher is a fixed-term employee and such period cannot be counted
Renew the contract after the expiration of the probation their “probationary period” should they be hired as teachers under
period before the teacher is entitled to regular or probation.
permanent employment status. (Magis Young Achievers’
Learning Center v. Manalo) — in other words, the school
has no legal obligation to reappoint the teacher after the
lapse of the probationary period.
The employee must in addition to the 3 years of service:
Be a full-time teacher, and
His services rendered are satisfactory.
Probationary vis-a-vis fixed term employment of teachers (Mercado v.
AMACC)
Schools utilize its fixed-term contracts as a convenient
arrangement dictated by the trimestral system and not because
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SUMMARY TABLE OF CLASSES OF EMPLOYMENT
Probationary Regular Seasonal Project Casual Fixed-term
Elements 1. 180 day period (has Nature: Work 1. Work is seasonal 1. There’s a specific 1. Incidental 1. Fixed term agreed
exemptions) performed is usually in nature project functions upon
2. Reasonable standards necessary and 2. Employee worked 2. Duration of 2. Work is for a 2. Voluntarily
conveyed at the time of desirable in the usual for that season project is definite period entered into, OR
engagement trade or business determined or known to the Employer and
determinable at employee employee are
Length: casual the time of more or less on
employees after one engagement equal footing
year of work, whether
continuous or broken *must be stated in the Note: work may be
written project necessary or desirable
Probationary employment contract in the employer’s usual
employment: the day trade or business.
after the probationary Note: project may be
period ends within the regular
business of the
company, OR not
within the regular
business. For both, the
project must be
distinct and separate
and identifiable as
such from other
undertakings.
Termination 1. Just cause 1. Just cause 1. Just cause 1. Just cause 1. Just cause 1. Just cause
of 2. Authorized cause 2. Authorized cause 2. Authorized cause 2. Authorized cause 2. Authorized cause 2. Autjorized cause
employment 3. Failed to meet the 3. End of the season 3. Completion of the 3. End of the period 3. End of the period
standards (must be done (but if regular project (No need (notice not
before the probationary seasonal, must be for prior notice) necessary)
period ends and does not hired annually for
require notice and that season)
hearing)
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Probationary Regular Seasonal Project Casual Fixed-term
Establishes 1. The day after the N/A 1. When employed 1. Continuous 1. Repeated rehiring 1. Renewal of fixed
regular probationary period ends for more than one rehiring of term employment
employment 2. No reasonable standards season employees after several times
conveyed at time of cessation of the exceeding one year
engagement NOTE: regular project
seasonal is different 2. Failure to present
from regular the written project
employees employment
contract
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III. I N D E P E N D E N T C O N T R A C TO R S A N D L A B O R - O N LY • CONTRACTING DEFINED [D.O. NO. 174]

CONTRACTORS Agreement whereby a principal agrees to farm out to a contractor/
subcontractor the performance of a specific job, work, or service within
a. Trilateral Relationship a definite or predetermined period, regardless of whether such job or
work is to be performed or completed inside or outside the premises of
• INTRODUCTION the principal
Remember the 4-fold test. The power to control when it’s only as to the Jurisprudence
end result, that person may be an independent contractor not an Bilateral relationships. After establishing the bilateral contractual
employee. relationship, the Civil Code applies.
• IMPORTANT ARTICLES • THREE PARTIES IN A CONTRACTING AGREEMENT

Art. 106-109 of the Labor Code Principal
Does not allow labor only contracting. Decides to farm out a job, work, or service to a contractor
Art. 106 of the Labor Code states: The Secretary of Labor and Contractor
Employment may, by appropriate regulations, restrict or Has the capacity to independently undertake the performance of
prohibit the contracting-out of labor to protect the rights of the job, work, or service
workers established under this Code. In so prohibiting or Contractor’s employees
restricting, he may make appropriate distinctions between labor- Engaged by the contractor to accomplish the job, work, or
only contracting and job contracting as well as differentiations service
within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes • TRILATERAL RELATIONSHIP
of this Code, to prevent any violation or circumvention of any In a legitimate job contracting agreement, there is a trilateral relationship
provision of this Code. (in an independent contractor arrangement, there is only a bilateral
Can the Secretary of Labor completely prohibited contacting relationship)
arrangements? Are there always 3 parties in a contracting relationship?
DOLE No. 18-A-11 NO. There may be a bilateral relationship, meaning the
DOLE D.O. 174-17 independent contractor himself or herself performs the work for
Prohibited arrangements the principal.
Pertains to trilateral relationships.
• DO NO. 18-A-11
Does DO No. 18-A-11 apply to an independent contractor
arrangement? No. DO No. 18-A-11 clearly speaks of trilateral
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relationships that characterizes a contracting/subscontracting Employer-employee relationship between the contractor and the
arrangement. Civil Code should apply. (Memorandum Circular No. 1, employees engaged to perform the specific job, work, or service
2012) being contracted
Contractual relationship between the principal and the contractor
• LAWS GOVERNING governed by the Civil Code
principal and contractor – principally the Civil Code
contractor and employees – principally the Labor Code • REQUIRED STIPULATIONS IN EMPLOYMENT CONTRACTS
principal and employees – principally the Labor Code BETWEEN CONTRACTORS AND EMPLOYEES
Specific description of the job
• LANGUAGE OF THE CONTRACT IS NOT CONTROLLING Place of work and terms and conditions of employment
How it is actually operationalized controls Wage rate, if applicable
Term or duration of the employment is co-extensive with the Service
• ELEMENTS OF LEGITIMATE JOB CONTRACTING (DOLE DO Agreement
174-17)
Contractor is engaged in a distinct and independent business and • REQUIRED STIPULATIONS IN SERVICE AGREEMENT BETWEEN
undertakes to perform the job or work on its own responsibility PRINCIPAL AND CONTRACTOR
according to its own manner and method. Specific description of the job
Substantial capital and/or investment in the form of tools, equipment, Place of work and terms and conditions
machinery, and supervision. Agreed amount of services
Individual: P5,000,000 net worth Standard administrative fee
Corporation: P5,000,000 in capital stock or investment Net financial contracting capacity is equal to or greater than the contract
Free from the control and/or direction of the principal in all matters cost
connected to performance of the work except as to the results Issuance of the bond renewable every year
Service agreement ensures compliance with the rights and benefits of Contractor’s direct remittance of contributions for SSS, PhilHealth, etc.
employees under Labor laws Term or duration
• LEGAL IMPLICATION OF LACK OF SERVICE AGREEMENT OR Employee Independent

CONTRACT REGARDING THE CONTRACTOR ARRANGEMENT Contractor
principal shall be deemed the direct employer of the contractor’s How work is Hiring Engaging
employee (Sec. 5, DO 18-A-11) obtained
Remuneration Wages Fees
In such arrangement, there exists:
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How services are Dismissal Termination of contract If contractor fails to comply with the NFCC requirement, what is the
terminated consequence?
Control Over the means and Over the end results NFCC is part of the Service Agreement. Non-compliance with
method and the end only
the Service Agreement under Section 8 of the DO means the
results
contractor is considered a labor-only contractor.
• REGISTRATION AS A CONTRACTOR
• BOND REQUIREMENT
Non-registration raises the disputable presumption of being a labor-
Cost of labor under the contract
only contractor (Section 14, D.O. No. 18-A-11)
Security for payment of services of contractor
As a general rule, the fact of contracting raises a presumption
that it is a labor-only contractor, and the principal must prove
• INVESTMENT REQUIREMENT OF LABOR CONTRACTORS
otherwise.
Not restricted by the monetary amount
Registration, however, is not proof of legitimate job contracting
Just enough to perform the service to the principal
Existence of the contracting agreement is dependent on actual
observable facts, not by stipulation or documents
• LABOR-ONLY CONTRACTING
Not prohibited by the Labor Code to be regulated
• WHAT IS THE VALUE OF REGISTRATION?
BUT was ultimately prohibited by DO-18-A-2011
FLJ: In Labor Law, there is a presumption that a contractor is engaged in
Elements
labor-only contracting in the absence of proof otherwise. Registration
ESSENTIAL ELEMENT: Merely supplying workers
does NOT give rise to legitimacy; rather, it merely prevents the
CONFIRMING ELEMENT #1: Contractor does not have
presumption of labor-only contractor from attaching.
substantial capital (at the time of establishment, not assets
amassed only after establishment) or investments (relating to the
• NET FINANCIAL CONTRACTING CAPACITY (NFCC)
job, work, or service to be performed) AND is performing
Required in order to show the financial capacity of the contractor to do
activities directly related to the main business of the principal;
the job
OR
Carrying out an independent business
CONFIRMING ELEMENT #2: Contractor does not exercise
Free from control of the principal as to the means and methods
control over the performance of the work of the employee
NFCC = [(Current Assets – Current Liabilities) x K] – Value of
Effect of labor-only contracting
outstanding/ongoing projects (MEMORIZE!!!)
Contractor is a mere agent
Where K stands for contract duration equivalent to:
The principal is treated as the employer. Hence, liable for claims
10 for 1 year or less
of the employees
15 for more than 1 year up to 2 years
20 for more than 2 years
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Labor-only contracting = Essential element + Confirming element (1 or Contracting work with a “cabo”
2) Contracting work with a “In house agency”
Can the Secretary of Labor can define labor-only contracting however Contracting work with a “in house cooperative” which merely
s/he wants? supplies workers to the principal
NO. Labor-only contracting is explicitly defined under Article Contracting out of a job or work by reason of Strike or lockout,
106 of the Labor Code. Secretary of Labor cannot define it whether actual or imminent
differently. Contracting out of a job or work being performed by union
True or False: if the contractor does not have substantial capital, the members and such will interfere with, restrain or coerce
arrangement is labor-contractor. employees in the exercise of their rights to self-organization as
FALSE. (1) the contractor might have substantial investments provided in Art. 259 of the Labor code, as amended
(which is different from capital) and (2) must satisfy the element Requiring the contractor/subcontractors’ employees to perform
of performing activities directly related to the business of the functions currently performed by regular employees of principal
principal. Requiring the contractor/subcontractors’ employees to sign, as a
*Substantial investments = machinery, tools, equipment (as precondition to employment
opposed to the standard of having P3M paid-in capital) 1. Antecedent resignation letter
What is the test of “usually necessary and desirable”? 2. Blank payroll
You have to look at the business model of the principal. For 3. Waiver of labor standards (including minimum wages
example, in the Coca Cola case, distributing was part of the and social or welfare beenfits), OR
“manufacturing process.” Contrast this with a business that stops 4. Quitclaim releasing principal or contractor from any
with manufacturing, and then hires an “exclusive distributor.” liability as to payment of future claim, OR
A cooperative with no substantial capital, even if it claims its members 5. Requiring the employee to become a member of a
to be self-employed, is a labor-only contractor if it renders services cooperative.
directly related to the business of the principal Repeated hiring of employees under employment contracts of
This is because the cooperative does not carry an independent short duration
business Requiring employees under Subcontracting agreement to sign a
contract fixing period of employment to a term shorter than the
• SECTION 6 OF DO 174: OTHER PROHIBITIONS term of the Service Agreement, unless the contract is divisible
Violator of Sec 6 will be treated like a labor-only contractor. into phases requiring substantially different skills, and is made
Can good faith be used as a defense? NO. Under DO 174, good faith or known to employee at the time of engagement
business exigencies cannot be used as a defense unlike in the previous Such other practices, schemes or employment arrangements
DOs. designed to circumvent the right of workers to security of tenure
Prohibited acts(MEMORIZE!!!)
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The fact that employees of contractors perform jobs of regular • LIABILITY OF PRINCIPAL IN A LABOR-ONLY CONTRACTING
employees is not necessarily a prohibited act AGREEMENT
If done in good faith and justified by the exigencies of business Principal is liable as an employer when (DO 174)
Example: to achieve greater economy and efficiency in its Labor only contracting
operations Commission of acts under Section 6
Thus, regular jobs can be contracted out Violation of Rights of the employees
Service Agreement or employment contract are not executed
• LIABILITY OF A PRINCIPAL IN A LEGITIMATE JOB CONTRACTING Liable directly as an employer
AGREEMENT For ALL money claims including those punitive in nature such as
Solidarily liable with the contractor for payment of wages to the extent moral damages, etc.
of the work done by the employee Liable to pay employees of supposed contractor the same rate for
Unwillingness or insolvency of the contractor is not a regular employees performing similar functions
prerequisite. So long as there is non-payment, the liability of the Because they are deemed employees of the principal now
principal arises. (DBP v. NLRC) Liable for salary differentials
An allegation of payment of wages to the contractor is not a defense
because of the presence of solidary liability • LABOR-ONLY CONTRACTOR IS SOLIDARILY LIABLE WITH THE
BUT principal can collect reimbursement from the contractor, PRINCIPAL
BUT not the other way around Thus, releases, waivers, and quitclaims in favor of the contractor
Principal will be liable for redounds to the benefit of the principal (see: Vigilla v. Philippine College
Increase in minimum wage binds the principal to pay of Criminology). Basis: any act of a solidary debtor benefits other
correspondent increase in wages (salary differentials) solidary debtors.
Overtime pay (see: Meralco Industrial) However, not ALL waivers will accrue to the benefit of the principal. In
Incentive fee the following cases, the principal cannot raise the waiver as a defense:
Holiday pay 1. Obligation is NOT solidary.
NOT liable for moral and exemplary damages, separation pay, and 2. Express provision not to release the principal.
backwages which are punitive in nature
Except if the principal took part in the violation or illegal act. • SITUATION
Employee must show that the principal conspired with the contractor in What if there was an increase in the minimum wage during the
order to hold the principal solidarily liable (see: Meralco Industrial; effectivity of the Service Agreement, who bears the burden? Principal or
Article 109) contractor?
NOTE: Liabilities arising from illegal dismissal are entirely separate from From the perspective of the employee, it’s easy because principal
nonpayment of statutory minimum wage and contractor are solidarily liable for wage differentials.
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However, from the perspective of principal and contractor, the Bilateral relationships (Requirement for registration under DO-18-
Rules say that it is the principal who should bear the burden. A-2011 applies only to trilateral relationships)
(Why? Reason seems to be because the principal who ultimately Other contractual relationships such as in contract of sale or purchase,
benefits from the services fo the employee. Although it can be contract of lease, contract of carriage, contract growing/growership
argued that the independent (legitimate) contractor is the real agreement, toll manufacturing, contract of management, operation and
employer, and should bear the burden. Let’s wait for a case on maintenance and such the contracts governed by the Civil Code and
this) other special laws.
A hired a contractor who provided employees which are being paid P500
per month. A on the other hand pays P1,000 to its regular workers. The • BPOS EXCLUSION FROM AMBIT OF DO-174
contractor was ruled as a labor only contractor. How much should A pay They are not required to comply with regulations under the DO to the
the “contractor’s” employees? P1000 extent of the BPO as a contractor, but not as a principal
Justifications
• DOLE OFFICIALS AND EMPLOYEES ARE PROHIBITED BPO is governed by vendor-vendee relationships
from engaging or having any interest in any contracting or Applicable provisions of the Civil Code govern
subcontracting business Contracting out of entire business is not contemplated by the DO
To prevent conflict of interest situations DO focuses on specific activities and undertakings
For DOLE to faithfully carry out its mandate It is a contract of sale more than it is a contract for services
DO applies to trilateral relationships only, not bilateral relationships
• EXCLUSIONS FROM DO 174 AS STATED IN DO 1-2017 Although there is essentially a trilateral relationship, the fact that
BPOs the Philippines has no jurisdiction over the foreign principally
Business Process Outsourcing makes the arrangement effectively a bilateral one
Knowledge Process Outsourcing IT services not contemplated by the DO
Legal Process Outsourcing
IT Infrastructure Outsourcing • CONSTRUCTION INDUSTRY’S EXCLUSION FROM AMBIT OF DO
Application Development 174
Hardware and/or Software Support Licensing and regulatory powers over the construction industry lies with
Medical Transcription the Philippine Contractors Accreditation Board (PCAB)
Animation Services Registers all contractors and regulates the same
Back Office Operations/Support
Construction Industry
Private Security Agencies (governed by DO 150 not 174)
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• OUTSOURCING view of the employee. But, between the employer and

Decision to outsource or contract work is a management prerogative but contractor, the true person at fault is liable.
subject to regulations in order to protect the contractor’s workers or Post-Termination
employees (see: Meralco vs Quisumbing) May opt to wait for re-employment within 3 months to
However, the exercise of management prerogative is not resign and transfer to another contractor-employer.
unlimited; it is subject to the limitations found in law, CBA, or Failure to provide a new employment shall entitle the
the general principles of fair play and justice. (Goya v. Goya latter to payment of separation benefits provided by law
Employees Union) or Service Agreement, whichever is higher.
Outsourcing is valid if it is
Motivated by good faith b. Jurisprudence on trilateral relationship labor-only contracting
Not to circumvent the law
Not malicious or arbitrary • JURISPRUDENTIAL INDICATIONS OF LABOR-ONLY
DOLE cannot impose limitations on contracting out in a CBA CONTRACTING
The Secretary of Labor also cannot dictate additional provisions IDs issued by principal is indicative of labor-only contracting
in the CBA If ID is exactly the same as that of regular employees
TIP: For uniforms, do not hand them out to the contractor’s employees
• PRESUMPTION Instead, give the contractor the money in order for them to issue
Labor only contracting the uniforms themselves
How to rebut this? SEE SECTION 8 DO 174. Contractor’s employees performing work in the premises of the
Tip: Go with Section 5, but know that there’s section 8. principal raises the presumption that the employees are under the
For section 8, in real life you prove by showing a list of your control of the principal
other clients BUT this may be rebutted
TIP: Show that the principal does not supervise or control the
• TERMINATION OF SERVICE AGREEMENT (SEC. 13 DO 174) employees of the contractor
Legal implication (1) Wages are paid by the principal, (2) the sales of the employees go to
Pre-termination - the account of the principal rather than the contractor, (3) the
If due to authorized causes, governed by Art. 297-299 of contractor and principal work in the same office, and (4) no substantial
the Labor Code capital or investment. (Cusap v. Adidas)
if not due to authorized causes, the principal and Contracting of manpower only (PCI Automation v. NLRC)
contractor are solidarily liable for the unpaid wages and
unpaid benefits (Sec. 13, DO 174). This is in the point of
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• INDICATION OF INDEPENDENT CONTRACTOR Compensation is through “arriba” meaning a percentage of the

Hired contractors to work in a different well. Hence, did not replace the bets collected and not through the principal.
regular workers.(Asian Alcohol v. NLRC) They can offer their services everywhere because they are duly
licensed by the GAB.
c. Bilateral Relationship They are free to choose which cockpit arena to enter and offer
their expertise.
• B I L AT E R A L R E L AT I O N S H I P I N A J O B C O N T R AC T I N G Sonza v. ABS-CBN versus Dumpit-Murillo v. CA
AGREEMENT Sonza v. ABS-CBN Dumpit-Murillo v. CA
Jurisprudence has recognized another kind of independent contractor:
individuals with unique skills and talents that set them apart from Engaged in view of his "unique skills, talent
and celebrity
ordinary employees.
If the independent contractor has the tools and the trade, the contractor Work was for radio and TV programs newscaster and co-anchor
is not an employee Talent fee: P317,000/month (the court Salary: P28,000/month

Tools and trade include peculiar or unique skills, talent, or found this to be a substantial amount that
indicated he was an independent
celebrity status contractor)
An exclusivity clause is valid
No element of control Presence of control: The duties and
Power to bargain for huge fees is a badge that the contractor is not an - ABS-CBN did not control how Sonza responsibilities enumerated in her contract
employee delivered his lines, how he appeared on was a clear indication that ABC had control
television, or how he sounded on radio over her work
However, wages should not be the conclusive factor in - All that Sonza needed was his talent
determining whether one is an employee or an independent - ABS-CBN could not terminate or
contractor. (Fuji v. Espiritu) discipline SONZA even if the means
and methods of performance of his
Even if the principal suffers losses, it is still obligated to pay the fees work did not meet ABS-CBN’s approval
Not required to work for eight (8) hours Had to be in ABC to do both on-air and
• PRESUMPTION off-air tasks.
Employer must prove that the worker is an independent contractor.
Fuji v. Espiritu: not an independent contractor but a fixed-term
employee because
• EXAMPLES OF INDEPENDENT CONTRACTORS
There is a fixed term contact
Masiador, and sentensiador (Semblante v. CA)
Arlene was hired by Fuji as a news producer, but there was no
Cockfighting, which is a part of our cultural heritage, has a
showing that she was hired because of unique skills that would
peculiar set of rules. They ought to have the talent and skill to
distinguish her from ordinary employees. Neither was there any
get the bets from numerous cockfighting aficionados and decide
showing that she had a celebrity status.
which cockerel to put in the arena.
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Everything that she uses to perform her job is owned by the While Tongko was later on designated unit manager,
company including the laptop computer and mini camera Branch Manager, then Regional Sales Manager, no formal
discounts the idea of job contracting. contract regarding these undertakings appears in the
Element of control records. Tongko remained an agent, but moved up in this
Fuji gave her instructions on what to report and even her role thru Manulife’s recognition that he could use other
mode of transportation in carrying out her functions was agents approved by Manulife, but operating under his
controlled. guidance and in whose commissions he had a share.
She was required to work for eight (8) hours from Tongko could be labeled as a lead agent who guided
Monday to Friday, although on flexible time under his wing other Manulife agents similarly tasked with
While her salary was US$1,900.00, which is higher than the the selling of Manulife insurance. (Tongko v. Manulife) —
normal rate, wages should not be the conclusive factor in in this case it was also mentioned that Manulife did not
determining whether one is an employee or an independent exercise control of Tongko’s means and methods
contractor Shoeshiner — commission basis (Besa v. Trajano)
Forwarder employees (Temic v. Temic Employees Union) Is not an employee, but a partner. He has his own customers and
Like travel agents for cargo his earning are split 50-50 with the owner.
They are controlled by the forwarders and not the principal Peddling contractos (Mafinco v. Ople)
Insurance Agents — you must look into the contract (Insular life v. Repomanta and Moralde voluntarily executed with Mafinco
NLRC, and Tongko v. Manulife) formal peddling contracts which indicate the manner in which
As a matter of IC-based business practice, an agency relationship they would sell Cosmos soft drinks. That circumstance signifies
prevails in the insurance industry for the purpose of selling that they were acting as independent businessmen. They were to
insurance sign or not to sign that contract.
EER: present of “control” NOTE: Ordinarily, a mere peddler does not execute a formal
A subsequent Agreement making Carungcong a New contract of employment. He is simply hired and he works under
Business Manager that superseded the Agreement the direction and control of the employer.
designating Carungcong as an agent empowered to solicit Collecting agents (Singer Sewing Machine v. Drilon)
applications for insurance (Carungcong case) The Agreement confirms the status of the collecting agent in this
After analyzing the duties and functions of the Ruiz case as an independent contractor not only because he is
brothers, as these were enumerated in their contracts, the SC explicitly described as such but also because the provisions
concluded that the company practically dictated the permit him to perform collection services for the company
manner by which the Ruiz brothers were to carry out without being subject to the control of the latter except only as
their jobs (Grepalife case) to the result of his work.
Agency relationship
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IV. OBJECTIVES AND CORRELATIONS OF LABOR LAW Right to conduct Collective bargaining and negotiate with
management
• LABOR IS PROTECTED UNDER OUR CONSTITUTION Right to participate in policy Decision making processes affecting
Article II, Sections 9, 10, 11, 13, 14, 18, 20 their rights and benefits as may be provided by law
Article III, Sections 1, 4, 7, 8, 10, 16, 18 (2) Not self-executing
Article XIII, Sections 1, 2, 3, 13, 14 But still an effective mandate of the Constitution
Not self executing Government cannot pass laws inconsistent with this mandate
Requires enabling legislation => Labor Code
However, this cannot be invoked at all times by the employee against the • FOR SOCIAL JUSTICE PROVISIONS TO APPLY
employer There must be an existing law/ Source of right
In cases of doubt, presumption in favor of labor
• DOUBTS IN THE LAW MUST BE CONSTRUED IN FAVOR OF LABOR Labor law is social legislation, but not all social legislation qualifies as
Article 4 of the Labor Code labor law
In cases of doubt only
If there is no doubt, the Article does not find application • IS THE CONSTITUTION BIASED TOWARD LABOR AND AGAINST
CAPITAL?
• EMPLOYER-EMPLOYEE RELATIONSHIP NO, but it affords special protection to labor
An employer-employee relationship is generally required in order for the Article III, Section 1 of the Constitution
provisions of the Labor Code to apply Business is a property right
However, the Labor Code also regulates instances or situations where Thus employers and business owners are afforded the
there is no existing employer-employee relationship right to due process
Illegal recruitment Also, labor laws recognize management prerogatives
Management also has the right to returns in investment and to
• ARTICLE XIII, SECTION 3 OF THE CONSTITUTION make profit
The seven Constitutional rights of labor (WHOSE-CD) Which, consequently, creates jobs and improves workers’
Right to receive a living Wage lot
Right to work under Humane conditions BUT we must also consider the existence of the police power of the
Right to Organize themselves State
Right to enjoy Security of tenure Police power is the basis/foundation of the social justice aim of
Right to Engage in peaceful concerted activities including to our labor laws
strike in accordance with law
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V. PRE-EMPLOYMENT EXCEPTIONS: (1) Direct hiring by members of the diplomatic

corps, international organizations, heads of state and government
a. Recruitment and Placement of Workers officials with the rank of at least deputy minister, and other
employers allowed by DOLE, and, (2) name hires (those
• FOUR-FOLD TEST individual workers who offered their services, and secured
Power to select or engage the employee contracts for overseas employment on their own efforts and
Power to dismiss representation without the assistance or participation of any
Payment of wages agency)
Control over the means and the method as well as the results NOTE: name hires must be processed through POEA
• RECRUITMENT AND PLACEMENT • ILLEGAL RECRUITMENT

Goes into the first aspect of an employer-employee relationship. License or authority is required only in cases where a person/entity hires
It is the power of the employer to select or engage the employee or procures employees for another
Definition (Art. 13): Refers to any act of Canvassing, Enlisting, Persons primarily engaged in recruitment and placement
Contracting, Transporting, Utilizing, Hiring or Procuring workers, and Plaintiff must show that the accused gave him the distinct impression
includes Referrals, Contract services, Promising or Advertising for that the accused had the power or ability to give him employment in
employment, locally or abroad, whether for profit or not (CECPHUT order to qualify an act as a placement or recruitment activity (see: People
and includes CRAP) vs. Goce)
Provided, that any person or entity which, in any manner, offers Mere payment for visa processing does not automatically equate
or promises for a fee employment to two or more persons shall to illegal recruitment
be deemed engaged in recruitment and placement “Two or more with a fee” clause is not an element of the crime of illegal
This is a presumption only recruitment
Only creates a disputable presumption
• “TWO OR MORE VICTIMS” There is no such thing as a conclusive presumption in criminal
Presumption only law
Not an essential element of illegal recruitment (People v. Panis)
• SITUATIONAL
• DIRECT HIRING: LOCAL VERSUS OVERSEAS EMPLOYMENT A company recruited you to work. However, you found out that the
LOCAL EMPLOYMENT: A license or authority is not required of corporation does not have a license to recruit. You filed a criminal case
employers who hire directly (Direct hiring) for illegal recruitment. Will the case prosper?
OVERSEAS EMPLOYMENT: Direct hiring of Filipino workers by a
foreign employers is NOT allowed. (Article 18, Labor Code)
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NO. The recruitment contemplated by the law does not refer to • REQUIRED UNDERTAKINGS OR RECRUITERS AND PLACERS
direct hires. It means recruitment of employees for another (SAAGAND – DPR)
corporation. Select only medically and technically qualified
You are outside your house. A woman passed by and asks you where the Assume full and complete responsibility for all claims arising from the
recruitment agency is in your village. You point her to the right direction. use of license
Later, the woman finds out that the agency had no license and so files a Assume joint and solidary liability for claims arising from
case of illegal recruitment against you for “referring” her to the agency. implementation of the contract
Will it prosper? Guarantee compliance with labor and social legislation
NO. Plaintiff must show that the I gave her the distinct Assume full and complete responsibility for acts of officials, employees,
impression that I had the power or ability to give her employment and representatives
in order to qualify an act as recruitment and placement. Negotiate the best terms and conditions of employment
Disclose the full terms and conditions of employment
b. Regulation of Recruitment and Placement Activities Deploy at least 100 workers within 1 year from issuance of license
Provide orientation on recruitment procedures, terms and conditions of
• PRIVATE RECRUITMENT (SEE: ARTICLE 16) employment, and other relevant information
No person or entity other than public employment offices are allowed to Repatriate deployed workers and their personal belongings when the
recruit and place workers need arises
BUT there are exceptions. Article 25 provides a broad exception (Private
employment sector shall participate in the recruitment and placement of • QUALIFICATION
workers, locally and overseas) (ESPERMCO) Citizenship
Public Employment offices Capitalization
Shipping or manning agents or representatives Additional qualifications for local employment
POEA Owner, partners or the officers of the corporation must be of
Private Employment agencies good moral character
Private Recruitment entities Office space (minimum floor area of 50sqm)
Members of the diplomatic corps although hirings done by them
have to be processed through POEA • CITIZENSHIP REQUIREMENT FOR RECRUITMENT (ART. 27)
Construction contractors if authorized to operate by DOLE and Must be Filipino
CIA For corporations, at least 75% of the controlling shares must be Filipino
Other persons or entities as may be authorized by DOLE Voting stock
Secretary Q: If all of the officers of the corporation are foreigners, can the
corporation still engage in recruitment and placement of workers?
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YES because citizenship refers to the controlling shares, not the • DISQUALIFICATION FROM APPLYING FOR A LICENSE OR
officers/board of directors. AUTHORITY FOR OVERSEAS EMPLOYMENT
Agencies with a record of illegal recruitment, trafficking, anti-child labor
• CAPITALIZATION violation, or crimes involving moral turpitude
Based on rules determined by the Secretary of Labor (Art. 28) Agencies whose license has been previously revoked or cancelled
Local Travel agencies and sales agencies of airlines companies, whether for
Sole proprietor – P200,000 profit or not (Art. 26)
Corporation – P500,000 paid-up capital Notice, this is only for overseas. Hence a local employment may
Overseas be engaged in the business of travel agencies.
Sole proprietor – P2,000,000 Officers or members of the board of any corporation/partnership
Corporation – P2,000,000 paid-up capital engaged in travel agencies
Corporations and partnerships, where any of its officers, members of
• BOND REQUIREMENT (ART. 31) the board or partners is also an officer, member of the board or partner
Requirement of a corporation or partnership engaged in the business of a travel
Escrow agreement amounting to P1,000,000 AND agency
Surety bond of P100,000 Individuals, partners, officers or directors of an insurance company who
Separate and distinct from an appeal bond make, propose or provide an insurance contract under the compulsory
POEA has the power to enforce liability under the bond insurance coverage for agency-hired Overseas Filipino Workers
Sole proprietors, partners or officers and members of the board with
• DISQUALIFICATION FROM APPLYING FOR A LICENSE OR derogatory records, such as, but not limited to the following
AUTHORITY FOR LOCAL EMPLOYMENT The engagement, directly or indirectly, of any:
Agencies with a record of illegal recruitment, trafficking, anti-child labor Any official or employee of the DOLE, POEA, OWWA, DFA,
violation, or crimes involving moral turpitude DOJ, DOH, BI, IC, NLRC, TESDA, CFO, NBI, PNP, Civil
Agencies whose license has been previously revoked or cancelled Aviation Authority of the Philippines (CAAP), international
Cooperatives whether registered or not airport authorities,
Law enforcers and any official and employee of the DOLE Other government agencies directly involved in the
Individuals, partners, officers, or directors of an insurance company who implementation of RA 8042, as amended
make, propose, or provide an insurance contract for agency-hired OFWs. His/her relatives within the fourth civil degree of consanguinity
Officials or employees of government agencies directly involved in or affinity
implementing RA 8042 (The Migrant Workers Act) DOLE, POEA,
OWWA, DFA, others • REGULATORY BODY
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Local Employment: Licensing requirements and conditions are regulated Prohibited acts under Article 34 + RA 8042 + RA 10022
by Bureau of Local Employment Committed by any one
Overseas Employment: licensing requirements and conditions are Payment of a fee is not an element of the crime
regulated by POEA It is malum prohibitum
Intent is immaterial
• LICENSE VS AUTHORITY (SEE: ARTICLE 13 (C) (D) (E) (F)) Special penal law
License Crucial to establish
Means a document issued by the Department of Labor That the act is one enumerated under Article 13 and that
authorizing a person or entity to operate a private employment the accused gave the impression that he could give
agency. employment (For non-licensed recruitment)
For private employment agencies which charge a fee That the act is a prohibited act
Authority Estafa may also be filed by a recruit who suffers pecuniary damage as a
Means a document issued by the Department of Labor result of his/her reliance to a false pretense/misrepresentation given by
authorizing a person or association to engage in recruitment and a non-licensee or non-holder of authority
placement activities as a private recruitment entity. Estafa: malum in se; and is wider in scope
For private recruitment entities which do not charge Illegal recruitment: malum prohibitum
Simple vs Economic sabotage
• TRANSFER OF OFFICE (ART. 29) Simple
Transfer of office of a recruitment agency is subject to the prior Committed against less than three victims
approval of DOLE Committed by less than three perpetrators
Penalty: Imprisonment of 12 years and 1 day to 20 years;
• NON-TRANSFERABILITY OF LICENSE OR AUTHORITY (ART. 29) Fine of P1M to P2M
Because the license or authority is purely personal Economic sabotage
Essentially a specific grant given by the Government to one specific Large scale: Committed against three or more victim.
person Individually or as a group
Not even transferred through successions Syndicated: Committed by three or more perpetrators.
Conspiring/confederating together
• ILLEGAL RECRUITMENT (SEE: ARTICLE 38) Penalty: Life Imprisonment; Fine of P2M to P5M
There are two kinds Penalty for prohibited acts Imprisonment of 6 years and 1 day to 12
Non-licensed recruitment (see: Article 13) Committed only by years; Fine of P500K to P1M
those who recruit without a license If the offender is an alien, he/she shall be deported in addition to
whatever applicable penalty imposed
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In all cases of conviction, there is an automatic revocation of license or Obstruct or attempt to obstruct Inspection by the Secretary or
registration his duly authorized representatives
Problem: Three separate informations for simple illegal recruitment Failure to submit Reports required by the Secretary
Prosecutor to amend and consolidate the informations to hold Substitute or alter, to the prejudice of the worker, the
the accused liable for economic sabotage Employment contracts approved and verified by DOLE from the
Venue time of actual signing up to and including the period of the same
Where committed or where offended party was residing at the without approval of DOLE
time of commission Officer or agent of a recruitment or placement agency to become
Second venue is an exception to the general rule on venue an officer or member of the Board of any corporation engaged
Prescriptive period in Travel agency or to be indirectly in the management of one
Simple: 5 years Withhold or deny Travel documents from applicant workers
Economic sabotage: 20 years before departure for monetary or financial considerations other
than those authorized in the Labor Code and its IRR.
• PROHIBITED ACTS Failure to Deploy without valid reason as determined by DOLE
Prohibited acts under Art. 34 as amended by Sec. 6 of RA 8042 (GF- Failure to Reimburse expenses incurred by worker in connection
MII-HIRETT+ DRA) - for both local and overseas employment with documentation and processing for purposes of deployment
Charge or accept any amount Greater than that specified in the when the worker is not actually deployed without fault on the
schedule of allowable fees, or to make a worker pay any amount part of the worker
Greater than that actually received by him as a loan or advance Allow a non-Filipino citizen to head or manage a licensed
Furnish False notice or information or document in relation to recruitment agency
recruitment or employment Additional acts under Sec. 6 of RA 10022 (SIR-HILT) - for overseas
Give false notice, testimony, information, or document, or employment only
Misrepresentation for the purpose of securing a license or Grant loan to an OFW with Interest above 8% per annum to be
authority used for payment of placement fees and make the worker issue
Induce or attempt a worker already employed to quit his postdated checks in relation to the loan
employment to offer him another unless it was designed to Impose compulsory and exclusive arrangement where an OFW is
liberate the worker from oppressive employment required to avail of a Loan only from specifically designated
Influence or attempt to influence any person or entity not to entities or persons
employ any worker who has not applied through his agency, or Refuse to condone or negotiate loan incurred by OFW after the
any worker connected with a union or worker’s organization latter’s employment contract has been prematurely terminated
Engage in recruitment and placement in jobs Harmful to public through no fault of his own
health or morality or to the dignity of the Republic
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Impose compulsory and exclusive arrangement for OFW to The Minister of Labor shall have the power to suspend or cancel any
undergo Health examinations only from specifically designated license or authority to recruit employees for overseas employment for
clinics or persons except in the case of a seafarer whose medical violation of rules and regulations issued by the Ministry of Labor, the
examination cost is shouldered by shipowner/principal Overseas Employment Development Board, or for violation of the
Impose compulsory and exclusive arrangement for OFW is to provisions of this and other applicable laws, General Orders and Letters
undergo Training of any kind from specifically designated of Instructions.
entities or persons except for trainings mandated by principal/ The Secretary of Labor has the power to restrict and regulate the
shipowner which costs are shouldered by the latter recruitment and placement activities of all agencies within the coverage
For Suspended recruitment agency to engage in any recruitment of this the Labor Code and is authorized to issue orders and promulgate
activity including processing of pending applications rules and regulations to carry out the objectives and implement the
For recruitment agency of foreign principal to pass on to OFW provisions of the Labor Code.
or deduct from his salary the payment of the cost of Insurance,
premium, or other insurance related charges, as provided under • CLOSURE ORDER BY POEA
the compulsory worker’s insurance coverage Grounds for issuance
Activities of non-licensee constitute a danger to national security
• SITUATIONAL and public order
Your client is American citizen and he wants to head or manage a Activities will lead to further exploitation of job seekers
licensed recruitment/manning agency geared towards local employment. Lifting of closure order
Is this prohibited under RA 8042, as amended? Who can file
NO. Under the chapeau of Section 6 of RA 8042, as amended, the Owner of building
recruitment must be for employment abroad for it to be Building administration
prohibited. Conversely, Article 34 of the Labor Code, which Person/entity to whom the order was issued
applies to both local and overseas employment, does not contain Any other person/entity operating a distinct business
any prohibition against a non-Filipino citizen from heading a within the padlocked premises
licensed recruitment agency. *Note, however, that under the Grounds
Foreign Investments Act, Corporation Code, and Anti-Dummy Office is not subject to the closure order
Law, there may be prohibition against foreigners from heading Contract of lease had already expired
certain entities. Office is shared by other persons/entities not involved in
illegal recruitment activities
• SUSPENSION AND/OR CANCELLATION OF LICENSE OR Other valid and meritorious grounds
AUTHORITY (ART. 35)
• SEARCH WARRANTS OR WARRANTS OR ARREST
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Secretary of Labor, not being a judge, cannot issue search warrants or overseas placement agency no matter what rank the job position
warrants of arrest in connection will illegal recruitment would be (even if you’ll be hired as a manager, VP, etc)
The Secretary must go through the proper judicial process In other words, the Filipino would need to go abroad to
This doctrine is highlighted in the case of Salazar vs. Achacoso apply, and can’t apply from the Philippines
c. Regulations Specifically for Overseas Employment under the Labor Code • HIRING FOR AN ENTITY YET TO BE ESTABLISHED AS DIRECT
HIRING
• DIRECT-HIRING Conservative: Don’t hire just yet
GR: Banned for foreign employer Wait until establishment
EXC: Direct hiring by There’s the risk of illegal recruitment
members of the diplomatic corps, BUT it may be argued that the hiring entity did not give the impression
international organizations, of assure employment
heads of state and government officials with the rank of at least Doubt resolved in favor of the accused
deputy minister,
other employers allowed by DOLE • LIABILITIES FOR ILLEGAL RECRUITMENT
Those provided above who bear a lesser rank if endorsed Local agents as solidarily liable with foreign employer
by the POLO, or Head of Mission Protection of employees
Professionals and skilled workers duly executed/ Difficult to go after the foreign employer due to jurisdictional
authenticated contracts over and above the standards set issue
by POEA GR: Solidary liability
Workers hired by a relative/family member EXC: When the foreign employer acted without the knowledge
Except diplomatic corps and others (including international of the local agency (see: Sunace)
organizations) Knowledge of the agent is knowledge of the principal,
Public policy: Employee will have no recourse against foreign employers but the knowledge of the principal is not necessarily the
because they are beyond Philippine jurisdiction knowledge of the agent
Recourse is through the local recruitment agency Non-application of the theory of imputed knowledge
“Name hires” are allowed, though still processed through POEA Sunace International v. NLRC
Secured overseas employment on their own. In this case, the contract was entered into after the first contract
FLJ: This contemplates that the person is already abroad although expired. In Datuman, the second contract was entered into when
still a Filipino national, but if you’re in the Philippines and the first POEA approved contract was in operation. Provisions in
applied to a foreign company, you still need to engage with an the second contract contrary to the first POEA approved
contract was a breach of the latter
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Also, in this case, communication was with the foreign broker, VI. RA 8042 AS AMENDED BY RA 10022 – THE MIGRANT WORKERS
not the foreign principal ACT
There was an implied revocation of agency when the principal
directly contracted with the employee • THE STATE DOES NOT ENCOURAGE OVERSEAS EMPLOYMENT
However, it must protect OFWs
• FEES PAID BY WORKERS
A private fee-charging employment agency may charge a worker • OFW
placement fee ONLY (Art. 32) [MEMORIZE] Sec. 3: Definition Person (a) to be engaged, is engaged
If the employee obtained employment through the agency’s or has been engaged in a remunerated activity in a state of which he or
efforts or she is not a citizen or (b) on board a vessel navigating the foreign seas
After actual commencement of employment. other than a government ship used for military or non-commercial
Signing of contract, deployment, etc. purposes or on an installation located offshore or on the high seas
The placement fee shall not exceed 20% of the worker’s “To be engaged, is engaged, or has been engaged”
Deployment is not essential to establishment of one as an OFW
• FEES CHARGEABLE TO PRINCIPAL (VAPO) OFWs can only be deployed to countries that can guarantee any of the
Visa fee following (Sec. 4)
Airfare Existing labor and social laws protecting worker’s rights
POEA processing fee Signatory to multilateral conventions relating to protection of
OWWA membership fee workers
Bilateral agreement with the Philippine Government for the
• DOCUMENTATION COSTS PAID BY WORKER protection of OFWs
Passport
Clearance • MINIMUM EMPLOYMENT CONDITIONS WHICH MUST BE
Authentication COMPLIED WITH BY PRINCIPAL
Birth certificate Guaranteed wages for regular working hours and overtime pay, not lower
Medicare than prescribed minimum wages
Trade test, if necessary Free transportation
Inoculation, if required Free food and accommodation
Medical examination fees Just/authorized causes for termination
• LICENSE OF AGENCY WHICH RECRUITED/DEPLOYED A MINOR

WILL BE AUTOMATICALLY REVOKED
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Fine of P500K to P1M in addition to the revocation of license

• CONCURRENT JURISDICTION
• DUTIES AND ROLES OF GOVERNMENT AGENCIES CHARGED Secretary of DOLE and POEA have concurrent jurisdiction in
WITH THE IMPLEMENTATION OF RA 8042 regulating licenses and authorities (see: Transaction)
DFA But once the matter is brought to the DOLE from POEA, regulatory
Priority action or make representation with foreign authority to functions are to be exercised only by the DOLE
protect rights of migrant workers and overseas Filipinos
Extend immediate assistance, including repatriation of distressed • WHO ARE CRIMINALLY LIABLE FOR VIOLATION OF SEC. 6?
OFWs and other overseas Filipinos The persons criminally liable for the above offenses are the principals,
DOLE accomplices and accessories.
Ensure that labor laws in foreign countries are fairly applied to In case of juridical persons, (1) the officers having ownership, control,
OFWs and other overseas Filipinos management or direction of their business who are responsible for the
POEA commission of the offense; and (2) the responsible employees/agents
Regulate private sector involvement in recruitment and overseas thereof shall be liable.
placement through licensing and registration Hence an officer may argue that they are not responsible for the
OWWA commission.
Provide assistance needed in the enforcement of contractual
obligations by agencies or entities and/or their principals • IT IS NOW POSSIBLE TO BE HELD LIABLE FOR ILLEGAL
Assistance in repatriation R E C R U I T M E N T A S E C O N O M I C S A B O TAG E T H RO U G H
PROHIBITED ACTS (SEE: GALLO)
• REALIGNMENT OF JURISDICTIONS BETWEEN POEA AND NLRC BUT is there a distinction between the first 14 prohibited acts and the
R.A. 8042 has transferred employer-employee relations cases from last 7?
POEA to the NLRC. Not settled, but it seems that there is
Jurisdiction retained with POEA. The POEA retains original and
exclusive jurisdiction to hear and decide: • FAILURE TO DEPLOY VIS-À-VIS ILLEGAL DISMISSAL
All cases which are administrative in character, involving or There is a distinction between perfection of employment contract and
arising out of violations of rules and regulations relating to commencement of employer-employee relationship
licensing and registration of recruitment and employment Illegal dismissal presupposes the existence of an employer-employee
agencies or entities relationship
Disciplinary action cases and other special cases which are Deployment is a suspensive condition for the existence of such
administrative in character, involving employers, principals, relationship
contracting partners and Filipino Migrant Workers.
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Failure to deploy holds the recruiter liable still for money claims Now all OFWs shall be entitled to the unexpired term if illegally
notwithstanding there being no illegal dismissal dismissed.
Breach of contract of employment already perfected Violation of Article XII and the equal protection clause
Serrano declared RA 8042 provision unconstitutional
• TERMINATION OF CONTRACT OF MIGRANT WORKERS Sameer declared RA 10022 provision unconstitutional
Must comply with substantive and procedural due process Sameer also made a pronouncement regarding the appicability of
Substantive: just or authorized cause BSP Circular No. 799, which took effect on July 1, 2013 and
Procedural: twin notice requirement (notice and hearing) revised the interest rate for loan or forbearance from 12% to 6%
What law applies? in the absence of stipulation.
Application of the International law doctrine presumed-identity or Circular No. 799 is NOT applicable when there is a law that
processual presumption states otherwise. A Central Bank issuance cannot repeal a law.
GR: Philippine Law In light of Section 10, RA 8042 as amended by RA 10022,
EXC: where foreign law is proven: a copy must be unlawfully terminated overseas workers are entitled to the
presented and it must comply with the Revised Rules of reimbursement of their “placement fees and the deductions made
Court. with 12% p.a. interest”
lex loci contractus (the law of the place where the contract is made) L I M I T E D A P P L I C AT I O N T O W H AT L AW
When the contract of employment is perfected in the PROVIDES
Philippines, the Labor Code, its implementing rules and The same cannot be said for the awards of salaries for the
regulations, and other laws affecting labor apply. unexpired portion of the employment contract. These awards are
Burden of proof fans on the foreign-based employer and the local agent not covered because the law does not provide for a specific
Sameer v. Cabiles interest rate that should apply.
Respondent’s dismissal grounded on inefficiency and negligence
less than one year from hiring + repatriation on the same day • MONEY CLAIMS
show failure to comply with both substantial and procedural due Illegal dismissal
process. Reimbursement of placement fee
Reimbursement of deductions made with 12% interest p.a.
• UNCONSTITUTIONALITY Instances where there was an unauthorised deduction
The provision in the law which states that “salaries for the unexpired from the salary
portion of the employment contract or for three months for every year Salary of unexpired portion
of the unexpired term, whichever is less” has been declared However, OFWs are NOT entitled to backwages, reinstatement
unconstitutional or separation pay
Legal Dismissal
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Procedural due process fulfilled: no money claims • MONEY CLAIMS MUST BE HEARD AND DECIDED WITHIN 90
Procedural due process lacking: nominal damages DAYS
Penalty for non-compliance
• TWO LAYERS OF SOLIDARY LIABILITY FOR MONEY CLAIMS Salary withheld until compliance
UNDER SECTION 10, RA 8042 AS AMENDED: Suspension not more than 90 days
Solidary liability of the principal/employer and the recruitment/ Dismissal with disqualification to hold appointive public office
placement agency, and for 5 years
If the recruitment/placement agency is a juridical being, the corporate
officers, directors, and partners shall be solidarily liable with the
corporation/partnership for the money claims
Note: this liability is notwithstanding the conviction in the criminal
liability
• AUTOMATIC SOLIDARY LIABILITY UNDER SECTION 10 OF RA 8042

VIS-À-VIS SALAC
Section 10 imposes automatic solidary liability on directors and officers
of the recruitment agency. Performance bond answers for all damages/
money claims awarded
BUT Salac states that solidary liability attaches only upon a showing that
a director or officer participated in the act
To harmonize, apply by analogy the rules applicable in contracting
arrangements regarding solidary liability of principals (Article 106-109,
Labor Code)
Director or officer is directly and solidarily liable for money
claims which are civil in nature
Money claims such as wages, overtime pay, service
incentive leave pay
Director or officer must have participated in the complained act
in order to be liable for damages which are punitive in nature
Backwages, etc.
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Labor 1 - FLJ Joachim Dompor D2017

Updated by MATSUMURA 松村 C2020

I. EMPLOYER EMPLOYEE RELATIONSHIP Power to dismiss

• FOUR-FOLD TEST FOR THE EXISTENCE OF EMPLOYER- • TWO-TIERED TEST

Employee’s functions such as maintenance and utility • BOUNDARY- HULOG SCHEME

He is considered a regular employee • FIXED-TERM

• REGULAR PROJECT EMPLOYEES Universal Robina v. Acibo

1 Found in Chan-Robles Bar Reviewer

2 Found in Chan-Robles Bar Reviewer

Punctuality is a reasonable standard imposed on every employee -

SUMMARY TABLE OF CLASSES OF EMPLOYMENT

Probationary Regular Seasonal Project Casual Fixed-term

Probationary Regular Seasonal Project Casual Fixed-term

III. I N D E P E N D E N T C O N T R A C TO R S A N D L A B O R - O N LY • CONTRACTING DEFINED [D.O. NO. 174]

• IMPORTANT ARTICLES • THREE PARTIES IN A CONTRACTING AGREEMENT

• LEGAL IMPLICATION OF LACK OF SERVICE AGREEMENT OR Employee Independent

• OUTSOURCING view of the employee. But, between the employer and

• INDICATION OF INDEPENDENT CONTRACTOR Compensation is through “arriba” meaning a percentage of the

is not an employee Talent fee: P317,000/month (the court Salary: P28,000/month

V. PRE-EMPLOYMENT EXCEPTIONS: (1) Direct hiring by members of the diplomatic

• RECRUITMENT AND PLACEMENT • ILLEGAL RECRUITMENT

• LICENSE OF AGENCY WHICH RECRUITED/DEPLOYED A MINOR

Fine of P500K to P1M in addition to the revocation of license

• AUTOMATIC SOLIDARY LIABILITY UNDER SECTION 10 OF RA 8042

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