ATENEO CENTRAL BAR OPERATIONS 2008 100 NOTES ON LABOR LAW / ATTY. MARLON J.

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EMPLOYER-EMPLOYEE RELATIONSHIP

1. It is possible for a “dual juridical relationship” to exist – that of employer-employee and vendor-
vendee, or that of employer-employee and corporation-stockholder. Control of the employee’s
conduct is the most crucial and determinative indicator of the presence or absence of an employer-
employee relationship. The existence of a different kind of juridical relationship between the parties
does not necessarily extinguish the employer-employee relationship. In the same way, the existence
of an employer-employee relationship cannot be negated by expressly repudiating it in a contract.

2. The submission of reports and recommendations regarding work progress on a regular basis
does not amount to control over the means and methods of work. Not all rules are equivalent to
control, that gives rise to an employer-employee relationship. There is a difference between rules and
guidelines towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first create no employer-employee relationship.

3. Exclusivity of service does not necessarily mean that the purported employer exercised control
over the means and methods of the purported employee’s work. This feature is not meant to change
the nature of the relationship between the parties, nor does it necessarily imbue such relationship with
the quality of control envisioned by law as giving rise to an employer-employee relationship.

4. A person may be paid on the basis of results or time expended on the work, and may or may
not acquire an employment status. Payment by results is merely a method of computing compensation
and not a basis for determining the existence of employer-employee relationship. Hence, payment by
commission or on per-trip basis will not negate the existence of an employer-employee relationship.

5. A party may render services for another, no matter how necessary for the latter’s business,
even without being hired as an employee. The fact that the worker performs work that is usually
necessary and desirable to the business of the employer is not determinative of the existence of an
employer-employee relationship. Article 280 of the Labor Code is not the yardstick for determining the
existence of an employer-employee relationship. The provision merely distinguishes between the two
(2) kinds of employees (regular and non-regular), in an employment relationship that is not in dispute.

6. The mere presence of the contractor’s supervisor in the work premises does not necessarily
mean that the contractor had control over the work of the employees. The test to determine the
existence of independent contractorship is whether one claming to be an independent contractor has
contracted to do the work on its own account, under its own responsibility, according to its own
methods and without being subject to the control of the principal, except only as to the results.

7. It is not enough to show substantial capitalization or investment in the form of tools and
equipment, to be considered as an independent contractor. In determining the existence of an
independent contractor relationship, several factors might be considered such as: whether the
contractor is carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance of specified
pieces of work, the control and supervision of the workers; the power of the employer with respect to
hiring, firing and payment of the workers of the contractor; the control of the premises; the duty to
supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.

8. In legitimate job-contracting, the law creates an employer-employee relationship for a limited

purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes
jointly and severally liable with the job contractor, only for the payment of the employees’ wages
whenever the contractor fails to pay the same. In labor-only contracting, the law creates an employer-
employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the latter is responsible to the
employees of the contractor as if such employees had been directly employed by the principal.

9. For employees in a contracting arrangement, the actual source of the payment of their wage
does not matter as long as they are paid. As creditors, the employees may collect from anyone of the
solidary debtors. Solidary liability does not mean that two solidary debtors are liable for only half of
the payment. The employees’ immediate recourse, however, is with their direct employer.

10. The Constitution declares that the State affirms labor as a primary social economic force. It
shall protect the rights of workers and promote their welfare. The State shall afford full protection to

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labor, local and overseas, organized and unorganized, and promote full employment and equality of
employment opportunities for all.

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ATENEO CENTRAL BAR OPERATIONS 2008 100 NOTES ON LABOR LAW / ATTY. MARLON J.
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CLASSES OF EMPLOYEES

1. What determines whether a certain employment is regular or not is not the will and word of the
employer but the nature of the activities performed by the employee. The primary standard of
determining regular employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer. The test is
whether the former is usually necessary or desirable in the usual trade or business of the employer.

2. Whether one’s employment is regular is not determined by the number of hours one works.
Hence, part-time work does not necessarily negate regular employment. Regular employment status
is likewise not determined by the manner of compensation. Hence, an employee whose mode of
compensation is on a “per-piece basis” can still be a regular employee.

3. The law does not provide the qualification that the employee must first be issued a regular
appointment or must first be formally declared as such before s/he can acquire a regular status. A
person becomes a regular employee by operation of law. Thus, the status of regular employment
attaches to a casual employee on the day immediately after the end of his first year of service.

4. For seasonal employees to be excluded from those classified as regular employees, it is not
enough that they perform work that is seasonal in nature. They must have been employed only for
the duration of one season. If seasonal workers perform the same tasks for the employer every
season for several years, they will be considered regular employees for their respective tasks.
Seasonal workers who are called to work from time to time and are temporarily laid off during off-
season are not separated from service, but merely considered on leave until re-employed.

5. Project employment contemplates an activity which is not commonly or habitually performed or

such type of work which is not done on a daily basis but only for a specific duration of time or until
completion, in which case, the services of an employee are necessary and desirable in the employer’s
usual business only for the period of time it takes to complete the project. A project could also refer
to a particular job or undertaking that is within the regular or usual business of the employer, but
which is distinct and separate, and identifiable as such, from the other undertakings of the employer.

6. Length of service of a project employee is not the controlling test of employment classification.
Whether one is employed as a project employee or not would depend on whether s/he was hired to
carry out a specific project or undertaking, the duration and scope of which were specified at the time
his/her services were engaged. If there is no specification of the duration and scope, and the work to
be undertaken is usually necessary or desirable in the usual business or trade of the employer, then it
is regular employment. In project employment, the employment is coterminous with the project.

7. A project employee may acquire the status of a regular employee when the following concur:
(a) there is a continuous rehiring of project employees even after the cessation of a project for the
same tasks or nature of tasks; and (b) the tasks performed by the employees are vital, necessary and
indispensable to the usual trade or business of the employer. The length of time during which the
employee was continuously rehired is not controlling, but serves as a badge of regular employment.

8. For fixed-term employment to be valid: (a) the fixed period of employment must be knowingly
and voluntarily agreed upon by the parties without any force, duress, or improper pressure brought to
bear upon the employee and absent any other circumstances vitiating his/her consent; (b) it
satisfactorily appears that the employer and the employee dealt with each other on more or less equal
terms with no moral dominance exercised by the former on the latter; and (c) the fixed-term
employment is not used by the employer to circumvent the employee’s right to security of tenure.
Utilizing a series of employment contracts of short duration can be considered circumvention.

9. The essence of probationary employment lies in the purpose or objective sought to be attained,
i.e., primarily for the employer to determine whether or not the employee is qualified for permanent
employment. The word “probationary” implies the purpose of the term, but not its length. The
probationary employee is not entitled to the completion of the probationary period and can be
terminated prior to that completion for a just cause or for failure to qualify as a regular employee in
accordance with reasonable standards made known to the employee at the time of engagement.

10. A part-time teacher cannot acquire permanent status despite the length of service. Only when
a teacher has served as a full-time employee can such teacher acquire permanent or regular status.
Semesters served as part-time lecturer cannot be credited in computing the number of years the
teacher has served to qualify for regular status.

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LABOR STANDARDS

1. The “floor wage” method involves the fixing of a determinate amount to be added to the
prevailing statutory minimum wage rates. The “salary-ceiling” method mandates a wage adjustment
that will be applied to employees receiving a certain denominated salary ceiling. In the “salary-ceiling”
method, workers already receiving more than the existing minimum wage (up to a certain amount
stated in the Wage Order – the “ceiling”) are also to be given a wage increase.

2. The cause of action of an entitled employee to claim the service incentive leave pay (SIL)
accrues from the moment the employer refuses to remunerate its monetary equivalent if the employee
did not make use of said leave credits but instead chose to avail of its commutation. Accordingly, if
the employee wishes to accumulate the leave credits and opts for its commutation upon his/her
resignation or separation, the cause of action to claim the whole amount of the SIL shall arise when
the employer fails to pay such amount at the time of the resignation or separation from employment.
The 3 year prescriptive period commences from the time when the employer refuses to pay its
monetary equivalent after demand of commutation or upon termination of the employee’s services.

3. The criterion in making a distinction between a supplement and a facility does not so much lie
in the kind but the purpose. Food or snacks or other convenience provided by the employers are
deemed as supplements if they are granted for the convenience of the employer.

4. Earnings and other remunerations which are not part of the basic salary shall not be included in
the computation of the 13th month pay. Management’s practice of including non-basic benefits in the
computation of the 13th month pay for two years, despite the clarity of the law on this, constitutes
voluntary employer practice which cannot be unilaterally withdrawn by the employer.

5. The mere factual existence of a wage distortion does not ipso facto result to an obligation to
rectify it absent a law or other source of obligation which requires rectification. The Labor Code’s
mandate for the correction of a wage distortion contemplates a wage distortion due to a prescribed law
or wage order. It does not cover voluntary and unilateral increases by the employer in fixing hiring
rates.

6. The granting of a bonus is basically a management prerogative which cannot be forced upon
the employer who may not be obliged to assume the onerous burden of granting bonuses or other
benefits aside from the employee’s basic salaries or wages, especially so if it is incapable of doing so.
As an exception, a bonus is demandable only when there is clear proof that it is made part of the wage
or salary or compensation (e.g., salary is partly fixed amount and partly incentive bonus).

7. A policy requiring employees to remain single and providing that they will be separated from
the service once they marry was declared void, it being violative of the Labor Code’s policy with regard
to discrimination against marriage. A policy prohibiting employees from marrying co-employees, and
requiring one of the spouses to resign from the company, was likewise held invalid. However, a policy
prohibiting employees from marrying employees of a competitor company was upheld.

8. “Field personnel” are 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. If required to be at specific places at specific
times, the employees cannot be considered to be field personnel. The definition is not merely
concerned with the location where the employee regularly performs his duties but also with the fact
that the employee’s performance is unsupervised by the employer.

9. Fixing of the work schedule of employees is the employer’s prerogative. Absent discrimination,
as in a situation where the change effected by management with regard to working time is made to
apply to all employees whether or not they are members of the union, it cannot be said that the new
schedule prejudices the right to self-organization.

10. Transfer of employees is within the inherent right of employers to manage their business. This
is subject to the condition that it must not be motivated by discrimination or bad faith. Furthermore,
the transfer may amount to constructive dismissal when the transfer is unreasonable, inconvenient, or
prejudicial to the employee, and involves a demotion in rank or diminution of salaries, benefits, and
other privileges. An act of clear discrimination, insensibility, or disdain by an employer may become so
unbearable on the part of the employee that it will force the employee to quit work.

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RECRUITMENT & SSS

1. The term “migrant worker” includes a Filipino who is hired by a Philippine corporation to work
for its branch abroad, even when the hiring was done through the branch office while the employee
was on a tourist status in the foreign country. Whether employed locally or overseas, all Filipino
workers enjoy the protective mantle of Philippine labor and social legislation, contract stipulations to
the contrary notwithstanding. Obtaining a work permit in a foreign country does not necessarily mean
a waiver of one’s national laws on labor. That permit does not automatically mean that the non-
citizen is thereby bound by local laws only, i.e., by the laws of the country of work.

2. The obligation of the recruitment agency and the foreign principal to the employee does not
end upon the expiration of their contract (manning agreement between agency and principal) but
continues up to the termination of the employment contract. In fact, such liability does not necessarily
end upon the termination of employment but upon the repatriation of the employee to the Philippines.

3. When after the termination of the original employment contract, the foreign principal directly
negotiated with the migrant worker and entered into a new and separate employment contract,
without the knowledge and consent of the recruitment agency, the agency cannot be held liable for the
worker’s claims arising from the contract extension.

4. The solidary nature of the relationship between the local recruitment agency and the foreign
principal makes them solidarily liable for any violation of the recruitment agreement or the employment
contract.

5. In illegal recruitment, the recruiter gives the impression that s/he has the power to send
workers abroad. The number of persons dealt with is not an essential ingredient of the act of
recruitment and placement. There can be recruitment even if only one prospective worker is involved.
Recruitment is deemed committed in large scale, however, if committed against three (3) or more
persons individually or as a group.

6. Under the “country-team approach,” all officers, representatives and personnel of the Philippine
government posted abroad regardless of their mother agencies shall, on a per country basis, act as one
country-team with a mission under the leadership of the ambassador.

7. Total disability means the disablement of an employee to earn wages in the same kind of work
or similar nature that s/he was trained for, or accustomed to perform, or any kind of work which a
person of his/her mentality and attainment could do. It does not mean absolute helplessness. In
disability compensation, it is not the injury which is compensated, but rather it is the incapacity to work
resulting in the impairment of one’s earning capacity. The fact that the employee was able to work
again after a few years will not negate total disability. It is of no consequence that the employee was
cured after a couple of years. The law does not require that the illness should be incurable.

8. The mandatory coverage of SSS is premised on the existence of an employer-employee

relationship. Regardless of the nature of employment, whether it is regular or project, employees are
subject of the compulsory coverage under the SSS law, unless their employment falls under the specific
exceptions provided by the law. By express provision of law, casual employees are not subject to
compulsory coverage of SSS.

9. The term “primary beneficiaries as of the date of his retirement” should include a dependent
spouse who was married to the member after the retirement of the latter. Classifying dependent
spouses and determining their entitlement to survivor’s pension based on whether the marriage was
contracted before or after the retirement of the other spouse, regardless of the duration of the said
marriage, bears no relation to the achievement of the policy objective of the law.

10. Voluntary coverage of the SSS includes Filipinos recruited in the Philippines by foreign-based
employers for employment abroad, and spouses who devote full time to managing the household and
family affairs.

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RIGHT TO SELF-ORGANIZATION

1. The inclusion in a union of disqualified employees cannot be used as a ground for a petition for
cancellation of union registration, unless such inclusion is due to misrepresentation, false statement or
fraud, in connection with the adoption or ratification of the constitution and by-laws, the minutes of
ratification, and the list of members who took part in the ratification; or in connection with the election
of officers, minutes of the election, and the list of voters. The alleged misrepresentation of a union by
making it appear that its membership was composed purely of rank-and-file employees is not the
misrepresentation that amounts to a ground for cancellation of registration.

2. The test of supervisory or managerial status depends on whether a person possesses authority
to act in the interest of his/her employer and whether such authority is not merely routinary or clerical
in nature but requires the use of independent judgment. “Policy-determining” refers to policy-
determination in matters that may be the subject of negotiation between management and labor.

3. The prohibition in Art. 245 is not confined to a case of individual employees (rank-and-file and
supervisors) co-mingling in the same union. The prohibition extends to a supervisors’ union joining a
national federation the members of which include unions of rank-and-file employees of the same
employer unit. For this extension of the prohibition in Article 245 to apply, however, two conditions
must concur: (a) the rank-and-file employees are directly under the authority of the supervisory
employees; and (b) the national federation is actively involved in union activities in the company.
Even the membership of a rank-and-file union and a supervisory union of the same company in two
separate federations with a common set of officers was held to be prohibited co-mingling.

4. The prohibition to join labor organizations extends to confidential employees or those who by
reason of their positions or nature of work are required to assist or act in a fiduciary manner to
managerial employees. Two criteria must concur for an employee to be considered a confidential
employee: (a) the confidential relationship must exist between the employee and his superior officer;
and (b) the officer must handle responsibilities relating to labor relations. A key element that must be
considered is the employee’s necessary access to confidential labor relations information - access must
not only be incidental but must be necessary in the performance of the employee’s duties.

5. False statements made by union officers before and during a certification election – that the
union is independent and not affiliated with a national federation – interfere with the free choice of the
employees, and can be a valid ground for a protest. A certification election may be set aside for
misstatements made during the campaign, where (1) a material fact has been misrepresented; (2) an
opportunity for reply has been lacking; and (3) the misrepresentation has had an impact on the free
choice of the employees in the election.

6. After a certificate of registration is issued to a union, its legal personality cannot be subject to
collateral attack. It may be questioned only in an independent petition for cancellation.

7. The pendency of a petition for cancellation of a union’s registration will not suspend an ongoing
certification election case. Neither will such petition for cancellation preclude or suspend collective
bargaining. The pendency of a petition for cancellation is not a ground for the employer to refuse to
bargain with the certified bargaining agent.

8. The test of whether an employer has interfered with and coerced employees in the exercise of
their rights to self-organization is whether the employer has engaged in conduct which it may
reasonably be said tends to interfere with the free exercise of the employees’ rights. It is not
necessary that there be direct evidence that any employee was in fact coerced. It is only necessary
that there is a reasonable inference that anti-union conduct of the employer does have an adverse
effect on self-organization and collective bargaining. Under the “totality of conduct doctrine,” the
culpability of the employer should be evaluated against the background of and in conjunction with all
collateral circumstances.

9. Report of violations of rights and conditions of union membership does not always require the
support of 30% of the union membership. A report of a violation of rights and conditions of
membership in a labor organization may be made by any member or members especially concerned.

10. The State shall regulate the relations between workers and employers, recognizing the right of
labor to its just share in the fruits of production and the right of enterprises to reasonable returns on
investments. Workers shall participate in policy and decision-making processes affecting their rights
and benefits as may be provided by law.

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ATENEO CENTRAL BAR OPERATIONS 2008 100 NOTES ON LABOR LAW / ATTY. MARLON J.
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COLLECTIVE BARGAINING

1. Collective bargaining is a mutual responsibility of the employer and the union and is
characterized as a legal obligation. The employer’s refusal to make a counter-proposal to the union’s
proposed CBA is an indication of bad faith and constitutes an unfair labor practice. As a result of the
employer’s refusal to bargain, the union’s proposal shall be considered as the CBA between the parties.
This principle applies to a situation where there is no existing CBA, and the parties are required to
negotiate one, and also, to a situation where there is an existing CBA, and the parties are mandated to
renegotiate its provisions not later than 3 years from the start of its effectivity.

2. The choice of a collective bargaining agent is the sole concern of the employees. The only
exception to this rule is where the employer has to file the petition for certification election because it
was requested to bargain collectively. The employer has no legal standing in a certification election as
it cannot oppose the petition or appeal the Med-Arbiter/Secretary’s orders related thereto.

3. The law has fixed the term of CBAs to a period of five years, in so far as the representation
aspect is concerned. There is no fixed period for the other provisions of the CBA but the parties are
mandated to renegotiate the non-representation provisions not later than 3 years from the start of the
CBA. In case of expiration of a CBA, the “hold-over principle” applies, i.e., the CBA that has expired
shall continue in full force and effect until a new CBA is reached by the parties.

4. If an employer interferes in the selection of the union’s negotiators or coerces the union to
exclude from its panel of negotiators a representative of the union, and if it can be inferred that the
employer adopted the said act to yield adverse effects on the free exercise of the right to self-
organization and to collective bargaining, the employer commits an unfair labor practice. Substantial
evidence of the coercion is necessary.

5. The employees sought to be represented by the collective bargaining agent must have
substantial mutual interests in terms of employment and working conditions. The express exclusion of
certain groups of employees from the bargaining unit in a previous CBA does not bar any renegotiation
for the future inclusion of said employees in the unit.

6. A certified bargaining agent has the right to be furnished by the employer with the annual
audited financial statements, including the balance sheet and the profit and loss statement, within
thirty (30) calendar days from the date of receipt of the request. The law requires a written request
from the union as a precondition for this right.

7. The terms and conditions of a CBA constitute the law between the parties. A unilateral policy
of the employer that is contrary to the CBA cannot prevail over the provisions of the CBA.

8. Under D.O. 40-03, a petition for certification election is barred when the duly certified
bargaining agent has commenced negotiations in good faith with the employer within one year from
the certification election and has sustained such negotiations (even beyond one year), also in good
faith.

9. The intention of the law is to limit the grounds for appeal that may stay the holding of a
certification election. Interlocutory orders of the Med-Arbiter are not appealable. The Med-Arbiter’s
order granting the conduct of a certification election in an unorganized establishment shall not be
subject to appeal. Any issue arising therefrom may be raised by means of protest on the conduct and
results of the certification election. All other orders of the Med-Arbiter granting or denying a petition
for certification election shall be subject to appeal.

10. Where a petition for certification election has been filed and upon the Med-Arbiter’s
intercession, the parties agree to hold a consent election, the results thereof shall constitute a bar to
future petitions for certification election, in the same manner as a certification election. The same
principle applies to a consent election conducted with the intercession of the Regional Office, even if no
petition for certification election was filed. If an election is conducted upon agreement by the parties
but without the participation of the Regional Office, such election will not serve as a bar to future
petitions for certification election.

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STRIKES

1. A strike is a temporary stoppage of work by the concerted action of the employees, as a result
of a labor dispute. A “picket” may be considered a strike if it causes a work stoppage (such as when
the picketers block the delivery of supplies or prevents other employees from reporting for work).
Even if the employer had shut down the operation of one department prior to the picket, if the other
departments that were still operating were adversely affected by the picket in such a way that there
was work stoppage, the “picket” amounted to a strike. An “overtime boycott” or the concerted refusal
of the union members to render overtime work, after years of regularly having the said arrangement,
was also considered a strike.

2. To be valid, a strike must have as ground either ULP or bargaining deadlock. As an exception,
even if no ULP is committed by the employer, if the employees believe in good faith that ULP acts exist
so as to constitute a valid ground to strike, then the strike held pursuant to that belief may be legal as
a “good faith strike.” A mere claim of good faith, however, will not be enough. In addition to such
good faith, circumstances must have warranted such belief.

3. In addition to the existence of a valid ground, the strike must likewise comply with the
procedural requirements (notice of strike, notice of the conduct of strike vote, actual strike vote, notice
of results of vote, cooling-off period, 7-day strike ban). The procedural requirements are mandatory
and the failure of a union to comply with the requirements will render the strike illegal. This strict
policy applies even to the 24-hour notice to the NCMB of the conduct of the strike vote.

4. When the NCMB issues a notice converting the dispute into a preventive mediation case, the
said conversion has the effect of dismissing the notice of strike that has been filed. If the union still
proceeds with the strike, after such conversion, then the strike is an illegal strike because the union, at
that time, has already lost the notice of strike.

5. As a general rule, the Labor Code prohibits the issuance of injunctions or restraining orders in
any case growing out of labor disputes. Exceptions to these are the following: (a) the NLRC’s power to
enjoin or restrain actual and threatened commission of any or all prohibited or unlawful acts, or to
require the performance of a particular act which, if not restrained or performed forthwith, may cause
grave or irreparable damage to any party or render ineffectual any decision in favor of such party; and
(b) the Secretary of Labor’s (and the President’s) powers to issue assumption or certification orders.
In some cases, the Court has said that the coercive measure of injunction may also be used to restrain
an actual or threatened unlawful strike, not just the illegal acts attendant to the strike.

6. When an assumption order (or certification order) is issued, it should mandate the return to
work of the strikers, and the actual reinstatement of the returning strikers. Payroll reinstatement is not
contemplated by the law. Reinstatement must be to the same position of the strikers before the strike
and this order acts as a limitation on the managerial prerogative to transfer and reassign employees.
The order to reinstate the returning strikers must cover all strikers and must not be limited to a group
of strikers. In one case, the Court even allowed the assumption order to cover striking employees
whose membership in the bargaining unit was in question.

7. The mere posting of an assumption order in conspicuous places in the picket area does not
satisfy the rigid requirement for proper service. The union affected could not be adjudged to have
defied such order since it was not properly apprised thereof.

8. Mere finding of the illegality of a strike should not be automatically followed by wholesale
dismissal of the strikers from employment. A union officer who knowingly participates in an illegal
strike and any worker or union officer who knowingly participates in the commission of illegal acts
during the strike may be declared to have lost their employment status. An ordinary striking employee
cannot be terminated for mere participation in an illegal strike.

9. The Secretary has the prerogative to temper the consequence of the defiance of an assumption
order. The Secretary may merely suspend rather than dismiss the employees involved. Labor laws
frown upon dismissal. Where a penalty less punitive would suffice, an employee should not be
sanctioned with a consequence so severe.

10. An “innocent bystander” who seeks an injunction from the regular court against a labor strike
must show that it is entirely different from, without any connection whatsoever to, either party to the
dispute, and, therefore, its interests are totally foreign to the context thereof.

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ATENEO CENTRAL BAR OPERATIONS 2008 100 NOTES ON LABOR LAW / ATTY. MARLON J.
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TERMINATION DISPUTES (Causes)

1. Gross misconduct is improper or wrong conduct, the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful
intent and not mere error in judgment. The misconduct must be of such a grave and aggravated
character and not merely trivial and unimportant. The misconduct must be work-related. Failure to
formally inform the employer of the employee’s pregnancy cannot be considered grave misconduct.

2. Willful disobedience, to justify termination, requires the concurrence of two factors: (a) the
employee’s conduct must have been willful or intentional, the willfulness being characterized by a
wrongful and perverse attitude; and (b) the order violated must have been reasonable, lawful, made
known to the employee and must pertain to the duties of the employee.

3. Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or
the entire absence of care. It is a thoughtless disregard of consequences without exerting any effort to
avoid them. To constitute a valid ground for dismissal, the negligence must not only be gross, it
should also be habitual in character. A first time infraction will not justify termination. Poor
performance does not necessarily amount to gross and habitual negligence.

4. Loss of trust and confidence applies only when the employee concerned holds a position of
trust and confidence. It is the breach of this trust that results in the employer’s loss of confidence.
The breach of trust must be related to the performance of the employee’s function and must be willful.
A breach is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as
opposed to an act done carelessly or inadvertently. The allegation of breach of trust must rest on
substantial ground and cannot be dependent on the employer’s arbitrariness. It should be genuine and
not simulated; not a mere afterthought to justify earlier termination or a subterfuge for causes which
are improper, illegal, unjustified.

5. There is a difference in the treatment of managerial employees from that of rank-and-file

employees, insofar as the application of loss of trust and confidence is concerned. For rank-and-file
employees, loss of trust requires proof of involvement in the events in question. As regards
managerial employees, mere existence of reasonable basis for believing that the employee has
breached the trust of the employer would suffice.

6. Abandonment means the deliberate, unjustified refusal of the employee to resume his/her
employment. For abandonment to be a valid ground for termination, two elements must concur: (a)
the employee’s intention to abandon; and (b) overt act from which it may be inferred that the
employee has no more intent to resume his/her work. The immediate filing of an illegal dismissal
complaint generally negates the employer’s claim of abandonment. As an exception, this principle does
not apply when the employee does not ask for reinstatement in his/her complaint for illegal dismissal.

7. Retrenchment is a management prerogative resorted to by employers to avoid or minimize

business losses. To justify retrenchment, the employer must prove by sufficient and convincing
evidence: (a) the losses expected, which must be substantial; (b) the reasonable imminence of the
losses and the urgency of the retrenchment; and (c) other measures taken by the employer prior or
parallel to the retrenchment. For retrenchment to be valid, there must be fair and reasonable criteria
in the selection of employees who will be affected by the retrenchment program.

8. Redundancy is a situation where the personnel complement of the employer is in excess of the
needs of its operations. Mere allegation of redundancy will not suffice. There must be adequate
proof of the redundancy. Like in retrenchment, the employer must also prove that it applied fair and
reasonable criteria in the implementation of the redundancy program. Possible criteria include: (a) less
preferred status, e.g. temporary employee; (b) efficiency; and (c) seniority. If the employer violates
its own criteria, then the redundancy cannot be considered valid.

9. Resignation is defined as the voluntary act of an employee who finds himself/herself in a

situation where he/she believes that personal reasons cannot be sacrificed in favor of the exigency of
the service, and he/she has no other choice but to disassociate himself/herself from employment. As
a general rule, voluntary resignation is inconsistent with the filing of a complaint for illegal dismissal.

10. For termination on the ground of disease to be valid, two requisites must concur: (a) the
disease cannot be cured within 6 months and the continued employment of the concerned employee is
prohibited by law or prejudicial to his/her health or to the health of the co-employees; and (b) a
certification to that effect must be issued by a competent public health authority.

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TERMINATION DISPUTES (Procedure and Effects)

1. Termination for a just cause requires two notices to the employee: (a) the show-cause letter
requiring the employee to explain; and (b) the final notice informing the employee of the termination.
The first notice must apprise the employee that his/her termination is being considered due to the acts
stated in the notice. The notice must clearly indicate the possibility of termination.

2. Retrenchment, even if temporary (based on the employer’s own program), must still comply
with the 30-day prior notice requirement. The law does not speak of temporary or permanent
retrenchment, hence, there is no need to qualify the term. When the law does not distinguish, we
must not distinguish.

3. Preventive suspension is justified where the employee’s continued employment poses a serious
and imminent threat to the life or property of the employer or the employee’s co-workers. Without
this kind of threat, preventive suspension is not proper. No preventive suspension shall last longer
than 30 days. An extension of the suspension beyond 30 days shall be with pay. Any violation of this
requirement amounts to constructive dismissal.

4. Even if the dismissal of an employee is conditioned not on the grounds for termination under
the Labor Code, but pursuant to the provisions of a CBA (eg., a union-security clause), it is still
necessary to observe substantive due process in order to validate the dismissal. As applied to the
Labor Code, adherence to substantive due process is a requisite for a valid determination that just or
authorized causes existed to justify dismissal. As applied to the dismissals grounded on violations of
the CBA, observance of substantial due process is indispensable in establishing the presence of the
cause or causes for dismissal as provided for in the CBA.

5. Reinstatement is intended by law as the general rule, i.e., the primary remedy for an illegally
dismissed employee. It is only when reinstatement is not possible that payment of separation pay is
awarded to the employee. Payment of separation pay in lieu of reinstatement is allowed due to: (a)
reasons not attributable to the fault of the employer, e.g., closure of the company; (b) the position has
already been abolished and reinstatement to an equivalent position is also not feasible; or (c) strained
relationship exists between the parties.

6. Substantial evidence is required to show that the relationship was indeed strained as a
necessary consequence of the judicial controversy. The principle of strained relations should not be
used so indiscriminately as to bar the reinstatement of illegally dismissed workers. It must be alleged
and proved during trial. Furthermore, the strained relationship must be between the dismissed
employee and the employer, not between the dismissed employee and his/her co-employees.

7. The payment of backwages is generally granted on the ground of equity. It is a form of relief
that restores the income that was lost by reason of the unlawful dismissal. It is not private
compensation or damages but is awarded in furtherance of the public objective of the law. It is not
redress of a private right but rather in the nature of a command to the employer to make public
reparation for dismissing an employee either due to the former’s unlawful act or bad faith. Hence, the
award of backwages is not conditioned on the employee’s ability or inability to, in the interim, earn any
income. Income earned by the employee during the pendency of the case will not be deducted from
the backwages that the employee should receive. The employee’s inability to earn during the period
(e.g., due to imprisonment) will not negate the award of full backwages.

8. In computing full backwages, the base figure to be used is pegged at the wage rate at the time
of the employee’s dismissal, inclusive of regular allowances that the employee had been receiving.
Salary increases, unless mandated by law or wage order, are a mere expectancy. Such prospective
salary increases cannot be included in the computation of the backwages.

9. If the dismissal is for just or authorized cause (proved during the trial), the procedural infirmity
in the termination, i.e., failure of the employer to comply with the procedural requirements of
termination, will not invalidate the dismissal. The employer should be held liable, however, for non-
compliance with the procedural requirements of due process. Reinstatement will not be ordered. No
backwages will be awarded. The employee will only be awarded nominal damages. The amount of
nominal damages should be higher in dismissals due to authorized causes, compared to dismissals due
to just causes.

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10. Separation pay as “financial assistance” may be granted to a legally dismissed employee on the
grounds of equity and social justice. This is not allowed, however, when the dismissal is for serious
misconduct or some other cause reflecting on the moral character of the employee.

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ATENEO CENTRAL BAR OPERATIONS 2008 100 NOTES ON LABOR LAW / ATTY. MARLON J.
MANUEL
DISPUTE SETTLEMENT

1. Under Article 128 of the Labor Code, the Secretary of Labor or his/her duly authorized
representatives shall have the power to issue compliance orders to give effect to the labor standards
provisions of the Code and other labor legislation based on findings of the labor employment and
enforcement officers or industrial safety engineers made in the course of inspection. The exercise of
this visitorial and enforcement powers can be exercised regardless of the amount of monetary claims of
the employee/s concerned. The P5,000 jurisdictional limitation applicable to employee complaints for
simple money claims under Article 129 does not apply.

2. Where the dispute is just in the interpretation, implementation or enforcement stage, it may be
referred to the grievance machinery set up in the CBA or by voluntary arbitration. But where there is
already an actual termination, it becomes a termination dispute that is already cognizable by the Labor
Arbiter. If there is a clear agreement between the parties that a termination dispute will be submitted
to voluntary arbitration, then the voluntary arbitrator shall have jurisdiction since Article 262 states that
“all other disputes” can be referred by agreement to voluntary arbitration.

3. The original and exclusive jurisdiction of the Labor Arbiter for money claims is limited only to
those arising from statutes or contracts other than a CBA. The Voluntary Arbitrator will have original
and exclusive jurisdiction over money claims arising from the interpretation or implementation of the
CBA. Of course, this assumes that the dispute should be submitted first to the grievance machinery
before it can be brought to voluntary arbitration.

4. The civil aspect of ULP including claims for damages can be within the jurisdiction of the Labor
Arbiter. The civil implications thereof do not necessarily defeat its nature as a fundamental labor
offense. The damages suffered only form part of the civil component of the injury arising from ULP.

5. The holding of an adversarial trial is discretionary on the Labor Arbiter and the parties cannot
demand it as a matter of right. In administrative proceedings, technical rules of procedure and
evidence are not strictly applied; administrative due process cannot be fully equated with due process
in its strict judicial sense. The requirements of due process are deemed to have been satisfied when
parties are given the opportunity to submit position papers.

6. A corporate officer’s dismissal is always a corporate act, or an intra-corporate controversy, and

the nature is not altered by the reason or wisdom with which the Board of Directors may have in taking
such action. Thus, a question involving the remuneration of a person who is not a mere employee but
a stockholder and officer, is not a simple labor problem but a matter that comes within the area of
corporate affairs and management. It is a corporate controversy in contemplation of the Corporation
Code. An “office” is created by the charter of the corporation and the officer is elected by the
directors or stockholders.

7. The right to appeal is a statutory right and one who seeks to avail of the right must comply with
the statute or rules. The requirements for perfecting an appeal within the reglementary period must
be strictly followed as they are considered indispensable interdictions against needless delays. The
posting of a cash or surety bond is mandatory for an appeal by the employer of the Labor Arbiter’s
decision. It was intended to discourage the employer from using an appeal to delay or evade its
obligation, and to assure the workers that they will receive the money judgment upon the dismissal of
the appeal. The perfection of an appeal in the manner and within the period prescribed by law is not
only mandatory but jurisdictional.

8. Legitimate waivers that represent a voluntary and reasonable settlement of a worker’ claim
should be respected as the law between the parties. Not all quitclaims are per se invalid or against
public policy, except: (a) where there is clear proof that the waiver was wangled from an unsuspecting
or gullible persons, or (b) where the terms of settlement are unconscionable on their faces. In these
cases, the law will step in to annul the questionable transactions. Such quitclaims are regarded as
ineffective to bar the workers from claiming their full measure of their legal rights.

9. The authority of the Secretary of Labor to assume jurisdiction over a labor dispute necessarily
includes and extends to all questions and controversies arising therefrom, including cases over which
the labor arbiter has exclusive jurisdiction (like dismissal of employees and illegality of the strike).

10. The decision of the Bureau of Labor Relations, which is made in the exercise of its original
jurisdiction, may be appealed to the Secretary of Labor. The BLR’s decision, which is made in the

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exercise of its appellate jurisdiction over decisions of the Regional Director, shall be final and
executory.

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