LABOR LAW:

OVERVIEW AND
BASIC PRINCIPLES
ATTY. ADA D. ABAD
Dean, Adamson College of Law
Legal Counsel, Philippine Association of Colleges And Universities (PACU)
Managing Partner, Abad Abad & Associates Law Offices
Former Vice-Dean, Lyceum College of Law

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A. GENERAL PRINCIPLES OF
LABOR LAW
1. OVERVIEW AND BALANCING OF
INTERESTS
2. GENERAL PRINCIPLES
3. GENERAL FLOW IN LABOR
RELATIONS: RIGHT TO UNIONIZE,
COLLECTIVE BARGAINING AND TO
STRIKE IN ACCORDANCE WITH LAW
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B. EMPLOYER-EMPLOYEE
RELATIONSHIP AS CONTRASTED
WITH INDEPENDENT
CONTRACTING ARRANGEMENTS

C. MANAGEMENT PREROGATIVES
AND EMPLOYMENT
CLASSIFICATION
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1. Constitutional and statutory
basis of labor law and social
legislation

2. Declaration of policy and

paradigm shift towards mutual
cooperation

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FOR BASIC FRAMEWORK OF LABOR LAW, MEMORIZE
ARTICLE 3, LABOR CODE: DECLARATION OF POLICY
Mnemonic: PFE-SC-SJ
ART. 3. Declaration of basic policy. - The State shall afford
Protection to labor, promote Full employment, ensure
Equal work opportunities regardless of sex, race or creed and
regulate the relations between workers and employers. The
State shall assure the rights of workers to Self-organization,
Collective bargaining, Security of tenure, and Just
and humane conditions of work.
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Principles of Social Justice,
Equity and Police Power:

• The tension of opposites, and

balancing of interests in case
workers’ and management’s
rights collide

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In balancing the interest between labor and
capital, the prudent recourse in termination cases
is to safeguard the prized security of tenure of
employees and to require employers to present
the best evidence obtainable, especially so
because in most cases, the documents or proof
needed to resolve the validity of the termination,
are in the possession of employers. (American Power
Conversion Corp et. al. vs. Jason Yu Lim, G.R. No. 214291. 11 January 2018.)

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 VS
MANAGEMENT LABOR
• CAPITAL • WORK

• PROFIT • EQUITABLE SHARE IN THE

PROFITS
• Management • Workers’ rights
prerogatives Minimum standards; constitutional
Hiring, employee rights to security of tenure,
classification, work methods, unionization, collective bargaining
rules and regulations and to strike

STATE
police power/social justice
interpretation in favor of labor

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GENERAL RULE #1:
EXISTENCE OF AN EMPLOYER-
EMPLOYEE RELATIONSHIP IS
CONDITION SINE QUA NON FOR
THE APPLICATION OF LABOR
LAWS
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GENERAL RULE#2

PRINCIPLE OF INCORPORATION

the minimum labor standards and benefits

in Labor Code are considered inherent in
every employer-employee relationship
even absent a written employment
contract
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 GENERAL RULE #3:
Burden of proof is always
upon employer to show
validity of its exercise of
management prerogatives,
especially as regards
termination of
employment.

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GENERAL RULE #4:

Only SUBSTANTIAL
EVIDENCE required.

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GENERAL RULE #5

NO RETROACTIVE EFFECT OF
LABOR LAWS

EXCEPTION:
WHEN EXPLICITLY SO PROVIDED
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GENERAL RULE #6:
IN CASE OF DOUBT OR AMBIGUITY, INTERPRET IN
FAVOR OF LABOR

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HOW DO YOU KNOW IF THE PERSON IS YOUR
EMPLOYEE?
APPLICATION OF FOUR-FOLD TEST TO DETERMINE
EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP

ELECTION AND HIRING

AGES

ISMISSAL
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 ONTROL TEST
• IS THE MOST IMPORTANT TEST TO DETERMINE
EXISTENCE OF EMPLOYMENT RELATIONSHIP

• an employer-employee relationship is deemed to

exist “where the employer has a right to CONTROL
the conduct of the employee in relation to his
work.”
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 RULES as NO CONTROL, NO ER-
GUIDELINES EE RELN

RULES fixing CONTROL,

METHOD ER-EE RELN

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 INDEPENDENT JOB
CONTRACTING

VERSUS

LABOR-ONLY CONTRACTING
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JOB-CONTRACTING IS OF TWO FORMS:

1. BILATERAL
(example: Company and retainer lawyer)

2. TRILATERAL
(example: Company and security agency with
security guards)

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In BOTH arrangements,
the company must have
NO CONTROL over the
manner and method by
which the contractor will
do the job. Hence,
RESULTS ORIENTED.

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 INDEPENDENT
CONTRACTOR

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FACTORS TO DETERMINE:

• Job is necessary or desirable in the

usual trade or business of the
employer

• Control test determines existence of

employer-employee relationship.

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BASIC PREMISES IN VALID JOB CONTRACTING
(INDEPENDENT CONTRACTORSHIP ARRANGEMENT)

FIRST PREMISE:
Not all who work for you, need to be your employees

SECOND PREMISE:
Contractual relationship borne out of free will.
Management prerogative on part of the owner of the company
(principal), and freedom to contract and earn a living (property
right) on the part of the job contractor
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THIRD PREMISE:
TRILATERAL RELATIONSHIP (ARRANGEMENT BETWEEN
THREE PARTIES REGARDING WORK)

principal Ind. contractor

employees

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FOURTH PREMISE:
The vinculum of the relationship between the principal and
independent contractor is the JOB OR SERVICE (example:
SECURITY SERVICES)
NO CONTROL; BUT
RESULT MUST BE THAT
PREMISES ARE SECURED.

IND. CONTRACTOR/
PRINCIPAL
SECURITY AGENCY
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FIFTH PREMISE:
The vinculum of the relationship between the independent contractor and
the employees is the EMPLOYER-EMPLOYEE RELATIONSHIP

ER-EE RELNS.

Employees/se
Ind. Contractor/ curity guards
security agency
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SIXTH PREMISE:
The principal (OWNER) does NOT HAVE ANY CONTROL over the
Independent Contractor, nor of the employees of the independent
contractor – EXCEPT as to the results of the job contracted.
NO
CONTROL

PRINCIPAL Ind. contractor employees

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TWO DIFFERENT CONTRACTS:
1. Between principal and independent contractor: CIVIL contract
–> Civil Code
2. Between independent contractor and his employees: LABOR
contract --> Labor Code
NO
CONTROL

PRINCIPAL Ind. contractor employees

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TWO WAYS OF PROVING
LABOR-ONLY CONTRACTING:
(MEMO AID)

1. NO CAP + DIRECT
OR
2. NO CONTROL
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TWO WAYS OF PROVING
LABOR-ONLY CONTRACTING:
(Sec. 5 of Department Order No. 18-02)

(a) The contractor has NO SUFFICIENT CAPITAL OR INVESTMENT, and

the employees supplied to the COMPANY are performing work
which are DIRECTLY RELATED to the principal business business of
the so-called Indirect employer; OR

(b) The contractor has NO CONTROL over the conduct of the work to
be done by the contractor and/or his employees.
PHILIPPINE AIRLINES VS. LIGAN, GR 146408; 548 SCRA 181 (FEB 2008).

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LABOR-ONLY CONTRACTING DIAGRAM

PRINCIPAL Ind. contractor

employees

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WHAT IS MANAGEMENT’S PREROGATIVE?
In its quest for profits, management may exercise its management
prerogatives – which is the discretionary power to decide ALL
ASPECTS OF OPERATIONS. In the aspect of EMPLOYMENT, it
includes everything -
From HIRING

To FIRING

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 ELEMENTS FOR
A VALID EXERCISE OF
MANAGEMENT PREROGATIVES:

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The free will of the management to conduct its
own affairs to achieve its purpose cannot be
denied, PROVIDED THAT THE SAME IS
EXERCISED:
• IN GOOD FAITH,
• FOR THE ADVANCEMENT OF THE
EMPLOYER’S INTEREST; AND
• NOT TO CIRCUMVENT THE RIGHTS OF THE
EMPLOYEES. (San Miguel Brewery and Union
Carbide cases).
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EMPLOYEE CLASSIFICATION
(Art. 295-296, Labor Code)

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The provisions of a written agreement to the contrary
notwithstanding, and regardless of the oral agreement
between the parties, an employment shall be deemed
REGULAR where the employee has been
engaged to perform activities which are
usually necessary or desirable to the usual
trade or business of the employer EXCEPT
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•where the employment has been fixed for a
SPECIFIC PROJECT OR UNDERTAKING, the
completion of which has been determined at
the time of the engagement of the worker;
OR
• where the job, work or services to be
performed is SEASONAL in nature, and the
employment is for the duration of the
season.
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An employment shall be deemed to be CASUAL
if it is NOT covered by the preceding
paragraph;
PROVIDED, that any employee who has rendered at
least one year of service, whether such service be
continuous or broken, shall be considered a
REGULAR employee with respect to the
activity for which he is employed, and his
employment shall continue while such activity
exists. DEAN ADA ABAD FOR PALS COVID LECTURE 15APR2020 42
FRAMEWORK: Article 295-296, Labor Code
GENERAL RULE: Employment is regular
EXCEPTIONS:
• Probationary • Seasonal
• Term • Casual
• Project
EXCEPTIONS TO EXCEPTION:
• Probn. Employee allowed to work after probn. period
• Casual employee allowed to work FOR AT LEAST ONE YEAR,
whether continuous or broken.
• Term allowed to work beyond term
• Project employee allowed to work after project without any contract; or project employee
allowed to work project after project but no termination reports
• Regular seasonal workers DEAN ADA ABAD FOR PALS COVID LECTURE
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15APR2020