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LABOR CODE OF

THE PHILIPPINES
Reporter:

Rodrigo G. Buenaventura
Ph.D. BA Student
The Labor Code
The Labor Code of the Philippines
(Presidential Decree No. 442, as amended) is
the legal code governing employment
practices and labor relations in the
Philippines. It was enacted on Labor
day, May 1, 1974 by Late President of
the Philippines Ferdinand Marcos in the
exercise of his then extant legislative
powers.
Parts of the Labor Code
Book 1: Pre-Employment (with the Preliminary
Title)

Book 2: Human Resources Development Program

Book 3: Conditions of Employment

Book 4: Health, Safety and Social Welfare Benefits

Book 5: Labor Relations

Book 6: Post Employment

Book 7: Transitory and Final Provisions


CASE #1. (Filipinas Pre-Fabricated Building Systems Inc. vs.
Puente. G.R.153832. March 18, 2005. 453 SCRA 820).
Bert started working with FSI, a corporation engaged in
construction business, on June 12, 1989. His employment contract
provides that it is good only for the duration of the project unless the
employees services is terminated due to completion of the phase of
work/section or piece of work to which employee is assigned. He
was initially hired as an "installer" and later promoted to mobile
crane operator, stationed at the company premises. FSI regularly
submitted to the labor department reports of the termination of
services of all project workers including Bert. His last employment
contract was on August 26, 1996 where he worked at the site of the
World Finance Plaza at Meralco Avenue, Ortigas Center, Pasig City,
assigned at the phase of work termed as "Lifting and Hauling of
Materials". On October 1, 1999, his employment for that particular
project was terminated by FSI.
Thus, on November 18, 1999, Bert filed a complaint for illegal
dismissal against FSI. He claimed that his work with the
company was not dependent upon the completion or
termination of any project and was continuous and without
interruption. He alleged that he was performing tasks vital and
desirable to the employers usual business attending to the
maintenance of all the companys mobile cranes for the past ten
years. The Labor Arbiter and the NLRC did not agree with him.
But on appeal to the Court of Appeals (CA), he was sustained.
The CA ruled that he was a regular employee and ordered his
reinstatement with full back wages and without loss of
seniority rights. Was the CA correct?
THE DECISION:

No. Bert was a project employee. A project employee is one


whose employment has been fixed for a specific project or
undertaking the completion or termination of which has been
determined at the time of engagement of the employee or where
the work or services to be performed is seasonal in nature and
the employment is for the duration of the season. The length of
the service of a project employee is not the controlling test of
employment tenure but whether or not the employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee.
In this case, the contracts of employment of Bert attest to the
fact that he was hired for specific projects. His employment was
coterminous with the completion of the projects for which he
has been hired. Those contract expressly provided that his tenure
of employment depended on the duration of any phase of the
project or on the completion of the construction projects.
Furthermore, the compliance by FSI with the reportorial
requirement on termination of services of project workers
confirms that Bert was a project employee. That his employment
does not mention particular dates establishing the specific
duration of the project does not preclude his classification as
project employee and make him a regular employee. The last
employment contract did specify that the termination of the
parties employment relationship was to be on a day certain the
day when the phase of work termed as Lifting and Hauling of
Materials for the World Finance Plaza Project would be
completed.
"Day certain" is understood to be that which must necessarily
come, although it may not be known exactly when. This means
that the final completion of a project or phase thereof is in fact
determinable and the expected completion is made known to the
employee. Thus Bert cannot be considered a regular employee.
He was a project employee. That he was employed with FSI for
ten years in various projects did not ipso facto make him a
regular employee, considering that the definition of a regular
employment in article 280 of the Labor Code makes a specific
exception with respect to project employment. The mere re-
hiring of Bert on a project to project basis did not confer upon
him regular employment status. The practice was dictated by
practical consideration that experienced construction workers
are more preferred. It did not change his status as a project
employee#.
Labor Standards Benefits

Minimum requirements set by laws, rules


and regulations and other issuances relating
to: wages, hours of work, cost of living
allowances, and other monetary and welfare
benefits, including those set by
occupational safety and health standards.
Labor Standards Benefits
1. Minimum Wage 7. Service Incentive Leave

2. Holiday Pay 8. Maternity Leave

3. Premium Pay 9. Paternity Leave

4. Overtime Pay 10. Parental Leave

5. Night Shift Pay 11. Leave for VAWC

6. Service Charge Share 12. Special Leave for


Women
Labor Standards Benefits
13. 13th Month Pay

14. Separation Pay

15. Retirement Pay

16. Employee Compensation (ECC) Benefits*

17. PhilHEALTH Benefits*

18. SSS Benefits*

19. PagIBIG Benefits*


Retail and Service
Establishment Exemptions
Labor Standard 1 to 5 Workers 1 to 9 Workers
Benefits
Holiday Pay None None

Night Shift Pay None Applicable

Service Incentive None None


Leave
Retirement Pay None None
Minimum Wage Law
(RA 6727)
National Wages and Productivity Commission.

Regional Tripartite Wage and Productivity Boards.

Wage Orders are issued by region, and also by


sector, by type of establishments, by size of
workforce, by capitalization, and by gross sales.

Penalty for Violation:


Imprisonment of 2 to 4 years (without probation
benefits); or
Fine of P25,000 to P100,000; or both.
Plus DOUBLE INDEMNITY for the workers.
Minimum Wage (NCR)
Wage Order No. NCR-17 (May 17, 2012)

June 3, 2012:
Old COLA was Integrated to Basic Wage:
P22 + P404 = New Basic Wage: P426
New COLA: P20
New Minimum Wage: P426 + P20 = P446

November 1, 2012:
Add P10 to New COLA: P30 + P426 = P456
Minimum Wage (NCR)
Rule (June 3/November 1, 2012) :
BW: P426 + COLA: P20/P30 = MW: P446/P456

Exception:
BW: P389 + COLA: P20/P30 = MW: P409/P419
Agriculture;
Private Hospitals with bed capacity of 100 or less;
Retail and Service Establishments with 15
workers or less;
Manufacturing Establishments with 9 workers or
less.
Minimum Wage
Other Exceptions:
Government Employees under Civil Service Law.
Domestic Workers under RA 10361 (MW:
P2,500/P2,000/P1,500 per month).
Personal Assistants, including family drivers.
Barangay Micro Business Enterprises (BMBEs)
under DTI and LGU guidelines.
Distressed Establishments, but only for a period
not exceeding 1 year under NWPC guidelines.
Minimum Wage
Special Circumstances:
Reduced working hours, i.e Underemployed or
those working less than 8-hours of work per day.
Reduced working days, i.e. Shortened workweek.
Workers paid by results i.e. They should be paid
not less than the minimum wage rate
proportionate to the number of working hours
they actually rendered.
Apprentices, Learners, and (unqualified) Disabled
Workers: 75% of minimum wage.
Rules on Wages
What is Wage Distortion?
What is Across-the-Board Wage Increase?

What is the Rule on Payment of Wages?


Paid in legal currency at or near the workplace.
Frequency: 2x/month not exceeding 16 days
interval.

What is the Rule on Wage Deduction?


Mandatory: Allowed by law.
Non-mandatory: Written Authorization needed.
Rules on Hours of Work:
Who are covered?
All employees in all establishments, for profit or not.
Exceptions
Government employees under Civil Service Law;
Managerial employees and managerial staff;
Domestic workers under RA 10361;
Persons in the personal service of another;
Workers paid by results;
Field personnel and those whose time and
performance are unsupervised; and
Dependent family members of the Employer.
Normal Hours of Work

Shall not exceed 8 hours/day.


Rationale.
Broken time or workday is lawful.
Shortening of work week is lawful.
What are Hours Worked?

All time during which an employee is


required to be on duty or at a prescribed
work place.
All the time during which an employee is
permitted or suffered to work.
Principles to Determine
Hours Worked
All hours required, whether spent in
productive labor or involved physical or
mental exertion, are hours worked.
Rule on rest period.
Rule on work interruptions.
Other Rules on Work Hours
Waiting time compensable if integral part of
work.
On call compensable if time cannot be used
for personal purpose.
Travel time if part of work, yes. Home to
work, no. Travel away from home, yes only if it
cuts across employees workday.
Attendance to seminars No, if voluntary,
outside of work hours and/or no productive
work done.
Other Rules
Power interruptions yes, if less than 20
minutes. No if more, and employee leave
premises.
Union matters no, unless CBA provides
otherwise.
Attendance at hearings not compensable.
Strike participation NO, definitely.
Meal Periods
Required. It should not be less than 60
minutes, but it is not compensable.
Shortening of meal period to less than 60
minutes? Yes, it is allowed but it must be
paid.
Overtime Pay
Overtime Pay refers to the additional compensation
for work performed beyond 8 hours per day.
Rule: Overtime work is not permitted.
Exceptions:
When there is an emergency or urgent situation.
When completion or continuation after work
hours is necessary to prevent prejudice to business
or operations.
Rate: 125% of regular hourly rate on ordinary
working days. 130% for overtime work on Rest
Days.
COLA not included in computation.
Overtime Pay:
Who are Covered?
All employees in all establishments, for profit or not.

Exceptions
Government employees subject to Civil Service
Law;
Managerial employees and managerial staff;
Persons in the personal service of another;
Workers paid by results;
Field personnel and other employees whose time
and performance are unsupervised; and
Dependent family members of the Employer.
When Is Overtime Work
Valid & Must Be Paid?

Even if without prior permission:


The work performed was necessary.
The work benefited the Employer.
Employee could not abandon his work at the
end of normal working hours because there is
no replacement.
Undertime Not Offset
By Overtime
Undertime work on any day shall not be offset
by overtime work on any other day.
Permission granted by the Employer for the
Employee to go on leave on some other day shall
not exempt him from the payment of additional
compensation for overtime work rendered.
Valid overtime work is always subject to
Overtime Pay.
15-Minute
Networking Break
Masters, treat your slaves the
SAME WAY. Dont threaten them;
Remember, you both have the
same Master in Heaven, and He
has no favorites. EPHESIANS 6:9
New Living Translation (NLT)
Holiday Pay

Holiday Pay refers to the payment of regular


daily wage for any unworked Regular Holiday at
the rate of 100%.
If the Employee is allowed or required to work
on a Regular Holiday, he is entitled to 200% of
his daily wage rate (Basic Wage + COLA).
If 2 Regular Holidays fall on the same day and
the Employee is allowed or required to work on
such day, he is entitled to 300%.
Holiday Pay:
Who are Covered?
All employees in all establishments, for profit or not,
including daily-paid workers.

Exceptions
Government employees subject to Civil Service Law;
Managerial employees and managerial staff;
Persons in the personal service of another;
Workers paid by results;
Field personnel and other employees whose time and
performance are unsupervised;
Dependent family members of the Employer; and
Retail/Service Establishment regularly employing less than
10 workers.
Rules on Holiday Payment
Employees are entitled when they are present or on
leave with pay on the preceding workday.
Employees are NOT entitled if absent or on leave
without pay on the preceding workday, unless they
work on such Regular Holiday, in which case they
are entitled to 200%.
When preceding day is non-work day or rest day, the
Employee is entitled, if he worked on the day before
such non-work day or rest day.
In case of successive Regular Holidays i.e. Holy
Week, the Employee shall NOT be entitled to the
successive Regular Holidays if he is absent or on
leave without pay on the preceding work day
(Wednesday), unless he worked on the first Holiday.
Holiday Pay Rules continued

Seasonal workers may not be paid during off season.

Those without regular working days are entitled.


When company is on temporary or periodic
shutdown not due to business reverses, the employee
is entitled.
But when shutdown is due to business reverses, the
employee is not entitled.

If a Regular Holiday falls on the same day, the


Employee shall still be paid 100% for each days or a
total of 200%.
What are the Regular Holidays?

EO 292, as amended by RA 9849.


12 Regular Holidays: New Years Day,
Maundy Thursday, Good Friday, Araw ng
Kagitingan, Labor Day, Independence Day,
National Heroes Day, Eidul Fitr (End of
Ramadhan), Eidul Adha (Feast of Sacrifice
October 26, 2012), Bonifacio Day, Christmas
Day, Rizal Day.
4 Muslim Holidays observed in ARMM (for
both Muslims and Non-Muslims) and
applicable to all Muslims outside ARMM.
What are Special Days?
EO 292, as amended by RA 9849.
3 Special Days: Ninoy Aquino Day, All Saints
Day, and Last Day of the Year.
The President (or Congress) may proclaim other
days as Special Day i.e. November 2, 2012 (per
Proclamation No. 295).
Unworked Special Day is NOT paid.
Work performed on a Special Day is paid 130%.
Special Work Day (or Special Working Day) is
treated as an ordinary work day.
What are Weekly Rest Days?
It is the duty of the Employer to provide a Rest Day
of not less than 24 hours after 6 consecutive working
days.
Old law: Rest Day is Sunday.
New law: Rest Day is any day.
Employer determines the Rest Day of the Employee,
subject to agreement and rules of DOLE.
Employees are given preference based on religion.
Premium Pay
(Rest Day/Special Day Pay)
Rule: Work on Rest Day (and Special Day) is not
permitted.
Exceptions (Rest Day):
When there is an emergency or urgent situation.
When work is necessary to prevent prejudice to
business or operations.
Rate: 130% of regular hourly rate on ordinary
working days. 150% if Rest Day and Special Day fall
on the same day.
COLA not included in the computation (unlike in
Holiday Pay).
Premium Pay:
Who are Covered?
All employees in all establishments, for profit or not.

Exceptions
Government employees subject to Civil Service Law;
Managerial employees and managerial staff;
Househelpers and persons in the personal service of
another;
Workers paid by results;
Field personnel and other employees whose time and
performance are unsupervised;
Dependent family members of the Employer.
Night Shift Differential Pay
NSD Pay refers to the the additional compensation
for each hour of work performed between 10PM and
6AM.

Rate: 110% of the regular hourly wage rate.


Night Shift Differential Pay:
Who are Covered?
All employees in all establishments, for profit or not.
Exceptions
Government employees subject to Civil Service Law;
Managerial employees and managerial staff;
Househelpers and persons in the personal service of
another;
Field personnel and other employees whose time and
performance are unsupervised;
Workers paid by results;
Dependent family members of the Employer; and
Retail/ Service Establishment employing not more
than 5 workers.
Service Incentive Leave
The Employee is entitled to 5 days of leave with pay
for every one year of service; provided that he has
served for 1 year already.
If Employer grants vacation leave with pay of at
least 5 days every year, then this is already
compliance with SIL.
Commutable to cash and becomes SIL Pay.
Part-time employees are also entitled to full service
incentive leave.
No Labor Code provisions on vacation leave or sick
leave.
Service Incentive Leave:
Who are Covered?
All employees in all establishments, for profit or not.

Exceptions
Government employees subject to Civil Service Law;
Managerial employees and managerial staff;
Persons in the personal service of another;
Field personnel and other employees whose time and
performance are unsupervised;
Workers paid by results;
Dependent family members of the Employer; and
Retail/ Service Establishment employing less than 10
workers.
Service Charges
Employees are entitled to a share from the Service
Charge being collected by the Employer from his
customers.
Rank-and-file employees share: 85%
Managements share: 15%.
Rank-and-file employees shall receive equal share.
If abolished, the share of the Rank-and-file employees
shall be considered integrated to their wages.
If the Employer doesnt collect Service Charge, the
pooled tips shall be treated the same way as Service
Charge.
Art. 287. Retirement Pay
Retirement age: 60 to 65 years old.
Employee must also have worked for at least 5 years
for the Employer.
Rate: Equivalent to 22.5 days salary for every year
of service payable by Employer.
Distinct from the Retirement Benefits from SSS.
Excluded: Government employees; and Retail/
Service/ Agricultural Establishments employing not
more than 10 workers.
Separation Pay
Employees terminated by the Employer on the basis
of Authorized Causes are entitled to Separation Pay.

Rate: 1 Month or Month Salary for every year of


service: Retrenchment, Closure of Business, Serious
Disease.

Rate: 1 Month or 1 Month Salary for every year of


service: Labor-saving device, Redundancy, and
Impossible Reinstatement.

Regular Allowance in included in the computation.


CASE #2. (Villaruel vs. Yeo Han Guan etc. R.R. 169191, June 1,
2011)

Cardo was originally employed in June 1963 by GMC, a


company engaged in the business of manufacturing and selling
PVC pipes owned and managed by Charlie Yu. Over a period
of 20 years, the company changed its name four times.
Starting in 1993 it was already operating under the name of
YCH. Despite changes in the company name, Cardo remained
in the employ of Mr. Yus company.

On October 5, 1998, Cardo got sick and was confined at the


hospital. After his recovery and because of his failing health,
Cardo asked Mr. Yu that he be assigned to a lighter kind of
work. Mr Yu however just told him to return to work.
Mr Yu however just told him to return to work. But instead of
returning back, Cardo opted to resign and asked for his
separation pay for the period from 1963 to 1999. But Yu
offered him the sum of P15,000 corresponding to the period
between 1993 and 1999 only when he worked with YCH. So
Cardo just filed a complaint for payment of separation pay
computed from his first day of employment in June 1963. He
also asked for the payment of his service incentive leave for
three years plus attorneys fees.

The Labor Arbiter (LA) rendered judgment in favor of Cardo,


granting him separation benefits of one-half month salary for
every year of service from June, 1963 to October 1998 or a
total of P91,445 plus incentive leave in the amount of P3,015.
This was affirmed by the National Labor Relations
Commission (NLRC). Were the LA and the NLRC correct?
THE DECISION:

No. An employee is entitled to separation pay pursuant to


Article 284 of the Labor Code if the employer terminates the
services of an employee found to be suffering from any disease
and whose continued employment is prohibited by law or
prejudicial to his health as well as the health of the co-
employees. Under Article 283, separation pay may also be
given to the employee where there is illegal dismissal and
reinstatement is no longer feasible. So it is the employer who
terminates the services. It does not contemplate a situation
where it is the employee who voluntarily resigns or severs
his/her employment ties. In fact the rule is that an employee
who voluntarily resigns from employment is not entitled to
separation pay except when it is stipulated in the employment
contract or CBA or it is sanctioned by employer practice or
policy or when the court allows separation pay as a measure of
social justice.
In this case it was Cardo the employee who initiated the
severance of his employment with Mr. Yu. The latter did not
terminate the employment of Cardo. In fact he rejected Yus
offer for him to return to work which is tantamount to
resignation. So he is not entitled to separation pay under the
provisions of the Labor Code.

However taking into consideration the factual circumstances


obtaining in the present case, Cardo is entitled to some kind of
financial assistance as a matter of social and compassionate
justice. He has been in the employ of Yu for more than 35
years. While, the name of the company has changed four
times, the present company YCH is not distinct from its
predecessors but in fact merely continued their operation under
the same owner and the same business venture. Hence Cardo
should be paid P50,000 as financial assistance #.
13th Month Pay (PD 851)
Rank-and-file employees are entitled to 13th month
pay; provided they worked for at least 1 month.

Rate: 1/12 of the total basic salary earned by an


Employee in a year.

Excluded: Government employees, Employees paid


based on results, and Managerial employees.

Domestic workers are now entitled to 13th Month


Pay per RA 10361.
Maternity Leave
All pregnant female workers are entitled to
Maternity Leave subject to SSS Law.

60 days of the average daily salary credit for normal


birth or miscarriage.

78 days of the average daily salary credit for


ceasarian section delivery.

Requirements: Membership in the SSS with at least


3 months contributions prior to delivery or
miscarriage.
Paternity Leave
All married male workers are entitled to Paternity
Leave of 7 calendar days with pay for the first 4
deliveries (or miscarriage) of his lawful wife whom
he is cohabiting with.

Paternity Leave is Not convertible to cash.


Parental Leave for Solo Parents

Parental Leave shall mean leave benefits granted to a


solo parent to enable him or her to perform parental
duties and responsibilities where physical presence is
required.

The solo parent is entitled to 7 days leave with pay.

Parental Leave is Not convertible to cash.

Requirements: At least 1 year of service and DSWD


Solo Parents ID.
Leave for Victims of VAWC
Female employees who are certified as victims under
the Anti-Violence Against Women and their
Children Act of 2004 are entitled to 10 days of
leave with pay to enable her to attend to medical and
legal concerns.

VAWC Leave is Not convertible to cash.

Requirements: Certification from the barangay,


prosecutor, or clerk of court that a VAWC case
involving the victim female employee is pending.
Special Leave for Women
Female employees who has undergone surgery due
to gynecological disorders are entitled to 2 months
leave with pay to enable her to attend to medical and
legal concerns.

Special Leave is Not convertible to cash.

Requirements: Certification from physician, and


employment service of at least 6 months within the
12 month period prior to surgery.
Employees Compensation Program

The ECP is designed to provide a compensation


package to Employees and their dependents in case
of work-related sickness, injury, disability or death.

Benefits: Loss of income benefit; Medical benefit;


Rehabilitation services; Carers allowance; and
Death benefits.

Workers in the formal sector are covered starting on


day 1 of their employment.
PhilHEALTH Benefits
The National Health Insurance Program, which is
administered by PhilHEALTH, provides financial
assistance to member-Employees when they get
hospitalized.

All employees are required to be members.

Benefits: Inpatient hospital care; and outpatient care


based on a Schedule of Benefits.
Social Security Benefits
The Social Security Program provides a package of
benefits in the event of death, disability, sickness,
maternity, and old age. It provides replacement for
income lost during these contingencies.

All employees in the private sector are mandatorily


covered, including Domestic Workers.

Benefits: Sickness, Maternity, Disability, Retirement,


Death & Funeral, based on a Schedule of Benefits.
Occupational Safety and
Health Standards
Every covered Employer is required to keep and
maintain his workplace free from work hazards
that are causing or likely to cause physical harm
to the workers or damage to property.
The Occupational Safety and Health Standards,
as amended, is the body of rules and regulations
that protect every worker against the dangers of
injury, sickness or death through safe and
healthful working conditions.
Non-diminution
of Benefits
The reduction or elimination of
benefits provided under the law,
agreement or voluntary practice is
prohibited.
Exceptions to Rule on
Non-diminution
If circumstances no longer justify grant of
benefits (Dislocation pay, relocation
allowance, per diem, supplements, etc.)
Rule on grant of bonus management
prerogative, but not if given as a salary
supplement and without conditions.
Working Conditions for Special
Groups of Employees
Working Women (Chapter XI)

a. Prohibiting night work within certain hours regardless of age, with


or without compensation are: industrial undertakings, between 10:00
PM and 6:00 AM of the following day.

Exceptions:

In cases of actual or impending emergencies to prevent loss


of life or property; imminent danger to public safety; in case of
urgent work on machineries, equipment or installations to
avoid serious loss to the employer, among others.
Working Conditions for Special
Groups of Employees
Working Women (Chapter XI)

b. Requiring facilities for women

Exceptions:

The law requires the Secretary of Labor to establish


standards to ensure the safety and health of women employees,
such as seats when appropriate, separate toilet rooms and a
dressing room for women, a nursery, and appropriate minimum
age and other standards for retirement or termination in special
occupations (cf. Art. 132 LC).
Thank You!
Do not twist JUSTICE in legal
matters by favoring the poor or
being partial to the rich and
powerful. Always judge people
fairly. (LEVITICUS 19:15 Bible
New Living Translation)
Working Conditions for Special
Groups of Employees

Working Women (Chapter XI)


c. Requiring free family planning services and incentives
Establishments required to maintain a clinic or
infirmary shall provide for family planning services to
their employees (Art. 134 LC)
Working Conditions for Special
Groups of Employees

Working Women (Chapter XI)


d. Prohibiting discrimination on account of sex
Equal remuneration shall be paid to both the men
and women for work of equal value (Art. 135 LC).
This has been relegated into a crime by R.A. 6725 (cf.
infra).
Working Conditions for Special
Groups of Employees

Working Women (Chapter XI)


e. Identifying prohibited acts of an employer
The Code makes it unlawful for an employer: to
deny legal benefits or to discharge a women employee
to prevent her from enjoying them; to discharge her on
account of pregnancy; or while on leave or in
confinement due to her pregnancy; or to discharge or
refuse her admission upon returning to work for fear
that she may again be pregnant (Art. 137 LC).