Common

Labor
Problems
Hospitality and Restaurant Industry

COMPILED BY:
ATTY. ORLANDO P. QUIACHON &
ATTY. NEA CECILLE V. QUIACHON
 Employer – Employee
Relationship

 Power of engagement (hiring)

 Wages
 Discipline and Removal
 Control (means and methods)
 Basic Statutory
Worker Benefits
 Minimum Wage

 Holiday Pay

 Premium Pay

 Overtime Pay

 Night Shift Differential

 Service Charge

 Leaves (Paternity, Parental, RA 9262, RA 9710)

 Retirement, ECC, PHIL-HEALTH, SSS, PAG-ibig

 Types of Employees

 REGULAR
 PROJECT
 PROBATIONARY
 SEASONAL
 CASUAL
 FIXED-TERM
 Department Order 18-A
Nov. 14, 2011

 COVERAGE
1. MANPOWER SERVICE
COOPERATIVES
2. JANITORIAL AGENCIES
3. SECURITY AGENCIES
 Permissible Job
Contracting
(Department Order 18-A; Nov. 14, 2011)
 What is contracting or subcontracting?

- refers to an arrangement whereby a principal

agrees to put out or farm out with a contractor the
performance or completion of a specific job, work or
service within a definite or predetermined period,
regardless of whether such job, work or service is to
be performed or completed within or outside the
premises of the principal.
 Requisites of Legitimate
Contracting
 Employer must be registered (25,000Php – registration
fee with the DOLE)/ has an INDEPENDENT BUSINESS
 Employer has SUBSTANTIAL CAPITAL
“Substantial capital” refers to paid-up capital
stocks/shares of at least Three Million Pesos
(P3,000,000.00) in the case of CORPORATIONS,
PARTNERSHIPS AND COOPERATIVES; in the case
of SINGLE PROPRIETORSHIP, a net worth of at least
Three Million Pesos (P3,000,000.00).
 SERVICE AGREEMENT ensuring compliance with
Labor Law Provisions (Sections 7, 8, 9 – DO No. 18-A)
 NEW EMPLOYEMENT
STRUTCURE CREATED

Employer Employee

Contractor
TWO TYPES of PROHIBITED
CONTRACTING

Labor –
Only
Contracting

Other
Prohibited
Activities
Labor – Only Contracting
 Labor-Only Contracting– merely
recruits, supplies or places workers to
perform a job, work, or service for a
principal and the ff are present:
 no substantial capital or investments;
 does not exercise the right to control
over the performance of the work of the
employee OR employees recruited
perform work DIRECTLY RELATED
to the business
 Other Prohibited Acts

 Contracting out of jobs, works or

services when the same results
in the termination or reduction
of regular employees and
reduction of work hours or
reduction or splitting of the
bargaining unit.
 Taking undue advantage of the economic situation
or lack of bargaining strength of the contractor’s
employees, or undermining their security of tenure
or basic rights, or circumventing the provisions of
regular employment, in any of the following
instances:

(i) Requiring them to perform functions which are

currently being performed by the regular employees
of the principal; and
(ii) Requiring them to sign, as a precondition to
employment or continued employment, an
antedated resignation letter; a blank payroll; a
waiver of labor standards including minimum
wages and social or welfare benefits; or a quitclaim
releasing the principal, contractor or from any
liability as to payment of future claims.
 Contracting out of a job, work or service through an in-
house agency.
 Contracting out of a job, work or service that is necessary
or desirable or directly related to the business or
operation of the principal by reason of a strike or lockout
whether actual or imminent.
 Contracting out of a job, work or service being
performed by union members when such will interfere
with, restrain or coerce employees in the exercise of their
rights to self-organization as provided in Art. 248 (c) of
the Labor Code, as amended.
 Repeated hiring of employees under an employment
contract of short duration or under a Service Agreement
of short duration with the same or different contractors,
which circumvents the Labor Code provisions on
Security of Tenure.
 Requiring employees under a subcontracting
arrangement to sign a contract fixing the period of
employment to a term shorter than the term of the
Service Agreement, unless the contract is divisible into
phases for which substantially different skills are
required and this is made known to the employee at the
time of engagement.
 Engaging or maintaining by the
principal of subcontracted
employees in excess of those
provided for in the applicable
Collective Bargaining Agreement
(CBA) or as set by the Industry
Tripartite Council (ITC).
 Effect of Prohibited
Contracting
 A finding by competent authority of LABOR-ONLY
CONTRACTING shall render the principal jointly
and severally liable with the contractor to the
latter’s employees, in the same manner and extent that
the principal is liable to employees directly hired by him/her.

 On the other hand, a finding of commission of any of the

PROHIBITED ACTIVITIES renders the principal the
direct employer of the employees of the
contractor or subcontractor.
 *** representations binding; Ees treated as regular employees
 Effect if Contractor is
unregistered

 It is mandatory for all persons or entities, including

cooperatives, acting as contractors, to register with
the Regional Office of the DOLE where it
principally operates. Failure to register shall
GIVE RISE TO THE PRESUMPTION
THAT THE CONTRACTOR IS
ENGAGED IN LABOR-ONLY
CONTRACTING.
What if the Contractor does
not pay Employees’ wages?
Mere inability to pay:
Principal is jointly and
severally liable (pay wages
only to the extent of work
performed)

When there is LOC –

Principal will be liable to
the full extent as if he is the
direct employer
 If the Regional Wage Board issues a Wage Order at
any time of a subsisting Service Agreement, who is
responsible for the resulting wage differentials?

 The principal /client shall bear the

cost of any required wage increases
plus the standard 10%
administrative cost. Contractor may
seek reimbursement from Principal.
Not vice versa.
 But if the principal/client fails, the
contractor is deemed jointly and
severally liable.
 Contract Bond to be put
up by Principal
 The principal may require the contractor to put up a
bond equivalent to the contract price.

 If the principal fails to require such bond, the

principal must answer for whatever liability the
contractor has to his employees without prejudice to
seeking reimbursement from the contractor.

Franklin Baguio et. Al. vs. NLRC

GR No. 79004-8, Oct. 4, 1991
 What is the hiring practice of repeated
"5-5-5" or "endo" workers that are
prohibited by DO 18-A, S. 2011?

 It is the hiring practice deliberately resorted to

prevent workers from acquiring regular status done
through repeated short-term arrangements (e.g., “5
months, 5 months”, “5-5-5”, or less)
a) by one principal through the same contractor, or
under different contractors, or

b) through a Service Agreement of short

duration under the same contractor, or
different contractors;
 Difference with Legal
Repeated Hiring
 Repeated hiring of the same workers shows that
he/she is performing functions that are usual and
necessary to the trade or business of the employer
and eventually becomes a regular employee after
the lapse of one year.

 On the other hand, the 5-5-5 working arrangement

that is not repeated has been declared as a violation
of public policy as it has been shown to have been
resorted to prevent regular employment.
 Termination of Employment
JUST CAUSES
(Art. 282, Labor Code)

(a) Serious misconduct or willful

disobedience by the employee of the
lawful orders of his employer or
representative in connection with his
work;

(b) Gross and habitual neglect by the

employee of his duties;
(c) Fraud or willful breach by the employee
of the trust reposed in him by his employer
or duly authorized representative;

(d) Commission of a crime or offense by the

employee against the person of his
employer or any immediate member of his
family or his duly authorized
representatives; and

(e) Other causes analogous to the foregoing.

AUTHORIZED CAUSES
(Article 283, Labor Code)
(a) installation of labor-saving devices,
(b) Redundancy
(c) retrenchment to prevent losses or the
closing or cessation of operation of the
establishment or undertaking unless the
closing is for the purpose of circumventing
the provisions of this Title
No valid cause; no
valid termination =
ILLEGAL
DISMISSAL
 How to validly
terminate/fire an employee:

Just or
Authorized
Cause

Observance of
Procedural
Due Process
 Procedure for termination due to
JUST causes: (Twin Notice Rule)

 Serve the first written notice on

the employees containing the
specific ground/s for termination
and a directive that they are given
the opportunity to submit their
written explanation within a
reasonable period.
 After serving the first notice, the employers
should schedule and conduct
hearing or conference wherein the employees
will be given the opportunity to:
 (a) explain and clarify their defenses to the
charge against them;
 (b) present evidence in support of their
defenses; and
 (c)rebut the evidence presented against them by
the management.
 During the hearing or conference, the employees are
given the chance to defend themselves personally,
with the assistance of a representative or counsel of
their choice. Moreover, this conference or hearing
could be used by the parties as an opportunity to
come to an amicable settlement.
 Note however, that in a recent case decide by the
Supreme Court, a hearing or conference is not
mandatory. It is enough that the employee is given
an opportunity to be heard, which could be through
submission of position papers or other evidence.
 (3) After determining that termination of
employment is justified, the employers shall serve
the employees a written notice of
termination indicating that:

(a) all circumstances involving the charge

against the employees have been considered;
and

(b) grounds have been established to justify the

severance of their employment
 Procedure for termination due to
AUTHORIZED causes
(Double Notice Rule)
 Serve a written notice upon the
worker at least one month or 30
days before the intended date of
the termination. This is to inform
the employee of the impending
loss of his employment so he
could at the earliest opportunity
look for prospective jobs.
 Serve a written notice on the DOLE at
least one month or 30 days before the
intended date of the termination. This
is in order for the DOLE to:
a. Determine the validity of the
dismissal; and
b. To intervene for a possible conciliation
or mediation
 To give separation pay such as when termination is
due to redundancy, but not when the employer is
suffering from severe financial losses.

 If you do not comply with procedures, even you

have a valid cause for terminating the employment;
you may still be required to pay damages: Fifty
thousand pesos (P50,000) if the cause was attributed
to you as employer or thirty thousand pesos
(P30,000) if the cause was attributed to the
employee.
 JUST CAUSE;
WRONG PROCEDURE
 Mercury Drug Rule (1989)
 Wenphil (1989) - declared the termination valid
BUT the employer should pay indemnity for not
respecting the employee's right to due process.
 Serrano (2000) - modified Wenphil; stiffened the
penalty to "full backwages"; The employee,
dismissed for a valid reason, remains dismissed, but
the employer who disregarded proper procedure,
must pay full backwages in addition to the
separation pay, if applicable, and indemnity.
 Viernes (2003) - imposed both backwages and
indemnity.

 Agabon (2004) - the termination is valid, the

employee remains dismissed, but the employer
must pay an indemnity (penalty for not observing
due process) heavier than that imposed in Wenphil
but lighter than full backwages; fixed the amount to
P30,000.00
 Jaka (2005) - fine-tunes Agabon; P50,000
nominal damages
1) if the dismissal is based on a just cause
underArticle 282 but the employer failed to
comply with the notice requirement, the
sanction to be imposed upon him should be
tempered because the dismissal process was, in
effect, initiated by an act imputable to the
employee;
2) if the dismissal is based on an authorized cause
under Article 283 but the employer failed to
comply with the notice requirement, the
sanction should be stiffer because the dismissal
was initiated by the employer's exercise of his
management prerogative.
 Industrial Timber (2006) -
subdivides the authorized causes
into:
1) due to losses and
2) not due to losses.
 If the authorized cause that terminates
employment arises from losses, the
penalty to the employer who disregarded
due process may be lighter than if the
authorized cause has no relation to losses.
 The court in the Industrial Timber case
awarded P10,000.00 for each employee
instead of P50,000.00.
 The court enumerated other factors to consider in
assessing the penalty to the employer, which are
(INDUSTRIAL TIMBER CASE):

 the authorized cause invoked, whether it was a

retrenchment or a closure or cessation of operation
of the establishment due to serious business losses
or financial reverses or otherwise

 the number of employees to be awarded;

 the capacity of the employers to satisfy the awards,

taking into account their prevailing financial status
as borne by the records;
 the employer's grant of other termination benefits in
favor of the employees; and

 whether there was a bona fide attempt to comply

with the notice requirements as opposed to giving
no notice at all.

(Industrial Timber Corp, et al. vsAbaban, et al., GR

No. 165418, March 30, 2006)
 TO PREVENT LABOR
PROBLEMS
 COMPLY WITH LABOR STANDARDS

 DO NOT PERFORM PROHIBITED

LABOR ACTS

 NOTE UNION RULES

 EMPLOY A GOOD PERSONNEL

MANAGER WHO CAN DO EFFICIENT
DOCUMENTATION

 DIMISS LEGALLY WITH CAUSE AND

FOLLOWING THE PROPER
PROCEDURE

 HAVE A SEASONED LABOR LAWYER

AS RETAINED COUNSEL